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COMPANIES ACT 1956

ACT NO. 1 OF 1956

[18th January, 1956]

Short title, commencement and extent.

1.Short title, commencement and extent. (1) This Act may be called the Companies Act, 1956.

(2) It shall come into force on such date2* as the Central Government may, by notification in the Official Gazette, appoint.

3[(3) It extends to the whole of India: 4 * * * * *] 5[Provided 6* * * that it shall apply to the State of Nagaland subject to such modifications, if any, as the Central Government may, by notification in the Official Gazette, specify.]

Definitions. 2.Definitions.In this Act, unless the context otherwise requires,-

(1) "alter" and "alteration" shall include the making of additions and omissions;

(2) "articles" means the articles of association of a company as originally framed or as altered from time to time in pursuance of any previous companies law or of this Act, including, so far as they apply to the company, the regulations contained, as the case may be, in Table B in the Schedule annexed to Act No. 19 of 1857 or in Table A in the First Schedule annexed to the Indian Companies Act, 1882, (6 of 1882.) or in Table A in the First ---------------------------------------------------------------------- 1 This Act has been extended to Goa, Daman and Diu by Regulation 12 of 1962 (with modifications), s. 3 and Sch.: to Dadra and Nagar Haveli by Regulation 6 of 1963, s. 2 and Sch. I and to Pondicherry by Regulation 7 of 1963, s. 3 and Sch. 1. The provisions of this Act shall apply to Goa, Daman and Diu, subject to the exceptions, modifications and adaptations contained in the Schedule to G.S.R. 615, dated the 24th April, 1965 (Gazette of India, Pt. II, Sec. 3(i), p. 670). Amended in its application to Goa, Daman and Diu by Reg. 11 of 1963, s. 9. 2 1st April, 1956, vide Notification No. S.R.O. 612, dated 8-3- 1956, Gazette of India, Extraordinary, 1956, Pt. II, Sec. 3, p. 473.

3 Subs. by Act 62 of 1956 s. 2 and Sch., for sub-section (3) (w.e.f. 1-11-1956). 4 Proviso omitted by Act 25 of 1968, s. 2 and Sch. (w.e.f. 15-8-1968). 5 Ins. by Act 31 of 1965, s. 2 (w.e.f. 15-10-1965). 6 The word "further" omitted by Act 25 of 1968, s. 2 and Sch. (w.e.f. 15-8-1968). 50 Schedule annexed to the Indian Companies Act, 1913, or in Table A in Schedule I annexed to this Act;

(3) "associate", in relation to a managing agent, means any of the following, and no others: - (a)where the managing agent is an individual. any partner or relative of such individual; any firm in which such individual, partner or relative is a partner; any private company of which such individual or any such partner, relative or firm is the managing agent or secretaries and treasurers or a director or the manager ; and any body corporate at any general meeting of which not less than one- third of the total voting power in regard to any matter may be exercised or controlled by any one or more of the following, namely, such individual, partner or par- tners, relative or relatives, firm or firms; and private company or companies; (b) where the managing agent is a firm: any member of such firm; any partner or relative of any such member; and any other firm in which any such member, par- tner or relative is a partner; any private company of which the firm first mentioned, or any such member, partner, relat- ive or other firm is the manag- ing agent, or secretaries and treasurers, or a director, or the manager; and any body corporate at any general meeting of which not less than one-third of the total voting power in regard to any matter may be exercised or controlled by any one or more of the 51 following, namely, the firm firstmentioned, any such member or members, partner or part- ners, relative or relatives, other firm or firms and priv- ate company or companies; (c) where the managing agent is a body corpo- rate: (i)any subsidiary or holding company of such body corporate; the managing agent or secretaries and treasurers, or a director, the manager or an officer of. the body corporate or of any subsidiary or holding company thereof ; any partner or relative of any such director or manager; any firm in which such director, manager, partner or relative, is a partner;1 * * * (ii)any other body corporate at any general meeting of which not less than one-third of the total voting power in regard to any matter may be exercised or controlled by any one or more of the following, namely, the body corporate and the companies and other persons specified in paragraph (i) above; and 2[(iii)any subsidiary of the other body corporate referred to in paragraph (ii) above: Provided that where the body corporate is the manag- ing agent of the other body corporate referred to in paragraph (ii) above, a subsidiary of such other body corporate shall not be an associate ------------------------------------------------------------------- 1 The "and" omitted by Act 65 of 1960, s. 2. 2 Ins. by s. 2, ibid. -------------------------------------------------------------------- 52 in relation to the managing agent aforesaid ; and] (d) where the managing agent is a private company or a body corporate having not more than fifty members: in addition to the persons men- tioned in sub clause (c), any member of the private company or body corporate; Explanation.-If one person is an associate in relation to another within the meaning of this clause, the latter shall also be deemed to be an associate in relation to the former within its meaning;

(4) " associate ", in relation to any secretaries and treasurers, means any of the following, and no others:- (a) where the secretaries and treasurers are a firm: any member of such firm ; any partner or relative of any such member; and any other firm in which any such member, part- ner or relative is a partner ; any private company of which the firm first-mentioned, or any such member, partner, relat- ive or other firm is the manag- ing agent, or secretaries and treasurers, or a director, or the manager ; and any body corporate at any gene- ral meeting of which not less than one-third of the total vot- ing power in regard to any matter may be exercised or controlled by any one or more of the following, namely, the firm first-mentioned, any such member or members, partner or partners, relative or relatives, other firm or firms, and private company or companies; 53 (b) where the secretaries and treasurers are a body corporate: (i) any subsidiary or hold- ing company of such body corpo- rate; the managing agent or secretaries and treasurers, or a director, the manager or an officer of the body corporate or of any subsidiary or hold- ing company thereof ; any part- ner or relative of any such director or manager; any firm in which such director or manager, partner or relative, is a partner; 1 * * * (ii) any other body corporate at any general meeting of which not less than one-third of the total voting power in regard to any matter may be exercised or controlled by any one or more of the following, namely, the body corporate and the com- panies and other persons speci- fied in paragraph (i) above; and 2 [ (iii) any subsidiary of the other body corporate refe- rred to in paragraph (ii) above: Provided that where the body corporate is the secretar- ies and treasurers of the other body corporate referred to in paragraph (ii) above, a subsidiary of such other body corporate shall not be an associate in relation to the secretaries and treasurers aforesaid; and] ------------------------------------------------------------------ 1 The word "and" omitted by Act 65 of 1960, s. 2. 2 Ins. by s. 2, ibid. ------------------------------------------------------------------- 54 (c) where the secretaries and treasurers are a private company or a body corporate having not more than fifty members: in addition to the persons mentioned in sub-clause (b), any member of the private com- pany or body corporate ; Explanation.-If one person is an associate in relation to another within the meaning of this clause, the latter shall also be deemed to be an associate in relation to the former within its meaning;

(5) "banking company" has the same meaning as in the Banking Companies Act, 1949 (10 of 1949);

(6) "Board of directors " or " Board ", in relation to a company, means the Board of directors of the company;

(7) "body corporate " or " corporation' includes a company incorporated outside India but 1[does not include- (a) a corporation sole ; (b) a co-operative society registered under any law relating to co-operative societies ; and (c)any other body corporate (not being a company as defined in this Act) which the Central Government may, by notification in the Official Gazette, specify in this behalf ;]

(8) "book and paper " and " book or paper " include accounts,. deeds , 2 [vouchers,] writings, and documents;

3[(9) "branch office" in relation to a company means- (a) any establishment described as a branch by the company ; or (b)any establishment carrying on either the same or substantially the same activity as that carried on by the head office of the company ; or (c)any establishment engaged in any production, processing or manufacture, ---------------------------------------------------------------------- 1 Subs. by Act 65 of 1960, s. 2, for " does not include a corporation sole". 2 Ins. by Act 31 of 1965, s. 3 (w.e.f. 15-10-1965),

3 Subs. by Act 65 of 1960, s. 2, for cl. (9), ----------------------------------------------------------------------- 55 but does not include any establishment specified in any order made by the Central Government under section 8;]

(10) "company" means a company as defined in section 3; 1[(10A) "Company Law Board" means the Board of Company Law Administration constituted under section 10E;]

2[(11)"the Court" means,- (a)with respect to any matter relating to a company other than any offence against this Act), the Court having jurisdiction under this Act with respect to that matter relating to that company, as provided in section 10; (b)with respect to any offence against this Act, the Court of a Magistrate of the First Class or, as the case may be, a Presidency Magistrate, having jurisdiction to try such offence;]

(12) "debenture" includes debenture stock, bonds and any other securities of a company, whether constituting a charge on the assets of the company or not;

(13) "director" includes any person occupying the position of director, by whatever name called;

(14) "District Court" means the principal Civil Court of original jurisdiction in a district, but does not include a High Court in the exercise of its ordinary original civil jurisdiction;

(15) "document" includes summons, notice, requisition, order, other legal process, and registers, whether issued, sent or kept in pursuance of this or any other Act or otherwise;

(16) "existing company" means an existing company as defined in section 3;

(17) "financial year" means, in relation to any body corporate, the period in respect of which any profit and loss account of the body corporate laid before it in annual general meeting is made up, whether that period is a year or not: ---------------------------------------------------------------------- 1 Ins. by Act 53 of 1963, s. 2 (w.e.f. 1-1-1964).

2 Subs. by Act 65 of 1960, s. 2, for cl. (11). ---------------------------------------------------------------------- 56 Provided that, in relation to an insurance company, "financial year" shall mean the calendar year referred to in

sub-section (1) of section 11 of the Insurance Act, 1938 (4 of 1938);

(18) "Government company" means a Government company within the meaning of section 617; 1* * * * * *

(19) "holding company" means a holding company within the meaning of section 4; 2* * * * * *

(21) "insurance company" means a company which carries on the business of insurance either solely or in conjunction with any other business or businesses;

(22) "issued generally" means, in relation to a prospectus, issued to persons irrespective of their being existing members or debenture holders of the body corporate to which the prospectus relates;

(23) "limited company" means a company limited by shares or by guarantee:

(24) "manager" means an individual (not being the managing agent) who, subject to the superintendence, control and direction of the Board of directors, has the management of the whole, or subsantially the whole, of the affairs of a company, and includes a director or any other person occupying the position of a manager, by whatever name called, and whether under a contract of service or not; --------------------------------------------------------------------- 1 Omitted by Act 30 of 1984, s.52 (w.e.f. 1.8.1984).

2 Cl. (20) omitted by Act 62 of 1956, s. 2 and Sch. (w.e.f. 1-11- 1956). ---------------------------------------------------------------------- 57

(25) "managing agent" means any individual, firm or body corporate entitled, subject to the provisions of this Act, to the management of the whole, or substantially the whole, of the affairs of a company by virtue of an agreement with the company, or by virtue of its memorandum or articles of association, and includes any individual, firm or body corporate occupying the position of a managing agent, by whatever name called. 1[Explanation I.-For the purposes of this Act, references to "managing agent" shall be construed as references to any individual, firm, or body corporate who, or which, was, at any time before the 3rd day of April, 1970, the managing agent of any company. Explanation II.-For the removal of doubts, it is hereby dec- lared that notwithstanding anything contained in section 6 of the Companies (Amendment) Act, 1969, (17 of 1969.) this clause shall remain, and shall be deemed always to have re- mained, in force;]

(26) "managing director" means a director who, by virtue of an agreement with the company or of a resolution passed by the company in general meeting or by its Board of directors or, by virtue of its memorandum or articles of association, is entrusted with 2[substantial powers of management] which would not otherwise be exercisable by him, and includes a director occupying the position of a managing director, by whatever name called: 3[Provided that the power to do administrative acts of a routine nature when so authorised by the Board such as the power to affix the common seal of the company to any document or to draw and endorse any cheque on the account of the company in any bank or to draw and endorse any negotiable instrument or to sign any certificate of share or to direct registration of transfer of any share, shall not be deemed to be included within substantial powers of management: Provided further that a managing director of a company shall exercise his powers subject to the superintendence, control and direction of its Board of directors;] --------------------------------------------------------------------- 1 Ins. by Act 41 of 1974, s. 2 (w.e.f. 1-2-1975). 2 Subs. by Act 65 of 1960, s. 2, for "any powers of management". 3 Ins. by s. 2, ibid. --------------------------------------------------------------------- 58

(27) "member", in relation to a company, does not include a bearer of a share-warrant of the company issued in pursuance of section 114;

(28) "memorandum" means the memorandum of association of a company as originally framed or as altered from time to time in pursuance of any previous companies law or of this Act;

(29) "modify" and "modification" shall include the making of additions and omissions;

1[(30) "officer" includes any director, managing agent, secretaries and treasurers, manager or secretary, 2[or any person in accordance with whose directions or instructions the Board of directors or any one or more of the directors is or are accustomed to act,] and also includes- (a) where the managing agent, 3[or the secretaries and treasures] is or are a firm, any partner in the firm; (b)where the managing agent or the secretaries and treasurers is or are a body corporate, any director or manager of the body corporate; 4* * * * * * but save in sections, 477, 478, 539, 543, 545, 621, 625 and 633 does not include an auditor;]

(31) "officer who is in default", in relation to any provision referred to in section 5, has the meaning specified in that section;

(32) "paid-up capital" or "capital paid up" includes capital credited as paid up;

(33) " prescribed" means, as respects the provisions of this Act relating to the winding up of companies except sub-section

(5) of section 503, 5[sub-section (3) of section 550, section

552 and sub-section (3) of section 555], prescribed ---------------------------------------------------------------------

1 Subs. by Act 65 of 1960, s. 2, for cl. (30). 2 Ins. by Act 31 of 1965, s. 3 (w.e.f. 15-10-1965). 3 Subs. by Act 41 of 1974, s. 2, for "the secretaries and treasurers or the secretary" (w.e.f. 1-8-1975). 4 Sub-clause (c) omitted by s. 2, ibid. (w.e.f. 1-8-1975).

5 Subs. by Act 65 of 1960, s. 2, for "sub-section (1) of section

549 and subsection (3) of section 550". ----------------------------------------------------------------------- 59 by rules made by the Supreme Court in consultation with High Courts, and as respects the other provisions of this Act

including sub-section (5) of section 503,1[sub-section (3) of

section 550, section 552 and sub-section (3) of section 555], prescribed by rules made by the Central Government;

(34) "previous companies law" means any of the laws

specified in clause (ii) of sub-section (1) of section 3;

(35) "private company" means a private company as defined in section 3;

(36) "prospectus" means 2[any document described or issued as a prospectus and includes any] notice, circular, adver- tisement or other document 3[inviting deposits from the public or] inviting offers from the public for the subscrip- tion or purchase of any shares in, or debentures of, a body corporate;

(37) "public company" means a public company as defined in section 3;

(38) "public holiday" means a public holiday within the meaning of the Negotiable Instruments Act, 1881 (26 of 1881.) : Provided that no day declared by the Central Government to be a public holiday shall be deemed to be such a holiday, in relation to any meeting, unless the declaration was notified before the issue of the notice convening such meeting;

(39) "recognised stock exchange" means, in relation to any provision of this Act in which it occurs, a stock exchange, whether in or outside India, which is notified by the Central Government in the Official Gazette as a recognised stock exchange for the purposes of that provision;

(40) "Registrar" means a Registrar, or an Additional, a Joint, a Deputy or an Assistant Registrar, having the duty of registering companies under this Act; ----------------------------------------------------------------------

1 Subs. by Act 65 of 1960. s. 2, for "sub-section (1) of section

549 and subsection (3) of section 550". 2 Subs. by s. 2, ibid., for "any prospectus". 3 Ins. by Act 41 of 1974, s. 2 (w.e.f. 1-2-1975). ----------------------------------------------------------------------- 60

(41) "relative" means, with reference to any person, any one who is related to such person in any of the ways specified in section 6, and no others;

(42) "Schedule" means a Schedule annexed to this Act;

(43) "Scheduled Bank" has the same meaning as in the Reserve Bank of India Act, 1934 (2 of 1934);

(44) "secretaries and treasurers" means any firm or body corporate (not being the managing agent) which, subject to the superintendence, control and direction of the Board of directors, has the management of the whole, or substantially the whole, of the affairs of a company; and includes any firm or body corporate occupying the position of secretaries and treasurers, by whatever name called, and whether under a contract of service or not. 1[Explanation I.-For the purposes of this Act, references to "secretaries and treasurers" shall be construed as references to any firm or body corporate which was, at any time before the 3rd day of April, 1970, secretaries and treasurers of any company. Explanation II.-For the removal of doubts, it is hereby declared that notwithstanding anything contained in section 6 of the Companies (Amendment) Act, 1969 (17 of 1969), this clause shall remain, and shall be deemed always to have remained, in force;]

4[(45) "secretary" means a Company Secretary within the meaning of

clause (c) of sub-section (1) of section 2 of the Company Secretaries Act, 1980 (56 of 1980), and includes any other individual possessing the prescribed qualifications and appointed to perform the duties which may be performed by a secretary under this Act and any other ministerial or administrative duties;] 5[(45A) "secretary in whole-time practice" means a secretary who shall

be deemed to be in practice within the meaning of sub-section (2) of section 2 of the Company Secretaries Act, 1980 (56 of 1980) and who is not in fulltime employment;] 6[(46A) "Securities and Exchange Board of India" means the Securities and Exchange Board of India established under section 3 of the Securi- ties and Exchange Board of India Act, 1992 (15 of 1992)]

(46) "share" means share in the share capital of a company, and includes stock except where a distinction between stock and shares is expressed or implied;

(47) "subsidiary company" or "subsidiary" means a subsidiary company within the meaning of section 4;

(48) "total voting power", in regard to any matter relating to a body corporate, means the total number of votes which ----------------------------------------------------------------------- 1 Ins. by Act 41 of 1974, s. 2 (w.e.f. 1-2-1975).

2 Subs. by Act 65 of 1960, s. 2, for el. (45). 3 41 of 1974, s. 2, for certain words (w.e.f. 1-2-1975). 4 Subs. by Act 31 of 1988, s. 2 (w.e.f. --------------). 5 Subs by s.2 ibid (w.e.f. 15.6.1988). 6 Ins. by Act 22 of 1996, s.31 and Sch. (w.e.f. 20.9.1995). ----------------------------------------------------------------------- 60A may be cast in regard to that matter on a poll at a meeting of such body, if all the members thereof and all other persons, if any, having a right to vote on that matter are present at the meeting, and cast their votes;

(49) "trading corporation" means a trading corporation within the meaning of entries 43 and 44 in List I in the Seventh Schedule to the Constitution; 1* * * * * *

(50) "variation" shall, include abrogation; and "vary" shall include abrogate. 2[(2A.) Words and expressions used and not defined in this Act but defined in the Depositories Act, 1996 (22 of 1996), shall have the same meanings respectively assigned to them in that Act.]

Definitions of "Company", "Existing Company", "Private Company" and"Public Company". 3.Definitions of "Company", "Existing Company", "Private Company"

and "Public Company".(1) In this Act, unless the context otherwise requires, the expressions "company", "existing company", "private company" and "public company" shall, subject to the provisions of sub-

section (2), have the meanings specified below:- (i) "company" means a company formed and registered under this Act or an existing company as defined in clause (ii); (ii) "existing company" means a company formed and register- ed under any of the previous companies laws specified below:- (a)Any Act or Acts relating to companies in force before the Indian Companies Act, 1866 (10 of 1866.)and repealed by that Act; (b) The Indian Companies Act, 1866 (10 of 1866); (c) The Indian Companies Act, 1882 (6 of 1882); (d) The Indian Companies Act, 1913 (7 of 1913); (e) The Registration of Transferred Companies Ordinance, 1942 ( 54 of 1942); and 2[(f) Any law corresponding to any of the Acts or the Ordinance aforesaid and in force-

(1)in the merged territories or in a Part B State (other than the State of Jammu and Kashmir), or any part thereof, before the extension thereto of the Indian Companies Act, 1913 (7 of 1913); or ---------------------------------------------------------------------- 1 Cl. (49A) omitted by Act 17 of 1967, s. 4 and Sch. (w.e.f. 1-7- 1967). 2 Ins. by Act 22 of 1996, s. 31 and Sch. (w.e.f. 20.9.1995). 3 Subs. by Act 62 of 1956, s. 2 and Sch., for cl. (f) (w.e.f. 1- 11-1956). ---------------------------------------------------------------------- 60B

(2)in the State of Jammu and Kashmir, or any part thereof, before the commencement of the Jammu and Kashmir (Extension of Laws) Act, 1956 (62 of 1956). 1[in so far as banking, insurance and financial corporations are concerned, and before the commencement of the Central Laws (Extension to Jammu and Kashmir) Act, 1968 (25 of 1968) in so far as other corporations are concerned];] (iii) "private company" means a company which, by its arti- cles,- (a) restricts the right to transfer its shares, if any; (b) limits the number of its members to fifty not including- (i) persons who are in the employment of the company,and (ii) persons who, having been formerly in the employment of the company, were members of the company while in that employment and have continued to be members after the employment ceased; and --------------------------------------------------------------------- 1 Ins. by Act 25 of 1968, s. 2 and Sch. (w.e.f, 15-8-1968). ---------------------------------------------------------------------- 61 (c)prohibits any invitation to the public to subscribe for any shares in, or debentures of, the company: Provided that where two or more persons hold one or more shares, in a company jointly, they shall, for the purposes of this definition, be treated as a single member; (iv)"public company" means a company which is not a private company.

(2) Unless the context otherwise requires, the following companies, shall not be included within the scope of any of the

expressions defined in clauses (i) to (iv) of sub-section (1), and such companies shall be deemed, for the purposes of this Act, to have been formed and registered outside India:-- (a) a company the registered office where of is in Burma, Aden or Pakistan, and which immediately before the separation of that country from India was a company as defined in clause

(i) of subsection (1); 1* * * * * *

Meaning of "holding company" and "subsidiary".

4.Meaning of "holding company" and "subsidiary".(1) For the purposes of this Act, a company shall, subject to the provisions of

sub-section (3), be deemed to be a subsidiary of another if, but only if,-- (a) that other controls the composition of its Board of directors ; or 2[(b) that other- (i)where the first-mentioned company is an existing company in respect of which the holders of preference shares issued before the commencement of this Act have the same voting rights in all respects as the holders of equity shares, exercises or controls more than half of the total voting power of such company; (ii)where the first-mentioned company is any other company, holds more than half in nominal value of its equity share capital ; or] (c) the first-mentioned company is a subsidiary of any com- pany which is that other's subsidiary. --------------------------------------------------------------------- 1 Cl. (b) omitted by Act 62 of 1956, s. 2 and Sch (w.e.f. 1-11- 1956). 2 Subs. by Act 65 of 1960, s. 3, for cl, (b), --------------------------------------------------------------------- 62 Illustration Company B is a subsidiary of Company A, and Company C is a subsidiary of Company B. Company C is a subsidiary of Company A, by virtue of clause (c)above. It Company D is a subsidiary of Company C, Company D will be a subsidiary of Company B and consequently also of Company A, by virtue of clause (c) above; and so on.

(2) For the purposes of sub-section (1), the composition of a company's Board of directors shall be deemed to be controlled by another company if, but only if, that other company by the exercise of some power exercisable by it at its discretion without the consent or concurrence of any other person, can appoint or remove the holders of all or a majority of the directorships ; but for the purposes of this provision that other company shall be deemed to have power to appoint to a directorship with respect to which any of the following conditions is satisfied, that is to say- (a) that a person cannot be appointed thereto without the exercise in his favour by that other company of such a power as aforesaid; (b) that a person's appointment thereto follows necessarily from his appointment as director, managing agent, secretaries and treasurers, or manager of, or to any other office or employment in, that other company; or 1[(c) that the directorship is held by an individual nominated by that other company or a subsidiary thereof ;]

(3) In determining whether one company is a subsidiary of another- (a) any shares hold or power exercisable by that other company in a fiduciary capacity shall be treated as not held or exercisable by it; (b) subject to the provisions of clauses (c) and (d), any shares held or power exercisable- (i) by any person as a nominee for that other company (except where that other is concerned only in a fiduciary capacity) ; or (ii) by, or by a nominee for, a subsidiary of that other company, not, being a subsidiary which is concerned only in a fiduciary capacity; shall be treated as held or exercisable by that other company; ---------------------------------------------------------------------- 1 Subs. by Act 65 of 1960, s. 3, for cl. (c). --------------------------------------------------------------------- 63 (c) any shares held or power exercisable by any person by virtue of the provisions of any debentures of the first- mentioned company or of a trust deed for securing any issue of such debentures shall be disregarded-, (d) any shares held or power exercisable by, or by a nominee for, that other or its subsidiary [not being held or exercisable as mentioned in clause (c); shall be treated as not held or exercisable by that other, if the ordinary business of that other or its subsidiary, as the case may be, includes the lending of money and the shares are held or the power is exercisable as aforesaid by way of security only for the purposes of a transaction entered into in the ordinary course of that business.

(4) For the purposes of this Act, a company shall be deemed to be the holding company of another if, but only if, that other is its subsidiary.

(5) In this section, the expression "company" includes any body corporate, and the expression "equity share capital" has the same

meaning as in sub-section (2) of section 85.

(6) In the case of a body corporate which is incorporated in a country outside India, a subsidiary or holding company of the body corporate under the law of such country shall be deemed to be a sub- sidiary or holding company of the body corporate within the meaning and for the purposes of this Act also, whether the requirements of this section are fulfilled or not.

1[(7) A private company, being a subsidiary of a body corporate incorporated outside India, which, if incorporated in India, would be a public company within the meaning of this Act, shall be deemed for the purposes of this Act to be a subsidiary of a public company if the entire share capital in that private company is not held by that body corporate whether alone or together with one or more other bodies corporate incorporated outside India.] 4A. Public financial institutions.

2[4A.Public financial institutions. (1) Each of the financial institutions specified in this subsection shall be regarded, for the purposes of this Act, as a public financial institution, namely:- (i) the Industrial Credit and Investment Corporation of India Limited, a company formed and registered under the Indian Companies Act, 1913 (7 of 1913); --------------------------------------------------------------------- 1 Ins. by Act 65 of 1960, s. 3. 2 Ins. by Act 41 of 1974, s. 3 (w.e.f. 1-2-1975). -------------------------------------------------------------------- 64 (ii) the Industrial Finance Corporation of India, established under section 3 of the Industrial Finance Corporation Act, 1948 (15 of 1948); (iii) the Industrial Development Bank of India, established under section 3 of the Industrial Development Bank of India Act, 1964 (18 of 1964); (iv) the Life Insurance Corporation of India, established under section 3 of the Life Insurance Corporation Act, 1956 (31 of 1956); (v) the Unit Trust of India, established under section 3 of the Unit Trust of India Act, 1963 (52 of 1963).

(2) Subject to the provisions of sub-section (1), the Central Government may, by notification in the Official Gazette, specify such other institution as it may think fit to be a public financial institution: Provided that no institution shall be so specified unless- (i) it has been established or constituted by or under any Central Act, or (ii) not less than fifty one per cent. of the paid-up share capital of such institution is held or controlled by the Central Government.]

Meaning of "officer who is in default". 1[5.Meaning of "officer who is in default". For the purpose of any provision in this Act which enacts that an officer of the company who is in default shall be liable to any punishment or penalty, whether by way of imprisonment, fine or otherwise, the expression "officer who is in default" means all the following officers of the company, namely:- (a) the managing director or managing directors; (b) the whole-time director or whole-time directors; (c) the manager; (d) the secretary; (e) any person in accordance with whose directions or instructions the Board of directors of the company is accustomed to act; (f) any person charged by the Board with the responsibility of complying with that provision: Provided that the person so charged has given his consent in this behalf to the Board; (g) where any company does not have any of the officers specified in clauses (a) to (c), any director or directors who may be specified by the Board in this behalf or where no director is so specified, all the directors: Provided that where the Board exercises any power under clause (f) or clause (g), it shall, within thirty days of the exercise of such powers, file with the Registrar a return in the prescribed form.

Meaning of "relative". 2[6.Meaning of "relative". A person shall be deemed to be a relative of another if, and only if,- (a) they are members of a Hindu undivided family; or (b) they are husband and wife; or (c) the one is related to the other in the manner indicated in Schedule IA.] ----------------------------------------------------------------------- 1 Subs by Act 31 of 1988, s. 3 (w.e.f. 15.7.1988). 2 Subs by Act 65 of 1960, s.4, for s.6. ---------------------------------------------------------------------- 65

Interpretation of "person in accordance with whose directions orinstructions directors are accustomed to act". 7.Interpretation of "person in accordance with whose directions or instructions directors are accustomed to act". Except where this Act expressly provides otherwise, a person shall not be deemed to be, within the meaning of any provision in this Act, a person in accordance with whose directions or instructions the Board of directors of a company is accustomed to act, by reason only that the Board acts on advice given by him in a professional capacity.

Power of Central Government to declare an establishment not to bea branch office. 8.Power of Central Government to declare an establishment not to be a branch office. The Central Government may, by order, declare that in the case of any company, 1* * *, any establishment carrying on either the same or substantially the same activity as that carried on by the head office of the company, or 2[any establishment engaged in any production, processing or manufacture], shall not be treated as a branch office of the company for all or any of the purposes of this Act.

Act to override memorandum, articles, etc. 9.Act to override memorandum, articles, etc. Save as otherwise expressly provided in the Act- (a) the provisions of this Act shall have effect notwithstanding anything to the contrary contained in the memorandum or articles of a company, or in any agreement executed by it, or in any resolution passed by the company in general meeting or by its Board of directors, whether the same be registered, executed or passed, as the case may be, before or after the commencement of this Act; and (b) any provision contained in the memorandum, articles, agreement or resolution aforesaid shall, to the extent to which it is repugnant to the provisions of this Act, become or be void, as the case may be.

Jurisdiction of Courts.

10. Jurisdiction of Courts. (1) The Court having jurisdiction under this Act shall be- (a) the High Court having jurisdiction in relation to the place at which the registered office of the company concerned is situate, except to the extent to which jurisdiction has been conferred on any District Court or District Courts subordinate to that High Court in pursuance of subsection

(2); and ---------------------------------------------------------------------- 1 The words "not being a banking or an insurance company" omitted by Act 65 of 1960, s. 5. 2 Subs. by s. 5, ibid., for "any production or manufacture". ---------------------------------------------------------------------- 66 (b) where jurisdiction has been so conferred, the District Court in regard to matters falling within the scope of the jurisdiction conferred, in respect of companies having their registered offices in the district.

(2) The Central Government may, by notification in the Official Gazette and subject to such restrictions, limitations and conditions as it thinks fit, empower any District Court to exercise all or any of the jurisdiction conferred by this Act upon the Court, not being the jurisdiction conferred- (a) in respect of companies generally, by sections 237, 391, 394, 395 and 397 to 407, both inclusive; (b) in respect of companies with a paid-up share capital of not less than one lakh of rupees, by Part VII (sections 425 to 560) and the other provisions of this Act relating to the winding up of companies.

(3) For the purposes of jurisdiction to wind up companies, the expression "registered office" means the place which has longest been the registered office of the company during the six months immediately preceding the presentation of the petition for winding up. 10A. [Constitution of Tribunal.] Repealed by the Companies Tribunal (Abolition) Act, 1967 (17 of 1967) s. 4 and Sch. 10B. [Procedure of Tribunal.] Repealed by s. 4 and Sch. ibid 10C. [Powers of Tribunal.] Repealed by s 4 and Sch., ibid 10D. [Appeals against decisions. etc.. of the Tribunal.] Repealed by s. 4 and Sch., ibid. 1[PART IA, BOARD OF COMPANY LAW ADMINISTRATION 10E. Constitution of Board of Company Law Administration. 10E. Constitution of Board of Company Law Administration.

2[(1) As soon as may be after the commencement of the Companies (Amendment) Act, 1988, the Central Government shall, by notification in the Official Gazette, constitute a Board to be called the Board of Company Law Administration. (1A) The Company Law Board shall exercise and discharge such powers and functions as may be conferred on it, by or under this Act or any other law, and shall also exercise and discharge such other powers and functions of the Central Government under this Act or any other law as may be conferred on it by the Central Government, by notification in the Official Gazette under the provisions of this Act or that other law.] ---------------------------------------------------------------------- 1 Ins. by Act 53 of 1963, s. 4 (w.e.f. 1-1-1964). 2 Subs. by Act 31 of 1988, s. 4 (w.e.f. 31.5.1991). --------------------------------------------------------------------- 66A

(2) The Company Law Board shall consist of such number of members, not exceeding 1[nine], as the Central Government deems fit, to be appointed by that Government by notification in the Official Gazette: 2["Provided that the Central Government may, by notification in the official Gazette, continue the appointment of the chairman or any other member of the company Law Board functioning as such immediately before the commencement of the Companies (Amendment) Act, 1988 (31 of 1988), as the chairman or any other member of the Company Law Board, after such commencement for such period not exceeding three years as may be specified in the notification. 3[(2A)The members of the Company Law Board shall possess such qualifications and experience as maybe prescribed."]

(3) One of the members shall be appointed by the Central Gov- ernment to be the chairman of the Company Law Board.

(4)No act done by the Company Law Board shall be called in question on the ground only of any defect in the constitution of, or the existence of any vacancy in, the Company Law Board. 4* * * * * 5[(4B) 6[The Board may, by order in writing, form one or more Benches from among its members and authorise each such Bench to exercise and discharge such of the Board's powers and functions as may be specified in the order; and every order made or act done by a Bench in exercise of such powers or discharge of such functions shall be deemed to be the order or act as the case may be, of the Board. (4C) Every Bench referred to in sub-section (4B) shall have powers which are vested in a Court under the Code of Civil Procedure, 1908, (5 of 1908). while trying a suit, in respect of the following matters, namely :- (a) discovery and inspection of documents or other material objects producible as evidence; ---------------------------------------------------------------------- 1 Subs. by Act 41 of 1974, s. 4, for "five" (w.e.f. 1-2-1975). 2. Ins. by Act 31 of 1988, s.4 (w.e.f. 31-5-1991). 3 Ins by s.4, ibid (w.e.f. 4-8-1989). u 4 Omitted by s.4, ibid Act 31 of 1988, s. 4 (w.e.f.31-5-1991). 5 Ins.by Act 41 of 1974, s.4 (w.e.f. 1-2-1975). 6. Subs. by s.4, ibid (w.e.f.1-2-1975). ---------------------------------------------------------------------- 66B (b)enforcing the attendance of witnesses and requiring the deposit of their expenses; (c)compelling the production of documents or other material objects producible as evidence and impounding the same; (d) examining witnesses on oath; (e) granting adjournments; (f) reception of evidence on affidavits. (4D) Every Bench shall be deemed to be a civil court for the purposes of section 195 and 1[Chapter XXVI of the Code of Criminal Procedure, 1973], (2 of 1974). and every proceeding before the Bench shall be deemed to be a judicial proceeding within the meaning of section 193 and 228 of the Indian Penal Code and for the purpose of section 196 of that Code.] (45 of 1860).

2[(5) Without prejudice to the provisions of sub-sections (4C) and (4D), the Company Law Board shall in the exercise of its powers and the discharge of its functions under this Act or any other law be guided by the principles of natural justice and shall act in its discretion.

(6)Subject to the foregoing provisions of this section, the Company Law Board shall have power to regulate its own procedure"] 10F. Appeals against the orders of the Company Law Board. 3[10F.Appeals against the orders of the Company Law Board. Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.] PART II INCORPORATION OF COMPANY AND MATTERS INCIDENTAL THERETO Certain companies, associations and partnerships to be registered, as companies under Act.

Prohibition of associations and partnerships exceeding certain number. 11.Prohibition of associations and partnerships exceeding certain

number.(1) No company, association or partnership consisting of more than ten persons shall be formed for the purpose of carrying on the business of banking, unless it is registered as a company under this Act, or is formed in pursuance of some other Indian law. ---------------------------------------------------------------------- 1 Subs. by Act 46 of 1977, s. 2, for the words and figures "Chapter XXXV of the Code of Criminal Procedure, 1898". 2 Subs. by Act 31 of 1988, s. 4 (w.e.f.31-5-1991). 3 Ins. by s. 5, ibid. (w.e.f. 31-5-1991). ---------------------------------------------------------------------- 67

(2) No company, association or partnership consisting of more than twenty persons shall be formed for the purpose of carrying on any other business that has for its object the acquisition of gain by the company, association or partnership, or by the individual members thereof, unless it is registered as a company under this Act, or is formed in pursuance of some other Indian law.

(3) This section shall not apply to a joint family as such carrying on a business; and where a business is carried on by two or more joint families, in computing the number of persons for the

purposes of sub-sections (1) and (2), minor members of such families shall be excluded.

(4) Every member of a company, association or partnership carry- ing on business in contravention of this section shall be personally liable for all liabilities incurred in such business.

(5) Every person who is a member of a company, association or partnership formed in contravention of this section shall be punish- able with fine which may extend to one thousand rupees. Memorandum of Association

Mode of forming incorparated company.

12.Mode of forming incorparated company.(1) Any seven or more persons, or where the company to be formed will be a private company, any two or more persons, associated for any lawful purpose may, by subscribing their names to a memorandum of association and otherwise complying with the requirements of this Act in respect of registration, form an incorporated company, with or without limited liability.

(2) Such a company may be either- (a) a company having the liability of its members limited by the memorandum to the amount, if any, unpaid on the shares respectively held by them (in this Act termed " a company limited by shares" (b) a company having the liability of its members limited by the memorandum to such amount as the members may respectively undertake by the memorandum to contribute to the assets of the company in the event of its being wound up (in this Act termed "a company limited by guarantee"); (c) a company not having any limit on the liability of its members (in this Act termed " an unlimited company "). 68

Form of memorandum.

13.Requirements with respect to memorandum. (1) The memorandum of every company shall state- (a)the name of the company with " Limited " as the last word of the name in the case of a public limited company, and with "Private Limited" as the last word of the name in the case of a private limited company; (b)the State in which the registered office of the company is to be situate; 1* * * 2[(c) in the case of a company in existence immediately before the commencement of the Companies (Amendment) Act, 1965, the objects of the company ; (d)in the case of a company formed after such commencement,- (i)the main objects of the company to be pursued by the company on its incorporation and objects incidental or ancillary to the attainment of the main objects ; (ii)other objects of the company not included in sub-clause (i); and (e)in the case of companies (other than trading corporations), with objects not confined to one State, the States to whose territories the objects extend.]

(2) The memorandum of a company limited by shares or by guarantee shall also state that the liability of its members is limited.

(3)The memorandum of a company limited by guarantee shall also state that each member undertakes to contribute to the assets of the company in the event of its being wound up while he is a member or within one year after he ceases to be a member, for payment of the debts and liabilities of the company, or of such debts and liabilities of the company as may have been contracted before he ceases to be a member, as the case may be, and of the costs, charges and expenses of winding up, and for adjustment of the rights of the contributories among themselves, such amount as may be required, not exceeding a specified amount.

(4) In the case of a company having a share capital- (a) unless the company is an unlimited company, the memorandum shall also state the amount of share capital with ---------------------------------------------------------------------- 1 The word "and " omitted by Act 31 of 1965, s. 5 (w.e.f. 15-10- 1965). 2 Subs. by s. 5, ibid., for clause (c) (w.e.f. 15-10-1965). ---------------------------------------------------------------------- 69 which the company is to be registered and the division thereof into shares of a fixed amount; (b)no subscriber of the memorandum shall take less than one share; and (c) each subscriber of the memorandum shall write opposite to his name the number of shares he takes. 14.Form of memorandum.The memorandum of association of a company shall be in such one of the Forms in Tables B, C, D and E in Schedule I as may be applicable to the case of the company, or in a Form as near thereto as circumstances admit.

Printing and signature of memorandum. 15.Printing and signature of memorandum. The memorandum shall- (a) be printed, (b) be divided into paragraphs numbered consecutively, and (c)be signed by each subscriber (who shall add his address,description and occupation, if any,) in the, presence of at least one witness who shall attest the signature and shall likewise add his. address, description and occupation, if any. 15A. Special provision as to alternation of memorandum consequent on alter-ation of name of State of Madras. 1[15A.Special provision as to alternation of memorandumconsequent on alteration o 15B. Special provision as to alternation of memorandum consequent on alter-ation of name of State of Mysore. 1[15B.Special provision as to alteration of memorandum consequent on alteration of name of State of Mysore. Where, in the memorandum of association of a company in existence immediately before the commencement of the Mysore State (Alteration of Name) Act, 1973 (31 of 1973), it is stated that Mysore is the State in which the registered office of that company is situate, then, notwithstanding anything contained in this Act, the said memorandum shall, as from such commencement, be deemed to have been altered by substitution of a reference to the State of Karnataka for the reference to the State of Mysore and the Registrar of the State of Karnataka shall make necessary alterations in the memorandum of association and the certificate of incorporation of the said company.]

Alteration of memorandum.

16.Alteration of memorandum.(1) A company shall not alter the conditions contained in its memorandum except in the cases, in the mode, and to the extent, for which express provision is made in this Act.

(2) Only those provisions which are required by section 13 or by any other specific provision contained in this Act, to be stated in the memorandum of the company concerned shall be deemed to be con- ditions contained in its memorandum.

(3) Other provisions contained in the memorandum, including those relating to the appointment of a managing director, managing agent, secretaries and treasurers or manager, may be altered in the same manner as the articles of the company, but if there is any express provision in this Act permitting of the alteration of such provisions in any other manner, they may also be altered in such other manner.

(4)All references to the articles of a company in this Act shall be construed as including references to the other provisions aforesaid contained in its memorandum. ---------------------------------------------------------------------- 1 Ins. by the Mysore State (Alteration of Name) (Adaptation of Laws on Union Subjects) Order, 1974 (w.e.f. 1-11-1973), see Notification No. G.S.R. 431(E), dated 21st October, 1974, see Gazette of India, Extraordinary, Pt. II, Sec. 3(i), P. 1981. ---------------------------------------------------------------------- 71

Special resolution and confirmation by Company Law Board required foralternation of memorandum. 17.Special resolution and confirmation by Company Law Board

required for alternation of memorandum.(1) A company may, by special resolution, alter the provisions of its memorandum so as to change the place of its registered office from one State to another, or with respect to the objects of the company so far as may be required to enable it- (a)to carry on its business more economically or more efficiently; (b) to attain its main purpose by new or improved means; (c) to enlarge or change the local area of its operations; (d)to carry on some business which under existing circumstances may conveniently or advantageously be combined with the business of the company; (e)to restrict or abandon any of the objects specified in the memorandum; (f)to sell or dispose of the whole, or any part, of the undertaking, or of any of the undertakings, of the company; or (g)to amalgamate with any other company or body of persons.

(2)The alteration shall not take effect until, and except in so far as, it is confirmed by the 1[Company Law Board] on petition.

(3)Before confirming the alteration, the 1[Company Law Board] must be satisfied- (a)that sufficient notice has been given to every holder of the debentures of the company, and to every other person or class of persons whose interests will, in the opinion of the 1[Company Law Board], be affected by the alteration; and (b) that, with respect to every creditor who, in the opinion of the 1[Company Law Board], is entitled to object to the alteration, and who signifies his objection in the manner directed by the 1[Company Law Board], either his consent to the alteration has been obtained or his debt or claim has been discharged or has determined, or has been secured to the satisfaction of the 1 [Company Law Board] : Provided that the 1[Company Law Board] may, in the case of any person or class of persons, for special reasons, dispense with the notice required by clause (a). ---------------------------------------------------------------------- 1 Subs. by Act 41 of 1974, s. 5, for "Court" (w.e.f. 1-2-1975). ---------------------------------------------------------------------- 72/1

1[(4) The 2[Company Law Board] shall cause notice of the petition for confirmation of the alteration to be served on the Registrar who shall also be given a reasonable opportunity to appear before the 2[Company Law Board] and state his objections and suggestions, if any, with respect to the confirmation of the alteration.]

(5) The 2[Company Law Board] may make an order confirming the alteration either wholly or in part, and on such terms and conditions, if any, as it thinks fit, and may make such order as to costs as it thinks proper.

(6) The 2[Company Law Board] shall, in exercising its powers under this section, have regard to the rights and interests of the members of the company and of every class of them, as well as to the rights and interests of the creditors of the company and of every class of them.

(7) The 2[Company Law Board] may, if it thinks fit, adjourn the proceedings in order that an arrangement may be made to the satis- faction of the 2[Company Law Board] for the purchase of the interests of dissentient members; and may give such directions and make such orders as it thinks fit for facilitating, or carrying into effect, any such arrangement : Provided that no part of the capital of the company may be ex- pended in any such purchase.

Alternation to be registered within three months.

18.Alternation to be registered within three months.3[(1) A certified copy of the order of the 2[Company Law Board] made under

sub-section (5) of section 17 confirming the alteration, together with a printed copy of the memorandum as altered, shall, within three months from the date of the order, be filed by the company with the Registrar who shall register the same and certify the registration under his hand within one month from the date of the filing of such documents.)

(2)The certificate shall be conclusive evidence that all the re- quirements of this Act with respect to the alteration and the confir- mation thereof have been complied with, and thenceforth the memorandum as so altered shall be the memorandum of the company.

(3)Where the alteration involves a transfer of the registered office from, one state to another, a certified copy of the order ----------------------------------------------------------------------

1 Subs. by Act . 65 of 1960, s. 6, for sub-section (4). 2 Subs. by Act 41 of 1974, s. 5, for "Court" (w.e.f. 1-2-1975).

3 Subs. by Act 65 of 1960, s. 7, for sub-section (1). ---------------------------------------------------------------------- 72/2 confirming the alteration shall be filed by the company with the Registrar of each of the States, and the Registrar of each such State shall register the same, and shall certify under his hand the registration thereof; and the Registrar of the State from which such office is transferred shall send to the Registrar of the other State all documents relating to the company registered, recorded or filed in his office.

(4) The 1[Company Law Board] may, at any time, by order, extend the time for the filing of documents 2[or for the registration of the alteration] under this section by such period as it thinks proper. 19 Effect of failure to register.

19.Effect of failure to register.(1) No such alteration as is referred to in section 17 shall have any effect until it has been duly registered in accordance with the provisions of section 18.

3[(2) If the documents required to be filed with the Registrar under section 18 are not filed within the time allowed under that section, such alteration and the order of the 1[Company Law Board]

made under sub-section (5) of section 17 and all proceedings connected therewith, shall, at the expiry of such period, become void and inoperative : Provided that the 1[Company Law Board] may, on sufficient cause shown, revive the order on application made within a further period of one month.] Provisions with respect to names of companies

Companies not to be registered with undesirable names.

20.Companies not to be registered with undesirable names.(1) No company shall be registered by a name which, in the opinion of the Central Government, is undesirable.

(2) Without prejudice to the generality of the foregoing power, a name which is identical with, or too nearly resembles, the name by which a company in existence has been previously registered, may be deemed to be undesirable by the Central Government within the meaning

of sub-section (1). ---------------------------------------------------------------------- 1 Subs. by Act 41 of 1974, s. 5, for "Court" (w.e.f. 1-2-19 75). 2 Ins. by Act 65 of 1960, s. 7.

3 Subs. by s. 8, ibid., for sub-section (2). ---------------------------------------------------------------------- 72/3

Change of name by company. *21.Change of name by company. A company may, by special resolution and with the approval of the Central Government signified in writing, change its name: 1[Provided that no such approval shall be required where the only change in the name of a company is the addition thereto or, as the case may be, the deletion therefrom, of the word "Private", consequent on the conversion in accordance with the provisions of this Act of a public company into a private company or of a private company into a public company.]

Rectification of name of company.

22.Rectification of name of company.(1) If, through inadvertence or otherwise, a company on its first registration or on its registration by a new name, is registered by a name which, in the opinion of the Central Government, is identical with, or too nearly resembles, the name by which a company in existence has been previously registered, whether under this Act or any previous companies law, the first-mentioned company- (a)may, by ordinary resolution and with the previous approval of the Central Government signified in writing, change its name or new name; and ---------------------------------------------------------------------- * In its application to Government Companies, section 21 shall be read along with the following proviso: "Provided that nothing in this section shall apply to a Government Company where the change in its name consists only in the deletion of the word 'Private' therefrom": Vide Notification No.GSR 1649 dt. 13.11.65, Gaz. of India, Pt.II, Sec. 3(i), p. 1733-34 (issued under s. 620). 1 Added by Act 31 of 1965, s. 6 (w.e.f. 15-10-1965). ---------------------------------------------------------------------- 72A (b)shall,if the Central Government so, directs within twelve months of its first registration or registration by its new name, as the case may be, or within twelve months of the commencement of this Act, whichever is later, by ordinary resolution and with the previous approval of the Central Government signified in writing, change its name or new name within a period of three months from the date of the direction or such longer period as the Central Government may think fit to allow.

(2)If a company makes default in complying with any direction

given under clause (b) of sub-section (1), the company, and every officer who is in default, shall be punishable with fine which may extend to one hundred rupees for every day during which the default continues.

Registration of change of name and effect thereof.

*23.Registration of change of name and effect thereof.(1) Where a company changes its name in pursuance of section 21 or 22, the Registrar shall enter the new name on the Register in the place of the former name, and shall issue a fresh certificate of incorporation with the necessary alterations embodied therein ; and the change of name shall be complete and effective only on the issue of such a certificate.

(2)The Registrar shall also make the necessary alteration in the memorandum of association of the company.

(3)The change of name shall not affect any rights or obligations of the company, or render defective any legal proceedings by or against it; and any legal proceedings which might have been continued or commenced by or against the company by its former name may be continued by or against the company by its new name.

Change of existing private limited companies.

24.Change of existing private limited companies. (1) In the case of a company which was a private limited company immediately before the commencement of this Act, the Registrar shall enter the word 'Private' before the word 'Limited' in the name of the company upon the register and shall also make the necessary alterations in the certificate of incorporation issued to the company and in its memorandum of association.

(2) Sub-section (3) of section 23 shall apply to a change of

name under sub-section (1), as it applies to a change of name under section 21. ---------------------------------------------------------------------- *In its application to Government Companies section 23 shall be read along with the following sub-section:- "(1A) Where the change in the name of a Government Company consists only in the deletion of the word "Private" therefrom, that Government Company shall, not later than three months from the date thereof,inform the Registrar of the aforesaid change and thereupon the Registrar shall delete the word 'Private' before the word 'Limited' in the name of the Company upon the register and shall also make the necessary alterations in the certificate of incorporation issued to the company": Vide Notifn. No. (GSR 1649 dt. 13.11.1965, Gaz. of India, Pt.II, Sec.3(i), p-1733-34 (issued under s. 620). ---------------------------------------------------------------------- 72B

Power to dispense with "Limited" in name of charitable or othercompany. 25.Power to dispense with "Limited" in name of charitable or

other company. (1) Where it is proved to the satisfaction of the Central Government that an association- (a)is about to be formed as a limited company for promoting commerce, art, science, religion, charity or any other useful object, and (b)intends to apply its profits, if any, or other income in promoting its objects, and to prohibit the payment of any dividend to its members, the Central Government may, by licence, direct that the association may be registered as a company with limited liability, without the addition to its name of the word " Limited" or the words "Private Limited ".

(2)The association may thereupon be registered accordingly; and on registration shall enjoy all the privileges, and (subject to the provisions of this section) be subject to all the obligations, of limited companies.

(3) Where it is proved to the satisfaction of the Central Government- (a)that the objects of a company registered under this Act as a limited company are restricted to those specified in clause

(a) of sub-section (1); and (b)that by its constitution the company is required to apply its profits, if any, or other income in promoting its objects and is prohibited from paying any dividend to its members, 73 the Central Government may, by licence, authorise the company by a special resolution to change its name, including or consisting of the omission of the word "Limited" or the words "Private Limited "; and section 23 shall apply to a change of name under this sub-section as it applies to a change of name under section 21.

(4) A firm may be a member of any association or company licensed under this section, but on the dissolution of the firm, its membership of the association or company shall cease.

(5) A licence may be granted by the Central Government under this section on such conditions and subject to such regulations as it thinks fit, and those conditions and regulations shall be binding on the body to which the licence is granted, and where the grant is under

sub-section (1), shall, if the Central Government so directs, be inserted in the memorandum, or in the articles, or partly in the one and partly in the other.

1[(6) It shall not be necessary for a body to which a licence is so granted to use the word " Limited " or the words " Private Limited" as any part of its name and, unless its articles otherwise provide, such body shall, if the Central Government by general or special. order so directs and to the extent specified in the direction, be exempt from such of the provisions of this Act as may be specified therein.]

(7) The licence may at any time be revoked by the Central Gov- ernment, and upon revocation, the Registrar shall enter the word "Limited" or the words "Private Limited " at the end of the name upon the register of the body to which it was granted; and the body shall cease to enjoy the exemption granted by this section: Provided that, before a licence is so revoked, the Central Government shall give notice in writing of its intention to the body, and shall afford it an opportunity of being heard in opposition to the revocation.

2[(8) (a) A body in respect of which a licence under this section is in force shall not alter the provisions of its memorandum with respect to its objects except with the previous approval of the Central Government signified in writing. (b) The Central Government may revoke the licence of such a body if it contravenes the provisions of clause (a). ----------------------------------------------------------------------

1 Subs. by Act 65 of 1960 s. 9, for sub-section (6).

2 Subs. by s. 9, ibid., for sub-section (8). ---------------------------------------------------------------------- 74 (c)In according the approval referred to in clause (a), the Central Government may vary the licence by making it subject to such conditions and regulations as that Government thinks fit, in lieu of, or in addition to, the conditions and regulations, if any, to which the licence was formerly subject. (d)Where the alteration proposed in the provisions of the memorandum of a body under this sub-section is with respect to the objects of the body so far as may be required to enable it to do any

of the things specified in clauses (a) to (g) of sub-section (1) of section 17, the provisions of this sub-section shall be in addition to, and not in derogation of, the provisions of that section.]

(9) Upon the revocation of a licence granted under this section to a body the name of which contains the words "Chamber of Commerce", that body shall, within a period of three months from the date of revocation or such longer period as the Central Government may think fit to allow, change its name to a name which does not contain those words; and- (a)the notice to be given under the proviso to sub-section

(7) to that body shall include a statement of the effect of the foregoing provisions of this sub-section; and (b) section 23 shall apply to a change of name under this sub-section as it applies to a change of name under section

(10) If the body makes default in complying with the requirements

of sub-section (9),it shall be punishable with fine which may extend to five hundred rupees for every day during which the default continues. Articles of Association.

Articles prescribing regulations. 26.Articles prescribing regulations.There may in the case of a public company limited by shares, and there shall in the case of an unlimited company or a company limited by guarantee or a private company limited by shares, be registered with the memorandum, articles of association signed by the subscribers of the memorandum, prescribing regulations for the company.

Regulations required in case of unlimited company, company limited byguarantee or private company limited by shares. 27.Regulations required in case of unlimited company, company

limited by guarantee or private company limited by shares.(1) In the case of an unlimited company, the articles shall state the number of members with which the company is to be registered and, if the company has a share capital, the amount of share capital with which the Company is to be registered. 75

(2)In the case of a company limited by guarantee, the articles shall state the number of members with which the company is to be registered.

(3)In the case of a private company having a share capital, the articles shall contain provisions relating to the matters specified in

sub-clauses (a), (b) and (c) of clause (iii) of sub-section (1) of section 3; and in the case of any other private company, the articles shall contain provisions relating to the matters specified in the said sub-clauses (b) and (c).

Adoption and application of Table A in the case of companies limitedby shares. 28.Adoption and application of Table A in the case of companies

limited by shares. (1) The articles of association of a company limited by shares may adopt all or any of the regulations contained in Table A in Schedule I.

(2) In the case of any such company which is registered after the commencement of this Act, if articles are not registered, or if articles are registered, in so far as the articles do not exclude or modify the regulations contained in Table A aforesaid, those regula- tions shall, so far as applicable, be the regulations of the company in the same manner and to the same extent as if they were contained in duly registered articles.

Form of articles in the case of other companies. 29.Form of articles in the case of other companies.The articles of a association of any company, not being a company limited by shares, shall be in such one of the Forms in Tables C, D and E in Schedule I as may be applicable, or in a Form as near thereto as circumstances admit: 1[Provided that nothing in this section shall be deemed to pre- vent a company from including any additional matters in its articles in so far as they are not inconsistent with the provisions contained in the Form in any of the Tables C, D and E, adopted by the company.]

Form and signature of articles. 30.Form and signature of articles. Articles shall- (a) be printed; (b) be divided into paragraphs numbered consecutively ; and (c) be signed by each subscriber of the memorandum of asso- ciation (who shall add his address, description and occu- pation, if any,) in the presence of at least one witness who shall attest the signature and shall likewise add his address, description and occupation, if any. ---------------------------------------------------------------------- 1 Ins. by Act 65 of 1960, s. 10. ---------------------------------------------------------------------- 76

Alteration of articles by special resolution.

31.Alteration of articles by special resolution.(1) Subject to the provisions of this Act and to the conditions contained in its memorandum, a company may, by special resolution, alter its articles: 1[Provided that no alteration made in the articles under this subsection which has the effect of converting a public company into a private company, shall have effect unless such alteration has been approved by the Central Government.]

(2)Any alteration so made shall, subject to the provisions of this Act, be as valid as if originally contained in the articles and be subject in like manner to alteration by special resolution. 1[(2A) Where any alteration such as is referred to in the proviso

to sub-section (1) has been approved by the Central Government, a printed copy of the articles as altered shall be filed by the company with the Registrar within one month of the date of receipt of the order of approval.]

(3) The power of altering articles under this section shall, in the case of any company formed and registered under Act No. 19 of 1857 and Act No. 7 of 1360 or either of them, extend to altering any provisions in Table B annexed to Act 19 of 1857, and shall also, in the case of an unlimited company formed and registered under the said Acts or either of them, extend to altering any regulations relating to the amount of capital or its distribution into shares, notwithstanding that those regulations are contained in the memorandum. Change of registration of companies

Registration of unlimited company as limited, etc.

32.Registration of unlimited company as limited, etc. (1) Subject to the provisions of this section,- (a)a company registered as unlimited may register under this Act as a limited company; and (b) a company already registered as a. limited company may re-register under this Act.

(2) On registration pursuance of this section, the Registrar shall close the former registration of the company, and may dispense with the delivery to him of copies of any documents with copies of which he was furnished on the occasion of the original registration of the company; but, save as aforesaid, the registration shall take place in the same manner and shall have effect, as if it were the first registration of the company under this Act. ---------------------------------------------------------------------- 1 Ins. by Act 65 of 1960, s. 11. ---------------------------------------------------------------------- 77

(3) The registration of an unlimited company as a limited com- pany under this section shall not affect any debts, liabilities, obligations or contracts incurred or entered into, by, to, with or on behalf of, the company before the registration, and those debts, liabilities, obligations and contracts may be enforced in the manner provided by Part IX of this Act in the case of a company registered in pursuance of that Part. General provisions with respect to memorandum and articles.

Registration of memorandum and articles.

33.Registration of memorandum and articles.(1) There shall be presented for registration, to the Registrar of the State in which the registered office of the company is stated by the memorandum to be situate- (a) the memorandum of the company; (b) its articles, if any ; and 1[(c) the agreement, if any, which the company proposes to enter into with any individual for appointment as its managing or whole-time director or manager.]

(2) A declaration by an advocate of the Supreme Court or of a High Court, an attorney or a plader entitled to appear before a High Court,or 2["a secretary,or a chartered accountant,in whole-time practice in India"] who is engaged in the formation of a company, or by a person named in the articles as a director, 2* * * manager or secretary of the company, that all the requirements of this Act and the rules thereunder have been complied with in respect of registration and matters precede- nt and incidental thereto, shall be filed with the Registrar; and the Registrar may accept such a declaration as sufficient evidence of such compliance. 3[Explanation.-For the purposes of this sub-section, "chartered accountant in whole-time practice in India" means a chartered

accountant within the meaning of clause (b) of sub-section (1) of section 2 of the Chartered Accountants Act, 1949 (38 of 1949), who is practising in India and who is not in fultime employment.]

(3)If the Registrar is satisfied that all the requirements aforesaid have been complied with by the company and that it is authorised to be registered under this Act, he shall retain and register the memorandum, the articles, if any, and the agreement

referred to in clause (c) of sub-section (1), if any.

Effect of Registration.

34.Effect of Registration.(1) On the registration of the memorandum of a company, the Registrar shall certify under his hand that the company is incorporated and, in the case of a limited company, that the company is limited. ---------------------------------------------------------------------- 1 Subs. by Act 31 of 1988, s. 6 (w.e.f. 15-6-1988). 2. Omitted by s.6, ibid. (w.e.f. 15-6-1988). 3. Added by s.6, ibid (w.e.f. 15-6-1988). ---------------------------------------------------------------------- 78

(2) From the date of incorporation mentioned in the certificate of incorporation, such of the subscribers of the memorandum and other persons, as may from time to time be members of the company, shall be a body corporate by the name contained in the memorandum, capable forthwith of exercising all the functions of an incorporated company, and having perpetual succession and a common seal, but with such liability on the part of the members to contribute to the assets of the company in the event of its being wound up as is mentioned in this Act.

Conclusiveness of certificate of incorporation. 35.Conclusiveness of certificate of incorporation. A certificate of incorporation given by the Registrar in respect of any association shall be conclusive evidence that all the requirements of this Act have been complied with in respect of registration and matters precedent and incidental thereto, and that the association is a company authorised to be registered and duly registered under this Act.

Effect of memorandum and articles.

36.Effect of memorandum and articles.(1) Subject to the provisions of this Act, the memorandum and articles shall, when registered, bind the company and the members thereof to the same extent as if they respectively had been signed by the company and by each member, and contained covenants on its and his part to observe all the provisions of the memorandum and of the articles.

(2) All money payable by any member to the company under the memorandum or articles shall be a debt due from him to the company.

Provision as to companies limited by guarantee.

37.Provision as to companies limited by guarantee.(1) In the case of a company limited by guarantee and not having a share capital, and registered on or after the first day of April,1914, every provision in the memorandum or articles or in any resolution of the company purporting to give any person a right to participate in the divisible profits of the company otherwise than as a member shall be void.

(2) For the purpose of the provisions of this Act relating to the memorandum of a company limited by guarantee and of this section, every provision in the memorandum or articles, or in any resolution, of any company limited by guarantee and registered on or after the first day of April, 1914, purporting to divide the undertaking of the company into shares or interests, shall be treated as a provision for a share capital, notwithstanding that the nominal amount or number of the shares or interests is not specified thereby. 79

Effect of alteration in memorandum or articles. 38.Effect of alteration in memorandum or articles. Notwithstanding anything in the memorandum or articles of a company, no member of the company shall be bound by an alteration made in the memorandum or articles after the date on which he became a member, if and so far as the alteration requires him to take or subscribe for more shares than the number held by him at the date on which the alteration is made, or in any way increases his liability as at that date, to contribute to the share capital of, or otherwise to pay money to, the company: 1[Provided that this section shall not apply- (a)in any case where the member agrees in writing either before or after a particular alteration is made, to be bound by the alteration; or (b)in any case where the company is a club or the company is any other association and the alteration requires the member to pay recurring or periodical subscriptions or charges at a higher rate although he does not agree in writing to be bound by the alteration.]

Copies of memorandum and articles, etc, to be given to members. 39.Copies of memorandum and articles, etc, to be given to

members.(1) A company shall, on being so required by a member, send to him within seven days of the requirement and subject to the payment of a fee of one rupee, a copy each of the following documents as in force for the time being- (a) the memorandum; (b) the articles, if any; (c)the agreement, if any, entered into or proposed to be entered into, by the company with any person appointed or to be appointed as its managing agent or as its secretaries and treasurers ; and (d)every other agreement and every resolution referred to in section 192, if and in so far as they have not been embodied in the memorandum or articles.

(2) If a company makes default in complying with the requirements of this section, the company, and every officer of the company who is in default, shall be punishable, for each offence, with fine which may extend to fifty rupees.

Alteration of memorandum or articles, etc., to be noted in every copy. 40.Alteration of memorandum or articles, etc., to be noted in

every copy.(1) Where an alteration is made in the memorandum or articles of a company, in the agreement referred to in clause (c) of ---------------------------------------------------------------------- 1 Subs. by Act 65 of 1960, s. 12, for the proviso. ---------------------------------------------------------------------- 80

sub-section (1) of section 39 or in any other agreement, or any resolution, referred to in section 192, every copy of the memorandum, articles, agreement or resolution issued after the date of the alteration shall be in accordance with the alteration.

(2) If, at any time, the company issues any copies of the memo- randum, articles, resolution or agreement, which are not in accordance with the alteration or alterations made therein before that time, the company, and every officer of the company who is in default, shall be punishable with fine which may extend to ten rupees for each copy so issued. Membership of company

Definition of "member".

41.Definition of "member". (1) The subscribers of the memorandum of a company shall be deemed to have agreed to become members of the company, and on its registration, shall be entered as members in its register of members.

(2)Every other person who 1[agrees in writing] to become a member of a company and whose name is entered in its register of members, shall be a member of the company.

2[(3) Every person holding equity share capital or company and whose name is entered as beneficial owner in the records of the depository shall be deemed to be a members of the conserned company.]

Membership of holding company.

42.Membership of holding company.(1) Except in the cases mentioned in this section, a body corporate cannot be a member of a company which is its holding company and any allotment or transfer of shares in a company to its subsidiary shall be void.

(2) Nothing in this section shall apply- (a)where the subsidiary is concerned as the legal representative of a deceased member of the holding company; or (b)where the subsidiary is concerned as trustee, unless the holding company or a subsidiary thereof is beneficially interested under the trust and is not so interested only by way of security for the purposes of a transaction entered into by it in the ordinary course of a business which includes the lending of money.

(3) This section shall not prevent a subsidiary from continuing to be a member of its holding company if it was a member thereof either at the commencement of this Act or before becoming a subsidiary of the holding company, but, except in the cases referred to in sub-

section (2), the subsidiary shall have no right to vote at meetings of the holding company or of any class of members thereof. ---------------------------------------------------------------------- 1 Subs. by Act 65 of 1960, s, 13, for " agrees." 2. Ins. by Act 22 of 1996, s.31 and Sch. (w.e.f. 20-9-1995). ---------------------------------------------------------------------- 81

(4) Subject to sub-section (2), sub-sections (1) and (3) shall apply in relation to a nominee for a body corporate which is a

subsidiary, as if references in the said sub-sections (1) and (3) to such a body corporate included references to a nominee for it.

(5) In relation to a holding company which is either a company limited by guarantee or an unlimited company, the reference in this section to shares shall, whether or not the company has a share capital, be construed as including a reference to the interest of its members as such, whatever the form of that interest. Private companies

Consequences of default in complying with conditions constituting acompany a private company. 43.Consequences of default in complying with conditions constituting a company a private company. Where the articles of a company include the provisions which, under clause (iii) of sub-

section (1) of section 3, are required to be included in the articles of a company in order to constitute it a private company, but default is made in complying with any of those provisions, the company shall cease to be entitled to the privileges and exemptions conferred on private companies by or under this Act, and this Act shall apply to the company as if it were not a private company: Provided that the 1[Company Law Board] on being satisfied that the failure to comply with the conditions was accidental or due to inadvertence or to some other sufficient cause, or that on other grounds it is just and equitable to grant relief, may, on the application of the company or any other person interested and on such terms and conditions as seem to the 1[Company Law Board] just and expedient, order that the company be relieved from such consequences as aforesaid. 43A. Private company to become public company in certain cases. 2[43A.Private company to become public company in certain cases.

(1) Save as otherwise provided in this section, where not less than twenty-five per cent. of the paid-up share capital of a private company having a share capital, is held by one or more bodies cor- porate, the private company shall,- (a)on and from the date on which the aforesaid percentage is first held by such body or bodies corporate, or (b)where the aforesaid percentage has been first so held before the commencement of the Companies (Amendment) Act, 1960 (65 of 1960), on and from the expiry of the period of three months from the date of such commencement unless within that period the aforesaid percentage is reduced ---------------------------------------------------------------------- 1 Subs. by Act 31 of 1988, s. 67 (w.e.f. 31-5-1991). 2 Ins. by Act 65 of 1960, s.14. ---------------------------------------------------------------------- 82 below twenty-five per cent. of the paid-up share capital of the private company, become by virtue of this section a public company: Provided that even after the private company has so become a public company, its articles of association may include provisions

relating to the matters specified in clause (iii) of sub-section (1) of section 3 and the number of its members may be, or may at any time be reduced, below seven : Provided further that in computing the aforesaid percentage, account shall not be taken of any share in the private company held by a banking company, if, but only if, the following conditions are satisfied in respect of such share, namely:- (a) that the share- (i) forms part of the subject-matter of a trust, (ii) has not been set apart for the benefit of any body corporate, and (iii)is held by the banking company either as a trustee of that trust or in its own name on behalf of a trustee of that trust; or (b) that the share- (i) forms part of the estate of a deceased person, (ii)has not been bequeathed by the deceased person by his will to any body corporate, and (iii)is held by the banking company either as an executor or administrator of the deceased person or in its own name on behalf of an executor or administrator of the deceased person; and the Registrar may, for the purpose of satisfying himself that any share is held in the private company by a banking company as aforesaid, call for at any time from the banking company such books and papers as he considers necessary. 1[Explanation.- For the purposes of this sub-section, "bodies corporate" means public companies, or private companies which had become public companies by virtue of this section.]

2[(1A) Without prejudice to the provisions of sub-section (1), where the average annual turnover of a private company, whether in existence at the commencement of the Companies (Amendment) Act, ---------------------------------------------------------------------- 1 Added by Act 31 of 1988, s. 7 (w.e.f. 15.6.1988). 2 Ins. by Act 41 of 1974 s.6 (w.e.f. 1-2-1975). ---------------------------------------------------------------------- 83 1974, (41 of 1974) or incorporated thereafter, is not, during the relevant period 1[less than such amount as may be prescribed] the pri- vate company shall, irrespective of its paid-up share capital, become, on and from the expiry of a period of three months from the last day of the relevant period during which the private company had the said average annual turnover, a public company by virtue of this sub- section : Provided that even after the private company has so become a public company, its articles of association may include provisions

relating to the matters specified in clause (iii) of sub-section (1) of section 3 and the number of its members may be, or may at any time be reduced, below seven. (1B) Where not less than twenty-five per cent. of the paid-up share capital of a public company, having share capital, is held by a private company, the private company shall,- (a) on and from the date on which the aforesaid percentage is first held by it after the commencement of the Companies (Amendment) Act, 1974, (41 of 1974), or (b)where the aforesaid percentage has been first so held before the commencement of the Companies (Amendment) Act, 1974,( 41 of 1974) on and from the expiry of the period of three months from the date of such commencement, unless within that period the aforesaid percentage is reduced below twenty-five per cent. of the paid-up share capital of the public company, become, by virtue of this sub-section, a public company, and thereupon all other provisions of this section shall apply thereto : Provided that even after the private company has so become a public company, its articles of association may include provisions

relating to the matters specified in clause (iii) of sub-section (1) of section 3 and the number of its members may be, or may at any time be reduced, below seven.] 2[(1C)Where, after the commencement of the Companies (Amendment) Act, 1988,(31 of 1988) a private company accepts, after an invitation is made by an advertisement,or renews, deposits from the public, other than its members, directors or their relatives, such private company shall,on and from the date on which such acceptance or renewal, as the case may be, is first made after such commencement, become a public company and thereupon all the provisions of this section shall apply thereto: Provided that even after the private company has so become a public company, its articles of association may include provisions

relating to the matters specified in clause (iii) of sub-section (1) of section 3 and the number of its members may be, or may at any time be, reduced below seven.]

(2) Within three months from the date on which a private company becomes a public company by virtue of this section, the company shall inform the Registrar that it has become a public company as aforesaid, and thereupon the Registrar shall delete the word "Private" before the word "Limited" in the name of the company upon the register and shall also make the necessary alterations in the certificate of incorporation issued to the company and in its memorandum of association. ---------------------------------------------------------------------- 1 Subs. by Act 31 of 1988, s. 7 (w.e.f. 15.6.88). 2 Ins. by s.7, ibid (w.e.f. 15.6.88). ---------------------------------------------------------------------- 84/1

(3) Sub-section (3) of section 23 shall apply to a change of

name under sub-section (2) as it applies to a change of name under section 21.

(4)A private company which has become a public company by virtue of this section shall continue to be a public company until it has, with the approval of the Central Government and in accordance with the provisions of this Act, again become a private company.

(5)If a company makes default in complying with sub-section (2), the company and every officer of the company who is in default, shall be punishable with fine which may extend to five hundred rupees for every day during which the default continues. 1* * * * * ---------------------------------------------------------------------- 1 Omitted by Act 31 of 1988, s. 7 (w.e.f. 15-6-1988). ---------------------------------------------------------------------- 84/2

(8)Every private company having a share capital shall, in

addition to the certificate referred to in sub-section (2) of section 161, file with the Registrar along with the annual return a second certificate signed by both the signatories of the return, stating either- (a) that since the date of the annual general meeting with reference to which the last return was submitted, or in the case of a first return, since the date of the incorporation of the private company, no body or bodies corporate has or have held twenty-five per cent. or more of its paid-up share capital, 1* * * 1* * * * * 2[(c) that the private company, irrespective of its paid-up share capital, did not have, during the relevant period, an average annual turnover of 3[such amount as is referred to in such-section (1A) or more.]] 4["(d) that the private company did not accept or renew deposits from the public.]

2[(9)Every private company, having share capital, shall file with the Registrar along with the annual return a certificate signed by both the signatories of the return, stating that since the date of the annual general meeting with reference to which the last return was submitted, or in the case of a first return, since the date of the incorporation of the private company, it did not hold twenty-five per cent. or more of the paid-up share capital of one or more public companies.

4[(10) Subject to the other provisions of this Act, any reference in this section to accepting, after an invitation is made by an advertisement, or renewing deposits from the public shall be construed as including a reference to accepting, after an invitation is made by an advertisement, or renewing deposits from any section of the public and the provisions of section 67 shall, so far as may be, apply, as if the reference to invitation to the public to subscribe for shares or debentures occurring in that section, includes a reference to invitation from the public for acceptance of deposits.] ---------------------------------------------------------------------- 1 Omitted by Act 31 of 1988, s. 7 (w.e.f. 15.6.88). 2 Ins. by Act 41 of 1974, s.6 (w.e.f. 1-2-1975). 3 Subs. by Act 31 of 1988 s.7 (w.e.f. 15-6-88). 4 Ins. by s.7, ibid (w.e.f. 15-6-1988). ---------------------------------------------------------------------- 84/3 Explanation.-For the purposes of this section,-- (a)"relevant period" means the period of three consecutive financial years,- (i)immediately preceding the commencement of the Companies (Amendment) Act, 1974, (41 of 1974), or (ii)a part of which immediately preceded such commencement and the other part of which immediately, followed such commencement, or (iii)immediately following such commencement or at any time thereafter; (b) "turnover", of a company, means the aggregate value of the realisation made from the sale, supply or distribution of goods or on account of services rendered, or both, by the company during a financial year.] 1["(c) "deposit" has the same meaning as in section 58A.]

Prospectus or statement in lieu of prospectus to be filed by privatecompany on ceasing to be private company. 44.Prospectus or statement in lieu of prospectus to be filed by

private company on ceasing to be private company. (1) If a company, being a private company, alters its article in such a manner that they no longer include the provisions which, under clause (iii) of sub-

section (1) of section 3, are required to be included in the articles of a company in order to constitute it a private company, the company- (a) shall, as on the date of the alteration, cease to be a private company; and (b) shall, within a period of 2[thirty] days after the said date, file with the Registrar either a prospectus or a statement in lieu of prospectus, as specified in sub-section

(2).

(2) (a) Every prospectus filed under sub-section (1) shall state the matters specified in Part I of Schedule II and set out the reports specified in Part II of that Schedule, and the said Parts I and II shall have effect subject to the provisions contained in Part III of that Schedule. (b) Every statement in lieu of prospectus filed under sub-

section (1) shall be in the form and contain the particulars set out in Part I of Schedule IV, and in the cases mentioned in Part II of the Schedule, shall set out the reports specified therein, and the said Parts I and II ---------------------------------------------------------------------- 1 Ins. by Act 31 of 1988, s.7 (w.e.f. 15-6-1988). 2 Subs. by Act 31 of 1965, s. 62 and Sch., for "fourteen" (w.e.f. 15-10-1965). ---------------------------------------------------------------------- 84A shall have effect subject to the provisions contained in Part III of that Schedule. (c) Where the persons making any such report as is referred to in clause (a) or (b) have made therein, or have, without giving the reasons indicated therein, any such adjustments as are mentioned in clause 32 of Schedule II or clause 5 of Schedule IV, as the case may be, the prospectus or statement in lieu of prospectus filed as aforesaid, shall have endorsed thereon or attached thereto, a written 85 statement signed by those persons, setting out the adjustments and giving the reasons therefor.

(3) If default is made in complying with sub-section (1) or (2), the company, and every officer of the company who is in default, shall be punishable with fine which may extend to five hundred rupees for every day during which the default continues.

(4) Where any prospectus or statement in lieu of prospectus filed under this section includes any untrue statement, any person who authorised the filing of such prospectus or statement shall be punishable with imprisonment for a term which may extend to two years, or with fine which may extend to five thousand rupees, or with both, unless he proves either that the statement was immaterial or that he had reasonable ground to believe, and did up to the time of the filing of the prospectus or statement believe, that the statement was true.

(5) For the purposes of this section- (a) a statement included in a prospectus or a statement in lieu of prospectus shall be deemed to be untrue if it is misleading in the form and context in which it is included; and (b) where the omission from a prospectus or a statement in lieu of prospectus of any matter is calculated to mislead, the prospects or statement in lieu of prospectus shall be deemed, in respect of such omission, to be a prospectus or a statement in lieu of prospectus in which an untrue statement is included.

(6) For the purposes of sub-section (4) and clause (a) of sub-

section (5), the expression "included" when used with reference to a prospectus or statement in lieu of prospectus, means included in the prospectus or statement in lieu of prospectus itself or contained in any report or memorandum appearing on the face thereof, or by reference incorporated therein. Reduction of Number of Members below Legal Minimum

Members severally liable for debts where business carried on withfewer than seven, or in the case of a private company, two members. 45.Members severally liable for debts where business carried on with fewer than seven, or in the case of a private company, two members.If at any time the number of members of a company is reduced,in the case of a public company, below seven, or in the case of a private company, below two, and the company carries on business for more than six months while the number is so reduced, every person who is a member of the company during the time that it so carries on business after those six months and is cognisant of the fact that it is carrying on business with fewer than seven members or two 86 members, as the case may be, shall be severally liable for the payment of the whole debts of the company contracted during that time, and may be severally sued therefor. Contracts and deeds, investments, seal, etc.

Form of contracts.

46.Form of contracts.(1) Contracts on behalf of a company may be made as follows: - (a) a contract which, if made between private persons, would by law be required to be in writing signed by the parties to be charged therewith, may be made on behalf of the company in writing signed by any person acting under its authority, express or implied, and may in the same manner be varied or discharged; (b) a contract which, if made between private persons, would by law be valid although made by parol only and not reduced into writing, may be made by parol on behalf of the company by any person acting under its authority, express or implied, and may in the same manner be varied or discharged.

(2) A contract made according to this section shall bind the company.

Bills of exchange and promissory notes. 47.Bills of exchange and promissory notes. A bill of exchange, hundi or promissory note shall be deemed to have been made, accepted, drawn or endorsed on behalf of a company if drawn, accepted, made, or endorsed in the name of, or on behalf or on account of, the company by any person acting under its authority, express or implied.

Execution of deeds.

48.Execution of deeds.(1) A company any, by writing under its common seal, empower any person, either generally or in respect of any specified matters, as its attorney, to execute deeds on its behalf in any place either in or outside India.

(2) A deed signed by such an attorney on behalf of the company and under his seal where sealing is required, shall bind the company and have the same effect as if it were under its common seal.

Investments of company to be held in its own name.

49.Investments of company to be held in its own name. (1) Save

as otherwise provided in sub-sections (2) to (5) 1[or any other law for the time being in force] and subject to the provisions of sub-

sections (6) to (8),- (a)all investments made by a company on its own behalf shall be made and held by it in its own name; and ---------------------------------------------------------------------- 1 Ins. by Act 65 of 1960, s. 15. ---------------------------------------------------------------------- 87 (b)where any such investments are not so held at the commencement of this Act the company shall, within a period of one year from such commencement, either cause them to be transferred to, and hold them in, its own name, or dispose of them.

(2) Where the company has a right to appoint any person or persons, or where any nominee or nominees of the company has or have been appointed, as a director or directors of any other body corporate, shares in such other body corporate to an amount not exceeding the nominal value of the qualification shares which are required to be held by a director thereof, may be registered or held by such company jointly in the names of itself and of each such person or nominee or in the name of each such person or nominee 1** *.

(3) A company may hold any shares in its subsidiary in the name or names of any nominee or nominees of the company, if and in so far as it is necessary so to do, to ensure that the number of members of the subsidiary is not reduced, where it is a public company, below seven, and where it is a private company, below two.

(4) Sub-section (1) shall not apply to investments made by a company whose principal business consists of the buying and selling of shares or securities.

(5) Nothing in this section shall be deemed to prevent a company- (a)from depositing,, with a bank, being the bankers of the company, any shares or securities for the collection of any dividend or interest payable thereon ; or 2[(aa) from depositing with, or transferring to, or holding in the name of, the State Bank of India or a Scheduled Bank, being the bankers of the company, shares or securities, in order to facilitate the transfer thereof; Provided that if thin a period of six months from the date on which the shares or securities are transferred by the company to, or are first held by the company in the name of, the State Bank of India or a Scheduled Bank as aforesaid, no transfer of such shares or securities takes place, the company shall, as soon as practicable after the expiry ---------------------------------------------------------------------- 1 The words "expressly described as a nominee of the company" omitted by Act 65 of 1960, s. 15. 2 Ins. by s. 15, ibid. ---------------------------------------------------------------------- 88 of that period, have the shares or securities retransferred to it from the State Bank of India or the Scheduled Bank or, as the case may be, again hold the shares or securities in its own name; or] (b)from depositing with, or transferring to, any person any shares or securities, by way of security for the repayment of any loan advanced to the company or the performance of any obligation undertaken by it. 1[(c) from holding investments in the name of a depository when such investment are in the form of Securities held by the company as a beneficial owner.]

(6) The certificate or letter of allotment relating to the shares or securities in which investments have been made by a company

shall, except in the cases referred to in sub-sections (4) and (5), be in the custody of such company or 2[with the State Bank of India or a Scheduled Bank], being the bankers of the company.

(7)Where, in pursuance of sub-section (2), (3), (4) or (5), any shares or securities in which investments have been made by a company are not held by it in its own name, the company shall forthwith enter in a register maintained by it for the purpose- (a) the nature, value, and such other particulars as may be necessary fully to identify the shares or securities in question; and (b) the bank or person in whose name or custody the shares or securities are held.

(8) The register kept under sub-section (7) shall be open to the inspection of any member or debenture holder of the company without charge, during business hours, subject to such reasonable restrictions as the company may, by its articles or in general meeting, impose, so that not less than two hours in each day are allowed for inspection.

(9)If default is made in complying with any of the requirements

of subsections (1) to (8), the company and every officer of the company who is in default, shall be punishable with fine which may extend to five thousand rupees.

(10)If any inspection required under sub-section (8) is refused, the 3[Company Law Board] may, by order, direct an immediate inspec- tion, of the register. Nothing in this sub-section shall be construed as prejudicing in

any way the operation of sub-section (9).

(11) in this section, "Securities" includes stock and debentures. ---------------------------------------------------------------------- 1. Ins. by Act 22 of 1996 s.31 and Sch. (w.e.f. 20-9-1995). 2 Subs. by Act 65 of 1960 s. 15, for "with a Scheduled Bank". 3 Subs. by Act 31 of 1988, s. 67 (w.e.f. 31-5-1991). --------------------------------------------------------------------- 89

Power for company to have official seal for use outside India. 50.Power for company to have official seal for use outside

India.(1) A company whose objects require or comprise the transaction of business outside India may, if authorised by its articles, have for use in any territory, district or place not situate in India an official seal which shall be a facsimile of the common seal of the company, with the addition on its face of the name of the territory, district or place where it is to be used.

(2) A company having an official seal for use in any such terri- tory, district or place may by writing under its common seal, autho- rise any person appointed for the purpose in that territory, district or place to affix the official seal to any deed or other document to which the company is a party in that territory, district or place.

(3) The authority of any agent authorised under sub-section (2) shall, as between the company and any person dealing with the agent, continue during the period, if any, mentioned in the instrument conferring the authority, or if no period is there mentioned, until notice of the revocation or determination of the agents authority has been given to the person dealing with him.

(4) The person affixing any such official seal shall, by writing under his hand, certify on the deed or other document to which the seal is affixed, the date on which and the place at which, it is affixed.

(5) A deed or other document to which an official seal is duly affixed shall bind the company as if it had been sealed with the common seal of the company. Service of Documents

Service of documents on company. 51. Service of documents on company. A document may be served on a company or an officer thereof by sending it to the company or officer at the registered office of the company by post under certificate of posting or by registered post, or by leaving it at its registered office: 1[Provided that where the securities are held in a depository, the records of the beneficial ownership may be served by such depository on the company by means of electronic mode or by delivery of floppies or discs.]

Service of documents on Registrar. 52.Service of documents on Registrar. A document may be served on a Registrar by sending it to him at,, his office by post, under a certificate of posting or by registered post,' or by delivering it to or leaving it for, him at his office.

Service of documents on members by company.

53.Service of documents on members by company. (1) A document may be served by a company on any member thereof either personally, or by sending it by post to him to his registered address, or if he has no registered address in India, to the address,if any, within India supp- lied by him to the company for the giving of notices to him.

(2) Where a document is sent by post,- (a)service thereof shall be deemed to be effected by properly addressing, prepaying and posting a letter containing the --------------------------------------------------------------------- 1. Ins. by Act 22 of 1996, s.31 and Sch. (w.e.f. 20-9-1995). --------------------------------------------------------------------- 90 document, provided that where a member has intimated to the company in advance that documents should be sent to him under a certificate of posting or by registered post with or without acknowledgement due and has deposited with the company a sum sufficient to defray the expenses of doing so, service of the document shall not be deemed to be effected unless it is sent in the manner intimated by the member; and (b)1* * * such service shall be deemed to have been effected- (i)in the case of a notice of a meeting, at the expiration of forty-eight hours after the letter containing the same is posted, and (ii)in any other case, at the time at which the letter would be delivered in the ordinary course of post.

(3) A document advertised in a newspaper circulating in the neighbourhood of the registered office of the company shall be deemed to be duly served on the day on which the advertisement appears, on every member of the company who has no registered address in India and has not supplied to the company an address within India for the giving of notices to him.

(4) A document may be served by the company on the jointholders of a share by serving it on the joint-holder named first in the register in respect of the share.

(5) A document may be served by the company on the persons entitled to a share in consequence of the death or insolvency of a member by sending it through the post in a prepaid letter addressed to them by name, or by the title of representatives of the deceased, or assignees of the insolvent, or by any like description, at the address, if any, in India supplied for the purpose by the persons claiming to be so entitled, or until such an address has been so supplied, by serving the document in any manner in which it might have been served if the death or insolvency had not occurred. Authentication of Documents and Proceedings

Authentication of documents and proceedings. 54.Authentication of documents and proceedings.Save as otherwise expressly provided in this Act, a document or proceeding requiring authentication by a company may be signed by a director, the managing agent the secretaries and treasurers, the manager, the secretary or other authorised officer of the company, and need not be under its common seal. ---------------------------------------------------------------------- 1 The words " unless the contrary is proved," omitted by Act 65 of 1960, s. 16. ---------------------------------------------------------------------- 91 PART III PROSPECTUS AND ALLOTMENT, AND OTHER MATTERS RELATING TO ISSUE OF SHARES OR DEBENTURES Prospectus

Dating of prospectus. 55. Dating of prospectus.A prospectus issued by or on behalf of a company or in relation to an intended company shall be dated, and that date shall,unless the contrary is proved, be taken as the date of publication of the prospectus.

Matters to be stated and reports to be set out in prospectus. 56.Matters to be stated and reports to be set out in prospectus.

(1) Every prospectus issued- (a) by or on behalf of a company, or (b)by or on behalf of any person who is or has been engaged or interested in the formation of a company, shall state the matters specified in Part I of Schedule II and set out the reports specified in Part II of that Schedule ; and the said Parts I and II shall have effect subject to the provisions contained in Part III of that Schedule.

(2) A condition requiring or binding an applicant for shares in or debentures of a company to waive compliance with any of the requirements of this section, or purporting to affect him with notice of any contract, document or matter not specifically referred to in the prospectus, shall be void.

(3) No one shall issue any form of application for shares in or debentures of a company, unless the form is accompanid 1[by memorandum containing such salient features or a prospectus as may be prescribed] which complies with he requirements of this section: 1[Provided that a copy of the prospectus shall, on a request being made by any person before the closing of the subscription list, be furnished to him: Provided further that this sub-section shall not apply if it is shown that the form of application was issued either- (a)in connection with a bona fide invitation to a person to enter into an underwriting agreement with respect to the shares or debentures ; or (b)in relation to shares or debentures which were not offered to the public. If any person acts in contravention of the provisions of this sub-section, he shall be punishable with fine which may extend to five thousand rupees.

(4) A director or other person responsible for the prospectus shall not incur any liability by reason of any non-compliance with, or ---------------------------------------------------------------------- 1 Subs. by Act 31 of 1988, s. 8 (w.e.f.31-5-1991). --------------------------------------------------------------------- 92 contravention of, any of the requirements of this section, if- (a)as regards any matter not disclosed, he proves that he had no knowledge thereof ; or (b)he proves that the non-compliance or contravention arose from an honest mistake of fact on his part ; or (c) the non-compliance or contravention was in respect of matters which, in the opinion of the Court dealing with the case 1[were immaterial], or was otherwise such as ought, in the opinion of that Court, having regard to all the circumstances of the case, reasonably to be excused: Provided that no director or other person shall incur any liability in respect of the failure to include in a pros- pectus a statement with respect to the matters specified in clause 18 of Schedule II, unless it is proved that he had knowledge of the matters not disclosed.

(5) This section shall not apply- (a)to the issue to existing members or debenture holders of a company of a prospectus or form of application relating to shares in or debentures of the company, whether an applicant for shares or debentures will or will not have the right to renounce in favour of other persons; or (b)to the issue of a prospectus or form of application relating to shares or debentures which are, or are to be, in all respects uniform with shares or debentures previously issued and for the time being dealt in or quoted on a recognised stock exchange ; but, subject as aforesaid, this section shall apply to a prospectus or a form of application, whether issued on or with reference to the formation of a company or subsequently.

(6) Nothing in this section shall limit or diminish any liability which any person may incur under the general law or under this Act apart from this section.

Expert to be unconnected with formation or management of company. 57.Expert to be unconnected with formation or management of company.A prospectus inviting persons to subscribe for shares in or debentures of a company shall not include a statement purporting to be made by an expert, unless the expert is a person who is not, and has not been, engaged or interested in the formation or promotion, or in the management, of the company. ---------------------------------------------------------------------- 1 Subs. by Act 52 of 1964 s. 3 and Sch. II, for "was immaterial". ---------------------------------------------------------------------- 93

Expert's consent to issue of prospectus containing statement by him. 58.Expert's consent to issue of prospectus containing statement by him. A prospectus inviting persons to subscribe for shares in or debentures of a company and including a statement purporting to be made by an expert shall not be issued, unless- (a)he has given his written consent to the issue thereof with the statement included in the form and context in which it is included, and has not withdrawn such consent before the delivery of a copy of the prospectus for registration; and (b)a statement that he has given and has not withdrawn his consent as aforesaid appears in the prospectus. 58A. Deposits not to be invited without issuing an advertisement. 1[58A.Deposits not to be invited without issuing an

advertisement. (1) The Central Government may, in consultation with the Reserve Bank of India, prescribe the limits up to which, the manner in which and the conditions subject to which deposits may be invited or accepted by a company either from the public or from its members.

(2) No company shall invite, or allow any other person to invite or cause to be invited on its behalf, any deposit unless- (a)such deposit is invited or is caused to be invited in

accordance with the rules made under sub-section (1), and (b)an advertisement, including therein a statement showing the financial position of the company, has been issued by the company in such form and in such manner as may be prescribed.

(3) (a) Every deposit accepted by a company at any time before the commencement of the Companies (Amendment) Act, 1974, (41 of 1974). in accordance with the directions made by the Reserve Bank of India under Chapter IIIB of the Reserve Bank of India Act, 1934, (2 of 1934) shall, unless renewed in accordance with clause (b), be repaid in accordance with the 2[terms and conditions of such deposit.] (b) No deposit referred to in clause (a) shall be renewed by the company after the expiry of the term thereof unless the deposit is such that it could have been accepted if the rules made under sub-

section (1) were in force at the time when the deposit was initially accepted by the company. ---------------------------------------------------------------------- 1 Ins. by Act 41 of 1974, s. 7 (w.e.f. 1-2-1975). 2 Subs. by Act 31 of 1988, s. 9 (w.e.f. 1.9.1989). ---------------------------------------------------------------------- 94 (c) Where, before the commencement of the Companies (Amendment) Act, 1974 (41 of 1974), any deposit was received by a company in con- travention any direction made under Chapter IIIB of the Reserve Bank of India Act, 1934(2 of 1934), repayment of such deposit shall be made in full on or before the 1st day of April, 1975 and such repayment shall be without prejudice to any action that may be taken under the Reserve bank of India Act, 1934 for the acceptance of such deposit in contravention of such direction. 1[(3A) Every deposit accepted by a company after the commencement of the Companies (Amendment) Act, 1988, shall, unless renewed in

accordance with the rules made under subsection (1), be repaid in accordance with the terms and conditions of such deposit.]

(4)Where any deposit is accepted by a company after the com- mencement of the Companies (Amendment) Act, 1974(41 of 1974), in cont-

ravention of the rules made under sub-section (1), repayment of such deposit shall be made by the company within thirty days from the date of acceptance of such deposit or within such further time, not excee- ding thirty days, as the Central Government may, on sufficient cause being shown by the company, allow.

(5)Where a company omits or fails to make repayment of a deposit

in accordance with the provisions of clause (c) of sub-section (3), or

in the case of a deposit referred to in sub-section (4), within the time specified in that sub-section,- (a) the company shall be punishable with fine which shall not be less than twice the amount in relation to which the repayment of the deposit has not been made, and out of the fine, if realised, an amount equal to the amount in relation to which the repayment of deposit has not been made, shall be paid by the Court, trying the offence, to the person to whom repayment of the deposit was to be made, and on such payment, the liability of the company to make repayment of the deposit shall, to the extent of the amount paid by the Court, stand discharged; (b)every officer of the company who is in default shall be punishable with imprisonment for a term which may extend to five years and shall also be liable to fine.

(6) Where a company accepts or invites, or allows or causes any other person to accept or invite on its behalf, any deposit in excess

of the limits prescribed under sub-section (1) or in contravention of ---------------------------------------------------------------------- 1 Ins. by Act 31 of 1988, s. 9 (w.e.f. 1.9.1989). ---------------------------------------------------------------------- 94A the manner or condition prescribed under that sub-section or in con-

travention of the provisions of subsection (2), as the case may be,- (a) the company shall be punishable,- (i)where such contravention relates to the acceptance of any deposit, with fine which shall not be less than an amount equal to the amount of the deposit so accepted, (ii)where such contravention relates to the invitation of any deposit,with fine which may extend to one lakh rupees but shall not be less than five thousand rupees; (b)every officer of the company who is in default shall be punishable with imprisonment for a term which may extend to five years and shall also be liable to fine.

(7) (a) Nothing contained in this section shall apply to,-- (i) a banking company, or (ii) such other company as the Central Government may, after consultation with the Reserve Bank of India, specify in this behalf. (b)Except the provisions relating to advertisement contained in

clause (b) of sub-section (2), nothing in this section shall apply to such closess of financial companies as the Central Government may after consulationwith the Reserve Bank of India, specify in this behalf.

1[(8) The Central Government may, if it considers it necessary for avoiding any hardship or for any other just and sufficient reason by order issued either prospectively or retrospectively from a date not earlier than the commencement of the Companies (Amendment) Act, 1974 (41 of 1974), grant extension of time to a company or class of companies to comply with, or exempt any company or class of companies from, all or any of the provisions of this section either generally or for any specified period subject to such conditions as may be specified in the order: Provided that no order under this sub-section shall be issued in relation to a class of companies except after consultation with the Reserve Bank of India.]

2[(9)Where a company has failed to repay any deposit or part thereof in accordance with the terms and conditions of such deposit, the Company Law Board may, if it is satisfied, either on its own motion or on the application of the depositor, that it is necessary so to do to safeguard the interests of the company, the depositors or in the public interest, direct, by order, the company to make repayment of such deposit or part thereof forthwith or within such time and subject to such conditions as may be specified in the order: Provided that the Company Law Board may, before making any order under this sub-section,give a reasonable opportunity of being heard to the company and the other persons interested in the matter.

(10) Whoever fails to comply with any order made by the Company

Law Board under sub-section (9) shall be punishable with imprisonment which may extend to three years and shall also be liable to a fine of not less than rupees fifty for every day during which such noncompliance continues.] ---------------------------------------------------------------------- 1 Ins. by Act 46 of 1977, s. 3. 2 Ins. by Act 31 of 1988, s. 9 (w.e.f. 1.9.1989). ---------------------------------------------------------------------- 94B Explanation.-For the purposes of this section "deposit" means any deposit of money with, and includes any amount borrowed by, a company but shall not include such categories of amount as may be prescribed in consultation with the Reserve Bank of India. 58B. Provisions relating to prospectus to apply to advertisement. 58B. Provisions relating to prospectus to apply to advertisement. The provisions of this Act relating to a prospectus shall, so far as may be, apply to an advertisement referred to in section 58A.]

Penalty and interpretation.

59.Penalty and interpretation.(1) If any prospectus is issued in' contravention of section 57 or 58, the company, and every person, who is knowingly a party to the issue thereof, shall be punishable with fine which may extend to five thousand rupees.

(2)In sections 57 and 58, the expression "expert" includes an engineer, a valuer, an accountant and any other person whose profes- sion gives authority to a statement made by him.

Registration of prospectus.

60.Registration of prospectus.(1) No prospectus shall be issued by or on behalf of a company orin relation to an intended company unless, on or before the date ofits publication, there has been delivered to the Registrar for registration a copy thereof signed by every person who is named therein as a director or proposed director of the company or by his agent authorised in writing, and having endorsed thereon or attached thereto- (a)any consent to the issue of the prospectus required by section 58 from any person as an expert; and (b)in the case of a prospectus issued generally, also- (i)a copy of every contract required by clause 16 of Schedule II to be specified in the prospectus, or, in the case of a contract not reduced into writing, a memorandum giving full particulars thereof; and (ii)where the persons making any report required by Part II of that Schedule have made therein, or, have, without giving the reasons, indicated therein, any such adjustments as are mentioned in clause 32 of that Schedule, a written statement signed by those persons setting out the adjustments and giving the reasons therefor. 94C

(2) Every prospectus to which sub-section (1) applies shall, on the face of it,- (a)state that a copy has been delivered for registration as required by this section; and (b)specify any documents requird by this section to be endorsed on or attached to the copy so delivered, or refer to statements included in the prospectus which specify those documents,

1[(3) The Registrar shall not register a prospectus unless the

requirements of sections 55, 56, 57 and 58 and sub-sections (1) and

(2) of this section have been complied with and the prospectus is accompanied by the consent in writing of the person, if any, named therein as the auditor, legal adviser, attorney, solicitor, banker or broker of the company or intended company, to act in that capacity.]

(4) No prospectus shall be issued more than ninety days after the date on which a copy thereof is delivered for registration; and if a prospectus is so issued, it shall be deemed to be a prospectus a copy of which has not been delivered under this section to the Registrar.

(5) If a prospectus is issued without a copy thereof being delivered under this section to the Registrar or without the copy so delivered having endorsed thereon or attached thereto the required consent or documents, the company, and every person who is knowingly a party to the issue of the prospectus, shall be punishable with fine which may extend to five thousand rupees.

Terms of contract mentioned in prospectus or statement in lieu ofprospectus, not to be varied. 61.Terms of contract mentioned in prospectus or statement in lieu of prospects, not to be varied. A company shall not, at any time, vary the terms of a contract referred to in the prospectus or statement in lieu of prospectus, except subject to the approval of, or except on authority given by, the company in general meeting. ----------------------------------------------------------------------

1 Subs. by Act 65 of 1960, s. 17, for sub-section (3). ---------------------------------------------------------------------- 94D

Civil liability for misstatements in prospectus.

62.Civil liability for misstatements in prospectus.(1) Subject to the provisions of this section, where a prospectus invites persons to subscribe for shares in or debentures of a company, the following persons shall be liable to pay compensation to every person who subscribes for any shares or debentures on the faith of the prospectus for any loss or damage he may have sustained by reason of any untrue statement included therein, that is to say,- (a)every person who is a director of the company at the time of the issue of the prospectus; 95 (b)every person who has authorised himself to be named and is named in the prospectus either as a director, or as having agreed to become a director, either immediately or after an interval of time ; (c)every person who is a promoter of the company ; and (d)every person who has authorised the issue of the prospectus: Provided that where, under section 58, the consent of a person is required to the issue of a prospectus and he has given that consent, or where, under 1* * * sub-section

(3)of section 60, the consent of a person named in a pros- pectus is required and he has given that consent, he shall not, by reason of having given such consent, be liable under this sub-section as a person who has authorised the issue of the prospectus except in respect of an untrue statement, if any, purporting to be made by him as an expert.

(2) No person shall be liable under sub-section (1), if he proves- (a)that, having consented to become a director of the company, he withdrew his consent before the issue of the prospectus, and that it was issued without his authority or consent; (b)that the prospectus was issued without his knowledge or consent, and that on becoming aware of its issue, he forthwith gave reasonable public notice that it was issued without his knowledge or consent; (c) that, after the issue of the prospectus and before allotment thereunder, he, on becoming aware of any untrue statement therein, withdrew his consent to the prospectus and gave reasonable public notice of the withdrawal and of the reason therefor ; or (d) that- (i)as regards, every untrue statement not purporting to be made on the authority of an expert or of a public official document or statement, he had reasonable ground to believe, and did up to the time of the ---------------------------------------------------------------------- 1 The words, brackets and letter "clause (b) of " omitted by Act 65 of 1960, S. 18. ---------------------------------------------------------------------- 96 allotment of the shares or debentures, as the case may be, believe, that the statement was true ; and (ii)as regards every untrue statement purporting to be a statement by an expert or contained in what purports to be a copy of or an extract from a report or valuation of an expert, it was a correct and fair representation of the statement, or a correct copy of, or a correct and fair extract from, the report or valuation ; and he had reasonable ground to believe, and did up to the time of the issue of the prospectus believe, that the person making the statement was competent to make it and that that person had given the consent required by section 58 to the issue of the prospectus and had not withdrawn that consent before delivery of a copy of the prospectus for registration or, to the defendant's knowledge, before allotment thereunder: and (iii)as regards every untrue statement purporting to be a statement made by an official person or contained in what purports to be a copy of or extract from a public official document, it was a correct and fair representation of the statement, or a correct copy of, or a correct and fair extract from, the document: Provided that this sub-section shall not apply in the case of a person liable, by reason of his having given a consent required of him by section 58, as a person who has authorised the issue of the prospectus in respect of an untrue statement purporting to be made by him as an expert.

(3) A person who, apart from this sub-section, would, under sub-

section (1), be liable by reason of his having given a consent re- quired of him by section 58 as a person who has authorised the issue of a prospectus in respect of an untrue statement purporting to be made by him as an expert shall not be so liable, if he proves- (a) that, having given his consent under section 58 to the issue of the prospectus, he withdrew it in writing before delivery of a copy of the prospectus for registration ; (b)that, after delivery of a copy of the prospectus for registration and before allotment thereunder, he, on becoming aware of the untrue statement, withdrew his consent 97 in writing and gave reasonable public notice of the with- drawal and of the reason therefor; or (c)that he was competent to make the statement and that he had reasonable ground to believe, and did up to the time of the allotment of the shares or debentures, believe, that the statement was true.

(4) Where-- (a) the prospectus specifies the name of a person as a director of the company, or as having agreed to become a director thereof, and he has not consented to become a director, or has withdrawn his consent before the issue of the prospectus, and has not authorised or consented to the issue thereof; or (b)the consent of a person is required under section 58 to the issue of the prospectus and he either has not given that consent or has withdrawn it before the issue of the prospectus; the directors of the company excluding those without whose knowledge or consent the prospectus was issued, and every other person who authorised the issue thereof, shall be liable to indemnify the person referred to in clause (a) or clause (b), as the case may be, against all damages, costs and expenses to which he may be made liable by reason of his name having been inserted in the prospectus or of the inclusion therein of a statement purporting to be made by him as an expert, as the case may be, or in defending himself against any suit or legal proceeding brought against him in respect thereof: Provided that a person shall not be deemed for the purposes of this sub-section to have authorised the issue of a prospectus by reason only of his having given the consent required by section 58 to the inclusion therein of a statement purporting to be made by him as an expert.

(5)Every person who, becomes liable to make any payment by virtue of this section, may recover contribution, as in cases of contract, from any other person who, if sued separately, would have been liable to make the same payment, unless the former person was, and the latter person was not, guilty of fraudulent misrepresentation.

(6) For the purposes of this section-- (a) the expression " promoter" means a promoter who was a party to the preparation of the prospectus or of the 98 portion thereof containing the untrue statement but does not include any person by reason of his acting in a professional capacity for persons engaged in procuring the formation of the company; and (b) the expression "expert" has the same meaning as in section 58.

Criminal liability for mis-statements in prospectus.

63.Criminal liability for mis-statements in prospectus. (1) Where a prospectus issued after the commencement of this Act includes any untrue statement, every person who authorised the issue of the prospectus shall be punishable with imprisonment for a term which may extend to two years, or with fine which may extend to five thousand rupees, or with both, unless he proves either that the statement was immaterial or that he had reasonable ground to believe, and did, up to the time of the issue of the prospectus believe, that the statement was true.

(2) A person shall not be deemed for the purposes of this section to have authorised the issue of a prospectus by reason only of his having given- (a) the consent required by section 58 to the inclusion therein of a statement purporting to be made by him as an expert, or

(b) the consent required by 1* * * sub-section (3) of section 60.

Document containing offer of shares or debentures for also to bedeemed prospectus. 64.Document containing offer of shares or debentures for also to

be deemed prospectus. (1) Where a company allots or agrees to allot any shares in or debentures of the company with a view to all or any of those shares or debentures being offered for sale to the public, any document by which the offer for sale to the public is made shall, for all purposes, be deemed to be a prospectus issued by the company; and all enactments and rules of law as to the contents of prospectuses and as to liability in respect of statements in and omissions from prospectuses, or otherwise relating to prospectuses, shall apply with

the modifications specified in sub-sections (3), (4) and (5), and have effect accordingly, as if the shares or debentures had been offered to the public for subscription and as if persons accepting the offer in respect of any shares or debentures were subscribers for those shares or debentures, but without prejudice to the liability, if any, of the persons by whom the offer is made in respect of misstatements contained in the document or otherwise in respect thereof. ---------------------------------------------------------------------- 1 The words, brackets and letter " clause (b) of " omitted by Act 65 of 1960, S. 19. ----------------------------------------------------------------------- 99

(2) For the purposes of this Act, it shall, unless the contrary is proved, be evidence that an allotment of, or an agreement to allot, shares or debentures was made with a view to the shares or debentures being offered for sale to the public if it is shown- (a)that an offer of the shares or debentures or of any of them for sale to the public was made within six months after the allotment or agreement to allot ; or (b)that at the date when the offer was made, the whole consideration to be received by the company in respect of the shares or debentures had not been received by it.

(3) Section 56 as applied by this section shall have effect as if it required a prospectus to state in addition to the matters required by that section to be stated in a prospectus- (a)the net amount of the consideration received or to be received by the company in respect of the shares or debentures to which the offer relates; and (b)the place and time at which the contract under which the said shares or debentures have been or are to be allotted may be inspected.

(4) Section 60 as applied by this section shall have effect as if the persons making the offer were persons named in a prospectus as directors of a company.

(5) Where a person making an offer to which this section relates is a company or a firm, it shall be sufficient if the document

referred to in sub-section (1) is signed on behalf of the company or firm by two directors of the company or by not less than one-half of the partners in the firm, as the case may be; and any such director or partner may sign by his agent authorised in writing.

Interpretation of provisions relating to prospectuses.

65.Interpretation of provisions relating to prospectuses. (1) For the purposes of the foregoing provisions of this Part- (a)a statement included in a prospectus shall be deemed to be untrue, if the statement is misleading in the form be untrue and context in which it is included; and (b)where the omission from a prospectus of any matter is calculated to mislead, the prospectus shall be deemed, in respect of such omission, to be a prospectus in which an untrue statement is included. 100

(2) For the purposes of sections 61, 62 and 63 and clause (a)

of sub-section (1) of this section, the expression " included " when used with reference to a prospectus, means included in the prospectus itself or contained in any report or memorandum appearing on the face thereof or by reference incorporated therein or issued therewith.

Newspaper advertisements of prospectus. 66.Newspaper advertisements of prospectus. Where any prospectus is published as a newspaper advertisement, it shall not be necessary in the advertisement to specify the contents of the memorandum or the signatories thereto, or the number of shares subscribed for by them.

Construction of references to offering shares or debentures to thepublic, etc] 67.Construction of references to offering shares or debentures to

the public, etc](1) Any reference in this Act or in the articles of a company to offering shares or debentures to the public shall, subject to any provision to the contrary contained in this Act and subject

also to the provisions of sub-sections (3) and (4), be construed as including a reference to offering them to any section of the public, whether selected as members or debenture holders of the company concerned or as clients of the person issuing the prospectus or in any other manner.

(2) Any reference in this Act or in the articles of a company to invitations to the public to subscribe for shares or debentures shall, subject as aforesaid, be construed as including a reference to invitations to subscribe for them extended to any section of the public, whether selected as members or debenture holders of the company concerned or as clients of the person issuing the prospectus or in any other manner.

(3) No offer or invitation shall be treated as made to the

public by virtue of sub-section (1) or sub-section (2), as the case may be, if the offer or invitation can properly be regarded, in all the circumstances- (a)as not being calculated to result, directly or indirectly, in the shares or debentures becoming available for sub- scription or purchase by persons other than those receiving the offer or invitation ; or (b) otherwise as being a domestic concern of the persons making and receiving the offer or invitation.

(4) Without prejudice to the generality of sub-section (3), a provision in a company's articles prohibiting invitations to the public to subscribe for shares or debentures shall not be taken as prohibiting the making to members or debenture holders of an invitation 101 which can properly be regarded in the manner set forth in that sub- section.

(5)The provisions of this Act relating to private companies shall be construed in accordance with the provisions contained in sub-

sections (1) to (4).

Penalty for fraudulently inducing persons to invest money. 68.Penalty for fraudulently inducing persons to invest money. Any person who, either by knowingly or recklessly making any statement, promise or forecast which is false, deceptive or misleading, or by any dishonest concealment of material facts, induces or attempts to induce another person to enter into, or to offer to enter into- (a)any agreement for, or with a view to, acquiring, disposing of, subscribing for, or underwriting shares or debentures; or (b) any agreement the purpose or pretended purpose of which is to secure a profit to any of the parties from the yield of shares or debentures, or by reference to fluctuations in the value of shares or debentures ; shall be punishable with imprisonment for a term which may extend to five years, or with fine which may extend to ten thousand rupees, or with both. 68A. Personation for acquisition, etc., of shares.

1[68A. Personation for acquisition, etc., of shares. (1) Any person who- (a) makes in a fictitious name an application to a company for acquiring, or subscribing for, any shares therein, or (b)otherwise induces a company to allot, or register any transfer of, shares therein to him, or any other person in a fictitious name, shall be punishable with imprisonment for a term which may extend to five years.

(2) The provisions of sub-section (1) shall be prominently reproduced in every prospectus issued by the company and in every form of application for shares which is issued by the company to any person.] Allotment

Prohibition of allotment unless minimum subscription received. 69.Prohibition of allotment unless minimum subscription

received.(1) No allotment shall be made of any share capital of a company offered to the public for subscription, unless the amount ---------------------------------------------------------------------- 1 Ins. by Act 31 of 1965, s. 8 (w.e.f. 15-10-1965). ---------------------------------------------------------------------- 102 stated in the prospectus as the minimum amount which, in the opinion of the Board of directors, must be raised by the issue of share capital in order to provide for the matters specified in clause 5 of Schedule II has been subscribed, and the sum payable on application for the amount so stated has been paid to and received by the company, whether in cash or by a cheque or other instrument which has been paid.

(2) The amount so stated in the prospectus shall be reckoned exclusively of any amount payable otherwise than in money, and is in this Act referred to as " the minimum subscription".

(3) The amount payable on application on each share shall not be less than five per cent. of the nominal amount of the share.

1[(4) All moneys received from applicants for shares shall be deposited and kept deposited in a Scheduled Bank- (a) until the certificate to commence business is obtained under section 149 ; or (b)Where such certificate has already been obtained, until the entire amount payable on applications for shares in res- pect of the minimum subscription has been received by the company, and where such amount has not been received by the company within the time or the expiry of which the moneys received from the applicants for shares are required to be repaid without interest under sub-section

(5), all moneys received from applicants for shares shall be returned in accordance with the provisions of that sub-section. In the event of any contravention of the provisions of this sub- section, every promoter, director or other person who is knowingly responsible for such contravention shall be punishable with fine which may extend to five thousand rupees.]

(5) If the conditions aforesaid have not been complied with on the expiry of one hundred and twenty days after the first issue of the prospectus, all moneys received from applicants for shares shall be forthwith repaid to them without interest; and if any such money is not so repaid within one hundred and thirty days after the issue of the prospectus, the directors of the company shall be jointly and severally liable to repay that money with interest at ----------------------------------------------------------------------

1 Subs. by Act 31 of 1965, s. 9, for sub-section (4) (w.e.f. 15- 10-1965). ---------------------------------------------------------------------- 102A the rate of six per cent. per annum from the expiry of the one hundred and thirtieth day: Provided that a director shall not be so liable if he proves that the default in the repayment of the money was not due to any mis- conduct or negligence on his part.

(6) Any condition purporting to require or bind any applicant for shares to waive compliance with any requirement of this section shall be void.

(7) This section, except sub-section (3) thereof, shall not apply in relation to any allotment of shares subsequent to the first allotment of shares offered to the public for subscription.

Prohibition of allotment in certain cases unless statement in lieu ofprospectus delivered to Registrar. 70.Prohibition of allotment in certain cases unless statement in

lieu of prospectus delivered to Registrar. (1) A company having a share capital, which does not issue a prospectus on or with reference to its formation, or which has issued such a prospectus but has not proceeded to allot any of the shares offered to the public for subscription, shall not allot any of its shares or debentures unless at least three days before the first allotment of either shares or debentures, there has been delivered to the Registrar for registration a statement in lieu of prospectus signed by every person who is named therein as a director or proposed director of the company or by his agent authorised in writing, in the form and containing the particulars set out in Part I of Schedule III and, in the cases mentioned in Part II of that Schedule, setting out the reports specified therein, and the said Parts I and II shall have effect subject to the provisions contained in Part III of that Schedule. 103

(2) Every statement in lieu of prospectus delivered under sub-

section (1), shall, where the persons making any such report as aforesaid have made therein, or have without giving the reasons indicated therein, any such adjustments as are mentioned in clause 5 of Schedule III, have endorsed thereon or attached thereto a written statement signed by those persons, setting out the adjustments and giving the reasons thereof.

(3) This section shall not apply to a private company.

(4) If a company acts in contravention of sub-section (1) or (2), the company, and every director of the company who wilfully authorises or permits the contravention, shall be punishable with fine which may extend to one thousand rupees.

(5) Where a statement in lieu of prospectus delivered to the

Registrar under sub-section (1) includes any untrue statement, any person who authorised the delivery of the statement in lieu of prospectus for registration shall be punishable with imprisonment for a term which may extend to two years or with fine which may extend to five thousand rupees or with both, unless he proves either that the statement was immaterial or that he had reasonable ground to believe, and did up to the time of the delivery for registration of the statement in lieu of prospectus believe, that the statement was true.

(6)For the purposes of this section- (a)a statement included in a statement in lieu of prospectus shall be deemed to be untrue if it is misleading in the form and context in which it is included; and (b)where the omission from a statement in lieu of prospectus of any matter is calculated to mislead, the statement in lieu of prospectus shall be deemed, in respect of such omission, to be a statement in lieu of prospectus in which an untrue statement is included.

(7) For the purposes 'of sub-section (5) and clause (a) of sub-

section (6), the expression "included", when used with reference to a statement in lieu of prospectus, means included in the statement in lieu of prospectus itself or contained in any report or memorandum appearing on the face thereof, or by reference incorporated therein, or issued therewith. 104

Effect of irregular allotment.

71.Effect of irregular allotment. (1) An allotment made by a company to an applicant in contravention of the provisions of section 69 or 70 shall be voidable at the instance of the applicant- (a)within two months after the holding of the statutory meeting of the company, and not later, or (b) in any case where the company is not required to hold a statutory meeting or where the allotment is made after the holding of the statutory meeting, within two months after the date of the allotment, and not later.

(2) The allotment shall be voidable as aforesaid, notwithstand- ing that the company is in course of being wound up.

(3) If any director of a company knowingly contravenes, or wilfully authorises or permits the contravention of, any of the pro- visions of section 69 or 70 with respect to allotment, he shall be liable to compensate the company and the allottee respectively for any loss, damages or costs which the company or the allottee may have sustained or incurred thereby : Provided that proceedings to recover any such loss, damages or costs shall not be commenced after the expiration of two years from the date of the allotment.

Applications for, and allotment of, shares and debentures.

72.Applications for, and allotment of, shares and debentures.(1) (a) No allotment shall be made of any shares in or debentures of a company in pursuance of a prospectus issued generally, and no proceedings shall be taken on applications made in pursuance of a prospectus so issued, until the beginning of the fifth day after that on which the prospectus is first so issued or such later time, if any, as may be specified in the prospectus: Provided that where, after a prospectus is first issued generally, a public notice is given by some person responsible under section 62 for the prospectus which has the effect of excluding, limiting or diminishing his responsibility, no allotment shall be made until the beginning of the fifth day after that on which such public notice is first given. (b) Nothing in the foregoing proviso shall be deemed to exclude, limit or diminish any liability that might be incurred in the case referred to therein under the general law or this Act. (c) The beginning of the fifth day or such later time as is men- tioned in the first paragraph of clause (a), or the beginning of the fifth day mentioned in the second paragraph of that clause, as the 105 case may be, is hereinafter in this Act referred to as "the time of the opening of the subscription lists".

(2)In sub-section (1), the reference to the day on which the prospectus is first issued generally shall, be construed as referring to the day on which it is first so issued as a newspaper advertisement: Provided that, if it is not so issued as a newspaper advertisement before the fifth day after that on which it is first so issued in any other manner, the said reference shall be construed as referring to the day on which it is first so issued in any manner.

(3)The validity of an allotment shall not be affected by any contravention of the foregoing provisions of this section; but, in the event of any such contravention, the company, and every officer of the company who is in default, shall be punishable with fine which may extend to five thousand rupees.

(4)In the application of this section to a prospectus offering

shares or debentures for sale, sub-sections (1) to (3) shall have effect with the substitution of references to sale for references to allotment, and with the substitution for the reference to the company and every officer of the company who is in default of a reference to any person by or through whom the offer is made and who is knowingly guilty of, or wilfully authorises or permits, the contravention.

(5)An application for shares in, or debentures of, a company, which is made in pursuance of a prospectus issued generally shall not be revocable until after the expiration of the fifth day after the time of the opening of the subscription lists, or the giving, before the expiry of the said fifth day by some person responsible under sec- tion 62 for the prospectus, of a public notice having the effect under that section of excluding, limiting or diminishing the responsibility of the person giving it.

Allotment of shares and debentures to be dealt in on stock exchange. 73 Allotment of shares and debentures to be dealt in on stock

exchange. 1[(1) Every company intending to offer shares or debentures to the public for subscription by the issue of a prospectus shall, before such issue, make an application to one or more recognised stock exchanges for permission for the shares or debentures intending to be so offered to be dealt with in the stock exchange or each such stock exchange.] 2[1A] Where a prospectus, whether issued generally or not,

state that an 3[application under sub-section (1) has been] made for permission for the shares or debentures offered thereby to be dealt in one or more recognized stock exchanges, such prospectus, shall state the name of the stock exchange or, as the case may be, each such stock exchange, and any allotment made on an applica- tion in pursuance of such prospectus shall, whenever made, be void 4* * * ---------------------------------------------------------------------- 1 Ins. by Act 31 of 1988, s.10(w.e.f.15-6-1988).

2 Subs. by Act 41 of 1974, s.8 sub-section (1) (w.e.f. 1-2-1975) and renumbered as sub-section (1A) by Act 31 of 1988, s.10 (w.e.f. 15-6-1988). 3 Subs. by Act 31 of 1988, s.10 (w.e.f. 15-6-1988). 4 Omitted by s.10, ibid.(w.e.f. 15-6-1988). ---------------------------------------------------------------------- 106 if the permission has not been granted by the stock exchange or each such stock exchange, as the case may be, before the expiry of ten weeks from the date of the closing of the subscription lists: Provided that where an appeal against the decision of any recog- nized stock exchange refusing permission for the shares or debentures to be dealt in on that stock exchange has been preferred under section 22 of the Securities Contracts (Regulation) Act,1956 (42 of 1956),such allotment shall not be void until the dismissal of the appeal.]

(2) Where the permission has not been 1[applied under sub-

section(1)] 2[or, such permission, having been applied for, has not been granted as aforesaid], the company shall forthwith repay without interest all moneys received from applicants in pursuance of the prospectus, and, if any such money is not repaid within eight days after the company becomes liable to repay it 1[the company and every director of the company who is an officer in default shall, on and from the expiry of the eighth day, be jointly and severally liable to repay that money with interest at such rate, not less than four per cent. and not more than fifteen per cent., as may be prescribed, having regard to the length of the period of delay in making the repayment of such money.] 3* * * * * 4[(2A) Where permission has been granted by the recognized stock exchange or stock exchanges for dealing in any shares or debentures in such stock exchange or each such stock exchange and the moneys received from applicants for shares or debentures are in excess of the aggregate of the application moneys relating to the shares or debentures in respect of which allotments have been made, the company shall repay the moneys to the extent of such excess forthwith without interest, and if such money is not repaid within eight days, from the day the company becomes liable to pay it, 1[the company and every director of the company who is an officer in default shall, on and from the expiry of the eighth day, be jointly and severally liable to repay that money with interest at such rate, not less than four per cent. and not more than fifteen per cent., as may be prescribed, having regard to the length of the period of delay in making the repayment of such money.] 3* * * * * ---------------------------------------------------------------------- 1 Subs. by Act 31 of 1988, s.10 (w.e.f. 15-6-1988). 2 Subs. by Act 41 of 1974, s. 8, for certain words (w.e.f. 1-2-1975). 3 Omitted by Act 31 of 1988, s.10 (w.e.f. 15-6-1988). 4 Ins. by Act 41 of 1974, s.8 (w.e.f. 1-2-1975). ---------------------------------------------------------------------- 106A (2B) If default is made in complying with the provisions of sub- section (2A ), the company and every officer of the company who is in default shall be punishable with fine which may extend to five thousand rupees, and where repayment is not made within six months from the expiry of the eighth day, also with imprisonment for a term which may extend to one year.]

(3) All moneys received as aforesaid shall be kept in a separate bank account maintained with a Scheduled Bank 1[until the permission has been granted, or where an appeal has been preferred against the refusal to grant such. permission, until the disposal of the appeal, and the money standing in such separate account shall, where the permission has not been applied for as aforesaid or has not been granted, be repaid within the time and in the manner specified in sub-

section (2)]; and if default is made in complying with this sub- section, the company, and every officer of the company who is in default, shall be punishable with fine which may extend to five thousand rupees. 2[(3A) Moneys standing to the credit of the separate bank account

referred to in sub-section (3) shall not be utilised for any purpose other than the following purposes, namely :- (a) adjustment against allotment of shares, where the shares have been permitted to be dealt in on the stock exchange or each stock exchange specified in the prospectus; or (b) repayment of moneys received from applicants in pursuance of the prospectus, where shares have not been per- mitted to be dealt in on the stock exchange or each stock exchange specified in the prospectus, as the case may be, or, where the company is for any other reason unable to make the allotment of share.]

(4) Any condition purporting to require or bind any applicant for shares or debentures to waive compliance with any of the require- ments of this section shall be void. ---------------------------------------------------------------------- 1 Subs. by Act 41 of 1974, s. 8, for certain words (w.e.f. 1-2- 1975). 2 Ins. by s. 8, ibid. (w.e.f. 1-2-1975). ---------------------------------------------------------------------- 106B

1[(5) For the purposes of this section, it shall be deemed that permission has not been granted if the application for permission, where made, has not been disposed of within the time specified in sub-

section (1).]

(6)This section shall have effect- (a)in relation to any shares or debentures agreed to be taken by a person underwriting an offer thereof by a pros- pectus, as if he had applied therefor in pursuance of the prospectus; and (b)in relation to a prospectus offering shares for sale, with the following modifications, namely:- (i)references to sale shall be substituted for references to allotment; ----------------------------------------------------------------------

1 Subs. by Act 41 of 1974, s.8, for sub-section (5) (w.e.f. 1-2- 1975). ---------------------------------------------------------------------- 107 (ii)the persons by whom the offer is made, and not the.

company, shall be liable under sub-section (2) to 'repay money received from applicants, and references to the company's liability under that sub-section shall be construed accordingly; and

(iii)for the reference in sub-section (3) to the company and every officer of the company who is in default, there shall be substituted a reference to any person by or through whom the offer is made and who is knowingly guilty of, or wilfully authorises or permits, the default.

(7) No prospectus shall state that application has been made for permission for the shares or debentures offered thereby to be dealt in on any stock exchange, unless it is a recognised stock exchange.

Manner of reckoning fifth, eighth and tenth days in sections 72 and73. 74. Manner of reckoning fifth, eighth and tenth days in sections 72 and 73. In reckoning for the purposes of sections 72 and 73, the fifth day 1[or the eighth day] another day, any intervening day which is a public holiday under the Negotiable Instruments Act, 1881 (36 of 1881), shall be disregarded, and if the fifth, or eighth day (as so reckoned) is itself such a public holiday, there shall for the said purposes be substituted the first day thereafter which is not such a holiday.

Return as to allotments.

75.Return as to allotments.(1) Whenever a company having a share capital makes any allotment of its shares, the company shall, within 2[thirty days] thereafter,- (a)file with the Registrar a return of the allotments, stating the number and nominal amount of the shares comprised in the allotment, the names, addresses and occupations of the allottees, and the amount, if any, paid or due and payable on each share: 3[Provided that the company shall not show in such return any shares as having been allotted for cash if cash has not actually been received in respect of such allotment.] (b) in the case of shares (not being bonus shares) allotted as fully or partly paid up otherwise than in cash, produce for the inspection and examination of the Registrar a contract in writing constituting the title of the allottee ---------------------------------------------------------------------- 1 Subs. by Act 31 of 1988, s.11 (w.e.f. 15-6-1988). 2 Subs. by Act 31 of 1965, s. 62 and Sch., for " one month " (w.e.f. 15-10-1965). 3 Added by s. 11, ibid. (w.e.f. 15-10-1965). ----------------------------------------------------------------------- 108 to the allotment together with any contract of sale, or a contract for services or other consideration in respect of which that allotment was made, such contracts being duly stamped, and file with the Registrar copies verified in the prescribed manner of all such contracts and a return stating the number and nominal amount of shares so allotted, the extent to which they are to be treated as paid up, and the consideration for which they have been allotted ; and 1[(c) file with the Registrar- (i)in the case of bonus shares, a return stating the number and nominal amount of such shares comprised in the allotment and the names, addresses and occupations of the allottees and a copy of the resolution authorising the issue of such shares; (ii)in the case of issue of shares at a discount a copy of the resolution passed by the company authorising such issue together with a copy of the order of the Court sanctioning the issue and where the maximum rate of discount exceeds ten per cent., a copy of the orders of the Central Government permitting the issue at the higher percentage.]

(2) Where a contract such as is mentioned in clause (b) of sub-

section (1) is not reduced to writing, the company shall, within 2[thirty days] after the allotment, file with the Registrar the pres- cribed particulars of the contract stamped with the same stamp duty as would have been payable if the contract had been reduced to writing; and those particulars shall be deemed to be an instrument within the meaning of the Indian Stamp Act, 1899,(2 of 1899.) and the Registrar may, as a condition of filing the particulars, require that the duty payable thereon be adjudicated under section 31 of that Act.

(3) If the Registrar is satisfied that in the circumstances of any particular case the period of 2 [thirty days] specified in

subsections (1) and (2) for compliance with the requirements of this section 3[is or was inadequate, he may, on application made in that behalf by the company, whether before or after the expiry of the said period, extend ---------------------------------------------------------------------- 1 Subs. by Act 65 of 1960, s. 21, for cl. (c). 2 Subs. by Act 31 of 1965, s. 62 and Sch., for " one month " (w.e.f. 15-10-1965). 3 Subs. by s. 11, ibid., for certain words, (w.e.f. 15-10-1965). ---------------------------------------------------------------------- 109 that period as he thinks fit] ; and if he does so, the provisions of

sub-sections (1) and (2) shall have effect in that particular case as if for the said period of 1[thirty days] the extended period allowed by the Registrar were substituted.

(4) If default is made in complying with this section, every officer of the company who is in default shall be punishable with fine which may. extend to five hundred rupees for every day during which the default continues : 2[Provided that in case of contravention of the proviso to clause

(a) of sub-section (1), every such officer, and every promoter of the company who is guilty of the contravention shall be punishable with fine which may extend to five thousand rupees.]

(5) Nothing in this section shall apply to the issue and allotment by a company of shares which under the provisions of its articles were forfeited for non-payment of calls. Commissions and Discounts

Power to pay certain commissions and prohibition of payment of allother commissions, discounts, etc. 76.Power to pay certain commissions and prohibition of payment of

all other commissions, discounts, etc. (1) A company may pay a commission to any person in consideration of- (a)his subscribing or agreeing to subscribe, whether absolutely or conditionally, for any shares in, or debentures of, the company, or (b)his procuring or agreeing to procure subscriptions, whether absolute or conditional, for any shares in, or debentures of, the company, if the following conditions are fulfilled, namely:- (i) the payment of the commission is authorised by the articles ; (ii) the commission paid or agreed to be paid does not exceed in the case of shares, five per cent. of the price at which the shares are issued or the amount or rate authorised by the articles, whichever is less, and in the case of debentures, two and a half per cent. of the price at which the debentures are issued or the amount or rate authorised by the articles, whichever is less; ---------------------------------------------------------------------- 1 Subs. by Act 31 of 1965, s. 62 and Sch., for " one month " (w.e.f. 15-10-1965). 2 Subs. by s. 11, ibid., for the proviso (w.e.f. 15-10-1965). ---------------------------------------------------------------------- 110 (iii) the amount or rate per cent. of the commission paid or agreed to be paid is- in the case of shares or debentures offered to the public for subscription, disclosed in the prospectus ; and in the case of shares or debentures not offered to the public for subscription, disclosed in the statement in lieu of prospectus, or in a statement in the prescribed form signed in like manner as a statement in lieu of prospectus and filed before the payment of the commission with the Registrar and, where a circular or notice, not being a prospectus inviting subscription for the shares or debentures, is issued, also disclosed in that circular or notice ; 1* * * (iv) the number of shares or debentures which persons have agreed for a commission to subscribe absolutely or conditionally is disclosed in the manner aforesaid 2 [and] 2[(V)a copy of the contract for the payment of the commission is delivered to the Registrar at the time of delivery of the prospectus or the statement in lieu of prospectus for registration.]

(2) Save as aforesaid and save as provided in section 79, no company shall allot any of its shares or debentures or apply 3[any of its moneys], either directly or indirectly, in payment of any com- mission, discount or allowance, to any person in consideration of- (a) his subscribing or agreeing to subscribe, whether absolutely or conditionally, for any shares in, or debentures of, the company, or (b)his procuring or agreeing to procure subscriptions, whether absolute or conditional, for any shares in, or debentures of, the company, whether the shares, debentures or money be so allotted or applied by being added to the purchase money of any property acquired by the company or to the contract price of any work to be executed for the company, or the money be paid out of the nominal purchase money or contract price, or otherwise. ---------------------------------------------------------------------- 1 The word " and" omitted by Act 31 of 1965, s. 12 (w.e.f. 15-10- 1965). 2 Ins. by s. 12, ibid. (w.e.f. 15-10-1965). 3 Subs. by Act 65 of 1960, s. 22, for "any of its capital moneys". ---------------------------------------------------------------------- 110A

(3) Nothing in this section shall affect the power of any company to pay such brokerage as it has heretofore been lawful for a company to pay.

(4) A vendor to. promoter of, or other person who receives pay- ment in shares, debentures or money from, a company shall have and shall be deemed always to have had power to apply any part of the shares, debentures or money so received in payment of any commission the payment of which, if made directly by the company, would have been legal under this section. 1[(4A) For the removal of doubts it is hereby declared that no

commission shall be paid under clause (a) of sub-section (1) to any person on shares or debentures which are not offered to the public for subscription: Provided that where a person has subscribed or agreed to subs-

cribe under clause (a) of sub-section (1) for any shares in, or deben- tures of, the company and before the issue of the prospectus or statement in lieu thereof any other person or persons has or have subscribed for any or all of those shares or debentures and that fact together with the aggregate amount of commission payable under this section in respect of such subscription is disclosed in such pros- pectus or statement, then, the company may pay commission to the first-mentioned person in respect of such subscription.]

(5) If default is made in complying with the provisions of this section, the company, and every officer of the company who is in default, shall be punishable with fine which may extend to five hundred rupees.

Restrictions on purchase by company or loans by company for purchase,of its own or its holding company's shares. 77.Restrictions on purchase by company or loans by company for

purchase, of its own or its holding company's shares. (1) No company limited by shares, and no company limited by guarantee and having a share capital, shall have power to buy its ---------------------------------------------------------------------- 1 Ins. by Act 31 of 1965, s. 12 (w.e.f. 15-10-1965). ---------------------------------------------------------------------- 111 own shares, unless the consequent reduction of capital is effected and sanctioned in pursuance of sections 100 to 104 or of section 402.

(2) No public company, and no private company which is a sub- sidiary of a public company, shall give, whether directly or indirectly, and whether by means of a loan, guarantee, the provision of security or otherwise, any financial assistance for the purpose of or in connection with a purchase or subscription made or to be made by any person of or for any shares in the company or in its holding company : Provided that nothing in this sub-section shall be taken to prohibit- (a)the lending of money by a banking company in the ordinary course of its business; or (b)the provision by a company, in accordance with any scheme for the time being in force, of money for the purchase of, or subscription for, fully paid shares in the company or its holding company, being a purchase or subscription by trustees of or for shares to be held by or for the benefit of employees of the company, including any director holding a salaried office or employment in the company; or (c)the making by a company of loans, within the limit laid

down in sub-section (3), to persons (other than directors, managing agents, secretaries and treasurers or managers) bona fide in the employment of the company with a view to enabling those persons to purchase or subscribe for fully paid shares in the company or its holding company to be held by themselves by way of beneficial ownership.

(3) No loan made to any person in pursuance of clause (c) of the foregoing proviso shall exceed in amount his salary or wages at that time for a period of six months.

(4) If a company acts in contravention of sub-sections (1) to

(3), the company, and every officer of the company who is in default, shall be punishable with fine which may extend to one thousand rupees.

(5) Nothing in this section shall affect the right of a company to redeem any shares issued under section 80 or under any corresponding provision in any previous companies law. 112 Issue of Shares at Premium and Discount

Application of premiums received on issue of shares.

78.Application of premiums received on issue of shares.(1) Where a company issues shares at a premium, whether for cash or otherwise, a sum equal to the aggregate amount or value of the premiums on those shares shall be transferred to an account, to be called "the share premium account"; and the provisions of this Act relating to the reduction of the share capital of a company shall, except as provided in this section, apply as if the share premium account were paid-up share capital of the company.

(2) The share premium account may, notwithstanding anything in

sub-section (1), be applied by the company- (a)in paying up unissued shares of the company to be issued to members of the company as fully paid bonus shares; (b) in writing off the preliminary expenses of the company; (c)in writing off the expenses of, or the commission paid or discount allowed on, any issue of shares or debentures of the company; or (d)in providing for the premium payable on the redemption of any redeemable preference shares or of any debentures of the company.

(3) Where a company has, before the commencement of this Act, issued any shares at a premium, this section shall apply as if the shares had been issued after the commencement of this Act : Provided that any part of the premiums which has been so applied that it does not at the commencement of this Act form an identifiable part of the company's reserves within the meaning of Schedule Vl, shall be disregarded in determining the sum to be included in the share premium account.

Power to issue shares at a discount.

79.Power to issue shares at a discount. (1) A company shall not issue shares at a discount except as provided in this section.

(2) A company may issue at a discount shares in the company of a class already issued, if the following conditions are fulfilled, namely:- (i)the issue of the shares at a discount is authorised by a resolution passed by the company in general meeting, and sanctioned by the 1 [Company Law Board]; ---------------------------------------------------------------------- 1 Subs. by Act 41 of 1974, s. 9, for "Court" (w.e.f. 1-2-1975). ---------------------------------------------------------------------- 113 (ii) the resolution specifies the maximum, rate of discount 1* * * at which the shares are to be issued: 2[Provided that no such resolution shall be sanctioned by the Company Law Board if the maximum rate of discount specified in the resolution exceeds ten per cent., unless that Board is of opinion that a higher percentage of discount may be allowed in the special circumstances of the case;] (iii)not less than one year has at the date of the issue elapsed since the date on which the company was entitled to commence business; and (iv) the shares to be issued at a discount are issued within two months after the date on which the issue is sanctioned by the 3[Company Law Board] or within such extended time as the 3[Company Law Board] may allow.

(3) Where a company has passed a resolution authorising the issue of shares at a discount, it may apply to the 3[Company Law Board] for an order sanctioning the issue; and on any such applica- tion, the 3[Company Law Board], if, having regard to all. the circum- stances of the case, it thinks proper so to do, may make an order sanctioning the issue on such terms and conditions as it thinks fit.

(4) Every prospectus relating to the issue of the shares shall contain particulars of the discount allowed on the issue of the shares or of so much of that discount as has not been written off at the date of the issue of the prospectus. If default is made in complying with this sub-section, the com- pany, and every officer of the company who is in default, shall be punishable with fine which may extend to fifty rupees. 4[Issue and Redemption of Preference Shares]

Power to issue redeemable preference shares.

80.Power to issue redeemable preference shares.(1) Subject to the provisions of this section, a company limited by shares may, if so authorised by its articles, issue preference shares which are, or at the option of the company are to be liable, to be redeemed: ---------------------------------------------------------------------- 1 Certain words omitted by Act 41 of 1974, s. 9 (w.e.f. 1-2- 1975). 2 Ins. by s. 9, ibid. (w.e.f. 1-2-1975). 3 Subs. by s. 9, ibid.. for "Court" (w.e.f. 1-2-1975). 4 Subs. by Act 31 of 1988, s. 12 (w.e.f. 15.6.1988). ---------------------------------------------------------------------- 114 Provided that- (a)no such shares shall be redeemed except out of profits of the company which would otherwise be available for dividend or out of the proceeds of a fresh issue of shares made for the purposes of the redemption; (b)no such shares shall be redeemed unless they are fully paid; (c)the premium,, if any, payable on redemption shall have been provided for out of the profits of the company or ,out of the company's share premium account, before the shares are redeemed; (d) where any such shares are redeemed otherwise than out of the proceeds of a fresh issue, there shall, out of profits which would otherwise have been available for dividend, be transferred to a reserve fund, to be called 1[the capital redemption reserve account], a sum equal to the nominal amount of the shares redeemed; and the provisions of this Act relating to the reduction of the share capital of a company shall, except as provided in this section, apply as if 1[the capital redemption reserve account] were paid-up share capital of the company.

(2) Subject to the provisions of this section, the redemption of preference shares thereunder may be effected on such terms and in such manner as may be provided by the articles of the company.

(3) The redemption of preference shares under this section by a company shall not be taken as reducing the amount of its authorised share capital.

(4) Where in pursuance of this section, a company has redeemed or is about to redeem any preference shares, it shall have power to issue shares up to the nominal amount of the shares redeemed or to be redeemed as if those shares had never been issued; and accordingly the share capital of the company shall not, for the purpose of calculating the fees payable under 2[section 611], be deemed to be increased by the issue of shares in pursuance of this sub-section: ---------------------------------------------------------------------- 1 Subs. by Act 65 of 1960, s. 23, for "the capital redemption reserve fund". 2 Subs. by s. 23, ibid., for "section 601". ---------------------------------------------------------------------- 114A Provided that, where new shares are issued before the redemption of the old shares, the new shares shall not, so far as relates to stamp duty, be deemed to have been issued in pursuance of this sub- section unless the old shares are redeemed within one month after the issue of the new shares.

(5) 1[The capital redemption reserve account] may, notwithstanding anything in this section, be applied by the company, in paying up unissued shares of the company to be issued to members of the company as fully paid bonus shares. 2[(5A) Notwithstanding anything contained in this Act, no company limited by shares shall, after the commencement of the Companies (Amendment) Act, 1988, issue any preference share which is irredeemable or is redeemable after the expiry of a period of ten years from the date of its issue]

(6) If a company fails to comply with the provisions of this section, the company, and every officer of the company who is in default, ---------------------------------------------------------------------- 1 Subs. by Act 65 of 1960, s. 23, for "The capital redemption reserve fund". 2 Ins. by Act 31 of of 1988, s. 13 (w.e.f 15.6.1988). ---------------------------------------------------------------------- 115 shall be punishable with fine which may extend to one thousand rupees. 80A. Redemption of irredeemable preference shares, etc.

4[80A.Redemption of irredeemable preference shares, etc. (1) Notwithstanding anything contained in the terms of issue of any preference shares, every preference share issued before the commencement of the Companies (Amendment) Act, 1988,- (a) which is irredeemable, shall be redeemed by the company within a period not exceeding five years from such com- mencement, or (b) which is not redeemable before the expiry of ten years from the date of issue there-on in accordance with the terms of its issue and which had not been redeemed before such com- mencement, shall be redeemed by the company on the date on which such share is due for redemption or within a period not exceeding ten years from such commencement, whichever is earlier: Provided that where a company is not in a position to redeem any such share within the period aforesaid and to pay the dividend, if any, due thereon (such shares being hereinafter referred to as unredeemed preference shares), it may, with the consent of the Company Law Board, on a petition made by it in this behalf and notwithstanding anything contained in this Act, issue further redeem-able preference shares equal to the amounts due (including the dividend thereon), in respect of the unredeemed preference shares, and on the issue of such further redeemable preference shares, the unredeemed shares shall be deemed to have been redeemed.

(2) Nothing contained in section 106 or any scheme referred to in sections 391 to 395, or in any scheme made under section 396, shall be deemed to confer power on any class of shareholders by resolution or on any court or the Central Government to vary or modify the provisions of this section.

(3)If any default is made in complying with the provisions of this section,- (a) the company making such default shall be punishable with fine which may extend to one thousand rupees for every day during which such default continues; and (b) every officer of the company who is in default shall be punishable with imprisonment for a term which may extend to three years and shall also be liable to fine.] Further issue of Capital

Further issue of capital.

81.Further issue of capital.(1) 2[Where at any time after the expiry of two years from the formation of a company or at any time after the expiry of one year from the allotment of shares in that company made for the first time after its formation, whichever is earlier, it is proposed to increase the subscribed capital of the company by allotment of further shares, then,] (a)such 3[further] shares shall be offered to the persons who, at the date of the offer, are holders of the equity shares of the company, in proportion, as nearly as circumstances admit, to the capital paid up on those shares at that date ; (b)the offer aforesaid shall be made by notice specifying the number of shares offered and limiting a time not being less than fifteen days from the date of the offer within which the offer, if not accepted, will be deemed to have been declined ; (c)unless the articles of the company otherwise provide, the offer aforesaid shall be deemed to include a right exercis- able by the person concerned to renounce the shares offered to him or any of them in favour of any other person; and the notice referred to in clause (b) shall contain a statement of this right ; (d)after the expiry of the time specified in the notice aforesaid, or on receipt of earlier intimation from the person to whom such notice is given that he declines to accept the shares offered, the Board of directors may dispose of them in such manner as they think most beneficial to the company. Explanation.-In this sub-section, " equity share capital " and equity shares " have the same meaning as in section 85.

4[(1A) Notwithstanding anything contained in sub-section (1), the further shares aforesaid may be offered to any persons [whether or ---------------------------------------------------------------------- 1 Ins. by Act 31 of 1988, s. 14 (w.e.f. 15.6.1988). 2 Subs. by Act 65 of 1960, s. 24, for certain words. 3 Subs. by s. 24, ibid., for "new". 4 Ins. by s. 24, ibid. ---------------------------------------------------------------------- 116 not those persons include the persons referred to in clause (a) of

subsection (1)] in any manner whatsoever- (a)if a special resolution to that effect is passed by the company in general meeting, or (b)where no such special resolution is passed, if the votes cast (whether on a show of hands, or on a poll, as the case may be) in favour of the proposal contained in the resolution moved in that general meeting (including the casting vote, if any, of the Chairman) by members who, being entitled so to do, vote in person, or where proxies are allowed, by proxy, exceed the votes, if any, cast against the proposal by members so entitled and voting and the Central Government is satisfied, on an application made by the Board of directors in this behalf, that the proposal is most beneficial to the company.]

(2) Nothing in clause (c) of sub-section (1) shall be deemed- (a)to extend the time within which the offer should be accepted, or (b)to authorise any person to exercise the right of renunciation for a second time, on the ground that the person in whose favour the renunciation was first made has declined to take the shares comprised in the renunciation.

1(3) Nothing in this section shall apply- (a) to a private company; or (b)to the increase of the subscribed capital of a public company caused by the exercise of an option attached to debentures issued or loans raised by the company- (i)to convert such debentures or loans into shares in the company, or (ii) to subscribe for shares in the company: 2[Provided that the terms of issue of such debentures or the terms of such loans include a term providing for such option and such term- (a)either has been approved by the Central Government before the issue of debentures or the raising of the loans or is in conformity with the rules, if any, made by that Government in this behalf ; and ----------------------------------------------------------------------

1 Subs. by Act 65 of 1960, s. 24, for sub-section (3). 2 Subs. by Act 53 of 1963, s. 5, for the proviso (w.e.f. 1-1- 1964). ---------------------------------------------------------------------- 117 (b) in the case of debentures or loans other than debentures issued to, or loans obtained from, the Government or any institution specified by the Central Government in this behalf, has also been approved by a special resolution passed by the company in general meeting before the issue of the debentures or the raising of the loans.] ]

1[(4) Notwithstanding anything contained in the foregoing provi- sions of this section, where any debentures have been issued to, or loans have been obtained from, the Government by a company, whether such debentures have been issued or loans have been obtained before or after the commencement of the Companies (Amendment) Act, 1963, the Central Government may, if in its opinion it is necessary in the public interest so to do, by order, direct that such debentures or loans or any part thereof shall be converted into shares in the company on such terms and conditions as appear to that Government to be reasonable in the circumstances of the case, even if the terms of issue of such debentures or the terms of such loans do not include a term providing for an option for such conversion.

(5) In determining the terms and conditions of such conversion, the Central Government shall have due regard to the following cir- cumstances, that is to say, the financial position of the company, the terms of issue of the debentures or the terms of the loans, as the case may be, the rate of interest payable on the debentures or the loans, the capital of the company, its loan liabilities, its reserves, its profits during the preceding five years and the current market price of the shares in the company.

(6) A copy of every order proposed to be issued by the Central

Government under sub-section (4) shall be laid in draft before each House of Parliament while it is in session for a total period of thirty days which may be comprised in one session or in two or more successive sessions.

(7) If the terms and conditions of such conversion are not acceptable to the company, the company may, within thirty days from the date of communication to it of such order or within such further time as may be granted by the Court, prefer an appeal to the Court in regard to such terms and conditions and the decision of the Court on such appeal and, subject only to such decision, the order of the

Central Government under sub-section (4) shall be final and conclu- sive.] ---------------------------------------------------------------------- 1 Ins. by Act 53 of 1963, s. 5 (w.e.f. 1-1-1964). ---------------------------------------------------------------------- 118 PART IV SHARE CAPITAL AND DEBENTURES Nature, Numbering and Certificate of Shares

Nature of shares. 82. Nature of shares. The shares or other interest of any member in a company shall be movable property, transferable in the manner provided by the articles of the company.

[Repeled] 83. Repealed by the Depositories Act, 1996 (22 of 1996) s.31 and Sch. (w.e.f. 20-9-1995).

Certificate of shares.

84.Certificate of shares.1[(1)] A certificate, under the common seal of the company, specifying any shares held by any member, shall be prima facie evidence of the title of the member to such shares.

2 [(2) A certificate may be renewed or a duplicate of a certificate may be issued if such certificate- (a) is proved to have been lost or destroyed, or (b) having been defaced or mutilated or torn is surrendered to the company.

(3) If a company with intent to defraud renews a certificate or issues a duplicate thereof, the company shall be punishable with fine which may extend to ten thousand rupees and every officer of the company who is in default shall be punishable with imprisonment for a term which may extend to six months, or with fine which may extend to ten thousand rupees, or with both.

(4) Notwithstanding anything contained in the articles of asso- ciation of a company, the manner of issue or renewal of a certificate or issue of a duplicate thereof, the form of a certificate (original or renewed) or of a duplicate thereof, the particulars to be entered in the register of members or in the register of renewed or duplicate certificates, the form of such registers, the fee on payment of which, the terms and conditions, if any (including terms and conditions as to evidence and indemnity and the payment of out-of-pocket expenses incurred by a company in investigating evidence) on which a certi- ficate may be renewed or a duplicate thereof may be issued, shall be such as may be prescribed.] ----------------------------------------------------------------------

1 S. 84 re-numbered as sub-section (1) of that section by Act 65 of 1960, s. 25. 2 Ins. by s. 25, ibid. ---------------------------------------------------------------------- 118A Kinds of Share Capital

Two kinds of share capital.

85.Two kinds of share capital.(1) " Preference share capital " means, with reference to any company limited by shares, whether formed before or after the commencement of this Act , that part of the share capital of the company which fulfils both the following requirements, namely:- (a)that as respects dividends, it carries or will carry a preferential right to be paid a fixed amount or an amount calculated at a fixed rate, which may be either free of or subject to income-tax ; and (b) that as respects capital, it carries or will carry, on a winding up or repayment of capital, a preferential right to be repaid the amount of the capital paid up or deemed to have been paid up, whether or not there is a preferential right to the payment of either or both of the following amounts, namely: - (i)any money remaining unpaid, in respect of the amounts specified in clause (a), up to the date of the winding up or repayment of capital; and (ii)any fixed premium or premium on any fixed scale, specified in the memorandum or articles of the company. Explanation.-Capital shall be deemed to be preference, capital, notwithstanding that it is entitled to, either or both of the following rights, namely: - (i) that, as respects dividends, in addition to the preferential right to the amount specified in clause (a), it has a right to participate, whether fully or to a limited extent, with capital not entitled to the preferential right aforesaid; (ii) that as respects capital, in addition to the preferential right to the repayment, on a winding up, of the amounts specified in clause (b), it has a right to participate, 119 whether fully or to a limited extent, with capital not entitled to that preferential right in any surplus which may remain after the entire capital has been repaid.

(2) " Equity share capital " means, with reference to any such company, all share capital which is not preference share capital.

(3)The expressions " preference share " and " equity share " shall be construed accordingly.

New issues of share capital to be only of two kinds. 86.New issues of share capital to be only of two kinds.The share capital of a company limited by shares formed after the commencement of this Act, or issued after such commencement, shall be of two kinds only, namely:- (a) equity share capital; and (b) preference share capital.

Voting rights.

87.Voting rights.(1) Subject to the provisions of section 89 and

sub-section (2) of section 92- (a) every member of a company limited by shares and holding any equity share capital therein shall have a right to vote, in respect of such capital, on every resolution placed before the company ; and (b)his voting right on a poll shall be in proportion to his share of the paid up equity capital of the company.

(2) (a) Subject as aforesaid and save as provided in clause (b) of this sub-section, every member of a company limited by shares and holding any preference share capital therein shall, in respect of such capital, have a right to vote only on resolutions placed before the company which directly affect the rights attached to his preference shares. Explanation.-Any resolution for winding up the company or for the repayment or reduction of its share capital shall be deemed directly to affect the rights attached to preference shares within the meaning of this clause. (b) Subject as aforesaid, every member of a company limited by shares and holding any preference share capital therein shall, in respect of such capital, be entitled to vote on every resolution placed before the company at any meeting, if the dividend due on such capital or any part of such dividend has remained unpaid- (i) in the case of cumulative preference shares, in respect of an aggregate period of not less than two years preceding the date of commencement of the meeting; and 120 (ii) in the case of non-cumulative preference shares, either in respect of a period of not less than two years ending with the expiry of the financial year immediately preceding the commencement of the meeting or in respect of an aggregate period of not less than three years comprised in the six years ending with the expiry of the financial year aforesaid. Explanation.-For the purposes of this clause, dividend shall be deemed to be due on preference shares in respect of any period, whether a dividend has been declared by the company on such shares for such period or not,- (a) on the last day specified for the payment of such dividend for such period, in the articles or other instrument executed by the company in that behalf ; or (b) in case no day is so specified, on the day immediately following such period. (c) Where the holder of any preference share has a right to vote on any resolution in accordance with the provisions of this sub- section, his voting right on a poll, as the holder of such share,

shall, subject to the provisions of section 89 and sub-section (2) of section 92, be in the same proportion as the capital paid up in respect of the preference share bears to the total paid up equity capital of the company.

Prohibition of issue of shares with disproportionate rights. 88.Prohibition of issue of shares with disproportionate rights. No company formed after the commencement of this Act, or issuing any share capital after such commencement, shall issue any shares (not being preference shares) which carry voting rights or rights in the company as to dividend, capital or otherwise which are disproportionate to the rights attaching to the holders of other shares (not being preference shares).

Termination of disproportionately excessive voting rights in existingcompanies. 89.Termination of disproportionately excessive voting rights in

existing companies.(1) If at the commencement of this Act any shares, by whatever name called, of any existing company limited by shares carry voting rights in excess of the voting rights attaching under

sub-section (1) of section 87 to equity shares in respect of which the same amount of capital has been paid up, the company shall, within a period of one year from the commencement of this Act, reduce the voting rights in respect of the shares first mentioned so as to bring them into conformity with the voting rights attached to such equity

shares under sub-section (1) of section 87.

(2) Before the voting rights are brought into such conformity, the holders of the shares in question shall not exercise in respect thereof voting rights in excess of what would have been exercisable by them if the capital paid up on their shares had been equity share capital, in respect of the following resolutions placed before the company, namely:- (a) any resolution relating to the appointment or reappointment of a director or of a managing agent or secretaries and treasurers, or to any variation in the terms of an agreement between the company and a managing or wholetime director thereof or its managing agent or secretaries and treasurers; (b) any resolution relating to the appointment of buying or selling agents; (c) any resolution relating to the grant of a loan or to the giving of a guarantee or any other financial assistance, to any other body corporate having any person as managing agent or secretaries and treasurers who is also either the managing agent or the secretaries and treasurers of the company or an associate of such managing agent or secretaries and treasurers.

(3) If, by reason of the failure of the requisite proportion of any class of members to agree, it is not found possible to comply with

the provisions of subsection (1), the company shall, within one month of the expiry of the period of one year mentioned in that sub-section. apply to the Court for an order specifying the manner in which the provisions of that sub-section shall be complied with, and any order made by the Court in this behalf shall bind the company and all its shareholders. If default is made in complying with this sub-section, the com- pany, and every officer of the company who is in default, shall be punishable with fine which may extend to one thousand rupees.

(4) The Central Government may, in respect of any shares issued by a company before the 1st day of December, 1949, exempt the company

from the requirements of sub-sections (1), (2) and (3), wholly or in part, if in the opinion of the Central Government the exemption is required either in the public interest or in the interests of the company or of any class of shareholders therein or of the creditors or any class of creditors thereof. 122 Every order of exemption made by the Central Government under this sub-section shall be laid before both Houses of Parliament as soon as may be after it is made.

Savings.

1[90.Savings. (1) Nothing in sections 85, 86, 88 and 89 shall, in the case of any shares issued by a public company before the commencement of this Act, affect any voting rights attached to the shares save as otherwise provided in section 89, or any rights attached to the shares as to dividend, capital or otherwise.

(2) Nothing in sections 85 to 89 shall apply to a private company, unless it is a subsidiary of a public company.

(3) For the removal of doubts, it is hereby declared that on and from the commencement of the Companies (Amendment) Act, 1974 (41 of 1974), the provisions of section 87 shall apply in relation to the voting rights attached to preference shares issued by a public company before the 1st day of April, 1956, as they apply to the prefe- rence shares issued by a public company after that date. Explanation.-For the purposes of this section references to a public company shall be construed as including references to a private company which is a subsidiary of a public company.] Miscellaneous provisions as to share capital

Calls on shares of same class to be made on uniform basis. 91.Calls on shares of same class to be made on uniform basis. Where after the commencement of this Act, any calls for further share capital are made on shares, such calls shall be made on a uniform basis on all shares falling under the same class. Explanation.-For the purposes of this section, shares of the same nominal value on which different amounts have been paid up shall not be deemed to fall under the same class.

Power of company to accept unpaid share capital, although not calledup. 92.Power of company to accept unpaid share capital, although not

called up. (1) A company may, if so authorised by its articles, accept from any member the whole or a part of the amount remaining un- paid on any shares held by him, although no part of that amount has been called up.

(2) The member shall not however be entitled, where the company is one limited by shares, to any voting rights in respect of the moneys so paid by him until the same would. but for such payment, become presently payable. --------------------------------------------------------------------- 1 Subs. by Act 41 of 1974, S. 10, for section 90 (w.e.f. 1-2- 1975). --------------------------------------------------------------------- 123

Payment of dividend in proportion to amount paid up. 93.Payment of dividend in proportion to amount paid up. A company may, if so authorised by its articles, pay dividends in proportion to the amount paid up on each share where a larger amount is paid up on some shares than on others.

Power of limited company to alter its share capital.

94.Power of limited company to alter its share capital. (1) A limited company having a share capital, may, if so authorised by its articles, alter the conditions of is memorandum as follows, that is to say, it may-- (a) increase its share capital by such amount as it thinks expedient by issuing new shares; (b) consolidate and divide all or any of its share capital into shares of larger amount than its existing shares; (c) convert all or any of its fully paid up shares into stock, and reconvert that stock into fully paid up shares of any denomination; (d) subdivide its shares, or any of them, into shares of smaller amount than is fixed by the memorandum, so however. that in the sub-division the proportion between the amount paid and the amount, if any, unpaid on each reduced share shall be the same as it was in the case of the share from which the reduced share is derived; (e) cancel shares which, at the date of the passing of the resolution in that behalf, have not been taken or agreed to be taken by any person, and diminish the amount of its share capital by the amount of the shares so cancelled.

(2) The powers conferred by this section shall be exercised by the company in general meeting and shall not require to be confirmed by the Court.

(3) A cancellation of shares in pursuance of this section shall not be deemed to be a reduction of share capital within the meaning of this Act. 124 94A.

Share capital to stand increased where an order is made under section81 (4). 1[94A.Share capital to stand increased where an order is made

under section 81(4). (1) Notwithstanding anything contained in this Act, where the Central Government has, by an order made under sub-

section (4) of section 81, directed that any debenture or loan or any part thereof shall be converted into shares in a company, the condi- tions contained in the memorandum of such company shall, where such order has the effect of increasing the nominal share capital of the company, stand altered and the nominal share capital of such company shall stand increased by an amount equal to the amount of the value of the shares into which such debentures or loans or part thereof has been converted.

(2) Where, in pursuance of an option attached to debentures issued or loans raised by the company, any public financial institution proposes to convert such debentures or loans into shares in the company, the Central Government may, on the application of such public financial institution, direct that the conditions contained in the memorandum of such company shall stand altered and the nominal share capital of such company shall stand increased by an amount equal to the amount of the value of the shares into which such debentures or loans or part thereof has been converted.

(3) Where the memorandum of a company becomes altered, whether by reason of an order made by the Central Government under sub-section

(4) of section 81` or sub-section (2) of this section, the Central Government shall send a copy of such order to the Registrar and also to the company and on receipt of such order, the company shall file in the prescribed form, within thirty days from the date of such receipt, a return to the Registrar with regard to the increase of share capital and the Registrar shall, on receipt of such order and return, carry out the unecessary alterations in the memorandum of the company.

Notice to Registrar of consolidation of share capital conversion ofshares into stock, etc. 95.Notice to Registrar of consolidation of share capital

conversion of shares into stock, etc. (1) If a company having a share capital has- (a) consolidated and divided its share capital into shares of larger amount than its existing shares; (b) converted any shares into stock; (c) re-converted any stock into shares; (d) sub-divided its shares or any of them; --------------------------------------------------------------------- 1 Ins. by Act 41 of 1974, s. 11(w.e.f. 1-2-1975). --------------------------------------------------------------------- 124A (e) redeemed any redeemable preference shares; or (f) cancelled any shares, otherwise than in connection with a reduction of share capital under sections 100 to 104; the company shall within 1[thirty days] after doing so give notice thereof to the Registrar specifying, as the case may be, the shares, consolidated, divided, converted, sub-divided, redeemed or cancelled, or the stock reconverted.

(2) The Registrar shall thereupon record the notice, and make any alterations which may be necessary in the company's memorandum or articles or both.

(3) If default is made in complying with sub-section (1), the company, and every officer of the company who is in default, shall be punishable with fine which may extend to fifty rupees for every dlay during which the default continues.

Effect of conversion of shares into stock. 96. Effect of conversion of shares into stock. Where a company having a share capital has converted any of its shares into stock, and given notice of the conversion to the Registrar, all the provisions of this Act which are applicable to shares only, shall cease to apply as to so much of the share capital as is converted into stock.

Notice of increase of share capital or of members.

97.Notice of increase of share capital or of members. (1) Where a company having a share capital, whether its shares have or have not been converted into stock, has increased its share capital beyond the authorised capital, and where a company, not being a company limited by shares, has increased the number of its members beyond the registered number, it shall file with the Registrar, notice of the increase of capital or of members within 2[thirty] days after the passing of the resolution authorising the increase; and the Registrar shall record the increase and also make any alterations which may be necessary in the company's memorandum or articles or both.

(2) The notice to be given as aforesaid shall include particulars of the classes of shares affected and the conditions, if any, subject to which the new shares have been or are to be issued.

(3) If default is made in complying with this section, the com- pany, and every officer of the company who is in default, shall be --------------------------------------------------------------------- 1 Subs. by Act 31 of 1965, s. 62 and Sch., for "one month" (w.e.f. 15-10 1965). 2 Subs. by s. 62 and Sch., ibid., for "fifteen" (w.e.f. 15-10- 1965). --------------------------------------------------------------------- 124B punishable with fine which may extend to fifty rupees for every day during which the default continues.

Power of unlimited company to provide for reserve share capital on re-registration. 98.Power of unlimited company to provide for reserve share capital on re- registration. An unlimited company having a share capital may, by its resolution for registration as a limited company in pursuance of this Act, do either or both of the following things, namely :- (a) increase the nominal amount of its share capital by increasing the nominal amount of each of its shares, but subject to the condition that no part of the increased capital shall be capable of being called up except in the event and for the purposes of the company being wound up; (b) provide that a specified portion of its uncalled share capital shall not be capable of being called up except in the 125 event and for the purposes of the company being wound up.

Reserve liability of limited company. 99.Reserve liability of limited company.A limited company may, by special resolution, determine that any portion of its share capital which has not been already called up shall not be capable of being called up, except in the event and for the purposes of the company being wound up, and thereupon that portion of its share capital shall not be capable of being called up except in that event and for those purposes. Reduction of Share Capital

Special resolution for reduction of share capital.

100.Special resolution for reduction of share capital. (1) Subject to confirmation by the Court, a company limited by shares or a company limited by guarantee and having a share capital, may, if so authorised by its articles, by special resolution, reduce its share capital in any way; and in particular and without prejudice to the generality 'of the foregoing power, may-- (a) extinguish or reduce the liability on any of its shares in respect of share capital not paid up; (b) either with or without extinguishing or reducing liability on any of its shares, cancel any paid-up share capital which is lost, or is unrepresented by available assets ; or (c) either with or without extinguishing or reducing liability on any of its shares, pay off any paid-up share capital which is in excess of the wants of the company; and may, if and so far as is necessary, alter its memorandum by reducing the amount of its share capital and of its shares accordingly.

(2) A special resolution under this section is in this Act referred to as " a resolution for reducing share capital".

Application to Court for cofirming order, objections by creditors, andsettlement of list of objecting creditors. 101.Application to Court for cofirming order, objections by

creditors, and settlement of list of objecting creditors. (1) Where a company has passed a resolution for reducing share capital, it may apply, by petition, to the Court for an order confirming the reduction.

(2) Where the-proposed reduction of share capital involves either the diminution of liability In respect of unpaid share capital or the payment to any shareholder of any paid-up share capital, and in any other case if the Court so directs, the following provisions shall

have effect, subject to the provisions of sub-section (3):- (a) every creditor of the company who at the date fixed by the Court is entitled to any debt or claim which, if that 126 date were the commencement of the winding up of the company, would be admissible in proof against the company, shall be entitled to object to the reduction ; (b) the Court shall settle a list of creditors so entitled to object, and for that purpose shall ascertain, as far as possible without requiring an application from any creditor, the names of those creditors and the nature and amount of their debts or claims, and may publish notices fixing a day or days within which creditors not entered on the list are to claim to be so entered or are to be excluded from the right of objecting to the reduction ; (c) where a creditor entered on the list whose debt or claim is not discharged or has not determined does not consent to the reduction', the Court may, if it thinks fit, dispense with the consent of that creditor, on the company securing payment of his debt or claim by appropriating, as the Court may direct, the following amount:- (i)if the company admits the full amount of the debt or claim, or, though not admitting it, is willing to provide for it, then, the full amount of the debt or claim; (ii)if the company does not admit and is not willing to provide for the full amount of the debt or claim, or if the amount is contingent or not, ascertained, then, an amount fixed by the Court after the like inquiry and adjudication as if the company were being wound up by the Court.

(3) Where a proposed reduction of share capital involves either the diminution of any liability in respect of unpaid share capital or the payment to any share holder of any paid-up share capital, the Court may, if, having regard to any special circumstances of the case, it thinks proper so to do, direct that the provisions of sub-section

(2) shall not apply as regards any class or any classes of creditors.

Order confirming reduction and powers of court on making such order. 102.Order confirming reduction and powers of court on making such

order.(1) The Court, if satisfied with respect to every creditor of the company who under section 101 is entitled to object to the reduction, that either his consent to the reduction has been obtained or his debt or claim has been discharged, or has determined, or has 127 been secured, may make an order confirming the reduction on such terms and conditions as it thinks fit.

(2) Where the Court makes any such order, it may- (a) if for any special reason it thinks proper so to do, make an order directing that the company shall, during such period commencing on, or at any time after, the date of the order, as is specified in the order, add to its name as the last words thereof the words " and reduced " ; and (b) make an order requiring the company to publish as the Court directs the reasons for reduction or such other information in regard thereto as the Court may think expedient with a view to giving proper information to the public, and, if the Court thinks fit, the causes which led to the reduction.

(3) Where a company is ordered to add to its name the words "and reduced ", those words shall, until the expiration of the period specified in the order, be deemed to be part of the name of the company,

Registration of order and minute of reduction.

103.Registration of order and minute of reduction.(1) The Registrar- (a) on production to him of an order of the Court confirming the reduction of the share capital of a company ; and (b) on the delivery to him of a certified copy of the order and of a minute approved by the Court showing, with respect to the share capital of the company as altered by the order, (i) the amount of the share capital, (ii) the number of shares [into which it is to be divided, (iii) the amount of each share and (iv) the amount, if any, at the date of the registration deemed to be paid up on each share; shall register the order and minute.

(2) On the registration of the order and minute, and not before, the resolution for reducing share capital as confirmed by the order shall take effect.

(3) Notice of the registration shall be published in such manner as the Court may direct.

(4) The Registrar shall certify under his hand the registration of the order and minute, and his certificate shall be conclusive evidence that all the requirements of this Act with respect to 128 reduction of share capital have been complied with, and that the share capital of the company is such as is stated in the minute.

(5) The minute when registered shall be deemed to be substituted for the corresponding part of the memorandum of the company, and shall be valid and alterable as if it had been originally contained therein.

(6) The substitution of any such minute as aforesaid for part of the memorandum of the company shall be deemed to be an alteration of the memorandum within the meaning and for the purposes of section 40.

Liability of members in respect of reduced shares..

104.Liability of members in respect of reduced shares.. (1) A member of the company, past or present, shall not be liable, in respect of any share, to any call or contribution exceeding in amount the difference, if any, between the amount paid on the share, or the reduced amount, if any, which is to be deemed to have been paid thereon, as the case may be, and the amount of the share as fixed by the minute of reduction: Provided that, if any creditor entitled in respect of any debt or claim to object to the reduction of share capital is, by reason of his ignorance of the proceedings for reduction or of their nature and effect with respect to his debt or claim, not entered on the list of creditors, and after the reduction the company is unable, within the meaning of section 434, to pay the amount of his debt or claim, then- (a) every person who was a member of the company at the date of the registration of the order for reduction and minute, shall be liable to contribute for the payment of that debt or claim an amount not exceeding the amount which he would have been liable to contribute if the company had commenced to be wound up on the day immediately before the said date ; and (b) if the company is wound up, the Court, on the application of any such creditor and proof of his ignorance as aforesaid, may, if it thinks fit, settle accordingly a list of persons so 'liable to contribute, and make and enforce calls and orders on the contributories settled on the list, as if they were ordinary contributories in a winding up.

(2) Nothing in this section shall affect the rights of the contributories among themselves.

Penalty for concealing name of creditor, etc. 105.Penalty for concealing name of creditor, etc. If any officer of the company- (a) knowingly conceals the name of' any creditor entitled to object to the reduction: (b) knowingly misrepresents the nature or amount of the debt or claim of' any creditor. or (c) abets of is privy to any such concealment or misrepresentation as aforesaid; he shall be punishable with imprisonment for a term which may extend to one year, or with fine, or with both. Variation of Shareholders Rights

Alteration of rights of holders of special classes of shares. 1[106.Alteration of rights of holders of special classes of shares. Where the share capital of a company is divided into different classes of shares, the rights attached to the shares of any class may be varied with the consent in writing of not less than three-fourths of the issued shares of that class or with the sanction of a special resolution passed at a separate meeting of the holders of the issued shares of that class-- (a) if provision with respect to such variation is contained in the memorandum or articles of the company, or (b) in the absence of any such provision in the memorandum or articles, if such variation is not prohibited by the terms of issue of the shares of that class.]

Rights of dissentient shareholders.

107.Rights of dissentient shareholders. (1) If in pursuance of any provision such as is referred to in section 106, the rights attached to any such class of shares are at any time varied, the holders of not less in the aggregate than ten per cent. of issued shares of that class, being persons who did not consent to or vote in favour of the resolution for the variation, may apply to the Court to have the variation cancelled and where any such application is made, the variation shall not have effect unless and until it is confirmed by the Court.

(2) An application under this section shall be made within twenty-one days after the date on which the consent was given or the resolution was passed,as the case may be, and may be made on behalf of the shareholders entitled to make the application by such one or more of their number as they may appoint in writing for the purpose.

(3) On any such application, the Court. after hearing the applicant and any other persons who apply to the Court to be heard and appear to --------------------------------------------------------------------- 1 Subs. by Act 65 of 1960, s. 26, for s. 106. ---------------------------------------------------------------------

the Court to be interested in the application, may, if it is satisfied, having regard to all the circumstances of the case, that the variation would unfairly prejudice the shareholders of the class represented by the applicant, disallow the variation; and shall, if not so satisfied, confirm the variation.

(4) The decision of the Court on any such application shall be final.

(5) The company shall, within 1[thirty] days after the service on the company of any order made on any such application, forward a copy of the order to the Registrar; and if default is made in complying with this provision, the company, and every officer of the company who is in default, shall be punishable with fine which may extend to fifty rupees. Transfer of shares and debentures

Transfer not to be registered except on production of instrument oftransfer. 108.Transfer not to be registered except on production of

instrument of transfer. (1) A company shall not register a transfer of shares in, or debentures of, the company, unless a proper instrument of transfer duly stamped and executed by or on behalf of the transferor and by or on behalf of the transferee and specifying the name, address and occupation, if any, of the transferee, has been delivered to the company along with the certificate relating to the shares or debentures, or if no such certificate is in existence, along with the letter of allotment of the shares or debentures: Provided that where, on an application in writing made to the company by the transferee and bearing the stamp required for an instrument of transfer, it is proved to the satisfaction of the Board of directors that the instrument of transfer signed by or on behalf of the transferor and by or on behalf of the transferee has been lost, the company may register the transfer on such terms as to indemnity as the Board may think fit: Provided further that nothing in this section shall prejudice any power of the company to register as shareholder or debenture holder any person to whom the right to any shares in, or debentures of, the company has been transmitted by operation of law. 2[3[(1A) Every instrument of transfer of shares shall be in such form as may be prescribed, and- (a) every such form shall, before it is signed by or on behalf of the transferor and before any entry is made therein, be presented to the prescribed authority, being a person --------------------------------------------------------------------- 1 Subs. by Act 31 of 1965, s. 62 and Sch., for "fifteen" (w.e.f. 15-10-1965). 2 Ins. by s. 13, ibid. (w.e.f. 1-4-1966). 3 Subs. by Act 37 of 1966, s. 2. for sub-sections (1A), (1B) and (1C) (w.e.f. 1-4-1966). --------------------------------------------------------------------- 130A already in the service of the Government, who shall stamp or otherwise endorse thereon the date on which it is so presented, and (b) every instrument of transfer in the prescribed form with the date of such presentation stamped or otherwise en- dorsed thereon shall, after it is executed by or on behalf of the transferor and the transferee and completed in all other respects, be delivered to the company,- (i)in the case of shares dealt in or quoted on a re- cognised stock exchange, at any time before the date on which the register of members is closed, in accordance with law, for the first time after the date of the presentation of the prescribed form to the prescribed authority under clause (a) or within 1[twelve months] from the date of such presentation, whichever is latter; (ii) in any other case, within two months from the date of such presentation. (1B) Notwithstanding anything contained in sub-section (1A),-an instrument of transfer of shares, executed before the commencement of section 13 of the Companies (Amendment) Act, 1965, (31 of 1965). or executed after such commencement in a form other than the prescribed form, shall be accepted by a company,- (a) in the case of shares dealt in or quoted on a recognised stock exchange, at any time not later than the expiry of six months from such commencement or the date on which the register of members is closed, in accordance with law, for the first time after such commencement, whichever is later; (b) in any other case, at any time not later than the expiry of six months from such commencement. (1C) Nothing contained in sub-sections (1A) and (1B) shall apply to- (A) any share- (i)which is held by a company in any other body corporate in the name of a director or nominee in pursuance of sub-section

(2), or as the case may be, sub-section(3), of section 49, or (ii) which is held by a corporation, owned or controlled by the Central Government or a State Government, in any other body corporate in the name of a director or nominee, or --------------------------------------------------------------------- 1.Subs. by Act 31 of 1988, s.15 (w.e.f.15-6-1988). --------------------------------------------------------------------- 130B (iii) in respect of which a declaration has been made to the Public Trustee under section 153B, if-

(1) the company or corporation, as the case may be, stamps or otherwise endorses, on the form of transfer in respect of such share, the date on which it decides that such share shall not be held in the name of the said director or nominee or, as the case may be, in the case of any share in respect of which any such declaration has been made to the Public Trustee, the Public Trustee stamps or otherwise endorses, on the form of transfer in respect of such share under his seal, the date on which the form is presented to him, and

(2) the instrument of transfer in such form, duly completed in all respects, is delivered to the- (a) body corporate in, whose share such company or corporation has made investment in the name of its director or nominee, or (b) company in which such share is held in trust, within two months of the date so stamped or otherwise endorsed ; or (B) any share deposited by any person with- (i) the State Bank of India, or (ii) any scheduled bank, or (iii)any banking company (other than a scheduled bank) or financial institution approved by the Central Government by notification in the Official Gazette (and any such approval may be accorded so as to be retros- pective to any date not earlier than the 1st day of April, 1966), or (iv) the Central Government or a State Government or any corporation owned or controlled by the Central Government or a State Government, by way of security for the repayment of any loan or ad- vance to, or for the performance of any obligation undertaken by, such person, if-

(1) the bank, institution, Government or corporation, as the case may be, stamps or otherwise endorses on the form of transfer of such share- (a)the date on which such share is returned by it to the depositor, or 130c (b)in the case of failure on the part of the depositor to repay the loan or advance or to perform the obligation, the date on which such share is released for sale by such bank. institution, Government or corporation, as the case may be, or (c)where the bank, institution, Government or corporation, as the case may be, intends to get such share registered in its own name, the date on which the instrument of transfer relating to such share is executed by it; and

(2)the instrument of transfer in such form, duly completed in all respects, is delivered to the company within two months from the date so stamped or endorsed. Explanation.-Where any investment by a company or a cor- poration in the name of its director or nominee referred to in clause (A) (i) or clause (A) (ii), or any declaration referred to in clause (A) (iii), or any deposit referred to in clause (B), of this sub-section is made after the expiry of the period or date mentioned in clause (a) of sub-section (1B) or after the expiry of the period mentioned in clause (b) of that sub-section, as the case may be, the form of transfer, in respect of the share which is the subject of such investment, declaration or deposit, means the prescribed form; or (C) any share which is held in any company by the Central Government or a State Government in the name of its nominee, except that every instrument of transfer which is executed on or after the 1st day of October, 1966, in respect of any such share shall be in the prescribed form.] (1D) Notwithstanding anything in sub-section (1A) or sub-section (1B) 1[or sub-section (1C)], where in the opinion of the Central Gov- ernment it is necessary so to do to avoid hardship in any case, that Government may on an application made to it in that behalf, extend the periods mentioned in those sub-sections by such further time as it may deem fit 1[whether such application is made before or after the expiry of the periods aforesaid]; and the number of extensions --------------------------------------------------------------------- 1 Ins. by Act 37 of 1966, s. 2 (w.e.f. 1-4-1966). -------------------------------------------------------------------- 131 granted hereunder and the period of each such extension shall be shown in the annual report laid before the Houses of Parliament under section 638.]

(2) In the case of a company having no share capital, sub-

section (1) shall apply as if the references therein to shares were references instead to the interest of the member in the company.

1[(3) Nothing contained in this section shall apply to transfer of security effected by the transferor and the transferee both of whome are entered as beneficial owners in the records of a depository.] 108A Restriction on acquisition of certain shares.

2[108A. Restriction on acquisition of certain shares.(1) Except with the previous approval of the Central Government, no individual, firm, group, constituent of a group, body corporate or bodies corporate under the same management, shall jointly or severally acquire or agree to acquire, whether in his or its own name or in the name of any other person, any equity shares in a public company, or a private company which is a subsidiary of a public company, if the total nominal value of the equity shares intended to be so acquired exceeds, or would, together with the total nominal value of any equity shares already held in the company by such individual, firm, group, constituent of a group, body corporate or bodies corporate under the same management, exceed twenty-five per cent. of the paid-up equity share capital of such company.

(2) Where any individual, firm.group constituent of a group, body corporate or bodies corporate under the same management (hereafter in this Act referred to as the acquirer), is prohibited, by sub-section

(1), from acquiring or agreeing to acquire except with the previous approval of the Central Government, any share of a public company or a private company which is a subsidiary of the company, no- (a) company in which not less than fifty-one per cent of the share capital is held by the Central Government; or (b) corporation (not being a company) established by or under any Central Act; or (c) financial institution, shall transfer or agree to transfer any share to such acquirer unless such acquirer has obtained the previous approval of the Central Government for the acquisition, or agreement for the acquisition, of such share. 108B Restriction on transfer of shares.

108B.Restriction on transfer of shares. (1) Every body corporate or bodies corporate under the same management, holding, whether singly or in the aggregate, ten per cent. or more of the nominal value of the subscribed equity share capital of any other company shall, before transferring one or more of such shares, give to the Central Government an intimation of its or their proposal to transfer such share, and every such intimation shall include a statement as to the particulars of the share proposed to be transferred, the name and address of the person to whom the share is proposed to be transferred, the share holding, if any, of the proposed transferee in the concerned company and such other particulars as may be prescribed.

(2) Where, on receipt of an intimation given under sub-section

(1) or otherwise, the Central Government is satisfied that as a result of such transfer, a change in the composition of the Board of directors of the company is likely to take place and that such change would be prejudicial to the interests of the company or to the public interest, it may, by order, direct that- (a) no such share shall be transferred to the proposed transferee: Provided that no such order shall preclude the body corporate or bodies corporate from intimating in accordance

with the provisions of sub-section (1), to the Central Government its or their proposal to transfer the share to any other person, or (b) where such share is held in a company engaged in any industry specified in Schedule XV, such share shall be trans- ferred to the Central Government or to such corporation owned or controlled by that Government as may be specified in the direction.

(3) Where a direction is made by the Central Government under

clause (b) of sub-section (2), the share referred to in such direction shall stand transferred to the Central Government or to the Corporation specified therein, and the Central Government or the specified corporation, as the case may be, shall pay. in cash, to the body corporate or bodies corporate from which such share stands transferred, an amount equal to the market value of such share, within

the time specified in sub-section (4). Explanation.--In this sub-section, "market value" means, in the case of a share which is quoted on any recognised stock exchange,value quoted at such stock exchange on the date immediately preceding the date on which the direction is made, and, in any other case, such value as may be mutually agreed upon between the holder of the share and the Central Government or the specified corporation, as the case may be, or in the absence of such agreement, as may be determined by the court.

(4) The market value referred to in sub-section (3) shall be given forthwith, where there is no dispute as to such value or where such value has been mutually agreed upon, but where there is a dispute as to the market value, such value as is estimated by the Central Government or the corporation, as the case may be, shall be given forthwith and the balance, if any, shall be given within thirty days from the date when the market value is determined by the court.

(5) If the Central Government does not make any direction under

sub-section (2) within sixty days from the date of receipt by it of

the intimation given under sub-section (1), the provisions contained

in sub-section (2) with regard to the transfer of such share shall not apply. 108C Restriction on the transfer of shares of foreign companies. 108C.Restriction on the transfer of shares of foreign companies. No body corporate or bodies corporate under the same management, which holds. or hold in the aggregate, ten per cent. or more of the nominal value of the equity share capital of a foreign company, having an established place of business in India, shall transfer any share in such foreign company to any citizen of India or any body corporate incorporated in India except with the previous approval of the Central Government and such previous approval shall not be refused unless the Central Government is of opinion that such transfer would be prejudicial to the public interest. 108D Power of Central Government to direct companies not to give effect tothe transfer. 108D.Power of Central Government to direct companies not to give

effect to the transfer. (1) Where the Central Government is satisfied that as a result of the transfer of any share or block of shares of a company, a change in the controlling interest of the company is likely to take place and that such change would be prejudicial to the interests of the company or to the public interest,that Government may direct the company not to give effect to the transfer of any such share or block of shares and- (a)where the transfer of such share or block of shares has already been registered, not to permit the transferee or any nominee or proxy of the transferee, to exercise any voting or other rights attaching to such share or block of shares; and (b) where the transfer of such share or block of shares has not been registered, not to permit any nominee or proxy of the transferor to exercise any voting or other rights attaching to such share or block of shares.

(2) Where any direction is given by the Central Government

under sub-section (1), the share or the block of shares referred to therein shall stand retransferred to the person from whom it was acquired, and thereupon the amount paid by the transferee for the acquisition of such share or block of shares shall be refunded to him by the person to whom such share or block of shares stands or stand retransferred.

(3)If the refund referred 'GO in sub-section (2) is not made within the period of thirty days from the date of the direction

referred to in sub-section (1), the Central Government shall, on the application of the person entitled to get the refund, direct, by order, the refund of such amount and such order may be enforced as if it were a decree made by a civil court.

(4) The person to whom any share or block of shares stands or

stand retransferred under sub-section (2) shall, on making refund

under sub-section (2) or sub-section (3), be eligible to exercise voting or other rights attaching to such share or block of shares. 108E Time within which refusal to be communicated. 108E.Time within which refusal to be communicated. Every request made to the Central Government for according its approval to the proposal for the acquisition of any share referred to in section 108A or the transfer of any share referred to in section 108C shall be presumed to have been granted unless, within a period of sixty days from the date of receipt of such request, the Central Government communicates to the person by whom the request was made, that the approval prayed for cannot be granted. 108F Nothing in sections 108A to 108D to apply to Government companies,etc. 108F.Nothing in sections 108A to 108D to apply to Government companies, etc. Nothing contained in section 108A [except sub-section

(2) thereof] shall apply to the transfer of any share to, and nothing in section 108B or section 108C or section 108D shall apply to the transfer of any share by- (a) any company in which not less than fifty-one per cent. of the share capital is held by the Central Government; (b) any corporation (not being a company) established by or under any Central Act; (c) any financial institution. 108G Applicability of the provisions of sections 108A to 108F. 108G.Applicability of the provisions of sections 108A to 108F. The provisions of sections 108A to 108F (both inclusive) shall apply to the acquisition or transfer of shares or share capital by, or to, an individual, firm, group, constituent of a group, body corporate or bodies corporate under the same management, who or which- (a) is, in case of acquisition of shares or share capital, the owner in relation to a dominant undertaking and there would be, as a result of such acquisition, any increase- (i)in the production, supply, distribution or control of any goods that are produced, supplied, distributed or controlled in India or any substantial part thereof by that dominant undertaking, or (ii)in the provision or control of any services that are rendered in India or any substantial part thereof by that dominant undertaking; or (b) would be, as a result of such acquisition or transfer of shares or share capital, the owner of a dominant undertaking; or (c)is, in case of ,transfer of shares or share capital, the owner in relations to a dominant undertaking. 108H Penalty for acquisition or transfer of share in contravention ofsections 108A to 108D. 108H.Construction of certain expressions used in sections 108A to 108G. The expressions "group", "same management", "financial institution", "dominant undertaking" and "owner" used in sections 108A to 108G (both inclusive), shall have the meanings respectively assigned to them in the Monopolies and Restrictive Trade Practices Act, 1969 (54 of 1969). 3[108-I.Penalty for acquisition or transfer of share in

contravention of sections 108A to 108D. (1) Any person who acquires any share in contravention of the provisions of section 108A shall be punishable with imprisonment for a term which may extend to three years, or with fine which may extend to five thousand rupees, or with both.

(2) (a) Every body corporate which makes any transfer of shares without giving any intimation is required by section 108B, shall be punishable with fine which may extend to five thousand rupees. (b) Where any contravention of the provisions of section 108B has been made by a company, every officer of the company. who in default shall be punishable with imprisonment for a term which may extend to three years, or with fine which may extend to five thousand rupees, or with both.

(3) (a) Every body corporate which makes any transfer of shares in contravention of the provisions of section 108C, shall be punish- able with fine which may extend to five thousand rupees. (b) Where any contravention of the provisions of section 108C has been made by a company, every officer of the company who is in default shall be punishable with imprisonment for a term which may ex- tend to three years, or with fine which may extend to five thousand rupees, or with both.

(4) (a) Every person who transfers any share in contravention of any order made by the Central Government under section 108B, or gives effect to any transfer of shares made in contravention of any direction made by the Central Government under section 108D, or who exercises any voting right in respect of any share in contravention of any direction made by the Central Government under section 108D, shall be punishable with imprisonment for a term which may extend to five years and shall also be liable to fine. (b) If any company gives effect to any voting or other right exercised in relation to any share acquired in contravention of the provisions of section 108B, or which gives effect to any voting right in contravention of any direction made by the Central Government under section 108D the company shall be punishable with fine which may extend to five thousand rupees, and every officer of the company who is in default shall be punishable with imprisonment for a term which may exetend to three years, or with fine which may extend to five tho- usand rupees, or with both. --------------------------------------------------------------------- 1 Ins. by Act 22 of 1996, s.31 and Sch. (w.e.f. 20-9-1995). 2 Sections 108A to 108H were ins. by Act 41 of 1974, s. 12 (w.e.f. 1-2-1975) and omitted by Act 30 of 1984, s. 52 (w.e.f. 1-8-1984) now ins. by Act 58 of 1991, s. 28 (w.e.f. 27-9-1991). 3. Ins. by Act 58 of 1991, s.28 (w.e.f. 27-9-1991). --------------------------------------------------------------------- 132C.

Transfer by legal representative. 109.Transfer by legal representative. A transfer of the share or other interest in a company of a deceased member thereof made by his legal representative shall, although the legal representative is not himself a member, be as valid as if he had been a member at the time of the execution of the instrument of transfer.

Application for transfer.

110.Application for transfer.(1) An application for the registration of a transfer of the shares or other interest of a member in a company may be made either by the transferor or by the transferee.

(2)Where the application is made by the transferor and relates to partly paid shares, the transfer shall not be registered, unless the company gives notice of the application to the transferee and the transferee makes no objection to the transfer within two weeks from the receipt of the notice. 132D

(3) For the purposes of sub-section (2), notice to the transferee shall be deemed to have been duly given if it is despatched by pre-paid registered post to the transferee at the address given in the instrument of transfer and shall be deemed to have been duly deli- vered at the time at which It would have been delivered in the ordinary course of post.

Power to refuse registration and appeal against refual.

1[111.Power to refuse registration and appeal against refual. (1) If a company refuses, whether in pursuance of any power of the company under its articles or otherwise, to register, the transfer of, or the transmission by operation of law of the right to, any shares or interest of a member in, or debentures of, the company, it shall, within two months from the date on which the instrument of transfer, or the intimation of such transmission, as the case may be, was delivered to the company, send notice of the refusal to the transferee and the transferor or to the person giving intimation of such transmission, as the case may be, giving reasons for such refusal.

(2) The transferer or transferee, or the person who gave inti- mation of the transmission by operation of law, as the case may be, may appeal to the Company Law Board against any refusal of the company to register the transfer or transmission, or against any failure on

its part within the period referred to in subsection (1), either to register the transfer or transmission or to send notice of its refusal to register the same.

(3) An appeal under sub-section (2) shall be made within two months of the receipt of the notice of such refusal or, where no notice has been sent by the company, within four months from the date on which the instrument of transfer, or the intimation of transmission, as the case may be', was delivered to the company.

(4) If- (a) the name of any person- (i) is, without sufficient cause, entered in the register of members of a company, or (ii) after having been entered in the register, is, without sufficient cause, omitted therefrom; or (b) default is made, or unnecessary delay takes place, in entering in the register the fact of any person having become, or ceased to be, a member [including a refusal under

sub-section (1)], the person aggrieved, or any member of the company, or the company, may apply to the Company Law Board for rectification of the register.

(5) The Company Law Board, while dealing with an appeal

preferred under sub-section (2) or an application made under sub-

section (4) may, after hearing the parties, either dismiss the appeal or reject the application, or by order- (a) direct that the transfer or transmission shall be registered by the company and the company shall comply with such order within ten days of the receipt of the order; or (b) direct rectification of the register and also direct the company to pay damages, if any, sustained by any party aggrieved.

(6) The Company Law Board, while acting under sub-section (5), may, at its discretion make- (a) such interim orders, including any orders as to injunction or stay, as it may deem fit and just; (b) such orders as to costs as it thinks fit; and (c) incidental or consequential orders regarding payment of dividend or the allotment of bonus or rights shares.

(7) On any application under this section, the Company Law Board- (a) may decide any question relating to the title of any person who is a party to the application to have his name entered in, or omitted from, the register; (b) generally, may decide any question which it is neces- sary or expedient to decide in connection with the application for rectification.

(8) The provisions of sub-sections (4) to (7)shall apply in relation to the rectification of the register of debenture-holders as they apply in relation to the rectification of the register of members.

(9) If default is made in giving effect to the orders of the Company Law Board under this section, the company and every officer of the company who is in default shall be punishable with fine which may extend to one thousand rupees, and with a further fine which may extend to one hundred rupees for every day after the first day after which the default continues.

(10)Every appeal or application to the Company Law Board under

sub-section (2) or sub-section (4) shall be made by a petition in writing and shall be accompanied by such fee as may be prescribed.

(11) In the case of a private company which is not a subsidiary of a public company, where the right to any shares or interest of a member in, or debentures of, the company is transmitted by a sale thereof held by a court or other public authority, the provisions of

sub-sections (4) to (7) shall apply as if the company were a public company: Provided that the Company Law Board may, in lieu of an order

under sub-section (5), pass an order directing the company to register the transmission of the right unless any member or members of the company specified in the order acquire the right aforesaid within such time as may, be allowed for the purpose by the order, on payment to the purchaser of the price paid by him therefore or such other sum as the Company Law Board may determine to be a reasonable compensation for the right in all the circumstances of the case.

(12)If default is made in complying with any of the provisions of this section, the company and every officer of the company who is in default, shall be punishable with fine which may extend to fifty rupees for every day during which the default continues.

(13) Nothing in this section and section 108, 109 or 110 shall prejudice any power of a private company under its articles to enforce the restrictions contained therein against the right to transfer the shares of such company.

2[(14) In this section "company" means a private company and in- cludes a private company which had become a public company by virue of section 43A of this Act.] --------------------------------------------------------------------- 1. Subs. by Act 31 of 1988, s.16 (w.e.f. 31-5-1991). 2. Ins. by Act 22 of 1996, S.31 and Sch. (w.e.f. 20-9-1995). ---------------------------------------------------------------------

111A Rectification of register of transfer.

1[111A. Rectification of register of transfer. (1) In this section, unless the context otherwise requires, "company" means a

company other than a company referred to in sub-section (14) of section 111 of this Act.

(2) Subject to the provisions of this section, the shares or debentures and any interest therein of a company shall be freely transferable.

(3) The Company Law Board may, on an application made by a depository, company, participant or investor or the Securities and Exchange Board of India within two months from the date of transfer of any shares or debentures held by a depository or from the date on which the instrument of transfer or the intimation of transmission was delivered to the company, as the case may, be, after such enquiry as it thinks fit, direct any company or depository to rectify register or records if the transfer of the shares or debentures is in contravention of any of the provisions of the Securities and Exchange Board of India Act, 1992 (15 of 1992), or regulations made thereunder or the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986).

(4) The Company Law Board while acting under sub-section (3), may at its descretion make such interim order as to suspend the voting rights before making or completing such enquiry.

(5) The provisions of this section shall not restrict the right of a holder of shares or debentures, to transfer such shares or debentures and any person acquiring such shares or debentures shall be entitled to voting rights unless the voting rights have been suspended by an order of the Company Law Board.

(6) Notwithstanding anything contained in this section, any further transfer, during the pendency of the application with the Company Law Board, of shares or debentures shall entitle the transferee to voting rights unless the voting rights in respect of such transferee have also been suspended.

(7) The provisions of sub-sections (5), (7), (9), (10) and (12) of section 111 shall, so far as may be, apply to the proceedings before the Company Law Board under this section as they apply to the proceedings under that section]. ---------------------------------------------------------------------- 1. Ins. by Act 22 of 1986, s. 31 and Sch. (20-9-1995). ---------------------------------------------------------------------- 134

Certification of transfers.

112.Certification of transfers.(1) The certification by a company of any instrument of transfer of shares in, or debentures of, the company, shall be taken as a representation by the company to any person acting on the faith of the certification that there have been produced to the company such documents as on the face of them show a prima facie title to the shares or debentures in the transferor named in the instrument of transfer, but not as a representation that the transferor has any title to the shares or debentures.

(2) Where any person acts on the faith of an erroneous certification made by a company negligently, the company shall be under the same liability to him as if the certification had been made fraudulently.

(3) For the purposes of this section- (a) an instrument of transfer shall be deemed to be certificated if it bears the words " certificate lodged " or words to the like effect ; (b) the certification of an instrument of transfer shall be deemed to be made by a company, if- (i) the person issuing the certificated instrument is a person authorised to issue such instruments of transfer on the company's behalf ; and (ii) the certification is signed by any officer or servant of the company or any other person, authorised to certificate transfers on the company's behalf, or if a body corporate has been so authorised, by any officer or servant of that body corporate; (c) a certification shall be deemed to be signed by any person, if it purports to be authenticated by his signature unless it is shown that the signature was placed there neither by himself nor by any person authorised to use the signature for the purpose of certificating transfers on the company's behalf. Issue of Certificate of Shares, etc.

Limitation of time for issue of certificates.

113.Limitation of time for issue of certificates. (1) 1[Every company, unless prohibited by any provision of law or of any order of any court, tribunal or other authority, shall, within three months after the allotment of any of its shares, debentures or debenture stock, and within two months after the application for the registration of the transfer of any such shares, debentures or debenture stock, deliver, in accordance with the procedure laid down in section 53, the certificates of all shares, debentures and certificates of debenture stocks allotted or transferred: Provided that the Company Law Board may, on an application being made to it in this behalf by the company, extend any of the periods within which the certificates of all debentures and debenture stocks allotted or transferred shall be delivered under this sub-section, to a further period not exceeding nine months, if it is satisfied that it is not possible for the company to deliver such certificates within the said periods.] --------------------------------------------------------------------- 1. Subs. by Act 31 of 1988, s.17 (w.e.f. 15-6-1988). -------------------------------------------------------------------- 134A The expression "transfer", for the purposes of this sub-section, means a transfer duly stamped and otherwise valid, and does not include any transfer which the company is for any reason entitled to refuse to register and does not register.

(2) If default is made in complying with sub-section (1), the company, and every officer of the company who is in default, shall be punishable with fine which may extend to five hundred rupees for every day during which the default continues. 135

(3) If any company on which a notice-has been served requiring it to make good any default in complying with the provisions of sub-

section (1), fails to make good the default within ten days after the service of the notice, the 1[Company Law Board] may, on the application of the person entitled to have the certificates or the debentures delivered to him, make an order directing the company and any officer of the company to make good the default within such time as may be specified in the order; and any such order may provide that all costs of and incidental to the application shall be borne by the company or by any officer of the company responsible for the default.

2[(4) Notwithstanding anything contained in sub-section (1), where the securities are dealt with in a depository, the company shall inti- mate the details of allotment of securities to depository immediately on allotment of such securities.] Share warrants

Issue and effect of share warrants to bearer.

114.Issue and effect of share warrants to bearer. (1) A public company limited by shares, if so authorised by its articles, may, with the previous approval of the Central Government, with respect to any fully paid-up shares, issue under its common seal a warrant stating that the bearer of the warrant is entitled to the shares therein specified, and may provide, by coupons or otherwise, for the payment of the future dividends on the shares specified in the warrant.

(2) The warrant aforesaid is in this Act referred to as a "share warrant".

(3) A share warrant shall entitle the bearer thereof to the shares therein specified, and the shares may be transferred by delivery of the warrant.

Share warrants and entries in register of members.

115.Share warrants and entries in register of members. (1) On the issue of a share warrant, the company shall strike out of its register of members the name of the member then entered therein as holding the shares specified in the warrant as if he had ceased to be a member, and shall enter in that register the following particulars, namely:- (a) the fact of the issue of the warrant; (b) a statement of the shares specified in the warrant, distinguishing each share by its number; and (c) the date of the issue of the warrant.

(2) The bearer of a share warrant shall, subject to the articles of the company, be entitled, on surrendering the warrant for cancella- tion and paying such fee to the company as the, Board of directors may from time to time determine, to have his name entered as a member in the register of members. --------------------------------------------------------------------- 1. Subs. by Act 31 of 1988, s.17 (w.e.f. 31-5-1991). 2. Ins. by Act 22 of 1996, s.31 and Sch. (w.e.f. 20-9-1995). --------------------------------------------------------------------- 136

(3) The company shall be responsible for any loss incurred by any person by reason of the company entering in its register of mem- bers the name of a bearer of a share warrant in respect of the shares therein specified, without the warrant being surrendered and cancelled.

(4) Until the warrant is surrendered, the particulars specified

in sub-section (1) shall be deemed to be the particulars required by this Act to be entered in the register of members ; and, on the surrender, the date of the surrender shall be entered in that register.

(5) Subject to the provisions of this Act, the bearer of a share warrant may, if the articles of the company so provide, be deemed to be a member of the company within the meaning of this Act, for any purposes defined in the articles.

(6) If default is made in complying with any of the requirements of this section, the company and every officer of the company who is in default, shall be punishable with fine which may extend to fifty rupees for every day during which the default continues. Penalty for personation of shareholder

Penalty for personation of shareholder. 116.Penalty for personation of shareholder. If any person deceitfully personates an owner of any share or interest in a company or of any share warrant or coupon issued in pursuance of this Act, and thereby obtains or attempts to obtain any such share or interest or any such share warrant or coupon, or receives or attempts to receive any money due to any such owner, he shall be punishable with imprisonment for a term which may extend to three years and shall also be liable to fine. Special Provisions as to Debentures

Debentures with voting rights not to be issued hereafter. 117.Debentures with voting rights not to be issued hereafter. No company shall, after the commencement of this Act, issue any debentures carrying voting rights at any meeting of the company whether generally or in respect of particular classes of business.

Right to obtain copies of and inspect trust deed.

118.Right to obtain copies of and inspect trust deed. (1) A copy of any trust deed for securing any issue of debentures shall be forwarded to the holder of any such debentures or any member of the company, at his request and within seven days of the making thereof, on payment- (a) in the case of a printed trust deed, of 1[such sum as may be prescribed]; and --------------------------------------------------------------------- 1. Subs. by Act 31 of 1988, s.67 (w.e.f. 15-7-1988). --------------------------------------------------------------------- 137 (b) in the case of a trust deed which has not been printed, of 1[such sum as may be prescribed for] every one hundred words or fractional part thereof required to be copied.

(2) If a copy is refused, or is not forwarded within the time

specified in sub-section (1), the company, and every officer of the company who is in default, shall be punishable, for each offence, with fine which may extend to fifty rupees and with a further fine which may extend to twenty rupees for every day during which the offence continues.

(3) The 2[Company Law Board] also, by order. direct that the copy required shall forthwith be sent to the person requiring it.

(4) The trust deed referred to in sub-section (1) shall also be open to inspection by any member or debenture holder of the company in the same manner, to the same extent, and on payment of the same fees, as if it were the register of members of the company.

Liability of trustees for debenture holders.

119.Liability of trustees for debenture holders. (1) Subject to the provisions of this section, any provision contained in a trust deed, for securing an issue of debentures, or in any contract with the holders of debentures secured by a trust deed, shall be void in so far as, it would have the effect of exempting a trustee thereof from. or indemnifying him against liability for breach of trust, where he fails to show the degree of care and diligence required of him as trustee, having regard to the provisions of the trust deed conferring on him, any powers, authorities or discretions.

(2) Sub-section (1) shall not invalidate- (a) any release otherwise validly given in respect of anything done or omitted to be done by a trustee before the giving of the release ; or (b) any provision enabling such a release to be given- (i)on the agreement thereto of a majority of not less than three fourths in value of the debenture holders present and voting in person or, where proxies are per- mitted, by proxy, at a meeting summoned for the purpose; and (ii)either with respect to specific acts or commissions or on the trustee dying or ceasing to act.

(3) Sub-section (1) shall not operate- (a) to invalidate any provision in force at the commencement of this Act so long as any person then entitled to the benefit of that provision or afterwards given the benefit --------------------------------------------------------------------- 1. Subs. by Act 31 of 1988, s.67 (w.e.f. 15-7-1988). 2. Subs. by s.67, ibid, (w.e.f. 31-5-1991). --------------------------------------------------------------------- 138

thereof under sub-section (4) remains a trustee of the deed in question; or (b) to deprive any person of any exemption or right to be indemnified in respect of anything done or omitted to be done by him while any such provision was in force.

(4) While any trustee of a trust deed remains entitled to the

benefit of a provision saved by sub-section (3), the benefit of that provision may be given either- (a) to all trustees of the deed, present and future ; or (b) to any named trustees or proposed trustees thereof; by a resolution passed by a majority of not less than three-fourths in value of the debenture holders present in person or, where proxies are permitted, by proxy, at a meeting called for the purpose in accordance with the provisions of the deed or, if the deed makes no provision for calling meetings, at a meeting called for the purpose in any manner approved by the Court.

Perpetual debentures. 120.Perpetual debentures. A condition contained in any debentures or in any deed for securing any debentures, whether issued or executed before or after the commencement of this Act, shall not be invalid by reason only that thereby, the debentures are made irredeemable or redeemable only on the happening of a contingency, however remote, or on the expiration of a period, however long.

Power to re-issue redeemed debentures in certain cases.

121.Power to re-issue redeemed debentures in certain cases. (1) Where either before or after the commencement of this Act, a company has redeemed any debentures previously issued, then,- (a) unless any provision to the contrary, whether express or implied, is contained in the articles, or in the conditions of issue, or in any contract entered into by the company; or (b) unless the company has, by passing a resolution to that effect or by some other act, manifested its intention that the debentures shall be cancelled ; the company shall have, and shall be deemed always to have had, the right to keep the debentures alive for the purposes of re-issue ; and in exercising such a right, the company shall have. and shall be deemed always to have had, power to re-issue the debentures either by re-issuing the same debentures or by issuing other debentures in their place. 139

(2) Upon such re-issue, the person entitled to the debentures shall have, and shall be deemed always to have had, the same rights and priorities as if the debentures had never been redeemed.

(3) Where with the object of keeping debentures alive for the purpose of re-issue, they have, either before or after the commence- ment of this Act, been transferred to a nominee of the company, a transfer from that nominee shall be deemed to be a re-issue for the purposes of this section.

(4) Where a company has, either before or after the commencement of this Act, deposited any of its debentures to secure advances from time to time on current account or otherwise, the debentures shall not be deemed to have been redeemed by reason only of the account of the company having ceased to be in debit whilst the debentures remained so deposited.

(5) The re-issue of a debenture or the issue of another debenture in its place under the power by this section given to, or deemed to have been possessed by, a company, whether the re-issue or issue was made before or after the commencement of this Act, shall be treated as the issue of a new debenture for the purposes of stamp duty, but it shall not be so treated for the purposes of any provision limiting the amount or number of debentures to be issued: Provided that any person lending money on the security of a debenture re-issued under this section which appears to be duly stamped may give the debenture in evidence in any proceedings for enforcing his security without payment of the stamp duty or any penalty in respect thereof, unless he had notice or, but for his negligence, might have discovered, that the debenture was not duly stamped ; but in any such case the company shall be liable to pay the proper stamp duty and penalty.

(6) Nothing in this section shall prejudice- (a) the operation of any decree or order of a Court of competent jurisdiction pronounced or made before the twenty- fifth day of February, 1910, as between the parties to the proceedings in which the decree or order was made; (b) where an appeal has been preferred against any such decree or order the operation of any decree or order passed on such appeal, as between the parties to such appeal; or (c) any power to issue debentures in the place of any debentures paid off or otherwise satisfied or extinguished, 140 reserved to a company by its debentures or the securities for the same.

Specific performance of contract to subscribe for debentures. 122.Specific performance of contract to subscribe for debentures. A contract with a company to take up and pay for any debentures of the company may be enforced by a decree for specific performance.

Payments of certain debts out of assets subject to floating charge inpriority to claims under the charge. 123.Payments of certain debts out of assets subject to floating

charge in priority to claims under the charge. (1) Where either- (a) a receiver is appointed on behalf of the holders of any debentures of a company secured by a floating charge; or (b) possession is taken by or on behalf of those debenture holders of any property comprised in or subject to the charge; then, if the company is not at the time in course of being wound up, the debts which in every winding up are, under the provisions of Part VII relating to preferential payments, to be paid in priority to all other debts, shall be paid forthwith out of any assets coming to the hands of the receiver or other person taking possession as aforesaid in priority to any claim for principal. or interest in respect of the debentures.

(2) In the application of the provisions aforesaid, section 530 shall be construed as if the provision for payment of accrued-holiday remuneration becoming payable on the termination of employment before or by the effect of the winding up order or resolution were a provision for payment of such remuneration becoming payable on the termination of employment before or by the effect of the appointment of the receiver or possession being taken as aforesaid.

(3) The periods of time mentioned in the said provisions of Part VII shall be reckoned from the date of appointment of the receiver or of possession being taken as aforesaid, as the case may be.

(4) Where the date referred to in sub-section (3) occurred

before the commencement of this Act, sub-sections (1) and (3) shall have effect with the substitution, for references to the said provisions of Part VII, of references to the provisions which, by

virtue of sub-section (9) of section 530, are deemed to remain in

force in the case therein mentioned, and subsection (2) shall not apply.

(5) Any payments made under this section shall be recouped, as far as may be, out of the assets of the company available for payment of general creditors.

PART V REGISTRATION OF CHARGES

"Charge" to include mortgage in this Part. 124."Charge" to include mortgage in this Part. In this Part, the expression " charge" includes a mortgage.

Certain charges to be void against liquidator or creditors unlessregistered. 125.Certain charges to be void against liquidator or creditors

unless registered. (1) Subject to the provisions of this Part, every charge created on or after the 1st day of April, 1914, by a company and being a charge to which this section applies shall, so far as any security on the company's property or undertaking is conferred thereby, be void against the liquidator and any creditor of the company, unless the prescribed particulars of the charge, together with the instrument, if any, by which the charge is created or evidenced, or a copy thereof verified in the prescribed manner, are filed with the Registrar for registration in the manner required by this Act within 1[thirty] days after the date of its creation: 2[Provided that the Registrar may allow the particulars and instrument or copy as aforesaid to be filed within thirty days next following the expiry of the said period of thirty days on payment of such additional fee not exceeding ten times the amount of fee speci- fied in Schedule X as the Registrar may determine, if the company satisfies the Registrar that it had sufficient cause for not filing the particulars and instrument or copy within that period.]

(2) Nothing in subsection (1) shall prejudice any contract or obligation for the repayment of the money secured by the charge.

(3) When a charge becomes void under this section, the money secured thereby shall immediately become payable.

(4) This section applies to the following charges:- (a) a charge for the purpose of securing any issue of deben- tures ; (b) a charge on uncalled share capital of the company; (c) a charge on any immovable property, wherever situate, or any interest therein; (d) a charge on any book debts of the company; (e) a charge, not being a pledge, on any movable property of the company ; (f) a floating charge on the undertaking or any property of the company including stock-in-trade; (g) a charge on calls made but not paid; (h) a charge on a ship or any share in a ship; --------------------------------------------------------------------- 1 Subs. by Act 31 of 1965, s. 62 and Sch., for " twenty-one " (w.e.f. 15-10-1965). 2. Subs. by Act 31 of 1988, s.18 (w.e.f. 15-6-1988). --------------------------------------------------------------------- 142 (i) a charge on goodwill, on a patent or a licence under a patent, on a trade mark, or on a copyright or a licence under a copyright.

(5) In the case of a charge created out of India and comprising solely property situate outside India, 1 [thirty] days after the date on which the instrument creating or evidencing the charge or a copy thereof could, in due course of post and if despatched with due dili- gence, have been received in India, shall be substituted for 1[thirty] days after the date of the creation of the charge, as the time within which the particulars and instrument or copy are to be filed with the Registrar.

(6) Where a charge is created in India but comprises property outside India, the instrument creating or purporting to create the charge under this section or a copy thereof verified in the prescribed manner, may be filed for registration, notwithstanding that further proceedings may be necessary to make the charge valid or effectual according to the law of the country in which the property is situate.

(7) Where a negotiable instrument has been given to secure the payment of any book debts of a company, the deposit of the instrument for the purpose of securing an advance to the company shall not, for the purposes of this section, be treated as a charge on those book debts.

(8) The holding of debentures entitling the holder to a charge on immovable property shall not, for the purposes of this section, be deemed to be an interest in immovable property.

Date of notice of charge. 126.Date of notice of charge. Where any charge on any property of a company required to be registered under section 125 has been so registered, any person acquiring such property or any part thereof, or any share or interest therein, shall be deemed to have notice of the charge as from the date of such registration.

Registration of charges on properties acquired subject to charge. 127.Registration of charges on properties acquired subject to

charge. (1) Where a company acquires any property which is subject to a charge of any such kind as would, if it had been created by the company after the acquisition of the property, have been required to be registered under this Part, the company shall cause the prescribed particulars of the charge, together with a copy (certified in the prescribed manner to be a correct copy) of the instrument, if any, by which the charge was created or is evidenced, to be delivered to the Registrar for registration in the manner required by --------------------------------------------------------------------- 1 Subs. by Act 31 of 1965. s. 62 and Sch., for " twenty-one " (w.e.f. 15-10-1965), --------------------------------------------------------------------- 143 this Act within 1[thirty] days after the date on which the acquisition is completed: Provided that, if the property is situate, and the charge was created, outside India, 1[thirty] days after the date on which a copy of the instrument could, in due course of post and if despatched with due diligence, have been received in India shall be substituted for 1[thirty] days after the completion of the acquisition as the time within which the particulars and the copy of the instrument are to be delivered to the Registrar.

(2)If default is made in complying with sub-section (1), the company, and every officer of the company who is in default, shall be punishable with fine which may extend to five hundred rupees.

Particulars in case of series of debentures entitling holders paripassu. 128.Particulars in case of series of debentures entitling holders pari passu. Where a series of debentures containing, or giving by reference to any other instrument, any charge to the benefit of which the debenture holders of that series are entitled pari passu is created by a company, it shall, for the purposes of section 125, be sufficient, if there are filed with the Registrar, within 1[thirty] days after the execution of the deed containing the charge or, if there is no such deed, after the execution of any debentures of the series, the following particulars:- (a) the total amount secured by the whole series; (b) the dates of the resolutions authorising the issue of the series and the date of the covering deed, if any, by which the security is created or defined; (c) a general description of the property charged;and (d) the names of the trustees, if any, for the debenture holders; together with the deed containing the charge, or a copy of the deed verified in the prescribed manner, or if there is no such deed, one of the debentures of the series: Provided that, where more than one issue is made of debentures in the series, there shall be filed with the Registrar, for entry in the register, particulars of the date and amount of each issue; but an omission to do this shall not affect the validity of the debentures issued.

Particulars in case of commission, etc., on debentures. 129.Particulars in case of commission, etc., on debentures. Where any commission, allowance or discount has been paid or made either directly or indirectly by a company to any person in consideration of his subscribing or agreeing to subscribe, whether --------------------------------------------------------------------- 1 Subs. by Act 31 of 1965, s. 62 and Sch., for "twenty-one" (w.e.f. 15-10-1965). --------------------------------------------------------------------- 144 absolutely or conditionally, for any debentures of the company, or procuring or agreeing to procure subscriptions, whether absolute or conditional, for any such debentures, the particulars required to be filed for registration under sections 125 and 128 shall include parti- culars as to the amount or rate per cent. of the commission, discount or allowance so paid or made ; but an omission to do this shall not affect the validity of the debentures issued: Provided that the deposit of any debentures as security for any debt of the company shall not, for the purposes of this section, be treated as the issue of the debentures at a discount.

Register of charges to be kept by Registrar.

130.Register of charges to be kept by Registrar 1[(1) The Registrar shall, in respect of each company, cause to be kept a register containing the particulars of all the charges requiring registration under this Part. (1A) Every company shall forward to the Registrar for being entered in

the register kept under sub-section (1) the particulars of all the charges requiring registration under this Part in such form and manner, and after payment of, such fees as may be prescribed.

(1B) The particulars of the charges referred to in sub-section (1) shall relate to,- (a) in the case of a charge to the benefit of which the holders of a series of debentures are entitled, such particu- lars as are specified in sections 128 and 129; (b) in the case of any other charge,- (i)if the charge is a charge created by the company, the date of its creation, and if the charge was a charge existing on property acquired by the company, the date of the acquisition of the property; (ii) the amount secured by the charge; (iii)short particulars of the property charged; and (iv) the persons entitled to the charge. (1C) The pages of the register shall be consecutively numbered and the Registrar shall- (a) cause to be kept in such register in the prescribed form, the documents of charges filed in such form and manner as may be prescribed; and (b) sign or initial every page of such register.

(2) After entering the particulars of all the charges required

under sub-section (1), the Registrar shall return the instrument, if any, or the verified copy thereof, as the case may be, filed in accordance with the provisions of this Part to the person filing it].

(3) The Registrar kept in pursuance of this section shall be open to inspection by any person on payment of 1[such fee as may be prescribed ] for each inspection.

Index to register of charges. 131.Index to register of charges. The Registrar shall keep a chronological index, in the prescribed form and with the prescribed particulars, of the charges registered with him in pursuance of this Part. --------------------------------------------------------------------- 1. Subs. by Act 31 of 1988, s.19 (w.e.f. 17-4-1989). ---------------------------------------------------------------------

Certificate of registration. 132.Certificate of registration. The Registrar shall give a certificate under his hand of the registration of any charge registered in pursuance of this Part, stating the amount thereby secured ; and the certificate shall be conclusive evidence that the requirements of this Part as to registration have been complied with.

Endorsement of certificate of registration on debenture or certificateof debenture stock. 133.Endorsement of certificate of registration on debenture or

certificate of debenture stock.(1) The company shall cause a copy of every certificate of registration given under section 132, to be endorsed on every debenture or certificate of debenture stock which is issued by the company and the payment of which is secured by the charge so registered: Provided that nothing in this sub-section shall be construed as requiring a company to cause a certificate of registration of any charge so given to be endorsed on any debenture or certificate of debenture stock issued by the company before the charge was created.

(2) If any person knowingly delivers, or wilfully authorises or permits the delivery of, any debenture or certificate of debenture

stock which, under the provisions of sub-section (1), is required to have endorsed on it a copy of a certificate of registration without the copy being so endorsed upon it, he shall, without prejudice to any other liability, be punishable with fine which may extend to one thousand rupees.

Duty of company as regards registration and right of interested party. 134.Duty of company as regards registration and right of

interested party. (1) It shall be the duty of a company to file with the Registrar for registration the particulars of every charge created by the company, and of every issue of debentures of a series, requiring registration under this Part ; but registration of any such charge may also be effected on the application of any person interested therein.

(2) Where registration is effected on the application of some person other than the company, that person shall be entitled to recover from the company the amount of any fees properly paid by him to the Registrar on the registration.

Provisions of Part to apply to modification of charges. 135.Provisions of Part to apply to modification of charges. Whenever the terms or conditions, or the extent or operation, of any charge registered under this Part are or is modified, it shall be the duty of the company to send to the Registrar the particulars of such modification, and the provisions of this Part as to registration of a charge shall apply to such modification of the charge.

Copy of instrument creating charge to be kept by company at registeredoffice. 136.Copy of instrument creating charge to be kept by company at registered office. Every company shall cause a copy of every instrument creating any charge requiring registration under this Part to be kept at the registered office of the company: Provided that, in the case of a series of uniform debentures, a copy of one debenture of the series shall be sufficient. 146

Entry in register of charges of appointment of receiver or manager. 137.Entry in register of charges of appointment of receiver or

manager. (1) If any person obtains an order for the appointment of a receiver of, or of a person to manage, the property of a company, or if any person appoints such receiver or person under any powers contained in any instrument, he shall, within 1[thirty] days from the date of the passing of the order or of the making of the appointment under the said powers, give notice of the fact to the Registrar ; and the Registrar shall, on payment of the prescribed fee, enter the fact in the Register of charges.

(2) Where any person so appointed under the powers contained in any instrument ceases to act as such, he shall, on so ceasing, give to the Registrar notice to that effect ; and the Registrar shall enter the notice in the Register of charges.

(3) If any person makes default in complying with the require-

ments of sub-section (1) or (2), he shall be punishable with fine which may extend to fifty rupees for every day during which the default continues.

Company to report satisfaction and procedure thereafter.

138.Company to report satisfaction and procedure thereafter. (1) The company shall give intimation to the Registrar of the payment or satisfaction 2[in full], of any charge relating to the company and requiring registration under this Part, within 3[thirty] days from the date of such payment or satisfaction.

(2) The Registrar shall, on receipt of such intimation, cause a notice to be sent to the holder of the charge calling upon him to show cause within a time (not exceeding fourteen days) specified in such notice, why payment or satisfaction should not be recorded as intimated to the Registrar.

(3) If no cause is shown, the Registrar shall order that a memo- randum of satisfaction 4* * * shall be entered in the register of charges.

(4) If cause is shown, the Registrar shall record a note to that effect in the register, and shall inform the company that he has done so.

(5) Nothing in this section shall be deemed to affect the power of the Registrar to make an entry in the register of charges under section 139 otherwise than on receipt of an intimation from the company. --------------------------------------------------------------------- 1. Subs. by Act 31 of 1965, s. 62 and Sch., for "fifteen" (w.e.f. 15-10-1965). 2 Subs. by Act 65 of 1960, s. 30, for " in whole or in part ". 3 Subs. by Act 31 of 1965, s. 62 and Sch., for "twenty-one" (w.e.f. 15-10-1965). 4 The words " in whole or in part, as the case may be," omitted by Act 65 of 1960, S. 30. --------------------------------------------------------------------- 147

Power of Registrar to make entries of satisfaction and release inabsence of intimation from company. 139.Power of Registrar to make entries of satisfaction and release in absence of intimation from company. The Registrar may, on evidence being given to his satisfaction with respect to any registered charge,- (a) that the debt for which the charge was given has been paid or satisfied in whole or in part; or (b) that part of the property or undertaking charged has been released from the charge or has ceased to form part of the company's property or undertaking; enter in the register of charges a memorandum of satisfaction in whole or in part, or of the fact that part of the property or undertaking has been released from the charge or has ceased to form part of the company's property or undertaking, as the case may be, notwithstanding the fact that no intimation has been received by him from the company.

Copy of memorandum of satisfaction to be furnished to company. 140.Copy of memorandum of satisfaction to be furnished to company. Where the Registrar enters a memorandum of satisfaction in whole or in part, in pursuance of section 138 or 139, he shall furnish the company with a copy of the memorandum.

Rectification by Company Law Board of register of charges. 141.Rectification by Company Law Board of register of charges.

1[(1) The 2[Company Law Board], on being satisfied-- (a) that the omission to file with the Registrar the particulars of any charge created by a company or of any charge subject to which any property has been acquired by the company or of any modification of any such charge or of any issue of debentures of a series, or that the omission to register any charge within the time required by this Part, or that the omission to give intimation to the Registrar of the payment or satisfaction of a charge, within the time required by this Part, or that the omission or misstatement of any particular with respect to any such charge, modification or issue of debentures of a series or with respect to any memorandum of satisfaction or other entry made in pursuance of section 138 or 139, was accidental or due to inadvertence or to some other sufficient cause or is not of a nature to prejudice the position of creditors or shareholders of the company; or ---------------------------------------------------------------------

1. Subs. by Act 65 of 1960, s. 31, for sub-section (1). 2. Subs. by Act 41 of 1974, s. 13, for "Court" (w.e.f. 1-2-1975). --------------------------------------------------------------------- 148 (b) that on other grounds it is just and equitable to grant relief; may, on the application of the company or any person interested and on such terms and conditions as seem to the 1[Company Law Board] just and expedient, direct that the time for the filing of the particulars or for the registration of the charge or for the giving of intimation of payment or satisfaction shall be extended or, as the case may require, that the omission or mis-statement shall be rectified.]

(2) The 1[Company Law Board] may make such order as to, the

costs of an application under sub-section (1) as it thinks fit.

(3) Where the 1[Company Law Board] extends the time for the registration of a charge,the order shall not prejudice any rights acquired in respect of the property concerned before the charge is actually registered.

Penalties.

142.Penalties. (1) If default is made in filing with the Registrar for registration the particulars- (a) of any charge created by the company; (b) of the payment or satisfaction, 2* * * of a debt in respect of which a charge has been registered under this Part; or (c) of the issues of debentures of a series; requiring registration with the Registrar under the provisions of this Part, then, unless the registration has been effected on the applica- tion of some other person, the company, and every officer of the company or other person who is in default, shall be punishable with fine which may extend to five hundred rupees for every day during which the default continues.

(2) Subject as aforesaid, if any company makes default in com- plying with any of the other requirements of this Act as to the regis- tration with the Registrar of any charge created by the company or of any fact connected therewith, the company, and every officer of the company who is in default, shall, without prejudice to any other liability, be punishable with fine which may extend to one thousand rupees. --------------------------------------------------------------------- 1. Subs. by Act 41 of 1974, s. 13, for "Court" (w.e.f. 1-2-1975). 2.The words "in whole or in part" omitted by Act 65 of 1960, s.

148A

Company's register of charges.

143.Company's register of charges.(1) Every company shall keep at its registered office a register of charges and enter therein all charges specifically affecting property of the company and all floating charges on the undertaking or on any property of the company, giving in each case- (i) a short description of the property charged; (ii) the amount of the charge; and (iii) except in the case of securities to bearer, the names of the persons entitled to the charge. 149

(2) If any officer of the company knowingly omits, or wilfully authorises or permits the omission of, any entry required to be made

in pursuance of sub-section (1), he shall be punishable with fine which may extend to five hundred rupees.

Right to inspect copies of instruments creating charges and company'sregister of charges. 144.Right to inspect copies of instruments creating charges and

company's register of charges.(1) The copies of instruments creating charges kept in pursuance of section 136, and the register of charges kept in pursuance of section 143, shall be open during business hours (but subject to such reasonable restrictions as the company in general meeting may impose, so that not less than two hours in each day are allowed for inspection) to the inspection of any creditor or member of the company without fee, at the registered office of the company.

(2) The register of charges kept in pursuance of section 143 shall also be open, during business hours but subject to the reasonable restrictions aforesaid, to the inspection of any other person on payment of a fee of 1[such sum as may be prescribed]for each inspection, at the registered office of the company.

(3) If inspection of the said copies or register is refused the company, and every officer of the company who is in default, shall be punishable with fine which may extend to fifty rupees and with a further fine which may extend to twenty rupees for every day during which the refusal continues.

(4) The 2[Company Law Board] may also by order compel an immediate inspection of the said copies or register.

Application of Part to charges requiring registration under it but notunder previous law. 145.Application of Part to charges requiring registration under it but not under previous law. In respect of 1[any charge created before, and remaining unsatisfied at, the commencement of this Act,] which, if this Act had been in force at the relevant time, would have had to be registered by the company in pursuance of this Part but which did not require registration under the Indian Companies Act, 1913, (7 of 1913). and in respect of all matters relating to such charge, the provisions of this Part shall apply and have effect in all respects, as if the date of commencement of this Act had been substituted therein for the date of creation of the charge, or the date of completion of the acquisition of the property subject to the charge, as the case may be. Nothing contained in this section shall be deemed to affect the relative priorities as they existed immediately before the commence- ment of this Act, as between charges on the same property. --------------------------------------------------------------------- 1. Subs. by Act 31 of 1988, s.67 (w.e.f. 15-7-1988). 2. Subs. by s.67, ibid. (w.e.f. 31-5-1991). 3 Subs. by Act 65 of 1960, s, 33, for "any charge created before the commencement of this Act". ---------------------------------------------------------------------

PART VI MANAGEMENT AND ADMINISTRATION CHAP GENERAL PROVISIONS CHAPTER I.-GENERAL PROVISIONS Registered Office and Name

Registered office of company.

146.Registered office of company.(1) A company shall, as from the day on which it begins to carry on business, or as from the 1[thirtieth] day after the date of its incorporation, whichever is earlier, have a registered office to which all communications and notices may be addressed.

(2)Notice of the situation of the registered office, and of every change there in, shall be given within 2[thirty] days after the date of the incorporation of the company or after the date of the change, as the case may be, to the Registrar who shall record the same: Provided that except on the authority of a special resolution passed by the company, the registered office of the company shall not be removed- (a) in the case of an existing company, outside the local limits of any city, town or village where such office is situated at the commencement of this Act, or where it may be situated later by virtue of a special resolution passed by the company; and (b) in the case of any other company, outside the local limits of any city, town or village where such office is first situated, or where it may be situated later by virtue of a special resolution passed by the company.

(3) The inclusion in the annual return of a company of a state- ment as to the address of its registered office shall not be taken to

satisfy the obligation imposed by sub-section (2).

(4) If default is made in complying with the requirements of this section, the company, and every officer of the company who is in default, shall be punishable with fine which may extend to fifty rupees for every day during which the default continues.

Publication of name by Company.

147.Publication of name by Company.(1) Every company- (a) shall paint or affix its name 3[and the ad-dress of its registered office], and keep the same painted or affixed, on the outside of every office or place in which its business is carried on, in a conspicuous position, in letters easily --------------------------------------------------------------------- 1 Subs. by Act 31 of 1965, s. 62 and Sch., for twenty-eighth " (w.e.f. 15-10-1965). 2 Subs. by s. 62 and Sch., ibid., for " twenty-eighth" (w.e.f. 15-10-1965). 3 Ins. by Act 65 of 1960, s, 34. --------------------------------------------------------------------- 151 legible; and if the characters employed therefore are not those of the language, or of one of the languages, in general use in that locality, also in the characters of that language or of one of those languages; (b) shall have its name engraven in legible characters on its seal ; and (c) shall have its name 1[and the address of its registered office) mentioned in legible characters in all its business letters, in all its bill heads and letter paper, and in all its notices, 2* * * and other official publications; 3[and also have its name so mentioned in all bills of exchange], hundies, promissory notes, endorsements, cheques and orders for money or goods purporting to be signed by or on behalf of the company, and in all bills of parcels, invoices, receipts and letters of credit of the company.

(2) If a company does not paint or affix its name 1[and the address of its registered office], or keep the same painted or affixed

in the manner directed by clause (a) of sub-section (1), the company, and every officer of the company who is in default, shall be punishable with fine which may extend to fifty rupees for not so painting or affixing its name 1[and the address of its registered office], and for every day during which its name 1[and the address of its registered office], is not so kept painted or affixed.

(3) If a company fails to comply with clause (b) or clause (c)

of sub-section (1), the company shall be punishable with fine which may extend to five hundred rupees.

(4) If an officer of a company or any person on its behalf- (a) uses, or authorises the use of, any seal purporting to be a seal of the company whereon its name is not engraven in the manner, aforesaid; (b) issues, or authorises the issue of, any business letter, bill, head, letter paper, notice 4* * * or other official publication of the company wherein 5[its name and the address of its registered office are] not mentioned in the manner aforesaid; --------------------------------------------------------------------- 1 Ins. by Act 65 of 1960, s. 34. 2 The words ", advertisements" omitted by s. 34, ibid. 3 Subs. by s. 34, ibid., for " and in all bills of exchange". 4 The word ",advertisement" omitted by s.34, ibid. 5 Subs. by s. 34, ibid., for " its name is". --------------------------------------------------------------------- 152 (c) signs, or authorises to be signed, on behalf of the company, any bill of exchange, hundi, promissory note, endorsement, cheque or order for money or goods wherein its name is not mentioned in the manner aforesaid; or (d) issues, or authorises the issue of, any bill of parcels, invoice, receipt or letter of credit of the company, wherein its name is not mentioned in the manner aforesaid; such officer or person shall be punishable with fine which may extend to five hundred rupees, and shall further be personally liable to the holder of the bill of exchange, hundi, promissory note, cheque, or order for money or goods, for the amount thereof, unless it is duly paid by the company.

Publication of authorised as well as subscribed and paid-up capital. 148.Publication of authorised as well as subscribed and paid-up

capital. (1) Where any notice, advertisement or other official publi- cation, or any business letter, bill head or letter paper, of a company contains a statement of the amount of the authorised capital of the company, such notice, advertisement or other official publication, or such letter, bill head or letter paper, shall also contain a statement, in an equally prominent position and in equally conspicuous characters, of the amount of the capital which has been subscribed and the amount paid up.

(2) If default is made in complying with the requirements of

subsection (1), the company, and every officer of the company who is in default, shall be punishable with fine which may extend to one thousand rupees. Restrictions on Commencement of Business

Restrictions on commencement of business.

149.Restrictions on commencement of business.(1) Where a company having a share capital has issued a prospectus inviting the public to subscribe for its shares, the company shall not commence any business or exercise any borrowing powers, unless- (a) shares held subject to the payment of the whole amount thereof in cash have been allotted to an amount not less in the whole than the minimum subscription; (b) every director of the company has paid to the company, on each of the shares taken or contracted to be taken by him and for which he is liable to pay in cash, a proportion equal to the proportion payable on application and allotment on the shares offered for public subscription; 153 (c) no money is, or may become, liable to be repaid to applicants for any shares or debentures which have been offered for public subscription by reason of any failure to apply for, or to obtain, permission for the shares or debentures to be dealt in on any recognized stock exchange ; and (d) there has been filed with the Registrar a duly verified declaration by 1[one of the directors or the secretary or, where the company has not appointed a secretary, a secretary in whole-time practice] in the prescribed form, that clauses (a), (b) and (c) of this sub-section, have been complied with.

(2) Where a company having a share capital has not issued a prospectus inviting the public to subscribe for its shares, the com- pany shall not commence any business or exercise any borrowing powers, unless- (a) there has been filed with the Registrar a statement in lieu of prospectus ; (b) every director of the company has paid to the company, on each of the shares taken or contracted to be taken by him and for which he is liable to pay in cash, a proportion equal to the proportion payable on application and allotment on the shares payable in cash; and (c) there has been filed with the Registrar a duly verified declaration by 1[one of the directors or the secretary or, where the company has not appointed a secretary, a secretary in whole-time practice] in the prescribed form, that clause (b) of this sub-section has been complied with.

2[(2A) Without prejudice to the provisions of sub-section (1) and

sub-section (2) a company having a share capital, whether or not it has issued a prospectus inviting the public to subscribe for its shares, shall not at any time commence any business- (a) if such company is a company in existence immediately before the commencement of the Companies (Amendment) Act, 1965 (31 of 1965), in relation to any of the objects stated in its memorandum in pursuance of clause (c) of sub-section

(1) of section 13 ; (b) if such company is a company formed after such commencement, in relation to any of the objects stated in its memorandum in pursuance of sub-clause (ii) of clause (d) of

sub-section (1) of the said section, --------------------------------------------------------------------- 1. Subs. by Act 31 of 1988, s.20 (w.e.f. 15-6-1988). 2. Ins. by Act 31 of 1965, s. 15 (w.e.f. 15-10-1965). ---------------------------------------------------------------------- 154 unless- (i) the company has approved of the commencement of any such business by a special resolution passed in that behalf by it in general meeting; and (ii) there has been filed with the Registrar a duly verified declaration by 1[one of the directors or the secretary or, where the company has not appointed a secretary, a secretary in whole-time practice],in the prescribed form, that clause (i) or as the case may be,sub-section (2B) has been complied with; and if the company commences any such business in contravention of this sub-section, every person who is responsible for the contra- vention shall, without prejudice to any other liability, be punishable with fine which may extend to five hundred rupees for every day during which the contravention continues. Explanation.-A company shall be deemed to commence any business within the meaning of clause (a) if and only if it commences any new business which is not germane to the business which it is carrying on at the commencement of the Companies (Amendment) Act, 1965 (31 of 1965),in relation to any of the objects referred to in the said clause. (2B) Notwithstanding anything contained in sub-section (2A) where no such special resolution as is referred to in that sub-section is passed but the votes cast (whether on a show of hands or, as the case may be, on a poll) in favour of the proposal to commence any business 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, the Central Government may on an application made to it by the Board of directors in this behalf allow the company to commence such business as if the proposal had been passed by a special resolution by the company in general meeting.]

(3) The Registrar shall, on the filing of a duly verified

declaration in accordance with the provisions of sub-section (1) or

sub-section (2), as the case may be, and, in the case of a company

which is required by sub-section (2) to file a statement in lieu of prospectus, also of 'such a statement, certify that the company is entitled to commence business, and that certificate shall be conclusive evidence that the company is so entitled.

(4) Any contract made by a company before the date at which it is entitled to commence business shall be provisional only, and --------------------------------------------------------------------- 1. Subs. by Act 31 of 1988, s.20 (w.e.f. 15-6-1988). --------------------------------------------------------------------- 155 shall not be binding on the company until that date, and on that date it shall become binding.

(5)Nothing in this section shall prevent the simultaneous offer for subscription or allotment of any shares and debentures or the receipt of any money payable on applications for debentures.

(6)If any company commences business or exercises borrowing powers in contravention of this section, every person who is respon- sible for the contravention shall, without prejudice to any other liability, be punishable with fine which may extend to five hundred rupees for every day during which the contravention continues.

(7) Nothing in this section shall apply to- (a) a private company; or (b) a company registered before the first day of April, 1914, which has not issued a prospectus inviting the public to subscribe for its shares. 1* * * * * Registers of members and debenture holders

Register of members.

150.Register of members. (1) Every company shall keep in one or more books a register of its members, and enter therein the following particulars:- (a) the name and address, and the occupation, if any, of each member; (b) in the case of a company having a share capital, the shares held by each member, 2* * * and the amount paid or agreed to be considered as paid on those shares; (c) the date at which each person was entered in the register as a member; and (d) the date at which any person ceased to be a member: Provided that where the company has converted any of its shares into stock and given notice of the conversion to the Registrar, the register shall show the amount of stock held by each of the members concerned instead of the shares so converted which were previously held by him.

(2) If default is made in complying with sub-section (1), the company, and every officer of the company who is in default, shall be punishable with fine which may extend to fifty rupees for every day during which the default continues. ---------------------------------------------------------------------

1 Sub-section (8) omitted by Act 65 of 1960, s. 35. 2 The words "distinguishing each share by its number," omitted by Act 22 of 1996, s.31 and Sch. (w.e.f. 20-9-1995). --------------------------------------------------------------------- 156

Index of members.

151.Index of members.(1) Every company having more than fifty members shall, unless the register of members is in such a form as in itself to constitute an index, keep an index (which may be in the form of a card index) of the names of the members of the company and shall, within fourteen days after the date on which any alteration is made in the register of members, make the necessary alteration in the index.

(2) The index shall, in respect of each member, contain a sufficient indication to enable the entries relating to that member in the register to be readily found.

(3) The index shall, at all times, be kept at the same place as the register of members.

(4) If default is made in complying with sub-section (1), (2) or

(3), the company, and every officer of the company who is in default, shall be punishable with fine which may extend to fifty rupees.

Register and index of debenture holders.

152.Register and index of debenture holders. (1) Every company shall keep in one or more books a register of the holders of its debentures and enter therein the following particulars, namely: - (a) the name and address, and the occupation, if any, of each debenture holder ; (b) the debentures held by each holder, 1* * * and the amount paid or agreed to be considered as paid on those debentures; (c) the date at which each person was entered in the register as a debenture holder ; and (d) the date at which any person ceased to be a debenture holder.

(2) (a) Every company having more than fifty debenture holders shall, unless the register of debenture holders is in such a form as in itself to constitute an index, keep an index (which may be in the form of a card index) of the names of the debenture holders of the company and shall, within fourteen days after the date on which any alteration is made in the register of debenture holders, make the necessary alteration in the index. (b) The index shall, in respect of each debenture holder, contain a sufficient indication to enable the entries relating to that holder in the register to be readily found.

(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 fifty rupees. ---------------------------------------------------------------------- 1. The words "distinguishing each debenture by its number," omi- tted by Act 22 of 1996, s.31 and Sch. (w.e.f. 20-9-1996). -------------------------------o-------------------------------------- 157

(4) Sub-sections (1) to (3) shall not apply with respect to debentures which, ex facie, are payable to the bearer thereof. 152A Register and index of beneficial owners. 1[152A. Register and index of beneficial owners. The register and index of beneficial owners maintainted by a depository under section 11 of the Depositories Act, 1996, shall be deemed to be an index of members and register and index of debenture holders, as the case may be, for the purposes of this Act.]

Trusts not to be entered on register. 153.Trusts not to be entered on register. No notice of any trust, express, implied or constructive, shall be entered on the register of members or of debenture holders 2* * *. 153A Appointment of public trustee. 3[153A.Appointment of public trustee. The Central Government may, by notification in the Official Gazette, appoint a person as public trustee to discharge the functions and to exercise the rights and powers conferred on him by or under this Act. 153B Declaration as to shares and debentures held in trust.

153B.Declaration as to shares and debentures held in trust. (1) Notwithstanding anything contained in section 153, where any shares in, or debentures of, a company are held in trust by any person (hereinafter referred to as the trustee), the trustee shall, within such time and in such form as may be prescribed, make a declaration to the public trustee.

(2) A copy of the declaration made under sub-section (1) shall be sent by the trustee to the company concerned, within twenty-one days, after the declaration has been sent to the public trustee.

(3) (a) If a trustee fails to make a declaration as required by this section, he shall be punishable with fine which may extend to five thousand rupees and in the case of a continuing failure, with a further fine which may extend to one hundred rupees for every day during which the failure continues. (b) If a trustee makes in a declaration aforesaid any statement which is false and which he knows or believes to be false or does not believe to be true, he shall be punishable with imprisonment for a term which may extend to two years and also with fine.

(4) The provisions of this section and section 187B shall not apply in relation to a trust- (a) where the trust is not created by instrument in writing; or (b) even if the trust is created by instrument in writing, 4[where the value of the shares in, or debentures of, a company held in trust]- (i) does not exceed one lakh of rupees, or (ii) exceeds one lakh of rupees but does not exceed either five lakhs of rupees or twenty-five per cent. of --------------------------------------------------------------------- 1 Ins. by Act 22 of 1996, s.31 and Sch. (w.e.f. 20-9-1995). 2 The words " or be receivable by the Registrar" omitted by Act 53 of 1963, s. 6 (w.e.f. 1-1-1964). 3 Ins. by s. 7, ibid. (w.e.f. 1-1-1964). 4 Subs. by Act 31 of 1965, s. 16, for certain words (w.e.f. 15-10-1965). --------------------------------------------------------------------- 158-159 the paid-up share capital of the company, whichever is less.] 1[Explanation.-The expression " the value of the shares in, or debentures of, a company " in clause (b) means,- (i) in the case of shares or debentures acquired by way of allotment or transfer for consideration, the cost of acqui- sition thereof, and (ii) in any other case, the paid-up value of the shares or debentures.]

Power to close register of members of debenture holders.

154.Power to close register of members of debenture holders. (1) A company may, after giving not less than seven days' previous notice by advertisement in some newspaper circulating in the district in which the registered office of the company is situate, close the register of members or the register of debenture holders for any period or periods not exceeding in the aggregate forty-five days in each year, but not exceeding thirty days at any one time.

(2) If the register of members or of debenture holders is closed

without giving the notice provided in sub-section (1), or after giving shorter notice than that so provided, or for a continuous or an aggre- gate period in excess of the limits specified in that sub-section, the company, and every officer of the company who is in default, shall be punishable with fine which may extend to five hundred rupees for every day during which the register is so closed. 2* * * * * --------------------------------------------------------------------- 1 Ins. by Act 31 of 1965, s. 16 (w.e.f. 15-10-1965). 2. Omitted by Act 31 of 1988, s.21 (w.e.f. 31-5-1991). --------------------------------------------------------------------- 160 Foreign registers of members or debenture holders

Power for company to keep foreign register of members of debentureholders. 157.Power for company to keep foreign register of members of

debenture holders.(1) A company which has a share capital or which has issued debentures may, if so authorised by its articles, keep in any State or country outside India a branch register of members or debenture holders resident in that State or country (in this Act called a " foreign register ").

(2) The company shall, within 1[thirty days] from the date of the opening of any foreign register, file with the Registrar notice of the situation of the office where such register is kept ; and in the event of any change in the situation of such office or of its discontinuance, shall, within 1[thirty days] from the date of such change or discontinuance, as the case may be, file notice with the Registrar of such change or discontinuance.

(3) If default is made in complying with the requirements of

sub-section (2), the company, and every officer of the company who is in default, shall be punishable with fine which may extend to fifty rupees for every day during which the default continues.

Provisions as to foreign registers.

158.Provisions as to foreign registers. (1) A foreign register shall be deemed to be part of the company's register (in this section called the " principal register ") of members or of debenture holders, as the case may be.

(2) A foreign register shall be kept, shall be open to inspection and may be closed, and extracts may be taken therefrom and copies thereof may be required, in the same manner, mutatis mutandis, as is applicable to the principal register under this Act, except that the advertisement before closing the register shall be inserted in some newspaper circulating in the district wherein the foreign register is kept.

(3) (a) The Central Government may, by notification in the Official Gazette, direct that the provisions of clause (b) shall apply, or cease to apply, to foreign registers kept in any State or country outside India. (b) If a foreign register is kept by a company in any State or country to which a direction under clause (a) applies for the time being, the decision of any competent Court in that State or country in regard to-the rectification of the register shall have the same force and effect as if it were the decision of a competent Court in India. --------------------------------------------------------------------- 1 Subs. by Act 31 of 1965, s. 62 and Sch., for " one month " (w.e.f. 15-10-1965). --------------------------------------------------------------------- 161

(4) The company shall- (a) transmit to its registered office in India a copy of every entry in any foreign register as soon as may be after the entry is made ; and (b) keep at such office a duplicate of every foreign register duly entered up from time to time.

(5) Every such duplicate shall, for all the purposes of this Act, be deemed to be part of the principal register.

(6) Subject to the provisions of this section with respect to duplicate registers, the shares or debentures registered in any foreign register shall be distinguished from the shares or debentures registered in the principal register and in every other foreign register and no transaction with respect to any shares or debentures registered in a foreign register shall, during the continuance of that registration, be registered in any other register.

(7) The company may discontinue the keeping of any foreign register; and thereupon all entries in that register shall be transferred to some other foreign register kept by the company in the same part of the world or to the principal register.

(8) Subject to the provisions of this Act, a company may, by its articles, make such regulations as it thinks fit in regard to its foreign registers.

(9) If default is made in complying with sub-section (4), the company, and every officer of the company who is in default shall be punishable with fine which may extend to fifty rupees. Annual Returns

Annual return to be made by company having a share capital.

159.Annual return to be made by company having a share capital. (1) Every company having a share capital shall, within 1[sixty] days from the day on which each of the annual general meetings referred to in section 166 is held, prepare and file with the Registrar a return containing the particulars specified in Part I of Schedule V, as they stood on that day, regarding- (a) its registered office, (b) the register of its members, (c) the register of its debenture holders, (d) its shares and debentures, (e) its indebtedness, --------------------------------------------------------------------- 1 Subs. by Act 31 of 1965, s. 62 and Sch., for " forty-two" (w.e.f. 15-10-1965). --------------------------------------------------------------------- 162 (f) its members and debenture holders, past and present, and (g) its directors, managing directors, managing agents, secretaries and treasurers, 1[managers and secretaries], past and present : 2[Provided that if 3[any of the five] immediately preceding returns has given as at the date of the annual general meeting with reference to which it was submitted, the full particulars required as to past and present members and the shares held and transferred by them, the return in question may contain only such of the particulars as relate to persons ceasing to be or becoming members since that date and to shares transferred since that date or to changes as compared with that date in the number of shares held by a member. Explanation.-Any reference in this section or in section 160 or 161 or in any other section or in Schedule V to the day on which an annual general meeting is held or to the date of the annual general meeting shall, where the annual general meeting for any year has not been held, be construed as a reference to the latest day on or before which that meeting should have been held in accordance with the provisions of this Act.]

(2) The said return shall be in the Form set out in Part II of Schedule V or as near thereto as circumstances admit 2[and where the return is filed even though the annual general meeting has not been held on or before the latest day by which it should have been held in with the return a statement specifying the reasons for not holding the annual general meeting]: (c) the conditions subject to which any manufacturing into stock and given notice of the conversion to the Registrar. the list referred to in paragraph 5 of Part I of Schedule V shall state the amount of stock held by each of the members concerned instead of the shares so converted previously held by him.

Annual return to be made by company not having a share capital. 160.Annual return to be made by company not having a share

capital. (1) Every company not having a share capital shall, within under section 65. Meetings referred to in section 166 is held, prepare and file with the --------------------------------------------------------------------- 1 Subs. by Act 65 of 1960, s. 38, for "and managers". 2 Ins. by s. 38, ibid. 3. Subs. by Act 31 of 1988, s.22 (w.e.f. 15-6-1988). 4 Subs. by Act 31 of 1965, s. 62 and ch., for " forty-two " (w.e.f. 15-10-1965). --------------------------------------------------------------------- 162A Registrar a return stating the following particulars as they stood on that day: - (a) the address of the registered office of the company; 1[(aa) the names of members and the respective dates on which they became members and the names of persons who ceased to be members since the date of the annual general meeting of the immediately preceding year, and the dates on which they so ceased;] (b) all such particulars with respect to the persons who, at the date of the return, were the directors of the company, its managing agent, its secretaries and treasurers, 2[its manager and its secretary] as are set out in section 303.

(2) There shall be annexed to the return a statement containing particulars of the total amount of the indebtedness of the company as on the day aforesaid in respect of all charges which are or were required to be registered with the Registrar under this Act or under any previous companies law, or which would have been required to be registered under this Act if they had been created after the com- mencement of this Act.

Further provisions regarding annual return and certificate to beannexed thereto. 161.Further provisions regarding annual return and certificate to

be annexed thereto. (1) The copy of the annual return filed with the Registrar under section 159 or 160, as the case may be, shall be signed both by a director and by the 3[* * *] manager or secretary of the company, or where there is no managing agent, secretaries and treasurers, manager or secretary, by two directors of the company, one of whom shall be the managing director where there is one: 4[Provided that where the annual return is filed by a company whose shares are listed on a recognised stock exchange, the copy of such annual return shall also be signed by a secretary in whole-time practice].

(2) There shall also be filed with the Registrar along with the return a certificate signed by 5[the signatories] of the return, stating-- (a) that the return states the facts as they stood on the day of the annual general meeting aforesaid, correctly and completely ; 6* * * 7[(aa) that since the date of the last annual return the transfer of all shares and debentures and the issue of all further certificates of shares and debentures have been appropriately recorded in the books maintained for the pur- pose; and] --------------------------------------------------------------------- 1. Ins by Act 65 of 1960, s. 39. 2 Subs by s. 39, ibid., for " and its manager". 3 The words "managing agent, secretaries and treasurers," omitted by Act 31 of 1988, S.23 (w.e.f. 15-6-1988). 4 Ins. by s.23, ibid. (w.e.f. 15-6-1988). 5 Subs. by s.23, ibid. (w.e.f. 15-6-1988). 6 The word "and" omitted by Act 65 of 1960, s. 40, 7 Ins. by s. 40, ibid. --------------------------------------------------------------------- 162B (b) in the case of a private company also, (i) that the company has not, 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 in- corporation of the company, issued any invitation to the public to subscribe for any shares or debentures of the company, and (ii) that, where the annual return discloses the fact that the number of members of the company exceeds fifty, the excess consists wholly of persons who under sub-clause

(b) of clause (iii) of sub-section. (1) of section 3 are not to be included in reckoning the number of fifty.

Penalty and interpretation.

162.Penalty and interpretation. (1) If a company fails to comply with any of the provisions contained in section 159, 160 or 161, the company, and every officer of the company who is in default, shall be punishable with fine which may extend to fifty rupees for every day during which the default continues.

(2) For the purposes of this section and sections 159, 160, and 161, the expressions " officer " and " director " shall include any person in accordance with whose directions or instructions the Board of directors of the Company is accustomed to act. General provisions regarding registers and returns

Place of keeping, and inspection of, registers and returns. 163.Place of keeping, and inspection of, registers and

returns.(1) The register of members commencing from the date of the registration of the company, the index of members, the register and index of debenture holders, and copies of all annual returns prepared under sections 159 and 160, together with the copies of certificates and documents required to be annexed thereto under sections 160 and 161, shall be kept at the registered office of the company: 1[Provided that such registers, indexes, returns and copies of certificates and documents or any or more of them may, instead of being kept at the registered office of the company, be kept at any other place within the city, town or village in which the registered office is situate, if-- (i) such other place has been approved for this purpose by a special resolution passed by the company in general meeting, 2 [and] 3* * * * *. -------------------------------------------------------------------- 1. Ins. by Act 65 of 1960, s. 41. 2. Ins. by Act 31 of 1965, s. 17 (w.e.f. 15-10-1965). 3. Cl. (ii) omitted by s. 17, ibid. (w.e.f. 15-10-1965). --------------------------------------------------------------------- 162C. (iii) the Registrar has been given in advance a copy of the proposed special resolution.]

1[(1A) Notwithstanding anything contained in sub-section (1), the Central Government may make rules for the preservation and for the disposal, whether by destruction or otherwise, of the registers, indexes, --------------------------------------------------------------------- 1 Ins. by Act 65 of 1960, s. 41. --------------------------------------------------------------------- 163 returns, and copies of certificates and other documents referred to in

sub-section (1).]

(2) The registers, indexes, returns, and copies of certificates

and other documents referred to in sub-section (1) shall, except when the register of members or debenture holders is closed under the pro- visions of this Act, be open during business hours (subject to such reasonable restrictions, as the company may impose, so that not less than two hours in each day are allowed for inspection) to the inspec- tion-- (a) of any member or debenture holder, without fee; and (b) of any other person, on payment of 1[such sum as may be prescribed] each inspection.

(3) Any such member, debenture holder or other person may- (a) make extracts from any register, index, or copy

referred to in sub-section (1) without fee or additional fee, as the case may be ; or (b) require a copy of any such register, index or copy or of any part thereof, on payment of 1[such sum as may be prescribed] for every one hundred words or fractional part thereof required to be copied.

(4) The company shall cause any copy required by any person

under clause (b) of sub-section (3) to be sent to that person within a period of ten days, exclusive of non-working days, commencing on the day next after the day on which the requirement is received by the company.

(5) If any inspection, or the making of any extract required under this section, is refused, or if any copy required under this

section is not sent within the period specified in sub-section (4), the company, and every officer of the company who is in default, shall be punishable, in respect of each offence, with fine which may extend to fifty rupees for every day during which the refusal of default continues.

(6) The 2[company Law Board] may also by order, compel an immediate inspection of the document, or direct that the extract required shall forthwith be. allowed to be taken by the person requiring it, or that the copy required shall forthwith be sent to the person requiring it, as the case may be.

Registers, etc., to be evidence. 164.Registers, etc., to be evidence. The register of members, the register of debenture holders, and the annual returns, certificates and statements referred to in --------------------------------------------------------------------- 1. Subs. by Act 31 of 1988, s.67 (w.e.f. 15-7-1988). 2. Subs. by s.67, ibid. (w.e.f. 31-5-1991). --------------------------------------------------------------------- 164 sections 159, 160 and 161 shall be prima facie evidence of any matters directed or authorised to be inserted therein by this Act. Meetings and Proceedings

Statutory meeting and statutory report of company.

165.Statutory meeting and statutory report of company. (1) Every company limited by shares, and every company limited by guarantee and having a share capital, shall, within a period of not less than one month nor more than six months from the date at which the company is entitled to commence business, hold a general meeting of the members of the company, which shall be called " the statutory meeting".

(2) The Board of directors shall, at least twenty-one days before the day on which the meeting is held, forward a report (in this Act referred to as " the statutory report ") to every member of the company: Provided that if the statutory report is forwarded later than is required above, it shall, notwithstanding that fact, be deemed to have been duly forwarded if it is so agreed to by all the members entitled to attend and vote at the meeting.

(3) The statutory report shall set out- (a) the total number of shares allotted, distinguishing shares allotted as fully or partly paid up otherwise than in cash, and stating in the case of shares partly paid up, the extent to which they are so paid up, and in either case, the consideration for which they have been allotted ; (b) the total amount of cash received by the company in respect of all the shares allotted, distinguished as aforesaid ; (c) an abstract of the receipts of the company and of the payments made there out, up to a date within seven days of the date of the report, exhibiting under distinctive headings the receipts of the company from shares and debentures and other sources, the payments made there out, and particulars concerning the balance remaining in hand, and an account or estimate of the preliminary expenses of the company, showing separately any commission or discount paid or to be paid on the issue or sale of shares or debentures ; (d) the names, addresses and occupations of the directors of the company and of its auditors ; and also, if there be any, of its managing agent, secretaries and treasurers, manager, and secretary; and the changes, if any which 165 have occurred in such names, addresses and occupations since the date of the incorporation of the company ; (e) the particulars of any contract which, or the modification or the proposed modification of which, is to submitted to the meeting for its approval, together in the latter case with the particulars of the modification or proposed modification ; (f) the extent, if any, to which each under-writing contract, if any, has not been carried out, and the reasons therefore ; (g) the arrears, if any, due on calls from every director ; from the managing agent, every partner of the managing agent, every firm in which the managing agent is a partner, and where the managing agent is a private company, every director thereof ; from the secretaries and treasurers ; where they are a firm, from every partner therein ; and where they are a private company, from every director thereof ; and from the manager, and (h) the particulars of any commission or brokerage paid or to be paid in connection with the issue or sale of shares or debentures to any director; to the managing agent, any partner of the managing agent, any firm in which the managing agent is a partner; and where the managing agent is a private company, to any director thereof ; to the secretaries and treasurers ; where they are a firm, to any partner therein ; and where they are a private company,to any director thereof; or to the manager.

(4) The statutory report shall be certified as correct by not less than two directors of the company one of whom shall be a managing director, where there is one. After the statutory report has been certified as aforesaid, the auditors of the company shall, in so far as the report relates to the shares allotted by the company, the cash received in respect of such shares and the receipts and payments of the company 1* * *, certify it as correct.

(5) The Board shall cause a copy of the statutory report certified as is required by this section to be delivered to the Registrar for registration forthwith, after copies thereof have been sent to the members of the company. -------------------------------------------------------------------- 1 The words " on capital account " omitted by Act 65 of 1960, s.

166

(6) The Board shall cause a list showing the names, addresses and occupations of the members of the company, and the number of shares held by them respectively, to be produced at the commencement of the statutory meeting, and to remain open and accessible to any member of the company during the continuance of the meeting.

(7) The members of the company present at the meeting shall be at liberty to discuss any matter relating to the formation of the company or arising out of the statutory report, whether previous notice has been given or not ; but no resolution may be passed of which notice has not been given in accordance with the provisions of this Act.

(8) The meeting may adjourn from time to time, and at any adjourned meeting any resolution of which notice has been given in accordance with the provisions of this Act, whether before or after the former meeting, may be passed ; and the adjourned meeting shall have the same powers as an original meeting.

(9) If default is made in complying with the provisions of this section, every director or other officer of the company who is in default shall be punishable with fine which may extend to five hundred rupees.

(10) This section shall not apply to a private company.

Annual general meeting.

166.Annual general meeting. 1[(1) Every company shall in each year hold in addition to any other meetings a general meeting as its annual general meeting and shall specify the meeting as such in the notices calling it ; and not more than fifteen months shall elapse between the date of one annual general meeting of a company and that of the next: Provided that a company may hold its first annual general meeting within a period of not more than eighteen months from the date of its incorporation ; and if such general meeting is held within that period, it shall not be necessary for the company to hold any annual general meeting in the year of its incorporation or in the following year: Provided further that the Registrar may, for any special reason, extend the time within which any annual general meeting (not being the first annual general meeting) shall be held, by a period not exceeding three months.]

(2) Every annual general meeting shall be called for a time during business hours, on a day that is not a public holiday, and shall be ---------------------------------------------------------------------

1 Subs. by Act 65 of 1960, s. 43, for sub-section (1). --------------------------------------------------------------------- 167 held either at the registered office of the company or at some other place within the city, town or village in which the registered office of the company is situate 1* * *: 2[Provided that the Central Government may exempt any class of companies from the provisions of this sub-section subject to such conditions as it may impose: Provided further that- (a) a public company or a private company which is a subsi- diary of a public company, may by its articles fix the time for its annual general meetings and may also by a resolution passed in one annual general meeting fix the time for its subsequent annual general meetings; and (b) a private company which is not a subsidiary of a public company, may in like manner and also by a resolution agreed to by all the members thereof, fix the times as well at the place for its annual general meeting.]

Power of company Law Board to call annual general meeting.

167.Power of company Law Board to call annual general meeting.(1) If default is made in holding an annual general meeting in accordance with section 166, the 3[Company Law Board] may, not with standing anything in this Act or in the articles of the company, the application of any member of the company, call, or direct the calling of, a general meeting of the company and give such ancillary or consequential directions as the 3[Company Law Board] thinks expedient in relation to the calling, holding and conducting of the meeting. Explanation.-The directions that may be given under this sub- section may include a direction that one member of the company present in person or by proxy shall be deemed to constitute a meeting.

(2) A general meeting held in pursuance of sub-section (1) shall, subject to any directions of the 3[Company Law Board] be deemed to be an annual general meeting of the company.

Penalty for default in complying with section 166 or 167. 168.Penalty for default in complying with section 166 or 167. If default is made in holding a meeting of the company in accordance with section 166, or in complying with any directions of the Central

Government under sub-section (1) of section 167, 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[and --------------------------------------------------------------------- 1 The words "and the notices calling the meeting shall specify it at the annual general meeting" omitted by Act 65 of 1960, s. 43. 2 Ins. by s. 43, ibid. 3. Subs. by Act 31 of 1988, s.67 (w.e.f. 31-5-1991). 4. Ins. by Act 65 of 1960, s.44. --------------------------------------------------------------------- 168 in the case of a continuing default, with a further fine which may extend to two hundred and fifty rupees for every day after the first during which such default continues].

Calling of extraordinary general meeting on requisition.

169.Calling of extraordinary general meeting on requisition. (1) The Board of directors of a company shall, on the requisition of such

number of members of the company as is specified in sub-section (4), forthwith proceed duly to call an extraordinary general meeting of the company.

(2) The requisition shall set out the matters for the consideration of which the meeting is to be called, shall be signed by the requisitionists, and shall be deposited at the registered office of the company.

(3) The requisition may consist of several documents in like form, each signed by one or more requisitionists.

(4) The number of members entitled to requisition a meeting in regard to any matter shall be- (a) in the case of a company having a share capital, such number of them as hold at the date of the deposit of the requisition, not less than one-tenth of such of the paid-up capital of the company as at that date carries the right of voting in regard to that matter ; (b) in the case of a company not having a share capital, such number of them as have at the date of deposit of the requisition not less than one-tenth of the total voting power of all the members having at the said date a right to vote in regard to that matter.

(5) Where two or more distinct matters are specified in the

requisition, the provisions of sub-section (4) shall apply separately in regard to each such matter; and the requisition shall accordingly be valid only in respect of those matters in regard to which the condition specified in that sub-section is fulfilled.

(6) If the Board does not, within twenty-one days from the date of the deposit of a valid requisition in regard to any matters, proceed duly to call a meeting for the consideration of those matters on a day not later than forty-five days from the date of the deposit of the requisition, the meeting may be called- (a) by the requisitionists themselves, (b) in the case of a company having a share capital, by such of the requisionists as represent either a majority in value of the paid-up share capital held by all of them or 169 not less than one-tenth of such of the paid-up share capital of the company as is referred to in clause (a) of sub-section

(4), whichever is less ; or (c) in the case of a company not having a share capital, by such of the requisitionists as represent not less than one- tenth of the total voting power of all the members of the

company referred to in clause (b) of sub-section (4). Explanation.-For the purposes of this sub-section, the Board shall, in the case of a meeting at which a resolution is to be proposed as a special resolution, be deemed not to have duly convened the meeting if they do not give such notice thereof as is required by

sub-section (2) of section 189.

(7) A meeting called under sub-section (6) by the requisitionists or any of them- (a) shall be called in the same manner, as nearly as possible, as that in which meetings are to be called by the Board; but (b) shall not be held after the expiration of three months from the date of the deposit of the requisition. Explanation.-Nothing in clause (b) shall be deemed to prevent a meeting duly commenced before the expiry of the period of three months, aforesaid, from adjourning to some day after the expiry of that period.

(8) Where two or more persons hold any shares or interest in a company jointly, a requisition, or a notice calling a meeting, signed by one or some only of them shall, for the purposes of this section, have the same force and effect as if it had been signed by all of them.

(9) Any reasonable expenses incurred by the requisitionists by reason of the failure of the Board duly to call a meeting shall be repaid to the requisitionists by the company; and any sum so repaid shall be retained by the company out of any sums due or to become due from the company by way of fees or other remuneration for their services to such of the directors as were in default.

Section 171 to 186 to apply to meetings.

170.Section 171 to 186 to apply to meetings. (1) The provisions of sections 171 to 186- (i) shall, notwithstanding anything to the contrary in the articles of the company, apply with respect to general meetings of a public company, and of a private company which is a subsidiary of a public company; and 170 (ii) shall. unless otherwise specified therein or unless the articles of the company otherwise provide, apply with respect to general meetings of a private company which is not a subsidiary of a public company.

(2) (a) Section 176, with such adaptations and modifications, if any, as may be prescribed, shall apply with respect to meetings of any class of members, or of debenture holders or any class of debenture holders, of a company, in like manner as it applies with respect to general meetings of the company. (b) Unless the articles of the company or a contract binding on the persons concerned otherwise provide, sections 171 to 175 and sections 177 to 186 with such adaptations and modifications, if any, as may be prescribed, shall apply with respect to meetings of any class of members, or of debenture holders or any class of debenture holders, of a company, in like manner as they apply with respect to general meetings of the company.

Length of notice for calling meeting.

171.Length of notice for calling meeting. (1) A general meeting of a company may be called by giving not less than twenty-one days' notice in writing.

(2) A general meeting may be called after giving shorter notice

than that specified in sub-section (1), if consent is accorded thereto- (i) in the case of an annual general meeting, by all the members entitled to vote thereat ; and (ii) in the case of any other meeting, by members of the company (a) holding, if the company has a share capital, not less than 95 per cent. of such part of the paid-up share capital of the company as gives a right to vote at the meeting, or (b) having, if the company has no share capital, not less than 95 per cent. of the total voting power exercisable at that meeting : Provided that where any members of a company are entitled to vote only on some resolution or resolutions to be moved at a meeting and not on the others, those members shall be taken into account for the purposes of this sub-section in respect of the former resolution or resolutions and not in respect of the latter.

Contents and manner of service of notice and persons on whom it is tobe served. 172,Contents and manner of service of notice and persons on whom

it is to be served. (1) Every notice of a meeting of a company shall specify the place and the day and hour of the meeting, and shall contain a statement of the business to be transacted thereat. 171

(2) Notice of every meeting of the company shall be given- (i) to every member of the company, in any manner

authorised by sub-sections (1) to (4) of section 53; (ii) to 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 giving the notice in any manner in which it might have been given if the death or insolvency had not occurred; and (iii) to the auditor or auditors for the time being of the company, in any manner authorised by section 53 in the case of any member or members of the company: 1[Provided that where the notice of a meeting is given by advertising the same in a newspaper circulating in the neighbourhood of

the registered office of the company under sub-section (3) of section 53, the statement of material facts referred to in section 173 need not be annexed to the notice as required by that section but it shall be mentioned in the advertisement that the statement has been forwarded to the members of the company.]

(3) The accidental omission to give notice to, or the non- receipt of notice by, any member or other person to whom it should be given shall not invalidate the proceedings at the meeting.

Explanatory statement to be annexed to notice.

173.Explanatory statement to be annexed to notice.(1) For the purposes of this section,-- (a) in the case of an annual general meeting, all business to be transacted at the meeting shall be deemed special, with the exception of business relating to (i) the consideration of the accounts, balance sheet and the reports of the Board of directors and auditors, (ii) the declaration of a dividend, (iii) the appointment of directors in the place of those retiring, and (iv) the appointment of, and the fixing of the remuneration of, the auditors; and (b) in the case of any other meeting, all business shall be deemed special. --------------------------------------------------------------------- 1 Ins. by Act 65 of 1960, s. 45. ---------------------------------------------------------------------

(2) Where any items of business to be transacted at the meeting are deemed to be special as aforesaid, there shall be annexed to the notice of the meeting a statement setting out all material facts concerning each such item of business, including in particular 1[the nature of the concern or interest], if any, therein, of every director, the managing agent, if any, the secretaries and treasurers, if any, and the manager, if any: 2[Provided that where any item of special business as aforesaid to be transacted at a meeting of the company relates to, or affects, any other company, the extent of shareholding interest in that other company of every director, the managing agent, if any, the secretaries and treasurers, if any, and the manager, if any, of the first- mentioned company shall also be set out in the statement if the extent of such shareholding interest is not less than twenty per cent. of the paid-up share capital of that other company.]

(3) Where any item of business consists of the according of approval to any document by the meeting, the time and place where the document can be inspected shall be specified in the statement aforesaid.

Quorum for meeting.

174.Quorum for meeting. (1) Unless the articles of the company provide for a larger number, five members personally present in the case of 3[public company (other than a public company which has become such by virtue of section 43A), and two members personally present in the case of any other company,] shall be the quorum for a meeting of the company.

(2) Unless the articles of the company otherwise provide, the

provisions of sub-sections (3), (4) and (5) shall apply with respect to the meetings of a public or private company.

(3) If within half an hour from the time appointed for holding a meeting of the company, a quorum is not present, the meeting, if called upon the requisition of members, shall stand dissolved.

(4) In any other case, the meeting shall stand adjourned to the same day in the next week, at the same time and place, or to such other day and at such other time and place as the Board may determine.

(5) If at the adjourned meeting also, a quorum is not present within half an hour from the time appointed for holding the meeting the members present shall be a quorum. --------------------------------------------------------------------- 1. Subs. by Act 65 of 1960, s. 46, for "the nature and extent of the interest". 2. Ins. by s. 46, ibid. 3. Subs. by Act 31 of 1965, s. 18, for certain words (w.e.f. 15- 10-1965). --------------------------------------------------------------------- 173

Chairman of meeting.

175. Chairman of meeting. (1) Unless the articles of the company otherwise provide, the members personally present at the meeting shall elect one of themselves to be the chairman thereof on a show of hands.

(2) If a poll is demanded on the election of the chairman, it shall be taken forthwith in accordance with the provisions of this Act, the chairman elected on a show of hands exercising all the powers of the chairman under the said provisions.

(3) If some other person is elected chairman as a result of the poll, he shall be chairman for the rest of the meeting.

Proxies.

176.Proxies. (1) Any member of a company entitled to attend and vote at a meeting of the company shall be entitled to appoint another person (whether a member or not) as his proxy to attend and vote instead of himself; but a proxy so appointed shall not have any right to speak at the meeting: Provided that, unless the articles otherwise provide- (a) this sub-section shall not apply in the case of a company not having a share capital; (b) a member of a private company shall not be entitled to appoint more than one proxy to attend on the same occasion ; and (c) a proxy shall not be entitled to vote except on a poll.

(2) In every notice calling a meeting of a company which has a share capital, or the articles of which provide for voting by proxy at the meeting, there shall appear with reasonable prominence a statement that a member entitled to attend and vote is entitled to appoint a proxy, or, where that is allowed, one or more proxies, to attend and vote instead of himself, and that a proxy need not be a member. If default is made in complying with this sub-section as respects any meeting, every officer of the company who is in default shall be punishable with fine which may extend to five hundred rupees.

1[(3) Any provision contained in the articles of a public company, or of a private company which is a subsidiary of a public company, which specifies or requires a longer period than forty-eight hours before a meeting of the company, for depositing with the company or any other person any instrument appointing a proxy or any other document necessary to, show the validity or otherwise relating to ---------------------------------------------------------------------

1 Subs. by Act 65 of 1960, s. 47, for sub-section (3). --------------------------------------------------------------------- 174 the appointment of a proxy in order that the appointment may be effective at such meeting, shall have effect as if a period of forty- eight hours had been specified in or required by such provision for such deposit.]

(4) If for the purpose of any meeting of a company, invitations to appoint as proxy a person or one of a number of persons specified in the invitations- are issued at the company's expense to any member entitled to have a notice of the meeting sent to him and to vote thereat by proxy, every officer of the company who knowingly issues the invitations as aforesaid or wilfully authorises or permits their issue shall be punishable with fine which may extend to one thousand rupees: Provided that an officer shall not be punishable under this sub- section by reason only of the issue to a member at his request in writing of a form of appointment naming the proxy, or of a list of persons willing to act-as proxies, if the form or list is available on request in writing to every member entitled to vote at the meeting by proxy.

(5) The instrument appointing a proxy shall- (a) be in writing ; and (b) be signed by the appointer or his attorney duly authorised in writing or, if the appointer is a body corporate, be under its seal or be signed by an officer or an attorney duly authorised by it.

(6) An instrument appointing a proxy, if in any of the forms set out in Schedule IX, shall not be questioned on the ground that it fails to comply with any special requirements specified for such instrument by the articles.

(7) Every member entitled to vote at a meeting of the company, or on any resolution to be moved thereat, shall be entitled during the period beginning twenty-four hours before the time fixed for the commencement of the meeting and ending with the conclusion of the meeting, to inspect the proxies lodged, at any time during the business hours of the company, provided not less than three days' notice in writing of the intention so to inspect is given to the company.

Voting to be by show of hands in first instance. 177.Voting to be by show of hands in first instance. At any general meeting, a resolution put to the vote of the meeting shall, unless a poll is demanded under section 179, be decided on a show of hands. 175

Chairman's declaration of result of voting by show of hands to beconclusive. 178.Chairman's declaration of result of voting by show of hands to be conclusive. A declaration by the chairman in pursuance of section 177 that on a show of hands, a resolution has or has not been carried, or has or has not been carried either unanimously or by a particular majority, and an entry to that effect in the books containing the minutes of the proceedings of the company, shall be conclusive evidence of the fact, without proof of the number or proportion of the votes cast in favour of or against such resolution.

Demand for poll.

179.Demand for poll. (1) Before or on the declaration of the result of the voting on any resolution on a show of hands, a poll may be ordered to be taken by the chairman of the meeting of his own motion, and shall be ordered to be taken by him on a demand made in that behalf by the persons or person specified below, that is to say,-- 1 [(a)in the case of a public company having a share capital, by any members present in person or by proxy and holding shares in the company- (i)which confer a power to vote on the resolution not being less than one tenth of the total voting power in respect of the resolution, or (ii)on which an aggregate sum of not less than fifty thou- sand rupees has been paid up, (b) in the case of a private company having a share capital, by one member having the right to vote on the resolution and present in person or by proxy if not more than seven such members are personally present, and by two such members present in person or by proxy, if more than seven such members are personally present, (c) in the case of any other company, by any member or members present in person or by proxy and having not less than one tenth of the total voting power in respect of the resolution].

(2)The demand for a poll may be withdrawn at any time by the person or persons who made the demand.

Time of taking poll.

180.Time of taking poll. (1) A poll demanded on a question of adjournment shall be taken forthwith.

(2) A poll demanded on any other question (not being a question relating to the election of a chairman which is provided for in sec- tion 175) shall be taken at such time not being later than forty- --------------------------------------------------------------------- 1. Subs. by Act 31 of 1988, s.24 (w.e.f. 15-6-1988). --------------------------------------------------------------------- 176 eight hours from the time when the demand was made, as the chairman may direct.

Restriction on exercise of voting right of members who have not paidcalls, etc. 181. Restriction on exercise of voting right of members who have not paid calls, etc. Notwithstanding anything contained in this Act, the articles of a company may provide that no member shall exercise any voting right in respect of any shares registered in his name on which any calls or other sums presently payable by him have not been paid, or in regard to which the company has and has exercised any right of lien.

Restrictions on exercise of voting right in other cases to be void. 182. Restrictions on exercise of voting right in other cases to be void. A public company, or a private company which is a subsidiary of a public company shall not prohibit any member from exercising his voting right on the ground that he has not held his share or other interest in the company for any specified period preceding the date on which the vote is taken, or on any other ground not being a ground set out in section 181.

Right member to use his votes differently. 183.Right member to use his votes differently. On a poll taken at a meeting of a company, 'a member entitled to more than one vote, or his proxy, or other person entitled to vote for him, as the case may be, need not, if he votes, use all his votes or cast in the same way all the votes he uses.

Scrutineers at poll.

184.Scrutineers at poll. (1) Where a poll is to be taken, the chairman of the meeting shall appoint two scrutineers to scrutinise the votes given on the poll and to report thereon to him.

(2) The chairman shall have power, at any time before the result of the poll is declared, to remove a scrutineer from office and to fill vacancies in the office of scrutineer arising from such removal or from any other cause.

(3) Of the two scrutineers appointed under this section, one shall always be a member(not being an officer or employee of the com- pany) present at the meeting, provided such a member is available and willing to be appointed.

Manner of taking poll and result thereof.

185. Manner of taking poll and result thereof. (1) Subject to the provisions of this Act, the chairman of the meeting shall have power to regulate the manner in which a poll shall be taken.

(2) The result of the poll shall be deemed to be the decision of the meeting on the resolution on which the poll was taken. 177

Power of Company Law Board to order meeting to be called.

186.Power of Company Law Board to order meeting to be called. (1) If for any reason it is impracticable to call a meeting of a company, other than an annual general meeting, in any manner in which meetings of the company may be called, or to hold or conduct the meeting of the company in the manner prescribed by this Act or the articles, the 1[Company Law Board] may, either of its own motion or on the application of any director of the company, or of any member of the company who would be entitled to vote at the meeting,-- (a) order a meeting of the company to be called, held and conducted in such manner as the 1[Company Law Board] thinks fit; and (b) give such ancillary or consequential directions as the 1[Company Law Board] thinks expedient, including directions modifying or supplementing in relation to the calling, holding and conducting of the meeting, the operation of the provisions of this Act and of the company's articles. Explanation.-The directions that may be given under this sub- section may include a direction that one member of the company present in person or by proxy shall be deemed to constitute a meeting.

(2) Any meeting called, held and conducted in accordance with any such order shall, for all purposes, be deemed to be a meeting of the company duly called, held and conducted.

Representation of corporations at meetings of companies and ofcreditors. 187. Representation of corporations at meetings of companies and

of creditors. (1) A body corporate (whether a company within the mean- ing of this Act or not) may- (a) if it is a member of a company within the meaning of this Act, by resolution of its Board of directors or other governing body, authorise such person as it thinks fit to act as its representative at any meeting of the company, or at any meeting of any class of members of the company; (b) if it is a creditor (including a holder of debentures) of a company within the meaning of this Act, by resolution of its directors or other governing body, authorise such person as it thinks fit to act as its representative at any meeting of any creditors of the company held in pursuance of this Act or of any rules made thereunder, or in --------------------------------------------------------------------- 1 Subs. by Act 41 of 1974, s. 14, for "Court" (w.e.f. 1-2-1975). --------------------------------------------------------------------- 178 pursuance of the provisions contained in any debenture or trust deed, as the case may be.

(2) A person authorised by resolution as aforesaid shall be entitled to exercise the same rights and powers (including the right to vote by proxy) on behalf of the body corporate which he represents as that body could exercise if it were 1[an individual member), creditor or holder of debentures of the company. 187A Representation of the President and Governors in meetings of companiesof which they are members. 2[187A.Representation of the President and Governors in meetings

of companies of which they are members. (1) The President of India or the Governor of a State if he is a member of a company, may appoint such person as he thinks fit to act as his representative at any meeting of the company or at any meeting of any class of members of the company.

(2) A person appointed to act as aforesaid shall, for the purposes of this Act, be deemed to be a member of such a company and shall be entitled to exercise the same rights and powers (including the right to vote by proxy) as the President or, as the case may be, the Governor could exercise as a member of the company.] 187B Exercise of voting rights in respect of shares held in trust. 3[187B. Exercise of voting rights in respect of shares held in

trust. (1) Save as otherwise provided in section 153B but notwithstanding anything contained in any other provisions of this Act or any other law or any contract, memorandum or articles, where any shares in a company are held in trust by a person (hereinafter referred to as trustee), the rights and powers (including the right to vote by proxy) exercisable at any meeting of the company or at any meeting of any class of members of the company by the trustee as a member of the company shall- (a) cease to be exercisable by the trustee as such member. and (b) become exercisable by the public trustee.

(2) The public trustee may, instead of himself attending the meeting, and exercising the rights and powers, as aforesaid, appoint as his proxy an officer of Government or the trustee himself to attend such meeting and to exercise such rights and powers in accordance with the directions of the public trustee : Provided that where the trustee is appointed by the public trustee as his proxy, the trustee shall be entitled, notwithstanding anything -------------------------------------------------------------------- 1. Subs. by Act 65 of 1960, s. 48, for "a member". 2. Ins. by s. 49, ibid. 3. Ins. by Act 53 of 1963, s. 8 (w.e.f. 1-12-1964). --------------------------------------------------------------------- 178A contained in any other provisions of this Act, to exercise such rights and powers in the same manner as he would have been but for the provisions of this section.

(3) The public trustee may abstain from exercising the rights and powers conferred on him by this section if in his opinion the objects of the trust or the interests of the beneficiaries of the trust are not likely to be adversely affected by such abstention.

(4) If for any reason the trustee considers that the public trustee should not abstain from exercising the rights and powers conferred on him by this section and the exercise of such rights and powers is necessary in order to safeguard the objects of the trust or the interests. of the beneficiaries of the trust, he, may by writing communicate his views in this behalf to the public trustee but the public. trustee may in his discretion either accept such views or reject the same.

(5) No suit, prosecution or other legal proceeding shall lie against 'the public trustee at the instance of the trustee or any person on his behalf or any other person on the ground that the public trustee has abstained from exercising the rights and powers conferred on him by this section.

(6) In order to enable the public trustee to exercise the rights and powers aforesaid, the public trustee shall also be entitled to. receive and inspect all books and papers under this Act, which a member is entitled to receive and inspect.] 187C Declaration by persons not holding beneficial interest in any share. 1[187C. Declaration by persons not holding beneficial interest in

any share. (1) Notwithstanding anything contained in section 150 section 153B or section 187B, a person, whose name is entered, at the commencement of the Companies (Amendment) Act, 1974,(41 of 1974) or at any time thereafter, in the register of members of a company as the holder of a share in that company but who does not hold the beneficial interest in such share, shall, within such time and in such form as may be prescribed, make a declaration to the company specifying the name and other particulars of the person who holds the beneficial interest in such share.

(2) Notwithstanding anything contained elsewhere in this Act, a person who holds a beneficial interest in a share or a class of shares of a company shall, within thirty days from the commencement of the Companies (Amendment) Act, 1974,(41 of 1974) or within thirty days after --------------------------------------------------------------------- 1. Ins. by Act 41 of 1974, s. 15 (w.e.f. 1-2-1975). --------------------------------------------------------------------- 178B his becoming such beneficial owner, whichever is later, make a decla- ration to the company specifying the nature of his interest, parti- culars of the person in whose name the shares stand registered in the books of the company and such other particulars as may be prescribed.

(3) Whenever there is a change in the beneficial interest in such shares the beneficial owner shall, within thirty days from the date of such change, make a declaration to the company in such form and containing such particulars as may be prescribed.

(4) Notwithstanding anything contained in section 153 where any

declaration referred to in sub-section (1), sub-section (2) or sub-

section (3) is made to a company, the company shall make a note of such declaration, in its register of members and shall file, within thirty days from the date of receipt of the declaration by it, a return in the prescribed form with the Registrar with regard to such declaration.

(5) (a) If any person, being required by the provisions of sub-

section (1), sub-section (2) or sub-section (3), to make a declaration, fails without any reasonable excuse, to do so, he shall be punishable with fine which may extend to one thousand rupees for every day during which the failure continues. (b) 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 hundred rupees for every day during which the default continues.

(6) Any charge, promissory note or any other collateral agree- ment, created, executed or entered into in relation to any share, by the ostensible owner thereof, or any hypothecation by the ostensible owner of any share, in respect of which a declaration is required to be made under the foregoing provisions of this section, but not so declared, shall not be enforceable by the beneficial owner or any person claiming through him.

(7) Nothing in this section shall be deemed to prejudice the obligation of a company to pay dividend in accordance with the provisions of section 206, and the obligation shall, on such payment, stand discharged. 178C. 187D Investigation of beneficial ownership of shares in certain cases. 187D. Investigation of beneficial ownership of shares in certain cases. Where it appears to the Central Government that there are good reasons, so to do, it may appoint one or more Inspectors to investigate and report as to whether the provisions of section 187C have been complied with with regard to any share, and thereupon the provisions of section 247 shall, as far as may be, apply to such investigation as if it were an investigation ordered under that section.]

Circulation of members' re-solutions.

188.Circulation of members' re-solutions. (1) Subject to the provisions of this section, a company shall, on the requisition in writing of such number of members as is hereinafter specified and (unless the company otherwise resolves) at the expense of the requisitionists,- (a) give to members of the company entitled to receive notice of the next annual general meeting notice of any resolution which may properly be moved and is intended to be moved at that meeting; (b) circulate to members entitled to have notice of any general meeting sent to them, any statement of not more than one thousand words with respect to- the matter referred to in any proposed resolution, or any business to be dealt with at that meeting.

(2) The number of members necessary for a requisition under sub-

section (1) shall be- (a) such number of members as represent not less than one- twentieth of the total voting power of all the members having at the date of the requisition a right to vote on the resolution or business to which the requisition relates; or (b) not less than one hundred members having the right aforesaid and holding shares in the company on which there has been paid up an aggregate sum of not less than one lakh of rupees in all. 179

(3) Notice of any such resolution shall be given, and any such statement shall be circulated to members of the company entitled to have notice of the meeting sent to them, by serving a copy of the resolution or statement on each member in any manner permitted for service of notice of the meeting; and notice of any such resolution shall be given to any other member of the company by giving notice of the general effect of the resolution in any manner permitted for giving him notice of meetings of the company: Provided that the copy shall be served, or notice of the effect of the resolution shall be given, as the case may be, in the same manner and, so far as practicable, at the same time as notice of the meeting, and where it is not practicable for it to be served or given at that time, it shall be served or given as soon as practicable thereafter.

(4) A company shall not be bound under this section to give notice of any resolution or to circulate any statement unless- (a) a copy of the requisition signed by the requisitionists (or two or more copies which between them contain the signatures of all the requisitionists) is deposited at the registered office of the company- (i)in the case of a requisition requiring notice of a resolution, not less than six weeks before the meeting; (ii)in the case of any other requisition, not less than two weeks before the meeting; and (b) there is deposited or tendered with the requisition a sum reasonably sufficient to meet the company's expenses in giving effect thereto: Provided that if, after a copy of a requisition requiring notice of a resolution has been deposited at the registered office of the company, an annual general meeting is called for a date six weeks or less after the copy has been deposited, the copy, although not deposited within the time required by this sub-section shall be deemed to have been properly deposited for the purposes thereof.

(5) The company shall also not be bound under this section to circulate any statement if, on the application either of the company or of any other person who claims to be aggrieved, the 1[Company Law Board] satisfied that the rights conferred by this section are being abused to secure needless publicity for defamatory matter; and the 1[Company Law Board] may order the company's costs on an application under this section --------------------------------------------------------------------- 1. Subs. by Act 31 of 1988, s.67 (w.e.f. 31-5-1991). --------------------------------------------------------------------- 180 to be paid in whole or in part by the requisitionists, notwithstanding that they are not parties to the application.

(6) A banking company shall not be bound to circulate any state- ment under this section, if, in the opinion of its Board of directors, the circulation will injure the interests of the company.

(7) Notwithstanding anything in the company's articles, the business which may be dealt with at an annual general meeting shall include any resolution of which notice is given in accordance with this section, and for the purposes of this sub-section, notice shall be deemed to have been so given, notwithstanding the accidental omission in giving it, of one or more members.

(8) If default is made in complying with the provisions of this section, every officer of the company who is in default, shall be punishable with fine which may extend to five thousand rupees.

Ordinary and special resolutions.

189.Ordinary and special resolutions. (1) A resolution shall be an ordinary resolution when at a general meeting of which the notice required under this Act has been duly given, the votes cast (whether on a show of hands, or on a poll, as the case may be,) in favour of the resolution (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 resolution by members so entitled and voting.

(2) A resolution shall be a special resolution when- (a) the intention to propose the resolution as a special resolution has been duly specified in the notice calling the general meeting or other intimation given to the members of the resolution ; - (b) the notice required under this Act has been duly given of the general meeting; and (c) the votes cast in favour of the resolution (whether on a show of hands, or on a poll, as the case may be,) by members who, being entitled so to do, vote in person, or where proxies are allowed, by proxy, are not less than three times the number of the votes, if any, cast against the resolution by members so entitled and voting.

Resolutions requiring special notice.

190. Resolutions requiring special notice. (1) Where, by any provision contained in this Act or in the articles, special notice is required of any resolution, notice of the 181 intention to move the resolution shall be given to the company not less than 1[fourteen days] before the meeting at which it is to be moved, exclusive of the day on which the notice is served or deemed to be served and the day of the meeting.

2[(2) The company shall, immediately after the notice of the intention to move any such resolution has been received by it, give its members notice of the resolution in the same manner as it gives notice of the meeting, or if that is not practicable, shall give them notice thereof, either by advertisement in a newspaper having an appropriate circulation or in any other mode allowed by the articles, not less than seven days before the meeting.]

Resolutions passed at adjourned meetings. 191.Resolutions passed at adjourned meetings. Where a resolution is passed at an adjourned meeting of- (a) a company; (b) the holders of any class of shares in a company; or (c) the Board of directors of a company; the resolution shall, for all purposes, be treated as having been passed on the date on which it was in fact passed, and shall not be deemed to have been passed on any earlier date.

Registration of certain resolutions and agreements.

192.Registration of certain resolutions and agreements. (1) A copy of every resolution 3[(together with a copy of the statement of material facts annexed under section 173 to the notice of the meeting in which such resolution has been passed)] or agreement to which this section applies shall, within 4[thirty] days after the passing or making thereof, be printed or typewritten and duly certified under the signature of an officer of the company and filed with the Registrar who shall record the same.

(2) Where articles have been registered 5[a copy of every reso-

lution referred to in sub-section (1) which has the effect of altering the articles and a copy of every agreement referred to in that sub- section] for the time being in force shall be embodied in or annexed to every copy of the articles issued after the passing of the resolution or the making of the agreement. --------------------------------------------------------------------- 1 Subs. by Act 65 of 1960, s. 50, for "twenty-eight days".

2 Subs. by s. 50, ibid., for sub-sections (2) and (3). 3 Ins. by s. 51, ibid. 4 Subs. by Act 31 of 1965, s. 62 and Sch., for "fifteen" (w.e.f. 15-10-1965). 5 Subs. by Act 65 of 1960, s. 51, for "a copy of every such resolution or agreement". --------------------------------------------------------------------- 182

(3) Where articles have not been registered, a printed copy of

every 1[resolution or agreement referred to in sub-section (1)] shall be forwarded to any member at his request, on payment of one rupee.

(4) This section shall apply to- (a) special resolutions; (b) resolutions which have been agreed to by all the members of a company, but which, if not so agreed to, would not have been effective for their purpose unless they had been passed as special resolutions; (c) any resolution of the Board of directors of a company or agreement executed by a company, relating to the appointment, re-appointment or renewal of the appointment, or variation of the terms of appointment, of a managing director; (d) any agreement relating tot the appointment, re- appointment or renewal of the appointment of a managing agent or secretaries and treasurers for a company, or varying the terms of any such agreement, executed by the company; (e) resolutions or agreements which have been agreed to by all the members of any class of shareholders but which, if not so agreed to, would not have been effective for their purpose unless they had been passed by some particular majority or otherwise in some particular manner; and all resolutions or agreements which effectively bind all the members of any class of shareholders though not agreed to by all those member; 2* * * 3[(ee) resolutions passed by a company- (i)according consent to the exercise by its Board of directors of any of the powers under clause (a), clause (d)

and clause (e) of sub-section (1) of section 293; --------------------------------------------------------------------- 1 Subs. by Act 65 of 1960, s. 51, for "such resolution or agreement". 2 The word "and" omitted by s. 51, ibid. 3 Ins. by s. 51, ibid. --------------------------------------------------------------------- 182A (ii) approving the appointment of sole selling agents under 1[section 294 or section 294AA]; and] (f) resolutions requiring a company to be wound up volun-

tarily passed in pursuance of sub-section (1) of section 484; 2[(g) copies of the terms and conditions of appointment of a sole selling agent appointed under section 294 or of a sole selling agent or other person appointed under section 294AA.] --------------------------------------------------------------------- 1 Subs. by Act 41 of 1974, s. 16, for "section 294" (w.e.f. 1-2- 1975). 2 Ins. by s. 16, ibid. (w.e.f. 1-2-1975). --------------------------------------------------------------------- 183

(5)If default is made in complying with sub-section (1), the com- pany, and every officer of the company who is in default, shall be punishable with fine which may extend to twenty rupees for every day during which the default continues.

(6)If default is made in complying with sub-section (2) or(3),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 in respect of which default is made.

(7)For the purposes of sub-sections (5) and (6), the liquidator of a company shall be deemed to be an officer of the company.

Minutes of proceedings of general meetings and of Board and othermeetings. 193.Minutes of proceedings of general meetings and of Board and

other meetings. 1[(1) Every company shall cause minutes of all proceedings of every general meeting and of all proceedings of every meeting of its Board of directors or of every committee of the Board, to be kept by making within 2[thirty] days of the conclusion of every such meeting concerned, entries thereof in books kept for that purpose with their pages consecutively numbered. (1A) Each page of every such book shall be initialled or signed and the last page of the record of proceedings of each meeting in such books shall be dated and signed- (a) in the case of minutes of proceedings of a meeting of the Board or of a committee thereof, by the chairman of the said meeting or the chairman of the next succeeding meeting ; (b) in the case of minutes of proceedings of a general meeting, by the chairman of the same meeting within the aforesaid period of 2[thirty] days or in the event of the death or inability of that chairman within that period, by a director duly authorised by the Board for the purpose. (1B) In no case the minutes of proceedings of a meeting shall be attached to any such book as aforesaid by pasting or otherwise.]

(2) The minutes of each meeting shall contain a fair and correct summary of the proceedings thereat.

(3) All appointments of officers made at any of the meetings aforesaid shall be included in the minutes of the meeting.

(4) In the case of a meeting of the Board of directors or of a committee of the Board, the minutes shall also contain- (a) the names of the directors present at the meeting; and ---------------------------------------------------------------------

1 Subs. by Act 65 of 1960, s. 52, for sub-section (1). 2 Subs. by Act 31 of 1965, s. 62 and Sch. for " fourteen " (w.e.f. 15-10-1985). --------------------------------------------------------------------- 184 (b) in the case of each resolution passed at the meeting, the names of the directors, if any, dissenting from, or not concurring in, the resolution.

(5) Nothing contained in Sub-sections (1) to (4) shall be deemed to require the inclusion in any such minutes of any matter which, in the opinion of the chairman of the meeting- (a) is, or could reasonably be regarded as, defamatory of any person ; (b) is irrelevant or immaterial to the proceedings ; or (c) is detrimental to the interests of the company. Explanation.-The chairman shall exercise an absolute discretion in regard to the inclusion or non-inclusion of any matter in the minutes on the grounds specified in this sub-section.

(6) If default is made in complying with the foregoing provi- sions of this section in respect of any meeting, the company, and every officer of the company who is in default, shall be punishable with fine which may extend to fifty rupees.

Minutes to be evidence. 1[194. Minutes to be evidence. Minutes of meetings kept in accordance with the provisions of section 193 shall be evidence of the proceedings recorded therein.]

Presumptions to be drawn where minutes duly drawn and signed. 195.Presumptions to be drawn where minutes duly drawn and signed. Where minutes of the proceedings of any general meeting of the company or of any meeting of its Board of directors or of a committee of the Board 2[have been kept in accordance with the provisions of section 193], then, until the contrary is proved, the meeting shall be deemed to have' been duly called and held, and all proceedings thereat to have duly taken place, and in particular, all appointments of directors or liquidators made at the meeting shall be deemed to be valid.

Inspection of minute books of general meetings.

196.Inspection of minute books of general meetings. (1) The books containing the minutes of the proceedings of any general meeting of a company held on or after the 15th day of January, 1937, shall- (a) be kept at the registered office of the company, and (b) be open, during business hours, to the inspection of any member without charge, subject to such reasonable --------------------------------------------------------------------- 1. Subs. by Act 65 of 1960, s. 53, for s. 194. 2. Subs. by s. 54, ibid., for certain words. --------------------------------------------------------------------- 185 restrictions as the company may, by its articles or in general meeting impose, so however that not less than two hours in each day are allowed for inspection.

(2) Any member shall be entitled to be furnished, within seven days after he has made a request in that behalf to the company, with a

copy of any minutes referred to in sub-section (1),on payment of 1[such sum as may be prescribed] for every one hundred words or fractional part thereof required to be copied.

(3) If any inspection required under sub-section (1) is refused

or if any copy required under sub-section (2) is not furnished within the time specified therein, the company, and every officer of the com- pany who is in default, shall be punishable with fine which may extend to five hundred rupees in respect of each offence.

(4) In the case of any such refusal or default, the 2[company Law Board] may, by order, compel an immediate inspection of the minute books or direct that the copy required shall forthwith be sent to the person requiring it.

Publication of reports of proceedings of general meetings. 197. Publication of reports of proceedings of general meetings.

(1) No document purporting to be a report of the proceedings of any general meeting of a company shall be circulated or advertised at the expense of the company, unless it includes the matters required by section 193 to be contained in the minutes of the proceedings of such meeting.

(2) If any report is circulated or advertised in contravention

of sub-section (1), the company, and every officer of the company who is in default, shall be punishable, in respect of each offence, with fine which may extend to five hundred rupees. 1[Prohibition of simultaneous appointment of different categories of managerial personnel 197A Company not to appoint or employ certain different categories of mana-gerial personnel at the same time. 197A.Company not to appoint or employ certain different categories of managerial personnel at the same time. Notwithstanding anything contained in this Act or any other law or any agreement or instrument, no company shall, after the commencement of the Companies (Amendment) Act, 1960, (65 of 1960) appoint or employ at the same time, or after the expiry of six months from such commencement, continue the appointment or employment at the same time, of more than one of the following categories of managerial personnel, namely:-. (a) managing director, (b) managing agent, --------------------------------------------------------------------- 1 Subs. by Act 31 of 1988, S.67 (w.e.f. 15-7-1988). 2 Subs. by s.67, ibid. (w.e.f. 31-5-1991). 3 Ins. by Act 65 of 1960, s.55. --------------------------------------------------------------------- 186 (c) secretaries and treasurers, and (d) manager.] Managerial remuneration, etc.

Overall maximum managerial remuneration and managerial remuneration incase of absence or inadequacy of profits. 1 [198.Overall maximum managerial remuneration and managerial

remuneration in case of absence or inadequacy of profits. (1) The total managerial remuneration payable by a public company or a private company which is a subsidiary of a public company, to its directors and its managing agent, secretaries and treasurers or manager in respect of any financial year shall not exceed eleven per cent. of the net profits of that company for that financial year computed in the manner laid down in sections 349, 350 and 351, except that the remuneration of the directors shall not be deducted from the gross profits : Provided that nothing in this section shall affect the operation of sections 352 to 354 and 356 to 360.

(2) The percentage aforesaid shall be exclusive of any fees pay-

able to directors under sub-section (2) of section 309.

(3) Within the limits of the maximum remuneration specified in

sub-section (1), a company may pay a monthly remuneration to its managing or whole-time director in accordance with the provisions of section 309 or to its manager in accordance with the provisions of section 387.

2[ (4) Notwithstanding anything contained in sub-sections (1) to

(3), but subject to the provisions of section 269, read with Schedule XIII, if, in any financial year, a company has no profits or its profits are inadequate, the company shall not pay to its directors, including any managing or whole-time director or manager, by way of remuneration any sum [exclusive of any fees payable to directors under

sub-section (2) of section 309], except with the previous approval of the Central Government.] --------------------------------------------------------------------- 1 Subs by Act 65 of 1960, s. 56, for s. 198. 2 Subs. by Act 31 of 1988, s.25 (w.e.f. 15-6-1988). --------------------------------------------------------------------- 187 Explanation.-For the purposes of this section and sections 309, 310, 311, 348, 352, 381 and 387, "remuneration" shall include,- (a) any expenditure incurred by the company in providing any rent-free accommodation, or any other benefit or amenity in respect of accommodation free of charge, to any of the

persons specified in sub-section (1); (b) any expenditure incurred by the company in providing any other benefit or amenity free of charge or at a concessional rate to any of the persons aforesaid ; (c) any expenditure incurred by the company in respect of any obligation or service which, but for such expenditure by the company, would have been incurred by any of the persons aforesaid ; and (d) any expenditure incurred by the company to effect any insurance on the life of, or to provide any pension, annuity or gratuity for, any of the persons aforesaid or his spouse or child.]

Calculation of commission, etc., in certain cases.

199. Calculation of commission, etc., in certain cases. (1) Where any commission or other remuneration payable to any officer or employee of a company (not being a director, the managing agent, secretaries and treasurers or a manager) is fixed at a percentage of, or is otherwise based on, the net profits of the company, such profits shall be calculated in the manner set out in sections 349, 350 and

(2) Any provision in force at the commencement of this Act for the payment of any commission or other remuneration in any manner based on the net profits of a company, shall continue to be in force for a period of one year from such commencement; and thereafter shall

become subject to the provisions of sub-section (1).

Prohibition of tax-free payments.

200. Prohibition of tax-free payments. (1) No company shall pay to any officer or employee thereof, whether in his capacity as such or otherwise, remuneration free of any tax, or otherwise calculated by reference to, or varying with, any tax payable by him, or the rate or standard rate of any such tax, or the amount thereof. Explanation.-In this sub-section, the expression "tax" comprises any kind of income-tax including super-tax.

(2) Where by virtue of any provision in force immediately before the commencement of this Act, whether contained in the company's 188 articles, or in any contract made with the company, or in any re- solution passed by the company in general meeting or by the company's Board of directors, any officer or employee of the company holding any office at the commencement of this Act is entitled to remuneration in

any of the modes prohibited by sub-section (1), such provision shall have effect during the residue of the term for which he is entitled to hold such office at such commencement, as if it provided instead for the payment of a gross sum subject to the tax in question, which, after deducting such tax, would yield the net sum actually specified in such provision.

(3) This section shall not apply to any remuneration- (a) which fell due before the commencement of this Act, or (b) which may fall due after the commencement of this Act, in respect of any period before such commencement.

Avoidance of provisions relieving liability of officers and auditorsof company. 201.Avoidance of provisions relieving liability of officers and

auditors of company. (1) Save as provided in this section, any provision, whether contained in the articles of a company or in an agreement with a company or in any other instrument, for exempting any officer of the company or any person employed by the company as auditor from, or indemnifying him against, any liability which, by virtue of any rule of law, would otherwise attach to him in respect of any negligence, default, misfeasance, breach of duty or breach of trust of which he may be guilty in relation to the company, shall be void; Provided that a company may, in pursuance of any such provision as aforesaid indemnify any such officer or auditor against any liability incurred by him in defending any proceedings, whether civil or criminal, in which judgment is given in his favour or in which he is acquitted or discharged or in connection with any application under section 633 in which relief is granted to him by the Court.

(2) Nothing contained in the proviso to sub-section (1) shall apply to the constituted attorney of the managing agent of a company, unless such attorney is, or is deemed to be, an officer of the company. Prevention of Management by Undesirable Persons

Undischarged insolvent not to manage companies.

202.Undischarged insolvent not to manage companies. (1) If any person, being an undischarged insolvent,- (a) discharges any of the functions of a director, or acts as or discharges any of the functions of the managing agent, secretaries and treasurers, or manager, of any company; or 189 (b) directly or indirectly takes part or is concerned in the promotion, formation or management of any company; he 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.

(2) In this section, " company " includes- (a) an unregistered company; and (b) a body corporate incorporated outside India, which has an established place of business within India.

Power to restrain fraudulent person from managing companies. 203.Power to restrain fraudulent person from managing companies.

(1) Where- (a) a person is convicted of any offence in connection with the promotion, formation or management of a company; or (b) in the course of winding up a company it appears that a person- (i)has been guilty of any offence for which he is punishable (whether he has been convicted or not) under section 542 ; or (ii)has otherwise been guilty, while an officer of the company, of any fraud or misfeasance in relation to the company or of any breach of his duty to the company; the Court may make an order that that person shall not, without the leave of the Court, be a director of, or in any way, whether directly or indirectly, be concerned or take part in the promotion, formation or management of a company, for such period not exceeding five years as may be specified in the order.

(2) In sub-section (1), the expression " the Court",- (a) in relation to the making of an order against any person by virtue clause (a) thereof, includes the Court by which he is convicted, as well as any Court having jurisdiction to wind up the company as respects which the offence as committed; and (b) in relation to the granting of leave, means any Court having jurisdiction to wind up the company as respects which leave is sought.

(3) A person intending to apply for the making of an order under this section by the Court having jurisdiction to wind up a company shall give not less than ten days' notice of his intention to the person

against whom the order is sought, and at the hearing of the applica- tion, the last-mentioned person may appear and himself give evidence or call witnesses.

(4) An application for the making of an order under this section by the Court having jurisdiction to wind up a company may be made by the Official Liquidator, or by the liquidator of the company, or by any person who is or has been a member or creditor of the company.

(5) On the hearing of any application for an order under this section by the Official Liquidator or the liquidator, or of any application for leave under this section by a person against whom an order has been made on the application of the Official Liquidator or liquidator, the Official Liquidator or liquidator shall appear and call the attention of the Court to any matters which seem to him to be relevant, and may himself give evidence or call witnesses,

(6) An order may be made by virtue of sub-clause (ii) of clause

(b) of sub-section (1), notwithstanding that the person concerned may be criminally liable in respect of the matters on the ground of which the order is to be made 1* * *.

(7) If any person acts in contravention of an order made under this section, he shall, in, respect of each offence, 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.

(8) The provisions of this section shall be in addition to, and without prejudice to the operation of, any other provision contained in this Act. Restriction on appointment of firms and bodies corporate to offices

Restriction on appointment of firm or body corporate to office orplace of profit under a company. 204.Restriction on appointment of firm or body corporate to

office or place of profit under a company. 2[(1) Save as provided in

sub-section (2), no company shall, after the commencement of this Act, appoint or employ any firm or body corporate to or in any office or place of profit under the company, other than the office of managing agent, secretaries and treasurers or trustee for the holders of debentures of the company, for a term exceeding five years at a time: Provided that the initial appointment or employment of a firm or body corporate to or in any office or place of profit as aforesaid may, --------------------------------------------------------------------- 1. Certain words omitted by Act 31 of 1965, s. 19 (w.e.f. 15-10- 1965).

2. Subs. by Act 65 of 1960, s. 57. for sub-section (1). --------------------------------------------------------------------- 191 with the approval of the Central Government, be made for a term not exceeding ten years.]

(2) Sub-section (1) shall not apply to the appointment or employment of a firm or body corporate as a technician or a consultant,- (i) unless the firm or body corporate aforesaid is already the managing agent or secretaries and treasurers of the com- pany; or (ii) unless a partner in the firm, aforesaid, or a director or member of the body corporate aforesaid being a private company, or a director of the body corporate aforesaid not being a private company, is- already the managing agent of the company; or a member of the firm, a director or member of the private company, or a director of the body corporate not being a private company,which firm, private company or body corporate is already the managing agent or the secretaries and treasurers of the company.

(3) Any firm or body corporate holding at the commencement of this Act any office or place of profit under the company shall, unless its term of office expires earlier, be deemed to have vacated its office immediately on the expiry of five years from the commencement of this Act.

(4) Nothing contained in sub-section (1) shall be deemed to prohibit the re-appointment, re-employment, or extension of the term of office, of any firm or body corporate, by further periods not exceeding five years on each occasion: Provided that any such re-appointment, re-employment or extension shall not be sanctioned earlier than two years from the date on which it is to come into force.

(5) Any office or place in a company shall be deemed to be an office or place of profit under the company, within the meaning of this section, if the person holding it 1[obtains from the company anything] by way of remuneration, whether as salary, fees, commission, perquisites, the right to occupy free of rent any premises as a place of residence, or otherwise. --------------------------------------------------------------------- 1 Subs. by Act 65 of 1960, s. 57, for "obtains anything". -------------------------------------------------------------------- 192

(6) This section shall not apply to a private company, unless it is a subsidiary of a public company. 204A Restrictions on the appointment of former managing agents orsecretaries and treasurers to any office. 1[204A. Restrictions on the appointment of former managing agents

or secretaries and treasurers to any office. (1) Except with the previous approval of the- (a) company in general meeting, and (b) Central Government, no company shall, during a period of five years from the commence- ment of the Companies (Amendment) Act, 1974, (41 of 1974.) appoint as secretary, consultant or adviser or to any other office, by whatever name called,- (i) any individual, firm or body corporate who, or which, had at any time after the 15th day of August, 1960, been holding office as the managing agents or secretaries and treasurers of the company, or (ii) any associate of the managing agents or secretaries and treasurers as aforesaid : Provided that where any such appointment has been made before the commencement of the Companies (Amendment) Act, 1974, (41 of 1974.) no such appointment shall be continued by the company after a period of six months from such commencement unless such appointment has been approved by the company in general meeting and the Central Government before the expiry of the said period.

(2) (a) Where- (i) any individual, firm or body corporate, who, or which, had at any time after the 15th day of August, 1960, been holding office as the managing agents or secretaries and treasurers of the company, or (ii) any associate of the managing agents or secretaries and treasurers as aforesaid; has been appointed by such company at any time during a period of five years preceding the 3rd day of April, 1970, or at any time after that date, as its secretary, consultant or adviser, or to any other office under it, by whatever name called, the Central Government may, if it appears to it that there is good reason for so doing, require the --------------------------------------------------------------------- 1 Ins. by Act 41 of 1974, s. 17 (w.e.f. 1-2-1975). --------------------------------------------------------------------- 193 company to furnish to it such information as it may consider neces- sary, with regard to the terms and conditions of the appointment of such individual, firm or body corporate as secretary, consultant or adviser or as the holder of such other office, for the purpose of determining whether or not such terms and conditions are prejudicial to the interest of the company. (b) If the company refuses or neglects to furnish any such information, the Central Government may appoint a competent person to investigate and report on the terms and conditions of appointment to any of the offices referred to in clause (a) and the provisions of section 240A shall, so far as may be, apply, to such investigation, as they apply to any other investigation made under any other provision of this Act. (c) If, after perusal of the information furnished by the com- pany, or, as the case may be, the report submitted by the person appointed under clause (b), the Central Government is of opinion that the terms and conditions of appointment to any of the offices referred to in clause (a) are prejudicial to the interests of the company, it may, by order, make such variations in those terms and conditions as would, in its opinion, no longer render such terms and conditions of appointment prejudicial to the interests of the company. (d) As from such date as may be specified by the Central Gov- ernment in the order aforesaid, the appointment referred to in clause (a) shall be regulated by the terms and conditions as varied by that Government.

(3) For the purposes of this section, the expression "appointment" includes re-appointment, employment and re-employment.] Dividends and manner and time of payment thereof

Dividend to be paid only out of profits.

1[205. Dividend to be paid only out of profits. (1) No dividend shall be declared or paid by a company for any financial year except out of the profits of the company for that year arrived at after providing for depreciation in accordance with the provisions of sub-

section (2) or out of the profits of the company for any previous financial year or years arrived at after providing for depreciation in accordance with those provisions and remaining undistributed or out of both or out of moneys provided by the Central Government or a State Government for the payment of dividend in pursuance of a guarantee given by that Government: --------------------------------------------------------------------- 1 Subs. by Act 65 of 1960, s. 58, for s. 205. --------------------------------------------------------------------- 194 Provided that- (a) if the company has not provided for depreciation for any previous financial year or years which falls or fall after the commencement of the Companies (Amendment) Act, 1960, (65 of 1960.) it shall, before declaring or paying dividend for any financial year provide for such depreciation out of the profits of that financial year or out of the profits of any other previous financial year or years; (b) if the company has incurred any loss in any previous financial year or years, which falls or fall after the commencement of the Companies (Amendment) Act, 1960, (65 of 1960.) then, the amount of the loss or an amount which is equal to the amount provided for depreciation for that year or those years whichever is less, shall be set off against the profits of the company for the year for which dividend is proposed to be declared or paid or against the profits of the company for any previous financial year or years, arrived at in both cases after providing for depreciation in accordance

with the provisions of subsection (2) or against both; (c) the Central Government may, if it thinks necessary so to do in the public interest, allow any company to declare or pay dividend for any financial year out of the profits of the company for that year or any previous financial year or years without providing for depreciation : Provided further that it shall not be necessary for a company to provide for depreciation as aforesaid where dividend for any financial year is declared or paid out of the profits of any previous financial year or years which falls or fall before the commencement of the companies (Amendment) Act, 1960.(65 of 1960.)

(2) For the purpose of sub-section (1), depreciation shall be provided either- (a) to the extent specified in section 350; or (b) in respect of each item of depreciable asset, for such an amount as is arrived at by dividing ninety-five per cent. of the original cost thereof to the company by the specified period in respect of such asset; or 194A (c) on any other basis approved by the Central Government which has the effect of writing off by way of depreciation ninety-five per cent. of the original cost to the company of each such depreciable asset on the expiry of the specified period; or (d) as regards any other depreciable asset for which no rate of depreciation has been laid down by 1[this Act or any rules made thereunder], on such basis as may be approved by the Central Government by any general order published in the Official Gazette or by any special order in any particular case : Provided that where depreciation is provided for in the manner laid down in clause (b) or clause (c), then, in the event of the depreciable asset being sold, discarded, demolished or destroyed the written down value thereof at the end of the financial year in which the asset is sold, discarded, demolished or destroyed, shall be written off in accordance with the proviso to section 350.

2 [(2A) Notwithstanding anything contained in sub-section (1), on and from the commencement of the Companies (Amendment) Act, 1974, (41 of 1974) no dividend shall be declared or paid by a company for any financial year out of the profits of the company for that year arrived at after providing for depreciation in accordance with the provisions

of subsection (2), except after the transfer to the reserves of the company of such percentage of its profits for that year, not exceeding ten per cent., as may be prescribed : Provided that nothing in this sub-section shall be deemed to prohibit the voluntary transfer by a company of a higher percentage of its profits to the reserves in accordance with such rules as may be made by the Central Government in this behalf.] 3[(2B) A company which fails to comply with the provisions of section 80A shall not, so long as such failure continues, declare any dividend on its equity shares.]

(3) No dividend shall be payable except in cash: Provided that nothing in this sub-section shall be deemed to pro- hibit the capitalization of profits or reserves of a company for the purpose of issuing fully paid-up bonus shares or paying up any amount for the time being unpaid on any shares held by the members of the company.

(4) Nothing in this section shall be deemed to affect in any manner the operation of section 208. ----------------------------------------------------------------------- 1 Subs. by Act 31 of 1988, s.26 (w.e.f. 15-6-1988). 2 Ins. by Act 41 of 1974, s. 18 (w.e.f. 1-2-1975). 3 Ins. by Act 31 of 1988, s.26 (w.e.f. 15-6-1988). ------------------------------------------------------------------------ 194B

(5) For the purposes of this section- (a) "specified period" in respect of any depreciable asset shall mean the number of years at the end of which at least ninety-five per cent. of the original cost of that asset to the company will have been provided for by way of depreciation if depreciation were to be calculated in accordance with the provisions of section 350; (b) any dividend payable in cash may be paid by cheque or warrant sent through the post directed to the registered address of the shareholder entitled to the payment of the dividend or in the case of joint shareholders, to the registered address of that one of the joint shareholders which is first named on the register of members, or to such person and to such address as the shareholder or the joint shareholders may in writing direct.] 205A Unpaid divident to be transferred to special divided account. 1[205A. Unpaid dividend to be transferred to special dividend

account. (1) Where, after the commencement of the Companies (Amend- ment) Act, 1974 ( 41 of 1974), a dividend has been declared by a com- pany but has not been paid, 2[or claimed] within forty-two days, from, the date of the declaration, to any shareholder entitled to the pay- ment of the dividend, the company shall, within seven days from the date of expiry of the said period of forty-two days, transfer the total amount of dividend which remains unpaid 2[or unclaimed] within the said period of forty-two days, to a special account to be opened by the company in that behalf in any scheduled bank, to be called "Unpaid Dividend Account of...... Company Limited/Company (Pri- vate) Limited". 3[Explanation.- In this sub-section, the expression "dividend which remains unpaid" means any dividend the warrant in respect thereof has not been encashed or which has otherwise not been paid or claimed.]

(2) Where the whole or any part of any dividend, declared by a company before the commencement of the Companies (Amendment) Act, 1974, (41 of 1974.) remains unpaid at such commencement, the com- pany shall, within a period of six months from such commencement, transfer such unpaid amount to the account referred to in sub-section

(1).

(3) Where, owing to inadequacy or absence of profits in any year, any company proposes to declare dividend out of the accumulated profits earned by the company in previous years and transferred by it to the reserves, such declaration of dividend shall not be made ---------------------------------------------------------------------- 1 Ins. by Act 41 of 1974, s. 19 (w.e.f. 1-2-1975). 2 Subs. by Act 31 of 1988, s. 27 (w.e.f. 15.6.88) 3 Ins. by s.27, ibid. ---------------------------------------------------------------------- 194C except in accordance with such rules as may be made by the Central Government in this behalf, and, where any such declaration is not in accordance with such rules, such declaration shall not be made except with the previous approval of the Central Government.

(4) If the default is made in transferring the total amount

referred to in sub-section (1) or any part thereof to the unpaid dividend account of the concerned company, the company shall pay, from the date of such default, interest on so much of the amount as has not been transferred to the said account, at the rate of twelve per cent. per annum and the interest accruing on such amount shall enure to the benefit of the members of the company in proportion to the amount remaining unpaid to them.

(5) Any money transferred to the unpaid dividend account of a company in pursuance of this section which remains unpaid or unclaimed for a period of three years from the date of such transfer, shall be transferred by the company to the general revenue account of the Central Government but a claim to, any money so transferred to the general revenue account may be preferred to the Central Government by the person to whom the money is due and shall be dealt with as if such transfer to the general revenue account had not been made, the order, if any, for payment of the claim being treated as an order for refund of revenue.

(6) The company shall, when making any transfer under sub-section

(5) to the general revenue account of the Central Government any unpaid or unclaimed dividend, furnish to such officer as the Central Government may appoint in this behalf a statement in the prescribed form setting forth in respect of all sums included in such transfer, the nature of the sums, the names and last known addresses of the person entitled to receive the sum, the amount to which each person is entitled and the nature his claim thereto and such other particulars as may be prescribed.

(7) The company shall be entitled to a receipt from the Reserve Bank of India for any money transferred by it to the general revenue account of the Central Government and such receipt shall be an effectual discharge of the company in respect thereof.

(8) If a company fails to comply with any of the requirements of this section, the company and every officer of the company who is in default, shall be punishable with fine which may extend to five hundred rupees for every day during which the failure continues. 194D 205B Payment of unpaid or unclaimed dividend. 205B. Payment of unpaid or unclaimed dividend. Any person

claiming to be entitled to any money transferred under sub-section (5) of section 205A to the general revenue account of the Central Government, may apply to the Central Government for an order for payment of the money claimed; and the Central Government may, if satisfied, whether on a certificate by the company or otherwise, that such person is entitled to the whole or any part of the money claimed, make an order for the payment to that person of the sum due to him after taking such security from him as it may think fit.]

Dividend not to be paid except to registered shareholders or to theirorder or to their bankers. 206. Dividend not to be paid except to registered shareholders or

to their order or to their bankers. (1) No dividend shall be paid by a company in respect of any share therein, except- (a) to the registered holder of such share or to his order or to his bankers; or (b) in case a share warrant has been issued in respect of the share in pursuance of section 114, to the bearer of such warrant or to his bankers.

(2) Nothing contained in sub-section (1) shall be deemed to require the bankers of a registered shareholder to make a separate application to the company for the payment of the dividend. 206A Right to dividend rights shares and bonus shares to be help in abeyancepending registration of transfer of shares. 2[206A. Right to dividend rights shares and bonus shares to be held in abeyance pending registration of transfer of shares. Where any instrument of transfer of shares has been delivered to any company for registration and the transfer of such shares has not been registered by the company, it shall, notwithstanding anything contained in any other provision of this Act,- (a) transfer the dividend in relation to such shares to the special account referred to in section 205A unless the company is authorised by the registered holder of such share in writing to pay such dividend to the transferee specified in such instrument of transfer; and (b) keep in abeyance in relation to such shares any offer

of rights shares under clause (a) of sub-section (1) of section 81 and any issue of fully paid-up bonus shares in

pursuance of sub-section (3) of section 205.]

Penalty for failure to distribute dividends within forty-two days. 207. Penalty for failure to distribute dividends within forty-two days. Where a dividend has been declared by a company but has not been paid, or the warrant in respect thereof has not been posted, within 1[forty-two days] from the date of the declaration, to any shareholder entitled to the payment of the dividend, every director of the company; its managing agent or secretaries and treasurers; and where the managing agent is a firm or body corporate, every partner in the firm and every director of the body corporate; and where the secretaries and treasurers are a firm, every partner in the firm and where they are a body corporate, every director thereof; shall, if he is knowingly a party to the default, be punishable with simple imprisonment for a term which may extend to seven days and shall also be liable to fine: Provided that no offence shall be deemed to have been committed within the meaning of the foregoing provision in the following cases, namely:- (a) where the dividend could not be paid by reason of the operation of any law; ----------------------------------------------------------------------- 1 Ins. by Act 31 of 1988, s.28 (w.e.f. 15-6-1988). 2 Subs. by Act 65 of 1960, s. 59, for "three months". ----------------------------------------------------------------------- 195 (b) where a shareholder has given directions to the company regarding the payment of the dividend and those directions cannot be complied with; (c) where there is a dispute regarding the right to receive the dividend; (d) where the dividend has been lawfully adjusted by the company against any sum due to it from the shareholder; or (e) where, for any other reason, the failure to pay the dividend or to post the warrant within the period aforesaid was not due to any default on the part of the company. Payments of interest out of capital

Power of company to pay interest out of capital in certain cases. 208. Power of company to pay interest out of capital in certain

cases. (1) Where any shares in a company are issued for the purpose of raising money to defray the expenses of the construction of any work or building, or the provision of any plant, which cannot be made profitable for a lengthy period, the company may- (a) pay interest on so much of that share capital as is for the time being paid up, for the period and subject to the

conditions and restrictions mentioned in sub-sections (2) to

(7) ; and (b) charge the sum so paid by way of interest, to capital as part of the cost of construction of the work or building or the provision of the plant.

(2) No such payment shall be made unless it is authorised by the articles or by a special resolution.

(3) No such payment, whether authorised by the articles or by special resolution, shall be made without the previous sanction of the Central Government. The grant of such sanction shall be conclusive evidence, for the purposes of this section, that the shares of the company, in respect of which such sanction is given, have been issued for a purpose specified in this section.

(4) Before sanctioning any such payment, the Central Government may, at the expense of the company, appoint a person to inquire into, and report to the Central Government on, the circumstances of the case; and may, before making the appointment, require the company to give security for the payment of the costs of the inquiry. 196

(5) The payment of interest shall be made only for such period as may be determined by the Central Government; and that period shall in no case extend beyond the close of the half year next after the half-year during which the work or building has been actually completed or the plant provided.

(6) The rate of interest shall in no case exceed four per cent. per annum or such other rate as the Central Government may, by notifi- cation in the Official Gazette, direct.

(7) The payment of the interest shall not operate as a reduction of the amount paid up on the shares in respect of which it is paid.

(8) Nothing in this section shall affect any company to which the Indian Railway Companies Act, 1895, (10 of 1895.) or the Indian Tramways Act, 1902, (4 of 1902.) applies. Accounts

Books of account to be kept by company.

209. Books of account to be kept by company. 1[(1) Every company shall keep at its registered office proper books of account with respect to- (a) all sums of money received and expended by the company and the matters in respect of which the receipt and expenditure take place ; (b) all sales and purchases of goods by the company; 2* * * (c) the assets and liabilities of the company ; 3[and] 3[(d) in the case of a company pertaining to any class of companies engaged in production, processing, manufacturing or mining activities, such particulars relating to utilisation of material or labour or to other items of cost as may be prescribed, if such class of companies is required by the Central Government to include such particulars in the books of Account:] Provided that all or any of the books of account aforesaid may be kept at such other place in India as the Board of directors may decide and when the Board of directors so decides, the company shall, within seven days of the decision, file with the Registrar a notice in writing giving the full address of that other place.]

(2) Where a company has a branch office, whether in or outside India, the company shall be deemed to have complied with the

provisions of sub-section (1), if proper books of account relating to the -----------------------------------------------------------------------

1 Sub. by Act 65 of 1960, s. 60, for sub-section (1). 2 The word " and" omitted by Act 31 of 1965, s. 20 (w.e.f. 15-10- 1965). 3 Ins. by s. 20, ibid. (w.e.f. 15-10-1965). ----------------------------------------------------------------------- 197 transactions effected at the branch office are kept at that office and proper summarised returns, made up to dates at intervals of not more than three months, are sent by the branch office to the company at its

registered office or the other place referred to in subsection (1).

1[(3) For the purposes of sub-sections (1) and (2), proper books of account shall not be deemed to be kept with respect to the matters specified therein,- (a) if there are not kept such books as are necessary to give a true and fair view of the state of affairs of the company or branch office, as the case may be, and to explain its transactions; and (b) if such books are not kept on accrual basis and accord- ing to the double entry system of accounting.]

2[(4) 2* * * The books of account and other books and papers shall be open to inspection by any director during business hours. 3* * * * 4[(4A) The books of account of every company relating to a period of not less than eight years immediately preceding the current year 4[together with the vouchers relevant to any entry in such books ,of account] shall be preserved in good order: Provided that in the case of a company incorporated less than eight years before the current year, the books of account for the entire period preceding the current year 5[together with the vouchers relevant to any entry in such books of account] shall be so preserved.]

(5) If any of the persons referred to in sub-section (6) fails to take all reasonable steps to secure compliance by the company with the requirements of this section, or has by his own wilful act been the cause of any default by the company thereunder, he shall, in respect of each offence, be punishable with 6 [imprisonment for a term. which may extend to six months, or with fine which may extend to one thousand rupees, or with both] : Provided that in any proceedings against a person in respect of an offence under this section consisting of a failure to take reasonable steps to secure compliance by the company with the requirements of ---------------------------------------------------------------------- 1 Subs. by Act 31 of 1988, s.29 (w.e.f. 15-6-1988).

2 Subs. by Act 31 of 1965, s. 20, for sub-section (4) (w.e.f, 15- 10-1965). 3 The brackets and letter "(a)" and (clauses (b), (c) and (d) omitted by Act 41 of 1974, s. 20) (w.e.f. 1-2 1975). 4 Ins. by Act 65 of 1960, s. 60. 5 Ins. by Act 31 of 1965, s. 20 (w.e.f. 15-10-1965). 6 Subs. by Act 65 of 1960, s. 60, for "fine which may extend lo one thousand rupees" --------------------------------------------------------------------- 198 this section, it shall be a defence to prove 1* * * that a competent and reliable person was charged with the duty of seeing that those requirements were complied with and was in a position to discharge that duty : 2[Provided further that no person shall be sentenced to imprison- ment for any such offence unless it was committed wilfully.]

(6) The persons referred to in sub-section (5) are the following, namely:- (a) where the company has a managing agent, 3[secretaries and treasurers or managing director or manager], such managing agent, 3[secretaries and treasurers or managing director or manager] 4[and all officers and other employees

and agents [as defined in sub-section (6) of section 240 but excluding bankers, auditors and legal advisers] of such managing agent or secretaries and treasurers]; (b) where such managing agent or secretaries and treasurers are a firm, every partner in the firm; (c) where such managing agent or secretaries and treasurers are a body corporate, every director of such body corporate; 5* * * (d) where the company has neither a managing agent nor 6[secretaries and treasurers nor managing director nor manager, every director of the company]; 4[and] 4[(e) whether or not a company has a managing agent or secre- taries and treasurers, every officer and other employee and agent (defined as aforesaid) of the company.]

(7) If any person, not being a person referred to in sub-section

(6), having been charged by the managing agent, secretaries and treasurers, 2[managing director, manager] or Board of directors, as --------------------------------------------------------------------- 1 The words "that he had reasonable ground to believe, and did believe", omitted by Act 65 of 1960, s. 60. 2 Ins. by s. 60, ibid. 3 Subs. by s. 60, ibid, for "or secretaries and treasurers". 4 Ins. by Act 31 of 1965, s. 20 (w.e.f. 15-10-1965). 5 The word "and" omitted by s. 20, ibid. (w e.f. 15-10-1965). 6 Subs. by Act 65 of 1960, s. 60, for "secretaries and treasurers, every director of the company". ---------------------------------------------------------------------- 198A the case may be, with the duty of seeing that the requirements of this section are complied with, makes default in doing so, he shall, in respect of each offence, be punishable with 1[imprisonment for a term which may extend to six months, or with fine which may extend to one thousand rupees, or with both]. 209A Inspection of books of account, etc., of companies.

2[209A. Inspection of books of account, etc., of companies (1) The books of account and other books and papers of every company shall be open to inspection during business hours- (i) by the Registrar, or (ii) by such officer of Government as may be authorised by the Central Government in this behalf: Provided that such inspection may be made without giving any previous notice to the company or any officer thereof.

(2) It shall be the duty of every director, other officer or employee of the company to produce to the person making inspection

under sub-section (1), all such books of account and other books and papers of the company in his custody or control and to furnish him with any statement, information or explanation relating to the affairs of the company as the said person may require of him within such time and at such place as he may specify.

(3) It shall also be the duty of every director, other officer or employee of the company to give to the person making inspection under this section all assistance in connection with the inspection which the company may be reasonably expected to give.

(4) The person making the inspection under this section may, during the course of inspection,- (i) make or cause to be made copies of books of account and other books and papers, or (ii) place or cause to be placed any marks of identification thereon in token of the inspection having been made.

(5) Notwithstanding anything contained in any other law for the time being in force or any contract to the contrary, any person making an inspection under this section shall have the same powers, as are vested in a civil court under the Code of Civil Procedure, --------------------------------------------------------------------- 1 Subs. by Act 65 of 1960, s. 60, for "fine which may extend to one thousand rupees". 2 Ins. by Act 41 of 1974, s. 21 (w.e.f. 1-2-1975). --------------------------------------------------------------------- 198B 1908 (5 of 1908), while trying a suit, in respect of the following matters, namely:- (i) the discovery and production of books of account and other documents, at such place and such time as may be specified by such person; (ii) summoning and enforcing the attendance of persons and examining them on oath; (iii) inspection of any books, registers and other documents of the company at any place.

(6) Where an inspection of the books of account and other books and papers of the company has been made under this section, the person making the inspection shall make a report to the Central Government.

(7) Any officer authorised to make an inspection under this section shall have all the powers that a Registrar has under this Act in relation to the making of inquiries.

(8) If default is made in complying with the provisions of this section, every officer of the company who is in default shall be punishable with fine which shall not be less than five thousand rupees, and also with imprisonment for a term not exceeding one year.

(9) Where a director or any other officer of a company has been convicted of an offence under this section he shall, on and from the date on which he is so convicted, be deemed to have vacated his office as such and on such vacation of office, shall be disqualified for holding such office in any company, for a period of five years from such date.]

Annual accounts and balance sheet.

210.Annual accounts and balance sheet. (1) At every annual general meeting of a company held in pursuance of section 166, the Board of directors of the company shall lay before the company- (a) a balance sheet as at the end of the period specified

in sub-section (3); and (b) a profit and loss account for that period.

(2) In the case of a company not carrying on business for profit, an income and expenditure account shall be laid before the company 198C at its annual general meeting instead of a profit and loss account, and all references to "profit and loss account", "profit" and "loss" in this section and elsewhere in this Act, shall be construed, in relation to such a company, as references respectively to the "income and expenditure account", "the excess of income over expenditure", and "the excess of expenditure over income".

(3) The profit and loss account shall relate- (a) in the case of the first annual general meeting of the company, to the period beginning with the incorporation of the company and ending with a day which shall not 199 precede the day of the meeting by more than nine months ; and 1[(b) in the case of any subsequent annual general meeting of the company, to the period beginning with the day immediately after the period for which the account was last submitted and ending with a day which shall not precede the day of the meeting by more than six months, or in cases where an extension of time has been granted for holding the meeting

under the second proviso to subsection (1) of section 166, by more than six months and the extension so granted.]

(4) The period to which the account aforesaid relates is referred to in this Act as a " financial year " ; and it may be less or more than a calendar year, but it shall not exceed fifteen months : Provided that it may extend to eighteen months where special permission has been granted in that behalf by the Registrar.

(5) If any person, being a director of a company, fails to take all reasonable steps to comply with the provisions of this section, he shall, in respect of each offence, be punishable with imprisonment for a term which may extend to six months, or with fine which may extend to one thousand rupees, or with both: Provided that in any proceedings against a person in respect of an offence under this section, it shall be a defence to prove 2* * * that a competent and reliable person was charged with the duty of seeing that the provisions of this section were complied with and was in a position to discharge that duty: Provided further that no person shall be sentenced to imprison- ment for any such offence unless it was committed wilfully.

(6) If any person, not being a director of the company, having been charged by the Board of directors with the duty of seeing that the provisions of this section are complied with, makes default in doing so, he shall, in respect of each offence, be punishable with imprisonment for a term which may extend to six months, or with fine which may extend to one thousand rupees, or with both: Provided that no person shall be sentenced to imprisonment for any such offence unless it was committed wilfully. --------------------------------------------------------------------- 1 Subs. by Act 65 of 1960, s. 61, for cl. (b). 2 The words" that he had reasonable ground to believe, and did believe" omitted by s. 61, ibid. ---------------------------------------------------------------------- 200

Form and contents of balance sheet and profit and loss account. 211.Form and contents of balance sheet and profit and loss

account. 1[(1) Every balance sheet of a company shall give a true and fair view of the state of affairs of the company as at the end of the financial year and shall, subject to the provisions of this section, be in the form set out in Part I of Schedule VI, or as near thereto as circumstances admit or in such other form as may be approved by the Central Government either generally or in any particular case; and in preparing the balance sheet due regard shall be had, as far as may be, to the general instructions for preparation of balance sheet under the heading " Notes " at the end of that Part: Provided that nothing contained in this subsection shall apply to any insurance or banking company or any company engaged in the generation or supply of electricity or to any other class of company for which a form of balance sheet has been specified in or under the Act governing such class of company.]

(2) Every profit and loss account of a company shall give a true and fair view of the profit or loss of the company for the financial year and shall, subject as aforesaid, comply with the requirements of Part II of Schedule VI, so far as they are applicable thereto : Provided that nothing contained in this sub-section shall apply to any insurance or banking company 2 [or any company engaged in the generation or supply of electricity], or to any other class of company for which a form of profit and loss account has been specified in or under the Act governing such class of company.

(3) The Central Government may, by notification in the Official Gazette, exempt any class of companies from compliance with any of the requirements in Schedule VI if, in its opinion, it is necessary to grant the exemption in the I [public interest]. Any such exemption may be granted either unconditionally or subject to such conditions as may be specified in the notification.

(4) The Central Government may, on the application or with the consent of the Board of directors of the company, by order, modify in relation to that company any of the requirements of this Act as to the matters to be stated in the company's balance sheet or profit and loss account for the purpose of adapting them to the circumstances of the company.

(5) The balance sheet and the profit and loss account of a com- pany shall not be treated as not disclosing a true and fair view of the ----------------------------------------------------------------------

1 Subs. by Act 65 of 1960, s. 62, for sub-section (1). 2 Ins. by s. 62, ibid. 3 Subs. by s. 62 ibid. for "national interest" ---------------------------------------------------------------------- 201 state of affairs of the company, merely by reason of the fact that they do not disclose- (i) in the case of an insurance company, any matters which are not required to be disclosed by the Insurance Act, 1938 ; (4 of 1838.) (ii) in the case of a banking company, any matters which are not required to be disclosed by the Banking Companies Act, 1949 ; (10 of 1994) (iii) in the case of a company engaged in the generation or supply of electricity, any matters which are not required to be disclosed by 1[both the Indian Electricity Act, 1910, (9 of 1910) and the Electricity (Supply) Act, 1948]; (54 of 1948.) (iv) in the case of a company governed by any other special Act for the time being in force, any matters which are not required to be disclosed by that special Act; or (v) in the case of any company, any matters which are not required to be disclosed by virtue of the provisions con- tained in Schedule VI or by virtue of a notification issued

under sub-section (3) or an order issued under, subsection

(4).

(6) For the purposes of this section, except where the context otherwise requires, any reference to a balance sheet or profit and loss account shall include any notes thereon or documents annexed thereto, giving information required by this Act, and allowed by this Act to be given in the form of such notes or documents.

(7) If any such person as is referred to in sub-section (6) of section 209 fails to take all reasonable steps to secure compliance by the company, as respects any accounts laid before the company in general meeting, with the provisions of this section and with the other requirements of this Act as to the matters to be stated in the accounts, he shall, in respect of each offence, be punishable with imprisonment for a term which may I extend to six months, or with fine which may extend to one thousand rupees, or with both: Provided that in any proceedings against a person in respect of an offence under this section, it shall be a defence to prove 2* * * that a competent and reliable person was charged with the duty of seeing that the provisions of this section and the other requirements --------------------------------------------------------------------- 1 Subs. by Act 65 of 1960; s. 62, for " the Electricity (Supply) Act, 1948 (54 of 1948) ". 2 The words "that he had reasonable ground to believe and did believe" omitted by S. 62, ibid. --------------------------------------------------------------------- 202 aforesaid were complied with and was in a position to discharge that duty: Provided further that no person shall be sentenced to imprison- ment for any such offence unless it was committed wilfully.

(8) If any person, not being a person referred to in sub-section

(6)of section 209, having been charged by the managing agent, secretaries and treasurers, 1[managing director or manager,] or Board of directors, as the case may be, with the duty of seeing that the provisions of this section and the other requirements aforesaid are complied with, makes default in doing so, he shall, in respect of each offence, be punishable with imprisonment for a term which may extend to six months or with fine which may extend to one thousand rupees, or with both: Provided that no person shall be sentenced to imprisonment for any such offence unless it was committed wilfully.

Balance sheet of holding company to include certain particulars as toits subsidiaries. 212.Balance sheet of holding company to include certain

particulars as to its subsidiaries. (1) There shall be attached to the balance sheet of a holding company having a subsidiary or subsidiaries at the end of the financial year as at which the holding company's balance sheet is made out, the following documents in respect of such subsidiary or of each such subsidiary, as the case may be:- (a) a copy of the balance sheet of the subsidiary; (b) a copy of its profit and loss account ; (c) a copy of the report of its Board of directors (d) a copy of the report of its auditors ; (e) a statement of the holding company's interest in the

subsidiary as specified in sub-section (3); the statement

referred to in sub-section (5), if any ; and

(g) the report referred to in sub-section (6), if any.

(2) 2[(a) The balance sheet referred to in clause (a) of sub-

section (1)shall be made out in accordance with the requirements of this Act,- (i) as at the end of the financial year of the subsidiary, where such financial year coincides with the financial year of the holding company; --------------------------------------------------------------------- 1 Ins. by Act 65 of 1960, s. 62. 2 Subs. by s. 63, ibid., for cl. (a). -------------------------------------------------------------------- 203 (ii) as at the end of the financial year of the subsidiary last before that of the holding company where the financial year of the subsidiary does not coincide with that of the holding company;] (b) The profit and loss account and the reports of the Board of directors and of the auditors, referred to in clauses (b), (c) and (d)

of subsection (1), shall be made out, in accordance with the require- ments of this Act, for the financial year of the subsidiary referred to in clause (a). (c) 1[Where the financial year of the subsidiary does not coincide with that of the holding company, the financial year aforesaid] of the subsidiary shall not end on a day which precedes the day on which the holding company's financial year ends by more than six months. (d) Where the financial year of a subsidiary is shorter in duration than that of its holding company, references to the financial year of the subsidiary in clauses (a), (b) and (c) shall be construed as references to two or more financial years of the subsidiary the duration of which, in the aggregate, is not less than the duration of the holding company's financial year.

(3) The statement referred to in clause (e) of sub-section (1) shall specify- (a) the extent of the holding company's interest in the subsidiary at the end of the financial year or of the last of the financial years of the subsidiary referred to in sub-

section (2); (b) the net aggregate amount, so far as it concerns members of the holding company and is not dealt with in the company's accounts, of the subsidiary's profits after deducting its losses or vice versa- (i) for the financial year or years of the subsidiary aforesaid ; and (ii) for the previous financial years of the subsidiary since it became the holding company's subsidiary; (c) the net aggregate amount of the profits of the subsidiary after deducting its losses or vice versa- (i)for the financial year or years of the subsidiary aforesaid; and --------------------------------------------------------------------- 1 Subs. by Act 65 of 1960, s. 63, for "the financial year aforesaid". -------------------------------------------------------------------- 204 (ii)for the previous financial years of the subsidiary since it became the holding company's subsidiary; so far as those profits are dealt with, or provision is made for those losses, in the company's accounts.

(4) Clauses (b) and (c) of sub-section (3) shall apply only to profits and losses of the subsidiary which may properly be treated in the holding company's accounts as revenue profits or losses, and the profits or losses attributable to any shares in a subsidiary for the time being held by the holding company or any other of its subsi- diaries shall not (for that or any other purpose) be treated as afore- said so far as they are profits or losses for the period before the date on or as from which the shares were acquired by the company or any of its subsidiaries, except that they may in a proper case be so treated where- (a) the company itself the subsidiary of another body corporate ; and (b) the shares were acquired from that body corporate or a subsidiary of it ; and for the purpose of determining whether any profits or losses are to be treated as profits or losses for the said period, the profit or loss for any financial year of the subsidiary may, if it is not practicable to apportion it with reasonable accuracy by reference to the facts, be treated as accruing from day to day during that year and be apportioned accordingly.

(5) Where the financial year or years of a subsidiary referred

to in sub-section (2) do not coincide with the financial year of the holding company, a statement containing information on the following matters shall also be attached to the balance sheet of the holding company:- (a) whether there has been any, and, if so, what change in the holding company's interest in the subsidiary between the end of the financial year or of the last of the financial years of the subsidiary and the end of the holding company's financial year; (b) details of any material changes which have occurred between the end of the financial year or of the last of the financial years of the subsidiary and the end of the holding company's financial year in respect of- (i) the subsidiary's fixed assets 205 (ii) its investments (iii)the moneys lent by it; (iv) the moneys borrowed by it for any purpose other than that of meeting current liabilities.

(6) If, for any reason, the Board of directors of the holding company is unable to obtain information on any of the matters required

to be specified by sub-section (4), a report in writing to that effect shall be attached to the balance sheet of the holding company.

(7) The documents referred to in clauses (e), (f) and (g) of

sub-section (1) shall be signed by the persons by whom the balance sheet of the holding company is required to be signed.

(8) The Central Government may, on the application or with the consent of the Board of directors of the company, direct that in relation to any subsidiary, the provisions of this section shall not apply, or shall apply only to such extent as may- be specified in the direction.

(9) If any such person as is referred to in sub-section (6) of section 209 fails to take all reasonable steps to comply with the provisions of this section, he shall, in respect of each offence, be punishable with imprisonment for a term which may extend to six months, or with fine which may extend to one thousand rupees, or with both: Provided that in any proceedings against a person in respect of an offence under this section, it shall be a defence to prove 1* * * that a competent and reliable person was charged with the duty of seeing that the provisions of this section were complied with and was in a position to discharge that duty: Provided further that no person shall be sentenced to imprison- ment for any such offence unless it was committed wilfully.

(10) If any person, not being a person referred to in sub-section

(6) of section 209, having been charged by the managing agent, secretaries and treasures, 2[managing director, manager,] or Board of directors, as the case may be, with the duty of seeing that the provisions of this section are complied with, makes default in doing so, he shall, in respect of each offence, be punishable with ---------------------------------------------------------------------- 1 The words "that he had reasonable ground to believe, and did believe," omitted by Act 65 of 1960, s. 63. 2 Ins. by s. 63, ibid. ---------------------------------------------------------------------- 206 imprisonment for a term which may extend to six months, or with fine which may extend to one thousand rupees, or with both: Provided that no person shall be sentenced to imprisonment for any such offence unless it was committed wilfully.

Financial year of holding company and subsidiary.

213.Financial year of holding company and subsidiary. (1) Where it appears to the Central Government desirable for a holding company or a holding company's subsidiary, to extend its financial year so that the subsidiary's financial year may end with that of the holding company, and for that purpose to postpone the submission of the relevant accounts to a general meeting, the Central Government may, on the application or with the consent of the Board of directors of the company whose financial year is to be extended, direct that in the case of that company, the submission of accounts to a general meeting, the holding of an annual general meeting or the making of an annual return, shall not be required to be submitted, held or made, earlier than the dates specified in the direction, notwithstanding anything to the contrary in this Act or in any other Act for the time being in force.

(2) The Central Government shall, on the application of the Board of directors of a holding company or a holding company's sub- sidiary, exercise the powers conferred on that Government by sub-

section (1) if it is necessary so to do, in order to secure that the end of the financial year of the subsidiary does not precede the end of the holding company's financial year by more than six months, where that is not the case at the commencement of this Act, or at the date on which the relationship of holding company and subsidiary comes into existence where that date is later than the commencement of this Act.

Rights of holding company's representatives and members.

214.Rights of holding company's representatives and members. (1) A holding company may, by resolution, authorise representatives named in the resolution to inspect the books of account kept by any of its subsidiaries; and the books of account of any such subsidiary shall be open to inspection by those representatives at any time during business hours.

(2) The rights conferred by section 235 upon members of a com- pany may be exercised, in respect of any subsidiary, by members of the holding company as if they alone were members of the subsidiary. 207

Authentication of balance sheet and profit and loss account. 215.Authentication of balance sheet and profit and loss account.

(1) Save as provided by sub-section (2), every balance sheet and every profit and loss account of a company shall be signed on behalf of the Board of directors- (i) in the case of a banking company, by the persons specified in clause (a) or clause (b), as the case may be, of

subsection (2) of section 29 of the Banking Companies Act, 1949; (10 of 1949). (ii) in the case of any other company, by its, managing agent, secretaries and treasurers, manager or secretary, if any, and by not less than two directors of the company one of whom shall be a managing director where there is one.

(2) In the case of a company not being a banking company, when only one of its directors is for the time being in India, the balance sheet and the profit and loss account shall be signed by such director; but in such a case there shall be attached to the balance sheet and the profit and loss account a statement signed by him explaining the reason for non-compliance with the provisions of

subsection (1).

(3) The balance sheet and the profit and loss account shall be approved by the Board of directors before they are signed on behalf of the Board in accordance with the provisions of this section and before they are submitted to the auditors for their report thereon.

Profit and loss account to be annexed and auditors' report to beattached to balance sheet. 216.Profit and loss account to be annexed and auditors' report to be attached to balance sheet. The profit and loss account shall be annexed to the balance sheet and the auditors' report 1[(including the auditors' separate special or supplementary report, if any)] shall be attached thereto.

Board's report.

217.Board's report. (1) There shall be attached to every balance sheet laid before a company in general meeting, a report by its Board of directors, with respect to- (a) the state of the company's affairs; (b) the amounts, if any, which it proposes to carry to any reserves 2* * * in such balance sheet 3* * * --------------------------------------------------------------------- 1 Ins. by Act 65 of 1960, s. 64. 2 The word "either" omitted by s. 65, ibid. 3 The words "or in a subsequent balance sheet; and" omitted by s. 65, ibid. --------------------------------------------------------------------- 208 (c) the amount, if any, which it recommends should be paid by way of dividend; 1[(d) material changes and commitments, if any; affecting the financial position of the company which have occurred between the end of the financial year of the company to which the balance sheet relates and the date of the report.] 2[(e) the conservation of energy technology absorption, foreign exchange earnings and outgo, in such manner as may be prescribed.]

(2) The Board's report shall, so far as is material for the appreciation of the state of the company's affairs by its members and will not in the Board's opinion be harmful to the business of the company or of any of its subsidiaries, deal with any changes which have occurred during the financial year- (a) in the nature of the company's business: (b) in the company's subsidiaries or in the nature of the business carried on by them; and (c) generally in the classes of business in which the company has an interest. 3[(2A) (a) The Board's report shall also include a statement showing the name of every employee of the company who- (i) if employed throughout the financial year, was in receipt of remuneration for that year which, in the aggregate, was not less than 4[such sum as may be prescribed]; or (ii) if employed for a part of the financial year, was in receipt of remuneration for any part of that year, at a rate which, in the aggregate, was not less than 4[such sum per month as may be prescribed; or] 5[(iii) if employed throughout the financial year or part thereof, was in receipt of remuneration in that year which,in the aggregate, or as the case may be, at a rate which, in the aggregate, is in excess of that drawn by the managing director or whole-time director or manager and holds by himself or along with his spouse and dependent children, not less than two per cent., of the equity shares of the company. (b) The statement referred to in clause (a) shall also indicate,- (i) whether any such employee is a relative of any director or manager of the company and if so, the name of such director, and (ii) such other particulars as may be prescribed. Explanation.- "Remuneration" has the meaning assigned to it in the Explanation to section 198.] ----------------------------------------------------------------------- 1 Ins. by Act 65 of 1960, s. 65. 2 Added by Act 31 of 1988, s. 30 (w.e.f. 1.4.1989). 3 Ins. by Act 41 of 1974, s. 22 (w.e.f. 1-2-1975). 4 Subs. by Act 31 of 1988, s.30 (w.e.f. 15-6-1988). 5 Ins. by s. 30, ibid. (w.e.f. 15.6.1988). ---------------------------------------------------------------------- 208A

(3) The Board shall also be bound to give the fullest information and explanations in its report aforesaid, or in cases falling under the proviso to section 222, in an addendum to that report, on every reservation, qualification or adverse remark contained in the auditors' report.

(4) The Board's report and any addendum thereto shall be signed by its chairman if he is authorised in that behalf by the Board; and where he is not so authorised, shall be signed by such number of directors as are required to sign the balance sheet and the profit and

loss account of the company by virtue of sub-sections (1) and

(2) of section 215.

(5) If any person, being a director of a company, fails to take

all reasonable steps to comply with the provisions of subsections (1)

to (3), or being the chairman, signs the Board's report otherwise than

in conformity with the provisions of sub-section (4), he shall, in respect of each offence, be punishable with imprisonment for a term which may extend to six months, or with fine which may extend to two thousand rupees, or with both : Provided that no person shall be sentenced to imprisonment for any such offence unless it was committed wilfully: Provided further that in any proceedings against a person in

respect of an offence under sub-section (1), it shall be a defence to 209 prove 1* * * that a competent and reliable person was charged with the duty of seeing that the provisions of that sub-section were complied with and was in a position to discharge that duty.

(6) If any person, not being a director, having been charged by the Board of directors with the duty of seeing that the provisions of

sub-sections (1) to (3) are complied with, makes default in doing so, he shall, in respect of each offence, be punishable with imprisonment for a term which may extend to six months, or with fine which may extend to two thousand rupees, or with both: Provided that no person shall be sentenced to imprisonment for any such offence unless it was committed wilfully.

Penalty for improper issue, circulation or publication of balancesheet or profit and loss account. 218.Penalty for improper issue, circulation or publication of balance sheet or profit and loss account. (a) If any copy of a balance sheet or profit and loss account which has not been signed as required by section 215 is issued, circulated or published; or (b) If any copy of a balance sheet is issued, circulated or published without there being annexed or attached thereto, as the case may be, a copy each of (i) the profit and loss account, (ii) any accounts, reports or statements which, by virtue of section 212, are required to be attached to the balance sheet, (iii) the auditors' report, and (iv) the Board's report referred to in section 217 the company, and every officer of the company who is in default, shall be punishable with fine which may extend to five hundred rupees.

Right of member to copies of balance sheet and auditors' report. 219 Right of member to copies of balance sheet and auditors'

report. (1) A copy of every balance sheet (including the profit and loss account, the auditors' report and every other document required by law to be annexed[ or attached, , as the case may be, to the balance sheet) which is to be laid before a company in general meeting shall, not less than twenty-one days, before the date of the meeting, be sent to every member of the company, 2[to every trustee for the holders of any debentures issued by the company, whether such member or trustee is or is not entitled to have notices of general meetings of the company sent to him, and to all persons other than such members or trustees, being persons so entitled:] ---------------------------------------------------------------------- 1 The words "that he had reasonable ground to believe, and did believe, " omitted by Act 65 of 1960, s. 65. 2 Subs. by Act 31 of 1988, s. 31 (w.e.f. 17.4.1989) ---------------------------------------------------------------------- 210 Provided that- (a) in the case of a company not having a share capital, this sub-section shall not require the sending of a copy of the documents aforesaid to a member, or holder of debentures, of the company who is not entitled to have notices of general meetings of the company sent to him; (b) this sub-section shall not require a copy of the documents aforesaid to be sent- (i)to a member, or holder of debentures, of the company, who is not entitled to have notices of general meetings of the company sent to him and of whose address the company is unaware; (ii)to more than one of the joint holders of any shares or debentures none of whom is entitled to have such notices sent to him; 1* * * (iii) in the case of joint holders of any shares or debentures some of whom are and some of whom are not entitled to have such notices sent to them, to those who are not so entitled; 1* * * 1[(iv) in the case of a company whose shares are listed on a recognised stock exchange, if the copies of the documents aforesaid are made available for inspection at its registered office during working hours for a period of twenty-one days before the date of the meeting and a statement containing the salient features of such documents in the prescribed form or copies of the documents aforesaid, as the company may deem fit, is sent to every member of the company and to every trustee for the holders of any debentures issued by the company not less than twenty-one days before the date of the meeting] (c) if the copies of the documents aforesaid are sent less than twenty-one days before the date of the meeting, they shall, notwithstanding that fact, be deemed to have been duly sent if it is so agreed by all the members entitled to vote at the meeting.

2[(2) Any member or holder of debentures of a company and any person from whom the company has accepted a sum of money by way of deposit shall, on demand, be entitled to be furnished free of cost, with a copy of the last balance sheet of the company and of every document required by law to be annexed or attached thereto, including the profit and loss account and the auditors' report.]

(3) If default is made in complying with sub-section (1), the company, and every officer of the company who is in default, shall be punishable with fine which may extend to five hundred rupees.

(4) If, when any person makes a demand for a copy of any document with which he is entitled to be furnished by virtue of sub-

section (2), default is made in complying with the demand within seven days after the making thereof, the company, and every officer ---------------------------------------------------------------------- 1 Omitted by Act 31 of 1988, s. 31 (w.e.f 17.4.1989) 2 Subs. by s.31, ibid (w.e.f. 17-4-1989). ---------------------------------------------------------------------- 211 of the company who is in default, shall be punishable with fine which may extend to five hundred rupees, unless it is proved that that person had already made a demand for and been furnished with a copy of the document. The 1[Company Law Board] may, also by order, direct that the copy demanded shall forthwith be furnished to the person concerned.

(5) Sub-sections (1) to (4) shall not apply in relation to a balance sheet of a private company laid before it before the commencement of this Act; and in such a case the right of any person to have sent to him or to be furnished with a copy of the balance sheet, and the liability of the company in respect of a failure to satisfy that right, shall be the same as they would have been if this Act had not been passed.

Three copies of balance sheet, etc., to be filed with Registrar. 220.Three copies of balance sheet, etc., to be filed with

Registrar. (1) After the balance sheet and the profit and loss account have been laid before a company at an annual general meeting as aforesaid, there shall be filed with the Registrar 2[within thirty days from, the date on-which the balance sheet and the profit and loss account were so laid 3[, or where the annual general meeting of a company for any year has not been held, there shall be filed with the Registrar within thirty days from the latest day on or before which that meeting should have been held in accordance with the provisions of this Act.]] (a) 4* * * three copies of the balance sheet and the profit and loss account, signed by the managing director, managing agent, secretaries and treasurers, manager or secretary of the company, or if there be none of these, by a director of the company, together with three copies of all documents which are required by this Act to be annexed or attached to such balance sheet or profit and loss account : 5[Provided that in the case of a private company, copies of the balance sheet and copies of the ]profit and loss account shall be filed with the Registrar separately: 6* * * * * --------------------------------------------------------------------- 1 Subs. by Act 31 of 1988, s. 31 (w.e.f. 31.5.1991). 2 Subs. by Act 31 of 1965, s. 62 and Sch., for certain words (w.e.f. 15-10-1965). 3 Ins. by Act 46 of 1977, s. 5. 4 The words "in the case of a public company" omitted by Act 65 of 1960, s. 66. 5 Ins. by s. 66, ibid. 6 Cl. (b) omitted bys. 66, ibid. --------------------------------------------------------------------- 212 1[Provided further that,- (i)in the case of a private company which is not a subsidiary of a public company, or (ii)in the case of a private company of which the entire paid-up share capital is held by one or more bodies corporate incorporated outside India, or (iii)in the case of a company which becomes a public company by virtue of section 43A, if the Central Government directs that it is not in the public interest that any person other than a member of the company shall be entitled to inspect, or obtain copies of, the profit and loss account of the company, no person other than a member of the company concerned shall be entitled to inspect, or obtain copies of, the profit and loss account of that company under section 610.]

(2)If the annual general meeting of a 2* * * company before which a balance sheet is laid as aforesaid does not adopt the balance sheet 3[, 4[,or is adjourned without adopting the balance sheet, ]or, if the annual general meeting of a company for any year has not been held], a statement of that fact and of the reasons therefor shall be annexed to the balance sheet and to the copies thereof required to be filed with the Registrar.

(3) If default is made in complying with the requirements of

sub-sections (1) and (2), the company, and every officer of the com- pany who is in default, shall be liable to the like punishment as is provided by section 162 for a default in complying with the provisions of sections 159, 160 or 161.

Duty of officer to make disclosure of payments, etc.

221.Duty of officer to make disclosure of payments, etc. (1) Where any particulars or information is required to be given in the balance sheet or profit and loss account of a company or in any document required to be annexed or attached thereto, it shall be the duty of the concerned officer of the company to furnish without delay to the company, and also to the company's auditor whenever he so requires, those particulars or that information in as full a manner as possible. ---------------------------------------------------------------------- 1 Ins. by Act 65 of 1960, s. 66. 2 The words "Public or private" omitted by s. 66, ibid. 3 Ins. by Act 46 of 1977, s. 5. 4 Ins. by Act 31 of 1988, s. 32 (w.e.f. 15.6.1988) ----------------------------------------------------------------------- 213

(2) Where the officer concerned is a firm or body corporate acting as managing agent or as secretaries and treasurers, the duty aforesaid shall extend to every partner in the firm, or to every director of the body corporate, as the case may be.

(3) The particulars or information referred to in sub-section

(1) may relate to payments made to any director, managing agent, secretaries and treasurers, or other person by any other company, body corporate, firm or person.

(4) If any person knowingly makes default in performing the duty cast on him by the foregoing provisions of this section, he shall be punishable with imprisonment which may extend to six months, or with fine which may extend to five thousand rupees, or with both.

Construction of references to documents annexed to accounts. 222.Construction of references to documents annexed to accounts. References in this Act to documents annexed or required to be annexed to a company's accounts or any of them shall not include the Board's report, the auditors' report or any document attached or required to be attached to those accounts : Provided that any information which is required by this Act to be given in the accounts, and is allowed by it to be given in a statement annexed to the accounts, may be given in the Board's report instead of in the accounts; and if any such information is so given, the report shall be annexed to the accounts and this Act shall apply in relation there to accordingly, except that the auditors shall report thereon only in so far as it gives the said information.

Certain companies to publish statement in the Form in Table F inSchedule I. 223.Certain companies to publish statement in the Form in Table

F in Schedule I. (1) Every company which is a limited banking company, an insurance company, or a deposit, provident or benefit society, shall, before it commences business and also on the first Monday in February and the first Monday in August in every year during which it carries on business, make a statement in the Form in Table F in Schedule I. or in a Form as near thereto as circumstances admit.

(2) A copy of the statement, together with a copy of the last audited balance sheet laid before the members of the company, shall be displayed and until the display of the next following statement, shall be kept displayed, in a conspicuous place in the registered office of the company, and in every branch office or place where the business of the company is carried on.

(3) Every member, and every creditor, of the company shall be entitled, on payment of a sum of eight annas, to be furnished with a copy of the statement, within seen days of such payment. 214

(4) If default is made in complying with any of the requirement of this section, the company, and every officer of the company who is in default, shall be punishable with fine which may extend to fifty rupees for every day during which the default continues.

(5) This section shall not apply, to a life assurance company or provident insurance society to which the, provisions of the Insurance Act, 1938 (4 of 1938), as to the annual statements to be made by such company or society, apply with or without modifications, if the company or society complies with those provisions. Audit

Appointment and remuneration of auditors.

224.Appointment and remuneration of auditors. 1[(1) Every company shall, at each annual general meeting, appoint an auditor or auditors to hold office from the conclusion of that meeting until the conclusion of the next annual general meeting and shall, within seven days of the appointment, give intimation thereof to every auditor so appointed 2* * * : 3[Provided that before any appointment or re-appointment of auditor or auditors is made by any company at any annual general meeting, a written certificate shall be obtained by the company from the auditor or auditors proposed to be so appointed to the effect that the appointment or re-appointment, if made, will be in accordance with the limits specified in sub-section (1B).]

(1A) Every auditor appointed under subsection (1), 2* * * shall within thirty days of the receipt from the company of the intimation of his appointment, inform the Registrar in writing that he has accepted, or refused to accept, the appointment.] 3[(1B) On and from, the financial year next following the commencement of the Companies (Amendment) Act, 1974 (41 of 1974), no company or its Board of directors shall appoint or re-appoint any person 4[ who is in full time employment elsewhere] or firm as its auditor if such person or firm is, at the date of such appoint- ment or re-appointment, holding appointment as auditor of the specified number of companies or more than the specified number of companies: 4[Provided that in the case of a firm of auditors, "specified number of companies" shall be construed as the number of companies specified for every partner of the firm who is not in full-time employment elsewhere:] ---------------------------------------------------------------------

1 Subs. by Act 65 of 1960, s. 67, for sub-section (1). 2 Omitted by Act 41 of 1974, s. 23 (w.e.f. 1-2-1975). 3 Ins. by s. 23, ibid. (w.e.f. 1-2-1975) 4 Ins. by Act 31 of 1988, s. 33 (w.e.f. 15.6.1988) 5 Subs. by s.33, ibid. (w.e.f. 15-6-1988). -------------------------------------------------------------------- 215 Provided further that where any partner of the firm is also a partner of any other firm or firms of auditors, the number of compa- nies which may be taken into account, by all the firms together, in relation to such partner shall not exceed the specified number in the aggregate: Provided also that where any partner of a firm of auditors is also holding office, in his individual capacity, as the auditor of one or more companies, the number of companies which may be taken into account in his case shall not exceed the specified number, in the aggregate. (1C) For the purposes of enabling a company to comply with the provisions of sub-section (lB), a person or firm holding, immediately before the commencement of the Companies (Amendment) Act, 1974, (41 of 1974.) appointment as the auditor of a number of companies exceeding the specified number, shall, within sixty days from such commencement, intimate his or its unwillingness to be re-appointed as the auditor from the financial year next following such commencement, to the company or companies of which he or it is not willing to be re- appointed as the auditor; and shall simultaneously intimate to the Registrar the names of the companies of which he or it is willing to be re-appointed as the auditor and forward a copy of the intimation to each of the companies referred to therein. Explanation I.-For the purposes of sub-sections (1B) and (lC), "specified number" means,- (a) in the case of a person or firm holding appointment as auditor of a number of companies each of which has a paid-up share capital of less than rupees twenty-five lakhs, twenty such companies; (b) in any other case, twenty companies, out of which not more than ten shall be companies each of which has a paid-up share capital of rupees twenty-five lakhs or more. Explanation II.-In computing the specified number, the number of companies in respect of which or any part of which any person or firm has been appointed as an auditor, whether singly or in combination with any other person or firm., shall be taken into account.] 216

(2) 1[Subject to the provisions of sub-section (lB) and section 224A, at any annual general meeting], a retiring auditor, by whatso- ever authority appointed, shall be re-appointed, unless- (a) he is not qualified for re-appointment; (b) he has given the company notice in writing of his unwillingness to be re-appointed; (c) a resolution has been passed at that meeting appointing somebody instead of him or providing expressly that he shall not be re-appointed; or (d) where notice has been given of an intended resolution to appoint some person or persons in the place of a retiring auditor, and by reason of the death, incapacity or dis- qualification of that person or of all those persons, as the case may be, the resolution cannot be proceeded with.

(3) Where at an annual general meeting no auditors are appointed or re-appointed, the Central Government may appoint a person to fill the vacancy.

(4) The company shall, within seven days of the Central Govern-

ment's power under sub-section (3), becoming exercisable, give notice of, that fact to that Government; and, if a company fails to give such notice, the company, and every officer of the company who is in default, shall be punishable with fine which may extend to five hundred rupees.

(5) The first auditor or auditors of a company shall be appointed by the Board of directors within one month of the date of registration of the company; and the auditor or auditors so appointed shall hold office until the conclusion of the first annual general meeting: Provided that- (a) the company may, at a general meeting, remove any such auditor or all or any of such auditors and appoint in his or their places any other person or persons who have been nominated for appointment by any member of the company and of whose nomination notice has been given to the members of the company not less than fourteen days before the date of the meeting; and --------------------------------------------------------------------- 1 Subs. by Act 41 of 1974, s.23, for certain words (w.e.f. 1-2- 1975). ---------------------------------------------------------------------- 216A (b) if the Board falls to exercise its powers under this sub-section, the company in general meeting may appoint the first auditor or auditors.

(6) (a) The Board may fill any casual vacancy in the office of an auditor; but while any such vacancy continues, the remaining auditor or auditors, if any, may act : Provided that where such vacancy is caused by the resignation of an auditor, the vacancy shall only be filled by the company In general meeting. (b) Any auditor appointed in a casual vacancy shall hold office until the conclusion of the next annual general meeting.

(7) Except as provided in the proviso to sub-section (5), any auditor appointed under this section may be removed from office before the expiry of his term only by the company in general meeting, after obtaining the previous approval of the Central Government in that behalf.

(8) The remuneration of the auditors of a company- (a) in the case of an auditor appointed by the Board or the Central Government, may be fixed by the Board or the Central Government, as the case may be; and (b) subject to clause (a), shall be fixed by the company in general meeting or in such manner as the company in general meeting may determine. For the purposes of this sub-section, any sums paid by the company in respect of the auditors' expenses shall be deemed to be included in the expression "remuneration". 224A Auditor not to be appointed except with the approval of the company byspecial resolution in certain cases. 1[224A.Auditor not to be appointed except with the approval of

the company by special resolution in certain cases. (1) In the case of a company in which not less than twenty-five per cent of the subscribed share capital is held, whether singly or in any combination, by- (a) a public financial institution or a Government company or Central Government or any State Government, or, (b) any financial or other institution established by any Provincial or State Act in which a State Government holds not less than fifty-one per cent. of the subscribed share capital, or ---------------------------------------------------------------------- 1 Ins. by Act 41 of 1974, s. 24 (w.e.f. 1-2-1975). ---------------------------------------------------------------------- 216B (c) a nationalised bank or an insurance company carrying on general insurance business, the appointment or reappointment at each annual general meeting of an auditor or auditors shall be made by a special resolution.

(2) Where any company referred to in sub-section (1) omits or fails to pass at its annual general meeting any special resolution appointing an auditor or auditors, it shall be deemed that no auditor or auditors had been appointed by the company at its annual general

meeting, and thereupon the provisions of sub-section (3) of section 224 shall become applicable in relation to such company. Explanation.-For the purposes of this section,- (a) "general insurance business" has the meaning assigned to it in the General Insurance (Emergency Provisions) Act, 1971; (17 of 1971.) (b) "nationalised bank" means a corresponding new bank as defined in the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (5 of 1970), 1[or in the Banking Comp- anies (Acquisition and Transfer of Undertakings) Act, 1980] (40 of 1980)]

Provisions as to resolutions for appointing or removing auditors. 225.Provisions as to resolutions for appointing or removing

auditors. (1) Special notice shall be required for a resolution at an annual general meeting appointing as auditor a person other than a retiring auditor, or providing expressly that a retiring auditor shall not be re-appointed.

(2) On receipt of notice of such a resolution, the company shall forthwith send a copy thereof to the retiring auditor.

(3) Where notice is given of such a resolution and the retiring auditor makes with respect thereto representations in writing to the company (not exceeding a reasonable length) and requests their notification to members of the company, the company shall, unless the representations are received by it too late for it to do so,- (a) in any notice of the resolution given to members of the company, state the fact of the representations having been made; and (b) send a copy of the representations to every member of the company to whom notice of the meeting is sent, whether before or after the receipt of the representations by the company; --------------------------------------------------------------------- 1 Added by Act 31 of 1988, s.34 (w.e.f. 15-6-1988). ---------------------------------------------------------------------- 216C and if a copy of the representations is not sent as aforesaid because they were received too late or because of the company's default, the auditor may (without prejudice to his right to be heard orally) require that the representations shall be read out at the meeting: Provided that copies of the representations need not be sent out and the representations need not be read out at the meeting if, on the application either of the company or of any other person who claims to be aggrieved, the 1[Company Law Board]is satisfied that the rights conferred by this sub-section are being abused to secure needless publicity for defamatory matter; and the 1[Company Law Board] may order the company's costs on such an application to be paid in whole or in part by the auditor, notwithstanding that he is not a party to the application.

(4) Sub-sections (2) and (3) shall apply to a resolution to

remove the first auditors or any of them under sub-section (5) of section 224 or to the removal of any auditor or auditors under sub-

section (7) of that section, as they apply in relation to a resolution that a retiring auditor shall not be re-appointed.

Qualifications and disqualifications of auditors.

226.Qualifications and disqualifications of auditors. (1) A person shall not be qualified for appointment as auditor of a company unless he is a chartered accountant within the meaning of the Chartered Accountants Act, 1949 (48 of 1949) : Provided that a firm whereof all the partners practising in India are qualified for appointment as aforesaid may be appointed by its ----------------------------------------------------------------------- 1. Subs. by Act 31 of 1988, s.67 (w.e.f. 31-5-1991). ----------------------------------------------------------------------- 217 firm name to be auditor of a company, in which case any partner so practising may act in the name of the firm.

(2) (a) Notwithstanding anything contained in sub-section (1) but subject to the provisions of any rules made under clause (b), the holder of a certificate granted under a law in force in the whole or any portion of a Part B State immediately before the commencement of the Part B States (Laws) Act, 1951 (3 of 1951.) 1[or of the Jammu and Kashmir (Extension of Laws) Act, 1956, (62 of 1956.) as the case may be,] entitling him to act as an auditor of companies 2[in the territories which, immediately before the 1st November, 1956, were comprised in that State] or any portion thereof, shall be entitled to be appointed to act as an auditor of companies registered anywhere in 3[India]. (b) The Central Government may, by notification in the Official Gazette, make rules providing for the grant, renewal, suspension or cancellation of auditors' certificates to persons in 4[the territories which, immediately before the 1st November, 1956, were comprised in Part- B States] for the purposes of clause (a), and prescribing conditions and restrictions for such grant, renewal, suspension or cancellation.

(3) None of the following persons shall be qualified for appointment as auditor of a company- (a) a body corporate; (b) an officer or employee of the company ; (c) a person who is a partner, or who is in the employment, of an officer or employee of the company ; (d) a person who is indebted to the company for an amount exceeding one thousand rupees, or who, has given any guarantee or provided any security in connection with the indebtedness of any third person to the company for an amount exceeding one thousand rupees; (e) a person who is a director or member of a private company, or a partner of a firm, which is the managing agent or the secretaries and treasurers of the company; (f) a person who is a director or the holder of shares exceeding five per cent. in nominal value of the subscribed --------------------------------------------------------------------- 1 Ins. by Act 62 of 1956, s. 2 and Sch. (w.e.f. 1-11-1956). 2 Subs. by the A. O. (No. 3) 1956, for "in that State". 3 Subs. by Act 65 of 1960, s. 68, for " those territories". 4 Subs. by the A. O. (No. 3) 1956, for " Part B States". --------------------------------------------------------------------- 218 capital, of any body corporate which is the managing agent or the secretaries and treasurers, of the company: Provided that any shares held by such person as nominee or trustee for any third person and in which the holder has no beneficial interest shall be excluded in computing the percentage of shares held by him for the purpose of this clause. Explanation.-References in this sub-section to an officer or employee shall be construed as not including references to an auditor.

(4) A person shall also not be qualified for appointment as

auditor of a company if he is, by virtue of sub-section (3), disqualified for appointment as auditor of any other body corporate which is that company's subsidiary or holding company or a subsidiary of that company's holding company, or would be so disqualified if the body corporate were a company.

(5) If an auditor becomes subject, after his appointment, to any

of the disqualifications specified in subsections (3) and (4), he shall be deemed to have vacated his office as such.

Powers and duties of auditors.

227.Powers and duties of auditors. (1) Every auditor of a company shall have a right of access at all times to the books and accounts and vouchers of the company, whether kept at the head office of the company or elsewhere, and shall be entitled to require from the officers of the company such information and explanations as the auditor may think necessary for the performance of his duties as auditor.

1[(1A) Without prejudice to the provisions of sub-section (1), the auditor shall inquire- (a) whether loans and advances made by the company on the basis of security have been properly secured and whether the terms on which they have been made are not prejudicial to the interests of the company or its members ; (b) whether transactions of the company which are represented merely by book entries are not prejudicial to the interests of the company ; (c) where the company is not an investment company within the meaning of section 372 or a banking company, whether so much of the assets of the company as consist of shares, debentures and other securities have been sold at a price less than that at which they were purchased by the company; ----------------------------------------------------------------------- 1 Ins. by Act 31 of 1965, s. 21 (w.e.f. 15-10-1965). ----------------------------------------------------------------------- 219 (d) whether loans and advances made by the company have been shown as deposits; (e) whether personal expenses have been charged to revenue account ; (f) where it is stated in the books and papers of the company that any shares have been allotted for cash, whether cash has actually been received in respect of such allotment, and if no cash has actually been so received, whether the position as stated in the account books and the balance-sheet is correct, regular and not misleading.]

(2) The auditor shall make a report to the members of the company on the accounts examined by him, and on every balance sheet and profit and loss account and on every other document declared by this Act to be part of or annexed to the balance sheet or profit and loss account, which are laid before the company in general meeting during his tenure of office, and the report shall state whether, in his opinion and to the best of his information and according to the explanations given to him, the said accounts give the information required by this Act in the manner so required and give a true and fair view- (i) in the case of the balance sheet, of the state of the company's affairs as at the end of its financial year; and (ii) in the case of the profit and loss account, of the profit or loss for its financial year.

(3) The auditor's report shall also state- (a) whether he has obtained all the information and explanations which to the best of his knowledge and belief were necessary for the purposes of his audit; (b) whether, in his opinion, proper books of account as required by law have been kept by the company so far as appears from his examination of those books, and proper returns adequate for the purposes of his audit have been received from branches not visited by him; 1[(bb) whether the report on the accounts of any branch office audited under section 228 by a person other than the company's auditor has been forwarded to him as required by

clause (c) of sub-section (3) of that section and how he has dealt with the same in preparing the auditor's report; ---------------------------------------------------------------------- 1 Ins. by Act 65 of 1960, s. 69. ---------------------------------------------------------------------- 220 (c) whether the company's balance sheet and profit and loss account dealt with by the report are in agreement with the books of account and returns.

(4) Where any of the matters referred to in clauses (i) and (ii)

of sub-section (2) or in clauses (a), (b), I [(bb)] and (c) of sub-

section (3) is answered in the negative or with a qualification, the auditor's report shall state the reason' for the answer, 2[(4A) The Central Government may, by general or special order, direct. that, in the case, of such class or description of companies as may be specified in the order, the auditor's report shall also include a statement on such matters as may be specified therein: Provided that before making any such order the Central Government may consult the Institute of Chartered Accountants of India constituted under the Chartered Accountants Act, 1949, (38 of 1949) in regard to the class or description of companies and other ancillary matters proposed to be specified therein unless the Government decides that such consultation is not necessary or expedient in the circumstances of the case.]

3[(5) The accounts of a company shall not be deemed as not having been, and the auditor's report shall not state that those accounts have not been, properly drawn up on the ground merely that the company has not disclosed certain matters if- (a) those matters are such as the company is not required to disclose by virtue of any provisions contained in this or any other Act, and (b) those provisions are specified in the balance sheet and profit and loss account of the company.]

Audit of accounts of branch office of company.

228.Audit of accounts of branch office of company. (1) Where a company has a branch office, the accounts of that office shall, 4[be audited by the company's auditor appointed under section 224 or] by a person qualified for appointment as auditor of the company under section 226, or where the branch office is situate in a country outside India, either 5[by the company's auditor or a person qualified as aforesaid] or by an accountant duly qualified to act as an auditor of the accounts of the branch office in accordance with the laws of that country. ---------------------------------------------------------------------- 1 Ins. by Act 65 of 1960, s. 69. 2 Ins. by Act 31 of 1965, s. 21(W.e.f. 15-10-1965).

3 Subs. by Act 65 of 1960, s. 69, for sub-section (5). 4 Subs. by s. 70, ibid., for certain words. 5 Subs. by s. 70, ibid., for "by a person qualified as aforesaid". --------------------------------------------------------------------- 221

(2) Where the accounts of any branch office are 1[audited by a person other than the company's auditor] the company's auditor- (a) shall be entitled to visit the branch office, if he deems it necessary to do so for the performance of his duties as auditor, and (b) shall have a right of access at all times to the books and accounts and vouchers of the company maintained at the branch office: Provided that in the case of a banking company having a branch office outside India, it shall be sufficient if the auditor is allowed access to such copies of, and extracts from, the books and accounts of the branch as have been transmitted to the principal office of the company in India.

2[(3) (a) Where a company in general meeting decides to have the accounts of a branch office audited otherwise than by the company's auditor, the company in that meeting shall for the audit of those accounts appoint a person qualified for appointment as auditor of the company under section 226, or where the branch office is situate in a country outside India, a person who is either qualified as aforesaid or an accountant duly qualified to act as an auditor, of the accounts of the branch office in accordance with the laws of that country, or authorise the Board of directors to appoint such a person in consultation with the company's auditor; (b) the person so appointed (hereafter in this section referred to as the branch auditor) shall have the same powers and duties in respect of audit of the accounts of the branch office as the company's auditor has in respect of the same ; (c) the branch auditor shall prepare a report on the accounts of the branch office examined by him and forward the same to the company's auditor who shall in preparing the auditor's report, deal with the same in such manner as he considers necessary; (d) the branch auditor shall receive such remuneration and shall hold his appointment subject to such terms and conditions as may be fixed either by the company in general meeting or by the Board of directors if so authorised by the company in general meeting.

(4) Notwithstanding anything contained in the foregoing pro- visions of this section, the Central Government 3[may make rules ---------------------------------------------------------------------- 1 Subs. by Act 65 of 1960, s. 70, for "not so audited". 2 Ins. by s 70, ibid. 3 Subs. by Act 31 of 1965, S. 22, for "may, by rules made in this behalf, exempt" (w.e.f. 15-10-1965). ----------------------------------------------------------------------- 222 providing for the exemption of) any branch office from the provisions of this section to the extent specified in the rules and in making such rules the Central Government shall have regard to all or any of the following matters, namely :- (a) the arrangement made by the company for the audit of accounts of the branch office by a person otherwise qualified for appointment as branch auditor even though such person may be an officer or employee of the company; (b) the nature and quantum of activity carried on at the branch office during a period of three years immediately preceding the date on which the branch office is exempted from the provisions of this section ; (c) the availability at a reasonable cost of a branch auditor for the audit of accounts of the branch office; (d) any other matter which in the opinion of the Central Government justifies the grant of exemption to the branch office from the provisions of this section.]

Signature of audit report, etc. 229. Signature of audit report, etc. Only the person appointed as auditor of the company, or where a firm is so appointed in pursuance

of the proviso to sub-section (1) of section 226, only a partner in the firm practising in India, may sign the auditor's report, or sign or authenticate any other document of the company required by law to be signed or authenticated by the auditor.

Reading and inspection of auditor's report. 230.Reading and inspection of auditor's report. The auditor's report shall be read before the company in general meeting and shall be open to inspection by any member of the company.

Right of auditor to attend general meeting. 231.Right of auditor to attend general meeting. All notices of, and other communications relating to, any general meeting of a company which any member of the company is entitled to have sent to him shall also be forwarded to the auditor of the company; and the auditor shall be entitled to attend any general meeting and to be heard at any general meeting which he attends on any part of the business which concerns him as auditor.

Penalty for non-compliance with sections 225 to 231. 232.Penalty for non-compliance with sections 225 to 231. If default is made by a company in complying with any of the provisions contained in sections 225 to 231, the company, and every officer of the company who is in default, shall be punishable with fine which may extend to five hundred rupees. 223

Penalty for non-compliance by auditor with sections 227 and 229. 233. Penalty for non-compliance by auditor with sections 227 and 229. If any auditor's report is made, or any document of the company is signed or authenticated, otherwise than in conformity with the requirements of sections 227 and 229, the auditor concerned, and the person, if any, other than the auditor who signs the report or signs or authenticates the document, shall, if the default is wilful, be punishable with fine which may extend to one thousand rupees. 233A Power of Central Government to direct special audit in certain cases. 1[233A.Power of Central Government to direct special audit

in certain cases. (1) Where the Central Government is of the opinion- (a) that the affairs of any company are not being managed in accordance with sound business principles or prudent commercial practices; or (b) that any company is being managed in a manner likely to cause serious injury or damage to the interests of the trade, industry or business to which it pertains; or (c) that the financial position of any company is such as to endanger its solvency; the Central Government may at any time by order direct that a special audit of the company's accounts for such period or periods as may be specified in the order, shall be conducted and may by the same or a different order appoint either a chartered accountant as defined in

clause (b) of sub-section (1) of section 2 of the Chartered Accountants Act. 1949 ( 38 of 1949.) (whether or not such chartered accountant is a chartered accountant in practice within the meaning of that Act), or the company's auditor himself to conduct such special audit.

(2) The chartered accountant or the company's auditor appointed

under sub-section (1) to conduct a special audit as aforesaid is here- after in this section referred to as the special auditor.

(3) The special auditor shall have the same powers and duties in relation to the special audit as an auditor of a company has under section 227 : Provided that the special. auditor shall, instead of making his report to the members of the company, make the same to the Central Government.

(4) The report of the special auditor shall, as far as may be, include all the matters required to be included in an auditor's report under section 227 and, if the Central Government so directs, shall --------------------------------------------------------------------- 1 Ins. by Act 65 of 1960, s. 71. -------------------------------------------------------------------- 224 also include a statement on any other matter which may be referred to him by that Government.

(5) The Central Government may by order direct any person specified in the order to furnish to the special auditor within such time as may be specified therein such information or additional in- formation as may be required by the special auditor in connection with the special audit; and on failure to comply with such order such person shall be punishable with fine which may extend to five hundred rupees.

(6) On receipt of the report of the special auditor, the Central Government may take such action on the report as it considers necessary in accordance with the provisions of this Act or any other law for the time being in force : Provided that if the Central Government does not take any action on the report within four months from the date of its receipt, that Government shall send to the company either a copy of, or relevant extract from, the report with its comments thereon and require the company either to circulate that copy or those extracts to the members or to have such copy or extracts read before the company at its next general meeting.

(7) The expenses of, and incidental to, any special audit under this section (including the remuneration of the special auditor) shall be determined by the Central Government (which determination shall be final) and paid by the company and in, default of such payment shall be recoverable from the company as an arrear of land revenue.] 233B Audit of cost accounts in certain cases.

1[233B. Audit of cost accounts in certain cases. (1) Where in the opinion of the Central Government it is necessary so to do in relation

to any company required under clause (d) of sub-section (1) of section 209 to include in its books of account the particulars referred to therein, the Central Government may, by order, direct that an audit of cost accounts of the company shall be conducted in such manner as may be specified in the order by an auditor 2[who shall be a cost accountant within the meaning of the Cost and Works Accountants Act, 1959(23 of 1959): Provided that if the Central Government is of opinion that sufficient number of cost accountants within the meaning of the Cost ---------------------------------------------------------------------- 1 Ins. by Act 31 of 1965, s. 23 (w.e.f. 15-1965). 2 Subs. by Act 41 of 1974, s. 25, for certain words (w.e.f. 1-2- 1975). ---------------------------------------------------------------------- 225 and Works Accountants Act, 1959 (23 of 1959), are not available for conducting the audit of the cost accounts, of companies generally, that Government may, by notification in the Official Gazette, direct that, for such period as may be specified in the said notification, such Chartered Accountant within the meaning of the Chartered Accountants Act, 1949 (13 of 1949), as possesses the prescribed qualifications, may also conduct the audit of the cost accounts of companies, and thereupon a Chartered Accountant possessing the prescribed qualifications may be appointed to audit the cost accounts of the company.]

1[(2) The auditor under this section shall be appointed by the Board of directors of the company in accordance with the provisions of sub-section (1B) of section 224 and with the previous approval of the Central Government: Provided that before the appointment of any auditor is made by the Board, a written certificate shall be obtained by the Board from the auditor proposed to be so appointed to the effect that the appointment, if made, will be in accordance with the provisions of sub-section (1B) of section 224.]

(3) An audit conducted by an auditor under this section shall be in addition to an audit conducted by an auditor appointed under section 224.

(4) An auditor shall have the same powers and duties in relation to an audit conducted by him under this section as an auditor of a

company has under sub-section (1) of section 227 and such auditor shall make his report to the 2[Central Government] in such form and within such time as may be prescribed and shall also at the same time forward a copy of the report to the company.]

3[(5) (a) A person referred to in sub-section (3) or sub-section

(4) of section 226 shall not be appointed or re-appointed for con- ducting the audit of the cost accounts of a company. (b) A person appointed, under section 224, as an auditor of a company, shall not be appointed or re-appointed for conducting the audit of the cost accounts of that company. (c) If a person, appointed for conducting the audit of cost accounts of a company, becomes subject, after his appointment, to any of the disqualifications specified in clause (a) or clause (b) of this sub-section, he shall, on and from the date on which he becomes so subject, cease to conduct the audit of the cost accounts of the company.

(6) Upon receipt of an order under sub-section (1), it shall be the duty of the company to give all facilities and assistance to the ---------------------------------------------------------------------- 1 Subs. by Act 31 of 1988, S.35 (w.e.f. 15-6-1988). 2 Subs. by Act 41 of 1974, s.25 for "Company Law Board" (w.e.f. 1-2- 1975). 3 Ins. by s. 25, ibid. (w.e.f. 1-2-1975) ---------------------------------------------------------------------- 226 person appointed for conducting the audit of the cost accounts of the company.

(7) The company shall, within thirty days from the date of

receipt of a copy of the report referred to in sub-section (4), furnish the Central Government with full information and explanations or every reservation or qualification contained in such report.

(8) If, after considering the report referred to in sub-section

(4) and the information and explanations furnished by the company

under sub-section (7), the Central Government is of opinion that any further information or explanation is necessary, that Government may call for such further information and explanation and thereupon the company shall furnish the same within such time as may be specified by that Government.

(9) On receipt of the report referred to in sub-section (4) and the informations and explanations furnished by the company under sub-

section (7) and sub-section (8), the Central Government may take such action on the report, in accordance with the provisions of this Act or any other law for the time being in force, as it may consider necessary.

(10) The Central Government may direct the company whose cost accounts have been audited under this section to circulate to its members, along with the notice of the annual general meeting to be held for the first time after the submission of such report, the whole or such portion of the said report as it may specify in this behalf.

(11) If default is made in complying with the provisions of this section, the company shall be liable to be punished with fine which may extend to five thousand rupees, and every officer of the company who is in default, shall be liable to be punished with imprisonment for a term which may extend to three years, or with fine which may extend to five thousand rupees, or with both.] Power of Registrar to call for information, etc.

Power of Registrar to call for information or explanation. 234.Power of Registrar to call for information or explanation.

(1) Where, on perusing any document which a company is required to submit to him under this Act, the Registrar is of opinion that any information or explanation is necessary 1[with respect to ,any matter to which such document] purports to relate, he may, by a written order, call on the company submitting the document to ----------------------------------------------------------------------- 1 Subs. by Act 65 of 1960, s. 72, for certain words. ----------------------------------------------------------------------- 226A furnish in writing such information or explanation, within such time as he may specify in the order.

(2) On receipt by the company of an order under sub-section (1), it shall be the duty of the company, and of all persons who are officers of the company, to furnish such information or explanation to the best of their power.

(3) On receipt of a copy of an order under sub-section (1), it shall also be the duty of every person who has been an officer of the company to furnish such information or explanation to the best of his power. 1[(3A) If no information or explanation is furnished within the time specified or if the information or explanation furnished is, in the opinion of the Registrar, inadequate, the Registrar may by another written order call on the company to produce before him for his inspection such books and papers as he considers necessary within such time as he may specify in the order; and it shall be the duty of the company, and of all persons who are officers of the company, to produce such books and papers.]

(4) If the company, or any such person as is referred to in,

sub-section (2) or (3), refuses or neglects to furnish any such information or explanation 1[or if the company or any such person as is referred to in sub-section (3A) refuses or neglects to produce any such books and papers],- 2[(a) the company and each such person shall be punishable with fine which may extend to five hundred rupees and in the case of a continuing offence, with an additional fine which may extend to fifty rupees for every day after the first during which the offence continues; and (b) the Court trying the offence may, on application of the Registrar and after notice to the company, make an order on the company for production before the Registrar of such books and papers as in the opinion of the Court, may reasonably be required by the Registrar for the purpose referred to in sub-

section (1).] ---------------------------------------------------------------------- 1 Ins. by Act 65 of 1960, s. 72. 2 Subs. by s. 72, ibid., for cls. (a) and (b). ---------------------------------------------------------------------- 226B

1[(5) On receipt of any writing containing the information or

explanation referred to in sub-section (1), or of any book or paper produced whether in pursuance of an order of the Registrar under sub-

section (3A) or of an order of the Court under sub-section (4), the Registrar may annex that writing, book or paper, or where that book or paper is required by the company, any copy or extract thereof, to the

document referred to in sub-section (1); and any writing or any book or paper or copy or extract thereof so annexed, shall be subject to the like provisions as to inspection, the taking of extracts and the furnishing of copies, as that document is subject.]

2[(6) If such information or explanation is not furnished within the specified time or if after perusal of such information or explana- tion or of the books and papers produced whether in pursuance of an order of the Registrar under sub-section (3A) or of an order of the

Court under sub-section (4), the Registrar is of opinion that the

document referred to in sub-section (1), together with such informa- tion or explanation or such books and papers discloses an unsatis- factory state of affairs or does not disclose a full and fair statement of any matter to which the document purports to relate, the Registrar shall report in writing the circumstances of the case to the Central Government.]

(7) If it is represented to the Registrar on materials placed before him by any contributory or creditor or any other person interested that the business of a company is being carried on in fraud of its creditors or of persons dealing with the company or otherwise for a fraudulent or unlawful purpose, he may, after giving the company an opportunity of being heard, by a written order, call on the company to furnish in writing any information or explanation on matters specified in the order, within such time as he may specify therein;

and the provisions of sub-sections (2), (3), 3[(3A)], (4) and (6) of this section shall apply to such order. If upon inquiry the Registrar is satisfied that any representation on which he took action under this sub-section was frivolous or vexatious, he shall disclose the identity of his informant to the company. ----------------------------------------------------------------------

1 Subs. by Act 65 of 1960, s. 72, for sub-section (5).

2 Subs. by s. 72, ibid., for sub-section (6). 3 Ins. by s. 72, ibid ---------------------------------------------------------------------- 226C

(8) The provisions of this section shall apply mutatis mutandis to documents which a liquidator, or a foreign company within the meaning of section 591, is required to file under this Act. 234A Seizure of documents by Registrar.

1[234A. Seizure of documents by Registrar. (1) Where, upon information in his possession or other wise, the Registrar has reasonable ground to believe that books and papers of, or relating to, any company or other body corporate, or any managing agent or secretaries and treasurers or managing director or manager of such company or other body corporate, or any associate of such managing agent or secretaries and treasurers, may be destroyed, mutilated, altered, falsified or secreted, the Registrar may make an application 2* * * to the Magistrate of the First Class or, as the case may be, the Presidency Magistrate having jurisdiction for an order for the seizure of such books and papers.

(2) After considering the application and hearing the Registrar, if necessary, the 3[Magistrate] may, by order, authorise the Regis- trar- (a) to enter, with such assistance as may be required, the place or places where such books and papers are kept; (b) to search that place or those places in the manner specified in the order; and (c) to seize such books and papers as he considers necessary.

(3) The Registrar shall return the books and papers seized under this section as soon as may be, and in any case not later than the thirtieth day, after such seizure, to the company or the other body corporate or, as the case may be, to the managing agent or the secre- taries and treasurers or the associate of such managing agent or secretaries and treasurers or the managing director or the manager or any other person, from whose custody or power they were seized and inform the 3[Magistrate] of such return: Provided that the Registrar may, before returning such books and papers as aforesaid, take copies of, or extracts from the 4[or place identification marks on them or any part thereof] or deal with the same in such other manner as he considers necessary. ---------------------------------------------------------------------- 1 Ins. by Act 65 of 1960, s. 73. 2 The words "to the Tribunal or" omitted by Act 17 of 1967, s. 4 and Sch. (w.e.f. 1-7-1967). 3 Subs. by s. 4 and Sch., ibid., for "Tribunal or Magistrate, as the case may be," (w.e.f. 1-7-1967). 4 Ins. by Act 31 of 1965, s. 24 (w.e.f. 15-10-1965). ---------------------------------------------------------------------- 226D

(4) Save as otherwise provided in this section, every search 1[or seizure] made under this section shall be carried out in accordance with the provisions of the Code of Criminal Procedure, 1898 (5 of 1898), relating to searches 1[or seizures] made under that Code.] Investigation

Investigation of the affairs of a company.

2[235.Investigation of the affairs of a company. (1) The Central Government may, where a report has been made by the Registrar under

sub-section (6) of section 234, or under sub-section (7) of that

section, read with sub-section (6) thereof, appoint one or more competent persons as inspectors to investigate the affairs of a company and to report thereon in such manner as the Central Government may direct.

(2) Where- (a) in the case of a company having a share capital, an ap- plication has been received from not less than two hundred members or from members holding not less than one-tenth of the total voting power therein, and (b) in the case of a company having no share capital, an application has been received from not less than one-fifth of persons on the company's register of members, the Company Law Board may, after giving the parties an opportunity of being heard, by order, declare that the affairs of the company ought to be investigated by an inspector or inspectors, and on such a declaration being made, the Central Government shall appoint one or more competent persons as inspectors to investigate the affairs of the company and to report thereon in such manner as the Central Government may direct.] --------------------------------------------------------------------- 1 Ins. by Act 31 of 1965, s. 24 (w.e.f 15-10. 1965). 2 Subs. by Act 31 of 1988, s. 36 (w.e.f. 31-5-1991). --------------------------------------------------------------------- 227

Application by members to be supported by evidence and power to callfor security. 236.Application by members to be supported by evidence and power to call for security. An application by members of a company 1[under

sub-section (2) of section 235] shall be supported by such evidence as the 1[Company Law Board may require] for the purpose of showing that the applicants have good reason for requiring the investigation; and the Central Government may, before appointing an inspector, require the applicants to give security, for such amount not exceeding one thousand rupees as it may think fit, for payment of the costs of the investigation.

Investigation of company's affairs in other cases. 237.Investigation of company's affairs in other cases. Without prejudice to its powers under section 235, the Central Government- (a) shall appoint one or more competent persons as inspectors to investigate the affairs of a company and to report thereon in such manner as the Central Government may direct, if- (i) the company, by special resolution; or (ii) the Court, by order, declares that the affairs of the company ought to be investigated by an inspector appointed by the Central Government; and (b) may do so if, in the opinion of the 2[Company Law Board] there are circumstances suggesting-- (i)that the business of the company is being conducted with intent to defraud its creditors, members or any other persons, or otherwise for a fraudulent or unlawful purpose, or in a manner oppressive of any of its members, or that the company was formed for any fraudulent or unlawful purpose; (ii)that persons concerned in the formation of the company or the management of its affairs have in connection therewith been guilty of fraud, misfeasance or other misconduct towards the company or towards any of its members; or --------------------------------------------------------------------- 1 Subs. by Act 31 of 1988, s.37 (w.e.f. 31.5.1991). 2 Subs. by s. 38, ibid. (w.e.f. 31.5.1991) ---------------------------------------------------------------------- 228 (iii)that the members of the company have not been given all the information with respect to its affairs which they might reasonably expect, including information relating to the calculation of the commission payable to a managing or other director, 1* * * or the manager, of the company.

Firm body corporate or association not to be appointed as inspector. 238.Firm body corporate or association not to be appointed as inspector. No firm, body corporate or other association shall be appointed as an inspector under section 235 or 237.

Power of inspectors to carry investigation into affairs of relatedcompanies or of managing agent or associate, etc. 2[239.Power of inspectors to carry investigation into affairs of

related companies or of managing agent or associate, etc. (1) If an inspector appointed under section 235 or 237 to investigate the affairs of a company thinks it necessary for the purposes of his investigation to investigate also the affairs of- (a) any other body corporate which is, or has at any relevant time been the company's subsidiary or holding company, or a subsidiary of its holding company, or a holding company of its subsidiary; (b) any other body corporate which is, or has at any relevant time been, managed- (i)by any person as managing agent or as secretaries and treasurers or as managing director or as manager, who is, or was at the relevant time, either the managing agent or the secretaries and treasurers or the managing director or the manager of the company; or (ii)by any person who is, or was at the relevant time, an associate of the managing agent, or secretaries and treasurers of the company ; or (iii) by any person of whom the managing agent or secretaries and treasurers of the company is, or was at the relevant time, an associate; (c) any other body corporate which is, or has at any relevant time been, managed by the company or whose Board of directors comprises of nominees of the company or is accustomed to act in accordance with the directions or instructions of- (i) the company, or (ii) any of the directors of the company, or --------------------------------------------------------------------- 1 Omitted by Act 31 of 1988, S. 38 (w.e.f. 31.5.1991). 2 Subs. by Act 65 of 1960, s. 74 for s. 239. --------------------------------------------------------------------- 229 (iii)any company any of whose directorships is held by the employees or nominees of those having the control and management of the first-mentioned company ; or (d) any person who is or has at any relevant time been the company's managing agent or secretaries and treasurers or managing director or manager or an associate of such managing agent or secretaries and treasurers,

the inspector shall, subject to the provisions of sub-section (2), have power so to do and shall report on the affairs of the other body corporate or of the managing agent, secretaries and treasurers, managing director, manager or associate of the managing agent or secretaries and treasurers, so far as he thinks that the results of his investigation thereof are relevant to the investigation of the affairs of the first-mentioned company.

(2) In the case of any body corporate or person referred to in

clause (b) (ii), (b) (iii), (c) or (d) of sub-section (1), the inspector shall not exercise his power of investigating into, and reporting on, its or his affairs without first having obtained the prior approval of the Central Government thereto: Provided that before according approval under this sub-section, the Central Government shall give the body corporate or person a reasonable opportunity to show cause why such approval should not be accorded.]

Production of documents and evidence.

240.Production of documents and evidence. (1) It shall be the duty of 1[all officers and other employees] and agents of the company, and where the company is or was managed by a managing agent or secretaries and treasurers, of 1[all officers and other employees] and agents of the managing agent or secretaries and treasurers, and where the affairs of any other body corporate, or of a managing agent or secretaries and treasurers, or of- an associate of a managing agent or secretaries and treasurers, are investigated by virtue of section 239, of 1[all officers and other employees] and agents of such body corporate, managing agent, secretaries and treasurers, or associate, and where such managing agent, secretaries and treasurers or associate is or was a firm, of all partners in the firm- (a) 2[to preserve and to produce to an inspector or any person authorised by him in this behalf with the previous ---------------------------------------------------------------------- 1 Subs. by Act 65 of 1960, s. 75, for "all officers" 2 Subs. by Act 31 of 1965, s. 25, for "to produce to an inspector" (w.e.f. 15-10-1965). ------------------------------------------------------------------------ 230 approval of the Central Government,] all books and papers of, or relating to, the company or, as the case may be, of or relating to the other body corporate, managing agent, secretaries and treasurers or associate, which are in their custody or power; and (b) otherwise to give to the inspector all assistance in connection with the investigation which they are reasonably able to give. 1[(1A) The inspector may, with the previous approval of the Central Government, require any body corporate [other than a body

corporate referred to in sub-section (1)] to furnish such information to, or produce such books and papers before, him or any person autho- rised by him in this behalf 2 [with the previous approval of that Government] as he may consider necessary if the furnishing of such information or the production of such books and papers is relevant or necessary for the purposes of his investigation. (1B) The inspector may keep in his custody any books and papers

produced under sub-section (1) or sub-section (lA) for six months and thereafter shall return the same to the company, body corporate, firm or individual by whom or on whose behalf the books and papers are produced: Provided that the inspector may call for the books and papers if they are needed again: Provided further that if certified copies of the books and papers produced under sub-section (lA) are furnished to the inspector, he shall return those books and papers to the body corporate concerned.]

3[(2) An inspector may examine on oath-

(a) any of the persons referred to in sub-section (1) ; and (b) with the previous approval of the Central Government, any other person, in relation to the affairs of the company, other body corporate, managing agent, secretaries and treasurers or associate, as the case may be; and may administer an oath accordingly and for that purpose may require any of those persons to appear before him personally. ------------------------------------------------------------------------ 1 Ins. by Act 31 of 1965, s. 25 (w.e.f. 15-10-1965). 2 Ins. by Act 34 of 1966, s. 2 (w.e.f. 1-4-1966).

3 Subs. by Act 31 of 1965, s. 25, for sub-sections (2), (3), (3A)

and (4) (w.e.f 15-10-1965). ------------------------------------------------------------------------ 231

(3) If any person fails without reasonable cause or refuses- (a) to produce to an inspector or any person authorised by him in this behalf with the previous approval of the Central Government any book or paper which it is his duty under sub-

section (1) or sub-section (1A) to produce ; or (b) to furnish any information which it is his duty under sub-section (1A) to furnish ; or (c) to appear before the inspector personally when required

to do so under sub-section (2) or to answer any question which is put to him by the inspector in pursuance of that sub-section ; or (d) to sign the notes of any examination referred to in

sub-section (5), he shall be punishable with imprisonment for a term which may extend to six months, or with fine which may extend to two thousand rupees, or with both, and also with a further fine which may extend to two hundred rupees for every day after the first during which the failure or refusal continues.] 1 * * * * *

(5) Notes of any examination under sub-section (2) 2* * * shall be taken down in writing and shall be read over to or by, and signed by, the person examined, and may thereafter be used in evidence against him.

(6) In this section- (a) the expression "officers ", in relation to any company or body corporate, includes any trustee for the debenture holders of such company or body corporate; (b) the expression " agent ", in relation to any company, body corporate or person, means any one acting or purporting to act for or on behalf of such company, body corporate or person, and includes the bankers and legal advisers of, and persons employed as auditors by, such company, body corporates or person ; and (c) any referenceto 3[officers and other employees], agents or partners shall be construed as a reference to past as well as present 3[officers and other employees], agents or partners, as the case may be. ---------------------------------------------------------------------

1 Omitted as a result of substitution of sub-sections (2),(3),

(3A) and (4) by Act 31 of 1965, s.25 (w.e.f. 15-10-1965).

2 The word, brackets and figure "or (4)" omitted by s.25, ibid (w.e.f. 15-10-1965). 3 Subs. by Act 65 of 1960, s. 75, for " officers" ---------------------------------------------------------------------- 232 240A Seizure of documents by inspector.

1[240A. Seizure of documents by inspector. (1) Where in the course of investigation under section 235 or section 237 or section 239 or section 247, the inspector has reasonable ground to believe that the books and papers of, or relating to, any company or other body corporate or any managing agent or secretaries and treasurers or managing director or manager of such company or other body corporate, or any associate of such managing agent or secretaries and treasurers may be destroyed, mutilated, altered, falsified or secreted, the inspector may make an application 2* * * to the Magistrate of the First Class or, as the case may be, the Presidency Magistrate, having jurisdiction for an order for the seizure of such books and papers.

(2) After considering the application and hearing the inspector, if necessary, the 3[Magistrate] may by order authorise the inspector-- (a) to enter, with such assistance, as may be required, the place or places where such books and papers are kept ; (b) to search that place or those places in the manner specified in the order ; and (c) to seize books and papers he considers necessary for the purposes of his investigation.

(3) The inspector shall keep in his custody the books and papers seized under this section for such period not later than the conclu- sion of the investigation as he considers necessary and thereafter shall return the same to the company or the other body corporate, or, as the case may be, to the managing agent, or the secretaries and treasurers or the associate of such managing agent or secretaries and treasurers or the managing director or the manager or any other person, from whose custody or power they were seized and inform the 3[Magistrate] of such return: 4[Provided that the inspector may, before returning such books and papers as aforesaid, place identification marks on them or any part thereof.]

(4) Save as otherwise provided in this section, every search 4[or seizure] made under this section shall be carried out in accordance with the provisions of the Code of Criminal Procedure, 1898(5 of 1898), relating to searches 4[or seizures] made under that Code.] ---------------------------------------------------------------------- 1 Ins. by Act 65 of 1960, s. 76. 2 The words " to the Tribunal or " omitted by Act 17 of 1967, s. 4 and Sch. (w.e.f. 1-7-1967). 3 Subs. by s. 4 and Sch., ibid., for " Tribunal or Magistrate, as the case may be," (w.e.f. 1-7-1967). 4 Ins. by Act 31 of 1965, s. 26 (w.e.f. 15-10-1965). ----------------------------------------------------------------------- 232A

Inspectors' report.

241.Inspectors' report. (1) The inspectors may, and if so directed by the Central Government shall, make interim reports to that Government, and on the conclusion of the investigation, shall make a final report to the Central Government. Any such report shall be written or printed, as the Central Gov- ernment may direct. 233

(2) The Central Government- (a) shall forward a copy of any report 1[(other than an interim report)] made by the inspectors to the company at its registered office, and also to any body corporate, managing agent, secretaries and treasurers or associate dealt with in the report by virtue of section 239; (b) may, if it thinks fit, furnish a copy thereof, on request and on payment of the prescribed fee, to any person- (i)who is a member of the company or other body corporate (including a managing agent, secretaries and treasurers, or an associate of a managing agent or secretaries and treasurers, where such managing agent, secretaries and treasurers or associate is a body cor- porate) dealt with in the report by virtue of section 239 ; (ii)who is a partner in the firm, where such managing agent, secretaries and treasurers or associate is a firm; or (iii)whose interests as a creditor of the company, other body corporate, managing agent, secretaries and treasurers or associate aforesaid appear to the Central Government to be affected; (c) shall, where the inspectors are appointed 2[in

pursuance of the provisions of sub-section (2)] of section 235, furnish, at the request of the applicants for the investigation, a copy of the report to them; (d) shall, where the inspectors are appointed under section 237 in pursuance of an order of the Court, furnish a copy of the report to the Court 3 * * *; 4[(dd) shall where the inspectors are appointed in pursuance

of the provisions of sub-section (2) of section 235, furnish a copy of the report to the Company Law Board; and] (e) may also cause the report to be published.

Prosecution.

242.Prosecution. (1) If, from any report made under section 241, it appears to the Central Government that any person has, in relation to the company or in relation to any other body corporate, managing agent, secretaries and treasurers or associate of a managing agent or secretaries and treasurers, whose affairs have been investigated by virtue of section 239, been guilty of any offence for which he is criminally liable, the Central Government may, after taking such legal advice as it thinks fit, prosecute such person for the offence ; and it shall be the duty of 5[all offices and other employees] and agents of the ------------------------------------------------------------------ 1 Ins. by Act 31 of 1965, S. 27 (w.e.f. 15-10-1965). 2 Subs. by Act 31 of 1988, s.39 (w.e.f. 31-5-1991). 3 Omitted by s.39, ibid (w.e.f. 31-5-1991). 4 Ins. by s.39, ibid (w.e.f. 31-5-1991). 5 Subs. by Act 65 of 1960, 77, for " all officers". --------------------------------------------------------------------- 234 company, body corporate, managing agent, secretaries and treasurers, or associate, as the case may be (other than the accused in the pro- ceedings), to give the Central Government all assistance in connec- tion with the prosecution which they are reasonably able to give.

(2) Sub-section (6) of section 240 shall apply for the purposes of this section, as it applies for the purposes of that section.

Application for winding up of company or an order under section 397 or398. 243.Application for winding up of company or an order under section 397 or 298. If any such company or other body corporate, or any such managing agent, secretaries and treasurers, or associate, being a body corporate, is liable to be wound up under this Act and it appears to the Central Government from any such report as aforesaid that it is expedient so to do by reason of any such circumstances as are referred to in sub-clause (i) or (ii) of clause (b) of section 237, the Central Government may, unless the company, body corporate, managing agent, secretaries and treasurers or associate is already being wound up by the Court, cause to be presented to the Court by any person authorised by the Central Government in this behalf- (a) a petition for the winding up of the company, body corporate, managing agent, secretaries and treasurers, or associate, on the ground that it is just and equitable that it should be wound up; (b) an application for an order under section 397 or 398 ; or (c) both a petition and an application as aforesaid.

Proceedings for recovery of damages or property.

244.Proceedings for recovery of damages or property. (1) If from any such report as aforesaid, it appears to the Central Government that proceedings ought, in the public interest, to be brought by the company or any body corporate whose affairs have been investigated in pursuance of clause (a), (b) or (c) of section 239,- (a) for the recovery of damages in respect of any fraud, misfeasance or other misconduct in connection with the pro- motion or formation, or the management of the affairs, of such company or body corporate; or (b) for the recovery of any property of such company, or body corporate, which has been misapplied or wrongfully retained ; the Central Government may itself bring proceedings for that purpose in the name of such company or body corporate.

(2) The Central Government shall indemnify such company or body corporate against any costs or express incurred by it in, or in 235

connection with, any proceedings brought by virtue of sub-section (1).

Expenses of investigation.

245.Expenses of investigation. (1) The expenses of and incidental to an investigation by an inspector appointed by the Central Government under section 235 or 237 shall be defrayed in the first instance by the Central Government; but the following persons shall, to the extent mentioned below, be liable to reimburse the Central Government in respect of such expenses:- (a) any person who is convicted on a prosecution instituted in pursuance of section 242, or who is ordered to pay damages or restore any property in proceedings brought by virtue of section 244, may, in the same proceedings, be ordered to pay the said expenses to such extent as may be specified by the Court convicting such person, or ordering him to pay such damages or restore such property, as the case may be ; (b) any company or body corporate in whose name proceedings are brought as aforesaid shall be liable, to the extent of the amount or value of any sums or property recovered by it as a result of the proceedings ; and (c) unless, as a result of the investigation, a prosecution is instituted in pursuance of section 242,- 1[(i) any company, body corporate, managing agent, secretaries and treasurers, associate, managing director or manager dealt with by the report of the inspector shall be liable to reimburse the Central Government in respect of the whole of the expenses, unless and except in so far as, the Central Government otherwise directs ; and] (ii) the applicants for the investigation, where the inspector was appointed 2[in pursuance of the provisions

of sub-section (2) ] of section 235, shall be liable to such extent, if any, as the Central Government may direct.

(2) Any amount for, which a company or body corporate is liable

by virtue of clause (b) of sub-section (1) shall be a first charge on the sums or property mentioned in that clause. ---------------------------------------------------------------------- 1 Subs. by Act 65 of 1960, s. 78, for sub-clause (i). 2 Subs. by Act 31 of 1988, s.40 (w.e.f. 31.5.1991). --------------------------------------------------------------------- 236

1[(3) The amount of expenses in respect of which any company, body corporate, managing agent, secretaries and treasurers, associate, managing director or manager is liable under sub-clause (i) of clause

(c) of sub-section (1) to reimburse the Central Government shall be recoverable from that company, body corporate, managing agent, secretaries and treasurers, associate, managing director or manager, as an arrear of land revenue.]

(4) For the purposes of this section, any costs or expenses incurred by the Central Government in or in connection with proceedings brought by virtue of section 244 (including expenses

incurred by virtue of sub-section (2) thereof) shall be treated as expenses of the investigation giving rise to the proceedings.

(5) (a) Any liability to reimburse the Central Government impos-

ed by clauses (a) and (b) of sub-section (1) shall, subject to satis- faction of the right of the Central Government to reimbursement, be a liability also to indemnify all persons against liability under clause (c) of that sub-section. (b) Any such liability imposed by the said clause (a) shall, subject as aforesaid, be a liability also to indemnify all persons against liability under the said clause (b). (c) Any person liable under the said clause (a) or (b) or sub-clause (i) or (ii) of the said clause (c) shall be entitled to contribution from any other persons liable under the same clause or sub-clause, as the case may be, according to the amount of their res- pective liabilities thereunder.

(6) In so far as the expenses to be defrayed by the Central Government under this section are not recovered thereunder, they shall be paid out of moneys provided by Parliament.

Inspectors' report to be evidence. 246.Inspectors' report to be evidence. A copy of any report of any inspector or inspectors appointed under section 235 or 237 authenticated in such manner, if any, as may be prescribed, shall be admissible in any legal proceeding as evidence of the opinion of the inspector or inspectors in relation to any matter contained in the report.

Investigation of ownership of company.

247. (1)Investigation of ownership of company. Where it appears to the- Central Government that there is good reason so to do, it may appoint one or more inspectors to investigate and report on the membership of any company and other -------------------------------------------------------------------

1 Subs. by Act 65 of 1960, s. 78, for sub-section (3). --------------------------------------------------------------------- 237 matters relating to the company, for the purpose of determining the true persons- (a) who are or have been financially interested in the success or failure, whether real or apparent, of the company; or (b) who are or have been able to control or materially to influence the policy of the company. 1 [(1A) Without prejudice to its powers under this section, the Central Government shall appoint one or more, inspectors under sub-

section (1), if the Company Law Board, in the course of any proceedings before it, declares by an order that the affairs of the company ought to be investigated as regards the membership of the company and other matters relating to the company, for the purpose of determining the true persons- (a) who are or have been financially interested in the success or failure, whether real or apparent, of the company; or (b) who are or have been able to control or materially to influence the policy of the company.]

(2) When appointing an inspector under sub-section (1), the Cent- ral Government may define the scope of his investigation, whether as respects the matter or the period to which it is to extend or otherwise, and in particular, may limit the investigation to matters connected with particular shares or debuntures.

(3)Subject to the terms of an inspector's appointment, his powers shall extend to the investigation of any circumstances suggesting the existence of any arrangement or understanding which, though hot legally binding, is or was observed or is likely to be observed in practice and which is relevant to the purposes of his investigation.

(4)Subject as aforesaid, the powers of the inspector shall also extend, where the company has or at any time had a managing agent or secretaries and treasurers,- (a) in case such managing agent or secretaries and treasurers are or were a body corporate, to the investigation of the ownership of the shares of such body corporate, and of who the persons are or were who control or, manage or controlled managed its affairs or; (b) in case such managing agent or secretaries and treasurers are or were a firm, to the investigation of who the persons are or were who control or manage or controlled or managed its affairs as partners in the firm or otherwise and of the respective interests therein of the partners; and (c)in all cases, to the investigation of who the persons are or were who are or were entitled to any share of, or any amount forming part of, the remuneration of such managing agent or secretaries and treasurers.

(5) For the purposes of any investigation under this section, sections 239, 240 and 241 shall apply with the necessary modifications of references to the affairs of the company or to those of any other ---------------------------------------------------------------------- 1 Ins. by Act 31 of 1988, s.41 (w.e.f. 31.5.1991). ----------------------------------------------------------------------- 238 body corporate or of any managing agent, secretaries and treasurers, or associate : Provided that the said sections shall apply in relation to all persons (including persons concerned only on behalf of others) who are or have been, or whom the inspector has reasonable cause to believe to be or to have been,- (i) financially interested in the success or failure, or the apparent success or failure, of the company, or of any other body corporate, managing agent, secretaries and treasurers or associate whose membership or constitution is investigated with that of the company; or (ii) able to control or materially to influence the policy of such company, body corporate, managing agent, secretaries and treasurers or associate; as they apply in relation to 1[officers and other employees and agents] of the company, of the other body corporate, or of the managing agent, secretaries and treasurers or associate, as the case may be : Provided further that the-Central Government shall not be bound to furnish the company or any other person with a copy of any report by an inspector appointed under this section or with a complete copy thereof, if it is of opinion that there is good reason for not divulging the contents of the report or of parts thereof ; but in such a case, the Central Government shall cause to be kept by the Registrar a copy of any such report, or as the case may be, of the parts thereof, as respects which it is not of that opinion.

(6) The expenses of any investigation under this section shall be defrayed by the Central Government out of money provided by Parliament, unless the Central Government directs that the expenses or any part thereof should be paid by the persons on whose application the investigation was ordered.

Information regarding persons having an interest in company or in bodycorporate or firm acting as managing agent thereof. 248 Information regarding persons having an interest in company

or in body corporate or firm acting as managing agent thereof. (1) 2 [Where it appears to the Central Government or to the Company Law Board in any proceedings before it] that there is good reason to investigate the ownership of any shares in or debentures of a company, or of a body corporate which acts or has acted as the managing agent or secretaries and treasures of a company, and that it is unnecessary to appoint an inspector for the purpose, 2 [the Central Government or the Company Law Board, as the case may be, may require] any person whom it has reasonable cause to believe- (a) to be, or to have been, interested in those shares or debentures; or ---------------------------------------------------------------------- 1 Subs. by Act 65 of 1960, s, 79, for " officers and agents". 2 Subs. by Act 31 of 1988, s. 42 (w.e.f. 31.5.1991). --------------------------------------------------------------------- 239 (b) to act, or to have acted, in relation to those shares or debentures, as the legal adviser or agent of someone interested therein ; 1 [to give the Central Government or the Company Law Board, as the case may be, ] any information which he has, or can reasonably be expected to obtain, as to the present and past interests in those shares or debentures, and the names and addresses of the persons interested and of any persons who act or have acted on their behalf in relation to the shares or debentures.

(2) For the purposes of sub-section (1), a person shall be deemed to have an interest in a share or debenture- (a) if he has any right to acquire or dispose of the share or debenture or any interest therein or to vote in respect thereof; (b) if his consent is necessary for the exercise of any of the rights of other persons interested therein ; or (c) if other persons interested therein can be required, or are accustomed, to exercise their rights in accordance with his directions or instructions.

(3) Where it appears to the Central Government that there is good reason to investigate the ownership of any interest in a firm which acts or has acted as managing agent or as secretaries and treasurers of any company, and that it is unnecessary to appoint an inspector for the purpose, the Central Government may require any person whom it has reasonable cause to believe- (a) to have, or to have had, any interest in the firm ; or (b) to act, or to have acted, in relation to any such interest, as the legal adviser or agent of someone interested therein ; to give the Central Government any information which he has, or can reasonably be expected to obtain, as to the present and past interests held in the firm, and the names and addresses of the persons interested and of any persons who act or have acted on their behalf in relation to any such interest.

(4) Any person- (a) who fails to give any information required of him under this section ; or (b) who, in giving any such information, makes any statement which he knows to be false in a material particular, --------------------------------------------------------------------- 1 Subs. by Act 31 of 1988, s. 42 (w.e.f. 31.5.1991). ----------------------------------------------------------------------- 240 or recklessly makes any statement which is false in a material particular ; shall be punishable with imprisonment for a term which may extend to six months, or with fine which may extend to five thousand rupees, or with both.

Investigation of associateship with managing agent, etc.

249.Investigation of associateship with managing agent, etc. (1) Where any question arises as to whether any body corporate, firm, or individual is or is not, or was or was not, an associate of the managing agent or secretaries and treasurers of a company and it appears to the Central Government that there is good reason to investigate such question, it may either- (a) appoint an inspector for the purpose of making the investigation; or (b) if it considers it unnecessary to appoint an inspector as aforesaid, require any person whom it has reasonable cause to believe to be in a position to give relevant information in regard to the question, to furnish the Central Government with information on such matters as may be specified by it.

(2) The provisions of section 247 shall apply mutatis mutandis

to cases falling under clause (a) of sub-section (1) and those of section 248 to cases falling under clause (b) of that sub-section.

Imposition of restrictions upon shares and debentures and prohibitionof transfer of shares or debentures in certain cases. [250.Imposition of restrictions upon shares and debentures and

prohibition of transfer of shares or debentures in certain cases. (1) 1[Where it appears to the Company Law Board, whether on a reference made to it by the Central Government in connection with any investigation under section 247, 248 or 249 or on a complaint made by any person in this behalf], that there is good reason to find out the relevant facts about any shares (whether issued or to be issued) and the 1[Company Law Board] is of the opinion that such facts cannot be

found out unless the restrictions specified in sub-section (2) are imposed the 1[Company Law Board] may, by order, direct that the shares

shall be subject to the restrictions imposed by sub-section (2) for such period not exceeding three years as may be specified in the order.

(2) So long as any shares are directed to be subject to the restrictions imposed by this sub-section- (a) any transfer of those shares shall be void; (b) where those shares are to be issued, they shall not be issued; and any issue thereof or any transfer of the right to be issued therewith, shall be void; ---------------------------------------------------------------------- 1 Subs. by Act 31 of 1988, s. 43 (w.e.f. 31.5.1991). ---------------------------------------------------------------------- 241 (c) no voting right shall be exercisable in respect of those shares ; (d) no further shares shall be issued in right of those shares or in pursuance of any offer made to the holder thereof ; and any issue of such shares or any transfer of the right to be issued therewith, shall be void; and (e) except in a liquidation, no payment shall be made of any sums due from the company on those shares, whether in respect of dividend, capital or otherwise.

1[(3) Where a transfer of shares in a company has taken place and as a result there of a change in the composition of the Board of directors of the company is likely to take place and the Company Law Board is of the opinion that any such change would. be prejudicial to the public interest, it may, by order, direct that- (a)the voting rights in respect of those shares shall not be exercisable for such period not exceeding three years as may be specified in the order; (b)no resolution passed or action taken to effect a change in the composition of the Board of directors before the date of the order shall have effect unless confirmed by the Company Law Board.

(4)Where the Company Law Board has reasonable ground to believe that a transfer of shares in a company is likely to take place whereby a change in the composition of the Board of directors of the company is likely to take place and the Company Law Board is of the- opinion that any such change would be prejudicial to the public interest, the Company Law Board may, by order, direct that any transfer of shares In the company during such period not exceeding three years as may be specified in the order, shall be void] -------------------------------------------------------------------- 1 Subs. by Act 31 of 1988, s. 43 (w.e.f. 31.5.1991). -------------------------------------------------------------------- 242

(5) The 1[Company Law Board] may, be order at any time, vary or

rescind any order made by it under sub-section (1) or sub-section (3)

or sub-section (4). 2* * * * *

(8), Any order made by the 1[Company Law Board] under sub-section

(5) shall be served on the company within fourteen days of the making of the order.

(9) Any person who- (a) exercises or purports to exercise any right to dispose of any shares or of any right to be issued with any such shares when to his knowledge he is not entitled to do so by reason of any of the said restrictions applicable to the case

section (2) ; or (b) votes in respect of any shares whether as holder or proxy, or appoints a proxy to vote in respect thereof, when to his knowledge entitled to do so by reason of any of the said restrictions applicable to the case under sub-

section (2) or by reason of any order made under sub-section

(3) ; or (c) transfers any shares in contravention of any order made

under sub-section (4) ; or (d) being the holder of any shares in respect of which an

order under sub-section (2) or sub-section (3) has been made, --------------------------------------------------------------------- 1 Subs. by Act 31 of 1988, s. 43 (w.e.f. 31.5.1991). 2 Omitted by s.43, ibid. --------------------------------------------------------------------- 243 fails to give notice of the fact of their being subject to any such order to any person whom he does not-know to be aware of that fact but whom. he knows to be otherwise entitled to vote in respect of those shares, whether as holder or as proxy, shall be punishable with imprisonment for a term which may extend to six months, or with fine which may extend to five thousand rupees, or with both.

(10)Where shares in any company are issued in contravention of such ofthe restrictions as may be applicable to the case under 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 thousand rupees.

(11) A prosecution shall not be instituted under this section except by, or with the consent of, the Central Government.

(12) This section shall apply in relation to debentures as it applies in relation to shares.] 250A Voluntary winding up of company, etc., not to stop investigation proc-eedings. 1[250A. Voluntary winding up of company, etc., not to stop investigation proceedings. An investigation may be initiated under section 235, 237, 239, 247. 248 or 249 notwithstanding that- (a) an application has been made for an order under section 397 or section 398 ; or (b) the company has passed a special resolution for voluntary winding up, and no investigation so initiated shall be stopped or suspended by reason only of the fact that an application referred to in clause (a) has been made or a special resolution referred to in clause (b) has been passed.]

Saving for legal advisers and bankers. 251. Saving for legal advisers and bankers. Nothing in sections 234 to 250 shall require the disclosure to 2[Company Law Board or to the Central Government or to the Registrar or to an inspector appointed by Central Government]- (a) by a legal adviser, of any privileged communication made to him in that capacity, except as respects the name and address of his client ; or (b) by the bankers of any company, body corporate, managing agent, secretaries and treasurers or other person, referred to in the sections aforesaid, as such bankers, of any ---------------------------------------------------------------------- 1 Ins. by Act 31 of 1965, s. 38 (w.e.f. 15.10.1965). 2 Subs. by Act 31 of 1988, s. 44 (w.e.f. 31.5.1991). ----------------------------------------------------------------------- 244 information as to the affairs of any of their customers other than such company, body corporate, managing agent, secretaries and treasurers or person. CHAP Constitution of Board of Directors CHAPTER II.-DIRECTORS Constitution of Board of Directors

Minimum number of directors.

252.Minimum number of directors. (1) Every 1[public company (other than a public company which has become such by virtue of section 43A)]2* * * shall have at least three directors.

(2) Every 3[other] company 4* * * shall have at least two directors.

(3) The directors of a company collectively are referred to in this Act as the " Board of directors " or " Board ".

Only individuals to be directors. 253 Only individuals to be directors. No body corporate, association or firm shall be appointed director of a 5 * * * com- pany, and only an individual shall be so appointed.

Subscribers of memorandum deemed to be directors. 254.Subscribers of memorandum deemed to be directors. In default of and subject to any regulations in the articles of a company, subscribers of the memorandum who are individuals, shall be deemed to be the directors of the company, until the directors are duly appointed in accordance with section 255.

Appointment of directors and proportion of those who are to retire byrotation. 255.Appointment of directors and proportion of those who are to

retire by rotation. (1) 6[Unless the articles provide for the retirement of all directors at every annual general meeting, not less than two-thirds] of the total number of directors of a public company, or of a private company which is a subsidiary of a public company, shall- (a) be persons whose period of office is liable to determination by retirement of directors by rotation; and (b) save as otherwise expressly provided in this Act, be appointed by the company in general meeting. ----------------------------------------------------------------------- 1 Subs. by Act 31 of 1965, s. 29, for "public company" (w.e.f. 15-10-1965). 2 The words " and every private company which is a subsidiary of a public company" omitted by Act 65 of 1960, s. 81. 3 Subs. by Act 31 of 1965, s. 29, for "private" (w.e.f. 15-10- 1965). 4 The words "which is not a subsidiary of a public company" omitted by Act 65 of 1960, s. 81. 5 The words " public or private " omitted by s. 82, ibid. 6 Subs. by s. 83, ibid., for "Not less than two-thirds". ------------------------------------------------------------------------ 245

(2) The remaining directors in the case of any such company, and the directors generally in the case of a private company which is not a subsidiary of a public company, shall, in default of and subject to any regulations in the articles of the company, also be appointed by the company in general meeting,

Ascertainment of directors retiring by rotation and filling ofvacancies. 256.Ascertainment of directors retiring by rotation and filling

of vacancies. (1) At the first annual general meeting of a public company, or a private company which is a subsidiary of a public company, held next after the date of the general meeting at which the first directors are appointed in accordance with section 255 and at every subsequent annual general meeting, one-third of such of the directors for the time being as are liable to retire by rotation, or if their number is not three or a multiple of three, then, the number nearest to one-third, shall retire from office.

(2) The directors to retire by rotation at every annual general meeting shall be those who have been longest in office since their last appointment, but as between persons who became directors on the same day, those who are to retire shall, in default of and subject to any agreement among themselves, be determined by lot.

(3) At the annual general meeting at which a director retires as aforesaid, the company may fill up the vacancy by appointing the retiring director or some other person thereto.

(4) (a) If the place of the retiring director is not so filled up and the meeting has not expressly resolved not to fill the vacancy, the meeting shall stand adjourned till the same day in the next week, at the same time and place, or if that day is a public holiday, till the next succeeding day which is not a public holiday, at the same time and place. (b) If at the adjourned meeting also, the place of the retiring director is not filled up and that meeting also has not expressly resolved not to fill the vacancy, the retiring director shall be deemed to have been reappointed at the adjourned meeting, unless- (i) at that meeting or at the previous meeting a resolution for the reappointment of such director has been put to the meeting and lost; (ii) the retiring director has, by a notice in writing addressed to the company. or its Board of directors, expressed his unwillingness to be so reappointed; (iii)he is not qualified or is disqualified for appointment; 246 (iv) a resolution, whether special or ordinary, is required for his appointment or re-appointment in virtue of any pro- visions of this Act ; or

(v) the proviso to sub-section (2) of section 263 1* * * is applicable to the case. 2* * * * 3 [Explanation.-In this section and in section 257, the expression " retiring director " means a director retiring by rotation.]

Right of persons other than retiring directors to stand fordirectorship. 257.Right of persons other than retiring directors to stand for

directorship. (1) A person who is not a retiring director shall, sub- ject to the provisions of this Act, be eligible for appointment to the office of director at any general meeting, if he or some member inte- nding to propose him, has not less than fourteen days before the meeting, left at the office of the company a notice in writing under his hand signifying his candidature for the office of director or the intention of such member to propose him as a candidate for that office, as the case may be 4[along with a deposit of five hundred rupees which shall be refunded to such person or, as the case may be, to such member, if the person succeeds in getting elected as a director. ] 5[(1A) The company shall inform its members of the candidature of a person for the office of director or the intention of a member to propose such person as a candidate for that office, by serving individual notices on the members not less than seven days before the meeting: Provided that it shall not be necessary for the company to serve individual notices upon the members as aforesaid if the company advertises such candidature or intention not less than seven days before the meeting in at least two newspapers circulating in the place where the registered office of the company is located, of which one is published in the English language and the other in the regional language of that place.]

(2) Sub-section (1) shall not apply to a private company, unless it is a subsidiary of a public company.

Right of company to increase or reduce the number of directors. 258.Right of company to increase or reduce the number of directors. 6* * * Subject to the provisions of sections 252, 255 and 259, a company in general meeting may, by ordinary resolution, increase or reduce the number of its directors within the limits fixed in that behalf by its articles. ----------------------------------------------------------------------

1 The words, brackets and figures "or sub-section (3) of section 280" omitted by Act 31 of 1965, s. 3o (w.e.f. 15-10-1965).

2 Sub-section (5) omitted by s. 30, ibid. (w.e.f. 15-10-1965), 3 Ins. by Act 65 of 1960, s. 84. 4 Added by Act 31 of 1988, s.45 (w.e.f. 31-5-1988). 5 Ins. by Act 65 of 1960, s.85. 6 The brackets and figure "(I)" omitted by Act 36 of 1957, s. 3 and Sch. II. ----------------------------------------------------------------------- 247

Increase in number of directors to require Government sanction. 259.Increase in number of directors to require Government sanction. In the case of a public company or a private company which is a subsidiary of a public company, any increase in the number of its directors, except- (a) in the case of a company which was in existence on the 21st day of July, 1951, an increase which was within the permissible maximum under its articles as in force on that date, and (b) in the case of a company which came or may come into existence after that date, an increase which is within the permissible maximum under its articles as first registered, shall not have any effect unless approved by the Central Government; and shall become void if, and in so far as, it is disapproved by that Government: 1 [Provided that where such. permissible maximum is twelve or less than twelve, no approval of the Central Government shall be required if the increase in the number of its directors does not make the total number of its directors more than twelve.]

Additional directors. 260.Additional directors. Nothing in section 255, 258 or 259 shall affect any power conferred on the Board of directors by the articles to appoint additional directors: Provided that such additional directors shall hold office only to the date of the next annual general meeting of the company: Provided further that the number of the directors and additional directors together shall not exceed the maximum strength fixed for the Board by the articles.

Certain persons not to be appointed directors, except by specialresolution. 261.Certain persons not to be appointed directors, except by

special resolution. (1) If a public company, or a private company which is a subsidiary of a public company, has a managing agent and such managing agent is authorized by the articles or by an agreement to appoint any director to the Board, 2[none of the following persons shall be appointed-- (i) as a director of the company whose period of office is liable to determination by retirement of directors by rotation, or (ii) to fill a casual vacancy in the office of a director under section 262, or --------------------------------------------------------------------- 1 Added by Act 31 of 1965, s. 31 (w.e.f. 15-10-1965). 2 Subs. by Act 65 of 1960, s. 86, for certain words. --------------------------------------------------------------------- 248 (iii)as an additional director under section 260, or (iv) as an alternate director under section 313, except by a special resolution passed by the company:-] (a) any person who is an officer or employee of, or who holds any office or place of profit under, the company or any subsidiary thereof : Provided that nothing in this clause shall apply to the director of such company or subsidiary, or to the holder of any office or place of profit under such company or subsidiary which may be held by a director of the company by virtue of section 314 ; (b) where any office or place of profit which would disqualify a person under clause (a), read with the proviso thereto. is held by any firm, any partner in, or employee of, the firm; (c) where any such office or place of profit is held by a private company, any member, officer or employee of such com- pany; (d) where any such office or place of profit is held by a body corporate, any officer or employee of such body cor- porate; (e) any person who is entitled, by virtue of any agreement, to any share of, or any amount out of, the remuneration received by the managing agent; any associate, or officer or employee, of the managing agent; or (g) any person who is an officer or employee of, or who holds any office or place of profit under, any body corporate under the management of the managing agent or any subsidiary of such body corporate: Provided that nothing in clause (g) shall apply to the director of such body corporate or subsidiary or to the holder of any office or place of profit under such body corporate or subsidiary which may be held by a director of such body corporate by virtue of section 314.

(2) Special notice shall be required of any resolution appointing, or approving the appointment of, any person referred to in clauses (a) to

(g) of sub-section (1), 1[as director or an additional or ---------------------------------------------------------------------- 1 Subs. by Act 65 of 1960, s. 86, for "as a director of the company". ----------------------------------------------------------------------- 249 alternate director of the company or to fill a casual vacancy in the office of a director under section 262].

(3)The notice given to the company, of any such resolution, and the notice thereof given by the company to its members, shall set out the reasons which make the resolution necessary.

(4)Nothing in this section shall be deemed to prevent any director holding any office immediately before the commencement of this Act from continuing to hold that office up to the next annual general meeting of the company.

Filling of casual vacancies among directors.

262.Filling of casual vacancies among directors. (1) In the case of a public company or a private company which is a subsidiary of a public company, if the office of any director appointed by the company in general meeting is vacated before his term of office will expire in the normal course, the resulting casual vacancy may, in default of and subject to any regulations in the articles of the company, be filled by the Board of directors at a meeting of the Board.

(2)Any person so appointed shall hold office only up to the date up to which the director in whose place he is appointed would have held office if it had not been vacated as aforesaid.

Appointment of directors to be voted on individually.

263.Appointment of directors to be voted on individually. (1) At a general meeting of a public company or of a private company which is a subsidiary of a public company, a motion shall not be made for the appointment of two or more persons as directors of the company by a single resolution, unless a resolution that it shall be so made has first been agreed to by the meeting without any vote being given against it.

(2)A resolution moved in contravention of sub-section (1) shall be void, whether or not objection was taken at the time to its being so moved: Provided that where a resolution so moved is passed, no provision for the automatic reappointment of 1[the director retiring by rota- tion] in default of another appointment shall apply.

(3)For the purposes of this section a motion for approving a persons appointment, or for nominating a person for appointment, shall be treated as a motion for his appointment. 263A Sections 177, 255, 256 and 263 not to apply in relation to companiesnot carrying business for profit, etc. 2[263A. Sections 177, 255, 256 and 263 not to apply in relation to companies not carrying business for profit, etc. Nothing contained in sections 177, 255, 256 and 263 shall affect any provision in the articles of a company for the ---------------------------------------------------------------------- 1 Subs. by Act 65 of 1960, s 87 for "retiring directors". 2 Ins. by s. 88, ibid. ----------------------------------------------------------------------- 250 election by ballot of all its directors at each annual general meeting if such company does not carry on business for profit or prohibits the payment of a dividend to its members.]

Consent of candidate for directorship to be filed with the company andconsent to act as director to be filed with the Registrar. 1[264.Consent of candidate for directorship to be filed with the company and consent to act as director to be filed with the Registrar.

(1) Every person (2[other than a director retiring by rotation or otherwise or a person] who has left at the office of the company a notice under section 257 signifying his candidature for the office of a director) proposed as a candidate for the office of a director shall sign, and file with the company, his consent in writing to act as a director, if appointed.

3[(2) A person other than- (a) a director re-appointed after retirement by rotation or immediately on the expiry of his term of office, or (b) an additional or alternate director, or a person filling a casual vacancy in the office of a director under section 262, appointed as a director or re-appointed as an additional or alternate director, immediately on the expiry of his term of office, or (c) a person named as a director of the company under its articles as first registered, shall not act as a director of the company unless he has within thirty days of his appointment signed and filed with the Registrar his con- sent in writing to act as such director.]

(3)This section shall not apply to a private company unless it is a subsidiary of a public company.]

Option to company to adopt proportional representation for theappointment of directors. 265.Option to company to adopt proportional representation for the appointment of directors. Notwithstanding anything contained in this Act, the articles of a company may provide for the appointment of not less than two-thirds of the total number of the directors of a public company or of a private company which is a subsidiary of a public company, according to the principle of proportional representation, whether by the single transferable vote or by a system of cumulative voting or otherwise, the appointments being made once in every three years and interim casual vacancies being filled in accordance with the provisions, mutatis mutandis, of section 262.

Restrictions on appointment or advertisement of director.

266.Restrictions on appointment or advertisement of director. (1) A person shall not be capable of being appointed director of a company by the articles, and shall not be named as a director ---------------------------------------------------------------------- 1 Subs by Act 65 of 1960, s. 89, for s. 264. 2 Subs. by Act 31 of 1965, s. 32, for " other than a person " (w.e.f. 15-10-1965),

3 Subs. by s. 32, ibid., for sub-section (2) (w.e.f. 15-10-1965). ---------------------------------------------------------------------- 251 or proposed director of a company in a prospectus issued by or on behalf of the company, or as proposed director of an intended company in a prospectus issued in relation to that intended company, or in a statement in lieu of prospectus filed with the Registrar by or on behalf of a company, unless, before the registration of the articles. the publication of the prospectus, or the filing of the statement in lieu of prospectus, as the case may be, he has, by himself or by his agent authorised in writing,- (a) signed and filed with the Registrar a consent in writing to act as such director; and (b) either- (i)signed the memorandum for shares not being less in number or value than that of his qualification shares, if any; or (ii)taken his qualification shares, if any, from the company and paid or agreed to pay for them; or (iii)signed and filed with the Registrar an undertaking in writing to take from the company his qualification shares if any, and pay for them; or (iv)made and filed with the Registrar an affidavit to the effect that shares, not being less in number or value than that of his qualification shares, if any, are registered in his name.

(2) Where a person has signed and filed as aforesaid an under- taking to take and pay for his qualification shares, he shall, as regards those shares, be in the same position as if he had signed the memorandum for shares of that number or value.

(3) References in this section to the share qualification of a director or proposed director shall be construed as including only a share qualification required within a period determined by reference to the time of appointment, and references therein to, qualification shares shall be construed accordingly. 1 * * * * * -----------------------------------------------------------------------

1 Sub-section (4) omitted by Act 31 of 1965, s. 33 (w.e.f. 15-10- 1965). ----------------------------------------------------------------------- 252

(5) This section shall not apply to- (a) a company not having a share capital; (b) a private company; (c) a company which was a private company before becoming a public company; or (d) a prospectus issued by or on behalf of a company after the expiry of one year from the date on which the company was entitled to commence business. Managing Directors, etc.

Certain persons not to be appointed managing directors. 267.Certain persons not to be appointed managing directors. No company shall, after the commencement of this Act, appoint or employ, or continue the appointment or employment of, any person as its managing or whole-time director who- (a) is an undischarged insolvent, or has at any time been adjudged an insolvent; (b) suspends, or has at any time suspended, payment to his creditors, or makes, or has at any time made, a composition with them; or (c) is or has at any time been, convicted by a Court 1* * * of an offence involving moral turpitude.

Amendment of provision relating to managing, whole time or non-rotational directors to require Government approval. 268.Amendment of provision relating to managing, whole time or non-rotational directors to require Government approval. In the case of a public company or a private company which is a subsidiary of a public company, an amendment of any provision relating to the appointment or re-appointment of a managing or whole-time director or of a director not liable to retire by rotation, whether, that provision be contained in the company's memorandum or articles, or in an agreement entered into by it, or in any resolution passed by the company in general meeting or by its Board of directors, shall not have any effect unless approved by the Central Government; and the amendment shall become void if, and in so far as, it is disapproved by that Government. ---------------------------------------------------------------------- 1 The words "in India" omitted by Act 65 of 1960, s. 90. ---------------------------------------------------------------------- 253

Appointment of managing or whole-time director or manager to requireGovernment approval only in certain cases. 4[269. Appointment of managing or whole-time director or manager

to require Government approval only in certain cases. (1) On and from the commencement of the Companies (Amendment) Act, 1988, every public company, or a private company which is a subsidiary of a public company, having a paid up share capital of such sum as may be prescribed, shall have a managing or whole-time director or a manager.

(2) On and from the commencement of the Companies (Amendment) Act, 1988, no appointment of a person as a managing or whole-time director or a manager in a public company or a private company which is a subsidiary of a public company shall be made except with the approval of the Central Government unless such appointment is made in accordance with the conditions specified in Parts I and II of Schedule XIII (the said Parts being subject to the provisions of Part III of that Schedule) and a return in the prescribed form is filed within ninety days from the date of such appointment.

(3)Every application seeking approval to the appointment of a managing or whole-time director or a manager shall be made to the CentralGovernment within a period of ninety days from the date of such appointment.

(4) The Central Government shall not accord its approval to an

application made under sub-section (3), if it is satisfied that- (a)the managing or whole-time director or the manager appointed is, in its opinion, not a fit and proper person to be appointed as such or such appointment is not in the public interest; or (b)the terms and conditions of the appointment of managing or whole time director or the manager are not fair and :reasonable.

(5)It shall be competent for the Central Government while

according approval to an appointment under sub-section (3) to accord approval for a period lesser than the period for which the appointment is proposed to be made.

(6)If the appointment of a person as a managing or wholetime director or a manager is not approved by the Central Government under

sub-section (4), the person so appointed shall vacate his office as such managing or whole-time director or manager on the date on which the decision of the Central Government is communicated to the company, and if he omits or fails to do so, he shall be punishable with fine which may extend to five hundred rupees for every day during which he omits or fails to vacate such office.

(7)Where the Central Government suo motu or on any information received by it is, prima facie, of the opinion that any appointment

made under sub-section (2) without the approval of the Central Government has been made in contravention of the requirements of Schedule XIII, it shall be competent for the Central Government to refer the matter to the Company Law Board for decision.

(8)The Company Law Board shall, on receipt of a reference under

sub-section (7), issue a notice to the company, the managing or whole- time director or the manager, as the case may be, and the director or other officer responsible for complying with the requirements of Schedule XIII, to show cause as to why such appointment shall not be

terminated and the penalties provided under sub-section (10) shall not be imposed.

(9)The Company Law Board shall, if, after giving a reasonable opportunity to the company, the managing or whole-time director or the manager, or the officer who is in default, as the case may be, comes to the conclusion that the appointment has been made in contravention of the requirements of Schedule XIII, make an order declaring that a contravention of the requirements of Schedule XIII has taken place.

(10) On the making of an order by the Company Law Board under

sub-section (9),- (a) the company shall be liable to a fine which may extend to five thousand rupees; (b) every officer of the company who is in default shall be liable to a fine of ten thousand rupees; and (c)the appointment of the managing or whole-time director or manager, as the case may be, shall be deemed to have come to an end and the person so appointed shall, in addition to being liable to pay a fine of ten thousand rupees, refund to the company the entire amount of salaries, commissions and perquisites received or enjoyed by him between the date of his appointment and the passing of such order.

(11) If a company contravenes the provisions of sub-section (10) or any direction given by the Company Law Board under that sub- section, every officer of the company who is in default and the managing or whole-time director or the manager, as the case may be, shall be punishable with imprisonment for a term which may extend to three years and shall also be liable to a fine which may extend to fifty rupees for every day of default.

(12)All acts, done by a managing or whole-time director or a manager, as the case may be, purporting to act in such capacity and whose appointment has been found to be in contravention of Schedule XIII, shall, if the acts so done are valid otherwise be valid notwithstanding any order made by the Company Law Board under sub-

section (9). Explanation.-In this section "appointment" includes reappointment and "whole-time director" includes a director in the 'whole-time employment of the company] ----------------------------------------------------------------------- 1 Subs. by Act 31 of 1988, s. 46 (w.e.f. 15.6.1988). ----------------------------------------------------------------------- 254 Share qualifications

Time within which share qualification is to be obtained and maximumamount thereof. 270.Time within which share qualification is to be obtained and

maximum amount thereof. (1) Without prejudice to the restrictions imposed by section 266, it shall be the duty of every director who is required by the articles of the company to hold a specified share qualification and who is not already qualified in that respect, to obtain his qualification within two months after his appointment as director.

(2)Any provision in the articles of the company (whether made before or after the commencement of this Act) shall be void in so far as it requires a person to hold the qualification shares before his appointment as a director or to obtain them within a shorter time than two months after his appointment as such.

(3)The nominal value of the qualification shares shall not exceed five thousand rupees, or the nominal value of one share where it exceeds five thousand rupees.

(4)For the purpose of any provision in the articles requiring a director to hold a specified share qualification, the bearer of a share warrant shall not be deemed to be the holder of the shares specified in the warrant.

[Filing of declaration of share qualification by director.] 271.[Filing of declaration of share qualification by director.] Rep. bythe Companies (Amendment) Act, 1965 (31 of 1965), s. 34 (w.e.f.15-10-1965). 254A

Penalty. 272. Penalty. If, after the expiry of the said period of two months, any person acts as a director of the company when he does not hold the qualification shares referred to in section 270, he shall be punishable with fine which may extend to fifty rupees for every day between such expiry and the last day on which he acted as a director.

Saving. 273. Saving. Sections 270 1[and 272] shall not apply to a private company, unless it is a subsidiary of a public company. Disqualifications of Directors

Disqualifications of directors.

274.Disqualifications of directors. (1) A person shall not be capable of being appointed director of a company, if- (a) he has been found to be of unsound mind by a Court of competent jurisdiction and the finding is in force; (b) he is an undischarged insolvent; (c) he has applied to be adjudicated as an insolvent and his application is pending; (d) he has been convicted by a Court 2* * * of any offence involving moral turpitude and sentenced in respect thereof to imprisonment for not less than six months, and a period of five years has not elapsed from the date of expiry of the sentence: (e) he has not paid any call in respect of shares of the company held by him, whether alone or jointly with others, and six months have elapsed from the last day fixed for the payment of the call; or (f) an order disqualifying him for appointment as director has been passed by a Court in pursuance of section 203 and is in force, unless the leave of the Court has been obtained for his appointment in pursuance of that section.

(2) The Central Government may, by notification in the Official Gazette, remove- (a) the disqualification incurred by any person in virtue

of clause (d) of sub-section (1), either generally or in ----------------------------------------------------------------------- 1 Subs. by Act 31 of 1965, s. 35. for "to 272" (w.e.f. 15-10- 1965). 2 The words "in India" omitted by Act 65 of 1960, s. 93. ---------------------------------------------------------------------- 254B relation to any company or companies specified in the notification; or (b) the disqualification incurred by any person in virtue

of clause (e) of sub-section (1).

(3) A private company which is not a subsidiary of a public com- pany may, by its articles, provide that a person shall be disqualified for appointment as a director on any grounds in addition to those

specified in sub-section (1). 255 Restrictions on number of directorships

No person to be a director of more than twenty companies. 275.No person to be a director of more than twenty companies. After the commencement of this Act, no person shall, save as otherwise provided in section 276, hold office at the same time as director in more than twenty companies.

Choice to be made by director of more than twenty companies atcommencement of Act. 276.Choice to be made by director of more than twenty companies

at commencement of Act. (1) Any person holding office as director in more than twenty companies immediately before the commencement of this Act shall, within two months from such commencement,- (a) choose not more than twenty of those companies, as companies in which he wishes to continue to hold the office of director; (b) resign his office as director in the other companies; and (c) intimate the choice made by him under clause (a) to each of the companies in which he was holding the office of director before such commencement, to the Registrar having jurisdiction in respect of each such company, and also to the Central Government.

(2) Any resignation made in pursuance of clause (b) of sub-

section (1) shall become effective immediately on the despatch thereof to the company concerned.

(3) No such person shall act as director- (a) in more than twenty companies, after the expiry of two months from the commencement of this Act; or (b) of any company after despatching the resignation of his office as director thereof, in pursuance of clause (b) of

sub-section (1).

Choice by person becoming director of more than twenty companies aftercommencement of Act. 277.Choice by person becoming director of more than twenty

companies after commencement of Act. (1) Where a person already holding the office of director in twenty companies is appointed, after the commencement of this Act, as a director of any other company, the appointment- (a)shall not take effect unless such person has, within fifteen days thereof, effectively vacated his office as director in any of the Companies in which he was already a director; and (b) shall become void immediately on the expiry of the fifteen days if he has not, before such expiry, effectively vacated his office as director in any of the other companies aforesaid. 256

(2) Where a person already holding the office of director in nineteen companies or less is appointed, after the commencement of this Act, as a director of other companies, making the total number of his directorships more than twenty, he shall choose the directorships which he wishes to continue to hold or to accept, so however that the total number of the directorships, old and new, held by him shall not exceed twenty. None of the new appointments of director shall take effect until such choice is made; and all the new appointments shall become void if the choice is not made within fifteen days of the day on which the last of them was made.

Exclusion of certain directorships for the purposes of sections 275,276 and

278.Exclusion of certain directorships for the purposes of

sections 275, 276 and 277. (1) In calculating, for the purposes of sections 275, 276 and 277, the number of companies of which a person may be a director, the following companies shall be excluded, namely:- (a) a private company which is neither a subsidiary nor a holding company of a public company; (b) an unlimited company; (c) an association not carrying on business for profit or which prohibits the payment of a dividend; (d) a company in which such person is only an alternate director, that is to say, a director who is only qualified to act as such during the absence or incapacity of some other director.

(2) in making the calculation aforesaid, any company referred to

in clauses (a), (b) and (c) of sub-section (1) shall be excluded for a period of three months from the date on which the company ceases to fall within the purview of those clauses.

Penalty. 279. Penalty. Any person who holds office, or acts, as a director of more than twenty companies in contravention of the foregoing provisions shall be punishable with fine which may extend to five thousand rupees in respect of each of those companies after the first twenty. Retiring age of Directors

[Age limit.] 280, [Age limit.] Rep. by the Companies (Amendment) Act, 1965 (31 of 1965), s. 36 (w.e.f. 15-10-1965).

[Age limit not to apply if Company so resolves.] 281. [Age limit not to apply if Company so resolves.] Rep. by s. 37, ibid. (w.e.f. 15-10-1965). 257-258

[Duty of director to disclose age.] 282.(Duty of director to disclose age.] Rep. by the Companies amendment) Act, 1965 (31 of 1965), s. 38 (w.e.f. 15-10-1965). Vacation of Office by Directors

Vacation of office by directors.

283.Vacation of office by directors. (1) 1[The office of a director shall become vacant if-] (a) he fails to obtain within the time specified in sub-

section (1) of section 270, or at any time thereafter ceases to hold, the share qualification, if any, required of him by the articles of the company; (b) he is found to be of unsound mind by a Court of competent jurisdiction ; (c) he applies to be adjudicated an insolvent; (d) he is adjudged an insolvent; 2[(e) he is convicted by a Court of any offence involving moral turpitude and sentenced in respect thereof to imprisonment for not less than six months;] (f) he fails to pay any call in respect of shares of the company held by him, whether alone or jointly with others, within six months from the last date fixed for the payment of the call 3 [unless the Central Government has, by notification in the Official Gazette, removed the disquali- fication incurred by such failure] ; (g) he absents himself from three consecutive meetings of the Board of directors, or from all meetings of the Board for a continuous period of three months, whichever is longer, without obtaining leave of absence from the Board; (h) 4[he (whether by himself or by any person for his benefit or on his account), or any firm in which] he is a partner or any private company of which he is a director, accepts a loan, or any guarantee or security for a loan, from the company in contravention of section 295; (i) he acts in contravention of section 299; ---------------------------------------------------------------------- 1 Subs. by Act 65 of 1960, s. 95, for certain words. 2 Subs. by s. 95, ibid., for cl. (e). 3 ins. by s. 95, ibid. 4 Subs, by s. 95, ibid., for "he, or any firm in which". ------------------------------------------------------------------------ 259 (j) he becomes disqualified by an order of Court under section 203; 1* * * (k) he is removed in pursuance of section 284 ; 2[or (l) having been appointed a director by virtue of his holding any office or other employment in the company, or as a nominee of the managing agent of the company, he ceases to hold such office or other employment in the company or, as the case may be, the managing agency comes to an end.]

(2) Notwithstanding anything in clauses (d), (e) and (j) of sub-

section (1), the disqualification referred to in those clauses shall not take effect- (a) for thirty days from the date of the adjudication, sentence or order ; (b) where any appeal or petition is preferred within the thirty days aforesaid against the adjudication, sentence or conviction resulting in the sentence, or order until the expiry of seven days from the date on which such appeal or petition is disposed of ; or (c) where within seven days aforesaid, any further appeal or petition is preferred in respect of the adjudication, sentence, conviction, or order, and the appeal or petition, if allowed, would result in the removal of the disquali- fication, until such further appeal or petition is disposed of.

2 [(2A) Subject to the provisions of sub-sections (1) and (2), if a person functions as a director when he knows that the office of director held by him has become vacant on account of any of the disqualifications, specified in the several clauses of sub-section

(1), he shall be punishable with fine which may extend to five hundred rupees for each day on which he so functions as a director.]

(3) A private company which is not a subsidiary of a public com- pany may, by its articles, provide, that the office of director shall be vacated on any grounds in addition to those specified in sub-section

(1). ---------------------------------------------------------------------- 1 The word "or" omitted by Act 65 of 1960, s. 95. 2 Ins. by. s. 95, ibid. ---------------------------------------------------------------------- 260

Removal of directors.

284.Removal of directors. (1) A company may, by ordinary resolution, remove a director (not being a director appointed by the Central Government in pursuance of section 408) before the expiry of his period of office : Provided that this sub-section shall not, in the case of a private company, authorise the removal of a director holding office for life on the 1st day of April, 1952, whether or not he is subject to retirement under an age limit by virtue of the articles or otherwise: Provided further that nothing contained in this sub-section shall apply where the company has availed itself of the option given to it under section 265 to appoint not less than two-thirds of the total number of directors according to the principle of proportional re- presentation.

(2)Special notice shall be required of any resolution to remove a director under this section, or to appoint somebody instead of a director so removed at the meeting at which he is removed.

(3)On receipt of notice of a resolution to remove a director under this section, the company shall forthwith send a copy thereof to the director concerned, and the director (whether or not he is a member of the company) shall- be entitled to be heard on the resolution at the meeting.

(4)Where notice is given of a resolution to remove a director under this section and the director concerned makes with respect thereto representations in writing to the company (not exceeding a reasonable length) and requests their notification to members of the company, the company shall, unless the representations are received by it too late for it to do so,- (a) in any notice of the resolution given to members of the company state the fact of the representations having been made; and (b) send a copy of the representations to every member of the company to whom notice of the meeting is sent (whether before or after receipt of the representations by the company) ; and if a copy of the representations is not sent as aforesaid because they were received too late or because of the company's default, the director may (without prejudice to his right to be heard orally) require that the representations shall be read out at the meeting: Provided that copies of the representations need not be sent out and the representations need not be read out at the meeting if, on 261 the application either of the company or of any other person who claims to be aggrieved, the 1[Company Law Board] is satisfied that the right conferred by this sub-section are being abused to secure nee- dless publicity for defamatory matter; and 1[Company Law Board] may order the company's costs on the application to be paid in whole or in part by the director notwithstanding that he is not a party to it.

(5)A vacancy created by the removal of a director under this section may, if he had been appointed by the company in general meeting or by the Board in pursuance of section 262, be filled by the appointment of another director in his stead by the meeting at which he is removed, provided special notice of the intended appointment has

been given under sub-section (2). A director so appointed shall hold office until the date up to which his predecessor would have held office if he had not been removed as aforesaid.

(6)If the vacancy is not filled under sub-section (5), it may be filled as a casual vacancy in accordance with the provisions, so far as they may be applicable, of section 262, and all the provisions of that section shall apply accordingly: Provided that the director who was removed from office shall not be re-appointed as a director by the Board of directors.

(7) Nothing in this section shall be taken- (a) as depriving a person removed thereunder of any compensation or damages payable to him in respect of the termination of his appointment as director or of any appointment terminating with that as director; or (b) as derogating from any power to remove a director which may exist apart from this section. Meetings of Board

Board to meet at least once in every three calendar months. 1[285.Board to meet at least once in every three calendar months. In the case of every company, a meeting of its Board of directors shall be held at least once in every 3[three months and atleast four such meetings shall be held in every year] Provided that the Central Government may, by notification in the Official Gazette, direct that the provisions of this section shall not apply in relation to any class of companies or shall apply in relation thereto subject to such exceptions, modifications or conditions as may be specified in the notification.] --------------------------------------------------------------------- 1 Subs. by Act 31 of 1988, s.67 (w.e.f. 31.5.1991). 2 Subs. by Act 65 of 1960, s. 96, for s. 285. 3 Subs. by Act 31 of 1965 s. 39 for certain in words --------------------------------------------------------------------- 262

Notice of meetings.

286.Notice of meetings. (1) Notice of every meeting of the Board of directors of a company shall be given in writing to every director for the time being in India, and at his usual address in India to every other director.

(2) Every officer of the company whose duty it is to give notice as aforesaid and who fails to do so shall be punishable with fine which may extend to one hundred rupees.

Quorum for meetings.

287.Quorum for meetings. (1) In this section- (a) " total strength " means the total strength of the Board of directors of a company as determined in pursuance of this Act, after deducting therefrom the number of the directors, if any, whose places may be vacant at the time; and (b) " interested director " means any director whose presence cannot, by reason of section 300, count for the purpose of forming a quorum at a meeting of the Board, at the time of the discussion or vote on any matter.

(2) The quorum for a meeting of the Board of directors of a company shall be one-third of its total strength (any fraction con- tained in that one-third being rounded off as one), or two directors, whichever is higher: Provided that where at any time the number of interested directors exceeds or is equal to two-thirds of the total strength, the number of the remaining directors, that is to say, the number of the directors who are not interested, I [present at the meeting being not less than two], shall be the quorum during such time.

Procedure where meeting adjourned for want of quorum.

288.Procedure where meeting adjourned for want of quorum. (1) If a meeting of the Board could not be held for want of quorum, then, unless the articles otherwise provide, the meeting shall automatically stand adjourned till the same day in the next week, at the same time and place, or if that day is a public holiday, till the next succeeding day which is not a public holiday, at the same time and place.

(2) The provisions of section 285 shall not be deemed to have been contravened merely by reason of the fact that a meeting of the ---------------------------------------------------------------------- 1 Ins. by Act 65 of 1960, s. 97. ----------------------------------------------------------------------- 263 Board which had been called in compliance with the terms of that section could not be held for want of a quorum.

Passing of resolutions by circulation. 289.Passing of resolutions by circulation. No resolution shall be deemed to have been duly passed by the Board or by a committee thereof by circulation, unless the resolution has been circulated in draft, together with the necessary papers, if any, to all the directors, or to all the members of the committee, then in India (not being less in number than the quorum fixed for a meeting of the Board or committee, as the case may be), and to all other directors or members at their usual address in India, and has been approved by such of the directors as are then in India, or by a majority of such of them, as are entitled to vote on the Resolution.

Validity of acts of directors. 290.Validity of acts of directors. Acts done by a person as a director shall be valid, notwithstanding that it may afterwards be discovered that his appointment was invalid by reason of any defect or disqualification or had terminated by virtue of any provision contained in this Act or in the articles: Provided that nothing in this section shall be deemed to give validity to acts done by a director after his appointment has been shown to the company to be invalid or to have terminated. Board's powers and restrictions thereon

General powers of Board.

291.General powers of Board. (1)Subject to the provisions of this Act, the Board of directors of a company shall be entitled to exercise all such powers, and to do all such acts and things, as the company is authorised to exercise and do: Provided that the Board shall not exercise any power or do any act or thing which is directed or required, whether by this or any other Act or by the memorandum or articles of the company or otherwise, to be exercised or done by the company in general meeting: Provided further that in exercising any such power or doing any such act or thing, the Board shall be subject to the provisions con- tained in that behalf in this or any other Act, or in the memorandum or articles of the company, or in any regulations not inconsistent therewith and duly made thereunder, including regulation made by the company in general meeting.

(2) No regulation made by the company in general meeting shall invalidate any prior act of the Board which would have been valid if that regulation had not been made. 264

Certain powers to be exercised by Board only at meeting.

292.Certain powers to be exercised by Board only at meeting. (1) The Board of directors of a company shall exercise the following powers on behalf of the company, and it shall do so only by means of resolutions passed at meetings of the Board:- (a) the power to make calls on shareholders in respect of money unpaid on their shares; (b) the power to issue debentures; (c) the power to borrow moneys otherwise than on debentures; (d) the power to invest the funds of the company; and (e) the power to make loans: 1[Provided that the Board may, by a resolution passed at a meeting, delegate to any committee of directors, the managing director, the managing agent, secretaries and treasurers, the manager or any other principal officer of the company or in the case of a branch office of the company, a principal officer of the branch office, the powers specified in clauses (c), (d) and (e) to the extent specified in sub-

sections (2), (3) and (4) respectively, on such conditions as the Board may prescribe: Provided further that the acceptance by a banking company in the ordinary course of its business of deposits of money from the public repayable on demand or otherwise and withdrawable by cheque, draft, order or otherwise, or the placing of moneys on deposit by a banking company with another banking company on such conditions as the Board may prescribe, shall not be deemed to be a borrowing of moneys or, as the case may be, a making of loans by a banking company within the meaning of this section.

Explanation I. Nothing in clause (c) of sub-section (1) shall apply to borrowings by a banking company from other banking companies or from the Reserve Bank of India, the State Bank of India or any other banks established by or under any Act. Explanation II.-In respect of dealings between a company and its bankers, the exercise by the company of the power specified in clause

(c) of sub-section (1) shall mean the arrangement made by the company with its bankers for the borrowing of money by way of overdraft or cash credit or otherwise and not the actual day to day ----------------------------------------------------------------------- 1 Subs. by Act 65 of 1960, a. 98, for the proviso. ----------------------------------------------------------------------- 265 operation on overdraft, cash credit or other accounts by means of which the arrangement so made is actually availed of.]

(2) Every resolution delegating the power referred to in clause

(c) of sub-section (1) shall specify the total amount 1[outstanding at any one time] up to which moneys may be borrowed by the delegate.

(3) Every resolution delegating the power referred to in clause

(d) of subsection (1) shall specify the total amount up to which the funds may be invested, and the nature of the investments which may be made, by the delegate.

(4) Every resolution delegating the power referred to in clause

(e) of sub-section (1) shall specify the total amount up to which loans may be made by the delegate, the purposes for which the loans may be made, and the maximum amount of loans which may be made for each such purpose in individual cases.

(5) Nothing in this section shall be deemed to affect the right of the company in general meeting to impose restrictions and conditions on the exercise by the Board of any of the powers specified

in subsection (1).

Restrictions on powers of Board.

293. Restrictions on powers of Board. (1) The Board of directors of a public company, or of a private company which is a subsidiary of a public company, shall not, except with the consent of such public company or subsidiary in general meeting,- (a) sell, lease or otherwise dispose of the whole, or substantially the whole, of the undertaking of the company, or where the company owns more than one undertaking, of the whole, or substantially the whole, of any such undertaking; (b) remit, or give time for the re-payment of, any debt due by a director 2[except in the case of renewal or continuance of an advance made by a banking company to its director in the ordinary course of business]; (c) invest, otherwise than in trust securities, 3 [the amount of compensation received by the company in respect of the compulsory acquisition, after the commencement of this Act], of any such undertaking as is referred to in clause ----------------------------------------------------------------------- 1 Ins. by Act 65 of 1960, s. 98. 2 Ins. by s. 99, ibid. 3 Subs. by s. 99, ibid., for certain words. ----------------------------------------------------------------------- 266 (a),or of any premises or properties used for any such undertaking and without which it cannot be carried on or can be carried on only with difficulty or only after a considerable time; (d) borrow moneys after the commencement of this Act, where the moneys to be borrowed, together with the moneys already borrowed by the company (apart from temporary loans obtained from the company's bankers in the ordinary course of business), will exceed the aggregate of the paid-up capital of the company and its free reserves, that is to say, reserves not set apart for any specific purpose; or (e) contribute, after the commencement of this Act, to charitable and other funds not directly relating to the business of the company or the welfare of its employees, any amounts the aggregate of which will, in any financial year, exceed 1[fifty thousand rupees] or five per cent. of its average net profits as determined in accordance with the provisions of sections 349 and 350 during the three financial years immediately preceding, whichever is greater. 2[Explanation I. Every resolution passed by the company in general meeting in relation to the exercise of the power referred to in clause (d) or in clause (e) shall specify the total amount up to which moneys may be borrowed by the Board of directors under clause (d) or as the case may be, the total amount which may be contributed to charitable and other funds in any financial year under clause (e). Explanation II.-The expression "temporary loans" in clause (d) means loans repayable on demand or within six months from the date of the loan such as short term, cash credit arrangements, the discounting of bills and the issue of other short term loans of a seasonal character, but does not include loans raised for the purpose of financing expenditure of a capital nature.] Explanation 3[III].-Where a portion of a financial year of ,he company falls before the commencement of this Act, and a portion falls after such commencement, the latter portion shall be deemed to ------------------------------------------------------------------------ 1 Subs. by Act 46 of 1977, s.6, for the words "twenty-five thousand rupees". 2 Ins. by Act 65 of 1960, s. 99. 3 Former Explanation I re-numbered as Explanation III by s. 99, ibid. ---------------------------------------------------------------------- 267 be financial year within the meaning, and for the purposes, of clause (e).

(2) Nothing contained in clause (a) of sub-section (1) shall affect- (a) the title of a buyer or other person who buys or takes a lease of any such undertaking as is referred to in that clause, in good faith and after exercising due care and caution: or (b) the selling or leasing of any property of the company where the ordinary business of the company consists of, or comprises, such selling or leasing.

(3) Any resolution passed by the company permitting any

transaction such as is referred to in clause (a) of sub-section(1) may attach such conditions to the permission as may be specified in the resolution, including conditions regarding the use, disposal or inves- tment of the sale proceeds which may result from the transaction : Provided that this sub-section shall not be deemed to authorise the effect any reduction in its capital except in accordance with the provisions contained in that behalf in this Act.

(4) The acceptance by a banking company, in the ordinary course of its business, of deposits of money from the public, repayable on demand or otherwise, and withdrawable by cheque, draft, order or otherwise, shall not be deemed to be a borrowing of moneys by the

banking company within the meaning of clause (d) of sub-section (1).

(5) No debt incurred by the company in excess of the limit

imposed by clause (d) of sub-section (1) shall be valid or effectual, unless the lender proves that he advanced the loan in good faith and without knowledge that the limit imposed by that clause had been exceeded. 1[Political contributions 293A Prohibitions and restrictions regarding political contributions. 293A.Prohibitions and restrictions regarding political

contributions. (1) Notwithstanding anything contained in any other provision of this Act,- (a) no Government company; and (b) no other company which has been in existence for less than three financial years, shall contribute any amount or amounts, directly or indirectly,- (i) to any political party; or (ii) for any political purpose to any person.

(2) A company, not being a company referred to in clause (a) or

clause (b) of sub-section (1), may contribute any amount or amounts, directly or indirectly,- (a) to any political party, or (b) for any political purpose to any person: Provided that the amount or, as the case may be, the aggregate of the amounts which may be so contributed by a company in any financial year shall not exceed five per cent. of its average net profits determined in accordance with the provisions of sections 349 and 350 during the three immediately preceding financial years. Explanation.-Where a portion of a financial year of the company falls before, the commencement of the Companies (Amendment) Act, 1985, and a portion falls after such commencement, the latter portion shall be deemed to be a financial year within the meaning, and for the purposes, of this sub-section: Provided further that no such contribution shall be made by a company unless a resolution authorising the making of such contribution is passed at a meeting of the Board of Directors and such resolution shall, subject to the other provisions of this section, be deemed to be justification in law for the making and the acceptance of the contribution authorised by it.

(3) Without prejudice to the generality of the provisions of

sub-sections (1) and (2),- (a) a donation or subscription or payment caused to be given by a company on its behalf or on its account to a person who, to its knowledge, is carrying on any activity which, at the time at which such donation or subscription or payment was given or made, can reasonably be regarded as likely to effect public support for a political party shall also be deemed to be contribution of the amount of such donation, subscription or payment to such person for a political purpose; (b) the amount of expenditure incurred, directly or indirectly, by a company on advertisement in any publication (being a publication in the nature of a souvenir, brochure, tract, pamphlet or the like) by or on behalf of a political party or for its advantage shall also be deemed,- (i) where such publication is by or on behalf of a political party, to be a contribution of such amount to such political party, and (ii) where such publication is not by or on behalf of but for the advantage of a political party, to be a contribution for a political purpose to the person publishing it.

(4) Every company shall disclose in its profit and loss account any amount or amounts contributed by it to any political party or for any political purpose to any person during the financial year to which that account relates, giving particulars of the total amount contributed and the name of the party or person to which or to whom such amount has been contributed.

(5) If a company makes any contribution in contravention of the provisions of this section,- (a) the company shall be punishable with fine which may extend to three times the amount so contributed; and (b) every officer of the company who is in default shall be punishable with imprisonment for a term which may extend to three years and shall also be liable to fine.] ---------------------------------------------------------------------- 1 Subs. by Act 35 of 1985, s.2 ----------------------------------------------------------------------- 268 293B Power of Board and other persons to make contributions to the NationalDefence Fund, etc. 1[293B.Power of Board and other persons to make contributions to

the National Defence Fund, etc. (1) The Board of directors of any company or any person or authority exercising the powers of the Board of directors of a company, or of the company in general meeting, may, notwithstanding anything contained in sections 293 and 293A or any other provision of this Act or in the memorandum, articles or any other instrument relating to the company, contribute such amount as it thinks fit to the National Defence Fund or any other Fund approved by the Central Government for the purpose of national defence.

(2) Every company shall disclose in its profits and loss account the total amount or amounts contributed by it to the Fund referred to

in sub-section (1) during the financial year to which the amount relates.] 2[Appointment of sole selling agents

Appointment of sole selling agents to require approval of company ingeneral meeting. 294 Appointment of sole selling agents to require approval of

company in general meeting. (1) No company shall, after the commencement of' the Companies (Amendment) Act 1960 (65 of 1960), app- oint a sole selling agent for any area for a term exceeding five years at a time: Provided that nothing in this sub-section shall be deemed to prohibit the re-appointment, or the extension of the term of office, of any sole selling agent by further periods not exceeding five years on each occasion.

(2)After the commencement of the Companies (Amendment) Act, 1960 (65 of 1960), the Board of directors of a company shall not appoint a sole selling agent for any area except subject to tie condition that the appointment shall cease to be valid if it is not approved by the company in the first general meeting held after the date on which the appointment is made. (2A) If the company in general meeting as aforesaid disapproves the appointment, it shall cease to be valid with effect from the date of that general meeting.]

(3) Where before the commencement of this Act, a company has appointed a sole selling agent for any area for a period of not less --------------------------------------------------------------------- 1 Ins. by Act 80 of 1971. s. 2 (w.e.f. 3-12-1971)

2 Subs. by Act 65 of 1960, s. 101, for sub-sections (1) and (2). ------------------------------------------------------------------------ 269 than five years, the appointment shall be placed before the company in general meeting within a period of six months from such commencement; and the company in general meeting may, by resolution,- (a) if the appointment was made on or after the 15th day of February, 1955, terminate the appointment forthwith or with effect from such later date as may be specified in the resolution ; and (b) if the appointment was made before the date specified in clause (a), terminate the appointment with effect from such date as may be specified in the resolution, not being earlier than five years from the date on which the appoint- ment was made, or the expiry of one year from the commencement of this Act, whichever is later.

1[[(4) Notwithstanding anything contained in the foregoing pro visions of this section- (a) where at an time during the period beginning on the 1st day of April, 1956 and ending on the commencement of the Companies (Amendment) Act, 1960, (65 of 1960.) a managing agent has ceased to hold office as such and has been appointed as the sole selling agent of the company whose managing agent he was, the sole selling agency agreement whether taken in his own name or in association with, or in the name of, any other person for his benefit or on his own account, shall unless approved by the Central Government within a period of six months from such commencement, become void and inoperative and the appointment as sole selling agent shall, unless it has terminated by efflux of time, come to an end on the expiry of that period; (b) no managing agent- (i) who has ceased to hold office as such before the commencement of the Companies (Amendment) Act, 1960, (65 of 1960.) but has not been appointed before such commencement as the sole selling agent of the company whose managing agent he was, or (ii) who has ceased to hold office as such after the commencement of the Companies (Amendment) Act, 1960, (63 of 1960.) ----------------------------------------------------------------------- 1 Ins. by Act 65 of 1960, s. 101, ------------------------------------------------------------------------ 270 shall be appointed after such commencement during a period of three years from the date of such cesser as the sole selling agent of the company whose managing agent he was except with the approval of the Central Government obtained in this behalf.

(5) (a) Where a company has a sole selling agent (by whatever name called) for any are and it appears to the Central Government that there is good reason so to do, the Central Government may require the company to furnish to it such information regarding the terms and conditions of the appointment of the sole selling agent as it considers necessary for the purpose of determining whether or not such terms and conditions are prejudicial to the interests of the company; (b) if the company refuses or neglects to furnish any such information, the Central Government may appoint a suitable person on to investigate and report on the terms and conditions of appointment of the sole selling agent; (c) if after perusal of the information furnished by the company or, as the case may be, the report submitted by the person appointed under clause (b), the Central Government is of the opinion that the terms and conditions of appointment of the sole selling agent are prejudicial to the interests of the company, the Central Government may, by order, make such variations in those terms and conditions as would in its opinion make them no longer prejudicial to the interests of the company; (d) as from such date as may be specified by the Central Govern- ment in the order aforesaid, the appointment of the sole selling agent shall be regulated by the terms and conditions as varied by the Central Government.

(6) (a) Where a company has more selling agents than one (by whatever name called) in any area or areas and it appears to the Central Government that there is good reason so to do, the Central Government may require the company to furnish to it such information regarding the terms and conditions of appointment of all the selling agents as it considers necessary for the purpose of determining whether any of those selling agents should be declared to be the sole selling agent for such area or any of such areas; (b) if the company refuses or neglects to furnish any such information, the Central Government may appoint a suitable person to investigate and report on the terms and conditions of appointment of all the selling agents; 271 (c) if after perusal of the information furnished by the company or, as the case may be, the report submitted by the person appointed under clause (b), the Central Government is of the opinion that having regard to the terms and conditions of appointment of any of the selling agents and to any other relevant factors, that selling agent is to all intents and purposes the sole selling agent for such area, although there may be one or more other selling agents of the company operating in that area, the Central Government may by order declare that selling agent to be the sole selling agent of the company for that area with effect from such date as may be specified in the order and may make suitable variations in such of the terms and conditions of appointment of that selling agent as are in the opinion of the Central Government prejudicial to the interests of the company; (d) as from the date specified in clause (c)the appointment of the selling agent declared to be the sole selling agent shall be regulated by the terms and conditions as varied by the Central Government.

(7) It shall be the duty of the company- (a) to produce to the person appointed under clause (b) of

sub-section (5) or clause (b) of sub-section (6), all books and papers of, or relating to, the company which are in its custody or power; and (b) otherwise to give to that person all assistance in connection with the investigation which the company is reasonably able to give.

(8) If a company refuses or neglects- (a) to furnish the information required by the Central

Government under clause (a) of sub-section (5) or clause (a)

of sub-section (6), or (b) to produce to the person appointed under clause (b)

of sub- section (5) or clause (b) of sub-section (6) any books and papers which are in its custody or power or otherwise to give to that person any assistance which it is reasonably able to give, 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 with a further fine of not less than fifty rupees for every day after the first during which such refusal or neglect continues.] 272 294A Prohibition of payment of compensation to sole selling agents forloss of office in certain cases. 1[294A. Prohibition of payment of compensation to sole selling

agents for loss of office in certain cases. (1) A company shall not pay or be liable to pay to its sole selling agent any compensation for the loss of his office in the following cases :- (a) where the appointment of the sole selling agent ceases to be valid by virtue of sub-section (2A) of section 294; (b) where the sole selling agent resigns his office in view of the reconstruction of the company or of its amalgamation with any other body corporate or bodies corporate and is appointed as the sole selling agent of the reconstructed company or of the body corporate resulting from the amalgamation; (c) where the sole selling agent resigns his office, otherwise than on the reconstruction of, the company or its amalgamation as aforesaid; (d) where the sole selling agent has been guilty of fraud or breach of trust in relation to, or of gross negligence in, the conduct of his duty as the sole selling agent; (e) where the sole selling agent has instigated, or has taken part directly or indirectly in bringing about, the termination of the sole selling agency.

(2) The compensation which may be paid by a company to its sole selling agent for loss of office shall not exceed the remuneration which he would have earned if he had been in office for the unexpired residue of his term, or for three years, whichever is shorter, calculated on the basis of the average remuneration actually earned by him during a period of three years immediately preceding the date on which his office ceased or was terminated, or where he held his office for a lesser period than three years, during such period.] 294A Power of Central Government to prohibit the appointment of soleselling agents in certain cases. 2[294AA. Power of Central Government to prohibit the appointment

of sole selling agents in certain cases. (1) Where the Central Government is of opinion that the demand for goods of any category, to be specified by that Government, is substantially in excess of the production or supply of such goods and that the services of sole selling agents will not be necessary to create a market for such goods, the Central Government may, by notification in the Official Gazette, declare that sole selling agents shall not be appointed by a company for the sale of such goods for such period as may be specified in the declaration. ----------------------------------------------------------------------- 1 Ins. by Act 31 of 1965, s. 40 (w.e.f. 15-10-1965). 2 Ins. by Act 41 of 1974, s. 27 (w.e.f. 1-2-1975). ---------------------------------------------------------------------- 273

(2) No company shall appoint any individual, firm or body cor- porate, who or which has a substantial interest in the company, as sole selling agent of that company unless such appointment has been previously approved by the Central Government.

(3) No company having a paid-up share capital of rupees fifty lakhs or more shall appoint a sole selling agent except with the con- sent of the company accorded by a special resolution and the approval of the Central Government.

(4) The provisions of sub-sections (5), (6) and (7) of section 294 shall, so far as may be, apply to the sole selling, or the sole purchasing or buying, agents of a company.

(5) A company seeking approval under this section shall furnish such particulars as may be prescribed.

(6) Where an appointment has been made of a sole selling agent by a company before the commencement of the Companies (Amendment) Act, 1974, (41 of 1974.) and the appointment is such that it could not have been made except on the authority of a special resolution passed by the company and the approval of the Central Government, if sub-section

(2), sub-section (3) and sub-section (8), were in force at the time of such appointment, the company shall obtain s authority and approval within six months from such commencement. and if such authority and approval are not so obtained, the appointment of the sole selling agent shall stand terminated on the expiry of six months from such commencement.

(7) If the company in general meeting disapproves the appoint-

ment referred to in sub-section (3), such appointment shall, not-

withstanding anything contained in sub-section (6), cease to have effect from the date of the general meeting.

(8) The provisions of this section except those of sub-section

(1), shall apply so far as may be to the appointment by a company of a sole agent for the buying or purchasing of goods on behalf the company. Explanation.- In this section,- (a) "appointment" includes "re-appointment", 274 (b) "substantial interest"- (i) in relation to an individual, means the beneficial interest held by such individual or any of his relatives, whether singly or taken together, in the shares of the company, the aggregate amount paid-up on which exceeds five lakhs of rupees or five per cent. of the paid up share capital of the company, whichever is the lesser; (ii) in relation to a firm, means the beneficial inte- rest held by one or more partners of the firm or any relative of such partner, whether singly or taken toge- ther, in the shares of the company, the aggregate amount paid-up on which exceeds five lakhs of rupees or five per cent. of the paid-up share capital of the company whichever is the lesser; (iii) in relation to a body corporate, means the beneficial interest held by such body corporate or one or more of its directors or any relative of such director, whether singly or taken together, in the shares of the company, the aggregate amount paid-up on which exceeds five lakhs of rupees or five per cent. of the paid up share capital of the company, whichever is the lesser.]

Loans to directors, etc.

295.Loans to directors, etc. (1) Save as otherwise provided in

sub-section (2), no company (hereinafter in this section referred to as "the lending company") 1[without obtaining the previous approval of the Central Government in that behalf shall directly or indirectly,] make any loan to, or give any guarantee or provide any security in connection with a loan made by any other person to, or to any other person by,- (a) any director of the lending company or of a company which is its holding company or any partner or relative of any such director; ---------------------------------------------------------------------- 1 Subs. by Act 65 of 1960, s. 102, for certain words. ---------------------------------------------------------------------- 274A (b) any firm in which any such director or relative is a partner; (c) any private company of which any such director is a director or member; (d) any body corporate at a general meeting of which not less than twenty-five per cent. of the total voting power may be exercised or controlled by any such director, or by two or more such directors together; or (e) any body corporate, the Board of directors, managing director, managing agent, secretaries and treasurers, or manager whereof is accustomed to act in accordance with the directions or instructions of the Board, or of any director or directors, of the lending company.

1[(2) Sub-section (1) shall not apply to- (a) any loan made, guarantee given or security provided- (i) by a private company unless it is a subsidiary of a public company, or (ii) by a banking company; (b) any loan made- (i) by a holding company to its subsidiary,or (ii) by a company which is the managing agent or secretaries and treasurers of another company to that other company; (c) any guaranty given or security provided- (i) by a holding company in respect of any loan made to its subsidiary, or (ii) by a company which is the managing agent or secretaries and treasurers of another company in respect of any loan made to that other company.]

(3) Where any loan made, guarantee given or security provided by a lending company and outstanding at the commencement of this Act could not have been made, given or provided, without the previous approval of the Central Government, if this section had then been in force, the lending company shall, within six months from the commencement of this Act or such further time not exceeding six months as the Central Government may grant for that, purpose, --------------------------------------------------------------------

1 Subs. by Act 65 of 1960, s.102, for sub-section (2). --------------------------------------------------------------------- 274B either obtain the approval of the Central Government to the trans- action or enforce the repayment of the loan made, or in connection with which the guarantee was given or the security was provided, notwithstanding any agreement to the contrary.

(4) Every person who is knowingly a party to any contravention

of sub-section (1) or (3), including in particular any person to whom the loan is made or who has taken the loan in respect of which the guarantee is given or the security is provided, shall be punishable either with fine which may extend to five thousand rupees or with simple imprisonment for a term which may extend to six months: Provided that where any such loan, or any loan in connection with which any such guarantee or security has been given or provided by the lending company, has been repaid in full, no punishment by way of imprisonment shall be imposed under this sub-section; and where the loan has been repaid in part, the maximum punishment which may be imposed under this sub-section by way of imprisonment shall be proportionately reduced.

(5) All persons who are knowingly parties to any contravention

of sub-section (1) or (3) shall be liable, jointly and severally, to the lending company for the repayment of the loan or for making good the sum which the lending company may have been called upon the pay in virtue of the guarantee given or the security provided by such company.

(6) No officer of the lending company or of the borrowing body

corporate shall be punishable under sub-section (4) or shall incur the

liability referred to in sub-section (5) in respect of any loan made, guarantee given or security provided 1[after the 1st day of April

1956] in contravention of clause (d) or (e) of sub-section (1), unless at the time when the loan was made, the guarantee was given or the security was provided by the lending company, he knew or had express notice that that clause was being contravened thereby.

Application of section 295 to book debts in certain cases. 2[296.Application of section 295 to book debts in certain cases. Section 295 shall apply to any transaction represented by a book debt which was from its inception in the nature of a loan or an advance.] ----------------------------------------------------------------------- 1 Ins. by Act 65 of 1960, S. 102. 2 Subs. by s. 103, ibid., for s. 296. ----------------------------------------------------------------------- 274C

Board's sanction to be required for certain contracts in whichparticular directors are interested. 297.Board's sanction to be required for certain contracts in

which particular directors are interested. (1) Except with the consent of the Board of directors of a company, a director of the company or his relative, a firm in which such a director or relative is a partner, any other partner in such a firm, or a private company of which the director is a member or director, shall not enter into any contract with the company- (a) for the sale, purchase or supply of any goods, materials or services; or (b) after the commencement of this Act, for underwriting the subscription of any shares in, or debentures of, the company: 1 [Provided that in the case of a company having a paid-up share capital of not less than rupees one crore, no such contract shall be entered into except with the previous approval of the Central Government.]

2[(2) Nothing contained in clause (a) of sub-section (1) shall affect- (a) the purchase of goods and materials from the company or the sale of goods and materials to the company, by any director, relative, firm, partner or private company as aforesaid for cash at prevailing market prices; or (b) any contract or contracts between the company on one side and any such director, relative, firm, partner or private company on the other for sale, purchase or supply of an goods, materials and services in which either the company, or the director, relative, firm, partner or private company, as the case may be, regularly trades or does business : Provided that such contract or contracts do not relate to goods and materials the value of which, or services the cost which, exceeds five thousand rupees in the aggregate in any year comprised in the period of the contract or contracts; or (c) in the case of a banking or insurance company any tran- saction in the ordinary course of business of such ----------------------------------------------------------------------- 1 Ins. Act 41 of 1974, s. 28 (w.e.f.1-2-1975).

2 Subs. by Act 65 of 1960, s. 104, for subsection (2) to (5). --------------------------------------------------------------------- 275 company with any director, relative, firm, partner or private company as aforesaid.

(3) Notwithstanding anything contained in sub-sections (1) and

(2), a director, relative, firm, partner or private company as aforesaid may, in circumstances of urgent necessity, enter, without obtaining the consent of the Board, into any contract with the company for the sale, purchase or supply of any goods, materials or services even if the value of such goods or cost of such services exceeds five thousand rupees in the aggregate in any year comprised in the period of the contract ; but in, such a case, the consent of the Board shall be obtained at a meeting within three months of the date on which the contract was entered into.

(4) Every consent of the Board required under this section shall be accorded by a resolution passed at a meeting of the Board and not

otherwise; and the consent of the Board required under sub-section (1) shall not be deemed to have been given within the meaning of that sub- section unless the consent is accorded before the contract is entered into within three months of the date on which if was entered into.

(5) If consent is not accorded to any contract under this section, anything done in pursuance of the contract shall be voidable at the option of the Board.

(6) Nothing in this section shall apply to any case where the consent has been accorded to the contract before the commencement of the Companies Amendment) Act 1960.] (65 of 1960.)

Power of directors to carry on business when managing agent orsecretaries and treasurers are deemed to have vacated office, etc. 298.Power of directors to carry on business when managing agent or secretaries and treasurers are deemed to have vacated office, etc. Where in pursuance of any provisions contained in this Act, the managing agent or secretaries and treasurers of a company are deemed to have vacated or to have been suspended from office, or are removed or suspended from office, or cease to act or to be entitled to act as managing agent or secretaries and treasurers, or where a permanent or temporary vacancy has otherwise occurred in the office of managing agent or secretaries and treasurers, then 1* * * the Board of directors shall have power to carry on, or arrange for the carrying on of, the affairs of the company until the managing agent or secretaries and treasurers again become entitled to act as such, or until the company in general meeting resolves otherwise. --------------------------------------------------------------------- 1 The words "notwithstanding anything contained in this Act" omitted by Act 65 of 1960, s. 105. ---------------------------------------------------------------------- 276 Procedure, etc., where Director interested

Disclosure of interests by director.

299.Disclosure of interests by director. (1) Every director of a company who is in any way, whether directly or indirectly, concerned or interested in a contract or arrangement, or proposed contract or arrangement, entered into or to be entered into, by or on behalf of the company, shall disclose the nature of his concern or interest at a meeting of the Board of directors.

(2) (a) In the case of a proposed contract or arrangement,the

disclosure required to be made by a director under sub-section (1) shall be made at-the meeting of the Board at which the question of entering into the contract or arrangement is first taken into consideration, or if the director was not, at the date of that meeting, concerned or interested in the proposed contract or arrangement, at the first meeting of the Board held after he becomes so concerned or interested. (b) In the case of any other contract or arrangement, the required disclosure shall be made at the first meeting of the Board held after the director becomes concerned or interested in the contract or arrangement.

(3)(a) For the purposes of sub-sections (1) and (2), a general notice given to the Board by a director, to the effect that he is a director or a member of a specified body corporate or is a member of a specified firm and is to be regarded as concerned or interested in any contract or arrangement which may, after the date of the notice, be entered into with that body corporate or firm, shall be deemed to be a sufficient disclosure of concern or interest in relation to any contract or arrangement so made. (b) Any such general notice shall expire at the end of the financial year in which it is given, but may be renewed for further periods of one financial year at a time, by a fresh notice given in the last month of the financial year in which it would otherwise expire. (c) No such general notice, and no renewal thereof, shall be of effect unless either it is given at a meeting of the Board, or the director concerned takes reasonable steps to secure that it is brought upon and read at the first meeting of the Board after it is given.

(4) Every director who fails to comply with sub-section (1) or

(2) shall be punishable with fine which may extend to five thousand rupees. 277

(5) Nothing in this section shall be taken to prejudice the operation of any rule of law restricting a director of a company from having any concern or interest in any contracts or arrangements with the company.

1[(6) Nothing in this section shall apply to any contract or arrangement entered into or to be entered into between two companies where any of the directors of the one company or two or more of them together holds or hold not more than two per cent. of the paid-up share capital in the other company.]

Interested director not to participate or vote in Board's proceedings. 300.Interested director not to participate or vote in Board's

proceedings. (1) No director of a company shall, as a director, take any part in the discussion of, or vote on, any contract or arrangement entered into, or to be entered into, by or on behalf of the company, if he is in any way, whether directly or indirectly, concerned or interested in the contract or arrangement ; nor shall his presence count for the purpose oF forming a quorum at the time of any such discussion or vote ; and if he does vote, his vote shall be void.

(2) Sub-section (1) shall not apply to- (a) a private company which is neither a subsidiary nor a holding company of a public company; (b) a private company which is a subsidiary of a public company, in respect of any contract or arrangement entered into or to be entered into, by the private company with the holding company thereof ; (c) any contract of indemnity against any loss which the directors, or any one or more of them, may suffer by reason of becoming or being sureties or a surety for the company; (d) any contract or arrangement entered into or to be entered into with a public company, or a private company which is a subsidiary of a public company, in which the interest of the director aforesaid 2[consists solely- (i) in his being a director of such company and the holder of not more than shares of such number or value therein as is requisite to qualify him for appointment as a director thereof, he having been nominated as such ----------------------------------------------------------------------- 1 Ins. by Act 65 of 1960, s. 106. 2 Subs. by s. 107, ibid., for certain words. ----------------------------------------------------------------------- 278 .lm15

director by the company referred to in sub-section (1), or (ii) in his being a member holding not more than two per cent. of its paid-up share capital.] (e) a public company, or a private company which is a subsidiary of a public company, in respect of which a noti-

fication is issued under sub-section (3), to the extent specified in the notification.

(3) In the case of a public company or a private company which is a subsidiary of a public company, if the Central Government is of opinion that having, regard to the desirability of establishing or promoting any industry, business or trade, it would not be in the public interest to apply all or any of the prohibitions contained in

sub-section (1) to the company, the Central Government may, by notification in the Official Gazette, direct that that sub-section shall not apply to such company , or shall apply thereto subject to such exceptions, modifications and conditions as may be specified in the notification.

(4) Every director who knowingly contravenes the provisions of this section shall be punishable with fine which may extend to five thousand rupees.

Register of contracts, companies and firms in which directors areinterested. 301.Register of contracts, companies and firms in which directors

are interested. 1[(1) Every company shall keep one or more registers in which shall be entered separately particulars of all contracts or arrangements to which section 297 or section 299 applies, including the following particulars to the extent they are applicable in each case, namely: - (a) the date of the contract or arrangement; (b) the names of the parties thereto; (c) the principal terms and conditions thereof; (d) in the case of a contract to which section 297 applies or in the case of a contract or arrangement to which sub-

section (2) of section 299 applies, the date on which it was placed before the Board; (e) the names of the directors voting for and against the contract or arrangement and the names of those remaining neutral. ---------------------------------------------------------------------

1 Subs. by Act 65 of 1960, s. 108, for sub-section (1), (2) and (3). --------------------------------------------------------------------- 279

(2) Particulars of every such contract or arrangement to which

section 297 or, as the case may be, sub-section (2) of section 299 applies, shall be entered in the relevant register aforesaid- (a) in the case of a contract or arrangement requiring the Board's approval, within seven days (exclusive of public holidays) of the meeting of the Board at which the contract or arrangement is approved, (b) in the case of any other contract or arrangement, within seven days of the receipt at the registered office of the company of the particulars of such other contract or arrangement or within thirty days of the date of such other contract or arrangement whichever is later; and the register shall be placed before the next meeting of the Board and shall then be signed by all the directors present at the meeting.

(3) The register aforesaid shall also specify, in relation to each director of the company, the names of the firms and bodies corporate of which notice has been given by him under sub-section

(3) of section 299.

(3A) Nothing in sub-sections (1), (2) and (3) shall apply- (a) to any contract or arrangement for the sale, purchase or supply of any goods, materials or services if the value of such goods and materials or the cost of such services does not exceed one thousand rupees in the aggregate in any year; or (b) to any contract or arrangement (to which section 297 or, as the case may be, section 299 applies) by a banking company for the collection of bills in the ordinary course of its business or to any transaction referred to in clause

(c) of sub- section (2) of section 297.]

(4) If default is made in complying with the provisions of sub-

section (1), (2) or (3), the company, and every officer of the company who is in default, shall, in respect of each default, be punishable with fine which may extend to five hundred rupees.

(5) The register aforesaid shall be kept at the registered office of the company ; and it shall be open to inspection at such office and extracts may be taken therefrom and copies thereof may be required, by any member of the company to the same extent, in the same manner, and on payment of the same fee, as in the case of the register of members of the company; and the provisions of section 163 shall apply accordingly. 280

Disclosure to members of director's interest in contract appointingmanager, managing director, managing agent or secretaries andtreasurers. 302.Disclosure to members of director's interest in contract appointing manager, managing director, managing agent or secretaries

and treasurers. (1) Where a company- (a) enters into a contract for the appointment of a manager of the company, in which contract any director of the company is in any way, whether directly or indirectly, concerned or interested; or (b) varies any such contract already in existence and in which a director is concerned or interested as aforesaid; the company shall, within twenty-one days from the date of entering into the contract or of the varying of the contract, as the case may be, send to every member of the company an abstract of the terms of the contract or variation, together with a memorandum clearly specifying the nature of the concern or interest of the director in such contract or variation.

(2) Where a company enters into a contract for the appointment of a managing director of the company, or varies any such contract which is already in existence, the company shall send an abstract of the terms of the contract or variation to every member of the company

within the time specified in sub-section (1); and if any other director of the company is concerned or interested in the contract or variation, a memorandum clearly specifying the nature of the concern or interest of such other director in the contract or variation shall also be sent to every member of the company with the abstract aforesaid.

(3) Where a company proposes to enter into a contract for the appointment of a managing agent or of secretaries and treasurers, in which contract any director of the company is concerned or interested as aforesaid, or proposes to vary any such contract already in existence in which a director is concerned or interested as afore- said, the company shall send the abstract and memorandum referred to

in sub-section (2) to every member of the company, in sufficient time before the general meeting of the company at which the proposal is to be considered.

(4) Where a director becomes concerned or interested as afore-

said in any such contract as is referred to in sub-section (1), (2)

or (3) after it is made, the abstract and the memorandum, if any, referred to in the said sub-section shall be sent to every member of the company within twenty-one days from the date on which the director becomes so concerned or interested.

(5) If default is made in complying with the foregoing provisions of this section, the company, and every officer of the company who 281 is in default, shall be punishable with fine which may extend to one thousand rupees.

(6) All contracts entered into by a company for the appointment of a manager, managing director, managing agent or secretaries and treasurers, shall be kept at the registered office of the company ; and shall be open to the inspection of any member of the company at such office ; and extracts may be taken therefrom and copies thereof may be required by any such member, to the same extent, in the same manner and on payment of the same fee, as in the case of the register of members of the company ; and the provisions of section 163 shall apply accordingly.

(7) The provisions of this section shall apply in relation to any resolution 1* * * of the Board of directors of a company appoint- ing, a manager or a managing or whole-time director, or varying any previous contract or resolution of the company relating to the appointment of a manager or a managing or whole time director, as they apply in relation to any contract 2* * * for the like purpose. Register of Directors, etc.

Register of directors, managing agents, secretaries and treasurers,etc. 303.Register of directors, managing agents, secretaries and

treasurers, etc. (1) Every company shall keep at its registered office a register of its directors, managing director, managing agent, secretaries and treasurers, manager and secretary, containing with respect to each of them the following particulars, that is to say :- (a) in the case of an individual, his present name and surname in full; any former name or surname in full; 3[his father's name and surname in full or where the individual is a married woman, the husband's name and surname in full] his usual residential address; his nationality ; and, if that nationality is not the nationality of origin, his nationality of origin ; his business occupation, if any; if he holds the office of director, managing director, managing agent, manager or secretary in any other body, corporate, the particulars of each such office held by him ; and except in the case of a private company which is not a subsidiary of a public company, the date of his birth; (b) in the case of a body corporate, its corporate name and registered or principal office ; and the full name, address, ---------------------------------------------------------------------- 1 The words " or proposed resolution" omitted by Act 65 of 1960, s. 109. 2 The words "or proposed contract" omitted by s. 109, ibid. 3 Ins. by s. 110 ibid. ---------------------------------------------------------------------- 282 nationality, and nationality of origin,if different from that nationality 1[the father's name or where a director is a married woman, the husband's name] of each of its directors; and if it holds the office of managing agent, secretaries and treasurers, manager or secretary in any other body corporate, the particulars of each such office ; (c) in the case of a firm, the name of the firm, the full name, address, nationality, and nationality of origin, if different from that nationality 1[the father's name or where a partner is a married woman, the husband's name] of each partner; and the date on which each became a partner; and if the, firm holds the office of managing agent, secretaries and treasurers, manager or secretary in any other body corporate, the particulars of each such office; (d) if any director or directors have been nominated by a body corporate, its corporate name ; all the particulars referred to in clause (a) in respect of each director so nominated, and also all the particulars referred to in clause (b) in respect of the body corporate; (e) if any director or directors have been nominated by a firm, the name of the firm, all the particulars referred to in clause (a) in respect of each director so nominated, and also all the particulars referred to in clause (c) in respect of the firm. Explanation.-For the purposes of this sub-section-

(1) any person in accordance with 2 [whose directions or instructions], the Board of directors of a company is accustomed to act shall be deemed to be a director of the company;

(2) in the case of a person usually known by a title different from his surname, the expression " surname" means that title ; and

(3) references to a former name or surname do not include- (i) in the case of a person usually known by an Indian title different from his surname, the name by ----------------------------------------------------------------------- 1 Ins. by Act 65 of 1960, s. 110. 2 Subs. by s. 110, ibid. for "whose instructions". ----------------------------------------------------------------------- 283 which he was known previous to the adoption of, or .succession to, the title; (ii) in the case of any person, a former name or sur- name, where that name or surname was changed or disused before the person bearing the name attained the age of eighteen years, or has been changed or disused for a period of not less than twenty years ; and (iii) in the case of a married woman, the name or surname by which she was known previous to the marriage.

(2) The company shall, within the periods respectively mentioned in this sub-section, send to the Registrar 1[a return in duplicate in the prescribed form] containing the particulars specified in the said register and 2 [a notification in duplicate in the prescribed form] of any change among its directors, managing directors, managing agents, secretaries 3* * * and treasurers, managers or secretaries specifying the date of the change. The period within which the said return is to be sent shall be a period of 4[thirty] days from the appointment of the first directors of the company and the period within which the said notification of a change is to be sent shall be 4 [thirty] days from the happening thereof: 5* * * * *

(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 fifty rupees for every day during which the default continues.

Inspection of the register.

304.Inspection of the register. (1) The register kept under section 303 shall be open to the inspection of any member of the company without charge and of any other person on payment of one rupee for each inspection during business hours subject to such reasonable restrictions as the company may by its articles or in general meeting impose, so that not less than two hours in each day are allowed for inspection. ---------------------------------------------------------------------- 1 Subs. by Act 65 of 1960, s. 110, for " a return in the prescribed form". 2 Subs. by s.110, ibid for "a notification in the prescribed form" 3 The words " or in any of the particulars contained in the register " omitted by Act 31 of 1965, s. 41 (w.e.f. 15-10-1965). 4 Subs. by s. 62 and Sch., ibid., for "twenty-eight" (w.e.f. 15- 10-1965). 5 Proviso omitted by s. 41, ibid. (w.e.f. 15-10-1965). ------------------------------------------------------------------------ 284

(2) If any inspection required under sub-section (1) is refused,- (a) the company, and every officer of the company who is in default, shall be punishable with fine which may extend to fifty rupees ; and (b) the 1[Company Law Board] may, by order, compel an immediate inspection of the register.

Duty of directors. etc., to make disclosure.

2[305.Duty of directors. etc., to make disclosure. (1) Every director, managing director, managing agent, secretaries and treasurers, manager or secretary of any company, who is appointed to, or relinquishes, the office of director, managing director, managing agent, secretaries and treasurers, manager or secretary of any other body corporate, shall, within twenty days of his appointment to, or as the case may be, relinquishment of, such office, disclose to the company aforesaid the particulars relating to the office in the other

body corporate which are required to be specified under sub-section (1) of section 303 ; and if he fails to do so, he shall be punishable with fine which may extend to five hundred rupees.

(2) The provisions of sub-section (1) shall also apply to a person deemed to be a director of the company by virtue of the

Explanation to sub-section (1) of section 303 when such person is appointed to, or relinquishes, any of the offices in the other body

corporate referred to in sub-section (1).]

Register to be kept by Registrar and inspection thereof.

306.Register to be kept by Registrar and inspection thereof. (1) The Registrar shall keep a separate register or registers in which there shall be entered the particulars received by him under sub-

section (2) of section 303 in respect of companies, so however that all entries in respect of each such company shall be together.

(2) The register or registers aforesaid shall be open to inspection by any member of the public at any time during office hours, on payment of the prescribed fee. Register of Directors' Shareholdings

Register of directors', share holdings, etc.

307.Register of directors', share holdings, etc. (1) Every company shall keep a register showing, as respects each director of the company, the number, description and amount of any shares in, or debentures of, the company or any other body corporate, being the company's subsidiary or holding company, or a subsidiary of the company's holding company, which are held by him or in trust for him, or of Which he has any right to become the holder whether on payment or not. --------------------------------------------------------------------- 1 Subs. by Act 31 of 1988, s. 67 (w.e.f. 31.5.1991). 2 Subs. by Act 65 of 1960, s. 111, for s. 305. ---------------------------------------------------------------------- 285

(2) Where any shares or debentures have to be recorded in the said register or to be omitted therefrom, in relation to any director, by reason of a transaction entered into after the commencement of, this Act and while he is a director, the register shall also show the date of, and the price or other consideration for, the transaction: Provided that where there is an interval between the agreement for any such transaction and the completion thereof, the date so shown shall be that of the agreement.

(3) The nature and extent of any interest or right in or over any shares or debentures recorded in relation to a director in the said register shall, if he so requires, be indicated in the register.

(4) The company shall not, by virtue of anything done for the purposes of this section, be affected with notice of, or be put upon inquiry as to, the rights of any person in relation to any shares or debentures.

(5) The said register shall, subject to the provisions of this section, be kept at the registered office of the company, and shall be open to inspection during business hours (subject to such reasonable restrictions as the company may, by its articles or in general meeting, impose, so that not less than two hours in each day are allowed for inspection) as follows:- (a) during the period beginning fourteen days before the date of the company's annual general meeting and ending three days after the date of its conclusion, it shall be open to the inspection of any member or holder of debentures of the company; and (b) during that or any other period, it shall be open to the inspection of any person acting on behalf of the Central Government or of the Registrar. In computing the fourteen days and the three days mentioned in this sub-section, any day which is a Saturday, a Sunday or a public holiday shall be disregarded.

(6) Without prejudice to the rights conferred by sub-section

(5), the Central Government or the Registrar may, at any time require a copy of the said register, or any part thereof.

(7) The said register shall also be produced at the commencement of every annual general meeting of the company and shall remain open and accessible during the continuance of the meeting to any person having the right to attend the meeting. 286 If default is made in complying with this sub-section the company, and every officer of the company who is in default, shall be punish- able with fine which may extend to five hundred rupees.

(8)If default is made in complying with sub-section(1) or (2), or if any inspection required under this section is refused, or if any copy required thereunder is not sent within a reasonable time, 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 also with a further fine which may extend to twenty rupees for every day during which the default continues.

(9) In the case of any such refusal, the 1[Company Law Board] may also, by order, compel an immediate inspection of the register.

(10) For the purposes of this section- (a) any person in accordance with whose directions or instructions the Board of directors of a company is accustomed to act, shall be deemed to be a director of the company ; and (b) a director of a company shall be deemed to hold, or to have an interest or a right in or over, any shares or debentures, if a body corporate other than the company holds them or has that interest or right in or over them, and either- (i) that body corporate or its Board of directors is accustomed to act in accordance with his directions or instructions; or (ii) he is entitled to exercise or control the exercise of one-third or more of the total voting power exercis- able at any general meeting of that body corporate.

2[(11) The provisions of this section and section 308 shall apply to managing agents, secretaries and treasurers and managers as they apply to directors.]

Duty of directors and persons deemed to be directors to makedisclosure of share holdings. 308.Duty of directors and persons deemed to be directors to make

disclosure of share holdings. (1) Every director of a company, and every person deemed to be a director of the company by virtue of sub-

section (10) of section 307, shall give notice to the company of such matters relating to himself as may be necessary for the purpose of enabling the company to comply with the provisions of that section.

(2) Any such notice shall be given in writing, and if it is not given at a meeting of the Board, the person giving the notice shall ---------------------------------------------------------------------- 1 Subs. by Act 31 of 1988, s. 67 (w.e.f. 31-5-1991). 2 Ins. by Act 65 of 1960, s.112. --------------------------------------------------------------------- 287 take all reasonable steps to secure that it is brought up and read at the meeting of the Board next after it is given.

(3) Any person who fails to comply with sub-section (1) or (2) 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. Remuneration of Directors

Remuneration of directors.

309.Remuneration of directors. (1) The remuneration payable to the directors of a company, including any managing or whole-time director, shall be determined, in accordance with and subject to the provisions of section 198 and this section, either by the articles of the company, or by a resolution or, if the articles so require, by a special resolution, passed by the company in general meeting 1[and the remuneration payable to any such director determined as aforesaid shall be inclusive of the remuneration payable to such director for services rendered by him in any other capacity: Provided that any remuneration for services rendered by any such director in any other capacity shall not be so included if- (a) the services rendered are of a professional nature, and (b) in the opinion of the Central Government, the director possesses the requisite qualifications for the practice of, the profession].

2[(2) A director may receive remuneration by way of a fee for each meeting of the Board, or a committee thereof, attended by him: Provided that where immediately before the commencement of the Companies (Amendment) Act, 1960, (65 of 1960.) fees for meetings of the Board and any committee thereof, attended by a director are paid on a monthly basis, such fees may continue to be paid on that basis for a period of two years after such commencement or for the remainder of the term of office of such director, whichever is less, but no longer.

(3) A director who is either in the whole-time employment of the company or a managing director may be paid remuneration either by way of a monthly payment or at a specified percentage of the net profits of the company or partly by one way and partly by the other: Provided that except with the approval of the Central Government such remuneration shall not exceed five per cent. of the net profits ---------------------------------------------------------------------- 1 Ins. by Act 31 of 1965, s. 42 (w.e.f. 15-10-1965).

2 Subs. by Act 65 of 1960, s. 113, for sub-sections (2) and (3). ----------------------------------------------------------------------- 288 for one such director, and if there is more than one such director, ten per cent. for all of them together.]

1[(4) A director who is neither in the whole-time employment of the company nor a managing director may be paid remuneration- either (a) by way of a monthly, quarterly or annual payment with the approval of the Central Government; or (b) by way of commission if the company by special resolution authorises such payment: Provided that the remuneration paid to such director, or where there is more than one such director, to all of them together, shall not exceed- (i) one per cent. of the net profits of the company, if the company has a managing or whole-time director, a managing agent or secretaries and treasurers or a manager; (ii) three per cent. of the net profits of the company, in any other case: Provided further that the company in general meeting may, with the approval of the Central Government, authorise the payment of such remuneration at a rate exceeding one per cent. or, as the case may be, three per cent of its net profits.]

(5) The net profits referred to in sub-sections (3) and (4) shall be computed in the manner referred to in section 198, sub-

section (1). 2[(5A) If any director draws or receives, directly or indirectly, by way of remuneration any such sums in excess of the limit prescribed by this section or without the prior sanction of the Central Government, where it is required, he shall refund such sums to the company and until such sum is refunded, hold it in trust for the company. (5B) The company shall not waive the recovery of any sum refund- able to it under sub-section (5A) unless permitted by the Central Government.]

(6) No director of a company who is in receipt of any commission from the company and who is either in the whole-time employment ----------------------------------------------------------------------

1 Subs. by Act 31 of 1965, s. 42, for sub-section (4) (w.e.f. 15- 10-1965). 2 Ins. by Act 65 of 1960, S. 113. ---------------------------------------------------------------------- 289 of the company or a managing director shall be entitled to receive any commission or other remuneration from any subsidiary of such company.

(7) The special resolution referred to in sub-section (4) shall not remain in force for a period of more than five years; but may be renewed, from time to time, by special resolution for further periods of not more than five years at a time: Provided that no renewal shall be effected earlier than one year from the date on which it is to come into force.

(8) The provisions of this section shall come into force imme- diately on the commencement of this Act or, where such commencement does not coincide with the end of a financial year of the company, with effect from the expiry of the financial year immediately succeeding such commencement.

(9) The provisions of this section shall not apply to a private company unless it is a subsidiary of a public company.

Provision for increase in remuneration to require Government sanction. 310.Provision for increase in remuneration to require Government sanction. 1[In the case of a public company, or a private company which is a subsidiary of a public company, any provision relating to the remuneration of any director including a managing or wholetime director, or any amendment thereof, which purports to increase or has the effect of increasing, whether directly or indirectly, the amount thereof, whether that provision be contained in the company's memorandum or articles, or in an agreement entered into by it, or in any resolution passed by the company in general meeting or by its Board of director, 2[shall not have any effect-- (a) in case where Schedule XIII is applicable, unless such increase is in accordance with the conditions specified in that Schedule; and (b) in any other case, unless it is approved by the Central Government.] and the amendment shall become void if, and in so far as, it is disapproved by that Government.] 3[Provided that the approval of the Central Government shall not be required where any such provision or any amendment thereof purports to increase, or has the effect of increasing, the amount of such remuneration only by way of a fee for each meeting of the Board or a committee thereof attended by any such director and the amount of such fee after such increase does not exceed 2[such sum as may be prescri- bed: 4 [Provided further that where in the case of any private company which converts itself into a public company or becomes a public company under the provisions of section 43A, any provisions relating to the remuneration of any director including a managing or whole- time director as contained in its memorandum or articles or in any agreement entered into by it or in any resolution passed by it in general meeting or by its Board of directors includes a provisions for the payment of fee for each meeting of the Board or a Committee thereof attended by any such director which is in excess of the sum specified under the first proviso, such provision shall be deemed to be an increase in the remuneration of such director and shall not, after it ceases to be a private company, or as the case may be, becomes a public company, have any effect unless approved by the Central Government.] ----------------------------------------------------------------------- 1 Subs. by Act 65 of 1960, s. 114, for certain words. 2 Subs. by Act 31 of 1988, s.47 (w.e.f. 15-6-1988). 3 Added by Act 31 of 1965, s. 43 (w.e.f. 15-10-1965). 4 Ins. by Act 31 of 1988, s. 47 (w.e.f. 15.6.1988). ---------------------------------------------------------------------- 290

Increase in remuneration of managing director on re-appointment orappointment after Act to require Government sanction. 311.Increase in remuneration of managing director on re- appointment or appointment after Act to require Government sanction. In the case of a public company, or a private company which is a subsidiary of a public company, if the terms of any re-appointment or appointment of a managing or whole-time director, made after the commencement of this Act, purport to increase or have the effect of increasing, whether directly or indirectly, the remuneration which the managing or whole-time director or the previous managing or whole-time director, as the case may be, was receiving immediately before such re-appointment or appointment, the re-appointment or appointment 1[shall not have any effect-- (a) in cases where Schedule XIII is applicable, unless such increase is in accordance with the conditions specified in that Schedule; and (b) in any other case, unless it is approved by the Central Government;] and shall become void if, and in so far as, it is disapproved by that Government. Miscellaneous Provisions

Prohibition of assignment of office by directors. 312. Prohibition of assignment of office by directors. Any assignment of his office made after the commencement of this Act by any director of a company shall be void.

Appointment and term of office of alternate directors.

313.Appointment and term of office of alternate directors. (1) The Board of directors of a company may. it so authorised by its articles or by a resolution passed by the company in general meeting, appoint an alternate director to act for a director (hereinafter in this section called "the original director") during his absence for a period of not less than three months from the State in which meetings of the Board are ordinarily held.

2[(2) An alternate director appointed under sub-section (1) shall not hold office as such for a period longer than that permissible to the original director in whose place he has been appointed and shall vacate office if and when the original director returns to the State in which meetings of the Board are ordinarily held.]

(3) If the term of office of the original director is determined before he so returns to the State aforesaid, any provision for the automatic re-appointment of retiring directors in default of another appointment shall apply to the original, and not to the alternate, director. ------------------------------------------------------------------- 1 Subs. by Act 31 of 1988, s. 48 (w.e.f. 15.6.1988).

2 Subs. by Act 65 of 1960, s. 115, for sub-section(2). --------------------------------------------------------------------- 291

Director, etc., not to hold office or place of profit.

314.Director, etc., not to hold office or place of profit. 1[(1) Except with the 2[consent] of the company accorded by a special resolution,- (a) no director of a company shall hold any office or place of profit, and (b) 3[no partner or relative of such a director, no firm in which such director, or a relative of such director, is a partner, no private company of which such director is a director or member, and no director or manager of such a private company, shall hold any office or place of profit carrying a total monthly remuneration of 4[such sum as may be prescribed], except that of managing director or manager,] banker or trustee for the holders of debentures of the company,- (i) under the company; or (ii) under any subsidiary of the company, unless the remuneration received from such subsidiary in respect of such office or place of profit is paid over to the company or its holding company: 5[Provided that it shall be sufficient if the special resolution according the consent of the company is passed at the general meeting of the company held for the first time after the holding of such office or place of profit: Provided further that where a relative of a director or a firm in which such relative is a partner, is appointed to an office or place of profit under the company or a subsidiary thereof without the knowledge of the director, the consent of the company may be obtained either in the general meeting aforesaid or within three months from the date of the appointment, whichever is later.] Explanation.-For the purpose of this sub-section, a special reso- lution according consent shall be necessary for every appointment in the first instance to an office or place of profit and to every subse- quent appointment to such office or place of profit on a higher ----------------------------------------------------------------------

1 Subs. by Act 65 of 1960, s. 116, for sub-section (1). 2 Subs. by Act 31 of 1965, s. 44, for "previous consent" (w.e.f. 15-10-1965). 3 Subs, by Act 41 of 1974, s. 29, for certain words (w.e.f. 1-2- 1975). 4 Subs. by Act 31 of 1988, s. 49 (w.e.f. 15.6.1988). 5 Subs. by Act 31 of 1965, s. 44, for proviso (w.e.f. 15-10- 1965). ---------------------------------------------------------------------- 292 remuneration not covered by the special resolution, except where an appointment on a time scale has already been approved, by the special resolution.

(1A) Nothing in sub-section (1) shall apply where a relative of a director or a firm in which such relative is a partner holds any office or place of profit under the company or a subsidiary thereof having been appointed to such office or place before such director becomes a director of the company.]

1[(1B) Notwithstanding anything contained in subsection (1),-- (a) no partner or relative of a director or manager, (b) no firm in which such director or manager, or, relative of either, is a partner, (c) no private company of which such a director or manager. or relative of either, is a director or member, shall hold any office or place of profit in the company which carries a total monthly remuneration of not less than 2[such as may be prescribed] except with the prior consent of the company by a special resolution and the approval of the Central Government; 3* * * * *

4[(2) 5[(a)] If any office or place of profit is held in

contravention of the provisions of sub-section (1) the director, partner, relative, firm, private company, managing agent, secretaries and treasurers or the manager, concerned, shall be deemed to have vacated his or its office as such on and from the date next following the date of the general meeting of the company referred to in the first proviso or, as the case may be, the date of the expiry of the period of three months referred to in the second proviso to that sub-section, and shall also ---------------------------------------------------------------------- 1 Ins. by Act 41 of 1974, s. 29 (w.e.f. 1-2-1975). 2 Subs. by Act 31 of 1988, s.49 (w.e.f. 15-6-1988). 3 Omitted by s.49, ibid.

4 Subs. by Act 31 of 1965, s. 44, for sub-section (2) (w.e.f. 15- 10-1965).

5 Sub-section (2) relettered at cl. (a) by Act 41 of 1974, s. 29 (w.e.f. 1-2-1975), ------------------------------------------------------------------------ 292A be liable to refund to the company any remuneration received or the monetary equivalent of any perquisite or advantage enjoyed by him or it for the period immediately preceding the date aforesaid in respect of such office or place of profit.] 1[(b) The company shall not waive the recovery of any sum refundable to it under clause (a) unless permitted to do so by the Central Government.] 2[(2A) Every individual, firm, private company or other body corporate proposed to be appointed to any office or place of profit to which this section applies shall, before or at the time of such appointment, declare in writing whether he or it is or is not connected with a director of the company in any of the ways referred

to in subsection (1).] 1[(2B) If, after the commencement of the Companies (Amendment) Act, 1974, (41 of 1974.) any office or place of profit is held, without the prior consent of the company by a special resolution and the approval of the Central Government, the partner, relative, firm or private company appointed to such office or place of profit shall be liable to refund to the company any remuneration received or the monetary equivalent of any perquisite or advantage enjoyed by him on and from the date on which the office was so held by him. (2C) If any office or place of profit is held in contravention of the provisions of the proviso to sub-section (1B), the director, partner, relative, firm, private company or manager concerned shall be deemed to have vacated his or its office as such on and from the expiry of six months from the commencement of the Companies (Amend- ment) Act, 1974, (41 of 1974.) or the date next following the date of the general meeting of the company referred to in the said proviso, whichever is earlier, and shall be liable to refund to the company any remuneration received or the monetary equivalent of any perquisite or advantage enjoyed by him or it for the period immediately preceding the date aforesaid in respect of such office or place of profit. (2D) The company shall not waive the recovery of any sum refundable to it under sub-section (2B) 3* * * unless permitted to do so by the Central Government.] ----------------------------------------------------------------------- 1 Ins. by Act 41 of 1974, s. 29 (w.e.f. 1-2-1975). 2 Ins. by Act 65 of 1960, s. 116. 3 Omitted by Act 31 of 1988, s.49 (w.e.f. 15.6.1988). --------------------------------------------------------------------- 292B

(3) Any office or place 1* * * shall be deemed to be an office or place of profit under the company 2[within the meaning of this section],- (a) in case the office or place is held by a director, if the director holding it 3[obtains from the company anything] by way of remuneration over and above the re- muneration to which he is entitled as such director whether as salary, fees, commission, perquisites, the right to occupy free of rent any premises as a place of residence, or otherwise; (b) in case the office or place is held by an individual other than a director or by any firm, private company or other body corporate, if the individual, firm, private company or body corporate holding it 3[obtains from the company anything] by way of remuneration whether as salary fees, commission, perquisites, the right to occupy free of rent any premises as a place of residence, or otherwise.

4[(4) Nothing in this section shall apply to a person, who being the holder of any office of profit in the company, is appointed by the Central Government, under section 408, as a director of the company.] Restrictions on appointment of managing directors

[Application of sections 316 and 317.] 315. [Application of sections 316 and 317.] Rep. by the Companies (Amendment) Act, 1960 (65 of 1960), s. 117. ---------------------------------------------------------------------- 1 The words "in a company" omitted by Act 65 of 1960, s. 116. 2 Subs. by Act 41 of 1974, s. 29, for certain words (w.e.f. 1-2- 1975). 3 Subs. by Act 65 of 1960, s. 116, for "obtains anything". 4 Ins. by Act 41 of 1974, s. 29 (w.e.f. 1-2-1975). --------------------------------------------------------------------- 293

Number of companies of which one person may be appointed managingdirector. 316.Number of companies of which one person may be appointed

managing director. (1) 1[No public company and no private company which is a subsidiary of a public company] shall, after the commencement of this Act, appoint or employ any person as managing director, if he is either the managing director or the manager of 2[any other company (including a private company which is not a subsidiary of a public company)], except as provided in sub-section

(2).

(2) 3[A public company or a private company which is a subsidiary of a public company] may appoint or employ a person as its managing director, if he is the managing director or manager of one, and of not more than one , 4 [other company (including a private company which is not a subsidiary of a public company) ] : Provided that such appointment or employment is made or approved by a resolution passed at a meeting of the Board with the consent of all the directors present at the meeting and of which meeting, and of the resolution to be moved thereat, specific notice has been given to all the directors then in India.

(3)Where, at the commencement of this Act, any person is holding the office either of managing director or of manager in more than 5[two companies of which each one or at least one is a public company or a private company which is a subsidiary of a public company], he shall, within one year from the commencement of 6[the Companies (Amendment) Act, 1960], (65 of 1960.) choose not more than two of those companies as companies in which he wishes to continue to hold the office of managing director or manager, as the case may be; and

the provisions of clauses (b) and (c) of sub-section (1) and of sub-

sections (2) and (3) of section 276 shall apply mutatis mutandis in relation to this case, as those provisions apply in relation to the case of a director.

(4) Notwithstanding anything contained in sub-sections (1) to

(3), the Central Government may, by order, permit any person to be appointed as a managing director of more than two companies if the Central Government is satisfied that it is necessary that the companies should, for their proper working, function as a single unit and have a common managing director. ----------------------------------------------------------------------- 1 Subs. by Act 65 of 1960, s. 118, for "No company". 2 Subs. by s. 118, ibid., for "any other company". 3 Subs. by s. 118, ibid., for "A company". 4 Subs. by s. 118, ibid., for " other company". 5 Subs. by s. 118, ibid., for "two companies". 6 Subs. by s. 118, ibid., for "this Act". ----------------------------------------------------------------------- 294

Managing director not to be appointed for more than five years at atime. 317 Managing director not to be appointed for more than five

years at a time. (1) No company shall, after the commencement of this Act, appoint or employ any individual as its managing director for a term exceeding five years at a time.

(2) Any individual holding at the commencement of this Act the office of managing director in a company shall, unless his term expires earlier, be deemed to have vacated his office immediately on the expiry of five years from the commencement of this Act.

(3) Nothing contained in sub-section (1) shall be deemed to prohibit the re-appointment, re-employment, or the extension of the term of office, of any person by further periods not exceeding five years on each occasion: Provided that any such re-appointment, re-employment or extension shall not be sanctioned earlier than two years from the date on which it is to come into force.

1[(4) This section shall not apply to a private company unless it is a subsidiary of a public company.] Compensation for loss of office

Compensation for loss of office not permissible except to managing orwhole-time directors or to directors who are managers. 318. Compensation for loss of office not permissible except to

managing or whole-time directors or to directors who are managers. (1) Payment may be made by a company, except in the cases specified in

sub-section (3) and subject to the limit specified in sub-section (4), to a managing director, or a director holding the office of manager or in the whole-time employment of the company, by way of compensation for loss of office, or as consideration for retirement from office, or in connection with such loss or retirement.

(2) No such payment shall be made by the company to any other director.

(3) No payment shall be made to a managing or other director in

pursuance of sub-section (1), in the following cases, namely:- (a) where the director resigns his office in view of the reconstruction of the company, or of its amalgamation with any other body corporate or bodies corporate, and is appointed as the managing director, managing agent, 2* * * manager or other officer of the reconstructed company or of the body corporate resulting from the amalgamation; (b) where the director resigns his office otherwise than on the reconstruction of the company or its amalgamation as aforesaid; ------------------------------------------------------------------------ 1 Ins. by Act 65 of 1960, s. 119. 2 The words " secretaries and treasurers " omitted by s. 120, ibid. ----------------------------------------------------------------------- 295 (c) where the office of the director is vacated by virtue of section 203, 1* * * or any of the clauses (a) to 2[(l)],

of sub-section (1) of section 283 ; (d) where the company is being wound up, whether by or subject to the supervision of the Court or voluntarily, provided the winding up was due to the negligence or default of the director; (e) where the director has been guilty of fraud or breach of trust in relation to, or of gross negligence in or gross mismanagement of, the conduct of the affairs of the company or any subsidiary or holding company thereof ; (f) where the director has instigated, or has taken part directly or indirectly in bringing about, the termination of his office.

(4) Any payment made to a managing or other director in pur-

suance of sub-section (1) shall not exceed the remuneration which he would have earned if he had been in office for the unexpired residue of his term or for three years, whichever is shorter, calculated on the basis of the average remuneration actually earned by him during a period of three years immediately preceding the date on which he ceased to hold the office, or where he held the office for a lesser period than three years, during such period: Provided that no such payment shall be made to the director in the event of the commencement of the winding up of the company, whether before, or at any time within twelve months after, the date on which he ceased to hold office, if the assets of the company on the winding up, after deducting the expenses thereof, are not sufficient to repay to the shareholders the share capital (including the pre- miums, if any,) contributed by them.

(5) Nothing in this section shall be deemed to prohibit the pay- ment to a managing director, or a director holding the office of manager, of any remuneration for services rendered by him to the company in any other capacity.

Payment to director, etc., for loss of office, etc., in connectionwith transfer of undertaking or property. 319. Payment to director, etc., for loss of office, etc., in

connection with transfer of undertaking or property. (1) No director of a company shall, in connection with the transfer of the whole or any part of any undertaking or property of the company, receive any payment, by way of compensation for loss ------------------------------------------------------------------- 1 The word and figures "section 280 "omitted by Act 31 of 1965, s. 45 (w.e.f. 15-10-1965). 2 Subs. by Act 65 of 1960, s. 120, for "(k),". ---------------------------------------------------------------------- 296 of office, or as consideration for retirement from office, or in connection with such loss or retirement- (a) from such company; or (b) from the transferee of such undertaking or property or from any other person (not being such company), unless particulars with respect to the payment proposed to be made by such transferee or person (including the amount thereof) have been disclosed to the members of the company and the proposal has been approved by the company in general meeting.

(2) Where a director of a company receives payment of any amount

in, contravention of sub-section (1), the amount shall be deemed to have been received by him in trust for the company.

(3) Sub-sections (1) and (2) shall not affect in any manner the operation of section 318.

Payment to director for loss of office, etc., in connection withtransfer of shares. 320. Payment to director for loss of office, etc., in connection

with transfer of shares. (1) No director of a company shall, in connection with the transfer to any persons of all or any of the shares in a company, being a transfer resulting from- (i) an offer made to the general body of shareholders; (ii) an offer made by or on behalf of some other body corporate with a view to the company becoming a subsidiary of such body corporate or a subsidiary of its holding company; (iii) an offer made by or on behalf of an individual with a view to his obtaining the right to exercise, or control the exercise of, not less than one-third of the total voting power at any general meeting of the company; or (iv) any other offer which is conditional on acceptance to a given extent; receive any payment by way of compensation for loss of office, or as consideration for retirement from office, or in connection with such loss or retirement,- (a) from such company; or (b) except as otherwise provided in this section, from the transferees of the shares or from any other person (not being such company).

(2) In the case referred to in clause (b) of sub-section (1), It shall be the duty of the director concerned to take all reasonable steps to 296A secure that particulars with respect to the payment proposed to be made by the transferees or other person (including the amount thereof) are included in, or sent with, any notice of the offer made for their shares which is given to any shareholders.

(3) If- (a) any such director fails to take reasonable steps as aforesaid; or (b) any person who has been properly required by any such director to include the said particulars in, or send them with, any such notice as aforesaid fails so to do; he shall be punishable with fine which may extend to two hundred and fifty rupees.

(4) If-

(a) the requirements of sub-section (2) are not complied with in relation to any such payment as is governed by clause

(b) of sub-section (1) ; or (b) the making of the proposed payment is not, before the transfer of any shares in pursuance of the offer, approved by a meeting, called for the purpose, of the holders of the shares to which the offer relates and other holders of shares of the same class (other than shares already held at the date of the offer by, or by a nominee for, the offeror, or where the offeror is a company, by, or by a nominee for, any subsidiary thereof) as any of the said shares; any sum received by the director on account of the payment shall be deemed to have been received by him in trust for any persons who have sold their shares as a result of the offer made, and the expenses incurred by him in distributing that sum amongst those persons shall be borne by him and not retained out of that sum. 297

(5) If at a meeting called for the purpose of approving any pay-

ment as required by clause (b) of sub-section (4), a quorum is not present and, after the meeting has been adjourned to a later date, a quorum is again not present, the payment shall, for the purposes of that sub-section, be deemed to have been approved.

Provisions supplementary to section 318, 319 and 320. 321. Provisions

supplementary to section 318, 319 and 320. (1)Where in proceedings for the recovery of any payment as having, byvirtue

Directors, etc., with unlimited liability in limited company. 322. Directors, etc., with unlimited liability in limited

company. (1) In a limited company, the liability of the directors or of any director or of the managing agent, secretaries and treasurers or manager may, if so provided by the memorandum be unlimited.

(2) In a limited company in which the liability of a director, managing agent, secretaries and treasurers or manager is unlimited, the directors, the managing agent, secretaries and treasurers and the manager of the company, and the member who proposes a person for appointment to the office of director, managing agent, secretaries and treasurers or manager, shall add to that proposal a statement that the liability of the person holding that office will be unlimited; and before the person accepts the office or acts therein, notice in writing that his liability will be unlimited, shall be given to him by the following or one of the following persons, namely, the promoters of the company, its directors, its managing agent, secretaries and treasurers or manager, if any, and its officers.

(3) If any director, managing agent, secretaries and treasurers, manager or proposer makes default in adding such a statement, or if any promoter, director, managing agent, secretaries and treasurers, manager or officer of the company makes default in giving such a notice, he shall be punishable with fine which may extend to one thousand rupees and shall also be liable for any damage which the person so appointed may sustain from the default; but the liability of the person appointed shall not be affected by the default.

Special resolution of limited company making liability of directors,etc., unlimited. 323. Special resolution of limited company making liability of

directors, etc., unlimited. (1) A limited company may, if so authorised by its articles, by special resolution, alter its memorandum so as to render unlimited the liability of its directors or of any director or of its managing agent, secretaries and treasurers or manager.

(2) Upon the passing of any such special resolution, the provisions thereof shall be as valid as if they had been originally contained in the memorandum: Provided that no alteration of the memorandum making the

liability of any of the officers referred to in sub-section (1) unlimited shall apply to such officer, if he was holding the office from before the date of the alteration, until the expiry of his then term, unless he has accorded his consent to his liability becoming unlimited.

CHAP Prohibition of appointment of managing agent in certain cases CHAPTER III.-MANAGING AGENTS Prohibition of appointment of managing agent in certain cases

Power of Central Government to notify that companies engaged inspecified classes of industry or business shall not have managingagents. 324. Power of Central Government to notify that companies engaged in specified classes of industry or business shall not have managing

agents. (1) Subject to such rules as may be prescribed in this behalf, the Central Government may, by notification in the Official Gazette, declare that, as from such date as may be specified in the

notification, the provisions of sub-section (2) shall apply to all companies, whether incorporated before or after the commencement of this Act, which are engaged on that date or may thereafter be engaged, wholly or in part, in such class or description of industry or business as may be specified in the notification.

(2) Thereupon,-- (a) where any such company has a managing agent on the specified date, the term of office of that managing agent shall, if it does not expire earlier, expire at the end of three years from the specified date, or on the 15th day of August, 1960, whichever is later; and the company shall not re-appoint or appoint the same or any other managing agent; and (b) where any such company has no managing agent on the specified date, or where it is incorporated on or after that date, it shall not appoint a managing agent.

(3) Copies of all rules prescribed under sub-section (1) shall, as soon as may be after they have been prescribed, be laid before both Houses of Parliament.

(4) A copy of every notification proposed to be issued under

sub-section (1) shall be laid in draft before both Houses of Parliament for a period of not less than thirty days while they are in session; and if, within that period, either House disapproves of the issue of the notification or approves of such issue only with modifications, the notification shall not be issued or, as the case may require, shall be issued only with such modifications as may be agreed on by both the Houses. 324A Abolition of managing agencies and secretaries and treasurers. 1[324A. Abolition of managing agencies and secretaries and

treasurers. (1) Notwithstanding anything contained in any other provision of this Act or in the memorandum or articles of association or in any contract to the contrary, where any company has, on the 3rd day of April, 1970, a managing agent or secretaries and treasurers, the term of office of such managing agent or, as the case may be, the secretaries and treasurers shall expire, if it does not expire earlier, on that date.

(2) No company shall appoint or re-appoint any managing agent or secretaries and treasurers on or after the 3rd day of April, 1970.] ---------------------------------------------------------------------- 1 Ins. by Act 17 of 1969, s. 4. ---------------------------------------------------------------------- 300

Managing agency company not to have managing agent.

325. Managing agency company not to have managing agent. (1) No company acting as the managing agent of any other company shall, after the commencement of this Act, appoint a managing agent for itself, whether it transacts any other kind of business in addition or not.

(2) No company having a managing agent shall, after the commencement of this Act, be appointed as the managing agent of any other company.

(3) Any appointment of managing agent made in contravention of

sub-section (1) or (2) shall be void.

(4) Where at the commencement of this Act a company having a managing agent is itself acting as a managing agent of any other company, the term of office of the company first-mentioned as managing agent of the other company shall, if it does not expire earlier in accordance- with the provisions applicable thereto immediately before such commencement (including any provisions contained in the Indian Companies Act, 1913 (7 of 1913), expire on the 15th day of August,

325A Subsidiary of a body corporate not to be appointed as managing agent. 1[325A. Subsidiary of a body corporate not to be appointed as managing agent. After the commencement of the Companies (Amendment) Act, 1960, (65 of 1960.) no company shall appoint as its managing agent any body corporate which is a subsidiary either of itself or of any other body corporate unless immediately before such commencement the company has any such subsidiary as its managing agent.] Appointment and term of office

Central Government to approve of appointment etc., of managing agent;and circumstances in which approval may be accorded. 326. Central Government to approve of appointment etc., of managing agent; and circumstances in which approval may be accorded.

(1) In respect of any company to which neither the prohibition specified in section 324 nor that specified in section 325 applies, a managing agent shall not be appointed or re-appointed,- (a) except by the company in general meeting; and (b) unless the approval of the Central Government has been obtained for such appointment or re-appointment.

(2) The Central Government shall not accord its approval under

subsection (1) in any case, unless it is satisfied- (a) that it is not against the public interest to allow the company to have a managing agent; ---------------------------------------------------------------------- 1 Ins. by Act 65 of 1960, s. 121. ----------------------------------------------------------------------- 300A. (b) that the managing agent proposed is, in its opinion, a fit and proper person to be appointed or re-appointed as such, and that the conditions of the managing agency agreement proposed are fair and reasonable; and (c) that the managing agent proposed has fulfilled any conditions which the Central Government requires him to fulfil.

Application of sections 328 to 331. 327. Application of sections 328 to 331. The provisions of sections 328 to 331 shall apply to- (a) a public company; (b) a private company which is a subsidiary of a public company; and 301 (c) a private company which is not a subsidiary of a public company, unless the Central Government, by general or special order, specifically exempts the private company.

Term of office of managing agent.

328.Term of office of managing agent. (1)After the commencement of this Act, no company shall- (a) in case it appoints a managing agent for the first time (that is to say, in case the company has had no managing agent at any time since its formation), make the appointment for a term exceeding fifteen years; (b) in any other case, re-appoint or appoint a managing agent for a term exceeding ten years at a time; (c) re-appoint a managing agent for a fresh term, when the existing term of the managing agent has two years or more to run: Provided that the Central Government may, if satisfied that it is in the interest of the company so to do, permit the re-appointment of a managing agent at an earlier time than that specified in clause (c).

(2) For the purpose of sub-section (1), re-appointment does not include the re-appointment of any person on fresh, additional or changed conditions for any period not extending beyond his existing term, but otherwise includes- (a) the renewal, or the extension of the term, of a previous appointment ;and (b) the appointment of any person or persons having an interest in the previous managing agency.

(3) Any appointment or reappointment of a managing agent, made

in contravention of the provisions of sub-sections (1) and (2) shall be void in respect of the entire term for which the appointment or re-appointment is made. Variation of Managing Agency Agreement

Variation of managing agency agreement. 329.Variation of managing agency agreement. A resolution of the company in general meeting shall be required for varying the terms of a managing agency agreement; and before such a resolution is passed, the previous sanction of the Central Government shall be obtained therefor. Special provisions regarding existing managing agents

Term of office of existing managing agents to terminate on 15thAugust,

330.Term of office of existing managing agents to terminate on 15th August, 1960. Where a company has a managing agent at the commencement of this Act, the term of office of such managing agent shall, 302 if it does not expire earlier in accordance with the provisions appli- cable thereto immediately before such commencement [including any provisions contained in the Indian Companies Act, 1913], (7 of 1913.) expire on the 15th day of August, 1960, unless before that date he is reappointed for a fresh term in accordance with any provision con- tained in this Act.

Application of Act to existing managing agents. 331. Application of Act to existing managing agents. All provisions of this Act, other than those relating to the term for which the office can be held, shall apply to every managing agent holding office at the commencement of this Act, with effect from such commencement. Restrictions on Number of Managing Agencies

No person to be managing agent of more than ten companies after 15thAugust,

332. No person to be managing agent of more than ten companies

after 15th August, 1960. (1) After the 15th day of August, 1960, no person shall, at the same time, hold office as managing agent in more than ten companies.

(2) Where a person holding office as managing agent in more than

ten companies before that date fails to comply with sub-section (1), the Central Government may permit him to hold office as managing agent with effect from that date in respect of such of those companies, not exceeding ten in number, as it may determine.

(3) In calculating the number of companies of which a person may be a managing agent in pursuance of this section, the following companies shall be excluded, namely:- (a) a private company which is neither a subsidiary nor a holding company of a public company; (b) an unlimited company; (c) an association which does not carry on business for profit, or which prohibits the payment of a dividend.

(4) For the purposes of this section, each of the following persons shall also be deemed to hold office as managing agent of the company :- (a) where the managing agent of the company is a firm, every partner in the firm; 1[(b) where the managing agent of the company is itself a company, every person who is a director, the secretaries and treasurers or a manager of the latter company, and where the latter company is a public company, every member who is entitled to exercise not less than ten per --------------------------------------------------------------------- 1 Subs. by Act 65 of 1960, s. 122, for cl. (b). ----------------------------------------------------------------------- 303 cent. of the total voting power therein and, where the latter company is a private company, every member thereof who is entitled to exercise not less than five per cent. of the total voting power therein.] 1[(4A) A director or member referred to in clause (b) of sub-

section (4) shall include any person in accordance with whose direc- tions or instructions any director or, as the case may be, any member is in the opinion of the Central Government accustomed to act.]

(5) Any person who acts as a managing agent of more than ten companies in contravention of this section shall be punishable with fine which may extend to one thousand rupees in respect of each of those companies in excess of ten, for each day on which he so acts. Right to charge on assets

Right of managing agent to charge on company's assets. 333. Right of managing agent to charge on company's assets. A managing agent whose office stands terminated under section 324 or 332 shall be entitled to a charge on the assets of the company in respect of all moneys which are due to him from the company at the date of such termination, or which he may have to pay after that date in respect of any liability or obligation properly incurred by him on behalf of the company before such date, subject to all existing charges and incumbrances, if any, on such assets. Vacation of Office, Removal and Resignation

Vacation of office on insolvency, dissolution or winding up, etc. 334. Vacation of office on insolvency, dissolution or winding up, etc. Subject to the provisions of section 340, the managing agent of a company shall be deemed to have vacated his office as such-, (a) in case the managing agent is an individual, if he is adjudged an insolvent; (b) in the same case, if the managing agent applies to be adjudicated an insolvent; (c) In case the managing agent is a firm, on its dissolution from any cause whatsoever, including the insolvency of a partner in the firm; (d) in case the managing agent is a body corporate, on the commencement of its winding up whether by or subject to the supervision of the Court, or voluntarily ; (e) in all cases, on the commencement of the winding up of the company managed by the managing agent, whether by or subject to the supervision of the Court or voluntarily. ----------------------------------------------------------------------- 1 Ins. by Act 65 of 1960, s. 122. ----------------------------------------------------------------------

Suspension from office where receiver appointed.

335. Suspension from office where receiver appointed. (1) The managing agent of a company shall be deemed to have been suspended from his office as such, if a receiver is appointed for his property- (a) by a Court, or (b) by or on behalf of the creditors of the managing agent, including the holders of debentures issued by the managing agent, in pursuance of any power conferred by an instrument executed by the managing agent: Provided that the Court which appointed the receiver, or which will have jurisdiction to wind up the managed company, as the case may be, may, by order, direct that the managing agent shall continue to act as such for such period and subject to such restrictions and conditions, if any, as may be specified in the order.

(2) The Court may, at any time, cancel or vary any order passed

by it under the proviso to sub-section (1).

Vacation of office on conviction in certain cases. 336. Vacation of office on conviction in certain cases. Subject to the provisions of sections 340 and 341, the managing agent of a company shall also be deemed to have vacated his office as such, if- (a) the managing agent; (b) in case the managing agent is a firm, any partner in the firm ; or (c) in case the managing agent is a body corporate, any director of, or any officer holding a general power of attorney from, such body corporate; is convicted by a Court in India, after the commencement of this Act, of any offence, and sentenced therefor to imprisonment for a period of not less than six months.

Removal for fraud or breach of trust. 337. Removal for fraud or breach of trust. A company in general meeting may, by ordinary resolution, remove its managing agent from office- (i) for fraud or breach of trust in relation to the affairs of the company or of any subsidiary or holding company thereof, whether committed before or after the commencement of this Act; (ii) for fraud or breach of trust, whether committed before or after such commencement, in relation to the affairs of any other body corporate, if a Court of Law, whether in or outside India, finds such fraud or breach of trust to have been duly established ; or 305 (iii) subject to the provisions of sections 340 and, 341, where the managing agent is a firm or body corporate, if any partner in the firm, or any director of, or any officer holding a general power of attorney from, the body corporate is guilty of any such fraud or breach of trust as is referred to in clause (i).

Removal for gross negligence or mismanagement. 338. Removal for gross negligence or mismanagement. A company in general meeting may, by special resolution,, remove its managing agent from office for gross negligence in, or for gross mismanagement of, the affairs of the company or of any subsidiary thereof.

Power to call meetings for the purposes of sections 337 and 338 andprocedure. 339. Power to call meetings for the purposes of sections 337 and

338 and procedure. (1) Without prejudice to any other provision contained in this Act or in the articles of the company for the calling of meetings, any two directors of the company may call a general meeting of the company for the purpose of considering any resolution of the nature referred to in section 337 or 338.

(2) On receipt of notice of any such resolution, a copy of the resolution shall be sent forthwith to the managing agent by the company.

(3) The managing agent shall have, in relation to any such resolution, all the rights which a director of the company has under section 284 in relation to any resolution for removing him from office, including, in particular, the right to make representations to the company in writing, to have such representations sent to members of the company and to have them read out at the meeting and also the right to be heard on the resolution at the meeting.

Time when certain in disqualifications will take effect.

340. Time when certain in disqualifications will take effect. (1) The disqualifications imposed by clause (a) of section 334, by sub-

section (1) of section 335, by section 336, and by any resolution passed in pursuance of clause (ii) of section 337, shall not take effect- (a) for thirty days from the date of the order of adjudication, appointment of the receiver, sentence, or finding of the Court as the case may be, or (b) where any appeal or petition is preferred within the thirty days aforesaid against the order, appointment, sentence or conviction resulting in the sentence, or finding, until the expiry of seven days from the date on which such appeal or petition is disposed of, or (c) where within the seven days aforesaid, any further appeal or petition is preferred in respect of the order, appoint-

ment, sentence, conviction or finding, as the case may be, and the appeal or petition, if allowed, would result in the removal of the disqualification, or in making the resolution inapplicable, as the case may be, until such further appeal or petition is disposed of.

(2) In the cases referred to in sub-section (1), the Board may suspend the managing agent from office immediately on, or at any time after, the adjudication, appointment, sentence or finding referred to in clause (a) of that sub-section and until the disposal of the appeals and petitions, if any, referred to in clauses (b) and (c) thereof, or until the convicted partner, director or officer is expelled or dismissed in pursuance of section 341, as the case may be.

Conviction not to operate as disqualification if convicted partner, 341. Conviction not to operate as disqualification if convicted

partner, director, etc., is expelled. (1) In the cases referred to in clauses (b) and (c) of section 336, it shall be open to the managing agent, notwithstanding anything to the contrary in any other law or agreement, for the time being in force, to expel or dismiss the convicted partner, director or officer, within thirty days from the date of his sentence and in that event, the disqualifications imposed by the clauses aforesaid shall cease to apply.

(2) Sub-section (1) shall not affect the operation of section 346 in any case to which that section would otherwise apply.

Resignation of office by managing agent.

342. Resignation of office by managing agent. (1) Unless the managing agency agreement otherwise provides, a managing agent may, by notice to the Board, 1[resign his office as from such date as may be specified in the notice but such resignation shall not be effective

until it is accepted by the company under sub-section (7)].

(2) The managing agent shall cease to act as such with effect from the date so specified or from such later date, if any, as may be mutually agreed on between him and the Board; 2[but the managing agent shall not be absolved from liability to the company for his acts whether of commission or omission, during the period of his managing agency].

3[(3) When notice of resignation is given as aforesaid, the Board shall require the managing agent within such time as may be fixed by it or such further time as may be allowed by it, to prepare, and ---------------------------------------------------------------------- 1 Subs. by Act 65 of 1960, s. 123, for "resign his office with effect from such date as may be specified in the notice". 2 Subs. by s. 123, ibid., or "but his resignation shall not be

effective until it is considered as provided in sub-section (3)".

3 Subs. by s. 123, ibid.,for sub-sections (3), (4) and (5). ---------------------------------------------------------------------- 307 the managing agent shall prepare, a report on the state of affairs of the company as on the date specified in the notice of resignation or such subsequent date as the Board may think suitable, not being later than that on which the. managing agent ceases to act as such under

sub-section (2), together with a balance-sheet made out as on that date and a profit and loss account for the period commencing from the date up to which the last such account was prepared and ending with the date on which the managing agent ceases to act as such.

(4)In case of default by the managing agent in complying with the

requisition of the Board under sub-section (3), the Board shall itself cause a report on the state of affairs of the company as on the date specified in the notice of resignation or such subsequent date as the Board may think suitable, not being later than that on which the

managing agent ceases to act as such under sub-section (2), together with a balance-sheet made out as on that date and a profit and loss

account for the period specified in sub-section (3), to be prepared.

(5)The Board shall also obtain a report from the auditors of the company on such balance-sheet and profit and loss account in accor- dance with sections 227,228 and 229 and place the managing agents resignation together with the report on the state of the company's affairs, balance-sheet, profit and loss account and auditors' report mentioned above, before the company in general meeting.

(6)In relation to any report made by the auditors as aforesaid, sections 230 to 233 shall apply in like manner as they apply in rela- tion to auditors' report referred to therein.

(7)The company in general meeting may, by a resolution, accept the resignation or take such other action with reference thereto as it may deem fit.] Transfers of, and Succession to, Office

Transfer of office by managing agent.

1[343. Transfer of office by managing agent. (1) The managing agent of a company shall not transfer his office to another person or enter into any agreement or arrangement with another person by or under which the managing agent parts with, or which has the effect of transferring, his right to manage the whole or substantially the whole of the affairs of the company in favour of or to that other person unless approval of the company in general meeting and also of the Central Government has been accorded to such transfer, agreement or arrangement. ---------------------------------------------------------------------- 1 Subs. by Act 65 of 1960, s. 124, for s.343. ---------------------------------------------------------------------- 308

(2)If the other person and the managing agent referred to in sub-

section (1) contravene the provisions of that sub-section, that other person and the managing agent, and where the managing agent is a firm, every partner in the firm and where the managing agent is a body corporate, every director of the body corporate, shall be punishable with imprisonment for a term which may extend to six months, or with fine which may extend to five thousand rupees, or with both.]

Managing agency not to be heritable after commencement of Act. 344. Managing agency not to be heritable after commencement of Act. Any agreement made by a company other than a private company which is not a subsidiary of a public company, with its managing agent after the commencement of this Act shall be void in so far as it provides for succession to the office by inheritance or devise.

Succession to managing agency by inheritance or devise under agreementbefore commencement of Act to be subject to Central Government'sapproval. 345. Succession to managing agency by inheritance or devise under agreement before commencement of Act to be subject to Central

Government's approval. (1) Where the office of the managing agent of a company is held by an individual at the commencement of this Act and the managing agency agreement provides for succession to the office by inheritance or devise, no person shall succeed to the office on the death of the holder thereof, unless the succession of such person thereto is a proved by the Central Government ; and that Government shall not accord such approval unless, in its opinion, such person is a fit and proper person to hold the office of managing agent of the company.

(2)The provisions of sub-section (1) shall not apply to a private company which is not a subsidiary of a public company. Changes in Constitution of Firms and Corporations

Change in constitution of managing agency firm or corporation to beapproved by Central Government. 346. Change in constitution of managing agency firm or

corporation to be approved by Central Government. (1) Notwithstanding anything to the contrary contained in any other provision of this Act, where the managing agent of a public company, or of a private company which is a subsidiary of a public company, is a firm or body corporate and any change takes place in the constitution of the firm or body corporate, the managing agent shall cease to act as such on the expiry of six months from the date on which the charge takes place or such further time as the Central Government may (whether before or after the expiry of the six months) allow in that behalf, unless the approval of the Central Government has been accorded 1[before the expiry of six months aforesaid or where further time has been allowed by the Central Government, before the expiry of that time] to the changed constitution of the firm or body corporate. ---------------------------------------------------------------------- 1 Subs. by Act 65, of 1960, s. 125, for "before such expiry". ---------------------------------------------------------------------- 309 Explanation.-For the purposes aforesaid, a change in the consti- tution of a body corporate means- (a) its conversion from a private to a public company, or from a public to a private company; (b) any change among the directors or managers of the corporation, whether caused by the death or retirement of a director or manager, the appointment of a new director or manager, or otherwise; (c) any change in the ownership of shares in the body corporate or in the case of a body corporate not having a share capital, any change in its membership; 1[and where the managing agent, being a body corporate is a subsidiary of another body corporate, includes a change in the cons- titution of that other body corporate within the meaning of clause (a), clause (b) or clause (c)].

2[(2) Where the managing agent is a body corporate (whether or not it is a subsidiary of another body corporate) and its shares are for the time being dealt in, or quoted on, a recognised stock ex- change, a change in the ownership of its shares, or where a managing agent being a body corporate is a subsidiary of another body corporate and the shares of the other body corporate are for the time being dealt in, or quoted on, a recognised stock exchange, a change in the ownership of the shares of the other body corporate, shall not be deemed to be a change in the constitution of the managing agent within the meaning and for the purposes of sub-section

(1), unless the Central Government, by notification in the Official Gazette, otherwise directs: Provided that no such notification shall be issued in respect of any such, or such other, body corporate as aforesaid, unless the Central Government is of the opinion that any change in the owner-. ship of its shares has taken place or is likely to take place, which has affected or is likely to affect prejudicially the affairs of any company which is being managed by the managing agent.]

Application of Schedule VIII to certain managing agents.

347.Application of Schedule VIII to certain managing agents. (1) The provisions of Schedule VIII shall apply- (a) to every firm or private company which acts . as the managing agent of any company, whether public or private; and ---------------------------------------------------------------------- 1 Ins. by Act 65 of 1960, s. 125.

2 Subs. by s. 125, ibid., for sub-section (2). ---------------------------------------------------------------------- 310

(b) save as provided in sub-section (2), to every other body corporate (not being a private company) which acts as the managing agent of any company, whether public or private.

(2) A body corporate (not being a private company) acting as managing agent shall, if and so long as its shares are dealt in, or quoted on, any recognised stock exchange, be exempt from the operation

of sub-section (1), unless the Central Government, by notification in the Official Gazette, otherwise directs: Provided that the Central Government may, by order, modify or limit the operation of this sub-section in relation to any body cor- porate in such manner as that Government thinks fit.

(3) If default is made by a managing agent to which Schedule VIII applies in complying with the provisions thereof,- (a) if the managing agent is a firm, every partner therein who is in default, and (b) if the managing agent is a body corporate, the body corporate, and every director or other officer thereof who is in default, shall be punishable with fine which may extend to fifty rupees for every day during which the default continues. Remuneration of managing agents

Remuneration of managing agent ordinarily not to exceed 10 per cent. ofnet profits. 348.Remuneration of managing agent ordinarily not to exceed 10

per cent. of net profits. 1[(1)] 2* * * A company shall not pay to its managing agent, in respect of any financial year beginning at or after the commencement of this Act, by way of remuneration, whether in respect of his services as managing agent or any other capacity, any sum in excess of ten per cent. of the net profits of the company for that financial year.

3[(2) For the purposes of this section, any payment made by way of remuneration to any of the following persons shall be deemed to be included in the remuneration of the managing agent:- (a) where the managing agent of the company is a firm, every partner in the firm ; (b) where the managing agent of the company is a public company, every director of that public company; ----------------------------------------------------------------------

1 S. 348 renumbered as sub-section (1) of that section by Act 65 of 1960, s. 126. 2 The words "Save as otherwise expressly provided in this Act," omitted by s. 126, ibid. 3 Ins. by s. 126, ibid. ---------------------------------------------------------------------- 311 (c) where the managing agent of the company is a private company, every director and member of that private company.

(3) Nothing contained in sub-section (1) or sub-section (2) shall be deemed to affect the operation of sections 352, 354 and 356 to 360.]

Determination of net profits.

349.Determination of net profits. (1) In computing for the purpose of section 348, the net profits of a company in any financial year- (a) credit shall be given for the sums specified in sub-

section (2), and credit shall not be given for those

specified in sub-section (3) ; and

(b) the sums specified in sub-section (4) shall be

deducted, and those specified in sub-section (5) shall not be deducted.

(2) In making the computation aforesaid, credit shall be given for the following sums:- bounties and subsidies received from any Government, or any public authority constituted or authorized in this behalf, by any Government unless and except in so far as the Central Government otherwise directs.

(3) In making the computation aforesaid, credit shall not be given for the following sums: - (a) profits, by way of premium, on shares or debentures of the company, which are issued or sold by the company; (b) profits on sales by the company of forfeited shares; (c) 1[profits of a capital nature including profits from the sale] of the undertaking or any of the undertakings of the company or of any part thereof; (d) profits from the sale of any immovable property or fixed assets of a capital nature comprised in the undertaking or any of the undertakings of the company, unless the business of the company consists, whether wholly or partly, of buying and selling any such property or assets: 2 [Provided that where the amount for which any fixed asset is sold exceeds the written-down value thereof referred to in section 350, credit shall be given for so much of the excess as is not higher ---------------------------------------------------------------------- 1 Subs. by Act 65 of 1960, s. 127, for "profits from the sale". 2 Ins. by s. 127, ibid. ---------------------------------------------------------------------- 312 than the difference between the original cost of that fixed asset and its written-down value.]

(4) In making the computation aforesaid, the following sums shall be deducted:- (a) all the usual working charges; (b) directors' remuneration; (c) bonus or commission paid or payable to any member of the company's staff, or to any engineer, technician or person employed or engaged by the company, whether on a whole-time or on a part-time basis; (d) any tax notified by the Central Government as being in the nature of a tax on excess or abnormal profits; (e) any tax on business profits imposed for special reasons or in special circumstances and notified by the Central Government in this behalf ; (f) interest on debentures issued by the company; (g)interest on mortgages executed by the company and on loans and advances secured by a charge on its fixed or floating assets ; (h) interest on unsecured loans and advances; (i) expenses on repairs, whether to immovable or to movable property, provided the repairs are not of a capital nature; 1[(j)outgoings inclusive of contributions made under clause

(e) of sub-section (1) of section 293 ;] (k) depreciation to the extent specified in section 350; 2[(l) the excess of expenditure over income, which had arisen in computing the net profits in accordance with this section in any year which begins at or after the commencement of this Act, in so far as such excess has not been deducted in any subsequent year preceding the year in respect of which the net profits have to be ascertained;] (m) any compensation or damages to be paid in virtue of any legal liability, including a liability arising from a breach of contract; ---------------------------------------------------------------------- 1 Subs. by Act 65 of 1960, S. 127, for cl. (j). 2 Subs. by s. 127, ibid., for cl. (l). ---------------------------------------------------------------------- 313 (n) any sum paid by way of insurance against the risk of meeting any liability such as is referred to in clause (m) ; 1[(o) debts considered bad and written off or adjusted during the year of account.]

(5) In making the computation aforesaid, the following sums shall not be deducted:- (a) the remuneration payable to the managing agent; (b) income-tax and super-tax payable by the company under the Indian Income-tax Act, 1922, (11 of 1922) or any other tax on the income of the company not falling under clauses

(d) and (e)of sub-section (4) (c) any compensation, damages or payments made voluntarily, that is to say, otherwise than in virtue of a liability such

as is referred to in clause (m) of sub-section (4) ; 1[(d) loss of a capital nature including loss on sale of the undertaking or any of the undertakings of the company or of any part thereof not including any excess referred to in the proviso to section 350 of the written-down value of any asset which is sold, discarded, demolished or destroyed over its sale proceeds or its scrap value.]

Ascertainment of depreciation. 2[350.Ascertainment of depreciation. The amount of depreciation

to be deducted in pursuance of clause (k) of sub-section (4) of section 349 shall be the amount calculated with reference to the written-down value of the assets as shown by the books of the company at the end of the financial year expiring at the commencement of this Act or immediately thereafter and at the end of each subsequent financial year, 3[at the rate specified in Schedule XIV]: Provided that if any asset is sold, discarded, demolished or destroyed for any reason before depreciation of such asset has been provided for in full, the excess, if any, of the written-down value of such asset over its sale proceeds or, as the case may be, its scrap ---------------------------------------------------------------------- 1 Ins. by Act 65 of 1960, s. 127. 2 Subs. by s. 128, for s. 350. 3 Subs. by Act 31 of 1988, s.50 (w.e.f.15.6.1988) ----------------------------------------------------------------------- 314 value, shall be written off in the financial year in which the asset is sold, discarded, demolished or destroyed.]

Special provision where there is a profit sharing arrangement betweentwo or more companies. 351.Special provision where there is a profit sharing arrangement between two or more companies. Where there is an arrangement between two or more companies to share their profits, and not less than two of those companies have the same managing agent, any profits paid in pursuance of the arrangement by any of the companies having that managing agent to any other or others of them shall- (a) be excluded from the net profits of the company making such payment; and (b) be included in the net profits of the company receiving such payment, or where more than one company receives such payment, be included in the net profits of each of the receiving companies, to the extent of the payment received by it.

Payment of additional remuneration. 352.Payment of additional remuneration. Additional remuneration in excess of the limits specified in sections 198 and 348 may be paid to the managing agent if and only if, such remuneration is sanctioned by a special resolution of the company and is approved by the Central Government as being in the public interest.

Time of payment of remuneration. 353.Time of payment of remuneration. The remuneration payable to the managing agent for any financial year or part thereof shall not be paid to him, until the accounts of the company for such financial year have been audited and laid before the company in general meeting: Provided that the minimum remuneration, if any, payable in pursuance of section 198 may be paid to the managing agent in such suitable instalments as may be specified either in the articles of the company or in a resolution passed by the company at an annual general meeting or in the managing agency agreement executed by the company.

Managing agent not entitled to office allowance but entitled to bereimbursed in respect of expenses. 354.Managing agent not entitled to office allowance but entitled to be reimbursed in respect of expenses. The managing agent shall not be paid any office allowance, but he may be reimbursed in respect of any expenses incurred by him on behalf of the company and sanctioned by the Board or by the company in general meeting; and nothing contained in sections 348 to 353 shall be deemed to prohibit his being so reimbursed.

Saving. 355.Saving. Sections 348 to 354 shall not apply to a private company unless it is a subsidiary of a public company. 315 Appointments as Selling and Buying Agents

Appointment of managing agent or associate as selling agent of goodsproduced by the company. 356.Appointment of managing agent or associate as selling agent

of goods produced by the company. (1) No managing agent and no associate of a managing agent, shall receive any commission or other remuneration from the company, in respect of sales of goods produced by the managed company, if the sales are made from the premises at which they are produced or from the head office of the managing agent or from any place in India.

(2) For sales of any goods produced by the company which are effected from any place outside India not being a place specified in

sub-section (1), the managing agent, or an associate of the managing agent, may be appointed as a selling agent subject to the following conditions, namely:- (a) that the managing agent or associate maintains an office at such place for his own business, that is to say, for a business not connected with that of the company 1[or any other company managed by the managing agent]; (b) that the remuneration payable in respect of the work done as selling agent by the managing agent or associate is in accordance with the terms of a special resolution passed by the company in that behalf ; and (c) that no other sums are payable by the company to managing agent or associate whether by way of expenses or otherwise.

(3) Any appointment made in pursuance of sub-section (2) shall not be made for a term exceeding five years but may be renewed from time to time for a term not exceeding five years on each occasion: Provided that such renewal shall not be effected earlier than one year from the date on which it is to come into force.

(4) The special resolution referred to in clause (b) of sub-

section (2) shall set out the material terms subject to which the appointment of selling agent is made,

(5) Every appointment made under sub-section (2) and all particulars relating thereto shall be entered in a register maintained by the company for the purpose.

Application of section 356 to case where business of company consistsof the supply or rendering of any services. 357.Application of section 356 to case where business of company consists of the supply or rendering of any services. Where and in so far as the business of a company consists in the supply or rendering of any services, the provisions of section ---------------------------------------------------------------------- 1 Ins. by Act 65 of 1960, s. 129. ---------------------------------------------------------------------- 316 356 shall apply in respect of any such business procured for the com- pany by its managing agent or any associate of its managing agent from any place outside India, in like manner as those provisions apply in respect of sales of any goods produced by a company which are effected from that place.

Appointment of managing agent or associate as buying agent forcompany. 358.Appointment of managing agent or associate as buying agent

for company (1) No managing agent, and no associate of a managing agent, shall receive any payment whatever, from the company except expenses, if any, sanctioned under section 354 in respect of purchases of goods made on its behalf either in India, or in cases to which sub-

section (2) does not apply, outside India.

(2) Where purchases of goods are made on behalf of a company by its managing agent or any associate of its managing agent, at any place outside India, then, if the managing agent or associate main- tains an office at such place not only for such purchase but also for his own business, that is to say, for a business not connected with that of the company 1[or any other company managed by the managing agent], he may receive, at the option of the company, either- (a) such part of the expenses of such office as may reasonably be attributed to the purchases made on behalf of the company as aforesaid ; or (b) remuneration, by way of commission or otherwise, in respect of the work done by the managing agent or associate in making such purchases.

(3) In cases to which clause (a) of sub-section (2) applies, the maximum amount which may be paid to the managing agent shall be specified in a special resolution passed by the company; and in cases to which clause (b) of that sub-section applies, the remuneration payable to the managing agent or associate shall be in accordance with the terms of a special resolution, passed by the company in that behalf.

(4) The special resolution referred to in sub-section (3) shall set out in sufficient detail nature of the office maintained by the managing agent or associate outside India, the purposes for which it is maintained, the scale of its operations, the expenses incurred in maintaining the office, and the proportion of those expenses which may be reasonably attributed to the work done on behalf of the company.

(5) The special resolution shall not remain in force for a term exceeding three years but may be renewed from time to time for a term not exceeding three years on each occasion: ---------------------------------------------------------------------- 1 Ins. by Act 65 of 1960, s. 130. ---------------------------------------------------------------------- 317 Provided that no renewal shall take place earlier than one year from the date on which it is to come into force.

(6) Every resolution passed in pursuance of this section shall be entered in a register maintained by the company for the purpose.

Commission, etc., of managing agent as buying or selling agent ofother concerns. 359.Commission, etc., of managing agent as buying or selling

agent of other concerns. (1) A company in general meeting may, by resolution, authorise its managing agent or any associate of its managing agent to retain any commission or other remuneration earned or to be earned by such agent or associate as the 1* * * agent, secretary or selling or buying agent of any firm, body corporate or other concern in respect of any goods, power, freight, repairs or other services, for the sale, purchase, supply or rendering of which a contract has been, or is to be, entered into by such firm, body or concern with the company, provided the prices or amounts charged to or received by the company are at rates which are not less favourable to the company than the market rates or which are otherwise reasonable.

(2) Every contract so entered into and all particulars relating thereto shall be entered in a separate register maintained by the company for the purpose.

Contracts between managing agent or associate and company for the saleor purchase of goods or the supply of services, etc. 360.Contracts between managing agent or associate and company for

the sale or purchase of goods or the supply of services, etc. 2[(1) A contract between a company and its managing agent or an associate of the managing agent,- (a) for the sale, purchase or supply of any property, movable or immovable, or for the supply or rendering of any service other than that of managing agent-, or (b) for the underwriting of any shares or debentures, to be issued or sold by the company; shall not be valid against the company- (i) unless the contract has been approved by the company by a special resolution passed by it, and (ii) where the contract is for the supply or rendering of any service other than that of managing agent, unless further the contract has been approved by the Central Government. either before the date of the contract or at any time within three months next after that date.] ---------------------------------------------------------------------- 1 The words "managing agent, secretaries and treasurers, manager" omitted by Act 65 of 1960, s. 131.

2 Subs. by s. 132, ibid., for sub-section (1). ---------------------------------------------------------------------- 318

(2) The special resolution aforesaid shall- (a) set out the material terms of the contract proposed to be entered into 1[or entered into] ; and (b) provide specifically that for any property supplied or sold, or any services supplied or rendered, by the company, the managing agent or associate shall make payment to the company within one month from the date of the supply or sale of the 2[property], or the supply or rendering of the service, as the case may be.

(3) Every such contract and all particulars relating thereto shall be entered in a separate register maintained by the company for the purpose.

3[(4) Nothing in clause (a) of sub-section (1) shall affect any contract or contracts for the sale, purchase or supply of any property or the supply or rendering of any services, in which either the com- pany or the managing agent or associate, as the case may be, regularly trades or does business, provided that the value of such property or the cost of such services does not exceed five thousand rupees in the aggregate in any year comprised in the period of the contract or contracts.]

Existing contracts relating to matters dealt with in sections 365 to360 to terminate on 1st March, 1958. 361.Existing contracts relating to matters dealt with in sections 365 to 360 to terminate on 1st March, 1958. All contracts in force at the commencement of this Act, to which a company or the managing agent or an associate of the managing agent of a company is a party, shall, in so far as the contracts relate to any of the matters referred to in sections 356 to 360, be deemed to terminate on the first day of March, 1958, unless they terminate on an earlier date.

Registers to be open to inspection. 362.Registers to be open to inspection. The registers referred to in sections 356 to 360 shall be open to inspection, and extracts may be taken therefrom and copies thereof may be required, by any member of the company, in the same manner, to the same extent and on payment of the same fees as in the case of the register of members of the company.

Remuneration received in contravention of foregoing sections to beheld in trust for company. 363. Remuneration received in contravention of foregoing sections

to be held in trust for company. 4 [(1)] Where the managing agent of a company, or an associate of the managing agent, receives any sum from the company, ---------------------------------------------------------------------- 1 Ins. by Act 65 of 1960, S. 132. 2 Subs. by s. 132, ibid., for "goods".

3 Subs. by s. 132, ibid., for sub-section (4).

4 S. 363 renumbered as sub-section (1) of that section by s. 133, ibid. ---------------------------------------------------------------------- 319 whether directly or indirectly, by way of remuneration, rebate, commission, expenses or otherwise,- (a) in the case of a public company or a private company which is a subsidiary of a public company, in contravention of sections 348 to 354 and sections 356 to 361; or (b) in the case of a private company which is not a subsidiary of a public company, in contravention of sections 356 to 361; the managing agent or associate 1[shall refund such sum to the company and until such sum is so refunded, hold it in trust for the company].

2[(2) The company shall not waive the recovery of any sum

refundable to it under sub-section (1) unless permitted by the Central Government.] Assignment of, or charge on, remuneration

Company not to be bound by assignment of, or charge on, managingagent's remuneration. 364.Company not to be bound by assignment of, or charge on, managing agent's remuneration. Any assignment of, or charge on, his remuneration, or any part thereof, effected by a managing agent shall be void as against the company. This section shall not affect the rights inter se of the managing agent and any person other than the company. Compensation for termination of office

Prohibition of payment of compensation for loss of office in certaincases. 365.Prohibition of payment of compensation for loss of office in certain cases. A company shall not pay or be liable to pay to its managing agent any compensation for the loss of his office in the following cases:- (a) where the managing agent resigns his office in view of the re-construction of the company or of its amalgamation with any other body corporate or bodies corporate and is ap- pointed as the managing agent, secretaries and treasurers, manager or other officer of the reconstructed company or of the body corporate resulting from the amalgamation; (b) where the managing agent resigns his office, otherwise than on the reconstruction of the company or its amalgamation as aforesaid; ---------------------------------------------------------------------- 1 Subs. by Act 65 of 1960, s. 133, for certain words. 2 Ins. by s. 133, ibid. ---------------------------------------------------------------------- 320 (c) where the managing agent vacates his office in pursuance of section 324, 1[324A,] 330 or 332; (d) where the managing agent is deemed to have vacated his office in pursuance of clause (a), (b), (c) or (d) of section 334 or of section 336; (e) where the managing agent is deemed to have vacated his office in pursuance of clause (e) of section 334, provided the winding up of the company was due to the negligence or default of the managing agent; (f) where the managing agent is deemed to have been suspended,or is suspended, from his office in pursuance of

section 335 or sub-section (2) of section 340; (g) where the managing agent is removed from office by a resolution in pursuance of section 337 or 338; and (h) where the managing agent has instigated, or has taken part in bringing about, the termination of his office.

Limit of compensation for loss of office. 366.Limit of compensation for loss of office. The compensation which may be paid by a company to its managing agent for loss of office shall not exceed the remuneration which he would have earned if he had been in office for the unexpired residue of his term, or for three years, whichever is shorter, calculated on the basis of the average remuneration actually earned by him during a period of three years immediately preceding the date on which his office ceased or was terminated, or where he held the office for a lesser period than three years, during such period: Provided that in the event of the winding up of the company commencing, whether before, or at any time within twelve months after, the date of the cessation or termination of the office of managing agent, no compensation shall be payable to him if the assets of the company on the winding up, after deduction of the expenses thereof, are not sufficient to repay the share capital (including the premiums, if any,) contributed by the members of the company. Other rights and liabilities, not affected on terminations of office

Managing agent's rights and liabilities after termination of office. 367.Managing agent's rights and liabilities after termination of office. Where the office of a managing agent ceases or is terminated- (a) the managing agent and the company shall be entitled to enforce any claim or demand which each may have against the other, in respect of anything done or omitted ---------------------------------------------------------------------- 1 Ins. by Act 17 of 1969, s. 5. ---------------------------------------------------------------------- 321 to be done by either of them before the cessation or termination of the managing agency; and (b) the rights and liabilities, in relation to the company, of the managing agent in any other capacity, shall not be affected. Restrictions on powers

Managing agent to be subject to control of Board and to restrictionsin Schedule VII. 368.Managing agent to be subject to control of Board and to restrictions in Schedule VII. The managing agent of a company, whether appointed before or after the commencement of this Act, shall exercise his powers subject to the superintendence, control and direction of its Board of directors and subject also to the provisions of the memo- randum and articles of the company and to the restrictions contained in Schedule VII.

Loans to managing agent.

369.Loans to managing agent. (1) No public company, and no private company which is a subsidiary of a public company, 1[shall directly or indirectly make] any loan to, or give any guarantee or provide any security in connection with a loan made by any other person to, or to any other person by,- (a) its managing agent or any associate of its managing agent; or (b) any body corporate in respect of which the Central Government, by order, declares that it is satisfied that the Board of directors, managing director, managing agent, secretaries and treasurers or manager thereof is accustomed to act in accordance with the directions or instructions of the managing agent or associate of the managing agent, notwithstanding that the body corporate may not itself be an associate of the managing agent.

2[(2) Nothing contained in sub-section (1) or section 295 shall apply to- (a) any credit given by the company to its managing agent for the purpose of facilitating the company's business and held by such agent in his own name in one or more current accounts, subject to limits previously approved by the directors of company and on no account exceeding twenty thousand rupees in the aggregate; or ---------------------------------------------------------------------- 1 Subs. by Act 65 of 1960, s. 134, for " shall make".

2 Subs. by s. 134, ibid., for sub-section (2). ---------------------------------------------------------------------- 322 (b) any loan made by a holding company to its subsidiary.

Explanation.-Credit referred to in clause (a) of sub-section (2) is confined to any cash advance given by way of a permanent advance or imprest for facilitating the carrying on of the company's business, transactions on such advance or imprest account being settled as far as possible on a monthly basis.]

Loans, etc., to companies under the same management.

370.Loans, etc., to companies under the same management. (1) No company (hereinafter in this section referred to as "the lending company") shall- (a) make any loan to, or (b) give any guarantee, or provide any security, in connection with a loan made by any other person to, or to any other person by, any body corporate 1* * *, unless the making of such loan, the giving of such guarantee or the provision of such security has been previously authorised by a special resolution of the lending company. 2[Provided that no special resolution shall be necessary in the case of loans made to other bodies corporate not under the same management as the lending company where the aggregate of such loans does not exceed 3[such percentage of the aggregate of the subscribed capital of the lending company and its free reserves as may be prescribed:] Provided further that the aggregate of the loans made to all bodies corporate shall not exceed without the prior approval of the Central Government- (a) 3[such percentage of the aggregate of the subscribed capital of the lending company and its free reserves as may be prescribed] where all such other bodies corporate are not under the same management as the lending company; (b) 3[such percentage of the aggregate of the subscribed capital of the lending company and its free reserves as may be prescribed] where all such other bodies corporate are under the same management as the lending company. Explanation 4[1].-If a special resolution has been passed by the lending company authorising the making of loans up to the limit of 3[ the percentage of the aggregate specified in clause (a) or, as the case may be, the percentage of the aggregate specified in clause (b) of the second proviso] ---------------------------------------------------------------------- 1 The words " which is under the same management as the lending company" omitted by Act 31 of 1965, s. 46 (w.e.f. 1-4-1967). 2 Added by s. 46, ibid. (w.e.f. 1-4-1967). 3 Subs. by Act 31 of 1988, s.51 (w.e.f. 17.4.1989). 4 Renumbered as Explanation 1 by Act 34 of 1966, s. 3 (w.e.f. 1-4-1967) --------------------------------------------------------------------- 323 then, no further special resolution or resolutions shall be deemed to be necessary for the making of any loan or loans within such limit.] 1[Explanation 2.-If a special resolution has been passed by the lending company authorising the Board of Directors to give any guarantee or provide any security up to a limit specified in the reso- lution, then, no further special resolution or resolutions shall be deemed to be necessary for giving any guarantee or providing any security within such limit.] 2[(1A) Where the lending company- (a) makes any loan to, or (b) gives any guarantee, or provides any security, in connection with a loan made by any other person to, or to any other person by, a firm in which a partner is a body corporate under the same manage- ment as the lending company- (i) the loan shall be deemed to have been made to, or (ii) the guarantee or the security shall be deemed to have been given or provided in connection with the loan made by such other person to, or to such other person by, a body corporate under the same management.]

3[(1B)] 4[For the purposes of sub-sections (1) and (1A)] two bodies corporate shall be deemed to be under the same management- (i) if the managing agent, secretaries and treasurers, managing director or manager of the one body, or where such managing agent or secretaries and treasurers are a firm, any partner in the firm, or where such managing agent or secretaries and treasurers are a private company, any director of such company, is- (a)the managing agent, secretaries and treasurers, managing director or manager of the other body; or (b)a partner in the firm acting as managing agent or secretaries and treasurers of the other body ; or --------------------------------------------------------------------- 1 Ins. by Act 34 of 1966, s. 3 (w.e.f. 1-4-1967). 2 Ins. by Act 65 of 1960, S. 135. 3 Explanation numbered and lettered as sub-section (1B) by s. 135, ibid. 4 Subs. by s. 135, ibid., for " For the purposes of this sub- section ". ---------------------------------------------------------------------- 324 (c)a director of the private company acting as managing agent or secretaries and treasurers of the other body ; or (ii) if a majority of the directors of the one body constitute, or at any time within the six months immediately preceding constituted, a majority of the directors of the other body ; 1[or] 1[(iii) if not less than one-third of the total voting power with respect to any matter relating to each of the two bodies corporate is exercised or controlled by the same individual or body corporate ; or (iv) if the holding company of the one body corporate is under the same management as the other body corporate within the meaning of clause (i), clause (ii) or clause (iii), or (v) if one or more directors of the one body corporate while holding, whether by themselves or together with their relatives, the majority of shares in that body corporate also hold, whether by themselves or together with their relatives, the majority of shares in the other body corporate.] 1[(1C) Every lending company shall keep a register showing- (a) the names of all bodies corporate under the same management as the lending company and the name of every firm in which a partner is a body corporate under the same management as the lending company, and (b) the following particulars in respect of every loan made, guarantee given or security provided by the lending company 2[in relation to any such body corporate] under this section:- (i)the name of the body corporate to which the loan has been made whether such loan has been made before or after that body corporate came under the same management as the lending company, (ii) the amount of the loan, (iii)the date on which the loan has been made, (iv)the date on which the guarantee has been given or security has been provided in connection with a ---------------------------------------------------------------------- 1 Ins. by Act 65 of 1960, s. 135. 2 Ins. by Act 31 of 1965, s. 46 (w.e.f. 1-4-1967). ---------------------------------------------------------------------- 325 loan made by any other person to, or to any other person by,

any body corporate or firm referred to in sub-section (1) or (1A) together with the name of the person, body corporate or firm. (1D) Particulars of 1[every loan, guarantee or security referred to in sub-section (1C)] shall be entered in the register aforesaid within three days of the making of such loan, or the giving of such guarantee or the provision of such security or in the case of any loan made, guarantee given or security provided before the commencement of the Companies (Amendment) Act, 1960, (65 of 1960.) within three months from such commencement or such further time not exceeding six months as the company may by special resolution allow. (1E) If default is made in complying with the provisions of sub- section (1C) or (1D), the company and every officer of the company who is in default, shall be punishable with fine which may extend to five hundred rupees and also with a further fine which may extend to fifty rupees for every day after the first during which the default continues. (1F) The register aforesaid shall be kept at the registered office of the lending company and- (a) shall be open to inspection at such office, and (b) extracts may be taken therefrom or copies thereof may be required, by any member of the company to the same extent and in the same manner and on the payment of the same fees as in the case of the register of members of the company; and the provisions of section 163 shall apply accordingly.]

2 [(2) Nothing contained in the foregoing provisions of this section shall apply to- (a) any loan made- (i) by a holding company to its subsidiary, or (ii)by the managing agent or secretaries and treasurers to any company under his or their management, or 3[(iii) by a banking company, or an insurance company, in the ordinary course of its business ; 4[or] ---------------------------------------------------------------------- 1 Subs. by Act 31 of 1965, s. 46, for " every such loan, guarantee or security (w.e.f. 1-4-1967).

2 Subs. by Act 65 of 1960, S. 135, for sub-section (2). 3 Subs. by Act 31 of 1965, S. 46, for sub-clause (iii) (w.e.f. 1- 4-1967). 4 Ins. by Act 34 of 1966, s. 3 (w.e.f. 1-4-1967). --------------------------------------------------------------------- 326 (iv) by a private company, unless it is a subsidiary of a public company; 1[or] (v) by a company established with the object of financing industrial enterprises;] (b) any guarantee given or any security provided- (i)by a holding company in respect of any loan made to its subsidiary; or (ii)by the managing agent or secretaries and treasurers in respect of any loan made to any company under his or their management; or 2[(iii) by a banking company, or an insurance company, in the ordinary course of its business ; or (iv)by a private company, unless it is a subsidiary of a public company; or (v)by a company established with the object of financing industrial enterprises.]

(3) Nothing in this section shall apply to a book debt unless the transaction represented by the book debt was from its inception in the nature of a loan or an advance.

(4) For the purposes of this section, any person in accordance with whose directions or instructions the Board of directors of a company is accustomed to act shall be deemed to be a director of the company.]

3[ (5) Where before the commencement of the Companies (Amendment) Act, 1965, any loan, guarantee or security has been made, given or provided by a company which could not have been made, given or provided under this section as amended by that Act, and such loan, guarantee or security is outstanding at such commencement, the company shall,'within six months from such commencement enforce the repayment of the loan made or, as the case may be, revoke the guarantee given or the security provided, notwithstanding any agreement to the contrary: Provided that the aforesaid period of six months may be extended by the Central Government on an application made to it in that behalf by the company.] 4[Explanation.--For the purposes of this section, "loan" includes any deposit of money made by one company with another company, not being a banking company.] ---------------------------------------------------------------------- 1 Ins. by Act 34 of 1966, s. 3 (w.e.f. 1-4-1967). 2 Subs. by s. 3, ibid., for sub-clause (iii) (w.e.f. 1-4-1967). 3 Ins. by Act 31 of 1965, s. 46 (w.e.f. 1-4-1967). 4 Added by Act 31 of 1988, s. 51 (w.e.f. 17-4-1989) --------------------------------------------------------------------- 326A 370A Provisions as to certain loans which could not have been made ifsections 369 and 370 were in force. 1[370A.Provisions as to certain loans which could not have been made if sections 369 and 370 were in force. Where any loan made, guarantee given or security provided by a company and outstanding at the commencement of the Companies (Amendment) Act, 1960 (65 of 1960.) would not have been made, given or provided if section 369 or section 370 had' been in force at the time when such loan was made, guarantee given or security provided, the company shall, within six months from the commencement of that Act, enforce the repayment of the loan made or, as the case may be, revoke the guarantee given or the security provided, notwithstanding any agreement to the contrary: Provided that the period of six months within which the company is required by this section to enforce the repayment of the loan or to revoke the guarantee or security, may be extended- (a) in the case of a loan guarantee or security under section 369, by the Central Government on an application made to it by the company for that purpose ; (b) in the case of a loan, guarantee or security under section 370, by a special resolution of the company.]

Penalty for contravention of section 369, 370 or 370A.

371.Penalty for contravention of section 369, 370 or 370A. (1) Every person who is a party to any contravention of 2[section 369 or section 370 [excluding sub-section (1C) or (1D)], or section 370A] including in particular any person to whom the loan is made, or in whose interest the guarantee is given or the security is provided, shall be punishable with fine which may extend to five thousand rupees or with simple imprisonment for a term which may extend to six months: Provided that where any such loan, or any loan in connection with which any such guarantee or security has been given or provided by the lending company, has been repaid in full, no punishment by way of imprisonment shall be imposed under this sub-section; and where the loan has been repaid in part, the maximum punishment which may be imposed under this sub-section by way of imprisonment shall be proportionately reduced.

(2) All persons who are knowingly parties to any such contra- vention shall be liable, jointly and severally, to the lending company for the repayment of the loan, or for making good the sum which the lending company may have been called upon to pay in virtue of the guarantee given or the security provided by such company. ---------------------------------------------------------------------- 1 Ins. by Act 65 of 1960, s. 136. 2 Subs. by s. 137, ibid., for "section 369 or 370 ---------------------------------------------------------------------- 326B

Purchase by company of shares, etc., of other companies. 1[372.Purchase by company of shares, etc., of other companies.

(1) A company, whether by itself or together with its subsidiaries (hereafter in this section and section 373 referred as the investing company), shall not be entitled to acquire, by way of subscription, purchase or otherwise (whether by itself, or by any individual or association of individuals in trust for it or for its benefit or on its account) the shares of any other body corporate except to the extent, and except in accordance with the restrictions and conditions, specified in this section.] 1[ The Board of directors of the investing company shall be entitled to invest in any shares of any other body corporate up to such percentage of the subscribed equity share capital, or the aggregate of the paid-up equity and preference share capital, of such other body corporate, whichever is less, as may be prescribed:] Provided that the aggregate of the investments so made by the Board in all other bodies corporate shall not exceed 1[such percentage of the aggregate of the subscribed capital and free reserves of the investing company, as may be prescribed:] Provided further that the aggregate of the investments made in all other bodies corporate in the same group shall not exceed 1[such percentage of the aggregate of the subscribed capital and free reserves of the investing company as may be prescribed.]

(3) In computing at any time the percentages specified in sub-

section (2) and the provisos thereto, the aggregate of the investments made by the investing company in other body or bodies corporate [whether before or after the commencement of the Companies (Amendment) Act, 1960 (65 of 1960),] up to that time shall be taken into account. --------------------------------------------------------------------- 1 Subs. by Act 31 of 1988, s.52 (w.e.f. 17.4.1989) --------------------------------------------------------------------- 327

(4) The investing company shall not make any investment in the shares of any other body corporate in excess of the percentages speci-

fied in sub-section (2) and the provisos thereto, unless the investment is sanctioned by a resolution of the investing company in general meeting and 1[unless previously approved] by the Central Government: Provided that the investing company may at any time invest up to

any amount in shares offered to it under clause (a) of sub-section (1) of section 81 (hereafter in this section referred to as rights shares) irrespective of the aforesaid percentages: Provided further that when at any time the investing company intends to make any investments in shares other than rights shares, then, in computing at that time any of the aforesaid percentages, all existing investments, if any, made in rights shares up to that time shall be included in the aggregate of the investments of the company.

(5) No investment shall be made by the Board of directors of an

investing company in pursuance of sub-section (2), unless it is sanc- tioned by a resolution passed at a meeting of the Board with the consent of all the directors present at the meeting, except those not entitled to vote thereon, and unless further notice of the resolution to be moved at the meeting has been given to every director in the manner specified in section 286.

(6) Every investing company shall keep a register of all invest- ments made by it in shares of any other body or bodies corporate (whether in the same group or not and whether in the case of a body corporate in the same group, such investments were made before or after that body came within the same group as the investing company), showing in respect of each investment the following particulars: - (a) the name of the body corporate in which the investment has been made ; (b) the date on which the investment has been made; (c) where the body corporate is in the same group as the investing company, the date on which the body corporate came in the same group; (d) the names of all bodies corporate in the same group as the investing company.

(7) Particulars of every investment to which sub-section (6) applies shall be entered in the register aforesaid within seven days of the making thereof or in the case of investments made before the commencement of the Companies (Amendment) Act, 1960, (65 of 1960.) within six ---------------------------------------------------------------------- 1 Subs. by Act 31 of 1988, s.52 (w.e.f. 17.4.1989) ---------------------------------------------------------------------- 328 months from such. commencement, or such further time as the Central Government may grant on an application by the company in that behalf.

(8) If default is made in complying with the provisions of sub-

section (6) or (7), the company, and every officer of the company who is in default, shall be punishable with fine which may extend to five hundred rupees and also with a further fine which may extend to fifty rupees for every day after the first during which the default continues.

(9) The register aforesaid shall be kept at the registered office of the investing company and- (a) shall be open to inspection at such office, and (b) extracts may be taken therefrom and copies thereof may be required, by any member of the investing company to the same extent, in the same manner, and on the payment of the same fees as in the case of the register of members of the investing company; and the provisions of section 163 shall apply accordingly.

(10) Every investing company shall annex in each balance-sheet prepared by it after the commencement of the Companies (Amendment) Act, 1960, (65 of 1960), a statement showing the bodies corporate (indicating separately the bodies corporate in the same group) in the shares of which investments have been made by it (including all investments, whether existing or not, made subsequent to the date as at which the previous balance-sheet was made out) and the nature and extent of the investments so made in each body corporate: Provided that in the case of a company whose principal business is the acquisition of shares, stock, debentures or other securities (hereafter in this section referred to as an investment company), it shall be sufficient if the statement shows only the investments existing on the date as at which the balance-sheet to which the statement is annexed has been made out.

(11) For the purposes of this section, a body corporate shall be deemed to be in the same group as the investing company- (a) if the body corporate is the managing agent of the investing company ; or (b) if the body corporate and the investing company should, in virtue of sub-section (1B) of section 370, be deemed to be under the same management. 329

(12) References in the foregoing provisions of this section to shares shall in the case of investments made by the investing company in other bodies corporate in the same group, be deemed to include references to debentures also.

(13) The provisions of this section except the first proviso to

subsection (2) 1[and sub-section (5)] shall also apply to an investment company.

(14) This section shall not apply- (a) to any banking or insurance company (b) to a private company, unless it is a subsidiary of a public company; (c) to any company established with the object of financing, whether by way of making loans or advances to, or subscribing to the capital of, private industrial enterprises in India, in any case where the Central Government has made or agreed to make to the company a special advance for the purpose or has guaranteed or agreed to guarantee the payment of moneys borrowed by the company from any institution outside India; 2[(d) to investments by a holding company in its subsidiary other than a subsidiary within the meaning of clause (a) of

sub-section (1) of section 4; (e) to investments by a managing agent or secretaries and treasurers in a company managed by him or them.]

Investments made before commencement of Act. 373.Investments made before commencement of Act. Where any investments have been made by a company 3[in any other body corporate in the same group] at any time after the first day of April, 1952, which, if section 372 had been then in force, could not have been made except on the authority of a resolution passed by the investing company and the approval of the Central Government, the authority of the company by means of a resolution and the approval of the Central Government shall be obtained to such investments, within six months from the commencement of this Act ; and if such authority and approval are not so obtained, the Board of directors of the company shall dispose of the investments, in so far as they may be in excess of the

limits specified in sub-section (2) of section 372 and 4[the second proviso to that sub-section], within two years from the commencement of this Act.

Penalty for contravention of section 372 or 373. 374.Penalty for contravention of section 372 or 373. If default is made in complying with the provisions of 5[section 372 [excluding

sub-sections (6) and (7)] or section 373), --------------------------------------------------------------------- 1 Ins. by Act 31 of 1965, s. 47 (w.e.f. 15-10-1965). 2 Subs. by Act 31 of 1988, s.52 (w.e.f. 17.4.1989). 3 Ins. by Act 65 of 1960, s. 139. 4 Subs. by s. 139, ibid., for "the proviso to that sub-section. 5 Subs. by s. 140, ibid., for " section 372 or 373." ---------------------------------------------------------------------- 330 every officer of the company who is in default shall be punishable with fine which may extend to five thousand rupees.

Managing agent not engage in business competing with business ofmanaged company.

375. (1)Managing agent not engage in business competing with business of managed company. A managing agent shall not engage on his own account in any business which is of the same nature as, and directly competes with, the business carried on by a company of which he is the managing agent or by a subsidiary of such company, unless such company by special resolution permits him to do so.

(2) For the purposes of sub-section (1), a managing agent shall be deemed to be engaged in business on his own account, if such busi- ness is carried on by- (a) a firm in which he is a partner; or (b) a private company at any general meeting of which not less than twenty per cent. of the total voting power may be exercised or controlled by any of the following persons, or by any two or more of them acting together, namely, (i) the managing agent aforesaid; (ii) where such managing agent is a firm, any partner in the firm; and (iii) where such managing agent is a body corporate, any officer of the body corporate; (c) a body corporate (not being a private company) at any general meeting of which not less than seventy per cent. of the total voting power may be exercised or controlled by any of the following persons, or by any two or more of them acting together, namely, (i) the managing agent aforesaid; (ii) where such managing agent is a firm, any partner in the firm; and (iii) where such managing agent is a body corporate, any officer of such body corporate.

(3) If a managing agent engages in any business in contravention of this section, he shall be deemed to have received all profits and benefits accruing to him from such business, in trust for the company under his management or the subsidiary of such company, as the case may be; and where such profits and benefits are deemed to have been so received by the managing agent in trust for two or more such companies or subsidiaries, such profits and benefits shall be held by the managing agent in trust for each of them in such proportions as may be agreed upon between them or, failing such agreement, as may be decided by the Court.

Condition prohibiting reconstruction or amalgamation of companyexcept on continuance of managing agent, etc., to be void. 376.Condition prohibiting reconstruction or amalgamation of company except on continuance of managing agent, etc., to be void. Where any provision in the memorandum or articles of a company, or in any resolution passed in general meeting by, or by the 331 Board of directors of, the company, or in an agreement between the company and its managing agent or any other person, whether made before or after the commencement of this Act, prohibits the recons- truction of the company or its amalgamation with any other body corporate or bodies corporate, either absolutely or except on the condition that the managing director, managing agent, secretaries and treasurers, or manager of the company is appointed or reappointed as secretaries and treasurers, managing director, managing agent, or manager of the reconstructed company or of the body resulting from amalgamation, as the case may be, shall become void with effect from the commencement of this Act, or be void, as the case may be.

Restrictions on right of managing agent to appoint directors. 377.Restrictions on right of managing agent to appoint directors.

(1) The managing agent of a company may, if so authorised by its articles, appoint not more than two directors where the total number of the directors exceeds five, and one director where the total number does not exceed five.

1[(1A) Nothing contained in sub-section (1), or In any other provision of this Act, or 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 shall be deemed to authorise the managing agent to appoint the chairman of the Board of directors.]

(2) The managing agent may, at any time, remove any director so appointed, and appoint another director in his place or in the place of a director so appointed who resigns or otherwise vacates his office.

(3) Any provision contained in the articles of, or in any agreement with, the company, authorising the managing agent to appoint

more than the number of directors authorised under sub-section (1), which is in force immediately before the commencement of this Act, shall, in regard to the excess, be void, with effect from the expiry of one month from such commencement.

(4) Where at the commencement of this Act, the number of direc- tors appointed by the managing agent exceeds the number authorised

under sub-section (1), the managing agent shall determine which of them shall continue to hold office, and intimate the choice made by him to the company before the expiry of one month from such com- mencement ; and only the director or directors so chosen shall conti- nue to hold office as directors after such expiry. ---------------------------------------------------------------------- 1 Ins. by Act 65 of 1960, s. 141. ---------------------------------------------------------------------- 332

(5) If no choice is made by the managing agent as aforesaid, all the directors appointed by him shall, with effect from the expiry of one month from the commencement of this Act, be deemed to have vacated their offices.

1[(6) Where from any cause the total number of directors is so reduced as not to exceed five, but the number of directors appointed by the managing agent exceeds, after such reduction, the number

authorised under sub-section (1), the managing agent shall determine which of them shall continue to hold office and intimate the choice made by him to the company before the expiry of one month from the happening of the cause and only the director so chosen shall continue to hold office as director with effect from such expiry: Provided that if no choice is made by the managing agent as aforesaid, all the directors appointed by him shall with effect from such expiry, be deemed to have vacated their offices.] CHAP A SECRETARIES AND TREASURERS CHAPTER IV.-A. SECRETARIES AND TREASURERS

Appointment of secretaries and treasurers. 378.Appointment of secretaries and treasurers. Subject to the provisions of this Chapter, a company may appoint a firm or body corporate as its secretaries and treasurers. 2* * * * * *

Provisions applicable to managing agents to apply to secretaries andtreasurers with the exceptions and modifications specified in sections380 to

379. Provisions applicable to managing agents to apply to secretaries and treasurers with the exceptions and modifications specified in sections 380 to 383. Subject to the exceptions and modifications specified in sections 380 to 383,- (a) all the provisions of this Act applicable to, or in relation to, a managing agent which is a firm or body corporate shall apply to secretaries and treasurers; and (b) all the provisions of this Act applicable to, or in relation to, any person or persons connected or associated in any manner with such a managing agent shall apply to, or in relation to, any person or persons connected or associated with secretaries and treasurers in the like manner; and subject as aforesaid 3[and unless the context otherwise requires], all references in this Act to a managing agent or any person or persons connected or associated in any manner with a managing agent shall be construed accordingly, as including a reference to secretaries and treasurers or to the person or persons connected or associated with them in the like manner. ---------------------------------------------------------------------- 1 Ins. by Act 65 of 1960, s. 141. 2 Proviso omitted by s. 142, ibid. 3 Ins. by s. 143, ibid. ---------------------------------------------------------------------- 333

Sections 324, 330 and 332 not to apply. 380. Sections 324, 330 and 332 shall not apply to secretaries and treasurers.

Section 348 to apply subject to a modification. 381.Section 348 to apply subject to a modification. Section 348 shall apply to secretaries and treasurers subject to the modification that for the words "ten per cent. of the net 1* * * profits" occurring in the section, the words "seven and a half per cent. of the net 1* * * profits" shall be substituted.

Secretaries and treasurers not to appoint directors. 382.Secretaries and treasurers not to appoint directors. Secretaries and treasurers shall have no right to appoint any director of the company; and sections 377 and 261 shall not apply to, or in relation to, secretaries and treasurers, or persons connected or associated with them in the manner in which the persons specified in section 261 are connected or associated with managing agents.

Secretaries and treasurers not to sell goods or articles produced bycompany, etc., unless authorised by Board. 383.Secretaries and treasurers not to sell goods or articles produced by Secretaries and treasurers shall have no right, unless, and except to the extent to which, they are authorised by the Board of directors, to sell any goods or articles manufactured or produced by the company, or to purchase, obtain, or acquire machinery, stores, goods or materials for the purposes of the company, or to sell the same when no longer required for those purposes. 383A Certain companies to have secretaries.

2[383A.Certain companies to have secretaries. (1) Every company 3[having such paid-up share capital as may be prescribed] shall have a whole-time secretary, and where the Board of directors of any such company comprises only two directors, neither of them shall be the secretary of the company. 1[(1A) If a company fails to comply with the provisions of sub-

section (1), the company and every officer of the company who is in default, shall be punishable with fine which may extend to fifty rupees for every day during which the default continues: Provided that in any proceedings against a person in respect of an offence under this sub-section, it shall be a defence to prove that all reasonable efforts to comply with the provisions of sub-

section (1) were taken or that the financial position of the company was such that it was beyond its capacity to engage a whole- time secretary.]

(2) Where, at the commencement of the Companies (Amendment) Act, 1974 (31 of 1974),-- (a) any firm or body corporate is holding office, as the secretary of a company, such firm or body corporate shall, within six months from such commencement, vacate office as secretary of such company; (b) any individual is holding office as the secretary of more than one company having a paid-up share capital of ---------------------------------------------------------------------- 1 The word "annual" omitted by Act 65 of 1960, s. 144. 2 Ins by Act 41 of 1974, s. 30.(w.e.f. 1-2-1975). 3 Subs. by Act 31 of 1988, s.53 (w.e.f. 1-12-1988). 4 Ins. by s.53, ibid. --------------------------------------------------------------------- 334 rupees twenty-five lakhs or more, he shall, within a period of six months from such commencement, exercise his option as to the company of which he intends to continue as the secretary and shall, on and from such date, vacate office as secretary in relation to all other companies.] B. MANAGERS

Firm or body corporate not to be appointed manager. 384.Firm or body corporate not to be appointed manager. 1[No company] shall, after the commencement of this Act, appoint or employ, or after the expiry of six months from such commencement, continue the appointment or employment of, any firm, body corporate or association as its manager.

Certain persons not to be appointed managers.

385.Certain persons not to be appointed managers. (1) No company shall, after the commencement of this Act, appoint or employ, or continue the appointment or employment of, any person as its manager who- (a) is an undischarged insolvent, or has at any time within the preceding five years been adjudged an insolvent; or (b) suspends, or has at any time within the preceding five years suspended, payment to his creditors; or makes, or has at any time within the preceding five years made, a composition with them; or (c) is, or has at any time within the preceding five years been, convicted by a Court in India of an offence involving moral turpitude.

(2) The Central Government may, by notification in the Official Gazette, remove the disqualification incurred by any person in virtue

of clause (a), (b), or (c) of sub-section (1), either generally or in relation to any company or companies specified in the notification.

Number of companies of which a person may be appointed manager. 386.Number of companies of which a person may be appointed

manager. (1) No company shall, after the commencement of this Act, appoint or employ any person as manager, if he is either the manager or the managing director of any other company, except as provided in

sub-section (2).

(2) A company may appoint or employ a person as its manager, if he is the manager or managing director of one, and not more than one, other company : --------------------------------------------------------------------- 1 Subs. by Act 65 of 1960, s. 145, for certain words. --------------------------------------------------------------------- 334A Provided that such appointment or employment is made or approved by a resolution passed at a meeting of the Board with the consent of all the directors present at the meeting, and of which meeting and of the resolution to be moved thereat, specific notice has been given to all the directors then in India.

(3)Where, at the commencement of this Act, any person is holding the office either of manager or of managing director in more than two companies, he shall, within one year from the commencement of this Act, choose not more than two of those companies as companies in which he wishes to continue to hold the office of manager or managing director, as the case may be; and the provisions of clauses (b) and

(c) of sub-section (1) and of sub-sections (2) and (3) of section 276 shall apply mutatis mutandis in relation. to this case, as those provisions apply in relation to the case of a director.

(4)Notwithstanding anything contained in sub-sections (1) to (3), the Central Government may, by order, permit any person to be appointed as a manager of more than two companies, if the Central Government is satisfied that it is necessary that the companies should, for their proper working, function as a single unit and have a common manager. 1* * * * * *

Remuneration of manager. 387.Remuneration of manager. The manager of a company may, subject to the provisions of section 198, receive remuneration either by way of a monthly payment, or by way of a specific percentage,2* * *, of the "net profits" of the company calculated in the manner laid down in sections 349, 350 and 351, or partly by the one way and partly by the other : 3[Provided that except with the approval of the Central Govern- ment such remuneration shall not exceed in the aggregate five per cent. of the net profits.] ----------------------------------------------------------------------

1 Sub-section (5) omitted by Act 65 of 1960, s. 146. 2 The words "not exceeding five" omitted by s. 147, ibid. 3 Ins. by s. 147, ibid. ---------------------------------------------------------------------- 335

Application of sections 269, 310, 311, 312 and 317 to managers. 388.Application of sections 269, 310, 311, 312 and 317 to managers. The provisions of sections 1[269, 310], 311 and 317 shall apply in relation to the manager of a company as they apply in relation to a managing director thereof, and those of section 312 shall apply in relation to the manager of a company, as they apply to a director thereof. 388A Sections 386 to 388 not to apply to certain private companies. 2[388A. Sections 386 to 388 not to apply to certain private companies. Sections 386, 387 and 388 shall not apply to a private company unless it is a subsidiary of a public company.] 3[CHAPTER IVA.-POWERS OF CENTRAL GOVERNMENT TO REMOVE MANAGERIAL PERSONNEL FROM OFFICE ON THE RECOMMENDATION OF THE 4[Company Law Board] 388B Reference to Company Law Board of cases against managerial personnel. 388B. Reference to Company Law Board of cases against managerial

personnel. (1) Where in the opinion of the Central Government there are circumstances suggesting- (a) that any person concerned in the conduct and management of the affairs of a company is or has been in connection therewith guilty of fraud, misfeasance, persistent negligence or default in carrying out his obligations and functions under the law, or breach of trust ; or (b) that the business of a company is not or has not been conducted and managed by such person in accordance with sound business principles or prudent commercial practices ; or (c) that a company is or has been conducted and managed by such person in a manner which is likely to cause, or has caused, serious injury or damage to the interest of the trade, industry or business to which such company pertains ; or (d) that the business of a company is or has been conducted and managed by such person with intent to defraud its creditors, members or any other persons or otherwise for a fraudulent or unlawful purpose or in a manner prejudicial to public interest, the Central Government may state a case against the person aforesaid and refer the same to the 4[Company Law Board.] with a request that the ----------------------------------------------------------------------- 1 Subs. by Act 65 of 1960, s. 148, for " 310" 2 Ins. by s. 149, ibid. 3 Ins. by Act 53 of 1963, s. 9 (w.e.f. 1-1-1964). 4 Subs. by Act 31 of 1988, s. 67 (w.e.f. 31.5.1991) ----------------------------------------------------------------------- 336 1[Company Law Board] may inquire into the case and 2[record a decision] as to whether or not such person is a fit and proper person to hold the office of director or any other office connected with the conduct and management of any company.

(2) Every case under sub-section (1) shall be stated in the form of an application which shall be presented to the 1[Company Law Board] or such officer thereof as it may appoint in this behalf.

(3) The person against whom a case is referred to the 1[Company Law Board] under this section shall be joined as a respondent to the application.

(4) Every such application- (a) shall contain a concise statement of such circumstances and materials as the Central Government may consider neces- sary for the purpose of the inquiry, and (b) shall be signed and verified in the manner laid down in the Code of Civil Procedure, 1908, (5 of 1908.) for the signature and verification of a plaint in a suit by the Central Government.

(5) The 1[Company Law Board] may at any stage of the proceedings allow the Central Government to alter or amend the application in such manner and no such terms as may be just, and all such alterations or amendments shall be made as may be necessary for the purpose of determining the real questions in the inquiry. 388C Interim order by Company Law Board.

388C. Interim order by Company Law Board. (1) Where during the pendency of a case before the 1[Company Law Board] it appears necessary to the 1[Company Law Board] so to do in the interest of the members or creditors of the company or in the public interest, the 1[Company Law Board] may on the application of the Central Government or on its own motion by an order- (a) direct that the respondent shall not discharge any of the duties of his office until further orders of the 1[Company Law Board], and (b)appoint a suitable person in place of the respondent to discharge the duties of the office held by the respondent subject to such terms and conditions as the 1[Company Law Board] may specify in the order.

(2) Every person appointed under clause (b) of sub-section (1) shall be deemed to be a public servant within the meaning of section 21 of the Indian Penal Code (45 of 1860). ---------------------------------------------------------------------- 1 Subs. by Act 31 of 1988, s.67 (w.e.f.31.5.1991). 2 Subs. by Act 17 of 1967), s. 4 and Sch., for record a finding (w.e.f. 1-7-1967). ----------------------------------------------------------------------- 336A 388D Decision of the Company Law Board. 388D. Decision of the Company Law Board. At the conclusion of the hearing of the case, the 7[Company Law Board] shall record its decision] stating therein specifically as to whether or not the respondent is a fit and proper person to hold the office of director or any other office connected with the conduct and management of any company. 388E Power of Central Government to remove managerial personnel on thebasis of Company Law Board's decisions. 388E. Power of Central Government to remove managerial personnel

on the basis of Company Law Board's decisions. (1) Notwithstanding any other provision contained in this Act, the 2[Central Government shall], by order, remove from office any director, or any other person concerned in the conduct and management of the affairs, of a company, against whom there is a 3[decision of the 1[ Company Law Board under this Chapter]: Provided that where a firm or a body corporate is concerned in the conduct and management of the affairs of a company as its managing agent orsecretaries and treasurers, and the 4[decision of the 1[Company Law Board] is against any partner in such firm, or any director of, or any person holding a general power of attorney from, such body corporate, the Central Government may also remove from the office of managing agent or secretaries and treasurers, such firm or body corporate.

5[(2) No order removing a firm or body corporate from the office of managing agents or secretaries and treasurers shall be made in

pursuance of the proviso to sub-section (1) unless such firm or body corporate has been given a reasonable opportunity of showing cause against the same: Provided that no matter shall be raised by such firm or body cor- porate before the Central Government if such matter has been decided by the 1[Company Law Board].

(3)The person against whom an order of removal from office is made under this section shall not hold the office of a director or any other office connected with the conduct and management of the affairs of any company during a period of five years from the date of the order of removal: Provided that the Central Government may, with the previous concurrence of the 1[Company Law Board] permit such person to hold any ---------------------------------------------------------------------- 1 Subs. by Act 31 of 1988, s.67 (w.e.f. 31-5-1991). 2 Subs. by Act 17 of 1967, s. 4 and Sch., for "Central Gover- nment may "(w.e.f. 1-71967). 3 Subs. by s. 4 and Sch., ibid., for " finding of the Tribunal under this Chapter or a decision of a High Court thereon " (w.e.f 1-7- 1967). 4 Subs. S. 4 and Sch., ibid., for "finding of the Tribunal or the decision of a High Court" (w.e.f. 1-7-1967).

5 Subs. by s. 4 and Sch., ibid., for sub-section (2) (w.e.f. 1-7- 1967). ----------------------------------------------------------------------- 336B such office before the expiry of the said period of five years.

(4) Notwithstanding anything contained in any other provision of this Act or any other law or any contract, memorandum or articles, on the removal of a person from the office of a director or, as the case may be, any other office connected with the conduct and management of the affairs of the company, that person shall not be entitled to, or be paid, any compensation for the loss or termination of office.

(5) On the removal of a person from the office of a director or, as the case may be, any other office connected with the conduct and management of the affairs of the company, the company may, with the previous approval of the Central Government, appoint another person to that office in accordance with the provision of this Act. CHAP ARBITRATION, COMPROMISES, ARRANGEMENTS AND RECONSTRUCTIONS CHAPTER V.-ARBITRATION, COMPROMISES, ARRANGEMENTS AND RECONSTRUCTIONS

[Power for companies to refer matters to arbitration.] 389. [Power for companies to refer matters to arbitration.] Rep. by the Companies (Amendment) Act, 1960 (65 of 1960), s. 150.

Interpretation of sections 391 and 393. 390.Interpretation of sections 391 and 393. In sections 391 and 393,- (a) the expression " company " means any company liable to be wound up under this Act; (b) the expression " arrangement includes a reorganization of the share capital of the company by the consolidation of shares of different classes, or by the division of shares into shares of different classes or, by both those methods; and (c) unsecured creditors who may have filed suits, or obtained decrees shall he deemed to be of the same class as other unsecured creditors.

Power to compromise or make arrangements with creditors and members. 391.Power to compromise or make arrangements with creditors and

members. (1) Where a compromise or arrangement is proposed- (a) between a company and its creditors or any class of them ;or (b)between a company and its members or any class of them; the Court may, on the application of the company or of any creditor or member of the company, or, in the case of a company, which is being wound up, of the liquidator, order a meeting of the creditors or class of creditors, or of the members or class of members, as the 336c case may be, to be called, held and conducted in such manner as the Court directs.

(2) If a majority in number representing three-fourths in value of the creditors, or class of creditors, or members, or class of members as the case may be, present and voting either in person or, where proxies are allowed 1[under the rules made under section 643], by proxy, at the meeting, agree to any compromise or arrangement, the compromise or arrangement shall, if sanctioned by the Court, be bind- ing on all the creditors, all the creditors of the class, all the members, or all the members of the class, as the case may be, and also on the company, or, in the case of a company which is being wound up, on the liquidator and contributories of the company: 2[Provided that no order sanctioning any compromise or arrange- ment shall be made by the Court unless the Court is satisfied that the company or any other person by whom an application has been made under

sub-section (1) has disclosed to the Court, by affidavit or otherwise, all material facts relating to the company, such as the latest financial position of the company, the latest auditor's report on the accounts of the company, the pendency of any investigation proceedings in relation to the company under sections 235 to 251, and the like.]

(3) An order made by the Court under sub-section (2) shall have no effect until a certified copy of the order has been filed with the Registrar.

(4) A copy of every such order shall be annexed to every copy of the memorandum of the company issued after the certified copy of the order has been filed as aforesaid, or in the case of a company not having a memorandum, to every copy so issued of the instrument constituting or defining the constitution of the company.

(5) If default is made in complying with sub-section (4), 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 in respect of which default is made.

(6) The Court may, at any time after an application has been made to it under this section, stay the commencement or continuation of any suit or proceeding against the company on such terms as the Court thinks fit, until the application is finally disposed of.

(7) An appeal shall lie from any order made by a Court exercising original jurisdiction under this section to the Court empowered to ---------------------------------------------------------------------- 1 Ins. by Act 65 of 1960, s. 151. 2 Added by Act 31 of 1965, s. 48 (w.e.f. 15-10-1965). ---------------------------------------------------------------------- 336D hear appeals from the decisions of that Court, or if more than one Court is so empowered, to the Court of inferior jurisdiction.

The provisions of sub-sections (3) to (6) shall apply in relation to the appellate order and the appeal as they apply in relation to the original order and the application.

Power of High Court to enforce compromises and arrangements. 392. Power of High Court to enforce compromises and

arrangements. (1) Where a High Court makes an order under section 391 sanctioning a compromise or an arrangement in respect of a company, it-- (a) shall have power to supervise the carrying out of the compromise or arrangement ; and (b) may, at the time of making such order or at any time thereafter, give such directions in regard to any matter 337 or make such modifications in the compromise or arrangement as it may consider necessary for the proper working of the compromise or arrangement.

(2) If the Court aforesaid is satisfied that a compromise or arrangement sanctioned under section 391 cannot be worked satisfactorily with or without modifications, it may, either on its own motion or on the application of any person interested in the affairs of the company, make an order winding up the company, and such an order shall be deemed to be an order made under section 433 of this Act.

(3) The provisions of this section shall, so far as may be, also apply to a company in respect of which an order has been made before the commencement of this Act under section 153 of the Indian Companies Act, 1913, (7 of 1913) sanctioning a compromise or an arrangement.

Information as to compromises or arrangements with creditors andmembers. 393.Information as to compromises or arrangements with creditors

and members. (1) Where a meeting of creditors or any class of creditors, or of members or any class of members, is called under section 391,- (a) with every notice calling the meeting which is sent to a creditor or member, there shall be sent also a statement setting forth the terms of the compromise or arrangement and explaining its effect; and in particular, stating any material interests of the directors, managing director, managing agent, secretaries and treasurers or manager of the company, whether in their capacity as such or as members or creditors of the company or otherwise, and the effect on those interests, of the compromise or arrangement, if, and in so far as, it is different from the effect on the like interests of other persons ; and (b) in every notice calling the meeting which is given by advertisement, there shall be included either such a statement as aforesaid or a notification of the place at which and the manner in which creditors or members entitled to attend the meeting may obtain copies of such a statement as aforesaid.

(2) Where the compromise or arrangement affects the rights of debenture holders of the company, the said statement shall give the like information and explanation as respects the trustees of any deed for securing the issue of the debentures as it is required to give as respects the company's directors.

(3) Where a notice given by advertisement includes a notification that copies of a statement setting forth the terms of the compromise or arrangement proposed and explaining its effect can be obtained 338 by creditors or members entitled to attend the meeting, every creditor or member so entitled shall, on making an application in the manner indicated by the notice, be furnished by the company, free of charge, with a copy of the statement.

(4) Where default is made in complying with any of the requirements of this section, the company, and every officer of the company who is in default, shall be punishable with fine which may extend to five thousand rupees ; and for the purpose of this sub- section any liquidator of the company and any trustee of a deed for securing the issue of debentures of the company shall be deemed to be an officer of the company: Provided that a person shall not be punishable under this sub- section if he shows that the default was due to the refusal of any other person, being a director, managing director, managing agent, secretaries and treasurers, manager or trustee for debenture holders, to supply the necessary particulars as to his material interests.

(5) Every director, managing director, managing agent, secre- taries and treasurers or manager of the company, and every trustee for debenture holders of the company, shall give notice to the company of such matters relating to himself as may be necessary for the purposes of this section ; and if he falls to do so, he shall be punishable with fine which may extend to five hundred rupees.

Provisions for facilitating reconstruction and amalgamation ofcompanies. 394.Provisions for facilitating reconstruction and amalgamation

of companies. (1) Where an application is made to the Court under section 391 for the sanctioning of a compromise or arrangement proposed between a company and any such persons as are mentioned in that section, and it is shown to the Court- (a) that the compromise or arrangement has been proposed for the purposes of, or in connection with, a scheme for the reconstruction of any company or companies, or the amalgamation of any two or more companies; and (b) that under the scheme the whole or any part of the undertaking, property or liabilities of any company concerned in the scheme (in this section referred to as a "transferor company") is to be transferred to another company (in this section referred to as ".the transferee company"); the Court may, either by the order sanctioning the compromise or arrangement or by a subsequent order, make provision for all or any of the following matters:- (i) the transfer to the transferee company of the whole or any part of the undertaking, property or liabilities of any transferor company; 339 (ii) the allotment or appropriation by the transferee company of any shares, debentures, policies, or other like interests in that company which, under the compromise or arrangement, are to be allotted or appropriated by that company to or for any person ; (iii) the continuation by or against the transferee company of any legal proceedings pending by or against any transferor company ; (iv) the dissolution, without winding up, of any transferor company; (v) the provision to be made for any persons who, within such time and in such manner as the Court directs, dissent from the compromise or arrangement ; and (vi) such incidental, consequential and supplemental matters as are necessary to secure that the reconstruction or amalgamation shall be fully and effectively carried out: 1[Provided that no compromise or arrangement proposed for the purposes of, or in connection with, a scheme for the amalgamation of a company, which is being wound up, with any other company or companies, shall be sanctioned by the Court unless the Court has received a report from the Company Law Board, or the Registrar that the affairs of the company have not been conducted in a manner prejudicial to the interests of its members or to public interest: Provided further that no order for the dissolution of any trans- feror company under clause (iv). shall be made by the Court unless the Official Liquidator has, on scrutiny of the books and papers of the company, made a report to the Court that the affairs of the company have not been conducted in a manner prejudicial to the interests of its members or to public interest.]

(2) Where an order under this section provides for the transfer of any property or liabilities, then, by virtue of the order, that property shall be transferred to and vest in, and those liabilities shall be transferred to and become the liabilities of, the transferee company ; and in the case of any property, if the order so directs, freed from any charge which is, by virtue of the compromise or arrangement, to cease to have effect.

(3) Within 2 [thirty] days after the making of an order under this section every company in relation to which the order is made shall ---------------------------------------------------------------------- 1 Added by Act 31 of 1965, s. 49 (w.e.f. 15-10-1965). 2 Subs. by s. 62 and Sch., ibid. for "fourteen" (w.e.f. 15-10- 1965). ---------------------------------------------------------------------- 340 cause a certified copy thereof to be filed with the Registrar for registration. If default is made in complying with this sub-section, the com- pany, and every officer of the company who is in default, shall be punishable with fine which may extend to fifty rupees.

(4) In this section- (a) " property " includes property, rights and powers of every description and " liabilities " includes duties of every description; and (b) " transferee company " does not include any company other than a company within the meaning of this Act ; but "transferor company " includes any body corporate, whether a company within the meaning of this Act or not. 394A Notice to be given to Central Government for applications under sec-tions 391 and 394. 1[394A. Notice to be given to Central Government for applications under sections 391 and 394. The Court shall give notice of every application made to it under section 391 or 394 to the Central Government, and shall take into consideration the representations, if any, made to it by that Government before passing any order under any of these sections.]

Power and duty to acquire shares of shareholders dissenting fromscheme or contract approved by majority. 395. Power and duty to acquire shares of shareholders

dissenting from scheme or contract approved by majority.(1) Where a scheme or contract involving the transfer of shares or any class of shares in a company (in this section referred to as " the transferor company ") to another company (in this section referred to as " the transferee company "), has, within four months after the making of the offer in that behalf by the transferee company, been approved by the holders of not less than nine-tenths in value of the shares whose transfer is involved (other than shares already held at the date of the offer by, or by a nominee for, the transferee company or its subsidiary), the transferee company may, at any time within two months after the expiry of the said four months, give notice in the prescribed manner to any dissenting shareholder, that it desires to acquire his shares ; and when such a notice is given, the transferee company shall, unless, on an application made by the dissenting shareholder within one month from the date on which the notice was given, the Court thinks fit to order otherwise, be entitled and bound to acquire those shares on the terms on which, under the scheme or contract, the shares of the approving shareholders are to be trans- ferred to the transferee company: Provided that where shares in the transferor company of the same class as the shares whose transfer is involved are already held as aforesaid to a value greater than one-tenth of the aggregate of the ---------------------------------------------------------------------- 1 Ins. by Act 31 of 1965, s. 50 (w.e.f. 15-10-1965). ---------------------------------------------------------------------- 341 values of all the shares in the company of such class, the foregoing provisions of this sub-section shall not apply, unless- (a) the transferee company offers the same terms to all holders of the shares of that class (other than those already held as aforesaid) whose transfer is involved; and (b) the holders who approve the scheme or contract, besides holding not less than nine-tenths in value of the shares (other than those already held as aforesaid) whose transfer is involved, are not less than three-fourths in number of the holders of those shares;

(2) Where, in pursuance of any such scheme or contract as afore- said, shares, or shares of any class, in a company are transferred to another company or its nominee, and those shares together with any other shares or any other shares of the same class, as the case may be, in the first-mentioned company held at the date of the transfer by, or by a nominee for, the transferee company or its subsidiary com- prise nine-tenths in value of the shares. or the shares of that class, as the case may be, in the first-mentioned company, then,- (a) the transferee company shall, within one month from the date of the transfer (unless on a previous transfer in pur- suance of the scheme or contract it has already complied with this requirement), give notice of that fact in the prescribed manner to the holders of the remaining shares or of the remaining shares of that class, as the case may be, who have not assented to the scheme or contract; and (b) any such holder may, within three months from the giving of the notice to him, require the transferee company to acquire the shares in question and where a shareholder gives notice under clause (b) with respect to any shares, the transferee company shall be entitled and bound to acquire those shares on the terms on which, under the scheme or contract, the shares of the approving shareholders were transferred to it, or on such other terms as may be agreed, or as the Court on the application of either the transferee company or the shareholder thinks fit to order.

(3) Where a notice has been given by the transferee company

under sub-section (1) and the Court has not, on an application made by the dissenting shareholder, made an order to the contrary, the transferee company shall, on the expiry of one month from the date on which the notice has been given, or, if an application to the Court by the dissenting shareholder is then pending, after that application 342 has been disposed of, transmit a copy of the notice to the transferor company together with an instrument of transfer executed on behalf of the shareholder by any person appointed by the transferee company and on its own behalf by the transferee company, and pay or transfer to the transferor company the amount or other consideration representing the price payable by the transferee company for the shares which, by virtue of this section, that company is entitled to acquire ; and 1[the transferor company shall-- (a) thereupon register the transferee company as the holder of those shares. and (b) within one month of the date of such registration, inform the dissenting shareholders of the fact of such registration and of the receipt of the amount or other consideration representing the price payable to them by the transferee company:] Provided that an instrument of transfer shall not be required for any share for which a share warrant is for the time being outstanding.

(4) Any sums received by the transferor company under this section shall be paid into a separate bank account, and any such sums and any other consideration so received shall be held by that company in trust for the several persons entitled to the shares in respect of which the said sums or other consideration were respectively received. 2[ (4A) (a) The following provisions shall apply in relation to every offer of a scheme or contract involving the transfer of shares or any class of shares in the transferor company to the transferee company, namely: - (i)every such offer or every circular containing such offer or every recommendation to the members of the transferor company by its directors to accept such offer shall be accompanied by such information as may be prescribed ; (ii) every such offer shall contain a statement by or on behalf of the transferee company, disclosing the steps it has taken to ensure that necessary cash will be available ; (iii) every circular containing, or recommending acceptance of, such offer shall be presented to the Registrar for registration and no such circular shall be issued until it is so registered ; --------------------------------------------------------------------- 1 Subs. by Act 31 of 1965, s.58, for certain words (w.e.f. 15-10-1965). 2 Ins. by s. 51, ibid. (w.e.f. 15-10-1965). --------------------------------------------------------------------- 342 343 (iv) the Registrar may refuse to register any such circular which does not contain the information required to be given under sub-clause (i) or which sets out such information in a manner likely to give a false impression; and (v) an appeal shall lie to the Court against an order of the Registrar refusing to register any such circular. (b) Whoever issues a circular referred to in sub-clause (iii) of clause (a), which has not been registered, shall be punishable with fine which may extend to five hundred rupees.]

(5) In this section- (a) "dissenting shareholder" includes a shareholder who has not assented to the scheme or contract and any shareholder who has failed or refused to transfer his shares to the transferee company in accordance with the scheme or contract; (b) transferor company " and " transferee company " shall have the same meaning as in section 394.

(6) In relation to an offer made by the transferee company to shareholders of the transferor company before the commencement of this Act, this section shall have effect-

(a) with the substitution, in sub-section (1), for the words " the shares whose transfer is involved (other than shares already held at the date of the offer by, or by a nominee for, the transferee company or its subsidiary)," of the words " the shares affected " and with the omission of the proviso to that sub-section;

(b) with the omission of sub-section (2);

(c) with the omission in sub-section (3) of the words "together with an instrument of transfer executed on behalf of the shareholder by any person appointed by the transferee company and on its own behalf by the transferee company and of the proviso to that sub-section ; and

(d) with the omission of clause (b) of sub-section (5).

Power of Central Government to provide for amalgamation of companiesin public interest. 396.Power of Central Government to provide for amalgamation of

companies in public interest. (1) Where the Central Government is satisfied that it is essential in the 1[public interest] that two or more companies should amalgamate, then, notwithstanding anything contained in sections ---------------------------------------------------------------------- 1 Subs. by Act 65 of 1960, s. 152, for "national interest". ---------------------------------------------------------------------- 344 394 and 395 but subject to the provisions of this section, the Central Government may, by order notified in the Official Gazette, provide for the amalgamation of those companies into a single company with such constitution ; with such property, powers, rights, interests, authorities and privileges ; and with such liabilities, duties, and obligations; as may be specified in the order.

(2) 1[The order aforesaid may provide for the continuation by or against the transferee company of any legal proceedings pending by or against any transferor company and may also] contain such consequential, incidental and supplemental provisions as may, in the opinion of the Central Government, be necessary to give effect to the amalgamation.

(3) Every member or creditor (including a debenture holder) of each of the companies before the amalgamation shall have, as nearly as may be, the same interest in or rights against the company resulting from the amalgamation as he had in the company of which he was originally a member or creditor; and to the extent to Which the interest or rights of such member or creditor in or against the com- pany resulting from the amalgamation are less than his interest in or rights against the original company, he shall be entitled to com- pensation which shall be assessed by such authority 1[as may be prescribed and every such assessment shall be published in the Official Gazette] The compensation so assessed shall be paid to the member or creditor concerned by the company resulting from the amalgamation. 2[(3A) Any person aggrieved by any assessment of compensation

made by the prescribed authority under sub-section (3) may, within thirty days from the date of publication of such assessment in the Official Gazette, prefer an appeal to the Company Law Board and thereupon the assessment of the compensation shall be made by the Company Law Board]

(4) No order shall be made under this section, unless- (a) a copy of the proposed order has been sent in draft to each of the companies concerned; 3* * * 2[(aa) the time for preferring an appeal under sub-section (3A) has expired, or where any such appeal has been preferred, the appeal has been finally disposed of; and] (b) the Central Government has considered, and made such- modifications, if any, in the draft order as may seem to it desirable in the light of any suggestions and objections_ which may be received by it from any such company within such period as the Central Government may fix in that behalf. not being less than two months from the date on which the copy aforesaid is received by that company, or from any class of shareholders therein, or from any creditors or any class of creditors thereof.

(5) Copies of every order made under this section shall, as soon as may be after it has been made, be laid before both Houses of Parliament. 396A Preservation of books and papers of amalgamated company. 4[396A.Preservation of books and papers of amalgamated company. The books and papers of a company which has been amalgamated with, or whose shares have been acquired by, another ---------------------------------------------------------------------- 1 Subs., by Act 35 of 1985, s.3. 2 Ins. by s.3, ibid. 3 Omitted by s.3, ibid. 4 Ins. by Act 31 of 1965, s.52 (w.e.f. 15-10-1965). ----------------------------------------------------------------------- 344A company under this Chapter shall not be disposed of without the prior permission of the Central Government and before granting such permission, that Government may appoint a person to examine the books and papers or any of them for the purpose of ascertaining whether they contain any evidence of the commission of an offence in connection with the promotion or formation, or the management of the affairs, of the first-mentioned company or its amalgamation or the acquisition of its shares.] CHAP PREVENTION OF OPPRESSION AND MISMANAGEMENT CHAPTER VI.-PREVENTION OF OPPRESSION AND MISMANAGEMENT A. Powers of 1[Company Law Board]

Application to Company Law Board for relief in cases of oppression. 397.Application to Company Law Board for relief in cases of

oppression. (1) Any members of a company who complain that the affairs of the company 2[are being conducted in a manner prejudicial to public interest or] in a manner oppressive to any member or members (including any one or more of themselves) may apply to the 1[Company Law board] for an order under this section, provided such members have a right so to apply in virtue of section 399.

(2)If, on any application under sub-section (1), the 1[Company Law Board] is of opinion- (a) that the company's affairs 2[are being conducted in a manner prejudicial to public interest or] in a manner oppressive to any member or members; and (b) that to wind up the company would unfairly prejudice such member or members, but that otherwise the facts would justify the making of a winding-up order on the ground that it was just and equitable that the company should be wound up; the 1[Company Law Board] may with a view to bringing to an end the matters complained of, make such order as it thinks fit.

Application to Company Law Board for relief in cases of mismanagement. 398.Application to Company Law Board for relief in cases of

mismanagement. (1) Any members of a company who complain- (a) that the affairs of the company 3[are being conducted in a manner prejudicial to public interest or] in a manner prejudicial to the interests of the company ; or (b) that a material change (not being a change brought about by, or in the interests of, any creditors including deben- ---------------------------------------------------------------------- 1 Subs. by Act 31 of 1988, s.67 (w.e.f.31-5-1991). 2 Subs. by Act 53 of 1963, s.10, for "are being conducted" (w.e.f. 1-1-1964). 3 Subs. by s.11, ibid., for "are being conducted" (w.e.f. 1-1-1964). --------------------------------------------------------------------- 344B ture holders, or any class of shareholders, of the company) has taken place in the management or control of the company, whether by an alteration in its Board of directors, or of its managing agent or secretaries and treasurers 1[or manager], or in the constitution or control of the firm or body corporate acting as its managing agent or secretaries and treasurers, or in the ownership of the company's shares, or if it has no share capital, in its membership, or in any other manner whatsoever, and that by reason of such change, it is likely that the affairs of the company 2[will be conducted in a manner prejudicial to public interest or] in a manner prejudicial to the interests of the company; may apply to the 3[Company Law Board] for an order under this section, provided such members have a right so to apply in virtue of section

(2) If, on any application under sub-section (1), the 3[Company Law Board] is of opinion that the affairs of the company are being conducted as aforesaid or that by reason of any material change as aforesaid in the management or control of the company, it is likely that the affairs of the company will be conducted as aforesaid, the 3[Company Law Board] may, with view to bringing to an end or preventing the matters complained or apprehended, make such order as it thinks fit.

Right to apply under section 397 and 398.

399.Right to apply under section 397 and 398. (1) The following members of a company shall have the right to apply under section 397 or 398: - (a) in the case of a company having a share capital, not less than one hundred members of the company or not less than one-tenth of the total number of its members, whichever is less, or any member or members holding not less than one- tenth of the issued share capital of the company, provided that the applicant or applicants have paid all calls and other sums due on their shares; (b) in the case of a company not having a share capital, not less than one-fifth of the total number of its members.

(2) For the purposes of sub-section (1), where any share or shares are held by two or more persons jointly, they shall be counted only as one member. ---------------------------------------------------------------------- 1 Ins. by Act 65 of 1960, s. 153. 2 Subs. by Act 53 of 1963, s. 11, for "will be conducted" (w.e.f. 1-1-1964). 3 Subs. by Act 31 of 1988, s.67(w.e.f.31.5.1991). ---------------------------------------------------------------------- 345

(3) Where any members of a company are entitled to make an

application in virtue of sub-section (1), any one or more of them having obtained the consent in writing of the rest, may make the application on behalf and for the benefit of all of them.

(4) The Central Government may, if in its opinion circumstances exist which make it just and equitable so to do, authorise any member or members of the company to apply to, the 1[Company Law Board] under section 397 or 398, notwithstanding that the requirements of clause

(a) or (b), as the case may be, of sub-section (1) are not fulfilled.

(5) The Central Government may before authorising any member or members as aforesaid, require such member or members to give security for such amount as the Central Government may deem reasonable, for the payment of any costs which the 1[Company Law Board] dealing with the application, may order such member or members to pay to any other person or persons who are parties to the application.

Notice to be given to Central Government of applications undersections 397 and 398. 400.Notice to be given to Central Government of applications under sections 397 and 398. The 1[Company Law Board] shall give notice of every application made to it under section 397 or 398 to. the Central Government, and shall take into consideration the representations, if any, made to it by that Government before passing a final order under that section.

Right of Central Government to apply under sections 397 and 398. 401.Right of Central Government to apply under sections 397 and 398. The Central Government may itself apply to the 1[Company Law Board] for an order under section 397 or 398, or cause an application to be made to the 1[Company Law Board] for such an order by any person authorised by it in this behalf.

Powers of Company Law Board on application under section 397 or 398. 402. Powers of Company Law Board on application under section 397 or 398. Without prejudice to the generality of the powers of the 1[Company Law Board] under section 397 or 398, any order under either section may provide for- (a) the regulation of the conduct of the company's affairs in future; (b) the purchase of the shares or interests of any members of the company by other members thereof or by the company; (c) in the case of a purchase of its shares by the company as aforesaid, the consequent reduction of its share capital; (d) the termination, setting aside or modification of any agreement, howsoever arrived at, between the company on ---------------------------------------------------------------------- 1 Subs. by Act 31 of 1988, s.67 (w.e.f.31.5.1991). ---------------------------------------------------------------------- 346 the one hand, and any of the following persons, on the other, namely: - (i) the managing director, (ii) any other director, (iii)the managing agent, (iv) the secretaries and treasurers, and (v) the manager, upon such terms and conditions as may, in the opinion of the 1[Company Law Board] be just and equitable in all the circumstances of the case; (e) the termination, setting aside or modification of any agreement between the company and any person not referred to in clause (d), provided that no such agreement shall be terminated, set aside or modified except after due notice to the party concerned and provided further that no such agreement shall be modified except after obtaining the consent of the party concerned; (f) the setting aside of any transfer, delivery of goods, payment, execution or other act relating to property made or done by or against the company within three months before the date of the application under section 397 or 398, which would, if made or done by or against an individual, be deemed in his insolvency to be a fraudulent preference ; (g) any other matter for which in the opinion of the 1[Company Law Board] it is just and equitable that provision should be made.

Interim order by Company Law Board. 403.Interim order by Company Law Board. Pending the making by it of a final order under section 397 or 398, as the case may be, 1[Company Law Board] may, on the application of any party to the proceeding, make any interim order which it thinks fit for regulating the conduct of the company's affairs, upon such terms and conditions as appear to it to be just and equitable.

Effect of alteration of memorandum or articles of company by orderunder section 397 or 398. 404.Effect of alteration of memorandum or articles of company by

order under section 397 or 398. (1) Where an order under section 397 or 398 makes any alteration in the memorandum or articles of a company, then, notwithstanding any other provision of this Act, the company shall not have power, except to the extent, if any, permitted in the order, to make without the leave of the 1[Company Law Board] any alteration whatsoever which is inconsistent with the order, either in the memorandum or in the articles. ---------------------------------------------------------------------- 1 Subs. by Act 31 of 1988, s.67 (w.e.f. 31.5.1991) ---------------------------------------------------------------------- 347

(2) Subject to the provisions of sub-section (1), the alterations made by the order shall, in all respects, have the same effect as if they had been duly made by the company in accordance with the provisions or this Act; and the said provisions shall apply accordingly to the memorandum or articles as so altered.

(3) A certified copy of every order altering, or giving leave to alter, a company's memorandum or articles, shall within 1[thirty] days after the making thereof, be filed by the company with the Registrar who shall register the same.

(4) If default is made in complying with the provisions of sub-

section (3), the company, and every officer of the company who is in default, shall be punishable with fine which may extend to five thousand rupees.

Addition of respondents to application under section 397 or 398. 405.Addition of respondents to application under section 397 or 398. If the managing director or any other director, the managing agent, secretaries and treasurers or the manager, of a company, or any other person, who has not been impleaded as a respondent to any application under section 397 or 398 applies to be added as a respondent thereto, the 2[Company Law Board] shall, if it is satisfied that there is sufficient cause for doing so, direct that he may be added as a respondent accordingly.

Application of sections 539 to 544 to proceedings under sections 397or 398. 406.Application of sections 539 to 544 to proceedings under sections 397 or 398. In relation to an application under section 397 or 398, sections 539 to 544, both inclusive, shall apply in the form set forth in Schedule XI.

Consequences of termination or modification of certain agreements. 407.Consequences of termination or modification of certain

agreements. (1) Where an order 3* * * made under section 397 or 398 terminates, sets aside, or modifies an agreement such as is referred to in clause (d) or (e) of section 402,- (a) the order shall not give rise to any claims whatever against the company by any person for damages or for compen- sation for loss of office or in any other respect, either in pursuance of the agreement or otherwise; (b) no managing or other director, managing agent, secretaries and treasurers, or manager whose agreement is so termi- --------------------------------------------------------------------- 1 Subs. by Act 31 of 1965, s.62 and Sch. for "fifteen" (w.e.f.15- 10-1965). 2 Subs. by Act 31 of 1988, s.67 (w.e.f. 31-5-1991). 3 Omitted by s.67, ibid (w.e.f.S31-5-1991). ---------------------------------------------------------------------- 348 nated or set aside and no person who, at the date of the order terminating or setting aside the agreement was or subsequently becomes, an associate of such managing agent or secretaries and treasurers shall, for a period of five years from the date of 1[the order terminating or setting aside the agreement], without the leave of the 2[Company Law Board], be appointed, or act, as the managing or other director, managing agent, secretaries and treasurers, or manager of the company.

(2)(a) Any person who knowingly acts as a managing or other director, managing agent, secretaries and treasurers, or manager of, a

company in contravention of clause (b) of sub-section (1); (b)where the person so acting as managing agent or as secre- taries and treasurers is a firm or body corporate, every partner in the firm, or every director of the body corporate who is knowingly a party to such contravention; and (c)every other director or every director, as the case may be, of the company, who is knowingly a party to such contravention; shall be punishable with imprisonment for a term which may extend to one year, or with fine which may extend to five thousand rupees, or with both.

(3) 2[Company Law Board] under clause (b) of sub-section (1) unless notice of the intention to apply for leave has been served on the Central Government and that Government has been given an opportunity of being heard in the matter. B. Powers of Central Government

Powers of Government to prevent oppression or mismanagement. 408.Powers of Government to prevent oppression or mismanagement.

3[(1) Notwithstanding anything contained in this Act, the Central Government, may appoint such number of persons as the Company Law Board may, by order in writing, specify as being necessary to effectively safeguard the interests of the company, or its shareholders or the public interests to hold office as directors thereof for such period, not exceeding three years on any one occasion, as it may think fit, if the Company Law Board, on a reference made to it by the Central Government or on an application of not less than one hundred members of the company or of the members of the company holding not less than one-tenth of the total voting power therein, is satisfied, after such inquiry as it deems fit to make, that it is necessary to make the appointment or appointments in order to prevent the affairs of the company being conducted either in a manner which is oppressive to any members of the company or in a manner which is prejudicial to the interests of the company or to public interest: Provided that in lieu of passing an order as aforesaid, the Company Law Board may, if the company has not availed itself of the option given to it under section 265, direct the company to amend its articles in the manner provided in that section and make fresh appointments of directors in pursuance of the articles as so amended, within such time as may be specified in that behalf by the Company Law Board.

(2) In case the Company Law Board passes an order under the

proviso to sub-section (1), it may, if it thinks fit, direct that until new directors are appointed in pursuance of the order aforesaid, such number of persons as the Company Law Board may, by order, specify as being necessary to effectively safeguard the interests of the company, or its shareholders or the public interest, shall hold office as additional directors of the company and on such directions, the Central Government shall appoint such additional directors.] ----------------------------------------------------------------------- 1 Subs. by Act 65 of 1960, s. 154, for "the order terminating the agreement". 2 Subs. by Act 31 of 1988,s.67 (w.e.f.31-5-1991). 3 Subs. by s.67, ibid., (w.e.f. 31.5.1991). ----------------------------------------------------------------------- 349

(3) For the purpose of reckoning two-thirds or any other proportion of the total number of directors of the company, any director or directors appointed by the Central Government under sub-

section (1) or (2) shall not be taken into account.

1[(4) A person appointed under sub-section (1) to hold office as

a director or a person directed under sub-section (2) to hold office as an additional director, shall not be required to hold any qualification shares nor his period of office shall be liable to determination by retirement of directors by rotation; but any such director or additional director may be removed by the Central Government from his office at any time and another person may be appointed by that Government in his place to hold office as a director or, as the case may be, an additional director. ---------------------------------------------------------------------- 1 Ins. by Act 65 of 1960, s. 155. ----------------------------------------------------------------------- 350

(5) No change in the Board of directors made after a person is appointed or directed to hold office as a director or additional director under this section shall, so long as such director or additional director holds office, have effect unless confirmed by the 1[Company Law Board.]

2[(6) Notwithstanding anything contained in this Act or in any other law for the time being in force, where any person is appointed by the Central Government to hold office as director or additional

director of a company in pursuance of sub-section (1) or sub-section

(2), the Central Government may issue such directions to the company as it may consider necessary or appropriate in regard to its affairs 3[and such directions may include directions to remove an auditor already appointed and to appoint another auditor in his place or to alter the articles of the company, and upon such directions being given, the appointment, removal or alteration, as the case may be, shall be deemed to have come into effect as if the provisions of this Act in this behalf have been complied with without requiring any further act or thing to be done.]

(7) The Central Government may require the persons appointed as

directors or additional directors in pursuance of sub-section (1) or

sub-section (2) to report to the Central Government from time to time with regard to the affairs of the company.]

Power of company Law Board to prevent change in Board of directorslikely to affect company prejudicially. 409.Power of company Law Board to prevent change in Board of

directors likely to affect company prejudicially. (1) Where a complaint is made to the 4[Company Law Board], by the managing director or any other director, the managing agent, 5[the secretaries and treasurers or the manager]. of a company that as a result of a change which has taken place or is likely to take place in the ownership of any shares held in the company, a change in the Board of directors is likely to take place which (if allowed) would affect prejudicially the affairs of the company, the 4[Company Law Board] may, if satisfied, after such inquiry as it thinks fit to make that it is just and proper so to do, by order, direct that 6[no resolution passed or that may be passed or no action taken or that may be taken] to effect a change in the Board of directors after the date of the complaint shall have effect unless confirmed by the 4[Company Law Board] and any such order shall have effect notwithstanding anything to the contrary contained in any other provision of this Act or in the memorandum or articles of the company, or in any agreement with, or any resolution passed in general meeting by, or by the Board of directors of, the company.

(2) The 4[Company Law Board] shall have power when any such complaint is received by it, to make an interim order to the effect

set out in sub-section (1), before making or completing the inquiry aforesaid. ---------------------------------------------------------------------- 1 Subs. by Act 31 of 1988, s.54 (w.e.f. 15.6.1988). 2 Ins. by Act 41 of 1974, s. 31 (w.e.f. 1-2-1975). 3 Added by Act 31 of 1988, s.54 (w.e.f. 15-6-1988). 4 Subs. by s.67, ibid, (w.e.f. 31.5.1991). 5 Subs. by Act 65 of 1960, s. 156, for "or the secretaries and treasurers". 6 Subs. by s.156, ibid., for "no resolution passed or action taken". ---------------------------------------------------------------------- 351-352

(3) Nothing contained in sub-sections (1) and (2) shall apply to a private company, unless it is a subsidiary of a public company. CHAP CONSTITUTION AND POWERS OF 1[ADVISORY COMMITTEE] CHAPTER VII.-CONSTITUTION AND POWERS OF 1[ADVISORY COMMITTEE]

Appointment of Advisory Committee. 2[410. Appointment of Advisory Committee. For the purpose of advising the Central Government and the Company Law Board on such matters arising out of the administration of this Act as may be referred to it by that Government or Board, the Central Government, may constitute an Advisory Committee consisting of not more than five persons with suitable qualifications.] CHAP MISCELLANEOUS PROVISIONS CHAPTER VIII.-MISCELLANEOUS PROVISIONS Contracts where company is undisclosed principal

Contracts by agents of company in which company is undisclosedprincipal. 416.Contracts by agents of company in which company is

undisclosed principal. (1) Every person, being the managing agent, secretaries and treasurers, manager or other agent of a public company or of a private company which is a subsidiary of a public company, who enters into a contract for or on behalf of the company in which contract the company is an undisclosed principal shall, at the time of entering into the contract, make a memorandum in writing of the terms of the contract, and specify therein the person with whom it is entered into.

(2) Every such person who enters into a contract as aforesaid shall forthwith deliver the memorandum to the company and send copies thereof to each of the directors; and such memorandum shall ---------------------------------------------------------------------- 1 Subs. by Act 31 of 1965, s.53, for "ADVISORY COMMISSION" (w.e.f. 15-10-1965). 2 Subs. by s.53, ibid, for sections 410-415 (w.e.f.15-10-1965). --------------------------------------------------------------------- 353 be filed in the office of the company and laid before the Board of directors at its next meeting.

(3) If default is made in complying with the requirements of this section,- (a) the contract shall, at the option of the company, be voidable as against the company; and (b) the person who enters into the contract, or every officer of the company who is in default, as the case may be, shall be punishable with fine which may extend to two hundred rupees. Employees' securities and provident funds

Employees' securities to be deposited in post office savings bank orScheduled Bank. 417.Employees' securities to be deposited in post office savings

bank or Scheduled Bank. 1[(1) Any money or security deposited with a company by any of its employee in pursuance of his contract of service with the company shall be kept or deposited by the company within fifteen days from the date of deposit- (a) in a post office savings bank account, or (b) in a special account to be opened by the company for the purpose in the State Bank of India or in a Scheduled Bank, or (c) where the company itself is a Scheduled Bank, in a special account to be opened by the company for the purpose either in itself or in the State Bank of India or in any other Scheduled Bank.]

(2) No portion of such moneys or securities shall be utilised by the company except for the purposes agreed to in the contracts of service.

(3) A receipt for moneys deposited with a company by its em- ployee shall not be deemed to be a security within the meaning of this section; and the moneys themselves shall accordingly be depo-

sited 2* * *as provided in sub-section (1).

Provisions applicable to provident funds of employees.

418.Provisions applicable to provident funds of employees. 3[(1) Where a provident fund has been constituted by a company for its employees or any class of its employees, all moneys contributed to such fund (whether by the company or by the employees) or received or accruing by way of interest or otherwise ----------------------------------------------------------------------

1 Subs. by Act 65 of 1960, s. 158, for sub-section (1). 2 The words "with a Scheduled Bank" omitted by s. 158, ibid.

3 Subs. by s. 159, ibid., for sub-section (1). ---------------------------------------------------------------------- 354 to such fund shall, within fifteen days from the date of contribution, receipt or accrual, as the case may be, either- (a) be deposited- (i) in a post office savings bank account, or (ii)in a special account to be opened by the company for the purpose in the State Bank of India or in a Scheduled Bank, or (iii)where the company itself is a Scheduled Bank, in a special account to be opened by the company for the purpose either in itself or in the State Bank of India or in any other Scheduled Bank; or (b) be invested in the securities mentioned or referred to in clauses (a) to (e) of section 20 of the Indian Trusts Act, 1882 (2 of 1882).]

(2) Notwithstanding anything to the contrary in the rules of any

provident fund to which sub-section (1) applies or in any contract between a company and its employees, no employee shall be entitled to receive, in respect of such portion of the amount to his credit in such fund as is invested in accordance with the provisions of sub-

section (1), interest at a rate exceeding the rate of interest yielded by such investment.

(3) Nothing in sub-section (1) shall affect any rights of an em- ployee under the rules of a provident fund to obtain advances from or to withdraw money standing to his credit in the fund, where the fund is a recognised provident fund within the meaning of clause (a) of section 58A of the Indian Income-tax Act, 1922 (11 of 1922)3, or where the rules of the fund contain provisions corresponding to rules 4, 5, 6, 7, 8, and 9 of the Indian Income-tax (Provident Funds Relief) Rules.

(4) Where a 1* * * trust has been created by a company with

respect to any provident fund referred to in sub-section (1), the company shall be bound to collect the contributions of the employees concerned and pay such contributions as well as its own contributions, if any, to the trustees 2[within fifteen days from the date of collection] ; but in other respects, the obligations laid on the company by this section shall devolve on the trustees and shall be discharged by them instead of by the company. ---------------------------------------------------------------------- 1 The word "separate" omitted by Act 65 of 1960, s. 159. 2 Ins. by s. 159, ibid. 3 See now the income-tax Act, 1961 (43 of 1961). ---------------------------------------------------------------------- 355

Right of employee to see bank's receipt for moneys or securitiesreferred to in section 417 or 418. 419. Right of employee to see bank's receipt for moneys or securities referred to in section 417 or 418. An employee shall be entitled, on request made in this behalf to the company, or to the

trustees referred to in sub-section (4) of section 418, as the case may be, to see the bank's receipt for any money or security such as is referred to in sections 417 and 418.

Penalty for contravention of sections 417, 418 and 419. 420.Penalty for contravention of sections 417, 418 and 419. Any officer of a company, or any such trustee of a provident fund as is

referred to in sub-section (4) of section 418 who, knowingly, contravenes, or authorises or permits the contravention of, the provi- sions of section 417, 418 or 419, shall be punishable with 1[imprison- ment for a term which may extend to six months, or with fine which may extend to one thousand rupees]. Receivers and Managers

Filing of accounts of receivers. 421.Filing of accounts of receivers. Every receiver of the property of a company who has been appointed under a power conferred by any instrument and who has taken possession, shall once in every half year while he remains in possession, and also on ceasing to act as receiver, file with the Registrar an abstract in the prescribed form of his receipts and payments during the period to which the abstract relates.

Invoices,etc., to refer to receiver where there is one. 422.Invoices,etc., to refer to receiver where there is one. Where a receiver, of the property of a company has been appointed, every invoice, order for goods, or business letter issued by or on behalf of the company, or the receiver of the company, being a document on or in which the name of the company appears, shall contain a statement that a receiver has been appointed.

Penalty for non-compliance with sections 421 and 422. 423.Penalty for non-compliance with sections 421 and 422. If default is made in complying with the requirements of section 421 or 422, the company, and every officer of the company who is in default, shall be punishable with fine which may extend to two hundred rupees. For the purposes of this section, the receiver shall be deemed to be an officer of the company.

Application of sections 421 to 423 to receivers and managers appointedby Court and managers appointed in pursuance of an instrument. 424. Application of sections 421 to 423 to receivers and managers appointed by Court and managers appointed in pursuance of an instrument. The provisions of sections 421, 422 and 423 shall apply to the receiver of, or any person appointed to manage, the property of a company, appointed by a Court or to any person appointed to manage the property of a company under any powers contained in an instrument, in like manner as they apply to a receiver appointed under any powers contained in an instrument. ---------------------------------------------------------------------- 1 Subs. by Act 65 of 1960, s. 160, for "fine which may extend to five hundred rupees". ---------------------------------------------------------------------- 356 PART VII WINDING UP CHAP PRELIMINARY CHAPTER I.-PRELIMINARY Modes of Winding Up

Modes of winding up.

425. Modes of winding up. (1) The winding up of a company may be either- (a) by the Court ; or (b) voluntary ; or (c) subject to the supervision of the Court.

(2) The provisions of this Act with respect to winding up apply, unless the contrary appears, to the winding up of a company in any of those modes. Contributories

Liability as contributories of present and past members. 426. Liability as contributories of present and past members.

(1) In the event of a company being wound up, every present and past member shall be liable to contribute to the assets of the company to an amount sufficient for payment of its debts and liabilities and the costs, charges and expenses of the winding up, and for the adjustment of the rights of the contributories among themselves, subject to the provisions of section 427 and subject also to the following qualifications, namely:- (a) a past member shall not be liable to contribute if he has ceased to be a member for one year or upwards before the commencement of the winding up; (b) a past member shall not be liable to contribute in respect of any debt or liability of the company contracted after he ceased to be a member; (c) no past member shall be liable to contribute unless it appears to the Court that the present members are unable to satisfy the contributions required to be made by them in pursuance of this Act; (d) in the case of a company limited by shares, no contribution shall be required from any past or present member exceeding the amount, if any, unpaid on the shares in respect of which he is liable as such member; (e) in the case of a company limited by guarantee, no contribution shall, subject to the provisions of sub-section

(2), be required from any past or present member exceeding 357 the amount undertaken to be contributed by him to the assets of the company in the event of its being wound up; (f) nothing in this Act shall invalidate any provision contained in any policy of insurance or other contract whereby the liability of individual members on the policy or contract is restricted, or whereby the funds of the company are alone made liable in respect of the policy or contract; (g) a sum due to any past or present member of the company in his character as such, by way of dividends, profits or otherwise, shall not be deemed to be a debt of the company payable to that member, in a case of competition between himself and 1[any creditor claiming otherwise than in the character of a past or present member of the company]; but any such sum shall be taken into account for the purpose of the final adjustment of the rights of the contributories among themselves.

(2) In the winding up of a company limited by guarantee which has a share capital, every member of the company shall be liable, in addition to the amount undertaken to be contributed by him to the assets of the company in the event of its being wound up, to contri- bute to the extent of any sums unpaid on any shares held by him as if the company were a company limited by shares.

Obligations of directors, managing agents and managers whose liabilityis unlimited. 427. Obligations of directors, managing agents and managers whose liability is unlimited. In the winding up of a limited company, any director, managing agent, secretaries and treasurers or manager, whether past or present, whose liability is, under the provisions of this Act, unlimited, shall, in addition to his liability, if any, to contribute as an ordinary member, be liable to make a further contribution as if he were, at the commencement of the winding up, a member of an unlimited company: Provided that- (a) a past director, managing agent, secretaries and treasurers or manager shall not be liable to make such further contribution, if he has ceased to hold office for a year or upwards before the commencement of the winding up; (b) a past director, managing agent, secretaries and treasurers or manager shall not be liable to make such further contribution in respect of any debt or liability of the company contracted after he ceased to hold office; ---------------------------------------------------------------------- 1 Subs. by Act 65 of 1960, s. 161, for certain words. ---------------------------------------------------------------------- 358 (c) subject to the articles of the company, a director, managing agent, secretaries and treasurers or manager shall not be liable to make such further contribution, unless the Court deems it necessary to require the contribution in order to satisfy the debts and liabilities of the company, and the costs, charges and expenses of the winding up.

Definition of "contributory". 428. Definition of "contributory". The term "contributory" means every person liable to contribute to the assets of a company in the event of its being wound up, and includes the holder of any shares which are fully paid up ; and for the purposes of all proceedings for determining, and all proceedings prior to the final determination of, the persons who are to be deemed contributories, includes any person alleged to be a contributory.

Nature of liability of contributory.

429. Nature of liability of contributory. (1) The liability of a contributory shall create a debt accruing due from him at the time when his liability commenced, but payable at the times specified in calls made on him for enforcing the liability.

(2) No claim founded on the liability of a contributory shall be cognizable by any Court of Small Causes sitting outside the presi- dency-towns.

Contributories in case of death of member.

430. Contributories in case of death of member. (1) If a contributory dies either before or after he has been placed on the list of contributories, his legal representatives shall be liable in a due course of administration, to contribute to the assets of the company in discharge of his liability, and shall be contributories accordingly.

(2) If the legal representatives make default in paying any money ordered to be paid by them, proceedings may be taken for administering the estate of the deceased contributory and compelling payment thereout of the money due.

(3) For the purposes of this section, where the deceased contributory was a member of a Hindu joint family governed by the Mitakshara School of Hindu Law, his legal representatives shall be deemed to include the surviving coparceners.

Contributories in case of insolvency of member. 431. Contributories in case of insolvency of member. If a contributory is adjudged insolvent, either before or after he has been placed on the list of contributories,- (a) his assignees in insolvency shall represent him for all the purposes of the winding up, and shall be contributories accordingly, and may be called on to admit to proof against the estate of the insolvent, or otherwise to allow 359 to be paid out of his assets in due course of law, any money due from the insolvent in respect of his liability to contribute to the assets of the company ; and (b) there may be proved against the estate of the insolvent the estimated value of his liability to future calls as well as calls already made.

Contibutories in case of winding up of a body corporate which is amember. 432. Contibutories in case of winding up of a body corporate which is a member. If a body corporate which is a contributory is ordered to be wound up, either before or after it has been placed on the list of contributor,-- (a) the liquidator of the body corporate shall represent it for all the purposes of the winding up of the company and shall be a contributory accordingly, and may be called on to admit to proof against the assets of the body corporate, or otherwise to allow to be paid out of its assets in due course of law, any money due from the body corporate in respect of its liability to contribute to the assets of the company ; and (b) there may be proved against the assets of the body corporate the estimated value of its liability to future calls as well as calls already made. CHAP WINDING UP BY THE COURT CHAPTER II-WINDING UP BY THE COURT Cases in which company may be wound up by the Court

Circumstances in which company may be wound up by Court. 433. Circumstances in which company may be wound up by Court. A company may be wound up by the Court,- (a) if the company has, by special resolution, resolved that the company be wound up by the Court; (b) if default is made in delivering the statutory report to the Registrar or in holding the statutory meeting ; (c) if the company does not commence its business within a year from its incorporation, or suspends its business for a whole year; (d) if the number of members is reduced, in the case of a public company, below seven, and in the case of a private company, below two; (e) if the company is unable to pay its debts; (f) if the Court is of opinion that it is just and equitable that the company should be wound up. 360

Company when deemed unable to pay its debts.

434. Company when deemed unable to pay its debts. (1) A company shall be deemed to be unable to pay its debts- (a) if a creditor, by assignment or otherwise, to whom the company is indebted in a sum exceeding five hundred rupees then due, has served on the company, by causing it to be delivered at its registered office, by registered post or otherwise, a demand under his hand requiring the company to pay the sum so due and the company has for three weeks thereafter neglected to pay the sum, or to secure or compound for it to the reasonable satisfaction of the creditor; (b) if execution or other process issued on a decree or order of any Court in favour of a creditor of the company is returned unsatisfied in whole or in part; or (c) if it is proved to the satisfaction of the Court that the company is unable to pay its debts, and, in determining whether a company is unable to pay its debts, the Court shall take into account the contingent and prospective liabilities of the company.

(2) The demand referred to in clause (a) of sub-section (1) shall be deemed to have been duly given under the hand of the creditor if it is signed by any agent or legal adviser duly authorised on his behalf, or in the case of a firm, if it is signed by any such agent or legal adviser or by any member of the firm. Transfer of Proceedings

Transfer of winding up proceedings to District Court. 435. Transfer of winding up proceedings to District Court. Where a High Court Makes an order for winding up a company under this Act, the High Court may, if it thinks fit, direct all subsequent proceedings to be had in a District Court subordinate thereto or, with the consent of any other High Court, in such High Court or in a District Court subordinate thereto ; and thereupon for the purposes of winding up the company, the Court in respect of which such direction is given shall be deemed to be "the Court" within the meaning of this Act, and shall have all the jurisdiction and powers of a High Court under this Act.

Withdrawal and transfer of winding up from one District Court toanother. 436. Withdrawal and transfer of winding up from one District Court to another. If during the progress of a winding up in a District Court, it appears to the High Court that the same could be more conveniently proceeded with in the High Court or in any other District Court, the High Court may, as the case may require,- (a) withdraw the case and proceed with the winding up itself; or 361 (b) transfer the case to such other District Court, whereupon the winding up shall proceed in that District Court.

Power of High Court to retain winding up proceedings in DistrictCourt. 437. Power of High Court to retain winding up proceedings in District Court. The High Court may direct that a District Court in which proceedings for winding up a company have been commenced, shall retain and continue the proceedings, although it may not be the Court in which they ought to have been commenced.

Jurisdiction of High Court under sections 435, 436 and 437 to beexercised at any time and at any stage. 438. Jurisdiction of High Court under sections 435, 436 and 437 to be exercised at any time and at any stage. The High Court shall have jurisdiction to pass orders under section 435, 436 or 437 at any time and at any stage and either on the application of, or without application from, any of the parties to the proceedings. Petition for Winding Up

Provisions as to applications for winding up.

439. Provisions as to applications for winding up. (1) An application to the Court for the winding up of a company shall be by petition presented, subject to the provisions of this section,- (a) by the company; or (b) by any creditor or creditors, including any contingent or prospective creditor or creditors ; or (c) by any contributory or contributories ; or (d) by all or any of the parties specified in clauses (a), (b) and (c), whether together or separately ; or (e) by the Registrar ; or (f) in a case falling under section 243, by any person authoised by the Central Government in that behalf.

(2) A secured creditor, the holder of any debentures (including debenture stock), whether or not any trustee or trustees have been appointed in respect of such and other like debentures, and the trustee for the holders of debentures, shall be deemed to be creditors

within the meaning of clause (b) of sub-section (1).

(3) A contributory shall be entitled to present a petition for winding up a company, notwithstanding that he may be the holder of fully paid-up shares, or that the company may have no assets at all, or may have, no surplus assets left for distribution among the share- holders after the satisfaction of its liabilities. 362

(4) A contributory shall not be entitled to present a petition for winding up a company unless- (a) either the number of members is reduced, in the case of a public company, below seven, and, in the case of a private company, below two; or (b) the shares in respect of which he is a contributory, or some of them, either were originally allotted to him or have been held by him, and registered in his name, for at least six months during the eighteen months immediately before the commencement of the winding up, or have devolved on him through the death of a former holder.

(5) Except in the case where he is authorised in pursuance of

clause (f) of sub-section (1), the Registrar shall be entitled to pre- sent a petition for winding up a company only on the grounds specified in 1[clauses (b), (c), (d), (e) and (f)] of section 433: Provided that the Registrar shall not present a petition on the ground specified in clause (e) aforesaid, unless it appears to him either from the financial condition of the company as disclosed in its balance-sheet or from the report of 2[a special auditor appointed under section 233A or an inspector] appointed under section 235 or 237, that the company is unable to pay its debts : Provided further that the Registrar shall obtain the previous sanction of the Central Government to the presentation of the petition on any of the grounds aforesaid.

(6) The Central Government shall not accord its sanction in pur- suance of the foregoing proviso, unless the company has first been afforded an opportunity of making its representations, if any.

(7) A petition for winding up a company on the ground specified in clause (b) of section 433 shall not be presented- (a) except by the Registrar or by a contributory ; or (b) before the expiration of fourteen days after the last day on which the statutory meeting referred to in clause (b) aforesaid ought to have been held.

(8) Before a petition for winding up a company presented by a contingent or prospective creditor is admitted, the leave of the Court ----------------------------------------------------------------------- 1 Subs. by Act 65 of 1960, s. 162, for " clauses (b), (c) and (e)". 2 Subs. by s. 162, ibid., for "an inspector ". ----------------------------------------------------------------------- 363 shall be obtained for the admission of the petition and such leave shall not be granted- (a) unless, in the opinion of the Court there is a prima facie case for winding up the company ; and (b) until such security for costs has been given as the Court thinks reasonable.

Right to present winding up petition where company is being wound upvoluntarily or subject to Court's supervision. 440. Right to present winding up petition where company is being

wound up voluntarily or subject to Court's supervision. (1) Where a company being wound up voluntarily or subject to the supervision of the Court, a petition for its winding up by the Court may be presented by- (a) any person authorised to do so under section 439, and subject to the provisions of that section ; or (b) the Official Liquidator.

(2) The Court shall not make a winding up order on a petition

presented to it under sub-section (1), unless it is satisfied that the voluntary winding up or winding up subject to the supervision of the Court cannot be continued with due regard to the interests of the creditors or contributories or both. Commencement of Winding Up

Commencement of winding up by Court.

441. Commencement of winding up by Court. (1) Where, before the presentation of a petition for the winding up of a company by the Court, a resolution has been passed by the company for voluntary winding up, the winding up of the company shall be deemed to have commenced at the time of the passing of the resolution, and unless the Court, on proof of fraud or mistake, thinks fit to direct otherwise, all proceedings taken in the voluntary winding up shall be deemed to have been validly taken.

(2) In any other case, the winding up of a company by the Court shall be deemed to commence at the time of the presentation of the petition for the winding up. Powers of Court

Power of Court to stay or restrain proceedings against Company. 442. Power of Court to stay or restrain proceedings against Company. At any time after the presentation of a winding up petition and before a winding up order has been made, the company, or any creditor or contributory, may- (a) where any suit or proceeding against the company is pending in the Supreme Court or in any High Court, apply to the Court in which the suit or proceeding is pending for a stay of proceedings therein ; and 364 (b) where any suit or proceeding is pending against the company in any other Court, apply to the Court having jurisdiction to wind up the company , to restrain further proceedings in the suit or proceeding; and the Court to which application is so made may stay or restrain the proceedings accordingly, on such terms as it thinks fit.

Powers of Court on hearing petition.

443. Powers of Court on hearing petition. (1) On hearing a winding up petition, the Court may- (a) dismiss it, with or without costs; or (b) adjourn the hearing conditionally or unconditionally; or (c) make any interim order that it thinks fit ; or (d) make an order for winding up the company with or without costs, or any other order that it thinks fit: Provided that the Court shall not refuse to make a winding up order on the ground only that the assets of the company have been mortgaged to an amount equal to or in excess of those assets, or that the company has no assets.

(2) Where the petition is presented on the ground that it is just and equitable that the company should be wound up, the Court may refuse to make an order of winding up, if it is of opinion that some other remedy is available to the petitioners and that they are acting unreasonably in seeking to have the company wound up instead of pursuing that other remedy.

(3) Where the petition is presented on the ground of default in delivering the statutory report to the Registrar, or in holding the statutory meeting, the Court may- (a) instead of making a winding up order, direct that the statutory report shall be delivered or that a meeting shall be held; and (b) order the costs to be paid by any persons who, in the opinion of the Court, are responsible for the default. Consequences of Winding up Order

Order for winding up to be communicated to Official Liquidator andRegistrar. 444. Order for winding up to be communicated to Official Liquidator and Registrar. Where the Court makes an order for the winding up of a company, the Court shall forthwith cause intimation thereof to be sent to the 1[Official Liquidator and the Registrar]. ---------------------------------------------------------------------- 1 Subs. by Act 65 of 1960, s. 163, for "Official Liquidator". ---------------------------------------------------------------------- 365

Copy of winding up order to be filed with Registrar.

445. Copy of winding up order to be filed with Registrar. (1) On the making of a winding up order, it shall be the duty of the petitioner in the winding up proceedings and of the company to file with the Registrar a certified copy of the order, within 1[thirty days] from the date of the making of the order. If default is made in complying with the foregoing provision, the petitioner, or as the case may require, the company, and every officer of the company who is in default, shall be punishable with fine which may extend to one hundred rupees for each day during which the default continues. 2[(1A) In computing the period of 1[thirty days] from the date of

the making of a winding up order under sub-section (1), the time requisite for obtaining a certified copy of the order shall be excluded.]

(2) On the filing of a certified copy of the winding up order, the Registrar shall make a minute thereof in his books relating to the company, and shall notify in the Official Gazette that such an order has been made.

(3) Such order shall be deemed to be notice of discharge to the officers and employees of the company, except when the business of the company is continued.

Suits stayed on winding up order.

446. Suits stayed on winding up order. (1) When a winding up order has been made or the Official Liquidator has been appointed as provisional liquidator, no suit or other legal proceeding shall be commenced. or if pending at the date of the winding up order, shall be proceeded with, against the company, except by leave of the Court and subject to such terms as the Court may impose.

3[(2) The Court which is winding up the company shall, notwith- standing anything contained in any other law for the time being, in force, have jurisdiction to entertain, or dispose of- (a) any suit or proceeding by or against the company; (b) any claim made by or against the company (including claims by or against any of its branches in India) ; (c) any application made under section 391 by or in respect of the company; (d) any question of priorities or any other question whatsoever, whether of law or fact, which may relate to or arise in course of the winding up of the company; ---------------------------------------------------------------------- 1 Subs. by Act 31 of 1965, s. 62 and Sch., for "one month" (w.e.f. 15-10-1965). 2 Ins. by Act 65 of 1960, s. 164.

3 Subs. by s. 165, ibid., for sub-section (2). ----------------------------------------------------------------------- 366 whether such suit or proceeding has been instituted or is instituted, or such claim or question has arisen or arises or such application has been made or is made before or after the order for the winding up of the company, or before or after the commencement of the Companies (Amendment) Act, 1960.] (65 of 1960.)

(3)Any suit or proceeding by or against the company which is pending in any Court other than that in which the winding up of the company is proceeding may, notwithstanding anything contained in any other law for the time being in force, be transferred to and disposed of by that Court.

1[(4) Nothing in sub-section (1) or sub-section (3) shall apply to any proceeding pending in appeal before the Supreme Court or a High Court.]

Effect of winding up order. 447. Effect of winding up order. An order for winding up a company shall operate in favour of all the creditors and of all the contributories of the company as if it had been made on the joint petition of a creditor and of a contributory. Official Liquidators

Appointment of Official Liquidator.

448. Appointment of Official Liquidator. (1) For the purposes of this Act, so far as it relates to the winding up of companies by the Court,- (a) there shall be attached to each High Court, an Official Liquidator appointed by the Central Government, who shall be a whole-time officer, unless the Central Government considers that there will not be sufficient work for a whole-time officer in which case a part-time officer may be appointed; and (b) the Official Receiver attached to a District Court for insolvency purposes, or if there is no such Official Receiver, then, such person as the Central Government may, by notification in the Official Gazette appoint for the pur- pose, shall be the Official Liquidator attached to the District Court. 2 [(1A) The Central Government may appoint one or more Deputy or Assistant Official Liquidators to assist the Official Liquidator in the discharge of his functions.]

(2) All references to the " Official Liquidator " in this Act shall be construed as references to the Official Liquidator referred to in ---------------------------------------------------------------------- 1 Ins. by Act 65 of 1960, s. 165. 2 Ins. by s. 166, ibid. ---------------------------------------------------------------------- 367

clause (a) or clause (b), as the case may be, of sub-section (1) 1[and as including references to Deputy or Assistant Official Liquidators appointed under sub-section (1A)].

Official Liquidator to be liquidator. 449. Official Liquidator to be liquidator. On a winding up order being made in respect of a company, the Official Liquidator shall, by virtue of his office, become the liquidator of the company.

Appointment and powers of provisional liquidator.

450. Appointment and powers of provisional liquidator. (1) At any time after the presentation of a winding up petition and before the making of a winding up order, the Court may appoint the Official Liquidator to be liquidator provisionally.

(2) Before appointing a provisional liquidator, the Court shall give notice to the company and give a reasonable opportunity to it to make its representations, if any, unless, for special reasons to be recorded in writing, the Court thinks fit to dispense with such notice.

(3) Where a provisional liquidator is appointed by the Court, the Court may limit and restrict his powers by the order appointing him or by a subsequent order; but otherwise he shall have the same powers as a liquidator.

(4) The Official Liquidator shall cease to hold office as provisional liquidator, and shall become the liquidator, of the company, on a winding up order being made.

General provisions as to liquidators.

451. General provisions as to liquidators. (1) The liquidator shall conduct the proceedings in winding up the company and perform such duties in reference thereto as the Court may impose.

(2) Where the Official liquidator becomes or acts as liquidator, there shall be paid to the Central Government out of the assets of the company such fees as may be prescribed.

(3) The acts of a liquidator shall be valid, notwithstanding any defect that may afterwards be discovered in his appointment or qualification; Provided that nothing in his sub-section shall be deemed to give validity to acts done by a liquidator after his appointment has been shown to be invalid.

Style, etc., of liquidator. 452. Style, etc., of liquidator. A liquidator shall be described by the style of "The Official Liquidator " of the particular company in respect of which he acts, and not by his individual name. ---------------------------------------------------------------------- 1 Ins. by Act 65 of 1960, s. 166. ---------------------------------------------------------------------- 368

Receiver not to be appointed of assets with liquidator. 453. Receiver not to be appointed of assets with liquidator. A receiver shall not be appointed of assets in the hands of a liquidator except by, or with the leave of, the Court.

Statement of affairs to be made to Official Liquidator.

454. Statement of affairs to be made to Official Liquidator. (1) Where the Court has made a winding up order or appointed the Official Liquidator as provisional liquidator, unless the Court in its discretion otherwise orders, there shall be made out and submitted to the Official Liquidator a statement as to the affairs of the company in the prescribed form, verified by an affidavit, and containing the following particulars, namely:- (a) the assets of the company, stating separately the cash balance in hand and at the bank, if any, and the negotiable securities, if any, held by the company; (b) its debts and liabilities; (c) the names, residences and occupations of its creditors, stating separately the amount of secured and unsecured debts; and in the case of secured debts, particulars of the securities given, whether by the company or an officer thereof, their value and the dates on which they were given ; (d) the debts due to the company and the names, residences and occupations of the persons from whom they are due and the amount likely to be realised on account thereof ; (e) such further or other information as may be prescribed, or as the Official Liquidator may require.

(2) The statement shall be submitted and verified by one or more of the persons who are at the relevant date the directors and by the person who is at that date the manager, secretary or other chief officer of the company, or by such of the persons hereinafter in this sub-section mentioned, as the Official Liquidator, subject to the direction of the Court, may require to submit and verify the statement, that is to say, persons- (a) who are or have been officers of the company; (b) who have taken part in the formation of the company at any time within one year before the relevant date; (c) who are in the employment of the company, or have been in the employment of the company within the said year, and are, in the opinion of the Official Liquidator, capable of giving the information required; 369 (d) who are or have been within the said year officers of, or in the employment of, a company which is, or within the said year was, an officer of the company to which the statement relates.

(3) The statement shall be submitted within twenty-one days from the relevant date, or within such extended time not exceeding three months from that date as the Official Liquidator or the Court may, for special reasons, appoint.

(4) Any person making, or concurring in making, the statement and affidavit required by this section shall be allowed, and shall be paid by the Official liquidator or provisional liquidator, as the case may be, out of the assets of the company, such costs and expenses incurred in and about the preparation and making of the statement and affidavit as the Official Liquidator may consider reasonable, subject to an appeal to the Court.

1[(5) If any person, without reasonable excuse, makes default in complying with any of the requirements of this section, he shall be punishable with imprisonment for a term which may extend to two years, or with fine which may extend to one hundred rupees for every day during which the default continues, or with both. (5A) The Court by which the winding up order is made or the provisional liquidator is appointed, may take cognizance of an offence

under sub-section (5) upon receiving a complaint of facts constituting such an offence and trying the offence itself in accordance with the procedure laid down in the Code of Criminal Procedure, 1898, (5 of 1898.) 2[for the trial of summons cases by magistrates.]]

(6) Any person stating, himself in writing to be a creditor or contributory of the company shall be entitled, by himself or by his agent, at all reasonable times, on payment of the prescribed fee, to inspect the statement submitted in pursuance of this section, and to a copy thereof or extract therefrom.

(7) Any person untruthfully so stating himself to be a creditor or contributory shall be guilty of an offence under section 182 of the Indian Penal Code; (45 of 1860.) and shall, on the application of the Official Liquidator, be punishable accordingly.

(8) In this section, the expression "the relevant date" means, in a case where a provisional liquidator is appointed, the date of his appointment, and in a case where no such appointment is made, the date of the winding up order. ----------------------------------------------------------------------

1 Subs. by Act 65 of 1960, s. 167, for sub-section (5). 2 See now the Code of Criminal Procedure, 1973 (2 of 1974). ---------------------------------------------------------------------- 370

Report by Official Liquidator.

455. Report by Official Liquidator. (1) In a case where a winding up order is made, the Official Liquidator shall, as soon as practicable after receipt of the statement to be submitted under section 454 and not later than six months from the date of the order, 1[or such extended period as may be allowed by the Court] or in a case where the Court orders that no statement need be submitted, as soon as practicable after the date of the order, submit a preliminary report to the Court--- (a) as to the amount of capital issued, subscribed, and paid up, and the estimated amount of assets and liabilities, giving separately, under the heading of assets, particulars of (i) cash and negotiable securities; (ii) debts due from contributories ; (iii) debts due to the company and securities, if any, available in respect thereof ; (iv) movable and immovable properties belonging to the company; and (v) unpaid calls; (b) if the company has failed, as to the causes of the failure; and (c) whether, in his opinion, further inquiry is desirable as to any matter relating to the promotion, formation, or failure of the company, or the conduct of the business thereof.

(2) The Official Liquidator may also, if he thinks fit, make a further report, or further reports, stating the manner in which the company was promoted or formed and whether in his opinion any fraud has been committed by any person in its promotion or formation, or by any officer of the company in relation to the company since the formation thereof, and any other matters which, in his opinion, it is desirable to bring to the notice of the Court.

(3) If the Official Liquidator states in any such further report that in his opinion a fraud has been committed as aforesaid, the Court shall have the further powers provided in section 478.

Custody of company's property.

456. Custody of company's property. (1) Where a winding up order has been made or where a provisional liquidator has been appointed, the liquidator 2[or the provisional liquidator, as the case may be,] shall take into his custody or under his control, all the property, effects and actionable claims to which the company is or appears to be entitled. 2 [(1A) For the purpose of enabling the liquidator or the provisional liquidator, as the case may be, to take into his custody or ---------------------------------------------------------------------- 1 Ins. by Act 65 of 1960, s. 168. 2 Ins. by s. 169, ibid. ---------------------------------------------------------------------- 371 under his control, any property, effects or actionable claims to which the company is or appears to be entitled, the liquidator or the provisional liquidator, as the case may be, may by writing request the Chief Presidency Magistrate or the District Magistrate within whose jurisdiction such property, effects or actionable claims or any books of account or other documents of the company may be found, to take possession thereof, and the Chief Presidency Magistrate or the District Magistrate may thereupon, after such notice as he may think fit to give to any party, take possession of such property, effects, actionable claims, books of account or other documents and deliver possession thereof to the liquidator or the provisional liquidator. (1B) For the purpose of securing compliance with the provisions of sub-section (1A), the Chief Presidency Magistrate or the District Magistrate may take or cause to be taken such steps and use or cause to be used such force as may in his opinion be necessary.]

(2)All the property and effects of the company shall be deemed to be in the custody of the court as from the date of the order for the winding up of the company.

Powers of liquidator.

457. Powers of liquidator. (1) The liquidator in a winding up by the Court shall have power, with the sanction of the Court,- (a) to institute or defend any suit, prosecution, or other legal proceeding, civil or criminal, in the name and on behalf of the company; (b) to carry on the business of the company so far as may be necessary for the beneficial winding up of the company; (c) to sell the immovable and movable property and actionable claims of the company by public auction or private contract, with power to transfer the whole thereof to any person or body corporate, or to sell the same in parcels; (d) to raise on the security of the assets of the company any money requisite; (e) to do all such other things as may be necessary for winding up the affairs of the company and distributing its assets.

(2) The liquidator in a winding up by the Court shall have power- (i) to do all acts and to execute, in the name and on behalf of the company, all deeds, receipts, and other documents, 372 and for that purpose to use, when necessary, the company's seal ; 1[(ia) to inspect the records and returns of the company on the files of the Registrar without payment of any fee;] (ii) to prove, rank and claim in the insolvency of any contributory, for any balance against his estate, and to receive dividends in the Insolvency, in respect of that balance, as a separate debt due from the insolvent, and rateably with the other separate creditors ; (iii) to draw, accept, make and endorse any bill of exchange, hundi or promissory note in the name and on behalf of the company, with the same effect with respect to the liability of the company as if the bill, hundi, or note had been drawn, accepted, made or indorsed by or on behalf of the company in the course of its business ; (iv) to take out, in his official name, letters of administration to any deceased contributory, and to do in his official name any other act necessary for obtaining payment of any money due from a contributory or his estate which cannot be conveniently done in the name of the company, and in all such cases, the money due shall, for the purpose of enabling the liquidator to take out the letters of ad- ministration or recover the money, be deemed to be due to the liquidator himself: Provided that nothing herein empowered shall be deemed to affect the rights, duties and privileges of any Administrator-General; (v) to appoint an agent to do any business which the liquidator is unable to do himself.

(3) The exercise by the liquidator in a winding up by the Court of the powers conferred by this section shall be subject to the control of the Court; and any creditor or contributory may apply to the Court with respect to the exercise or proposed exercise of any of the powers conferred by this section.

Discretion of liquidator. 458. Discretion of liquidator. The Court may, by order, provide that the liquidator may exercise any of the powers referred to in sub-

section (1) of section 457 without the sanction or intervention of the Court : Provided always that the exercise by the liquidator of such powers shall be subject to the control of the Court. ---------------------------------------------------------------------- 1 Ins. by Act 65 of 1960, s. 170. ----------------------------------------------------------------------- 373 458A Exclusion of certain time in computing periods of limitation. 1[458A. Exclusion of certain time in computing periods of limitation. Notwithstanding anything in the Indian Limitation Act, 1908 (9 of 1908.) or in any other law for the time being in force, in computing the period of limitation prescribed for any suit or application in the name and on behalf of a company which is being wound up by the Court, the period from the date of commencement of the winding up of the company to the date on which the winding up order is made (both inclusive) and a period of one year immediately following the date of the winding up order shall be excluded.]

Provision for legal assistance to liquidator. 459. Provision for legal assistance to liquidator. The liquidator may, with the sanction of the Court, appoint an advocate, attorney or pleader entitled to appear before the Court to assist him in the performance of his duties.

Exercise and control of liquidator's powers.

460. Exercise and control of liquidator's powers. (1) Subject to the provisions of this Act, the liquidator shall, in the administration of the assets of the company and the distribution thereof among its creditors, have regard to any directions which may be given by resolution of the creditors or contributories at any general meeting or by the committee of inspection.

(2)Any directions given by the creditors or contributories at any general meeting shall, in case of conflict, be deemed to override any directions given by the committee of inspection.

(3) The liquidator- (a) may summon general meetings of the creditors or contributories, whenever he thinks fit, for the purpose of ascertaining their wishes; (b) shall summon such meetings at such times, as the creditors or contributories, as the case may be, may, by resolution, direct, or whenever requested in writing to do so by not less than one-tenth in value of the creditors or contributories, as the case may be.

(4) The liquidator may apply to the Court in the manner pres- cribed, if any, for directions in relation to any particular matter arising in the winding up.

(5) Subject to the provisions of this Act, the liquidator shall use his own discretion in the administration of the assets of the company and in the distribution thereof among the creditors.

(6) Any person aggrieved by any act or decision of the liquidator may apply to the Court ; and the Court may confirm, reverse or modify the act or decision complained of, and make such further order as it thinks just in the circumstances. ---------------------------------------------------------------------- 1 Ins. by Act 65 of 1960, s. 171. ---------------------------------------------------------------------- 374

Books to be kept by liquidator.

461. Books to be kept by liquidator. (1) The liquidator shall keep, in the manner prescribed, proper books in which he shall cause entries or minutes to be made of proceedings at meetings and of such other matters as may be prescribed.

(2) Any creditor or contributory may, subject to the control of the Court, inspect any such books, personally or by his agent.

Audit of liquidator's accounts.

462. Audit of liquidator's accounts. (1) The liquidator shall, at such times as may be prescribed but not less than twice in each year during his tenure of office, present to the Court an account of his receipts and payments as liquidator.

(2) The account shall be in the prescribed form, shall be made in duplicate, and shall be verified by a declaration in the prescribed form.

(3) The Court shall cause the account to be audited in such manner as it thinks fit ; and for the purpose of the audit, the liquidator shall furnish the Court with such vouchers and information as the Court may require, and the Court may, at any time, require the production of, and inspect, any books or accounts kept by the liquidator.

(4) When the account has been audited, one copy thereof shall be filed and kept by the Court, and the other copy shall be delivered to the Registrar for filing; and each copy shall be open to the inspection of any creditor, contributory or person interested.

2[(4A) Where an account referred to in sub-section (4) relates to a Government company in liquidation, the liquidator shall forward a copy thereof,- (a) to the Central Government, if that Government is a member of the Government company; or (b) to any State Government, if that Government is a member of the Government company; or (c) to the Central Government and any State Government, if both the Governments are members of the Government company.

(5) The liquidator shall cause the account when audited or a summary thereof to be printed, and shall send a printed copy of the account or summary by post to every creditor and to every contributory: Provided that the Court may in any case dispense with compliance with this sub-section.

Control of Central Government over liquidators.

463. Control of Central Government over liquidators. (1) The Central Government shall take cognisance of the conduct of liquidators of companies which are being wound up by the Court, and, if a liquidator does not faithfully perform his duties and duly observe all the requirements imposed on him by this Act 1[or by the Indian Companies Act, 1913],(7 of 1913.) the rules thereunder, or otherwise, with respect to the performance of his duties, or if any complaint is made to the Central Government by any creditor or contributory in regard thereto, the Central Government shall inquire into the matter, and take such action thereon as it may think expedient: ---------------------------------------------------------------------- 1 Ins. by Act 65 of 1960, s.172. 2 Ins. by Act 31 of 1988, s.55 (w.e.f. 15-6-1988). --------------------------------------------------------------------- 375 1[Provided that where the winding up of a company has commenced before the commencement of this Act, the Court may, on the application of the Central Government, appoint in place of such liquidator the Official Liquidator as the liquidator in such winding up.]

(2)The Central Government may at any time require any liquidator of a company which is being wound up by the Court to answer any inquiry in relation to any winding up in which he is engaged, and may, if the Central Government thinks fit, apply to the Court to examine him or any other person on oath concerning the winding up.

(3)The Central Government may also direct a local investigation to be made of the books and vouchers of the liquidators. Committee of inspection

Appointment and Composition of committee of inspection. 464. Appointment and Composition of committee of inspection.

2[(1)(a) The Court may, at the time of making an order for the winding up of a company or at any time thereafter, direct that there shall be appointed a committee of inspection to act with the liquidator. (b)Where a direction is given by the Court as aforesaid, the liquidator shall, within two months from the date of such direction, convene a meeting of the creditors of the company (as ascertained from its books and documents) for the purpose of determining who are to be members of the committee.]

3 [(2) The liquidator shall, within fourteen days from the date of the creditors' meeting or such further time as the Court in its discretion may grant for the purpose, convene a meeting of the contributories to consider the decision of the creditors' meeting with respect to the membership of the committee ; and it shall be open to the meeting of the contributories to accept the decision of the creditors' meeting with or without modifications or to reject it.]

(3)Except in the case where the meeting of the contributories' accepts the decision of the creditors' meeting in its entirety, it shall be the duty of the liquidator to apply to the Court for directions as to 4* * * what the composition of the committee shall be, and who shall be members thereof. ---------------------------------------------------------------------- 1 Ins. by Act 65 of 1960, s. 172.

2 Subs. by s. 173, ibid., for sub-section (1).

3 Subs. by s. 173, ibid., for sub-section (2). 4 The words " whether there shall be a committee of inspection ; and, if so," omitted by s. 173, ibid. ---------------------------------------------------------------------- 376

Constitution and proceedings of committee of inspection.

465. Constitution and proceedings of committee of inspection. (1) A committee of inspection appointed in pursuance of section 464 shall consist of not more than twelve members, being creditors and contributories of the company or persons holding general or special powers of attorney from creditors or contributories, in such proportions as may be agreed on by the meetings of creditors and con- tributories, or in case of difference of opinion between the meetings, as may be determined by the Court.

(2) The committee of inspection shall have the right to inspect the accounts of the liquidator at all reasonable times.

(3) The committee shall meet at such times as it may from time to time appoint, 1* * * and the liquidator or any member of the committee may also call a meeting of the committee as and when he thinks necessary.

(4) The quorum for a meeting of the committee shall be one-third of the total number of the members, or two, whichever is higher.

(5) The committee may act by a majority of its members present at a meeting, but shall not act unless a quorum is present.

(6) A member of the committee may resign by notice in writing signed by him and delivered to the liquidator.

(7) If a member of the committee is adjudged an insolvent, or compounds or arranges with his creditors, or is absent from five consecutive meetings of the committee without the leave of those members who, together with himself, represent the creditors or con- tributories, as the case may be, his office shall become vacant.

(8) A member of the committee may be removed at a meeting of creditors if he represents creditors, or at a meeting of contributories if he represents contributories, by an ordinary resolution of which seven days' notice has been given, stating the object of the meeting.

(9) On a vacancy occurring in the committee, the liquidator shall forthwith summon a meeting of creditors or of contributories, as the case may require, to fill the vacancy; and the meeting may, by resolution, reappoint the same, or appoint another, creditor or contributory to fill the vacancy: Provided that if the liquidator, having regard to the position in the winding up, is of the opinion that it is unnecessary for the vacancy to be filled, he may apply to the Court and the Court may make an order that the vacancy shall not be filled, or shall not be filled except in such circumstances as may be specified in the order. ---------------------------------------------------------------------- 1 The words "and, failing such appointment, at least once a month," omitted by Act 65 of 1960, s. 174. ---------------------------------------------------------------------- 377

(10)The continuing members of the committee, if not less than two, may act notwithstanding any vacancy in the committee. General powers of Court in case of winding up by Court

Power of Court to stay winding up.

466. Power of Court to stay winding up. (1) The Court may at any time after making a winding up order, on the application either of the Official Liquidator or of any creditor or contributory, and on proof to the satisfaction of the Court that all proceedings in relation to the winding up ought to be stayed, make an order staying the proceedings, either altogether or for a limited time, on such terms and conditions as the Court thinks fit.

(2) On any application under this section, the Court may, before making an order, require the Official Liquidator to furnish to the Court a report with respect to any facts or matters which are in his opinion relevant to the application.

(3) A copy of every order made under this section shall forthwith be forwarded by the company, or otherwise as may be prescribed, to the Registrar, who shall make a minute of the order in his books relating to the company.

Settlement of list of contributories and application of assets. 467. Settlement of list of contributories and application of

assets. (1) As soon as may be after making a winding up order, the Court shall settle a list of contributories, with power to rectify the register of members in' all cases where rectification is required in pursuance of this Act, and shall cause the assets of the company to be collected and applied in discharge of its liabilities: Provided that, where it appears to the Court that it will not be necessary to make calls on, or adjust the rights of, contributories, the Court may dispense with the settlement of a list of contributories.

(2) In settling the list of contributories, the Court shall distinguish between those who are contributories in their own right and those who are contributories as being representatives of, or liable for the debts of, others.

Delivery of property to liquidator. 468. Delivery of property to liquidator. The Court may, at any time after making a winding up order, require any contributory for the time being on the list of contributories, and any trustee, receiver, banker, agent, 1[officer or other employee] of the company, to pay, deliver, surrender or transfer forthwith, or within such time as the Court directs, to the liquidator, any money, property or books and papers 2[in his custody or under his control] to which the company is prima facie entitled. ---------------------------------------------------------------------- 1 Subs. by Act 65 of 1960, s. 175, for "or officer". 2 Subs. by s. 175, ibid., for "in his hands". ---------------------------------------------------------------------- 378

Payment of debts due by contributory and extent of set-off. 469. Payment of debts due by contributory and extent of set-off.

(1) The Court may, at any time after making a winding up order, make an order on any contributory for the time being on the list of contributories to pay, in the manner directed by the order, any money due to the company, from him or from the estate of the person whom he represents, exclusive of any money payable by him or the estate by virtue of any call in pursuance of this Act.

(2) The Court, in making such an order, may- (a) in the case of an unlimited company, allow to the contributory, by way of set-off, any money due to him or to the estate which he represents, from the company, on any independent dealing or contract with the company, but not any money due to him as a member of the company in respect of any dividend or profit ; and (b) in the case of a limited company, make to any director, managing agent, secretaries and treasurers or manager whose liability is unlimited, or to his estate, the like allowance.

(3) In the case of any company, whether limited or unlimited, when all the creditors have been paid in full, any money due on any account whatever to a contributory from the company may be allowed to him by way of set-off against any subsequent call.

Power of Court to make calls.

470. Power of Court to make calls. (1) The Court may,at any time after making a winding up order and either before or after it has ascertained the sufficiency of the assets of the company,- (a) make calls on all or any of the contributories for the time being on the list of the contributories, to the extent of their liability, for payment of any money which the Court considers necessary to satisfy the debts and liabilities of the company, and the costs, charges and expenses of winding up, and for the adjustment of the rights of the contributories among themselves; and (b) make an order for payment of any calls so made.

(2) In making a call, the Court may take into consideration the probability that some of the contributories may, partly or wholly, fail to pay the call.

Payment into bank of moneys due to company.

471. Payment into bank of moneys due to company. (1) The Court may order any contributory, purchaser or other person from whom any money is due to the company to pay the money into the public account of India in the Reserve Bank of India instead of to the liquidator. 379

(2) Any such order may be enforced in the same manner as if the Court had directed payment to the liquidator.

Moneys and securities paid into Bank to be subject to order of Court. 472. Moneys and securities paid into Bank to be subject to order of Court. All moneys, bills, hundis, notes and other securities paid or delivered into the Reserve Bank of India in the course of the wind- ing up of a company by the Court, shall be subject in all respects to the orders of the Court.

Order on contributory to be conclusive evidence.

473. Order on contributory to be conclusive evidence. (1) An order made by the Court on a contributory shall, subject to any right of appeal, be conclusive evidence that the money, if any, thereby appearing to be due or ordered to be paid is due.

(2) All other pertinent matters stated in the order shall be taken to be truly stated as against all persons and in all proceedings whatsoever.

Power to exclude creditors not proving in time. 474. Power to exclude creditors not proving in time. The Court may fix a time or times within which creditors are to prove their debts or claims, or to be excluded from the benefit of any distribution made before those debts or claims are proved.

Adjustment or rights of contributories. 475. Adjustment or rights of contributories. The Court shall adjust the rights of the contributories among themselves, and distribute any surplus among the persons entitled thereto.

Power to order costs. 476. Power to order costs. The Court may, in the event of the assets being insufficient to satisfy the liabilities, make an order for the payment out of the assets, of the costs, charges and expenses incurred in the winding up, in such order of priority inter se as the Court thinks just.

Power to summon persons suspected of having property of company, etc. 477. Power to summon persons suspected of having property of

company, etc. (1) The Court may, at any time after the appointment of a provisional liquidator or the making of a winding up order summon before it any officer of the company or person known or suspected to have in his possession any property or books or papers, of the company, or known or suspected to be indebted to the company, or any person whom the Court deems capable of giving information concerning the promotion, formation, trade, dealings, property, books or papers, or affairs of the company.

(2) The Court may examine any officer or person so summoned on oath concerning the matters aforesaid, either by word of mouth or on written interrogatories; and may, in the former case, reduce his answers to writing and require him to sign them.

(3) The Court may require any officer or person so summoned to produce any books and papers in his custody or power relating to 380 the company; but, where he claims any lien on books or papers produced by him, the production shall be without prejudice to that lien, and the Court shall have jurisdiction in the winding up to determine all questions relating to that lien.

(4) If any officer or person so summoned, after being paid or tendered a reasonable sum for his expenses, fails to appear before the Court at the time appointed, not having a lawful impediment (made known to the Court at the time of its sitting and allowed by it), the Court may cause him to be apprehended and brought before the Court for examination.

1[(5) If, on his examination, any officer or person so summoned admits that he is indebted to the company, the Court may order him to pay to the provisional liquidator or, as the case may be, the liquidator at such time and in such manner as to the Court may seem just, the amount in which he is indebted, or any part thereof, either in full discharge of the whole amount or not, as the Court thinks fit, with or without costs of the examination.

(6) If, on his examination, any such officer or person admits that he has in his possession any property belonging to the company, the Court may order him to deliver to the provisional liquidator or, as the case may be, the liquidator, that property or any part thereof, at such time, in such manner and on such terms as to the Court may seem just.

(7) Orders made under sub-sections (5) and (6) shall be executed in the same manner as decrees for the payment of money or for the delivery of property under the Code of Civil Procedure, 1908, (5 of 1908.) respectively.

(8) Any person making any payment or delivery in pursuance of an

order made under sub-section (5) or sub-section (6) shall by such payment or delivery be, unless otherwise directed by such order, discharged from all liability whatsoever in respect of such debt or property.]

Power to order public examination of promoters, directors, etc. 478 Power to order public examination of promoters, directors,

etc. (1) When an order has been made for winding up a company by the Court, and the Official Liquidator has made a report to the Court under this Act, stating that in his opinion a fraud has been committed by any person in the promotion or formation of the company, or by any officer of the company in relation to the company since its formation, the Court may, after considering the report, direct that that person or officer shall attend before the Court on a day ---------------------------------------------------------------------- 1 Ins. by Act 65 of 1960, s. 176. ---------------------------------------------------------------------- 381 appointed by it for that purpose, and be publicly examined as to the promotion or formation or the conduct of the business of the company, or as to his conduct and dealings as an officer thereof.

(2) The Official Liquidator shall take part in the examination, and for that purpose may, if specially authorized by the Court in that behalf, employ such legal assistance as may be sanctioned by the Court.

(3) Any creditor or contributory may also take part in the examination either personally or by any advocate, attorney or pleader entitled to appear before the Court.

(4) The Court may put such questions to the person examined as it thinks fit.

(5) The person examined shall be examined on oath, and shall answer all such questions as the Court may put, or allow to be put, to him.

(6) A person ordered to be examined under this section- (a) shall, before his examination, be furnished at his own cost with a copy of the Official Liquidator's report ; and (b) may at his own cost employ an advocate, attorney or pleader entitled to appear before the Court, who shall be at liberty to put to him such questions as the Court may deem just for the purpose of enabling him to explain or qualify any answers given by him.

(7) (a) If any such person applies to the Court to be exculpated from any charges made or suggested against him, it shall be the duty of the Official Liquidator to appear on the hearing of the application and call the attention of the Court to any matters which appear to the Official Liquidator to be relevant. (b) If the Court, after hearing any evidence given or witnesses called by the Official Liquidator, grants the application, the Court may allow the applicant such costs as it may think fit.

(8) Notes of the examination shall be taken down in writing, and shall be read over to or by, and signed by, the person examined ; and may thereafter be used in evidence against him, and shall be open to the inspection of any creditor or contributory at all reasonable times.

(9) The Court may, if it thinks fit, adjourn the examination from time to time.

(10) An examination under this section may, if the Court so directs and subject to any rules made in this behalf, be held before any District Judge, or before any officer of the High Court, being an official Referee, Master, Registrar or Deputy Registrar. 382

(11) The powers of the Court under this section as to the conduct of the examination, but not as to costs, may be exercised by the Judge or officer before whom the examination is held in pursuance

of sub-section (10).

Power to arrest absconding contributory. 479.Power to arrest absconding contributory. At any time either before or after making a winding up order, the Court may, on proof of probable cause for believing that a contributory is about to quit India or otherwise to abscond, or is about to remove or conceal any of his property, for the purpose of evading payment of calls or of avoiding examination respecting the affairs of the company, cause-- (a) the contributory to be arrested and safely kept until such time as the Court may order ; and (b) his books and papers and movable property to be seized and safely kept until such time as the Court may order.

Saving of existing powers of Court. 480.Saving of existing powers of Court. Any powers conferred on the Court by this Act shall be in addition to, and not in derogation of, any existing powers of instituting proceedings against any contributory or debtor of the company, or the estate of any contributory or debtor, for the recovery of any call or other sums.

Dissolution of company.

481.Dissolution of company. (1) When the affairs of a company have been completely wound up 1[or when the Court is of the opinion that the liquidator cannot proceed with the winding up of a company for want of funds and assets or for any other reason whatsoever and it is just and reasonable in the circumstances of the case that an order of dissolution of the company should be made], the Court shall make an order that the company be dissolved from the date of the order, and the company shall be dissolved accordingly.

(2) A copy of the order shall, within 2[thirty] days from the date thereof, be forwarded by the liquidator the Registrar who shall make in his books a minute of the dissolution of the company.

(3) If the liquidator makes default in forwarding a copy as aforesaid. he shall be punishable with fine which may extend to fifty rupees for every day during which the default continues. Enforcement of and appeal from orders

Order made to any Court to be enforced by other Courts. 482.Order made to any Court to be enforced by other Courts. Any order made by a Court for, or in the course of, winding up a company shall be enforceable at any place in India, other than --------------------------------------------------------------------- 1 Ins. by Act 65 of 1960, s. 177. 2 Subs. by Act 31 of 1965, s. 62 and Sch., for "fourteen" (w.e.f. 15-10-1985). --------------------------------------------------------------------- 383 that over which such Court has jurisdiction, by the Court which would have had jurisdiction in respect of the company if its registered office had been situate at such other place, and in the same manner in all respects as if the order had been made by that Court.

Appeals from orders. 483. Appeals from orders. Appeals from any order made, or decision given, in the matter of the winding up of a company by the Court shall lie to the same Court to which, in the same manner in which, and subject to the same conditions under which, appeals lie from any order or decision of the Court in cases within its ordinary jurisdiction. CHAP VOLUNTARY WINDING UP CHAPTER III.-VOLUNTARY WINDING UP Resolutions for, and commencement of, voluntary winding up

Circumstances in which company may be wound up voluntarily. 484. Circumstances in which company may be wound up voluntarily.

(1) A company may be wound up voluntarily-- (a) when the period, if any, fixed for the duration of the company by the articles has expired, or the event, if any, has occurred, on the occurrence of which the articles provide that the company is to be dissolved, and the company in general meeting passes a resolution requiring the company to be wound up voluntarily; (b) if the company passes a special resolution that the company be wound up voluntarily.

(2) In this Act, the expression "a resolution for voluntary winding up" means a resolution passed under clause (a) or (b) of sub-

section (1).

Publication of resolution to wind up voluntraily.

485. Publication of resolution to wind up voluntraily. (1) When a company has passed a resolution for voluntary winding up, it shall, within fourteen days of the passing of the resolution, give notice of the resolution by advertisement in the Official Gazette, and also in some newspaper circulating in the district where the registered office of the company is situate.

(2) If default is made in complying with sub-section (1), the company, and every officer of the company who is in default, shall be punishable with fine which may extend to fifty rupees for every day during which the default continues. For the purposes of this sub-section, a liquidator of the company shall be deemed to be an officer of the company.

Commencement of voluntary winding up. 486. Commencement of voluntary winding up. A voluntary winding up shall be deemed to commence at the time when the resolution for voluntary winding up is passed. 384 Consequences of voluntary winding up

Effect of voluntary winding up on status of company. 487. Effect of voluntary winding up on status of company. In the case of a voluntary winding up, the company shall from the commencement of the winding up, cease to carry on its business, except so far as may be required for the beneficial winding up of such business: Provided that the corporate state and corporate powers of the company shall continue until it is dissolved. Declaration of Solvency

Declaration of solvency in case of proposal to wind up voluntarily. 488. Declaration of solvency in case of proposal to wind up

voluntarily. (1) Where it is proposed to wind up a company voluntarily, its directors, or in case the company has more than two directors, the majority of the directors, may, at a meeting of the Board, make a declaration verified by an affidavit, to the effect that they have made a full inquiry into the affairs of the company, and that, having done so, they have formed the opinion that the company has no debts, or that it will be able to pay its debts in full within such period not exceeding three years from the commencement of the winding up as may be specified in the declaration.

(2) A declaration made as aforesaid shall have no effect for the purposes of this Act, unless- (a) it is made within the five weeks immediately preceding the date of the passing of the resolution for winding up the company and is delivered to the Registrar for registration before that date ; and 1[(b) it is accompanied by a copy of the report of the auditors of the company (prepared, as far as circumstances admit, in accordance with the provisions of this Act) on the profit and loss account of the company for the period commencing from the date up to which the last such account was prepared and ending with the latest practicable date immediately before the making of the declaration and the balance sheet of the company made out as on the last- mentioned date and also embodies a statement of the company's assets and liabilities as at that date.]

(3) Any director of a company making a declaration under this section without having reasonable grounds for the opinion that the company will be able to pay its debts in full within the period specified in the declaration, shall be punishable with imprisonment ----------------------------------------------------------------------- 1 Subs. by Act 65 of 1960, s. 178, for cl. (b), ----------------------------------------------------------------------- 385 for a term which may extend to six months, or with fine which may extend to five thousand rupees, or with both.

(4)If the company is wound up in pursuance of a resolution passed within the period of five weeks after the making of the declaration, but its debts are not paid or provided for in full within the period specified in the declaration, it shall be presumed, until the contrary is shown, that the director did not have reasonable grounds for his opinion.

(5)A winding up in the case of which a declaration has been made and delivered in accordance with this section is in this Act referred to as "a members' voluntary winding up" ; and a winding up in the case of which a declaration has not been so made and delivered is in this Act referred to as a creditors' voluntary winding up". Provisions applicable to a Members Voluntary Winding Up

Provisions applicable to a members' voluntary winding up. 489. Provisions applicable to a members' voluntary winding up. The provisions contained in sections 490 to 498, both inclusive, shall subject to the provisions of section 498, apply in relation to a members' voluntary winding up.

Power of company to appoint and fix remuneration of liquidators. 490. Power of company to appoint and fix remuneration of

liquidators. (1) The company in general meeting shall- (a) appoint one or more liquidators for the purpose of winding up the affairs and distributing the assets of the company ; and (b) fix the remuneration, if any, to be paid to the liquidator or liquidators.

(2) Any remuneration so fixed shall not be increased in any cir- cumstances whatever, whether with or without the sanction of the Court.

(3) Before the remuneration of the liquidator or liquidators is fixed as aforesaid, the liquidator, or any of the liquidators, as the case may be, shall not take charge of his office.

Board's powers to cease on appointment of a liquidator. 491. Board's powers to cease on appointment of a liquidator. On the appointment of a liquidator, all the powers of the Board of directors and of the managing or whole-time directors, managing agent, secretaries and treasurers, and manager, if there be any of these, shall cease, except for the purpose of giving notice of such appointment to the Registrar in pursuance of section 493 or in so far as the company in general meeting or the liquidator may sanction the continuance thereof. 386

Power to fill vacancy in office of liquidator.

492. Power to fill vacancy in office of liquidator. (1) If a vacancy occurs by death, resignation or otherwise in the office of any liquidator appointed by the company, the company in general meeting may, subject to any arrangement with its creditors, fill the vacancy.

(2) For that purpose, a general meeting may be convened by any contributory, or by the continuing liquidator or liquidators, if any.

(3) The meeting shall be held in the manner provided by this Act or by the articles, or in such other manner as the Court may, on application by any contributory or by the continuing liquidator or liquidators, determine.

Notice of appointment of liquidator to be given to Registrar. 493. Notice of appointment of liquidator to be given to

Registrar. (1) The company shall give notice to the Registrar of the appointment of a liquidator or liquidators made by it under section 490, of every vacancy occurring in the office of liquidator, and of the name of the liquidator or liquidators appointed to fill every such vacancy under section 492.

(2) The notice aforesaid shall be given by the company within ten days of the event to which it relates.

(3) If default is made in complying with sub-section (1) or (2), the company, and every officer of the company (including every liquidator or continuing liquidator) who is in default, shall be punishable with fine which may extend to one hundred rupees for every day during which the default continues.

Power of liquidator to accept shares, etc., as consideration for saleof property of company. 494. Power of liquidator to accept shares, etc., as consideration

for sale of property of company. (1) Where- (a) a company (in this section called "the transferor company") is proposed to be, or is in course of being, wound up altogether voluntarily ; and (b) the whole or any part of its business or property is proposed to be transferred or sold to another company,, whether a company within the meaning of this Act or not (in this section called " the transferee company ") ; the liquidator of the transferor company may, with the sanction of a special resolution of that company conferring on the liquidator either a general authority or an authority in respect of any particular arrangement,- (i) receive, by way of compensation or part compensation for the transfer or sale, shares, policies, or other like interests in the transferee company, for distribution among the, members of the transferor company; or 387 (ii) enter into any other arrangement whereby the members of the transferor company may, in lieu of receiving cash. shares, policies, or other like interests or in addition thereto, participate in the profits of, or receive any other benefit from, the transferee company.

(2) Any sale or arrangement in pursuance of this section shall be binding on the members of the transferor company.

(3) If any member of the transferor company who did not vote in favour of the special resolution expresses his dissent therefrom in writing addressed to the liquidator, and left at the registered office of the company within seven days after the passing of the resolution, he may require the liquidator either- (a) to abstain from carrying the resolution into effect ; or (b) to purchase his interest at a price to be determined by agreement, or by arbitration in the manner provided by this section.

(4) If the liquidator elects to purchase the member's interest, the purchase money shall be paid before the company is dissolved, and be raised by the liquidator in such manner as may be determined by special resolution.

(5) A special resolution shall not be invalid for the purposes of this section by reason only that it is passed before or concurrently with, a resolution for voluntary winding up or for appointing liquidators ; but if an order is made within a year for winding up the company by or subject to the supervision of the Court, the special resolution shall not be valid unless it is sanctioned by the Court.

(6) The provisions of the Arbitration Act, 1940 (10 of 1940)1 other than those restricting the application of that Act in respect of the subject matter of the arbitration, shall apply to all arbitrations in pursuance of this section.

Duty of liquidator to call creditors' meeting in case of insolvency. 495. Duty of liquidator to call creditors' meeting in case of

insolvency. (1) If, in the case of a winding up commenced after the commencement of this Act, the liquidator is at any time of opinion that the company will not be able to pay its debts in full within the period stated in the declaration under section 488, or that period has expired without the debts having been paid in full, he shall forthwith summon a meeting of the creditors, and shall lay before the meeting a statement of the assets and liabilities of the company.

(2) If the liquidator fails to comply with sub-section (1), he shall be punishable with fine which may extend to five hundred rupees. ---------------------------------------------------------------------- 1 See now the Arbitration and Conciliation Act, 1996 (26 of 1996). ---------------------------------------------------------------------- 388

Duty of liquidator to call general meeting at end of each year. 496. Duty of liquidator to call general meeting at end of each

year. (1) Subject to the provisions of section 498, in the event of the winding up continuing for more than one year, the liquidator shall- (a) call a general meeting of the company at the end of the first year from the commencement of the winding up, and at the end of each succeeding year, or as soon thereafter as may be convenient within three months from the end of the year or such longer period as the Central Government may allow; and (b) lay before the meeting an account of his acts and dealings and of the conduct of the winding up during the preceding year, together with a statement in the prescribed form and containing the prescribed particulars with respect to the proceedings in, and position of, the liquidation.

(2) If the liquidator fails to comply with sub-section (1), he shall be punishable, in respect of each failure, with fine which may extend to one hundred rupees.

Final meeting and dissolution.

497. Final meeting and dissolution. (1) Subject to the provisions of section 498, as soon as the and affairs of the company are fully wound up, the liquidator shall- (a) make up an account of the winding up, showing how the winding up has been conducted and the property of the company has been disposed of; and (b) call a general meeting of the company for the purpose of laying the account before it, and giving any explanation thereof.

(2) The meeting shall be called by advertisement- (a) specifying the time, place and object of the meeting ; and (b) published not less than one month before the meeting in the Official Gazette, and also in some newspaper circulating in the district where the registered office of the company is situate,

(3) Within one week after the meeting, the liquidator shall send to the 1[Registrar and the Official liquidator a copy each of the account and shall make a return to each of them] of the holding of the meeting and of the date thereof. If the copy is not so sent or the return is not so made, the liquidator shall be punishable with fine which may extend to fifty rupees for every day during which the default continues. .LM0 ---------------------------------------------------------------------- 1 Subs. by Act 31 of 1965, s. 54, for certain words (w.e.f. 15-10-1965). ---------------------------------------------------------------------- 389

(4) If a quorum is not present at the meeting aforesaid, the

liquidator shall, in lieu of the return referred to in sub-section (3) make a return that the meeting was duly called and that no quorum was present thereat. Upon such a return being made within one week after the date

fixed for the meeting, the provisions of sub-section (3) as to the making of the return shall be deemed to have been complied with,

1[(5) The Registrar, on receiving the account and either the

return mentioned in sub-section (3) or the return mentioned in sub-

section (4), shall forthwith register them.

(6)The Official Liquidator, on receiving the account and either

the return mentioned in sub-section (3) or the return mentioned in

sub-section (4), shall, as soon as may be, make, and the liquidator and all officers, past or present, of the company shall give the Official Liquidator all reasonable facilities to make, a scrutiny of the books and papers of the company and if on such scrutiny the Official Liquidator makes a report to the Court that the affairs of the company have not been conducted in a manner prejudicial to the interests of its members or to public interest, then, from the date of the submission of the report to the Court the company shall be deemed to be dissolved. (6A) If on such scrutiny the Official Liquidator makes a report to the Court that the affairs of the company have been conducted in a manner prejudicial as aforesaid, the Court shall by order direct the Official Liquidator to make a further investigation of the affairs of the company and for that purpose shall invest him with all such powers as the Court may deem fit. (6B) On the receipt of the report of the Official Liquidator on such further investigation the Court may either make an order that the company shall stand dissolved with effect from the date to be specified by the Court therein or make such other order as the circum- stances of the case brought out in the report permit.]

(7)If the liquidator fails to call a general meeting of the com- pany as required by this section, he shall be punishable with fine which may extend to five hundred rupees. ----------------------------------------------------------------------

1 Subs. by Act 31 of 1965, s. 54, for sub-sections (5) and (6) (w.e.f. 15-10-1965). ---------------------------------------------------------------------- 390

Alternative provisions as to annual and final meetings in case ofinsolvency. 498. Alternative provisions as to annual and final meetings in case of insolvency. Where section 495 has effect, sections 508 and 509 shall apply to the winding up, to the exclusion of sections 496 and 497, as if the winding up were a creditors' voluntary winding up and not a members' voluntary-winding up: Provided that the liquidator shall not be required to call a meeting of creditors under section 508 at the end of the first year from the commencement of the winding up, unless the meeting held under section 495 has been held more than three months before the end of that year. Provisions applicable to a Creditors' Voluntary Winding Up

Provisions applicable to a creditor's voluntary winding up. 499. Provisions applicable to a creditor's voluntary winding up. The provisions contained in sections 500 to 509, both inclusive, shall apply in relation to a creditors' voluntary winding up.

Meeting of creditors.

500. Meeting of creditors. (1) The company shall cause a meeting of the creditors of the company to be called for the day, or the day next following the day, on which there is to be held the general meeting of the company at which the resolution for voluntary winding up is to be proposed, and shall cause notices of the meeting of creditors to be sent by post to the creditors simultaneously with the sending of the notices of the meeting of the company.

(2)The company shall cause notice of the meeting of the creditors to be advertised once at least in the Official Gazette and once at least in two newspapers circulating in the district where the re- gistered office or principal place of business of the company is situate.

(3) The Board of directors of the company shall- (a) cause a full statement of the position of the company affairs together with a list of the creditors of the company and the estimated amount of their claims to be laid before the meeting of the creditors to be held as aforesaid ; and (b) appoint one of their number to preside at the said meeting.

(4) It shall be the duty of the director appointed to preside at the meeting of creditors to attend the meeting and preside thereat.

(5) If the meeting of the company at which the resolution for voluntary winding up is to be proposed is adjourned and the resolution is passed at an adjourned meeting, any resolution passed at 390A

the meeting of the creditors held in pursuance of sub-section (1) shall have effect as if it had been passed immediately after the pass- ing of the resolution for winding up the company.

(6) If default is made-

(a) by the company, in complying with sub-sections (1) and

(2) ; (b) by its Board of directors, in complying with sub-section

(3); (c) by any director of the company, in complying with sub-

section (4) ; the company, each of the directors, or the director, as the case may be, shall be punishable with fine which may extend to one thousand rupees and, in the case of default by the company, every officer of 391 the company who is in default, shall be liable to the like punishment.

Notice of resolutions passed by creditors' meeting to be given toRegistrar. 501. Notice of resolutions passed by creditors' meeting to be

given to Registrar. (1) Notice of any resolution passed at a creditors' meeting in pursuance of section 500 shall be given by the company to the Registrar within ten days of the passing thereof.

(2) If default is made in complying with sub-section (1), the company, and every officer of the company who is in default, shall be punishable with fine which may extend to fifty rupees for every day during which the default continues. For the purposes of this section, a liquidator of the company shall be deemed to be an officer of the company.

Appointment of liquidator.

502. Appointment of liquidator. (1) The creditors and the company at their respective meetings mentioned in section 500 may nominate a person to be liquidator for the purpose of winding up the affairs and distributing the assets of the company.

(2) If the creditors and the company nominate, different persons the person nominated by the creditors shall be liquidator: Provided that any director, member or creditor of the company may, within seven days after the date on which the nomination was made by the creditors, apply to the Court for an order either directing that the person nominated as liquidator by the company shall be liquidator instead of or jointly with the person nominated by the creditors, or appointing the Official Liquidator or some other person to be liquidator instead of the person appointed by the creditors.

(3) If no person is nominated by the creditors, the person, if any, nominated by the company shall be liquidator.

(4) If no person is nominated by the company, the person, if any, nominated by the creditors shall be liquidator.

Appointment of committee of inspection.

503. Appointment of committee of inspection. (1) The creditors at the meeting to be held in pursuance of section 500 or at any subsequent meeting may, if they think fit, appoint a committee of inspection consisting of not more than five persons.

(2) If such a committee is appointed, the company may, either at the meeting at which the resolution for voluntary winding up is passed or at any subsequent general meeting, appoint such number of persons (not exceeding five) as they think fit to act as members of the committee: 392 Provided that the creditors may, if they think fit, resolve that all or any of the persons so appointed by the company ought not to be members of the committee of inspection.

(3) If the creditors so resolve, the persons mentioned in the resolution shall not, unless the Court otherwise directs, be qualified to act as members of the committee.

(4) On any application to the Court for a direction under sub-

section (3), the Court may, if it thinks fit, appoint other persons to act as members of the committee of inspection in the place of the persons mentioned in the creditors' resolution.

(5) Subject to the provisions of sub-sections (1) to (4) and to such rules as may be made by the Central Government, the provisions of

section 465 [except sub-section (1) thereof] shall apply with respect to a committee of inspection appointed under this section as they apply with respect to a committee of inspection appointed in a winding up by the Court.

Fixing of liquidators' remuneration.

504. Fixing of liquidators' remuneration. (1) The committee of inspection, or if there is no such committee, the creditors, may fix the remuneration to be paid to the liquidator or liquidators.

(2) Where the remuneration is not so fixed, it shall be determined by the Court.

(3) Any remuneration fixed under sub-section (1) or (2) shall not be increased in any circumstances whatever, whether with or without the sanction of the Court.

Board's powers to cease on appointment of liquidator. 505. Board's powers to cease on appointment of liquidator. On the appointment of a liquidator, all the powers of the Board of directors shall cease, except in so far as the committee of inspection, or if there is no such committee, the creditors in general meeting, may sanction the continuance thereof.

Power to fill vacancy in office of liquidator. 506. Power to fill vacancy in office of liquidator. If a vacancy occurs by death, resignation or otherwise, in the office of a liquidator (other than a liquidator appointed by, or by the direction of, the Court), the creditors in general meeting may fill the vacancy.

Application of section 494 to a creditors' voluntary winding up. 507. Application of section 494 to a creditors' voluntary winding up. The provisions of section 494 shall apply in the case of a creditors' voluntary winding up as in the case of a members' voluntary winding up, with the modification that the powers of the liquidator under that section shall not be exercised except with the sanction either of the Court or of the committee of inspection. 393

Duty of liquidator to call meetings of company and of creditors at endof each year. 508. Duty of liquidator to call meetings of company and of

creditors at end of each year. (1) In the event of the winding up continuing for more than one year, the liquidator shall- (a) call a general meeting of the company and a meeting of the creditors at the end of the first year from the com- mencement of the winding up and at the end of each succeeding year, or as soon thereafter as may be convenient within three months from the end of the year or such longer period as the Central Government may allow ; and (b) lay before the meetings an account of his acts and dealings and of the conduct of the winding up during the preceding year, together with a statement in the prescribed form and containing the prescribed particulars with respect to the proceedings in, and position of, the winding up.

(2) If the liquidator fails to comply with sub-section (1), he shall be punishable, in respect of each failure, with fine which may extend. to one hundred rupees.

Final meeting and dissolution.

509. Final meeting and dissolution. (1) As soon as the affairs of the company are fully wound up, the liquidator shall- (a) make up an account of the winding up, showing how the winding up has been conducted and the property of the company has been disposed of ; and (b) call a general meeting of the company and a meeting of the creditors for the purpose of laying the account before the meetings and giving any explanation thereof,

(2) Each such meeting shall be called by advertisement- (a) specifying the time, place and object thereof ; and (b) published not less than one month before the meeting in the Official Gazette and also in some newspaper circulating in the district where the registered office of the company is situate.

(3) Within one week after the date of the meetings, or if the meetings are not held on the same date, after the date of the later meeting, the liquidator shall send to the 1[Registrar and the Official Liquidator a copy each of the account and shall make a return to ----------------------------------------------------------------------- 1 Subs. by Act 31 of 1965, s. 55, for certain words (w.e.f. 15-10-1965). ----------------------------------------------------------------------- 394 each of them] of the holding of the meetings and of the date or dates on which they were held. If the copy is not so sent or the return is not so made, the liquidator shall be punishable with fine which may extend to fifty rupees for every day during which the default continues.

(4) If a quorum (which for the purposes of this section shall be two persons) is not present at either of such meetings, the liquidator

shall, in lieu of the return referred to in sub-section (3), make a return that the meeting was duly called and that no quorum was present thereat. Upon such a return being made within one week after the date

fixed for the meeting, the provisions of sub-section (3) as to the making of the return shall, in respect of that meeting, be deemed to have been complied with.

1[(5) The Registrar, on receiving the account and also, in respect of each such meeting, either the return mentioned in

sub-section (3) or the return mentioned in sub-section (4), shall forthwith register them.

(6) The Official Liquidator, on receiving the account and

either the return mentioned in sub-section (3) or the return mentioned

in sub-section (4), shall, as soon as may be, make, and the liquidator and all officers, past or present, of the company shall give the Official Liquidator all reasonable facilities to make, a scrutiny of the books and papers of the company and if on such scrutiny the Official Liquidator makes a report to the Court that the affairs of the company have not been conducted in a manner prejudicial to the interests of its members or to public interest, then, from the date of the submission of the report to the Court the company shall be deemed to be dissolved. (6A) If on such scrutiny the Official Liquidator makes a report to the Court that the affairs of the company have been conducted in a manner prejudicial as aforesaid, the Court shall by order direct the Official Liquidator to make a further investigation of the affairs of the company and for that purpose shall invest him with all such powers as the Court may deem fit. (6B) On the receipt of the report of the Official Liquidator on such further investigation the Court may either make an order that the company shall stand dissolved with effect from the date to be specified by the Court therein or make such other order as the circumstances of the case brought out in the report permit.] ---------------------------------------------------------------------

1 Subs. by Act 31 of 1965, s. 55, for sub-sections (5) and (6) (w.e.f. 15.10.1965). ---------------------------------------------------------------------- 395

(7) If the liquidator fails to call a general meeting of the company or a meeting of the creditors as required by this section, he shall be punishable, in respect of each such failure, with fine which may extend to five hundred rupees. Provisions applicable to every voluntary winding up

Provisions applicable to every voluntary winding up. 510. Provisions applicable to every voluntary winding up. The provisions contained in sections 511 to 521, both inclusive, shall apply to every voluntary winding up, whether a members' or a creditors' winding up.

Distribution of property of company. 511. Distribution of property of company. Subject to the provisions of this Act as to preferential payments, the assets of a company shall, on its winding up, be applied in satisfaction of its liabilities pari passu and, subject to such application, shall, unless the articles otherwise provide, be distributed among the members according to their rights and interests in the company. 511A Application of section 454 to voluntary winding up. 1[511A. Application of section 454 to voluntary winding up. The provisions of section 454 shall, so far as may be, apply to every voluntary winding up as they apply to the winding up by the Court except that references to- (a) the Court shall be omitted ; (b) the Official Liquidator or the provisional liquidator shall be construed as references to the liquidator ; and (c) the " relevant date " shall be construed as references to the date of commencement of the winding up.]

Powers and duties of liquidator in voluntary winding up. 512. Powers and duties of liquidator in voluntary winding up.

(1) The liquidator may,- (a) in the case of a members' voluntary winding up, with the sanction of a special resolution of the company, and in the case of a creditors' voluntary winding up, with the sanction of the Court or, the committee of inspection or, if there is no such committee, of a meeting of the creditors, exercise any of the powers given by 2 [clauses (a)to (d) of

sub-section (1)] of section 457 to a liquidator in a winding up by the Court; (b) without the sanction referred to in clause (a), exercise any of the other powers given by this Act to the liquidator in a winding up by the Court; ---------------------------------------------------------------------- 1 Ins. by Act 31 of 1965, s. 56 (w.e.f. 15-10-1965). 2 Subs. by Act 65 of 1960, s. 179, for "clauses (i) to (iv) of

sub-section (2)". ---------------------------------------------------------------------- 396 (c) exercise the power of the Court under this Act of settling a list of contributories (which shall be prima facie evidence of the liability of the persons named therein to be contributories); (d) exercise the power of the Court of making calls; (e) call general meetings of the company for the purpose of obtaining the sanction of the company by ordinary or special resolution, as the case may require, or for any other purpose he may think fit.

(2) The exercise by the liquidator of the powers given by clause

(a) of sub-section (1) shall be subject to the control of the Court ; and any creditor or contributory may apply to the Court with respect to any exercise or proposed exercise of any of the powers conferred by this section.

(3)The liquidator shall pay the debts of the company and shall adjust the rights of the contributories among themselves.

(4) When several liquidators are appointed, any power given by this Act may be exercised by such one or more of them as may be determined at the time of their appointment, or, in default of such determination, by any number of them not being less than two.

Body corporate not to be appointed as liquidator.

513.Body corporate not to be appointed as liquidator. (1) A body corporate shall not be qualified for appointment as liquidator of a company in a voluntary winding up.

(2) Any appointment made in contravention of sub-section (1) shall be void.

(3) Any body corporate which acts as liquidator of a company and every director, the managing agent or secretaries and treasurers, or a manager thereof) shall be punishable with fine which may extend to one thousand rupees.

Corrupt inducement affecting appointment as liquaidator. 514.Corrupt inducement affecting appointment as liquaidator. Any person who gives, or agrees or offers to give, to any member or creditor of a company any gratification whatever with a view to- (a) securing his own appointment or nomination as the company's liquidator; or (b) securing or preventing the appointment or nomination of some person other than himself, as the company's liquidator ; shall be punishable with fine which may extend to one thousand rupees. 396A

Power of Court to appoint and remove liquidator in voluntary windingup. 515. Power of Court to appoint and remove liquidator in voluntary

winding up. (1) If from any cause whatever, there is no liquidator acting, 1[the Court may appoint the Official Liquidator or any other person as a liquidator].

2[(2) The Court may, on cause shown remove a liquidator and appoint the Official Liquidator or any other person as a liquidator in place of the removed liquidator.

(3) The Court may also appoint or remove a liquidator on the application made by the Registrar in this behalf.

(4) If the Official Liquidator is appointed as liquidator under

the proviso to sub-section (2) of section 502 or under this section, the remuneration to be paid to him shall be fixed by the Court and shall be credited to the Central Government.]

Notice by liquidator of his appointment.

516. Notice by liquidator of his appointment. (1) The liquidator shall, within 3[thirty] days after his appointment, publish in the Official Gazette, and deliver to the Registrar for registration, a notice of his appointment in the form prescribed.

(2) If the liquidator fails to comply with sub-section (1), he shall be punishable with fine which may extend to fifty rupees for every day during which the default continues. ---------------------------------------------------------------------- 1 Subs. by Act 65 of 1960, s.180, for "the Court may appoint a liquidator".

2 Subs. by s.180, ibid., for sub-section (2). 3 Subs. by Act 31 of 1965, s.62 and Sch. for "twenty-one" (w.e.f.15-10-1965). ---------------------------------------------------------------------- 397

Arrangement when binding on company and creditors.

517. Arrangement when binding on company and creditors. (1) Any arrangement entered into between a company about to be, or in the course of being, wound up and its creditors shall, subject to the right of appeal under this section, be binding on the company and on the creditors if it is sanctioned by a special resolution of the company and acceded to by three-fourths in number and value of the creditors.

(2) Any creditor or contributory may, within three weeks from the completion of the arrangement, appeal to the Court against it and the Court may thereupon, as it thinks just, amend, vary, confirm or set aside the arrangement.

Power to apply to Court to have questions determined or powersexercised. 518. Power to apply to Court to have questions determined or

powers exercised. (1) The liquidator or any contributory or creditor may apply to the Court- (a) to determine any question arising in the winding up of a company ; or (b) to exercise, as respects the enforcing of calls, the staying of proceedings or any other matter, all or any of the powers which the Court might exercise if the company were being wound up by the Court.

(2) The liquidator or any creditor or contributory may apply to

the Court specified in sub-section (3) for an order setting aside any attachment, distress or execution put into force against the estate or effects of the company after the commencement of the winding up,

(3) An application under sub-section (2) shall be made- (a) if the attachment, distress or execution is levied or put into force by a High Court, to such High Court ; and (b) if the attachment, distress or execution is levied or put into force by any other Court, to the Court having juris- diction to wind up the company.

(4) The Court, if satisfied on an application under sub-section

(1) or (2) that the determination of the question or the required exercise of power or the order applied for will be just and beneficial, may accede wholly or partially to the application on such terms and conditions as it thinks fit, or may make such other order on the application as it thinks just.

(5) A copy of an order staying the proceedings in the winding up, made by virtue of this section, shall forthwith be forwarded by the company, or otherwise as may be prescribed, to the Registrar, who shall make a minute of the order in his books relating to the company. 398

Application of liquidator to Court for public examination ofpromoters, directors, etc. 519. Application of liquidator to Court for public examination of

promoters, directors, etc. (1) The liquidator may make a report to the Court stating that in his opinion a fraud has been committed by any person in the promotion or formation of the company or by any officer of the company in relation to the company since its formation; and the Court may, after considering the report, direct that that person or officer shall attend before the Court on a day appointed by it for that purpose, and be publicly examined as to the promotion or formation or the conduct of the business of the company, or as to his conduct and dealings as officer thereof.

(2) The provisions of sub-sections (2) to (11) of section 478 shall apply in relation to any examination directed under sub-section

(1) as they apply in relation to an examination directed under sub-

section (1) of section 478 with references to the liquidator being substituted for references to the Official Liquidator in those provi- sions.

Costs of voluntary winding up. 520. Costs of voluntary winding up. All costs, charges and expenses properly incurred in the winding up, including the remuneration of the liquidator, shall subject to the rights of secured creditors, if any, be payable out of the assets of the company in priority to all other claims.

Saving of right of creditors and contributories to apply for windingup. 521. [Saving of right of creditors and contributories to apply for winding up.] Rep. by the Companies (Amendment) Act, 1960 (65 of 1960), s. 181. CHAP WINDING UP SUBJECT TO SUPERVISION OF COURT CHAPTER IV.-WINDING UP SUBJECT TO SUPERVISION OF COURT

Power to order winding up subject to supervision. 522. Power to order winding up subject to supervision. At any time after a company has passed a resolution for voluntary winding up, the Court may make an order that the voluntary winding up shall continue, but subject to such supervision of the Court, and with such liberty for creditors, contributories or others to apply to the Court, and generally on such terms and conditions, as the Court thinks just.

Effect of petition for winding up subject to supervision. 523. Effect of petition for winding up subject to supervision. A petition for the continuance of a voluntary winding up subject to the supervision of the Court shall, for the purpose of giving jurisdiction to the Court over suits and legal proceedings, be deemed to be a petition for winding up by the Court.

Power of Court to appoint or remove liquidators.

524. Power of Court to appoint or remove liquidators. (1) Where an order is made for a winding up subject to supervision, the Court may, by that or any subsequent order, appoint an additional liquidator or liquidators. 399

(2) The Court may remove any liquidator so appointed or any liquidator continued under the supervision order, and fill any vacancy occasioned by the removal, or by death or resignation.

1[(3) The Court may appoint the Official Liquidator as a liqui-

dator under sub-section (1) or to fill any vacancy occasioned under

sub-section (2).

(4) The Court may also appoint or remove a liquidator on an application made by the Registrar in this behalf.]

Powers and obligations of liquidator appointed by Court. 525. Powers and obligations of liquidator appointed by Court. A liquidator appointed by the Court under section 524 shall have the same powers, be subject to the same obligations, and in all respects stand in the same position, as if he had been duly appointed a in accordance with the provisions of this Act with respect to the appointment of liquidators in a voluntary winding up.

Effect of supervision order.

526. Effect of supervision order. (1) Where an order is made for a winding up subject to supervision, the liquidator may, subject to any restrictions imposed by the Court, exercise all his powers, without the sanction or intervention of the Court, in the same manner as if the company were being wound up altogether voluntarily.

(2) Except as provided in sub-section (1), any order made by the Court for a winding up subject to the supervision of the Court, shall for all purposes, including the staying of suits and other pro- ceedings, be deemed to be an order of the Court for winding up the company by the Court, and shall confer full authority on the Court to make calls or to enforce calls made by the liquidators, and to exercise all other powers which it might have exercised if an order had been made for winding up the company altogether by the Court.

(3) In the construction of the provisions whereby the Court is empowered to direct any act or thing to be done to or in favour of the liquidator, the expression "liquidator" shall be deemed to mean the liquidator conducting the winding up, subject to the supervision of the Court.

Appointment in certain cases of voluntary liquidators to office ofliquidators. 527. Appointment in certain cases of voluntary liquidators to office of liquidators. Where an order has been made for winding up a company subject to supervision, and an order is afterwards made for winding up by the Court, the Court may, by the last-mentioned or any subsequent order, appoint any person or persons who are then liquidators, either provisionally or permanently, to be liquidator or liquidators -------------------------------------------------------------------- 1 Ins. by Act 65 of 1960, s. 182. --------------------------------------------------------------------- 400 in the winding up by the Court in addition to, and subject to the control of, the Official Liquidator. CHAP PROVISIONS APPLICABLE TO EVERY MODE OF WINDING UP CHAPTER V.-PROVISIONS APPLICABLE TO EVERY MODE OF WINDING UP Proof and ranking of claims

Debts of all descriptions to be admitted to proof. 528. Debts of all descriptions to be admitted to proof. In every winding up (subject, in the case of insolvent companies, to the application in accordance with the provisions of this Act of the law of insolvency), all debts payable on a contingency, and all claims against the company, present or future, certain or contingent, ascertained or sounding only in damages, shall be admissible to proof against the company, a just estimate being made, so far as possible, of the value of such debts or claims as may be subject to any contingency, or may sound only in damages, or for some other reason may not bear a certain value.

Application of insolvency rules in winding up of insolvent companies. 529. Application of insolvency rules in winding up of insolvent

companies. (1) In the winding up of an insolvent company, the same rules shall prevail and be observed with regard to- (a) debts provable ; (b) the valuation of annuities and future and contingent liabilities ; and (c) the respective rights of secured and unsecured creditors; as are in force for the time being under the law of insolvency with respect to the estates of persons adjudged insolvent: 1[Provided that the security of every secured creditor shall be deemed to be subject to a pari passu charge in favour of the workmen to the extent of the workmen's portion therein, and, where a secured creditor, instead of relinquishing his security and proving his debt, opts to realise his security,- (a) the liquidator shall be entitled to represent the workmen and enforce such charge; (b) any amount realised by the liquidator by way of enforcement of such charge shall be applied ratably for the discharge of workmen's dues; and (c) so much of the debt due to such secured creditor as could not be realised by him by virtue of the foregoing provisions of this proviso or the amount of the workmen's portion in his security, whichever is less, shall rank pari passu with the workmen's dues for the purposes of section 529A.]

(2) All persons who in any such case would be entitled to prove for and receive dividends out of the assets of the company,may come in under the winding up, and make such claims against the company as they respectively are entitled to make by virtue of this section, 2[Provided that if a secured creditor instead of relinquishing his security and proving for his debt proceeds to realise his security, he shall be liable to 3[pay his portion of the expenses] incurred by the liquidator(including a provisional liquidator, if any) for the preservation of the security before its realization by the secured creditor.] 1[Explanation.-For the purposes of this proviso, the portion of expenses incurred by the liquidator for the preservation of a security which the secured creditor shall be liable to pay shall be the whole of the expenses less amount which bears to such expenses the same proportion as the workmen's portion in relation to the security bears to the value of the security.]

1[(3) For the purposes of this section, section 529A and section 530,- (a) "workmen", in relation to a company, means the employees of the company, being workmen within the meaning of the Industrial Disputes Act, 1947(14 of 1947); (b) "workmen's dues", in relation to a company, means the aggregate of the following sums due from the company to its workmen, namely:- (i) all wages or salary including wages payable for time or piece work and salary earned wholly or in part by way of commission of any workman, in respect of services rendered to the company and any compensation payable to any workman under any of the provisions of the Industrial Disputes Act, 1947 (14 of 1947); (ii)all accrued holiday remuneration becoming payable to any workman, or in the case of his death to any other person in his right, on the termination of his employment before, or by the effect of, the winding up order or resolution; (iii) unless the company is being wound up voluntarily merely for the purposes of reconstruction or of amalgamation with another company, or unless the company has,at the commencement of the winding up, under such contract with insurers as is mentioned in section 14 the Workmen's Compensation Act, 1923 (8 of 1923), rights capable of being transferred to and vested in the workman, all amounts due in respect of any compensation or liability for compensation under the said Act in res- pect of the death or disablement of any workman of the company; (iv)all sums due to any workman from a provident fund, a pension fund, a gratuity fund or any other fund for the welfare of the workmen, maintained by the company; (c) "workmen's portion", in relation to the security of any secured creditor of a company, means the amount which bears to the value of the security the same proportion as the amount of the workmen's dues bears to the aggregate of- (i) the amount of workmen's dues; and (ii) the amounts of the debts due to the secured creditors. Illustration The value of the security of a secured creditor of a company is Rs. 1,00,000. The total amount of the workmen's dues is Rs. 1,00,000.The amount of the debts due from the company to its secured creditors is Rs. 3,00,000. The aggregate of the amount of workmen's dues and of the amounts of debts due to secured creditors is Rs. 4,00,000. The workmen's portion of the security is, therefore, one-fourth of the value of the security, that is Rs. 25,000.] 529A Overriding preferential payment. 4[529A. Overriding preferential payment. Notwithstanding anything contained in any other provision of this Act or any other law for the time being in force in the winding up of a company- (a) workmen's dues; and (b) debts due to secured creditors to the extent such debts

rank under clause (c) of the proviso to sub-section (1) of section 529 pari passu with such dues, shall be paid in priority to all other debts.

(2) The debts payable under clause (a) and clause (b) of sub-section

(1) shall be paid in full, unless the assets are insufficient to meet them, in which case they shall abate in equal proportions.]

Preferential payments.

530. Preferential payments. (1) In a winding up, 5[subject to the provisions of section 529A, there shall be paid] in priority to all other debts- (a) all revenues, taxes, cesses and rates due from the company to the Central or a State Government or to a local autho- ---------------------------------------------------------------------- 1 Ins. by Act 35 of 1985, s.4. 2 Ins. by Act 65 of 1960, s. 183. 3 Subs. by s.4, ibid. 4 Ins. by s.5, ibid. 5 Subs. by s.6, ibid. ----------------------------------------------------------------------- 401 rity at the relevant date as defined in clause (c) of sub-

section (8), and having become due and payable within the twelve months next before that date ; (b) all wages or salary (including wages payable for time or piece work and salary earned wholly or in part by way of commission) of any employee, in respect of services rendered to the company and due for a period not exceeding four months within the twelve months next before the relevant date 1* **

subject to the limit specified in sub-section (2); (c) all accrued holiday remuneration becoming payable to any employee, or in the case of his death to any other person in his right, on the termination of his employment before, or by the effect of, the winding up order or resolution ; (d) unless the company is being wound up voluntarily merely for the purposes of reconstruction or of amalgamation with another company, all amounts due, in respect of contributions payable during the twelve months next before the relevant date, by the company as the employer of any persons, under the Employees' State Insurance Act, 1948 ( 34 of 1948.) or any other law for the time being in force; (e) unless the company is being wound up voluntarily merely for the purposes of reconstruction or of amalgamation with another company, or unless the company has, at the commencement of the winding up, under such a contract with insurers as is mentioned in section 14 of the Workmen's Compensation Act, 1923, (8 of 1923.) rights capable of being transferred to and vested in the workman, all amounts due in respect of any compensation or liability for compensation under the said Act in respect of the death or disablement of any employee of the company; (f)all sums due to any employee from a provident fund, a pension fund a gratuity fund-or any other fund for the welfare of the employees, maintained by the company; and (g) the expenses of any investigation held in pursuance of section 235 or 237, in so far as they are payable by the company. ---------------------------------------------------------------------- 1 Omitted by Act 35 of 1985, s.6. ---------------------------------------------------------------------- 402

(2) The sum to which priority is to be given under clause (b) of

sub-section (1), shall not, in the case of any one claimant, exceed one thousand rupees. 1* * * * *

(3) Where any compensation under the Workmen's Compensation Act, 1923(8 of 1923) is a weekly payment, the amount due in respect

thereof shall, for the purposes of clause (e) of sub-section (1), be taken to be the amount of the lump sum for which the weekly payment could, if redeemable, be redeemed if the employer made an application for that purpose under the said Act.

(4) Where any payment has been made to any employee of a company,- (i) on account of wages or salary ; or (ii) to him, or in the case of his death, to any other person in his right, on account of accrued holiday remuneration, out of money advanced by some person for that purpose, the person by whom the money was advanced shall, in a winding up, have a right of priority in respect of the money so advanced and paid, up to the amount by which the sum in respect of which the employee or other person in his right, would have been entitled to priority in the winding up has been diminished by reason of the payment having been made.

(5) The foregoing debts shall- (a) rank equally among themselves and be paid in full, unless the assets are insufficient to meet them, in which case they shall abate in equal proportions; and (b) so far as the assets of the company available for payment of general creditors are insufficient to meet them, have priority over the claims of holders of debentures under any floating charge created by the company, and be paid accordingly out of any property comprised in or subject to that charge.

(6) Subject to the retention of such sums as may be necessary for the costs and expenses of the winding up, the foregoing debts shall be discharged forthwith so far as the assets are sufficient to --------------------------------------------------------------------- 1. Omitted by Act 35 of 1985, s.6 --------------------------------------------------------------------- 403 meet them, and in the case of the debts to which priority is given by

clause (d) of sub-section (1), formal proof thereof shall not be required except in so far as may be otherwise prescribed.

(7)In the event of a landlord or other person distraining or having distrained on any goods or effects of the company within three months next before the date of a winding up order, the debts to which priority is given by this section shall be a first charge on the goods or effects so distrained on, or the proceeds of the sale thereof: Provided that, in respect of any money paid under any such charge, the landlord or other person shall have the same rights of priority as the person to whom the payment is made.

(8) For the purposes of this section- (a) any remuneration in respect of a period of holiday or of absence from work through sickness or other good cause shall be deemed to be wages in respect of services rendered to the company during that period; (b) the expression "accrued holiday remuneration" includes, in relation to any person, all sums which, by virtue either of his contract of employment or of any enactment (including any order made or direction given under any enactment), are payable on account of the remuneration which would, in the ordinary course, have become payable to him in respect of a period of holiday, had his employment with the company continued until he became entitled to be allowed the holiday 1* * *. 2[(bb) the expression "employee" does not include a workman;] and (c) the expression "the relevant date" means- (i) in the case of a company ordered to be wound up compulsorily, the date of the appointment (or first ap- pointment) of a provisional liquidator, or if no such appointment was made, the date of the winding up order, unless in either case the company had commenced to be wound up voluntarily before that date; and (ii) in any case where sub-clause (i) does not apply, the date of the passing of the resolution for the volun- tary winding up of the company.

(9) This section shall not apply in the case of a winding up where the

date referred to in sub-section (5) of section 230 of the Indian Companies Act, 1913,(7 of 1913.) occurred before the commencement of this Act, and in such a case, the provisions relating to preferential payments which would have applied if this Act had not been passed, shall be deemed to remain in full force. ---------------------------------------------------------------------- 1 Omitted by Act 35 of 1985, s.6. 2 Ins. by s.6, ibid. ---------------------------------------------------------------------- 404 Effect of winding up on antecedent and other transactions

Frudulent preference.

531. Frudulent preference. (1) Any transfer of property, movable or immovable, delivery of goods, payment, execution or other act relating to property made, taken or done by or against a company within six months before the commencement of its winding up which, had it been made, taken or done by or against an individual within three months before the presentation of an insolvency petition on which he is adjudged insolvent, would be deemed in his insolvency a fraudulent preference, shall in the event of the company being wound up, be deemed a fraudulent preference of its creditors and be invalid accordingly: Provided that, in relation to things made, taken or done before the commencement of this Act, this sub-section shall have effect with the substitution, for the reference to six months, of a reference to three months.

(2) For the purposes of sub-section (1), the presentation of a petition for winding up in the case of a winding up by or subject to the supervision of the Court, and the passing of a resolution for winding up in the case of a voluntary winding up, shall be deemed to correspond to the act of insolvency in the case of an individual. 531A Avoidance of voluntary transfer. 1[531A. Avoidance of voluntary transfer. Any transfer of property, movable or immovable, or any delivery of goods, made by a company, not being a transfer or delivery made in the ordinary course of its business or in favour of a purchaser or encumbrancer in good faith and for valuable consideration, if made within a period of one year before the presentation of a petition for winding up by or subject to the supervision of the Court or the passing of a resolution for voluntary winding up of the company, shall be void against the liquidator.]

Transfer for benefit of all creditors to be void. 532. Transfer for benefit of all creditors to be void. Any transfer or assignment by a company of all its property to trustees for the benefit of all its creditors shall be void.

Liabilities and rights of certain fraudulently preferred persons. 533. Liabilities and rights of certain fraudulently preferred

persons. (1) Where. in the case of a company which is being wound up, anything made, taken or done after the commencement of this Act is invalid under section 531 as a fraudulent preference of a person interested in property mortgaged or charged to secure the company's debt, then (without prejudice to any rights or liabilities arising apart from this provision), the person preferred shall be subject to the same liabilities, and shall have the same rights, as if he had undertaken to be personally liable as surety for the debt, to the extent of the mort- ---------------------------------------------------------------------- 1 Ins. by Act 65 of 1960, s. 185. ---------------------------------------------------------------------- 405 gage or charge on the property or the value of his interest, whichever is less.

(2) The value of the said person's interest shall be determined as at the date of the transaction constituting the fraudulent preference, and shall be determined as if the interest were free of all encumbrances other than those to which the mortgage or charge for the company's debt was then subject.

(3) On any application made to the Court with respect to any payment on the ground that the payment was a fraudulent preference of a surety or guarantor, the Court shall have jurisdiction to determine any questions with respect to the payment arising between the person to whom the payment was made and the surety or guarantor and to grant relief in respect thereof, notwithstanding that it is not necessary so to do for the purposes of the winding up, and for that purpose may give leave to bring in the surety or guarantor as a third party as in the case of a suit for the recovery of the sum paid. This sub-section shall apply, with the necessary modifications, in relation to transactions other than the payment of money as it applies in relation to payments of money.

Effect of floating charge. 534. Effect of floating charge. Where a company is being wound up, a floating charge on the undertaking or property of the company created within the twelve months immediately preceding the commencement of the winding up, shall, unless it is proved that the company immediately after the creation of the charge was solvent, be invalid, except to the amount of any cash paid to the company at the time of, or subsequently to the creation of, and in consideration for, the charge, together with interest on that amount at the rate of five per cent. per annum or such other rate as may for the time being be notified by the Central Government in this behalf in the Official Gazette: Provided that in relation to a charge created more than three months before the commencement of this Act, this section shall have effect with the substitution, for references to twelve months of references to three months.

Disclaimer of onerous property in case of a company which is beingwound up. 535. Disclaimer of onerous property in case of a company which is

being wound up. (1) Where any part of the property of a company which is being wound up consists of- (a) land of any tenure, burdened with onerous covenants; (b) shares or stock in companies; (c) any other property which is unsaleable or is not readily saleable, by reason of its binding the possessor thereof 406 either to the performance of any onerous act or to the payment of any sum of money ; or (d) unprofitable contracts ; the liquidator of the company, notwithstanding that he has endeavoured to sell or has taken possession of the property, or exercised any act of ownership in relation thereto, or done anything in pursuance of the contract, may, with the leave of the Court and subject to the provisions of this section, by writing signed by him, at any time within twelve months after the commencement of the winding up or such extended period as may be allowed by the Court, disclaim the property: Provided that, where any such property has not come to the knowledge of the liquidator within one month after the commencement of the winding up, the power of disclaiming the property may be exercised at any time within twelve months after he has become aware thereof or such extended period as may be allowed by the Court.

(2) The disclaimer shall operate to determine, as from the date of disclaimer, the rights, interest, and liabilities of the company, and the property of the company, in or in respect of the property disclaimed, but shall not, except so far as is necessary for the pur- pose of releasing the company and the property of the company from liability, affect the rights or liabilities of any other person.

(3) The Court, before or on granting leave to disclaim, may re- quire such notices to be given to persons interested, and impose such terms as a condition of granting leave, and make such other order in the matter as the Court thinks just.

(4) The liquidator shall not be entitled to disclaim any property in any case where an application in writing has been made to him by any person interested in the property requiring him to decide whether he will or will not disclaim, and the liquidator has not, within a period of twenty-eight days after the receipt of the application or such extended period as may be allowed by the Court, given notice to the applicant that he intends to apply to the Court for leave to disclaim ; and in case the property is a contract, if the liquidator, after such an application as aforesaid, does not within the said period or extended period disclaim the contract, 1[he shall be deemed to have adopted it]. ---------------------------------------------------------------------- 1 Subs. by Act 65 of 1960, s. 186, for "the company shall be deemed to have adopted it". ---------------------------------------------------------------------- 407

(5) The Court may, on the application of any person who is, as against the liquidator, entitled to the benefit or subject to the burden of a contract made with the company, make an order rescinding the contract on such terms as to payment by or to either party of damages for the non-performance of the contract, or otherwise as the Court thinks just ; and any damages payable under the order to any such person may be proved by him as a debt in the winding up.

(6) The Court may, on an application by any person who either claims any interest in any disclaimed property or is under any liabi- lity not discharged by this Act in respect of any disclaimed property, and after hearing any such persons as it thinks fit, make an order for the vesting of the property in, or the delivery of the property to, any person entitled thereto or to whom it may seem just that the property should be delivered by way of compensation for such liability as aforesaid, or a trustee for him, and on such terms as the Court thinks just ; and on any such vesting order being made, the property comprised therein shall vest accordingly in the person therein named in that behalf without any conveyance or assignment for the purpose: Provided that, where the property disclaimed is of a lease-hold nature, the Court shall not make a vesting order in favour of any person claiming under the company, whether as under-lessee or as mortgagee or holder of a charge by way of demise, except upon the terms of making that person- (a) subject to the same liabilities and obligations as those to which the company was subject under the lease in respect of the property at the commencement of the winding up; or (b) if the Court thinks fit, subject only to the same liabilities and obligations as if the lease had been assigned to that person at that date ; and in either event (if the case so requires) as if the lease had com- prised only the property comprised in the vesting order ; and any mortgagee or under-lessee declining to accept a vesting order upon such terms shall be excluded from all interest in and security upon the property, and, if there is no person claiming under the company who is willing to accept an order upon such terms, the Court shall have power to vest the estate and interest of the company in the property in any person liable, either personally or in a represen- tative character, and either alone or jointly with the company, to 408 perform the lessee's covenants in the lease, freed and discharged from all estates, encumbrances and interests created therein by the company.

(7) Any person injured by the operation of a disclaimer under this section shall be deemed to be a creditor of the company to the amount of the compensation or damages payable in respect of the injury, and may accordingly prove the amount as a debt in the winding up.

Avoidance of transfers, etc., after commencement of winding up. 536. Avoidance of transfers, etc., after commencement of winding

up. (1) In the case of a voluntary winding up, any transfer of shares in the company, not being a transfer made to or with the sanction of the liquidator, and any alteration in the status of the members of the company, made after the commencement of the winding up, shall be void.

(2) In the case of a winding up by or subject to the supervision of the Court, any disposition of the property (including actionable claims) of the company, and any transfer of shares in the company or alteration in the status of its members, made after the commencement of the winding up, shall, unless the Court otherwise orders, be void.

Avoidance of certain attachments, executions, etc., in winding up byor subject to supervision of Court. 537. Avoidance of certain attachments, executions, etc., in

winding up by or subject to supervision of Court. (1) Where any company is being wound up by or subject to the supervision of the Court- (a) any attachment, distress or execution put in force, without leave of the Court, against the estate or effects of the company, after the commencement of the winding up ; or (b) any sale held, without leave of the Court, of any of the properties or effects of the company after such com- mencement; shall be void.

1[(2) Nothing in this section applies to any proceedings for the recovery of any tax or impost or any dues payable to the Government.] Offences antecedent to or in course of winding up

Offences by officers of companies in liquidation.

538. Offences by officers of companies in liquidation. (1) If any person, being a past or present officer of a company, which, at the time of the commission of the alleged offence, is being wound up, whether by or subject to the supervision of the Court or voluntarily, or which is subsequently ordered to be wound ----------------------------------------------------------------------

1 Subs. by Act 65 of 1960, s. 187, for sub-section (2). ---------------------------------------------------------------------- 408/1 up by the Court or which subsequently passes a resolution for volun- tary winding up,- (a) does not, to the best of his knowledge and belief, fully and truly discover to the liquidator all the property, movable and immovable, of the company, and how and to whom and for what consideration and when the company disposed of any part thereof, except such part as has been disposed of in the ordinary course of the business of the company; (b) does not deliver up to the liquidator, or as he directs, all such part of the movable and immovable property of the company as is in his custody or under his control, and which he is required by law to deliver up ; (c) does not deliver up to the liquidator, or as he directs, all such books and papers of the company as are in his custody or under his control and which he is required by law to deliver up ; (d) within the twelve months next before the commencement of the winding up or at any time thereafter, conceals any part of the property of the company to the value of one hundred rupees or upwards, or conceals any debt due to or from the company ; (e) within the twelve months next before the commencement of the winding up or at any time thereafter, fraudulently removes any part of the property of the company to the value of one hundred rupees or upwards; (f) makes any material omission in any statement relating to the affairs of the company ; (g) knowing or believing that a false debt has been proved by any person under the winding up, fails for a period of one month to inform the liquidator thereof ; (h) after the commencement of the winding up, prevents the production of any book or paper affecting or relating to the property or affairs of the company; (i) within the twelve months next before the commencement of the winding up or at any time thereafter, conceals, destroys, mutilates or falsifies, or is privy to the con- cealment, destruction, mutilation or falsification of, any book or paper affecting or relating to, the property or affairs of the company; 408/2 (j) within the twelve months next before the commencement of the winding up or at any time thereafter makes, or is privy to the making of, any false entry in any book or paper affecting or relating to, the property or affairs of the company ; (k) within the twelve months next before the commencement of the winding up or at any time thereafter, fraudulently parts with, alters or makes any omission in, or is privy to the fraudulent parting with, altering or making of any omission in, any book or paper affecting or relating to the property or affairs of the company ; (l) after the commencement of the winding up or at any meeting of the creditors of the company within the twelve months next before the commencement of the winding up, attempts to account for any part of the property of the company by fictitious losses or expenses ; (m) within the twelve months next before the commencement of the winding up or at any time thereafter, by any false representation or other fraud, obtains on credit, for or on behalf of the company, any property which the company does not subsequently pay for ; (n) within the twelve months next before the commencement of the winding up or at any time thereafter, under the false pretence that the company is carrying on its business, obtains on credit, for or on behalf of the company, any property which the company does not subsequently pay for; (o) within the twelve months next before the commencement of the winding up or at any time thereafter, pawns, pledges or disposes of any property of the company which has been obtained on credit and has not been paid for, unless such pawning, pledging or disposing is in the ordinary course of the business of the company; or (p) is guilty of any false representation or other fraud for the purpose of obtaining the consent of the creditors of the company or any of them, to an agreement with reference to the affairs of the company or to the winding up; he shall be punishable, in the case of any of the offences mentioned in clauses (m), (n) and (o), with imprisonment for a term which may extend to five years, or with fine, or with both, and, in the case of 408/3 any other offence, with imprisonment for a term which may extend to two years, or with fine, or with both: Provided that it shall be a good defence- (i) to a charge under any of the clauses, (b), (c), (d), (f), (n) and (o), if the accused proves that he had no intent to defraud ; and (ii) to a charge under any of the clauses, (a), (h), (i) and if he proves that he had no intent to conceal the true state of affairs of the company or to defeat the law.

(2) Where any person pawns, pledges or disposes of any property in circumstances which amount to an offence under clause (o) of sub-

section (1), every person who takes in pawn or pledge or otherwise receives the property, knowing it to be pawned, pledged, or disposed of in such circumstances as aforesaid, shall be punishable with imprisonment for a term which may extend to three years, or with fine, or with both.

(3) For the purposes of this section, the expression "officer" shall include any person in accordance with whose directions or instructions the directors of the company have been accustomed to act.

Penalty for falsification of books. 539. Penalty for falsification of books. If with intent to defraud or deceive any person, any officer or contributory of a company which is being wound up- (a) destroys, mutilates, alters, falsifies or secretes, or is privy to the destruction, mutilation, alteration, falsification or secreting of, any books, papers or securities ; or (b) makes, or is privy to the making of, any false or fraudulent entry in any register, book of account or document belonging to the company; he shall be punishable with imprisonment for a term which may extend to seven years, and shall also be liable to fine.

Penalty for frauds by officers. 540. Penalty for frauds by officers. If any person, being at the time of the commission of the alleged offence an officer of a company which is subsequently ordered to be wound up by the Court or which subsequently passes a resolution for voluntary winding up,- (a) has, by false pretences or by means of any other fraud, induced any person to give credit to the company; or (b) with intent to defraud creditors of the company, has made or caused to be made any gift or transfer of or charge 408/4 on, or has caused or connived at the levying of any exe- cution against, the property of the company ; or (c) with intent to defraud creditors of the company, has concealed or removed any part of the property of the company since the date of any unsatisfied judgment or order for payment of money obtained against the company, or within two months before that date; he shall be punishable with imprisonment for a term which may extend to two years and shall also be liable to fine.

Liability where proper accounts not kept.

541. Liability where proper accounts not kept. (1) Where a company is being wound up, if it is shown that proper books of account were not kept by the company throughout the period of two years immediately preceding the commencement of the winding up, or the period between the incorporation of the company and the commencement of the winding up, whichever is shorter, every officer of the company who is in default shall, unless he shows that he acted honestly and that in the circumstances in which the business of the company was carried on, the default was excusable, be punishable with imprisonment for a term which may extend to one year.

(2) For the purposes of sub-section (1), it shall be deemed that proper books of account have not been kept in the case of any company, if there have not been kept-- (a) such books or accounts as are necessary to exhibit and explain the transactions and financial position of the business of the company, including books containing entries made from day to day in sufficient detail of all cash received and all cash paid ; and (b) where the business of the company has involved dealings in goods, statements of the annual stocktakings and (except in the case of goods sold by way of ordinary retail trade) of all goods sold and purchased, showing the goods and the buyers and sellers thereof in sufficient detail to enable those goods and those buyers and sellers to be identified.

Liability for fraudulent conduct of business.

542. Liability for fraudulent conduct of business. (1) If in the course of the winding up of a company, it appears that any business of the company has been carried on, with intent to defraud creditors of the company or any other persons or for any fraudulent purpose, the Court, on the application of the Official Liquidator, or the liquidator or any creditor or contributory of. 408/5 the company, may, if it thinks it proper so to do, declare that any persons who were knowingly parties to the carrying on of the business in the manner aforesaid shall be personally responsible, without any limitation of liability, for all or any of the debts or other liabilities of the company as the Court may direct. On the hearing of an application under this sub-section, the Official Liquidator or the liquidator, as the case may be, may himself give evidence or call witnesses.

(2) (a) Where the Court makes any such declaration, it may give such further directions as it thinks proper for the purpose of giving effect to that declaration. (b) In particular, the Court may make provision for making the liability of any such person under the declaration a charge on any debt or obligation due from the company to him, or on any mortgage or charge or any interest in any mortgage or charge on any assets of the company held by or vested in him, or any person on his behalf, or any person claiming as assignee from or through the person liable or any person acting on his behalf. (c) The Court may, from time to time, make such further order as may be necessary for the purpose of enforcing any charge imposed under this sub-section. (d) For the purpose of this sub-section, the expression "assignee" includes any person to whom or in whose favour, by the directions of the person liable, the debt, obligation, mortgage or charge was created, issued or transferred or the interest was created, but does not include an assignee for valuable consideration (not including consideration by way of marriage) given in good faith and without notice of any of the matters on the ground of which the declaration is made.

(3) Where any business of a company is carried on with such

intent or for such purpose as is mentioned in sub-section (1), every person who was knowingly a party to the carrying on of the business in the manner aforesaid, 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.

(4) This section shall apply, notwithstanding that the person concerned may be criminally liable in respect of the matters on the ground of which the declaration is to be made.

Power of Court to assess damages against delinquent directors, etc. 543. Power of Court to assess damages against delinquent

directors, etc. (1) If in the course of winding up a company, it appears that any person who has taken part in the promotion or formation 408/6 of the company, or any past or present director, managing agent, sec- retaries and treasurers, manager, liquidator or officer of the company- (a) has misapplied, or retained, or become liable or accountable for, any money or property of the company ; or (b) has been guilty of any misfeasance or breach of trust in relation to the company ; the Court may, on the application of the Official Liquidator, of the liquidator, or of any creditor or contributory, made within the time

specified in that behalf in sub-section (2), examine into the conduct of the person, director, managing agent, secretaries and treasurers, manager, liquidator or officer aforesaid, and compel him to repay or restore the money or property or any part thereof respectively, with interest at such rate as the Court thinks just, or to contribute such sum to the assets of the company by way of compensation in respect of the misapplication, retainer, misfeasance or breach of trust, as the Court thinks just.

(2) An application under sub-section (1) shall be made within five years from the date of the order for winding up, or of the first appointment of the liquidator in the winding up, or of the misapplica- tion, retainer,. misfeasance or breach of trust, as the case may be, whichever is longer.

(3) This section shall apply notwithstanding that the matter is one for which the person concerned may be criminally liable.

Liability under sections 542 and 543 to extend to partners ordirectors in firm or company. 544. Liability under sections 542 and 543 to extend to partners or directors in firm or company. Where a declaration under section 542 or an order under section 543 is or may be made in respect of a firm or body corporate, the Court shall also have power to make a declaration under section 542, or pass an order under section 543, as the case may be, in respect of any person who was at the relevant time a partner in that firm or a director of that body corporate.

Prosecution of delinquent officers and members of company. 545. Prosecution of delinquent officers and members of company.

(1) If it appears to the Court in the course of a winding up by, or subject to the supervision of, the Court, that any past or present officer, or any member, of the company has been guilty of any offence in relation to the company, the Court may, either on the application of any person interested in the winding up or of its own motion, direct the liquidator either himself to prosecute the offender or to refer the matter to the Registrar.

(2) If it appears to the liquidator in the course of a voluntary winding up that any past or present officer, or any member, of the company has been guilty of any offence in relation to the company, 408/7 he shall forthwith report the matter to the Registrar and shall furnish to him such information and give to him such access to and facilities for inspecting and taking copies of any books and papers, being information or books and papers in the possession or under the control of the liquidator and relating to the matter in question, as the Registrar may require.

(3) Where any report is made under sub-section (2) to the Regis- trar, he may, if he thinks fit, refer the matter to the Central Government for further inquiry. The Central Government shall thereupon investigate the matter and may, if it thinks it expedient, apply to the Court for an order conferring on any person designated by the Central Government for the purpose, with respect to the company concerned, all such powers of investigating the affairs of the company as are provided by this Act in the case of a winding up by the Court.

(4) If on any report to the Registrar under sub-section (2), it appears to him that the case is not one in which proceedings ought to be taken by him, he shall inform the liquidator accordingly, and thereupon, subject to the previous sanction of the Court, the liquida- tor may himself take proceedings against the offender.

(5) If it appears to the Court in the course of a voluntary winding up that any past or present officer, or any member, of the company has been guilty as aforesaid, and that no report with respect to the matter has been made by the liquidator to the Registrar under

sub-section (2), the Court may, on the application of any person interested in the winding up or of its own motion, direct the liquidator to make such a report, and on a report being made accordingly, the provisions of this section shall have effect as though the report had been made in pursuance of the provisions of sub-

section (2).

(6) If, where any matter is reported or referred to the Registrar under this section, he considers that the case is one in which a prosecution ought to be instituted, he shall report the matter to the Central Government; and that Government may, after taking such legal advice as it thinks fit, direct the Registrar to institute proceedings: Provided that no report shall be made by the Registrar under this sub-section without first giving the accused person an opportunity of making a statement in writing to the Registrar and of being heard thereon.

(7) When any proceedings are instituted under this section, it shall be the duty of the liquidator and of every officer and agent of the 408/8 company past and present (other than the defendant in the proceedings) to give all assistance in connection with the prosecution which he is reasonably able to give. For the purposes of this sub-section, the expression "agent", in relation to a company, shall be deemed to include any banker or legal adviser of the company and any person employed by the company as auditor.

(8) If any person fails or neglects to give assistance in the

manner required by sub-section (7), the Court may, on the application of the Registrar, direct that person to comply with the requirements of that sub-section.

(9) Where any such application is made with respect to a liquidator, the Court may, unless it appears that the failure or neglect was due to the liquidator not having in his hands sufficient assets of the company to enable him so to do, direct that the costs of the application shall be borne by the liquidator personally. Miscellaneous Provisions

Liquidator to exercise certain powers subject to sanction. 546. Liquidator to exercise certain powers subject to sanction.

(1) The liquidator may- (a) with the sanction of the Court, when the company is being wound up by or subject to the supervision of the Court; and (b) with the sanction of a special resolution of the company, in the case of a voluntary winding up,- (i) pay any classes of creditors in full ; (ii) make any compromise or arrangement with creditors or persons claiming to be creditors, or having or alleging themselves to have any claim, present or future, certain or contingent, ascertained or sounding only in damages, against the company, or whereby the company may be rendered liable ; or (iii) compromise any call or liability to call, debt, and liability capable of resulting in a debt, and any claim, present or future, certain or contingent, ascertained or sounding only in damages, subsisting or alleged to subsist between the company and a contributory or alleged contributory or other debtor or person apprehending liability to the company, and all questions in any way relating to or affecting the assets or liabilities or the winding up of the company, on such terms as may be agreed, and take 408/9 any security for the discharge of any such call, debt, liability or claim, and give a complete discharge in respect thereof.

1[(1A) Notwithstanding anything contained in sub-section (1), in the case of a winding up by the Court, the Supreme Court may make rules under section 643 providing that the liquidator may, under such circumstances, if any, and subject to such conditions, restrictions and limitations, if any, as may be specified in the rules, exercise any of the powers referred to in sub-clause (ii) or sub-clause (iii)

of sub-section (1) without the sanction of the Court.]

(2) In the case of a voluntary winding up, the exercise by the

liquidator of the powers conferred by sub-section (1) shall be subject to the control of the Court.

(3) Any creditor or contributory may apply to the Court with respect to any exercise or proposed exercise of any such power.

Notification that a company is in liquidation.

547. Notification that a company is in liquidation. (1) Where a company is being wound up, whether by or under the supervision of the court or voluntarily, every invoice, order for goods or business letter issued by or on behalf of the company or a liquidator of the company, or a receiver or manager of the property of the company, being a document on or in which the name of the company appears, shall contain a statement that the company is being wound up.

(2) If default is made in complying with this section, the com- pany, and every one of the following persons who wilfully authorises or permits the default, namely, any officer of the company, any liqui- dator of the company and any receiver or manager, shall be punishable with fine which may extend to five hundred rupees.

Books and papers of company to be evidence. 548. Books and papers of company to be evidence. Where a company is being wound up, all books and papers of the company and of the liquidators shall, as between the contributories of the company, be prima facie evidence of the truth of all matters purporting to be therein recorded.

Inspection of books and papers by creditors and contributories. 549. Inspection of books and papers by creditors and

contributories. (1) At any time after the making of an order for the winding up of a company by or subject to the supervision of the Court, any creditor or contributory of the company may, if 2[the Supreme Court], by rules prescribed so permit and in accordance with and subject to such rules but not further or otherwise, inspect the books and papers of the company. ---------------------------------------------------------------------- 1 Ins. by Act 65 of 1960, s. 188. 2 Subs. by s. 189, ibid., for "the Central Government". ---------------------------------------------------------------------- 408/10

(2) Nothing in sub-section (1) shall be taken as excluding or restricting any rights conferred by any law for the time being in force- (a) on the Central or a State Government; or (b) on any authority or officer thereof ; or (c) on any person acting under the authority of any such Government or of any such authority or officer.

Disposal of books and papers of company.

550. Disposal of books and papers of company. (1) When the affairs of a company have been completely wound up and it is about to be dissolved, its books and papers and those of the liquidator may be disposed of as follows, that is to say:- (a) in the case of a winding up by or subject to the supervision of the Court, in such manner as the Court directs; (b) in the case of a members' voluntary winding up, in such manner as the company by special resolution directs; and (c) in the case of a creditors' voluntary winding up, in such manner as the committee of inspection or, if there is no such committee. as the creditors of the company may direct.

(2) After the expiry of five years from the dissolution of the company, no responsibility shall rest on the company, the liquidator, or any person to whom the custody of the books and papers has been committed, by reason of any book or paper not being forthcoming to any person claiming to be interested therein.

(3) The Central Government may, by rules,- (a) prevent for such period (not exceeding five years from the dissolution of the company) as the Central Government thinks proper, the destruction of the books and papers of a company which has been wound up and of its liquidator ; and (b) enable any creditor or contributory of the company to make representations to the Central Government in respect of the matters specified in clause (a) and to appeal to the Court from any direction which may be given by the Central Government in the matter.

(4) If any person acts in contravention of any such rules or of any direction of the Central Government thereunder, he shall be punishable with imprisonment for a term which may extend to six months, or with fine which may extend to five thousand rupees, or with both. 408/11

Information as to pending liquidations.

551. Information as to pending liquidations. 1[(1) If the winding up of a company is not concluded within one year after its commencement, the liquidator shall, unless he is exempted from so doing either wholly or in part by the Central Government, within two months of the expiry of such year and thereafter until the winding up is concluded, at intervals of not more than one year or at such shorter intervals, if any, as may be prescribed, file a statement in the prescribed form and containing the prescribed particulars duly audited, by a person qualified to act as auditor of the company, with respect to the proceedings in, and position of, the liquidation,- (a) in the case of a winding up by or subject to the supervision of the Court, in Court ; and (b) in the case of a voluntary winding up, with the Registrar: Provided that no such audit as is referred to in this sub-section shall be necessary where the provisions of section 462 apply.]

(2) When the statement is filed in Court under clause (a) of

sub-section (1), a copy shall simultaneously be filed with the Registrar and shall be kept by him along with the other records of the company.

2[(2A) Where a statement referred to in sub-section (2) relates to a Government company in liquidation, the liquidator shall forward a copy thereof,- (a) to the Central Government, if that Government is a member of the Government company; or (b) to any State Government, if that Government is a member of the Government company; or (c) to the Central Government and any State Government, if both the Governments are members of the Government com- pany.]

(3) Any person stating himself in writing to be a creditor or contributory of the company shall be entitled, by himself or by his agent, at all reasonable times, on payment of the prescribed fee, to inspect the statement, and to receive a copy thereof or an extract therefrom.

(4) Any person untruthfully stating himself to be a creditor or contributory for the above purpose shall be deemed to be guilty of an offence under section 182 of the Indian Penal Code, (45 of 1860.) and shall, on the application of the liquidator, be punishable accordingly.

(5) If a liquidator fails to comply with any of requirements of this section, he shall be punishable with fine which may extend to five hundred rupees for every day during which the failure continues: 3[Provided that if the liquidator makes wilful default in causing

the statement referred to in sub-section (1) to be audited by a person qualified to act as auditor of the company, the liquidator shall be punishable with imprisonment for a term which may extend to six ----------------------------------------------------------------------

1 Subs. by Act 65 of 1960, s. 190, for sub-section (1). 2 Ins. by Act 31 of 1988, s.56 (w.e.f. 15.6.1988). 3 Added by s.190, ibid. ----------------------------------------------------------------------- 408/12 months, or with fine which may extend to one thousand rupees, or with both.]

Official Liquidator to make payments into the public account of India. 552. Official Liquidator to make payments into the public account of India. Every Official Liquidator shall, in such manner and at such times as may be pescribed, pay the moneys received by him as liqui- dator of any company, into the public account of India in the Reserve Bank of India.

Voluntary liquidator to make payments into Scheduled Bank. 553. Voluntary liquidator to make payments into Scheduled Bank.

(1) Every liquidator of a company, not being an Official Liquidator, shall, in such manner and at such times as may be prescribed, pay the moneys received by him in his capacity as such into a Scheduled Bank to the credit of a special banking account opened by him in that behalf, and called "the Liquidation Account of Company Limited" ------------------------- ---------------------------- Company Private Limited": ------------------------- Company" Provided that if the Court is satisfied that for the purpose of carrying on the business of the company or of obtaining advances or for any other reason, it is to the advantage of the creditors or contributories that the liquidator should have an account with any other bank, the Court may authorise the liquidator to make his payments into or out of such other bank as the Court may select ; and thereupon those payments shall be made in the prescribed manner and at the prescribed times into or out of such other bank.

(2) If any such liquidator at any time retains for more than ten days a sum exceeding five hundred rupees or such other amount as the Court may, on the application of the liquidator, authorise him to retain, then, unless he explains the retention to the satisfaction of the Court, he shall- (a) pay interest on the amount so retained in excess, at the rate of twelve per cent. per annum and also pay such penalty as may be determined by the Registrar ; (b) be liable to pay any expenses occasioned by reason of his default; and (c) also be liable to have all or such part of his remuneration as the Court may think just disallowed, and to be removed from his office by the Court. 408/13

Liquidator not to pay moneys into private banking account. 554. Liquidator not to pay moneys into private banking account. Neither the Official Liquidator nor any other liquidator of a company shall pay any moneys received by him in his capacity as such into any private banking account.

Unpaid dividends and undistributed assets to be paid into theCompanies Liquidation Account. 555. Unpaid dividends and undistributed assets to be paid into

the Companies Liquidation Account. 1[(1) Where any company is being wound up, if the liquidator has in his hands or under his control any money representing- (a) dividends payable to any creditor which had remained unpaid for six months after the date on which they were declared, or (b) assets refundable to any contributory which have remained undistributed for six months after the date on which they became refundable, the liquidator shall forthwith pay the said money into the public account of India in the Reserve Bank of India in a separate account to be known as the Company's Liquidation Account.]

(2) The liquidator shall, on the dissolution of the company, similarly pay into the said account any money representing 2[unpaid] dividends or undistributed assets in his hands at the date of dis- solution.

(3) The liquidator shall, when making any payment referred to in

sub-sections (1) and (2), furnish to such officer as the Central Government may appoint in this behalf, a statement in the prescribed form, setting forth, in respect of all sums included in such payment, the nature of the sums, the names and last known addresses of the per- sons entitled to participate therein, the amount to which each is entitled and the nature of his claim thereto, and such other particulars as may be prescribed.

(4) The liquidator shall be entitled to a receipt from the

Reserve Bank of India for any money paid to it under sub-sections (1)

and (2) ; and such receipt shall be an effectual discharge of the liquidator in respect thereof.

(5) Where the company is being wound up by the Court, the

liquidator shall make the payments referred to in sub-sections (1) and

(2) by transfer from the account referred to in section 552.

(6) Where the company is being wound up voluntarily or subject to the supervision of the Court, the liquidator shall, when filing

a statement in pursuance of sub-section (1) of section 551, indicate the sum of money which is payable to the Reserve Bank of India ----------------------------------------------------------------------

1 Subs. by Act 65 of 1960, s. 191, for sub-section (1). 2 Subs. by s. 191, ibid., for "unclaimed". ---------------------------------------------------------------------- 408/14

under sub-sections (1) and (2) of this section which he has had in his hands or under his control during the six months preceding the date to which the said statement is brought down, and shall, within fourteen days of the date of filing the said statement, pay that sum into the Companies Liquidation Account.

(7) (a) Any person claiming to be entitled to any money paid into the Companies Liquidation Account (whether paid in pursuance of this section or under the provisions of any previous companies law) may apply to the Court for an order for payment thereof, and the Court, if satisfied that the person claiming is entitled, may make an order for the payment to that person of the sum due: Provided that before making such an order, the Court shall cause a notice to be served on such officer as the Central Government may appoint in this behalf, calling on the officer to show cause within one month from the date of the service of the notice why the order should not be made. (b) Any person claiming as aforesaid may, instead of applying to the Court, apply to the Central Government for an order for payment of the money claimed; and the Central Government may, if satisfied whether on a certificate by the liquidator or the Official Liquidator or otherwise, that such person is entitled to the whole or any part of the money claimed and that no application made in pursuance of clause (a) is pending in the Court, make an order for the payment to that person of the sum due to him, after taking such security from him as it may think fit.

(8) Any money paid into the Companies Liquidation Account in pursuance of this section, which remains unclaimed thereafter for a period of fifteen years, shall be transferred to the general revenue account of the Central Government; but a claim to any money so

transferred may be preferred under sub-section (7) and shall be dealt with as if such transfer had not been made, the order, if any, for payment on the claim being treated as an order for refund of revenue.

(9) Any liquidator retaining any money which should have been paid by him into the Companies Liquidation Account under this section shall- (a) pay interest on the amount retained at the rate of twelve per cent. per annum, and also pay such penalty as may be determined by the Registrar: 1[Provided that the Central Government may in any proper case remit either in part or in whole the amount of ---------------------------------------------------------------------- 1 Ins. by Act 65 of 1960, s. 191. ---------------------------------------------------------------------- 408/15 interest which the liquidator is required to pay under this clause ;] (b) be liable to pay any expenses occasioned by reason of his default; and (c) where the winding up is by or under the supervision of the Court, also be liable to have all or such part of his remuneration as the Court may think just to be disallowed, and to be removed from his office by the Court.

Enforcement of duty of liquidator to make returns, etc.

556. Enforcement of duty of liquidator to make returns, etc. (1) If any liquidator who has made any default in filing. delivering or making any return, account or other document, or in giving any notice which he is by law required to file, deliver, make or give, fails to make good the default within fourteen days after the service on him of a notice requiring him to do so, the Court may, on an application made to the Court by any contributory or creditor of the company or by the Registrar, make an order directing the liquidator to make good the default within such time as may be specified in the order.

(2) Any such order may provide that all costs of and incidental to the application shall be borne by the liquidator.

(3) Nothing in this section shall be taken to prejudice the operation of any enactment imposing penalties on a liquidator in respect of any such default as aforesaid. Supplementary Powers of Court

Meetings to ascertain wishes of creditors or contributories. 557. Meetings to ascertain wishes of creditors or contributories.

(1) In all matters relating to the winding up of a company, the Court may- (a) have regard to the wishes of creditors or contributories of the company, as proved to it by any sufficient evidence ; (b) if it thinks fit for the purpose of ascertaining those wishes, direct meetings of the creditors or contributories to be called, held and conducted in such manner as the Court directs ; and (c) appoint a person to act as chairman of any such meeting and to report the result thereof to the Court.

(2) When ascertaining the wishes of creditors, regard shall be had to the value of each creditor's debt.

(3) When ascertaining the wishes of contributories, regard shall be had to the number of votes which may be cast by each contributory. 408/16

Court or person before whom affidavit may be sworn.

558. Court or person before whom affidavit may be sworn. (1) Any affidavit required to be sworn under the provisions, or for the purposes, of this Part may be sworn- (a) in India, before any Court, Judge or person lawfully authorised to take and receive affidavits ; and (b) in any other country, either before any Court, Judge or person lawfully authorised to take and receive affidavits in that country or before an Indian Consul or Vice Consul. 1* * * * *

(2) All Courts, Judges, Justices, Commissioners and persons act- ing judicially in India shall take judicial notice of the seal, stamp or signature, as the case may be, of any such Court, Judge, person, Consul or Vice-Consul, attached, appended or subscribed to any such affidavit or to any other document to be used for the purposes of this Part. Provisions as to Dissolution

Power of Court to declare dissolution of company void.

559. Power of Court to declare dissolution of company void. (1) Where a company has been dissolved, whether in pursuance of this Part or of section 394 or otherwise, the Court may at any time within two years of the date of the dissolution, on application by the liquidator of the company or by any other person who appears to the Court to be interested, make an order, upon such terms as the Court thinks fit, declaring the dissolution to have been void; and thereupon such proceedings may be taken as might have been taken if the company had not been dissolved.

(2) It shall be the duty of the person on whose application the order was made, within 2[thirty] days after the making of the order or such further time as the Court may allow, to file a certified copy of the order with the Registrar who shall register the same; and if such person fails so to do, he shall be punishable with fine which may extend to fifty rupees for every day during which the default continues.

Power of Registrar to strike defunct company off register. 560. Power of Registrar to strike defunct company off register.

(1) Where the Registrar has reasonable cause to believe that a company is not carrying on-business or in operation, he shall send to the company by post a letter inquiring whether the company is carrying on business or in operation.

(2) If the Registrar does not within one month of sending the letter receive any answer thereto, he shall, within fourteen days after the expiry of the month, send to the company by post a registered ---------------------------------------------------------------------- 1 Explanation omitted by Act 62 of 1956, s. 2 and Sch. (w.e.f. 1-11-1956). 2 Subs. by Act 31 of 1965, s. 62 and Sch., for "twenty-one" (w.e.f. 15-10-1965). ---------------------------------------------------------------------- 408/17 letter referring to the first letter, and stating that no answer thereto has been received and that, if an answer is not received to the second letter within one month from the date thereof, a notice will be published in the Official Gazette with a view to striking the name of the company off the register.

(3) If the Registrar either receives an answer from the company to the effect that it is not carrying on business or in operation, or does not within one month after sending the second letter receive any answer, he may publish in the Official Gazette, and send to the company by registered post, a notice that, at the expiration of three months from the date of that notice, the name of the company mentioned therein will, unless cause is shown to the contrary, be struck off the resister and the company will be dissolved.

(4) If, in any case where a company is being wound up, the Registrar has reasonable cause to believe either that no liquidator is acting, or that the affairs of the company have been completely wound up, and any returns required to be made by the liquidator have not been made for a period of six consecutive months, the Registrar shall publish in the Official Gazette and send to the company or the

liquidator, if any, a like notice as is provided in subsection (3).

(5) At the expiry of the time mentioned in the notice referred

to in sub-section (3) or (4), the Registrar may, unless cause to the contrary is previously shown by the company, strike its name off the register, and shall publish notice thereof in the Official Gazette ; and on the publication in the Official Gazette of this notice, the company shall stand dissolved: Provided that- (a) the liability, if any, of every director, the managing agent, secretaries and treasurers, manager or other officer who was exercising any power of management, and of every member of the company, shall continue and may be enforced as if the company had not been dissolved ; and (b) nothing in this sub-section shall affect the power of the Court to wind up a company the name of which has been struck off the register.

(6) If a company, or any member or creditor thereof, feels aggrieved by the company having been struck off the register, the Court, on an application made by the company, member or creditor before the expiry of twenty years from the publication in the Official Gazette of the notice aforesaid, may, if satisfied that the company was, at the 408/18 time of the striking off, carrying on business or in operation or otherwise that it is just that the company be restored to the register, order the name of the company to be restored to the register; and the Court may, by the order, give such directions and make such provisions as seem just for placing the company and all other persons in the same position as nearly as may be as if the name of the company had not been struck off.

(7) Upon a certified copy of the order under sub-section(6) being delivered to the Registrar for registration, the company shall be deemed to have continued in existence as if its name had not been struck off.

(8) A letter or notice to be sent under this section to a company may be addressed to the company at its registered office,or if no office has been registered, to the care of some director, the managing agent, secretaries and treasurers, manager or other officer of the company, or if there is no director, managing agent, secretaries and treasurers, manager or officer of the company whose name and address are known to the Registrar, may be sent to each of the persons who subscribed the memorandum, addressed to him at the address mentioned in the memorandum.

(9) A notice to be sent under this section to a liquidator may be addressed to the liquidator at his last known place of business. PART VIII APPLICATION OF ACT TO COMPANIES FORMED OR REGISTERED UNDER PREVIOUS COMPANIES LAWS

Application of Act to companies formed and registered under previouscompanies laws. 561. Application of Act to companies formed and registered under previous companies laws. This Act shall apply to existing companies as follows:- (a) in the case of a limited company other than a company limited by guarantee, this Act shall apply in the same manner as if the company had been formed and registered under this Act as a company limited by shares; (b) in the case of a company limited by guarantee, this Act shall apply in the same manner as if the company had been formed and registered under this Act as a company limited by guarantee; and (c) in the case of a company other than a limited company, this Act shall apply in the same manner as if the company 408/19 had been formed and registered under this Act as an unlimited company: Provided that- (i) nothing in Table A in Schedule I shall apply to a company formed and registered under Act 19 of 1857 and Act 7 of 1860 or either of them, or under the Indian Companies Act, 1866, (10 of 1866.) or the Indian Companies Act, 1882 ;(6 of 1882.) (ii) reference, express or implied, to the date of registration shall be construed as a reference to the date at which the company was registered under the previous companies law concerned.

Application of Act to companies registered but not formed underprevious companies laws. 562. Application of Act to companies registered but not formed under previous companies laws. This Act shall apply to every company registered but not formed under any previous companies law in the same manner as it is in Part IX of this Act declared to apply to companies registered but not formed under this Act: Provided that reference, express or implied, to the date of registration shall be construed as a reference to the date at which the company was registered under the previous companies law concerned.

Application of Act to unlimited companies re-registered under previouscompanies laws. 563. Application of Act to unlimited companies re-registered under previous companies laws. This Act shall apply to every unlimited company registered as a limited company in pursuance of any previous companies law, in the same manner as it applies to an unlimited company registered in pursuance of this Act as a limited company: Provided that reference, express or implied, to the date of registration shall be construed as a reference to the date at which the company was registered as a limited company under the previous companies law concerned.

Mode of transferring shares in the case of companies registered underActs 19 of 1857 and 7 of 1860. 564. Mode of transferring shares in the case of companies registered under Acts 19 of 1857 and 7 of 1860. A company registered under Act 19 of 1857 and Act 7 of 1860 or either of them may cause its shares to be transferred in the manner hitherto in use, or in such other manner as the company may direct. PART IX COMPANIES AUTHORISED TO REGISTER UNDER THIS ACT

Companies capable of being registered.

565. Companies capable of being registered. (1) With the exceptions and subject to the provisions contained in this section- (a) any company consisting of seven or more members, which was in existence on the first day of May, 1882, including 408/20 any company registered under Act No. 19 of 1857 and Act No. 7 of 1860 or either of them or under any laws or law in force in a Part B State, corresponding to those Acts or either of them ; and (b) any company formed after the date aforesaid, whether before or after the commencement of this Act, in pursuance of any Act of Parliament other than this Act or of any other Indian law (including a law in force in a Part B State), or of any Act of Parliament of the United Kingdom or Letters Patent in force in India, or being otherwise duly constituted according to law, and consisting of seven or more members; may at any time register under this Act as an unlimited company, or as a company limited by shares, or as a company limited by guarantee ; and the registration shall not be invalid by reason only that it has taken place with a view to the company's being wound up: Provided that- (i) a company registered under the Indian Companies Act, 1882,(6 of 1882.) or under the Indian Companies Act, 1913,(7 of 1913.) shall not register in pursuance of this section ; (ii) a company having the liability of its members limited by any Act of Parliament other than this Act or by any other Indian law (including a law in force in a Part B State), or by any Act of Parliament of the United Kingdom or Letters Patent in force in India, and not being a joint stock company as defined in section 566, shall not register in pursuance of this section ; (iii) a company having the liability of its members limited by any Act of Parliament other than this Act or by any other Indian law (including a law in force in a Part B State), or any Act of Parliament of the United Kingdom or Letters Patent in force in India, shall not register in pur- suance of this section as an unlimited company or as a company limited by guarantee; (iv) a company that is not a joint stock company as defined in section 566 shall not register in pursuance of this section as a company limited by shares ; (v) a company shall not register in pursuance of this section without the assent of a majority of such of its members 408/21 as are present in person, or where proxies are allowed, by proxy, at a general meeting summoned for the purpose; (vi) where a company not having the liability of its members limited by any Act of Parliament or any other Indian law (including a law in force in a Part B State) or by any Act of Parliament of the United Kingdom or Letters Patent in force in India, is about to register as a limited company, the majority required to assent as aforesaid shall consist of not less than three-fourths of the members present in person, or where proxies are allowed, by proxy, at the meeting ; (vii) where a company is about to register as a company limited by guarantee, the assent to its being so registered shall be accompanied by a resolution declaring 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 as may have been contracted before he ceases to be a member, and of the costs, charges and expenses of winding up, and for the adjustment of the rights of the contributories among themselves, such amount as may be required, not exceeding a specified amount.

(2) In computing any majority required for the purposes of sub-

section (1) when a poll is demanded, regard shall be had to the number of votes to which each member is entitled according to the regulations of the company.

(3) Nothing in this section shall be deemed to apply to any com- pany the registered office whereof at the commencement of this Act is in Burma, Aden or Pakistan, 1* * *.

Definition of "joint-stock company".

566. Definition of "joint-stock company". (1) For the purposes of this Part, so far as it relates to the registration of companies as companies limited by shares, a joint stock company means a company having a permanent paid up or nominal share capital of fixed amount divided into shares, also of fixed amount, or held and transferable as stock, or divided and held partly in the one way and partly in the other, and formed on the ---------------------------------------------------------------------- 1 The words "or in the State of Jammu and Kashmir" omitted by Act 62 of 1956, s. 2 and Sch. (w.e.f. 1-11-1956). ---------------------------------------------------------------------- 408/22 principle of having for its members the holders of those shares or that stock, and no other persons.

(2) Such a company, when registered with limited liability under this Act, shall be deemed to be a company limited by shares.

Requirements for registration of joint-stock companies. 567. Requirements for registration of joint-stock companies. Before the registration in pursuance of this Part of a joint stock company, there shall be delivered to the Registrar the following documents: - (a) a list showing the names, addresses and occupations of all persons who on a day named in the list, not being more than six clear days before the day of registration, were members of the company, with the addition of the shares or stock held by them respectively, distinguishing, in cases where the shares are numbered, each share by its number; (b) a copy of any Act of Parliament or other Indian law, Act of Parliament of the United Kingdom, Royal Charter, Letters Patent, deed of settlement, deed of partnership or other instrument constituting or regulating the company; and (c) if the company is intended to be registered as a limited company, a statement specifying the following parti- culars: - (i) the nominal share capital of the company and the number of shares into which it is divided or the amount of stock of which it consists ; (ii) the number of shares taken and the amount paid on each share; (iii) the name of the company, with the addition of the word "Limited" or "Private Limited" as the case may require, as the last word or words thereof ; and (iv) in the case of a company intended to be registered as a company limited by guarantee, a copy of the resolution declaring the amount of the guarantee.

Requirements for registration of companies not being joint-stockcompanies. 568. Requirements for registration of companies not being joint- stock companies. Before the registration in pursuance of this Part of any company not being a joint-stock company, there shall be delivered to the Registrar the following documents:- (a) a list showing the names, addresses and occupations of the directors, the managing agent, if any, the secretaries and 408/23 treasurers, if any, and the manager, if any, of the company; (b) a copy of any Act of Parliament or other Indian law, Act of Parliament of the United Kingdom, Letters Patent, deed of settlement, deed of partnership or other instrument constituting or regulating the company; and (c) in the case of a company intended to be registered as a company limited by guarantee, a copy of the resolution declaring the amount of the guarantee.

Authentication of statements of existing companies. 569. Authentication of statements of existing companies. The lists of members and directors and any other particulars relating to the company required to be delivered to the Registrar shall be duly verified by the declaration of any two or more directors or other principal officers of the company.

Power of Registrar to require evidence as to nature of company. 570.Power of Registrar to require evidence as to nature of company. The Registrar may require such evidence as he thinks necessary for the purpose of satisfying himself whether any company proposing to be registered is or is not a joint-stock company as de- fined in section 566.

Notice to customers on registration of banking company with limitedliability. 571. Notice to customers on registration of banking company with

limited liability. (1) Where a banking company which was in existence on the first day of May, 1882, proposes to register as a limited company under this Part, it shall, at least thirty days before so registering, give notice of its intention so to register, to every person who has a banking account with the company, either by delivery of the notice to him, or by posting it to him at, or delivering it at, his last known address.

(2) If the banking company omits to give the notice required by

sub-section (1), then, as between the company and the person for the time being interested in the account in respect of which the notice ought to have been given, and so far as respects the account down to the time at which notice is given, but not further or otherwise, the certificate of registration with limited liability shall have no operation.

Change of name for purposes of registration. 572. Change of name for purposes of registration. Where the name of a company seeking registration under this Part is one which in the opinion of the Central Government is undesirable, the company may, with the approval of the Central Government signified in writing, change its name with effect from the date of its registration under this Part: Provided that the like assent of the members of the company shall be required to the change of name as is required by section 565 to the registration of the company under this Part. 408/24

Addition "Limited " or "Private Limited" to name. 573. Addition "Limited " or "Private Limited" to name. When a company registers in pursuance of this Part with limited liability, the word "Limited" or the words "Private Limited" as the case may be, shall form, and be registered as, the last word or words of its name: Provided that this section shall not be deemed to exclude the operation of section 25.

Certificate of registration of existing companies. 574. Certificate of registration of existing companies. On compliance with the requirements of this Part with respect to registration, and on payment of such fees, if any, as are payable under Schedule X, the Registrar shall certify under his hand that the company applying for registration is incorporated as a company under this Act, and in the case of a limited company that it is limited and thereupon the company shall be so incorporated.

Vesting of property on registration. 575. Vesting of property on registration. All property, movable and immovable (including actionable claims), belonging to or vested in a company at the date of its registration in pursuance of this Part, shall, on such registration, pass to and vest in the company as incorporated under this Act, for all the estate and interest of the company therein.

Saving for existing liabilities. 576. Saving for existing liabilities. The registration of a company in pursuance of this Part shall not affect its rights or liabilities in respect of any debt or obligation incurred, or any contract entered into, by, to, with, or on behalf of, the company before registration.

Continuation of pending legal proceedings. 577. Continuation of pending legal proceedings. All suits and other legal proceedings taken by or against the company, or any public officer or member thereof, which are pending at the time of the registration of a company in pursuance of this Part, may be continued in the same manner as if the registration had not taken place: Provided that execution shall not issue against the property or person of any individual member of the company on any decree or order obtained in any such suit or proceeding ; but, in the event of the property of the company being insufficient to satisfy the decree or order, an order may be obtained for winding up the company.

Effect of registration under Part.

578. Effect of registration under Part. (1) When a company is

registered in pursuance of this Part, sub-sections (2) to (7) shall apply.

(2) All provisions contained in any Act of Parliament or other Indian law, or other instrument constituting or regulating the 408/25 company, including, in the case of a company registered as a company limited by guarantee, the resolution declaring the amount of the guarantee, shall be deemed to be conditions and regulations of the company, in the same manner and with the same incidents as if so much thereof as would, if the company had been formed under this Act, have been required to be inserted in the memorandum, were contained in a registered memorandum, and the residue thereof were contained in registered articles.

(3) All the provisions of this Act shall apply to the company and the members, contributories and creditors thereof, in the same manner in all respects as if it had been formed under this Act, subject as follows:- (a) Table A in Schedule I shall not apply unless and except in so far as it is adopted by special resolution ; (b) the provisions of this Act relating to the numbering of shares shall not apply to any joint-stock company whose shares are not numbered; (c) subject to the provisions of this section, the company shall not have power to alter any provision contained in any Act of Parliament or other Indian law relating to the company; (d) subject to the provisions of this section, the company shall not have power, without the sanction of the Central Government, to alter any provision contained in any Act of Parliament of the United Kingdom, Royal Charter or Letters Patent, relating to the company ; (e) the company shall not have power to alter any provision contained in any Act of Parliament or other Indian law or in any Act of Parliament of the United Kingdom, Royal Charter or Letters Patent, with respect to the objects of the company ; (f) in the event of the company being wound up, every person shall be a contributory, in respect of the debts and liabilities of the company contracted before registration, who is liable to pay or contribute to the payment of any debt or liability of the company contracted before registration, or to pay or contribute to the payment of any sum for the adjustment of the rights of the members among themselves in respect of any such debt or liability, or to pay or contribute to the payment of the costs, 408/26 charges and expenses of winding up the company, so far as relates to such debts or liabilities as aforesaid ; (g) in the event of the company being wound up, every contributory shall be liable to contribute to the assets of the company, in the course of the winding up, all sums due from him in respect of any such liability as aforesaid; and in the event of the death or insolvency of any contributory, the provisions of this Act with respect to the legal representatives of deceased contributories, or with respect to the assignees of insolvent contributories, as the case may be, shall apply.

(4) The provisions of this Act with respect to- (a) the registration of an unlimited as a limited company; (b) the powers of an unlimited company on registration as a limited company, to increase the nominal amount of its share capital and to provide that a portion of its share capital shall not be capable of being called up except in the event of winding up ; (c) the power of a limited company to determine that a portion of its share capital shall not be capable of being called up except in the event of winding up ; shall apply, notwithstanding any provisions contained in any Act of Parliament or other Indian law, or other instrument constituting or regulating the company.

(5) Nothing in this section shall authorise the company to alter any such provisions contained in any instrument constituting or regulating the company as would, if the company had originally been formed under this Act, have been required to be contained in the memorandum and are not authorised to be altered by this Act.

(6) None of the provisions of this Act (apart from those of section 404) shall derogate from any power of altering its constitution or regulations which may be vested in the company, by virtue of any Act of Parliament or other Indian law, or other instrument constituting or regulating the company.

(7) In this section, the expression "instrument" includes deed of settlement, deed of partnership, Act of Parliament of the United Kingdom, Royal Charter and Letters Patent.

Power to substitute memorandum and articles for deed of settlement. 579. Power to substitute memorandum and articles for deed of

settlement. (1) Subject to the provisions of this section, a company registered in pursuance of this Part may, by special resolution, alter 408/27 the form of its constitution by substituting a memorandum and articles for a deed of settlement.

(2) The provisions of sections 17 and 19 with respect to an alteration of the objects of a company shall, so far as applicable, apply to any alteration under this section with the following modifications: - (a) there shall be substituted for the printed copy of the altered memorandum required to be filed with the Registrar a printed copy of the substituted memorandum and articles ; and (b) on the registration of the alteration being certified by the Registrar, the substituted memorandum and articles shall apply to the company in the same manner as if it were a company registered under this Act with that memorandum and those articles, and the company's deed of settlement shall cease to apply to the company.

(3) An alteration under this section may be made either with or without any alteration of the objects of the company under this Act.

(4) In this section, the expression "deed of settlement" includes any deed of partnership, Act of Parliament of the United Kingdom, Royal Charter or Letters Patent, or other instrument constituting or regulating the company, not being an Act of Parliament or other Indian law.

Power of Court to stay or restrain proceedings. 580. Power of Court to stay or restrain proceedings. The provisions of this Act with respect to staying and restraining suits and other legal proceedings against a company at any time after the presentation of a petition for winding up and before the making of a winding up order, shall, in the case of a company registered in pursuance of this Part, where the application to stay or restrain is by a creditor, extend to suits and other legal proceedings against any contributory of the company.

Suits stayed on winding up order. 581. Suits stayed on winding up order. Where an order has been made for winding up, or a provisional liquidator has been appointed for, a company registered in pursuance of this Part, no suit or other legal proceeding shall be proceeded with or commenced against the Company or any contributory of the company in respect of any debt of the company, except by leave of the Court and except on such terms as the Court may impose. 408/28 PART X WINDING UP OF UNREGISTERED COMPANIES

Managing of "unregistered company". 582. Managing of "unregistered company". For the purposes of this Part, the expression "unregistered company"- (a) shall not include- (i) a railway company incorporated by any Act of Parliament or other Indian law or any Act of Parliament of the United Kingdom; (ii) a company registered under this Act; or (iii) a company registered under any previous com- panies law and not being a company the registered office whereof was in Burma, Aden or Pakistan immediately before the separation of that country from India 1* * * ; and (b) save as aforesaid, shall include any partnership, association or company consisting of more than seven members 2[at the time when the petition for winding up the partnership, association or company, as the case may be, is presented before the Court].

Winding up of unregistred companies.

583. Winding up of unregistred companies. (1) Subject to the provisions of this Part, any unregistered company may be wound up under this Act, and all the provisions of this Act with respect to winding up shall apply to an unregistered company, with the exceptions

and additions mentioned in sub-sections (2) to (5).

(2) For the purpose of determining the Court having Jurisdiction in the matter of the winding up, an unregistered company shall be deemed to be registered in the State where its principal place of business is situate or, if it has a principal place of business situate in more than one State, then, in each State where it has a principal place of business ; and the principal place of business situate in that State in which proceedings are being instituted shall, for all the purposes of the winding up, be deemed to be the registered office of the company.

(3) No unregistered company shall be wound up under this Act voluntarily or subject to the supervision of the Court. ---------------------------------------------------------------------- 1 Certain words omitted by Act 62 of 1956, s. 2 and Sch. (w.e.f. 1-11-1956). 2 Ins. by Act 65 of 1960, s. 192. ---------------------------------------------------------------------- 408/29

(4) The circumstances in which an unregistered company may be wound up are as follows: - (a) if the company is dissolved, or has ceased to carry on business, or is carrying on business only for the purpose of winding up its affairs ; (b) it the company is unable to pay its debts; (c) if the Court is of opinion that it is just and equitable that the company should be wound up.

(5) An unregistered company shall, for the purposes of this Act, be deemed to be unable to pay its debts- (a) if a creditor, by assignment or otherwise, to whom the company is indebted in a sum exceeding five hundred rupees then due, has served on the company, by leaving at its principal place of business, or by delivering to the secretary, or some director, managing agent, secretaries and treasurers, manager or principal officer of the company, or by otherwise serving in such manner as the Court may approve or direct, a demand under his hand requiring the company to pay the sum so due, and the company has, for three weeks after the service of the demand, neglected to pay the sum or to secure or compound for it to the satisfaction of the creditor ; (b) if any suit or other legal proceeding has been instituted against any member for any debt or demand due, or claimed to be due, from the company, or from him in his character of member, and notice in writing of the institution of the suit or other legal proceeding having been served on the company by leaving the same at its principal place of business or by delivering it to the secretary, or some director, managing agent, secretaries and treasurers, manager or principal officer of the company or by otherwise serving the same in such manner as the Court may approve or direct, the company has not, within ten days after service of the notice,- (i) paid, secured or compounded for the debt or demand; or (ii) procured the suit or other legal proceeding to be stayed ; or (iii) indemnified the defendant to his satisfaction against the suit or other legal proceeding, and against 408/30 all costs, damages and expenses to be incurred by him by reason of the same ; (c) if execution or other process issued on a decree or order of any Court in favour of a creditor against the company, or any member thereof as such, or any person authorised to be sued as nominal defendant on behalf of the company, is returned unsatisfied in whole or in part ; (d) if it is otherwise proved to the satisfaction of the Court that the company is unable to pay its debts.

Power to wind up foreign companies, although dissolved. 584. Power to wind up foreign companies, although dissolved. Where a body corporate incorporated outside India which has been carrying on business in India, ceases to carry on business in India, it may be wound up as an unregistered company under this Part, notwithstanding that the body corporate has been dissolved or otherwise ceased to exist as such under or by virtue of the laws of the country under which it was incorporated.

Contributories in winding up of unregistred company.

585. Contributories in winding up of unregistred company. (1) In the event of an unregistered company being wound up, every person shall be deemed to be a contributory, who is liable to pay, or contribute to the payment of,- (a) any debt or liability of the company; or (b) any sum for the adjustment of the rights of the members among themselves; or (c) the costs, charges and expenses of winding up the company.

(2) Every contributory shall be liable to contribute to the assets of the company all sums due from him in respect of any liability to pay or contribute as aforesaid.

(3) In the event of the death or insolvency of any contributory, the provisions of this Act with respect to the legal representatives of deceased contributories, or with respect to the assignees of insolvent contributories, as the case may be, shall apply.

Power to stay or restrain proceedings. 586. Power to stay or restrain proceedings. The provisions of this Act with respect to staying and restraining suits and legal proceedings against a company at any time after the presentation of a petition for winding up and before the making of a winding up order, shall, in the case of an unregistered company, where the application to stay or restrain is by a creditor, extend to suits and legal proceedings against any contributory of the company. 408/31

Suits, etc., stayed or winding up order. 587. Suits, etc., stayed or winding up order. Where an order has been made for winding up an unregistered company, no suit or other legal proceeding shall be proceeded with or commenced against any contributory of the company in respect of any debt of the company, except by leave of the Court and except on such terms as the Court may impose.

Directions as to property in certain cases.

588. Directions as to property in certain cases. (1) If an unregistered company has no power to sue and be sued in a common name, or if for any reason it appears expedient, the Court may, by the winding up order or by any subsequent order, direct that all or any part of the property, movable or immovable (including actionable claims), belonging to the company or held by trustees on its behalf, shall vest in the Official Liquidator by his official name; and thereupon the property or the part thereof specified in the order shall vest accordingly.

(2) The Official Liquidator may, after giving such indemnity, if any, as the Court may direct, bring or defend in his official name any suit or legal proceeding relating to that property, or which it is necessary to bring or defend for the purpose of effectually winding up the company and recovering its property.

Provisions of Part cumulative.

589. Provisions of Part cumulative. (1) The provisions of this Part with respect to unregistered companies shall be in addition to and not in derogation of, any provisions hereinbefore in this Act contained with respect to the winding up of companies by the Court.

(2) The Court or Official Liquidator may exercise any powers or do any act in the case of unregistered companies which might be exercised or done by the Court or Official Liquidator in winding up companies formed and registered under this Act : Provided that an unregistered company shall not, except in the event of its being wound up, be deemed to be a company under this Act, and then only to the extent provided by this Part.

Saving and construction of enactments conferring power to wind uppartnership, association or company in certain cases. 590. Saving and construction of enactments conferring power to wind up partnership, association or company in certain cases. Nothing in this Part shall affect the operation of any enactment which provides for any partnership, association or company being wound up, or being wound up as a company or as an unregistered company, under the Indian Companies Act, 1913 (7 of 1913.) or any Act repealed by that Act : Provided that references in any such enactment to any provision contained in the Indian Companies Act, 1913 (7 of 1913.) or in any Act repealed by that Act shall be read as references to the corresponding provision, if any, contained in this Act. 408/32 PART XI COMPANIES INCORPORATED OUTSIDE INDIA Provisions as to Establishment of Places of Business in India

Application of sections 592 to 602 to foreign companies. 591. Application of sections 592 to 602 to foreign companies.

1[(1)] Sections 592 to 602, both inclusive, shall apply to all foreign companies, that is to say, companies falling under the following two classes, namely :- (a) companies incorporated outside India which, after the commencement of this Act, establish a place of business within India; and (b) companies incorporated outside India which have, before the commencement of this Act, established a place of business within India and continue to have an established place of business within India at the commencement of this Act.

2[(2) Notwithstanding anything contained in sub-section (1), where not less than fifty per cent. of the paid up share capital (whether equity or preference or partly equity and partly preference) of a company incorporated outside India and having an established place of business in India, is held by one or more citizens of India or by one or more bodies corporate incorporated in India, or by one or more citizens of India and one or more bodies corporate incorporated in India, whether singly or in the aggregate, such company shall comply with such of the provisions of this Act as may be prescribed with regard to the business carried on by it in India, as if it were a company incorporated in India.]

Documents, etc., to be delivered to Registrar by foreign companiescarrying on business in India. 592. Documents, etc., to be delivered to Registrar by foreign

companies carrying on business in India. (1) Foreign companies which, after the commencement of this Act, establish a place of business within India shall, within 3[thirty days] of the establishment of the place of business, deliver to the Registrar for registration- (a) a certified copy of the charter, statutes, or memorandum and articles, of the company or other instrument constituting or defining the constitution of the company; and, ----------------------------------------------------------------------

1 S. 591 renumbered as sub-section (1) by Act 41 of 1974, s. 32 (w.e.f. 1-2-1975). 2 Ins. by s. 32, ibid. (w.e.f. 1-2-1975). 3 Subs. by Act 31 of 1965, s. 62 and Sch., for "one month" (w.e.f. 15-10-1965). ---------------------------------------------------------------------- 408/32A if the instrument is not in the English language, a certi- fied translation thereof; (b) the full address of the registered or principal office of the company; (c) a list of the directors and secretary of the company,

containing the particulars mentioned in sub-section (2); (d) the name and address or the names and addresses of some one or more persons resident in India, authorised to accept on behalf of the company service of process and any notices or other documents required to be served on the company; and (e) the full address of the office of the company in India which is to be deemed its principal place of business in India.

(2) The list referred to in clause (c) of sub-section (1) shall contain the following particulars, that is to say:- (a) with respect to each director,- (i) in the case of an individual, his present name and surname in full, any former name or names and sur- 408/33 name or surnames in full, his usual residential address, his nationality, and if that nationality is not the nationality of origin, his nationality of origin, and his business occupation, if any, or if he has no business occupation but holds any other directorship or directorships, particulars of that directorship or of some one of those directorships ; and (ii) in the case of a body corporate, its corporate name and registered or principal office ; and the full name, address, nationality, and nationality of origin. if different from that nationality, of each of its directors ; (b) with respect to the secretary, or where there are joint secretaries with respect to each of them- (i) in the case of an individual., his present name and surname. any former name or names and surname or surnames, and his usual residential address; and (ii) in the case of a body corporate, its corporate name and registered or principal office: Provided that, where all the partners in a firm are joint secretaries of the company, the name and principal office of the firm may be stated instead of the particulars mentioned in clause (b) of this subsection.

(3) Clauses (2) and (3) of the Explanation to sub-section (1) of section 303 shall apply for the purpose of the construction of refer-

ences in sub-section (2) to present and former names and surnames as they apply for the purposes of the construction of such references in

sub-section (1) of section 303.

(4) Foreign companies, other than those mentioned in sub-section

(1), shall, if they have not delivered to the Registrar before the commencement of this Act the documents and particulars specified in

sub-section (1) of section 277 of the Indian Companies Act, 1913,(7 of 1913.) continue to be subject to the obligation to deliver those documents and particulars in accordance with that Act.

Return to be delivered to Registrar by foreign company wheredocuments, etc., altered. 593. Return to be delivered to Registrar by foreign company where documents, etc., altered. If any alteration is made or occurs in- (a) the charter, statutes, or memorandum and articles of a foreign company or other instrument constituting or defining the constitution of a foreign company ; or (b) the registered or principal office of a foreign company; or 408/34 (c) the directors or secretary of a foreign company 1* * * ; or (d) the name or address of any of the persons authorised to accept service on behalf of a foreign company ; or (e) the principal place of business of the company in India; the company shall, within the prescribed time, deliver to the Registrar for registration a return containing the prescribed particulars of the alteration.

Accounts of foreign company.

594. Accounts of foreign company. (1) Every foreign company shall, in every calendar year,- (a) make out a balance sheet and profit and loss account in such form, containing such particulars and including or having annexed or attached thereto such documents (including, in particular documents relating to every subsidiary of the foreign company) as under the provisions of this Act it would, if it had been a company within the meaning of this Act, have been required to make out and lay before the company in general meeting; and (b) deliver three copies of those documents to the Registrar: Provided that the Central Government may, by notification in the Official Gazette, direct that, in the case of any foreign company or class of foreign company the requirements of clause (a) shall not apply, or shall apply subject to such exceptions and modifications as may be specified in the notification.

(2) If any such document as is mentioned in sub-section (1) is not in the English language, there shall be annexed to it a certified translation thereof.

(3) Every foreign company shall send to the Registrar with the

documents required to be delivered to him under sub-section (1), three copies of a list in the prescribed form of all places of business established by the company in India as at the date with reference to

which the balance sheet referred to in sub-section (1) is made out.

Obligation to state name of foreign company whether limited, andcountry where incorporated. 595. Obligation to state name of foreign company whether limited, and country where incorporated. Every foreign company shall- (a) in every prospectus inviting subscriptions in India for its shares or debentures, state the country in which the company is incorporated; (b) conspicuously exhibit on the outside of every office or place where it carries on business in India, the name of the ---------------------------------------------------------------------- 1 Certain words omitted by Act 31 of 1965, s. 57 (w.e.f. 15-10-1965). ----------------------------------------------------------------------- 408/35 company and the country in which it is incorporated, in letters easily legible in English characters, and also in the characters of the language or one of the languages in general use in the locality in which the office or place is situate; (c) cause the name of the company and of the country in which the company is incorporated, to be stated in legible English characters in all business letters, bill-heads and letter paper, and in all notices, 1* * * and other official publications of the company; and (d) if the liability of the members of the company is limited cause notice of that fact- (i) to be stated in every such prospectus as aforesaid and in all business letters, bill-heads, letter paper, notices, advertisements and other official publications of the company, in legible English characters; and (ii) to be conspicuously exhibited on the outside of every office or place where it carries on business in India, in legible English characters and also in legible characters of the language or one of the languages in general use in the locality in which the office or place is situate.

Service on foreign company. 596. Service on foreign company. Any process, notice, or other document required to be served on a foreign company shall be deemed to be sufficiently served, if addressed to any person whose name has been delivered to the Registrar under the foregoing provisions of this Part and left at, or sent by post to, the address which has been so delivered: Provided that- (a) where any such company makes default in delivering to the Registrar the name and address of a person resident in India who is authorised to accept on behalf of the company service of process, notices or other documents; or (b) if at any time all the persons whose names and addresses have been so delivered are dead or have ceased so to reside, or refuse to accept service on behalf of the com- pany, or for any reason, cannot be served; ---------------------------------------------------------------------- 1 The word "advertisements" omitted by Act 65 of 1960, s. 193. ---------------------------------------------------------------------- 408/36 a document may be served on the company by leaving it at, or sending it by post to, any place of business established by the company in India.

Office where documents to be delivered.

597. Office where documents to be delivered. (1) Any document which any foreign company is required to deliver to the Registrar shall be delivered to the Registrar having jurisdiction over New Delhi, and references to the Registrar in this Part [except in sub-

section (2)] shall be construed accordingly.

(2) Any such document as is referred to in sub-section (1) shall also be delivered to the Registrar of the State in which the principal place of business of the company is situate.

(3) If any foreign company ceases to have a place of business in India, it shall forthwith give notice of the fact to the Registrar, and as from the date on which notice is so given, the obligation of the company to deliver any document to the Registrar shall cease, pro- vided it has no other place of business in India.

Penalties. 598. Penalties. If any foreign company fails to comply with any of the foregoing provisions of this Part, the company, and every officer or agent of the company who is in default, shall be punishable with fine which may extend to one thousand rupees, and in the case of a continuing offence, with an additional fine which may extend to one hundred rupees for every day during which the default continues.

Company's failure to comply with Part not to affect its liabilityunder contracts, etc. 599. Company's failure to comply with Part not to affect its liability under contracts, etc. Any failure by a foreign company to comply with any of the foregoing provisions of this Part shall not affect the validity of any contract, dealing or transaction entered into by the company or its liability to be sued in respect thereof ; but the company shall not be entitled to bring any suit, claim any set-off, make any counter-claim or institute any legal proceeding in respect of any such contract, dealing or transaction, until it has complied with the provisions of this Part.

Registration of charges, appointment of receiver and books of account. 600. Registration of charges, appointment of receiver and books

of account. (1) The provisions of Part V (sections 124 to 145) ; shall apply mutatis mutandis to- (a) charges on properties in India which are created by a foreign company after the 15th day of January, 1937; and (b) charges on property in India which is acquired by any foreign company after the day aforesaid: Provided that where a charge is created, or the completion of the acquisition of the property takes place, outside India, sub-section

(5) of section 125 and the proviso to sub-section (1) of section 127 shall 408/37 have effect as if the property, wherever situated, were situated out- side India.

(2) The provisions of section 118 shall apply mutatis mutandis to a foreign company.

(3) 1[(a)] The provisions of section 209 shall apply to a foreign company to the extent of requiring it to keep at its principal place of business in India the books of account referred to in that section, with respect to moneys received and expended, sales and purchases made, and assets and liabilities, in the course of or in relation to its business in India. 2[(b) On and from the commencement of the Companies (Amendment) Act, 1974,(41 of 1974.) - (i) the provisions of section 159 shall, subject to such modifications or adaptations as may be made therein by the rules made under this Act, apply to a foreign company having an established place of business in India, as they apply to a company incorporated in India; (ii) the proviso of sections 209, 209A, 233A and 233B and sections 234 to 246 (both inclusive) shall, so far as may be, apply only to the Indian business of a foreign company having an established place of business in India, as they apply to a company incorporated in India.]

(4) In applying the sections referred to in sub-sections (1),

(2) and (3) to a foreign company as aforesaid, references in those sections to the Registrar shall be deemed to be references to the Registrar having jurisdiction over New Delhi, and references to the registered office of the foreign company shall be deemed to be references to its principal place of business in India.

Fees for registration of documents under Part. 601. Fees for registration of documents under Part. There shall be paid to the Registrar for registering any document required by the foregoing provisions of this Part to be registered by him, such fees as may be prescribed. ----------------------------------------------------------------------

1 Sub-section (3) re-lettered as cl. (a) of that sub-section by Act 41 of 1974, s. 33 (w.e.f. 1-2-1975). 2 Ins. by s. 33, ibid. (w.e.f. 1-2-1975). --------------------------------------------------------------------- 408/38

Interpretation of foregoing sections of Part. 602. Interpretation of foregoing sections of Part. For the purposes of the foregoing provisions of this Part- (a) the expression "certified" means certified in the prescribed manner to be a true copy or a correct translation; (b) the expression "direct-or", in relation to a company, includes any person in accordance with whose directions or instructions the Board of directors of the company is accus- tomed to act; (c) the expression "place of business" includes a share transfer or share registration office; (d) the expression "prospectus" has the same meaning as when used in relation to a company incorporated under this Act; and (e) the expression "secretary" includes any person occupying the position of secretary, by whatever name called. Prospectuses

Dating of prospectus and particulars to be contained therein. 603. Dating of prospectus and particulars to be contained

therein. (1) No person shall issue, circulate or distribute in India any prospectus offering for subscription shares in or debentures of a company incorporated or to be incorporated outside India, whether the company has or has not established, or when formed will or will not establish, a place of business in India, unless the prospectus is dated: and (a) contains particulars with respect to the following matters : - (i) the instrument constituting or defining the con- stitution of the company; (ii) the enactments or provisions having the force of enactments, by or under which the incorporation of the company was effected; (iii) an address in India where the said instrument, enactments, or provision, or copies thereof, and if the same are not in English, a translation thereof certified in the prescribed manner, can be inspected; (iv) the date on which and the country in which the company was incorporated: 408/38A (v)whether the company has established a place of business in India, and, if so, the address of its principal office in India; and (b) subject to the provisions of this section, states the matters specified in Part I of Schedule 11 and sets out the reports specified in Part II of that Schedule, subject always to the provisions contained in Part III of that Schedule : Provided that sub-clauses (i), (ii) and (iii) of clause (a) shall not apply in the case of a prospectus issued more than two years after the date at which the company is entitled to commence business; and in the application of Part I of Schedule II for the purposes of this sub- section, clause 2 thereof shall have effect with the substitution, for references to the articles of references to the constitution of a company.

(2) Any condition requiring or binding an applicant for shares or debentures to waive compliance with any requirement imposed by

virtue of clause (a) or (b) of sub-section (1), or purporting to affect him with notice of any contract, document or matter not specifically referred to in the prospectus, shall be void.

(3) No person shall issue to any person in India a form of application for shares in or debentures of such a company or intended

company as is mentioned in sub-section (1), unless the form is issued with a prospectus which complies with the provisions of this Part and the issue whereof in India does not contravene the provisions of section 604 : Provided that this sub-section shall not apply if it is shown that the form of application was issued in connection with a bona fide 408/39 invitation to a person to enter into an underwriting agreement with respect to the shares or debentures.

(4) In the event of non-compliance with or contravention of any of the requirements imposed by clauses (a) and (b) of sub-section

(1), a director or other person responsible for the prospectus shall not incur any liability by reason of the non-compliance or contravention, if- (a) as regards any matter not disclosed, he proves that he had no knowledge thereof ; or (b) he proves that the non-compliance or contravention arose from an honest mistake of fact on his part ; or (c) the non-compliance or contravention was in respect of matters which, in the opinion of the Court dealing with the case, were immaterial, or was otherwise such as ought in the opinion of that Court, having regard to all the circumstances of the case, reasonably to be excused: Provided that, in the event of failure to include in a prospectus a statement with respect to the matters contained in clause 18 of Schedule II, no director or other person shall incur any liability in respect to the failure, unless it be proved that he had knowledge of the matters not disclosed.

(5) This section- (a) shall not apply to the issue to existing members or debenture holders of a company of a prospectus or form of application relating to shares in or debentures of the company, whether an applicant for shares or debentures will or will not have the right to renounce in favour of other persons ; and (b) except in so far as it requires a prospectus to be dated, shall not apply to the issue of a prospectus relating to shares or debentures which are or are to be in all respects uniform with shares or debentures previously issued and for the time being dealt in or quoted on a recognised stock exchange, but, subject as aforesaid, this section shall apply to a prospectus or form of application whether issued on or with reference to the for- mation of a company or subsequently.

(6) Nothing in this section shall limit or diminish any liability which any person may incur under the general law or under this Act apart from this section, 408/40

Provisions as to expert's consent and allotment.

604. Provisions as to expert's consent and allotment. (1) No person shall issue, circulate or distribute in India any prospectus offering for subscription shares in or debentures of a company incorporated or to be incorporated outside India, whether the company has or has not established, or when formed will or will not establish, a place of business in India- (a) if, where the prospectus includes a statement purporting to be made by an expert, he has not given, or has before delivery of the prospectus for registration withdrawn, his written consent to the issue of the prospectus with the statement included in the form and context in which it is included, or there does not appear in the prospectus a statement that he has given and has not withdrawn his consent as aforesaid ; or (b) if the prospectus does not have the effect, where an application is made in pursuance thereof, of rendering all persons concerned bound by all the provisions (other than penal provisions) of sections 72, 73 and 74, so far as applicable.

(2) In this section, the expression "expert" includes an engineer, a valuer, an accountant and any other person whose profession gives authority to a statement made by him ; and for the purposes of this section a statement shall be deemed to be included in a prospectus if it is contained in any report or memorandum appearing on the face thereof or by reference incorporated therein or issued therewith.

Registration of prospectus.

605. Registration of prospectus. 1[(1)] No person shall issue, circulate or distribute in India any prospectus offering for subscription shares in or debentures of a company incorporated or to be incorporated outside India, whether the company has or has not established, or when formed will or will not establish, a place of business in India, unless before the issue, circulation or distribution of the prospectus in India, a copy thereof certified by the chairman and two other directors of the company as having been approved by resolution of the managing body has been delivered for registration to the Registrar and the prospectus states on the face of it that a copy has been so delivered, and there is endorsed on or attached to the copy- (a) any consent to the issue of the prospectus required by section 604 ; (b) a copy of any contract required by clause 16 of Schedule II to be stated in the prospectus or, in the case of a ---------------------------------------------------------------------- 1 Ins. by Act 36 of 1957, s. 3 and Sch. II, ----------------------------------------------------------------------- 408/41 contract not reduced into writing, a memorandum giving full particulars thereof ; and (c) where the persons making any report required by Part II of Schedule II 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 therefore.

(2) The references in clause (b) of sub-section (1) to the copy of a 1[contract] required thereby to be endorsed on or attached to a copy of the prospectus shall, in the case of a contract wholly or partly in a language other than English, be taken as references to a copy of a translation of the contract in English or a copy embodying a translation in English of the parts which are not in English, as the case may be, being a translation certified in the prescribed manner to be a correct translation.

Penalty for contravention of sections 603 , 604 and 605. 606. Penalty for contravention of sections 603 , 604 and 605. Any person who is knowingly responsible- (a) for the issue, circulation or distribution of a prospectus ; or (b) for the issue of a form of application for shares or debentures ; in contravention of any of the provisions of sections 603, 604 and 605, shall be punishable with imprisonment for a term which may extend to six months, or with fine which may extend to five thousand rupees, or with both.

Civil liability for mis-statements in prospectus. 607. Civil liability for mis-statements in prospectus. Section 62 shall extend to every prospectus offering for subscription shares in or debentures of a company incorporated or to be incorporated outside India, whether the company has or has not established, or when formed will or will not establish, a place of business in India, with the substitution for references in section 62 to section 60 of this Act, of references to section 604 thereof.

Interpretation of provisions as to prospectuses.

608. Interpretation of provisions as to prospectuses. (1) Where any document by which any shares in, or debentures of, a company incorporated outside India are offered for sale to the public, would, if the company concerned had been a company within the meaning of this Act, have been deemed by virtue of section 64, to be a prospectus issued by the company, that document shall be deemed, for the purposes of this Part, to be a prospectus issued by the company offering such shares or debentures for subscription. ---------------------------------------------------------------------- 1 Subs. by Act 36 of 1957, s. 3 and Sch. II, for "contractor". ---------------------------------------------------------------------- 408/42

(2) An offer of shares or debentures for subscription or sale to any person whose ordinary business it is to buy or sell shares or debentures, whether as principal or as agent, shall not be deemed to be an offer to the public for the purposes of this Part.

(3) In this Part, the expressions "prospectus", "shares" and "debentures" have the same meanings as when used in relation to a company incorporated under this Act. PART XII REGISTRATION OFFICES AND OFFICERS AND FEES

Registration Offices.

609. Registration Offices. (1) For the purposes of the registration of companies under this Act, there shall be offices at such places as the Central Government thinks fit.

(2) The Central Government may appoint such Registrars, and such Additional, Joint, Deputy and Assistant Registrars as it thinks necessary for the registration of companies under this Act, and may make regulations with respect to their duties.

(3) The salaries of the persons appointed under this section shall be fixed by the Central Government.

(4) The Central Government may direct a seal or seals to be pre- pared for the authentication of documents required for, or connected with, the registration of companies.

(5) Whenever any act is by this Act directed to be done to or by the Registrar, it shall, until the Central Government otherwise directs, be done to or by the existing Registrar of companies or jointstock companies, or in his absence, to or by such person as the Central Government may for the time being authorise: Provided that in the event of the Central Government altering the constitution of the existing registry offices or any of them, any such act shall be done to or by such officer and at such place, with reference to the local situation of the registered offices of the com- panies concerned, as the Central Government may appoint.

Inspection, production and evidence of documents kept by Registrar. 610. Inspection, production and evidence of documents kept by

Registrar. (1) 1[Save as otherwise provided elsewhere in this Act, any person may]- (a) inspect any documents kept by the Registrar 2[in accordance with the rules made under the Destruction of ---------------------------------------------------------------------- 1 Subs. by Act 65 of 1960, s. 194, for "Any person may". 2 Ins. by s. 194, ibid. ---------------------------------------------------------------------- 408/43 Records Act, 1917] (5 of 1917.) being documents filed or registered by him in pursuance of this Act, or making a record of any fact required or authorised to be recorded or registered in pursuance of this Act, on payment for each inspection, of a 1[such fee as may be prescribed]; (b) require a certificate of the incorporation of any company, or a copy or extract of any other document or any part of any other document to be certified by the Registrar, 2[on payment in advance of 1[such fees as may be prescribed]: Provided that the rights conferred by this sub-section shall be exercisable- (i) in relation to documents delivered to the Registrar with a prospectus in pursuance of sub-clause (i) of clause

(b) of sub-section (1) of section 60, only during the fourteen days beginning with the date of publication of the prospectus ; and at other times, only with the permission of the Central Government; and (ii) in relation to documents so delivered in pursuance of

clause (b) of sub-section (1) of section 605, only during the fourteen days beginning with the date of the prospectus ; and at other times, only with the permission of the Central Government.

(2) No process for compelling the production of any document kept by the Registrar shall issue from any Court 3[or the Company Law Board] except with the leave of that Court 3[or the Company Law Board]; and any such process, if issued, shall bear thereon a statement that it is issued with the leave of the Court 3[or the Company Law Board].

(3) A copy of, or extract from, any document kept and registered at any of the offices for the registration of companies under this Act, certified to be a true copy under the hand of the Registrar (whose official position it shall not be necessary to prove), shall, in all legal proceedings, be admissible in evidence as of equal validity with the original document. 4* * * * * * ---------------------------------------------------------------------- 1 Subs. by Act 31 of 1988, s.57 (w.e.f.15.7.1988). 2 Subs. by Act 65 of 1960, s. 194, for certain words. 3 Ins. by Act 31 of 1988, S.57 (w.e.f. 31-5-1991).

4 Sub-section (4) omitted Act 65 of 1960, S.194. ----------------------------------------------------------------------- 408/44

Fees in Schedule X to be paid.

611. Fees in Schedule X to be paid. 1[(1)] In respect of the several matters mentioned in Schedule X, there shall, subject to the limitations imposed by that Schedule, be paid to the Registrar the several fees therein specified: Provided that no fees shall be charged in respect of the registration in pursuance of Part IX of a company, if it is not registered as a limited company, or if, before its registration as a limited company, the liability of the shareholders was limited by some other Act of Parliament or any other Indian law or by an Act of Parliament of the United Kingdom, Royal Charter or Letters Patent in force in India: 2[Provided further that in the case of resolutions to which sec- tion 192 applies, not more than one fee shall be required for the filing of more resolutions than one passed in the same meeting if such resolutions are filed with the Registrar at the same time.]

2[(2) Any document required or authorised by this Act to be filed or registered, or any fact required or authorised by this Act to be registered, with the Registrar on payment of the fee specified therefor in Schedule X, may, without prejudice to any other liability, be filed or registered after the time, if any, specified in this Act for its filing or registration on payment of such additional fee not exceeding ten times the amount of the fee so specified as the Registrar may determine.]

Fees, etc., paid to Registrar and other officers to be accounted forto Central Government. 612. Fees, etc., paid to Registrar and other officers to be accounted for to Central Government. All fees, charges, and other sums paid to any Registrar, any Additional, Joint, Deputy, or Assistant Registrar, or any other officer of the Central Government in pursuance of this Act shall be paid into the public account of India in the Reserve Bank of India.

Power of Central Government to reduce fees, charges, etc. 613. Power of Central Government to reduce fees, charges, etc.

(1) The Central Government may, by order notified in the Official Gazette, reduce the amount of any fee, charge or other sum specified in any provision contained in this Act, as payable in respect of any matter, either to the Central Government or to any Registrar, any Additional, Joint, Deputy, or Assistant Registrar or any other officer of the Central Government ; and thereupon such provision shall, during the period for which the order is in force, have effect as if the reduced fee had been substituted for the fee specified in such provision. ----------------------------------------------------------------------

1 S. 611 re-numbered as sub-section (1) of that section by Act 65 of 1960, s. 195. 2 Ins. by s. 195, ibid. ---------------------------------------------------------------------- 408/45

(2)Any order notified under sub-section (1) may, by a like order, be cancelled or varied at any time by the Central Government.

(3)Nothing in this section shall be deemed to affect the power of the Central Government under section 641 to alter any of the fees specified in Schedule X.

Enforcement of duty of company to make returns etc., to Registrar. 614. Enforcement of duty of company to make returns etc., to

Registrar. (1) If a company, having made default in complying with any provision of this Act which requires it to file or register with, or deliver or send to, the Registrar any return, account or other document, or to give notice to him of any matter, fails to make good the default within fourteen days after the service of a notice on the company requiring it to do so, the 1[Company Law Board] may, on an application made to it by any member or creditor of the company or by the Registrar, make an order directing the company and any officer thereof to make good the default within such time as may be specified in the order.

(2)Any such order may provide that all costs of and incidental to the application shall be borne by the company or by any officers of the company responsible for the default.

(3)Nothing in this section shall be taken to prejudice the opera- tion of any provisions in this or any other Act imposing penalties on a company or its officers in respect of any such default as aforesaid. 614A Power of Court trying offences under the Act to direct the filing ofdocuments with Registrar. 2[614A. Power of Court trying offences under the Act to direct

the filing of documents with Registrar. (1) Any Court trying an offence for a default in compliance with any provision of this Act which requires a company or its officers to file or register with, or deliver or send to, the Registrar, any return, account or other document, may at the time of sentencing, acquitting or discharging the accused, direct by order, if it thinks fit to do so, any officer or other employee of the company to file or register with, deliver or send to, the Registrar on payment of the fee including the additional fee required to be paid under section 611, such return, account or other document within such time as may be specified in the order.

(2)Any officer or other employee of the company who fails to

comply with an order of the Court under sub-section (1) shall be punishable with imprisonment for a term which may extend to six months, or with fine, or with both.] --------------------------------------------------------------------- 1 Subs. by Act 31 of 1988, s.67 (w.e.f.31.5.1991). 2 Ins. by Act 65 of 1960, s. 196. ---------------------------------------------------------------------- 408/46 PART XIII GENERAL Collection of information and statistics from companies

Power of Government to direct companies to furnish information orstatistics. 615. Power of Government to direct companies to furnish

information or statistics. (1) The Central Government may, by order, require companies generally, or any class of companies, or any company, to furnish such information or statistics with regard to their or its constitution or working, and within such time, as may be specified in the order.

(2)(a) Every order under sub-section (1) addressed to companies generally or to any class of companies, shall be published in the Official Gazette and in such other manner, if any, as the Central Government may think fit. (b)The date of publication of the order in the Official Gazette shall be deemed to be the date on which the demand for information or statistics is made on such companies or class of companies, as the case may be.

(3)Every order under sub-section (1) addressed to an individual company shall be served on it in the manner laid down in section 51.

(4)For the purpose of satisfying itself that any information or statistics furnished by a company in pursuance of any order under sub-

section (1) is correct and complete, the Central Government may require such company- (a) to produce such records or documents in its possession or under its control for inspection, before such officer and at such time as may be specified by the Central Government ; or (b) to furnish such further information as may be specified by the Central Government and within such time as may be fixed by it.

(5) The Central Government may also, by order, direct an inquiry to be made by any person or persons named in the order- (a) for the purpose of obtaining any information or statistics which a company has failed to furnish as required

of it by an order under sub-section (1) ; or (b) for the purpose of satisfying itself that any information or statistics furnished by a company in pursuance of an 408/47

order made under sub-section (1) is correct and complete; and in so far as such information or statistics may be found to be incorrect or incomplete for the purpose of obtaining such information or statistics as may be necessary to make the information or statistics furnished correct and complete; and a person or persons so appointed shall, for the purposes of such inquiry, have such powers as may be prescribed.

(6) If any company fails to comply with an order made under sub-

section (1) or (4), or knowingly furnishes any information or statistics which is incorrect or incomplete in any material respect, the company, and every officer thereof who is in default, shall be punishable with imprisonment which may extend to three months, or with fine which may extend to one thousand rupees, or with both.

(7) An order requiring any information or statistics to be fur- nished by a company may also be addressed to any person who is, or has at any time been, an officer or employee of the company, and all the provisions of this section, so far as may be, shall apply in relation to such person as they apply in relation to the company : Provided that no such person shall be punishable under sub-section

(6), unless the Court is satisfied that he was in a position to comply with the order and made wilful default in doing so.

(8) Where a body corporate incorporated outside India and having established an office within India, carries on business in India, all references to a company in this section shall be deemed to include references to the body corporate in relation, and only in relation, to such business. Application of Act to Companies governed by Special Acts

Application of Act to insurance, banking, electricity supply and othercompanies governed by special Acts. 616. Application of Act to insurance, banking, electricity supply and other companies governed by special Acts. The provisions of this Act shall apply-- (a) to insurance companies, except in so far as the said provisions are inconsistent with the provisions of the Insurance Act, 1938; (4 of 1938.) (b) to banking companies, except in so far as the said provisions are inconsistent with the provisions of the Bank- ing Companies Act, 1949; (10 of 1949.) 408/48 (c) to companies engaged in the generation or supply of electricity, except in so far as the said provisions are inconsistent with the provisions of 1[The Indian Electricity Act, 1910, (9 of 1910.) or] the Electricity Supply Act, 1948; (54 of 1948.) (d) to any other company governed by any special Act for the time being in force, except in so far as the said provisions are inconsistent with the provisions of such special Act; 2[(e) to such body corporate, incorporated by any Act for the time being in force, as the Central Government may, by notification in the Official Gazette, specify in this behalf, subject to such exceptions, modifications or adaptations, as may be specified in the notification.] Application of Act to Government Companies

Definition of "Government company". 617. Definition of "Government company". For the purposes of 3[this Act] Government company means any company in which not less than fifty-one per cent. of the 4[paid up share capital] is held by the Central Government, or by any State Government or Governments, or partly by the Central Government and partly by one or more State Governments 5[and includes a company which is a subsidiary of a Government company as thus defined].

Government companies not to have managing agents. 6[618. Government companies not to have managing agents. No Government company, whether formed before or after the 1st day of April, 1956, (65 of 1960.) shall, after the commencement of the Companies (Amendment) Act, 1960,(65 of 1960.) appoint or employ, or after the 6 expiry of six months from such commencement, continue the appointment or employment of, any managing agent : Provided that where a company has become a Government company after the 1st day of April, 1956, nothing in this section shall prevent that company from continuing after the commencement of the Companies (Amendment) Act, 1960(65 of 1960), the appointment or employ- ment of a managing agent appointed or employed before such commence- ment.] ---------------------------------------------------------------------- 1 Ins. by Act 65 of 1960, s. 197. 2 Ins. by Act 41 of 1974, s. 34 (w.e.f. 1-2-1975). 3 Subs. by Act 65 of 1960, s. 198, for "sections 618, 619 and 620". 4 Subs. by s. 198, ibid., for "share capital". 5 Added by s. 198, ibid. 6 Subs. by s. 199, ibid., for s. 618. ---------------------------------------------------------------------- 408/49

Application of sections 224 to 233 to Government companies. 619. Application of sections 224 to 233 to Government companies.

(1) In the case of a Government company, the following provisions shall apply, notwithstanding anything contained in sections 224 to

(2)The auditor of a government company shall be appointed or re- appointed by the Central Government on the advice of the Comptroller Auditor-General of India : 1[Provided that the limits specified in sub-sections (1B) and (1C) of section 224 shall apply in relation to the appointment or re- appointment of an auditor under this sub-section.]

(3)The Comptroller and Auditor-General of India shall have power-- (a) to direct the manner in which the company's accounts shall be audited by the auditor appointed in pursuance of

sub-section (2) and to give such auditor instructions in regard to any matter relating to the performance of his functions as such; (b) to conduct a supplementary or test audit of the company's accounts by such person or persons as he may authorise in this behalf; and for the purposes of such audit, to require information or additional information to be furnished to any person or persons so authorised, on such matters, by such person or persons, and in such form, as the comptroller and Auditor-general may, by general or special order, direct.

(4) The auditor aforesaid shall submit a copy of his audit report to the Comptroller and Auditor-General of India who shall have the right to comment upon, or supplement, the audit report in such manner as he may think fit.

(5) Any such comments upon, or supplement to, the audit report shall be placed before the annual general meeting of the company at the same time and in the same manner as the audit report. --------------------------------------------------------------------- 1 Ins. by Act 41 of 1974, s. 35 (w.e.f. 1-2-1975). --------------------------------------------------------------------- 408/50 619A Annual reports on Government companies.

1[619A. Annual reports on Government companies. (1) Where the Central Government is a member of a Government company, the Central Government shall cause an annual report on the working and affairs of that company to be- (a) prepared within three months of its annual general meeting before which the audit report is placed under sub-

section (5) of section 619; and (b) as soon as may be after such preparation, laid before both Houses of Parliament together with a copy of the audit report and any comments upon, or supplement to, the audit report, made by the Comptroller and Auditor General of India.

(2) Where in addition to the Central Government, any State Government is also a member of a Government company, that State Government shall cause a copy of the annual report prepared under sub-

section (1) to be laid before the House or both Houses of the State Legislature together with a copy of the audit report and the comments

or supplement referred to in sub-section (1).

(3) Where the Central Government is not a member of a Government company, every State Government which is a member of that company, or where only one State Government is a member of the company, that State Government shall cause an annual report on the working and affairs of the company to be-

(a) prepared within the time specified in sub-section (1); and (b) as soon as may be after such preparation, laid before the House or both Houses of the State Legislature with a copy of the audit report and comments or supplement referred to in

sub-section (1).] 619B Provisions of section 619 to apply to certain companies. 2[619B. Provisions of section 619 to apply to certain companies. The provisions of section 619 shall apply to a company in which not less than fifty-one per cent. of the paid-up share capital is held by one or more of the following or any combination thereof, as if it were a Government company, namely :- (a) the Central Government and one or more Government companies; (b) any State Government or Governments and one or more Government companies; ---------------------------------------------------------------------- 1 Ins. by Act 65 of 1960, s. 200. 2 Ins. by Act 41 of 1974, s.36 (w.e.f. 1.2.1975). 3 Ins. by Act 31 of 1988, s.58 (w.e.f. 15.6.1988). ---------------------------------------------------------------------- 408/50A (c) the Central Government, one or more State Governments and one or more Government companies; (d) the Central Government and one or more corporations owned or controlled by the Central Government; (e) the Central Government, one or more State Governments and one or more corporations owned or controlled by the Central Government; (f)one or more corporations owned or controlled by the Central Government or the State Government; (g) more than one Government company.]

Power to modify Act in relation to Government companies. 620. Power to modify Act in relation to Government companies.

(1) The Central Government may, by notification in the Official Gazette, direct that any of the provisions of this Act (other than sections 618, 619 and 1[619A]) specified in the notification :- (a) shall not apply to any Government company; or (b) shall apply to any Government company, only with such exceptions, modifications and adaptations, as may be specified in the notification.

2 [ (2) A copy of every notification proposed to be issued under sub-section (I), shall be laid in draft before each House of Parlia- ment, 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, and if, before the expiry of the session immediately following the session or the successive sessions aforesaid, both Houses agree in disapproving the issue of the 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[Modification of Act in its application to Nidhis and Mutual Benefit Societies 620A Power to modify Act in its application to Nidhis, etc.

620A. Power to modify Act in its application to Nidhis, etc. (1) In this section, "Nidhi" or "Mutual Benefit Society" means a company which the Central Government may, by notification in the Official Gazette, declare to be a Nidhi or Mutual Benefit Society, as the case may be. ---------------------------------------------------------------------- 1 Subs. by Act 52 of 1964, s. 3 and Sch II, for "639".

2 Subs. by Act 46 of 1977, s. 7, for sub-section (2) (w.e.f. 1-2- 1975).. 3 Ins. by Act 65 of 1960, s. 201. --------------------------------------------------------------------- 408/50B

(2) The Central Government may, by notification in the Official Gazette, direct that any of the provisions of this Act specified in the notification- (a) shall not apply to any Nidhi or Mutual Benefit Society, or (b) shall apply to any Nidhi or Mutual Benefit Society with such exceptions, modifications and adaptations as may be specified in the notification. 408/51

(3) A copy of every notification issued under sub-section (1) shall be laid as soon as may be after it is issued, before each House of Parliament.] 2[Special provision as to companies in Jammu and Kashmir 620C Special provision as to companies in Jammu and Kashmir. 620C. Special provision as to companies in Jammu and Kashmir.The Central Government may by notification in the Official Gazette, direct that with effect from the commencement of the Central Laws (Extension to Jammu and Kashmir) Act, 1968 or any subsequent date, any of the provisions of this Act specified in the notification shall not apply, or shall apply only with such exceptions and modifications or adaptations as may be specified in the notification, to- (a) any existing company in the State of Jammu and Kashmir; (b) any company registered in that State under this Act after the commencement of the Central Laws (Extension to Jammu and Kashmir) Act, 1968.] Offences

Offences against Act to be cognizable only on complaint by Registrar,shareholder or Government. 621. Offences against Act to be cognizable only on complaint by

Registrar, shareholder or Government. (1) No court shall take congnizance of any offence against this Act (other than an offence with respect to which proceedings are instituted under section 545), which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or of a shareholder of the company, or of a person authorised by the Central Government in that behalf: Provided that nothing in this sub-section shall apply to a prosecution by a company of any of its officers. 3[(1A) Notwithstanding anything contained in the Code of Criminal Procedure, 1898, (5 of 1898)4 where the complainant under sub-section

(1) is the Registrar or a person authorised by the Central Government, the personal attendance of the complainant before the Court trying the offence shall not be necessary unless the Court for reasons to be recorded in writing requires his personal attendance at the trial.]

(2) Sub-section (1) shall not apply to any action taken by the liquidator of a company in respect of any offence alleged to have been committed in respect of any of the matters included in Part VII (sections ---------------------------------------------------------------------- 1 For the text of section 620B as applicable to the Union territory of Goa, Daman and Diu, see Regulation 11 of 1963, s. 9. 2 Ins. by Act 25 of 1968, s. 2 and Sch. (w.e.f. 15-8-1968). 3 Ins. by Act 65 of 1960, s. 202. 4 See now the Code of Criminal Procedure, 1973 (2 of 1974). ----------------------------------------------------------------------- 408/52 425 to 560) or in any other provision of this Act relating to the winding up of companies.

(3) A liquidator of a company shall not be deemed to be an

officer of the company, within the meaning of sub-section (1). 621A Composition of certain offences.

1[621A. Composition of certain offences. (1) Notwithstanding anything contained in the Code of Criminal Procedure,1973 (2 of 1974), any offence punishable under this Act(whether committed by a company or any officer thereof), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by- (a) the Company Law Board; or (b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Director, as the case may be, may specify: Provided that the sum so specified shall not, in any case, exceed the maximum amount of the fine which may be imposed for the offence so compounded: Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under this sub-section,

the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.

(2) Nothing in sub-section (1) shall apply to an offence com- mitted by a company or its officer within a period of three years from the date on which a similar offence committed by it or him was compounded under this section. Explanation.-For the purposes of this section,- (a) any second or subsequent offence committed after the expiry of a period of three years from the date on which the offence was previously compounded, shall be deemed to be a first offence; (b) "Regional Director" means a person appointed by the Central Government as a Regional Director for the purposes of this Act.

(3) Every Regional Director shall exercise the powers to com- pound an offence, subject to the direction, control and supervision of the Company Law Board.

(4) (a) Every application for the compounding of an offence shall be made to the Registrar who shall forward the same, together with his comments thereon, to the Company Law Board or the Regional Director, as the case may be. (b) Where any offence is compounded under this section, whether before or after the institution of any prosecution, an intimation thereof shall be given by the company to the Registrar within seven days from the date on which the offence is so compounded. (c) Where any offence is compounded before the institution of any prosecution, no prosecution shall be instituted in relation to such offence, either by the Registrar or by any shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded. (d) Where the composition of any offence is made after the institution of any prosecution, such composition shall be brought by the Registrar in writing, to the notice of the Court in which the prosecution is pending and on such notice of the composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.

(5) The Company Law Board or the Regional Director, as the case may be, while dealing with a proposal for the compounding of an offence for a default in compliance with any provision of this Act which requires a company or its officer to file or register with, or deliver or send to, the Registrar any return, account or other document, may, direct, by order, if it or he thinks fit to do so, any officer or other employee of the company to file or register with, or on payment of the fee, and the additional fee, required to be paid under section 611, such return, account or other document within such time as may be specified in the order.

(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional

Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.

(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974),- (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in that Act for compounding of offences; (b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.

(8) No offence specified in this section shall be compounded ex- cept under and in accordance with the provisions of this section.]

Jurisdiction to try offences. 622. Jurisdiction to try offences. No Court inferior to that of a Presidency Magistrate or Magistrate of the first class shall try any offence against this Act.

Certain offences triable summarily in Presidency towns. 623. Certain offences triable summarily in Presidency towns. If any offence against this Act which is punishable with fine only is committed by any person within a Presidency town, such person may be tried summarily and punished by any Presidency Magistrate of that Presidency town.

Offences to be noncognizable. 624. Offences to be noncognizable. Notwithstanding anything in the Code of Criminal Procedure, 1898 (5 of 1898)2, every offence against this Act shall be deemed to be noncognizable within the meaning of the said Code. 624A Power of Central Government to appoint company prosecutors. 3[624A. Power of Central Government to appoint company prosecutors. Notwithstanding anything contained in the Code of Criminal Procedure, 1898 (5 of 1898)2, the Central Government may appoint generally or in any case, or for any specified class of cases in any local area, one or more persons, as company prosecutors for the conduct of prosecutions arising out of this Act; and the persons so appointed as company prosecutors shall have all the powers and privileges conferred by that Code on public prosecutors appointed by a State Government under section 492 4 of that Code. 624B Appeal against acquittal. 624B. Appeal against acquittal. Notwithstanding anything contained in the Code of Criminal Procedure, 1898 (5 of 1898)2, the Central Government may, in any case arising out of this Act, direct any company prosecutor or authorise any other person either by name or by virtue of his office. to present an appeal from an order of acquittal passed by any Court other than a High Court and an appeal presented by such prosecutor or other person shall be deemed to have been validly presented to the appellate Court.]

Payment of compensation in cases of frivolous or vexatiousprosecution. 625. Payment of compensation in cases of frivolous or vexatious

prosecution. (1) In respect of any case instituted upon the complaint of a shareholder against the company or any officer thereof in pursuance of section 621, the provisions of section 250 of the Code of Criminal Procedure, 1898 (5 of 1898)5, shall not apply; and the following provisions shall apply instead.

(2) If the Magistrate by whom any such case is heard discharges or acquits all or any of the accused, and is of opinion that the accusa- ---------------------------------------------------------------------- 1 Ins. by Act 31 of 1988, s.59 (w.e.f. 31.5.1991). 2 See now the Code of Criminal Procedure, 1973 (Act 2 of 1974). 3 Ins. by Act 65 of 1960, s. 203. 4 See now the Code of Criminal Procedure, 1973 (Act 2 of 1974), s. 24. 5 See now s. 250, ibid. ----------------------------------------------------------------------- 408/52A tion against them or any of them was false and either frivolous or vexatious, the Magistrate may, by his order of discharge or acquittal, if the shareholder upon whose complaint the accusation was made is present, call upon him forthwith to show cause why he should not pay compensation to such accused, or to each or any of such accused when there is more than one, or if such shareholder is not present, direct the issue of a summons to him to appear and show cause as aforesaid.

(3) The Magistrate shall record and consider any cause which such shareholder may show; and if the Magistrate is satisfied that the accusation was false and either frivolous or vexatious, he may, for reasons to be recorded, direct that compensation to such amount as he may determine be paid by such shareholder to the accused or to each or any of them, not exceeding one thousand rupees in all. 408/53

(4) The Magistrate may, by the order directing payment of the

compensation under sub-section (3), further order that, in default of payment, the shareholder ordered to pay such compensation shall suffer simple imprisonment for a term not exceeding two months.

(5) When any person is imprisoned under sub-section (4), the provisions of sections 68 and 69 of the Indian Penal Code (45 of 1860.) shall, so far as may be, apply.

(6) No person who has been directed to pay compensation under this section shall, by reason of such order, be exempted from any civil or criminal liability in respect of the complaint made by him: Provided that any amount paid to an accused person under this section shall be taken into account in awarding compensation to such person in any subsequent civil suit relating to the same matter.

(7) A complainant who has been ordered to pay compensation under

sub-section (3) by a Magistrate may appeal from the order, in so far as it relates to the payment of compensation,as if such complainant had been convicted on a trial held by such Magistrate.

(8) Where an order for payment of compensation to an accused person is made, the compensation shall not be paid to him before the period allowed for the presentation of the appeal under sub-section

(7) has elapsed ; or, if an appeal is presented,before the appeal has been decided.

Application of fines. 626. Application of fines. The Court imposing any fine under this Act may direct that the whole or any part thereof shall be applied in or towards payment of the costs of the proceedings, or in or towards the rewarding of the person on whose information or at whose instance the fine is recovered.

Production and inspection of books where offence suspected. 627. Production and inspection of books where offence suspected.

(1) If, on an application made to a Judge of a High Court in chambers by the Public Prosecutor of the State or by the Central Government, 1[or by a company prosecutor appointed under section 624A] it is shown that there is reasonable cause to believe that any person has, while he was an officer of a company, committed an offence in connection with the management of the company's affairs, and that evidence of the commission of the offence is to be found in any books or papers of or under the control of the company, an order may be made- (i) authorising any person named therein to inspect the said books or papers or any of them for the purpose of --------------------------------------------------------------------- 1 Ins. by Act 65 of 1960, s. 204. ---------------------------------------------------------------------- 408/54 investigating, and obtaining evidence of the commission of, the offence ; or (ii) requiring the managing agent, secretaries and treasurers or manager of the company or such other officer thereof as may be named in the order, to produce the said books or papers or any of them to a person, and at a place and time, named in the order.

(2) Sub-section (1) shall apply also in relation to any books or papers of a person carrying on the business of banking so far as they relate to the company's affairs, as it applies to any books or papers of or under the control of the company, except that no such order as is referred to in clause (ii) thereof shall be made by virtue of this sub-section.

(3) No appeal shall lie from the decision of a Judge of the High Court under this section.

Penalty for false statements. 628. Penalty for false statements. If in any return, report, certificate, balance sheet, prospectus, statement or other document required by or for the purposes of any of the provisions of this Act, any person makes a statement- (a) which is false in any material particular, knowing it to be false ; or (b) which omits any material fact knowing it to be material; he shall, save as otherwise expressly provided in this Act, be punish- able with imprisonment for a term which may extend to two years, and shall also be liable to fine.

Penalty for false evidence. 629. Penalty for false evidence. If any person intentionally gives false evidence- (a) upon any examination upon oath or solemn affirmation, authorised under this Act ; or (b) in any affidavit, deposition or solemn affirmation, in or about the winding up of any company under this Act, or otherwise in or about any matter arising under this Act; he shall be punishable with imprisonment for a term which may extend to seven years, and shall also be liable to fine. 629A Penalty where no specific penalty is provided elsewhere in the Act. 1[629A. Penalty where no specific penalty is provided elsewhere in the Act. If a Company or any other person contravenes any provision of this Act for which no punishment- is provided elsewhere in this Act or any condition, limitation or restriction subject to which any approval, sanction, consent, confirmation, recognition, direction ---------------------------------------------------------------------- 1 Ins. by Act 65 of 1960, s. 205. ---------------------------------------------------------------------- 408/55 or exemption in relation to any matter has been accorded, given or granted, the company and every officer of the company who is in default or such other person shall be punishable with fine which may extend to five hundred rupees, and where the contravention is a continuing one, with a further fine which may extend to fifty rupees for every day after the first during which the contravention continues.]

Penalty for wrongful withholding of property.

630. Penalty for wrongful withholding of property. (1) If any officer or employee of a company- (a) wrongfully obtains possession of any property of a company; or (b) having any such property in his possession, wrongfully withholds it or knowingly applies it to purposes other than those expressed or directed in the articles and authorised by this Act; he shall, on the complaint of the company or any creditor or contri- butory thereof, be punishable with fine which may extend to one thousand rupees.

(2) The Court trying the offence may also order such officer or employee to deliver up or refund, within a time to be fixed by the Court, any such property wrongfully obtained or wrongfully withheld or knowingly misapplied, or in default, to suffer imprisonment for a term which may extend to two years.

Penalty for improper use of words "Limited" and " Private Limited". 631. Penalty for improper use of words "Limited" and " Private Limited". If any person or persons trade or carry on business under any name or title of which the word "Limited" or the words "Private Limited", or any contraction or imitation thereof is or are the last word or words, that person or each of those persons shall, unless duly incorporated with limited liability, or unless duly incorporated as a private company with limited liability, as the case may be, be punishable with fine which may extend to fifty rupees for every day upon which that name or title has been used. Legal Proceedings

Power to require limited company to give security for costs. 632. Power to require limited company to give security for costs. Where a limited company is plaintiff or petitioner in any suit or other legal proceeding, any Court having jurisdiction in the matter may, if there is reason to believe that the company will be unable to pay the costs of the defendant if he is successful in his defence, require sufficient security to be given for those costs, and may stay all proceedings until the security is given. 408/56

Power of Court to grant relief in certain cases.

633. Power of Court to grant relief in certain cases. (1) If in any proceeding for negligence, default, breach of duty, misfeasance or breach of trust against an officer of a company it appears to the Court hearing the case that he is or may be liable in respect of the negligence, default, breach of duty, misfeasance or breach of trust, but that he has acted honestly and reasonably, and that having regard to all the circumstances of the case, including those connected with his appointment, he ought fairly to be excused, the Court may relieve him, either wholly or partly, from his liability on such terms as it may think fit : 1[Provided that in a criminal proceeding under this sub-section, the Court shall have no power to grant relief from any civil liability which may attach to an officer in respect of such negligence, default, breach of duty, misfeasance or breach of trust.]

2[(2) Where any such officer has reason to apprehend that any proceeding will or might be brought against him in respect of any negligence, default, breach of duty, misfeasance or breach of trust, he may apply to the High Court for relief and the High Court on such application shall have the same power to relieve him as it would have had if it had been a Court before which a proceeding against that officer for negligence, default, breach of duty, misfeasance or breach

of trust had been brought under sub-section (1).

(3) No Court shall grant any relief to any officer under sub-

section (1) or sub-section (2) unless it has, by notice served in the manner specified by it, required the Registrar and such other person, if any, as it thinks necessary, to show cause why such relief should not be granted.]

Enforcement of orders of Courts. 634. Enforcement of orders of Courts. Any order made by a Court under this Act may be enforced in the same manner as a decree made by the Court in a suit pending therein. 634A Enforcement of orders of Company Law Board. 3[634A. Enforcement of orders of Company Law Board. Any order made by the Company Law Board 4* * * may be enforced by that Board in the same manner as if it were a decree made by a Court in a suit pending therein, and it shall be lawful for that Board to send, in the case of its inability to execute --------------------------------------------------------------------- 1 Ins. by Act 65 of 1960, s. 206.

2 Subs. by s. 206, ibid., for sub-section (2). 3 Ins. by Act 46 of 1977, S.8. 4 omitted by Act 31 of 1988, s.60 (w.e.f.31-5-1991) ---------------------------------------------------------------------- 408/57 such order, to the Court within the local limits of whose jurisdiction,-- (a) in the case of an order against a company, the registered office of the company is situated, or (b) in the case of an order against any other person, the person concerned voluntarily resides, or carries on business or personally works for gain.]

Enforcement of orders of one Court by other Courts.

635. Enforcement of orders of one Court by other Courts. (1) Where any order made by one Court is required to be enforced by another Court, a certified copy of the order shall be produced to the proper officer of the Court required to enforce the order.

(2) The production of such certified copy shall be sufficient evidence of the order.

(3) Upon the production of such certified copy, the Court shall take the requisite steps for enforcing the order, in the same manner as if it had been made by itself.

1[(4) Where any order made by the Company Law Board 2* * * is reqired to be enforced by a Court, a certified copy of the order shall be produced to the proper officer of the Court required to enforce the

order and the provisions of sub-sections (2) and (3) shall, as far as may be, apply to every such order in the same manner and to the same extent as they apply to an order made by a Court.] 635A Protection of acts done in good faith. 3[635A. Protection of acts done in good faith. No suit, prosecution or other legal proceeding shall lie against the Government or any officer of Government or any other person in respect of anything which is in good faith done or intended to be done in pursuance of this Act or any rules or orders made thereunder, or in respect of the publication by or under the authority of the Government or such officer of any report, paper or proceedings. ---------------------------------------------------------------------- 1 Ins. by Act 46 of 1977, s. 9. 2 Omitted by Act 31 of 1988, s.61 (w.e.f. 31-5-1991). 3 Subs. by Act 31 of 1965, s. 58, for section 635A (w.e.f. 15-10-1965). ---------------------------------------------------------------------- 408/58 635A Non-disclosure of information in certain cases. 635AA. Non-disclosure of information in certain cases. Notwithstanding anything contained in any other law for the time being in force, the Registrar, any officer of Government or any other person shall not be compelled to disclose to any Court, tribunal or other authority whence he got any information which- (a) has led the Central Government to direct a special audit under section 233A or to order an investigation under section 235, 237, 247, 248 or 249; or (b) is or has been material or relevant in connection with such special audit or investigation.] 1[Temporary Protection of Employees 635B Protection of employees during investigation by Inspector or pendencyof proceeding before Court in certain cases. 635B. Protection of employees during investigation by Inspector or

pendency of proceeding before Court in certain cases. (1) If- (a) during the course of any investigation of the affairs and other matters of or relating to a company, body or person under section 235, section 237 or section 239 or of the membership and other matters of or relating to a company, or the ownership of shares in or debentures of a company or body corporate, or the affairs and other matters of or relating to a company, body or person, under section 247, section 248 or section 249; or (b) during the pendency of any proceeding against any person concerned in the conduct and management of the affairs of a company under Chapter IVA of Part VI, such company, body or person proposes- (i) to discharge, or (ii) to punish, whether by dismissal, removal, reduction in rank or otherwise, any employee, the company, body or person, as the case may be shall send by post to the Company Law Board previous intimation in writing of the action proposed against the employee and if the Company Law Board has any objection to the action proposed, it shall send by post notice thereof in writing to the company, body or person concerned.

(2) If the company, body or person concerned does not receive within thirty days of the sending of the previous intimation of the ---------------------------------------------------------------------- 1 Ins. by Act 32 of 1964, s. 2. ---------------------------------------------------------------------- 408/59 action proposed against the employee, any notice of the objection from the Company Law Board, then and only then, the company, body or person concerned may proceed to take against the employee the action proposed.

(3) If the company, body or person concerned is dissatisfied with the objection raised by the Company Law Board, it may, within thirty days of the receipt of the notice of the objection, prefer an appeal to the 1[Court] in the prescribed manner and on payment of the prescribed fee.

(4) The decision of the 1[Court] on such appeal shall be final and be binding on the Company Law Board and on the company, body or person concerned.

(5) For the removal of doubt, it is hereby declared that the provisions of this section shall have effect without prejudice to the provisions of any other law for the time being in force.] Reduction of fees payable to company

Reduction of fees, charges, etc, payable to company.

636. Reduction of fees, charges, etc, payable to company. (1) A company which is entitled to any specified fee, charge or other sum by virtue of any provision contained in this Act or in its articles, may reduce the amount thereof to such extent as it thinks fit; and thereupon such provision shall, so long as the reduction is in force, have effect as if the reduced amount had been substituted for the fee, charge or sum specified in such provision.

(2) Any reduction made under sub-section (1) may, at any time, be cancelled or varied by the company. Delegation of powers and functions of Central Government

Delegation by Central Government of its powers and functions underAct. 637 Delegation by Central Government of its powers and functions

under Act. 2[(1) The Central Government may, by notification in the Official Gazette, and subject to such conditions, restrictions and limitations as may be specified therein, delegate any of its powers or functions under this Act (other than the power to appoint a person as public trustee under section 153A and the power to make rules), to such authority or officer as may be specified in the notification.] ---------------------------------------------------------------------- 1 Subs. by Act 17 of 1967, s. 4 and Sch., for "tribunal" (w.e.f. 1-7-1967). 2 Subs. by Act 31 of 1988, s.62 (w.e.f. 31.5.1991). ----------------------------------------------------------------------- 408/60

(2) The powers and functions which cannot be delegated under

1*** sub-section (1) are those conferred by or mentioned in the

following provisions of this Act, namely, sections 10, 81, 89(4),

211(3) and (4), 212, 213, 235, 237 239, 241, 242, 243, 244, 245, 247,

248, 249, 250, 259, 268, 269, 274(2). 295, 300, 310, 311., 324, 326,

328, 329, 332, 343, 345, 346, 347(2), 349, 352, 369, 372, 396, 399(4)

and (5), 401, 408, 1*** 410, 411(b), 448, 609, 613, 620, 638, 641, and

1* * * * *

(3) A copy of every notification issued under sub-section (1) shall, as soon as may be after it is issued, be placed before both Houses of Parliament. 2[Grant of approval, etc., subject to conditions and levy of fees on applications 637A Power of Central Government or company Law Board to accord approval,etc., subject to conditions and to prescrible fees on applications. 637A. Power of Central Government or Company Law Board to accord approval, etc., subject to conditions and to prescrible fees on

applications. (1) Where the 3[Central Government or Company Law Board] is required or authorised by any provision of this Act,-- (a) to accord approval, sanction, consent, confirmation or recognition to, or relation to, any matter; (b) to give any direction in relation to any matter; or (c) to grant any exemption in relation to any matter, then, in the absence of anything to the contrary contained in such or any other provision of this Act, the 3[Central Government or Company Law Board] may accord, give or grant such approval, sanction, consent, confirmation, recognition, direction or exemption subject to such conditions, limitations or restrictions as it may think fit to impose and may, in the case of contravention of any such condition, limitation or restriction, rescind or withdraw such approval, sanc- tion, consent, confirmation, recognition, direction or exemption. ---------------------------------------------------------------------- 1 Omitted by Act 31 of 1988, s.62 (w.e.f.31.5.1991). 2 Ins. by Act 65 of 1960, s. 207 (with retrospective effect). 3 Subs. by Act 41 of 1974, s. 37 for "Central Government" (w.e.f. 1-2-1975). ---------------------------------------------------------------------- 408/60A 3 Omitted by Act 31 of 1988, s.63 (w.e.f.15.7.1988).

(2) Save as otherwise expressly provided in this Act, every application which may be, or is required to be, made to the 1[Central Government or Company Law Board] under any provision of this Act- (a) in respect of any approval, sanction, consent, confirmation or recognition to be accorded by that Government 2[or Board] to, or in relation to, any matter; or (b) in respect of any direction or exemption to be given or granted by that Government 2[or Board] in relation to any matter; or (c) in respect of any other matter, shall be accompanied by such fee 3*** as may be prescribed : Provided that different fees may be prescribed for applications in respect of different matters or in case of applications by companies, for applications by different classes of companies.] 637A Power of Central Government to fix a limit with regard to remuneration. 4[637AA. Power of Central Government to fix a limit with regard to remuneration. Notwithstanding anything contained in section 198, section 309 or section 637A, the Central Government may, while according its approval under section 269, to any appointment or to any remuneration under section 309, section 310, section 311 or section 387, fix the remuneration of the person so appointed or the remuneration, as the case may be, [within the limits specified in this Act,] at such amount or percentage of profits of the company, as it may deem fit and while fixing the remuneration, the Central Government shall have regard to-- (a) the financial position of the company; (b) the remuneration or commission drawn by the individual concerned in any other capacity, including his capacity as a sole selling agent; (c) the remuneration or commission drawn by him from any other company; (d) professional qualifications and experience of the individual concerned; ----------------------------------------------------------------------- 1 Subs. by Act 41 of 1974, s. 37, for "Central Government" (w.e.f 1-2-1975). 2 Ins. by s. 37, ibid., (w.e.f. 1-2-1975). 3 Omitted by Act 31 of 1988, s.63 (w.e.f.15.7.1988). 4 Ins. by Act 41 of 1974 s.38, (w.e.f.1-2-1975). ----------------------------------------------------------------------- 408/60B (e) public policy relating to the removal of disparities in income.] 637B Condonation of delays in certain cases. 1[637B. Condonation of delays in certain cases. Notwithstanding anything contained in this Act,- (a) where any application required to be made to the Central Government under any provision of this Act in respect of any matter is not made within the time specified therein, that Government may, for reasons to be recorded in writing, condone the delay; (b) where any document required to be filed with the Registrar under any provision of this Act is not filed within the time specified therein, the Central Government may, for reasons to be recorded in writing, condone the delay.] Annual Report on Working of Act

Annual report by Central Government. 638. Annual report by Central Government. The Central Government shall cause a general annual report on the working and administration of this Act to be prepared and laid before both Houses of Parliament, within one year of the close of the year to which the report relates. 2* * * * *

Annual reports on Government companies to be placed beforeParliament, etc. 639. [Annual reports on Government companies to be placed before Parliament, etc.] Rep. by the Companies (Amendment) Act, 1960 (65 of 1960), s. 208. Validation of registration of firms in certain cases

Validation of registration of firms as members of charitable and othercompanies. 640. Validation of registration of firms as members of charitable and other companies. Any firm which stood registered at the commencement of this Act, as a member of any association or company licensed under section 26 of the Indian Companies Act, 1913 (7 of 1913), shall be deemed to have been validly so registered with effect on and from the date of its registration. ---------------------------------------------------------------------- 1 Ins. by Act 31 of 1965, s. 59 (w.e.f. 15-10-1965). 2 The heading "Annual Reports on Government Companies" omitted by Act 65 of 1960, s. 208. ---------------------------------------------------------------------- 408/60C 1[Computation of time for filing orders of 2[Court or the Company Law Board] 640A Exclusion of time required in obtaining copies of orders of Court. 640A. Exclusion of time required in obtaining copies of orders of Court. Except as expressly provided in this behalf elsewhere in this Act, where by any provision of this Act, any order of the Court is required to be filed with the Registrar, or a company or any other person within a period specified therein, then, in computing that period, the time taken in drawing up the order and in obtaining a copy thereof shall be excluded.] Schedules, Forms and Rules 640B Forms of and procedure in relation to, certain applications. 3[640B. Forms of and procedure in relation to, certain

applications. (1) Every application made to the Central Government under section 259, 268, 269, 310, 311, 326, 328, 329, 332, 343, 345, 4[346 or 352] shall be in such form as may be prescribed.

(2)(a) Before any application is made by a company to the Central Government under any of the sections aforesaid, there shall be issued by or on behalf of the company a general notice to the members thereof, indicating the nature of the application proposed to be made. (b) Such notice shall be published at least once in a newspaper in the principal language of the district in which the registered office of the company is situate and circulating in that district, and at least once in English in an English newspaper circulating in that district. (c) Copies of the notices, together with a certificate by the company as to the due publication thereof, shall be attached to the application. (d) Nothing in clause (a), (b) or (c) shall apply to a private company which is not the managing agent of a public company.]

Power to alter Schedules.

641. Power to alter Schedules. (1) Subject to the provisions of this section, the Central Government may, by notification in the Official Gazette, alter any of the regulations, rules, tables, forms and other provisions contained in any of the Schedules to this Act, except Schedules XI and XII.

(2) Any alteration notified under sub-section (1) shall have effect as if enacted in this Act and shall come into force on the date of the notification, unless the notification otherwise directs: ---------------------------------------------------------------------- 1 Ins. by Act 65 of 1960, s. 209. 2 Subs. by Act 31 of 1988, s.64 (w.e.f. 31.5.1991). 3 Ins. by Act 31 of 1965, s.60(w.e.f. 15-10-1965). 4 Subs. by Act 31 of 1988, s.65, (w.e.f.31.5.1991). ---------------------------------------------------------------------- 408/60D Provided that no such alteration in Table A of Schedule I shall apply to any company registered before the date of such alteration.

1[(3) Every alteration made by the Central Government under sub-

section (1) shall be laid as soon as may be after it is made before each House of Parliament while it is in session for a total period of thirty days which may be 2[comprised in one session or in two or more successive sessions, and if, before the expiry of the session immediately following the session or the successive sessions afore- said,] both Houses agree in making any modification in the alteration, or both Houses agree that the alteration should not be made, the alteration shall thereafter have effect only in such modified form or be of no effect, as the case may be, so, however, that any such modi- fication or annulment shall be without prejudice to the validity of anything previously done in pursuance of that alteration.]

Power of Central Government to make rules.

642. Power of Central Government to make rules. (1) In addition to the powers conferred by section 641, the Central Government may, by notification in the Official Gazette, make rules- 3(a) for all or any of the matters which by this Act are to be, or may be, prescribed by the Central Government; and (b)generally to carry out the purposes of this Act.

4[(2) Any rule made under sub-section (1) may provide that a contravention thereof shall be punishable with fine which may extend to five hundred rupees and where the contravention is a continuing one, with a further fine which may extend to fifty rupees for every day after the first during which such contravention continues.

(3) Every rule made by the Central Government under sub-section

(1) shall be laid as soon as may be after it is made before each House of Parliament while it is in session for a total period of thirty days which may be 5[comprised in one session or in two or more successive sessions, and if, before the expiry of the session ----------------------------------------------------------------------

1 Subs, by Act 65 of 1960, s. 210, for sub-section (3). 2 Subs. by Act 41 of 1974, s. 39. for certain words (w.e.f. 1-2- 1975). 3 For the Companies (Central Government's) General Rules and Forms, 1956, see Gazette of India. Extraordinary, 1956, Pt. II, Sec. 3. p. 298/1.

4 Subs, by Act 65 of 1960, s. 211. for sub-sections (2) and

(3). 5 Subs. by Act 41 of 1974, s. 40. for certain words (w.e.f. 1- 2-1975). ---------------------------------------------------------------------- 408/60E immediately following the session or the successive sessions afore- said,] both Houses agree in making any modification in the rule or both Houses agree that the rule should not be made, the rule shall thereafter have effect only in such modified form or be of no effect, as the case may be, so, however, that any such modification or annulment shall be without prejudice to the validity of anything previously done under that rule.].

Power of Supreme Court to make rules.

643. Power of Supreme Court to make rules. (1) The Supreme Court, after consulting the High Courts,-- (a) shall make rules providing for all matters relating to the winding up of companies which, by this Act, are to be prescribed; and may make rules providing for all such matters as may be prescribed, except those reserved to the Central

Government by sub-section (5) of section 503, 1[sub-section

(3) of section 550, section 552 and sub-section (3) of section 555]; and (b) may make rules consistent with the Code of Civil Procedure, 1908 (5 of 1908)- (i)as to the mode of proceedings to be had for winding up a company in High Courts and in Courts subordinate thereto; ---------------------------------------------------------------------- 1 Subs. by Act 65 of 1960 s. 212 for certain words and figures. ---------------------------------------------------------------------- 408/61 (ii)for the voluntary winding up of companies, whether by members or by creditors; (iii)for the holding of meetings of creditors and members in connection with proceedings under section 391 ; (iv) for giving effect to the provisions of this Act as to the reduction of the capital 1* * * ; and (v)generally for all applications to be made to the Court under the provisions of this Act.

(2) Without prejudice to the generality of the foregoing power, the Supreme Court may, by such rules, enable or require all or any of the powers and duties conferred and imposed on the Court by this Act, in respect of the following matters, that is to say :- (a)the holding and conducting of meetings to ascertain the wishes of creditors and contributories ; (b)the settling of lists of contributories and the rectifying of the register of members where required, and collecting and applying the assets ; (c) the payment, delivery, conveyance, surrender or transfer of money, property, books or papers to the liquidator; (d) the making of calls ; and (e)the fixing of a time within which debts and claims shall be proved ; to be exercised or performed by the Official Liquidator or any other liquidator as an officer of the Court, and subject to the control of the Court: Provided that the liquidator shall not, without the special leave of the Court, rectify the register of members or make any call.

(3) Until rules are made by the Supreme Court as aforesaid, all rules made by any High Court on the matters referred to in this section and in force at the commencement of this Act, shall continue to be in force in so far as they are not inconsistent with the provisions of this Act in that High Court and in courts subordinate thereto.

2[(4) All rules made by the Central Government under sub-section

(1) of section 549 and in force immediately before the ---------------------------------------------------------------------- 1 The words "and the sub-division of the shares of a company" omitted by Act 65 of 1960, s. 212. 2 Ins. by s. 212, ibid. ---------------------------------------------------------------------- 408/62 commencement of the Companies (Amendment) Act, 1960 (65 of 1960),shall continue in force and be deemed to have been made by the Supreme Court unless and until they are superseded by rules made by the Supreme Court after such commencement.] Repeals and savings

Repeal of Acts specified in Schedule XII. 644.Repeal of Acts specified in Schedule XII.The enactments mentioned in Schedule XII are hereby repealed.

Saving of orders, rules, etc., in force at commencement of Act. 645.Saving of orders, rules, etc., in force at commencement of Act. Nothing in this Act shall affect any order, rule, regulation, appointment, conveyance, mortgage, deed, document or agreement made, fee directed, resolution passed, direction given, proceeding taken,instrument executed or issued, or thing done, under or in pursuance of any previous companies law; but any such order, rule, regulation, appointment, conveyance, mortgage, deed, document, agreement, fee, resolution, direction, proceeding, instrument or thing shall, if in force at the commencement of this Act, continue to be in force, and so far as it could have been made, directed, passed, given, taken, executed, issued or done under or in pursuance of this Act, shall have effect as if made, directed, passed, given, taken, executed, issued or done under or in pursuance of this Act.

Saving of operation of section 138 of Act 7 of 1913. 646.Saving of operation of section 138 of Act 7 of 1913. Nothing in this Act shall affect the operation of section 138 of the Indian Companies Act, 1913 (7 of 1913), as respects inspectors, or as resp- ects the continuation of an inspection begun by inspectors, appoin- ted before the commencement of this Act; and the provisions of this Act shall apply to or in relation to a report of inspectors appointed under the said section 138 as they apply to or in relation to a report of inspectors appointed under section 235 or 237 of this Act.

Saving of pending proceedings for winding up. 647.Saving of pending proceedings for winding up. Where the winding up of a company has commenced before the commencement of this Act-

(i)sub-section (7) of section 555 shall apply in respect of any moneys paid into the Companies Liquidation Account whether before or after such commencement ; and (ii)the other provisions with respect to winding up contained in this Act shall not apply, but the company shall be wound up in the same manner and with the same incidents as if this Act had not been passed: 408/63 1[Provided that where the proceedings in any such winding up are pending at the commencement of the Companies (Amendment) Act, 1960,- (a)sections 463, 502, 515 and 524 shall, as far as may be, also apply in relation thereto ; (b)the liquidator appointed by the Court and functioning in any such winding up shall in such manner and at such time as may be prescribed by the Central Government, pay the moneys received by him as such liquidator, into the public account of India in the Reserve Bank of India.]

Saving of prosecutions instituted by liquidator or Court under section237 of Act 7 of 1913. 648.Saving of prosecutions instituted by liquidator or Court under section 237 of Act 7 of 1913.Nothing in this Act shall affect any prosecution instituted or ordered by the Court to be instituted under section 237 of the Indian Companies Act, 1913 (7 of 1913); and the Court shall have the same power of directing how any costs, charges, and expenses properly incurred in any such prosecution are to be defrayed as it would have had, if this Act had not been passed.

Construction of references to former enactments in documents. 649.Construction of references to former enactments in documents.Any document referring to any former enactment relating to companies shall be construed as referring to the corresponding enactment in this Act.

[Repeald.] 650. [Construction of "registrar of joint stock companies" in Act 21 of 1860.] Rep. by the Companies (Amendment) Act, 1960 (65 of 1960), s. 214.

Construction of references to extraordinary resolution in articles,etc. 651.Construction of references to extraordinary resolution in articles, etc. Any reference to an extraordinary resolution in the articles of a company, or in any resolution passed in general meeting by the company, or in any other instrument, or in any law in force immediately before the commencement of this Act, shall, with effect on and from such commencement, be construed as a reference to a special resolution.

Appointment under previous companies laws to have effect as if madeunder Act. 652.Appointment under previous companies laws to have effect as if made under Act. Any person appointed to any office under or by virtue of any previous companies law shall be deemed to have been appointed to that office under or by virtue of this Act. ---------------------------------------------------------------------- 1 Ins. by Act 65 of 1960, s. 213. ---------------------------------------------------------------------- 408/64

Former registration offices continued. 653.Former registration offices continued. The offices existing at the commencement of this Act for the registration of companies shall be continued as if they had been established under this Act.

Registers under previous companies laws to be deemed to be part ofregisters under Act. 654.Registers under previous companies laws to be deemed to be part of registers under Act. Any register kept under the provisions of any previous companies law shall be deemed to be part of the register to be kept under the corresponding provisions of this Act.

Funds and accounts under Act to be in continuation of funds andaccounts under previous companies law. 655.Funds and accounts under Act to be in continuation of funds and accounts under previous companies law. All funds constituted and accounts kept under this Act shall be deemed to be in continuation of the corresponding funds constituted and accounts kept under previous companies laws.

Saving of incorporation under repealed Acts. 656.Saving of incorporation under repealed Acts.Nothing in this Act shall affect the incorporation of any company registered under any enactment hereby repealed.

Saving of certain Tables under previous companies laws. 657.Saving of certain Tables under previous companies laws.Nothing in this Act shall affect- (a) Table B in the Schedule annexed to Act No. XIX of 1857, or any part thereof, so far as the same applies to any company existing at the commencement of this Act; (b) Table A in the First Schedule annexed to the Indian Companies Act, 1882 (6 of 1882), or any part thereof, so far as the same applies to any company existing at the commen- cement of this Act ; (c)Table A in the First Schedule to the Indian Companies Act, 1913 (7 of 1913), either as originally contained in that Sch- edule or as altered in pursuance of section 151 of that Act, so far as the same applies to any company existing at the commencement of this Act.

Section 6 of the General Clauses Act, 1897 to apply in addition tosections 645 to 657 of Act. 658.Section 6 of the General Clauses Act, 1897 to apply in addition to sections 645 to 657 of Act.The mention of particular matters in sections 645 to 657 or in any other provision of this Act shall not prejudice the general application of section 6 of the General Clauses Act, 1897 (10 of 1897), with respect to the effect of repeals. 408/65 SCHE TABLE A.--Regulations for management of a company limited by shares. SCHEDULE I

[See sections 2 (2), 14, 28 (1), 29 and 223]

1. (1) In these regulations- (a) " the Act" means the Companies Act, 1956; (b) " the seal" means the common seal of the company.

(2) Unless the context otherwise requires, words or expressions contained in these regulations shall bear the same meaning as in the Act or any statutory modification thereof in force at the date at which these regulations become binding on the company. Share Capital and Variation of Rights 2. Subject to the provisions of section 80, any preference shares may, with the sanction of an ordinary resolution, be issued on the terms that they are, or at the option of the company are liable, to be redeemed on such terms and in such manner as the company before the issue of the shares may, by special resolution, determine.

3. (1) If at any time the share capital is divided into different classes of shares, the rights attached to any class (unless otherwise provided by the terms of issue of the shares of that class) may, subject to the provisions of sections 106 and 107, and whether or not the company is being wound up, be varied with the consent in writing of the holders of three-fourths of the issued shares of that class, or with the sanction of a special resolution passed at a separate 1* * * meeting of the holders of the shares of that class.

(2) To every such separate 1* * * meeting, the provisions of these regulations relating to general meetings shall mutatis mutandis apply, but so that the necessary quorum shall be two persons at least holding or representing by proxy one-third of the issued shares of the class in question. 4. The rights conferred upon the holders of the shares of any class issued with preferred or other rights shall not, unless otherwise expressly provided by the terms of issue of the shares of that class, be deemed to be varied by the creation or issue of further shares ranking pari passu therewith. ---------------------------------------------------------------------- 1 The word "general" omitted by Act 65 of 1960, s. 215. ---------------------------------------------------------------------- 408/66

5. (1) The company may exercise the powers of paying com- missions conferred by section 76, provided that the rate per cent. or the amount of the commission paid or agreed to be paid shall be dis- closed in the manner required by that section.

(2) The rate of the commission shall not exceed the rate of five per cent. of the price at which the shares in respect whereof the same is paid are issued or an amount equal to five per cent. of such price, as the case may be.

(3) The commission may be satisfied by the payment of cash or the allotment of fully or partly paid shares or partly in the one way and partly in the other.

(4) The company may also, on any issue of shares, pay such brokerage as may be lawful. 6. Except as required by law, no person shall be recognised by the company as holding any share upon any trust, and the company shall not be bound by, or be compelled in any way to recognise (even when having notice thereof) any equitable, contingent, future or partial interest in any share, or any interest in any fractional part of a share, or (except only as by these regulations or by law otherwise provided) any other rights in respect of any share except an absolute right to the entirety thereof in the registered holder.

7. (1) Every person whose name is entered as a member in the register of members shall be entitled to receive within three months after allotment or 1[within two months after the application for the] registration of transfer (or within such other period as the conditions of issue shall provide)- (a) one certificate for all his shares without payment ; or (b) several certificates, each for one or more of his shares, upon payment of one rupee for every certificate after the first.

(2)Every certificate shall be under the seal and shall specify the shares to which it relates and the amount paid up thereon.

(3)In respect of any share or shares held jointly by several persons, the company shall not be bound to issue more than one certi- ficate, and delivery of a certificate for a share to one of several joint holders shall be sufficient delivery to all such holders. ---------------------------------------------------------------------- 1 Ins. by G.S.R. 631. dated the 23rd April, 1966, see Gazette of India, 1966, Pt. II, 3(i), p. 789. ---------------------------------------------------------------------- 409 8.if a share certificate is defaced, lost or destroyed,it may be renewed on payment of such fee, if any, not exceeding 1[two rupees], and on such terms, if any, as to evidence and indemnity, and the pay- ment of out-of-pocket expenses incurred by the company in investi- gating evidence, as the directors think fit. Lien

9. (1) The company shall have a first and paramount lien- (a)on every share (not being a fully-paid share), for all moneys(whether presently payable or not) called, or payable at a fixed time, in respect of that share ; and (b) on all shares (not being fully-paid shares) standing registered in the name of a single person, for all moneys presently payable by him or his estate to the company: Provided that the Board of directors may at any time declare any share to be wholly or in part exempt from the provisions of this clause.

(2) The company's lien, if any, on a share shall extend to all dividends payable thereon. 10. The company may sell, in such manner as the Board thinks fit, any shares on which the company has a lien: Provided that no sale shall be made- (a)unless a sum in respect of which the lien exists is presently payable ; or (b)until the expiration of fourteen days after a notice in writing stating and demanding payment of such part of the amount in respect of which the lien exists as is presently payable, has been given to the registered holder for the time being of the share or the person entitled thereto by reason of his death or insolvency.

11 (1)To give effect to any such sale, the Board may authorize some person to transfer the shares sold to the purchaser thereof.

(2) The purchaser shall be registered as the holder of the shares comprised in any such transfer.

(3) The purchaser shall not be bound to see to the application of the purchase money, nor shall his title to the shares be affected ---------------------------------------------------------------------- 1 Subs. by G.S.R. 631, dated the 23rd April, 1966, for "eight annas ", see Gazette of India, 1966, Pt. 11, Sec. 3(i), p. 789. ---------------------------------------------------------------------- 410 by any irregularity or invalidity in the proceedings in reference to the sale.

12.(1) The proceeds of the sale shall be received by the company and applied in payment of such part of the amount in respect of which the lien exists as is presently payable.

(2)The residue, if any, shall, subject to a like lien for sums not presently payable as existed upon the shares before the sale, be paid to the person entitled to the shares at the date of the sale. Calls on Shares

13.(1) The Board may, from time to time, make calls upon the members in respect of any moneys unpaid on their shares (whether on account of the nominal value of the shares or by way of premium) and not by the conditions of allotment thereof made payable at fixed times: Provided that no call shall exceed one-fourth of the nominal value of the share or be payable at less than one month from the date fixed for the payment of the last preceding call.

(2)Each member shall, subject to receiving at least fourteen days' notice specifying the time or times and place of payment, pay to the company, at the time or times and place so specified, the amount called on his shares.

(3)A call may be revoked or postponed at the discretion of the Board. 14.A call shall be deemed to have been made at the time when the resolution of the Board authorizing the call was passed and may be required to be paid by instalments. 15.The joint holders of a share shall be jointly and severally liable to pay all calls in respect thereof.

16.(1) If a sum called in respect of a share is not paid before or on the day appointed for payment thereof, the person from whom the sum is due shall pay interest thereon from the day appointed for payment thereof to the time of actual payment at five per cent. per annum or at such lower rate, if any, as the Board may determine.

(2)The Board shall be at liberty to waive payment of any such interest wholly or in part. 411

17.(1) Any sum which by the terms of issue of a share becomes payable on allotment or at any fixed date, whether on account of the nominal value of the share or by way of premium, shall, for the purposes of these regulations, be deemed to be a call duly made and payable on the date on which by the terms of issue such sum becomes payable.

(2)In case of non-payment of such sum, all the relevant provisions of these regulations as to payment of interest and expenses, forfeiture or otherwise shall apply as if such sum had become payable by virtue of a call duly made and notified. 18. The Board- (a) may, if it thinks fit, receive from any member willing to advance the same, all or any part of the moneys uncalled and unpaid upon any shares held by him; and (b) upon all or any of the moneys so advanced, may (until the same would, but for such advance, become presently payable) pay interest at such rate not exceeding, unless the company in general meeting shall otherwise direct, six per cent. per annum, as may be agreed upon between the Board and the member paying the sum in advance. Transfer of shares

19. (1) The instrument of transfer of any share in the company shall be executed by or on behalf of both the transferor and transferee.

(2) The transferor shall be deemed to remain a holder of the share until the name of the transferee is entered in the register of members in respect thereof. 1[20. Subject to the provisions of section 108, the share in the company shall be transferred in the following form, namely:- Date of presentation to the prescribed authority. FORM No. 7B SHARE TRANSFER FORM FOR THE CONSIDERATION stated below the "Transferor(s) named do hereby transfer to the "Transferee(s)" named, his (their) executors, administrators and assigns, the shares specified below subject to the conditions on which the said shares are now held by the ---------------------------------------------------------------------- 1 Subs. by G.S.R. 631, dated the 23rd April, 1966, for regulation 20, see Gazette of India, 1966, Pt. II, See. 3(i), p. 789. ---------------------------------------------------------------------- 412 Transferor(s) and the Transferee(s) do hereby agree to accept and hold the said shares subject to the conditions aforesaid. ---------------------------------------------------------------------- Full Name of Company ---------------------------------------------------------------------- Number and full No.in Figures No. in words Description Equity/ description of Pref. shares shares ---------------------------------------------------------------------- Distinctive Numbers --------------------------------------------------------------------- Whether the said shares are dealt in or quoted on a recognised Stock-Exchange If reply to above is Yes, Name of St- ock Exchange should be indicated. ---------------------------------------------------------------------- TRANSFER FROM Transferor(s) names in full (Preferably type written or in block capitals). ---------------------------------------------------------------------- SCHE

[See section 6(c)]

[See section 6(c)]

[See sections 44(2)(a) and 56]

[See sections 44(2)(a) and 56]

1. (1) Save as hereinafter provided in clause 27, the main objects of the company, with the names, addresses, descriptions and occupations of the signatories of the memorandum and the number of shares subscribed for by them.

(2)The number and classes of shares, if any, and the nature and extent of the interest of the holders in the property and profits of the company.

(3) The number of redeemable preference shares intended to be issued, with the date of redemption or, where no date is fixed, the period of notice required for redeeming the shares and the proposed method of redemption.

2. (1) The number of shares, if any, fixed by the articles as the qualification of a director.

(2) Any provision in the articles as to the remuneration of the directors whether for their services to the company as directors, managing directors or otherwise.

3. (1) The names, addresses, descriptions and occupations of- (a) the directors or proposed directors ; (b)the managing director or proposed managing Director. if any ; ----------------------------------------------------------------------- 1 Serials 23 to 49 omitted by Act 31 of 1965, s. 61 (w.e.f. 15- 10-1965). ---------------------------------------------------------------------- 441 (c) the managing agent or proposed managing agent, if any; (d)secretaries and treasurers or proposed secretaries and treasurers,if any; (e) the manager or proposed manager, if any: 1[Provided that: - (i) where any such person is already a director, managing director or manager of any other company, or (ii)where any such person (including a firm or a body corporate) is already a managing agent or secretaries and treasurers of any other company, the matters to be specified under this clause shall include the names of all the companies in which such person is a director, managing director or managing agent or secretaries and treasurers or manager, and where any such person is a firm or a body corporate, the said particulars shall also be given in respect of every partner of the firm or, as the case may be, in respect of every director of the body corporate.]

(2) Any provision in the articles or in any contract which has been entered into as to the appointment of a managing director, managing agent, secretaries and treasurers or manager, the remunera- tion payable to him or them, and the compensation, if any, payable to him or them for loss of office. 4. In, the case of a company managed by a managing agent or secretaries and treasurers which is a body corporate, the subscribed capital of that body. 5. Where shares are offered to the public for subscription, particulars as to- (a) the minimum amount which, in the opinion of the directors or of the signatories of the memorandum arrived at after due inquiry, must be raised by the issue of those shares in order to provide the sums, or, if any part thereof is to be defrayed in any other manner, the balance of the sums, required to be provided in respect of each of the ---------------------------------------------------------------------- 1 Added by Notifn. No. G.S.R. 129, dated the 3rd January, 1968, see Gazette of India, Pt. 11, Sec. 3(i), p. 104. ---------------------------------------------------------------------- 442 following heads and distinguishing the amount required under each head: - (i)the purchase price of any property purchased or to be purchased which is to be defrayed in whole or in part out of the proceeds of the issue; (ii) any preliminary expenses payable by the company, and any commission so payable to any person in consideration of his agreeing to subscribe for, or of his procuring or agreeing to procure subscriptions for, any shares in the company; (iii)the repayment of any moneys borrowed by the company in respect of any of the foregoing matters; (iv)..working capital; (v) any other expenditure, stating the nature and purpose thereof and the estimated amount in each case; and (b) the amounts to be provided in respect of the matters aforesaid otherwise than out of the proceeds of the issue and the sources out of which those amounts are to be provided. 6. The time of the opening of the subscription lists. 7. The amount payable on application and allotment on each share, and in the case of a second or subsequent offer of shares, the amount offered for subscription on each previous allotment made within the two preceding years, the amount actually allotted, and the amount, if any, paid on the shares so allotted. 8. The substance of any contract or arrangement or proposed contract or arrangement, whereby any option or preferential right of any kind has been or is proposed to be given to any person to subscribe for any shares in or debentures of, a company, giving the number, description and amount of any such shares or debentures and including the following particulars of the option or right:- (a) the period during which the option or right is exercisable; (b)the price to be paid for shares or debentures subscribed for under the option or right; 442A (c) the consideration, if any, given or to be given for the option or right or for the right thereto; (d) the names, addresses, descriptions and occupations of the persons to whom the option or right or the right thereto has been given or is proposed to be given or, if given to existing shareholders or debenture holders as such, the description and numbers of the relevant shares or debentures; (e) any other material fact or circumstances relevant to the grant of the option or right. Explanation.-Subscribing for shares or debentures shall, for the purposes of this clause, include acquiring them from a person to whom they have been allotted or agreed to be allotted with a view to his offering them for sale. 9. The number, description, and amount of shares and debentures which within the two preceding years have been issued, or agreed to be issued, as fully or partly paid up otherwise than in cash, and in the latter case the extent to which they are so paid up, and in either case the consideration for which those shares or debentures have been issued or agreed to be issued. 443 10. The amount paid or payable by way of premium, if any, on each share which has been issued within the two years preceding the date of the prospectus, or is to be issued, stating the dates or proposed dates of issue and, where some shares have been or are to be issued at a premium and other shares of the same class at a lower premium, or at par or at a discount, the reasons for the differentiation and how any premiums received have been or are to be disposed of. 11. Where any issue of shares or debentures is underwritten, the names of the underwriters, and the opinion of the directors that the resources of the underwriters are sufficient to discharge their obligations.

12. (1) As respects any property to which this clause applies- (a) the names, addresses, descriptions and occupations of the vendors ; (b)the amount paid or payable in cash, shares or debentures to the vendor and, where there is more than one separate vendor, or the company is a sub-purchaser, the amount so paid or payable to each vendor, specifying separately the amount, if any, paid or payable for goodwill; (c)the nature of the title or interest in such property acquired or to be acquired by the company; (d)short particulars of every transaction relating to the property completed within the two preceding years, in which any vendor of the property to the company or any person who is, or was at the time of the transaction, a promoter or a director or proposed director of the company had any interest, direct or indirect, specifying the date of the transaction and the name of such promoter, director or proposed director and stating the amount payable by or to such vendor, promoter, director or proposed director in respect of the transaction.

(2) The property to which sub-clause (1) applies is property purchased or acquired by the company or proposed so to be purchased or acquired, which is to be paid for wholly or partly out of the proceeds of the issue offered for subscription by the prospectus or the purchase or acquisition of which has not been completed at the date of the issue of the prospectus, other than property- (a)the contract for the purchase or acquisition whereof was entered into in the ordinary course of the company's 444 business, the contract not being made in contemplation of the issue nor the issue in consequence of the contract ; or (b)as respects which the amount of the purchase money is not material.

(3) For the purposes of this clause, where any of the vendors is a firm, the members of the firm shall not be treated as separate vendors, 13.The amount, if any, or the nature and extent of any consideration, paid within the two preceding years, or payable, as commission to any person (including commission so paid or payable to any sub under writer, who is a promoter or officer of the company) for subscribing or agreeing to subscribe, or procuring or agreeing to procure subscriptions for any shares in, or debentures of the company ; and giving also the following particulars, namely:- (a) the name, address, description and occupation of each such person ; (b) particulars of the amounts which each has under written or sub-underwritten as aforesaid ; (c) the rate of the commission payable to each for such underwriting or sub-underwriting; (d) any other material term or condition of the underwriting or sub-underwriting contract with each such person ; and (e) when any such person is a company or a firm, the nature of any interest, direct or indirect such company or firm of any promoter or officer of the company in respect of which the prospectus is issued.

14. (1) Save as hereinafter provided in clause 27, the amount or estimated amount of preliminary expenses and the persons by whom any of those expenses have been paid or are payable.

(2) Save as aforesaid, the amount or estimated amount of the expenses of the issue and the persons by whom any of those expenses have been paid or are payable. 15. Any amount or benefit paid or given within the two preceding years or intended to be paid or given to any promoter or officer, and the consideration for the payment or the giving of the benefit. 445

16. (1) The dates of, parties to, and general nature of- (a) every contract appointing or fixing the remuneration of a managing director, managing agent, secretaries and treasurers or manager whenever entered into, that is to say, whether within, or more than, two years before the date of the prospectus; (b)every other material contract, not being a contract entered into in the ordinary course of the business carried on or intended to be carried on by the company or a contract entered into more than two years before the date of the prospectus.

(2) A reasonable time and place at which any such contract or a copy thereof may be inspected. 17. The names and addresses of the auditors, if any, of the company.

18. (1) Full particulars of the nature and extent of the interest, if any, of every director or promoter- (a)in the promotion of the company ; or (b)in any property acquired by the company within two years of the date of the prospectus or proposed to be acquired by it.

(2) Where the interest of such a director or promoter consists in being a member of a firm or company, the nature and extent of the interest of the firm or company, with a statement of all sums paid or agreed to be paid to him or to the firm or company in cash or shares or otherwise by any person either to induce him to become, or to qualify him as, a director, or otherwise for services rendered by him or by the firm or company in connection with the promotion or formation of the company. 19. If the share capital of the company is divided into different classes of shares, the right of voting at meetings of the company conferred by, and the rights in respect of capital and dividends attached to, the several classes of shares respectively. 20. Where the articles of the company impose any restrictions upon the members of the company in respect of the right to attend, 446 speak or vote at meetings of the company or of the right to transfer shares, or upon the directors of the company in respect of their powers of management, the nature and extent of those restrictions.

21. (1) In the case of a company which has been carrying on business, the length of time during which the business of the company has been carried on.

(2) If the company proposes to acquire a business which has been carried on for less than three years, the length of time during which the business has been carried on,

22. (1) If any reserves or profits of the company or' any of its subsidiaries have been capitalised, particulars of the capitalisation.

(2) Particulars of the surplus arising from any revaluation of the assets of the company or any of its subsidiaries during the two years preceding the date of the prospectus and the manner in which such surplus has been dealt with. 23. A reasonable time and place at which copies of all balance- sheets and profit and loss accounts, if any, on which the report of the auditors under Part II of this Schedule is based, may be inspected. PART REPORTS TO BE SET OUT. PART II.-REPORTS TO BE SET OUT

24. (1) A report by the auditors of the company with respect to- (a)profits and losses and assets and liabilities, in

accordance with sub-clause (2) or (3) of this clause, as the case may require ; and (b)the rates of the dividends, if any, paid by the company in respect of each class of shares in the company for each of the five financial years immediately preceding the issue of the prospectus, giving particulars of each class of shares on which such dividends have been paid and particulars of the cases in which no dividends have been paid in respect of any class of shares for any of those years; 447 and, if no accounts have been made up in respect of any part of the period of five years ending on a date three months before the issue of the prospectus, containing a statement of that fact 1[and accompanied by a statement of the accounts of the company in respect of that part of the said period up to a date not earlier than six months of the date of issue of the prospectus indicating the profit or loss for that period and the assets and liabilities position as at the end of that period together with a certificate from the auditors that such accounts have been examined and found correct by them. The said statement may indicate the nature of provision or adjustments made or are yet to be made].

(2) If the company has no subsidiaries, the report shall- (a) so far as regards profits and losses, deal with the profits or losses of the company (distinguishing items of a non. recurring nature) for each of the five financial years immediately preceding the issue of the prospectus; and (h)so far as regards assets and liabilities, deal with the assets and liabilities of the company at the last date to which the accounts of the company were made up.

(3) If the company has subsidiaries, the report shall- (a)so far as regards profits and losses, deal separately with

the company's profits or losses as provided by sub-clause (2) and in addition, deal either- (i) as a whole with the combined profits or losses of its subsidiaries, so far as they concern members of the company; or (ii)individually with the profits or losses of each subsidiary, so far as they concern members of the company; or, instead of dealing separately with the company's profits or losses, deal as a whole with the profits or losses of the company, and, so far as they concern members of the company, with the combined profits or losses of its subsidiaries; and ---------------------------------------------------------------------- 1 Ins. by Notifn. No. G.S.R. 129, dated the 3rd January, 1968, see Gazette of India, Pt. II, Sec. 3(i), p. 105. ---------------------------------------------------------------------- (b)so far as regards assets and liabilities, deal separately with the company's assets and liabilities as provided by sub-

clause (2) and in addition, deal either-- (i) as a whole with the combined assets and liabilities of its subsidiaries, with or without the company's assets and liabilities-, or (ii)individually with the assets and liabilities of each subsidiary; and shall indicate as respects the assets and liabilities of the subsidiaries, the allowance to be made for persons other than members of the company. 25. If the proceeds, or any part of the proceeds, of the issue of the shares or debentures are or is to be applied directly or indirectly- (i) in the purchase of any business; or (ii) in the purchase of an interest in any business and by reason of that purchase or, anything to be done in conse- quence thereof, or in connection therewith, the company will become entitled to an interest, as respects either the capital or profits and losses or both, in such business exceeding fifty per cent. thereof; a report made by accountants (who shall be named in the prospectus) upon- (a) the profits or losses of the business for each of the five financial years immediately preceding the issue of the prospectus; and (b) the assets and liabilities of the business at the last date to which the accounts of the business were made up, being a date not more than one hundred and twenty days before the date of the issue of the prospectus.

26. (1) If- (a) the proceeds, or any part of' the proceeds, of the issue of the shares or debentures are or is to be applied directly or indirectly in any manner resulting in the acquisition by the company of shares in any other body corporate; and 448A (b) by reason of that acquisition or anything to be done in consequence thereof or in connection therewith, that body corporate will become a subsidiary of the company; a report made by accountants (who shall be named in the prospectus) upon- (i) the profits or losses of the other body corporate for each of the five financial years immediately preceding the issue of the prospectus; and (ii) the assets and liabilities of the other body corporate at the last date to which its accounts were made up. 449

(2) The said report shall- (a)indicate how the profits or losses of the other body corporate dealt with by the report would, in respect of the shares to be acquired, have concerned members of the company and what allowance would have fallen to be made, in relation to assets and liabilities so dealt with, for holders of other shares, if the company had at all material times held the shares to be acquired ; and (b)where the other body corporate has subsidiaries, deal with the profits or losses and the assets and liabilities of the body corporate and its subsidiaries in the manner provided by

sub-clause (3) of clause 24 of this Schedule in relation to the company and its subsidiaries. PART PROVISIONS APPLYING TO PARTS I AND II OF SCHEDULE. PART III.-PROVISIONS APPLYING TO PARTS I AND II OF SCHEDULE 27. Clause 1 (so far as it relates to particulars of the signatories of the memorandum and the shares subscribed for by them) and clause 14 (so far as it relates to preliminary expenses) of this Schedule shall not apply in the case of a prospectus issued more than two years after the date at which the company is entitled to commence business. 28. Every person shall, for the purposes of this Schedule, be deemed to be a vendor who has entered into any contract, absolute or conditional, for the sale or purchase, or for any option of purchase, of any property to be acquired by the company, in any case where- (a)the purchase money is not fully paid at the date of the issue of the prospectus ; (b)the purchase money is to be paid or satisfied, wholly or in part, out of the proceeds of the issue offered for subs- cription by the prospectus ; (c)the contract depends for its validity or fulfilment on the result of that issue. 29. Where any property to be acquired by the company is to be taken on lease, this Schedule shall have effect as if the expression "vendor" included the lessor, the expression "purchase money" 450 included the consideration for the lease, and the expression "sub- purchaser" included a sub-lessee. 30. If in the case of a company which has been carrying on business, or of a business which has been carried on for less than five financial years, the accounts of the company or business have only been made up in respect of four such years, three such years, two such years or one such year, Part II of this Schedule shall have effect as if references to four financial years, three financial years, two financial years or one financial year, as the case may be, were substituted for references to five financial years. 31. Where the five financial years immediately preceding the issue of the prospectus which are referred to in Part II of this Schedule or in this Part cover a period of less than five years, references to the said five financial years in either Part shall have effect as if references to a number of financial years the aggregate period covered by which is not less than five years immediately preceding the issue of the prospectus were substituted for references to the five financial years aforesaid. 32. Any report required by Part II of this Schedule shall either-- (a) indicate by way of note any adjustments as respects the figures of any profits or losses or assets and liabilities dealt with by the report which appear to the persons making the report necessary; or (b)make those adjustments and indicate that adjustments have been made. 33. Any report by accountants required by Part II of this Schedule- (a)shall be made by accountants qualified under this Act for appointment as auditors of a company; and (b) shall not be made by any accountant who is an officer or servant, or a partner or in the employment of an officer or servant, of the company or of the company's subsidiary or holding company or of a subsidiary of the company's holding company. For the purposes of this clause, the expression "officer" shall include a proposed director but not an auditor. 451 SCHE SCHEDULE III (See section 70) FORM OF STATEMENT IN LIEU OF PROSPECTUS TO BE DELIVERED To REGISTRAR BY A COMPANY WHICH DOES NOT ISSUE A PROSPECTUS OR WHICH DOES NOT GO TO ALLOTMENT ON A PROSPECTUS ISSUED, AND REPORTS TO BE SET OUT THERE- IN PART PART I-FORM OF STATEMENT AND PARTICULARS TO BE CONTAINED THEREIN THE COMPANIES ACT, 1956 Statement in lieu of Prospectus delivered for registration by

[Insert the name of the company.]

Time and place at which (1) the

contracts or copies thereof or (2) (i) in the case of a contract not 456 reduced into writing, a memorandum giving full particulars thereof, and (ii) in the case of a contract wholly or partly in a language other than English, a copy of a translation thereof in English or embodying a translation in English of the parts in the other language, as the case may be, being a translation certified in the prescribed manner to be a correct translation, may be inspected. Names and addresses of the auditors of the company (if any). Full particulars of the nature and extent of the interest of every director, managing director, manag- ing agent, secretaries and treasur- ers or manager in the promotion of or in the property proposed to be acquired by the company, or where the interest of such a director consists in being a partner in a firm, the nature and extent of the interest of the firm, with a state- ment of all sums paid or agreed to be paid to him or to the firm in cash or shares, or otherwise, by any person either to induce him to become, or to qualify him as, a director, or otherwise for services rendered by him or by the firm in connection with the promotion or formation of the company. (Signatures of the persons above- named as directors or proposed ---------- directors, or of their agents ---------- authorized in writing.) ---------- Date 457 PART PART II-REPORTS TO BE SET OUT 1.Where it is proposed to acquire a business, a report made by accountants (who shall be named in the statement) upon- (a)the profits or losses of the business in respect of each of the five financial years immediately preceding the delivery of the statement to the Registrar ; and (b) the assets and liabilities of the business as at the last date to which the accounts of the business were made up.

2. (1) Where it is proposed to acquire shares in a body corporate which by reason of the acquisition or anything to be done in consequence thereof or in connection therewith will become a subsidiary of the company, a report made by accountants (who shall be named in the statement) with respect to the profits and losses and assets and liabilities of the other body corporate in accordance with

sub-clause (2) or (3) of this clause, as the case may require, indicating how the profits or losses of the other body corporate dealt with by the report would, in respect of the shares to be acquired, have concerned members of the company, and what allowance would have fallen to be made, in relation to assets and liabilities so dealt with, for holders of other shares, if the company had at all material times held the shares to be acquired.

(2) If the other body corporate has no subsidiaries, the report

referred to in sub-clause (1) shall- (a)so far as regards profits and losses, deal with the profits or losses of the body corporate in respect of each of the five financial years immediately preceding the delivery of the statement to the Registrar ; and (b)so far as regards assets and liabilities, deal with the assets and liabilities of the body corporate as at the last date to which the accounts of the body corporate were made up.

(3) If the other body corporate has subsidiaries, the report

referred to in sub-clause (1) shall- (a)so far as regards profits and losses, deal separately with the other body corporate's profits or losses as provided by

sub-clause (2) and in addition deal either- (i) as a whole with the combined profits or losses of its subsidiaries so far as they concern members of the other body corporate ; or 458 (ii) individually with the profits or losses of each subsidiary, so far as they concern members of the other body corporate ; or, instead of dealing separately with the other body corporate's profits or losses, deal as a whole with the profits or losses of the other body corporate and, so far as they concern members of the other body corporate, with the combined profits or losses of its subsidiaries ; and (b) so far as regards assets and liabilities, deal separately with the other body corporate's assets and

liabilities as provided by sub-clause (2) and, in addition, deal either- (i) as a whole with the combined assets and liabilities of its subsidiaries, with or without the other body corporate's assets and liabilities ; or (ii) individually with the assets and liabilities of each subsidiary ; and shall indicate, as respects the assets and liabilities of the subsidiaries, the allowance to be made for persons other than members of the company. PART PART III-PROVISIONS APPLYING TO PARTS I AND II OF THIS SCHEDULE

3. (1) In this Schedule, the expression "vendor" includes a vendor as defined in Part III of Schedule II.

(2) Clause 31 of Schedule II shall apply to the interpretation of Part II of this Schedule as it applies to the interpretation of Part II of Schedule II. 4. If in the case of a business which has been carried on, or of a body corporate which has been carrying on business, for less than five financial years, the accounts of the business or body corporate have only been made up in respect of four such years, three such years, two such years or one such year, Part II of this Schedule shall have effect as if references to four financial years, three financial years, two financial years or one financial year, as the case may be, were substituted for references to five financial years. 5. Any report required by Part II of this Schedule shall either- (a) indicate by way of note any adjustments as respects the figures of any profits or losses or assets and liabilities dealt 459 with by the report which appear to the person making the report necessary ; or (b)make those adjustments and indicate that adjustments have been made. 6. Any report by accountants required by Part II of this Schedule- (a)shall be made by accountants qualified under this Act for appointment as auditors of a company; and (b)shall not be made by any accountant who is an officer or servant, or a partner or in the employment of an officer or servant, of the company or of the company's subsidiary or holding company or of a subsidiary of the company's holding company. For the purposes of this clause, the expression "officer" shall include a proposed director but not an auditor. SCHE SCHEDULE IV

[See section 44(2)(b)]

[Insert the name of the company.]

Pursuant to clause (b) of sub-section (2) of section 44 of the Companies Act, 1956. Delivered for registration by The nominal share capital of the Rs............ company. 460 Divided into... shares of Rs...each. " " Rs...each. " " Rs...each. Amount (if any) of above capital shares of Rs....each. which consists of redeemable preference share. The earliest date on which the company has power to redeem these shares. Names, addresses, descriptions and occupations of- (a) directors or proposed directors; (b) managing director or proposed managing director ; (c) managing agent or proposed managing agent; (d) Secretaries and treasurers or proposed secretaries and treasures; (e) manager or proposed manager. Any provision in the articles of the company, or in any contract irrespective of the time when it was entered into, as to the appointment of and remuneration payable to the persons referred to in (a), (b), (c), (d) and (e) above. Amount of shares issued Shares . . . ...........Shares. Amount of commission paid or pay- able in connection therewith. Amount of discount, if any, allowed on the issue of any shares, or so much thereof as has not been written off at the date of the statement. 461 Unless more than two years have lapsed since the date on which the company was entitled to commence business: - Amount of preliminary expenses Rs............. By whom those expenses have been paid or are payable. Amount paid or intended to be paid Name of promoter: to any promoter. Amount Rs ....... Consideration for the payment. Consideration: Any other benefit given or intend- Name of promoter: ed to be given to any promoter. Nature and value of benefit: Consideration for the benefit. Consideration: If the share capital of the company is divided into different classes of shares, the right of voting at meetings of the company conferred by, and the rights in respect of capital and dividends attached to, the several classes of shares respectively. Number and amount of shares and 1 shares of Rs....fully debentures issued within the two paid. years preceding the date of this 2....shares uponwhich statement as fully or partly paid up Rs.... per share credited otherwise than for cash or agreed as paid. to be so issued at the date of this statement. Consideration for the issue of those 3 debentures. for Rs..... shares or debentures each. 4. Consideration: Number, description and amount of 1 shares of Rs..... and any shares or debentures which debentures of Rs...... any person has or is entitled to be given an option to subscribe for, or to acquire from, a person to whom they have been allotted or agreed to be allotted with a view to his offering them for sale. 462 Period during which the option 2. Until is exercisable. Price to be paid for shares 3. or debentures subscribed for or acquired under the option. Consideration for the option 4. Consideration: or right to option. Persons to whom the option or the 5.Names and addresses: right to option was given or, if given to existing shareholders or debenture holders as such, the rel- evant shares or debentures. Names, addresses, descriptions and occupations of vendors of property

(1)purchased or----acquired by the company within the two years preceding the date of this

statement or (2) agreed or proposed to be purchased or acquired by the company, except where the contract for its purchase or acquisition was entered into in the ordinary course of business and there is no connec- tion between the transaction and the company ceasing to be a private company or where the amount of the purchase money is not material. Amount (in cash, shares or deben- tures) paid or payable to each separate vendor. Amount paid or payable in cash, Total purchase price Rs...... shares or debentures for each such property, specifying the Cash Rs.... amount paid or payable for good Shares Rs. ... will. Debentures Rs.... Goodwill Rs.... Short particulars of every trans- action relating to each such property which was completed within the 463 two preceding years and in which any vendor to the company or any person who is, or was at the time thereof, a promoter, director or proposed director of the company had any interest direct or indirect. Amount (if any) paid or payable as Amount paid........... commission for subscribing or Amount payable ....... agreeing to subscribe or procuring Rate per cent......... or agreeing to procure subscriptions for any shares or debentures in the company; or rate of the commission. The number of shares, if any, which persons have agreed to subscribe for a commission. If it is proposed to acquire any business, the amount, as certified by the persons by whom the accounts of the business have been audited, of the net profits of the business in respect of each of the five years immediately preceding the date of this statement, provided that in the case of a business which has been carried on for less than five years, and the accounts of which have only been made up in respect of four years, three years, two years or one year, the above requirements shall have effect as if references to four years, three years, two years or one year, as the case may be, were substituted for references to five years, and in any such case, the statement shall say how long the business to be acquired has been carried on. Where the financial year with respect to which the accounts of the business have 464 been made up is greater or less than a year, references to five years, four years, three years, two years and one year in this para- graph shall have effect as if references to such number of financial years as, in the aggregate, cover a period of not less than five years, four years, three years, two years or one year, as the case may be, were substituted for references to three years, two years and one year respectively. Dates of, parties to, and general nature of- (a) Contract appointing or fixing the remuneration of directors, managing director, managing agent, secretaries and treasurers or mana- ger; and (b) every other material contract other than (i) contracts entered into in the ordinary course of the business intended to be carried on by the company or (ii) entered into more than two years before the delivery of this statement.

Time and place at which (1) the contracts or copies thereof ; or

(2) (i) in the case of a contract not reduced into writing, a memorandum giving full particulars thereof, and (ii) in the case of a contract wholly or partly in a language other than English, a copy of translation thereof in English or embodying a translation in English of the parts in 465 the other language, as the case may be, being a translation certified in the prescribed manner to be a correct translation, may be inspected. Names and addresses of the auditors of the company. Full particulars of the nature and extent of the interest of every director, managing director, manag- ing agent, secretaries and treasurers or manager, in any property purchased or acquired by the company within the two years preceding the date of this statement or proposed to be purchased or acquired by the company or, where the interest of such a director consists in being a partner in a firm, the nature and extent of the interest of the firm, with a statement of all sums paid or agreed to be paid to him or to the firm in cash or shares, or otherwise, by any person either to induce him to become or to qualify him as, a director, or otherwise for services rendered or to be rendered to the company by him or by the firm. Rates of the dividends (if any) paid by the company in respect of each class of shares in the company in each of the five financial years immediately preceding the date of this statement or since the incorporation of the company, whichever period is shorter. 466 Particulars of the cases in which no dividends have been paid in res- pect of any class of shares in any of these years. ---------------------------------------------------------- (Signatures of the persons above- --------------- named as directors or proposed --------------- directors or of their agents autho- --------------- rized in writing.) Date. PART PART II-REPORTS TO BE SET OUT 1.If unissued shares or debentures of the company are to be ap- plied in the purchase of a business, a report made by accountants (who shall be named in the statement) upon- (a)the profits or losses of the business in respect of each of the five financial years immediately preceding the delivery of the statement to the Registrar ; and (b) the assets and liabilities of the business as at the last date to which the accounts of the business were made up.

2. (1) If unissued shares or debentures of the company are to be applied directly or indirectly in any manner resulting in the acquisition of shares in a body corporate which by reason of the acquisition or anything to be done in consequence thereof or in connection therewith will become a subsidiary of the company, a report made by accountants (who shall be named in the statement) with respect to the profits and losses and assets and liabilities of the other body

corporate in accordance with sub-clause (2) or (3) of this clause, as the case may require, indicating how the profits or losses of the other body corporate dealt with by the report would, in respect of the shares to be acquired, have concerned members of the company, and what allowance would have fallen to be made, in relation to assets and liabilities so dealt with, for holders of other shares, if the company had at all material times held the shares to be acquired, 471 (h)of clause 3 (or, in the case of the first return, since the incorporation of the company) by persons who are still members or debenture holders and by persons who have ceased to be members or debenture holders respectively, 1[the dates of registration of transfers and the names of transferees or the relevant ledger folio containing particulars thereof]; (c) if the names aforesaid are not arranged in alphabetical order, having annexed thereto an index sufficient to enable the name of any person therein to be easily found. 6. All such particulars, with respect to the persons who at the date of the company's last annual general meeting are the directors of the company and with respect to any person who at that date is the managing agent, secretaries and treasurers, the manager or the secretary, of the company, as are by this Act required to be contained with respect to directors, the managing agent, secretaries and treasurers, the manager and the secretary respectively in the register of the directors, managing agents, secretaries and treasurers, managers and secretaries of a company 2[together with all such particulars with respect to those who had ceased to hold such office (that is, the office of director, managing agent, secretaries and treasurers, manager or secretary) on or before the date of the last annual general meeting and since the date referred to in sub-clause

(h) of clause (3) or in the case of the first return, since the incorporation of the company]. SCHE PART II.-FORM Limited ANNUAL RETURN of Private Limited made up to the day of 19 being the date of the last annual general meeting of the company. 1. Address. (Address of the registered office of the company.) ------------------------------------------------------------------- 2. Situation of Foreign Registers of Members and Debenture holders. (a) Name of every State or country outside India in which foreign register is kept. ---------------------------------------------------------------------- 1 Subs. by G. S. R. 631, dated the 23rd April, 1966, for "and the dates of registration of the transfers ", see Gazette of India, 1966, Pt. IT, See. 3(i), V. 789. 2 Ins. by Notifn. No. G. S. R. 279, dated the 17th April, 1958, see Gazette of India, 1958, Pt. II, See. 3(i), p. 206. ---------------------------------------------------------------------- 472 (b)Address of place in each such State or country in which a foreign register is kept. ------------------------------------------------------------- 3. Summary of Share Capital and Debentures (a) Nominal Share Capital. Nominal share capital----Rs divided into: (Insert number and class) shares of each ...........................shares of each .................................shares of each .................................shares of each (b) 1[Subscribed Share Capital] and Debentures. Number Class Number of shares of each class taken shares up to the date of the last annual shares general meeting (which number shares must agree with the total shown shares in the list as held by members on shares that date). Number of shares of each class issued shares subject to payment wholly in cash shares shares shares ---------------------------------------------------------------------- 1 Subs. by G.-S. R. 631, dated the 23rd April, 1966, for "Issued Share Capital",see Gazette of India, 1966, Pt. II, See. 3(i), p. 789. ---------------------------------------------------------------------- 473 Number Class Number of shares of each class issued shares. as fully paid up for a considera- shares. tion other than cash..... shares. shares. Number of shares of each class issued shares as partly paid up for a considera- issued as paid tion other than cash and extent up to the ext- to which each such share is so ent of Rs. per paid up. share Number Class Number of shares of each class taken shares up to the date of the last annual shares general meeting (which number shares must agree with the total shown shares in the list as held by members on shares that date). Number of shares of each class issued shares subject to payment wholly in cash ---- shares ---- shares ---- shares ---------------------------------------------------------------------- 1 Subs. by G.-S. R. 631, dated the 23rd April, 1966, for "Issued Share Capital",see Gazette of India, 1966, Pt. II, See. 3(i), p. 789. ---------------------------------------------------------------------- 473 Number Class Number of shares of each class issued shares. as fully paid up for a considera- shares. tion other than cash..... shares. shares. Number of shares of each class issued shares as partly paid up for a considera- issued as paid tion other than cash and extent up to the ext- to which each such share is so ent of Rs. per paid up. share shares issued as paid upto the extent of Rs per share shares issued as paid up to the extent of Rs per share shares issued as paid up to the extent of Rs........per share Number of shares (if any) of each.. shares class issued at a discount......... shares ............... shares ............... shares Amount of discount on the issue of Rs....... Rs shares which has not been written off at the date of last annual general meeting. Amount called.. Rs...per share on shares upon num- Rs...per share on...shares ber of shares of each.... Rs...per share on shares class. Rs...per share on...shares 474 Number Class Total amount of calls received, in- cluding payments on application and allotment and any sums re- ceived on shares forfeited. Rs......... Total amount (if any) agreed to be con- sidered as paid on shares number of shares shares of each class is- Rs on sued as fully paid shares up for a considera- sh as paid up to the extent of Rs........per share Number of shares (if any) of each.. shares class issued at a discount......... shares ............... shares ............... shares Amount of discount on the issue of Rs....... Rs shares which has not been written off at the date of last annual general meeting. Amount called.. Rs...per share on shares upon num- Rs...per share on...shares ber of shares of each.... Rs...per share on shares class. Rs...per share on...shares 474 Number Class Total amount of calls received, in- cluding payments on application and allotment and any sums re- ceived on shares forfeited. Rs......... Total amount (if any) agreed to be con- sidered as paid on shares number of shares shares of each class is- Rs on sued as fully paid shares up for a considera- shares tion other than cash. Total amount (if any) agreed to be considered as paid on shares number of shares shares of each class is- sued as partly paid shares up for a conside- shares ration other than cash. Total amount of calls unpaid Rs........ Total amount of the sums (if any) paid by way of commission in respect of any shares or debentures Rs.......... Total amount of the- sums (if any) allowed by way of discount in res- pect of any debentures since the date of the annual general meet- ing with reference to which the last annual return was submitted Rs........... Total number of shares of each class shares forfeited. shares shares shares 475 Total amount paid (if any) on shares Rs........ forfeited. Total amount of shares for which share Rs........ warrants to bearer are outstanding. Total amount of share warrants to bearer issued and surrendered res- pectively since the date of the Issued Rs......... annual general meeting with refer- Surrendered Rs........ ence to which the last annual re- turn was submitted. Number of shares comprised in each share warrant to bearer, specifying in the case of warrants of different kinds, particulars of each kind. 4. Particulars of Indebtedness. Total amount of indebtedness of the company in respect of all charges (including mortgages) which are required to be registered with the Registrar under the Companies Act, 1956 or which would have been required so to be registered if created on or after the 1st April, 1914. Rs -------------------------------------------------------------------- 5. 1[List of Past and Present Members and Debenture Holders] List of persons holding shares or stock in the company on the day of the annual general meeting, namely, the day of 19 ,and of persons who have held shares or stock therein at any time since the day of 19 when the previous annual meeting was ---------------------------------------------------------------------- 1 Subs. by Notifn. No. S.R.O. 1435, dated the 7th May, 1957, see Gazette of India, 1957, Pt. II, Sec. 3, p. 925, for "List of Past and Present Members". ---------------------------------------------------------------------- 476 held, or in the case of the first return, at any time since the incorporation of the company. --------------------------------------------------------------------- Folio in register Names, address, 1[Father's/ Number of sha- ledger containing descriptions Husband's res held by particulars and occupations, name] members at date if any of annual gene- ral meeting*. ----------------------------------------- Account of Shares ----------------------------------------- Particulars of shares transferred 2[Names of transferees R since the date of the previous an- or the relevant ledger e nual general meeting or, in the folio containing part- m case of the first return,since the iculars thereof.] a company, by (a) persons who are r still members and (b) persons who k have ceased to be members. s --------------------------------- Number Date of registration of transfer. ---------------------------------------------------------------------- (a) (b) --------------------------------------------------------------------- 3[ In the case of a company which has issued debentures particulars about its debenture holders, past and present, should also be furnished under this item, adapting the. form suitably for the purpose.] *The aggregate number of shares held by each member must be stated, and the aggregates must be added up so as to agree with the number of shares stated in the summary of share capital and debentures to have been taken up. When the shares are 'of different classes these columns should be subdivided so that the number of each class held, or transferred, may be shown separately. Where any shares have been converted into stock, the amount of stock held by each member must be shown. The date of registration of each transfer should be given as well as the number of shares transferred on each date. The particulars should be placed opposite the name of the transferor and not opposite that of the transferee, but the name of the transferee may be inserted in the " Remarks " column immediately opposite the particulars of each transfer. --------------------------------------------------------------------- 1 Ins. by Notifn. No. G.S.R. 1408, dated the 19th December, 1959, see Gazette of India, 1959, Pt. II, See. 3(ii), p. 1710. 2 Ins. by G. S. R. 631 dated the 23rd April, 1966, see Gazette of India, 1966, Pt. II, See. 3(i), P. 789. 3 Ins. by Notifn. No. S.R.O. 1435, dated the 7th May. 1957, see Gazette of India, 1957, Pt. II, Sec. 3, P. 925. --------------------------------------------------------------------- 476A Notes. 1[1. If either of the two immediately preceding returns has given, as at the date of the annual general meeting with reference to which it was submitted, the full particulars required as to the past and present members and the shares held and transferred by them, the return in question may contain only such of the particulars as relate to persons ceasing to be or becoming members since that date or two changes as compared with that date in the number of shares held by a member.] 2. If the names in the list are not arranged in alphabetical order, an index sufficient to enable the name of any person to be readily found must be annexed. --------------------------------------------------------------------- 1 Subs. by Notifn. No. G.S.R. dated the 21s February 1961, see Gazette of India, 1961, Pt. II, See. 3(i), p. 283. ---------------------------------------------------------------------

1[6. Particulars of Directors, Managing Agents, Secretaries and Treasurers, Managers and Secretaries, past and present. A. Particulars of the persons who are directors of the company on the day of the last annual general meeting, namely, the day of 19 and of persons who ceased to be directors on or before that date and since the date referred to in sub-clause (h) of clause 3 of Part I of Schedule V to the Companies Act, 1956, namely, the day of 19.. .. or, in the case of the first return, since the incorporation of the company. --------------------------------------------------------------------- Present name or Any former Nationality and Usual name and surna- name or names nationality of residential me in full (a). and surname origin if diff- address. in full. erent from pres- ent nationality. --------------------------------------------------------------------- 1 2 3 4 --------------------------------------------------------------------- Business occupation, Date of Date of Date of cess- and particulars of birth. appointment. ation, if any. directorships (a) managing agencies, managerships held in other companies/ bodies corporate. --------------------------------------------------------------------- 5 6 7 8 --------------------------------------------------------------------- --------------------------------------------------------------------- Note:-(a) Where the person holds the office of managing director, that fact should be specifically mentioned. --------------------------------------------------------------------- --------------------------------------------------------------------- 1 Subs. by Notifn. No. G.S.R. 279, dated the 17th April, 1958, see Gazette of India, 1958, Pt. II, Sec. 3(i), p. 206. ---------------------------------------------------------------------

B. Particulars of the person/persons who is/are managing agent/secretaries and treasurers of the company on the day of the last annual general meeting, namely, the day of 19 and of those who ceased to hold such offices on or before that date and since the date referred to in sub-clause (h) of clause 3 of Part I of Schedule V to the Act, namely, the day of 19 or, in the case of the to first return, since the incorporation of the company. --------------------------------------------------------------------- Where the managing agent Any former name Nationality and is an individual, present or names and nationality of name or names and surname surname in full. origin if different in full. Where the manag- from present natio- ing agent is, or secreta- nality (b) and (c). ries and treasurers are, a firm , the firm name (b).Where the managing agent is, or secretaries and treasurers are, a body corporate, the corporate name (c). --------------------------------------------------------------------- 1 2 3 --------------------------------------------------------------------- Usual residential Particulars of Date of appoint- Date address. (In the managing agen- ment, as managing of case of a firm or cies, offices agent/secretaries cessa- body corporate, of secretaries and treasurers in tion. the registered or and treasures the company filing if principal office.) directorships the annual return. any. managerships and secret- aryships ( in the case of in- dividuals) held in other compa- nies/ bodies corporate. --------------------------------------------------------------------- 4 5 6 7 ---------------------------------------------------------------------- --------------------------------------------------------------------- NOTES:(b) In the case of a firm, the full name, address and nationality of each partner and the date on which each became a partner should be indicated. (c) In the case of a body corporate, its corporate name and re- gistered or principal office should be shown along with the full name, address and nationality of each of its directors.

C. Particulars of the person who is manager/secretary of the company on the day of the last annual general meeting, namely, the day of 19 and of the person(s) who ceased to be manager/secretary on or before that date and since the date referred to in sub-clause (h) of clause 3 of Part I of Schedule V to the Act, namely, the.... . day of.... 19......, or, in the case of the first return, since the incorporation of the company. --------------------------------------------------------------------- Present name Any former name Nationality and Usual or names and or names and nationality of residential surname in surnames in full. origin, if diff- address. full. erent from pres- ent nationality. --------------------------------------------------------------------- 1 2 3 4 --------------------------------------------------------------------- Business, occupation and Date of Date of particulars of director- appointment. cessation, if any. ships (d) managing agen- cies, offices of secret- aries and treasurers, managerships and secret- aryships held in other companies/ bodies corporate. --------------------------------------------------------------------- 5 6 7 --------------------------------------------------------------------- --------------------------------------------------------------------- NOTE: (d) Where the person holds the office of managing director, the fact should be specifically mentioned. Signed...............,Director, Signed...............,Director/Managing Director/Managing Agent/Secretaries and Treasurers/ Manager/Secretary.] 480 "Director" includes any person who occupies the position of a director by whatsoever name called, and any person in accordance with whose directions or instructions the Board of Directors of the company is accustomed to act. "Name" includes a "forename", and "surname" in the case of a person usually known by a title different from his surname, means that title. "Former name" and "former surname" do not include- (a) in the case of a person usually known by a title different from his surname, the name by which he was known previous to the adoption of or succession to the title ; or (b) in the case of any person, a former name or surname where that name or surname was changed or disused before the person bearing the name attained the age of eighteen years or has been changed or disused for a period of not less than twenty years ; or (c) in the case of a married woman the name or surname by which she was known previous to the marriage. The names of all bodies corporate incorporated or carrying on business in India of which the director, managing agent, secretaries and treasurers, manager or secretary is also a director, managing agent, secretaries and treasurers, manager or secretary should be given, except bodies corporate of which the company making the return is the wholly-owned subsidiary or bodies corporate which are the wholly-owned subsidiaries either of the company or of another body corporate of which the company is the wholly-owned subsidiary. A body corporate is deemed to be the wholly-owned subsidiary of another if it has no members except that other and that other's wholly-owned subsidiaries and its or their nominees. If the space provided in the form is insufficient, particulars of other directorships, managing agencies, offices of secretaries and treasurers, managerships, or secretaryships should be listed on a separate statement attached to this return. Dates of birth need only be given in the case of a company which is subject to section 280 of the Companies Act, 1956, namely, a company which is not a private company or which, being a private company, is the subsidiary of a public company. Where all the partners in a firm are joint secretaries, the name and principal office of the firm may be stated. *Delivered for filing by............................... 1* * * * * * 2[Certificate to be given by a Director and the Managing Agent/ Secretaries and Treasurers/Manager/Secretary or two Directors of every company: We certify that the return states the facts as they stood on the date of the annual general meeting aforesaid correctly and completely]. --------------------------------------------------------------------- * This should be printed at the bottom of the first page of the return. 1 The heading " CERTIFICATES AND OTHER DOCUMENTS ACCOMPANYING ANNUAL RETURN " omitted by Notifn. No. S.R.O. 1435, dated the 7th May, 1957, see Gazette of India, 1957, Pt. II, Sec. 3, p. 925. 2 Ins. by Notifn. No. G.S.R. 1177, dated the 8th December, 1958, see Gazette of India, 1958, Pt. II, Sec. 3(i), p. 1217. --------------------------------------------------------------------- 481 Certificate to be given by a Director and the Managing Agent/ Secretaries and Treasurers, Manager/Secretary or by/ two Directors of every Private Company We certify that the company has not since the date of [the in- corporation of the company/the annual general meeting with reference to which the last annual return was submitted] issued any invitation to the public to subscribe for any shares or debentures of the company. 1 [Signed............... Director Signed.................. Director/Managing Director Managing Agent, Secretaries and Treasurers, Manager, Secretary.] Further Certificate to be given as aforesaid if the number of Members of the Company exceeds Fifty We certify that the excess of the number of members of the company over fifty consists wholly of persons who, under sub-clause (b)) of clause of section 3 of the Companies Act, 1956, are not to be included in reckoning the number of fifty. 1 [Signed.............Director Signed................Director/Managing Director Managing Agent, Secretaries and Treasurers, Manager, Secretary.] 2* * * * * * --------------------------------------------------------------------- In the case of the first return strike out the second alternative. In the case of a second or subsequent return strike out the first alternative. 1 Subs. by Notifn. No. G.S.R. 279, dated the 17th April, 1958, see Gazette of India, 1958. Pt. II, Sec. 3(i), P. 206. 2 The heading "Certified copies of Accounts" and the paragraph thereunder omitted by Notifn. No. S.R.O. 1435, dated the 7th May, 1957, see Gazette of India, 1957, Pt. II, Sec. 3, p. 925. --------------------------------------------------------------------- 482 1[7. Names and addresses of, and number of equity shares held, by each of the following, namely: (folio Nos. may also, be given). --------------------------------------------------------------------- No. Amount of of the Shares total equity share capital --------------------------------------------------------------------- (a) Foreign holdings (i) Foreign collaborators . . . . . .. (ii) Foreign Financial institutions . . . ... (iii) Foreign nationals . . . . . . .. ----------------------- TOTAL. .. . .. .. ----------------------- (b) Governments/Government sponsored Financial Institutions (i) Life Insurance Corporation of India .. . . (ii) Unit Trust of India . . .. . . (iii) Industrial Finance Corporation . .. . . (iv) Industrial Development Bank of India . . ... . (v) Industrial Credit and Investment Corporation of India . .. . . (vi) General Insurance Corporation of India . . . (vii) Nationalised Banks . . . . . (viii) Government companies . . . . . (ix) Central Government . . . . . . (x) State Governments . . . . . . (vi) State Financial Corporations . . . . . . ------------------------ TOTAL . .. .. .. ------------------------- (c) Bodies Corporated [not covered under (a) and (b) above] . . ... .. . . --------------------------------------------------------------------- 1 Ins. by Notifn. No. G.S.R. 1519, dated 15-10-1976. --------------------------------------------------------------------- 482A (d) Directors and their relatives (as defined in section 6), their share holdings and directorships . . . . . . .. .. . (e) Other top 50 share-holders (other than those listed above) . . . . . . .. . 482B SCHEDULE VI

[See section 211]

Of the above shares,.... shares are allotted as fully paid up pursuant to a contract without payments being recei- ved in cash. from any, person, directly or indirectly, in any foreign currency specifically for the purpose of acquiring the asset (being in either case the liability existing immediately before the date on which the change in the rate of exchange takes effect), the amount by which the liability is so increased or reduced during the year, shall be added to, or, as the case may be, deducted from the cost, and the amound arrived at after such addition or deduction shall be taken to be the cost of the fixed asset. Explanation 1.--This paragraph shall apply in relation to all balance-sheets that may be made out as at the 6th day of June, 1966, or any date thereafter and where at the date of issue of the notification of the Government of India, in the Ministery of Industrial Deve- lopment and Company Affairs (Department of Company Affairs), G.S.R. No. 129 dated the 3rd day of January, 1968, any balance-sheet, in relation to which this paragraph applies, has already been made out and laid before the com- pany in Annual General Meeting, the adjustment referred to in this paragraph may be made in the first balance-sheet made out after the issue of the aid notification. Explanation 2.-In this paragraph, unless the context otherwise re- ---------------------------------------------------------------------- --------------------------------------------------------------------- 1 Subs. by Act 65 of 1960, s. 217, for the original Part I. 2 Ins. by Notifn. No. G.S.R. 129, dated the 3rd January, 1968, see Gazette of India, Part. II, Sec. 3(i), p.105. ---------------------------------------------------------------------

--------------------------------------------------------------------- Instructions LIABILITIES ASSETS in accordance ------------------------------------------------------- with which Figures Figures Figures Figures liabilities for the for the for the for the should be previous current previous current made out year year year year --------------------------------------------------------------------- Rs. Rs. Rs. Rs. (b) (b) (b) (b) 2 *Specify, the 1[of the above shares.... source from shares are allotted as which bonus shares are issued e.g., capitalisation. --------------------------------------------------------------------- Instructions in accordance with which assets should be made out --------------------------------------------------------------------- quires the expressions rate of exchange", "foreign currency" and "Indian currency" shall have the meanings respectively assigned to

them under sub-section (1) of section 43A of the Income-tax Act 4961 (43 of 1961), and Explanation 2 and Explanation 3 of the said Sub-section shall as they- as may be' apply in relation to the said paragraph as they apply

to the said subsection (1).] 1[In every case where the original cost can not be ascertained, without unreasonable expense or delay the valuation shown by the books shall be given. For the purposes of this paragraph, such valuation shall be the net amount at which an asset stood in the company's books at the commencement of this Act after deduction of the amounts previously provided or written off for depreciation or depreciation in value, and where any Such asset is sold, the amount of sales proceeds shall be shown as deduction.]

of profits fully paid up by way Where sums have been or Reserves of bonus shares*.] written off on a re- or from Sh- duction of capital are Premium Less: Calls unpaid : or a revaluation of Account.] assets, every balan- (i) By managing age- ce-sheet (after the nt or secretaries and first balance-sheet) treasurers and where sub-sequent to the them an aging agent or reduction or reva- 2[Any capital secretaries and tre- lution shall show profit on re- asurers are afirm, the reduced figures issue of for- by the partners and with the date of feited shares thereof, and where the reduction in should be the managing agent place of the origi- transferred or secretaries and nal cost. to Capital treasurers are a Reserve.] private company Each balance-sheet by the directors for the first five or members of that years subsequent to company. the date of the reduction, shall (ii) By directors. show also the amount of the reduc- (iii) By others. tion made. [Add: Forfeited Similarly, where shares (amount sums have been originally paid added by writing up).] up the assets, every balance-sheet subsequent to such writing up shall show the increased figures with the date of the --------------------------------------------------------------------- 1 Subs. by Notifn. No. G.S.R. 414, dated the 21st March, 1961, see Gazette of India, Extraordinary, Pt. II, Sec. 3(i) p. 117. 2 Ins., ibid. ---------------------------------------------------------------------

--------------------------------------------------------------------- Instructions LIABILITIES ASSETS in accordance ------------------------------------------------------- with which Figures Figures Figures Figures liabilities for the for the for the for the should be previous current previous current made out year year year year --------------------------------------------------------------------- Rs. Rs. Rs. Rs. (b) (b) (b) (b) *Additions and *RESERVES AND INVESTMENTS : deductions si- SURPLUS : nce last bala-

ce-sheet to be 2[(1) Capital Showing nature of investments shown, under Reserves. and mode of valuation, for each of the example cost or market value

specified (2) Capital and distinguishing between-- heads. Redemption

Reserve. *(1) Investments in Government

2[The word " (3) Share or Trust Securities. fund" in rel- Premium Ac-

ation to any count (cc). *(2) Investments in shares, "Reserve" debentures or bonds (showing

should be (4) Other separately shares, fully paid used only Reserves sp- up and partly paid up and also where such ecifying the distinguishing the different Reserve is nature of classes of shares and showing specifically each reserve also in similar details represented and the amount investments by earmarked in respect investments.] thereof. Less : Debit balance in profit and loss account (if any) (h). --------------------------------------------------------------------- --------------------------------------------------------------------- Instructions in accordance with which assets should be made out --------------------------------------------------------------------- increase in place of the original cost. Each balance-sheet for the first five years subsequent to the date of writing up shall also show the amount of increase made. 1[Explanation.- Nothing contained in the preceding two paragraphs shall apply to any adjustment made in accordance with the second paragraph.] *Aggregate amount of company's quoted investments and also the market value thereof shall be shown. Aggregate amount of company's unquoted investments shall also be shown. ---------------------------------------------------------------------- 486/1

1[Loans from Directors, (5)Surplus, i.e., balance in profit the Managing Agents, Se- and loss account after providing cretaries and Trea- for proposed allocations, namely: surers,Manager should be shown separately. Dividend, Bonus or Reserves. Interest accrued and

due on Unsecured Loans (6) Proposed additions to Reserves. should be included u-

nder the appropriate sub- (7) Sinking Funds.] heads under the head "UNSECURED LOANS"]. SECURED LOANS:

*The nature of the security *(1)Debentures.to be specified in each case.

Where loans have been *(2) Loans and Advances from Banks. guaranteed by managing agents,

secretaries and treasurers, *(3) Loans and Advances from subsi- managers,and or directors, a diaries. mention thereof shall also be

*(4)Other Loans and Advances. in shares, debentures or bonds of subsidiary companies.

(3) Immovable properties.

3[(4) Investments in the capital of partnership Firms.] CURRENT ASSETS, LOANS AND ADVANCES: (A) CURRENT ASSETS

(1)Interest accrued on [[Mode of valuation of stock shall Investments. be stated and the amount in respect of raw materials shall also be sta- PART INTERPRETATION. PART III.-INTERPRETATION

7. (1) For the purposes of Parts I and II of this Schedule, unless the context otherwise requires,- (a)the expression "provision" shall, subject to sub-clause

(2) of this clause, mean any amount written off or retained by way of providing for depreciation, renewals or diminution in value of assets, or retained by way of providing for any known liability of which the amount cannot be determined with substantial accuracy. (b) the expression "reserve" shall not, subject as aforesaid,include any amount written off or retained by way of providing for depreciation, renewals or diminution in value of assets or retained by way of providing for any known liability; (c)the expression "capital reserve" shall not include any amount regarded is free for distribution through the profit and loss account; and the expression "revenue reserve" shall mean any reserve other than a capital reserve ; and in this sub-clause the expression "liability" shall include all liabilities in respect of expenditure contracted for and all disputed or contingent liabilities.

(2) Where- (a)any amount written off or retained by way of providing for depreciation, renewals or diminution in value of assets, not being an amount written off in relation to fixed assets before the commencement of this Act ; or (b)any amount retained by way of providing for any known liability ; is in excess of the amount which in the opinion of the directors is reasonably necessary for the purpose, the excess shall be treated for the purposes of this Schedule as a reserve and not as a Provision. 8.For the purposes aforesaid, the expression "quoted investment " means an investment as respects which there has been granted 498 a quotation or permission to deal on a recognised stock exchange, and the expression "unquoted investment" shall be construed accordingly. SCHE SCHEDULE VII (See sections 368 and 379) RESTRICTIONS ON POWERS OF MANAGING AGENT/SECRETARIES AND TREASURERS The managing agent/secretaries and treasures shall not exercise any of following powers except after obtaining the previous approval of the Board of directors of the company in regard to each such exercise: - 2* * * * * *

(2) Power to appoint as an officer or member of the staff of the company, payable from its funds (as distinguished from the funds of the managing agent,/secretaries and treasures or from out of any remuneration payable to him/them by the company), any person-- (a)on a remuneration or scale of remuneration exceeding the limits laid down by the Board in this behalf ; or (b)who is a relative of the managing agent, or where the managing agent is a firm, of any partner in secretaries and treasurers are managing agent is/the firm, or where the- managing agent is/secretaries and treasures/are a firm of any partner in the firm, or where the -managing agent is/secretaries and treasurers are a private company, of any director or member of such company;

(3) Power to purchase capital assets for the company except where the purchase price is within the limits prescribed by the Board in this behalf

(4) Power to sell the capital assets of the company, except where the sale price is within the limits prescribed by the Board in this behalf ;

(5) Power to compound, or sanction the extension of time for the satisfaction or payment of, any claim or demand of ------------------------------------------------------------------------

1 Cl. (1) omitted by Act 65 of 1960, s. 218. ------------------------------------------------------------------------- 499 the company against (including any debt claimed to be due to it from) the - managing agent/secretaries and treasures or any associate of the-managing agent /secretaries and treasurers;

(6) Power to compound any claim or demand made against the company (including any debt claimed to be due from it) by the-- managing agent/secretaries and treasures. or any associate of -managing agent/secretaries and treasurers. SCHE SCHEDULE VIII (See sections 347 and 379) DECLARATIONS TO BE MADE BY FIRMS, PRIVATE COMPANIES AND OTHER BODIES CORPORATE ACTING AS-MANAGING AGENTS /SECRETARIES AND TREASURERS Definition

1. (1) In this Schedule, " relevant date " means- (a)in the case of a firm or body corporate holding office at the commencement of this Act as the managing agent/ secretaries and treasurers of a company, the date of such commencement; and (b)in the case of a firm or body corporate appointed or re- appointed after the commencement of this Act as the managing agent/secretaries and treasures of a company, the date of such appointment or re-appointment.

(2) For the purposes of sub-clause (1), the expressions "re- appointment" and "re-appointed" shall have the same meaning as they

have for the purposes of sub-section (1) of section 328. Firms 2. Every firm acting as the managing agent/secretaries and treasures of any 500 company or companies shall file with each company, whether public or private, of which it acts as such, a declaration specifying- (a) the names of the partners constituting the firm on the relevant date ; (b)the share, or the extent of the interest, of each partner in the firm, on the relevant date ; (c) the names of persons, if any, other than partners, who are interested, on the relevant date, in any share of, or amount forming part of, the remuneration payable to the managing agent/secretaries and treasures by the company ; and the extent of the interest of each such person in such remuneration. 3.The declaration shall be signed by a partner of the firm and shall be filed within one month of the relevant date. 4.If any change occurs in regard to any of the matters specified in clause 2 after the relevant date, a declaration specifying the change and signed by a partner of the firm shall be filed, within three weeks of the occurrence of the change, with each of the com- panies referred to in that clause. Private Companies 5. Every private company which acts as managing agent/secretaries and treasurers of any other company or companies, whether public or private, shall file with each of those companies, a declaration specifying- (a)the names of the members of the private company on the relevant date ; (b)where the private company has a share capital, the shares held by each member of the company, on that date ; (c)where the private company has no share capital, the extent of the interest of each member of the company in it on that date; (d) the manner in which each such member holds his shares or interest, that is to say, whether he holds the same beneficially, or on behalf of or in trust for any other person ; and in the latter case, the name or names of the person or persons on whose behalf or in trust for whom 501 the shares or interest is held and the extent of the interest of each such person ; (e) the names of the directors of the private company, and the name of its managing director, if any; (f) the names of persons, if any, who are interested in any share of, or amount forming part of, the remuneration payable to the private company by the company under its management, otherwise than as members of the private company ; and the extent of the interest of each such person in such remuneration; (g)that no arrangement has been entered into to the knowledge of the private company, under which the control of the private company is vested in any persons other than the members of the company and the persons referred to in sub- clause (d): Provided that the obligation to furnish information on the matters specified in sub-clauses (d) and (f) shall extend only to such particulars relating to those matters as are within the knowledge of the private company. 6.The declaration shall be signed by a director of the private company and shall be filed within two months of the relevant date. 7.If, to the knowledge of the private company, there is a sale or transfer of any shares in the company or an agreement has been entered into, for the sale or transfer of any such shares, or any other change occurs in regard to any of the matters specified in clause 5, a declaration specifying the sale, transfer, agreement or change and signed by a director of the company shall be filed, within six weeks thereof, with each of the companies referred to in that clause, 8.Where any shares are sold or transferred or agreed to be sold or transferred, the declaration referred to in clause 7 shall specify the name of the person or persons who part with or have agreed to part with the shares and also the name or names of the person or persons who acquire or have agreed to acquire them, with full details of the sale, transfer or agreement. 502 Other Bodies Corporate 9. The provisions of clauses 5 to 8 shall apply to every body corporate (other than a private company) acting as the managing agent/secretaries and treasures of any company, unless it is exempt from the operation of the provisions of this Schedule by virtue of section 347/ section 379 read with section 347. General

10. (1) All declarations filed with any company in pursuance of this Schedule shall be open to inspection, and extracts may be taken therefrom and copies thereof may be required, by any member of the company to the same extent, in the same manner and on payment of the same fee as in the case of the register of members of the company.

(2) All such declarations shall also be open to inspection by any director of the company, free of charge. SCHE SCHEDULE IX FORM OF PROXY

[See Article 62 of the Table A and also section 176 (6)]

[Strike out whichever is not desired.]

539.Penalty for falsification of books. If with intent to defraud or deceive any person, any officer or member of a company in respect of which an application has been made under section 397 or 398- (a)destroys, mutilates, alters, falsifies or secretes any books, papers or securities, or is privy to the destruction, mutilation, alteration, falsification, or secreting of any books, papers or securities; or 503 (b)makes, or is privy to the making of, any false or fraudulent entry in any register, book of account or document belonging to the company, he shall be punishable with imprisonment for a term which may extend to seven years, and shall also be liable to fine.

Penalty for frauds by officers. 540.Penalty for frauds by officers.If any person, being at the time of the commission of the alleged offence, an officer of a company in respect of which the 1[Company Law Board] subsequently makes an order under section 397 or 398,- (a) has, by false pretences or by means of any other fraud, induced any person to give credit to the company; (b)with intent to defraud creditors of the company, has made or caused to be made any gift or transfer of or charge on, or has caused or connived at the levying of any execution against, the property of the company ; or (c)with intent to defraud creditors of the company, has concealed or removed any part of the property of the company since the date of any unsatisfied judgment or order for payment of money obtained against the company, or within two months before that date; he shall be punishable with imprisonment for a term which may extend to two years and shall also be liable to fine.

541.Liability where proper accounts not kept. (1) Where an application has been made to the 1[Company Law Board] section 397 or 398 in respect of a company, if it is shown that proper books of account were not kept by the company throughout the period of two years immediately preceding the making of the application, or the period between the incorporation of the company and the making of the application, whichever is shorter, every officer of the company who is in default shall, unless he shows that he acted honestly and that in the circumstances in which the business of the company was carried on, the default was excusable, be punishable with imprisonment for a term which may extend to one year.

(2) For the purposes of this section, proper books of account shall be deemed not to have been kept in the case of any company, if there have not been kept- (a) such books or accounts as are necessary to exhibit and explain the transactions and financial position of the business of the company, including books containing entries made from day to day in sufficient detail of all cash received and all cash-paid; and ----------------------------------------------------------------------- 1 Subs. by Act 31 of 1988, s. 67 (w.e.f. 31-5-1991). ----------------------------------------------------------------------- 504 (b) where the business of the company has involved dealings in goods, statements of the annual stocktakings and (except in the case of goods sold by way of ordinary retail trade) of all goods sold and purchased showing the goods and the buyers and sellers thereof in sufficient detail to enable those goods and those buyers and sellers to be identified.

542.Liability for fraudulent conduct of business. (1) If in the course of the proceedings on an application made to the 1[Company Law Board] under section 397 or 398 in respect of a company, it appears that any business of the company has been carried on with intent to defraud creditors of the company, or any other persons, or for any fraudulent purpose, the 1[Company Law Board] may, if it thinks it proper so to be declare that any persons who were knowingly parties to the carrying on of the business in the manner aforesaid shall be personally responsible, without any limitation of liability, for all or any of the debts or other liabilities of the company as the 1[Company Law Board] may direct.

(2) (a) where the 1[Company Low Board] makes any such declaration, it may give such further directions as it thinks proper for the purpose of giving effect to that declaration. (b) In particular the 1[Company Law Board] may make provision for making the liability of any such person under the declaration a charge on any debt or obligation due from the company to him, or on any mortgage or charge or any interest in any mortgage or charge on any assets of the company held by or vested in him, or any person on his behalf, or any person claiming as assignee from or through the person liable or any person acting on his behalf. (C) The 1[Company Law Board ] may, from time to time, make such further order as may be necessary for the purpose of enforcing any charge imposed under this sub-section. (d) For the purpose of this sub-section, the expression "assignee" includes any person to whom or in whose favour, by the directions of the person liable, the debt, obligation, mortgage or charge was created, issued or transferred or the interest was created, but does not include an assignee for valuable consideration (not including consideration by way of marriage) given in good faith and without notice of any of the matters on the ground of which the declaration is made.

(3) Where any business of a company is carried on with such intent or

for such purpose as is mentioned in sub-section (1), every person who was knowingly a party to the carrying on of the business in the manner aforesaid, shall be punishable with imprisonment for a term which may extend to two years, or with fine which may extend to five thou- sand rupees, or with both. --------------------------------------------------------------------- 1. Subs. by Act 31 of 1988, s. 67 (w.e.f. 31-5-1991). ---------------------------------------------------------------------

(4) This section shall apply, notwithstanding that the person concerned may be criminally liable in respect of the matters on the ground of which the declaration is to be made.

543.Power of Company Law Board to assess damages against

delinquent directors, etc.(1) If, in the course of the proceedings on an application made to the 1[Company low board] under section 397 or 398, it appears that any person who has taken part in the promotion or formation of the company, or any past or present director, managing agent, secretaries and treasurers, manager or officer of the company- (a)has misapplied or retained or become liable or accountable for any money or property of the company, or (b)has been guilty of any misfeasance or breach of trust in relation to the company; the 1[Company law board] may, on the application of any creditor or member, examine into the conduct of such person, director, managing agent, secretaries and treasurers, manager or officer aforesaid, and compel him to repay or restore the money or property or any part thereof respectively,with interest at such rate as the 1[Company law board] thinks just or to contribute such sum to the assets of the company by way of compensation in respect of the misapplication, retainer, misfeasance or breach of trust as the 1[Company Law Board] thinks just.

(2) This section shall apply notwithstanding that the matter is one for which the person concerned may be criminally liable.

544.Liability under sections 542 and 543 to extend to partners or directors in firm or company. Where a declaration under section 542 or an order under section 543 is or may be made in respect of a firm or body corporate,the 1[Company Law Board]shall also have power to make a declaration under section. 542 or pass an order under section 543, as the case may be, in respect of any person who is a partner in that firm or a director of that body corporate. ----------------------------------------------------------------------- 1 Subs. by Act 31 of 1988, s. 67 (w.e.f. 31-5-1991). ----------------------------------------------------------------------- 506 SCHE SCHEDULE XII (See section 644) Rates of depreciation ENACTMENTS REPEALED --------------------------------------------------------------------- Year No. Subject of short title 1 2 3 --------------------------------------------------------------------- 1913 7 The Indian Companies Act, 1913. 1942 54 The Registration of Transferred Companies Ordinance. 1951 52 The Indian Companies (Amendment) Act, 1951. 1952 51 The Indian Companies (Amendment) Act, 1952. --------------------------------------------------------------------- SCHE (See sections 198, 269, 310 and 311) 3[SCHEDULE XIII (See sections 198, 269, 310 and 311) CONDITIONS TO BE FULFILLED FOR THE APPOINTMENT OF A MANAGING OR WHOLE-TIME DIRECTOR OR A MANAGER WITHOUT THE APPROVAL OF THE CENTRAL GOVERNMENT PART Appointments. PART I Appointments 1. No person shall be eligible for appointment as a managing or whole-time director or a manager of a company unless he satisfies the following conditions, namely:- (a) he had not been sentenced to imprisonment for any period, or to a fine exceeding one thousand rupees, for the conviction of an offence under any of the following Acts, namely: - (i) The Indian Stamp Act, 1899 (2 of 1899), (ii) The Central Excises and Salt Act, 1944 (1 of 1944), (iii) The Imports and Exports (Control) Act, 1947 (18 of 1947), (iv) The Industries (Development and Regulation) Act, 1951 (65 of 1951), (v) The Prevention of Food Adulteration Act, 1954 (37 of 1954), (vi) The Essential Commodities Act, 1955 (10 of 1955), (vii)The Companies Act, 1956 (1 of 1956), (viii) The Wealth-tax Act, 1957 (27 of 1957), (ix) The Income-tax Act, 1961 (43 of 1961), (x) The Customs Act, 1962 (52 of 1962), (xi) The Gold (Control) Act, 1968 (45 of 1968), (xii) The Monopolies and Restrictive Trade Practices Act, 1.969 (54 of 1969), (xiii) The Foreign Exchange Regulation Act, 1973 (46 of 1973); (b) he had not been detained for any period under the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974: Provided that where the Central Government has given its approval to the appointment of a person convicted or detained under sub- paragraph (a) or sub-paragraph (b), as the case may be, no further approval of the Central Government shall be necessary for the subsequent appointment of that person if he had not been so convicted or detained subsequent to such approval; (c) he has completed the age of thirty years and has not attained the age of sixty-five years or the age of retirement, if any, specified by the company, whichever is earlier; (d) he is not a managing or whole-time director or manager in any other company or a managing partner of a firm, or is not in whole-time employment anywhere; (e) he is a citizen of India and is resident in India; (f) if the company had suffered loss or had inadequate profits during the financial year immediately preceding the financial year in which the appointment is made (hereinafter referred to as the preceding financial year) or in any of the three financial years in the four financial years immediately preceding the preceding financial year. PART Remuneration. PART II Remuneration 2. Subject to the ceiling limits laid down in section 198 and section 309, remuneration by way of salary, commission or both and perquisites shall not exceed the following limits, namely:- Salary:-Rupees 1,80,000/- per annum or rupees 15,000/- per month including dearness and all other allowances calculated in the following scale:- where the effective capital of monthly salary payable the Company is-- shall not exceed- (i) less than 20 lakhs rupees rupees 6,000/- (ii) rupees 20 lakhs or more rupees 7,500/- but less than rupees 50 lakhs (iii) rupees 50 lakhs or more rupees 9,000/- but less than rupees 1 crore (iv) rupees 1 crore or more rupees 11,000/- but less than rupees 3 crore (v) rupees 3 crores or more rupees 13,000/- but less than rupees 5 crores (vi) rupees 5 crores or more rupees 15,000/-. Explanation.-For the purposes of this Part, "effective capital" means the aggregate of the paid-up share capital amount, if any, for the time being standing to the credit of share premium account, reserves and surplus, long-term loans and deposits received, if any, as reduced by the aggregate of any investments, accumulated losses and preliminary expenses, not written off. Commission: - (i) In case commission is also payable along with the salary, it shall not be more than one per cent. of the net profits of the company, subject to a ceiling of fifty per cent. of the salary or Rs. 90,000/- per annum, whichever is less. (ii) Where it is Proposed to pay remuneration by way of commission only, such commission shall not exceed the fol- lowing limits, namely:- where the effective capital Commission payable an- of the company is- nually shall not exceed- (a) less than 20 lakhs rupees 1,08,000/- rupees (b) rupees 20 lakhs or rupees 1,35,0001- more but less than rupees 50 lakhs (c) rupees 50 lakhs or rupees 1,62,000/- more but less than rupees 1 crore (d) rupees 1 crore or rupees 1,98,000/- more but less than rupees 3 crores (e) rupees 3 crores or rupees 2,34,000/- more but less than rupees 5 crores. (f) rupees 5 crores or rupees 2,70,000/- more Perquisites ; - Perquisites may be allowed in addition to salary and/or commission or both. In the case of persons posted at Bombay, Calcutta, Delhi and Madras, perquisites shall be restricted to an amount equal to the annual salary or Rs. 1,35,000/- per annum, whichever is less. In the case of persons posted at other places, perquisites shall be restricted to an amount equal to the annual salary or Rs. 1,15,000/- per annum, whichever is less. Unless the context otherwise requires, perquisites are classified into three categories 'A', 'B' and 'C' as follows: Category-A This will comprise house rent allowance, leave travel concession, medical reimbursement, fees on clubs and personal accident insurance. These may be provided for as under: - (i) Housing I.-The expenditure by companies on hiring unfurnished accommodation for the appointee will be subject to the following ceilings:- (a) Bombay, Calcutta, Delhi and Madras: Sixty per cent. of the salary, over and above ten per cent. payable by the appointee. (b) other places : Fifty per cent. of the salary, over and above ten per cent. payable by the appointee. Housing IL-In case the accommodation is owned by the company, ten per cent. of the salary of the appointee shall be deducted by the company. Housing III.-In case no accommodation is provided by the company, the appointee shall be entitled to house-rent allowance subject to the ceilings laid down in Housing I. Explanation.-The expenditure incurred by companies on gas, electricity, water and furnishings shall be valued as per the Income-tax Rules, 1962. This shall, however, be subject to a ceiling of ten per cent. of the salary of the person proposed to be appointed. (ii) Medical reimbursement-Expenses incurred for the person to be appointed and the family subject to a ceiling of one month's salary in a year or three months' salary over a period of three years. (iii) Leave Travel Concession-For the person pro- posed to be appointed and his family, once in a year incurred in accordance with any rules specified by the company. (iv) Club fees--Fees of clubs subject to a maximum of two clubs. This will not include admission and life membership fees. (v) Personal Accident Insurance-Premium not to exceed Rs. 1,000/- per annum. Explanation.-For the purposes of Category-A, "family" means the spouse, the dependent children and dependent parents of the appointee. Category--B Contribution to provident fund, superannuation fund or annuity fund will not be included in the computation of the ceiling on perquisites to the extent these either singly or put together are not taxable under the Income- tax Act. Gratuity payable should not exceed half a month's salary for each completed year of service, sub- ject to a ceiling of rupees 1,00,000. Category-C Provision of car for use on company's business and telephone at residence will not be considered as perqui- sites. Personal long distance calls on telephone and use of car for private purpose shall be billed by the company to the individual appointee concerned. PART Provisions applicable to Parts I and II of this Schedule. PART III Provisions applicable to Parts I and II of this Schedule 1. The appointment and remuneration referred to in Parts I and of this Schedule shall be subject to approval by a resolution of share holders in general meeting.

2. The resolution referred to in paragraph (1) shall, in the event of or inadequacy of profits, provide for a cut of ten per cent. of salary proposed to be paid under Part 11 of this Schedule. 3. The auditor or the secretary of the company or where the company has not appointed a secretary, a secretary in whole-time practice shall certify that the requirement,,; of this Schedule have been complied with and such certificate shall be incorporated in the

return filed with the Registrar under sub-section (2) of section 269.] SCHE (See sections 205 and 350) 4[SCHEDULE XIV (See sections 205 and 350) Rates of depreciation ----------------------------------------------------------------------- Nature of assets Single Shift Double Shift Triple Shift W.D.V.S.L.M. W.D.V.S.L.M. W.D.V. S.L.M ------------------------------------------------------------------------ 1 2 3 4 5 6 7 ------------------------------------------------------------------------ (a)Buildings (other than factory buildings) NESD 5 1.63 per cent. per cent. (b) Factory Buildings 10 3.34 per cent. per cent. (c)Purely temporary erections such as wooden structures 100 100 per cent. per cent. Plant and Machinery (i)General rate applicable to plant and machinery (not being a ship) for which no special rate has been pre- scribed under (ii) be- low 15 5.15 22.5 8.09 30 11.31 per cent. per cent. per cent. per cent. per cent. per cent. (i) Special rates A.1 Cinematograph films-Machi- nery used in the production and exhibition of cinemato- graph films [N.E.S.D.]- (a) Recording equipment, re- producing equipment, developing machines, printing machines, editing machines, synchronisers and studio lights except bulbs (b)Projecting equipment of film exhibiting' concerns 2 Cycles [N.E.S.D.] 20 7.07 per cent. per cent. 3 Electrical machinery-Batteries; X-Ray and electro-therapeutic apparatus and accessories thereto

[N.E.S.D.]

[N.E.S.D.]

[N.E.S.D.]

(1) Accounting machines.

(2) Air-conditioning machinery including room air- conditioners.

(3) Building contractor's machiner.

(4) Calculating machines.

(5) Electrical machinery-- switchgear and instruments, transformers and other stationary plant and wiring and fitting of electric light and fan installations.

(6) Hydraulic works, pipelines arid sluices.

(7) Locomotives, rolling stocks, tramways and railways used by concerns, excluding railway concerns.

(8) Mineral oil concerns-field operations: (a) Boilers. (b) Prime movers. (c) Process plant. (d) Storage tanks (above ground). (e) Pipelines (above ground). (f) Jetties and dry docks.

(9) Mineral oil concerns-field operations (distribution)- kerbside pumps, including underground tanks and fittings.

(10) Mineral oil concerns-refineries: (a) Boilers. (b) Prime movers. (c) Process plant.

(11) Mines and quarries: (a) Surface and underground machinery (other then electri- cal machinery and portable underground machinery). (b) Head-gears. (c) Rails. (d) Boilers. (e) Shafts and inclines. (f) Tramways on the surface.

(12) Neo-post franking machines.

(13) Office machinery.

(14) Overhead cables and wires.

(15) Railway sidings.

(16) Refrigeration plant, containers, etc. (other than racks) SCHE 5["SCHEDULE XV

[See section 108B (2) (b)]

(17) Ropeway structures: (a) Trestle and station steel work. (b) Driving and tension gearing.

(18) Salt works-Reservoirs, condensers, salt pans, delivery channels and piers if constructed of masonry, concrete, cement, asphalt or similar materials; barges and floating plant; piers, quays and jetties; and pipelines for conveying brine if constructed of masonry, concrete, cement, asphalt or similar materials.

(19) Surgical instruments.

(20) Tramways electric and tramways run by internal combustion engines--permanent way: cars-car trucks, car bodies, electrical equip- ment and motors; tram cars including engines and gears.

(21) Typewriters.

(22) Weighing machines.

(23) Wireless apparatus and gear, wireless appliances and accessories.] ---------------------------------------------------------------------- 1 Ins. by Act 41 of 1974, s.41 (w.e.f. 1-2-1975). 2 Omitted by Act 30 of 1984, s.52 (w.e.f. 1-8-1984). 3 Ins. by Act 31 of 1988, s.66 (w.e.f. 15-6-1988). 4 Ins. by s. 66,ibid . (w.e.f. 2-4-1987). 5 Ins. by Act 58 of 1991, s.29 (w.e.f. 27-9-1991). ---------------------------------------------------------------------- 506B APPENDIX I (Table B in Schedule to Act 19 of 1857)1 REGULATIONS FOR MANAGEMENT OF THE COMPANY Shares 1. No person shall be deemed to have accepted any share in the company unless he has testified his acceptance thereof by writing under his hand in such form as the company from time to time directs. 2. The company may from time to time make such calls upon the shareholders, in respect of all moneys unpaid on their shares, as they think fit, provided that twenty-one days' notice at least is given of each call; and each shareholder shall be liable to pay the amount of calls so made to the persons and at the times and places appointed by the company. 3. A call shall be deemed to have been made at the time when the resolution authorizing such call was passed. 4. If, before or on the day appointed for payment, any share- holder does not pay the amount of any call to which he is liable, then such shareholder shall be liable to pay interest for the same at the rate of 5 per cent. per annum from the day appointed for the payment thereof to the time of the actual payment. 5. The company may, if they think fit, receive, from any of the shareholders willing to advance the same, all or any part of the moneys due upon their respective shares beyond the sums actually called for, and upon the moneys so paid in advance, or so much thereof as from time to time exceeds the amount of the calls then made upon the shares in respect of which such advance has been made, the company may pay interest at such rate as the shareholder paying such sum in advance and the company agree upon. 6. If several persons are registered as joint holders of any share, any one of such persons may give effectual receipts for any dividend payable in respect of such share. 7. The company may decline to register any transfer of shares made by a shareholder who is indebted to them. 8. Every shareholder shall, on payment, of such sum not exceed- ing eight annas as the company may prescribe, be entitled to a ---------------------------------------------------------------------- 1 The Table is reproduced here as an Appendix for convenience of reference. ---------------------------------------------------------------------- 507 certificate, under the common seal of the company, specifying the share or shares held by him, and the amount paid up thereon. 9.If such certificate is worn out or lost, it may be renewed on payment of such sum, not exceeding eight annas, as the company may prescribe. 10. The transfer books shall be closed during the fourteen days immediately preceding the ordinary general meeting in each year. Transmission of shares 11.The executors or administrators or representatives of a deceased shareholder shall be the only persons recognised by the company as having any title to his share. 12.Any person becoming entitled to a share in consequence of the death, bankruptcy or insolvency of any shareholder, or in consequence of the marriage of any female shareholder or in any way other than by transfer, may be registered as a shareholder upon such evidence being produced as may from time to time be required by the company. 13.Any person who has become entitled to a share in any way other than by transfer may, instead of being registered himself, elect to have some person to be named by him registered as a holder of such share. 14.The person so becoming entitled shall testify such election by executing to his nominee a transfer of such share. 15.The instrument of transfer shall be presented to the company accompanied with such evidence as they may require to prove the title of the transferor, and thereupon the company shall register the transferee as a shareholder. Forfeiture of shares 16.If any shareholder fails to pay any call due on the appointed day, the company may, at any time thereafter, during such time as the call remains unpaid, serve a notice on him, requiring him to pay such call, together with any interest that may have accrued by reason of such non-payment. 17.The notice shall name a further date, and a place or places, being a place or places, at which calls of the company are usually made payable on and at which such call is to be paid ; it shall also state that, in the event of non-payment at the time and place 508 appointed, the shares in respect of which such call was made will be liable to be forfeited. 18.If the requisitions of any such notice as aforesaid are not complied with, any share in respect of which such notice has been given may be forfeited by a resolution of the directors to that effect. 19.Any shares so forfeited shall be deemed to be the property of the company, and may be disposed of in such manner as the company thinks fit. 20.Any shareholder whose shares have been forfeited shall not- withstanding be liable to pay to the company all calls owing upon such shares at the time of the forfeiture. Increase in capital 21.The company may, with the sanction of the company previously given in general meeting, increase its capital. 22.Any capital raised by the creation of new shares shall be considered as part of the original capital, and shall be subject to the same provisions in all respects, whether with reference to the payment of calls, or the forfeiture of shares on non-payment of calls or otherwise, as if it had been part of the original capital. General meetings 23.The first general meeting shall be held at such time, not being more than twelve months after the incorporation of the company, and at such place as the directors may determine. 24.Subsequent general meetings shall be held at such time and place as may be prescribed by the company in general meeting; and if no other time or place is prescribed, a general meeting shall be held on the 1[first Monday in February] in every year, at such place as may be determined by the directors. 25.The above-mentioned general meetings shall be called ordinary meetings ; all other general meetings shall be called extraordinary. 26.The directors may, whenever they think fit, and they shall, upon a requisition made in writing by any number of shareholders holding in the aggregate not less than one-fifth part of the shares of the company, convene an extraordinary general meeting. ---------------------------------------------------------------------- 1 The bracketted portion read originally as follows: "day of". ---------------------------------------------------------------------- 509 27.Any requisition so made by the shareholders shall express the object of the meeting proposed to be called, and shall be left at the registered office of the company. 28.Upon the receipt of such requisition, the directors shall forthwith proceed to convene a general meeting ; if they do not proceed to convene the same within twenty-one days from the date of the requisition, the requisitionists, or any other shareholders holding the required number of shares, may themselves convene a meeting. 29.Seven days' notice at the least, specifying the place, the time, the hour of meeting, and the purpose for which any general meeting is to be held, shall be given by advertisement, or in such other manner (if any) as may be prescribed by the company. 30.Any shareholder may, on giving not less than three days' previous notice, submit any resolution to a meeting beyond the matters contained in the notice given of such meeting. 31. The notice required of a shareholder shall be given by leaving a copy of the resolution at the registered office of the company. 32. No business shall be transacted at any meeting, except the declaration of a dividend, unless a quorum of share holders is present at the commencement of such business; and such quorum shall be ascertained as follows (that is to say): if the shareholders belonging to the company at the time of the meeting do not exceed ten in number, the quorum shall be five ; if they exceed ten, there shall be added to the above quorum one for every five additional shareholders up to fifty, and one for every ten additional shareholders after fifty, with this limitation, that it shall not be necessary for any quorum in any case to exceed forty. 33.If within one hour from the time appointed for the meeting the required number of shareholders is not present, the meeting, if convened upon the requisition of the shareholders, shall be dissolved; in any other case it shall stand adjourned to the following day at the same time and place; and if at such adjourned meeting the required number of shareholders is not present, it shall be adjourned sine die. 34.The chairman (if any) of the Board of directors shall preside as chairman at every meeting of the company. 35.If there is not such chairman, or if at any meeting he is not present at the time of holding the same, the shareholders present shall choose some one of their number to be chairman of such meeting. 510 36. The chairman may, with the consent of the meeting, adjourn any meeting from time to time and from place to place ; but no business shall be transacted at any adjourned meeting other than the business left unfinished at the meeting from which the adjournment took place. 37. At any general meeting, unless a poll is demanded by at least five shareholders, a declaration by the chairman that a resolution has been carried, and an entry to that effect in the book of proceedings of the company, shall be sufficient evidence of the fact, without proof of the number or proportion of the votes recorded in favour of or against such resolution. 38. If a poll is demanded in manner aforesaid, the same shall be taken in such manner as the chairman directs ; and the result of such poll shall be deemed to be the resolution of the company in general meeting. Votes of shareholders 39. Every shareholder shall have one vote for every share up to ten ; he shall have an additional vote for every five shares beyond the first ten shares up to one hundred, and an additional vote for every ten shares held by him beyond the first hundred shares. 40. If any shareholder is a lunatic or idiot, he may vote by his committee ; and if any shareholder is a minor, he may vote by his guardian, or any one of his guardians if more than one. 41. If more persons than one are jointly entitled to a share or shares, the person whose name stands first in the register of share- holders as one of the holders of such share or shares, and no other, shall be entitled to vote in respect of the same. 42. No shareholder shall be entitled to vote at any meeting unless all calls due from him have been paid, nor until he shall have been possessed of his shares three calendar months, unless such shares shall have been acquired or shall have come by bequest, or by marriage, or by succession to an intestate's estate, or by any deed of settlement after the death of any person who shall have been entitled for life to the dividends of such shares. 43. Votes may be given either personally or by proxies ; a proxy shall be appointed in writing under the hand of the appointor, or, if such appointor is a corporation- under their common seal. 511 44. No person shall be appointed a proxy who is not a share- holder, and the instrument appointing him shall be deposited at the registered office of the company not less than forty-eight hours before the time of holding the meeting at which he proposes to vote; but no instrument appointing a proxy shall be valid after the expiration of one month from the date of its execution. Directors 45.The number of the directors, and the names of the first directors shall be determined by the subscribers of the memorandum of association. 46.Until directors are appointed, the subscribers of the memo- randum of association shall for all the purposes of this Act be deemed to be directors. Powers of directors 47.The business of the company shall be managed by the directors, who may exercise all such powers of the company as are not by this Act or by the articles of association (if any) declared to be exercisable by the company in general meeting, subject nevertheless to any regulations of the articles of association, to the provisions of this Act, and to such regulations, not being inconsistent with the aforesaid regulations or provisions, as may be prescribed by the company in general meeting, but no regulation made by the company in general meeting shall invalidate any prior act of the directors which would have been valid if such regulation had not been made. Disqualification of directors 48. The office of director shall be vacated- if he holds any other office or place of profit under the company ; if he becomes bankrupt or insolvent; if he is concerned in or participates in the profits of any contract with the company; if he participates in the profits of any work done for the company. But the above rules shall be subject to the following exceptions:- that no director shall vacate his office by reason of his being a shareholder in any incorporated company which 512 has entered into contracts with or done any work for the company of which he is director ; nevertheless he shall not vote in respect of such contract or work ; and, if he does so vote, his vote shall not be counted, and he shall incur a penalty, not exceeding five hundred rupees. Rotation of directors 49. At the first ordinary meeting after the incorporation of the company the whole of the directors shall retire from office ; and at the first ordinary meeting in every subsequent year, one-third of the directors for the time being, or, if their number is not a multiple of three, then the number nearest to one-third, shall retire from office. 50. The one-third or other nearest number to retire during the first and second years ensuing the incorporation of the company shall, unless the directors agree among themselves, be determined by ballot ; in every subsequent year the one-third or other nearest number who have been longest in office shall retire. 51. A retiring director shall be re-eligible. 52. The company at the general meeting at which any directors retire in manner aforesaid shall fill up the vacated offices by electing a like manner of persons. 53. If at any meeting at which an election of directors ought to take place no such election is made, the meeting shall stand adjourned till the next day, at the same time and place, and, if at such adjourned meeting no election takes place, the former directors shall continue to act until new directors are appointed at the first ordinary meeting of the following year. 54. The company may from time to time, in general meeting, increase or reduce the number of directors, and may also determine in what rotation such increased or reduced number is to go out of office. 55. Any casual vacancy occurring in the Board of directors may be filled up by the directors ; but any person so chosen shall retain his office so long only as the vacating director would have retained the same if no vacancy had occurred. Proceedings of directors 56. The directors may meet together for the despatch of business, adjourn and otherwise regulate their meetings, as they think fit, 513 and determine the quorum necessary for the transaction of business questions arising at any meeting shall be decided by a majority of votes ; in case of an equality of votes, the chairman, in addition to his original vote, shall have a casting vote ; a director may at any time summon a meeting of the directors. 57. The directors may elect a chairman of their meetings and determine the period for which he is to hold office ; but if no such chairman is elected or if at any meeting the chairman is not present at the time appointed for holding the same, the directors present shall choose some one of their number to be chairman of such meeting. 58. The directors may delegate any of their powers to committees consisting of such member or members of their body as they think fit: any committee so formed shall, in the exercise of the powers so delegated, conform to any regulations that may be imposed on them by the directors. 59. A committee may elect a chairman of their meetings: if no such chairman is elected, or if he is not present at the time appointed for holding the same, the members present shall choose one of their number to be chairman of such meeting. 60. A committee may meet and adjourn as they think proper: questions at any meeting shall be determined by a majority of votes of the members present ; and in case of an equal division of votes, the chairman shall have a casting vote. 61. All acts done by any meeting of the directors, or of a com- mittee of directors, or by any person acting as a director, shall, notwithstanding that it be afterwards discovered that there was some defect in the appointment of any such directors or persons acting as aforesaid, or that they or any of them were disqualified, be as valid as if every such person had been duly appointed and was qualified to be a director. 62. The director shall cause minutes to be made in books provided for the purpose-

(1) of all appointments of officers made by the directors ;

(2) of the names of the directors present at each meeting of directors and committees of directors ;

(3) of all orders made by the directors and committees of directors ; and 514

(4) of all resolutions and proceedings of meetings of the company, and of the directors and committees of directors. And any such minute as aforesaid if signed by any person purport- ing to be the chairman of any meeting of directors, or committee of directors, shall be receivable in evidence without any further proof. 63. The company, in general meeting, may, by a special resolution, remove any director before the expiration of his period of office, and appoint another qualified person in his stead; the person so appointed shall hold office during such time only as the director in whose place he is appointed would have held the same if he had not been removed. Dividends 64. The directors may, with the sanction of the company in general meeting, declare a dividend to be paid to the shareholders in proportion to their shares. 65. The directors may, before recommending any dividend, set aside out of the profits of the company such sum as they think proper as a reserved fund to meet contingencies, or for equalizing dividends, or for repairing or maintaining the works connected with the business of the company, or any part thereof ; and the directors may invest the sum so set apart as a reserved fund upon such securities as they, with the sanction of the company, may select. 66. The directors may deduct from the dividends payable to any shareholder all such sums of money as may be due from him to the company on account of calls or otherwise. 67. Notice of any dividend that may have been declared shall be given to each shareholder or sent by post or otherwise to his registered place of abode; and all dividends unclaimed for three years, after having been declared, may be forfeited by the directors for the benefit of the company. 68. No dividend shall bear interest as against the company. Accounts 69. Once at the least in every year the directors shall lay before the company in general meeting a statement of the income and expenditure for the past year made up to a date not more than three months before such meeting. 515 70. The statement so made shall show, arranged under the most convenient heads, the amount of gross income, distinguishing the several sources from which it has been derived, and the amount of gross expenditure, distinguishing the expense of the establishment, salaries, and other like matters ; every item of expenditure fairly chargeable against the year's income shall be brought into account, so that a just balance of profit and loss may be laid before the meeting; and in cases where any item of expenditure which may in fairness be distributed over several years has been incurred in any one year, the whole amount of such item shall be stated, with the addition of the reasons why only a portion of such expenditure is charged against the income of the year. 71.A balance-sheet shall be made out in every year, and laid before the general meeting of the company ; and such balance-sheet shall contain a summary of the property and liabilities of the company arranged under the heads appearing in the form annexed to this table, or as near thereto as circumstances admit. 72.A printed copy of such balance sheet shall, seven days previously to such meeting, be delivered at or sent by post to the registered address of every shareholder. Audit 73.The account of the company shall be examined, and the correctness of the balance-sheet ascertained by one or more auditor or auditors to be elected by the company in general meeting. 74.If not more than one auditor is appointed, all the provisions herein contained relating to auditors shall apply to him. 75.The auditors need not be shareholders in the company: no person is eligible as an auditor who is interested otherwise than as a shareholder in any transaction of the company ; and no director or other officer of the company is eligible during his continuance in office. 76.The election of auditors shall be made by the company at their ordinary meeting, or, if there are more than one, at their first ordinary meeting in each year. 77.The remuneration of the auditors shall be fixed by the company at the time of their election. 78. Any auditor shall be re-eligible on his quitting office. 516 79.If any casual vacancy occurs in the office of auditor, the directors shall forthwith call an extraordinary general meeting for the purpose of supplying the same. 80.If no election of auditors is made in manner aforesaid, the Local Government may, on the application of one-fifth in number of the shareholders of the company, appoint an auditor for the current year, and fix the remuneration to be paid to him by the company for his services. 81.Every auditor shall be supplied with a copy of the balance- sheet, and it shall be his duty to examine the same with the accounts and vouchers relating thereto. 82.Every auditor shall have a list delivered to him of all books kept by the company, and he shall at all reasonable times have access to the books and accounts of the company ; he may, at the expense of the company, employ accountants or other persons to assist him in investigating such accounts, and he may in relation to such accounts examine the directors or any other officer of the company. 83.The auditors shall make a report to the shareholders upon the balance-sheet and accounts ; and in every such report they shall state whether in their opinion the balance-sheet is a full and fair balance- sheet, containing the particulars required by these regulations, and properly drawn up so as to exhibit a true and correct view of the state of the company's affairs; and in case they have called for explanations or information from the directors, whether such explanations or information have been given by the directors, and whether they have been satisfactory ; and such report shall be read, together with the report of the directors, at the ordinary meeting. Notices 84.Notices requiring to be served by the company upon the shareholders may be served either personally, or by leaving the same, or sending them through the post in a letter addressed to the share- holders, at their registered places of abode. 85.All notices directed to be given to the shareholders shall, with respect to any share to which persons are jointly entitled, be given to whichever of the said persons is named first in the register of shareholders ; and notice so given shall be sufficient notice to all the proprietors of such share.

FORM OF BALANCE-SHEET REFERRED TO IN TABLE B. Dr. Balance-Sheet* of the Company made up to 18. Cr. --------------------------------------------------------------------- CAPITAL AND LIABILITIES PROPERTY AND ASSETS --------------------------------------------------------------------- I.- CAPITAL. SHOWING-- Rs.A.P Rs.A.P SHOWING-- Rs.A.P Rs.A.P. 1 The total amount III.--- 4 Immovable received from the PROPERTY property, shareholders; HELD BY distinguis- showing also- THE COM- hing-- PANY. (a) Land (a)The number of (describing shares. tenure)....... (b) Buildings . (b)The amount paid per share. . . 5 Movable property distinguishing-- (c)If any arrears (c) Stock-in-trade.. of calls, the (d) Plant . . . nature of the arrear, and the (The cost to be names of the stated with deduction defaulters . for deterioration in value as charged to the (Any arrears due Reserve Fund or Profit from any director and Loss.) or officer of the company to be sep- IV.-- SHOWING-- arately stated.) DEBTS OWING 6 Debts considered (d) The particulars TO THE good for which the of any forfeited COMPANY. company hold bills shares . or other securities. II.- SHOWING-- 7 Debts considered DEBTS good for which the AND 2 The amount of loans company hold no LIABI- on mortgage or security.. . . LITIES debenture bonds . . OF THE 3 The amount of debts COMPANY. owing by the company distinguishing-- (a) Debts for which acceptances have been given . . . ---------------------------------------------------------------------- *See clauses 71 and 72 of the foregoing Table B. ----------------------------------------------------------------------

FORM OF BALANCE-SHEET REFERRED TO IN TABLE B--Contd. Dr. Balance-Sheet* of the --------------------------------------------------------------------- CAPITAL AND LIABILITIES --------------------------------------------------------------------- SHOWING-- RS.A.P. RS.A.P. V.--DEBTS AND (b) Debts to tradesmen for LIABILITIES OF supplies of stock-in-trade THE COMPANY or other articles .. .. . --contd. (c) Debts of law expenses. (d) Debts for interest on debentures or other loans. (e) Unclaimed dividends. (f) Debts not enumerated above . . . SHOWING-- VI.--RESERVE The amount set aside from FUND. profits to meet continge- ncies. . . . SHOWING-- VII.--PROFIT The disposable balance for AND LOSS. payment of divident, etc. . CONTINGENT Claim against the company LIABILITIES. not acknowledged as debts. Moneys for which the company is contingently liable . . . ---------------------------------------------------------------------- Company made up to 18 Cr. --------------------------------------------------------------------- PROPERTY AND ASSETS --------------------------------------------------------------------- SHOWING-- RS.A.P. RS.A.P. IV.--DEBTS OWING 8 Debts considered doubtful TO THE COMPANY and bad . . . . --contd. (Any debt due from a director or other officer of the company to be separately stated.) SHOWING-- V.--CASH AND 9 The nature of investment INVESTMENT. and rate of interest. 10 The amount of cash, where lodged, and if bearing interest . . . . ------------------------------------------------------------------- *See clauses 71 and 72 of the foregoing Table B. ------------------------------------------------------------------- 519 APPENDIX II (Table A in the First.Schedule to Act 6 of 1882.)1 REGULATIONS FOR MANAGEMENT OF A COMPANY LIMITED BY SHARES Shares

(1)If several persons are registered as joint holders of any share, any one of such persons may give effectual receipts for any dividend payable in respect of such share.

(2)Every member shall, on payment of eight annas or such less sum as the company in general meeting may prescribe, be entitled to a certificate under the common seal of the company, specifying the share or shares held by him, and the amount paid up thereon.

(3)If such certificate is worn out or lost, it may be renewed on payment of eight annas or such less sum as the company in general meeting may prescribe. Calls on shares

(4)The directors may from time to time make such calls upon the members in respect of all moneys unpaid on their shares as they think fit, provided that twenty-one days' notice at least is given of each call and each member shall be liable to pay the amount of calls so made to the persons and at the times and places appointed by the directors.

(5)A call shall be deemed to have been made at the time when the resolution of the directors authorizing such call was passed.

(6)If the call payable in respect of any share is not paid before or on the day appointed for payment thereof, the holder for the time being of such share shall be liable to pay interest for the same at the rate of five per cent. per annum from the day appointed for the payment thereof to the time of the actual payment.

(7)The directors may, if they think fit, receive, from any member willing to advance the same, all or any part of the moneys due upon the shares held by him beyond the sums actually called for; and, upon the moneys so paid in advance, or so much thereof as from time to time exceeds the amount of the calls then made upon the shares in ---------------------------------------------------------------------- 1 The Table is reproduced here as an Appendix for convenience of reference. ---------------------------------------------------------------------- 520 respect of which such advance has been made, the company may pay interest at such rate as the member paying such sum in advance and the directors agree upon. Transfers of shares

(8) The instrument of transfer of any share in the company shall be executed both by the transferor and transferee, and the transferor shall be deemed to remain a holder of such share until the name of the transferee is entered in the register book in respect thereof.

(9) Shares in the company shall be transferred in the following form: I. A B, of ,in consideration of the sum of rupees paid to me by C D of , do hereby transfer to the said C D the share (or shares) numbered standing in my name in the books of the company, to hold unto the said C D, his executors, administrators and assigns, subject to the several conditions on which I held the same at the time of the execution thereof; and I, the said C D, do hereby agree to take the said share (or shares) subject to the same conditions. As witness our hands the day of .

(10) The company may decline to register any transfer of shares made by a member who is indebted to them.

(11) The transfer books shall be closed during the fourteen days immediately preceding the ordinary general meeting in each year. Transmission of shares

(12) The executors or administrators of a deceased member shall be the only persons recognised by the company as having any title to his share.

(13) Any person becoming entitled to a share in consequence of the death, bankruptcy or insolvency of any member, or in consequence of the marriage of any female member, may be registered as a member upon such evidence being produced as may, from time to time, be required by the company.

(14) Any person who has become entitled to a share in consequence of the death, bankruptcy or insolvency of any member or in 521 consequence of the marriage of any female member, may, instead of being registered himself, elect to have some person to be named by him registered as a transferee of such share.

(15) The person so becoming entitled shall testify such election by executing to his nominee an instrument of transfer of such share.

(16) The instrument of transfer shall be presented to the company, together with such evidence as the directors may require to prove the title of the transferee, and thereupon the company shall register the transferee as a member. Forfeiture of shares

(17)If any member fails to pay any call on the day appointed for payment thereof, the directors may, at any time thereafter, during such time as the call remains unpaid, serve a notice on him requiring him to pay such call together with interest and any expenses that may have accrued by reason of such non-payment.

(18)The notice shall name a further day on or before which such call and all interest and expenses that have accrued by reason of such non-payment are to be paid. It shall also name the place where pay- ment is to be made, the place so named being either the registered office of the company or some other place at which calls of the com- pany are usually made payable. The notice shall also state that, in the event of non-payment at or before the time and at the place appointed, the shares in respect of which such call was made will be liable to be forfeited.

(19)If the requisitions of any such notice as aforesaid are not complied with, any share in respect of which such notice has been given may at any time thereafter, before payment of all calls, interest and expenses due in respect thereof has been made, be forfeited by a resolution of the directors to that effect.

(20)Any share so forfeited shall be deemed to be the property of the company and may be disposed of in such manner as the company in general meeting thinks fit.

(21)Any member whose shares have been forfeited shall notwith- standing be liable to pay to the company all calls owing upon such shares at the time of the forfeiture. 522

(22)A solemn declaration in writing, made before a Magistrate, that the call in respect of a share was made and notice thereof given, and that default in payment of the call was made and that the forfeiture of the share was made by a resolution of the directors to that effect, shall be sufficient evidence of the facts therein stated as against all persons entitled to such share and such declaration and the receipt of the company for the price of such share shall constitute a good title to such share, and a certificate of proprietorship shall be delivered to the purchaser, and thereupon he shall be deemed the holder of such share discharged from all calls due prior to such purchase, and he shall not be bound to see to the application of the purchase-money, nor shall his title to such share be affected by any irregularity in the proceedings in reference to such sale. Conversion of shares into stock

(23)The directors may, with the sanction of the company pre- viously given in general meeting, convert any paid up shares into stock.

(24)When any shares have been converted into stock, the several holders of such stock may thenceforth transfer their respective interests therein, or any part of such interest, in the same manner and subject to the same regulations as and subject to which any shares in the capital of the company may be transferred, or as near thereto as circumstances admit.

(25)The several holders of stock shall be entitled to participate in the dividends and profits of the company according to the amount of their respective interests in such stock ; and such interests shall, in proportion to the amount thereof, confer on the holders thereof, respectively, the same privileges and advantages for the purpose of voting at meetings of the company and for other purposes as would have been conferred by shares of equal amount in the capital of the company but so that none of such privileges or advantages, except the participation in the dividends and profits of the company, shall be conferred by any such aliquot part of the consolidated stock as would not, if existing in shares, have conferred such privileges or advantages. Increase in capital

(26)The directors may, with the sanction of a special resolution of the company previously given in general meeting, increase its capital

by the issue of new shares; such aggregate: increase to be of such amount, and to be divided into shares of such respective amounts, as the company in general meeting directs, or, if no direction is given, as the directors think expedient.

(27)Subject to any direction to the contrary that may be given by the meeting that sanctions the increase of capital, all new shares shall be offered to the members in proportion to the existing shares held by them, and such offer shall be made by notice specifying the number of shares to which the member is entitled and limiting a time within which the offer, if not accepted, will be deemed to be declined; and after the expiration of such time, or on the receipt of an intimation from the member to whom such notice is given that he declines to accept the shares offered, the directors may dispose of the same in such manner as they think most beneficial to the company.

(28)Any capital raised by the creation of new shares shall be considered as part of the original capital, and shall be subject to the same provisions, with reference to the payment of calls, and the forfeiture of shares on non-payment of calls, or otherwise, as if it had been part of the original capital. General meetings

(29)The first general meeting shall be held at such time not being more than six months after the registration of the company, and at such place as the directors may determine.

(30)Subsequent general meetings shall be held, once at the least in every year, at such time and place as may be prescribed by the company in general meeting; and if no other time or place is prescribed, a general meeting shall be held on the first Monday in February in every year, at such place as may be determined by the directors.

(31)The above-mentioned general meetings shall be called ordinary meetings; all other general meetings shall be called extraordinary.

(32)The directors may, whenever they think fit, and they shall, upon a requisition made in writing by not less than one-fifth in number of the members of the company, convene an extraordinary general meeting.

(33)Any requisition made by the members shall express the object of the meeting proposed to be called, and shall be left at the registered office of the company. 524

(34) Upon the receipt of such requisition the directors shall forthwith proceed to convene an extraordinary general meeting. If they do not proceed to convene the same within twenty-one days from the date of the requisition, the requisitionists, or any other members amounting to the required number, may themselves convene an extra- ordinary general meeting. Proceedings at general meeting

(35) Seven days' notice at the least, specifying the place, the day and the hour of meeting, and, in case of special business, the general nature of such business, shall be given to the members in manner hereinafter mentioned, or in such other manner, if any, as may be prescribed by the company in general meeting; but the non-receipt of such notice by any member shall not invalidate the proceedings at any general meeting.

(36) All business shall be deemed special that is transacted at an extraordinary meeting, and all that is transacted at an ordinary meeting, with the exception of sanctioning a dividend, and the consi- deration of the accounts, balance-sheets and the ordinary report of the directors.

(37) No business shall be transacted at any general meeting except the declaration of a dividend, unless a quorum of members is present at the time when the meeting proceeds to business. Such quorum shall be ascertained as follows, that is to say:-If the persons who have taken shares in the company at the time of the meeting do not exceed ten in number, the quorum shall be five; if they exceed ten, there shall be added to the above quorum one for every five additional members up to fifty, and one for every ten additional members after fifty, with this limitation that no quorum shall in any case exceed twenty.

(38) If, within one hour from the time appointed for the meeting, a quorum is not present, the meeting, if convened upon the requisition of members, shall be dissolved. In any other case, it shall stand adjourned to the same day in the next week, at the same time and place; and if, at such adjourned meeting, a quorum is not present, it shall be adjourned sine die.

(39) The chairman (if any) of the Board of directors shall preside as chairman at every general meeting of the company. 525

(40)If there is no such chairman, or if at any meeting he is not present within fifteen minutes after the time appointed for holding the meeting, the members present shall choose some one of their number to be chairman.

(41)The chairman may, with the consent of the meeting, adjourn any meeting from time to time and from place to place but no business shall be transacted at any adjourned meeting other than the business left unfinished at the meeting from which the adjournment took place.

(42)At any general meeting, unless a poll is demanded by at least five members, a declaration by the chairman that a resolution has been carried, and an entry to that effect in the book of proceedings of the company, shall be sufficient evidence of the fact, without proof of the number or proportion of the votes recorded in favour of or against such resolution.

(43)If a poll is demanded by five or more members, it shall be taken in such manner as the chairman directs, and the result of such poll shall be deemed to be the resolution of the company in general meeting. In the case of an equality of votes at any general meeting, the chairman shall be entitled to a second or casting vote. Votes of members

(44)Every member shall have one vote for every share up to ten. He shall have an additional vote for every five shares beyond the first ten shares up to one hundred, and an additional vote for every ten shares beyond the first hundred shares.

(45)If any member is a lunatic or idiot, he may vote by his com- mittee or other legal curator; and, if any member is a minor, he may vote by his guardian or any one of his guardians if more than one.

(46)If one or more persons are jointly entitled to a share or shares, the member whose name stands first in the register of members as one of the holders of such share or shares, and no other, shall be entitled to vote in respect of the same.

(47)No member shall be entitled to vote at any general meeting unless all calls due from him have been paid, and no member shall be entitled to vote in respect of any share that he has acquired by transfer, at any meeting held after the expiration of three months from the 526 registration of the company, unless he has been possessed of the share in respect of which he claims to vote for at least three months pre- viously to the time of holding the meeting at which he proposes to vote.

(48) Votes may be given either personally or by proxy.

(49) The instrument appointing a proxy shall be in writing, under the hand of the appointor, or if such appointor is a corporation, under their common seal, and shall be attested by one or more witness or witnesses. No person shall be appointed a proxy who is not a member of the company.

(50) The instrument appointing a proxy shall be deposited at the registered office of the company not less than seventy-two hours before the time for holding the meeting at which the person named in such instrument proposes to vote ; but no instrument appointing a proxy shall be valid after the expiration of twelve months from the date of its execution.

(51) Any instrument appointing a proxy shall be in the following form: - Company, Limited. I, of ,being a member of the Company, Limited, and entitled to vote or votes, hereby appoint , of ,as my proxy to vote for me and on my behalf at the [ordinary or extra- ordinary as the case may be] general meeting of the Company to be held on the day of , and at any adjournment thereof (or at any meeting of the Company that may be held in the year ). As witness my hand, this day of . Signed by the said in the presence of Directors

(52) The number of the directors, and the names of the first directors, shall be determined by the subscribers of the memorandum of association.

(53) Until directors are appointed, the subscribers of the memo- randum of association shall be deemed to be directors. 527

(54) The future remuneration of the directors, and their remuneration for services performed previously to the first general meeting, shall be determined by the company in general meeting. Powers of directors

(55) The business of the company shall be managed by the direc- tors, who may pay all expenses incurred in getting up and registering the company and may exercise all such powers of the company as are not by the foregoing Act, or by these articles, required to be exercised by the company in general meeting, subject nevertheless to any regulations of these articles, to the provisions of the foregoing Act and to such regulations, being not inconsistent with the aforesaid regulations, or provisions, as may be prescribed by the company in general meeting; but no regulation made by the company in general meeting shall invalidate any prior act of the directors which would have been valid if such regulation had not been made.

(56) The continuing directors may act notwithstanding any vacancy in their body. Disqualification of directors

(57) The office of director shall be vacated- if he, or any partner of his, or the firm of which he is a member, holds any other office or place of profit under the company; if he becomes bankrupt or insolvent; if he is punished under any of the penal provisions of the fore going Act; if he is concerned in or participates in the profits of any contract with the company. But the above rules shall be subject to the following exceptions:- that no director shall vacate his office by reason of his being a member of any company which has entered into contracts with, or done any work for, the company of which he is director ; nevertheless, he shall not vote in respect of such contract or work, and, if he does so vote, his vote shall not be counted. Rotation of directors

(58) At the first ordinary meeting after the registration of the company the whole of the directors shall retire from office ; and at the 528 first ordinary meeting in every subsequent year one-third of the directors for the time being, or, if their number is not a multiple of three, then the number nearest to one-third, shall retire from office.

(59) The one-third or other nearest number to retire during the first and second years ensuing the first ordinary meeting of the company shall, unless the directors agree among themselves, be determined by ballot. In every subsequent year, the one-third or other nearest number, who have been longest in office shall retire.

(60) A retiring director shall be re-eligible.

(61) The company at the general meeting at which any directors retire in manner aforesaid shall fill up the vacated offices by electing a like number of persons.

(62) If at any meeting at which an election of directors ought to take place the places of the vacating directors are not filled up, the meeting shall stand adjourned till the same day in the next week, at the same time and place ; and if at such adjourned meeting the places of the vacating directors are not filled up, the vacating directors, or such of them as have not had their places filled up, shall continue in office until the ordinary meeting in the next year, and so on from time to time until their places are filled up.

(63) The company may from time to time, in general meeting, increase or reduce the number of directors, and may also determine in what rotation such increased or reduced number is to go out of office.

(64) Any casual vacancy occurring in the Board of directors may be filled up by the directors, but any person so chosen shall retain his office so long only as the vacating director would have retained the same if no vacancy had occurred.

(65) The company in general meeting may by a special resolution remove any director before the expiration of his period of office, and may by an ordinary resolution appoint another person in his stead. The person so appointed shall hold office during such time only as the director in whose place he is appointed would have held the same if he had not been removed. Proceedings of directors

(66) The directors may meet together for the despatch of business, adjourn and otherwise regulate their meetings as they think fit, and determine the quorum necessary for the transaction of business. Questions arising at any meeting shall be decided by a majority of votes. 529 In case of an equality of votes, the chairman shall have a second or casting vote. A director may at any time summon a meeting of the directors.

(67)The directors may elect a chairman of their meetings, and determine the period for which he is to hold office ; but, if no such chairman is elected or if at any meeting the chairman is not present at the time appointed for holding the same, the directors present shall choose some one of their number to be chairman of such meeting.

(68)The directors may delegate any of their powers to committees consisting of such member or members of their body as they think fit. Any committees so formed shall, in the exercise of the powers so delegated, conform to any regulations that may be imposed on it by the directors.

(69)A committee may elect a chairman of its meetings. If no such chairman is elected, or if he is not present at the time appointed for holding the same, the members present shall choose one of their number to be chairman of such meeting.

(70)A committee may meet and adjourn as it thinks proper. Questions arising at any meeting shall be determined by a majority of votes of the members present ; and, in case of an equality of votes, the chairman shall have a second or casting vote.

(71)All acts done by any meeting of the directors, or of a committee of directors, or by any person acting as a director, shall, notwithstanding that it be afterwards discovered that there was some defect in the appointment of any such directors or persons acting as aforesaid, or that they or any of them were disqualified, be as valid as if every such person had been duly appointed and was qualified to be a director. Dividends

(72)The directors may, with the sanction of the company in general meeting, declare a dividend to be paid to the members in pro- portion to their shares.

(73)No dividend shall be payable except out of the profits arising from the business of the company.

(74)The directors may, before recommending any dividend, set aside out of the profits of the company such sum as they think proper as a reserve fund to meet contingencies, or for equalizing dividends, or for repairing or maintaining the works connected with the business 530 of the company or any part thereof ; and the directors may invest the sum so set apart as a reserved fund upon such securities as they may select.

(75)The directors may deduct from the dividends payable to any member all such sums of money as may be due from him to the company on account of calls or otherwise.

(76)Notice of any dividend that may have been declared shall be given to each member in manner hereinafter mentioned; and all dividends unclaimed for three years after having been declared may be forfeited by the directors for the benefit of the company.

(77) No dividend shall bear interest as against the company. Accounts

(78) The directors shall cause true accounts to be kept-- of the stock in trade of the company ; of the sums of money received and expended by the company, and the matters in respect of which such receipt and expenditure take place ; and of the credits and liabilities of the company. The books of account shall be kept at the registered office of the company, and, subject to any reasonable restrictions as to the time and manner of inspecting the same that may be imposed by the com- pany in general meeting, shall be open to the inspection of the members during the hours of business.

(79) Once at the least in every year the directors shall lay before the company in general meeting a statement of the income and expenditure for the past year, made up to a date not more than three months before such meeting.

(80) The statement so made shall show. arranged under the most convenient heads, the amount of gross income, distinguishing the several sources from which it has been derived, and the amount of gross expenditure, distinguishing the expenses of the establishment, salaries and other like matters. Every item of expenditure fairly chargeable against the year's income shall be brought into account, so that a just balance of profit and loss may be laid before the meeting, and, in cases where any item of expenditure which may in fairness be distributed over several years has been incurred in any one year, the whole amount of such item shall be stated, with the addition of 531 the reasons why only a portion of such expenditure is charged against the income of the year.

(81) A balance-sheet shall be made out in every year and laid before the company in general meeting, and such balance-sheet shall contain a summary of the property and liabilities of the company arranged under the heads appearing in the form annexed to this table, or as near thereto as circumstances admit.

(82)A printed copy of such balance-sheet shall, seven days previously to such meeting, be served on every member in the manner in which notices are hereinafter directed to be served. Audit

(83) Once at the least in every year the accounts of the company shall be examined, and the correctness of the balance-sheet ascertain- ed by one or more auditor or auditors.

(84) The first auditors shall be appointed by the directors ; subsequent auditors shall be appointed by the company in general meeting.

(85) If one auditor only is appointed, all the provisions herein contained relating to auditors shall apply to him.

(86) The auditors may be members of the company, but no person is eligible as an auditor who is interested otherwise than as a member in any transaction of the company, and no director or other officer of the company is eligible during his continuance in office.

(87) The election of auditors shall be made by the company at their ordinary meeting in each year.

(88) The remuneration of the first auditors shall be fixed by the directors ; that of subsequent auditors shall be fixed by the company in general meeting.

(89) Any auditor shall be re-eligible on his quitting office.

(90) If any casual vacancy occurs in the office of any auditor appointed by the company, the directors shall forthwith call an extra- ordinary general meeting for the purpose of supplying the same. 532

(91) If no election of auditors is made in manner aforesaid the Local Government may, on the application of not less than five members of the company, appoint an auditor for the current year and fix the remuneration to be paid to him by the company for his services.

(92) Every auditor shall be supplied with a copy of the balance- sheet and it shall be his duty to examine the same with the accounts and vouchers relating thereto.

(93) Every auditor shall have a list delivered to him of all books kept by the company, and shall at all reasonable times have access to the books and accounts of the company. He may, at the expense of the company, employ accountants or other persons to assist him in investigating such accounts, and he may, in relation to such accounts, examine the directors or any other officer of the company.

(94) The auditors shall make a report to the members upon the balance-sheet and accounts, and in such report they shall state whether, in their opinion, the balance-sheet is a full and fair balance-sheet, containing the particulars required by these regulations and properly drawn up so as to exhibit a true and correct view of the state of the company's affairs, and, in case they have called for explanations or information from the directors, whether such explanations or information have or has been given by the directors, and whether they or it have or has been satisfactory. Such report shall be read, together with the report of the directors, at the ordinary meeting. Notices

(95) A notice may be served by the company upon any member either personally or by sending it through the post in a letter addressed to such member at his registered place of abode.

(96) All notices directed to be given to the members shall, with respect to any share to which persons are jointly entitled, be given to whichever of such persons is named first in the register of members; and notice so given shall be sufficient notice to all the holders of such share.

(97) Any notice, if served by post, shall be deemed to have been served at the time when the letter containing the same would be delivered in the ordinary course of the post ; and, in proving such service, it shall be sufficient to prove that the letter containing the notice was properly addressed and put into the post office.

FORM OF BALANCE-SHEET REFERRED TO IN TABLE A Dr. Balance-Sheet* of the ---------------------------------------------------------------------- CAPITAL AND LIABILITIES ---------------------------------------------------------------------- SHOWING-- Rs. As. I.--CAPITAL. 1 The number of shares . 2 The amount paid per share 3 If any arrears of calls, the nature of the arrear and the names of the defaulters . . . 4 The particulars of any forfeited shares . . . SHOWING-- II.--DEBTS AND LIABILITIES OF 5 The amount of loans or THE COMPANIES. mortgages or debenture bonds . . . . . 6 The amount of dabts owing by the company-- distinguishing-- (a) Debts for which acceptances have been given . . . ---------------------------------------------------------------------- Company made up to 18 . Cr. ---------------------------------------------------------------------- PROPERTY AND ASSETS ---------------------------------------------------------------------- SHOWING-- Rs. As. III.--PROPERTY 7 Immovable property--dis- HELD BY THE tinguishing-- COMPANY. (a) Freehold land . (b) ,, buildings . (c) Leasehold . . 8 Movable property--distin- guishing-- (d) Stock-in-trade . (e) Plant . . . The cost to be stated with deductions for deterioration in value as charged to the reserve fund or profit and loss . . SHOWING-- IV.--DEBTS 9 Debts considered good for OWING TO THE which the Company hold bills COMPANY. or other securities. ---------------------------------------------------------------------- *See Clauses 81 and 82 of the foregoing Table A. ----------------------------------------------------------------------

FORM OF BALANCE-SHEET REFERRED TO IN TABLE A--contd. Dr. Balance-Sheet* of the ---------------------------------------------------------------------- CAPITAL AND LIABILITIES ---------------------------------------------------------------------- SHOWING-- Rs. As. II.--DEBTS AND LIABILITIES OF (b) Debts to tradesmen for THE COMPANIES supplies of stock-in trade --contd. or other articles . . . (c) Debts for law expenses . . . (d) Debts for interest on debentures or other loans . . . (e) Unclaimed dividends (f) Debts not enumerated above . . . SHOWING-- VI.--RESERVE The amount set aside from FUND. profits to meet contingencies . . . SHOWING-- VII.--PROFIT The disposable balance for AND LOSS. payment of dividends, etc . . . CONTINGENT Claims agent the Company LIABILITIES. not acknowledged as debts . Moneys for which the Company is contingently liable . . . ---------------------------------------------------------------------- Company made up to 18 . Cr. ---------------------------------------------------------------------- PROPERTY AND ASSETS ---------------------------------------------------------------------- Rs. As. IV.--DEBTS OWING 10 Debts considered good TO THE COMPANY.-- for which the Company hold contd. no security . . . 11 Debts considered doub- tful and bad . . . Any debt due from a director or other officer of the company to be separately stated . . . SHOWING-- V.--CASH AND 12 The nature of investment INVESTMENT. and rate of interest . 13 The amount of cash, where lodged and if bearing interest . -------------------------------------------------------------------- 535 APPENDIX III (Table A in the First Schedule to Act 7 of 1913.)1 REGULATIONS FOR MANAGEMENT OF A COMPANY LIMITED BY SHARES Preliminary 1. In these regulations, unless the context otherwise requires, expressions defined in the Indian Companies Act,1913(7 of 1913),or any statutory modification thereof in force at the date at which these regulations become binding on the company, shall have the meanings so defined; and words importing the singular shall include the plural, and vice versa, and words importing the masculine gender shall include females, and words importing persons shall include bodies corporate. Business 2. The directors shall have regard to the restrictions on the commencement of business imposed by section 103 of the Indian Companies Act, 1913, if, and so far as, those restrictions are binding upon the company. Shares 3. Subject to the provisions, if any, in that behalf of the memorandum of association of the company, and without prejudice to any special rights previously conferred on the holders of existing shares in the company, any share in the company may be issued with such preferred, deferred or other special rights, or such restrictions, whether in regard to dividend, voting, return of share capital, or otherwise, as the company may from time to time by special resolution determine 2[and any preference share may with the sanction of a special resolution be issued on the terms that it is or at the option of the company is liable to be redeemed]. 4. If at any time the share capital is divided into different classes of shares, the rights attached to any class (unless otherwise provided by the terms of issue of the shares of that class) may 2 [subject to the provisions of section 66A of the Indian Companies Act, 1913] be varied with the consent in writing of the holders of three- fourths of the issued shares of that class, or with the sanction of an extraordinary resolution passed at a separate general meeting of the holders ---------------------------------------------------------------------- 1 The Table is reproduced here as an Appendix for convenience of reference. 2 Ins. by Act 22 of 1936, s. 122. ---------------------------------------------------------------------- 536 of the shares of the class. To every such separate general meeting the provisions of these regulations relating to general meetings shall mutatis mutandis apply, but so that the necessary quorum shall be two persons at least holding or representing by proxy one-third of the issued shares of the class. 5. No share shall be offered to the public for subscription except upon the terms that the amount payable on application shall be at least five per cent. of the nominal amount of the share ; and the directors shall, as regards any allotment of shares, duly comply with such of the provisions of sections 101 and 104 of the Indian Companies Act, 1913 (7 of 1913), as may be applicable thereto. 6. Every person whose name is entered as a member in the regis- ter of members shall, without payment, be entitled to a certificate under the common seal of the company specifying the share or shares held by him and the amount paid up thereon: Provided that, in respect of a share or shares held jointly by several persons, the company shall not be bound to issue more than one certificate, and delivery of a certificate for a share to one of several joint-holders shall be sufficient delivery to all. 7. If a share certificate is defaced, lost or destroyed, it may be renewed on payment of such fee, if any, not exceeding eight annas, and on such terms, if any, as to evidence and indemnity as the direc- tors think fit. 8. 1[Except to the extent allowed by section 54A of the Indian Companies Act, 1913,] no part of the funds of the company shall be employed in the purchase of, or in loans upon the security of, the company's shares. Lien 9. The company shall have a lien on every share (not being a fully paid share) for all moneys (whether presently payable or not) called or payable at a fixed time in respect of that share, and the company shall also have a lien on all shares (other than fully-paid shares) standing registered in the name of a single person, for all moneys presently payable by him or his estate to the company; but the ---------------------------------------------------------------------- 1 Ins. by Act 22 of 1936, s. 122. ---------------------------------------------------------------------- 537 directors may at any time declare any share to be wholly or in part exempt from the provisions of this clause. The company's lien, if any, on a share shall extend to all dividends payable thereon. 10.The company may sell, in such manner as the director thinks fit, any shares on which the company has a lien, but no sale shall, be made unless some sum in respect of which the lien exists is presently payable, nor until the expiration of fourteen days after a notice in writing, stating and demanding payment of such part of amount in respect of which the lien exists as is presently payable, has been given to the registered holder for the time being of the share, or the person entitled by reason of his death or insolvency to the share. 11.The proceeds of the sale shall be applied in payment of such part of the amount in respect of which the lien exists as is presently payable, and the residue shall (subject to a like lien for sums not presently payable as existed upon the shares prior to the sale) be paid to the person entitled to the shares at the date of the sale. The purchaser shall be registered as the holder of the shares, and he shall not be bound to see to the application of the purchase-money, nor shall his title to the shares be affected by any irregularity or invalidity in the proceedings in reference to the sale. Calls on shares 12.The directors may from time to time make calls upon the members in respect of any moneys unpaid on their shares, provided that no call shall exceed one-fourth of the nominal amount of the share, or be payable at less than one month from the last call ; and each member shall (subject to receiving at least fourteen days' notice specifying the time or times of payments) pay to the company at the time or times so specified the amount called on his shares. 13.The joint-holders of a share shall be jointly and severally liable to pay all calls in respect thereof. 14. If a sum called in respect of a share is not paid before or on the day appointed for payment thereof, the person from whom the sum is due shall pay interest upon the sum at the rate of five per cent. per annum from the day appointed for the payment thereof to the time of the actual payment, but the directors shall be at liberty to waive payment of that interest wholly or in part. 538 15.The provisions of these regulations as to payment of interest shall apply in the case of non-payment of any sum which, by the terms of issue of a share, becomes payable at a fixed time, whether on account of the amount of the share, or by way of premium, as if the same had become payable by virtue of a call duly made and notified. 16.The directors may make arrangements on the issue of shares for a difference between the holders in the amount of calls to be paid and in the times of payment. 17.The directors may, if they think fit, receive from any member willing to advance the same all or any part of the moneys uncalled and unpaid upon any shares held by him ; and upon all or any of the moneys so advanced may (until the same would, but for such advance, become presently payable) pay interest at such rate (not exceeding, without the sanction of the company in general meeting, six per cent.) as may be agreed upon between the member paying the sum in advance and the directors. Transfer and transmission of shares 18.The instrument of transfer of any share in the company shall be executed both by the transferor and transferee, and the transferor shall be deemed to remain holder of the share until the name of the transferee is entered in the register of members in respect thereof, 19.Shares in the company shall be transferred in the following form, or in any usual or common form which the directors shall approve: I, A B of ,in consideration of the sum of rupees paid to me by C D of (hereinafter called "the said transferee"), do hereby transfer to the said transferee the share [or shares] numbered in the undertaking called the Company, Limited, to hold unto the said transferee, his executors, administrators and assigns, subject to the several conditions on which I held the same at the time of the execution thereof, and I, the said transferee, do hereby agree to take the said share [or shares] subject to the conditions aforesaid. As witness our hands the day of Witness to the signatures of, etc. 20.The directors may decline to register any transfer of shares, not being fully-paid shares, to a person of whom they do not approve, 539 and may also decline to register any transfer of shares on which the company has a lien. The directors may also suspend the registration of transfers during the fourteen days immediately preceding the ordinary general meeting in each year. The directors may decline to recognise any instrument of transfer unless- (a) a fee not exceeding two rupees is paid to the company in respect thereof ; and (b) the instrument of transfer is accompanied by the certificate of the shares to which it relates, and such other evidence as the directors may reasonably require to show the right of the transferor to make the transfer. 1[If the directors refuse to register a transfer of any shares, they shall within two months after the date on which the transfer was lodged with the company send to the transferee and the transferor notice of the refusal.] 21. The executors or administrators of a deceased sole holder of a share shall be the only persons recognised by the company as having any title to the share. In the case of a share registered in the names of two or more holders, the survivors or survivor, or the executors or administrators of the deceased survivor, shall be the only persons recognised by the company as having any title to the share. 22. Any person becoming entitled to a share in consequence of the death or insolvency of a member shall, upon such evidence being produced as may from time to time be required by the directors, have the right, either to be registered as a member in respect of the share or, instead of being registered himself, to make such transfer of the share as the deceased or insolvent person could have made ; but the directors shall, in either case, have the same right to decline or suspend registration as they would have had in the case of a transfer of the share by the deceased or insolvent person before the death or insolvency. 23. A person becoming entitled to a share by reason of the death or insolvency of the holder shall be entitled to the same dividends and other advantages to which he would be entitled if he were the registered holder of the share, except that he shall not, before being registered as a member in respect of the share, be entitled in respect of it to exercise any right conferred by membership in relation to meetings of the company. ---------------------------------------------------------------------- 1 Ins. by Act 22 of 1936, s. 122. ---------------------------------------------------------------------- 540 Forfeiture of shares 24. If a member fails to pay any call or instalment of a call on the day appointed for payment thereof, the directors may, at any time thereafter during such time as any part of such call or instalment remains unpaid, serve a notice on him requiring payment of so much of the call or instalment as is unpaid, together with any interest which may have accrued. 25.The notice shall name a further day (not earlier than the expiration of fourteen days, from the date of the notice) on or before which the payment required by the notice is to be made, and shall state that, in the event of non-payment at or before the time appoint- ed, the shares in respect of which the call was made will be liable to be forfeited. 26.If the requirements of any such notice as aforesaid are not complied with, any share in respect of which the notice has been given may at any time thereafter, before the payment required by the notice has been made, be forfeited by a resolution of the directors to that effect. 27.A forfeited share may be sold or otherwise disposed of on such terms and in such manner as the directors think fit, and at any time before a sale or disposition the forfeiture may be cancelled on such terms as the directors think fit. 28.A person whose shares have been forfeited shall cease to be a member in respect of the forfeited shares, but shall, notwithstanding, remain liable to pay to the company all moneys which, at the date of forfeiture, were presently payable by him to the company in respect of the shares, but his liability shall cease if and when the company received payment in full of the nominal amount of the shares. 29.A duly verified declaration in writing that the declarant is a director of the company, and that a share in the company has been duly forfeited on a date stated in the declaration, shall be conclusive evidence of the facts therein stated as against all persons claiming to be entitled to the share, and that declaration, and the receipt of the company for the consideration, if any, given for the share on the sale or disposition thereof, shall constitute a good title to the share, and the 541 person to whom the share is sold or disposed of shall be registered as the holder of the share and shall not be bound to see to the application of the purchase-money (if any), nor shall his title to the share be affected by any irregularity or invalidity in the proceedings in reference to the forfeiture, sale or disposal of the share. 30. The provisions of these regulations as to forfeiture shall apply in the case of nonpayment of any sum which, by the terms of issue of a share, becomes payable at a fixed time, whether on account of the amount of the share, or by way of premium, as if the same had been payable by virtue of a call duly made and notified. Conversion of shares into stock 31. The directors may, with the sanction of the company pre- viously given in general meeting, convert any paid-up shares into stock, and may with the like sanction re-convert any stock into paid- up shares of any denomination. 32. The holders of stock may transfer the same, or any part thereof, in the same manner, and subject to the same regulations, as and subject to which, the shares from which the stock arose might previously to conversion have been transferred, or as near thereto as circumstances admit; but the directors may from time to time fix the minimum amount of stock transferable, and restrict or forbid the transfer of fractions of that minimum, but the minimum shall not exceed the nominal amount of the shares from which the stock arose. 33. The holders of stock shall, according to the amount of the stock held by them, have the same rights, privileges and advantages as regards dividends, voting at meetings of the company, and other matters, as if they held the shares from which the stock arose but no such privilege or advantage (except participation in the dividends and profits of the company) shall be conferred by any such aliquot part of stock as would not, if existing in shares, have conferred that privilege or advantage. 34. Such of the regulations of the company (other than those relating to share-warrants), as are applicable to paid-up shares shall apply to stock, and the words "share" and "shareholder" therein shall include "stock" and "stockholder". 542 Share-warrants 35. The company may issue share-warrants, and accordingly the directors may in their discretion, with respect to any share which is fully paid up, on application in writing signed by the person regis- tered as holder of the share, and authenticated by such evidence (if any as the directors may from time to time require as to the identity of the person signing the request, and on receiving the certificate (if any) of the share, and the amount of the stamp-duty on the warrant and such fee as the directors may from time to time require, issue under the company's seal a warrant, duly stamped, stating that the bearer of the warrant is entitled to the shares therein specified, and may provide by coupons or otherwise for the payment of dividends, or other moneys, on the shares included in the warrant. 36. A share-warrant shall entitle the bearer to the shares included in it, and the share shall be transferred by the delivery of the share warrant, and the provisions of the regulations of the company with respect to transfer and transmission of shares shall not apply thereto. 37. The bearer of a share-warrant shall, on surrender of the warrant to the company for cancellation, and on payment of such sum as the directors may from time to time prescribe, be entitled to have his name entered as a member in the register of members in respect of the shares included in the warrant. 38. The bearer of a share-warrant may at any time deposit the warrant at the office of the company and so long as the warrant remains so deposited, the depositor shall have the same right of sign- ing a requisition for calling a meeting of the company, and of attending and voting and exercising the other privileges of a member at any meeting held after the expiration of two clear days from the time of deposit, as if his name were inserted in the register of mem- bers as the holder of the shares included in the deposited warrant. Not more than one person shall be recognised as depositor of the share-warrant. The company shall, on two days' written notice, return the deposited share-warrant to the depositor. 39. Subject as herein otherwise expressly provided, no person shall, as bearer of a share-warrant, sign a requisition for calling a meeting of the company, or attend, or vote or exercise any other privilege of a member at a meeting of the company, or be entitled 543 to receive any notices from the company ; but the bearer of a share- warrant shall be entitled in all other respects to the same privileges and advantages as if he were named in the register of members as the holder of the shares included in the warrant, and he shall be a member of the company. 40. The directors may, from time to time, make rules as to the terms on which (if they shall think fit) a new share-warrant or coupon may be issued by way of renewal in case of defacement, loss or destruction. Alteration of capital 41. The directors may, with the sanction of 1[the company in general meeting], increase the share capital by such sum, to be divided into shares of such amount, as the resolution shall prescribe. 42. Subject to any direction to the contrary that may be given by the resolution sanctioning the increase of share capital, all new shares shall, before issue, be offered to such persons as at the date of the offer are entitled to receive notices from the company of general meetings in proportion, as nearly as the circumstances admit, to the amount of the existing shares to which they are entitled. The offer shall be made by notice specifying the number of shares offered, and limiting a time within which the offer, if not accepted, will be deemed to be declined, and after the expiration of that time, or on the receipt of an intimation from the person to whom the offer is made that he declines to accept the shares offered, the directors may dispose of the same in such manner as they think most beneficial to the company. The directors may likewise so dispose of any new shares which (by reason of the ratio which the new shares bear to shares held by persons entitled to an offer of new shares) cannot, in the opinion of the directors, be conveniently offered under this article. 43. The new shares shall be subject to the same provisions with reference to the payment of calls, lien, transfer, transmission, for- feiture and otherwise as the shares in the original share capital. 44. The company may, by 2[ordinary resolution],- (a) consolidate and divide its share capital into shares of larger amount than its existing shares ; ---------------------------------------------------------------------- 1 Subs. by Act 22 of 1936, s. 122, for "an extraordinary resolution of the company ". 2 Subs., ibid., for "special resolution". ---------------------------------------------------------------------- 544 (b) by sub-division of its existing shares or any of them, divide the whole or any part of its share capital into shares of smaller amount than is fixed by the memorandum of association, subject, nevertheless, to the provisions of

paragraph (d) of sub-section (1) of section 50 of the Indian Companies Act, 1913 (7 of 1913); (c) cancel any shares which, at the date of the passing of the resolution, have not been taken or agreed to be taken by any person ; 1* * * * * 2[44A. The company may, by special resolution, reduce its share capital in any manner and with, and subject to any incident authorized and consent required, by law.] General meetings 45. The Statutory general meeting of the company shall be held within the period required by section 77 of the Indian Companies Act, 1913 (7 of 1913). 46. A general meeting shall be held 3[within eighteen months from the date of its incorporation and thereafter once at least in every year] at such time (not being more than fifteen months after the holding of the last preceding general meeting) and place as may be prescribed by the company in general meeting, or, in default, at such time in the month following that in which the anniversary of the company's incorporation occurs, and at such place as the directors shall appoint. In default of a general meeting being so held, a general meeting shall be held in the month next following, and may be called by any two members in the same manner as nearly as possible as that in which meetings are to be called by the directors. 47. The above-mentioned general meetings shall be called ordinary meetings ; all other general meetings shall be called extraordinary. 48. The directors may, whenever they think fit, call an extraordinary general meeting, and extraordinary general meetings shall also be called on such requisition, or in default, may be called by such ---------------------------------------------------------------------- 1 Cl. (d) rep. by Act 22 of 1936. s. 122. 2 Ins., ibid. 3 Subs., ibid., for " once in every year". --------------------------------------------------------------------- 545 requisitionists, as provided by section 78 of the Indian Companies Act,1913 (7 of 1913). If at any time there are not within India suffi- cient directors capable of acting to form a quorum, any director or any two members of the company may call an extraordinary general meeting in the same manner as nearly as possible as that in which meetings may be called by the directors. Proceedings at general meeting

49. 1[Subject to the provisions of sub-section (2) of section 81 of the Indian Companies Act, 1913, relating to special resolution], fourteen days' notice at the least (exclusive of the day on which the notice is served or deemed to be served, but inclusive of the day for which notice is given) specifying the place, the day and the hour of meeting and, in case of special business, the general nature of that business, shall be given in manner hereinafter mentioned, or in such other manner, if any, as may be prescribed by the company in general meeting, to such persons as are, under 1[the Indian Companies Act, 1913 (7 of 1913), or] the regulations of the company, entitled to receive such notices from the company; but 2[the accidental omission to give notice to or the non-receipt of notice] by any member shall not invalidate the proceedings at any general meeting. 50. All business shall be deemed special that is transacted at an extraordinary meeting, and all that is transacted at an ordinary meeting with the exception of sanctioning a dividend, the considera- tion of the accounts, balance-sheets and the ordinary report of the directors and auditors, the election of directors and other officers in the place of those retiring by rotation, and fixing of the remuneration of the auditors. 51. No business shall be transacted at any general meeting unless a quorum of members is present at the time when the meeting proceeds to business ; save as herein otherwise provided, 3[two members in the case of a private company and five members in the case of any other company] personally present shall be a quorum. 52. If within half an hour from the time appointed for the meeting a quorum is not present, the meeting, if called upon the requisition of members, shall be dissolved ; in any other case, it shall stand ---------------------------------------------------------------------- 1 Ins. by Act 22 of 1936, s. 122. 2 Subs. by s. 122, ibid., for "non-receipt of the notice". 3 Subs. by s. 122, ibid., for "three members". --------------------------------------------------------------------- 546 adjourned to the same day in the next week at the same time and place, and, if at the adjourned meeting a quorum is not present within half an hour from the time appointed for the meeting, the members present shall be a quorum. 53. The chairman, if any, of the Board of directors shall preside as chairman at every general meeting of the company. 54. If there is no such chairman, or if at any meeting he is not present within fifteen minutes after the time appointed for holding the meeting, or is unwilling to act as chairman, the members present shall choose someone of their number to be chairman. 55. The chairman may, with the consent of any meeting at which a quorum is present (and shall if so directed by the meeting), adjourn the meeting from time to time and from place to place, but no business shall be transacted at any adjourned meeting other than the business left unfinished at the meeting from which the adjournment took place. When a meeting is adjourned for ten days or more, notice of the adjourned meeting shall be given as in the case of an original meeting. Save as aforesaid, it shall not be necessary to give any notice of an adjournment or of the business to be transacted at an adjourned meeting. 56. At any general meeting a resolution put to the vote of the meeting shall be decided on a show of hands, unless a poll is (before or on the declaration of the result of the show of hands) demanded

1[in accordance with the provisions of clause (c) of sub-section (1) of section 79 of the Indian Companies Act, 1913 (7 of 1913), ] and un- less a poll is so demanded, a declaration by the chairman that a reso- lution has, on a show of hands, been carried, or carried unani- mously, or by a particular majority, or lost, and an entry to that effect in the book of the proceedings of the company shall be con- clusive evidence of the fact, without proof of the number or proportion of the votes recorded in favour of, or against, that resolution. 57. If a poll is duly demanded, it shall be taken in such manner as the chairman directs, and the result of the poll shall be deemed to be the resolution of the meeting at which the poll was demanded. ---------------------------------------------------------------------- 1 Subs. by Act 2 of 1938, s. 19, for "by at least three members". ---------------------------------------------------------------------- 547 58. In the case of an equality of votes, whether on a show of hands or on a poll, the chairman of the meeting at which the show of hands takes place, or at which the poll is demanded, shall be entitled to a second or casting vote. 59. A poll demanded on the election of a chairman or on a question of adjournment shall be taken forthwith. A poll demanded on any other question shall be taken at such time as the chairman of the meeting directs. Votes of members 60. On a show of hands every member present in person shall have one vote. 1[On a poll every member shall have one vote in respect of each share or each hundred rupees of stock held by him.] 61. In the case of joint-holders, the vote of the senior who tenders a vote, whether in person or by proxy, shall be accepted to the exclusion of the votes of the other joint-holders ; and for this purpose seniority shall be determined by the order in which the names stand in the register of members. 62. A member of unsound mind, or in respect of whom an order has been made by any Court having jurisdiction in lunacy, may vote, whether on a show of hands or on a poll, by his committee or other legal guardian, and any such committee or guardian may, on a poll, vote by proxy. 63. No member shall be entitled to vote at any general meeting unless all calls or other sums presently payable by him in respect of shares in the company have been paid. 64. On a poll votes may be given either personally or by proxy: Provided that no company shall vote by proxy as long as a resolution of its directors in accordance with the provisions of section 80 of the Indian Companies Act, 1913 (7 of 1913), is in force. 65. The instrument appointing a proxy shall be in writing under the hand of the appointor or of his attorney duly authorized in writing, or, if the appoint or is a corporation either under the common seal, or under the hand of an officer or attorney so authorized. No person shall act as a proxy unless 2 [he is a member of the company]. ---------------------------------------------------------------------- 1 Subs. by Act 22 of 1936, s. 122, for " On a poll every member shall have one vote for each share of which he is the holder". 2 Subs., ibid., for the original words. ---------------------------------------------------------------------- 548 66.The instrument appointing a proxy and the power-of-attorney or other authority (if any), under which it is signed or a notarially certified copy of that power or authority, shall be deposited at the registered office of the company not less than seventy-two hours before the time for holding the meeting at which the person named in the instrument proposes to vote, and in default the instrument of proxy shall not be treated as valid. 67.An instrument appointing a proxy may be in the following form, or in any other form which the directors shall approve:- Company, Limited. " I of in the district of ,being a member of the Company, Limited, hereby appoint of as my proxy to vote for me and on my behalf at the

[ordinary or extraordinary, as the case may be] general meeting of the

section (1) of section 2[85] of the Indian Companies Act, 1913 (7 of 1913), or at any time thereafter ceases to hold, the share qualification, if any, necessary for his appointment ; or (b) is found to be of unsound mind by a Court of competent jurisdiction ; or (c) is adjudged insolvent ; or (d) fails to pay calls made on him in respect of shares held by him within six months from the date of such calls being made ; or (e) without the sanction of the company in general meeting accepts or holds any office of profit under the company other than that of a managing director or manager or a legal or technical adviser or a banker ; or (f) absents himself from three consecutive meetings of the directors or from all meetings of the directors for a continuous period of three months, whichever is longer, without leave of absence from the Board of directors ; or (g) accepts a loan from the company; or] ---------------------------------------------------------------------- 1 Subs. by Act 22 of 1936, s. 122, for the original cls. (a) to (d). 2 Subs. by Act 2 of 1938, s. 19, for " 84". ---------------------------------------------------------------------- 551 1[(h)] is concerned or participates in the profits of any contract with the company; or 1[(i)] is punished with imprisonment for a term exceeding six months: Provided, however, that no director shall vacate his office by reason of his being a member of any company which has entered into contracts with, or done any work for, the company of which he is director, but a director shall not vote in respect of any such contract or work, and if he does so vote, his vote shall not be counted. Rotation of directors 78. At the first ordinary meeting of the company, the whole of the directors shall retire from office, and at the ordinary meeting in every subsequent year, one-third of the directors for the time being or, if their number is not three or a multiple of three, then the number nearest to one-third shall retire from office. 79. The directors to retire in every year shall be those who have been longest in office since their last election, but as between persons who became directors on the same day those to retire shall (unless they otherwise agree among themselves) be determined by lot. 80. A retiring director shall be eligible for re-election. 81. The company at the general meeting at which a director retires in manner aforesaid may fill up the vacated office by electing a person thereto. 82. If at any meeting at which an election of directors ought to take place, the places of the vacating directors are not filled up, the meeting shall stand adjourned till the same day in the next week at the same time and place, and, if at the adjourned meeting the places of the vacating directors are not filled up, the vacating directors or such of them as have not had their places filled up shall be deemed to have been re-elected at the adjourned meeting. 83. 2[Subject to the provisions of sections 83A and 83B of the Indian Companies Act, 1913 (7 of 1913)] the company may from time to time in ---------------------------------------------------------------------- 1 The original cls. (e) and (f) were re-lettered (h) and (i) by Act 22 of 1936, s. 122. 2 Ins. by s. 122, ibid. --------------------------------------------------------------------- 352 general meeting increase or reduce the number of directors, and may also determine in what rotation the increased or reduced number is to go out of office. 84. Any casual vacancy occurring on the Board of directors may be filled up by the directors, but the person so chosen shall be subject to retirement at the same time as if he had become a director on the day on which the director in whose place he is appointed was last elected a director. 85. The directors shall have power at any time, and from time to time, to appoint a person as an additional director who shall retire from office at the next following ordinary general meeting, but shall be eligible for election by the company at that meeting as an addi- tional director. 86. The company may by extraordinary resolution remove any director before the expiration of his period of office, and may by an ordinary resolution appoint another person in his stead ; the person so appointed shall be subject to retirement at the same time as if he had become a director on the day on which the director in whose place he is appointed was last elected a director. Proceedings of directors 87. The directors may meet together for the despatch of business, adjourn and otherwise regulate their meetings, as they think fit. Questions arising at any meeting shall be decided by a majority of votes. In case of an equality of votes, the chairman shall have a second or casting vote. A director may, and the secretary on the requisition of a director shall, at any time, summon a meeting of directors. 88. The quorum necessary for the transaction of the business of the directors may be fixed by the directors, and unless so fixed shall (when the number of directors exceeds three) be three. 89. The continuing directors may act notwithstanding any vacancy in their body, but, if and so long as their number is reduced below the number fixed by or pursuant to the regulations of the company as the necessary quorum of directors, the continuing directors may act for the purpose of increasing the number of directors 553 to that number, or of summoning a general meeting of the company, but for no other purpose. 90. The directors may elect a chairman of their meetings and determine the period for which he is to hold office ; but if no such chairman is elected, or if at any meeting the chairman is not present within five minutes after the time appointed for holding the same the directors present may choose one of their number to be chairman of the meeting. 91. The directors may delegate any of their powers to committees consisting of such member or members of their body as they think fit; any committee so 1[formed] shall, in the exercise of the powers so delegated, conform to any regulations that may be imposed on them by the directors. 92. A committee may elect a chairman of their meetings: if no such chairman is elected, or if at any meeting the chairman is not present within five minutes after the time appointed for holding the same, the members present may choose one of their number to be chairman of the meeting. 93. A committee may meet and adjourn as they think proper. Questions arising at any meeting shall be determined by a majority of votes of the members present, and in case of an equality of votes, the chairman shall have a second or casting vote. 94. All acts done by any meeting of the directors or of a com- mittee of directors, or by any person acting as a director, shall, notwithstanding that it be afterwards discovered that there was some defect in the appointment of any such directors or persons acting as aforesaid, or that they or any of them were disqualified, be as valid as if every such person had been duly appointed and was qualified to be a director. Dividends and Reserve 95. The company in general meeting may declare dividends, but no dividends shall exceed the amount recommended by the directors. 96. The directors may from time to time pay to the members such interim dividends as appear to the directors to be justified by the profits of the company. ---------------------------------------------------------------------- 1 Subs. by Act 10 of 1914, Sch. I, for "found". ---------------------------------------------------------------------- 554 97.No dividends shall be paid otherwise than out of profits 1[of the year or any other undistributed profits]. 98.Subject to the rights of persons (if any) entitled to shares with special rights as to dividends, all dividends shall be declared and paid according to the amounts paid on the shares, but if and so long as nothing is paid upon any of the shares in the company, divi- dends may be declared and paid according to the amounts of the shares. No amount paid on a share in advance of calls shall, while carrying interest, be treated for the purposes of this article as paid on the share. 99.The directors may, before recommending any dividend, set aside out of the profits of the company such sums as they think proper as a reserve or reserves which shall, at the discretion of the directors, be applicable for meeting contingencies, or for equalizing dividends, or for any other purpose to which the profits of the company may be properly applied, and pending such application may, at the like discretion, either be employed in the business of the company or be invested in such investments (other than shares of the company) as the directors may from time to time think fit. 100. If several persons are registered as joint-holders of any share, any one of them may give effectual receipts for any dividend payable on the share. 101. Notice of any dividend that may have been declared shall be given in manner hereinafter mentioned to the persons entitled to share therein. 102. No dividend shall bear interest against the company. Accounts 2[103. The directors shall cause to be kept proper books of account with respect to- (a) all sums of money received and expended by the company and the matters in respect of which the receipts and expenditure take place: (b) all sales and purchases of goods by the company: (c) the assets and liabilities of the company.] ---------------------------------------------------------------------- 1 Ins. by Act 22 of 1936, s. 122. 2 Subs. by s. 122, ibid., for the original regulation. ---------------------------------------------------------------------- 555 1[104. The books of account shall be kept at the registered office of the company or at such other place as the directors shall think fit and shall be open to inspection by the directors during business hours.] 105. The directors shall from time to time determine whether and to what extent and at what times and places and under what conditions or regulations the accounts and books of the company or any of them shall be open to the inspection of members not being directors, and no member (not being a director) shall have any right of inspecting any account or book or document of the company except as conferred by law or authorized by the directors or by the company in general meeting. 1[106. The directors shall as required by sections 131 and 131A of the Indian Companies Act, 1913, cause to be prepared and to be laid before the company in general meeting such profit and loss accounts, 2[income and expenditure accounts], balance-sheets, and reports as are referred to in those sections.] 107. The profit and loss account shall, 3[in addition to the

matters referred to in sub-section (3) of section 132 of the Indian Companies Act, 1913 (7 of 1913)], show, arranged under the most con- venient heads, the amount of gross income 4[(diminished in the case of a banking company by the amount of any provision made to the satis- faction of the auditors for bad and doubtful debts)] distinguishing the several sources from which it has been derived, and the amount of gross expenditure distinguishing the expenses of the establishment, salaries and other like matters. Every item of expenditure fairly chargeable against the year's income shall be brought into account, so that a just balance of profit and loss may be laid before the meeting, and, in cases where any item of expenditure which may in fairness be distributed over several years has been incurred in any one year, the whole amount of such item shall be stated, with the addition of the reasons why only a portion of such expenditure is charged against the income of the year. ---------------------------------------------------------------------- 1 Subs. by Act 22 of 1936, s. 122, for the original regulation. 2 Ins. by Act 2 of 1938, s. 19. 3 Ins. by Act 22 of 1936, s. 122. 4 Ins. by Act 30 of 1943, s. 4 .(with retrospective effect). ---------------------------------------------------------------------

108. A balance-sheet shall be made out in every year and laid before the company in general meeting made up to a date not more than six months before such meeting. The balance-sheet shall be accompanied by a report of the directors as to the state of the com- pany's affairs, and the amount which they recommend to be paid by way of dividend, and the amount (if any) which they propose to carry to a reserve fund. 109. A copy of the balance-sheet and report shall, 1[fourteen] days previously to the meeting, be sent to the persons entitled to receive notices of general meetings in the manner in which notices are to be given hereunder. 110. The directors shall in all respects comply with the provisions of sections 130 to .135 of the Indian Companies Act, 1913 (7 of 1913), or any statutory modification thereof for the time being in force. Audit 111. Auditors shall be appointed and their duties regulated in accordance with sections 144 and 145 of the Indian Companies Act, 1913 (7 of 1913), or any statutory modification thereof for the time being in force. Notices

112. (1) A notice may be given by the company to any member 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 notice is sent by post, service of the notice shall be deemed to be effected by properly addressing, prepaying and posting a letter containing the notice and, unless, the contrary is proved, to have been effected at the time at which the letter would be delivered in the ordinary course of post. 113. If a member has no registered address in India and has not supplied to the company an address within India for the giving of notices to him, a notice addressed to him and advertised in a newspaper circulating in the neighbourhood of the registered ---------------------------------------------------------------------- 1 Subs. by Act 2 of 1938, s. 19, for "seven". ---------------------------------------------------------------------- 557 office of the company shall be deemed to be duly given to him on the day on which the advertisement appears. 114. A notice may be given by the company to the joint-holders of a share by giving the notice to the joint-holder named first in the register in respect of the share. 115. A notice may be given by the company to 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 assignee 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 giving the notice in any manner in which the same might have been given if the death or insolvency had not occurred. 116. Notice of every general meeting shall be given in some manner hereinbefore authorized to (a) every member of the company (including bearers of share-warrants) except those members who (having no registered address within India) have not supplied to the company an address within India for the giving of notices to them, and also to (b) every person entitled to a share in consequence of the death or insolvency of a member, who but for his death or insolvency would be entitled to receive, notice of the meeting. 1* * *. ---------------------------------------------------------------------- 1 The words "No other persons shall be entitled to receive notices of general meetings." rep. by Act 2 of 1938, s. 19. ---------------------------------------------------------------------- PART PRELIMINARY PART I PRELIMINARY

Short title, commencement and extent.

1. Short title, commencement and extent.-(1) This Act may be called the Companies Act, 1956.

(2) It shall come into force on such date as the Central Govern- ment may, by notification in the Official Gazette, appoint.

(3) It extends to the whole of India except the State of Jammu and Kashmir.

Definitions. 2. Definitions.-In this Act, unless the context otherwise re- quires,-

(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, ---------------------------------------------------------------------- 1.1st April, 1956. See Gazette of India, Extraordinary, 1956, Part II, Section 3, P. 413. ---------------------------------------------------------------------- 35 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 1918), 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 re- latives, 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 firstmentioned, any such member or members, partner, or partners, relative or relatives, other firm or firms and private company or com- panies; 36 (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 manager or an officer of the body corporate or of any subsidiary or holding company thereof; any partner or relative of any such director or manager; any firm in which such director, manager, partner or relative, is a partner; 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 men- tioned in sub-clause (c), any member of the private company or. body corporate; Explanation.-If one person is an associate in relation to another within the meaning of this clause, the latter shall also be deemed to be an associate in relation to the former within its meaning;

(4) "associate", in relation to any secretaries and treasurers, means any of the following, and no others:- (a) where the secre- taries and trea- surers 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 37 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 secre- taries, and tre- asurers 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 firm in which such director or manager, part- ner 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 (c) Where the secre- taries and trea- surers are a pri- vate company or a body corporate having not more than fifty mem- bers: 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, means 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 to 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 1938);

(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 either solely or in conjunction with any other business or businesses;

(22) "issued generally" means, in relation to a prospectus. issued to persons irrespective of their being existing members or debenture holders of the body corporate to which the prospectus relates;

(23) "limited company" means a company limited by shares or by guarantee; 39

(24) "manager" means an individual (not being the managIng agent) who, subject to the superintendence, control and direction of the Board of directors, has the-management of the whole, or substantially the whole,-of the affairs of a company. and includes a director or any other person occupying the position of a manager, by whatever name called, and whether under a contract of service or not;

(25) "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 a 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 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: 40

(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 or purchase of any shares in, or debentures of, a body corporate;

(37) "public company" means a public company as defined in section 3;

(38) "public holiday" means a public holiday within the meaning of the Negotiable Instruments Act, 1881 (26 of 1881): Provided that no day declared by the Central Government to be a public holiday shall be deemed to be such a holiday, in relation to any meeting, unless the declaration was notified before the issue of the notice convening such meeting;

(39) "recognised stock exchange" means, in relation to any provision of this Act in which it occurs, a stock exchange, whether in or outside India, which is notified by the Central Government in the Official Gazette as a recognised stock exchange for the purposes of that provision;

(40) "Registrar" means a Registrar, or an Additional, a Joint, a Deputy or an Assistant Registrar, having the duty of registering companies under this Act

(41) "relative" means, with reference to any person, any one who is related to such person in any of the ways specified in section 6, and no others;

(42) "Schedule" means a Schedule annexed to this Act;

(43) "Scheduled Bank" has the same meaning as in the Reserve Bank of India Act, 1934 (2 of 1934);

(44) "secretaries and treasurers" means any firm or body corporate (not being the managing agent) which, subject to the superintendence, control and direction of the Board of directors, has the management of the whole, or substantially the whole, of the affairs of a company; and includes any firm or body corporate occupying the position of secretaries and treasurers, by whatever name called, and whether under a contract of service or not;

(45) "secretary" means the person, if any, who is appointed to perform the duties which may be Performed by a secretary under this Act;

(46) "share" means share in the share capital of a company, and includes stock except where a distinction between stock and shares is expressed or implied;

(47) "subsidiary company" or "subsidiary" means a subsidiary company within the meaning of section 4; 41

(48) "total voting power", in regard to any matter relating to a body corporate, means. the total number of votes which may be cast in regard to that matter on a poll at a meeting of such body, if all the members thereof and all other persons, if any, having a right to vote on that matter are present at the meeting, and cast their votes;

(49) "trading corporation" means a trading corporation within the meaning of entries 43 and 44 in List I in the Seventh Schedule to the Constitution;

(50) "variation" shall include abrogation; and "vary" shall include abrogate.

Definitions of "company", "existing company", "private company" and"public company". 3. Definitions of "company", "existing company", "private com-

pany" 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 regis- tered under any of the previous companies laws specified below:- (a) any Act or Acts relating to companies in force before the Indian Companies Act, 1866 (10 of 1866) and repealed by that Act; (b) the Indian Companies Act, 1866 (10 of 1986); (c) the Indian Companies Act, 1882 (6 of 1882); (d) the Indian Companies Act, 1913 (7 of 1913); (e) the Registration of Transferred Companies Ordinance, 1942 (54 of 1942); and (f) any law corresponding to any of the Acts or the Ordinance aforesaid and in force in the merged territories or in a Part B State, 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; 42 (iv) "public company" means a company which is not a private company.

(2) Unless the context otherwise requires, the following companies shall not be included within the scope of any of the

expressions defined in clauses (i) to (iv) of sub-section (1), and such companies shall be deemed, for the purposes of this Act, to have been formed and registered outside India :- (a) a company the registered office 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.

Meaning of "holding company" and "subsidiary".

4. Meaning of "holding company" and "subsidiary".-(1) For the purposes of this Act, a company shall, subject to the provisions of

sub-section (3), be deemed to be a subsidiary of another if, but only if,-- (a) that other controls the composition of its Board of directors; or (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 ill a subsidiary of Company A by virtue of clause (c) above. If Company D is a subsidiary of Company C, 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 a power as aforesaid; (b) that a person's appointment thereto follows necessarily from his appointment as director, managing agent, secretaries and treasurers, or manager of, or to any other office or employment in, that other company; or (c) that the directorship is held by that other company itself or by a subsidiary of it. 43

(3) In detedmining whether one copany is a subsidiary of another- (a) any shares held or power exercisable by that other com- pany in a fiduciary capacity shall be treated as not held or exercisable by it; (b) subject to the provisions of clauses (c) and (d), any shares held or power exercisable- (i) by any person as a nominee for that other company (except where that other is concerned only in a fiduciary capacity); or (ii) by, or by a nominee for, a subsidiary of that other company, not being a subsidiary which is concerned only in a fiduciary capacity; shall be treated. as held or exercisable by that other company; (c) any shares held or power exercisable by any person by virtue of the provisions of any debentures of the first- mentioned company or of a trust deed for securing any issue of such debentures shall be disregarded; (d) any shares held or power exercisable by, or by a nominee for, that other or its subsidiary [not being held or exercisable as mentioned in clause (c)] shall be treated as not held or exercisable by that other, if the ordinary business of that other or its subsidiary, as the case may be, includes the lending of money and the shares are held or the. power is exercisable as aforesaid by way of security only for the purposes of a transaction entered into in the ordinary course of that business.

(4) For the purposes of this Act, a company shall be deemed to be the holding company of another if, but only if, that other is its subsidiary.

(5) In this section, the expression "company" includes any body corporate, and the expression "equity share capital" has the same

meaning as in sub-section (2) of section 85.

(6) In the case of a body corporate which is incorporated in a country outside India, a subsidiary or holding company of the body corporate under the law of such country shall be deemed to be a subsidiary or holding company of the body corporate within the meaning and for the purposes of this Act also, whether the requirements of this section are fulfilled or not.

Meaning of "officer who is in default". 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, noncompliance, failure, refusal or contravention mentioned in that provision, or who knowingly and wilfully authorises or permits such default, non-compliance, failure, refusal or contravention.

Meaning of "relative". 6.Meaning of "relative".-Two persons shall be deemed to be "relatives" if, and only if, they are husband and wife, or the one or 44 the spouse of the one is related to the other or the spouse of the other, whether by legitimate or illegitimate descent or by adoption and whether by full blood or by half blood, in any of the following ways, namely: - (i) as parent and Child; (ii) as grand-parent and grand-child; (iii) as brothers or sisters, or as brother and sister; (iv) as uncle or aunt, and nephew or niece; (v) as first cousins, that is to say, as persons having a common grand-parent, provided the cousins are members of a Hindu joint family whether governed by the Mitakshara, the Dayabagha, the Marumakhathayam, the Aliyasanthana or any other system of law.

Interpretation of "person in accordance with whose directions orInstructions directors are accustomed to act'. 7. Interpretation of "person in accordance with whose directions or Instructions directors are accustomed to act':-Except where this Act expressly provides otherwise, a person shall not be (teemed to be, within the meaning of any provision in this Act, a person in accordance with whose directions or instructions the Board of directors of a company is accustomed to act, by reason only that the Board acts on advice given by him in a professional capacity.

Power of Central Government to declare an establishment not to be abranch office. 8. Power of Central Government to declare an establishment not to be a branch office.-The Central Government may, by order, declare that in the case of any company, 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 bead 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.

Act to override memorandum, articles, etc. 9. Act to override memorandum, articles, etc.-Save as otherwise expressly provided in the Act- (a) the provisions of this Act shall have effect notwithstanding anything to the contrary contained in the memorandum or articles of a company, or in any agreement executed by it, or in any resolution passed by the company in general meeting or by its Board of directors, whether the same be registered, executed or passed, as the case may be, before or after the commencement of this Act; and (b) any provision contained in the memorandum, articles, agreement or resolution aforesaid shall, to the extent to which it is repugnant to the provisions of this Act, become or be void, as the case may be.

Jurisdiction of Courts.

10. Jurisdiction of Courts.-(1) The Court having jurisdiction under this Act shall be- (a) the High Court having jurisdiction in relation to the place at which the registered office of the company concerned is situate, except to the extent to which jurisdiction has been conferred on any District Court or District Courts subordinate to that High Court in pursuance of sub-section

(2); and 45 (b) where jurisdiction has been so conferred, the District Court in regard to matters falling within the scope of the jurisdiction conferred, in respect of companies having their registered offices in the district.

(2) The Central Government may, by notification in the Official Gazette and subject to such restrictions, limitations and conditions as it thinks fit, empower any District Court to exercise all or any of the jurisdiction. conferred by this Act upon the Court, not being the jurisdiction conferred- (a) in respect of companies generally, by sections 237, 391, 394, 395 and 397 to 407, both inclusive; (b) in respect of companies with a paid-up share capital of not less than one lakh of rupees, by Part VII (sections 425 to 560) and the other provisions of this Act relating to the winding up of companies.

(3) For the purposes of jurisdiction to wind up companies, the expression "registered office" means the place which has longest been the registered office of the company during the six months immediately preceding the presentation of the petition for winding up. PART 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

Prohibition of associations and partnerships exceeding certainnumber. 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 contravention of this section shall be punishable with fine which may extend to one thousand rupees. Memorandum of Association

Mode of forming incorporated company.

12. 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 45 a memorandum of association and otherwise complying with the re- quirements of this Act in respect of registration, form an incorporat- ed company, with or without limited liability.

(2) Such a company may be either- (a) a company having the liability of its members limited by the memorandum to the amount, if any, unpaid on the shares respectively held by them (in this Act termed "a company limited by shares"); (b) a company having the liability of its members limited by the memorandum to such amount as the members may respec- tively 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 On this Act termed "an unlimited company").

Requirements with respect to memorandum.

13. Requirements with respect to memorandum.-(1) The memorandum of every company shall state- (a) the name of the company with "Limited" as the last word of the name in the case of a public limited company, and with "Private Limited" as the last 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 the 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 limit- ed.

(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. 47

Form of memorandum. 14. Form of memorandum.-The memorandum of association of a company shall be in such one of the Forms in Tables B, C, D and E in Schedule I as may be applicable to the case of the company, or in a Form as near thereto as circumstances admit.

Printing and signature of memorandum. 15. Printing and signature of memorandum.-The memorandum shall- (a) be printed, (b) be divided into paragraphs numbered consecutively, and (c) be signed by each subscriber (who shall add his address, description and occupation, if any,) in the presence of at least one witness who shall attest the signature and shall likewise add his address, description and occupation, if any.

Alteration of memorandum.

16. Alteration of memorandum.-(1) A company shall not alter the conditions contained in its memorandum except in the cases, in the mode, and to the extent, for which express provision is made in this Act.

(2) Only those provisions which are required by section 13 or by any other specific provision contained in this Act, to be stated in the memorandum of the company concerned shall be deemed to be conditions contained in its memorandum.

(3) Other provisions contained in the memorandum, including those relating to the appointment of a managing director, managing agent, secretaries and treasurers or manager, may be altered in the same manner as the articles of the company, but if there is any express provision in this Act permitting of the alteration of such provisions in any other manner, they may also be altered in such other manner.

(4) All references to the articles of a company in this Act shall be construed as including references to the other provisions aforesaid contained in its memorandum.

Special resolution and confirmation by Court required for alterationof memorandum. 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 cir- cumstances may conveniently or advantageously be combined with the business of the company ; 48 (e) to restrict or abandon any of the objects specified in the memorandum; (f) to sell or dispose of the whole; or any part, of the under, taking, or of any of the undertakings, of the company; or (g) to amalgamate with any other company or body of per- sons.

(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 that an arrangement may be made to the satisfaction of the Court for the purchase of the interests of dissentient members; and may give such directions and make such orders as it thinks fit for facilitating, or carrying into effect, any such arrangement: Provided that part of the capital of the company may be expended in any such purchase.

Alteration to be registered within three months.

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 49 from the date of the order, be filed by the company with the Regis- trar, 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 con- firmation thereof have been complied with, and thenceforth the memorandum as so altered shall be the memorandum of the company.

(3) Where the alteration involves a transfer of the registered office from one State to another, a certified copy of the order confirmIng the alteration shall be filed by the company with the Registrar of each of the States, and the Registrar of each such State shall register the same, and shall certify under his hand the registration thereof; and the Registrar of the State from which such office is transferred shall send to the Registrar of the other State all documents relating to the company registered, recorded or filed in his office.

(4) The Court may, at any time, by order, extend the time for the fling of documents under this section by such period as it thinks proper.

Effect of failure to register.

19. Effect of failure to register.-(1) No such alteration as is referred to in section 17 shall have any effect until it has been duly registered in accordance with the provisions of section 18.

(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 proceed- ings 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

Companies not to be registered with undesirable names.-

20. Companies not to be registered with undesirable names. (1) No company shall be registered by a name which, in the opinion of the Central Government, is undesirable.

(2) Without prejudice to the generality of the foregoing power, a name which is identical with, or too nearly resembles, the name by which a company in existence has been previously registered, may be deemed to be undesirable by the Central Government within the meaning

of sub-section (1).

Change of name by company. 21. Change of name by company.-A company may, by special resolution and with the approval of the Central Government signified in writing, change its name.

Rectification of name of company.

22. Rectification of name of company.-(1) If, through inadver- tence 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 pre- 50 viously registered, whether under this Act or any previous companies law, the first-mentioned company- (a) may, by ordinary resolution and with the previous ap. proval 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 sub-section (1), the company, and every officer who is in default, shall be punishable with fine which may extend to one hundred rupees for every day during which the default continues.

Registration of change of name and effect thereof.

23. Registration of change of name and effect thereof.--(1) Where a company 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.

Change of name of existing private limited companies.-

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.

Power to dispense with "Limited" in name of charitable or othercompany. 25. Power to dispense with "Limited" in name of charitable or

other company.-(1) Where' it is proved to the satisfaction of the Central Government that an association-- (a) is about to be formed as a limited company for promoting commerce, art, science, religion, charity or any other useful object, and

(b) intends to apply its profits, if any, or other income in promoting its objects, and to prohibit the payment of any dividend to its members, the Central Government may, by licence, direct that the association may be registered as a company with limited liability, without the addition to its name of the word "Limited" or the words "Private limited".

(2) The association may thereupon be registered accordingly; and on registration shall enjoy all the privileges, and (subject to the provisions of this section) be subject to all the obligations, of limited companies.

(3) Where it is proved to the satisfaction of the Central Government- (a) that the objects of a company registered under this Act as a limited company are restricted to those specified in

clause (a) of sub-section (1), and (b) that by its constitution the company is required to apply its profits, if any, or other income in promoting its objects and is prohibited from paying any dividend to its, members, the Central Government may, by licence, authorise the company by a special resolution to charge 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 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) The body to which a licence is so granted shall be exempt from the provisions of this Act relating to- (a) the use of the word "Limited" or the words "Private Limited" as any part of its name, (b) the publishing of its name, (c) if the Central Government so directs and to the extent specified in the direction, the obligation laid on the company to send lists of its members to the Registrar, and (d) if the Central Government so directs and to the extent specified in the direction, the obligations laid on the company by section 303. 52

(7) The licence 'may at any time be revoked by the Central Gov- ernment, and upon revocation, the Registrar shall enter the word "Limited" or the words "Private Limited" at the end of the name upon the register of the body to which it was granted; and the body shall cease to enjoy the exemption granted by this section: Provided that, before a licence is so revoked, the Central Government shall give notice in writing of its intention to the body, and shall afford it an opportunity of being heard in opposition to the revocation.

(8) Where a body in respect if Which a licence under this section is in force alters the provisions of its memorandum with respect to its objects, the Central Government may- (a) revoke the licence if it sees fit to do so, or (b) vary the licence by making it subject to such conditions and regulations as the Central Government thinks fit, in lieu of, or in addition to, the conditions and regulations, if any, to which the licence was formerly subject.

(9) Upon the revocation of a licence granted under this section to a body the name of which contains the words "Chamber of commerce", that body shall, within a period of three months from the date of revocation or such longer period as the Central Government may think fit to allow, change its name to a name which does not contain those words; and- (a) the notice to be given under the proviso to sub-section

(7) to that body shall include a statement of the effect of the foregoing provisions of this sub-section; and (b) section 23 shall apply to a change of name under this sub-section as it applies to a change of name under section

(10) If the body makes default in complying with the requirements

of sub-section (9), it shall be punishable with fine which may extend to five hundred rupees for every day during which the default continues. Articles of Association

Articles prescribing regulations. 26. Articles prescribing regulations.-There may in the case of a public company limited by shares, and there shall in the case of an unlimited company or a company limited by guarantee or a private company limited by shares, by registered with the memorandum, articles of association signed by the subscribers of the memorandum, prescribing regulations for the company.

Regulation required in case of unlimited company, company limited 'byguarantee or private company limited by shares. 27.Regulation required in case of unlimited company, company

limited 'by guarantee or private company limited by shares.-(1) ED 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. 53

(2) In the case of a company limited by guarantee, the articles shall state the number of members with which the company is to be registered.

(3) In the case of a private company having a share capital, the articles shall contain provisions relating to the matters specified in

sub-clauses (a), (b) and (c) of clause (iii) of sub-section (1) of section 3; and in the case of any other private company, the articles shall contain provisions relating to the matters specified in the said sub-clauses (b) and (c).

Adoption and application of Table A in the case of companies limitedby shares. 28. Adoption and application of Table A in the case of companies

limited by shares.-(1) The articles of association of a company limited by shares may adopt all or any of the regulations contained in Table A in Schedule I.

(2) In the case of any such company which is registered after the commencement of this Act, if articles are not registered, or if articles are registered, in so far as the articles do not exclude or modify the regulations contained in Table A aforesaid, those regula- tions shall, so far as applicable, be the regulations of the company in "he same manner and to the same extent as if they were contained in duly registered articles.

Form of articles in the case of other companies. 29. Form of articles in the case of other companies.-The articles of 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.

Form and signature of articles. 30. Form and signature of articles.-Articles shall- (a) be printed; (b) be divided into paragraphs numbered consecutively; and (C) be signed by each subscriber of the memorandum of association (who shall add his address, description and occupation, if any), in the presence of at least one witness who shall attest the signature and shall likewise add his address, description and occupation, if any.

Alteration of articles by special resolution.

31. 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.

(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.

(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. 54 Change of registration of companies

Registration of unlimited company as limited, etc.

32. Registration of unlimited company as limited, etc.-(1) Sub- ject 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, lia- bilities, obligations and contracts may be enforced in the manner provided by Part IX of this Act in the case of a company registered in pursuance of that Part. General provisions with respect to memorandum and articles

Registration of memorandum and articles.

33. Registration of memorandum and articles.-(1) There shall be presented for registration, to the Registrar of the State in which the registered office of the company is stated by the memorandum to be situate- (a) the memorandum of the company; (b) its articles, if any; and (c) the agreement, if any, which the company proposes to enter into with any individual, firm or body corporate to be appointed as its managing agent, or with any firm or body corporate to be appointed as its secretaries and treasurers.

(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 chartered accountant practising in India, who is engaged in the formation of a company, or by a person named in the articles as a director, managing agent, secretaries and treasurers, 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.

(3) If the Registrar is satisfied that all the requirements aforesaid have been complied with by the company and that it is autho- rised 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. 55

Effect of registration.

34. Effect of registration.-(1) On the registration of the memo- randum of a company, the Registrar shall certify under his hand that the company is incorporated and, in the case of a limited company, that the company is limited.

(2) From the date of incorporation mentioned in the certificate of incorporation, such of the subscribers of the memorandum and other persons, as may from time to time be, members of the company, shall be a body corporate by the name contained in the memorandum, capable forthwith of exercising all the functions of an incorporated company, and having perpetual succession and a common seal, but with such liability on the part of the members to contribute to the assets of the company in the event of its being wound up as is mentioned in this Act.

Conclusiveness of certificate of incorporation. 35. Conclusiveness of certificate of incorporation.-A certificate of incorporation given by the Registrar in respect of any association shall be conclusive evidence that all the requirements of this Act have been complied with in respect of registration and matters precedent and incidental thereto, and that the association is a company authorised to be registered and duly registered under this Act.

Effect of memorandum and articles.

36. Effect of memorandum and articles.-(1) Subject to the pro- visions of this Act, the memorandum and articles shall, when regis- tered, bind the company and the members thereof to the same extent as if they respectively had been signed by the company and by each member, and contained covenants on its and his part to observe all the provisions of the memorandum and of the articles.

(2) All money payable by any member to, the company under the memorandum or articles shall be a debt due from him to the company.

Provision as to companies limited by guarantee.

37. Provision as to companies limited by guarantee.-(1) In the case of a company limited by guarantee and not having a share capital, and registered on or after the first day of April, 1914, every provision in the memorandum or articles or in any resolution of the company purporting to give any person a right to participate in the divisible profits of the company otherwise than as a member shall be void.

(2) For the purpose of the provisions of this Act relating to the memorandum of a company limited by guarantee and of this section every provision in the memorandum or articles, or in any resolution, of any company limited by, guarantee and registered on or after the first day of April, 1914, purporting to divide the undertaking of the company into shares or interests, shall be treated as a provision for a share capital, notwithstanding that the nominal amount or number of the shares or interests is not specified thereby.

Effect of alteration in memorandum or articles. 38. Effect of alteration in memorandum or articles.-Notwith- standing anything in the memorandum or articles of a company, no member of the company shall be bound by an alteration made in the memorandum or articles after the date on which he became a member, if and so far as the alteration requires him to take or subscribe for more shares than the number held by him at the date on which the alteration is made, or in any way increases his liability as 56 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 in any case where the member agrees in writing either before or after a particular altera- tion is made, to be bound by the alteration.

Copies of memorandum and articles etc. to be given to members. 39. Copies of memorandum and articles etc. to be given to mem-

bers.--(1) A company shall, on being so required by a member, send to him within seven days of the requirement and subject to the payment of a fee of one rupee, a copy each of the following documents as in force for the time being-- (a) the memorandum; (b) the articles, if any; (c) the agreement, if any, entered into or proposed to be entered into, by the company with any person appointed or to be appointed as its managing agent or as its secretaries and treasurers; and (b) every other agreement and every resolution referred to in section 192, if and in. so far as they have not been embodied in the memorandum or articles.

(2) If a company makes default in complying with the requirements of this section, the company, and every officer of the company who is in default, shall be punishable, for each offence, with fine. which may extend to fifty rupees.

Alteration of memorandum or articles etc. to be noted in every copy. 40. Alteration of memorandum or articles etc. to be noted in

every copy.--(1) Where an alteration is made in the memorandum or articles of a company, in the agreement referred to in clause (c) of

sub-section (1) of section 39 or in any other agreement. or any resolution, referred to in section 192, every copy of the memorandum, articles, agreement or resolution issued after the date of the alteration shall be in accordance with the alteration.

(2) If, at any time, the company issues any copies of the memorandum articles, resolution or agreement, which are not in accord- ance with the alteration or alterations made therein before that time, the company, and every officer of the company who is in default, shall be punishable with fine which may extend to ten rupees for each copy so issued. Membership of company

Definition of "member".

41, Definition of "member".-(1) The subscribers of the memorandum of a company shall be deemed to have agreed to become members of the company, and on its registration, shall be entered as members in its register of members.

(2) Every other person who agrees to become a member of a company and whose name is entered in its register of members, shall be a member of the company.

Membership of holding company.

42. Membership of holding company.-(1) Except in the cases mentioned in this section, a body corporate cannot be a member of a company which is its holding company and any allotment or transfer of shares in a company. to its subsidiary shall be void. 57

(2) Nothing in this section shall apply- (a) where the subsidiary is concerned as the legal repre- sentative of a deceased member of the holding company; or (b) where the subsidiary is concerned as trustee, unless the holding company or a subsidiary thereof is beneficially interested under the trust and is not so interested only by way of security for the purposes of a transaction entered into by it in the ordinary course of a business which includes the lending of money.

(3) This section shall not prevent a subsidiary from continuing to be a member of its holding company if it was a member thereof either at the commencement of this Act or before becoming a subsidiary of the holding company, but, except in the cases referred to in sub-

section (2), the subsidiary shall have no right to vote at meetings of the holding company or of any class of members thereof.

(4) Subject to subsection (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 La this section to shares shall, whether or not the company has a share capital, be construed as including a reference to the interest of its members as such, whatever the form of that interest. Private companies

Consequences of default in complying with conditions constituting acompany a private company. 43. Consequences of default in complying with conditions constituting a company a private company.-Where the articles of a company include the provisions which, under clause (iii) of subsection

(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 Court, on being satisfied that the failure to comply with the conditions was accidental or due to inadvertence or to some other sufficient cause, or that on other grounds it is just, and equitable to grant relief, may, on the application of the company or any other person interested and on such terms and conditions as seem to the Court just and expedient, order that the company be relieved from such consequences as aforesaid.

Prospectus or statement in lieu of prospectus to he filed by privatecompany on ceasing to be private company. 44. Prospectus or statement in lieu of prospectus to he filed by

private company on ceasing to be private company.-(1) If a company, being a private company, alters its articles in such a manner that they no longer include the provisions which, under clause (iii) of

sub-section (1) of section 3, are required to be included in the articles of a company in order to constitute it a private company, the company- (a) shall, as on the date of the alteration, cease to be a private company; and 58 (b) shall, within a period of fourteen days after the said date, file with the Registrar either a prospectus or a statement in lieu of prospectus, as specified in sub-section

(2).

(2) (a) Every prospectus filed under sub-section (1) shall state the matters specified in Part I of Schedule II and set out the reports specified in Part II of that Schedule, and the said Parts I and II shall have effect subject to the provisions contained in Part III of that Schedule. (b) Every statement in lieu of prospectus filed under sub-

section (1) shall be in the form and contain the particulars set out in Part I of Schedule IV, and in the cases mentioned in Part II of that Schedule, shall set out the reports specified therein, and the said Parts I and II shall have effect subject to the provisions contained in Part III of that Schedule. (c) Where the persons making any such report as is referred to in clause (a) or (b) have made therein, or have, without giving the reasons, indicated therein, any such adjustments as are mentioned in clause 32 of Schedule II or clause 5 of Schedule TV, as the case may be, the prospectus or statement in lieu of prospectus filed as aforesaid, shall have endorsed thereon or attached thereto, a written statement signed by those persons, setting out the adjustments and giving the reasons therefor.

(3) If default is made in complying with sub-section (1) or (2), the company, and every officer of the company who is in default, shall be punishable with fine which may extend to five hundred rupees for every day during which the default continues.

(4) Where any prospectus or statement in lieu of prospectus filed under this section includes any untrue statement, any person who authorised the filing of such prospectus or statement shall be punishable with imprisonment for a term which may extend to two years, or with fine which may extend to five thousand rupees, or with both, unless he proves either that the statement was immaterial or that he had reasonable ground to believe, and did up to the time of the filing of the prospectus or statement believe, that the statement was true.

(5) For the purposes of this section- (a) a statement included in a Prospectus or a statement in lieu of prospectus shall be deemed to be untrue if it is misleading in the form and context in which it is included; and (b) where the omission from a prospectus or a statement In lieu of prospectus of any matter is calculated to mislead, the prospectus or statement in lieu of prospectus shall be deemed, in respect of such omission, to be a prospectus or a statement in lieu of prospectus in which an untrue statement is included.

(6) For the purposes of sub-section (4) and clause (a) of sub-

section (5), the expression "Included" when used with reference to a prospectus or statement in lieu of prospectus, means included in the prospectus or statement in lieu of prospectus itself or contained in any report or memorandum appearing on the face thereof, or by reference incorporated therein. 59 Reduction of number of members below legal minimum

Members severally liable for debts where business carried on withfewer than seven, or in the case of a private company, two members. 45. Members severally liable for debts where business carried on with fewer than seven, or in the case of a private company, two members.-If at any time the number of members of a company is reduced, in the case of a public company, below seven, or in the case of a private company, below two, and the company carries on business for more than six months while the number is so reduced every person who is a member of the company during the time that it so carries on business after those six months and is cognizant of the fact that it is carrying on business with fewer than seven members or two members, as the case may be, shall be severally liable for the payment of the whole debts of the company contracted during that time, and may be severally sued therefor. Contracts and deeds, investments, seat, etc.

Form of contracts.

46. Form of contracts.-(1) Contracts on behalf of a company may be made as follows:- (a) a contract which, if made between private persons, would by law be required to be in writing signed by the parties to be charged therewith, may be made on behalf of the company in writing signed by any person acting under its authority, express or implied, and may in the same manner be varied or discharged; (b) a contract which, if made between private persons, would by law be valid although made by parol only and not reduced into writing, may be made by parol on behalf of the company by any person acting under its authority, express or implied, and may in the same manner be varied or discharged.

(2) A contract made according to this section shall bind the company.

Bills of exchange and promissory notes. 47. Bills of exchange and promissory notes.-A bill of exchange, hundi or promissory note shall be deemed to have been made, accepted, drawn or endorsed on behalf of a company if drawn, accepted, made, or endorsed in the name of, or on behalf or on account of, the company by any person acting under its authority, express or implied.

Execution of deeds.

48. Execution of deeds.-(1) A company may, by writing under its common seal, empower any person, either generally or in respect of any specified matters, as its attorney, to execute deeds on its behalf in any place either in or outside India.

(2) A deed signed by such an attorney on behalf of the company and under his seal where sealing is required, shall bind the company and have the same effect as if it were under its common seal.

Investments of company to be held in its own name.

49. Investments of company to be held in its own name.-(1) Save

as otherwise provided in sub-sections (2) to (5) and subject to the

provisions of sub-sections (6) to (8),-- (a) all investments made by a company on its own behalf shall be made and held by it in its own name; and (b) where any such investments are not so held at the commencement of this Act the company shall, within a period of one year from such commencement, either cause them to be transferred to, and hold them in, its own name, or dispose of them.

(2) Where the company has a right to appoint any person or persons, or where any nominee or nominees of the company has or have been appointed, as a director or directors of any other body corporate, shares in such other body corporate to an amount not exceeding the nominal value of the qualification shares which are required to be held by a director thereof, may be registered or held by such company jointly in the names of itself and of each such person or nominee or in the name of each such person or nominee expressly described as a nominee of the company.

(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 pi-event 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 (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.

(6) The certificate or letter of allotment relating to the shares or securities in which investments have been made by a company

shall except in the cases referred to in sub-sections (4) and (5), be in the custody of such company or with a Scheduled Bank, being the bankers of the company.

(7) Where, in pursuance of sub-sections (2), (3), (4) or (5), any shares or securities in which investments have been made by a com- pany are not held by it in its own name, the company shall forthwith enter in a register maintained by it for the purpose- (a) the nature, value, and such other particulars as may be necessary fully to identify the shares or securities in question; and (b) the bank or person in whose name or custody the shares or securities are held.

(8) The register kept under sub-section (7) shall be open to the inspection of any member or debenture holder of the company without charge, during business hours, subject to such reasonable restrictions as the company may, by its articles or in general meeting, impose, so that not less than two hours in each day are allowed for inspection.

(9) If default is made in complying with any of the requirements

of sub-sections (1) to (8), the company, and every officer of the company who is in default, shall be punishable with fine which may extend to five thousand rupees. 61

(10) If any inspection required under sub-section (8) is refused, the Court may, by order, direct an immediate inspection of the register. Nothing in this sub-section shall be construed as prejudicing in

any way the operation of sub-section (9).

(11) In this section, "securities" includes stock and debentures.

Power for company to have official seal for use outside India. 50. Power for company to have official seal for use outside

India.- (1) A company whose objects require or comprise the transaction of business outside India may, if authorised by its articles, have for use in any territory, district or place not situate in India an official seal which shall be a facsimile of the common seal of the, company, with the addition on its face of the name of the territory, district' or place where it is to be used.

(2) A company having an official seal for use in any such terri- tory, district or place may, by writing,. under its common seal, authorise any person appointed for-the purpose in that territory, dis- trict or place to affix the official seal to any deed or other document to which the company is a party in that territory, district or place.

(3) The authority of any agent authorised under sub-section (2) shall, as between the company and any person dealing with the agent, continue during the period, if any, mentioned in the instrument conferring the authority, or if no period is there mentioned, until notice of the revocation or determination of the agent's authority has been given to the person dealing with him.

(4) The person affixing any such official seal shall, by writing under his hand, certify on the deed or other document to which the seal is affixed, the date on which and the place at which, it is affixed.

(5) A deed or other document to which an official seal is duly affixed shall bind the company as if it had been sealed with the common seal of the company. Service of documents

Service of documents on company. 51. Service of documents on company.-A document may be served on a company or an officer thereof by sending it to the company or officer at the registered office of the company by post under a certi- ficate of posting or by registered post, or by leaving it at its registered office.

Service of documents on Registrar. 52. Service of documents on Registrar.-A document may be served on a Registrar by sending it to him at his office by post under a certificate of posting or by registered post, or by delivering it to, or leaving it for, him at his office.

Service of documents on members by company.

53. Service of documents on members by company.-(1) A document may be served by a company on any member thereof either personally, or by sending it by post to him to his registered address, or if he has no registered address in India, to the address, if any, within India 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 62 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) unless the contrary is proved, such service shall be deemed to have been effected- (i) in the case of a notice of a meeting, at the expiration of forty-eight hours after the letter containing the same is posted, and (ii) in any other case, at the time at which the letter would be delivered in the ordinary course of post.

(3) A document advertised in a newspaper circulating in the neighbourhood of the registered office of the company shall be deemed to be duly served on the day on which the advertisement appears, on every member of the company who has no registered address in India and has not supplied to the company an address within India for the giving of notices to him.

(4) A document may be served by the company on the jointholders of a share by serving it on the joint-holder named first in the register in respect of the share.

(5) A document may be served by the company on the persons entitled to a share in consequence of the death or insolvency of a member by sending it through the post in a prepaid letter addressed to them by name, or by the title of representatives of the deceased or assignees of the insolvent or by any like description, at the address, it any, in India supplied for the purpose by the persons claiming to be so entitled, or until such an address has been so supplied, by serving the document in any manner in which it might have been served if the death or insolvency had not occurred. Authentication of Documents and Proceedings

Authentication of documents and proceedings. 54. Authentication of documents and proceedings.-Save as otherwise expressly provided in this Act, a document or proceeding requiring authentication by a company may be signed by a director, the managing agent, the secretaries and treasurers, the manger, the secretary or other authorised officer of the company, and need not be under its common seal. PART PROSPECTUS AND ALLOTMENT, AND OTHER MATTERS RELATING TO ISSUE OF SHARES OR DEBENTURES PART III PROSPECTUS AND ALLOTMENT, AND OTHER MATTERS RELATING TO ISSUE OF SHARES OR DEBENTURES Prospectus

Dating of prospectus. 55. Dating of prospectus.-A prospectus issued by or on behalf of a company or in relation to an intended company shall be dated, and that date shall, unless the contrary is proved, be taken as the date of publication of the prospectus.

Matters to be stated and reports to be set out in prospectus. 56. Matters to be stated and reports to be set out in

prospectus.- (1) Every prospectus issued- (a) by or on behalf of a company, or (b) by or on behalf of any person who is or has been engaged or interested in the formation of a company, 63 shall state the matters specified in Part I of Schedule II and set out the reports specified in Part II of that Schedule; and the said Parts I and II shall have effect subject to the provisions contained in Part III of that Schedule.

(2) A condition requiring or binding an applicant for shares in or debentures of a company to waive compliance with any of the ,requirements of this section, or purporting to affect him with notice of any contract, document or matter not specifically referred to in the prospectus, shall be void.

(3) No one shall issue any form of application for shares in or debentures of a company, unless the form is accompanied by a pros- pectus which complies with the requirements of this section: Provided that this sub-section shall not apply if it is shown that the form of application was issued either- (a) in connection with a bona-fide invitation to a person to enter into an underwriting agreement with respect to the shares or debentures; or (b) in relation to shares or debentures which were not offered to the public. If any person acts in contravention of the provisions of this subsection , he shall be punishable with fine which may extend to five thousand rupees.

(4) A director or other person responsible for the prospectus shall not incur any liability by reason of any non-compliance with, or contravention of, any of the requirements of this section, if- (a) as regards any matter not disclosed, he proves that he had no knowledge thereof; or (b) he proves that the non-compliance or contravention arose from an honest mistake of fact on his part; or (c) the noncompliance or contravention was in respect of matters which, in the opinion of the Court dealing with the case, were immaterial, or was otherwise such as ought, in the opinion of that Court, having regard to all the circumstances of the case, reasonably to be excused: Provided that no director or other person shall incur any liability in respect of the failure to include in a prospectus a statement with resect to the matters specified in clause 18 of Schedule II unless it is proved that he had knowledge of the matters not disclosed.

(5) This section shall not apply- (a) to the issue to existing members or debenture holders of a company of a prospectus or form of application relating to shares in or debentures of the company, whether an applicant for shares or debentures will or will not have the right to renounce in favour of other persons; or (b) to the issue of a prospectus or form of application relating to shares or debentures which. are, or are to be, In all respects uniform with shares or debentures previously issued and for the time being dealt In or quoted on a recognised stock exchange; but, subject as aforesaid, this section shall apply to a prospectus 64 form of application, whether issued on or with reference to the formation of a company or subsequently.

(6) Nothing in this section shall limit or diminish any liability which any person may incur under the general law or under this Act apart from this section.

Expert to be unconnected with formation or management of company. 57. Expert to be unconnected with formation or management of company.-A prospectus inviting persons to subscribe for shares in or debentures of a company shall not include a statement purporting to be made by an expert, unless the expert is a person who is not, and has not been, engaged or interested in, the formation or promotion, or in the management, of the company.

Expert's consent to issue of prospectus containing statement by him. 58. Expert's consent to issue of prospectus containing statement by him.-A prospectus inviting persons to subscribe for shares in or debentures of a company and including a statement purporting to be made by an expert shall not be issued, unless- (a) he has given his written consent to the issue thereof with the statement included in the form and context in which it is included, and has not withdrawn such consent before the delivery of a copy of the prospectus for registration; and (b) a statement that he has given and has not withdrawn his consent as aforesaid appears in the prospectus.

Penalty and interpretation.

59. Penalty and interpretation.-(1) If any prospectus is issued in contravention of section 57 or 58, the company, and every person, who is knowingly a party to the issue thereof, shall be punishable with fine which may extend to five thousand rupees.

(2) In sections 57 and 58, the expression "expert ' includes an engineer, a valuer, an accountant and any other person whose profes- sion gives authority to a statement made by him.

Registration of prospectus.

60. Registration of prospectus.-(1) No prospectus shall be issued by or on behalf of a company 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 65 (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,- (a) unless it is dated and the copy thereof signed in the manner required by this section and unless further it has en- dorsed thereon or attached thereto the documents (if any' specified as aforesaid; and (b) in case the prospectus names any person as the auditor, legal adviser, attorney, solicitor, banker or broker of the company or proposed company, unless also it is accompanied by the consent in writing of the person so named, to act in the capacity stated.

(4) No prospectus shall be issued more than ninety days after the date on which a copy-thereof is delivered for registration; and if a prospectus is so issued, it shall be deemed to be a prospectus a copy of which has not been delivered under this section to the Registrar.

(5) If a prospectus is issued without a copy thereof being deli- vered under this section to the Registrar or without the copy so deli- vered having endorsed thereon or attached thereto the required consent or documents, the company, and every person who is knowingly a party to the issue of the prospectus, shall be punishable with fine which may extend to five thousand rupees.

Terms of contract mentioned in prospectus or statement in lieu ofprospectus, not to be varied. 61. Terms of contract mentioned in prospectus or statement in lieu of prospectus, not to be varied.-A company shall not, at any time, vary the terms of a contract referred to in the prospectus or statement in lieu of prospectus, except subject to the approval of, or except on authority given by, the company, in general meeting.

Civil liability for mis-statements in prospectus.

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 be has given that consent,

or where, under clause (b) of sub-section (3) of section 60, the consent of a person named in a prospectus is required and he has given 66 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 a correct and fair representation of the statement, or a correct copy of, or a correct and fair extract from, the report or valuation; and he had reasonable ground to believe, and did up to the time of the issue of the prospectus believe, that the person making the statement was competent to make it and that that person had given the consent, required by section 58 to the issue of the prospectus and had not withdrawn that consent before delivery of a copy of the prospectus for registration or, to the defendant's knowledge, before allotment thereunder; and (iii) as regards every untrue statement purporting to be a statement made by an official person or contained in what purports to be a copy of or extract from a public official document, it was a correct and fair representation of the statement, or a correct copy of, or a correct and fair extract from, the document: Provided that this sub-section shall not apply in the case of a person liable, by reason of his having given a consent required of him by section 58, as a person who has authorised the issue of the pros- pectus 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 67 of a prospectus in respect of an untrue statement purporting to be made by him as an expert, shall not be so liable, if he proves- (a) that, having given his consent under section 58 to the issue of the prospectus, he withdrew it in writing before delivery of a copy of the prospectus for registration; (b) that, after delivery of a copy of the prospectus for registration and before allotment thereunder, he, on becoming aware of the untrue statement, withdrew his consent in writing and gave reasonable public notice of the withdrawal and of the reason therefor; or (c) that he was competent to make the statement and that he had reasonable ground to believe, and did up to the time of the allotment of the shares or debentures, believe, that the statement was true.

(4) Where- (a) the prospectus specifies the name of a person as a director of the company, or as having agreed to become a director thereof, and he has not consented to become a director, or has withdrawn his consent before the issue of the prospectus, and has not authorised or consented to the issue thereof; or (b) the consent of a person is required under section 58 to the issue of the prospectus and he either has not given. that consent or has withdrawn it before the issue of the prospectus; the directors of the company excluding those without whose knowledge or consent the prospectus was issued, and every other person who authorised the issue thereof, shall be liable to indemnify the person referred to in clause (a) or clause (b), as the case may be, against all damages, costs and expenses to which he may be made liable by reason of his name having been inserted in the prospectus or of the inclusion therein of a statement purporting to be made by him as an expert, as the case may be, or in defending himself against any suit or legal proceeding brought against him in respect thereof: Provided that a person shall not be deemed for the purposes of this sub-section to have authorised the issue of a prospectus by reason only of his having given the consent required by section 58 to the inclusion therein of a statement purporting to be made by him as an expert.

(5) Every person who, becomes liable to make any payment by virtue of this section, may recover contribution, as in cases of con- tract, from any other person who, if sued separately, would have been liable to make the same payment, unless the former person was, and the latter person was not, guilty of fraudulent misrepresentation.

(6) For the purposes of this section- (a) the expression "promoter" means a promoter who was a party to the preparation of the prospectus or of, the portion thereof containing the untrue statement, but does not include any person by reason of his acting in a professional capacity for persons engaged in procuring the formation of the company; and 68 (b)the expression "expert" has the same meaning as in section 58.

Criminal liability for misstatements in prospectus.

63. Criminal liability for misstatements in prospectus.-(1) Where a prospectus issued after the commencement of this Act includes any untrue statement, every person who authorised the issue of the prospectus shall be punishable with imprisonment for a term which may extend to two years, or with fine which may extend to five thousand rupees, or with both, unless he proves either that the statement was immaterial or that he had reasonable ground to believe, and did up to the time of the issue of the prospectus believe, that the statement was true.

(2) A person shall not be deemed for the purposes of this section to have authorised the issue of a prospectus by reason only of his having given- (a) the consent required by section 58 to the inclusion therein of a statement purporting to be made by him as an expert, or

(b) the consent required by clause (b) of sub-section (3) of section 60.

Document containing offer of shares or debentures for sale to bedeemed prospectus. 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 au or any of those shares or debentures being offered for sale to the public, any document by which the offer for sale to the public is made shall, for all purposes, be deemed to be a prospectus issued by the company; and all enactments and rules of law as to the contents of prospectuses and as to liability in respect of statements in and omissions from prospectuses, or otherwise relating to prospectuses shall apply with

than modifications specified in sub-sections (3), (4) and (5), and have effect accordingly, as if the shares or debentures had been offered to the public for subscription and as if persons accepting the offer in respect of any shares or debentures were subscribers for those shares or debentures, but without prejudice to the liability, if any, of the persons by whom the offer is made in respect of misstatements contained in the document or otherwise in respect thereof.

(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. 69

(3) Section 56 as applied by this section shall have effect as if it required a prospectus to state in addition to the matters required by that section to be stated in a prospectus- (a) the net amount of the consideration received or to be received by the company in respect of the shares or debentures to which the offer relates; and (b) the place and time at which the contract under which the said shares or debentures have been or are to be allotted may be inspected.

(4) Section 60 as applied by this section shall have effect as if the persons making the offer were persons named in a prospectus as directors of a company.

(5) Where a person making an offer to which this section relates is a company or a firm, it shall be sufficient if the document

referred to in sub-section (1) is signed on behalf of the company or firm by two directors of the company or by not less than one-half of the partners in the firm, as the case may be; and any such director or partner may sign by his agent authorised in writing.

Interpretation of provisions relating to prospectuses.

65. Interpretation of provisions relating to prospectuses.-(1) For the purposes of the foregoing provisions of this Part- (a) a statement included in a prospectus shall be deemed to be untrue, if the statement is misleading in the form and context in which it is included; and (b) where the omission from a prospectus of any matter is calculated to mislead, the prospectus shall be deemed, in respect of such omission, to be a prospectus in which an untrue statement is included.

(2) For the purposes of sections 61, 62 and 63 and clause (a) of

sub-section (1) of this section, the expression "included" when used with reference to a prospectus, means included in the prospectus it- self or contained in any report or memorandum appearing on the face thereof or by reference incorporated therein or issued therewith.

Newspaper advertisements of prospectus. 66. Newspaper advertisements of prospectus.-Where any prospectus is published as a newspaper advertisement, it shall not be necessary in the advertisement to specify the contents of the memorandum or the signatories thereto, or the number of shares subscribed for by them.

Construction of references to offering shares or debentures to thepublic etc. 67. Construction of references to offering shares or debentures

to the public etc.-(1) Any reference in this Act or in the articles of a company to offering shares or debentures to the public shall, subject to any provision to the contrary contained in this Act and

subject also to the provisions of sub-sections (3) and (4), be construed as including a reference to offering them to any section of the public, whether selected as members or debenture holders of the company concerned or as clients of the person issuing the prospectus or in any other manner. 70

(2) Any reference in this Act or in the articles of a company to invitations to the public to subscribe for shares or debentures shall, subject as aforesaid, be construed as including a reference to invitations to subscribe for them extended to any section of the public, whether selected as members or debenture holders of the company concerned or as clients of the person issuing the prospectus or in any other manner.

(3) No offer or invitation shall be treated as made to the

public by virtue of sub-section (1) or sub-section (2), as the case may be, if the offer or invitation can properly be regarded, in all the circumstances-- (a) as not being calculated to result, directly or indirectly, in the shares or debentures becoming available for subscription or purchase by persons other than those receiving the offer or invitation; or (b) otherwise as being a domestic concern of the persons making and receiving the offer or invitation.

(4) Without prejudice to the generality of sub-section (3), a provision in a company's articles prohibiting invitations to the public to subscribe for shares or debentures shall not be taken as prohibiting the making to members or debenture holders of an invitation which can properly be regarded in the manner set forth in that sub-section.

(5) The provisions of this Act relating to private companies shall be construed in accordance with the provisions contained is sub-

sections (1) to (4).

Penalty for fraudulently inducing persons to invest money. 68. Penalty for fraudulently inducing persons to invest money.- Any person who, either by knowingly or recklessly making any statement, promise or forecast which is false, deceptive or misleading, or by any dishonest concealment of material facts, induces or attempts to induce another person to enter into, or to offer to enter into- (a) any agreement for, or with a view to, acquiring, disposing of, subscribing for, or underwriting shares or debentures; or (b) any agreement the purpose or pretended purpose of which is to secure a profit to any of the parties from the yield of shares or debentures, or by reference to fluctuations in the value of shares or debentures; shall be punishable with imprisonment for a term which may extend to five years, or with fine which may extend to ten thousand rupees, or with both. Allotment

Prohibition of allotment unless minimum subscription received. 69. Prohibition of allotment unless minimum subscription

received.--(1) No allotment shall be made of any share capital of 71 a company offered to the public for subscription, unless the amount stated in the prospectus as the minimum amount which, in the opinion of the Board of directors, must be raised by; the issue of share capital in order to provide for the matters specified in clause 5 of Schedule II has been subscribed, and the sum payable on application for the amount so stated has been paid to and received by the company, whether in cash or by a cheque or other instrument which has been paid.

(2) The amount so stated in the prospectus shall be reckoned exclusively of any amount payable otherwise than in money, and is in this Act referred to as "the minimum subscription".

(3) The amount payable on application on each share shall not be less than five per cent. of the nominal amount of the share.

(4) All moneys received from applicants for shares shall be deposited and kept deposited in a Scheduled Bank until they are

returned in accordance with the provisions of sub-section (5) or until the certificate to commence business is obtained under section 149. 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 with any requirement of this section shall be void.

(7) This section, except sub-section (3) thereof, shall not apply in relation to any allotment of shares subsequent to the first allotment of shares offered to the public for subscription.

Prohibition of allotment in certain cases unless statement in lieu ofprospectus delivered to Registrar. 70. Prohibition of allotment in certain cases unless statement

in lieu of prospectus delivered to Registrar.-(1) A company having a share capital, which does sot issue a prospectus on or with reference to its formation, or which has issued such a prospectus but has not proceeded to allot any of the shares offered to the public for 72 subscription, shall not allot any of its shares or debentures unless at least three days before the first allotment of either shares or debentures, there has been delivered to the Registrar for registration a statement in lieu of prospectus signed by every person who is named therein as a director or proposed director of the company or by his agent authorised in writing, in the form and containing the particulars set out in Part I of Schedule III and, in the cases mentioned in Part II of that Schedule, setting out the reports specified therein, and the said Parts I and II shall have effect subject to the provisions contained in Part III of that Schedule.

(2) Every statement in lieu of prospectus delivered under sub-

section (1), shall, where the persons making any such report as aforesaid have made therein, or have without giving the reasons indicated therein. any such adjustments as are mentioned in clause 5 of Schedule III, have endorsed thereon or attached thereto a written statement signed by those persons, setting out the adjustments and giving the reasons thereof.

(3) This section shall not apply to a private company.

(4) If a company acts in contravention of sub-section (1) or

(2), the company, and every director of the company who wilfully authorises or permits the, contravention, shall be punishable with fine which may extend to 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 pros- pectus 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 pros- pectus 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 73 memorandum appearing on the face thereof, or by reference incorporated therein, or issued therewith.

Effect of irregular allotment.

71. Effect of irregular allotment.-(1) An allotment made by a company to an applicant in contravention of the provisions of section 69 or 70 shall be voidable at the instance of the applicant- (a) within two months after the holding of the statutory meeting of the company, and not later, or (b) in any case where the company is not required to hold a statutory meeting or where the allotment is made after the holding of the statutory meeting, within two months after the date of the allotment, and not later.

(2) The allotment shall be voidable as aforesaid, notwithstand- ing that the company is in course of being wound up.

(3) If any director of a company knowingly contravenes, or wilfully authorises. or permits the contravention of, any of the pro- visions of section 69 or 70 with respect to allotment, he shall be liable to compensate the company and the allottee respectively for any loss, damages or costs which the company or the allottee may have sustained or incurred thereby: Provided that proceedings to recover any such loss, damages or costs shall not be commenced after the expiration of two years from the date of the allotment.

Applications for, and allotment of, shares and debentures. 72. Applications for, and allotment of, shares and debentures.-

(1) (a) No allotment shall be made of any shares in or debentures of a company in pursuance of a prospectus issued generally, and no pro- ceedings shall be taken on applications made in pursuance of a pros- pectus so issued, until the beginning of the fifth day after that on which the prospectus is first so issued or such later time, if any, as may be specified in the prospectus: Provided that where, after a prospectus is first issued generally, a public notice is given by some person responsible under section 62 for the prospectus which has the effect of excluding, limiting or diminishing his responsibility, no allotment shall be made until the beginning of the fifth day after that on which such public notice is first given. (b) Nothing in the foregoing proviso shall be deemed to exclude, limit or diminish any liability that might be incurred in the case referred to therein under the general law or this Act. (c) The beginning of the fifth day or such later time as is mentioned in the first paragraph of clause (a), or the beginning of the fifth day mentioned in the second paragraph of that clause, as the case may be, is hereinafter in this Act referred to as "the time of the opening of the subscription lists".

(2) In sub-section (1), the reference to the day on which the prospectus is first issued generally shall be construed as referring to the day on which it is first so issued as a newspaper advertisement: Provided that if it is not so issued as a newspaper advertisement before the fifth day after that on which it is first so issued in any 74 other manner, the said reference shall be construed as referring to the day on which it is first so issued in any manner.

(3) The validity of an allotment shall not be affected by any contravention of the foregoing provisions of this section; but, in the event of any such contravention, the company, and every officer of the company who is in default, shall be punishable with fine which may extend to five thousand rupees.

(4) In the application of this section to a prospectus offering

shares or debentures for sale, sub-sections (1) to (3) shall have effect with the substitution of references to sale for references to allotment, and with the substitution for the reference to the company and every officer of the company who is in default of a reference to any person by or through whom the offer is made and who is knowingly guilty of, or wilfully authorises or permits, the contravention.

(5) An, application for shares in, or debentures of, a company. which is made in pursuance of a prospectus issued generally shall not be revocable until after the expiration of the fifth day after the time of the opening of the subscription lists, or the giving, before the expiry of the said fifth day by some person responsible under section 62 for the prospectus, of, a public notice having the effect under that section of excluding, limiting or diminishing the responsi- bility of the person giving it.

Allotment of shares and debentures to be dealt in on stock exchange. 73. Allotment of shares and debentures to be dealt in on stock

exchange.-(1) Where a prospectus, whether issued generally or not, states that application has been or will be made for permission for the shares or debentures offered thereby to be dealt in on a recognised stock exchange, any allotment made on an application in pursuance of the prospectus shall, whenever made, be void, if the permission has not been applied for before the tenth day after the first issue of the prospectus or, if the permission has not been granted before the expiry of three weeks from the date of the closing of the subscription lists or such longer period not exceeding six weeks as may, within the said three weeks, be notified to the applicant for permission by or on behalf of the stock exchange.

(2) Where-the permission has not been applied for as aforesaid, or has not been granted as aforesaid, the company shall forthwith repay without interest all moneys received from applicants in pur- suance of the prospectus, and, if any such money is not repaid within eight days after the company becomes liable to repay it, the directors of the company shall be jointly and severally liable to repay that money with interest at the rate of five per cent. per annum from the expiry of the eighth day: Provided that a director shall not be liable if he proves that the default in the repayment of the money was not due to any misconduct or negligence on his part.

(3) All moneys received as aforesaid shall be kept in a separate bank account maintained with a Scheduled Bank so long as the company

may become liable to repay it under sub-section (2); and if default is made in complying with this sub-section, the company, and every officer of the company who is in default, shall be punishable with fine which may extend to five thousand rupees. 75

(4) Any condition purporting to require or bind any applicant for shares or debentures to waive compliance with any of the require- ments of this section shall be void.

(5) For the purpose of this section, permission shall not be deemed to be refused if it is intimated that the application for permission though not at present granted,, will be given further consideration.

(6) This section shall have effect- (a) in relation to any shares or debentures agreed to be taken by a person underwriting an offer thereof by a prospectus, as if he had applied therefor in pursuance of the prospectus; and (b) in relation to a prospectus offering shares for sale, with the following modifications, namely,- (i) references to sale shall be substituted for references to allotment; (ii) the persons by whom the offer is made, and not the

company, shall be liable under sub-section (2) to repay money received from applicants, and references to the company's liability under that sub-section shall be construed accordingly; and

(iii) for the reference in sub-section (3) to the company and every officer of the company who is in default, there shall be substituted a reference to any person by or through whom the offer is made and who is knowingly guilty of, or wilfully authorises or permits, the default.

(7) No prospectus shall state that application has been made for permission for the shares or debentures offered thereby to be dealt in on any stock exchange, unless it is a recognised stock exchange.

Manner of reckoning fifth, eighth and tenth days in sections 72 and73. 74. Manner of reckoning fifth, eighth and tenth days in sections 72 and 73.--In reckoning for the purposes of sections 72 and 73, the fifth day, the eighth day, or the tenth 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, eighth, or tenth day .(as so reckoned) is itself such a public holiday, there shall for the said purposes be substituted the first day thereafter which is not such a holiday.

Return as to allotments.

75. Return as to allotments.-(1) Whenever a company having a share capital makes any allotment of its shares, the company shall, within one month 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; (b) in the case of shares (not being bonus shares) allotted as fully or partly paid up otherwise than in cash, produce for the Inspection and examination of the Registrar a contract in writing constituting the title of the allottee to the allotment together with any contract of sale, or a contract for services or other consideration in respect of which that allotment was made, such contracts being duly stamped, and file with the Registrar copies verified in the prescribed manner of all such contracts and a 76 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) in the case of bonus shares, file with the Registrar a return stating the number and nominal amount of the bonus shares so allotted.

(2) Where a contract such as is mentioned in clause (b) of sub-

section (1) is not reduced to writing, the company shall, within one month 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 of one month specified in sub-sections

(1) and (2) for compliance with the requirements of this section is inadequate, he may 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 one month 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 default in filing with the Registrar any document required to be filed by this section within the time specified therein, the company, or any officer who is in default, may apply to the Court for relief, and the Court, if satisfied that the omission to file the document was accidental or due to inadvertence or that on other grounds it is just and equitable to grant relief, may make an order extending the time for the filing of the document for such period as the Court may think proper.

(5) Nothing in this section shall apply to the issue and allotment by a company of shares which under the provisions of its articles were forfeited for non-payment of calls. Commissions and Discounts

Power to pay certain commissions and prohibition of payment of allother commissions, discounts, etc. 76. Power to pay certain commissions and prohibition of payment

of all other commissions, discounts, etc.--(1) A company may pay a commission to any person in consideration of-- (a) his subscribing or agreeing to subscribe, whether abso- lutely 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; 77 (ii) the commission paid or agreed to be paid does not ex- ceed 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.

(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 capital 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 abso- lutely 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 brokerages as it has heretofore been lawful for a company to pay.

(4) A vendor to, promoter of, or other person who receives pay- ment in shares, debentures or money from, a company shall have and shall be deemed always to have had power to apply any part of the shares, debentures or money so received in payment of any commission the payment of which, if Made directly by the company, would have been legal under this section.

(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. 78

Restrictions on purchase by company, or loans by company forpurchase, of its own or its holding company's shares. 77. Restrictions on purchase by company, or loans by company for

purchase, of its own or its holding company's shares.-(1) No company limited by shares, and no company limited by guarantee and having a share capital, shall have power to buy its 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 of in connection with a purchase or subscription made or to be made by any person of or for any shares in the company or in its holding company: Provided that nothing in this sub-section shall be taken to prohibit- (a) the lending of money by a banking company in the ordinary course of its business; or (b) the provision by a company, in accordance with any scheme for the time being in force, of money for the purchase of, or subscription for, fully paid shares in the company or its holding company, being a purchase or subscription by trustees of or for shares to be held by or for the benefit of employees of the company, including any director holding a salaried office or employment in the company; or (c) the making by a company of loans, within the limit laid

down in sub-section (3), to persons (other than directors, managing agents, secretaries and treasurers or managers) bona fide in the employment of the company, with a view to enabling those persons to purchase or subscribe for fully paid shares in the company or its holding company to be held by themselves by way of beneficial ownership.

(3) No loan made to any person in pursuance of clause (c) of the foregoing proviso shall exceed in amount his salary or wages at that time for a period of six months.

(4) If a company acts in contravention of sub-sections (1) to

(3) the company, and every officer of the company who is in default, shall be punishable with fine which may extend to one thousand rupees.

(5) Nothing in this section shall affect the right of a company to redeem any shares issued under section 80 or under any corres- ponding provision in any previous companies law. Issue of shares at premium and discount

Application of premiums received on issue of shares.

78. Application of premiums received on issue of shares.-(1) Where a company issues shares at a premium, whether for cash or otherwise, a sum equal to the aggregate amount or value of the pre- miums on those shares shall be transferred to an account, to be called "the share premium account"; and the provisions of this Act relating to the reduction of the share capital of a company shall, except as provided in this section, apply as if the share premium account were paid-up share capital of the company. 79

(2) The share premium account may, notwithstanding anything in

sub-section (1), be applied. by the company-- (a) in paying up unissued shares of the company to be issued to members of the company as fully paid bonus shares; (b) in-writing off the preliminary expenses of the company; (c) in writing off the expenses of, or the commission paid or discount allowed on, any issue of shares or debentures of the company; or (d) in providing for the premium payable on the redemption of any redeemable preference shares or of any debentures of the company.

(3) Where a company has, before the commencement of this Act, issued any shares at a premium, this section shall apply as if the shares had been issued after the commencement of this Act: Provided that any part of the premiums which has been so applied that it does not at the commencement of this Act form an identifiable part of the company's reserves within the meaning of Schedule VI, shall be disregarded in determining the sum to be included in the share premium account.

Power to issue shares at a discount.

79. Power to issue shares at a discount.-(1) A company shall not issue shares at a discount except as provided in this section.

(2) A company may issue at a discount shares in the company of a class already issued, if the following conditions are fulfilled, namely: - (i) the issue of the shares at a discount is authorised by a resolution passed by the company in general meeting, and sanctioned by the Court; (ii) the resolution specifies the maximum rate of discount (not exceeding ten per cent. or such higher percentage as the Central Government may permit in any special case) at which the shares are to be issued; (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 Court or within such extended time as the Court may allow.

(3) Where a company has passed a resolution authorising the issue of shares at a discount, it may apply to the Court for an order sanctioning the issue; and on any such application, the Court, 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 80 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. Redeemable preference shares

Power to issue redeemable preference shares.

80. Power to issue redeemable preference shares.-(1) Subject to the provisions of this section, a company limited by shares may, if so authorised by its articles, issue preference shares which are, or at the option of the company are to be liable, to be redeemed: Provided that- (a) no such shares shall be redeemed except out of profits of the company which would otherwise be available for dividend or out of the proceeds of a fresh issue of shares made for the purposes of the redemption; (b) no such shares shall be redeemed unless they are fully paid; (c) the premium, if any, payable on redemption shall have been provided for out of the profits of the company or out of the company's share premium account, before the shares are redeemed; (d) where any such shares are redeemed otherwise than out of the proceeds of a fresh issue, there shall, out of profits which would otherwise have been available for dividend, be transferred to a reserve fund, to be called "the capital redemption reserve fund", 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 fund 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 601, 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. 81

(5) The capital redemption reserve fund may, notwithstanding anything in this section, be applied by the company, in paying up un- issued shares of the company to be issued to members of the company as fully paid bonus shares.

(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. Further issue of capital

Further issue of capital.

81. Further issue of capital.-(1) Where at any time subsequent to the first allotment of shares in a company, it is proposed to in crease the subscribed capital of the company by the issue of new shares, then, subject to any directions to the contrary which may be given by the company in general meeting, and subject only to those directions- (a) such new 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 of 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 subsection, "equity share capital" and equity shares" have the same meaning as in section 85.

(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 renun- ciation 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) This section shall not apply to a private company. 82 PART SHAM CAPITAL AND DEBENTURES PART IV SHAM CAPITAL AND DEBENTURES Nature, numbering and certificate of shares

Nature of shares. 82. Nature of shares.-The shares or other interest of any member in a company shall be movable property, transferable in the manner provided by the articles of the company.

Numbering of shares. 83. Numbering of shares.-Each share in a company having a share capital shall be distinguished by its appropriate number.

Certificate of shares. 84. Certificate of shares.-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. Kinds of share capital

Two kinds of share capital.

85. Two kinds of share capital.-(1) "Preference share capital" means, with reference to any company limited by shares, whether formed before or after the commencement of this Act, that part of the share capital of the company which fulfils both the following requirements, namely- (a) that as respects dividends, it carries or will carry a preferential right to be paid a fixed amount or an amount calculated at a fixed rate, which may be either free of or subject to income-tax; and (b) that as respects capital, it carries or will carry, on a winding up or repayment of capital, a preferential right to be repaid the amount of the capital paid UP or deemed to have been paid up, whether or not there is a preferential right to the payment of either or both of the following amounts, namely:- (i) any money remaining unpaid, in respect of the amounts specified in clause (a), up to the date of the winding up or repayment of capital; and (ii) any fixed premium or premium on any fixed scale, specified in the memorandum or articles of the company. Explanation.-Capital shall be deemed to be preference capital, notwithstanding that it is entitled. to either or both of the following rights, namely:- (i) that, as respects dividends, in addition to the preferential right to the amount specified in clause (a), it has a right to participate, whether fully or to a limited extent, with capital not, entitled to the preferential right aforesaid; (ii) that, as respects capital, in addition to the preferential. right to the repayment, on a winding up, of the amounts specified in clause (b), it has a right to participate, whether fully or to a limited extent with capital not entitled to that preferential 83 right in any surplus which may remain after the entire capi- tal has been repaid.

(2) "Equity share capital" means, with, reference to any such company, all share capital which is not preference share capital.

(3) The expressions "preference share" and "equity share" shall be construed accordingly.

New issues of share capital to be only of two kinds. 86. New issues of share capital to be only of two kinds.-The share capital of a company limited by shares formed after the com- mencement of this Act, or issued after such commencement, shall be of two kinds only, namely:- (a) equity share capital; and (b) preference share capital.

Voting rights.

87. Voting rights.-(1) Subject to the provisions of section 89

and sub-section (2) of section 92-- (a) every member of a company limited by shares and holding any equity share capital therein shall have a right to vote, in respect of such capital, on every resolution placed before the company; and (b) his voting right on a poll shall be in proportion to his share of the paid up equity capital of the company.

(2) (a) Subject as aforesaid and save as provided in clause (b) of this sub-section, every member of a company limited by shares and holding any preference share capital therein shall, in respect of such capital, have a right to vote only on resolutions placed before the company which directly affect the rights attached to his preference shares. Explanation.-Any resolution for winding up the company or for the repayment or reduction of its share capital shall be deemed directly to affect the rights attached to preference shares within the meaning of this clause. (b) Subject as aforesaid, every member of a company limited by shares and holding any preference share capital therein shall, in res- pect of such capital, be entitled to vote on every resolution placed before the company at any meeting, if the dividend due on such capital or any part of such dividend has remained unpaid- (i) in the case of cumulative preference shares, in respect of an aggregate period of not less than two years preceding the date of commencement of the meeting; and (ii) in the case of non-cumulative preference shares, either in respect of a period of not less than two years ending with the expiry of the financial year immediately preceding the commencement of the meeting or in respect of an aggregate period of not less than three years comprised in the six years ending with the expiry of the financial year aforesaid. 84 Explanation.-For the purposes of this clause, dividend shall be deemed to be due on preference shares in respect of any period, whether a dividend has been declared by the company on such shares for such period or not,- (a) on the last day specified for the payment of such divi- dend for such period, in the articles or other instrument executed by the company in that behalf; or (b) in case no day is so specified, on the day immediately following such period. (c) Where the holder of any preference share has a right to vote on any resolution in accordance with the provisions of this sub- section, his voting right on a poll, as the holder of such share,

shall, subject to the provisions of section 89 and sub-section (2) of section 92, be in the same proportion as the capital paid up in. respect of the preference share bears to the total paid up equity capital of the company.

Prohibition of issue of shares with disproportionate rights. 88. Prohibition of issue of shares with disproportionate rights. No company formed after the commencement of this Act, or issuing any share capital after such commencement, shall issue any shares (not being preference shares) which carry voting rights or rights in the company as to dividend, capital or otherwise which are dispro- portionate to the rights attaching to the holders of other shares (not being preference shares).

Termination of disproportionately excessive voting rights in existingcompanies. 89. Termination of disproportionately excessive voting rights in

existing companies.-(1) If at the commencement of this Act any shares, by whatever name called, of any existing company limited by shares carry voting rights in excess of the voting rights attaching under

sub-section (1) of section 87 to equity shares in respect of which the same amount of capital has been paid up, the company shall, within a period of one year from the commencement of this Act, reduce the voting rights in respect of the shares first mentioned so as to bring them into conformity with the voting rights attached to such equity

shares under sub-section (1) of section 87.

(2) Before the voting rights are brought into such conformity, the holders of the shares in question shall not exercise in respect thereof voting rights in excess of what would have been exercisable by them if the capital paid up on their shares had been equity share capital, in respect of the following resolutions placed before the company, namely:- (a) any resolution relating to the appointment or re- appointment of a director or of a managing agent or secretaries and treasurers, or to any variation in the terms of an agreement between the company and a managing or wholetime director thereof or its managing agent or secretaries and treasurers; (b) any resolution relating to the appointment of buying or selling agents; (c) any resolution relating to the grant of a loan or to the giving of a guarantee or any other financial assistance, to any 85 other body corporate having any person as managing agent or secretaries and treasurers who is also either the managing agent or the secretaries and treasurers of the company or an associate of such managing agent or secretaries and treasurers.

(3) If, by reason of the failure of the requisite proportion of any class of members to agree, it is not found possible to comply with

the provisions of sub-section (1), the company shall, within one month of the expiry of the period of one year mentioned in that subsection, apply to the Court for an order specifying the manner in which the provisions of that sub-section shall be complied with; and any order made by the Court in this behalf shall bind the company and all its shareholders. If default is made in complying with this sub-section, the com- pany, and every officer of the company who is in default, shall be punishable with fine which may extend to one thousand rupees.

(4) The Central Government may, in respect of any shares issued by a company before the 1st day of December, 1949, exempt the company

from the requirements of sub-sections (1), (2) and (3), wholly or in part, if in the opinion of the Central Government the exemption is required either in the public interest or in the interests of the company or of any class of shareholders therein or of the creditors or any class of creditors thereof. Every order of exemption made by the Central Government under this sub-section shall be laid before both Houses of Parliament as soon as may be after it is made.

Savings. 90. Savings.-Nothing in sections 85 to 89 shall,- (a) in the case of any shares issued before the commence- ment of this Act, affect any voting rights attached to the shares save as otherwise provided in section 89, or any right attached to the shares as to dividend, capital or otherwise; or (b) apply to a private company, unless it is a subsidiary of a public company. Miscellaneous provisions as to share capital

Calls on shares of same class to be made on uniform basis. 91. Calls on shares of same class to be made on uniform basis.- Where after the commencement of this Act, any calls for further share capital are made on shares, such calls shall be made on a uniform basis on all shares falling under the same class. Explanation.-For the purposes of this section, shares of the same nominal value on which different amounts have been paid up shall not be deemed to fall under the same class.

Power of company to accept unpaid share capital, although not calledup. 92. Power of company to accept unpaid share capital, although

not called up.-(1) A company may, if so authorised by its articles, accept from any member the whole or a part of the amount remaining unpaid on any shares held by him, although, no part of that amount has been called up. 86

(2) The member shall not however be entitled, where the company is one limited by shares, to any voting rights in respect of the moneys so paid by him until the same would, but for such payment, become presently payable.

Payment of dividend in proportion to amount paid up. 93. Payment of dividend in proportion to amount paid up.-A company may, if so authorised by its articles, pay dividends in proportion to the amount paid up on each share where a larger amount is paid up on some shares than on others.

Power of limited company to alter its share capital.

94. Power of limited company to alter its share capital.-(1) A limited company having a share capital, may, if so authorised by its articles, alter the conditions of its memorandum as follows, that is to say, it may- (a) increase its share capital by such amount as it thinks expedient by issuing new shares; (b) consolidate and divide all or any of its share capital into shares of larger amount than its existing shares; (c) convert all or any of its fully paid up shares into stock, and reconvert that stock into fully paid up shares of any denomination; (d) sub-divide its shares, or any of them, into shares of smaller amount than is fixed by the memorandum, so however, that in the sub-division the proportion between the amount paid and the amount, if any, unpaid on each reduced share shall be the same as it was in the case of the share from which the reduced share is derived; (e) cancel shares which, at the date of the passing of the resolution in that behalf, have not been taken or agreed to be taken by any person, and diminish the amount of its share capital by the amount of the shares so cancelled.

(2) The powers conferred by this section shall be exercised by the company in general meeting and shall not require to be confirmed by the Court.

(3) A cancellation of shares in pursuance of this section shall not be deemed to be a reduction of share capital within the meaning of this Act.

Notice to Registrar of consolidation of share capital, conversion ofshares into stock, etc. 95. Notice to Registrar of consolidation of share capital,

conversion of shares into stock, etc.-(1) If a company having a share capital has- (a) consolidated and divided its share capital into shares of larger amount than its existing shares; (b) converted any shares into stock; (c) re-converted any stock into shares; 87 (d) sub-divided its shares or any of them; (e) redeemed any redeemable preference shares; or (f) cancelled any shares, otherwise than in connection with reduction of share capital under sections 100 to 104; the company shall within one month after doing so, give notice thereof to the Registrar specifying, as the case may be, the shares consolidated, divided, converted, sub-divided, redeemed or cancelled, or the stock reconverted.

(2) The Registrar shall thereupon record the notice, and make any alterations which may be necessary in the company's memorandum or articles or both.

(3) If default is made in complying with sub-section (1), the company, and every office of the company who is in default, shall be punishable with fine which may extend to fifty rupees for every day during which the default continues.

Effect of conversion of shares into stock. 96. Effect of conversion of shares into stock.-Where a company having a share capital has converted any of its shares into stock, and given notice of the conversion to the Registrar, all the provisions of this Act which are applicable to shares only, shall cease to apply as to so much of the share capital as is converted into stock.

Notice of increase of share capital or of members.

97. Notice of increase of share capital or of members.-(1) Where a company having a share capital, whether its shares have or have not been converted into stock, has increased its share capital beyond the authorised capital, and where a company, not being a company limited by shares, has increased the number of its members beyond the registered number, it shall file with the Registrar, notice of the increase of capital or of members within fifteen days after the pas- sing of the resolution authorising the increase, and the Registrar shall record the increase and also make any alterations which may be necessary in the company's memorandum or articles or bath.

(2) The notice to be given as aforesaid shall include particulars of the classes of shares-affected and the conditions, if any, subject to which the new shares have been or are to be issued.

(3) If default is made in complying with this section, the com- pany, and every officer of the company who is in default, shall be punishable with fine which may extend to fifty rupees for everyday during which the default continues.

Power of unlimited company to provide for reserve share capital on re-registration. 98. Power of unlimited company to provide for reserve share capital on re-registration.-An unlimited company having a share capital may, by its resolution for registration as a limited company in pursuance of this Act, do either or both of the following things namely: - (a) increase the nominal amount of its share capital by In- creasing the nominal amount of each of its shares, but subject to 88 the condition that no part of the increased capital shall be capable of being called up except in the event and for the purposes of the company being wound up; (b) provide that a specified portion of its uncalled share capital shall not be capable of being called up except in the event and for the purposes of the company being wound up.

Reserve liability of limited company. 99. Reserve liability of limited company.-A limited company may, by special resolution, determine that any portion of its share capital which has not been already called up shall not be capable of being called up, except in the event and for the purposes of the company being wound up, and thereupon that portion of its share capital shall not be capable of being called up except in that event and for those purposes. Reduction of share capital

Special resolution for reduction of share capital.

100. Special resolution for reduction of share capital.-(1) Subject to confirmation by the Court, a company limited by shares or a company limited by guarantee and having a share capital, may, if so authorised by its articles, by special resolution, reduce its share capital In any way; and in particular and without prejudice to the generality of the foregoing power, may- (a) extinguish or reduce the liability on any of its shares in respect of share capital not paid up; (b) either with or without extinguishing or reducing liability on any of its shares, cancel any paid-up share capital which is lost, or is unrepresented by available assets; or (c) either with or without extinguishing or reducing liability on any of its shares, pay off any paid-up share capital which is in excess of the wants of the company; and may, if and so far as is necessary, alter its memorandum by reducing the amount of its share capital and of its share's accordingly.

(2) A special resolution under this section is in this Act referred to as "a resolution for reducing share capital".

Application to Court for confirming order, objections by creditors,and settlement of list of objecting creditors. 101. Application to Court for confirming order, objections by

creditors, and settlement of list of objecting creditors.-(1) Where a company has passed a resolution for reducing share capital, it may apply, by petition, to the Court for an order confirming the reduction.

(2) Where the proposed reduction of share capital involves either the diminution of liability in respect of unpaid share capital or the payment to any shareholder of any paid-up share capital, and in any other case if the Court so directs, the following provisions shall

have effect, subject to the provisions of sub-section (3):- (a) every creditor of the company who at the date fixed by the Court is entitled to any debt or claim which, if that date were the commencement of the winding up of the company, would be admissible in proof against the company, shall be entitled to object to the, reduction; 89 (b) the Court shall settle a list of creditors so entitled to object, and for that purpose shall ascertain, as far as possible without requiring an application from any creditor, the names of those creditors and the nature and amount of their debts or claims, and may publish notices fixing a day or days within which creditors not entered on the list are to claim to be so entered or are to. be excluded from the right of objecting to the, reduction; (c) where a creditor entered on the list whose debt or claim is not discharged or has not determined does not consent to the reduction, the Court may, if it thinks fit, dispense with the consent of that creditor, on the company securing payment of his debt or claim by appropriating, as the Court may direct, the following amount:- (i) if the company admits the full amount of the debt or claim, or, though not admitting it, is willing to provide for it, then, the full amount of the debt or claim; (ii) if the company does not admit and is not Willing to provide for the full amount of the debt or claim, or if the amount is contingent or not ascertained, then, an amount fixed by the Court after the like inquiry and adjudication as if the company were being wound up by the Court.

(3) Where a proposed reduction of share capital involves either the diminution of any liability in respect of unpaid share capital or the payment to any shareholder of any paid-up share capital, the Court may, if, having regard to any special circumstances of the case, it

thinks proper so to do, direct that the provisions of subsection (2) shall not apply as regards any class or any classes of creditors.

Order confirming reduction and powers of Court on making such order. 102. Order confirming reduction and powers of Court on making

such order.-(1) The Court, if satisfied with respect to every creditor of the company who under section 101 is entitled to object to the reduction, that either his consent to the reduction has been obtained or his debt or claim has been discharged, or has determined, or has been secured, may make an order confirming the reduction on such terms and conditions as it thinks fit.

(2) Where the Court makes any such order, it may- (a) if for any special reason it thinks proper so to do, make an order directing that the company shall, during such period commencing on, or at any time after, the date of the order, as is specified in the order, add to its name as the last words thereof the words "and reduced"; and (b) make an order requiring the company to publish as the Court directs the reasons for reduction or such other information in regard thereto as the Court may think expedient with a view to giving proper information to the public, and, if the Court thinks fit, the causes which led to the reduction.

(3) Where a company is ordered to add to its name the words "and reduced", those words shall, until the expiration of the period 90 specified in the order, be deemed to be part of the name of the company.

Registration of order and minute of reduction.

103. Registration of order and minute of reduction.-(1) The Registrar- (a) on production to him of an order of the Court confirming the reduction of the share capital of a company; and (b) on the delivery to him of a certified copy of the order and of a minute approved by the Court showing, with respect to the share capital of the company as altered by the order, (i) the amount of the share capital, (ii) the number of shares into which it is to be divided, (iii) the amount of each share, and (iv) the amount, if any, at the date of the registration deemed to be paid up on each share; shall register the order and minute.

(2) On the registration of the order and minute, and not before, the resolution for reducing share capital as confirmed by the order shall take effect.

(3) Notice of the registration shall be published in such manner as the Court may direct.

(4) The Registrar shall certify under his hand the registration of the order and minute, and his certificate shall be conclusive evidence that all the requirements of this Act with respect to reduction of share capital have been complied with, and that the share capital of the company is such as is stated in the minute.

(5) The minute when registered shall be deemed to be substituted for the corresponding part of the memorandum of the company, and shall be valid and alterable as if it had been originally contained therein.

(6) The substitution of any such minute as aforesaid for part of the memorandum of the company shall be deemed to be an alteration of the memorandum within the meaning and for the purposes of section 40.

Liability of members in respect of reduced shares.

104. Liability of members in respect of reduced shares.-(1) A member of the company, past or present, shall not be liable, in respect of any share, to any call or contribution exceeding in amount the difference, if any, between the amount paid on the share, or the reduced amount, if any, which is to be deemed to have been paid thereon, as the case may be, and the amount of the share as fixed by the minute of reduction: Provided that, if any creditor entitled in respect of any debt Or claim to object to the reduction of share capital is, by reason of his ignorance of the proceedings for reduction or of their nature and effect with respect to his debt or claim, not entered on the list of creditors, and after the reduction the company is unable, within the 91 meaning of section 434, to pay the amount of his debt or claim, then- (a) every person who was a member of the company at the date of the registration of the order for reduction and minute, shall be liable to contribute for the payment of that debt or claim an amount not exceeding the amount which he would have been liable to contribute if the company had commenced to be wound up on the day immediately before the said date; and (b) if the company is wound up, the Court, on the appli- cation of any such creditor and proof of his ignorance as aforesaid, may, if it thinks fit, settle accordingly a list of persons so liable to contribute, and make and enforce calls and orders on the contributories settled on the list, as if they were ordinary contributories in a winding up.

(2) Nothing in this section shall affect the rights of the contributories among themselves.

Penalty for concealing name of creditor, etc. 105. Penalty for concealing name of creditor, etc.-If any officer of the company- (a) knowingly conceals the name of any creditor entitled to object to the reduction, (b) knowingly misrepresents the nature or amount of the debt or claim of any creditor; or (c) abets or is privy to any such concealment or misrepresentation as aforesaid; he shall be punishable with imprisonment for a term which may extend to one year, or with fine, or with both. Variation of shareholders' rights

Alteration of rights of holders of special classes of shares. 106. Alteration of rights of holders of special classes of

shares.-(1) In the case of a company the share capital of, which is divided into different classes of shares, provision may be made by the memorandum or articles for authorising the variation of the rights attached to any class of shares in the company, subject to- (a) the consent of the holders of any specified proportion, not being less than three-fourths, of the issued shares of that class, or (b) the sanction of a resolution passed at a separate meeting of the holders of those shares, and supported by the votes of the holders of any specified proportion, not being less than three-fourths, of those shares.

(2) Any provision in the memorandum or articles of a company in force immediately before the commencement of this Act which specifies for the purpose aforesaid any proportion which is less than three- fourths of the shareholders of the class concerned shall, after such commencement. have effect as if a proportion of three. fourths had been specified therein instead. 92

Rights of dissentient shareholders.

107. Rights of dissentient shareholders.-(1) If, in pursuance of any provision such as is referred to in section 106, the rights attached to any such class of shares are at any time varied, the holders of not less in the aggregate than ten per cent. of the issued shares of that class, being persons who did not consent to or vote in favour of the resolution for the variation, may apply to the Court to have the variation cancelled, and where any such application is made, the variation shall not have effect unless and until it is confirmed by the Court.

(2) An application under this section shall be made within twenty-one days after the date on which the consent was given or the resolution was passed, as the case may be, and may be made. on behalf of the shareholders entitled to make the application by such one or more of their number as they may appoint in writing for the purpose.

(3) On any such application, the Court, after hearing the appli- cant and any other persons who apply to the Court to be heard and appear to the Court to be interested in the application, may, if it is satisfied, having regard to all the circumstances of the case, that the variation would unfairly prejudice the shareholders of the class represented by the applicant, disallow the variation; and shall, if not so satisfied, confirm the variation.

(4) The decision of the Court on any such application shall be final.

(5) The company shall, within fifteen days after the service on the company of any order made on any such application, forward a copy of the order-to the Registrar; and if default is made in complying with this provision, the company, and every officer of the company who is in default, shall be punishable with fine which may extend to fifty rupees. Transfer of shares and debentures

Transfer not to be registered except on production of instrument oftransfer. 108. Transfer not to be registered except on production of

instrument of transfer.-(1) A company shall not register a transfer of shares in, or debentures of, the company, unless a proper instrument of transfer duly stamped and executed by or on behalf of the transferor and by or on behalf of the transferee and specifying the name, address and occupation, if any, of the transferee, has been delivered to the company along with the certificate relating to the shares or debentures, or if no such certificate is in existence, along with the letter of allotment of the shares or debentures: Provided that where, on an application in writing made to the company by the transferee and bearing the stamp required for an instrument of transfer, it is proved to the satisfaction of the Board of directors that the instrument of transfer signed by or or 93 behalf of the transferor and by or on behalf of the transferee has been lost, the company may register the transfer on such terms as to indemnity as the Board may think fit: Provided further that nothing in this section shall prejudice any power of the company to register as shareholder or debenture holder any person to whom the right to any shares in, or debentures of, the company has been transmitted by operation of law.

(2) In the case of a company having no share capital, sub-

section (1) shall apply as if the references therein to shares were reference instead to the interest of the member in the company.

Transfer by legal representative. 109. Transfer by legal representative.-A transfer of the share or other interest in a company of a deceased member thereof made by his legal representative shall, although the legal representative is not himself a member, be as valid as if he had been a member at the time of the execution of the instrument of transfer.

Application for transfer.

110. Application for transfer.-(1) Am application for the registration of a transfer of the shares or other interest of a member in a company may be made either by the transferor or by the transferee.

(2) Where the application is made by the transferor and relates to partly paid shares, the transfer shall not be registered, unless the company gives notice of the application to the transferee and the transferee makes no objection to the transfer within two weeks from the receipt of the notice.

(3) For the purposes of sub-section (2), notice to the transferee shall be deemed to have been duly given if it is dispatched by prepaid registered post to the transferee at the address given in the instrument of transfer, and shall be deemed to have been duly delivered at the time at which it would have been delivered in the ordinary course of post.

Power to refuse registration and appeal against refusal.

111. Power to refuse registration and appeal against refusal.(1) Nothing in sections 108, 109 and 110 shall prejudice any power of the company under its articles to refuse to register the transfer of, or the transmission by operation of law of the right to, any shares or interest of a member in, or debentures of, the company.

(2) If, in pursuance of any such power, a company refuses to register any such transfer or transmission of right, it shall, within two months from the date on which the instrument of transfer, or the intimation of such transmission, as the case may be, was delivered to the company, send notice of the refusal to the transferee and the transferor or to the person giving intimation of such transmission, as the case may be. If default is made in complying with this sub-section, the com- pany, and every officer of the company who is in default, shall be punishable with fine which may extend to fifty rupees for every day during which the default continues. 94

(3) The transferor or transferee, or the person who gave intimation of the transmission by operation of law, as the case may be, may, where the company is a public company or a private company which is a subsidiary of a public company, appeal to the Central Government against any refusal of the company to register the transfer or transmission, or against any failure on its part, within the period

referred to in sub-section (2), either to register the transfer or transmission or to send notice of its refusal to register the same.

(4) An appeal to the Central Government under sub-section (3) shall be made- (a) in case the appeal is against the 'refusal to register a transfer or transmission, within two months of the receipt by him of the notice of refusal; and (b) in case the appeal is against the failure referred to

in sub-section (3), within two months from the expiry of the

period referred to in sub-section (2).

(5) The Central Government shall, after causing reasonable notice to be given to the company and also to, the transferor and the transferee or, as the case may require, to the person giving intimation of the transmission by operation of law and the previous owner, if any, and giving them a reasonable opportunity to make their representations, if any, in writing, by order, direct either that the transfer or transmission shall be registered by the company or that it need not be registered by it; and In the former case, the company shall give effect to the decision forthwith.

(6) The Central Government may, in its order aforesaid, give such incidental and consequential directions as to the payment of costs or otherwise as it thinks fit.

(7) All proceedings in appeals under sub-section (3) or in relation thereto shall be confidential, and no suit, prosecution or other legal proceeding shall lie in respect of any allegation made in such proceedings, whether orally or otherwise.

(8) In the case of a private company which is not a subsidiary of a public company, where the right to any shares or interest of a member in, or debentures of, the company, is transmitted by a sale thereof held by a Court or other public authority, the provisions of

sub-sections (3) to (7) shall apply as if the company were a public company: Provided that the Central Government may, in lieu of an order

under sub-section (5), pass an order directing the company to register the transmission of the right unless any member or members of the company specified in the order acquire the right aforesaid within such time as may be allowed for the purpose by the order, on payment to the purchaser of the price paid by him therefor or such other sum as the Central Government may determine to be a reasonable compensation for the right in all the circumstances of the case.

Certification of transfers.

112. Certification of transfers.-(1) The certification by a com- pany of any instrument of transfer of shares in, or debentures of, the company, shall be taken as a representation by the company, to any person acting on the faith of the certification that there have been 95 produced to the company such documents as on the face of them show a prima facie title to the shares or debentures in the transferor named in the instrument of transfer, but not as a representation that the transferor has any title to the shares or debentures.

(2) Where any person acts on the faith of an erroneous certification made by a company negligently, the company shall be under the same liability to him as if the certification had been made fraudulently.

(3) For the purposes of this section- (a) an instrument of transfer shall be deemed to be certificated if it bears the words "certificate lodged" or words to the like effect; (b) the certification of an instrument of transfer shall be deemed to be made by a company, if- (i) the person issuing the certificated instrument is a person authorised to issue such instruments of transfer on the company's behalf; and (ii) the certification is signed by any officer or servant of the company or any other person, authorised to certificate transfers on the company's behalf, or if a body corporate has been so authorised, by any officer or servant of that body corporate; (c) a certification shall be deemed to be signed by any person, if it purports to be authenticated by his signature unless it is shown that the signature was placed there neither by himself nor by any person authorised to use the signature for the purpose of certificating transfers on the company's behalf. Issue of certificate of shares, etc.

Limitation of time for issue of certificates.

113. Limitation of time for issue of certificates.-(1) Every com- pany shall, within three months after the allotment of any of its shares, debentures or debenture stock, and within three months after the application for the registration of the transfer of any such shares, debentures or debenture stock, complete and have ready for delivery the certificates of all shares, the debentures, and the certificates of all debenture stock allotted or transferred, unless the conditions of issue of the shares, debentures or debenture stock otherwise provide. The expression "transfer", for the purposes of this sub-section, means a transfer duly stamped and otherwise valid, and does not in- clude any transfer which the company is for any reason entitled to refuse to register and does not register.

(2) If default is made in complying with sub-section (1), the company, and every officer of the company who is in default, shall be punishable with fine which may extend to five hundred rupees for every day during which the default continues.

(3) If any company on which a notice has been served requiring it to make good any default in complying with the provisions of sub-

section (1), fails to make good the default within ten days after the service of the notice, the Court may, on the application of the person entitled to have the certificates or the debentures delivered to him, make an order directing the company and any officer of the company 96 to make good the default within such time as may be specified in the order; and any such order may provide that all costs of and incidental to the application shall be borne by the company or by any officer of the company responsible for the default. Share warrants

Issue and effect of share warrants to bearer.

114. Issue and effect of share warrants to bearer.--(1) A public company limited by shares, if so authorised by its articles, may, with the previous approval of the Central Government, with respect to any fully paid-up shares, issue under its common seal a warrant stating that the bearer of the warrant is entitled to the shares therein specified, and may provide, by coupons or otherwise, for the payment of the future dividends on the shares specified in the warrant.

(2) The warrant aforesaid is in this Act referred to as a "share warrant".

(3) A share warrant shall entitle the bearer thereof to the shares therein specified, and the shares may be transferred by delivery of the warrant.

Share warrants and entries in register of members.

115. Share warrants and entries in register of members.-(1) On the issue of a share warrant, the company shall strike out of its register of members the name of the member then entered therein as holding the shares specified in the warrant as if he had ceased to be a member, and shall enter in that register the following particulars namely: - (a) the fact of the issue of the warrant; (b) a statement of the shares specified in the warrant, distinguishing each share by its number; and (c) the date of the issue of the warrant.

(2) The bearer of a share warrant shall, subject to the articles of the company, be entitled, on surrendering the warrant for cancella- tion and paying such fee to the company as the Board of directors may from time to time determine, to have his name entered as a member in the register of members.

(3) The company shall be responsible for any loss incurred by any person by reason of the company entering in its register of mem- bers the name of a bearer of a share warrant in respect of the shares therein specified, without the warrant being surrendered and cancelled.

(4) Until the warrant is surrendered, the particulars specified

in sub-section (1) shall be deemed to be the particulars required by this Act to be entered in the register of members; and, on the surrender, the date of the surrender shall be entered in that register.

(5) Subject to the provisions of this Act, the bearer of a share warrant may, if the articles of the company so provide, be deemed to be a member of the company within the meaning of this. Act, for any purposes defined in the articles.

(6) If default is made in complying with any of the requirements of this section, the company, and every officer of the company who is in default, shall be punishable with fine which may extend to. fifty rupees for every day during which the default continues. 97 Penalty for personation of shareholder

Penalty for personation of shareholder. 116. Penalty for personation of shareholder.-If any person deceitfully personates an owner of any share or interest in a company, or of any share warrant or coupon issued in pursuance of this Act, and thereby obtains or attempts to obtain any such share or interest or any such share warrant or coupon, or receives or attempts to receive any money due to any such owner, he shall be punishable with imprisonment for a term which may extend to three years and shall also be liable to fine. Special provisions as to debentures

Debentures with voting rights not to be issued hereafter. 117. Debentures with voting rights not to be issued hereafter.No company shall, after the commencement of this Act, issue any debentures carrying voting rights at any meeting of the company whether generally or in respect of particular classes of business.

Right to obtain copies of and inspect trust deed.

118. Right to obtain copies of and inspect trust deed.--(1) A copy of any trust deed for securing any issue of debentures shall be forwarded to the holder of any such debentures or any member of the company, at his request and within seven days of the making thereof, on payment- (a) in the case of a printed trust deed, of the sum of one rupee; and (b) in the case of a trust deed which has not been printed, of six annas for every one hundred words or fractional part thereof required to be copied.

(2) If a copy is refused, or is not forwarded within the time

specified in sub-section (1), the company, and every officer of the company who is in default, shall be punishable, for each offence, with fine which may extend to fifty rupees and with a further fine which may extend to tyenty rupees for everyday during which the offence continues.

(3) The Court may also, by order, direct that the copy required shall forthwith be sent to the person requiring it.

(4) The trust deed referred to in sub-section (1) shall also be open to inspection by any member or debenture holder of the company in the same manner, to the same extent, and on payment of the same fees, as if it were the register of members of the company.

Liability of trustees for debenture holders.

119. Liability of trustees for debenture holders.--(1) Subject to the provisions of this section, any provision contained in a trust deed for securing an issue of debentures, or in any contract with the holders of debentures secured by a trust deed, shall be void in so far as it would have the effect of exempting a trustee thereof from, or Indemnifying him against, liability for breach of trust, where he fails to show the degree of care and diligence required of him as trustee, having regard to the provisions of the trust deed conferring on him any powers, authorities or discretions.

(2) Sub-section (1) shall not invalidate- (a) any release otherwise validly given in respect of any- thing done or omitted to be done by a trustee before the giving of the release; or 98 (b) any provision enabling such a release to be given- (i) on the agreement thereto of a majority of not less than three-fourths in value of the debenture holders present and voting in person or, where proxies are permitted, by proxy, at a meeting summoned for the purpose; and (ii) either with respect to specific acts or omissions or on the trustee dying or ceasing to act.

(3) Sub-section (1) shall not operate- (a) to in validate any provision in force at the commence- ment of this Act so long as any person then entitled to the benefit of that provision or afterwards given the benefit

thereof under sub-section (4) remains a trustee of the deed in question; or (b) to deprive any person of any exemption or right to be indemnified in respect of anything done or omitted to be done by him while an such provision was in force.

(4) While any trustee of a trust deed remains entitled to the

benefit of a provision saved by sub-section (3), the benefit of that provision may be given either- (a) to all trustees of the deed, present and future; or (b) to any named trustees or proposed trustees thereof; by a resolution passed by a majority of not less than three-fourths in value of the debenture holders present in person or, where proxies are permitted, by proxy, at a meeting called for the purpose in accordance with the provisions of the deed or, if the deed makes no provision for calling meetings, at a meeting called for the purpose in any manner approved by the Court.

Perpetual debentures. 120. Perpetual debentures.-A condition contained in any deben- tures or in any deed for securing any debentures, whether issued or executed before or after the commencement of this Act, shall not be invalid by reason only that thereby, the debentures are made irre- deemable or redeemable only on the happening of a contingency, however remote, or on the expiration of a period, however long.

Power to re-issue redeemed debentures in certain cases. 121. Power to re-issue redeemed debentures in certain

cases.-(1) Where either before or after the commencement of this Act, a company has redeemed any debentures previously issued, then,- (a) unless any provision to the contrary, whether express or implied, is contained in the articles, or in the conditions of issue, or in any contract entered into by the company; or (b) unless the company has, by passing a resolution to that effect or by some other act, manifested its intention that the debentures shall be cancelled; the company shall have, and shall be deemed always to have had. the right to keep the debentures alive for the purposes of re-issue; and in exercising such a right, the company shall have, and shall be deemed always to have had, power to re-issue the debentures either by re-issuing the same debentures or by issuing other debentures in their place. 99

(2) Upon such re-issue, the person entitled to the debentures shall have, and shall be deemed always to have had, the same rights and priorities as if the debentures had never been redeemed.

(3) Where with the object of keeping debentures alive for the purpose of re-issue, they have, either before or after the commencement of this Act, been transferred to a nominee of the company, a transfer from that nominee shall be deemed to be a re-issue for the purposes of this section.

(4) Where a company has, either before or after the commencement of this Act, deposited any of its debentures to secure advances from time to time on current account or otherwise, the debentures shall not be deemed to have been redeemed by reason only of the account of the company having ceased to be in debit whilst the debentures remained so deposited.

(5) The re-issue of a debenture or the issue of another debenture in its place under. the power by this section given to, or deemed to have been possessed by, a company, whether the re-issue or issue was made before or after the commencement of this Act, shall be treated as the issue of a new debenture for the purposes of stamp duty, but it shall not be so treated for the purposes of any provision limiting the amount or number of debentures to be issued: Provided that any person lending money on the security of a debenture re-issued under this section which appears to be duly stamped may give the debenture in evidence in any proceedings for enforcing his security without payment of the stamp duty or any penalty in respect thereof, unless he had notice or, but for his negligence, might have discovered, that the debenture was not duly stamped; but in any such case the company shall be liable to pay the proper stamp duty and penalty.

(6) Nothing in this section shall prejudice- (a) the operation of any decree or order of a Court of com- petent jurisdiction pronounced or made before the twenty- fifth day of February, 1910, as between the parties to the proceedings in which the decree or order was made; (b) where an appeal has been preferred against any such de- cree or order, the operation of any decree or order passed on such appeal, as between the parties to such appeal; or (c) any power to issue debentures in the place of any debentures paid off or otherwise satisfied or extinguished, reserved to a company by its debentures or the, securities for the same.

Specific performance of contract to subscribe for debenture. 122. Specific performance of contract to subscribe for deben- tures.-A contract with a company to take up and pay for any debentures of the company may be enforced by a decree for specific performance.

Payments of certain debts out of assets subject to floating charge inpriority to claims under the charge. 123. Payments of certain debts out of assets subject to floating

charge in priority to claims under the charge.-(1) Where either- (a) a receiver is appointed on behalf of the holders of any debentures of a company secured by a floating charge; or (b) possession is taken by or on behalf of those debenture holders of any property comprised in or subject to the charge: 100 then, if the company is not at the time in course of being wound up, the debts which in every winding up are, under the provisions of Part VII relating to preferential payments, to be paid in priority to all other debts, shall be paid forthwith out of any assets coming to the hands of the receiver or other person taking possession as aforesaid in priority to any claim for principal or interest in respect of the debentures.

(2) In the application of the provisions aforesaid, section 530 shall be construed as if the provision for payment of accrued, holiday remuneration becoming payable on the termination of employment before or by the effect of the winding-up order or resolution were a provision for payment of such remuneration becoming payable on the termination of employment before or by the effect of the appointment of the receiver or possession being taken as aforesaid.

(3) The periods of time mentioned in the said provisions of Part VII shall be reckoned from the date of appointment of the receiver or of possession being taken as aforesaid, as the case may be.

(4) Where the date referred to in sub-section (3) occurred

before the commencement of this Act, sub-sections (1) and (3) shall have. effect with the substitution, for references to the said provisions of Part VII, of references to the provisions which, by

virtue of sub-section (9) of section 530, are deemed to remain in

force in the case therein mentioned, and sub-section (2) shall not apply.

(5) Any payments made under this section shall be recouped, as far as may be, out of the assets of the company available for payment of general creditors. PART REGISTRATION CHARGES PART V REGISTRATION CHARGES

"Charge" to include mortgage in this Part. 124. "Charge" to include mortgage in this Part.-In this Part, the expression "charge" includes a mortgage.

Certain charges to be void against liquidator or creditors unlessregistered. 125. Certain charges to be void against liquidator or creditors

unless registered.-(1) Subject to the provisions of this Part, every charge created on or after the 1st day of April, 1914, by a company and being a charge to which this section applies shall, so far as any security on the company's property or undertaking is conferred thereby, be void against the liquidator and any creditor of the com- pany, unless the prescribed particulars of the charge, together with the instrument, if any, by which the charge is created or evidenced, or a copy thereof verified in the prescribed manner, are filed with the Registrar for registration in the manner required by this Act within twenty-one days after the date of its creation.

(2) Nothing in sub-section (1) shall prejudice any contract or obligation for the repayment of the money secured by the charge.

(3) When a charge becomes void under this section, the money secured thereby shall immediately become payable.

(4) This section applies to the following charges:- (a) a charge for the purpose of securing any issue of debentures; (b) a charge on uncalled share capital of the company; 101 (c) a charge on any immovable property, wherever situate, or any interest therein; (d) a charge on any book debts of the company; (e) a charge, not being a pledge, on any movable property of the company; (f) a floating charge on the undertaking or any property of the company including stock-in-trade; (g) a charge on calls made but not paid; (h) a charge on a Ship or any share in a ship; (i) a charge on goodwill, on a patent or a licence under a patent, on a trade mark, or on a copyright or a licence under a copyright.

(5) In the case or a charge created out of India and comprising solely property situate outside India, twenty-one days after the date on which the instrument creating or evidencing the charge or a copy thereof could, in due course of post and if despatched with due dili- gence, have been received in India, shall be substituted for twentyone days after the date of the creation of the charge, as the time within which the particulars and instrument or copy are to be filed with the Registrar.

(6) Where a charge is created in India but comprises property outside India, the instrument creating or purporting to create the charge under this section or a copy thereof verified in the prescribed manner, may be filed for registration, notwithstanding that further proceedings may be necessary to make the charge valid or effectual according to the law of the country in which the property is situate.

(7) Where a negotiable instrument has been given to secure the payment of any book debts of a company, the deposit of the instrument for the purpose of securing an advance to the company shall not, for the purposes of this section, be treated as a charge on those book debts.

(8) The holding of debentures entitling the holder to a charge on immovable property shall not, for the purposes of this section, be deemed to be an interest in immovable property.

Date of notice of charge. 126. Date of notice of charge.-Where any charge on any property of a company required to be registered under section 125 has been so registered, any person acquiring such property or any part thereof, or an share or interest therein, shall be deemed to have notice of the charge as from the date of such registration.

Registration of charges on properties acquired subject to charge. 127. Registration of charges on properties acquired subject

to charge.-(1) Where a company acquires any property which is subject to a charge of any such kind as would, if it had been created by the company after the acquisition of the property, have been required to be registered under this Part, the company shall cause the prescribed particulars of the charge, together with a copy (certified in the prescribed manner to be a correct copy) of the instrument, if any, by which the charge was created or is evidenced, to be delivered to the Registrar for registration in the manner required 102 by this Act within twenty-one days after the date on which the ac- quisition is completed: Provided that, if the property is situate, and the charge was created, outside India, twenty-one days after the date on which a copy of the instrument could, in due course of post and if despatched with due diligence, have been received in India shall be substituted for twenty-one days after the completion of the acquisition as the time within which the particulars and the copy of the instrument are to be delivered to the Registrar.

(2) If default is made in complying with sub-section (1), the company, and every officer of the company who is in default, shall be punishable with fine which may extend to five hundred rupees.

Particulars in case of series of debentures entitling holders paripassu. 128. Particulars in case of series of debentures entitling holders pari passu.-Where a series of debentures containing, or giving by reference to any other instrument, any charge to the benefit of which the debenture holders of that series are entitled pari passu is created by a company, it shall, for the purposes of section 125, be ,sufficient, if there are filed with the Registrar, within twenty-one days after the execution of the deed containing the charge or, if there is no such deed, after the execution of any debentures of the series, the following particulars:- (a) the total amount secured by the whole series; (b) the dates of the resolutions authorising the issue of the series and the date of the covering deed, if any, by which the security is created or defined; (c) a general description of the property charged; and (d) the names of the trustees, if any, for the debenture holders; together with the deed containing the charge, or a copy of the deed verified in the prescribed manner, or if there is no such deed, one of the debentures of the series: Provided that, where more than one issue is made of debentures in the series, there shall be filed with the Registrar, for-entry in the: register, particulars of the date and amount of each issue; but an omission to do this shall not affect the validity of the, debentures issued.

Particulars in case of commission etc., on debentures. 129. Particulars in case of commission etc., on debentures. Where any commission, allowance or discount has been paid or made either directly or indirectly by a company to any person in consideration of his subscribing or agreeing to subscribe, whether absolutely or conditionally, for any, debentures of the company, ox procuring or agreeing to procure subscriptions, whether absolute or conditional, for any such debentures, the particulars required to be filed for registration under sections 125 and 128 shall include particulars as to the amount or rate per cent of the commission, discount or allowance so paid or made; but an omission to do this shall not affect the validity of the debentures issued: Provided that the deposit of any debentures as security for any debt of the company shall not, for the purposes of this section, be treated as the issue of the debentures at a discount. 103

Register of charges to be kept by Registrar.

130. Register of charges to be kept by Registrar.-(1) The Registrar shall keep, with respect to each company, a register in the prescribed form of all the charges requiring registration tinder this Part, and shall, on payment of the prescribed fee, enter in the regis- ter. with respect to every such charge, the following particulars:- (a) in the case of a charge to the benefit of which the holders of a series of debentures are entitled, such particulars as are specified in sections 128 and 129; (b) in the case of any other charge-- (i) if the charge is a charge created by the company, the date of its creation; and if the charge was a charge existing on property acquired by the company, the date of the acquisition of the property; - (ii) the amount secured by the charge; (iii) short particulars of the property charged; and (iv) the persons entitled to the charge.

(2) After making the entry required by sub-section (1), the Registrar shall return the instrument, if any, or the verified copy thereof, as the case may be, filed in accordance with the provisions of this Part, to the person filing the same.

(3) The register kept in pursuance of this section shall be open to inspection by any person on payment of a fee of one rupee for each inspection.

Index to register of charges. 131. Index to register of charges.-The Registrar shall keep a chronological index, in the prescribed form and with the prescribed particulars, of the charges registered with him in pursuance of this Part.

Certificate of registration. 132. Certificate of registration.-The Registrar shall give a certificate under his hand of the registration of any charge registered in pursuance of this Part, stating the amount thereby secured; and the certificate shall be, conclusive evidence that the requirements of this Part as to registration have been complied with.

Endorsement of certificate of registration on debenture certificateof debenture stock. 133. Endorsement of certificate of registration on debenture or

certificate of debenture stock.-(1) The company shall cause a copy of every certificate of registration given under section 132, to be endorsed on every debenture or certificate of debenture stock which is issued by the company and the payment of which is secured by the charge so registered: Provided that nothing in this sub-section shall be construed as requiring a company to cause a certificate of registration of any charge so given to be endorsed on any debenture or certificate of debenture stock issued by the company before the charge was created.

(2) If any person knowingly delivers, or wilfully authorises or permits the delivery of, any debenture or certificate of debenture

stock which, under the provisions of sub-section (1), is required to have endorsed on it a copy of a certificate of registration without the copy being so endorsed upon it, he shall, without prejudice to any other liability, be punishable with fine which may extend to one thousand rupees. 104

Duty of company as regards registration and right of interested party. 134. Duty of company as regards registration and right of

interested party.-(1) It shall be the duty of a company to file with the Registrar for registration the particulars of every charge created by the company, and of every issue of debentures of a series, re- quiring registration under this Part; but registration of any such charge may also be effected on the application of any person interest- ed therein.

(2) Where registration is effected on the application of some person other than the company, that person shall be entitled to recover from the company the amount of any fees properly paid by him to the Registrar on the registration.

Provisions of Part to apply to modification of charges. 135. Provisions of Part to apply to modification of charges.- Whenever the terms or conditions; or the extent or operation, of any charge registered under this Part are or is modified, it shall be the duty of the company to send to the Registrar the particulars of such modification, and the provisions of this Part as to registration of a charge shall apply to such modification of the charge.

Copy of instrument creating charge to be kept by company at registeredoffice. 136. Copy of instrument creating charge to be kept by company at registered office.-Every company shall cause a copy of every instrument creating any charge requiring registration under this Part to be kept at the registered office of the company: Provided that, in the case of a series of uniform debentures, a copy of one debenture of the series shall be sufficient.

Entry in register of charges of appointment of receiver or manager. 137. Entry in register of charges of appointment of receiver or

manager.-(1) If any person obtains an order for the appointment of a receiver of, or of a person to manage, the property of a company, or if any person appoints such receiver or person under any powers contained in any instrument, he shall, within fifteen days from the date of the passing of the order or of the making of the appointment under the said powers, give notice of the fact to the Registrar; and the Registrar shall, on payment of the prescribed free, enter the fact in the register of charges.

(2) Where any person so appointed under the powers contained in any instrument ceases to act as such, he shall, on so ceasing, give to the Registrar notice to that effect; and the Registrar shall enter the notice in the register of charges.

(3) If any person makes default in complying with the require-

ments of sub-section (1) or (2), he shall be punishable with fine within twenty-one days from the date of such payment or satisdefault continues.

Company to report satisfaction and procedure thereafter.

138. Company to report satisfaction and procedure thereafter.-(1) The company shall give intimation to the Registrar of the payment or satisfaction, in whole or in part, of any charge relating to the company and requiring registration under this Part, within twenty-one days from the date of such payment or satisfaction.

(2) The Registrar shall, on receipt of such intimation, cause a notice to be sent to the holder of the charge calling upon him to show cause within a time. (not exceeding fourteen days) specified in such notice, why payment or satisfaction should not be recorded as intimated to the Registrar. 105

(3) If no cause is shown, the Registrar shall order that a memo- randum of satisfaction in whole or in part, as the case may be, shall be entered in the register of charges.

(4) If cause is shown, the Registrar shall record a note to that effect in the register, and shall inform the company that he has done so.

(5) Nothing in this section shall be deemed to affect the power of the Registrar to make an entry in the register of charges under section 139 otherwise than on receipt of an intimation from the company.

Power of Registrar to make entries of satisfaction and release inabsence of intimation from company. 139. Power of Registrar to make entries of satisfaction and release .in absence of intimation from company.-The Registrar may, on evidence being given to Ms satisfaction with respect to any registered charge,- (a) that the debt for which the charge was given has been paid or satisfied in whole or in part ; or (b) that part of the property or undertaking charged has been released from the charge or has ceased to form part of the company's property or undertaking; enter in the register of charges a memorandum of satisfaction in whole or in part, or of the fact that part of the property or undertaking has been released from the charge or has ceased to form part of the company's property or undertaking, as the case may be, notwithstanding the fact that no intimation has been received by him from the company.

Copy of memorandum of satisfaction to be furnished to company. 140. Copy of memorandum of satisfaction to be furnished to company.-Where the Registrar enters a memorandum of satisfaction in whole or in part, in pursuance of section 138 or 139, he shall furnish the company with a copy of the memorandum.

Rectification by Court of register of charges.

141. Rectification by Court of register of charges.-(1) The Court, on being satisfied- (a) that the omission to register a charge within the time required by this Part, or that the omission or misstatement of any particular with respect to any such charge or any memorandum of satisfaction or other entry made in pursuance of section 138 or 139, was accidental, or due to inadvertence, or to some other sufficient cause, or is not of a nature to prejudice the position of creditors or shareholders of the company; or (b) that on other grounds it is just and equitable to grant relief ; may, on the application of the company or any person interested and on such terms and conditions as seem to the Court just and expedient, order that the time for the registration shall be-extended or, as the case may require, that the omission or misstatement shall be rectified.

(2) The Court may make such order as to the costs of an applica-

tion under sub-section (1) as it thinks fit 106

(3) Where the Court extends the time for the registration of a charge, the order shall not prejudice any rights acquired in respect of the property concerned before the charge is actually registered.

Penalties.

142. Penalties.-(1) If default is made in filing with the Registrar for registration the particulars- (a) of any charge created by the company; (b) of the payment or satisfaction, in whole or in part, of a debt in respect of which a charge has been registered under this Part ; or (c) of the issues of debentures of a series; requiring registration with the Registrar under the provisions of this Part, then, unless the registration has been effected on the applica- tion of some other person, the company, and every officer of the company or other person who is in default, shall be punishable with line which may extend to five hundred rupees for everyday during which, the default continues.

(2) Subject as aforesaid, if any company makes default in com- plying with any of the other requirements of this Act as to the regis- tration with the Registrar of any charge created by the company or of any fact connected therewith, the company, and every officer of the company who is in default, shall, without prejudice to any other liability, be punishable with fine which may extend to one thousand rupees.

Company's register of charges.

143. Company's register of charges.-(1) Every company shall keep at its registered office a register of charges and. enter therein all charges specifically affecting property of the company and all floating charges on the undertaking or on any property of the company, giving in each case- (i) a short description of the property charged; (ii) the amount of the charge; and (iii) except in the case of securities to bearer, the names of the persons entitled to the charge.

(2) If any officer of the company knowingly omits, or wilfully authorises or permits the omission of, any entry. required to be made

in pursuance of sub-section (1), he shall be punishable with line which may extend to five hundred rupees.

Right to inspect copies of instruments creating charges and company'sregister of charges. 144. Right to inspect copies of instruments creating charges and

company's register of charges.-(1) The copies of instruments creating charges kept in pursuance of section 136, and the register of charges kept in pursuance of section 143, shall be open during business hours (but subject to such reasonable restrictions as the company in general meeting may impose, so that not less than two hours in each day are allowed for inspection to the inspection of any creditor or member of the company without fee, at the registered office of the company.

(2) The register of charges kept in pursuance of section 143 shall also be open, during business hours but subject to the reasonable restrictions aforesaid, to the inspection of any other person on payment of a fee of one rupee for each inspection, at the registered office of the company. 107

(3) If inspection of the said copies or register is refused, the company, and every officer of the company who is in default, shall be punishable with fine which may extend to fifty rupees and with a further fine which may extend to twenty rupees for everyday during which the refusal continues.

(4) The Court may also by order compel an immediate inspection of the said copies or register.

Application of Part to charges requiring registration under it but notunder previous law. 145. Application of Part to charges requiring registration under it but not under previous law.-In respect of any charge created before the commencement of this Act which, if this Act had been in force at the relevant time, would have had to be registered by the company in pursuance of this Part but which did not require registration under the Indian Companies Act, 1913 (7 of 1913), and in respect of all matters relating to such charge, the provisions of this Part shall apply and have effect in all respects, as if the date of commencement of this Act had been substituted therein for the date of creation of the charge, or the date of completion of the acquisition of the property subject to the charge, as the case may be. Nothing contained in this section shall be deemed to affect the relative priorities as they existed immediately before the commen- cement of this Act, as between charges on the same property. PART MANAGEMENT AND ADMINISTRATION PART VI MANAGEMENT AND ADMINISTRATION CHAP General provisions CHAPTER I.-General provisions Registered office and name

Registered office of company.

146. Registered office of company.-(1) A company shall, as from the day on which it begins to carry on business, or as from the twenty-eighth day after the date of its incorporation, whichever is earlier. have a registered office to which all communications and notices may be addressed.

(2) Notice of the situation of the registered office, and of every change therein, shall be given within twenty-eight days after the date of the incorporation of the company or after the date of the change, as the case may be, to the Registrar who shall record the same: Provided that except on the authority of a special resolution passed by the company, the registered office of the company shall not be removed- (a) in the case of an existing company, outside the local limits of any city, town or village where such office is situated at the commencement of this Act, or where it may be situated later by virtue of a special resolution passed by the company; and (b) in the case of any other company, outside the local limits of any city, town or village where such office is first situated, or where it may be situated later by virtue of a special resolution passed by the company.

(3) The inclusion in the annual return of a company of a statement as to the address of its registered office shall not be

taken to satisfy the obligation imposed by sub-section (2). 108

(4) If default is made in complying with the requirements of this section, the company, and every officer of the company who is in default, shall be punishable with fine which may extend to fifty rupees for everyday during which the default continues.

Publication of name by company.

147. Publication of name by company.-(1) Every company-.- (a) shall paint or affix its name, and keep the same painted or affixed, on, the outside of every office or place in which its business is carried on, in a conspicuous position, in letters easily legible; and if the characters employed therefor are not those of the language, or of one of the languages, in general use in that locality, also in the characters of that language or of one of those languages; (b) shall have its name engraven in legible characters on its seal; and (c) shall have its name mentioned in legible characters in all its business letters, in all its bill heads and letter paper, and in all its notices, advertisements and other official publications-, and, in all bills of exchange, hundies, promissory notes, endorsements, cheques, and orders for money or goods purporting to be signed by or on behalf of the company, and in all bills of parcels, invoices, receipts and letters of credit of the company.

(2) If a company does not paint or affix its name, or keep the same painted or affixed in the manner directed by clause (a) of sub-

section (1), the company, and every officer of the company who is in default, shall be punishable with fine which may extend to fifty rupees for not so painting or affixing its name, and for everyday during which its name is not so kept painted or affixed.

(3) If a company fails to comply with clause (b) or clause (c)

of sub-section (1), the company shall be punishable with fine which may extend to five hundred-rupees.

(4) If an officer of a company or any person on its, behalf- (a) uses, or authorises the use of, any seal purporting to be a seal of the company whereon its name is not engraven in the manner aforesaid; (b) issues, or authorises the issue of, any business letter. bill head, letter paper, notice, advertisement or other official publication of the company wherein its name is not mentioned in the manner aforesaid; (c) signs, or authorises to be signed, on behalf of the company, any bill of exchange, hundi, promissory note, endorsement. cheque or order for money or goods wherein its name is not mentioned. in the manner aforesaid; or (d) issues, or authorises, the issue of, any bill of parcels, invoice, receipt or letter of credit of the company, wherein its name is not mentioned in the manner aforesaid; such officer or person shall be punishable with fine which may, extend to five hundred rupees, and shall further be personally liable to the holder of the bill of exchange, hundi, promissory note, cheque 109 or order for money or goods, for the amount thereof, unless it is duly paid by the company.

Publication of authorised as well as subscribed and paid-up capital. 148. Publication of authorised as well as subscribed and paid-up

capital.-(1) Where any notice, advertisement or other official publication, or any business letter, bill head or letter paper, of a company contains a statement of the amount of the authorised capital of the company, such notice, advertisement or other official publication, or such letter, bill head or letter paper, shall also contain a statement, in an equally prominent position and in equally conspicuous characters, of the amount of the capital which has been subscribed and the amount paid up.

(2) If default is made in complying with the requirements of

sub-section (1), the company, and every officer of the company who is in default, shall be punishable with fine which may extend to one thousand rupees. Restrictions on commencement of business

Restrictions on commencement of business.

149. Restrictions on commencement of business.-(1) Where a company having a share capital has issued a prospectus inviting the public to subscribe for its shares, the company shall not commence any business or exercise any borrowing powers, unless- (a) shares held subject to the payment of the whole amount thereof in cash have been allotted to an amount not less in the whole than the minimum subscription; (b) every director of the company has paid to the company, on each of the shares taken or contracted to be taken by him and for which he is liable to pay in cash, a proportion equal to the proportion payable on application and allotment on the shares offered for public subscription; (c) no money is. or may become, liable to be repaid to ap- plicants for any shares or debentures which have been offered for public subscription by reason of any failure to apply for, or to obtain, permission for the shares or debentures to be dealt in on any recognized stock exchange; and (d) there hag been filed with the Registrar a duly verified declaration by one of the directors or the secretary, in the prescribed form, that clauses (a), (b) and (c) of this, sub- section, have been complied with.

(2) Where a company having a ,hare capital has not issued a prospectus inviting the public to subscribe for its shares, the, com- pany shall not commence any business or exercise any borrowing powers, unless- (a) there has been filed with the Registrar a statement in lieu of prospectus; (b) every director of the company has paid to the company, on each of the shares taken or contracted to be taken by him and for which he is liable to pay in cash, a proportion equal to the proportion payable on application and allotment on the shares payable in cash; and (c) there has been filed with the Registrar a duly verified declaration by one of the directors or the secretary, in the 110 prescribed form, that clause (b) of this sub-section has been complied with.

(3) The Registrar shall, on the filing of a duly verified

declaration In accordance with the provisions of sub-section (1) or

sub-section (2), as the case may be, and, in the case of a company

which is required by sub-section (2) to file a statement in lieu of prospectus, also of such a statement, certify that the company is entitled to commence business, and that certificate shall be conclusive evidence that the company is so entitled.

(4) Any contract made by a company before the date at which it is entitled to commence business shall be provisional only, and shall not be binding on the company until that date, and on that date it shall become binding.

(5) Nothing in this section shall prevent the simultaneous offer for subscription or allotment of any shares and debentures or the receipt of any money payable on applications for debentures.

(6) If any company commences business or exercises borrowing powers in contravention of this section, every person who is res- ponsible for the contravention shall, without prejudice to any other liability, be punishable with fine which may extend to five hundred rupees for every day during which the contravention continues.

(7) Nothing in this section shall apply to-- (a) a private company; or (b) a company registered before the first day of April, 1914, which has not issued a prospectus inviting the public to subscribe for its shares.

(8) The provisions of this section, in so far as they do not relate to shares, shall also apply to a company limited by guarantee and not having a share capital. Registers of members and debenture holders

Register of Members.

150. Register of Members.-(1) Every company shall keep in one or more books a register of its members, and enter therein the following particulars:- (a) the name and address, and the occupation, if any, of each member; (b) in the case of a company having a share capital, the shares held by each member, distinguishing each share by its number, and the amount paid or agreed to be considered as paid on those shares; (c) the date at which each person was entered in the register as a member; and (d) the date at which any person ceased to be a member: Provided that where the company has converted any of its shares into stock and given notice of the conversion to the Registrar, the register shall show the amount of stock held by each of the members concerned instead of the shares so converted which were previously held by him.

(2) If default is made in complying with sub-section (1), the company, and every officer of the company who Is in default, shall 111 be punishable with fine which may extend to fifty rupees for everyday during which the default continues.

Index of members.

151. Index of members.-(1) Every company having more than fifty members shall, unless the register of members is in such a form as in itself to constitute an index, keep an index (which may be in the form of a card index) of the names of the members of the company and shall, within fourteen days after the date on which any alteration is made in the register of members, make the necessary alteration in the index.

(2) The index shall, in respect of each member, contain a suffi- cient indication to enable the entries relating to that member in the register to be readily found.

(3) The index shall, at all times, be kept at the same place as the register of members.

(4) If default is made in complying with sub-section (1), (2) or

(3), the company, and every officer of the company who is in default, shall be punishable with fine which may extend to fifty rupees.

Register and index of debenture holders.

152. Register and index of debenture holders.-(1) Every company shall keep in one or more books a register of the holders of its debentures and enter therein the following particulars, namely:- (a) the name and address, and the occupation, if any, of each debenture holder; (b) the debentures held by each holder, distinguishing each debenture by its number, and the amount paid or agreed to be considered as paid on those debentures; (c) the date at which each person was entered in the register as a debenture holder; and (d) the date at which any person ceased to be a debenture holder.

(2) (a) Every company having more than fifty debenture holders shall, unless the register of debenture holders is in such a form as itself to constitute an index, keep an index (which may be in the form of a card index) of the names of the debenture holder's of the company and shall, within fourteen days after the date on which any alteration is made in the register of debenture holders, make the necessary alteration in the index. (b) The index shall, in respect of each debenture holder, contain a sufficient indication to enable the entries relating to that holder in the register to be readily found.

(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 fifty rupees.

(4) Sub-sections (1) to (3) shall not apply with respect to debentures which, ex facie, are payable to the bearer thereof.

Trusts not to be entered on register. 153. Trusts not to be entered on register.-No notice of any trust express, implied or constructive, shall be entered on the register of members or of debenture holders, or be receivable by the Registrar. 112

Power to close register of members or debenture holders. 154. Power to close register of members or debenture holders.-

(1) A company may, after giving not less than seven days' previous notice by advertisement in some newspaper circulating in the district in which the registered office of the company is situate, close the register of members or the register of debenture holders for any period or periods not exceeding in the aggregate forty-five days in each year, but not exceeding thirty days at any one time.

(2) If the register of members or of debenture holders is closed

without giving the notice provided in sub-section (1), or after giving shorter notice than that so provided, or for a continuous or an aggregate period in excess of the limits specified in that sub- section, the company, and every officer of the company who is in default. shall be punishable with fine which may, extend to five hunderd rupees for every day during which the register is so closed.

power of Court to rectify register of members.

155. power of Court to rectify register of members.-(1) If- (a) the name of any person is, without sufficient cause, entered in or omitted from the register of members of a company; or (b) default is made, or unnecessary delay takes place, in entering on the register the fact of any person having become, of ceased To be, a member; the person aggrieved, or any member of the company, or the company, may apply to the Court for rectification of the register.

(2) The Court may either reject the application or order rectification of the register; and in the latter case, may direct the company to pay the damages, if any, sustained by any party aggrieved. In either case, the Court in its discretion may make such order as to costs as it thinks fit.

(3) On an application under this section, the Court- (a) may decide any question relating to the title of any person who is a party to the application to have his name entered in or omitted from the register, whether the question arises between members or alleged members, or between members or alleged members on the one hand and the company on the other hand; and (b) generally, may decide any question which it is necessary or expedient to decide in connection with the application for rectification.

(4) From any order passed by the Court on the application, or on an issue raised therein and tried separately, an appeal shall lie on the grounds mentioned in section 100 of the Code of Civil Procedure, 1908 (Act 5 of 1908) - (a) if the order be passed by a District Court, to the High Court; (b) if the order be passed by a single Judge of a High Court consisting of three or more Judges, to a Bench of that High Court.

Notice to Registrar of rectification of register. 156. Notice to Registrar of rectification of register.-In the case of a company required by this Act to file a list of its members with 113 the Registrar, the Court, when making an order for rectification of the register, shall, by its order, direct notice of the rectification to be filed with the Registrar within fourteen days from the date of the making of the order. Foreign registers of members or debenture holders

Power for company to keep foreign register of members, or debentureholders. 157. Power for company to keep foreign register of members, or

debenture holders.-(1) A company which has a share capital or which has issued debentures may, if so authorised by its articles, keep in any State or country outside India a branch, register of members or debenture holders resident in that State or country (in this Act called a "foreign register").

(2) The company shall, within one month from the date of the opening of any foreign register, file with the Registrar notice of the situation of the office where such register is kept; and in the event, of any change in the situation of such office or of its discontinuance, shall, within one month from the date of such change or discontinuance, as the case may be, file notice with the Registrar of such change. or discontinuance.

(3) If default is made in complying with the requirements of

sub-section (2), the company, and every officer of the company who is in default, shall be punishable with fine which may extend to fifty rupees for every day during which the default continues.

Provisions as to foreign registers.

158. Provisions as to foreign registers.-(1) A foreign register shall be deemed to be part of the company's register (in this. section called the "principal register") of members or of debenture holders, as the case may be.

(2) A foreign register shall be kept, shall be open to inspection and may be closed, and extracts may be taken therefrom and copies thereof may be required, in the same manner, mutatis mutandis, as is applicable to the principal register under this Act, except that the advertisement before closing the register shall be inserted in some newspaper circulating in the district wherein the foreign register is kept.

(3) (a) The Central Government may, by notification in the Official Gazette, direct that the provisions of clause (b) shall apply, or cease to apply, to foreign registers kept in any State or country outside India. (b) If a foreign register is kept by a company in, any State or country to which a direction under clause (a) applies for the time being, the decision of any competent Court in that State or country in regard to the rectification of the register shall have the same force and effect as if it were the decision of a competent Court in India.

(4) The company shall- (a) transmit to its registered office in India a copy of ever entry in any foreign register as soon as may be after the entry is made; and 114 (b) keep at such office a duplicate of every foreign register duly entered up from time to time.

(5) Every such duplicate shall, for all the purposes of this Act, be deemed to be part of the principal register.

(6) Subject to the provisions of this section with respect to duplicate registers, the shares or debentures registered in any foreign register shall be distinguished from the shares or debentures registered in the principal register and in every other foreign register; and no transaction with respect to any shares or debentures registered in a foreign register shall, during the continuance of that registration, be registered in any other register.

(7) The company may discontinue the keeping of any foreign register; and thereupon all entries in that register shall be transferred to some other foreign register kept by the company in the same part of the world or to the principal register.

(8) Subject to the provisions of this Act, a company may, by its articles, make such regulations as it thinks fit in regard to its foreign registers.

(9) If default is made in complying with sub-section (4), the company, and every officer of the company who is in default, shall be punishable with fine which may extend to fifty rupees. Annual returns

Annual return to be made by company having a share capital. 159. Annual return to be made by company having a share capital.-

(1) Every company having a share, capital shall, within forty-two days from the day on which each of the annual general meetings referred to in section 166 is held, prepare and file with the Registrar a return containing the particulars specified in Part I of Schedule V, as they stood on that day, regarding- (a) its registered office, (b) the register of its members, (c) the register of its debenture holders. (d) its shares and debentures, (e) its indebtedness, (f) its members and debenture holders, past and present, and (g) its directors, managing directors, managing agents secretaries and treasurers and managers, past and present.

(2) The said return shall be in the Form set out in Part II of Schedule V or as near thereto as circumstances admit: Provided that where the company has converted any of its shares into stock and given notice of the conversion to the Registrar, the list referred to in paragraph 5 of Part I of Schedule V shall state the amount of stock held by each of the members concerned instead of the shares so converted previously held by him.

Annual return to be made by company not having a share capital. 160. Annual return to be made by company not having a share

capital.-(1) Every company not having a share capital shall, within forty-two days from the day on which each of the annual general meetings referred to in section 166 is held, prepare and file with the 115 Registrar a return stating the following particulars as they stood on that day:-- (a) the address of the registered office of the company; (b) all such particulars with respect to the persons who, at the date of the return, were the directors of the company, its managing agent, its secretaries-and treasurers and its manager as are set out in section 303.

(2) There shall be annexed to the return a statement containing particulars of the total amount of the indebtedness of the company as on the day aforesaid in respect of all charges which are or were required to be registered with the Registrar under this Act or under any previous companies law, or which would have been required to be registered under this Act if they had been created after the commencement of this Act.

Further provisions regarding annual return and certificate to beannexed thereto. 161. Further provisions regarding annual return and

certificate to be annexed thereto.- (1) The copy of the annual return filed with the Registrar under section 159 or 160, as the case may be, shall be signed both by a director and by the managing agent, secretaries and treasurers, manager or secretary of the company, or where there is no managing agent, secretaries and treasurers, manager or secretary, by two directors of the company, one of whom shall be the managing director where there is one.

(2) There shall also be filed with the Registrar along with the return a certificate signed by both the signatories of the return, stating- (a) that the return states the facts as they stood on the day of the annual general meeting aforesaid, correctly and completely; and (b) in the case of a private company also, (i) that the company has not, 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 company, issued any invitation to the public to subscribe for any shares or debentures of the company, and (ii) that, where the annual return discloses the fact that the number of members of the company exceeds fifty, the excess consists wholly of persons who under sub-clause

(b) of clause (iii) of sub-section (1) of section 3 are not to be included in reckoning the number of fifty.

Penalty and interpretation.

162. Penalty and interpretation.- (1) If a company fails to comply with any of the. provisions contained in sections 159, 160, or 161, the company, and every officer of the company who is in default, shall be punishable with fine which may extend to fifty rupees for every day during which the default continues.

(2) For the purposes of this section and sections 159, 160, and 161, the expressions "officer" and "director" shall include any person in accordance with whose directions or instructions the Board of directors of the Company is accustomed to act. 116 General provisions regarding registers and returns

Place of keeping, and inspection of, registers and returns. 163. Place of keeping, and inspection of, registers and returns.-

(1) The register of members commencing from the date of the registration of the company, the index of members, the register and index of debenture holders, and copies of all annual returns prepared under sections 159 and 160, together with the copies of certificates and documents required to be annexed thereto under sections 160 and 161, shall be kept at the registered office of the company.

(2) The registers, indexes, returns, and copies of certificates

and other documents referred to in sub-section (1) shall, except when the register of members or debenture holders is closed under the provisions of this Act, be open during business hours (subject to such reasonable restrictions, as the company may 'impose, so that not less than two hours in each day are allowed for inspection) to the inspection- (a) of any member or debenture holder, without fee; and (b) of any other person, on payment of a fee of one rupee for each inspection.

(3) Any such member, debenture holder or other person may- (a) make extracts from any register, Index, or copy

referred to in sub-section (1) without fee or additional fee, as the case may be; or (b) require a copy of any such register, index or copy or of any part thereof, on payment of six annas for every one hundred words or fractional part thereof required to be copied.

(4) The company shall cause any copy required by any person

under clause (b) of sub-section (3) to be sent to that person within a period of ten days, exclusive of non-working days, commencing on the day next after the day on which the requirement is received by the company.

(5) If any inspection, or the making of any extract required under this section, is refused, or if any copy required under this

section is not sent within the period specified in sub-section (4), the company, and every officer of the company who is in default, shall be punishable, in respect of each offence, with fine which may extend to fifty rupees for every day during which the refusal or default continues.

(6) The Court may also, by order, compel an immediate inspection of the document, or direct that the extract required shall forthwith be allowed to be taken by the person requiring it, or that the copy required shall forthwith be sent to the person requiring It, as the case may be.

Registers etc., to be evidence. 164. Registers etc., to be evidence.-The register of members, the register of debenture holders, and the annual returns, certificates and statements referred to in sections 159, 160, and 161 shall be prima facie evidence of any matters directed or authorised to be inserted therein by this Act. 117 Meetings and proceedings

Statutory meeting and statutory report of company.

165. Statutory meeting and statutory report of company.-(1) Every company limited by shares, and every company limited by guarantee and having a share capital, shall, within a period of not less than one month nor more than six months from the date at which the company is entitled to commence business, hold a general meeting of the members of the company, which shall be called "the statutory meeting".

(2) The Board of directors shall, at least twenty-one days before the day on which the meeting is held, forward a report (in this Act referred to as "the statutory report") to every member of the company: Provided that if the statutory report is forwarded later than is required above, it shall, notwithstanding that fact, be deemed to have been duly forwarded if it is so agreed to by all the members entitled to attend and vote at the meeting.

(3) The statutory report shall set out- (a) the total number of shares allotted, distinguishing shares allotted as fully or partly paid up otherwise than in cash, and stating in the case of shares partly paid up, the extent to which they are so paid up, and in either case, the consideration for which they have be-en allotted; (b) the total amount of cash received by the company in respect of all the shares allotted, distinguished as aforesaid; (c) an abstract of the receipts of the company and of the payments made thereout, up to a date within seven days of the date of the report, exhibiting under distinctive headings the receipts of the company from shares and debentures and other sources, the payments made thereout, and particulars concerning the balance remaining in hand, and an account or estimate of the preliminary expenses of the company, showing separately any. commission or discount paid or to be paid on the issue or sale of shares or debentures; (d) the names, addresses and occupations of the directors of the company and of its auditors; and also, if there be any, of its managing agent, secretaries and treasurers, manager, and secretary; and the changes, if any, which have occurred in such names, addresses and occupations since the date of the incorporation of the company; (e) the particulars of any contract which, or the modification or the proposed modification of which, is to be submitted to the meeting for Its approval, together in the latter case with the particulars of the modification or proposed modification; (f) the extent, If any, to which each under-writing contract, if any, has not been carried out, and the reasons therefor; (g) the arrears, if any, due on calls from every director; from the managing agent, every partner of the managing agent, every firm in which the managing agent is a partner, and where the managing agent is a private company, every director thereof; from the secretaries and treasurers; where they are a 118 firm, from every partner therein; and where they are a private company, from every director thereof; and from the manager, and (h) the particulars of any commission or brokerage paid. or to be paid in connection with the issue or sale of shares or debentures to any director; to the managing agent, any partner of the managing agent, any firm in which the managing agent is a partner; and where the managing agent is a private company, to any director thereof; to the secretaries and treasurers; where they are a firm, to any partner therein; and where they are a private company, to any director thereof; or to the manager.

(4) The statutory report shall be certified as correct by not less than two directors of the company one of whom shall be a managing director, where there is one. After the statutory report has been certified as aforesaid, the auditors of the company shall, in so far as the report relates to the shares allotted, by the company, the cash received in respect of such shares and the receipts and payments of the company on capital account, certify it as correct.

(5) The Board shall cause a copy of the statutory report certified as is required by this section to be delivered to the Registrar for registration forthwith, after copies thereof have been sent to the members of the company.

(6) The Board shall cause a list showing the names, addresses and occupations of the members of the company, and the number of shares held by them respectively, to be produced at the commencement of the statutory meeting, and to remain open and accessible to any member of the company during the continuance of the meeting.

(7) The members of the company present at the meeting shall be at liberty to discuss any matter relating to the formation of the company or arising out-of the statutory report, whether previous notice has been given or not; but no resolution may be passed of which notice has not been given in accordance with the provisions OIL this Act.

(8) The meeting may adjourn from time to time, and at any adjourned meeting, any resolution of which notice has been given in accordance with the provisions of this Act, whether before or after the former meeting, may be passed; and the adjourned meeting shall have the same powers as an original meeting.

(9) If default is made in complying with the provisions of this section, every director or other officer of the company who is in default shall be punishable with fine which may extend to five hundred rupees.

(10) This section shall not apply to a private company.

Annual general meeting.

166. Annual general meeting.-(1) (a) Every company shall, in addition to any other meetings, hold a general meeting which shall be styled its annual general meeting at the intervals, and in accordance with the provisions, specified below. 119 (b) The first annual general meeting shall be held by a company within eighteen months of its incorporation. (c) The next annual general meeting of the company shall be held by it within nine months after the expiry of the financial year in which the first annual general meeting was held; and thereafter an annual general meeting shall be held by the company within nine months after the expiry of each financial year: Provided that the Registrar may, for any special reason, extend the time within which any annual general meeting (not being the first annual general meeting) shall be held, by a further period not exceeding six months. (d) Except in the case referred to in the foregoing proviso, not more than fifteen months shall elapse between the date of one annual general meeting and that of the next.

(2) Every annual general meeting shall be called for a time during business hours, on a day that is not a public holiday, and shall be held either at the registered office of the company or at some other place within the city, town or village in which the registered office of the company is situate; and the notices calling the meeting shall specify it as the annual general meeting.

Power of Central Government to call annual general meeting. 167. Power of Central Government to call annual general meeting.-

(1) If default is made in holding an annual general meeting in accordance with section 166, the Central Government may, notwithstanding anything in this Act or in the articles of the company, on the application of any member of the company, call, or direct the calling of, a general meeting of the company and give such ancillary or consequential directions as the Central Government thinks expedient in relation to the calling, holding and conducting of the meeting. Explanation.-The directions that may be given under this sub- section may include a direction that one member of the company present in person or by proxy shall be deemed to constitute a meeting.

(2) A general meeting held in pursuance of sub-section (1) shall, subject to any directions of the Central Government, be deemed to be an annual general meeting of the company.

Penalty for default in complying with section 166 or 167. 168. Penalty for default in complying with section 166 or 167.-If default is made in holding a meeting of the company in accordance with section 166, or in complying with any directions of the Central

Government under sub-section (1) of section 167, the company, and every officer of the company who is in default, shall be punishable with fine which may extend to five thousand rupees.

Calling of extraordinary general meeting on requisition. 169. Calling of extraordinary general meeting on requisition.-

(1) The Board of directors of a company shall, on the requisition oft such number of members of the company as is specified in sub-section

(4), forthwith proceed duly to call an extraordinary general meeting of the company. 120

(2) The requisition shall set out the matters for the considera- tion of which the meeting is to be called, shall be signed by the requisitionists, and shall be deposited at the registered office of the company.

(3) The requisition may consist of several documents in like form, each signed by one or more requisitionists.

(4) The number of members entitled to requisition a meeting in regard to any matter shall be- (a) in the case of a company having a share capital, such number of them as hold at the date of the deposit of the re- quisition, not less than one-tenth of such of the paid-up capital of the company as at that date carries the right of voting in regard to that matter; (b) in the case of a company not having a share. capital, such number of them as have at the date of deposit of the re- quisition not less than one-tenth of the total voting power of all the members having at the said date a right to vote in regard to that matter.

(5) Where two or more distinct matters are specified in the

requisition, the provisions of sub-section (4) shall apply separately in regard to each such matter; and the requisition shall accordingly be valid only in respect of those matters in regard to which the condition specified in that sub-section is fulfilled.

(6) If the Board does not, within twenty-one days from the date of the deposit of a valid requisition in regard to any matters,. proceed duly to call a meeting for the consideration of those matters on a day not later than forty-five days from the date of the deposit of the requisition, the meeting may be called- (a) by the requisitionists themselves, (b) in the case of a company having a share capital, by such of the requisitionists as represent either a majority in value of the paid-up share capital held by all of them or not less than one-tenth of such of the paid-up share capital of the company as is referred to in clause (a) of sub-

section(4), whichever is less; or (c) in the case of a company not having a share capital, by such of the requisitionists as represent not less than one- tenth of the total voting power of all the members of the

company referred to in clause (b) of sub-section (4). Explanation.-For the purposes of this sub-section, the Board shall, in the case of a meeting at which a resolution is to be proposed as a special resolution, be deemed not to have duly. convened the meeting if they do not give such notice thereof as is required by

sub-section (2) of section 189.

(7) A meeting called under sub-section (6) by the requisitionists or any of them- (a) shall be called in the same manner, as nearly as possible, as that in which meetings are to be called by the Board; but (b) shall not be held after the expiration of three months from the date of the deposit of the requisition. 121 Explanation.-Nothing in clause (b) shall be deemed to prevent a meeting duly commenced before the expiry of the period of three months aforesaid, from adjourning to some day after the expiry of that period.

(8). Where two or more persons hold any shares or interest in a company jointly, a requisition, or a notice calling a meeting, signed by one or some only of them shall, for the purposes of this section, have the same force and effect as if it had been signed by all of them.

(9) Any reasonable expenses incurred by the requisitionists by reason of the failure of the Board duly to call a meeting shall be repaid to the requisitionists by the company; and any sum so repaid shall be retained by the company out of any sums due or to become due from the company by way of fees or other remuneration for their services to such of the directors as were in default.

Sections 171 to 186 to apply to meetings.

170. Sections 171 to 186 to apply to meetings.-(1) The provisions of sections 171 to 186-- (i) shall, notwithstanding anything to the contrary in the articles of the company, apply with respect to general meetings of a public company, and of a private company which is a subsidiary of a public company; and (ii) shall, unless otherwise specified therein or unless the articles of the company otherwise provide, apply with respect to general meetings of a private company which is a sub- sidiary of a public company.

(2) (a) Section 176, with such adaptations and modifications, if any, as may be prescribed, shall apply with respect to meetings of' any class of members, or of debenture holders or any class of deben- ture holders, of a company, in like manner as it applies with respect to general Meetings of the company. (b) Unless the articles of the company or a contract binding on the persons concerned otherwise provide, sections 171 to 175 and sections 177 to 186 with such adaptations and modifications, if any, as may be prescribed, shall apply with respect to meetings of any class of members, or of debenture holders or any class of debenture holders, of a company, in like manner as they apply with respect 'to general meetings of the company.

Length of notice for calling meeting.

171. Length of notice for calling meeting.-(1) A general meeting of a company may be called by giving' not less than twentyone days' notice in writing.

(2) A general meeting may be called after giving shorter notice

than that specified in sub-section (1), if consent is accorded thereto- (i) In the case of an annual general meeting, by all the members entitled to vote thereat; and (ii) in the case of any other meeting, by members of the company (a) holding, if the company, has a share capital, not less than 95 per cent. of such part of the paid-up share capital 122 of the company as gives a right to vote at the meeting, or (b) having, if the company has no share capital, not less than 95 per cent. of the total voting power exercisable at that meeting: Provided that where any members of a company are entitled to vote only on some resolution or resolutions to be moved at a meeting and not on the others, those members shall be taken into account for the purposes of this sub-section in respect of the former resolution or resolutions and not in respect of the latter.

Contents and manner of service of notice and persons on whom it is tobe served. 172. Contents and manner of service of notice and persons on

whom it is to be served.-(1) Every notice of a meeting of a company shall specify the place and the day and hour of the meeting, and shall contain a statement of the business to be transacted thereat.

(2) Notice of every meeting of the company shall be given- (i) to every member of the company, in any manner

authorised by sub-sections (1) to (4) of section 53; (ii) to 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 giving the notice in any manner in which it might have been given if the death or insolvency had not occurred; and (iii) to the auditor or auditors for the time being of the company, in any manner authorised by section 53 in the case of any member or members of the company.

(3) The accidental omission to give notice to, or the non- receipt of notice by, any member or other person to whom it should be given shall not invalidate the proceedings at the meeting.

Explanatory statement to be annexed to notice.

173. Explanatory statement to be annexed to notice.-(1) For the purposes of this section- (a) in the case of an annual general meeting, all business to be transacted at the meeting shall be deemed special, with the exception of business relating to (i) the consideration of the accounts, balance sheet and the reports of the Board of directors and auditors, (ii) the declaration of a dividend, (iii) the appointment of directors in the place of those retiring, and (iv) the appointment of, and the fixing of the remuneration of, the auditors; and (b) in the case of any other meeting, all business shall be deemed special.

(2) Where any items of business to be transacted at the meeting are deemed to be special as aforesaid, there shall be annexed to the 123 notice of the meeting a statement setting out all material facts con- cerning each such item of business, including in particular the nature and extent of the interest, if any, therein, of every director, the managing agent, if any, the secretaries and treasurers, if any, and the manager, if any.

(3) Where any item of business consists of the according of approval to any document by the meeting, the time and place where the document can be inspected shall be specified in the statement aforesaid.

Quorum for meeting.

174. Quorum for meeting.-(1) Unless the articles of the company provide for a larger number, five members personally, present in the case of public company, and two members personally present in the case of a private company, shall be the quorum for a meeting of the company.

(2) Unless the articles of the company otherwise provide, the

provisions of sub-sections (3) (4), and (5) shall apply with respect to the meetings of a public or private company.

(3) If within half an hour from the time appointed for holding a meeting of the company, a quorum is not present. the meeting, if called upon the requisition of members, shall stand dissolved.

(4) In any other case, the meeting shall stand adjourned to the same day in the next week, at the same time and place, or to such other day and at such other time and place as the Board may deter- mine.

(5) If at the adjourned meeting also, a quorum is not present within half an hour from the time appointed for holding the meeting, the members present shall be a quorum.

Chairman of meeting.

175. Chairman of meeting.- (1) Unless the articles of the company otherwise provide, the members personally present at the meeting shall elect one of themselves to be the chairman thereof or a show of hands.

(2) If a poll is demanded on the election of the chairman, it shall be taken forthwith in accordance with the provisions of this Act, the chairman elected on a show of hands exercising all the powers of the chairman under the said provisions.

(3) If some other person is elected chairman as a result of the poll, he shall be chairman for the rest of the meeting.

Proxies.

176. Proxies.-(1) Any member of a company entitled to attend and vote at a meeting of the company shall be entitled to appoint another person (whether a member or not) as his proxy to attend and vote instead of himself; but a proxy so appointed shall not have any right to speak at the meeting: Provided that, unless the articles otherwise provide- (a) this sub-section shall not apply in the case of a company not having a share capital; (b) a member of a private company shall not be entitled to appoint more than one proxy to attend on the same occasion; and (c) a proxy shall not be entitled to vote except on a poll. 124

(2) In every notice calling a meeting of a company which has a share capital, or the' articles of which provide for voting by proxy a the meeting, there shall appear with reasonable prominence a statement that a member entitled to attend and vote is entitled to appoint a proxy, or, where that is allowed, one or more proxies, to attend and vote instead of himself, and. that a proxy need not be a member. If default is made in complying with this sub-section as respects tiny meeting, every officer of the company who is in default shall be punishable with fine which may extend to five hundred rupees.

(3) Any provision contained in the articles of a public company, or of a private company which is a subsidiary of a public company, shall be void, in so far as it would have the effect of requiring. the Instrument appointing a proxy, or any other document necessary to show the validity of or otherwise relating to the appointment of, , a proxy, to be received by the company or any other person forty-eight hours before the meeting in order that the appointment may be effective thereat.

(4) If for the purpose of any meeting of a company, invitations to appoint as proxy a person or one of a number of persons specified in the invitations are issued at the company's expense to any member entitled to have a notice of the meeting sent to him and to vote thereat by proxy, every officer of the company who knowingly issues the invitations as aforesaid or wilfully authorises or permits their issue shall be punishable with fine which may extent to one thousand rupees: Provided that an officer shall not be punishable. under this sub- section by reason only of the issue to a member, at his request In writing of a form of appointment naming the proxy, or of a list of persons willing to act as proxies. if the form or list is available on request in writing to every member entitled to vote at the meeting by proxy.

(5) The instrument appointing a proxy shall- (a) be in writing; and (b) be signed by the appointer or his attorney duly authorised in writing or, if the appointer is a body corporate, be under its seal or be signed by an officer or an attorney duly authorised by ft.

(6) An instrument appointing a proxy, if in any of the forms set out in Schedule IX, shall not be questioned on the ground that it falls to comply with any special requirements specified for such Instrument by the articles.

(7) Every member entitled to vote. at a meeting of, the company, or on any resolution to be moved thereat, shall be entitled during the period beginning twenty-four hours before the time fixed for the commencement of the meeting and ending with the conclusion of the meeting. to inspect the. Proxies lodged, at any time during the business hours of the company. provided, not, less than three days' notice in writing of the intention so to Inspect is given to the com- pany. 125

Voting to be by show of hands in first instance. 177. Voting to be by show of hands in first instance.-At any general meeting, a resolution put to the vote of the meeting shall, unless a poll is demanded under section 179, be decided on a show of hands.

Chairman's declaration of result of voting by show of hands to beconclusive. 178. Chairman's declaration of result of voting by show of hands to be conclusive.-A declaration by the chairman in pursuance of section 177 that on a show of hands a resolution has or has not been carried, either has or has not been carried either unanimously or by a particular majority, and an entry to that effect in the' books containing the minutes of the proceedings of the company, shall be conclusive evidence of the fact, without proof of the number or proportion of the votes cast in favour of or against such resolution.

Demand for poll.

179. Demand for poll.-(1) Before or on the declaration of the result of the voting on any resolution on a show of hands, a poll may be ordered to be taken by the chairman of the meeting of his own motion, and shall be ordered to be taken by him on a demand made in that behalf by the persons or person specified below, that is to say,- (a) in the case of a public company, by at least five members having the right to vote on the resolution and present in person or by proxy, (b) in the case of a private company, by one member having' the right to vote on the resolution and present in person or by proxy If not more than seven such members are personally present, and by two such members present in person or by proxy if more than seven such members are personally present, (c) by any member or members present in person or by proxy and having not less than one-tenth of the total voting power in respect of the resolution, or (d) by any member or members present in person or by proxy and holding shares in the company conferring a right to vote on the resolution, being shares on which an aggregate sum has been paid up which is not less than one-tenth of the total sum paid up on all the shares conferring that right.

(2) The demand for a poll may be withdrawn at any time by the person or persons who made the demand.

Time of taking poll.

180. Time of taking poll.-(1) A poll demanded on a question of Adjournment shall be taken forthwith.

(2) A poll demanded on any other question (not being a question relating to the election of a chairman which is provided for In section 175) shall be taken at such time not being later than forty- eight hours from the time when the demand was made, as the chairman may direct.

Restriction on exercise of voting right of members who have not paidcalls etc. 181. Restriction on exercise of voting right of members who have not paid calls etc.-Notwithstanding anything contained in this M. the articles of a company may provide that no member shall exercise any voting right in respect of any shares registered in his name has and has exercise any voting right in respect of any shares registered in his name on which any calls or other sums presently payable by him have not been paid, or in regard to which the company has and has exercised any right of lien. 126

Restrictions on exercise of voting right in other cases to be void. 182. Restrictions on exercise of voting right in other cases to be void.-A public company, or. a private company which is a subsidiary of a public company, shall not prohibit any member from exercising his voting right on the ground that he has not held his share or other interest in the company for any specified period preceding the date on which the vote is taken, or on any other ground not being a ground set out in section 181.

Right of. member to use his votes differently. 183. Right of. member to use his votes differently.-On a poll taken at a meeting of a company, a member entitled to more than one vote, or his proxy, or other person entitled to vote for him, as the case may be, need not, if he votes, use all his votes or cast in the same way all the votes he uses.

Scrutineers at poll.

184. Scrutineers at poll.-(1) Where a poll is to be taken, the chairman of the meeting shall appoint two scrutineers to scrutinise the votes given on the poll and to report thereon to him.

(2) The chairman shall have power, at any time before the result of the poll is declared, to remove a scrutineer from office and to fill vacancies in the office of scrutineer arising from such removal or from any other cause.

(3) of the two scrutineers appointed under this section, one shall always be a member (not being an officer or employee of the com- pany) present at the meeting, provided such a member is available and willing to be appointed.

Manner of taking poll and result thereof.

185. Manner of taking poll and result thereof.-(1) Subject to the provisions of this Act, the chairman of the meeting shall have power to regulate the manner in which a poll shall be taken.

(2) The result of the poll shall be deemed to be the decision of the meeting on the resolution on which the poll was taken.

Power of Court to order meeting to be called.

186. Power of Court to order meeting to be called.-(1) If for any reason it is impracticable to call a meeting of a company, other than an annual general meeting, in any manner in which meetings of the company may be called, or to hold or conduct the meeting of the company in the manner prescribed by this Act or the articles, the Court may, either of its own motion or on the application of any director of the company, or of any member of the company who would be entitled to vote at the meeting,- (a) order a meeting of the company to be called, held and conducted in such manner as the Court thinks fit; and (b) give such ancillary or consequential directions as the Court thinks expedient, including directions modifying or supplementing in relation to the calling, holding and conducting of the meeting, the operation of the provisions of this Act and of the company's articles. Explanation.-The directions that may be given under this sub- section may include a direction that one member of the company present in person or by proxy shall be deemed to constitute a meeting.

(2) Any meeting called, held and conducted in accordance with any such order shall, for all purposes, be deemed to be a meeting of the company duly called, held and conducted. 127

Representation of corporations at meetings of companies and ifcreditors. 187. Representation of corporations at meetings of companies

and if creditors.-(1) A body corporate (whether a company within the meaning of this Act or not) may- (a) if it is a member of. a company within the meaning of this Act, by resolution of its Board of directors or other governing body, authorise such person as it thinks fit to act as its representative at any meeting of the company, or at any meeting of any class of members of the company; (b) if it is a creditor (including a holder of debentures) of a company within the meaning of this Act, by resolution of its directors or other governing body, authorise such person as it thinks fit to act as its representative at any meeting of any creditors of the company held in pursuance of this Act or of any rules made thereunder, or in pursuance of the provisions contained in any debenture or trust deed, as the case may be.

(2) A person authorised by resolution as aforesaid shall be entitled to exercise the same rights and powers (including the right to vote by proxy) on behalf of the body corporate which he represents as that body could exercise if it were a member, creditor or holder of debentures of the company.

Circulation of members' resolutions.

188. Circulation of members' resolutions.-(1) Subject to the pro- visions of this section, a company shall, on the requisition in writing of such number of members as is hereinafter specified and (unless the company otherwise resolves) at the expense of the requisi- tionists,- (a) give to members of the company entitled to receive notice of the next annual general meeting, notice of any resolution which may properly be moved and is intended to be moved at that meeting; (b) circulate to members entitled to have notice of any general meeting sent to them, any statement of not more than one thousand words, with respect to the matter referred to in any proposed resolution, or any business to be dealt with at that meeting.

(2) The number of members necessary for a requisition under sub-

section (1) shall be- (a) such number of members as represent not less than one- twentieth of the total voting power of all the members having at the date of the requisition a right to vote on the resolution or business to which the requisition relates; or (b) not less than one hundred members having the right aforesaid and holding shares in the company on which there has been paid up an aggregate sum of not less than one lakh of rupees in all.

(3) Notice of any such resolution shall be given, and any such statement shall be circulated, to members of the company entitled to have notice of the meeting sent to them, by serving a copy of the resolution or statement on each member in any manner permitted 128 for service of notice of the meeting; and notice of any such resolu- tion shall be given to any other member of the company by giving notice of the general effect of the resolution in any manner permitted for giving him notice of meetings of the company: Provided that the copy shall be served, or notice of the effect of the resolution shall be given, as the case may be, in the same manner and, so far as practicable, at the same time as notice of the meeting, and where it is not practicable for it to be served or given at that time, it shall be served or given as soon as practicable thereafter.

(4) A company shall not be bound under this section to give notice of any resolution or to circulate any statement unless- (a) a copy of the requisition signed by the requisitionists (or two or more copies which between them contain the signatures, of all the requisitionists) is deposited at the registered office of the company- (i) in the case of a requisition requiring notice of a resolution, not less than six weeks before the meeting; (ii) in the case of any other requisition, not less than two weeks before the meeting; and (b) there is deposited or tendered with the requisition a sum. reasonably sufficient to meet the company's expenses in giving effect thereto: Provided that if , after a copy of a requisition requiring notice of a resolution has been deposited at the registered office of the company, an annual general meeting is called for a date six weeks or less after the copy has been deposited, the copy, although not deposited within the time required by this sub-section, shall be deemed to have been properly deposited for the purposes thereof.

(5) The company shall also not be bound under this section to circulate any statement if, on the application either of the company or of any her person who claims to be aggrieved, the Court is satisfied that the rights conferred by this section are being abused to secure needless publicity for defamatory matter; and the Court may order the company's costs on an application under this section to be paid in whole or in part by the requisitionists, notwithstanding that they-are not parties to the application.

(6) A banking company shall not be bound to circulate any state- ment under this section, if, in the opinion of its Board of directors, the circulation will injure the interests of the company.

(7) Notwithstanding anything in the company's articles, the business which may be dealt with at an annual general meeting shall include any resolution of, which notice is given in accordance with this. section, and for the purposes of this sub-section, notice shall be deemed to have been so given, notwithstanding the accidental omis- sion, in giving it, of one or more members.

(8) If default is made in complying with the provisions of this section, every officer of the company who is in default, shall be punishable with fine which may extend to five thousand rupees. 129

Ordinary and special resolutions.

189 Ordinary and special resolutions.-(1) A resolution shall be an ordinary resolution when at a general meeting of which the notice required under this Act has been duly given, the votes cast (whether on a show of hands, or on a poll, as the case may be,) in favour of the resolution (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 resolution by members so entitled and voting.

(2) A resolution shall be a special resolution when- (a) the intention to propose the resolution as a special resolution has been duly specified in the notice calling the general meeting or other intimation given to the members of the resolution; (b) the notice required under this Act has been duly given of the general meeting; and (c) the votes cast in favour of the resolution (whether on a show of hands, or on a poll, as the case may be,) by members who, being entitled so to do, vote in person, or where proxies are allowed, by proxy, are not less than three times the number of the votes, if any, cast against the resolution by members so entitled and voting.

Resolutions requiring special notice.

190. Resolutions requiring special notice.-(1) Where, by any pro- vision contained in this Act or in the articles, special notice is required of any resolution, notice of the intention to move the resolution shall be given-to the company not less than twenty-eight days before the meeting at which it is to be moved, exclusive of the day on which the notice is served or deemed to be served and. the day of the meetIng. ( 2) The company shall give its members notice of any such reso- lution at the same time and in the same manner as it gives notice of the meeting, or if that is not practicable, shall give them notice thereof, either by advertisement in a newspaper having an appropriate circulation or in any other mode allowed by the articles, not. less than twenty-one days before the meeting.

(3) If, after notice of the intention to move such a resolution has been given to the company, a meeting is called for a date twenty- eight days or less after the notice has been given, then,

notwithstanding anything contained in sub-sections (1) and (2), the notice, though not given within the time required by this section, shall be deemed to have been properly given for the purposes thereof.

Resolutions passed at adjourned meetings. 191. Resolutions passed at adjourned meetings.-Where a resolution is passed at an adjourned meeting of- (a) a company; (b) the holders of any class of shares in a company; or (c) the Board of directors of a company; the resolution shall, for all purposes, be treated as having been passed on the date on which it was in fact passed, and shall not be deemed to have been passed on any earlier date, 130

Registration of certain resolutions and agreements.

192. Registration of certain resolutions and agreements.-(1) A copy. of every resolution or agreement to which this section applies shall, within fifteen days after the passing or making thereof, be printed or typewritten and duly certified under the signature of an officer of the company and filed with the Registrar who shall record the same,

(2) Where articles have been registered, a copy of every such resolution or agreement for the time being in force shall be embodied in or annexed to every copy of the articles issued after the passing of the resolution or the making of the agreement.

(3) Where articles have not been registered, a printed copy of every such resolution or agreement shall be forwarded to any member at his request, on payment of one rupee.

(4) This section shall apply to- (a) special resolutions; (b) resolutions which have been agreed to by all the members of a company, but which, if not so agreed to, would not have been effective for their purpose unless they had been passed as special resolutions; (c) any resolution of the Board of directors of a company or agreement executed by a company, relating to the appointment, re-appointment or renewal of the appointment, or variation of the terms of appointment, of a managing director; (d) any agreement relating to the appointment, re-appoint- ment or renewal of the appointment of a managing agent or secretaries and treasurers for a company, or varying the terms of any such agreement, executed by the company; (e) resolutions or agreements which have been agreed to by all the members of any class of shareholders but which, if not so agreed to, would not have been effective for their purpose unless they had been passed by some particular majority or otherwise in some particular manner; and all resolutions or agreements which effectively bind all the members of any class of shareholders though not agreed to by all those members; and (f) resolutions requiring a company to be wound up volun-

tarily passed in pursuance of sub-section (1) of section 484.

(5) If default is made in complying with sub-section (1), the company, and every officer of the company who is in default, shall be punishable with fine which may extend to twenty rupees for every day during which the default continues.

(6) If default is made in complying with sub-section (2) or (3), 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 in respect of which default is made.

(7) For the purposes of sub-sections (5) and (6), the liquidator of a company shall be deemed to be an officer of the company.

Minutes of proceedings of general meetings and of Board and othermeetings. 193. Minutes of proceedings of general meetings and of Board

and other meetings.-(1) Every company shall cause minutes of all proceedings of general meetings, and of all proceedings at meetings 131 of its Board of directors or of committees of the Board, to be entered in books kept for that purpose.

(2) The minutes of each meeting shall contain a fair and correct summary of the proceedings thereat.

(3) All appointments of officers made at any of the meetings aforesaid shall be included in the minutes of the meeting.

(4) In the case of a meeting of the Board of directors or of a committee of the Board, the minutes shall also contain- (a) the names of the directors present at the meeting; and (b) in the case of each resolution passed at the meeting, the names of the directors, if any, dissenting from, or not concurring in, the resolution.

(5) Nothing contained in sub-sections (1) to (4) shall be deemed to require the inclusion in any such minutes of any matter which, in the opinion of the chairman of the meeting- (a) is, or could reasonably be regarded as, defamatory of any person; (b) is irrelevant or immaterial to the proceedings; or (c) is detrimental to the interests of the company. Explanation.-The chairman shall exercise an absolute discretion in regard to the inclusion or non-inclusion of any matter in the minutes on the grounds specified in this sub-section.

(6) If default is made in complying with the foregoing provi- sions of this section in respect of any meeting, the company, and every officer of the company who is in default, shall be punishable with fine which may extend to fifty rupees.

Minutes to be evidence. 194. Minutes to be evidence.-Any such minute, if purporting to be signed by the chairman of the meeting at which the proceedings took place or by the chairman of the next succeeding meeting, shall be evidence of the proceedings.

Presumptions to be drawn where minutes duly drawn and signed. 195. Presumptions to be drawn where minutes duly drawn and signed.-Where minutes of the proceedings of any general meeting of the company or of any meeting of its Board of directors or of a committee of the Board have been made and signed in accordance with the provisions of sections 193 and 194, then, until the contrary is proved, the meeting shall be deemed to have been duly called and held, and all proceedings thereat to have duly taken place, and in particular, all-appointments of directors or liquidators made at the meeting shall be deemed to be valid.

Inspection of minute books of general meetings.

196. Inspection of minute books of general meetings.-(1) The books containing the minutes of the proceedings of any general meeting of a company held on or after the 15th day of January, 1937, shall- (a) be kept at the registered office of the company, and (b) be open, during business hours, to the inspection of any member without charge, subject to such reasonable restrictions as the company may, by its articles or in general meeting impose, so however that not less than two hours in each day are allowed for inspection. 132

(2) Any member shall be entitled to be furnished, within seven days after he has made a request in that behalf to the company, with a

copy of any minutes referred to in sub-section (1), on payment of six annas for every one hundred words or fractional part thereof required to be copied.

(3) If any inspection required under sub-section (1) is refused,

or if any copy required under sub-section (2) is not furnished within the time specified therein, the company, and every officer of the company who is in default, shall be punishable with fine which may extend to five hundred rupees in respect of each offence.

(4) In the case of any such refusal or default, the Court may, by order, compel an immediate inspection of the minute books or direct that the copy required shall forthwith be sent to the person requiring it.

Publication of reports of proceedings of general meetings. 197. Publication of reports of proceedings of general meetings.-

(1) No document purporting to be a report of the proceedings of any general meeting of a company shall be circulated or advertised at the expense of the company, unless it includes the matters required by section 193 to be contained in the minutes of the proceedings of such meeting.

(2) If any report is circulated or advertised in contravention

of sub-section (1), the company, and every officer of the company who is in default, shall be punishable, in respect of each offence, with fine which may extend to five hundred rupees. Managerial remuneration, etc.

Overall maximum managerial remuneration and minimum managerialremuneration in the absence or inadequacy of profits. 198. Overall maximum managerial remuneration and minimum

managerial remuneration in the absence or inadequacy of profits.(1) Save as otherwise expressly provided in this Act, in the case of a public company or a private company which is a subsidiary of a public company, the total remuneration payable by the company to its directors, its managing agent or secretaries and treasurers, if any, and its manager, if any, shall not exceed eleven per cent. of the net profits of the company, computed in the manner laid down in sections 349, 350 and 351, except that the remuneration of the directors shall not be deducted from the gross profits.

(2) The percentage aforesaid shall be exclusive of an fees pay- able to directors for meetings of the Board attended by them.

(3) Nothing contained in sub-sections (1) and (2) shall be deemed- (a) to prohibit the payment of a monthly remuneration to directors in accordance with the provisions of section 309 or to a manager in accordance with the provisions of section 387; or (b) to affect the operation of sections 352, 353, 354, 356, 357, 358, 359 or 360.

(4) Notwithstanding anything contained in sub-sections (1) to

(3), if in any financial year, a company has no profits or its profits are inadequate, the company may pay to any director or directors including managing or whole-time directors, if any, its managing agent or secretaries and treasurers, if any, and Its manager, if any, or if there are two or more of them holding office in the' company, 133 to all of them together, by way of minimum remuneration, such sum not exceeding fifty thousand rupees per annum as it considers reasonable: Provided that where a monthly payment is being made or is pro- posed to be made to any managing or whole-time director or directors and the manager or to any one or more of them and the Central Government is satisfied that for the efficient conduct of the business of the company, the minimum remuneration of fifty thousand rupees per annum. is or will be insufficient, the Central Government may, by order, sanction an increase in the minimum remuneration to such sum, for such period, and subject to such conditions, if any, as may be specified in the order.

Calculation of commission etc., in certain cases.

199. Calculation of commission etc., in certain cases.-(1) Where any commission or other remuneration payable to any officer or employee of a company (not being a director, the managing agent, secretaries and treasurers or a manager) is fixed at a percentage of, or is otherwise based on, the net profits of the company, such profits shall be calculated in the manner set out in sections 349, 350 and

(2) Any provision in force at the commencement of this Act for the payment of any commission or other remuneration in any manner based on the net profits of a company, shall continue to be in force for a period of one year from such commencement; and thereafter shall

become subject to the provisions of sub-section (1).

Prohibition of tax-free payments.

200. Prohibition of tax-free payments.-(1) No company shall pay to any officer or employee thereof, whether in his capacity as such or otherwise, remuneration free of any tax, or otherwise calculated by reference to, or varying with, any tax payable by him, or the rate or standard rate of any such tax, or the amount thereof. Explanation.-In this sub-section, the expression "tax" comprises any kind of income-tax including super-tax.

(2) Where by virtue of any provision in force immediately before the commencement of this Act, whether contained in the company's articles, or in any contract made with the company, or in any resolution passed by the company in general meeting or by the company's Board of directors, any officer or employee of the company holding any office at the commencement of this Act is entitled to

remuneration in any of the modes prohibited by sub-section (1), such provision shall have effect during the residue of the term for which he is entitled to hold such office at such commencement, as if it provided instead for the payment of a gross sum subject to the tax in question, which, after deducting such tax, would yield the net sum actually specified in such provision.

(3) This section shall not apply to any remuneration- (a) which fell due before the commencement of this Act, or (b) which may fall due after the commencement of this Act, in respect of any period before such commencement. 134

Avoidance of provisions relieving liability of officers and auditorsof company. 201. Avoidance of provisions relieving liability of officers

and auditors of company.-(1) Save as provided in this section, any provision, whether contained in the articles of a company or in an agreement with a company or in any other instrument, for exempting any officer of the company or any person employed by the company as auditor from, or indemnifying him against, any liability which, by virtue of any rule of law, would otherwise attach to him in respect of any negligence, default, misfeasance, breach of duty or breach of trust of which he may be guilty in relation to the company, shall be void: Provided that a company may, in pursuance of any such provision as aforesaid, indemnify any such officer or auditor against any liability incurred by him in defending any proceedings, whether civil or criminal, in which judgment is given in his favour or in which he is acquitted or discharged or in connection with any application under section 633 in which relief is granted to him by the Court.

(2) Nothing contained In the proviso to sub-section (1) shall apply to the constituted attorney of the managing agent of a company, unless such attorney is, or is deemed to be, an officer of the company. Prevention of management by undesirable persons

Undischarged insolvent not to manage companies.

202. Undischarged insolvent not to manage companies.-(1) If any person, being an undischarged insolvent,- (a) discharges any of the functions of a director, or acts as or discharges any of the functions of the managing agent, secretaries and treasurers, or manager, of any company; or (b) directly or indirectly takes part or is concerned in the promotion, formation or management of any company; he 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.

(2) In this section, "company" includes- (a) an unregistered company; and (b) a body corporate incorporated outside India, which has an established place of business within India. 203 Power to restrain fraudulent persons from managing Companies. 203. Power to restrain fraudulent persons from managing

Companies.-(1) Where- (a) a person is convicted of any offence in connection with the promotion, formation or management of a company; or 135 (b) in the course of winding up a company it appears that a person- (i) has been guilty of any offence for which he is punishable (whether he has been convicted or not) under section 542; or (ii) has otherwise been guilty, while an officer of the company, of any fraud or misfeasance in relation to the company or of any breach of his duty to the company; the Court may make an order that that person shall not, without the leave of the Court, be a director of, or in any way, whether directly or indirectly, be concerned or take part in the promotion, formation or management of a company, for such period not exceeding five years as may be specified in the order.

(2) In sub-section (1), the expression "the Court",- (a) in relation to the making of an order against any person by 'virtue of clause (a) thereof, includes the-Court by which he is convicted, as well as any Court having jurisdiction to wind up the company as respects which the offence was committed; and (b) in relation to the granting of leave, means any Court having jurisdiction to wind up the company as respects which leave is sought.

(3) A person intending to apply for the making of an order under this section by the Court having jurisdiction to wind up a company shall give not less than ten days' notice of his intention to the person against whom the order is sought, and at the hearing of the application, the last-mentioned person may appear and himself give evidence or call witnesses.

(4) An application for the making of an order under this section by the Court having jurisdiction to wind up a company may be made by the Official Liquidator, or by the liquidator of the company, or by any person who is or has been a member or creditor of the company.

(5) On the hearing of any application for an order under this section by the Official Liquidator or the liquidator, or of any application for leave under this section by a person against whom an order ha been made on the application' of the Official liquidator or liquidator, the Official Liquidator or liquidator shall appear and call the attention of the Court to any matters which seem to him to be relevant, and may himself give evidence or call witnesses.

(6) An order may be made by virtue of sub-clause (ii) of clause

(b) of sub-section (1), notwithstanding that the person concerned may be criminally liable in respect of the matters on the ground of which the order is to be made, and for the purposes of the said sub-clause (ii), the expression "officer" shall include any person in accordance with whose directions or instructions the Board of directors of the company has been accustomed to act.

(7) If any person act-, in contravention of an order made under this section, he shall, in respect of each offence, be punishable with 136 imprisonment for a term which may extend to two years, or with fine which may extend to five thousand rupees, or with both.

(8) The provisions of this section shall be in addition to, and without prejudice to the operation of, any other provision contained in this Act. Restriction on appointment of firms and bodies corporate to offices

Restriction on appointment of firm or body corporate to office orplace of profit under a company. 204. Restriction on appointment of firm or body corporate to

office or place of profit under a company.-(1) Save as provided in

sub-section (2), no company shall, after the commencement of this Act, appoint or employ any firm or body corporate to or in any office or place of profit under the company, other than the office of managing agent or secretaries and treasurers, for a term exceeding five years at a time.

(2) Sub-section (1) shall not apply to the appointment or em- ployment of a firm or body corporate as a technician or a consultant,- (i) unless the firm or body corporate aforesaid is already the managing agent or secretaries and treasurers of the com- pany; or (ii) unless a partner in the firm aforesaid, or a director or member of the body corporate aforesaid being a private company, or a director of the body corporate aforesaid not being a private company, is- already the managing agent of the company; or a member of the firm, a director or member of the private company, or a director of the body corporate not-being a private company, which firm, private company or body cor- porate is already the managing agent or the secretaries an treasurers of the company.

(3) Any firm or body corporate holding at the commencement of this Act any office or place of profit under the company shall, unless its term of office expires earlier, be deemed to have vacated its office immediately on the expiry of five years from the commencement of this Act.

(4) Nothing contained in sub-section (1) shall be deemed to prohibit the re-appointment, re-employment, or extension of the term of office, of any firm or body corporate by further periods not exceeding five years on each occasion: Provided that any such re-appointment, re-employment or extension shall not be sanctioned earlier than two years from the date on which it is to come into force.

(5) Any office or place in a company shall be deemed to be an office or place of profit under the company, within the meaning of this section, if the person holding it obtains anything by way of remuneration, whether as salary, fees, commission, perquisites, the right to occupy free of rent any premises as a place of residence, or otherwise.

(6) This section shall not apply to a private company, unless it is a subsidiary of a public company, 137 Dividends and manner and time of payment thereof

Dividend to be paid only out of profits. 205. Dividend to be paid only out of profits.-No dividend shall be declared or paid except out of the profits of the company or out of moneys provided by the Central or a State Government for the payment of the dividend in pursuance of a guarantee given by such Government. Explanation.-Nothing in this section shall be deemed to affect in any mariner the operation of section 208.

Dividend not to be paid except to registered shareholders or to theirorder or to their bankers. 206. Dividend not to be paid except to registered

shareholders or to their order or to their bankers.-(1) No dividend shall be paid by a company in respect of any share therein, except- (a) to the registered holder of such share or to his order or to his bankers; or (b) in case a share warrant has been issued in respect of the share in pursuance of section 114, to the bearer of such warrant or to his bankers.

(2) Nothing contained in sub-section (1) shall be deemed to require the bankers of a registered shareholder to make a separate application to the company for the payment of the dividend.

Penalty for failure to distribute dividends within three months. 207. Penalty for failure to distribute dividends within three months.-Where a dividend has been declared by a company but has not been paid, or the warrant in respect thereof has not been posted, within three months from the date of the declaration, to any shareholder entitled to the payment of the dividend, every director of the company; its managing agent or secretaries and treasurers; and where the managing agent is a firm or body corporate, every partner in the firm and every director of the body corporate; and where the secretaries and treasurers are a firm, every partner in the firm and where they are a body corporate, every director thereof; shall, if he is knowingly a party to the default, be punishable with simple imprisonment for a term which may extend to seven days and shall also be liable to fine: Provided that no offence shall be deemed to have been committed within the meaning of the foregoing provision in the following cases, namely: - (a) where the dividend could not be paid by reason of the operation of any law; (b) where a shareholder has given directions to the company regarding the payment of the dividend and those directions cannot be complied with; (c) where there is a dispute regarding the right to receive the dividend; (d) where the dividend has been lawfully adjusted by the company against any sum due to It from the shareholder; or (e) where, for any other reason, the failure to pay the dividend or to post the warrant within the period aforesaid was not due to any default on the part of the company. 138 Payments of interest out of capital

Power of company to pay interest out of capital in certain cases. 208. Power of company to pay interest out of capital in certain

cases.-(1) Where any shares in a company are issued for the purpose of raising money to defray the expenses of the construction of any work or building, or the provision of any plant, which cannot be made profitable for a lengthy period, the company may- (a) pay interest on so much of that share capital as is for the time being paid up, for the period and subject to the

conditions and restrictions mentioned in sub-sections (2) to

(7); and (b) charge the sum so paid by way of interest, to capital as part of the cost of construction of the work or building or the provision of the plant.

(2) No such payment shall be made unless it is authorised by the articles or by a special resolution.

(3) No such payment, whether authorised by the articles or by special resolution, shall be made without the previous sanction of the Central Government. The grant of such sanction shall be conclusive evidence, for the purposes of this section, that the shares of the company, in respect of which such sanction is given, have been issued for a purpose specified in this section.

(4) Before sanctioning any such payment, the Central Government may, at the expense of the company, appoint a person to inquire into, and report to the Central Government on, the circumstances of, the case; and may, before making the appointment, require the company to give security for the payment of the costs, of the inquiry.

(5) The payment of interest shall be made only for such period as may be determined by the Central Government; and that period shall in no case extend beyond the close of the half-year next after the half-year during which the work or building has been actually completed or the plant provided.

(6) The rate of interest shall in no case exceed four per cent. per annum or such other rate as the Central Government may, by notifi- cation in the Official Gazette, direct.

(7) The payment of the interest shall not operate as a reduction of the amount paid up on the shares in respect of which it is paid.

(8) Nothing in this section shall affect any company to which the Indian Railway Companies Act, 1895 (10 of 1895), or the Indian Tramways Act, 1902 (4 of 1902), applies. Accounts

Books of account to be kept by company.

209. Books of account to be kept by company.-(1) Every company shall keep at its registered office or at such other place in India as the Board of directors thinks fit, proper books of account with respect to- (a) all sums of money received and expended by the company and the matters in respect of which the receipt and expendi- ture take place; (b) all sales and purchases of goods by the company; and (c) the assets and liabilities of the company. 139

(2) Where a company has a branch office, whether in or outside India, the company shall be deemed to have complied with the pro-

visions of sub-section (1), if proper books of account relating to the transactions effected at the branch office are kept at that office and proper summarised returns, made up to dates at intervals of not more than three months, are sent by the branch office to the company at its registered office or the other place referred to in subsection

(1).

(3) For the purposes of sub-sections (1) and (2), proper books of account shall not be deemed to be kept with respect to the matters specified therein, if there are not kept such books as are necessary to give a true and fair view of the state of the affairs of the company or branch office, as the case may be, and to explain its transactions.

(4) The books of account shall be open to inspection by any director during business hours.

(5) If any of the persons referred to in sub-section (6) fails to take all reasonable steps to secure compliance by the company with the requirements of this section, or has by his own wilful act been the cause of any default by the company thereunder, he shall, in res- pect of each offence, be punishable with fine which, may extend to one thousand rupees: Provided that in any proceedings against a person in respect of an offence under this section consisting of a failure to take reasonable steps to secure compliance by the company with the requirements of this section, it shall be a defence to prove that he had reasonable ground to believe, and did believe, that a competent and reliable person was charged with the duty of seeing that those requirements were complied with and was in a position to discharge that duty.

(6) The persons referred to in sub-section (5) are the following, namely:- (a) where the company has a managing agent or secretaries and treasurers, such managing agent or secretaries and treasurers; (b) where such managing agent or secretaries and treasurers are a firm, every partner in the firm; (c) where such managing agent or secretaries and treasurers are a body corporate, every director of such body corporate; and (d) where the company has neither a managing agent nor secretaries and treasurers, every director of the company.

(7) I f any person, not being a person referred to in sub-

section (6), having been charged by the managing agent, secretaries and treasurers, or Board of directors, as the case may be, with the duty, of seeing that the requirements of this section are complied with, makes, default in doing so, he shall, in respect of each offence, be punishable with fine which may extend to one thousand rupees.

Annual accounts and balance sheet.

210. Annual accounts and balance sheet.-(1) At every annual general meeting of a company held in pursuance of section 166, 140 the Board of directors of the company shall lay before the company- (a) a balance sheet as at the end of the period specified in

sub-section (3); and (b) a profit and loss account for that period.

(2) In the case of a company not carrying on business for profit, an income and expenditure account shall be laid before the company at its annual general meeting instead of a profit and loss account, and all references to "profit and loss account", "profit" and "loss" in this section and elsewhere in this Act, shall be construed, In relation to such a company, as references respectively to the "income and expenditure account," "the excess of income over expenditure," and "the excess of expenditure over income".

(3) The profit and loss account shall relate- (a) in the case of the first annual general meeting of the company, to the period beginning with the incorporation of the company and ending with a day which shall not precede the day of the meeting by more than nine months; and (b) in the case of any subsequent annual general meeting of the company, to the period beginning with the day immediately after the period for which the account was last submitted and ending with a day which shall not precede the day of the meeting by more than nine months, or in cases where an extension of time has been granted for holding the meeting

under the proviso to section 166(1)(c), by more than nine months and the extension so granted.

(4) The period to which the account aforesaid relates is referred to in this Act as a "financial year"; and it may be less or more than a calendar year, but it shall not exceed fifteen months: Provided that it may extend to eighteen months where special permission has been granted in that behalf by the Registrar.

(5) If any person, being a director of a company, fails to take all reasonable steps to comply with the provisions of this section, he shall, In respect of each offence, be punishable with imprisonment for a term which may extend to six months, or with fine which may extend to one thousand rupees, or with both: Provided that In any proceedings against a person in respect of an offence under this section, it shall be a defence to prove that he had reasonable ground to believe, and did believe, that a competent and reliable person was charged with the duty of seeing that the provisions of this section were complied with and was in a position to discharge that duty: Provided further that no person shall be sentenced to imprison- ment for any such offence unless it was committed wilfully.

(6) If any person, not being a director of the company, having been charged by the Board of directors with the duty of seeing that the provisions of this section are complied with, makes default in doing so, he shall, in respect of each offence, be punishable with imprisonment for a term which may extend to six months, or with fine which may extend to one thousand rupees, or with both: 141 Provided that no person shall be sentenced to imprisonment for any such offence unless it was committed wilfully.

Form and contents of balance sheet and profit and loss account. 211. Form and contents of balance sheet and profit and loss

account.-(1) Every balance sheet of a company shall give a true and fair view of the state of affairs of the company as at the end of the financial year and shall, subject to the provisions of this section, be in the Form set out in Part I of Schedule VI, or as near thereto as circumstances admit: Provided that nothing contained in this sub-section shall apply to any insurance or banking company, or to any other class of company 'or which a form of balance sheet has been specified in or under the Act governing such class of company.

(2) Every profit and loss account of a company shall give a true and fair view of the profit or loss of the company for the financial year and shall, subject as aforesaid, comply with the requirements of Part II of Schedule VI, so far as they are applicable thereto: Provided that nothing contained in this sub-section shall apply to any insurance or banking company, or to any other class of company for which a form of profit and loss account has been specified In or under the Act governing such class of company.

(3) The Central Government may, by notification in the Official Gazette, exempt any class of companies from compliance with any of the requirements in Schedule VI if, in its opinion, It is necessary to grant the exemption in the national interest. Any such exemption may be granted either unconditionally or subject to such conditions as may be specified in the notification.

(4) The Central Government may, on the application or with the consent of the Board of directors of the company, by order, modify in relation to that company any of the requirements of this Act an to the matters to be stated in the company's balance sheet or profit and loss account for the purpose of adapting them to the circumstances of the company.

(5) The balance sheet and the profit and loss account of a com- pany shall not be treated as not disclosing a true and fair view of the state of affairs of the company, merely by reason of the fact that they do not disclose- (i) In the case of an insurance company, any matters which are not required to be disclosed by the Insurance Act, 1938 (4 of 1938); (ii) in the case of a banking company, any matters which are not required to be disclosed by the Banking Companies Act, 1949 (10 of 1949) ; (iii) in the case of a company engaged in the generation or supply of electricity, any matters which are not required to be disclosed by the Electricity (Supply) Act, 1948, (54 of 1948); (iv) in the case of a company governed by any other special Act for the time being in force, any matters which are not required to be disclosed by that special Act; or 142 (v) in the case of any company, any matters which are not required to be disclosed by virtue of the provisions contained in Schedule VI or by virtue of a notification

issued under sub-section (3) or an order issued under sub-

section (4).

(6) For the purposes of this section, except where the context otherwise requires, any reference to a balance sheet or profit and loss account shall include any notes thereon or documents annexed thereto, giving information required by this Act, and allowed by this Act to be given in the form of such notes or documents.

(7) If any such person as is referred to in sub-section (6) of section 209 fails to take all reasonable steps to secure compliance by the company, as respects any Accounts laid before the company in general meeting, with the provisions of this section and with the other requirements of this Act as to the matters to be stated in the accounts, he shall, in respect of each offence, be punishable with im- prisonment for a term which may extend to six months, or with fine which may extend to one thousand rupees, or with both: Provided that in any proceedings against a person in respect of an offence under this section, it shall be a defence to prove that he had reasonable ground to believe and did believe that a competent and reliable person was charged with the duty of seeing that the provisions of this section and the other requirements aforesaid were complied with and was in a position to discharge that duty: Provided further that no person shall be sentenced to imprison- ment for any such offence unless it was committed wilfully.

(8) If any person, not being a person referred to in sub-section

(6) of section 209, having been charged by the managing agent, sec- retaries and treasurers, or Board of directors, as the case may be, with the duty of seeing that the provisions of this section and the other requirements aforesaid are complied with, makes default in doing so, he shall, in respect of each offence, be punishable with im- prisonment for a term which may extend to six months or with fine which may extend to one thousand rupees, or with both: Provided that no person shall be sentenced to imprisonment for any such offence unless it was committed wilfully.

Balance sheet of holding company to include certain particulars as toits subsidiaries. 212. Balance sheet of holding company to include certain

particulars as to its subsidiaries.-(1) There shall be attached to the balance sheet of a holding company having a subsidiary or subsidiaries at the end of the financial year as at which the holding company's balance sheet is made out, the following documents in respect of such subsidiary or of each such subsidiary, as the case may be: - (a) a copy of the balance sheet of the subsidiary; (b) a copy of its profit and loss account; (c) a copy of the report of its Board of directors; (d) a copy of the report of its auditors; (e) a statement of the holding company's interest in the

subsidiary as specified in sub-section (3);

(f) the statement referred to in sub-section (5), if any; and 143

(g) the report referred to in sub-section (6), if any.

(2) (a) The balance sheet referred to in clause (a) of sub-

section (1) shall be made out, in accordance with the requirements of this Act, as at the end of the financial year of the subsidiary next before the day as at which the holding company's balance sheet is made out. (b) The profit and loss account and the reports of the Board of directors and of the auditors, referred to in clauses (b), (c) and (d)

of sub-section (1), shall be made out, in accordance with the requirements of this Act, for the financial year of the subsidiary referred to in clause (a). (c) The financial year aforesaid of the subsidiary shall not end on a day which precedes the day on which the holding company's financial year ends by more than six months. (d)- Where the financial year of a subsidiary is shorter in duration than that of its holding company, references to the financial year of the subsidiary in clauses (a), (b) and (c) shall be construed as references to two or more financial years of the subsidiary the duration of which, in the aggregate, is not less than the duration of the holding company's financial year.

(3) The statement referred to in clause (e) of sub-section (1) shall specify- (a) the extent of the holding company's interest in the subsidiary at the end of the financial year or of the last of the financial years of the subsidiary referred to in sub-

section (2) ; (b) the net aggregate amount, so far as it concerns members of the holding company and is not dealt with in the company's accounts, of the subsidiary's profits after deducting its losses or vice versa- (i) for the financial year or years of the subsidiary aforesaid ; and (ii) for the' previous financial years of the subsidiary since it became the holding company's subsidiary; (c) the net aggregate amount of the profits of the subsidiary after deducting its losses or vice versa- (i) for the financial year or years of the subsidiary aforesaid ; and (ii) for the previous financial years of the subsidiary since it became the holding company's subsidiary; so far as those profits are dealt with, or provision is made for those losses, in the company's accounts.

(4) Clauses (b) and (c) of sub-section (3) shall apply only to profits and losses of the subsidiary which may properly be treated in the holding company's accounts as revenue profits or losses, and the profits or losses attributable to any shares in a subsidiary for the time being held by the, holding company or any other of its subsi- diaries shall not (for that or any other purpose) be treated as afore- said so far as they are profits or losses for the period before the date 144 on or as from which the shares were acquired by the company or any of its subsidiaries, except that they may in a proper case be so treated where- (a) the company is itself the subsidiary of another body corporate; and (b) the shares were acquired from that body corporate or a subsidiary of it; and for the purpose of determining whether any profits or losses are to be treated as profits or losses for the said period, the profit or loss for any financial year of the subsidiary may, if it is not practicable to apportion it With reasonable accuracy by reference to the facts, be treated as accruing from day to day during that year and be apportioned accordingly.

(5) Where the financial year or years of a subsidiary referred

to in sub-section (2) do not coincide with the financial year of the holding company, a statement containing information on the following matters shall also be attached to the balance sheet of the holding company:- (a) whether there has been any, and, if so, what change in the holding company's interest in the subsidiary between the end of the financial year or of the last of the financial years of the subsidiary and the end of the holding company's financial year; (b) details of any material changes which have occurred between the end of the financial year or of the last of the financial years of the subsidiary and the end of the holding company's financial year in respect of- (i) the subsidiary's fixed assets; (ii) its investments; (iii) the moneys lent by it; (iv) the moneys borrowed by it for any purpose other than that of meeting current liabilities.

(6) If, for any reason, the Board of directors of the holding company is unable to obtain information on any of the matters required

to be specified by sub-section (4), a report in writing to that effect shall be attached to the balance sheet of the holding company.

(7) The documents referred to in clauses (e), (f) and (g) of

subsection (1) shall be signed by the persons by whom the balance sheet of the holding company is required to be signed.

(8) The Central Government may, on the application or with the consent of the Board of directors of the company, direct that in relation to any subsidiary, the provisions of this section shall not apply, or shall apply only to such extent. as may be specified in the direction.

(9) If any such person as is referred to in sub-section (6) of section 209 fails to take all reasonable steps to comply with the provisions of this section, he shall, in respect of each offence, be punishable with imprisonment for a term which may extend to six months, or with fine which may extend to one thousand rupees, or with both: 145 Provided that in any proceedings against a person in respect of an offence under this section, it shall be a defence to prove that he had reasonable ground to believe, and did believe, that a competent and reliable person was charged with the duty of seeing that the provisions of this section were complied with and was in a position to discharge that duty: Provided further that no person shall be sentenced to imprison- ment for any such offence unless it was committed wilfully.

(10) If any person, not being a person referred to in sub-section

(6) of section 209, having been charged by the managing agent, secretaries and treasurers, or Board of directors, as the case may be, with the duty of seeing that the provisions of this section are complied with, makes default in doing so, he shall in respect of each offence, be punishable with imprisonment for a term which may extend to six months, or with fine which may extend to one thousand rupees, or with both: Provided that no person shall be sentenced to imprisonment for any such offence unless it was committed wilfully.

Financial year of holding company and subsidiary,

213. Financial year of holding company and subsidiary,--(1) Where it appears to the Central Government desirable for a holding company or a holding company's subsidiary, to extend its financial year so that the subsidiary's financial year may end with that of the holding company, and for that purpose to postpone the submission of the relevant accounts to a general meeting, the Central Government may, on the application or with the consent of the Board of directors of the company whose financial year is to be extended, direct that in the case of that company, the submission of accounts to a general meeting, the holding of an annual general meeting or the making of an annual return, shall not be required to be submitted, held or made, earlier than the dates specified in the direction, notwithstanding anything to the contrary in this Act or in any other Act for the time being in force.

(2) The Central Government shall, on the application of the Board of directors of a holding company or a holding company's sub- sidiary, exercise the powers conferred on that Government by sub-

section (1) if it is necessary so to do, in order to secure that the end of the financial year of the subsidiary does not precede the end of the holding company's financial year by more than six months, where that is not the case at the commencement of this Act, or at the date on which the relationship of holding company and subsidiary comes into existence where that date is later than the commencement of this Act.

Rights of holding company's representatives and members. 214. Rights of holding company's representatives and members.-

(1) A holding company may, by resolution, authorise representatives named in the resolution to inspect the books of account kept by any of its subsidiaries; and the books of account of any such subsidiary shall be open to inspection by those representatives at any time during business hours.

(2) The rights conferred by section 235 upon members of a com- pany may be exercised; in respect of any subsidiary by members of the holding company as if they alone were members of the subsidiary. 146

Authentication of balance sheet and profit and loss account. 215. Authentication of balance sheet and profit and loss

account.-(1) Save as provided by 'sub-section (2), every balance sheet and every profit and loss account of a company shall be signed on behalf of the Board of directors- (i) in the case of a banking company, by the persons speci- fied in clause (a) or clause (b), as the case may be, of sub-

section (2) of section 29 of the Banking Companies Act, 1949 (10 of 1949); (ii) in the case of any other company, by its managing agent, secretaries and treasurers, manager or secretary, if any, and by not less than two directors of the company one of whom shall be a managing director where there is one.

(2) In the case of a company not being a banking company, when only one of its directors is for the time being in India, the balance sheet and the profit and loss account shall be signed by such director; but in such a case there shall be attached to the balance sheet and the profit and loss account a statement signed by him explaining the reason for non-compliance with the provisions of sub-

section (1).

(3) The balance sheet and the profit and loss account shall be approved by the Board of directors before they are signed on behalf of the Board in accordance with the provisions of this section and before they are submitted to the auditors for their report thereon.

Profit and loss account to be annexed and auditors' report to beattached to balance sheet. 216. Profit and loss account to be annexed and auditors' report to be attached to balance sheet.-The profit and loss account shall be annexed to the balance sheet and the auditors' report shall be attach- ed thereto.

Board's report.

217. Board's report.-(1) There shall be attached to every balance sheet laid before a company in general meeting, a report by its Board of directors, with respect to- (a) the state of the company's affairs; (b) the amounts, if any, which it proposes to carry to any reserves either in such balance sheet or in a subsequent balance sheet; and (c) the amount, if any, which it recommends should be paid by way of dividend.

(2) The Board's report shall, so far as is material for the appreciation of the state of the company's affairs by its members and will not-in the Board's opinion be harmful to the business of the com- pany or of any of its subsidiaries, deal with any changes which nave occurred during the financial year- (a) in the nature of the company's business; (b) in the company's subsidiaries or in the nature of the business carried on by them; and (c) generally in the classes of business in which the company has an interest.

(3) The Board shall also be bound to give the fullest informa- tion and explanations in its report aforesaid, or in cases falling 147 under the proviso to section 222, in an addendum to that report, on every reservation, qualification or adverse remark contained in the auditors' report.

(4) The Board's report and any addendum thereto shall be signed by its chairman if he is authorised in that behalf by the Board; and where he is not so authorised, shall be signed by such number of directors as. are required to sign the balance sheet and the profit

and loss account of the company by virtue of sub-sections (1) and (2) of section 215.

(5) If any person, being a director of a company, fails to take all reasonable steps to comply with the provisions of sub-sections

(1) to (3), or being the chairman, signs the Board's report other-

wise than in conformity with the provisions of sub-section (4), he shall, in respect of each offence, be punishable with imprisonment for a term which may extend to six months, or with fine which may extend to two thousand rupees, or with both: Provided that no person shall be sentenced to imprisonment for any such offence unless it was committed wilfully: Provided further that in any proceedings against a person in

respect of an offence under sub-section (1), it shall be a defence to prove that he had reasonable ground to believe, and did believe, that a competent and reliable person was charged with the duty of seeing that the provisions of that sub-section were complied with and was in a position to discharge that duty.

(6) If any person, not being a director, having been charged by the Board of directors with the duty of seeing that the provisions of

sub-sections (1) to (3) are complied with, makes default in doing so, he shall, in respect of each offence, be punishable with imprisonment for a term which may extend to six months, or with fine which may extend to two thousand rupees, or with both: Provided that no person shall be sentenced. to imprisonment for any such offence unless it was committed wilfully.

Penalty for improper issue, circulation of publication of balance sheetor profit and loss account. 218. Penalty for improper issue, circulation of publication of balance sheet or profit and loss account.-(a) If any copy of a balance sheet or profit and loss account which has not been signed as required by section 215 is issued, circulated or published; or (b) If any copy of a balance sheet is issued, circulated or pub- lished without there being annexed or attached thereto, as the case may be, a copy each of (i) the profit and loss account, (ii) any ac- counts, reports or statements which, by virtue of section 212, are required to be attached to the balance sheet, (iii) the auditors' re- port, and (iv) the Board's report referred to in section 217; the company, and every officer of the company who is in default, shall be punishable with fine which may extend to five hundred rupees.

Right of member to copies of balance sheet and auditors' report. 219. Right of member to copies of balance sheet and auditors'

report.-(1) A copy of every balance sheet (including the profit and loss account, the auditors' report and every other document required by law to be annexed or attached, as the case may be, to the, 148 balance sheet) which is to be laid before a company in general meeting shall, not less than twenty-one days before the date of the meeting, be sent to every member of the company, to every holder of debentures issued by the company (not being debentures which ex facie are payable to the bearer thereof), to every trustee for the holders of any debentures issued by the company, whether such member, holder or trustee is or is not entitled to have notices of general meetings of the company sent to him, and to all persons other than such members, holders or trustees, being persons so entitled. Provided that- (a) in the case of a company not having a share capital, this sub-section shall not require the sending of a copy of the documents aforesaid to a member, or holder of debentures, of the company who is not entitled to have notices of general meetings of the company sent to him; (b) this sub-section shall not require a copy of the docu- ments aforesaid to be sent- (i) to a member, or holder of debentures, of the com- pany, who is not entitled to have notices of general meetings of the company sent to him and of whose address the company is unaware; (ii) to more than one of the joint holders of any shares or debentures none of whom is entitled to have such notices sent to him; or (iii) in the case of joint holders of any shares or debentures some of whom are and some of whom are not entitled to have such notices sent to them, to those who are not so entitled; and (c) if the copies of the documents aforesaid are sent less than twenty-one days before the date of the meeting, they shall, notwithstanding that fact, be demeed to have been duly sent if it is so agreed by all the members entitled to vote at the meeting.

(2) Any member or holder of debentures of a company, whether he is or is not entitled to have copies of the company's balance sheet sent to him shall, on demand, be entitled to be furnished without charge, and any person from whom the company has accepted a sum of money by way of deposit shall, on demand accompanied by the payment of a fee of one rupee, be entitled to be furnished, with a copy of the last balance sheet of the company and of every document required by law to be annexed or attached thereto, including the profit and loss account and the auditors' report.

(3) If default is made, in complying with sub-section (1), the company, and every officer of the company who is in default, shall be punishable with fine which may extend to five hundred rupees.

(4) If, when any person makes a demand for a copy of any document with which he is entitled to 'be furnished by virtue of sub-

section (2), default is made in complying with the demand 149 within seven days after the making thereof, the company, and every officer of the company who is in default, shall be punishable with fine which may extend to five hundred rupees, unless it is proved that that person had already made a demand for and been furnished with a copy of the document. The Court may also, by order, direct that the copy demanded shall forthwith be furnished to the person concerned.

(5) Sub-sections (1) to (4) shall not apply in relation to a balance sheet of a private company laid before it before the commence- ment of this Act; and in such a case the right of any person to have sent to him or to be furnished with a copy of the balance sheet, and the liability of the company in respect of a failure to satisfy that right, shall be the same as they would have been if this Act had not been passed.

Three copies of balance sheet, etc. to be field with Registrar. 220. Three copies of balance sheet, etc. to be field with

Registrar. (1) After the balance sheet and the profit and loss account have been laid before a company at an annual general meeting as aforesaid, there shall be filed with the Registrar at the same time as the copy of the annual return referred to in section 161- (a) in the case of a public company, three copies of the balance sheet and the profit and loss account, signed by the managing director, managing agent, secretaries and trea- surers, manager or secretary of the company, or if there be none of these, by a director of the company, together with three copies of all documents which are required by this Act to be annexed or attached to such balance sheet or profit and loss account; (b) in the case of a private company, three copies of the balance sheet certified to be true copies by the company's auditors and of the auditors' report in so far as it relates to the balance sheet.

(2) If the annual general meeting of a public or private company before which a balance sheet is laid as aforesaid does not adopt the balance sheet, a statement of that fact and of the reasons therefor shall be annexed to the balance sheet and to the copies thereof required to be filed with the Registrar.

(3) If default is made in complying with the requirements of

sub-sections (1) and (2), the company, and every officer of the company who is in default, shall be liable to the like punishment as is provided by section 162 for a default in complying with the pro- visions of sections 159, 160 or 161.

Duty of officer to make disclosure of payments, etc.

221. Duty of officer to make disclosure of payments, etc.- (1) Where any particulars or information is required to be given in the balance sheet or profit and loss account of a company or in any document required to be annexed or attached thereto, it shall be the duty of the concerned officer of the company, to furnish without delay to the company, and also to the company's auditor whenever he so requires, those particulars or that information in as full a manner as possible. 150

(2) Where the officer concerned is a firm or body corporate acting as managing agent or as secretaries and treasurers, the duty aforesaid shall extend to every partner in the firm, or to every director of the body corporate, as the case may be.

(3) The particulars or information referred to in sub-section

(1) may relate to payments made to any director, managing agent, secretaries and treasurers, or other person by any other company, body corporate, firm or person.

(4) If any person knowingly makes default in performing the duty cast on him by the foregoing provisions of this section, he shall be punishable with imprisonment which may extend to six months, or with fine which may extend to five thousand rupees, or with both.

Construction of references to documents annexed to accounts. 222. Construction of references to documents annexed to accounts.-References in this Act to documents annexed or required to be annexed to a company's accounts or any of them shall not include the Board's report, the auditors' report or any document attached or required to be attached to those accounts: Provided that any information which is required by this Act to be given in the accounts, and is allowed by it to be given in a statement annexed to the accounts, may be given in the Board's report instead of in the accounts; and if any such information is so given, the report shall be annexed to the accounts and this Act shall apply in relation thereto accordingly, except that the auditors shall report thereon only in so far as it gives the said information.

Certain companies to publish statement in the form in Table F inSchedule I. 223. Certain companies to publish statement in the form in Table

F in Schedule I.-(1) Every company which is a limited banking company, an insurance company, or a deposit, provident or benefit society, shall, before it commences business and also on the first Monday in February and the first Monday in August in every year during which it carries on business, make a statement in the form in Table F in Schedule I, or in a form as near thereto as circumstances admit.

(2) A copy of the statement, together with a copy of the last audited balance sheet laid before the members of the company, shall be displayed and until the display of the next following statement, shall be kept displayed, in a conspicuous place in the registered office of the company, and in every branch office or place where the business of the company is carried on.

(3) Every member, and every creditor, of the company shall be entitled, on payment of a sum of eight annas, to be furnished with a copy of the statement, within seven days of such payment.

(4) If default is made in complying with any of the requirements of this section, the company, and every officer of the company who is in default, shall be punishable with fine which may extend to fifty rupees for every day during which the default continues.

(5) This section shall not apply to a life assurance company or provident insurance society to which the provisions of the Insurance Act, 1938 (4 of 1938), as to the annual statements to be made 151 by such company or society, apply with or without modifications, if the company or society complies with those provisions. Audit

Appointment and remuneration of auditors.

224. Appointment and remuneration of auditors.-(1) Every company shall, at each annual general meeting, appoint an auditor or auditors to hold office from the conclusion of that meeting until the conclusion of the next annual general meeting.

(2) At any annual general meeting, a retiring auditor, by whatsoever authority appointed, shall be re-appointed, unless- (a) he is not qualified for re-appointment; (b) he has given the company notice in writing of his unwillingness to be re-appointed; (c) a resolution has been passed at that meeting appointing somebody instead of him or providing expressly that he shall not be re-appointed; or (d) where' notice has been given of an intended resolution to appoint some person or persons in the place of a retiring auditor, and by reason of the death, incapacity or disqualification of that person or of all those persons, as the case may be, the resolution cannot be proceeded with.

(3) Where at an annual general meeting no auditors are appointed or re-appointed, the Central Government may appoint a person to fill the vacancy.

(4) The company shall, within seven days of the Central Govern-

ment's power under sub-section (3), becoming exercisable, give notice of that fact to that Government; and, if a company fails to give such notice, the company, and every officer of the company who is in default, shall be punishable with fine which may extend to five hundred rupees.

(5) The first auditor or auditors of a company shall be appoint- ed by the Board of directors within one month of the date of registration of the company; and the auditor or auditors so appointed shall hold office until the conclusion of the first annual general meeting: Provided that- (a) the company may, at a general meeting, remove any such auditor or all or any of such auditors and appoint in his or their places any other person or persons who have been nominated for appointment by any member of the company and of whose nomination notice has been given to the members of the company not less than fourteen days before the date of the meeting; and (b) if the Board fails to exercise its powers under this subsection, the company in general meeting may appoint the first auditor or auditors.

(6) (a) The Board may fill any casual vacancy in the office of an auditor; but while any such vacancy continues, the remaining auditor or auditors, if any, may act: 152 Provided that where such vacancy is caused by the resignation of in auditor, the vacancy shall only be filled by the company in general meeting. (b) Any auditor appointed in a casual vacancy shall hold office until the conclusion of the next annual general meeting.

(7) Except as provided in the proviso to sub-section (5), any auditor appointed under this section may be removed from office before the expiry of his term only by the company in general meeting, after obtaining the previous approval of the Central Government in that behalf.

(8) The remuneration of the auditors of a company- (a) in the case of an auditor appointed by the Board or the Central Government, may be. fixed by the Board or the Central Government, as the case may be; and (b) subject to clause (a), shall be fixed by the company in general meeting or in such manner as the company in general meeting may determine. For the purposes of this sub-section, any sums paid by the company in respect of the auditors' expenses shall be deemed to be included in the expression "remuneration".

Provisions as to resolutions for appointing or removing auditors. 225. Provisions as to resolutions for appointing or removing

auditors.-(1) Special notice shall be required for a resolution at an annual general meeting appointing as auditor a person other than a retiring auditor, or providing expressly that a retiring auditor shall not be re-appointed.

(2) On receipt of notice of such a resolution, the company shall forthwith send a copy thereof to the retiring auditor.

(3) Where notice is given of such a resolution and the retiring auditor makes with respect thereto representations in writing to the company (not exceeding a reasonable length) and requests their notification to members of the company, the company shall, unless the representations are received by it too late for it to do so,- (a) in any notice of the resolution given to members of the company, state the fact of the representations having been made; and (b) send a copy of the representations to every member of the company to whom notice of the meeting is sent, whether before or after the receipt of the representations by the company; and if a copy of the representations is not sent as aforesaid because they were received too late or because of the company's default, the auditor may (without prejudice to his right to be heard orally) require that the representations shall be read out at the meeting: Provided that copies of the representations need not be sent out and the representations need not be read out at the meeting if, on the application either of the company or of any other person 153 who claims to be aggrieved, the Court is satisfied that the rights conferred by this sub-section are being abused to secure needless publicity for defamatory matter; and the Court may order the company's costs on such an application to be paid in whole or in part by the auditor, notwithstanding that he is not a party to the application.

(4) Sub-sections (2) and (3) shall apply to a resolution to

remove the first auditors or any of them under sub-section (5) of section 224 or to the removal of any auditor or auditors under sub-

section (7) of that section, as they apply in relation to a resolution that a retiring auditor shall not be re-appointed.

Qualifications and disqualifications of auditors.

226. Qualifications and disqualifications of auditors.-(1) A person shall not be qualified for appointment as auditor of a company unless he is a chartered accountant within the meaning of the Chartered Accountants Act, 1949 (38 of 1949): Provided that a firm whereof all the partners practising in India are qualified for appointment as aforesaid may be appointed by its firm name to be auditor of a company, in which case any partner so practising may act in the name of the firm.

(2) (a) Notwithstanding anything contained in sub-section (1), but subject to the provisions of any rules made under clause (b), the holder of a certificate granted under a law in force in the whole or any portion. of a Part B State immediately before the commencement of the Part B States (Laws) Act, 1951 (3 of 1951), entitling him to act as an auditor of companies in that State or any portion thereof, shall be entitled to be appointed to act as an auditor of companies registered anywhere in that State. (b) The Central Government may, by notification in the Official Gazette, make rules providing for the grant, renewal, suspension or cancellation of auditors' certificates to persons in Part B States for the purposes of clause (a), and prescribing conditions and restrictions for such grant, renewal, suspension or cancellation.

(3) None of the following persons shall be qualified for appointment as auditor of a company- (a) a body corporate; (b) an officer or employee of the company; (c) a person who is a partner, or who is in the employment, of an officer or employee of the company; (d) a person who is indebted to the company for an amount exceeding one thousand rupees, or who has given any guarantee or provided any security in connection with the indebtedness of any third person to the company for an amount exceeding one thousand rupees; (e) a person who is a director or member of a private company, or a partner of a firm, which is the managing agent or the secretaries and treasurers of the company; (f) a person who is a director, or the holder of shares exceeding five per cent. in nominal value of the subscribed 154 capital, of any body corporate which is the managing agent or the secretaries and treasurers, of the company: Provided that any shares held by such person as nominee or trustee for any third person and in which the holder has no beneficial interest shall be excluded in computing the percentage of shares held by him for the purpose of this clause. Explanation.-References in this sub-section to an officer or employee shall be construed as not including references to an auditor.

(4) A person shall also not be qualified for appointment as

auditor of a company if he is, by virtue of sub-section (3), dis- qualified for appointment as auditor of any other body corporate which is that company's subsidiary or holding company or a subsidiary of that company's holding company, or would be so disqualified if the body corporate were a company.

(5) If an auditor becomes subject, after his appointment, to any

of the disqualifications specified in sub-sections (3) and (4), he shall be deemed to have vacated his office as such.

Powers and duties of auditors.

227. Powers and duties of auditors.-(1) Every auditor of a company shall have a right of access at all times to the books and accounts and vouchers of the company, whether kept at the head 'office of the company or elsewhere, and shall be entitled to require from the officers of the company such information and explanations as the auditor may think necessary for the performance of his duties as auditor.

(2) The auditor shall make a report to the members of the company on the accounts examined by him, and on every balance .sheet and profit and loss account and on every other document declared by this Act to be part of or annexed to the balance sheet or profit and loss account, which are laid before the company in general meeting during his tenure of office, and the report shall state whether, in his opinion and to the best of his information and according to the explanations given to him, the said accounts give the information required by this Act in the manner so required and give a true and fair view- (i) in the case of the balance sheet, of the state of the company's affairs as at the end of its financial year; and (ii) in the case of the profit and loss account, of the profit or loss for its financial year.

(3) The auditor's report shall also state- (a) whether he has obtained all the information and ex- planations which to the best of his knowledge and belief were necessary for the purposes of his audit; (b) whether, in his opinion, proper books of account as required by law have been kept by the company so far as appears from his examination of those books, and proper re- turns adequate for the purposes of his audit have been re- ceived from branches not visited by him; 155 (c) whether the company's balance sheet and profit and, loss account dealt with by the report are in agreement with the books of account and returns.

(4) Where any of the matters referred to in clauses (i) and (ii)

of sub-section (2) or in clauses (a), (b) and (c) of sub-section (3) is answered in the negative or with a qualification, the auditor's report shall state the reason for the answer.

(5) Where the company is one which is not required to disclose any matters by virtue of any provisions contained in this or in any other Act, if the balance sheet and the profit and loss account specify those provisions and if, in the opinion of the auditor and to the best of his information and according to the explanations given to him, they give the information required by this Act in the manner so required and, subject to the provisions aforesaid, give a true and fair view, in the case of the balance sheet, of the state of the company's affairs as at the end of its financial year, and in the case of the profit and loss account, of the profit or loss for its financial year, the auditor's report shall state that in his opinion and to the best of his information and according to the explanations given to him, the accounts of the company are properly drawn up so as to disclose the state of the company's affairs as at the date of its balance sheet and its profit or loss for its financial year ending on that date, so far as is required by the provisions of this or any other Act applicable to the company.

Audit of accounts of branch office of company.

228. Audit of accounts of branch office of company.-(1) Where a company has a branch office, the accounts of that office shall, unless the company in general meeting decides otherwise, be audited by a person qualified for appointment as auditor of the company under section 226, or where the branch office is situate in a country outside India, either by a person qualified as aforesaid or by an accountant duly qualified to act as an auditor of the accounts of the branch office in accordance with the laws of that country.

(2) Where the accounts of any branch office are not so audited, the company's auditor- (a) shall be entitled to visit the branch office, if he deems it necessary to do so for the performance of his duties as auditor, and (b) shall have a right of access at all times to the books and accounts and vouchers of the company maintained at the branch office: Provided that in the 'case of a banking company having a branch office outside India, it shall be sufficient if the auditor is allowed access to such copies of, and extracts from, the books and accounts of the branch as have been transmitted to the principal office of the company in India.

Signature of audit report etc.- 229. Signature of audit report etc.-Only the person appointed as auditor of the company, or where a firm is so appointed

in pursuance of the proviso to sub-section (1) of section 226, only a partner in the firm practising in India, may sign the auditor's report, or sign or authenticate any other document of the company required by law to be signed or authenticated by the auditor. 156

Reading and inspection of auditor's report. 230. Reading and inspection of auditor's report.-The auditor's report shall be read before the company in general meeting and shall be open to inspection by any member of the company.

Right of auditor to attend general meeting. 231. Right of auditor to attend general meeting.-All notices of, and other communications relating to, any general meeting of a company which any member of the company is entitled to have sent to him shall also be forwarded to the auditor of the company; and the auditor shall be entitled to attend any general meeting and to be heard at any general meeting which he attends on any part of the business which concerns him as auditor.

Penalty for non-compliance with sections 225 to 231. 232. Penalty for non-compliance with sections 225 to 231.-If de- fault is made by a company in complying with any of the provisions contained in sections 225 to 231, the company, and every officer of the company who is in default, shall be punishable with fine which may extend to five hundred rupees.

Penalty for non-compliance by auditor with sections 227 and 229. 233. Penalty for non-compliance by auditor with sections 227 and 229.-If any auditor's report is made, or any document of the company is signed or authenticated, otherwise than in conformity with the requirements of sections 227 and 229, the auditor concerned, and the person, if any, other than the auditor who signs the report or signs or authenticates the document, shall, if the default is wilful, be punishable with fine which may extend to one thousand rupees. Power of Registrar to call for information etc.

Power of Registrar to call for information or explanation. 234. Power of Registrar to call for information or explanation-

(1) Where, on perusing any document which a company is required to submit to him under this Act, the Registrar is of opinion that any information or explanation is necessary in order that such document may afford full particulars of the matter to which it purports to relate, he may, by a written order, call on the company submitting the document to furnish in writing such information or explanation, within such time as he may specify in the order.

(2) On receipt by the company of an order under sub-section (1), it shall be the duty of the company, and of all persons who are officers of the company, to furnish such information or explanation to the best of their power.

(3) On receipt of a copy of an order under sub-section (1), it shall also be the duty of every person who has been an officer of the company to furnish such information or explanation to the best of his power.

(4) If the company, or any such person as is referred to in sub-

section (2) or (3), refuses or neglects to furnish any such infor- mation or explanation,- (a) the company, and each such person, shall be punishable with fine which may extend to fifty rupees in respect of each offence; and (b) the Court may, on the application of the Registrar and after notice to the company, make an order on the company for production of such documents as, in the opinion of 157 the Court, may reasonably be required by the Registrar for

the purpose referred to in sub-section (1) and allow the Registrar inspection thereof on such terms and conditions as it thinks fit.

(5) On receipt of any document containing such information or explanation, the Registrar may annex it to the original document submitted to him; and any document so annexed shall be subject to the like provisions as to inspection, the taking of extracts, and the furnishing of copies, as the original document is subject.

(6) If such information or explanation is not furnished within the specified time, or if after perusal of such information or ex- planation the Registrar is of opinion that the document in question discloses an unsatisfactory state of affairs, or that it does not dis- close a full and fair statement of the matter to which it purports to relate, the Registrar shall report in writing the circumstances of the case to the Central Government.

(7) If it is represented to the Registrar on materials placed before him by any contributory or creditor or any other person interested that the business of a company is being carried on in fraud of its creditors or of persons dealing with the company or otherwise for a fraudulent or unlawful purpose, he may, after giving the company an opportunity of being heard, by a written order, call on the company to furnish in writing any information or explanation on matters specified in the order, within such time as he may specify therein;

and the provisions of sub-sections (2), (3), (4) and (6) of this section shall apply to such order. If upon inquiry the Registrar is satisfied that any representation on which he took action under this sub-section was frivolous or vexatious, he shall disclose the identity of his informant to the company.

(8) The provisions of this section shall apply mutatis mutandis to documents which a liquidator, or a foreign company within the meaning of section 591, is required to file under this Act. Investigation

Investigation of affairs of company on application by members orreport by Registrar. 235. Investigation of affairs of company on application by members or report by Registrar.-The Central Government may appoint one or more competent persons as inspectors to investigate the affairs of any company and to report thereon in such manner as the Central Government may direct,- (a) in the case of a company having a share capital, on the application either of not less than two hundred members or of members, holding not less than one-tenth of the total voting power therein; (b) in the case of a company not having a share capital, on the application of not less than one-fifth in number of the persons on the company's register of members; (c) in the case of any company, on a report by the

Registrar under sub-section (6), or sub-section (7) read with

subsection (6), of section 234. 158

Application by members to be supported by evidence and power to callfor security. 236. Application by members to be supported by evidence and power to call for security.-An application by members of a company under clause (a) or (b) of section 235 shall be supported by such evidence as the Central Government may require for the purpose of showing that the applicants have good reason for requiring the investigation; and the Central Government may, before appointing an inspector, require the applicants to give security, for such amount not exceeding one thousand rupees as it may think fit. for payment of the costs of the investigation.

Investigation of company's affairs in other cases. 237. Investigation of company's affairs in other cases.-Without prejudice to its powers under section 235, the Central Government- (a) shall appoint one or more competent persons as inspectors to investigate the affairs of a company and to report thereon in such manner as the Central Government may direct, if- (i) the company, by special resolution; or (ii) the Court, by order, declares that the affairs of the company ought to be investigated by an inspector appointed by the Central Government; and (b) may do so if, in the opinion of the Central Government, there are circumstances suggesting- (i) that the business of the company is being conducted with intent to defraud its creditors, members or any other persons, or otherwise for a fraudulent or unlawful purpose, or in a manner oppressive of any of its members, or that 'the company was formed for any fraudulent or unlawful purpose; (ii) that persons concerned in the formation of the company or the management of its affairs have in connection therewith been guilty of fraud, misfeasance or other misconduct towards the company or towards any of its members; or (iii) that the members of the company have not been given all the information with respect to its affairs which they might reasonably expect, including information relating to the calculation of the commission payable to a managing or other director, the managing agent, the secretaries and treasurers, or the manager, of the company.

Firm, body corporate or association not to be appointed as inspector. 238. Firm, body corporate or association not to be appointed as inspector.-No firm, body corporate or other association shall be appointed as an inspector under section 235 or 237.

Power of inspectors to carry investigation into affairs of relatedcompanies or of managing agent or associate. 239. Power of inspectors to carry investigation into affairs of

related companies or of managing agent or associate.-(1) If an ins- pector appointed under section 235 or 237 to investigate the affairs of a company thinks it necessary for the purposes of his investigation to investigate also the affairs of- (a) any other body corporate which is, or has at any relevant time been, the company's subsidiary or holding company, or a 159 subsidiary of its holding company, or a holding company of its subsidiary; (b) any other body corporate which is, or has at any relevant time been, managed- (i) by any person as managing agent or as secretaries and treasurers who is, or was at the relevant time, either the managing agent or the secretaries and treasurers of the company; (ii) by any person who is, or was at the relevant time, an associate of the managing agent or secretaries and treasurers of the company; or (iii) by any person of whom the managing agent or secretaries and treasurers of the company is, or was at the relevant time, an associate; (c) any other body corporate which is, or has at any rele- vant time been, managed by the company; or (d) any person who is, or has at any relevant time been, the company's managing agent or secretaries and treasurers or an associate of such managing agent or secretaries and treasurers,

the inspector shall, subject to the provisions of sub-section (2), have power so to do, and shall report on the affairs of the other body corporate or of the managing agent, secretaries and treasurers or associate of the managing agent or secretaries and treasurers, so far as he thinks the results of his investigation thereof are relevant to the investigation of the affairs of the first-mentioned company.

(2) In the case of any body corporate or person referred to in

clause (b) (ii), (b) (iii), (c), or (d) of sub-section (1), the inspector shall not exercise his power of investigating into, and reporting on, its or his affairs without first having obtained the prior approval of the Central Government thereto.

Production of documents and evidence.

240. Production of documents and evidence.-(1) It shall be the duty of all officers and agents of the company, and where the company is or was managed by a managing agent or secretaries and treasurers, of all officers and agents of the managing agent or secretaries and treasurers, and where the affairs of any other body corporate, or of a managing agent or secretaries and treasurers, or of an associate of a managing agent or secretaries and treasurers, are investigated by virtue of section 239, of all officers and agents of such body corporate, managing agent, secretaries and treasurers,. or associate, and where such managing agent, secretaries and treasurers or associate is or was a firm, of all partners in the firm= (a) to produce to an inspector all books and papers of, or relating to, the company or, as the case may be, of or relating to the other body corporate, managing agent, secretaries and treasurers or associate, which are in their custody or power; and (b) otherwise to give to the inspector all assistance in connection with the investigation which they are reasonably able to give.

(2). An inspector may examine on oath any of the persons

referred to in sub-section (1), in relation to the affairs of the company, other 160 body corporate, managing agent, secretaries and treasurers or associate, as the case may be; and may administer an oath accordingly.

(3) If any such person refuses- (a) to produce to an inspector any book or paper which It

is his duty under sub-section (1) to produce; or (b) to answer any question which is put to him by an

inspector in pursuance of sub-section (2), the inspector may certify the refusal under his hand to the Court; and the Court may thereupon inquire into the case; and after hearing any witnesses who may be produced against or on behalf of the alleged offender and after hearing any statement which may be offered in defence, punish the offender as if he had been guilty of contempt of the Court.

(4) If an inspector thinks it necessary for the purpose of his Investigation that a person whom he has no power to examine on oath should be so examined, he may apply to the Court and the Court may, if it sees fit, order that person to attend and be examined on oath before it on any matter relevant to the investigation, and on any such examination- (a) the inspector may take part therein either personally or by a legal practitioner; (b) the Court may put such questions to the person examined as the Court thinks fit; (c) the person examined shall answer all such questions as the Court may put or allow to be put to him, but may at his own cost employ a legal practitioner, who shall be at liberty to put to such person such questions as the Court may deem just for the purpose of enabling him to explain or qualify any answers given by him: Provided that, notwithstanding anything in clause (c), the Court may allow the person examined such costs as in its discretion it may think fit, and any costs so allowed shall be treated as part of the expenses of the investigation.

(5) Notes of any examination under sub-section (2) or (4) shall be taken down in writing and shall be read over to or by, and signed by, the person examined, and may thereafter be used in evidence against him.

(6) In this section- (a) the expression "officers", in relation to any company or body corporate, includes any trustee for the debenture holders of such company or body corporate; (b) the expression "agent", in relation to any company, body corporate or person, means any one acting or purporting to act for or on behalf of such company, body corporate or person, and includes the bankers and legal advisers of, and persons employed as auditors by, such company, body corporate or person; and (c) any reference to officers, agents or partners shall be construed as a reference to past as well as present officers, agents or partners, as the case may be. 161

Inspectors' report.

241. Inspectors' report.-(1) The inspectors may, and if so directed by the Central Government shall, make interim reports to that Government, and on the conclusion of the investigation, shall make final report to the Central Government. Any such report shall be written or printed, as the Central Gov- ernment may direct.

(2) The Central Government- (a) shall forward a copy of any report made by the inspectors to the company at its registered office, and also to any body corporate, managing agent, secretaries and treasurers or associate dealt with in the report by virtue of section 239; (b) may, if it thinks fit, furnish a copy thereof, on request and on payment of the prescribed fee, to any person- (i) who is a member of the company or other body corporate (including a managing agent, secretaries and treasurers; or an associate of a managing agent or secretaries and treasurers, where such managing agent, secretaries and treasurers or associate is a body corporate) dealt with in the report by virtue of section 239; (ii) who is a partner in the firm, where such managing agent, secretaries and treasurers or associate is a firm; or (iii) whose interests as a creditor of the company, other body corporate, managing agent, secretaries and treasurers or associate aforesaid appear to the Central Government to be affected; (c) shall, where the inspectors are appointed under clause (a) or (b) of section 235, furnish, at the request of the applicants for the investigation, a copy of the report to them; (d) shall, where the inspectors are appointed under section 237 in pursuance of an order of the Court, furnish a copy of the report to the Court; and (e) may also cause the report to be published.

Prosecution.

242. Prosecution.-(1) If, from any report made under section 241, it appears to the Central Government that any person has, in relation to the company or in relation to any other body corporate, managing agent, secretaries and treasurers, or associate of a managing agent or secretaries and treasurers, whose affairs have been investigated by virtue of section 239, been guilty of any offence for which he is criminally liable, the Central Government may, after taking such legal advice as it thinks fit, prosecute such person for the offence; and it shall be the duty of all officers and agents of the company, body corporate, managing agent, secretaries and treasurers, or associate, as the case may be, (other than the accused in the proceedings), to give the Central Government all assistance in connection with the prosecution which they are reasonably able to give.

(2) Sub-section (6) of section 240 shall apply for the purposes of this section, as it applies for the purposes of that section.

Application for winding up of company or an order under section 397 or398. 243. Application for winding up of company or an order under section 397 or 398.-If any such company or other body corporate, or any such managing agent, secretaries and treasurers, or associate, being a body corporate, is liable to be wound up under this Act and it appears to the Central Government from any such report as aforesaid that it is expedient so to do by reason of any such circumstances as are referred to in sub-clause (i) or (ii) of clause (b) of section 237, the Central Government may, unless the company, body corporate, managing agent, secretaries and treasurers or associate is already being wound up by the Court, cause to be presented to the Court by any person authorised by the Central Government in this behalf- (a) a petition for the winding up of the company, body cor- porate, managing agent, secretaries and treasurers, or associate, on the ground that it Is just and equitable that it should be wound up; (b) an application for an order under section 397 or 398; or (c) both a petition and an application as aforesaid.

Proceedings for recovery of damages or property.

244. Proceedings for recovery of damages or property.- (1) If from any such report as aforesaid, it appears to the Central Govern- ment that proceedings ought, in the public interest, to be brought by the company or any body corporate whose affairs have been investigated in pursuance of clause (a), (b) or (c) of section 239,- (a) for the recovery of damages in respect of any fraud, misfeasance or other misconduct in connection with the promotion or formation, or the management of the affairs, of such company or body corporate; or (b) for the recovery of any property of such company, or body corporate, which has been misapplied or wrongfully retained; the Central Government may itself bring proceedings for that purpose in the name of such company or body corporate.

(2) The Central Government shall indemnify such company or body corporate against any costs or expenses incurred by it in, or in

connection with, any proceedings brought by virtue of sub-section (1).

Expenses of investigation.

245. Expenses of investigation.-(1) The expenses of and incidental to an investigation by an inspector appointed by the Central Government under section 235 or 237 shall be defrayed in the first instance by the Central Government; but the following persons shall, to the extent mentioned below, be liable to reimburse the Central Government in respect of such expenses:- (a) any person who is convicted on a prosecution instituted in pursuance of section 242, or who is ordered to pay damages or restore any property in proceedings brought by virtue of section 244, may, in the same proceedings, be ordered to pay the said expenses to such extent as may be specified by the Court convicting such person, or ordering him to pay such damages or restore such property, as the case may be; 163 (b) any company or body corporate in whose name proceedings are brought as aforesaid shall be liable, to the extent of the amount or value of any sums or property recovered by it as a result of the proceedings; and (c) unless, as a result of the investigation, a prosecution is instituted in pursuance of section 242,- (i) any company, body corporate, managing agent, secretaries and treasurers or associate dealt with by the report, where the inspector was appointed under clause (a) or (b) of section 235 or clause (a) of section 237, shall be liable to reimburse the Central Government in respect of the whole of the expenses, unless, and except in so far as, the Central Government otherwise directs; and (ii) the applicants for the investigation, where the inspector was appointed under clause (a) or (b) of section 235, shall be liable to such extent, if any, as the Central Government may direct.

(2) Any amount for which a company or body corporate is liable

by virtue of clause (b) of subsection (1) shall be a first charge on the sums or property mentioned in that clause.

(3) The report of an inspector appointed under clause (c) of section 235 or clause (b) of section 237, may if he thinks fit, and shall if the Central Government so directs, include a recommendation as to the directions, if any, which he thinks appropriate, in the light of his investigation, to be given under clause (c) of sub-

section (1).

(4) For the purposes of this section, any costs or expenses incurred by the Central Government in or in connection with proceedings brought by virtue of section 244 (including expenses

incurred by virtue of sub-section (2) thereof) shall be treated as expenses of the investigation giving rise to the proceedings.

(5) (a) Any liability to reimburse the Central Government impos-

ed by clauses (a) and (b) of sub-section (1) shall, subject to satisfaction of the right of the Central Government to reimbursement, be a liability also to indemnify all persons against liability under clause (c) of that subsection. (b) Any such liability imposed by the said clause (a) shall, subject as aforesaid, be a liability also to indemnify all persons against liability under the said' clause (b). (c) Any person liable under the said clause (a) or (b) or sub- clause (i) or (ii) of the said clause (c) shall be entitled to contribution from any other persons liable under the same clause or sub-clause, as the case may be, according to the amount of their respective liabilities thereunder.

(6) In so far as the expenses to be defrayed by the Central Gov- ernment under this section are not recovered thereunder, they shall be paid out of moneys provided by Parliament.

Inspectors' report to be evidence. 246. Inspectors' report to be evidence.-A copy of any report of any Inspector or inspectors appointed under section 235 or 237 authenticated in such manner, if any, as may be prescribed, shall be admissible in any legal proceeding as evidence of the opinion of the inspector or inspectors in relation to any matter contained in the report, 164

Investigation of ownership of company.

247. Investigation of ownership of company.-(1) Where it appears to the Central Government that there is good reason so to do, it may appoint one or more inspectors to investigate and report on the membership of any company and other matters relating to the company, for the purpose of determining the true persons- (a) who are or have been financially interested in the success or failure, whether real or apparent, of the company; or (b) who are or have been able to control or materially to influence the policy of the company.

(2) When appointing an inspector under sub-section (1), the Central Government may define the scope of his investigation, whether as respects the matters or the period to which it is to extend or otherwise, and in particular, may limit the investigation to matters connected with particular shares or debentures.

(3) Subject to the terms of an inspector's appointment, his powers shall extend to the investigation of any circumstances suggesting the existence of any arrangement or understanding which, though not legally binding, is or was observed or is likely to be observed in practice and which is relevant to the purposes of his investigation.

(4) Subject as aforesaid, the powers of the inspector shall also extend, where the company has or at any time had a managing agent or secretaries and treasurers,- (a) in case such managing agent or secretaries and treasur- ers are or were a body corporate, to the investigation of the ownership of the shares of such body corporate, and of who the persons are or were who control or manage or controlled or managed its affairs; (b) in case such managing agent or secretaries and treasur- ers are or were a firm, to the investigation of who the persons are or were who control or manage or controlled or managed its affairs as partners in the firm or otherwise and of the respective interests therein of the partners; and (c) in all cases, to the investigation of who the persons are or were who are or were entitled to any share of, or any amount forming part of, the remuneration of such managing agent or secretaries and treasurers.

(5) For the purposes of any investigation under this section, sections 239, 240 and 241 shall apply with the necessary modification's of references to the affairs of the company or to those of any other body corporate or of any managing agent, secretaries and treasurers, or associate: Provided that the said sections shall apply in relation to all persons (including persons concerned only on behalf of others) who are or have been, or whom the inspector has reasonable cause to believe to be or to have been,- (i) financially interested in the success or failure, or the apparent success or failure, of the company or of any other 165 body corporate, managing agent, secretaries and treasurers or associate whose membership or constitution is investigated with that of the company; or (ii) able to control or materially to influence the policy of such company, body corporate, managing agent, secretaries and treasurers or associate; as they apply in relation to officers and agents of the company, of the other body corporate, or of the managing agent, secretaries and treasurers or associate, as the case may be: Provided further that the Central Government shall not be bound to furnish the company or any other person with a copy of any report by an inspector appointed under this section or with a complete copy thereof, if it is of opinion that there is good reason for not divulging the contents of the report or of parts thereof; but in such a case, the Central Government shall cause to be kept by the Registrar a copy of any such report, or as the case may be, of the parts thereof, as respects which it is not of that opinion.

(6) The expenses of any investigation under this section shall be defrayed by the Central Government out of moneys provided by Parliament, unless the Central Government directs that the expenses or any part thereof should be paid by the persons on whose application the investigation was ordered.

Information regarding persons having an interest in company, or inbody corporate or firm acting as managing agent thereof, 248. Information regarding persons having an interest in company,

or in body corporate or firm acting as managing agent thereof,--(1) Where it appears to the Central Government that there is good reason to investigate the ownership of any shares in or debentures of a company, or of a body corporate which acts or has acted as the managing agent or secretaries and treasurers of a company, and that it is unnecessary to appoint an inspector for the purpose, the Central Government may require any person whom it has reasonable cause to believe- (a) to be, or to have been, interested in those shares or debentures; or (b) to act, or to have acted, in relation to those shares or debentures, as the legal adviser or agent of someone interested therein; to give the Central Government any information which he has, or can reasonably be expected to obtain., as to the present and past interests in those shares or debentures, and the names and addresses of the persons interested and of any persons who act. or have acted on their behalf in relation to the shares or debentures.

(2) For the purposes of sub-section (1), a person shall be deemed to have an interest in a share or debenture- (a) if he has any right to acquire or dispose of the share or debenture or any interest therein or to vote in respect thereof-, (b) if his consent is necessary for the exercise of any of the rights of other persons interested therein; or (c) if other persons interested therein can be required, or are accustomed, to exercise their rights in accordance with his directions or instructions. 166

(3) Where it appears to the Central Government that there is good reason to investigate the ownership of any interest in a firm which acts or has acted as managing agent or as secretaries and treasurers of any company, and that it is unnecessary to appoint an inspector for the purpose, the Central Government may require any person whom it has reasonable cause to believe- (a) to have, or to have had, any interest in the firm; or (b) to act, or to have acted, in relation to any such interest, as the legal adviser or agent of someone interested therein; to give the Central Government any information which he has, or can reasonably be expected to obtain, as to the present and past interests held in the firm, and the names and addresses of the persons interested and of any persons who act or have acted on their behalf in relation to any such interest.

(4) Any person- (a) who fails to give any information required of him under this section; or (b) who, in giving any such information, makes any state- ment which he knows to be false in a material particular, or recklessly makes any statement which is false in a material particular; shall be punishable with imprisonment for a term which may extend to six months, or with fine which may extend to five thousand rupees, or with both.

Investigation of associateship with managing agent, etc.

249. Investigation of associateship with managing agent, etc.-(1) Where any question arises as to whether any body corporate firm, or individual is or is not, or was or was not, an associate of the managing agent or secretaries and treasurers of a company and it appears to the Central Government that there is good reason to investigate such question, it may either- (a) appoint an inspector for the purpose of making the in, vestigation; or (b) if it considers it unnecessary to appoint an inspector as aforesaid, require any person whom it has reasonable cause to believe to be in a position to give relevant information in regard to the question, to furnish the Central Government with information on such matters as may be specified by it.

(2) The provisions of section 247 shall apply mutatis mutandis

to cases falling under clause (a) of sub-section (1) and those of section 248 to cases falling under clause (b) of that sub-section.

Imposition of restrictions on shares or debentures.

250. Imposition of restrictions on shares or debentures.(1) Where in connection with an investigation under section 247, 248 or 249, it appears to the Central 'Government that there is difficulty in finding out the relevant facts about any shares (whether issued or to be issued), and that the difficulty is due wholly or mainly to the unwillingness of the persons concerned or any of them to assist the investigation as required by this Act, the Central Government 167 may, by order, direct that the shares shall, until further order, be subject to the restrictions imposed by this section.

(2) So long as any shares are directed to be subject to the res- trictions imposed by this section,- (a) any transfer of those shares shall be void; (b) where those shares are to be issued, they shall not be issued; and any issue thereof or any transfer of the right to be issued therewith, shall be void; (c) no voting rights shall be exercisable in respect of those shares; (d) no further shares shall be issued in right of those shares or in pursuance of any offer made to the holder thereof; and any issue of such shares, or any transfer of the right to be issued therewith, shall be void; and (e) except in a liquidation, no payment shall be made of any sums due from the company on those shares, whether in respect of dividend, capital or otherwise.

(3) Where the Central Government makes an order directing that any shares shall be subject to the said restrictions, or, refuses to make an order directing that any shares shall cease to be subject thereto, any person aggrieved thereby may apply to the Court, and the Court may, if it sees fit, direct that the shares shall cease to be subject to the said restrictions.

(4) Any order (whether of the Central Government or of the Court, directing that any shares shall cease to be subject to the said restrictions, which is expressed to be made with a view to permitting a transfer of those shares, may continue the restrictions mentioned in

clauses (d) and (e) of sub-section (2), either in whole or in part, so far as they relate to any right acquired, or offer made, before the transfer.

(5) Any person who- (a) exercises, or purports to exercise, any right to dispose of any shares or of any right to be issued with any such shares, when to his knowledge, lie is not entitled to do so, by reason of any of the said restrictions applicable to the case; (b) votes in respect of any such shares whether as holder or proxy, or appoints a proxy to vote in respect thereof, when, to his knowledge, he is not entitled to do so by reason of any of the said restrictions applicable to the case; or (c) being the holder of any such shares, fails to give notice of the fact of their being subject to the said restrictions to any person whom he does not know to be aware of that fact but whom he knows to be entitled, apart from such restrictions, to vote in respect of those shares, whether as holder or as proxy; shall be punishable with imprisonment for a term which may extend to six months, or with fine which may extend to five thousand rupees, or with both.

(6) Where shares in any company are issued in contravention of such of the said restrictions as may be applicable to the case, the company, and every officer of the company who is in default, shall be punishable with fine which may extend to five thousand rupees. 168

(7) A prosecution shall not be instituted under this section except by, or with the consent of, the Central Government.

(8) This section shall apply in relation to debentures as it applies in relation to shares.

Saving for legal advisers and bankers. 251.Saving for legal advisers and bankers.-Nothing in sections 234 to 250 shall require the disclosure to the Registrar or to the Central Government or to an inspector appointed by that Government- (a) by a legal adviser, of any privileged communication made to him in that capacity, except as respects the name and address of his client; or (b) by the bankers of any company, body corporate, managing agent, secretaries and treasurers or other person, referred to in the sections aforesaid, as such bankers, of any information as to the affairs of any of their customers other than such company, body corporate, managing agent, secretaries and treasurers or person. CHAP DIRECTORS CHAPTER II DIRECTORS Constitution of Board of Directors

Minimum number of directors.

252. Minimum number of directors.-(1) Every public company and every private company which is a subsidiary of a public company, shall have at least three directors.

(2) Every private company which is not a subsidiary of a public company shall have at least two directors.

(3) The directors of a company collectively are referred to in this Act as the "Board of directors" or "Board".

Only individuals to be directors. 253. Only individuals to be directors.-No body corporate, asso- ciation or firm shall be appointed director of a public or private company, and only an individual shall be so appointed.

Subscribers of memorandum deemed to be directors. 254. Subscribers of memorandum deemed to be directors.-In, default of and subject to any regulations in the articles of a company, subscribers of the memorandum who are individuals, shall be deemed to be the directors of the company, until the directors are duly appointed in accordance with section 255.

Appointment of directors and proportion of those who are to retire byrotation. 255. Appointment of directors and proportion of those who are to

retire by rotation.-(1) Not less than two-thirds of the total number of directors of a public company, or of a private company which is a subsidiary of a public company, shall- (a) be persons whose period of office is liable to determination by retirement of directors by rotation; and (b) save as otherwise expressly provided in this Act, be appointed by the company in general meeting.

(2) The remaining directors in the case of any such company, and the directors generally in the case of a private company which is not a subsidiary of a public company, shall, in default of and subject to any regulations in the articles of the company, also be appointed by the company in general meeting.

Ascertainment of directors retiring by rotation and filling ofvacancies. 256. Ascertainment of directors retiring by rotation and

filling of vacancies.-(1) At the first annual general meeting of a public 169 Company, or a private company which is a subsidiary of a public company, held next after the date of the general meeting at which the first directors are appointed in accordance with section 255 and ,at every subsequent annual general meeting, one-third of such of, the directors for the time being as are liable to retire, by rotation, or if their number is not three or a multiple of three, then, the number nearest to one-third, shall retire from office.

(2) The directors to retire by rotation at every annual general meeting shall be those who have been longest in office since their last appointment, but as between persons who became directors' on the ,same day, those who are to retire shall, in default of and subject to any agreement among themselves, be determined by lot.

(3) At the annual general meeting at which a director retires as aforesaid, the company may fill up the vacancy by appointing the retiring director or some other person thereto.

(4) (a) If the place of the retiring director is not so filled up and the meeting has not expressly resolved not to fill the vacancy, the meeting shall stand adjourned till the same day in the next week, at the same time and place, or if that day is a public holiday, till the next succeeding day which is not a public holiday, at the same time and place. (b) If at the adjourned meeting also, the. place of the retiring director is not filled up and that meeting also has not expressly resolved not to fill the vacancy, the retiring director shall be deemed to have been re-appointed at the adjourned meeting, unless- (i) at that meeting or at the previous meeting a resolution for the re-appointment of such director has been put to the meeting and lost; (ii) the retiring director has, by a notice in writing addressed to the company or its Board of directors, expressed his unwillingness to be so re-appointed; (iii) he is not qualified or is disqualified for appointment; (iv) a resolution. whether special or ordinary, is required for his appointment or re-appointment in virtue of any provisions of this Act; or

(v) the proviso to sub-section (2) of section 263 or sub-

section (3) of section 280 is applicable to the case.

(5) Where a director is to retire at any annual general meeting

both in virtue of sub-section (2) and in virtue of sub-section (2) of section 280, he shall be deemed, for the purposes of this section, to

retire in virtue of sub-section (2) of this section.

Right of persons other than retiring directors to stand fordirectorship. 257. Right of persons other than retiring directors to stand for

directorship.--(1) A Person who is not a retiring director shall, sub- ject to the provisions of this Act, be eligible for appointment to the office of director at any general meeting, if he or some member intending to propose him has, not less than fourteen days before the meeting, left at the office of the company a notice in writing under his hand signifying his candidature for the office of director or the intention of such member to propose him as a candidate for that office, as the case may be.

(2) Sub-section (1) shall not apply to a private company, unless it is a subsidiary of a public company. 170

Right of company to increase or reduce the number of directors. 258. Right of company to increase or reduce the number of directors.-Subject to the provisions of sections 252, 255, and 259. a company in general meeting may, by ordinary resolution, increase or reduce the number of its directors within the limits fixed in that behalf by its articles.

Increase in number of directors to require Government sanction. 259. Increase in number of directors to require Government sanction.-In the case of a public company or a private company which is a subsidiary of a public company, any increase in the number of its directors, except- (a) in the case of a company which was in existence on the 21st day of July, 1951, an increase which was within the per- missible maximum under its articles as in force on that date, and (b) in the case of a company which came or may come into existence after that date, an increase which is within the permissible maximum under its articles as first registered, shall not have any effect unless approved by the Central Government; and shall become void if, and in so far as, it is disapproved by that Government.

Additional directors. 260. Additional directors.-Nothing in section 255, 258 or 259 shall affect any, power conferred on the Board of directors by the articles to appoint additional directors: Provided that such additional directors shall hold office only up to the date of the next annual general meeting of the company: Provided further that the number of the directors and additional directors together shall not exceed the maximum strength fixed for the Board by the articles.

Certain persons not to be appointed directors, except by specialresolution. 261. Certain persons not to be appointed directors, except

by special resolution.-(1) If a public company, or a private company which is a subsidiary of a public company, has a managing agent and such managing agent is authorised by the articles or by an agreement to appoint any director to the Board, none of the following persons shall be appointed as a director of the company whose period of office is liable to determination by retirement of directors by rotation, except by a special resolution passed by the company:- (a) any person who is an officer or employee of, or who holds any office or place of profit under, the company or any subsidiary thereof: Provided that nothing in this clause shall apply to the director of such company or subsidiary, or to the holder of any office or place of profit under such company or subsidiary which may be held by a director of the company by virtue of section 314; (b) where any office or place of profit which would dis- qualify a person under clause (a), read with the proviso thereto, is held by any firm, any partner in, or employee of, the firm; (c) where any such office or place of profit is held by a private company, any member, officer or employee of such com- pany; 171 (d) where any such office or place of profit is held by a body corporate, any officer or employee of such body corporate; (e) any person who is entitled, by virtue of any agreement, to any share of, or any amount out of, the remuneration received by the managing agent; (f) any associate, or officer or employee, of the managing agent; or (g) any person who is an officer or employee of, or who holds any office or place of profit under, any body corporate under the management of the managing agent or any subsidiary of such body corporate: Provided that nothing in clause (g) shall apply to the director of such body corporate or subsidiary or to the holder of any office or place of profit under such body corporate or subsidiary which may be held by a director of such body corporate by virtue of section 314.

(2)Special notice shall be required of any resolution appointing, or approving the appointment of, any person referred to in clauses (a)

to (g) of sub-section (1), as a director of the company.

(3) The notice given to the company of any such resolution, and the notice thereof given by the company to its members, shall set out the reasons which make the resolution necessary.

(4) Nothing in this section shall be deemed to prevent any director holding any office immediately before the commencement of this Act from continuing to hold that office up to the next annual general meeting of the company.

Filling of casual vacancies among directors.

262. Filling of casual vacancies among directors.-(1) In the case of a public company or a private company which is a subsidiary of a public company, if the office of any director appointed by the company in general meeting is vacated before his term of office will expire in the normal course, the resulting casual vacancy may, in default of and subject to any regulations in the articles of the company, be filled by the Board of directors at a meeting of the Board.

(2) Any person so appointed shall hold office only up to the date up to which the director in whose place he is appointed would have held office if it had not been vacated as aforesaid.

Appointment of directors to be voted on individually. 263. Appointment of directors to be voted on individually.-

(1) At a general meeting of a public company or of a private company which is a subsidiary of a public company, 'a motion shall not be made for the appointment of two or more persons as directors of the company by a single resolution, unless a resolution that it shall be so made has first been agreed to by the meeting without any vote being given against it.

(2) A resolution moved in contravention of sub-section (1) shall be void, whether or not objection was taken at the time to its being so moved: Provided that where a resolution so moved is passed, no provision for the automatic re-appointment of retiring directors in default of another appointment shall apply. 172

(3) For the purposes of this section, a motion for approving a person's appointment, or for nominating a person for appointment, shall be treated as a motion for his appointment.

Consent of candidate for directorship to be filed with Registrar. 264. Consent of candidate for directorship to be filed with

Registrar.-(1) A person who is not a retiring director shall not be capable of being appointed director of a company unless he has, by himself or by his agent authorised in writing, signed and filed with the Registrar, a consent in writing to act as such director.

(2) Sub-section (1) shall not apply to a private company unless it is a subsidiary of a public company.

Option to company to adopt proportional representation for theappointment of directors. 265. Option to company to adopt proportional representation for the appointment of directors.-Notwithstanding anything contained in this Act, the articles of a company may provide for the appointment of not less than two-thirds of the total number of the directors of a public company or of a private company which is a subsidiary of a public company, according to the principle of proportional re- presentation, whether by the single transferable vote or by a system of cumulative voting or otherwise, the appointments being made once in every three years and interim casual vacancies being filled in' accordance with the provisions, mutatis mutandis, of section 262.

Restrictions on appointment or advertisement of director. 266. Restrictions on appointment or advertisement of director.-

(1) A person shall not be capable of being appointed director of a company by the articles, and shall not be named as a director or proposed director of a company in a prospectus issued by or on' behalf of the company, or as proposed director of an intended company in a prospectus issued in relation to that intended company. or in a statement in lieu of prospectus filed with the Registrar by or on behalf of a company, unless, before the registration of the articles, the publication of the prospectus or the filing of the statement in lieu of prospectus, as the case may be, he has, by himself or by his agent authorised in writing,- (a) signed and filed with the Registrar a consent in writing to act as such director; and (b) either- (i) signed the memorandum for shares not being less in number or value than that of his qualification shares, if any; or (ii) taken his qualification shares, if any, from the company and paid or agreed to pay for them; or (iii) signed and filed with the Registrar an undertaking in writing to take from the' company his qualification shares, if any, and pay for them; or (iv)made and filed with the Registrar an affidavit to the effect that shares, not being less in number or value than that of his qualification shares, if any, are registered in his name.

(2) Where a person has signed and filed as aforesaid an undertaking to take and pay for his qualification shares, he shall, as regards those shares, be in the same position as if he had signed the memorandum for shares of that number or value. 173

(3) References in this section to the share qualification of a director or proposed director shall be construed as including only a share qualification required within a period determined by reference to. the time of appointment, and. references therein to qualification shares shall be construed accordingly.

(4) On the application for registration of the memorandum and the articles, if any, of a company, the applicant shall file with the Registrar a list of the persons who have consented to be directors of the company; and, if this list contains the name of any person who has not so consented, the applicant shall be punishable with One which may extend to five hundred rupees.

(5) This section shall not apply to- (a) a company not having a share capital; (b) a private company; (c) a company which was a private company before becoming a public company; or (d) a prospectus issued by or on behalf of a company after the expiry of one year from the date on which the company was entitled to commence business. Managing directors, etc.

Certain persons not to be appointed managing directors. 267. Certain persons not to be appointed managing directors. No company shall, After the commencement of this Act, appoint or employ, or continue the appointment or employment of, any per. son as its managing or whole-time director who- (a) is an undischarged insolvent, or hag at any time been adjudged an insolvent; (b) suspends, or has at any time suspended, payment to his creditors, or makes, or has at any time made, a composition with them; or (c) is, or has at any time been, convicted by a Court in India of an offence involving moral, turpitude.

Amendment of provision relating to managing, Whole-time or non-rotational directors to require Government approval. 268. Amendment of provision relating to managing, Whole-time or non-rotational directors to require Government approval.-In the case of a public company or a private company which is a subsidiary of a public company, an amendment of any provision relating to the appointment or re-appointment of a managing or whole-time director or of a director not liable to retire by rotation, whether that provision be contained in the company's memorandum or articles, or in an agree- ment entered into by it, or in any resolution passed by the company in general meeting or by its Board of directors, shall not have any effect unless approved by the Central Government; and the amendment shall become void if, and in so far as, it is disapproved by that Government.

Appointment of managing or whole-time director to require Governmentapproval. 269. Appointment of managing or whole-time director to require Government approval.-In the case of a public company or a private company which is a subsidiary of a public company, the appointment of a managing or whole time director for the first time after the commencement of this Act in the case of an existing company, and after 174 the expiry of three months from the date of its incorporation in the case of any other company, shall not have any effect unless approved by the Central Government; and shall become void if, and in so far as, it is disapproved by that Government. Share qualification

Time within which share qualification is to be obtained and maximumamount thereof. 270. Time within which share qualification is to be obtained and

maximum amount thereof.-(1) Without prejudice to the restrictions imposed by section 266, it shall be the duty of every director who is required by the articles of the company to hold a specified share qualification and who is not already qualified in that respect, to obtain his qualification within two months after his appointment as director.

(2) Any provision in the articles of the company (whether made before or after the commencement of this Act) shall be void in so far as it requires a person to hold the qualification shares before his appointment as a director or to obtain them within a shorter time than two months after his appointment as such.

(3) The nominal value of the qualification shares shall not exceed five thousand rupees, or the nominal value of one share where it exceeds five thousand rupees.

(4) For the purpose of any provision in the articles requiring a director to hold a specified share qualification, the bearer of a share warrant shall not be deemed to be the holder of the shares specified in the warrant.

Filing of declaration of share qualification by director. 271. Filing of declaration of share qualification by director.- Every director, not being a technical director or a director appointed by the Central or a State Government, shall within two months after his appointment, or in the case of a director holding office at the commencement of this Act, within two months after such commencement, file with the company a declaration specifying the qualification shares held by him.

Penalty. 272. Penalty.-If, after the expiry of the said period of two months, any person acts as a director of the company when he does not hold the qualification shares referred to in section 270, he shall be punishable with fine which may extend to fifty rupees for every day between such expiry and the last day on which he acted as a director.

Saving. 273. Saving.-Sections 270 to 272 shall not apply to a private company, unless it is a subsidiary of a public company. Disqualifications of directors

Disqualifications of directors.

274. Disqualifications of directors.-(1) A person shall not be capable of being appointed director of a company, if- (a) he has been found to be of unsound mind by a Court of competent jurisdiction and the finding is in force; (b) he is an undischarged insolvent; (c) he has applied to be adjudicated as an insolvent and his application is Pending; 175 (d) he has been convicted by a Court in India of any offence involving moral turpitude and sentenced in respect thereof to imprisonment for not less than six months, and a period of five years has not elapsed from the date of expiry of the sentence; (e) he has not paid any call in respect of shares of the company held by him, whether alone or jointly with others, and six months have elapsed from the last day fixed for the payment of the call; or (f) an order disqualifying him for appointment as director has been passed by a Court in pursuance of section 203 and is in force, unless the leave of the Court has been obtained for his appointment in pursuance of that section.

(2) The Central Government may, by notification in the Official Gazette, remove- (a) the disqualification incurred by any person in virtue

of clause (d) of sub-section (1), either generally or in relation to any company or companies specified in the notification; or (b) the disqualification incurred by any person in virtue

of clause (e) of sub-section (1).

(3) A private company which is not a subsidiary of a public company may, by its articles, provide that a person shall be disquali- fied for appointment as a director on any grounds in addition to those

specified in sub-section (1). Restrictions on number of directorships

No person to be a director of more than twenty companies. 275. No person to be a director of more than twenty companies. After the commencement of this Act, no person shall, save as otherwise provided in section 276, hold office at the same time as director in more than twenty companies.

Choice to be made by director of more than twenty companies atcommencement of Act. 276. Choice to be made by director of more than twenty companies

at commencement of Act.-(1) Any person holding office as director in more than twenty companies immediately before the commencement of this Act shall, within two months from such commencement,- (a) choose not more than twenty of those companies, as companies in which he wishes to continue to hold the office of director; (b) resign his office as director in the other companies; and (c) intimate the choice made by him under clause (a) to each of the companies in which he was holding the office of director before such commencement, to the Registrar having jurisdiction in respect of each such company, and also to the Central Government.

(2) Any resignation made in pursuance of clause (b) of sub-

section (1) shall become effective immediately on the despatch thereof to the company concerned.

(3) No such person shall act as director- (a) in more than twenty companies, after the expiry of two months from the commencement of this Act; or 176 (b) of any company after despatching the resignation of his office as director thereof, in pursuance of clause (b) of

subsection (1).

Choice by person becoming director of more than twenty companies aftercommencement of Act. 277. Choice by person becoming director of more than twenty

companies after commencement of Act.-(1) Where a person already holding the office of director in twenty companies is appointed, after the commencement of this Act, as a director of any other company, the appointment-- (a) shall not take effect unless such person has, within fifteen days thereof, effectively vacated his office as director in any of the companies in Which he was already a director; and (b) shall become void immediately on the expiry of the fifteen days if he has not, before such expiry, effectively vacated his office as director in any of the other companies aforesaid.

(2) Where a person already holding the office of director in nineteen companies or less is appointed, after the commencement of this Act, as a director of other companies, making the total number of his directorships more than twenty, he shall choose the directorships which he wishes to continue to hold or to accept, so however that the total number of the directorships, old and new, held by him shall not exceed twenty. None of the new appointments of director shall take effect until such choice is made; and all the new appointments shall become void if the choice is not made within fifteen days of the day on which the last of them was made.

Exclusion of certain directorships for the purposes of sections 275,276 and

278. Exclusion of certain directorships for the purposes of

sections 275, 276 and 277.--(1) In calculating, for the purposes of sections 275, 276 and 277, the number of companies of which a person may be a director, the following companies shall be excluded, namely: - (a) a private company which is neither a subsidiary nor a holding company of a public company; (b) an unlimited company; (c) an association not carrying on business for profit or which prohibits the payment of a dividend; (d) a company in which such person is only an alternate director, that is to say, a director who is only qualified to act as such during the absence or incapacity of some other director.

(2) In making the calculation aforesaid, any company referred to

in clauses (a), (b) and (c) of sub-section (1) shall be excluded for a period of three months from the date on which the company ceases to fall within the purview of those clauses.

Penalty. 279. Penalty.-Any person who holds office, or acts, as a director of more than twenty companies in contravention of the foregoing provisions shall be punishable with fine which may extend to five thousand rupees in respect of each of those companies after the first twenty. 177 Retiring age of directors

Age limit.

280. Age limit.-(1) Save as otherwise provided in section 281, a person shall not be capable of being appointed a director of a public company or of a private company which is a subsidiary of a public company, if he has attained the age of sixty-five years.

(2) Save as aforesaid, a director of a public company or of a private company which is a subsidiary of a public company shall vacate his office at the conclusion of the annual general meeting commencing next after he attains the age of sixty-five years: Provided that this sub-section shall not apply to a director who is in office at the commencement of this Act so as to require the termination of the appointment then held by him before the conclusion of the third annual general meeting held after the commencement of this Act, but shall apply so as to terminate the appointment aforesaid at the conclusion of that meeting, if he had attained the age of sixty-five years before the commencement of the meeting.

(3) Where a person retires by virtue of sub-section (2), no provision for the automatic re-appointment of retiring directors in, default of another appointment shall apply; and if at the meeting at the conclusion of which he retires, the vacancy is not filled, it may be filled as a casual vacancy under section 262.

Age limit not to apply if company so resolves.

281. Age limit not to apply if company so resolves.-(1) Nothing in section 280 shall prevent the appointment of a director who has attained the age of sixty-five years or require a director to retire who has attained that age, if his appointment is or was made or approved by a resolution passed by the company in general meeting and specifically declaring that the age limit shall not apply to him.

(2) Special notice shall be required of any such resolution; and unless such notice is given, the resolution shall be void.

(3) Notice of any such resolution given to the company, and by the company to its members, must state or must have stated the age of the person to whom it relates.

Duty of director to disclose age.

282. Duty of director to disclose age.-(1) Any person who is appointed, or to his knowledge is proposed to be appointed, director of a company at a time when he has attained the age of sixty-five years or such lower age, if any, as may be specified in the company's articles in this behalf, shall give notice of his age to the company: Provided that this sub-section shall not apply in relation to a person's re-appointment on the termination of his previous appointment as director of the company, if notice has been given as aforesaid in connection with, or at any time during the continuance of, such previous appointment or any appointment as director prior thereto.

(2) Any person who- (a) fails to give notice of his age as required by sub-

section (1); or 178 (b) acts as director under any appointment which is invalid, or which has terminated, by reason of his age; shall be punishable with fine which may extend to fifty rupees for every day during which the failure continues or during which he continues to act as aforesaid, as the case may be.

(3) For the purposes of clause (b) of sub-section (2), a person who has acted as director under an appointment which is invalid or has terminated, shall be deemed to have continued so to act throughout the period from the date of the invalid appointment or the date on which the appointment terminated, as the case may be, until the last day on which he acted thereunder. Vacation of office by directors

Vacation of office by directors.

283. Vacation of office by directors.-(1) The office of a director shall be vacated if- (a) he fails to obtain within the time specified in sub-

section (1) of section 270, or at any time thereafter ceases to hold, the share qualification, if any, required of him by the articles of the company; (b) he is found to be of unsound mind by a Court of compe- tent jurisdiction; (c) he applies to be adjudicated an insolvent; (d) he is adjudged an insolvent; (e) he is convicted by a Court in India of any offence and is sentenced in respect thereof to imprisonment for not less than six months; (f) he fails to pay any call in respect of shares of the company held by him, whether alone or jointly with others, within six months from the last date fixed for the payment of the call; (g) he absents himself from three consecutive meetings of the Board of directors, or from all meetings of the Board for a continuous period of three months, whichever is longer, without obtaining leave of absence from the Board; (h) he, or any firm in which he is a partner or any private company of which he is a director, accepts a loan, or any guarantee or security for a loan, from the company in contravention of section 295; (i) he acts in contravention of section 299; (j) he becomes disqualified by an order of Court under section 203; or (k) he is removed in pursuance of section 284.

(2) Notwithstanding anything in clauses (d), (e) and (j) of sub-

section (1), the disqualification referred to in those clauses shall not take effect- (a) for thirty days from the date of the adjudication sentence or order; 179 (b) where any appeal or petition is preferred within the thirty days aforesaid against the adjudication, sentence or conviction resulting in the sentence, or order until the expiry of seven days from the date on which such appeal or petition is disposed of; or (c) where within the seven days aforesaid, any further appeal or petition is preferred in respect of the adjudication, sentence conviction, or order, and the appeal or petition, if allowed, would result in the removal of the disqualification, until such further appeal or petition is disposed of.

(3) A private company which is not a subsidiary of a public com- pany may, by its articles, provide, that the office of director shall be vacated on any grounds in addition to those specified in subsection

(1).

Removal of directors.

284. Removal of directors.-(1) A company may, by ordinary re- solution, remove a director (not being a director appointed by the Central Government in pursuance of section 408) before the expiry of his period of office: Provided that this sub-section shall not, in the case of a private company, authorise the removal of a director holding office for life on the 1st day of April, 1952, whether or not he is subject to retirement under an age limit by virtue of the articles or otherwise : Provided further that nothing contained in this sub-section shall apply where the company has availed itself of the option given to it under section 265 to appoint not less than two-thirds of the total number of directors according to the principle of proportional re- presentation.

(2) Special notice shall be required of any resolution to remove a director under this section, or to appoint somebody instead of a director so removed at the meeting at which he is removed.

(3) On receipt of notice of a resolution to remove a director under this section, the company shall forthwith send a copy thereof to the director concerned, and the director (whether or not he is a member of the company) shall be entitled to be heard on the resolution at the meeting.

(4) Where notice is given of a resolution to remove a director under this section and the director concerned makes with respect thereto representations in writing to the company (not exceeding a reasonable length) and requests their notification to members of the company, the company shall, unless the representations are received by it too late for it to do so,- (a) in any notice of the resolution given to members of the company, state the fact of the representations having been made; and (b) send a copy of the representations to every member of the company to whom notice of the meeting is sent (whether before or after receipt of the representations by the company); and if a copy of the representations is not sent as aforesaid because they were received too late or because of the company's default, the director may (without prejudice to his right to be beard orally) require that the representations shall be read out at the meeting: 180 Provided that copies of the representations need not be sent out and the representations need not be read out at the meeting if, on the application either of the company or of any other person who claims to be aggrieved, the Court is satisfied that the rights conferred by this subsection are being abused to secure needless publicity for defamatory matter; and the Court may order the company's costs on the application to be paid in whole or in part by the director notwithstanding that he is not a party to it.

(5) A vacancy created by the removal of a director under this section may, if he had been appointed by the company in general meeting or by the Board in pursuance of section 262, be filled by the appointment of another director in his stead by the meeting at which he is removed, provided special notice of the intended appointment has

been given under sub-section (2). A director so appointed shall hold office until the date up to which his predecessor would have held office if he had not been removed as aforesaid.

(6) If the vacancy is not filled under sub-section (5), it may be filled as a casual vacancy in accordance with the provisions, so far as they may be applicable, of section 262, and all the provisions of that section shall apply accordingly: Provided that the director who was removed from office shall not be re-appointed as a director by the Board of directors.

(7) Nothing in this section shall be taken- (a) as depriving a person removed thereunder of any com- pensation or damages payable to him in respect of the termination of his appointment as director or of any appointment terminating with that as director; or (b) as derogating from any power to remove a director which may exist apart from this section. Meetings of Board

Board to meet once in every three months. 285. Board to meet once in every three months.-In the case of every company, a meeting of its Board of directors shall be held at least once in every three calendar months.

Notice of meetings.

286. Notice of meetings.-(1) Notice of every meeting of the Board of directors of a company shall be given in writing to every director for the time being in India, and at his usual address in India to every other director.

(2) Every officer of the company whose duty it is to give notice as aforesaid and who fails to do so shall be punishable with fine which may extend to one hundred rupees.

Quorum for meetings. 287. Quorum for meetings.-

(1) In this section- (a) "total strength" means the total strength of the Board of directors of a company as determined in pursuance of this Act. after deducting' therefrom the number of the directors if any, whose places may be vacant at the time; and 181 (b) "interested director" means any director whose presence cannot, by reason of section 300, count for the purpose of forming a quorum at a meeting of the Board, at the time of the discussion or vote on any matter.

(2) The quorum for a meeting of the Board of directors of a company shall be one-third of its total strength (any fraction con- tained in that one-third being rounded off as one), or two directors, whichever is higher: Provided that where at any time the number of interested direc- tors exceeds or is equal to two-thirds of the total strength, the number of the remaining directors, that is to say, the number of the directors who are not interested, shall be the quorum during such time.

Procedure where meeting adjourned for want of quorum.

288. Procedure where meeting adjourned for want of quorum.- (1) If a meeting of the Board could not be held for want of quorum, then, unless the articles otherwise provide, the meeting shall automatically stand adjourned till the same day in the next week, at the same time and place, or if that day is a public holiday, till the next succeeding day which is not a public holiday, at the same time and place.

(2) The provisions of section 285 shall not be deemed to have been contravened merely by reason of the fact that a meeting of the Board which had been called in compliance with the terms of that section could not be held for want of a quorum.

Passing of resolutions by circulation. 289. Passing of resolutions by circulation.-No resolution shall be deemed to have been duly passed by the Board or by a committee thereof by circulation, unless the resolution has been circulated in draft, together with the necessary papers, if any, to all the direc- tors, or to all the members of the committee, then in India (not being less in number than the quorum fixed for a meeting of the Board or committee, as the case may 'be), and to all other directors or members at their usual address in India, and has been approved by such of the directors as are then in India, or by a majority of such of them, as are entitled to vote on the resolution.

Validity of acts of directors. 290. Validity of acts of directors.-Acts done by a person as a director shall be valid, notwithstanding that it may afterwards be discovered that his appointment was invalid by reason of any defect or disqualification or had terminated by virtue of any provision con- tained in this Act or in the articles: Provided that nothing in this section shall be deemed to give validity to acts done by a director after his appointment has been shown to the company to be invalid or to have terminated. Board's powers and restrictions thereon

General powers of Board.

291. General powers of Board.-(1) Subject to the provisions of this Act, the Board of directors of a company shall be entitled to exercise all such powers, and to do all such acts and things, as the company is authorised to exercise and do: Provided that the Board shall not exercise any power or do any act or thing which is directed or required, whether by this or any 182 other Act or by the memorandum or articles of the company or other- wise, to be exercised or done by the company in general meeting: Provided further that in exercising any such power or doing any such act or thing, the Board shall be subject to the provisions con- tained in that behalf in this or any other Act, or in the memorandum or articles of the company, or in any regulations not inconsistent therewith and duly made thereunder, including regulations made by the company in general meeting.

(2) No regulation made by the company in general meeting shall invalidate any prior act of the Board which would have been valid if that regulation had not been made.

Certain powers to be exercised by Board only at meeting.

292. Certain powers to be exercised by Board only at meeting. (1) The Board of directors of a company shall exercise the following powers on behalf of the company, and it shall do so only by means of resolutions passed at meetings of the Board: - (a) the power to make calls on shareholders in respect of money unpaid on their shares; (b) the power to issue debentures; (c) the power to borrow moneys otherwise than on debentures; (d) the power to invest the funds of the company; and (e) the power to make loans: Provided that the Board may, by a resolution passed at a meeting, delegate to any committee of directors, the managing director, the managing agent, secretaries and treasurers, or the manager of the company, or in the case of a banking company, also to a manager or other principal officer of a branch office of the company, the powers specified in clauses (c), (d) and (e), to the extent specified in sub-

sections (2), (3) and (4) respectively.

(2) Every resolution delegating the power referred to in clause

(C) of sub-section (1) shall specify the total amount up to which moneys may be borrowed by the delegate.

(3) Every resolution delegating the power referred to in clause

(d) of sub-section (1) shall specify the total amount up to which the funds may be invested, and the nature of the investments which may be made, by the delegate.

(4) Every resolution delegating the power referred to in clause

(e) of sub-section (1) shall specify the total amount up to which loans may be made by the delegate, the purposes for which the loans may be made, and the maximum amount of loans which may be made for each such purpose in individual cases.

(5) Nothing in this section shall be deemed to affect the right of the company in general meeting to impose restrictions and conditions on the exercise by the Board of any of the powers specified

in subsection (1). 183

Restrictions on powers of Board.

293. Restrictions on powers of Board.-(1) The Board of directors of, a public company, or of a private company which is a subsidiary of a public company, shall not, except with the consent of such public company or subsidiary in general meeting,- (a) sell, lease or otherwise dispose of the whole, or 'substantially the whole, of the undertaking of the company, or where the company owns more than one undertaking, of the whole, or substantially the whole, of any such undertaking; (b) remit, or give time for the re-payment of, any debt due by a director; (c) invest, otherwise than in trust securities, the sale proceeds resulting from the acquisition, after the commence- ment of this Act, without the consent of the company, of any such undertaking as is referred to in clause (a), or of any premises or properties used for any such undertaking and without which it cannot be carried on or can be carried on only with difficulty or only after a considerable time; (d) borrow moneys after the commencement of this Act, where the moneys to be borrowed, together with the moneys already borrowed by the company, (apart from temporary loans obtained from the company's bankers in the ordinary course of business) will exceed the aggregate of the paid-up capital of the company and its free reserves, that is to say, reserves not set apart for any specific purpose; or (e) contribute, after the commencement of this Act, to charitable and other funds not directly relating to the business of the company or the welfare of its employees, any amounts the aggregate of which will, in any financial year, exceed twentyfive thousand rupees, or five per cent. of its average net profits as determined in accordance with the provisions of sections 349 and 350 during the three financial years immediately preceding, whichever is greater. Explanation.-Where a portion of a financial year of the company falls before the commencement of this Act, and a portion falls after such commencement, the latter portion shall be deemed to be a financial year within the meaning, and for the purposes, of clause (e).

(2) Nothing contained in clause (a) of sub-section (1) shall affect- (a) the title of a buyer or other person who buys or takes a lease of any such undertaking as is referred to in that clause, in good faith and after exercising due care and caution; or (b) the selling or leasing of any property of the company where the ordinary business of the company consists of, or comprises, such selling or leasing.

(3) Any resolution passed by the company permitting any trans-

action such as is referred to in clause (a) of, sub-section (1) may attach such conditions to the permission as may be specified in the resolution, including conditions regarding the use, disposal or investment of the sale proceeds which may result from the transaction; 184 Provided that this sub-section shall not be deemed to authorise the company to effect any reduction in its capital except in accord- ance with the provisions contained in that behalf in this Act.

(4) The acceptance by a banking company, in the ordinary course of its business, of deposits of money from the public, repayable on demand or otherwise, and withdrawable by cheque, draft, order or otherwise, shall not be deemed to be a borrowing of moneys by the

banking company within the meaning of clause (d) of subsection (1).

(5) No debt incurred by the company in excess of the limit im-

posed by clause (d) of sub-section (1) shall be valid or effectual, unless the lender proves that he advanced the loan in good faith and without knowledge that the limit imposed by that clause had been exceeded.

Appointment of sole selling agents to require approval of company ingeneral meeting. 294. Appointment of sole selling agents to require approval of

company in general meeting.-(1) After the commencement of this Act, the Board of directors of a company shall not appoint a sole selling agent for any area, except subject to the condition that the appointment shall cease to be valid if it is not approved by the company in general meeting within a period of six months from the date on which the appointment is made.

(2) If the company in general meeting disapproves of the appointment, or does not approve of it within the period of six months aforesaid, it shall cease to be valid with effect from the date of such disapproval, or the expiry of the period of six months aforesaid, whichever is earlier.

(3) Where before the commencement of this Act, a company has appointed a sole selling agent for any area for a period of not less than five years, the appointment shall be placed before the company in general meeting within a period of six months from such commencement; and the company in general meeting may, by resolution,- (a) if the appointment was made on or after the 15th day of February, 1955, terminate the appointment forthwith or with effect from such later date as may be specified in the resolution: and (b) if the appointment was made before the date specified in clause (a), terminate the appointment with effect from such date as may be specified in the resolution, not being earlier than live years from the date on which the appointment was made, or the expiry of one year from the commencement of this Act, whichever is later.

Loans to directors, etc.

295. Loans to directors, etc.-(1) Save as otherwise provided in

sub-section (2), no company (hereinafter in this section referred to as the lending company") shall, without obtaining the previous appro- val of the Central Government in that behalf, make any loan to, or give any guarantee or provide any security in connection with a loan made by any other person to, or to any other person by,- (a) any director of the lending company or of a company which is its holding company or any partner or relative of any 185 such director. (b) any firm in which any such director or relative is a partner; (c) any private company of which any such director is a director or member: (d) any body corporate at a general meeting of which not less than twenty-five per cent. of the total voting power may be exercised or controlled by any such director, or by two or more such directors together; or (e) any body corporate, the Board of directors, managing director, managing agent, secretaries and treasurers, or manager whereof is accustomed to act in accordance with the directions or instructions of the Board, or of any director or directors, of the lending company.

(2) Sub-section (1) shall not apply to any loan made, guarantee given or security provided- (a) by a private company unless it is a subsidiary of a public company; (b) by a banking company; (c) by a holding company to its subsidiary; or (d) by a company which is the managing agent or secretaries and treasurers of another company to the latter.

(3) Where any loan made, guarantee given or security provided by a lending company and outstanding at the commencement of this Act could not have been made, given or provided, without the previous approval of the Central Government, if this section had then been in force, the lending company shall, within six months from the commencement of this Act or such further time not exceeding. six months as the Central Government may grant for that purpose, either obtain the approval of the Central Government to the transaction or enforce the repayment of the loan made, or in connection with which the guarantee was given or the security was provided, notwithstanding any agreement to the contrary.

(4) Every person who is knowingly a party to any contravention

of sub-section (1) or (3), including in particular any person to whom the loan is made or who has taken the loan in respect of which the guarantee is given or the security is provided, shall be punishable either with fine which may extend to five thousand rupees or with simple imprisonment for a term which may extend to six months: Provided that where any such loan, or any loan in connection with which any such guarantee or security has been given or provided by the lending company, has been repaid in full, no punishment by way of imprisonment shall be imposed under this sub-section; and where the loan has been re-paid in part, the maximum punishment which may be imposed under this sub-section by way of imprisonment shall be proportionately reduced.

(5) All persons who are knowingly parties to any contravention

of sub-section (1) or (3) shall be liable jointly and severally, to the 186 lending company for the repayment of the loan or for making good the sum which the lending company may have been called upon to pay in virtue of the guarantee given or the security provided by such company.

(6) No officer of the lending company or of the borrowing body

corporate shall be punishable under sub-section (4) or shall incur the

liability referred to in sub-section (5) in respect of any loan made, guarantee given or security provided in contravention of clause (d) or

(e) of sub-section (1), unless at the time when the loan was made, the guarantee was given or the security was provided by the lending company, he knew or had express notice that that clause was being contravened thereby.

Saving regarding book-debts. 296. Saving regarding book-debts.-Nothing contained in section 295 shall apply to a book-debt which is required to be treated by virtue of the provision contained in that behalf in Schedule VI as a loan or an advance for the, purpose of preparing the balance sheet of the company, unless the 'transaction represented by the bookdebt was from its inception in the nature of a loan or an advance.

Board's sanction to be required for certain contracts in whichparticular directors are interested. 297. Board's sanction to be required for certain contracts in

which particular directors are interested.-(1) Except with the consent of the Board of directors of a company, a director of the company or his relative, a firm in which such a director or relative is a partner, any other partner in such a firm, or a private company of which the director is a member or director, shall not enter into any contract with the company- (a) for the sale, purchase or supply of any goods, materials or services; or (b) after the commencement of this Act, for underwriting the subscription of any shares in, or debentures of, the company.

(2) Nothing contained in clause (a) of sub-section (1) shall affect any contract or contracts for the sale, purchase or supply of any goods, materials or services in which either the company, or the director, firm, partner or private company, as the case may be, regularly trades or does business, provided that the value of such goods and materials and the cost of such services do not exceed five thousand rupees in the aggregate in any calendar year comprised in the period of the contract or contracts.

(3) The consent of the Board required by sub-section (1) shall not be deemed to have been given within the meaning of that sub- section, unless the consent is accorded- (a) by a resolution passed at a meeting of the Board and (b) before the contract is entered into, or within two months of the date on which it was entered into.

(4) Where such consent is not accorded to the contract before it is entered into, anything done in pursuance of the contract shall, if such consent is ultimately not accorded, be voidable at the option of the Board. 187

(5) Sub-sections (3) and (4) shall not apply to any case where consent has been accorded to the contract before the commencement of this Act.

Power of directors to carry on business when managing agent orsecretaries and treasurers are deemed to have vacated office, etc.-- 298. Power of directors to carry on business when managing agent or secretaries and treasurers are deemed to have vacated office, etc.--Where in pursuance of any provisions contained in this Act, the managing agent or secretaries and treasurers of a company are deemed to have vacated or to have been suspended from office, or are removed or suspended from office, or cease to act or to be entitled to act as managing agent or secretaries and treasurers, or where a permanent or temporary vacancy has otherwise occurred in the office of managing agent or secretaries and treasurers, then notwithstanding anything contained in this Act, the Board of directors shall have power to carry on, or arrange for the carrying on of, the affairs of the company until the managing agent or secretaries and treasurers again become entitled to act as such, or until the company in general meeting resolves otherwise. Procedure, etc, where director interested

Disclosure of interests by director.

299. Disclosure of interests by director.-(1) Every director of a company who is in any way, whether directly or indirectly, concerned or interested in a contract or arrangement, or proposed contract or arrangement, entered into or to be entered into, by or on behalf of the company, shall disclose the nature of his concern or interest at a meeting of the Board of directors.

(2) (a) In the case of a proposed contract or arrangement, the

disclosure required to be made by a director under sub-section (1) shall be made at the meeting of the Board at which the question of entering into the contract or arrangement is first taken into consi- deration, or if the director was not, at the date of that meeting, concerned or interested in the proposed contract or arrangement, at the first meeting of the Board held after he becomes so concerned or interested. (b) In the case of any other contract or arrangement, the required disclosure shall be made at the first meeting of the Board held after the director becomes concerned or interested in the contract or arrangement.

(3) (a) For the purposes of sub-sections (1) and (2), a general notice given to the Board by a director, to the effect that he is a director or a member of a specified body corporate or is a member of a specified firm and is to be regarded as concerned or interested in any contract or arrangement which may, after the date of the notice, be entered into with that body corporate or firm, shall be deemed to be a sufficient disclosure of concern or interest in relation to any contract or arrangement so made. (b) Any such general notice shall expire at the end of the financial year in which it is given, but may be renewed for further periods of one financial year at a time, by a fresh notice given in the last month of the financial year in which it would otherwise expire. (c) No such general notice, and no renewal thereof, shall be of effect unless either it is given at a meeting of the Board, or the director concerned takes reasonable steps to secure that it is brought up and read at the first meeting of the Board after it is given. 188

(4) Every director who fails to comply with sub-section (1) or

(2) shall be punishable with fine which may extend to five thousand rupees.

(5) Nothing in this section shall be taken to prejudice the operation of any rule of law restricting a director of a company from having any concern or interest in any contracts or arrangements with the company.

Interested director not to participate or vote in Board's proceedings. 300. Interested director not to participate or vote in Board's

proceedings.-(1) No director of a company shall, as a director, take any part in the discussion of, or vote on, any contract or arrangement entered into, or to be entered into, by or on behalf of the company, if he is in 'any way, whether directly or indirectly, concerned or interested in the contract or arrangement; nor shall his presence count for the purpose of forming a quorum at the time of any such discussion or vote; and if he does vote, his vote shall be void.

(2) Sub-section (1) shall not apply to- (a) a private company which is neither a subsidiary nor a holding company of a public company; (b) a private company which is a subsidiary of a public company, in respect of any contract or arrangement entered into, or to be entered into, by the private company with the holding company thereof; (c) any contract of indemnity against any loss which the directors, or any one or more of them, may suffer by reason of becoming or being sureties or a surety for the company; (d) any contract or arrangement entered into or to be entered into with a public company, or a private company which is a subsidiary of a public company, in which the interest of the director aforesaid consists solely in his being a director of such company and the holder of not more than shares of such number or value therein as is requisite to qualify him for appointment as a director thereof, he having been nominated as such director by the company

referred to in sub-section (1); or (e) a public company, or a private company which is a sub- sidiary of, a public company, in respect of which a

notification is issued under sub-section (3), to the extent specified in the notification.

(3) In the case of a public company or a private company which is a subsidiary of a public company, if the Central Government is of opinion that having regard to the desirability of establishing or promoting any industry, business or trade, it would not be in the public interest to apply all or any of the prohibitions contained in

sub-section (1) to the company, the Central Government may, by notification in the Official Gazette, direct that that sub-section shall not apply to such company, or shall apply thereto subject to such exceptions, modifications and conditions as may be specified in the notification.

(4) Every director who knowingly contravenes the provisions of this section shall be punishable with fine which may extend to five thousand rupees. 189

Register of contracts, companies and firms in which directors areinterested. 301. Register of contracts, companies and firms in which

directors are interested.--(1) A register shall be kept by every company, in which shall be entered particulars of all contracts or arrangements to which section 297 or 299 applies, including the following particulars, namely: - (a) the date of the contract or arrangement; (b) the names of the parties thereto; (c) the principal terms and conditions thereof; (d) the date on which it was placed before the Board; (e) the names of the directors voting for and against the contract or arrangement and the names of those remaining neutral.

(2) Particulars of every such contract or arrangement shall be entered in the register aforesaid within three days of the meeting of the Board at which the contract or arrangement is approved; and the register shall be placed before the next meeting of the Board and shall then be signed by all the directors present at that meeting.

(3) The register aforesaid shall also specify, in relation to each director of the company, the names of the bodies corporate and

firms of which notice has been given by him under sub-section (3) of section 299.

(4) If default is made in complying with the provisions of sub-

section (1), (2) or (3), the company, and every officer of the company who is in default, shall, in respect of each default, be punishable with fine which may extend to five hundred rupees.

(5) The register aforesaid shall be kept at the registered office of the company; and it shall be open to inspection at such office, and extracts may be taken therefrom and copies thereof may be required, by any member of the company to the same extent, in the same manner, and on payment of the same fee, as in the case of the register of members of the company; and the provisions of section 163 shall apply accordingly.

Disclosure to members of director's interest in contract ap pointingmanager, managing director, managing agent or secretaries andtreasurers. 302. Disclosure to members of director's interest in contract ap- pointing manager, managing director, managing agent or secretaries and

treasurers.-(1) Where a company- (a) enters in to a contract for the appointment of a manager of the company, in which contract any director of the company is in any way, whether directly or indirectly, concerned or interested; or (b) varies any such contract already in existence and in which a director is concerned or interested as aforesaid; the company shall, within twenty-one days from the date of entering into the contract or of the varying of the contract, as the case may be, send to every member of the company an abstract, of the terms of the contract or variation, together with a memorandum clearly specifying the nature of the concern or interest of the director in such contract or variation. 190

(2) Where a company enters into a contract for the appointment of a managing director of the company, or varies any such contract which is already in existence, the company shall send an abstract of the terms of the contract or variation to every member of we company

within the time specified in sub-section (1); and if any other director of the company is concerned or interested in the contract or variation, a memorandum clearly specifying the nature of the concern or interest of such other director in the contract or variation shall also be sent to every member of the company with the abstract aforesaid.

(3) Where a company proposes to enter into a contract for the appointment of a managing agent or of secretaries and treasurers, in which contract any director of the company 'is concerned or interested as aforesaid, or proposes to vary any such contract already in existence in which a director is concerned or interested as aforesaid, the company shall send the abstract and memorandum referred to in sub-

section (2) to every member of the company, in sufficient time before the general meeting of the company at which the proposal is to be considered.

(4) Where a director becomes concerned or interested as

aforesaid in any such contract as is referred to in sub-section (1),

(2) or (3) after it is made, the abstract and the memorandum, if any, referred to in the said sub-section shall be sent to every member of the company within twenty-one days from the date on which the director becomes so concerned or interested.

(5) If default is made in complying with the foregoing provi- sions 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.

(6) All contracts entered into by a company for the appointment of a manager, managing director, managing agent or secretaries and treasurers, shall be kept at the registered office of the company; and shall be open to the inspection of any member of the company at such office; and extracts may be taken therefrom and copies thereof may be required by any such member, to the same extent, in the same manner and on payment of the same fee, as in the case of the register of members of the company; and the provisions of section 163 shall apply accordingly.

(7) The provisions of this section shall apply in relation to any resolution or proposed resolution of the Board of directors of a company appointing a manager or a managing or whole-time director, or varying any previous contract or resolution of the company relating to the appointment of a manager or a managing or whole-time director, as they apply in relation to any contract or proposed contract for the like purpose. Register of Directors, etc.

Register of directors, managing agents, secretaries and treasurersetc. 303. Register of directors, managing agents, secretaries and

treasurers etc.-(1) Every company shall keep at its registered office a register of its directors, managing director, managing agent, 191 secretaries and treasurers, manager and secretary, containing with respect to each of them the following particulars, that is to say:- (a) in the case of an individual, his present name and sur- name in full; any former name or surname in full; his usual residential address; his nationality; and, if that nationality is not the nationality of origin, his nationality of origin; his business occupation, if any; if he holds the office of director, managing director, managing agent, manager or secretary in any other body corporate, the particulars of each such office held by him; and except in the case of a private company which is not a subsidiary of a public company, the date of his birth; (b) in the case of a body corporate, its corporate name and registered or principal office; and the full name, address, nationality, and nationality of origin, if different from that nationality, of each of its directors; and if it holds the office of managing agent, secretaries and treasurers, manager or secretary in any other body corporate, the particulars of each such office; (c) in the case of a firm, the name of the firm, the full name, address, nationality, and nationality of origin, if different from that nationality, of each partner; and the date on which each became a partner; and if the firm holds the office of managing agent, secretaries and treasurers, manager or secretary in any other body corporate, the particulars of each such office; (d) if any director or directors have been nominated by a body corporate, its corporate name; all the particulars referred to in clause (a) in respect of each director so nominated, and also all the particulars referred to in clause (b) in respect of the body corporate; (e) if any director or directors have been nominated by a firm, the name of the firm, all the particulars referred to in clause (a) in respect of each director so nominated, and also all the particulars referred to in clause (c) in respect of the firm. Explanation.-For the purposes of this sub-section--

(1) any person in accordance with whose instructions, the Board of directors of a company is accustomed to act shall be deemed to be a director of the company;

(2) in the case of a person usually known by a title different from his surname, the expression "surname" means that title; and

(3) references to a former name or surname do not include- (i) in the case of a person usually known by an Indian title different from his surname, the name by which he was known previous to the adoption of, or succession to, the title; (ii) in the case of any person, a former name or sur- name, where that name or surname was changed or disused 192 before the person bearing the name attained the age of eighteen years, or has been changed or disused for a period of not less than twenty years; and (iii) in the case of a married woman, the name or sur- name by which she was known previous to the marriage.

(2) The company shall, within the periods respectively mentioned in this sub-section, send to the Registrar a return in the prescribed form containing the particulars specified in the said register and a notification in the prescribed form of any change among its directors, managing directors, managing agents, secretaries and treasurers, managers or secretaries or in any of the particulars contained in the register, specifying the date of the change. The period within which the said return is to be sent shall be a period of twenty-eight days from the appointment of the first directors of the company and the period within which the said noti- fication of a change is to be sent shall be twenty-eight days from the happening thereof.

(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 fifty rupees for every day during which the default continues.

Inspection of the register.

304. Inspection of the register.-(1) The register kept under section 303 shall be open to the inspection of any member of the company without charge and of any other person on payment of one rupee for each inspection during business 'hours subject to such reasonable restrictions as the company may by its articles or in general meeting impose, So that not less than two hours in each day are allowed for inspection.

(2) If any inspection required under sub-section (1) is refused,- (a) the company, and every officer of the company who is in default, shall be punishable with fine which may extend to fifty rupees; and (b) the Court may, by order, compel an immediate inspection of the register.

Duty of directors etc., to make disclosure. 305. Duty of directors etc., to make disclosure.-Every director including a person deemed to be a director by virtue of the Ex.

planation to sub-section (1) of section 303], managing director, managing agent, secretaries and treasurers, manager or secretary of any company, who is appointed to the office of director, managing director, managing agent, secretaries and treasurers, manager or secretary of any other body corporate shall, within twenty days of his appointment, disclose to the company aforesaid the particulars relating to the office in the other body corporate which are required

to be specified under sub-section (1) of section 303; and if he falls to do so, he shall be punishable with fine which may extend to five hundred rupees.

Register to be kept by Registrar and inspection thereof. 306. Register to be kept by Registrar and inspection thereof.-

(1) The Registrar shall keep a separate register or registers in which there shall be entered the particulars received by him under

sub-section (2) of section 303 in respect of companies, so however that all entries in respect of each such company shall be together 193

(2) The register or registers aforesaid shall be open to inspec- tion by any member of the public at any time during office hours, on payment of the prescribed fee. Register of Directors' shareholdings

Register of directors' shareholdings, etc.

307. Register of directors' shareholdings, etc.-(1) Every company shall keep a register showing, as respects each director of the company, the number, description and amount of any shares in, or debentures of, the company or any other body corporate, being the company's subsidiary or holding company, or a subsidiary of the company's holding company, which are held by him or in trust for him, or of which he has any right to become the holder whether on payment or not.

(2) Where any shares or debentures have to be recorded in the said register or to be omitted therefrom, in relation to any director, by reason of a transaction entered into after the commencement of this Act and while he is a director, the register shall also show the date of, and the price or other consideration for, the transaction: Provided that where there is an interval between the agreement for any such transaction and the completion thereof, the date so shown shall be that of the agreement.

(3) The nature and extent of any interest or right in or over any shares or debentures recorded in relation to a director in the said register shall, if he so requires, be indicated in the register.

(4) The company shall not, by virtue of anything done for the purposes of this section, be affected with notice of, or be put upon inquiry as to, the rights of any person in relation to any shares or debentures.

(5) The said register shall, subject to the provisions of this section, be kept at the registered office of the company, and shall be open to inspection during business hours (subject to such reasonable restrictions as the company may, by its articles or in general meeting, impose, so that not less than two hours in each day are allowed for inspection) as follows:- (a) during the period beginning fourteen days before the date of the company's annual general meeting, and ending three days after the date of its conclusion, it shall be open to the inspection of any member or holder of debentures, of the company; and (b) during that or any other period, it shall be open to the inspection of any person acting on behalf of the Central Government or of the Registrar. In computing the fourteen days and the three days mentioned in this sub-section, any day which is a Saturday, a Sunday or a public holiday shall be disregarded.

(6) Without prejudice to the rights conferred by sub-section

(5), the Central Government or the Registrar may, at any time, require a copy of the said register, or any part thereof.

(7) The said register shall also be produced at the commencement of every annual general meeting of the company and 194 shall remain open and accessible during the continuance of the meeting to any person having the right to attend the meeting. If default is made in complying with this sub-section the company, and every officer of the company who is in default, shall be punishable with fine which may extend to five hundred rupees.

(8) If default is made in complying with sub-section (1) or (2), or if any inspection required under this section is refused, or if any copy required thereunder is not sent within a reasonable time, 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 also with a further fine which may extend to twenty rupees for every day during which the default continues.

(9) In the case of any such refusal, the Court may also, by order, compel an immediate inspection of the register.

(10) For the purposes of this section- (a) any person in accordance with whose directions or instructions the Board of directors of a company is accustomed to act, shall be deemed to be a director of the company; and (b) a director of a company shall be deemed to hold, or to have an interest or a right in or over, any shares or debentures, if a body corporate other than the company holds them or has that interest or right in or over them, and either- (i) that body corporate or its Board of directors is accustomed to act in accordance with his directions or instructions; or (ii) he is entitled to exercise or control the exercise of one-third or more of the total voting power exercisable at any general meeting of that body corporate.

Duty of directors and persons deemed to be directors to makedisclosure of shareholdings. 308. Duty of directors and persons deemed to be directors to make

disclosure of shareholdings.-(1) Every director of a company, and every person deemed to be a director of the company by virtue of sub-

section (10) of section 307, shall give notice to the company of such matters relating to himself as may be necessary for the purpose of enabling the company to comply with the provisions of that section.

(2) Any such notice shall be given in writing, and if it is not given at a meeting of the Board, the person giving the notice shall take all reasonable steps to secure that it is brought up and read at the meeting of the Board next after it is given.

(3) Any person who fails to comply with sub-section (1) or (2) 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. Remuneration of directors

Remuneration of directors.

309. Remuneration of directors.-(1) The remuneration payable to the directors of a company, including any managing or wholetime director, shall be determined, in accordance with and subject to the provisions of section 198 and this section either by the articles 195 of the company, or by a resolution or, if the articles so require, by a special resolution, passed by the company in general meeting.

(2) A director may receive remuneration either by way of a monthly payment, or by way of a fee for each meeting attended, or partly by the one way and partly by the other.

(3) In lieu of or in addition to the remuneration specified in

sub-section (2), remuneration may be paid to a director who is either in the whole-time employment of the company or a managing director, at a specified percentage of the net profits of the company: Provided that such percentage shall not exceed five for any one such director, or where there is more than one such director, ten for all of them together.

(4) In the case of a director who is neither in the whole-time employment of the company nor a managing director and whose remuneration does not include anything by way of a monthly payment, the company may, by special resolution, authorise the payment, to such director, or where there is more than one such director, to all of them together- (a) if the company has a managing or whole-time director, a managing agent or secretaries and treasurers, or a manager, of a commission not exceeding one per cent. of the net profits of the company; (b) in any other case, of a commission not exceeding three per cent. of the net profits of the company.

(5) The net profits, referred to in sub-sections (3) and (4) shall be computed in the manner referred to in section 198, sub-

section (1).

(6) No director of a company who is in receipt of any commission from the company and who is either in the whole-time employment of the company or a managing director shall be entitled to receive any commission or other remuneration from any subsidiary of such company.

(7) The special resolution referred to in sub-section (4) shall not remain in force for a period of more than five years; but may be renewed, from time to time, by special resolution for further periods of not more than five years at a time: Provided that no renewal shall be effected earlier than one year from the date on which it is to come into force.

(8) The provisions of this section shall come into force imme- diately on the commencement of this Act or, where such commencement does not coincide with the end of a financial year of the company, with effect from the expiry of the financial year immediately succeeding such commencement,

(9) The provisions of this section shall not apply to a private company unless it is a subsidiary of a public company. 196

Provision for increase in remuneration to require Government sanction. 310. Provision for increase in remuneration to require Government sanction.-In the case of a public company, or a private company which is a subsidiary of a public company, an amendment of any provision relating to the remuneration of any director including a managing or whole-time director, which purports to increase or has the effect of increasing, whether directly or indirectly, the amount thereof, whether that provision be contained in the company's memorandum or articles, or in an agreement entered into by it, or in any resolution passed by the company in general meeting or by its Board of directors, shall not have any effect unless approved by the Central Government; and the amendment shall become void if, and in so far as, it is disapproved by that Government.

Increase in remuneration of managing director on reappointment orappointment after Act to require Government sanction. 311. Increase in remuneration of managing director on reappointment or appointment after Act to require Government sanction.-In the case of a public company, or a private company which is a subsidiary of a public company, if the terms of any re- appointment or appointment of a managing or whole-time director, made after the' commencement of this Act, purport to increase or have the effect of increasing, whether directly or indirectly, the remuneration which the managing or whole-time director or the previous managing or whole-time director, as the case may be, was receiving immediately before such re-appointment or appointment, the re-appointment or appointment shall not have any effect unless approved by the Central Government; and shall become void if, and in so far as, it is disapproved by that Government. Miscellaneous provisions

Prohibition of assignment of office by director. 312. Prohibition of assignment of office by director.-Any assignment of his office made after the commencement of this Act by any director of a company shall be void.

Appointment and term of office of alternate directors.

313. Appointment and term of office of alternate directors.-(1) The Board of directors of a company may, if so authorised by its articles or by a resolution passed by the company in general meeting, appoint an alternate director to act for a director (hereinafter in this section called "the original director") during his absence for a period of not less than three months from the State in which meetings of the Board are ordinarily held.

(2) An alternate director appointed under sub-section (1) shall vacate office if and when the original director returns to the State in which meetings of the Board are ordinarily held.

(3) If the term of office of the original director is determined before he so returns to the State aforesaid, any provision for the automatic re-appointment of retiring directors in default of another appointment shall apply to the original, and not to the alternate, director.

Director etc. not to hold office or place of profit.

314. Director etc. not to hold office or place of profit.-(1) Except with the previous consent of the company accorded by a special resolution, no director of a company, no partner or relative of such a director, no firm in which such a director or relative is a partner, no private company of which such a director is a director or member, and no director, managing agent, secretaries and treasurers, or manager of such a private company shall hold any office or place of profit, except that of managing director, managing agent, secretaries 197 and treasurers, manager, legal or technical adviser, banker, or trustee for the holders of debentures of the company,- (a) under the company; or (b) under any subsidiary of the company, unless the re- muneration received from such subsidiary in respect of such office or place is paid over to the company or its holding company.

(2) If any office or place of profit under the company or a subsidiary thereof is held in contravention of the provisions of sub-

section (1), the director concerned shall be deemed to have vacated his office as director with effect from the first day on which the contravention occurs; and shall also be liable to refund to the company any remuneration received, or the monetary equivalent of any perquisites or advantage enjoyed by him, in respect of such office or place of profit.

(3) Any office or place in a company shall be deemed to be an office or place of profit under the company within the meaning of sub-

section (1),- (a) in case the office or place is held by a director, if the director holding it obtains anything by way of remuneration over and above the remuneration to which he is entitled as such director, whether as salary, fees, commission, perquisites, the right to occupy free of rent any premises as a place of residence, or otherwise; (b) in case the office or place is held by an individual other than a director or by any firm, private company or other body corporate, if the individual, firm, private company or body corporate holding it obtains anything by way of remuneration whether as salary, fees, commission, perquisities, the right to occupy free of rent any premises as a place of residence, or otherwise. Restrictions on appointment of managing directors

Application of sections 316 and 317. 315. Application of sections 316 and 317.-Sections 316 and 317 shall not apply to a private company, unless it is a subsidiary of a public company.

Number of companies of which one person may be appointed managingdirector. 316. Number of companies of which one person may be appointed

managing director.--(1), No company shall, after the commencement of this Act, appoint or employ any person as managing director, if he is either the managing director or the manager of any other company,

except as provided in sub-section (2).

(2) A company may appoint or employ a person as its managing director, if he is the managing director or manager of one, and of not more than one, other company: Provided that such appointment or employment is made or approved by a resolution passed at a meeting of the Board with the consent of all the directors present at the meeting and of which meeting, and of the resolution to be moved thereat, specific notice has been given to all the directors then in India. 198

(3) Where, at the commencement of this Act, any person is holding the office either of managing director or of manager in more than two companies, he shall, within one year from the commencement of this Act, choose not more than two of those companies as companies in which he wishes to continue to hold the office of managing director or manager, as the case may be; and the provisions of clauses (b) and (c)

of sub-section (1) and of sub-sections (2) and (3) of section 276 shall apply mutatis mutandis in relation to this case, as those provisions apply in relation to the case of a director.

(4) Notwithstanding anything contained in sub-sections (1) to

(3), the Central Government may, by order, permit any person to be appointed as a managing director of more than two companies if the Central Government is satisfied that it is necessary that the companies should, for their proper working, function as a single unit and have a common managing director.

Managing director not to be appointed for more than five years at atime. 317. Managing director not to be appointed for more than five

years at a time.-(1). No company shall, after the commencement of this Act, appoint or employ any individual as its managing director for a term exceeding five years at a time.

(2) Any individual holding at the commencement of this Act the office of managing director in a company shall, unless his term ex- pires earlier, be deemed to have vacated his office immediately on the expiry of five years from the commencement of this Act.

(3) Nothing contained in sub-section (1) shall be deemed to pro- hibit the re-appointment, re-employment, or the extension of the term of office, of any person by further periods not exceeding five years on each occasion: Provided that any such re-appointment, re-employment or extension shall not be sanctioned earlier than two years from the date on which it is to come into force. Compensation for loss of office

Compensation for loss of office not permissible except to managing orwhole-time directors or to directors who are managers. 318. Compensation for loss of office not permissible except to

managing or whole-time directors or to directors who are managers.-(1) Payment may be made by a company, except in the cases, specified in

sub-section (3) and subject to the limit specified in sub-section (4), to a managing director, or a director holding the office of manager or in the whole time employment of the company, by way of compensation for loss of office, or as consideration for retirement from office, or in connection with such loss or retirement.

(2) No such payment shall be made by the company to any other director.

(3) No payment shall be made to a managing or other director in

pursuance of sub-section (1), in the following cases, namely:- (a) where the director resigns his office in view of the reconstruction of the company, or of its amalgamation with any other body corporate or bodies corporate, and is appointed as 199 the managing director, managing agent, secretaries and treasurers, manager or other officer of the reconstructed company or of the body corporate resulting from the amalgamation; (b) where the director resigns his office otherwise than on the reconstruction of the company or its amalgamation as aforesaid; (c) where the office of the director is vacated by virtue of section 203, section 280, or any of the clauses, (a) to

(k), of subsection (1) of section 283; (d) where the company is being wound up, whether by or subject to the supervision of the Court or voluntarily, provided the winding up was due to the negligence or default of the director; (e) where the director has been guilty of fraud or breach of trust in relation to, or of gross negligence in or gross mismanagement of, the conduct of the affairs of the company or any subsidiary or holding company thereof; (f) whether the director has instigated, or has taken part directly or indirectly in bringing about, the termination of his office.

(4) Any payment made to a managing or other director in pur-

suance of sub-section (1) shall not exceed the remuneration which he would have earned if he had been in office for the unexpired residue of his term or for three years, whichever is shorter, calculated on the basis of the average remuneration actually earned by him during a period of three years immediately preceding the date on which he ceased to hold the office, or where he held the office for a lesser period than three years, during such period: Provided that no such payment shall be made to the director in the event of the commencement of the winding up of the company, whether before, or at any time within twelve months after, the date on which he ceased to hold office, if the assets of the company on the winding up, after deducting the expenses thereof, are not sufficient to repay to the share-holders the share capital (including the pre- miums, if any,) contributed by them.

(5) Nothing in this section shall be deemed to prohibit the pay- ment to a managing director, or a director holding the office of manager, of any remuneration for services rendered by him to the company in any other capacity.

Payment to director, etc., for loss of office etc., in connection withtransfer of undertaking or property. 319. Payment to director, etc., for loss of office etc., in

connection with transfer of undertaking or property.-(1) No director of a company shall, in connection with the transfer of the whole or any part of any undertaking of property of the company, receive any payment, by way of compensation for loss of office, or as consideration for retirement from office, or in connection with such loss or retirement- (a) from such company; or (b) from the transferee of such undertaking or property or from any other person (not being such company), unless parti- culars with respect to the payment proposed to be made by such transferee or person (including the amount thereof) have been 200 disclosed to the members of the company and the proposal has been approved by the company in general meeting.

(2) Where a director of a company receives 'payment of any,

amount in contravention of sub-section (1), the amount shall be deemed to have been received by him in trust for the company.

(3) Sub-sections (1) and (2) shall not affect in any manner the operation of section 318.

Payment to director for loss of office, etc., in connection withtransfer of shares. 320. Payment to director for loss of office, etc., in

connection with transfer of shares.-(1) No director of a company shall, in connection with the transfer to any persons of all or any of the shares in a company, being a transfer resulting from- (i) an offer made to the general body of shareholders; (ii) an offer made by or on behalf of some other body cor- porate with a view to the company becoming a subsidiary of such body corporate or a subsidiary of its holding company; (iii) an offer made by or on behalf of an individual with a view to his obtaining the right to exercise, or control the exercise of, not less than one-third of the total voting power at any general meeting of the company; or (iv) any other offer which is conditional on acceptance to a given extent; receive any payment by way of compensation for loss of office, or as consideration for retirement from office, or in connection with such loss or retirement,-- (a) from such company; or (b) except as otherwise provided in this section, from the transferees of the shares or from any other person (not being such company).

(2) In the case referred to in clause (b) of sub-section (1), it shall be the duty of the director concerned to take all reasonable steps to secure that particulars with respect to the payment proposed to be made by the transferees or other person (including the amount thereof) are included in, or sent with, any notice of the offer made for their shares which is given to any shareholders,

(3) If- (a) any such director fails to take reasonable steps as aforesaid; or (b) any person who has been properly required by any such director to include the said particulars in, or send them with, any such notice as aforesaid fails so to do; he shall be punishable with fine which may extend to two hundred and fifty rupees.

(4) If-

(a) the requirements of sub-section (2) are not complied with in relation to any such payment as is governed 'by clause

(b) of sub-section (1); or 201 (b) the making of the proposed payment is not, before the transfer of any shares in pursuance of the offer, approved by a meeting, called for the purpose, of the holders of the shares to which the offer relates and other holders of shares of the same class (other than shares already held at the date of the offer by, or by a nominee for, the offeror, or where the offeror is a company, by, or by a nominee for, any subsidiary thereof) as any of the said shares; any sum received by the director on account of the payment shall be deemed to have been received by him in trust for any persons who have sold their shares as a result of the offer made, and the expenses incurred by him in distributing that sum amongst those persons shall be borne by him and not retained out of that sum.

(5) If at a meeting called for the purpose of approving any

payment as required by clause (b) of sub-section (4), a quorum is not present and, after the meeting has been adjourned to a later date, a quorum is again not present, the payment shall, for the purposes of that sub-section, be deemed to have been approved.

Provisions supplementary to sections 318, 319 and 320.

321. Provisions supplementary to sections 318, 319 and 320.-(1) Where in proceedings for the recovery of any payment as having, by

virtue of sub-section (2) of section 319 or sub-section (4) of section 320, been received by any person in trust, it is shown that- (a) the payment was made in pursuance of any arrangement entered into as part of the agreement for the transfer in question, or within one year before, or within two years after, that agreement or the offer leading thereto; and ' (b) the company or any person to whom the transfer was made was privy to that arrangement; the payment shall be deemed, except in so far as the contrary is shown, to be one to which that sub-section applies.

(2) If in connection with any such transfer as is mentioned in section 319 or in section 320,-- (a) the price to be paid, to a director of the company whose office is to be abolished or who is to retire from office, for any shares in the company held by him is in excess of the price which could at the time have been obtained by other holders of the like shares; or (b) any valuable consideration is given to any such director; the excess or the money value of the consideration, as the case may be, shall for the purposes of that section, he deemed to have been a payment made to him by way of compensation for loss of office, or as consideration for retirement from office, or in connection with such loss or retirement.

(3) References in sections 318, 319 and 320 to payments made to any director of a company by way of compensation for loss of office, or as consideration for retirement from office, or in connection with such loss or retirement, do not include any bona fide payment by way of damages for breach of contract or by way of pension in respect of past services; and for the purposes of this sub-section the 202 expression pension" includes any superannuation allowance, superannuation gratuity or similar payment.

(4) Nothing in sections 319 and 320 shall be taken to prejudice the operation of any rule of law requiring disclosure to be made with respect to any such payments as are therein mentioned or with respect to any other like payments made or to be made to the directors of a company. Directors with unlimited liability

Directors, etc., with unlimited liability in limited company. 322. Directors, etc., with unlimited liability in limited

company.- (1) In a limited company, the liability of the directors or of any director or of the managing agent, secretaries and treasurers or manager may, if so provided by the memorandum, be unlimited.

(2) In a limited company in which the liability of a director, managing agent, secretaries and treasurers or manager is unlimited, the directors, the managing agent, secretaries and treasurers and the manager of the company, and the member who proposes a person for appointment to the office of director, managing agent, secretaries and treasurers or manager, shall add to that proposal a statement that the liability of the person holding that office will be unlimited; and before the person accepts the office or acts therein, notice in writing that his liability will be unlimited, shall be given to him by the following or one of the following persons, namely, the promoters of the company, its directors, its managing agent, secretaries and treasurers or manager, if any, and its officers.

(3) If any director, managing agent, secretaries and treasurers, manager or proposer makes default in adding such a statement, or if any promoter, director, managing agent, secretaries and treasurers, manager or officer of the company makes' default in giving such a notice, he shall be punishable with fine which, may extend to one thousand rupees and shall also be liable for any damage which the person so appointed may. sustain from the default; but the liability of the person appointed shall not be affected by the default.

Special resolution of limited company making liability of directors,etc., unlimited. 323. Special resolution of limited company making liability

of directors, etc., unlimited.-(1) A limited company may, if so authorised by its articles, by special resolution, alter its memoran- dum so as to render unlimited the liability of its directors or of any director or of its managing agent, secretaries and treasurers or manager.

(2) Upon the passing of any such special resolution, the provisions thereof shall be as valid as if they had been originally contained in the memorandum: Provided that no alteration of the memorandum making the

liability of any of the officers referred to in sub-section (1) un- limited shall apply to such officer, if he was holding the office from before the date of the alteration, until the expiry of his then term, unless he has accorded his consent to his liability becoming un- limited. 203 CHAP Managing agents CHAPTER III.-Managing agents Prohibition of appointment of managing agent in certain cases

Power of Central Government to notify that companies engaged inspecified classes of industry or business shall not have managingagents. 324. Power of Central Government to notify that companies engaged in specified classes of industry or business shall not have managing

agents.-(1) Subject to such rules as may be prescribed in this behalf, the Central Government may, by notification in the Official Gazette, declare that, as from such date as may be specified in the

notification, the provisions of sub-section (2) shall apply to. all companies, whether incorporated before or after the commencement of this Act,-which are engaged on that date or may thereafter be engaged, wholly or in part, in such class or description of industry or business as may be specified in the notification.

(2) Thereupon,- (a) where any such company has a managing agent on the specified date, the term of office of that managing agent shall, if it does not expire earlier, expire at the end of three years from the specified date, or on the 15th day of August, 1960, whichever is later; and the company shall not re-appoint or appoint the same or any other managing agent; and (b) where any such company has no managing agent on the specified date, or where it is incorporated on or after that date, it shall not appoint a managing agent.

(3) Copies of all rules prescribed under sub-section (1) shall, as soon as may be after they have been prescribed, be laid before both Houses of Parliament.

(4) A copy of every notification proposed to be issued under

subsection (1) shall be laid in draft before both Houses of Parliament for a period of not less than thirty days while they are in session; and if, within that period, either House disapproves of the issue of the notification or approves of such issue only with modifications, the notification shall not be issued or, as the case may require, shall be issued only with such modifications as may be agreed on by both the Houses.

Managing agency company not to have managing agent.

325. Managing agency company not to have managing agent.-(1) No company acting as the managing agent of any other company shall, after the commencement of this Act, appoint a managing agent for itself, whether it transacts any other kind of business in addition or not.

(2) No company having a managing agent shall, after the com- mencement of this Act, be appointed as the managing agent of any other company.

(3) Any appointment of managing agent made in contravention of

sub-section (1) or (2) shall be void.

(4) Where at the commencement of this Act a company having a managing agent is itself acting as a managing agent of any other company, the term of office of the company first mentioned as managing agent of the other company shall, if it does not expire earlier in accordance with the provisions applicable thereto immediately before such commencement [including any provisions contained in the Indian Companies Act, 1913 (7 of 1913)], expire on the 15th day of August,

204 Appointment and term of office

Central Government to approve of appointment, etc., of managing agent;and circumstances in which approval may be accorded. 326. Central Government to approve of appointment, etc., of managing agent; and circumstances in which approval may be accorded.-

(1) In respect of any company to which neither the prohibition specified in section 324 nor that specified in section 325 applies, a managing agent shall not be appointed or re-appointed,- (a) except by the company in general meeting; and (b) unless the approval of the Central Government has been obtained for such appointment or re-appointment.

(2) The Central Government shall not accord its approval under

sub-section (1) in any case, unless it is satisfied- (a) that it is not against the public interest to allow the company to have a managing agent; (b) that the managing agent proposed is, in its opinion, a fit and proper person to be appointed or re-appointed as such, and that the conditions of the managing agency agreement proposed are fair and reasonable; and (c) that the managing agent proposed has fulfilled any con- ditions which the Central Government requires him to fulfil.

Application of sections 328 to 331. 327. Application of sections 328 to 331.-The provisions of sections 328 to 331 shall apply to- (a) a public company; (b) a private company which is a subsidiary of a public and (c) a private company which is not a subsidiary of a public company, unless the Central Government, by general or special order, specifically exempts the private company.

Term of office of managing agent.

328. Term of office of managing agent.-(1) After the commencement of this Act, no company shall- (a) in case it appoints a managing agent for the first time (that is to say, in case the company has had no managing agent at any time since its formation), make the appointment for a term exceeding fifteen years; (b) in any other case, re-appoint or appoint a managing agent for a term exceeding ten years at a time; (c) re-appoint a managing agent for a fresh term, when the existing term of the managing agent has two years or more to run: in the interest of the company so to do, permit the re-appointment of a managing agent at an earlier time than that specified in clause (c).

(2) For the purpose of sub-section (1), re-appointment does not include the re-appointment of any person on fresh, additional or changed conditions for any period not extending beyond his existing term, but otherwise includes- (a) the renewal, or the extension of the term, of a previous appointment; and (b) the appointment of any person or persons heaving an interest in the previous managing agency.

(3) Any appointment or re-appointment of a managing agent, made

in contravention of the provisions of sub-sections (1) and 205

(2) shall be void in respect of the entire term for which the appointment or re-appointment is made. Variation of managing agency agreement

Variation of managing agency agreement. 329. Variation of managing agency agreement.-A resolution of the company in general meeting shall be required for varying the terms of a managing agency agreement; and before such a resolution is passed, the previous sanction of the Central Government shall be obtained therefor. Special provisions regarding existing managing agents

Term of office of existing managing agents to terminate on 15thAugust,

330. Term of office of existing managing agents to terminate on 15th August, 1960.-Where a company has a managing agent at the commencement of this Act, the term of office of such managing agent shall, if it does not expire earlier in accordance with the provisions applicable thereto immediately before such commencement [including any provisions contained in the Indian Companies Act, 1913 (7 of 1913) ], expire on the 15th day of August, 1960, unless before that date he is re-appointed for a fresh term in accordance with any provision contained in this Act.

Application of Act to existing managing agents. 331. Application of Act to existing managing agents.-All pro- visions of this Act, other than those relating to the term for which the office can be held, shall apply to every managing agent holding office at the commencement of this Act, with effect from such commencement. Restrictions on number of managing agencies

No person to be managing agent of more than ten companies after 15thAugust,

332. No person to be managing agent of more than ten companies

after 15th August, 1960.-(1) After the 15th day of August, 1960, no person shall, at the same time, hold office as managing agent in more than ten companies.

(2) Where a person holding office as managing agent in more than

ten companies before that date fails to comply with sub-section (1), the Central Government may permit him to hold office as managing agent with effect from that date in respect of such of those companies, not exceeding ten in number, as it may determine.

(3) In calculating the number of companies of which a person may be a managing agent in pursuance of this section, the following companies shall be excluded, namely:- (a) a private company which is neither a subsidiary nor a holding company of a public company; (b) an unlimited company; (c) an association which does not carry on business for profit, or which prohibits the payment of a dividend.

(4) For the purposes of this section, each of the following persons shall also be deemed to hold office as managing agent of the company: - (a) where the managing agent of the company is a firm every partner in the firm; 206 (b) where the managing agent of the company is itself a company, every person who is a director, the secretaries and treasurers or a manager, of the latter company, and every member thereof who is entitled to exercise not less than twenty per cent. of the total voting power therein.

(5) Any person who acts as a managing agent of more than ten companies in contravention of this section shall be punishable with fine which may extend to one thousand rupees in respect of each of those companies in excess of ten, for each day on which he so acts. Right to charge on assets

Right of managing agent to charge on company's assets. 333. Right of managing agent to charge on company's assets.-A managing agent whose office stands terminated under section 324 or 332 shall be entitled to a charge on the assets of the company in respect of all moneys which are due to him from the company at the date of such termination, or which he may have to pay after that date in respect of any liability or obligation properly incurred by him on behalf of the company before such date, subject to all existing charges and incumbrances, if any, on such assets. Vacation of office, removal and resignation

Vacation of office on insolvency, dissolution or winding up, etc. 334.Vacation of office on insolvency, dissolution or winding up, etc.-Subject to the provisions of section 340, the managing agent of a company shall be deemed to have vacated his office as such- (a) in case the managing agent is an individual, if he is adjudged an insolvent; (b) in the same case, if the managing agent applies to be adjudicated an insolvent; (c) in case the managing agent is a firm, on its dissolution from any cause whatsoever, including the insolvency of a partner in the firm; (d) in case the managing agent is a body corporate, on the commencement of its winding up whether by or subject to the supervision of the Court, or voluntarily; (e) in all cases, on the commencement of the winding up of the company managed by the managing agent, whether by or subject to the supervision of the Court or voluntarily.

Suspension from office where receiver appointed.

335. Suspension from office where receiver appointed.-(1) The managing agent of a company shall be deemed to have been suspended from his office as such, if a receiver is appointed for his property- (a) by a Court, or (b) by or on behalf of the creditors of the managing agent, including the holders of debentures issued by the managing agent, in pursuance of any power conferred by an instrument executed by the managing agent: Provided that the Court which appointed the receiver, or which will have jurisdiction to wind up the managed company, as the case 207 may be, may, by order, direct that the managing agent shall continue to act as such for such period and subject to such restrictions and conditions, if any, as may be specified in the order.

(2) The Court may, at any time, cancel or vary any order passed

by it under the proviso to sub-section (1).

Vacation of office on conviction in certain cases. 336. Vacation of office on conviction in certain cases.- Subject to the provisions of sections 340 and 341, the managing agent of a company shall also be deemed to have vacated his office as such, if- (a) the managing agent; (b) in case the managing agent is a firm, any partner in the firm; or (c) in case the managing agent is a body corporate, any director of, or any officer holding a general power of attorney from, such body corporate; is convicted by a. Court in India, after the commencement of this Act, of any offence, and sentenced therefor to imprisonment for a period of not less than six months.

Removal for fraud or breach of trust. 337. Removal for fraud or breach of trust.-A company in general meeting may, by ordinary resolution,, remove its managing agent from office (i) for fraud or breach of trust in relation-to the affairs of the company or of any subsidiary or holding company thereof, whether committed before or after the commencement of this Act- (ii) for fraud or breach of trust, whether committed before or after such commencement, in relation to the affairs of any other, body corporate, if a Court of Law, whether in or outside India, finds such fraud or breach of trust to have been duly established; or (iii) subject to the provisions of sections 340 and 341, where the managing agent is a firm or body corporate, if any partner in the firm, or any director of, or any officer holding a general power of attorney from, the body corporate is guilty of any such fraud or breach of trust as is referred

to in clause (1).

Removal for gross negligence or mismanagement. 338. Removal for gross negligence or mismanagement.-A company in general meeting may, by special resolution, remove its managing agent from office for gross negligence in, or for gross mismanagement of, the affairs of the company or of any subsidiary thereof.

Power to call meetings for the purposes of sections 337 and 338 andprocedure. 339. Power to call meetings for the purposes of sections 337 and

338 and procedure.-(1) Without prejudice to any other provision contained in this Act or in the articles of the company for the calling of meetings, any two directors of the company may call a general meeting of the company for the purpose of considering any resolution of the nature referred to in section 337 or 338. 208

(2) On receipt of notice of any such resolution, a copy of the resolution shall be sent forthwith to the managing agent by the company.

(3) The managing agent shall have, in relation to any such resolution, all the rights which a director of the company has under section 284 in relation to any resolution for removing him from office, including, in particular, the right to make representations to the company in writing, to have such representations sent to members of the company and to have them read out at the meeting and also the right to be heard on the resolution at the meeting.

Time when certain disqualifications will take effect.

340. Time when certain disqualifications will take effect.-(1) The disqualifications imposed by clause (a) of section 334, by sub-

section (1) of section 335, by section 336, and by any resolution passed in pursuance of clause (ii) of section 337, shall not take effect- (a) for thirty days from the date of the order of adjudication, appointment of the receiver, sentence, or finding of the Court, as the case may be, or (b) where any appeal or petition is preferred within the thirty days aforesaid against the order, appointment, sentence or conviction resulting in the sentence, or finding, until the expiry of seven days from the date on which such appeal or petition is disposed of, or (c) where within the seven days aforesaid, any further appeal or petition is preferred in respect of the order, appointment, sentence, conviction or finding, as the case may be, and the appeal or petition, if allowed, would result in the removal of the disqualification, or in making the resolution inapplicable, as the case may be, until such further appeal or petition is disposed of.

(2) In the cases referred to in sub-section (1), the Board may suspend the managing agent from office immediately on, or at any time after, the adjudication, appointment, sentence or finding referred to in clause (a) of that sub-section and until the disposal of the appeals and petitions, if any, referred to in clauses (b) and (c) thereof, or until the convicted partner, director or officer is expelled or dismissed in pursuance of section 341, as the case may be.

Conviction not to operate as disqualification if convicted partner,director, etc., is expelled. 341. Conviction not to operate as disqualification if convicted

partner, director, etc., is expelled.-(1) In the cases referred to in clauses (b) and (c) of section 336, it shall be open to the managing agent, notwithstanding anything to the contrary in any other law or agreement, for the time being in force, to expel or dismiss the convicted partner, director or officer, within thirty days from the date of his sentence; and in that event, the disqualifications imposed' by the clauses aforesaid shall cease to apply.

(2) Sub-section (1) shall not affect the operation of section 346 in any case to which that section would otherwise apply. 209

Resignation of office by managing agent.

342. Resignation of office by managing agent.-(1) Unless the managing agency agreement otherwise provides, a managing agent may, by notice to the Board, resign his office with effect from such date as may be specified in the notice.

(2) The managing agent shall cease to act as such with effect from the date so specified or from such later date, if any, as may be mutually agreed on between him and the Board; but his resignation shall not be effective until it is considered as provided in sub-

section (3).

(3) When notice of resignation is given as aforesaid, the Board shall- (a) prepare a statement of the affairs of the company as at the date specified in the notice of resignation or such subsequent date [not being later than that on which the

managing agent ceases to act as such under sub-section (2)] as the directors may think suitable, together with a balance- sheet made out as at that date, and a profit and loss account for the period subsequent to the date for which the last such account was prepared and laid before the company in general meeting, and ending on that date; (b) obtain a report from the auditors of the company on such balance-sheet and profit and loss account, in accordance with sections 227, 228 and 229; and (c) place the managing agent's resignation together with the statement of affairs, balance-sheet, profit and loss account and auditors' report mentioned above, before the company in general meeting.

(4) In relation to any report made by the auditors as aforesaid sections 230, 231, 232 and 233 shall apply in like manner as they apply in relation to the auditors' report referred to therein.

(5) The company in general meeting may, by resolution, accept the resignation or take such other action with reference thereto as it may deem fit. Transfers of and succession to, office

Transfer of office by managing agent. 343. Transfer of office by managing agent.-A transfer of his office' by the managing agent of a company shall not take effect unless it Is approved both by the company in general meeting and by the Central Government.

Managing agency not to be heritable after commencement of Act. 344. Managing agency not to be heritable after commencement of Act.-Any agreement made by a company other than a private company which is not a subsidairy of a public company, with its managing agent after the commencement of this Act shall be void in so far as it provides for succession to the office by inheritance or devise.

Succession to managing agency by inheritance or devise under agreementbefore commencement of Act, to be subject to Central Government'sapproval. 345. Succession to managing agency by inheritance or devise under agreement before commencement of Act, to be subject to Central

Government's approval.-(1) Where the office of the managing agent of a company is held by an individual at the commencement of this Act and the managing agency agreement provides for succession to the office by inheritance or devise, no person shall 1512 M. of Law-27. 210 succeed to the office on the death of the holder thereof. unless the succession of such person thereto is approved by the Central Govern- ment; and that Government shall not accord such approval unless, in its opinion, such person is a fit and proper person to hold the office of managing agent of the company.

(2) The provisions of sub-section (1) shall not apply to a private company which is not a subsidiary of a public company. Changes in constitution of firms and corporations

Changes in constitution of managing agency firm or corporation to beapproved by Central Government. 346. Changes in constitution of managing agency firm or

corporation to be approved by Central Government.-(1) Notwithstanding anything to the contrary contained in any other provision of this Act, where the managing agent of a public company, or of a private company which is a subsidiary of a public company, is a firm or body corporate and any change takes place in the constitution of the firm or body corporate, the managing agent shall cease to act as such on the expiry of six months from the date on which the change takes place or such further time as the Central Government may (whether before or after the expiry of the six months) allow in that behalf, unless the approval of the Central Government has been accorded before such expiry to the changed constitution of the firm or body corporate. Explanation.-For the purposes aforesaid, a change in the consti- tution of a body corporate means- (a) its conversion from a private to a public company, or from a public to a private company; (b) any change among the directors or managers of the cor- poration, whether caused by the death or retirement of a director or manager, the appointment of a new director or manager, or otherwise; (c) any change in the ownership of shares in the body cor- porate or in the case of a body corporate not having a share capital, any change in its membership.

(2) Where a managing agent is a body corporate (other than a private company) the shares whereof are for the time being dealt in, or quoted on, a recognised stock exchange, no change in the ownership of the shares of the company shall be deemed to be a change in its constitution within the meaning and for the purposes of sub-section

(1), unless the Central Government, by notification in the Official Gazette, otherwise directs: Provided that no such notification shall be issued in respect of any company, unless the Central Government is of opinion that any change in the ownership of its shares has taken place or is likely to take place, which has affected or is likely to affect Prejudicially the affairs of any company which is being managed by the managing agent.

Application of Schedule VIII to certain managing agents.

347. Application of Schedule VIII to certain managing agents,-(1) The provisions of Schedule VIII shall apply- (a) to every firm or private company which acts as the managing agent of any company, whether public or private; and 211

(b) save as provided in subsection (2), to every other body corporate (not being a private company) which acts as the managing agent of any company, whether public or private.

(2) A body corporate (not being a private company) acting as managing agent shall, if and so long as its shares are dealt in, or quoted on, any recognised stock exchange, be exempt from the operation

of sub-section (1), unless the Central Government, by notification in the Official Gazette, otherwise directs: Provided that the Central Government may, by order, modify or limit the operation of this sub-section in relation to any body cor- porate in such manner as that Government thinks fit.

(3) If default is made by a managing agent to which Schedule VIII applies in complying with the provisions thereof,- (a) if the managing agent is a firm, every partner therein who is in default, and (b) if the managing agent is a body corporate, the body corporate, and every director or other officer thereof who is in default, shall be punishable with fine which may extend to fifty rupees for every day during which the default continues. Remuneration of managing agents

Remuneration of managing agent ordinarily not to exceed 10 per cent.of net profits. 348. Remuneration of managing agent ordinarily not to exceed 10 per cent. of net profits.-Save as otherwise expressly provided in this Act, a company shall not pay to its managing agent, in respect of any financial year beginning at or after the commencement of this Act, by way of remuneration, whether in respect of his services as managing agent or in any other capacity, any sum in excess of ten per cent. of the net profits of the company for that financial year.

Determination of net profits.

349. Determination of net profits.-(1) In computing for the purpose of section 348, the net profits of a company in any financial year- (a) credit shall be given for the sums specified in sub-

section (2), and credit shall not be given for those

specified in subsection (3); and

(b) the sums specified in sub-section (4) shall be deducted

and those specified in sub-section (5) shall not be deducted.

(2) In making the computation aforesaid, credit shall be given for the following sums:- bounties and subsidies received from any Government, or any public authority constituted or authorised in this behalf by any Government, unless and except in so far as the Central Government otherwise directs.

(3) In making the computation aforesaid, credit shall not be given for the following sums:- (a) profits, by Way of premium, on shares or debentures of the company, which ane issued or sold by the company; 212 (b) profits on sales by the company of forfeited shares-, (c) profits from the sale of the undertaking or any of the undertakings of the company or of any part thereof; (d) profits from the sale of any immovable property or fixed assets-of a capital nature comprised in the undertaking or any of the undertakings of the company, unless the business of the company consists, whether wholly or partly, of buying and selling any such property or assets.

(4) In making the computation aforesaid, the following sums shall be deducted:- (a) all the usual working charges; (b) directors' remuneration; (c) bonus or commission paid or payable to any member of the company's staff, or to any engineer, technician or person employed or engaged by the company, whether on a whole-time or on a part-time basis; (d) any tax notified by the Central Government as being in the nature of a tax on excess or abnormal profits; (e) any tax on business profits imposed for special reasons or in special circumstances and notified by the Central Government in this behalf; (f) interest on debentures issued by the company; (g) interest on mortgages executed by the company and on loans and advances secured by a charge on its fixed or floating assets; (h) interest on unsecured loans and advances; (i) expenses on repairs, whether to immovable or to movable property, provided the repairs are not of a capital nature: (j) outgoings; (k) depreciation to the extent specified in section 350; (l) the loss (not including any loss of a capital nature) incurred in any year which begins at or after the commencement of this Act, in so far as it has not been taken into account in arriving at the net profits of that year or of any subsequent year preceding the year in respect of which the net profits have to be ascertained; (m) any compensation or damages to be paid in virtue of any legal liability, including a liability arising from a breach of contract; (n) any sum paid by way of insurance against the risk of meeting any liability such as is referred to in clause (m).

(5) In making the computation aforesaid, the following sums shall not be deducted:- (a) the remuneration payable to the managing agent; (b) income-tax and super-tax payable by the company under the Indian Income-tax Act, 1922 (11 of 1922), or any other tax 213 on the income of the company not falling under clauses (d)

and (e) of sub-section (4); (c) any compensation, damages or payments made voluntarily, that is to say, otherwise than in virtue of a liability such

as is referred to in clause (m) of sub-section (4).

Ascertainment of depreciation. 350. Ascertainment of depreciation.-The amount of depreciation to

be deducted in pursuance of clause (k) of sub-section (4) of section 349- (a) shall be the amount of normal depreciation allowable under the Indian Income-tax Act, 1922 (11 of 1922) for the financial year for which the net profits are to be computed; (b) shall not include any special, initial or other depreciation or any development rebate, whether allowable under that Act or otherwise; (c) shall not include any arrears of depreciation: Provided that arrears of depreciation may be taken into account in the first of the financial years referred to in section 348, in so far as these arrears have not been taken into account in arriving at the net profits of any financial year or years preceding the first financial year aforesaid.

Special provision where there is a profit-sharing arrangement betweentwo or more companies. 351. Special provision where there is a profit-sharing arrangement between two or more companies.-Where there is an arrangement between two or more companies to share their profits, and not less, than two of those companies have the same managing agent, any profits paid in pursuance of the arrangement by any of the com- panies having that managing agent to any other or others of them shall- (a) be excluded from the not profits of the company making such payment; and (b) be included in the net profits of the company receiving such payment, or where more than one company receives such payment, be included in the net profits of each of the receiving companies, to the extent of the payment received by it.

Payment of additional remuneration. 352. Payment of additional remuneration.-Additional remuneration in excess of the limits specified in sections 198 and 348 may be paid to the managing agent if, and only if, such remuneration is sanctioned by a special resolution of the company and is approved by the Central Government as being in the public interest.

Time of payment of remuneration. 353. Time of payment of remuneration.-The remuneration payable to the managing agent for any financial year or part thereof shall not be paid to him, until the accounts of the company for such financial year have been audited and laid before the company in general meeting: Provided that the minimum remuneration, if any, payable in pursuance of section 198 may be paid to the managing agent in such suitable instalments as may be specified either in the articles of the company or in a resolution passed by the company at an anunal general meeting or in the managing agency agreement executed by the company. 214

Managing agent not entitled to office allowance but entitled to bereimbursed in respect of expenses. 354. Managing agent not entitled to office allowance but entitled to be reimbursed in respect of expenses.-The managing agent shall not be paid any office allowance, but he may be reimbursed in respect of any expenses incurred by him on behalf of the company and sanctioned by the Board or by the company in general meeting; and nothing contained in sections 348 to 353 shall be deemed to prohibit his being so reimbursed.

Saving. 355. Saving.-Sections 348 to 354 shall not apply to a private company unless it is a subsidiary of a public company. Appointments as selling and buying agents

Appointment of managing agent or associate as selling agent of goodsproduced by the company. 356. Appointment of managing agent or associate as selling agent

of goods produced by the company.-(1) No managing agent and no associate of a managing agent, shall receive any commission or other remuneration from the company, in respect of sales of goods produced by the managed company, if the sales are made from the premises at which they are produced or from the head office of the managing agent or from any place in India.

(2) For sales of any goods produced by the company which are effected from any place outside India not being a place specified in

sub-section (1), the managing agent, or an associate of the managing agent, may be appointed as a selling agent subject to the following conditions, namely:- (a) that the managing agent or associate maintains an .office at such place for his own business, that is to say, for a business not connected with that of the company; (b) that the remuneration payable in respect of the work done as selling agent by the managing agent or associate is in accordance with the terms of a special resolution passed by the company in that behalf; and (c) that no other sums are payable by the company to the managing agent or associate whether by way of expenses or otherwise.

(3) Any appointment made in pursuance of sub-section (2) shall not be made for a term exceeding five years but may be renewed from time to time for a term not exceeding five years on each occasion: Provided that such renewal shall not be effected earlier than one year from the date on which it is to come into force.

(4) The special resolution referred to in clause (b) of sub-

section (2) shall set out the material terms subject to which the appointment of selling agent is made.

(5) Every appointment made under sub-section (2) and all parti- culars relating thereto shall be entered in a register maintained by the company for the purpose.

Application of section 356 to case where business of company consistsof the supply or rendering of any services. 357. Application of section 356 to case where business of company consists of the supply or rendering of any services.-Where and in so far as the business of a company consists in the supply or rendering of any services, the provisions of section 356 shall apply in respect of any such business procured for the company by its managing agent or any associate of its managing agent from any place outside 215 India, in like manner as those provisions apply in respect of sales of any goods produced by a company which are effected from that place.

Appointment of managing agent or associate as buying agent forcompany. 58. Appointment of managing agent or associate as buying agent

for company.-(1) No managing agent, and no associate of a managing agent, shall receive any payment whatever, from the company except expenses, if any, sanctioned under section 354 in respect of purchases of goods made on its behalf either in India, or in cases to which sub-

section (2) does not apply, outside India.

(2) Where purchases of goods are made on behalf of a company by its managing agent or any associate of its managing agent, at any place outside India, then, if the managing agent or associate maintains an office at such place not only for such purchase but also for his own business, that is to say, for a business not connected with that of the company, he may receive, at the option of the company, either- (a) such part of the expenses of such office as may reasonably be attributed to the purchases made on behalf of the company as aforesaid; or (b) remuneration, by way of commission or otherwise, in respect of the work done by the managing agent or associate in making such purchases.

(3) In cases to which clause (a) of sub-section (2) applies, the maximum amount which may be paid to the managing agent shall be specified in a special resolution passed by the company; and in cases to which clause (b) of that sub-section applies, the remuneration payable to the managing agent or associate shall be in accordance with the terms of a special resolution, passed by the company in that behalf.

(4) The special resolution referred to in sub-section (3) shall se-, out in sufficient detail the nature of the office maintained by the managing agent or associate outside India, the purposes for which it is maintained, the scale of its operations, the expenses incurred in maintaining the office, and the proportion of those expenses which may be reasonably attributed to the work done on behalf of the company.

(5) The special resolution shall not remain in force for a term exceeding three years but may be renewed from time to time for a term not exceeding three years on each occasion: Provided that no renewal shall take place earlier than one year from the date on which it is to come into force.

(6) Every resolution passed in pursuance of this section shall be entered in a register maintained by the company for the purpose.

Commission, etc., of managing agent as buying or selling agent ofother concerns. 359. Commission, etc., of managing agent as buying or selling

agent of other concerns.-(1) A company in general meeting may by resolution, authorise its managing agent or any associate of its managing agent to retain any commission or other remuneration earned or to be earned by such agent or associate as the managing agent, secretaries and treasurers, manager, agent, secretary or selling 216 or buying agent of any firm, body corporate or other concern in respect of any goods, power, freight, repairs or other services, for the sale, purchase, supply or rendering of which a contract has been, or is to be, entered into by such firm, body or concern with the com- pany, provided the prices or amounts charged to or received by the company are at rates which are not less favourable to the company than the market rates or which are otherwise reasonable.

(2) Every contract so entered into and all particulars relating thereto shall be entered in a separate register maintained by the company for the purpose.

Contracts between managing agent or associate and company for the saleor purchase of goods or the supply of services, etc. 360. Contracts between managing agent or associate and company for the sale or purchase of goods or the supply of services, etc.-

(1) A company may, by special resolution, approve of any contract being entered into with its managing agent or an associate of its managing agent,- (a) for the sale, purchase or supply of any property, movable or immovable, or for the supply or rendering of any service other than that of managing agent, or (b) for the underwriting of any shares or debentures to be issued or sold by the company.

(2) The special resolution aforesaid shall- (a) set out the material terms of the contract proposed to be entered into; and (b) provide specifically that for any property supplied or sold, or any services supplied or rendered, by the company, the managing agent or associate shall make payment to the company within one month from the date of the supply or sale of the goods, or the supply or rendering of the service, as the case may be.

(3) Every such contract and all particulars relating thereto shall he entered in a separate register maintained by the company for the purpose.

(4) Nothing contained in clause (a) of sub-section (1) shall affect any contract or contracts for the sale, purchase or supply of any property or services in which either the company or the managing agent or associate, as the case may be, regularly trades or does business, provided that the value of such property and the cost of such services do not exceed five thousand rupees in the aggregate in any calendar year comprised in the period of the contract or contracts.

Existing contracts relating to matters dealt with in sections 356 to360 to terminate on 1st March, 1958. 361. Existing contracts relating to matters dealt with in sections 356 to 360 to terminate on 1st March, 1958.- All contracts in force at the commencement of this Act, to which a company or the managing agent or an associate of the managing agent of a company is a party, shall, in so far as the contracts relate to any of the matters referred to in sections 356 to 360, be deemed to terminate on the first day of March, 1958, unless they terminate on an earlier date.

Registers to be open to inspection. 362. Registers to be open to inspection.-The registers referred to in sections 356 to 360 shall be open to inspection, and extracts may be taken therefrom and copies thereof may be required, by 217 any member of the company, in the same manner, to the same extent and on payment of the same fees, as in the case of the register of members of the company.

Remuneration received in contravention of foregoing sections to beheld in trust for company. 363. Remuneration received in contravention of foregoing sections to be held in trust for company.-Where the managing agent of a company, or an associate of the managing agent, receives any sum from the company, whether directly or indirectly, by way of remuneration, rebate, commission, expenses or otherwise,- (a) in the case of a public company or a private company which is a subsidiary of a public company, in contravention of sections 348 to 354 and sections 356 to 361; or (b) in the case of a private company which is not a sub- sidiary of a public company, in contravention of sections 356 to 361; the managing agent or associate shall account to the company for such sum as if he held it in trust for the company. Assignment of, or charge on, remuneration

Company not to be bound by assignment of, or charge on, managingagent's remuneration. 364. Company not to be bound by assignment of, or charge on, managing agent's remuneration.-Any assignment of, or charge on, his remuneration, or any part thereof, effected by a managing agent shall be void as against the company. This section shall not affect the rights inter se of the managing agent and any person other than the company. Compensation for termination of office

Prohibition of payment of compensation for loss of office in certaincases. 365. Prohibition of payment of compensation for loss of office in certain cases.-A company shall not pay or be liable to pay to its managing agent any compensation for the loss of his office in the following cases :- (a) where the managing agent resigns hi-, office in view of the reconstruction of the company or of its amalgamation with any other body corporate or bodies corporate and is appointed as the managing agent, secretaries and treasurers, manager' or other officer of the reconstructed company or of the body corporate resulting from the amalgamation; (b) where the managing agent resigns his office, otherwise than on the reconstruction of the company or its amalgamation as aforesaid; (c) where the managing agent vacates his office in pursuance of section 324, 330 or 332; (d) where the managing agent is deemed to have vacated his office in pursuance of clause (a), (b), (c) or (d) of section 334 or of section 336; (e) where the managing agent is deemed to have vacated his office in pursuance of clause (e) of section 334, provided the winding up of the company was due to the negligence or default of the managing agent; 1512 M. of Law-28. 218 (f) where the managing agent is deemed to have been sus- pended, or is suspended, from his office in pursuance of

section 335 or sub-section (2) of section 340; (g) where the managing agent is removed from office by a resolution in pursuance of section 337 or 338; and (h) where the managing agent has instigated, or has taken part in bringing about, the termination of his office.

Limit of compensation for loss of office. 366. Limit of compensation for loss of office.-The compensation which may be. paid by a company to its managing agent for loss of office shall not exceed the remuneration which he would have earned if he had been in office for the unexpired residue of his term, or for three years, whichever is shorter, calculated on the basis of the average remuneration actually earned by him during a period of three years immediately preceding the date on which his office ceased or was terminated, or where he held the office for a lesser period than three years, during such period: Provided that in' the event of the winding up of the company commencing, whether before, or at any time within twelve months after, the date of the cessation or termination of the office of managing agent, no compensation shall be payable to him if the assets of the company on the winding up, after deduction of the expenses thereof, are not sufficient to repay the share capital (including the premiums, if any,) contributed by the members of the company. Other rights and liabilities not affected on termination of office

Managing agent's rights and liabilities after termination of office. 367. Managing agent's rights and liabilities after termination of office. Where the office of a managing agent ceases or is terminated- (a) the managing agent and the company shall be entitled to enforce any claim or demand which each may have against the other in, respect of anything done or omitted to be done by either of them before the cessation or termination of the managing agency; and (b) the rights and liabilities. in relation to the company, of the managing agent in any other capacity, shall not he affected. Restrictions or, powers

Managing agent to be subject to control of Board and to restrictionsin Schedule VII. 368. Managing agent to be subject to control of Board and to restrictions in Schedule VII.- The managing agent of a company, whe- ther appointed before or after the commencement of this Act, shall exercise his powers subject to the superintendence, control and direction of its Board of directors and subject also to the provisions of the memorandum and articles of the company and to the restrictions contained in Schedule VII.

Loans to managing agent.

369. Loans to managing agent.-(1) No public company, and no private company which is a subsidiary of a public company, shall make any loan to, or give any guarantee or provide any security in connection with a loan made by any other person to, or to any other 219 person by,- (a) its managing agent or any associate of its managing agent: or (b) any body corporate in respect of which the Central Government, by order, declares that it is satisfied that the Board of directors, managing director, managing agent, secretaries and treasurers or manager thereof is accustomed to act in accordance with the directions or instructions of. the managing agent or associate of the managing agent, notwithstanding that the body corporate may not itself be an associate of the managing agent.

(2) Nothing contained in sub-section (1) or in section 295 shall apply to any credit given by the company to its managing agent for the purpose of facilitating the company's business and held by such agent in his own name in one or more current acccunts, subject to limits previously approved by the directors of the company and on no account exceeding twenty thousand rupees in the aggregate.

Loans etc., to companies under the same management.

370. Loans etc., to companies under the same management.-(1) No company (hereinafter in this section referred to as "the lending company") shall- (a) make any loan to, or (b) give any guarantee, or provide any security, in connection with a loan made by any other person to, or to any other person by, any body corporate which is under the same management as the lending company, unless the making of such loan, the giving of such guarantee or the provision of such security has been previously authorised by a special resolution of the lending company. Explanation.-For the purposes of this sub-section, two bodies corporate shall be deemed to be under the same management- (i) if the managing agent, secretaries and treasurers, managing director or manager of the one body, or where such managing agent or secretaries and treasurers are a firm, any partner in the firm, or where such managing agent or secretaries and treasurers are a private company, any director of such company, is- (a) the managing agent, secretaries and treasurers, managing director or manager of the other body; or (b) a partner in the firm acting as managing agent or secretaries and treasurers of the other body; or (c) a director of the private company acting as manag- ing agent or secretaries and treasurers of the other body; or (ii) if a majority of the directors of the one body constitute, or at any time within the six months immediately preceding constituted, a majority of the directors of the other body. 220

(2) Nothing contained in sub-section (1) shall apply to any loan made, guarantee given or security provided- (a) by a holding company to its subsidiary; or (b) by the managing agent or secretaries and treasurers to any company under his or their management.

Penalty for contravention of section 369 or 370.

371. Penalty for contravention of section 369 or 370.-(1) Every person who is a party to any contravention of section 369 or 370, including in particular any person to whom the loan is made, or in whose interest the guarantee is given or the security is provided, shall be punishable with fine which may extend to five thousand rupees or with simple imprisonment for a term which may extend to six months: Provided that where any such loan, or any loan in connection with which any such guarantee or security has been given or provided by the lending company, has been repaid in full, no punishment by way of imprisonment shall be imposed under this subsection; and where the loan has been repaid in part, the maximum punishment which may be imposed under this sub-section by way of imprisonment shall be proportionately reduced.

(2) All persons who are knowingly parties to any such con- travention shall be liable, jointly and severally, to the lending com- pany for the repayment of the loan, or for making good the sum which the lending company may have been called upon to pay in virtue of the guarantee given or the security provided by such company.

Purchase by company of shares, etc., of other companies in same group. 372. Purchase by company of shares, etc., of other companies

in same group.-(1) A company (hereinafter in this section and section 373 referred to as "the investing company") shall not be entitled to subscribe for, or purchase, the shares or debentures of any body corporate belonging to the same group as the investing company, except to the extent and except in accordance with the restrictions and conditions specified in this section.

(2) The Board of directors of the investing company shall be entitled to invest in any shares or debentures of any other body corporate in the same group up to ten per cent. of the subscribed capital of such other body corporate: Provided that the aggregate of the investments so made by the Board in all other bodies corporate in the same group shall not exceed twenty per cent. of the subscribed capital of the investing company.

(3) The investing company shall not make any investment in the shares or debentures of any other body corporate in the same group, in

excess of the limits specified in sub-section (2) and the proviso thereto, unless the investment is sanctioned by a resolution of the investing company and unless further it is approved by the Central Government.

(4) No investment shall be made by the Board of directors of a

company in pursuance of sub-section (2), unless it is sanctioned by a resolution passed at a meeting of the Board with the consent of all the directors present at the meeting, except those not entitled to vote thereon, and unless further notice of the resolution to be 221 moved at the meeting has been given to every director in the manner specified in section 286.

(5) Every company shall keep a register of all investments made by it in shares and debentures of bodies corporate in the same group, snowing, in respect of each investment, the following particulars:- (a) the name of the body corporate in which the investment is made; (b) the date on which the investment is made; and (c) the nature and extent of the investment.

(6) Particulars of every investment to which sub-section (5) applies shall, within three days of the making thereof, be entered in the register aforesaid.

(7) If default is made in complying with the provisions of subsection

(5) or (6), the company, and every officer of the company who is in default, shall be punishable with fine which may extend to five hundred rupees.

(8) The register aforesaid shall be kept at the registered office of the company, and shall be open to inspection at such office; and extracts may be taken therefrom and copies thereof may be requir- ed, by any member of the company to the same extent, in the same manner, and on payment of the same fees as in the case of the register of members of the company; and the provisions of section 163 shall apply accordingly.

(9) Every company shall annex to each balance-sheet prepared by it after the commencement of this Act, a list of the bodies corporate in the same group in the shares or debentures of which investments have been made by it, and the nature and extent of the investments so made in each such body corporate.

(10) For the purposes of this section, a body corporate shall be deemed to be in the same group as the investing company-- (a) if the body corporate is the managing agent of the investing company; or (b) if the body corporate and the investing company should,

in virtue of the Explanation to sub-section (1) of section 370, be deemed to be under the same management.

(11) The provisions of this section [except sub-section (9)] shall apply to an investment company, that is to say, to a company whose principal business is the acquisition of shares, stock, debentures or other securities.

(12) This. section shall not apply- (a) to any banking or insurance company; (b) to a private company, unless it is a subsidiary of a public company; (c) to investments by a holding company in its subsidiary, or (d) to investments by a managing agent or secretaries and treasurers in a company managed by him or them. 222

Investments made before commencement of Act. 373. Investments made before commencement of Act.-Where any investments have been made by a company at any time after the first day of April, 1952, which, if section 372 had been then in force, could not have been made except on the authority of a resolution passed by the investing company and the approval of the Central Government, the authority of the company by means of a resolution and the approval of the Central Government shall be obtained to such investments, within six months from the commencement of this Act; and if such authority and approval are not so obtained, the Board of directors of the company shall dispose of the investments, in so far

as they may be in excess of the limits specified in sub-section (2) of section 372 and the proviso to that sub-section, within two years from the commencement of this Act.

Penalty for contravention of section 372 or 373. 374. Penalty for contravention of section 372 or 373.-If default is made in complying with the provisions of section 372 or 373, every officer of the company who is in default shall be punishable with fine which may. extend to five thousand rupees.

Managing agent not to engage in business competing with business ofmanaged company. 375. Managing agent not to engage in business competing with

business of managed company.-(1) A managing agent shall not engage on his own account in any business which is of the same nature as, and directly competes with, the business carried on by a company of which he is the managing agent or by a subsidiary of such company, unless such company by special resolution permits him to do so.

(2) For the purposes of sub-section (1), a managing agent shall be deemed to be engaged in business on his own account, if such business is carried on by- (a) a firm in which he is a partner; or (b) a private company at any general meeting of which not less than twenty per cent. of the total voting power may be exercised or controlled by any of the following persons, or by any two or more of them acting together, namely, (i) the managing agent aforesaid; (ii) where such managing agent is a firm, any partner in the firm; and (iii) where such managing agent is a body corporate, any officer of the body corporate; (c) a body corporate (not being a private company) at any general meeting of which not less than seventy per cent. of the total voting power may be exercised or controlled by any of the following persons, or by any two or more of them acting together, namely, (i) the managing agent aforesaid; (ii) where such managing agent is a firm, any partner in the firm; and (iii) where such managing agent is a body corporate, any officer of such body corporate.

(3) If a managing agent engages in any business in contravention of this section, he shall be deemed to have received all profits and benefits accruing to him from such business, in trust for the company under his management or the subsidiary of such company, as the case may be; and where such profits and benefits are deemed to have been so received by the managing agent in trust for two or more such companies or subsidiaries, such profits and benefits 223 shall be held by the managing agent in trust for each of them in such proportions as may be agreed upon between them or, failing such agreement, as may be decided by the Court.

Condition prohibiting reconstruction or amalgamation of company excepton continuance of managing agent etc. to be void. 376. Condition prohibiting reconstruction or amalgamation of company except on continuance of managing agent etc. to be void.-Where any provision in the memorandum or articles of a company, or in any resolution passed in general meeting by, or by the Board of directors of, the company, or in an agreement between the company and its managing agent or any other person, whether made before or after the commencement of this Act, prohibits the reconstruction of the company or its amalgamation with any other body corporate or bodies corporate, either absolutely or except on the condition that the managing director, managing agent, secretaries and treasurers, or manager of the company is appointed or re-appointed as secretaries and treasurers, managing director, managing agent, or manager of the reconstructed company or of the body resulting from amalgamation, as the case may be, shall become void with effect from the commencement of this Act, or be void, as the case may be.

Restrictions on right of managing agent to appoint directors. 377. Restrictions on right of managing agent to appoint direc-

tors.-(1) The managing agent of a company may, if so authorised by its articles, appoint not more than two directors where the total number of the directors exceeds five, and one director where the total number does not exceed five.

(2) The managing agent may, at any time, remove any director so appointed, and appoint another director in his place or in the place of a director so appointed who resigns or otherwise vacates his office.

(3) Any provision contained in the articles of, or in any agree- ment with, the company, authorising the managing agent to appoint more

than the number of directors authorised under sub-section (1), which is in force immediately before the commencement of this Act, shall, in regard to the excess, be void, with effect from the expiry of one month from such commencement.

(4) Where at the commencement of this Act, the number of directors appointed by the managing agent exceeds the number

authorised under sub-section (1), the managing agent shall determine which of them shall continue to hold office, and intimate the choice made by him to the company before the expiry of one month from such commencement; and only the director or directors so chosen shall continue to hold office as directors after such expiry.

(5) If no choice is made by the managing agent as aforesaid, all the directors appointed by him shall, with effect from the expiry of one month from the commencement of this Act, be deemed to have vacated their offices 224 CHAP A. SECRETARIES AND TREASURERS CHAPTER IV A. SECRETARIES AND TREASURERS

Appointment of secretaries and treasurers. 378. Appointment of secretaries and treasurers.-Subject to the provisions of this Chapter, a company may appoint a firm or body corporate as its secretaries and treasurers: Provided that no company shall, at the same time, have both a managing agent and secretaries and treasurers.

Provisions applicable to managing agents to apply to secretaries andtreasurers with the exceptions and modifications specified In sections380 to

379. Provisions applicable to managing agents to apply to secre- taries and treasurers with the exceptions and modifications specified In sections 380 to 383.-Subject to the exceptions and modifications specified in sections. 380 to 383,- (a) all the provisions of this Act applicable to, or in relation to, a managing agent which is a firm or body corporate shall apply to secretaries and treasurers; and (b) all the provisions of this Act applicable to, or in relation to, any person or persons connected or associated in any manner with such a managing agent shall apply to, or in relation to, any person or persons connected or associated with secretaries and treasurers in the like manner ; and subject as aforesaid, all references in this Act to a managing agent or any person or persons connected or associated in any manner with a managing agent shall be construed accordingly, as including a reference to secretaries and treasurers or to the person or persons connected or associated with them in the like manner.

Sections 324, 330 and 332 not to apply. 380. Sections 324, 330 and 332 not to apply.-Sections 324, 330 and 332 shall not apply to secretaries and treasurers.

Section 348 to apply subject to a modification. 381. Section 348 to apply subject to a modification.-Section 348 shall apply to secretaries and treasurers subject to the modification that for the words "ten per cent. of the net annual profits' occurring in the section, the words "seven and a half per cent. of the net annual profits" shall be substituted.

Secretaries and treasurers not to appoint directors. 382. Secretaries and treasurers not to appoint directors.-Sec- retaries and treasurers shall have no right to appoint any director 225 of the company; and sections 377 and 261 shall not apply to, or in relation to, secretaries and treasurers, or persons connected or associated with them in the manner in which the persons specified in section 261 are connected or associated with managing agents.

Secretaries and treasurers not to sell goods or articles produced bycompany, etc., unless authorised by Board. 383. Secretaries and treasurers not to sell goods or articles produced by company, etc., unless authorised by Board.-Secretaries and treasurers shall have no right, unless, and except to the extent to which, they are authorised by the Board of directors, to sell any goods or articles manufactured or produced by the company, or to purchase, obtain, or acquire machinery, stores, goods or materials for the purposes of the company, or to sell the same when no longer required for those purposes. B. MANAGERS

Firm or body corporate not to be appointed manager. 384. Firm or body corporate not to be appointed manager.-No public company, and no private company which is a subsidiary of a public company, shall, after the commencement of this Act, appoint or employ, or after the expiry of six months from such commencement, continue the appointment or employment of, any firm, body corporate or association as its manager.

Certain persons not to be appointed managers.

385. Certain persons not to be appointed managers.-(1) No company shall, after the commencement of this Act, appoint or employ, or continue the appointment or employment of, any person as its manager who- (a) is an undischarged insolvent, or has at any time within the preceding five years been adjudged an insolvent; or (b) suspends, or has at any time within the preceding five years suspended, payment to his creditors; or makes, or has at any time within the preceding five years made, a composition with them; or (c) is,. or has at any time within the preceding five years been, convicted by a Court in India of an offence involving moral turpitude.

(2) The Central Government may, by notification in the Official Gazette, remove the disqualification incurred by any person in virtue

of clause (a), (b), or (c) of sub-section (1), either generally or in relation to any company or companies specified in the notification. 1512 M. of Law-29. 226

Number of companies of which a person may be appointed manager. 386. Number of companies of which a person may be appointed

manager.-(1) No company shall, after the commencement of this Act, appoint or employ any person as manager, if he is either the manager or the managing director of any other company, except as provided in

sub-section (2).

(2) A company may appoint or employ a person as its manager, if he is the manager or managing director of one, and not more than one, other company: Provided that such appointment or employment is made or approved by a resolution passed at a meeting of the Board with the consent of all the directors present at the. meeting, and of which meeting and of the resolution to be moved thereat, specific notice has been given to all the directors then in India.

(3) Where, at the commencement of this Act, any person is holding the office either of manager or of managing director in more than two companies, he shall, within one year from the commencement of this Act, choose not more than two of those companies as companies in which he wishes to continue to hold the office of manager or managing director, as the case may be; and the provisions of clauses (b) and

(c) of sub-section (1) and of sub-sections (2) and (3) of section 276 shall apply mutatis mutandis in relation to this case, as those provisions apply in relation to the case of a director.

(4) Notwithstanding anything contained in sub-sections (1) to

(3), the Central Government may, by order, permit any person to be appointed as a manager of more than two companies, if the Central Government is satisfied that it is necessary that the companies should, for their proper working, function as a single unit and have a common manager.

(5) This section shall not apply to a private company, unless if is a subsidiary of a public company.

Remuneration of manager. 387. Remuneration of manager.-The manager of a company may, subject to the provisions of section 198, receive remuneration either by way of a monthly payment, or by way of a specified percentage, not exceeding five, of the "net profits" of the company calculated in the manner laid down in sections 349, 350, and 351, or partly by the one way and partly by the other.

Application of sections 310, 311, 312 and 317 to managers. 388. Application of sections 310, 311, 312 and 317 to managers.-The provisions of sections 310, 311 and 317 shall apply in relation to the manager of a company as they apply in relation to a managing director thereof, and those of section 312 shall apply in re- lation to the manager of a company, as they apply to a director thereof 227 CHAP ARBITRATION, COMPROMISES, ARRANGEMENTS AND RECONSTRUCTIONS CHAPTER V ARBITRATION, COMPROMISES, ARRANGEMENTS AND RECONSTRUCTIONS

Power for companies to refer matters to arbitration.

389. Power for companies to refer matters to arbitration.-(1) A company may, by written agreement, refer to arbitration, in accordance with the Arbitration Act, 1940 (10 of 1940), an existing or future difference between itself and any other company or person.

(2) A company which is a party to an arbitration may delegate to the arbitrator power to settle any terms or to determine any matter, capable of being lawfully settled or determined by the company itself, or by its Board of directors, managing director, managing agent, secretaries and treasurers, or manager.

(3) The provisions of the Arbitration Act, 1940 (10 of 1940), shall apply to all arbitrations in pursuance of this Act to which a company is a party.

Interpretation of sections 391 and 393. 390. Interpretation of sections 391 and 393.-In sections 391 and 393,- (a) the expression "company" means any company liable to be wound up under this Act; (b) the expression "arrangement" includes a reorganization of the share capital of the company by the consolidation of shares of different classes, or by the division of shares into shares of different classes or, by both those methods; and (c) unsecured creditors who may have filed suits or obtained decrees shall be deemed to be of the same class as other unsecured creditors.

Power to compromise or make arrangements with creditors and members. 391. Power to compromise or make arrangements with creditors and

members.-(1) Where a compromise or arrangement is proposed- (a) between a company and its creditors or any class of them; or (b) between a company and its members or any class of them; . the Court may, on the application of the company or of, any creditor or member of the company, or, in the case of a company which is being wound up, of the liquidator, order a meeting of the creditors 228 or class of creditors, or of the members or class of members, as the case may be, to be called, held and conducted in such manner as the Court directs.

(2) If a majority in number representing three-fourths in value of the creditors, or class of creditors, or members. or class of members, as the case may be, present and voting either in person or, where proxies are allowed, by proxy, at the meeting, agree to any compromise or arrangement, the compromise or arrangement shall, if sanctioned by the Court, be binding on all the creditors, all the creditors of the class, all the members, or all the members of the class, as the case may be, and also on the company, or, in the case of a company which is being wound up, on the liquidator and contributories of the company..

(3) An order made by the Court under sub-section (2) shall have no effect until a certified copy of the order has been filed with the registrar.

(4) A copy of every such order shall be annexed to every copy of the memorandum of the company issued after the certified Copy of the order has been filed as aforesaid, or in the case of a company not having a memorandum, to every copy so issued of the instrument constituting or defining the constitution of the company.

(5) If default is made in complying with sub-section (4), 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 in respect of which default is made.

(6) The Court may, at any time after an application has been made to it under this section, stay the commencement or continuation of any suit or proceeding against the company on such terms as the Court thinks fit, until the application is finally disposed of.

(7) An appeal shall lie from any order made by a Court exercising original jurisdiction under this section to the Court empowered to hear appeals from the decisions of that Court, or if more than one Court is so empowered, to the Court of inferior jurisdiction.

The provisions of sub-sections (3) to (6) shall apply in relation to the appellate order and the appeal as they apply in relation to the original order and the application.

Power of High Court to enforce compromises and arrangements. 392. Power of High Court to enforce compromises and arrange-

ments.-(1) Where a High Court makes an order under section 391 sanctioning a compromise or an arrangement in respect of a company, it- (a) shall have power to supervise the carrying out of the compromise or arrangement; and 229 (b) may, at the time of making such order or at any time thereafter, give such directions in regard to any matter or make such modifications in the compromise or arrangement as it may consider necessary for the proper working of the compromise or arrangement.

(2) If the Court aforesaid is satisfied that a compromise or ar- rangement sanctioned under section 391 cannot be worked satisfactorily with or without modifications, it may, either on its own motion or on the application of any person interested in the affairs of the company, make an order winding up the company, and such an order shall be deemed to be an order made under section 433 of this Act.

(3) The provisions of this section shall, so far as may be, also apply to a company in respect of which an order has been made before the commencement of this Act under section 153 of the Indian Companies Act, 1913 (7 of 1913), sanctioning a compromise or an arrangement.

Information as to compromises or arrangements with creditors andmembers. 393. Information as to compromises or arrangements with creditors

and members.-(1) Where a meeting of creditors or any class of creditors, or of members or any class of members, is called under section 391,- (a) with every notice calling the meeting which is sent to a creditor or member, there shall be sent also a statement setting forth the terms of the compromise or arrangement and explaining its effect; and in particulary stating any material interests of the directors, managing director, managing agent, secretaries and treasurers or manager of the company, whether in their capacity as such or as members or creditors of the company or otherwise, and the effect on those interest of the compromise or arrangement, if, and in so far as, it is different from the effect on the like interests of other persons; and (b) in every notice calling the meeting which is given by advertisement, there shall be included either such, a statement as aforesaid or a notification of the place at which and the manner in which creditors or members entitled to attend 'the meeting may obtain copies of such a statement as aforesaid.

(2) Where the compromise or arrangement affects the rights of debenture holders of the company, the said statement shall give the like information and explanation as respects the trustees of any deed for securing the issue of the debentures as it is required to give as respects the company's directors.

(3) Where a notice given by advertisement, includes a notifica- tion that copies of a statement setting forth the terms of the com- promise or arrangement proposed and explaining its effect can be obtained by creditors or members entitled to attend the meeting, every creditor or member so entitled shall, on making an application in the manner indicated by the notice, be furnished by the company, free of charge, with a copy of the statement. 230

(4) Where default is made in complying with any of the require- ments of this section, the company, and every officer of the company who is in default, shall be punishable with fine which may extend to five thousand rupees; and for the purpose of this sub-section any liquidator of the company and any trustee of a deed for securing the issue of debentures of the company shall be deemed to be an officer of the company: Provided that a person shall not be punishable under this sub- section if he shows that the default was due to the refusal of any other person, being a director, managing director, managing agent, secretaries and treasurers, manager or trustee for debenture holders, to supply the necessary particulars as to his material interests.

(5) Every director, managing director, managing agent, secre- taries and treasurers or manager of the company, and every trustee for debenture holders of the company, shall give notice to the company of such matters relating to himself as may be necessary for the purposes of this section; and if he fails to do so, he shall be punishable with fine which may extend to five hundred rupees.

Provisions for facilitating reconstruction and amalgamation ofcompanies. 394. Provisions for facilitating reconstruction and amalgamation

of companies.-(1) Where an application is made to the Court under section 391 for the sanctioning of a compromise or arrangement pro- posed between a company and any such persons as are mentioned in that section, and it is shown to the Court- (a) that the compromise or arrangement has been proposed for the purposes of, or in connection with, a scheme for the reconstruction of any company or companies, or the amalgama- tion of any two or more companies; and (b) that under the scheme the whole or any part of the undertaking, property or liabilities of any company concerned in the scheme (in this section referred to as a "transferor company") is to be transferred to another company (in this section referred to as "the transferee company"); the Court may, either by the order sanctioning the compromise or arrangement or by a subsequent order, make provision for all or any of the following matters:- (i) the transfer to the transferee company of the whole or any part of the undertaking, property or liabilities of any transferor company; (ii) the allotment or appropriation by the transferee com- pany of any shares, debentures, policies, or other like interests in that company which, under the compromise or arrangement, are to be allotted or appropriated by that company to or for any person; (iii) the continuation by or against the transferee company of any legal proceedings pending by or against any transferor company; 231 (iv) the dissolution, without winding up, of any transferor company; (v) the provision to be made for any persons who, within such time and in such manner as the Court directs, dissent from the compromise or arrangement; and (vi) such incidental, consequential and supplemental matters as are necessary to secure that the reconstruction or amalgamation shall be fully and effectively carried out.

(2) Where an order under this section provides for the transfer of any property or liabilities, then, by virtue of the order, that property shall be transferred to and vest in, and those liabilities shall be transferred to and become the liabilities of, the transferee company; and in the case of any property, if the order so directs, freed from any charge which is, by virtue of the compromise or arrangement, to cease to have effect.

(3) Within fourteen days after the making of an order under this section, every company in relation to which the order is made shall cause a certified copy thereof to be filed with the Registrar for registration. If default is made in complying with this sub-section, the com- pany, and every officer of the company who is in default, shall be, punishable with fine which may extend to fifty rupees..

(4) In this section- (a) "property" includes property, rights and powers of every description; and "liabilities" includes duties of every description; and (b) "transferee company" does not include any company other than a company within the meaning of this Act; but "transferor company" includes any body corporate, whether a company within the meaning of this Act or not.

Power and duty to acquire shares of shareholders dissenting fromscheme or contract approved by majority. 395. Power and duty to acquire shares of shareholders

dissenting from scheme or contract approved by majority.-(1) Where a scheme or contract involving the transfer of shares or any class of shares in a company (in this section referred to as "the transferor company") to another company (in this section referred to as "the transferee company"), has, within four months after the making of the offer in that behalf by the transferee company, been approved by the holders of not less than nine-tenths in value of the shares whose transfer is involved (other than shares already held at the date of the offer by, or by a nominee for, the transferee company or its subsidiary), the transferee company may, at any time within two months after the expiry of the said four months, give notice in the prescribed manner to any dissenting shareholder, that it desires to acquire his shares; and when such a notice is given, the 232 transferee company, shall, unless, on an application made by the dissenting shareholder within one month from the date on which the notice was given, the Court thinks fit to order otherwise, be entitled and bound to acquire those shares on the terms on which, under the scheme or contract, the shares of the approving shareholders are to be transferred to the transferee company. Provided that where shares in the transferor company of the same class as the shares whose transfer is involved are already held as aforesaid to a value greater than one-tenth of the aggregate of the values of all the shares in the company of such class, the foregoing provisions of this sub-section shall not apply, unless- (a) the transferee company offers the same terms to all holders of the shares of that class (other than those already held as aforesaid) whose transfer is involved; and (b) the holders who approve the scheme or contract, besides holding not less than nine-tenths in value of the shares (other than those already held as aforesaid) whose transfer is involved, are not less than three-fourths in number of the holders of those shares.

(2) Where, in pursuance of any such scheme or contract as afore- said, shares, or shares of any class. in a company are transferred to another company or its nominee, and those shares together with any other shares or any other shares of the same class, as the case may be, in the first-mentioned company held at the date of the transfer by, or by a nominee for, the transferee company or its subsidiary comprise nine-tenths in value of the shares, or the shares of that class, as the case may be, in the first-mentioned company, them- (a) the transferee company shall, within one month from the date of the transfer (unless on a previous transfer in pursuance of the scheme or contract it has already complied with this requirement), give notice of that fact in the prescribed manner to the holders of the remaining shares or of the remaining shares of that class, as the case may be, who have not assented to the scheme or contract; and (b) any such holder may, within three months from the giving of the notice to him, require the transferee company to acquire the shares in question; and where a shareholder gives notice under clause (b) with respect to any shares, the transferee company shall be entitled and bound to acquire those shares on the terms on which, under the scheme or contract, the shares of the approving shareholders were transferred to it, or on such other terms as may be agreed, or as the 'Court on the application of either the transferee company or the shareholder thinks fit to order.

(3) Where a notice has been given by the transferee company

under sub-section (1) and the Court has not, on an application made by the dissenting shareholder, made an order to the contrary, the transferee company shall, on the expiry of one month from the date on which the notice has been given, or, if an application to the Court by the dissenting shareholder is then pending, after that application lips been disposed of, transmit a copy of the notice to the transferor company together with an instrument of transfer executed 233 on behalf of the shareholder by any person appointed by the transferee company and on its own behalf by the transferee company, and pay or transfer to the transferor company the amount or other consideration representing the price payable by the transferee company for the shares which, by virtue of this section, that company is entitled to acquire; and the transferor company shall thereupon register the transferee company as the holder of those shares: Provided that an instrument of transfer shall not be required for any share for which a share warrant is for the time being outstanding.

(4) Any sums received by the transferor company under this section shall be paid into a separate bank account, and any such sum's and any other consideration so received shall be held by that company in trust for the several persons entitled to the shares in respect of which the said sums or other consideration were respectively received.

(5) In this section- (a) "dissenting shareholder" includes a shareholder who has not assented to the scheme or contract and any shareholder who has failed or refused to transfer his shares to the transferee company in accordance with the scheme or contract; (b) "transferor company" and "transferee company" shall have the same meaning as in section 394.

(6) In relation to an offer made by the transferee company to shareholders of the transferor company before the commencement of this Act, this section shall have effect-

(a) with the substitution, in sub-section (1), for the words "the shares whose transfer is involved (other than shares already held at the date of the offer by, or by a nominee for, the transferee company or its subsidiary)," of the words "the shares affected" and with the omission of the proviso to that subsection;

(b) with the omission of sub-section (2);

(c) with the omission in sub-section (3) of the words "together with an instrument of transfer executed on behalf of the shareholder by any person appointed by the transferee company and on its own behalf by the transferee company" and of the proviso to that sub-section; and

(d) with the omission of clause (b) of sub-section (5).

Power of Central Government to provide for amalgamation of companiesin national Interest. 396. Power of Central Government to provide for amalgamation of

companies in national Interest.-(1) Where the Central Government is satisfied that it is essential in the national interest that two or more companies should amalgamate, then, notwithstanding anything contained in sections 394 and 395 but subject to the provisions of this section, the Central Government. may, by order notified in the Official Gazette, provide for the amalgamation of those companies into a single company with such constitution; with such property, powers, rights, interests, authorities and privileges; and with such liabilities, duties, and obligations; as may be specified in the order. 1512 M. of Law-30. 234

(2) The order aforesaid may contain such consequential, inci- dental and supplemental provisions as may, in the opinion of the Central Government, be necessary to give effect to the amalgamation.

(3) Every member or creditor (including a debenture holder) of each of the companies before the amalgamation shall have, as nearly as may be, the same interest in or rights against the company resulting from the amalgamation as he had in the company of which he was originally a member or creditor; and to the extent to which the interest or rights of such member or creditor in or against the company resulting from the amalgamation are less than his interest in or rights against the original company, he shall be entitled to compensation which shall be assessed by such authority as may be prescribed. The compensation so assessed shall be paid to the member or creditor concerned by the company resulting from the amalgamation.

(4) No order shall be made under this section, unless- (a) a copy of the proposed order has been sent in draft to each of the companies concerned; and (b) the Central Government has considered, and made such modifications, if any, in the draft order as may seem to it desirable in the light of any suggestions and objections which may be received by it from any such company within such period as the Central Government may fix in that behalf, not being less than two months from the date on which the copy aforesaid is received by that company, or from any class of shareholders therein, or from any creditors or any class of creditors thereof.

(5) Copies of every order, made under this section shall, as soon as may be after it has been made, be laid before both Houses of Parliament. CHAP PREVENTION OF OPPRESSION AND MISMANAGEMENT CHAPTER VI PREVENTION OF OPPRESSION AND MISMANAGEMENT A. Powers of Court

Application to Court for relief in cases of oppression.

397. Application to Court for relief in cases of oppression.-(1) Any members of a company who complain 'that the affairs of the company are being conducted in a manner oppressive to any member or members (including any one or more of themselves) may apply to the Court for an order under this section, provided such members have a right so to apply in virtue of section 399.

(2) If, on any application under sub-section (1), the Court is of opinion- (a) that the company's affairs are being conducted in a manner oppressive to any member or members; and (b) that to wind up the company would unfairly prejudice such member or members, but that otherwise the facts would justify the making of a winding-up order on the ground that it was just and equitable that the company should be wound up; the Court may, with a view to bringing to an end the matters com- plained of make such order as it thinks fit. 235

Application to Court for relief in cues of mismanagement. 398. Application to Court for relief in cues of mismanagement.-

(1) Any members of a company who complain- (a) that the affairs of the company are being conducted in a manner prejudicial to the interests of the company, or (b) that a material change (not being a change brought about by, or in the interests of, any creditors including debenture holders, or any class of shareholders, of the company) has taken place in the management or control of the company, whether by an alteration in its Board of directors, or of its managing agent or secretaries and treasurers, or in the constitution or control of the firm or body corporate acting as its managing agent or secretaries and treasurers, or in the ownership of the company's shares, or if it has no share capital, in its membership, or in any other manner whatsoever, and that by reason of such change, it is likely that the affairs of the company will be conducted in a manner prejudicial to the interests of the company; may apply to the Court for an order under this section, provided such members have a right so to apply in virtue of section 399.

(2) If, on any application under sub-section (1), the Court is of opinion that the affairs of the company are being conducted as aforesaid or that by reason of any material change as aforesaid in the management or control of the company, it is likely that the affairs of the company will be conducted as aforesaid, the Court may, with a view to bringing to an end or preventing the matters complained of or apprehended, make such order as it thinks fit.

Right to apply under sections 397 and 398.

399. Right to apply under sections 397 and 398.-(1) The following members of a company shall have the right to apply under section 397 or 398: - (a) in the case of a company having a share capital, not less than one hundred members of the company or not less than onetenth of the total number of its members, whichever is less, or any member or members holding not less than one- tenth of the issued share capital of the company, provided that the applicant or applicants have paid all calls and other sums due on their shares; (b) in the case of a company not having a share capital, not less than one-fifth of the total number of its members.

(2) For the purposes of sub-section (1), where any share or shares are held by two or more persons jointly, they shall be counted only as one member.

(3) Where any members of a company are entitled to make an

application in virtue of sub-section (1), any one or more of them having obtained the consent in writing of the rest, may make the application on behalf and for the benefit of all of them.

(4) The Central Government may, if in its opinion circumstances exist which make it just and equitable so to do, authorise any member or members of the company to apply to the Court under section 397 or 398, notwithstanding that the requirements of clause (a) or clause

(b), as the case may be, of sub-section (1) are not, fulfilled.

(5) The Central Government may, before authorising any member or members as aforesaid, require such member or members to give security for such amount as the Central Government may deem 236 reasonable, for the payment of any costs which the Court dealing with the application may order such member or members to pay to any other person or persons who are parties to the application.

Notice to be given to Central Government of applications undersections 397 and 398. 400. Notice to be given to Central Government of applications under sections 397 and 398.-The Court shall give notice of every application made to it under section 397 or 398 to the Central Govern- ment, and shall take into consideration the representations, if any, made to it by that Government before passing a final order under that section.

Right of Central Government to apply under sections 397 and 398. 401. Right of Central Government to apply under sections 397 and 398.-The Central Government may itself apply to the Court for an order under section 397 or 398, or cause an application to be made to the Court for such an order by any person authorised by it in this behalf.

Powers of Court on application under section 397 or 398. 402. Powers of Court on application under section 397 or 398. Without prejudice to the generality of the powers of the Court under section 397 or 398, any order under either section may provide for- (a) the regulation of the conduct of the company's affairs in future; (b) the purchase of the shares or interests of any members of the company by other members thereof or by the company; (c) in the case of a purchase of its shares by the company as aforesaid, the consequent reduction of its share capital; (d) the termination, setting aside or modification of any agreement, howsoever arrived at, between the company on the one hand, and any of the following persons, on the other, namely : - (i) the managing director, (ii) -any other director, (iii) the managing agent, (iv) the secretaries and treasurers, and (v) the manager, upon such terms and conditions as may, in the opinion of the Court, be just and equitable in all the circumstances of the case; (e) the termination, setting aside or modification of any agreement between the company and any person not referred to in clause (d), provided that no such agreement shall be terminated, set aside or modified except after due notice to the party concerned and provided further that no such agreement shall be modified except after obtaining the consent of the party concerned; (f) the setting aside of any transfer, delivery of goods, payment, execution or other act relating to property made or done by or against the company within three months before the date of the application under section 397 or 398, which would, if made or done by or against an individual, be deemed in his insolvency to be a fraudulent preference; (g) any other matter for which in the opinion of the Court it is just and equitable that provision should be made. 237

Interim order by Court. 403. Interim order by Court.-Pending the making by it of a final order under section 397 or 398, as the case may be, the Court may, on the application of any party to the proceeding, make any interim order which it thinks fit for regulating the conduct of the company's affairs, upon such terms and conditions as appear to it to be just and equitable.

Effect of alteration of memorandum or articles of company by orderunder section 397 or 398. 404. Effect of alteration of memorandum or articles of company by

order under section 397 or 398.-(1) Where an order under section 397 or 398 makes any alteration in the memorandum or articles of a company, then, notwithstanding any other provision of this Act, the company shall not have power except to the extent, if any, permitted in the order, to make without the leave of the Court, any alteration whatsoever which is inconsistent with the order, either in the memorandum or in the articles.

(2) Subject to the provisions of sub-section (1), the alterations made by the order shall, in all respects, have the same effect as if they had been duly made by the company in accordance with the provisions of this Act; and the said provisions shall. apply accordingly to the memorandum or articles as so altered.

(3) A certified copy of every order altering, or giving leave to alter, a company's memorandum or articles, shall within fifteen days after the making thereof, be filed by the company with the Registrar who shall register the same.

(4) If default is made in complying with the provisions of sub-

section (3), the company, and every officer of the company who is in default, shall be punishable with fine which may extend to five thousand rupees.

Addition of respondents to application under section 397 or 398. 405. Addition of respondents to application under section 397 or 398.-If the managing director or any other director, the managing agent, secretaries and treasurers or the manager, of a company, or any other person, who has not been impleaded as a respondent to any application under section 397 or 398 applies to be added as a respondent thereto, the Court shall, if it is satisfied that there is sufficient cause for doing so, direct that he may be added as a res- pondent accordingly.

Application of sections 539 to 544 to proceedings under sections 397and 398. 406.Application of sections 539 to 544 to proceedings under sections 397 and 398.-In relation to an application under section 397 or 398, sections 539 to 544, both inclusive, shall apply in the form set forth in Schedule XI.

Consequences of termination or modification of certain agreements. 407. Consequences of termination or modification of certain

agreements.-(1) Where an order of a Court made under section 397 or 398 terminates, sets aside, or modifies an agreement such as is referred to in clause (d) or (e) of section 402,- (a) the order shall not give rise to any claim whatever against the company by any person for damages or for compen- sation for loss of office or in any other respect, either in pursuance of the agreement or otherwise; (b) no managing or other director, managing agent, secre- taries and treasurers, or manager whose agreement is so terminated or set aside and no person who, at the date of the order terminating or setting aside the agreement was, or subsequently becomes, an associate of such managing agent or secretaries 238 and treasurers shall, for a period of five years from the date of the order terminating the agreement, without the leave of the Court, be appointed, or act, as the managing or other director, managing agent, secretaries and treasurers, or manager of the company.

(2) (a) Any person who knowingly acts as a managing or other director, managing agent, secretaries and treasures, or manager of a company in contravention of clause (b) of sub-

section, (1); (b) where the person so acting as managing agent or as secretaries and treasurers is a firm or body corporate, every partner in the firm, or every director of the body corporate who is knowingly a party to such contravention; and (c) every other director or every director, as the case may be, of the company, who is knowingly a party to such contra- vention; shall be punishable with imprisonment for a term which may extend to one year, or with fine which may extend to five thousand rupees, or with both.

(3) No Court shall grant leave under clause (b) of sub-section

(1) unless notice of the intention to apply for leave has been served on the Central Government and that Government has been given an opportunity of being heard in the matter. B. Powers of Central Government

Powers of Government to prevent oppression or mismanagement. 408. Powers of Government to prevent oppression or mis-

management.-(1) Notwithstanding anything contained in this Act, the Central Government may appoint not more than two persons, being members of the company, to hold office as directors thereof for such period, not exceeding three years on any one occasion, as it may think fit, if the Central Government, on the application of not less than two hundred members of the company or of members of the company holding not less than one-tenth of the total voting power therein, is satisfied, after such inquiry as it deems fit to make, that it is necessary to make the appointment or appointments in order to prevent the affairs of the company being conducted either in a manner which is oppressive to any members of the company or in a manner which is prejudicial to the interests of the company: Provided that in lieu of passing an order as aforesaid, the Central Government may, if the company has not availed itself of the option given to it under section 265, direct the company to amend its articles in the manner provided in that section and make fresh appointments of directors in pursuance of the articles as so amended. within such time as may be specified in that behalf by the Central Government.

(2) In case the 'Central Government passes an order under the

proviso to sub-section (1), it may, if it thinks fit, direct that until' new directors are appointed in pursuance of the order aforesaid, not more than two members of the company specified by the Central Government shall hold office as additional directors of the company.

(3) For the purpose of reckoning two-thirds or any other propor- tion of the total number of directors of the company, any director or

directors appointed by the Central Government under sub-section (1) or

(2) shall not be taken into account. 239

Power of Central Government to prevent change in Board of directorslikely to affect company prejudicially. 409. Power of Central Government to prevent change in Board

of directors likely to affect company prejudicially.-(1) Where a complaint is made to the Central Government by the managing director or any other director, the managing agent, or the secretaries and treasurers, of a company that as a result of a change which has taken place or is likely to take place in the ownership of any shares held in the company, a change in the Board of directors is likely to take place which (if allowed) would affect prejudicially the affairs of the company, the Central Government may, if satisfied, after such inquiry as it thinks fit to make that it is just and proper so to do, by order, direct that no resolution passed or 'action taken to affect a change in the Board of directors after the date of the complaint shall have effect unless confirmed by the Central Government; and any such order shall have effect notwithstanding anything to the contrary contained in any other provision of this Act or in the memorandum or articles of the company, or in any agreement with, or any resolution passed in general meeting by, or by the Board of directors of, the company.

(2) The Central Government shall have power when any such complaint is received by it, to make an interim order to the effect

set out in sub-section (1), before making or completing the inquiry aforesaid.

(3) Nothing contained in sub-sections (1) and (2) shall apply to a private company, unless it is a subsidiary of a public company. CHAP CONSTITUTION AND POWERS OF ADVISORY COMMISSION. CHAPTER VII CONSTITUTION AND POWERS OF ADVISORY COMMISSION

Appointment of Advisory Commission. 410. Appointment of Advisory Commission.-For the purpose of advising the Central Government on the matter referred to in clause (a) of section 411, on the applications referred to in clause (b) of that section and on such other matters as the Central Government may think fit, the Central Government shall- (a) constitute a Commission (hereinafter called the "Advisory Commission") consisting of not more than' five persons with suitable qualifications; and (b) appoint one of those persons to be the Chairman of the Commission.

Duties of Advisory Commission. 411. Duties of Advisory Commission.-It shall be the duty of the Advisory Commission to inquire into and advise the Central Government- (a) before a notification is issued under section 324 in respect of any description of industry or business, on the necessity for, and advisability of, issuing the notification; (b) on all applications made to the Central Government under section 259, 268, 269, 310, 311, 326, 328, 329, 332, 343, 345, 346. 352, 408, or 409; and (c) on all other matters which may be referred to the Commission by the Central Government.

Forms and procedure in cases referred to Advisory Commission. 412. Forms and procedure in cases referred to Advisory

Commission.-(1) Every application made to the Central Government under any of the sections referred to in clause (b) of section 411 shall be in such form as may be prescribed. 240

(2) (a) Before any application is made by a company to the Central Government under any of the sections aforesaid, there shall be issued by or on behalf of the company a general notice to the members thereof, indicating the nature of the application proposed to be made. (b) Such notice shall be published at least once in a news- paper in a principal language of the district in which the registered office of the company is situate and circulating in that district, and at least once in English in an English newspaper circulating in that district. (c) Copies of the notices, together with, a certificate by the company as to the due publication thereof, shall be attached to the application. (d) Nothing in clause (a), (b) or (c) shall apply to a private company which is. not the managing agent of a public company.

Powers of Advisory Commission. 413. Powers of Advisory Commission.-For the purpose of making any inquiry under section 411, the Advisory Commission may- (a) require the production before it of any books or other documents in the possession, custody or control of the company and relating to any matter under inquiry; (b) call for any further information or explanation, if the Commission is of opinion that such information or explanation is necessary in order that the books or other documents pro- duced before it may afford full particulars of the matter to which they purport to relate; (c) with such assistants as it thinks necessary, inspect any books or other documents so produced and make copies thereof or take extracts therefrom; (d) require any managing director or any other director, managing agent, secretaries and treasurers, manager or other officer of the company, or any shareholder or any other person who, in the opinion of the Commission, is likely to furnish information with respect to the affairs of the company relating to any matter under inquiry, to appear before it and examine such person on oath or require him to furnish such information as may be required; and administer an oath accordingly to the person for the purpose.

Penalties. 414. Penalties.-If any person refuses or neglects to produce any book or other document in his possession or custody which he is required to produce under section 413 or to answer any question put to him relating to any matter under inquiry, he shall be punishable with imprisonment for a term which may extend to two years and shall also be liable to fine.

Immunity for action taken in good faith. 415. Immunity for action taken in good faith.-No suit or other legal proceeding shall lie against the Commission or the Chairman or any member thereof or against the Central Government, in respect of anything which is in good faith done or intended to be done in pursuance of this Chapter, or of the provisions referred to in section 411. or of any rules or orders made thereunder, 241 CHAP MISCELLANEOUS PROVISIONS. CHAPTER VIII MISCELLANEOUS PROVISIONS Contracts where company is undisclosed principal

Contracts by agents of company in which company is undisclosedprincipal. 416. Contracts by agents of company in which company is un-

disclosed principal.-(1) Every person, being the managing agent secretaries and treasurers, manager or other agent of a public company or of a private company which is a subsidiary of a public company, who enters into a contract for or on behalf of the company in which contract the company is an undisclosed principal shall, at the time of entering into the contract, make a memorandum in writing of the terms of the contract, and specify therein the person with whom it is entered into.

(2) Every such person who enters into a contract as aforesaid shall forthwith deliver the memorandum to the company and send copies thereof to each of the directors; and such memorandum shall be filed in the office of the company and laid before the Board of directors at its next meeting.

(3) If default is made in complying with the requirements of this section,- (a) the contract shall, at the option of the company, be voidable as against the company; and (b) the person who enters into the contract, or every officer of the company who is in default, as the case may be, shall be punishable with fine which may extend to two hundred rupees. Employees' securities and provident funds

Employees' securities to be deposited in Scheduled Bank. 417. Employees' securities to be deposited in Scheduled Bank.--

(1) All moneys or securities deposited with a company by its em- ployees in pursuance of their contracts of service with the company shall be kept or deposited by the company in a special account to be opened by the company for the purpose in a Scheduled Bank.

(2) No portion of such moneys or securities shall be utilised by the company except for the purposes agreed to in the contracts of service.

(3) A receipt for moneys deposited with a company by its em- ployee shall not be deemed to be a security within the meaning of this section; and the moneys themselves shall accordingly be deposited with

a Scheduled Bank as provided in sub-section (1).

Provisions applicable to provident funds of employee.

418. Provisions applicable to provident funds of employee.- (1) Where a provident fund has been constituted by a company for its employees or any class of its employees, all moneys contributed to such fund (whether by the company or by the employees)' or accruing by way of interest or otherwise to such fund, shall be either deposited in a Post Office Savings Bank account or invested in the securities mentioned or referred to in clauses (a) to (e) of section 20 of the Indian Trusts Act, 1882 (2 of 1882): Provided that where one-tenth part of the whole amount of the moneys belonging to such fund exceeds the maximum amount which may be deposited in a Post Office Savings Bank account under the rules regulating such deposits for the time being in force, the amount 242 of such excess may be kept or deposited in a special account to be opened for the purpose in a Scheduled Bank.

(2) Notwithstanding anything to the contrary in the rules of any

provident fund to which sub-section (1) applies or in any contract between a company and its employees, no employee shall be entitled to receive, in respect of such portion of the amount to his credit in such fund as is invested in accordance with the provisions of sub-

section (1), interest at a rate exceeding the rate of interest yielded by such investment.

(3) Nothing in sub-section (1) shall affect any rights of an em- ployee under the rules of a provident fund to obtain advances from or to withdraw money standing, to his credit in the fund, where the fund is a recognised provident fund within the meaning of clause (a) of section 58A of the Indian Income-tax Act, 1922 (11 of 1922), or where the rules of the fund contain provisions corresponding to rules 4, 5, 6, 7, 8 and 9 of the Indian Income-tax (Provident Funds Relief) Rules.

(4) Where a separate trust has been created by a company with

respect to any provident fund referred to in sub-section (1), the company shall be bound to collect the contributions of the employees concerned and pay such contributions as well as its own contributions, if any, to the trustees; but in other respects, the obligations laid on the company by this section shall devolve on the trustees and shall be discharged by them instead of by the company.

Right of employee to see bank's receipt for moneys or securitiesreferred to in section 417 or 418. 419. Right of employee to see bank's receipt for moneys or securities referred to in section 417 or 418.-An employee shall be en- titled, on request made in this behalf to the company, or to the

trustees referred to in sub-section (4) of section 418, as the case may be, to see the bank's receipt for any money or security such as is referred to in sections 417 and 418.

Penalty for contravention of sections 417, 418 and 419. 420. Penalty for contravention of sections 417, 418 and 419.-Any officer of a company, or any such trustee of a provident fund as is

referred to in sub-section (4) of section 418 who, knowingly, contra- venes, or authorises or permits the contravention of, the provisions of section 417, 418 or 419, shall be punishable with fine which may extend to five hundred rupees. Receivers and Managers

Filing of accounts of receivers. 421. Filing of accounts of receivers.-Every receiver of the pro- perty of a company who has been appointed under a power conferred by any instrument and who has taken possession, shall once in every half year while he remains in possession, and also on ceasing to act as receiver, file with the Registrar an abstract in the prescribed form of his receipts and payments during the period to which the abstract relates.

Invoices, etc., to refer to receiver where there is one. 422.Invoices, etc., to refer to receiver where there is one.- Where a receiver of the property of a company has been, appointed, every invoice, order for goods, or business letter issued by or on behalf of the company, or the receiver of the company, being a document on or in which the name of the company appears, shall contain a statement that I receiver has been appointed 243

Penalty for non-compliance with sections 421 and 422. 423.Penalty for non-compliance with sections 421 and 422.-If default is made in complying with the requirements of section 421 or 422, the company, and every officer of the company who Is in default, shall be punishable with fine which may extend to two hundred rupees. For the purposes of this section, the receiver shall be deemed to be an officer of the company.

Application of sections 421 to 423 to receivers and managers appointedby Court and managers appointed in pursuance of an instrument. 424. Application of sections 421 to 423 to receivers and managers appointed by Court and managers appointed in pursuance of an instrument.-The provisions of sections 421, 422 and 423 shall apply to the receiver of, or any person appointed to manage, the property of a company, appointed by a Court or to any person appointed to manage the property of a company under any powers contained in an instrument, in like manner as they apply to a receiver appointed under any powers contained in an instrument. PART WINDING UP. PART VII WINDING UP CHAP PRELIMINARY. CHAPTER I.-PRELIMINARY Modes of winding up

Modes of winding up.

425. Modes of winding up.-(1) The winding up of a company may be either- (a) by the Court; or (b) voluntary; or (c) subject to the supervision of the Court.

(2) The provisions of this Act with respect to winding up apply, unless the contrary appears, to the winding up of a company in any of those modes. Contributories

Liability as contributories of present and past members. 426. Liability as contributories of present and past members.--

(1) In the event of a company being wound up, every present and past member shall be liable to contribute to the assets of the company to an amount sufficient for payment of its debts and liabilities and the costs, charges and expenses of the winding up, and for the adjustment of the rights of the contributories among themselves, subject to the provisions of section 427 and subject also to the following qualifications, namely:- (a) a past member shall not be liable to contribute if he has ceased to be a member for one year or upwards before the commencement of the winding up; (b) a past member shall not be liable to contribute in respect of any debt or liability of the company contracted after he ceased to be a member; (c) no past member shall be liable to contribute unless it appears to the Court that the present members are unable to satisfy the contributions required to be made by them in pursuance of this Act; (d) in the case of a company limited by shares, no contribution shall be required from any past or present member exceeding the amount, if any, unpaid on the shares in respect of which he is liable as such member; 244 (e) in the case of a company limited by guarantee, no con- tribution shall, subject to the provisions of sub-section

(2), be required from any past or present member exceeding the amount undertaken. to be contributed by him to the assets of the company in the event of its-being wound up; (f) nothing in this Act shall invalidate any provision con- tained in any policy, of insurance or other contract whereby the liability of individual members on the policy or contract is restricted, or whereby the funds of the company are alone made liable in respect of the policy or contract; (g) a sum due to any past or present member of the company in his character as such, by way of dividends, profits or otherwise, shall not be deemed to be a debt of the company payable to that member, in a case of competition between himself and any other creditor who is not a past or present member of the company; but any such sum shall be taken into account for the purpose of the final adjustment of the rights of the contributories among themselves.

(2) In the winding up of a company limited by guarantee which has a share capital, every member of the company shall be liable, in addition to the amount undertaken to be contributed by him to the assets of the company in the event of its being wound up, to contri- bute to the extent of any sums unpaid on any shares held by him as if the company were a company limited by shares.

Obligations of directors, managing agents and managers whoseliability is unlimited. 427. Obligations of directors, managing agents and managers whose liability is unlimited.-In the winding up of a limited company, any director, managing agent, secretaries and treasurers or manager, whether past or present, whose liability is, under the provisions of this Act, unlimited shall, in addition to his liability, if any, to contribute as an ordinary member, be liable to make a further contribution as if he were, at the commencement of the winding up, a member of an unlimited company: Provided that- (a) a past director managing agent, secretaries and treasurers or manager shall not be liable to make such further contribution, if he has ceased to hold office for a year or upwards before the commencement of the winding up; (b) a past director, managing agent, secretaries and treasurers or manager shall not be liable to make such further contribution in respect of any debt or liability of the company contracted after he ceased to hold office; (c) subject to the articles of the company, a director, managing agent, secretaries and treasurers or manager shall not be liable to make such further contribution, unless the Court deems it necessary to require the contribution in order to satisfy the debts and liabilities of the company, and the costs, charges and expenses of the winding up.

Definition of "contributory". 428. Definition of "contributory".-The term "contributory" means every person liable to contribute to the assets of a company in the event of its being wound up, and includes the holder of any shares which are fully paid up; and for the purposes of all proceed- 245 ings for determining, and all proceedings prior to the final deter- mination of, the persons who are to be deemed contributories, includes any person alleged to be a contributory.

Nature of liability of contributory.

429. Nature of liability of contributory.-(1) The liability of a contributory shall create a debt accruing due from him at the time when his liability commenced, but payable at the times specified in calls made on him for enforcing the liability.

(2) No claim founded on the liability of a contributory shall be cognizable by any Court of Small Causes sitting outside the presidency-towns.

Contributories in case of death of member.

430. Contributories in case of death of member.-(1) If a contri- butory dies either before or after he has been placed on the list of contributories, his legal representatives shall be liable in a due course of administration, to contribute to the assets of the company in discharge of his liability, and shall be contributories accordingly.

(2) If the legal representatives make default in paying any money ordered to be paid by them, proceedings may be taken for. administering the estate of the deceased contributory and compelling payment there out of the money due.

(3) For the purposes of this section, where the deceased contributory was a member of a Hindu joint family governed by the Mitakshara School of Hindu Law, his legal representatives shall be deemed to include the surviving coparceners.

Contributories in case of insolvency of member. 431.Contributories in case of insolvency of member.-If a con- tributory is adjudged insolvent, either before or after. he has been placed on the list of contributories, - (a) his assignees in insolvency shall represent him for all the purposes of the winding up, and shall be contributories accordingly, and may be called on to admit to proof against the estate of the insolvent, or otherwise to allow to be paid out of his assets in due course of law, any money due from the insolvent in respect of his liability to contribute to the assets of the company; and (b) there may be proved against the estate of the insolvent the estimated value of his liability to future calls as well as calls already made.

Contributories in case of winding up of a body corporate which is amember. 432.Contributories in case of winding up of a body corporate which is a member.-If a body corporate which is a contributory is ordered to be wound up, either before or after it has been placed on the list of contributories,- (a) the liquidator of the body corporate shall represent it for all the purposes of the winding up of the company and shall be a contributory accordingly, and may be called on to admit to proof against the assets of the body corporate, or otherwise to allow to be paid out of its assets in due course of law, any money due from the body corporate in respect of its liability to contribute to the assets of the company; and (b) there may be proved against the assets of the body corporate the estimated value of its liability to future calls as well as calls already made. 246 CHAP WINDING UP BY THE COURT. CHAPTER II.- WINDING UP BY THE COURT Cases in which company may be wound up by the Court

Circumstances in which company may be wound up by Court. 433. Circumstances in which company may be wound up by Court.-A company may be wound up by the Court,- (a) if the company has, by special resolution, resolved that the company be wound up by the Court; (b) if default is made in delivering the statutory report to the Registrar or in holding the statutory meeting; (c) if the company does not commence its business within a year from its incorporation,. or suspends its business for a whole year; (d) if the number of members is reduced, in the case of a public company, below seven, and in the case of a private company, below two; (e) if the company is unable to pay its debts; (f) if the Court is of opinion that it is just and equitable that the company should be wound up.

Company when deemed unable to pay its debts.

434. Company when deemed unable to pay its debts.- (1) A company shall be deemed to be unable to pay its debts- (a) if a creditor, by assignment or otherwise, to whom the company is indebted in a sum exceeding five hundred rupees then due, has served on the company, by causing it to be delivered at its registered office, by registered post or otherwise, a demand under his hand requiring the company to pay the sum so due and the company has for three weeks thereafter neglected to pay the sum, or to secure or compound for it to the reasonable satisfaction of the creditor; (b) if execution or other process issued on a decree or order of any Court in favour of a creditor of the company is returned unsatisfied in whole or in part; or (c) if it is proved to the satisfaction of the Court that the company is unable to pay its debts, and, in determining whether a company Is unable to pay its debts, the Court shall take into account the contingent and prospective liabilities of the company.

(2) The demand referred to in clause (a) of sub-section (1) shall be deemed to have been duly given under the hand of the creditor If it is signed by any agent or legal adviser duly authorised on his behalf, or in the case of a firm, if it is signed by any such agent or legal adviser or by any member of the firm. Transfer of proceedings

Transfer of winding up proceedings to District Court. 435. Transfer of winding up proceedings to District Court.- Where a High. Court makes an order for winding up a company under this Act, the, High Court may, if it thinks fit, direct all subsequent proceedings to be had in a District Court subordinate thereto 247 or, with the consent of any other High Court, in such High Court or in a District Court subordinate thereto; and thereupon for the purposes of winding up the company, the Court in respect of which such direction is given shall be deemed to be "the Court" within the meaning of this Act, and shall have all the jurisdiction and powers of a High Court under this Act.

Withdrawal and transfer of winding up from one District Court toanother. 436. Withdrawal and transfer of winding up from one District Court to another.-If during the progress of a winding up in a District Court, it appears to the High Court that the same could be more conveniently proceeded with in the High Court or in any other District Court, the High Court may, as the case may require'- (a) withdraw the case and. proceed with the winding up itself ; or (b) transfer the case to such other District Court, whereupon the winding up shall proceed in that District Court,

Power of High Court to retain winding up proceedings in DistrictCourt. 437. Power of High Court to retain winding up proceedings in District Court.-The High Court may direct that a. District Court in which proceedings for winding up a company have been commenced, shall retain and continue the proceedings, although it may not be the Court in which they ought to have been commenced.

Jurisdiction of High Court under sections 435, 436 and 437 to beexercised at any time and at any stage. 438. Jurisdiction of High Court under sections 435, 436 and 437 to be exercised at any time and at any stage.-The High Court shall have jurisdiction to pass orders under section 435, 436 or 437 at any time and at any stage and either on the application of, or without application from, any- of the parties to the proceedings. Petition for winding up

Provisions as to applications for winding up.

439. Provisions as to applications for winding up.-(1) An appli- cation to the Court for the winding up of a company shall be by petition presented, subject to the provisions of this section,--- (a) by the company; or (b)by any creditor or creditors, including any contingent or prospective creditor or creditors; or (c) by any contributory or contributories; or (d) by all or any of the parties specified in clauses (a), (b) and (c), whether together or separately; or (e) by the Registrar; or (f)in a case failing under section 243, by any person authorised by the Central Government in that behalf.

(2) A secured creditor, the holder of any debentures (including debenture stock), whether or not any trustee or trustees have been appointed in respect of such and other like debentures, and the trustee for the holders of debentures, shall be deemed to be creditors

within the meaning of clause (b) of sub-section (1).

(3) A contributory shall be entitled to present a petition for, winding up a company, notwithstanding that he may be the holder of fully paid up shares, or that the company may have no assets at all, or may have no surplus assets left for distribution among the shareholders after the satisfaction of its liabilities,' 248

(4) A contributory shall not be entitled to present a petition for winding up a company unless- (a) either the number of members is reduced, in the case of a public company, below seven, and, in the case of a private company, below two; or (b)the shares in respect of which he is a contributory, or some of them, either were originally allotted to him or have been held by him, and registered in his name, for at least six months during the eighteen months immediately before the commencement of the winding up, or have devolved on him through the death of a former holder.

(5) Except in the case where he is authorised in pursuance of

clause (f) of sub-section (1), the Registrar shall be entitled to present a petition for winding up a company only on the grounds speci- fied in clauses (b), (c) and (e) of section 433: Provided that the Registrar shall not present a petition on the ground specified in clause (e) aforesaid, unless it appears to him either from the financial condition of the company as disclosed in its balance-sheet or from the report of an inspector appointed under section 235 or 237, that the company is unable to pay its debts: Provided further that the Registrar shall obtain the previous sanction of the Central Government to the presentation of the petition on any of the grounds aforesaid.

(6) The Central Government shall not accord its sanction in pursuance of the foregoing proviso, unless the company has first been afforded an opportunity of making its representations, if any.

(7) A petition for winding up a company on the ground specified in clause (b) of section 433 shall not be presented- (a) except by the Registrar or by a contributory; or (b)before the expiration of fourteen days after the last day on which the statutory meeting referred to in clause (b) aforesaid ought to have been held.

(8) Before a petition for winding up a company presented by a contingent or prospective creditor is admitted, the leave of the Court shall be obtained for the admission of the petition and such leave shall not be granted- (a) unless, in the opinion of the Court, there is a prima- facie case for winding up the company; and (b) until such security for costs has been given as the Court thinks reasonable.

Right to present winding up petition where company is being wound upvoluntarily or subject to Court's supervision. 440. Right to present winding up petition where company is being

wound up voluntarily or subject to Court's supervision.-(1) Where a company is being wound up voluntarily or subject to the supervision of the Court, a petition for its winding up by the Court may be presented by-- (a) any person authorised to do so under section 439, and subject to the provisions of that section; or (b) the Official Liquidator, 249

(2) The Court shall not make a winding up order on a petition

presented to it under sub-section (1), unless it is satisfied that the voluntary winding up or winding up subject to the supervision of the Court cannot be continued with due regard to the interests of the creditors or contributories or both. Commencement of winding up

Commencement of winding up by Court.

441. Commencement of winding up by Court.-(1) Where, before the presentation of a petition for the winding up of a company by the Court, a resolution has been passed by the company for voluntary winding up, the winding up of the company shall be deemed to have commenced at the time of the passing of the resolution, and unless the Court, on proof of fraud or mistake, thinks fit to direct otherwise, all proceedings taken in the voluntary winding up shall be deemed to have been validly taken.

(2) In any other case, the winding up of a company by the Court shall be deemed to commence at the time of the presentation of the petition for the winding up. Powers of Court

Power of Court to stay or restrain proceedings against company. 442. Power of Court to stay or restrain proceedings against company.-At any time after the presentation of a winding up petition and before a winding up order has been made, the company, or any creditor or contributory, may- (a) where any suit or proceeding against the company is pending in the Supreme Court or in any High Court, apply to the Court in which the suit or proceeding is pending for a stay of proceedings therein; and (b) where any suit or proceeding is pending against the company in any other Court, apply to the Court having jurisdiction to wind up the company, to restrain further proceedings in the suit or proceeding; and the Court to which application is so made may stay or restrain the proceedings accordingly, on such terms as it thinks fit.

Powers of Court on hearing petition.

443. Powers of Court on hearing petition.-(1) On hearing a winding up petition, the Court may- (a) dismiss it, with or without costs; or (b) adjourn the hearing conditionally or unconditionally; or (c) make any interim order that it thinks fit; or (d) make an order for winding up the company with or without costs, or any other order that it thinks fit: Provided that the Court shall not refuse to make a winding up order on the ground only that the assets of the company have been mortgaged to an amount equal to or in excess of those assets, or that the company has no assets.

(2) Where the petition is presented on the ground that it is just and equitable that the company should be wound up, the Court may refuse to make an order of winding up, if it is of opinion that 250 some other remedy is available to the petitioners and that they are acting unreasonably in seeking to have the company wound up instead of pursuing that other remedy.

(3) Where the petition is presented on the ground of default in delivering the statutory report to the Registrar, or in holding the statutory meeting, the Court may- (a) instead of making a winding up order, direct that the statutory report shall be delivered or that a meeting shall be held; and (b) order the costs to be paid by any persons who, in the opinion of the Court, are responsible for the default. Consequences of winding up order

Order for winding up to be communicated to Official Liquidator. 444. Order for winding up to be communicated to Official Liquidator.-Where the Court makes an order for the winding up of a company, the Court shall forthwith cause intimation thereof to be sent to the Official Liquidator.

Copy of winding up order to be filed with Registrar.

445. Copy of winding up order to be filed with Registrar.-(1) On the making of 'a winding up order, it shall be the duty of the petitioner in the winding up proceedings and of the company to file with the Registrar a certified copy of the order, within one month from the date of the making of the order. If default is made in complying with the foregoing provision, the petitioner, or as the case may require, the company, and every officer of the company who is in default, shall be punishable with fine which may extend to one hundred rupees for each day during which the default continues.

(2) On the filing of a certified copy of the winding up order, the Registrar shall make a minute thereof in his books relating to the company, and shall notify in the Official Gazette that such an order has been made.

(3) Such order, shall be deemed to be notice of discharge to the officers and employees of the company, except when the business of the company is continued.

Suits stayed on winding up order.

446. Suits stayed on winding up order.-(1) When a winding up order has been made or the Official Liquidator has been appointed as provisional liquidator, no suit or other legal proceeding shall be commenced, or if pending at the date of the winding up order, shall be proceeded with, against the company, except by leave of the Court and subject to such terms as the Court may impose.

(2) The Court which Is winding up the- company shall, notwith- standing anything contained in any other law for the time being in force, have jurisdiction to entertain, or dispose of, any suit or proceeding by or against the company.

(3) Any suit or proceeding by or against the company which Is pending in any Court other than that in which the winding up of the company is proceeding may, notwithstanding anything contained in any other law for the time being in force, be transferred to and disposed of by that Court. 251

Effect of winding up order. 447. Effect of winding up order.-An order for winding up a company shall operate in favour of all the creditors and of all the contributories of the company as if it had been made on the joint petition of a creditor and of a contributory. Official Liquidators

Appointment of Official Liquidator.

448. Appointment of Official Liquidator.--(1) For the purposes of this Act, so far as it relates to the winding up of companies by the Court,- (a) there shall be attached to each High Court, an Official Liquidator appointed by the Central Government, who shall be a whole-time officer, unless the Central Government considers that there will not be sufficient work for a whole-time officer in which cage a part-time officer may be appointed; and (b) the Official Receiver attached to a District Court for insolvency purposes, or if there is no such Official Receiver, then, such person as the Central Government may, by notification in the Official Gazette appoint for the purpose, shall be the Official Liquidator attached to the District Court.

(2) All references to the "Official Liquidator" in this Act shall be construed as references to the Official Liquidator referred to in clause (a) or clause (b), as the case may be, of sub-section

(1).

Official Liquidator to be liquidator. 449. Official Liquidator to be liquidator.-On a winding up order being made in respect of a company, the Official Liquidator shall, by virtue of his office, become the liquidator of the company.

Appointment and powers of provisional liquidator.

450. Appointment and powers of provisional liquidator.- (1) At any time after the presentation of a winding up petition and before the making of a winding up order, the Court may appoint the Official liquidate or to be liquidator provisionally.

(2) Before appointing a provisional liquidator, the Court shall give notice to the company and give a reasonable opportunity to it to make its representations, if any, unless, for special reasons to be recorded in writing, the Court thinks fit to dispense with such notice.

(3) Where a provisional liquidator Is appointed by the Court, the Court may limit and restrict his powers by the order appointing him or by a subsequent order; but otherwise he shall have the same powers as a liquidator.

(4) The Official Liquidator shall cease to hold office as provisional liquidator, and shall become the liquidator, of the company, on a winding up order being made.

General provisions as to liquidators.

451. General provisions as to liquidators.-(1) The liquidator shall conduct the proceedings in winding up the company and perform such 'duties in reference thereto as the Court may impose.

(2) Where the Official Liquidator becomes or acts as liquidator, there shall be paid to the Central Government out of the assets of the company such fees as may be prescribed.

(3) The acts of a liquidator shall be valid, notwithstanding any defect that may afterwards be discovered in his appointment or qualification: 252 Provided that nothing in this sub-section shall be deemed to give validity to acts done 'by a liquidator after his appointment has been shown to be invalid.

Style, etc., of liquidator. 452. Style, etc., of liquidator.-A liquidator shall be described by the style of "The Official Liquidator" of the particular company in respect of which he acts, and not by his individual name.

Receiver not to be appointed of assets with liquidator. 453. Receiver not to be appointed of assets with liquidator.A receiver shall not be appointed of assets in the hands of a liquidator except by, or with the leave of, the Court.

Statement of affairs to be made to Official Liquidator. 454. Statement of affairs to be made to Official

Liquidator.---(1) Where the Court has made a winding up order or appointed the Official Liquidator as provisional liquidator, unless the Court in its discretion otherwise orders, there shall be made out and submitted to the Official Liquidator a statement as to the affairs of the company in the prescribed form, verified by an affidavit, and containing the following particulars, namely:- (a) the assets of the company, stating separately the cash balance in hand and at the bank, if any, and the negotiable securities, if any, held by the company; (b) its debts and liabilities; (c) the names, residences and occupations of its creditors, stating separately the amount of secured and unsecured debts; and in the case of secured debts, particulars of the securities given, whether by the company or an officer thereof, their value and the dates on which they were given; (d) the debts due to the company and the names, residences and occupations of the persons from whom they are due and the amount likely to be realised on account thereof; (e) such further or other information as may be prescribed, or as the Official Liquidator may require.

(2) The statement shall be submitted and verified by one or more of the persons who are at the relevant date the directors and by the person who is at that date the manager, secretary or other chief officer of the company, or by such of the persons hereinafter in this sub-section mentioned, as the Official Liquidator, subject to the direction of the Court, may require to submit and verify the ,statement, that is to say, persons- (a) who are or have been officers of the company; (b) who have taken part in the formation of the company at any time within one year before the relevant date; (c) who are in the employment of the company, or have been in the employment of the company within the said year, and are, in the opinion of the Official Liquidator, capable of giving the information required. (d) who are or have been within the said year officers of, or in the employment of, a company which is, or within the said year was, an officer of the company to which the statement relates. 253

(3) The statement shall be submitted within twenty-one days from the relevant date, or within such extended time not exceeding three months from that date as the Official Liquidator or the Court may, for special reasons, appoint.

(4) Any person making, or concurring in making, the statement and affidavit required by this section shall be allowed, and shall be paid by the Official Liquidator or provisional liquidator, as the case may be, out of the assets of the company, such costs and expenses incurred in and about the preparation and making of the statement and affidavit as the Official Liquidator may consider reasonable, subject to an appeal to the Court.

(5) If any person, without reasonable excuse, makes, default in complying with any of the requirements of this section, he shall be punishable with fine which may extend to one hundred rupees for every day during which the default continues.

(6) Any person stating himself in writing to be a creditor or contributory of the company shall be entitled, by himself or by his agent, at all reasonable times, on payment of the prescribed fee, to inspect the statement submitted in pursuance of this section, and to a copy thereof or extract therefrom.

(7) Any person untruthfully so stating himself to be a creditor or contributory shall be guilty of an offence under section 182 of the Indian Penal Code (Act 45 of 1860); and shall, on the application of the Official Liquidator, be punishable accordingly.

(8) In this section, the expression "the relevant date" means, in a case where a provisional liquidator is appointed, the date of his appointment, and in a case where no such appointment is made, the date of the winding up order.

Report by Official Liquidator.

455. Report by Official Liquidator.-(1) In a case where a winding up order is made, the Official Liquidator shall, as soon as practicable after receipt of the statement to be submitted under section 454 and not later than six months from the date of the order, or in a case where the Court orders that no statement need be submitted, as soon as practicable after the date of the order, submit "a preliminary report to the Court- (a) to the amount of capital issued. subscribed, and said up, and the estimated amount of assets and liabilities, giving separately, under the heading of assets, particulars of (i) cash and negotiable securities; (ii) debts due from contributories; (iii) debts due to the company and securities, if any, available in respect thereof; (iv) movable and immovable properties belonging to the company; and (v) unpaid calls; (b) if the company has failed, as to the causes of the failure; and (c) whether, in his opinion, further inquiry is desirable as to any matter relating to the promotion, formation, or failure of the company, or the conduct of the business thereof. 254

(2) The Official Liquidator may also, if he thinks fit, make a further report, or further reports, stating the manner in which the company was promoted or formed and whether in his opinion any fraud has been committed by any person in its promotion or formation, or by any officer of the company in relation to the company since the for- mation thereof, and any other matters which, in his opinion, it is desirable to bring to the notice of the Court.

(3) If the Official Liquidator states in any such further report that in his opinion a fraud has been committed as aforesaid, the Court shall have the further powers provided in section 478.

Custody of company's property.

456.Custody of company's property.-(1) Where a winding up order has been made or where a provisional liquidator has been appointed, the liquidator shall take into his custody or under his control, all the property, effects and actionable claims to which the company is or appears to be entitled.

(2) All the property and effects of the company shall be deemed to be in the custody of the Court as from the date of the order for the winding up of the company.

Powers of liquidator.

457. Powers of liquidator.-(1) The liquidator in a winding up by the Court shall have power, with the sanction of the Court,- (a) to institute or defend any suit, prosecution, or other legal proceeding, civil or criminal, in the name and on behalf of the company; (b) to carry on the business of the company so far as may be necessary for the beneficial winding up of the company; (c) to sell the immovable and movable property and action- able claims of the company by public auction or private contract, with power to transfer the whole thereof to any person or body corporate, or to sell the same in parcels; (d) to raise on the security of the assets of the company any money requisite; (e) to do all such other things as may be necessary for winding up the affairs of the company and distributing its assets.

(2) The liquidator in a winding up by the Court shall have power- (i) to do all acts and to execute, in the name and on behalf of the company, all deeds, receipts, and other documents, and for that purpose to use, when necessary, the company's seal; (ii) to prove, rank and claim in the insolvency of any contributory, for any balance against his estate, and to receive dividends in the insolvency, in respect of that balance, as a separate debt due from the insolvent, and rateably with the other separate creditors; (iii) to draw, accept, make and indorse any bill of exchange, hundi or promissory note in the name and on behalf of the 255 company, with the same effect with respect to the liability of the company as if the bill, hundi, or note had been drawn, accepted, made or indorsed by or on behalf of the company in the course of its business; (iv) to take out, in his official name, letters of administration to any deceased contributory, and to do in his official name any other act necessary for obtaining payment of any money due from a contributory or his estate which cannot be conveniently done in the name of the company, and in all such cases, the money due shall, for the purpose of enabling the liquidator to take out the letters of administration or recover the money, be deemed to be due to the liquidator himself:] Provided that nothing herein empowered shall be deemed to affect the rights, duties and privileges of any Administrator General; (v) to appoint an agent to do any business which the liqui- dator is unable to do himself.

(3) The exercise by the liquidator in a winding up by the Court of the powers conferred by this section shall be subject to the control of the Court; and any creditor or contributory may apply to the Court with respect to the exercise or proposed exercise of any of the powers conferred by this section.

Discretion of liquidator. 458. Discretion of liquidator.-The Court may, by order, provide that the liquidator may exercise any of the powers referred to in sub-

section (1) of section 457 without the sanction or intervention of the Court: Provided always that the exercise by the liquidator of such powers shall be subject to the control of the Court.

Provision for legal assistance to liquidator. 459. Provision for legal assistance to liquidator.-The liquidator may, with the sanction of the Court, appoint an advocate, attorney or pleader entitled to appear before the Court to assist him in the performance of his duties.

Exercise and control of liquidators powers.

460. Exercise and control of liquidators powers.-(1) Subject to the provisions of this Act, the liquidator shall, in the administration of the assets of the company and the distribution thereof among its creditors, have regard to any directions which may be given by resolution of the creditors or contributories at any general meeting or by the committee of inspection.

(2) Any directions given by the creditors or contributories at any general meeting shall, in case of conflict, be deemed to override any directions given by the committee of inspection.

(3) The liquidator- (a) may summon general meetings of the creditors or con. tributaries, whenever he thinks fit, for the purpose of ascertaining their wishes; (b) shall summon such meetings at such times as the creditors or contributories, as the case may be, may, by resolution, direct, or whenever requested in writing to do so by not less than one-tenth in value of the creditors or contributories, as the case may be. 256

(4) The liquidator may apply to the Court in the manner pres- cribed, if any, for directions in relation to any particular matter arising in the winding up.

(5) Subject to the provisions of this Act, the liquidator shall use his own discretion in the administration of the assets of the company and in the distribution thereof among the creditors.

(6) Any person aggrieved by any act or decision of the liquidator may apply to the Court; and the Court may confirm, reverse or modify the act or decision complained of, and make such further order as it thinks just in the circumstances.

Books to be kept by liquidator.

461.Books to be kept by liquidator.-(1) The liquidator shall keep, in the manner prescribed, proper books in which he shall cause entries or minutes to be made of proceedings at meetings and of such other matters as may be prescribed.

(2) Any creditor or contributory may, subject. to the control of the Court, inspect any such books, personally or by his agent.

Audit of liquidators accounts.

462. Audit of liquidators accounts.-(1) The liquidator shall, at such times as may be prescribed but not less. than twice in each year during his tenure of office, present to the Court an account of his receipts and payments as liquidator.

(2) The account shall be in the prescribed form, shall be made in duplicate, and shall be verified by a declaration in the prescribed form.

(3) The Court shall cause the account to be audited in such manner as it thinks fit; and for the purpose of the audit, the liquidator shall furnish the Court with such vouchers and information as the Court may require, and the Court may, at any time, require-the production of, and inspect, any books or accounts kept by the liquidator.

(4) When the account has been audited, one copy thereof shall be filed and kept by the Court, and the other copy shall be delivered to the Registrar for filing; and each copy shall be open to the inspection of any creditor, contributory or person interested.

(5) The liquidator shall cause the account when audited or a summary thereof to be printed, and shall send a printed copy of the account or summary by post to every creditor and to every contributory: Provided that the Court may in any case dispense with compliance with this sub-section.

Control of Central Government over liquidators.

463. Control of Central Government over liquidators.-(1) The Central Government shall take cognisance of the conduct of liquidators of companies which are being wound up by the Court, and, if a liquidator does not faithfully perform his duties and duly observe all the requirements imposed on him by this Act, the rules thereunder, or otherwise, with respect to the performance of his duties, or if any complaint is made to the Central Government by any creditor or contributory in regard thereto, the Central Government shall inquire into the matter, and take such action thereon as it may think expedient 257

(2) The Central Government may at any time require any liqui- dator of a company which is being wound up by the Court to answer any inquiry in relation to any winding up in which he is engaged,, and may, if the Central Government thinks fit, apply to the Court to examine him or any other person on oath concerning the winding up.

(3) The Central Government may also direct a local investigation to be made of the books and vouchers of the liquidators. Committee of inspection

Appointment and composition of committee of inspection.

464. Appointment and composition of committee of inspection.- (1) The liquidator shall, within two months from the date of the order for the winding up of a company, convene a meeting of its creditors (as ascertained from its books and documents) for the purpose of determining whether or not a committee of inspection shall be appointed to act with the Liquidator, and who are to be members of the committee, if one is appointed.

(2) The liquidator shall, within fourteen days from the date of the- creditors meeting or such further time as the Court in its dis- cretion may grant for the purpose, convene a meeting of the Contri- butories to consider the decision of the creditors' meeting and to ex- press the views of the contributories on the matters specified in sub-

section (1); and it shall be open to the meeting to accept the decision of the creditors' meeting with or without modifications or to reject it.

(3) Except in the case where the meeting of the contributories accepts the decision of the creditors' meeting in its entirety, it shall be the duty of the liquidator to apply to the Court for directions as to whether there shall be a committee of inspection; and, if so, what the composition of the committee shall be, and who shall be members thereof.

Constitution and proceedings of committee of inspection. 465. Constitution and proceedings of committee of inspection.-

(1) A committee of inspection appointed in pursuance of section 464 shall consist of not more than twelve members, being creditors and contributories of the company or persons holding general or special powers of attorney from creditors or contributories, in such propor- tions as may be agreed on by the meetings of creditors and contribu- tories, or in case of difference of opinion between the meetings, as may be determined by the Court.

(2) The committee of inspection shall have the right to inspect the accounts of the liquidator at all reasonable times.

(3) The committee shall meet at such times at it may from time to time appoint, and, failing such appointment, at least once a month, and the liquidator or any member of the committee may also call a meeting of the committee as and when he thinks, necessary.

(4) The quorum for a meeting of the committee shall be one-third of the total number of the members, or two, whichever is higher.

(5) The committee may act by a majority of its members present at a meeting, but shall not act unless a quorum is present.

(6) A member of the committee may resign by notice in writing signed by him and delivered to the liquidator. 258

(7) If a member of the committee is adjudged an insolvent, or compounds or arranges with his creditors, or is absent from five consecutive meetings of, the committee without the leave of those members who, together with himself, represent the creditors or con- tributories, as the case may be, his office shall become vacant.

(8) A member of the committee may be removed at a meeting of creditors if he represents creditors, or at a meeting of contribu- tories if he represents contributories, by an ordinary resolution of which seven days' notice has been given, stating the object of the meeting.

(9) On a vacancy occurring in the committee, the liquidator shall forthwith summon a meeting of creditors or of contributories, as the case may require,. to fill the vacancy; and the meeting may, by resolution, re-appoint the same, or appoint another, creditor or contributory to fill the vacancy: Provided that if the liquidator, having regard to the position in the winding up, is of the opinion that it is unnecessary for the vacancy to be filled, he may apply to the Court and the Court may make an order that the vacancy shall not be filled, or shall not be filled except in such circumstances as may be specified in the order.

(10) The continuing members of the committee, if not less, than two, may act notwithstanding any vacancy in the committee. General powers of Court in case of winding up by Court

Power of Court to stay winding up.

466. Power of Court to stay winding up.-(1) The Court may at any Official Liquidator or of any creditor or contributory, and on proof to the satisfaction of the Court that all proceedings in relation to the winding up ought to be stayed, make an order staying the proceedings, either altogether or for a limited time, on such terms and conditions as the Court thinks fit.

(2) On any application under this section, the Court may, before making an order, require the Official Liquidator to furnish to the Court a report with respect to any facts or matters which are in his opinion relevant to the application.

(3) A copy of every order made under this section shall forthwith be forwarded by the company, or otherwise as may be prescribed, to the Registrar, who shall make a minute of the order in his books relating to the company.

Settlement of list of contributories and application of assets. 467. Settlement of list of contributories and application of

assets.- (1) As soon as may be after making a winding up order, the Court shall settle a list of contributories, with power to rectify the register of members in all cases where rectification is required in pursuance of this Act, and shall cause the assets of the company to be collected and applied in discharge of its liabilities: Provided that, where it appears to the Court that it will not be necessary to make calls on, or adjust the rights of, contributories, the Court may dispense with the settlement of a list of contributories.

(2) In settling the list of contributories, the Court shall distinguish between those who are contributories in their own right and those who are contributories as being representatives of, or liable for the debts of, others. 259

Delivery of property to liquidator. 468. Delivery of property to liquidator.-The Court may, at any time after making a winding up order, require any contributory for the time being on the list of contributories, and any trustee, receiver, banker, agent, or officer of the company, to pay, deliver, surrender or transfer forthwith, or within such time as the Court directs, to the liquidator, any money, property or books and papers in his hands to which the company is prima facie entitled.

Payment of debts due by contributory and extent of set-off. 469. Payment of debts due by contributory and extent of set-off

(1) The Court may, at any time after making a winding up order, make an order on any contributory for the time being on the list of contributories to pay, in the manner directed by the order, any money due to the company, from him or from the estate of the person whom he represents, exclusive of any money payable by him or the estate by virtue of any call in pursuance of this Act.

(2) The Court, in making such an order, may- (a) in the case of an unlimited company, allow to the con- tributory, by way of set-off, any money due to him or to the estate which he represents, from the company, on any indepen- dent dealing or contract with the company, but not any money due to him as a member of the company in respect of any divi- dend or profit ; and (b) in the case of a limited company, make to any director, managing agent, secretaries and treasurers or manager whose liability is unlimited, or to his estate, the like allowance.

(3) In the case of any company, whether limited or unlimited, when all the creditors have been paid in full, any money due on any account whatever to a Contributory from the company may be allowed to him by way of set-off against any subsequent call.

Power of Court to make calls.

470. Power of Court to make calls.-(1) The Court may, at any time after making a winding up order, and either before or after it has ascertained the sufficiency of the assets of the company,- (a) make calls on all or any of the contributories for the time being on the list of the contributories, to the extent of their liability, for payment of any money which the Court considers necessary to satisfy the debts and liabilities of the company, and the. costs, charges and expenses of winding up, and for the adjustment of the rights of the contributories. among themselves; and (b) make an order for payment of any calls so made.

(2) In making a call, the Court may take into consideration the probability that some of the contributories may, partly or wholly, fail to pay the call.

Payment into bank of moneys due to company.

471.Payment into bank of moneys due to company.-(1) The Court may order any contributory, purchaser or other person from whom any money is due to the company to pay the money into the public account of India in the Reserve Bank of India instead of to the liquidator.

(2) Any such order may be enforced in the same manner as if the Court had directed payment to the liquidator. 260

Moneys and securities paid into Bank to be subject to order of Court. 472. Moneys and securities paid into Bank to be subject to order of Court.-All moneys, bills, hundis, notes and other securities paid or delivered into the Reserve Bank of India in the course of the winding up of a company by the Court, shall be subject in all respects to the orders of the Court.

Order on contributory to be conclusive evidence.

473.Order on contributory to be conclusive evidence--(1) An order made by the Court on a contributory shall, subject to any right of appeal., be conclusive evidence that the money, if any, thereby appearing to be due or ordered to be paid is due.

(2) All other pertinent matters stated in the order shall be taken to be truly stated as against all persons and in all proceedings whatsoever.

Power to exclude creditors not proving in time. 474. Power to exclude creditors not proving in time.-The Court may fix a time or times within which creditors are to prove their debts or claims, or to be excluded from the benefit of any distribu- tion made before those debt. or claims are proved.

Adjustment of rights of contributories. 475. Adjustment of rights of contributories.-The Court shall adjust the rights of the contributories among themselves, and distri- bute any surplus among the persons entitled thereto.

Power to order costs. 476. Power to order costs.--The Court may, in the event of the assets being insufficient to satisfy the liabilities, make an order for the payment out of the assets, of the costs, charges and expenses incurred in the winding up in such order of priority inter se as the Court thinks just

Power to summon persons suspected of having property of company, etc. 477.Power to summon persons suspected of having property of

company, etc.- (1) The Court may, at any time after the appointment of a provisional liquidator or the making of a winding up order, summon before it any officer of the company or person known or suspected to have in his possession any property or books or papers, of the company, or known or suspected to be indebted to the company, or any person whom the Court deems capable of giving information concerning the promotion, formation, trade, dealings, property, books or papers, or affairs of the company.

(2) The Court may examine any officer or person so summoned on oath concerning the matters aforesaid, either by word of mouth or on written interrogatories; and may, in the former case, reduce his answers to writing and require him to sign them.

(3) The Court may require any officer or person so summoned to produce any books and papers in his custody or power relating to the company; but, where he claims any lien on books or papers produced by him, the production shall be without prejudice to that lien. and the Court shall have jurisdiction in the winding up to determine all questions relating to that lien.

(4) If any officer or person so summoned, after being paid or tendered a reasonable sum for his expenses, fails to appear before 261 the Court at the time appointed, not having a lawful impediment (made known to the Court at the time of its sitting and allowed by it), the Court may cause him to be apprehended and brought before the Court for examination.

Power to order public examination of promoters, directors etc. 478. Power to order public examination of promoters, directors

etc.-(1) When an order has been made for winding up a company by the Court, and the Official Liquidator has made a report to the Court under this Act, stating that in his opinion a fraud has been committed by any person in the promotion or formation of the company, or by any officer of the company in relation to the company since its formation, the Court may, after considering the report, direct that that person or officer shall attend before the Court on a day appointed by it for that purpose, and be publicly examined as to the promotion or formation or the conduct of the business of the company, or as to his conduct and dealings as an officer thereof.

(2) The Official Liquidator shall take part in the examination, and for that purpose may, if specially authorised by the Court in that behalf, employ such legal assistance as may be sanctioned by the Court.

(3) Any creditor or contributory may also take part in the exa- mination either personally or by any advocate, attorney or pleader entitled to appear before the Court.

(4) The Court may put such questions to the person examined as it thinks fit.

(5) The person examined shall be examined on oath, and shall answer all such questions as the Court may put, or allow to be put, to him.

(6) A person ordered to be examined under this section- (a) shall, before his examination, be furnished at hi's own cost with a copy of the Official Liquidator's report; and (b) may at his own cost employ an advocate, attorney or pleader entitled to appear before the Court, who shall be at liberty to put to him such questions as the Court may deem just for the purpose of enabling him to explain or qualify any answers given by him.

(7) (a) If any such person applies to the Court to be exculpated from any charges made or suggested against him, it shall be the duty of the Official Liquidator to appear on the hearing of the application and call the attention of the Court to any matters which appear to the Official Liquidator to be relevant. (b) If the Court, after hearing any evidence given or witnesses called by the Official Liquidator, grants the application, the Court may allow the applicant such costs as it may think fit.

(8) Notes of the examination shall be taken down in writing, and shall be read over to or by, and signed by, the person examined; and may thereafter be used in evidence against him, and shall be open to the inspection of any creditor or contributory at all reasonable times. 262

(9) The Court may, if it thinks fit, adjourn the examination from time to time.

(10) An examination under this section may, if the Court so directs and subject to any rules made in this behalf, be held before any District Judge, or before any officer of the High Court, being an Official Referee, Master, Registrar or Deputy Registrar.

(11) The powers of the Court under this section as to the conduct of the examination, but not as to costs, may be exercised by the judge or officer before whom the examination is held in pursuance of

subsection (10).

Power to arrest absconding contributory. 479.Power to arrest absconding contributory.-At any time either before or after making a winding up order, the Court may, on proof of probable cause for believing that a contributory is about to quit India or otherwise to abscond, or is about to remove or conceal any of his property, for the purpose of evading payment of calls or of avoiding examination respecting the affairs of the company, cause- (a) the contributory to be arrested and safely kept until such time as the Court may order ; and (b) his books and papers and movable property to be seized and safely kept until such time as the Court may order.

Saving of existing powers of Court. 480. Saving of existing powers of Court.-Any powers conferred on the Court by this Act shall be in addition to, and not in derogation of, any existing powers of instituting proceedings against any contributory or debtor of the company, or the estate of any contri- butory or debtor, for the recovery of any call or other sums.

Dissolution of company.

481. Dissolution of company.-(1) When the affairs of a company have been completely wound up, the Court shall make an order that the company be dissolved from the date of the order, and the company shall be dissolved accordingly.

(2) A copy of the order shall, within fourteen days from the date thereof, be forwarded by the liquidator to the Registrar who shall make in his books a minute of the dissolution of the company.

(3) If the liquidator makes default in forwarding a copy as aforesaid, he shall be punishable with fine which may extend to fifty rupees for every day during which the default continues. Enforcement of and appeal from orders

Order made in any Court to be enforced by other Courts. 482. Order made in any Court to be enforced by other Courts.Any order made by a Court for, or in the course of, winding up a company shall be enforceable at any place in India, other than that over which such Court has jurisdiction, by the Court which would have had jurisdiction in respect of the company if its registered Office had been situate at such other place, and in the same manner in all respects as if the order had been made by that Court. 263

Appeals from orders. 483. Appeals from orders.-Appeals from any order made, or decision given, in the matter of the winding up of a company by the Court shall lie to the same Court to which, in the same manner in which, and subject to the same conditions under which, appeals lie from any order or decision of the Court in cases within its ordinary jurisdiction. CHAP VOLUNTARY WINDING UP. CHAPTER III.-VOLUNTARY WINDING UP Resolutions for, and commencement of, voluntary winding up

Circumstances in which company may be wound up voluntarily. 484. Circumstances in which company may be wound up voluntarily.-

(1) A company may be wound Voluntarily- (a) when the period, if any, fixed for the duration of the company by the articles has expired, or the event, if any, has occurred, on the occurrence of which the articles provide that the company is to be dissolved, and the company in general meeting passes a resolution requiring the company to be wound up voluntarily; (b) if the company passes a special resolution that the company be wound up voluntarily.

(2) In this Act, the expression "a resolution for voluntary winding up" means a resolution passed under clause (a) or (lb) of sub-

section (1).

Publication of resolution to wind up voluntarily.

485.Publication of resolution to wind up voluntarily.-(1) When a company has passed a resolution for voluntary winding up, it shall, within fourteen days of the passing of the resolution, give notice of the resolution by advertisement in the Official Gazette, and also in some newspaper circulating in the district where the registered office of the company is situate.

(2) If default is made in complying with sub-section (1), the company, and every officer of the company who is in default, shall be punishable with fine which may extend to fifty rupees for every day during which the default continues. For the purposes of this sub-section, a liquidator of the company shall be deemed to be an officer of the company.

Commencement of voluntary winding up. 486. Commencement of voluntary winding up.-A voluntary winding up shall he deemed to commence at the time when the resolution for voluntary winding up is passed. Consequences of voluntary winding up

Effect of voluntary winding up on status of company. 487. Effect of voluntary winding up on status of company.-In the case of a voluntary winding up, the company shall, from the commencement of the winding up, cease to carry or) its business, except so far as may be required for the beneficial winding up of such business: Provided that the corporate state and corporate powers of the company shall continue until it is dissolved, 264 Declaration of solvency

Declaration of solvency in case of proposal to wind upvoluntarily. 488. Declaration of solvency in case of proposal to wind up

voluntarily.-(1) Where it is proposed to wind up a company voluntarily, its directors, or in case the company has more than two directors, the majority of the directors, may, at a meeting of the Board, make a declaration verified by an affidavit, to the effect that they have made a full inquiry into the affairs of the company, and that, having done so, they have formed the opinion that the company has no debts, or that it will be able to pay its debts in full within such period not exceeding three years from the commencement of the winding up as may be specified in the declaration.

(2) A declaration made as aforesaid shall have no effect for the purposes of this Act, unless- (a) it is made within the five weeks immediately preceding the date of the passing of the resolution for winding up the. company and is delivered, to the Registrar for registration before that date; and (b) it embodies a statement of the company's assets arm liabilities as at the latest practicable date before the making of the declaration.

(3) Any director of a company making a declaration under this section without having reasonable grounds for the opinion that the company will be able to pay its debts in full within the period specified in the declaration, shall be punishable with imprisonment for a term which may extend to six months, or with fine which may extend to five thousand rupees, or with both.

(4) If the company is wound up in pursuance of a resolution passed within the period of five weeks after the making of the decla- ration, but its debts are not paid or provided for in full within the period specified in the declaration, it shall be presumed, until the contrary is shown, that the director did not have reasonable grounds for his opinion.

(5) A winding up in the case of which a declaration has been made and delivered in accordance with this section is in this Act referred to as "a members' voluntary winding up"; and a winding up in the case of which a declaration has not been so made and delivered is in this Act referred to as "a creditors' voluntary winding up". Provisions applicable to a members' voluntary winding up

Provisions applicable-to a members' voluntary winding up. 489. Provisions applicable-to a members' voluntary winding up.The provisions contained in sections 490 to 498, both inclusive, shall subject to the provisions of section 498, apply in relation to a mem- bers' voluntary winding up.

Power of company to appoint and fix remuneration of liquidators. 490.Power of company to appoint and fix remuneration of liqui-

dators.-(1) The company in general meeting shall- (a) appoint one or more liquidators for the purpose of winding up the affairs and distributing the assets of the company; and 265 (b) fix the remuneration, if any, to be paid to the liquidator or liquidators.-

(2) Any remuneration so fixed shall not be increased in any cir- cumstances whatever, whether with or without the sanction of the Court.

(3) Before the remuneration of the liquidator or liquidators is fixed as aforesaid, the liquidator, or any of the liquidators, as the case may be, shall not take charge of his office.

Board's powers to cease on appointment of liquidator. 491. Board's powers to cease on appointment of liquidator.On the appointment of a liquidator, all the powers of the Board of directors and of the managing or whole-time directors, managing agent, secretaries and treasurers, and manager, if there be any of these, shall cease, except for the purpose of giving notice of such ap- pointment to the Registrar in pursuance of section 493 or in so far as the company in general meeting or the liquidator may sanction the continuance thereof.

Power to fill vacancy in office of liquidator.

492. Power to fill vacancy in office of liquidator.-(1) If a vacancy occurs by death, resignation or otherwise in the office of any liquidator appointed by the company, the company in general meeting may, subject to any arrangement with its creditors , fill the vacancy,

(2) For that purpose, a general meeting may be convened by any contributory, or by the continuing liquidator or liquidators, if any.

(3) The meeting shall be held in the manner provided by this Act or by the articles, or in such other manner as the Court may, on application by any contributory or by the continuing liquidator or liquidators, determine.

Notice of appointment of liquidator to be given to Registrar. 493. Notice of appointment of liquidator to be given to

Registrar.--(1) The company shall give notice to the Registrar of the appointment of a liquidator or liquidators made by it under section 490, of every vacancy occurring in the office of liquidator, and of the name of the liquidator or liquidators appointed to fill every such vacancy under section 492.

(2) The notice aforesaid shall be given by the company within ten days of the event to which it relates.

(3) If default is made in complying with subsection (1) or (2), the company, and every officer of the company (including every liquidator or continuing liquidator) who is in default, shall be punishable with fine which may extend to one hundred rupees for every day during which the default continues.

Power of liquidator to accept shares, etc., as consideration for saleof property of company. 494. Power of liquidator to accept shares, etc., as consideration

for sale of property of company.-(1) Where-. (a) a company (in this section called "the transferor com- pany") is proposed to be, or is in course of being, wound up altogether voluntarily; and (b) the whole or any part of its business or property is proposed to be transferred or sold to another company, whether 266 a company within the meaning of this Act or not (in this section called "the transferee company"); the liquidator of the transferor company may, with the sanction of a special resolution of that company conferring on the liquidator either a general authority or an authority in respect of any particular arrangement,- (i) receive, by way of compensation or part compensation for the transfer or sale, shares, policies, or other like interests in the transferee company, for distribution among the members of the transferor company; or (ii) enter into any other arrangement whereby the members of the transferor company may, in lieu of receiving cash, shares, policies, or other like interests or in addition thereto, participate in the profits of, or receive any other benefit from, the transferee company.

(2) Any sale or arrangement in pursuance of this section shall be binding on the members of the transferor company.

(3) If any member' of the transferor company who did not vote in favour of the special resolution expresses his dissent therefrom in writing addressed to the liquidator and left at the registered office of the company within seven days after the passing of the resolution, he may require the liquidator either- (a) to abstain from carrying the resolution into effect; or (b) to purchase his interest at a price to be determined by agreement, or by arbitration in the manner provided by this section.

(4)If the liquidator elects to purchase the member's interest, the purchase money shall be paid before the company is dissolved, and be raised by the liquidator in such manner as may be determined by special resolution.

(5) A special resolution shall not be invalid for the purposes of this section by reason only that it is passed before or concurrently with a resolution for voluntary winding up or for appointing liquidators; but if an order is made within a year for winding up the company by or subject to the supervision of the Court, the special resolution shall not be valid unless it is sanctioned by the Court.

(6) The provisions of the Arbitration Act, 1940 (10 of 1940), other than those restricting the application of that Act in respect of the subject matter of the arbitration, shall apply to all arbitrations in pursuance of this section.

Duty of liquidator to call creditors' meeting in case of insolvency.- 495. Duty of liquidator to call creditors' meeting in case of

insolvency.-(1) If, in the case of a winding up commenced after the commencement of this Act, the liquidator is at any time of opinion that the company will not be able to pay its debts in full within the period stated in the declaration under section 488, or that period has expired without the debts having been paid in full, he shall forthwith summon a meeting of the creditors, and shall lay before the meeting a statement of the assets and liabilities of the Company.

(2) If the liquidator fails to comply with sub-section (1), he shall be punishable with fine which may extend to five hundred rupees. 267

Duty of liquidator to call general meeting at end of each year. 496. Duty of liquidator to call general meeting at end of each

year. (1) Subject to the provisions of section 498, in the event of the winding up continuing for more than one year, the liquidator shall- (a)call a general meeting of the company at the end of this first year from the commencement of the winding up, and at the end of each succeeding year, or as soon thereafter as may be convenient within three months from the end of the year or such longer period as the Central Government may allow; and (b) lay before the meeting an account of his acts and dealings and of the conduct of the winding up during the preceding year, together with a statement In the prescribed form and containing the prescribed particulars with respect to the proceedings in, and position of, the liquidation.

(2) If the liquidator fails to comply with sub-section (1), he shall be punishable, in respect of each failure, with fine which may extend to one hundred rupees.

Final meeting and dissolution.

497. Final meeting and dissolution. (1) Subject to the provisions of section 498, as soon as the affairs of the company are fully wound up, the liquidator shall- (a) make up an account of the winding up, showing how the winding up has been conducted and the property of the company has been disposed of; and (b) call a general meeting of the company for the purpose of laying the account before it, and giving any explanation thereof.

(2) The meeting shall be called by advertisement- (a) specifying the time, place and object of the meeting; and (b)published not less than one month before the meeting in the Official Gazette, and also in some newspaper circulating in the district where the registered office of the company is situate.

(3) Within one week after the meeting, the liquidator shall send to the Registrar a copy of the account, and shall make a return to him of the holding of the meeting and of the date thereof. If the copy is not so sent or the return is not so made, the liquidator shall be punishable with fine which may extend to fifty rupees for every day during which the default continues.

(4) If a quorum is not present at the meeting aforesaid, the liquidator shall, in lieu of the return referred to in sub-section

(3), make a return that the meeting was duly called and that no quorum was present thereat. Upon such a return being made within one week after the date

fixed for the meeting, the provisions of sub-section (3) as to the making of the return shall be deemed to have been complied with.

(5) The Registrar, on receiving the account and either the

return mentioned in sub-section (3) or the return mentioned in sub-

section (4), shall forthwith register them and on the expiration of three months from such registration, the company shall be deemed to be dissolved: Provided that the Court may, on the application of the liquidator or of any other person who appears to the Court to be interested. 268 make an order deferring the date at which the dissolution of the company is to take effect, for such time as the Court thinks fit.

(6) It shall be the duty of the person on whose application an order of the Court under the foregoing proviso is made, within twenty- one days after the making of the order, to deliver to the Registrar a certified copy of the order for registration, and if that person fails so to do, he shall be punishable with fine which may extend to one hundred rupees for every day during which the default continues.

(7) If the liquidator fails to call a general meeting of the company as required by this section, he shall be punishable with fine which may extend to five hundred rupees.

Alternative provisions as to annual and final meetings in case ofinsolvency. 498. Alternative provisions as to annual and final meetings in case of insolvency. Where section 495 has effect, sections 508 and 509 shall apply to the winding up, to the exclusion of sections 496 and 497, as if the winding up were a creditors voluntary winding up and not a members' voluntary winding up: Provided that the liquidator shall not be required to call a meeting of creditors under section 508 at the end of the first year from the commencement of the winding up, unless the meeting held under section 495 has been held more than three months before the end of that year. Provisions applicable to a creditors' voluntary winding up

Provisions applicable to a creditors' voluntary winding up. 499. The provisions contained in sections 500 to 509, both inclusive, shall apply in relation to a creditors' voluntary winding up.

Meeting of creditors.

500. Meeting of creditors.-(1) The company shall cause a meeting of the creditors of the company to be called for the day, or the day next following the day, on which there is to be held the general meeting of the company at which the resolution for voluntary winding up is to be proposed, and shall cause notices of the meeting of creditors to be sent by post to the creditors simultaneously with the sending of the notices of the meeting of the company.

(2) The company shall cause notice of the meeting of the creditors to be advertised once at least in the Official Gazette and once at least in two newspapers circulating in the district where the registered office or principal place of business of the company is situate.

(3) The Board of directors of the company shall- (a) cause a full statement of the position of the company's affairs together with a list of the creditors of the company and the estimated amount of their claims to be laid before the meeting of the creditors to be held as aforesaid; and (b) appoint one of their number to preside at the said meeting.

(4) It shall be the duty of the director appointed to preside at the meeting of creditors to attend the meeting and preside thereat.

(5) If the meeting of the company at which the resolution for voluntary winding up is to be proposed is adjourned and the resolution s passed at an adjourned meeting, any resolution passed at 269

the meeting of the creditors held in pursuance of sub-section (1) shall have effect as if it had been passed immediately after the passing of the resolution for winding up the company.

(6) If default is made-

(a) by the company, in complying with sub-sections (1) and

(2); (b) by its Board of directors, in complying with sub-

section (3); (c) by any director of the company, in complying with sub-

section (4); the company, each of the directors, or the director, as the case may be, shall be punishable with fine which may extend to one thousand rupees and, in the case of default by the company, every officer of the company who is in default, shall be liable to the like punishment.

Notice of resolutions passed by creditors' meeting to be given toRegistrar. 501. Notice of resolutions passed by creditors' meeting to be

given to Registrar. (1) Notice of any resolution passed at a creditors' meeting in pursuance of section 500 shall be given by the company to the Registrar within ten days of the passing thereof.

(2) If default is made in complying with sub-section (1), the company, and every officer of the company who is in default, shall be punishable with fine which may extend to fifty rupees for every day during which the default continues. For the purposes of this section, a liquidator of the company shall be deemed to be an officer of the company.

Appointment of liquidator.

502. Appointment of liquidator.-(1) The creditors and the company at their respective meetings mentioned in section 500 may nominate a person to be liquidator for the purpose of winding up the affairs and distributing the assets of the company.

(2) If the creditors and the company nominate different persons, the person nominated by the creditors shall be liquidator: Provided that any director, member or creditor of the company may, within seven days after the date on which the nomination was made by the creditors, apply to the Court for an order either directing that the person nominated as liquidator by the company shall be liquidator instead of or jointly with the person nominated by the creditors, or appointing the Official Liquidator or some other person to be liquidator instead of the person appointed by the creditors.

(3) If no person is nominated by the creditors, the person, if any, nominated by the company shall be liquidator.

(4) If no person is nominated by the company, the person, if any, nominated by the creditors shall be liquidator.

Appointment of committee of inspection.

503. Appointment of committee of inspection.-(1) The creditors at the meeting to be held in pursuance of section 500 or at any sub- sequent meeting may, if they think fit, appoint a committee of inspec- tion consisting of not more than five persons.

(2)If such a committee is appointed, the company may, either at the meeting at which the resolution for voluntary winding up is passed or at any subsequent general meeting, appoint such number 270 of persons (not exceeding five) as they think fit to act as members of the committee: Provided that the creditors may, if they think fit, resolve that all or any of the persons so appointed by the company ought not to be members of the committee of inspection.

(3) If the creditors so resolve, the persons mentioned in the resolution shall not, unless the Court otherwise directs, be qualified to, act as members of the committee.

(4) On any application to the Court for a direction under sub-

section (3), the Court may, if it thinks fit, appoint other persons to act as members of the committee of inspection in the place of the persons mentioned in the creditors' resolution.

(5) Subject to the provisions of sub-sections (1) to (4) and to such rules as may be made by the Central Government, the provisions of

section 465 (except sub-section (1) thereof) shall apply with respect to a committee of inspection appointed under this section as they apply with respect to a committee of inspection appointed in a winding up by the Court.

Fixing of liquidator's remuneration.

504. Fixing of liquidators' remuneration.-(1) The committee of inspection, or if there is no such committee, the creditors, may fix the remuneration to be paid to the liquidator or liquidators.

(2) Where the remuneration is not so fixed, it shall be determined by the Court.

(3) Any remuneration fixed under sub-section (1) or (2) shall not be increased in any circumstances whatever, whether with or without the sanction of the Court.

Board's powers to cease on appointment of liquidator. 505. Board's powers to cease on appointment of liquidator.-On the appointment of a liquidator, all the powers of the Board of directors shall cease, except in so far as the committee of inspection, or if there is no such committee, the creditors in general meeting, may sanction the continuance thereof.

Power to fill vacancy in office of liquidator. 506. Power to fill vacancy in office of liquidator.-If a vacancy occurs by death, resignation or otherwise, in the office of a liquidator (other than a liquidator appointed by, or by the direction of, the Court), the creditors in general meeting may fill the vacancy.

Application of section 494 to a creditors' voluntary winding up. 507. Application of section 494 to a creditors' voluntary winding up.-The provisions of section 494 shall apply in the case of a creditors' voluntary winding up as in the case of a members' voluntary winding up, with the modification that the powers of the liquidator under that section shall not be exercised except with the sanction either of the Court or of the committee of inspection.

Duty of liquidator to call meetings of company and of creditors at endof each year. 508. Duty of liquidator to call meetings of company and of

creditors at end of each year.-(1) In the event of the winding up continuing for more than one year, the liquidator shall- (a) call a general meeting of the company and a meeting of the creditors at the end of the first year from the commence- ment of the winding up and at the end of each succeeding year, or as soon thereafter as may be convenient within three months 271 from the end of the year or such longer period as the Central Government may allow; and (b) lay before the meetings an account of his acts and dealings and of the conduct of the winding up during the preceding year, together with a statement in the prescribed form and containing the prescribed particulars with respect to the proceedings in, and position of, the winding up.

(2) If the liquidator fails to comply with sub-section (1), he shall be punishable, in respect of each failure, with fine which may extend to one hundred rupees.

Final meeting and dissolution.

509. Final meeting and dissolution.-(1) As soon as the affairs of the company are fully wound up, the liquidator shall- (a) make up an account of the winding up, showing how the winding up has been conducted and the property of the company has been disposed of; and (b) call a general meeting of the company and a meeting of the creditors for the purpose of laying the account before the meetings and giving any explanation thereof.

(2) Each such meeting shall be called by advertisement- (a) specifying the time, place and object thereof; and (b) published not less than one month before the meeting in the Official Gazette and also in some newspaper circulating in the district where the registered office of the company is situate.

(3) Within one week after the date of the meetings, or if the meetings are not held on the same date, after the date of the later meeting, the liquidator shall send to the Registrar a copy of the account, and shall make a return to him of the holding of the meetings and of the date or dates on which they were held. If the copy is not so sent or the return is not so made, the liquidator shall be punishable with fine which may extend to fifty rupees for every day during which the default continues.

(4) If a quorum (which for the purposes of this section shall be two persons) is not present at either of such meetings, the liquidator

shall, in lieu of the return referred to in sub-section (3), make a return that the meeting was duly called and that no quorum was present thereat. Upon such a return being made within one week after the date

fixed for the meeting, the provisions of sub-section (3) as to the making of the return shall, in respect of that meeting, be deemed to have been complied with.

(5) On receiving the account and also, in respect of each such

meeting, either the return mentioned in sub-section (3) or the return

mentioned in sub-section (4), the Registrar shall forthwith register them, and on the expiration of three months from their registration, the company shall be deemed to be dissolved: Provided that the Court may, on the application of the liquidator or of any other person who appears to the Court to be interested, make 272 an order deferring the date at which the dissolution of the company is to take effect for such time as the Court thinks fit.

(6) It shall be the duty of the person on whose application an order is made by the Court under the foregoing proviso, within twenty- one days after the making of the order, to deliver to the Registrar a certified copy of the order for registration, and if that person fails so to do, he shall be punishable with fine which may extend to one hundred rupees for every day during which the default continues.

(7) If the liquidator fails to call a general meeting of the company or a meeting of the creditors as required by this section, he shall be punishable, in respect of each such failure, with fine which may extend to five hundred rupees. Provisions applicable to every voluntary winding up

Provisions applicable to every voluntary winding up. 510.Provisions applicable to every voluntary winding up.-The provisions contained in sections 511 to 521, both inclusive, shall apply to every voluntary winding up, whether a members' or a creditors' winding up.

Distribution of property of company. 511. Distribution of property of company.-Subject to the pro- visions of this Act as to preferential payments, the assets of a com- pany shall, on its winding up, be applied in satisfaction of its liabilities pari passu and, subject to such application, shall, unless the articles otherwise provide, be distributed among the members according to their rights and interests in the company.

Powers and duties of liquidator in voluntary winding up.

512. Powers and duties of liquidator in voluntary winding up.-(1) The liquidator may,- (a) in the case of a members' voluntary winding up, with sanction of a special resolution of the company, and in the case of a creditors' voluntary winding up, with the sanction of the Court or, the committee of inspection or, if there is no such committee, of a meeting of the creditors, exercise any of the powers given by clauses (i) to (iv) of sub-section

(2) of section 457 to a liquidator in a winding up by the Court; (b) without the sanction referred to in clause (a), exercise any of the other powers given by this Act to the liquidator in a winding up by the Court; (c) exercise the power of the Court under this Act of settling a list of contributories (which shall be prima facie evidence of the liability of the persons named therein to be contributories); (d) exercise the power of the Court of making calls; (e) call general meetings of the company for the purpose of obtaining the sanction of the company by ordinary or special resolution, as the case may require, or for any other purpose be may think fit. 273

(2) The. exercise by the liquidator of the powers given by

clause (a) of subsection (1) shall be subject to the control of the Court; and any creditor or contributory may apply to the Court with respect to any exercise or proposed exercise of any of the powers conferred by this section.

(3) The liquidator shall pay the debts of the company and shall adjust the rights of the contributories among themselves.

(4) When several liquidators are appointed, any power given by this Act may be exercised by such one or more of them as may be determined at the time of their appointment, or, in default of such determination, by any number of them not being less than two.

Body corporate not to be appointed as liquidator.

513. Body corporate not to be appointed as liquidator.-(1) A body corporate shall not be qualified for appointment as liquidator of a company in a voluntary winding up.

(2) Any appointment made in contravention of sub-section (1) shall be void.

(3) Any body corporate which acts as liquidator of a company, and every director, the managing agent or secretaries and treasurers, or a manager thereof, shall be punishable with fine which may extend to one thousand rupees.

Corrupt inducement affecting appointment as liquidator. 514. Corrupt inducement affecting appointment as liquidator.Any person who gives, or agrees or offers to give, to any member or creditor of a company any gratification, whatever with a view to-- (a) securing his own appointment or nomination as the com- pany's liquidator; or (b) securing or preventing the appointment or nomination of some person other than himself, as the company's liquidator; shall be punishable with fine which may extend to one thousand rupees.

Power of Court to appoint and remove liquidator in voluntary windingup. 515. Power of Court to appoint and remove liquidator in voluntary

winding up.-(1) If from any cause whatever, there is no liquidator acting, the Court may appoint a liquidator.

(2) The Court may, on cause shown, remove a liquidator and appoint another liquidator.

Notice by liquidator of his appointment.

516. Notice by liquidator of his appointment.-(1) The liquidator shall, within twenty-one days after his appointment, publish in the Official Gazette, and deliver to the Registrar for registration, a notice of his appointment in the form prescribed.

(2) If the liquidator fails to comply with sub-section (1), he shall be punishable with fine which may extend to fifty rupees for every day during which the default continues.

Arrangement when binding on company and creditors.

517. Arrangement when binding on company and creditors.-(1) Any arrangement entered into between a company about to be, or in the course of being, wound up and its creditors shall, subject to the right of appeal under this section, be binding on the company and 274 on the creditors if it is sanctioned by a special resolution of the company and acceded to by three-fourths in number and value of the creditors.

(2) Any creditor or contributory may, within three weeks from the completion of the arrangement, appeal to the Court against it and the Court may thereupon, as it thinks just, amend, vary, confirm or set aside the arrangement.

Power to apply to Court to have questions determined or powersexercised. 518. Power to apply to Court to have questions determined or

powers exercised.-(1) The liquidator or any contributory or creditor may apply to the Court- (a) to determine any question arising in the winding up of a company; or (b) to exercise, as respects the enforcing of calls, the staying of proceedings or any other matter, all or any of the powers which the Court might exercise if the company were being wound up by the Court.

(2) The liquidator or any creditor or contributory may

apply to the Court specified in sub-section (3) for an order setting aside any attachment, distress or execution put into force against the estate or effects of the company after the commencement of the winding up.

(3) An application under sub-section (2) shall be made- (a) if the attachment, distress or execution is levied or put into force by a High Court, to such High Court; and (b) if the attachment, distress or execution is levied or put into force by any other Court, to the Court having jurisdiction to wind up the company.

(4) The Court, if satisfied on an application under sub-section

(1) or (2) that the determination of the question or the required exercise of power or the order applied for will be just and beneficial, may accede wholly or partially to the application on such terms and conditions as it thinks fit, or may make such other order on the application as it thinks just.

(5) A copy of an order staying the proceedings in the winding up, made by virtue of this section, shall forthwith be forwarded by the company, or otherwise as may be prescribed, to the Registrar, who shall make a minute of the order in his books relating to the company.

Application of liquidator to Court for public examination ofpromoters, directors, etc. 519. Application of liquidator to Court for public examination of

promoters, directors, etc.-(1) The liquidator may make a report to the Court stating that in his opinion a fraud has been committed by any person in the promotion or formation of the company or by any officer of the company in relation to the company since its formation; and the Court may, after considering the report, direct that that person or officer shall attend before the Court on a day appointed by it for that purpose, and be publicly examined as to the promotion or formation or the conduct of the business of the company, or as to his conduct and dealings as officer thereof.

(2)The provisions of sub-sections (2) to (11) of section 478 shall apply in relation to any examination directed under sub-section

(1) as they apply in relation to an examination directed under sub-

section (1) of section 478 with references to the liquidator being substituted for references to the Official Liquidator in those provi- sions. 275

Costs of voluntary winding up. 520. Costs of voluntary winding up.-All costs, charges and ex- penses properly incurred in the, winding up, including the remunera- tion of the liquidator, shall, subject to the rights of secured credi- tors if any, be payable out of the assets of the company in priority to all other claims.

Saving of right of creditors and contributories to apply for windingup. 521. Saving of right of creditors and contributories to apply for winding up.-The voluntary winding up of a company shall not bar the right of any creditor or contributory to have it wound up by the Court, but in the case of an application by a contributory, the Court must be satisfied that the rights of the contributories will be prejudiced by a voluntary winding up. CHAP WINDING UP SUBJECT TO SUPERVISION OF COURT. CHAPTER IV.--WINDING UP SUBJECT TO SUPERVISION OF COURT

Power to order winding up subject to supervision. 522. Power to order winding up subject to supervision.-At any time after a company has passed a resolution for voluntary winding up, the Court may make an order that the voluntary winding up shall continue, but subject to such supervision of the Court, and with such liberty for creditors, contributories or others to apply to the Court, and generally on such terms and conditions, as the Court thinks just.

Effect of petition for winding up subject to supervision. 523. Effect of petition for winding up subject to supervision.A petition for the continuance of a voluntary winding up subject to the supervision of the Court shall, for the purpose of giving jurisdiction to the Court over suits and legal proceedings, be deemed to be a petition for winding up by the Court.

Power of Court to appoint or remove liquidators.

524. Power of Court to appoint or remove liquidators.-(1) Where an order is made for a winding up subject to supervision, the Court may, by that or any subsequent order, appoint an additional liquidator or liquidators.

(2) The Court may remove any liquidator so appointed or any liquidator continued under the supervision order, and fill any vacancy occasioned by the removal, or by death or resignation.

Powers and obligations of liquidator appointed by Court. 525. Powers and obligations of liquidator appointed by Court.A liquidator appointed by the Court under section 524 shall have the same powers, be subject to the same obligations, and in all respects stand in the same position, as if he had been duly appointed in accordance with the provisions of this Act with respect to the appointment of liquidators in a voluntary winding up.

Effect of supervision order.

526. Effect of supervision order.-(1) Where an order is made for a winding up subject to supervision, the liquidator may, subject to any restrictions imposed by the Court, exercise all his powers, without the sanction or intervention of the Court, in the same manner as if the company were being wound up altogether voluntarily.

(2) Except as provided in sub-section (1), any order made by the Court for a winding up subject to the supervision of the Court, shall for all purposes, including the staying of suits and other pro- ceedings, be deemed to be an order' of the Court for winding up the company by the Court, and shall confer full authority on the Court to make calls or to enforce calls made by the liquidators, and to exercise all other powers which it might have exercised if an order had been made for winding up the company altogether by the Court. 276

(3) In the construction of the provisions whereby the Court is empowered to direct any act or thing to be done to or in favour of the liquidator, the expression "liquidator" shall be deemed to mean the liquidator conducting the winding up, subject to the supervision of the Court.

Appointment in certain cases of voluntary liquidators to office ofliquidators. 527. Appointment in certain cases of voluntary liquidators to office of liquidators.-Where an order has been made for winding up a company subject to supervision, and an order is afterwards made for winding up by the Court, the Court may, by the last-mentioned or any subsequent order, appoint any person or persons who are then liquidators, either provisionally or permanently, to be liquidator or liquidators in the winding up by the Court in addition to, and subject to the control of, the Official Liquidator. CHAP PROVISIONS APPLICABLE TO EVERY MODE OF WINDING UP. CHAPTER V.-PROVISIONS APPLICABLE TO EVERY MODE OF WINDING UP Proof and ranking of claims

Debts of all descriptions to be admitted to proof. 528. Debts of all descriptions to be admitted to proof.-In every winding up (subject, in the case of insolvent companies, to the application in accordance with the provisions of this Act of the law of insolvency), all debts payable on a contingency, and all claims against the company, present or future, certain or contingent, ascertained or sounding only in damages, shall be admissible to proof against the company, a just estimate being made, so far as possible, of the value of such debts or claims as may be subject to any contingency, or may sound only in damages, or for some other reason may not bear a certain value.

Application of insolvency rules in winding up of insolvent companies. 529. Application of insolvency rules in winding up of insolvent

companies.-(1) In the winding up of an insolvent company, the same rules shall prevail and be observed with regard to- (a) debts provable; (b) the valuation of annuities and future and contingent liabilities; and (c) the respective rights of secured and unsecured creditors; as are in force for the time being under the law of insolvency with respect to the estates of persons adjudged insolvent.

(2)All persons who in any such case would be entitled to prove for and receive dividends out of the assets of the company, may come in under the winding up, and make such claims against the company as they respectively are entitled to make by virtue of this section.

Preferential payments.

530. Preferential payments.-(1) In a winding up, there shall be paid in priority to all other debts- (a) all revenues, taxes, cesses and rates due from the company to the Central or a State Government or to a local authority at the relevant, date as defined in clause (c) of

subsection (8), and having become due and payable within the twelve months next before that date; (b) all wages or salary (including wages payable for time or piece work and salary earned wholly or in part by way of commission) of any employee, in respect of services rendered 277 to the company and due for a period not exceeding four months within the twelve months next before the relevant date,

subject to the limit specified in sub-section (2); (c) all accrued holiday remuneration becoming payable to any employee, or in the case of his death to any other person in his right, on the termination of his. employment before or by the effect of, the winding up order or resolution; (d) unless the company is being wound up voluntarily merely for the purposes of reconstruction or of amalgamation with another company, all amounts due, in respect of contributions payable during the twelve months next before the relevant date, by the company as the employer of any persons, under the Employees' State Insurance Act, 1948 (34 of 1948), or any other law for the time being in force; (e) unless the company is being wound up voluntarily merely for the purposes of reconstruction or of amalgamation with another company, or unless the company has, at the commencement of the winding up, under such a contract with insurers as is mentioned in section 14 of the Workmen's Compensation Act) 1928 (8 of 1923), rights capable of being transferred to and vested in the workman, all amounts due in respect of any compensation or liability for compensation under the said Act in respect of the death or disablement of any employee of the company; (f) all sums due to any employee from a provident fund, a pension fund, a gratuity fund or any other fund for the welfare of the employees, maintained by the company; and (g) the expenses of any investigation held in pursuance of section 235 or 237, in so far as they are payable by the company.

(2) The sum to which priority is to be given under clause (b) of

sub-section (1), shall not, in the case of any one claimant, exceed one thousand rupees: Provided that where a claimant is a labourer in husbandry who has entered into a contract for the payment of a portion of his wages in a lump sum at the end of the year of hiring, he shall have priority in respect of the whole of such sum, or a part thereof, as the Court may decide to be due under the contract, proportionate to the time of. service up to the relevant date.

(3) Where any compensation under the Workmen's Compensation Act, 1923 (8 of 1923) is a weekly payment, the amount due in respect

thereof shall, for the purposes of clause (e) of sub-section (1), be taken to be the amount of the lump sum for which the weekly payment could, if redeemable, be redeemed if the employer made an application for that purpose under the said Act.

(4) Where any payment has been made to any employee of a company,- (i) on account of wages or salary; or (ii) to him, or in the case of his death, to any other person in his right on account of accrued holiday remuneration, out of money advanced by some person for that purpose, the person by whom the money was advanced shall, in a winding up, have a 278 right of priority in respect of the money so advanced and paid, up to the amount by which the sum in respect of which the employee or other person in his right, would have been entitled to priority in the winding up has been diminished by reason of the payment having been made.

(5) The foregoing debts shall- (a) rank equally among themselves and be paid in full, Unless the assets are insufficient to meet them, in Which case they shall abate in equal proportions; and (b) so far as the assets of the company available for payment of general creditors are insufficient to meet them, have priority over the claims of holders of debentures under any floating charge created by the company, and be paid accordingly out of any property comprised in or subject to that charge.

(6) Subject to the retention of such sums as may be necessary for the costs and expenses of the winding up, the foregoing debts shall be discharged- forthwith so far as the assets are sufficient to meet them, and in the case of the debts to which priority is given by

clause (d) of sub-section (1), formal proof thereof shall not be required except in so far as may be otherwise prescribed.

(7) In the event of a landlord or other person distraining or having distrained on any goods or effects of the company within three months next before the date of a winding up order, the debts to which priority is given by this section shall be a first charge on the goods or effects so distrained on, or the proceeds of the sale thereof: Provided that. in respect of any money paid under any such charge, the landlord or other person shall have the same rights of priority as the person to whom the payment is made.

(8) For the purposes of this section- (a) any remuneration in respect of a period of holiday or of absence from work through sickness or other good cause shall be deemed to be wages in respect of services rendered to the company during that period; (b) the expression "accrued holiday remuneration" includes, in relation to any person, all sums which, by virtue either of his contract of employment or of any enactment (including any order made or direction given under any enactment), are payable on account of the remuneration which would, in the ordinary course, have become payable to him in respect of a period of holiday, had his employment with the company continued until he became entitled to be allowed the holiday; and (e) the expression "the relevant date" means- (i) in the case of a company ordered to be wound up compulsorily, the date of the appointment (or first appoint- ment) of a provisional liquidator, or if no such appointment was made, the date of the winding up order, unless in either case the company had commenced to be wound up voluntarily before that date; and 279 (ii) in any case where sub-clause (i) does not apply, the date of the passing of the resolution for the voluntary wind- ing up of the company.

(9) This section shall not apply in the case of a winding up

where the date referred to in sub-section (5) of section 230 of the Indian Companies Act, 1913 (7 of 1913), occurred before the commence- ment of this Act, and in such a case. the provisions relating to pre- ferential payments which would have applied if this Act had not been passed, shall be deemed to remain in full force. Effect of winding up on antecedent and other transactions

Fraudulent preference.

531. Fraudulent preference.-(1) Any transfer of property, movable or immovable, delivery of goods, payment, execution or other act relating to property made, taken or done by or against a company within six months before the commencement of its winding up which, had it been made, taken or done by or against an individual within three months before the presentation of an insolvency petition on which he is adjudged insolvent, would be deemed in his insolvency a fraudulent preference, shall in the event of the company being wound up, be deemed a fraudulent preference of its creditors and be invalid accordingly: Provided that, in relation to things made, taken or done before the commencement of this Act, this sub-section shall have-effect with the substitution, for the reference to six months, of a reference to three months.

(2) For the purposes of sub-section (1), the presentation of a petition for winding up in the case of a winding up by or subject to the supervision of the Court, and the passing of a resolution for winding up in the case of a voluntary winding up, shall be deemed to correspond to the act of insolvency in the case of an individual.

Transfers for benefit of all creditors to be void. 532. Transfers for benefit of all creditors to be void.-Any transfer or assignment by a company of all its property to trustees for the benefit of all its creditors shall be void.

Liabilities and rights of certain fraudulently preferred persons. 533. Liabilities and rights of certain fraudulently preferred

persons.-(1) Where, in the case of a company which is being wound up, anything made, taken or done after the commencement of this Act is invalid under section 531 as a fraudulent preference of a person interested in property mortgaged or charged to secure the company's debt, then (without prejudice to any rights or liabilities arising apart from. this provision), the person preferred shall be subject to the same liabilities, and shall have the same rights, as if he had undertaken to be personally liable as surety for the debt, to the extent of the mortgage or charge on the property or the value of his interest, whichever is less.

(2) The value of the said person's interest shall be determined as at the date of the transaction. constituting the fraudulent preference, and shall be determined as if the interest were free of all encumbrances other than those to which the mortgage or charge for the company's debt was then subject.

(3) On any application made to the Court with respect to any payment on the ground that the payment was a fraudulent preference 280 of a surety or guarantor, the Court shall have jurisdiction to deter- mine any questions with respect to the payment arising between the person to whom the payment was made and the surety or guarantor and to grant relief in respect thereof, notwithstanding that it is not necessary so to do for the purposes of the winding up, and for that purpose may give leave to bring in the surety or guarantor as a third party as in the case of a suit for the recovery of the sum paid. This sub-section shall apply, with the necessary modifications, in relation' to transactions other than the payment of money as it ap- plies in relation to payments of money.

Effect of floating charge. 534. Effect of floating charge.-Where a company is being wound up, a floating charge on the undertaking or property of the company created within the twelve months immediately preceding the com- mencement of the winding up, shall, unless it is proved that the company immediately after the creation of the charge was solvent, be invalid, except to the amount of any cash, paid to the company at the time of, or subsequently to the creation of, and in consideration for, the charge, together with interest on that amount at the rate of five per cent. per annum or such other rate as may for the time being be notified by the Central Government in this behalf in the Official Gazette: Provided that in relation to a charge created more than three months before the commencement of this Act, this section shall have effect with the substitution, for references to twelve months, of references to three months.

Disclaimer of onerous property in case of a company which is beingwound up. 535. Disclaimer of onerous property in case of a company which is

being wound up.-(1) Where any part of the property of a company which is being wound up consists of- (a) land of any tenure, burdened with onerous covenants; (b) shares or stock in companies; (c) any other property which is unsaleable or is not readily saleable, by reason of its binding the possessor thereof either to the performance of any onerous act or to the payment of any sum of money; or (d) unprofitable contracts; the liquidator of the company, notwithstanding that he has endeavoured to sell or has taken possession of the property, or exercised any act of ownership in relation thereto, or done anything in pursuance of the contract, may, with the leave of the Court and subject to the provisions of this section, by writing signed by him, at any time within twelve months after the commencement of the winding up or such extended period as may be allowed by the Court, disclaim the property: Provided that, where any such property has not come to the knowledge of the liquidator within one month after the commencement of the winding up, the power of disclaiming the property may be exercised at any time within twelve months after he has become aware thereof or such extended period as may be allowed by the Court, 281

(2) The disclaimer shall operate to determine, as from, the date of disclaimer the rights, interest, and liabilities of the company, and the property of the company, in or in respect of the property disclaimed, but shall not, except so far as is necessary for the purpose of releasing the company and the property of the company from liability, affect the rights or liabilities of any other person.

(3) The Court, before or on granting leave to disclaim, may re- quire such notices to be given to persons interested, and impose such terms as a condition of granting leave, and make such other order in the matter as the Court thinks just.

(4)The liquidator shall not be entitled to disclaim any property in any case where an application in writing has been made to him by any person interested in the property requiring him to decide whether he will or will not disclaim, and the liquidator has not, within a period of twenty-eight days after the receipt of, the application or such extended period as may be allowed by the Court, given notice to the applicant that he intends to apply to the Court for leave to disclaim; and in case the property is a contract, if the liquidator, after such an application as aforesaid, does not within the said period or extended period disclaim the contract, the company shall be deemed to have adopted it.

(5) The Court may' on the application of any person who is, as against the liquidator, entitled to the benefit or subject, to the burden of a contract made with the company, make an order rescinding the contract on such terms as to payment by or to either party of damages for the non-performance of the contract, or otherwise as the Court thinks just; and any damages payable under the order to any such person may be proved by him as a debt in the winding up.

(6) The Court may, on an application by any person who either claims any interest in any disclaimed property or is under any liabi- lity not discharged by this Act in respect of any disclaimed property, and after hearing any such persons-as it thinks fit, make an order for the vesting of the property in, or the delivery of the property to, any person entitled thereto or to whom it may seem just that the property should be delivered by way of compensation for such liability as aforesaid, or a trustee for him, and on such terms as the Court thinks just; and on any such vesting order being made, 'the property comprised therein shall vest accordingly in the person therein named in that behalf without any conveyance or assignment for the purpose:' Provided that, where the property disclaimed is of a lease-hold nature, the Court shall not make a vesting order in favour of any person claiming under the company, whether as under-lessee or as mortgagee or holder of a charge by way of demise', except upon the terms of making that person- (a) subject to the same liabilities and obligations as those to which the company was subject under the lease in respect of the property at the commencement of the winding up; or (b) if the Court thinks fit, subject only to the same liabilities and obligations as if the lease had been assigned. to that person at that date; and in either event (if the case so requires) as if the lease had comprised only the property comprised in the vesting order; and any 282 mortgagee or under-lessee declining to accept a vesting order upon such terms shall be excluded from all interest in and security upon the property, and, if there is no person claiming under the company who is willing to accept an order upon such terms, the Court shall, have power to vest the estate and interest of the company in the property in any person liable, either personally or in a represen- tative character, and either alone or jointly with the company, to perform the lessee's covenants in the lease, freed and discharged from all estates, encumbrances and interests created therein by the company.

(7) Any person injured by the operation of a disclaimer under this section shall be deemed to be a creditor of the company to the amount of the compensation or damages payable in respect of the injury, and may accordingly prove the amount as a debt in the winding up.

Avoidance of transfers, etc., after commencement of winding up. 536. Avoidance of transfers, etc., after commencement of winding

up.-(1) In the case of a voluntary winding up. any transfer of shares in the company, not being a transfer made to or with the sanction of the liquidator, and any alteration in the status of the members of the company, made after the commencement of the winding up shall be void,

(2)In the case of a winding up by or subject to the supervision of the Court, any disposition of the property (including actionable claims) of the company, and any transfer of shares in the company or alteration in the status of its members, made after the commencement of the winding up, shall, unless the Court otherwise orders, be void.

Avoidance of certain attachments, executions, etc., in winding up byor subject to supervision of Court. 537. Avoidance of certain attachments, executions, etc., in

winding up by or subject to supervision of Court.-(1) Where any com- pany is being wound up by or subject to the supervision of the Court- (a) any attachment, distress or execution put in force, without leave of the Court, against the estate or effects of the company, after the commencement of the winding up; or (b) any sale held, without leave of the Court, of any of the properties or effects of the company after such commencement; shall be void.

(2) Nothing in this section applies to proceedings by the Government. Offences antecedent to or in course of winding up

Offences by officers of companies liquidation.

538. Offences by officers A companies in liquidation--(1) If any person, being a past or present officer of a company which, at the time of the commission of the alleged offence, is being wound up, whether by or subject to the supervision of the Court or voluntarily, or which is subsequently ordered to be wound up by the Court or which subsequently passes a resolution for voluntary winding up,- (a) does not, to the best of his knowledge and belief, fully and truly discover to the liquidator all the property, movable and immovable, of the company, and how and to whom and fox what consideration and when the company disposed of any part thereof except such part as has been disposed of, in the ordinary Course of the business of the company; 283 (b) does not deliver up to the liquidator, or as he directs, all such part of the movable and immovable property of the company as is in his custody or under his control, and which he is required by law to deliver up; (c) does not deliver up to the liquidator, or as he directs, all such books And papers of the company as are in his custody or under his control and which he is required by law to deliver- up; (d) within the twelve months next before the commencement of the winding up or at any time thereafter, conceals any part of the property of the company to the value of one hundred rupees or upwards, or conceals any debt due to or from the company; (e) within the twelve months next before the commencement of the winding up or at any time thereafter, fraudulently removes any part of the property of the company to the value of one hundred rupees or upwards; (f)makes any material omission in any statement relating to the affairs of the company: (g) knowing or believing that a false debt has been proved by any person under the winding up, fails for a period of one month to inform the liquidator thereof; (h) after the commencement of the winding up, prevents the production of any book or paper affecting or relating to the property or affairs of the company; (i) within the twelve months next before the commencement of the winding up or at any, time thereafter, conceals, destroys, mutilates or falsifies, or is privy to the concealment, destruction, mutilation or falsification of, any book or paper affecting or relating to, the property or affairs of the company; (j)within the twelve months next before the commencement of the winding up or at any time thereafter makes, or is privy to the making of, any false entry in any book or paper affecting or relating to, the property or affairs of the company; (k) within the twelve months next before the commencement of the winding up or at any time thereafter, fraudulently parts with, alters or makes any omission in, or is privy to the fraudulent parting with, altering or making of any omission in, any book or paper affecting or relating to the property or affairs of the company; (l) after the commencement of the winding up or at any meeting of the creditors of the company within the twelve months next before the commencement of the winding up, attempts to account for any part of the property of the company by fictitious losses or expenses; (m) within the twelve months next before the commencement of the winding up or at any time thereafter, by any false representation or other fraud, obtains on credit, for or on behalf of the company, any property which the company does not subsequently pay for; 284 (n) within the twelve months next before the commencement of the winding up or at any time thereafter, under the false pretence that the company is carrying on its business, obtains on credit, for or on behalf of the company, any property which the company does not subsequently pay for; (o) within the twelve months next before the commencement of the winding up or at any time thereafter, pawns, pledges or disposes of any property of the company which has been obtained on credit and has not been paid for, unless such pawning, pledging or disposing is in the ordinary course of the business of the company; or (p) is guilty of any false representation or other fraud for the purpose of obtaining the consent of the creditors of the company or any of them, to an agreement with reference to the affairs of the company or to the winding up; he shall be punishable, in the case of any of the offences mentioned in clauses (m), (n) and (o), with imprisonment for a term which may extend to five years, or with fine, or with both, and, in the case of any other offence, with imprisonment for a term which may extend to two years, or with fine, or with both: Provided that it shall be a good defence- (i) to a charge under any of the clauses, (b), (c), (d), (n) and (o), if the accused proves that he had no intent to defraud;and (ii) to a charge under any of the clauses, (a), (h), (i) and if he proves that he had no intent to conceal the true state of affairs of the company or to defeat the law.

(2) Where any person pawns, pledges or disposes of any property in circumstances which amount to an offence under clause (o) of sub-

section (1), every person who takes in pawn or pledge or otherwise receives the property, knowing it to be pawned, pledged, or disposed of in such circumstances as aforesaid, shall be punishable with imprisonment for a term which may extend to three years, or with fine, or with both.

(3) For the purposes of this section, the expression "officer" shall include any person in accordance with whose directions or instructions the directors of the company have been accustomed to act.

Penalty for falsification of books. 539. Penalty for falsification of books.-If with intent to defraud or deceive any person, any officer or contributory of a company which is being wound up- (a) destroys, mutilates, alters, falsifies or secretes, or is privy to the destruction, mutilation, alteration, falsification or secreting of, any books, papers or securities; or (b) makes, or is privy to the making of, any false or fraudulent entry in any register, book of account or document belonging to the company; he shall be punishable with imprisonment for a term which may extend to seven years, and shall also be liable to fine. 285

Penalty for frauds by officers. 540. Penalty for frauds by officers.-If any person, being at the time of the commission of the alleged offence an officer of a company which is subsequently ordered to be wound up by the Court or which subsequently passes a resolution for voluntary winding up,- (a) has, by false pretences or by means of any other fraud, induced any person to give credit to the company; or (b) with intent to defraud creditors of the company, has made or caused to be made any gift or transfer of or charge on, or has caused or connived at the levying of any execution against, the property of the company; or (c) with intent to defraud creditors of the company, has concealed or removed any part of the property of the company since the date of any unsatisfied judgment or order for payment of money obtained against the company, or within two months before that date; he shall be punishable with imprisonment for a term which may extend to two years and shall also be liable to fine.

Liability where proper accounts not kept.

541. Liability where proper accounts not kept.-(1) Where a company is being wound up, if it is shown that proper books of account were not kept by the company throughout the period of two years immediately preceding the commencement of the winding up, or the period between the incorporation of the company and the commencement of the winding up, whichever is shorter, every officer of the company who is in default shall, unless he shows that he acted honestly and that in the circumstances in which the business of the company was carried on, the default was excusable, be punishable with imprisonment for a term which may extend to one year.

(2) For the purposes of sub-section (1), it shall be deemed that proper books of account have not been kept in the case of any company, if there have not-been kept- (a) such books or accounts as are necessary to exhibit and explain the transactions and financial position of the business of the company, including books containing entries made from day to day in sufficient detail of all cash received and all cash paid; and (b) where the business of the company has involved dealings in goods, statements of the annual stock-takings and (except in the case of goods sold by way of ordinary retail trade) of all goods sold and purchased, showing the goods and the buyers and sellers thereof in sufficient detail to enable those goods and those buyers and sellers to be identified.

Liability for fraudulent conduct of business.

542. Liability for fraudulent conduct of business.-(1) If in the course of the winding up of a company, it appears that any business of the company has been carried on, with intent to defraud, creditors of the company or any other persons, or for any fraudulent purpose, the Court, on the application of the Official Liquidator, or the liquidator or any creditor or contributory of the company, may, if it thinks it proper so to do, declare that any persons 286 who were knowingly parties to the carrying on of the business in the manner aforesaid shall be personally responsible, without any limita- tion of liability, for all or any of the debts or other liabilities of the company as the Court may direct. On the hearing of an application under this sub-section, the ,Official Liquidator or the liquidator, as the case may be, may himself give evidence or call witnesses.

(2) (a) Where the Court makes any such declaration, it may give such further directions as it thinks proper for the purpose of giving effect to that declaration. (b) In particular, the Court may make provision for making the liability of any such person under the declaration a charge on any debt or obligation due from the company to him,- or on any mortgage or charge or any interest in any mortgage or charge on any assets of the company held by or vested in him, or any person on his behalf, or any person claiming as assignee from or through the person liable or any person acting on his behalf. (c) The Court may, from time to time, make such further order as may be necessary for the purpose of enforcing any charge imposed under this sub-section. (d) For the purpose of this sub-section, the expression "assignee' includes any person to whom or in whose favour, by the directions of the person liable, the debt, obligation, mortgage or charge was created, issued or transferred or the interest was created, but does not include an assignee for valuable consideration (not including consideration by way of marriage) given in good faith and without notice of any of the matters on the ground of which the declaration is made.

(3) Where any business of a company is carried on with such

intent or for such purpose as is mentioned in sub-section (1), every person who was knowingly a party to the carrying on of the business in the manner aforesaid, shall be punishable with imprisonment for term which may extend to two years, or with fine which may extend to five thousand rupees, or with both.

(4) This section shall apply, notwithstanding that the person concerned may be criminally liable in respect of the matters on the ground of which the declaration is to be made.

Power of Court to assess damages against delinquent directors, etc. 543. Power of Court to assess damages against delinquent

directors, etc.-(1) If in the course of winding up a company, it appears that any person who has taken part in the promotion or formation of the company, or any past or present director, managing agent, secretaries and treasurers, manager, liquidator or officer of the company-- (a) has misapplied, or retained; or become liable or accountable for, any money or property of the company; or (b) has been guilty of any misfeasance or breach of trust in relation to the company; the Court may, on the application of the Official Liquidator, of the 287 liquidator, or of any creditor or contributory, made within the time

specified in that behalf in sub-section (2), examine into the conduct of the person, director, managing agent, secretaries and treasurers, manager, liquidator or officer aforesaid, and compel him to repay 'or restore the money or property or any part thereof respectively, with interest at such rate as the Court thinks just, or to contribute such sum to the assets of the company by way of compensation in respect of the misapplication, retainer, misfeasance or breach of trust, as the Court thinks just.

(2) An application under sub-section (1) shall be made within five years from the date of the order for winding up, or of the first appointment of the liquidator in the winding up, or of the misapplica- tion, retainer, misfeasance or breach of trust, as the case may be, whichever is longer.

(3) This section shall apply notwithstanding that the matter is one for which the person- concerned may be criminally liable.

Liability under section 542 and 543 to extend to partners or directorsin firm or company. 544. Liability under sections 542 and 543 to extend to partners or directors in firm or company.--Where a declaration under section 542 or an order under section 543 is or may be made in respect of a firm or body corporate, the Court shall also have power to make a declaration under section 542, or pass an order under section 543, as the case may be, in respect of any person who was at the relevant time a partner in that firm or a director of that body corporate.

Prosecution of delinquent officers and members of company. 545. Prosecution of delinquent officers and members of company.-

(1) If it appears to the Court in the course of a winding up by, or subject to the supervision of, the Court, that any past or present officer, or any member, of the company has been guilty of any offence in relation to the company, the Court may, either on the application of any person interested in the winding up or of its own motion, direct the liquidator either himself to prosecute the offender or to refer the matter to the Registrar.

(2) If it appears to the liquidator in the course of a voluntary winding up that any past or present officer, or any member, of the company has been guilty of any offence in relation to the company, he shall forthwith report the matter to the Registrar and shall furnish to him, such information and give to him such access to and facilities for inspecting and taking copies of any books and papers, being information or books and papers in the possession or under the control of the liquidator and relating to the matter in question, as the Registrar may require.

(3) Where any report is made under sub-section (2) to the Regis- trar, he may, if he thinks fit, refer the matter to the Central Gov- ernment for further inquiry. The Central Government shall thereupon investigate the matter and may, if it thinks it expedient, apply to the Court for an order conferring on any person designated by the Central Government for the purpose, with respect to the company concerned, all such powers of investigating the affairs of the company as are provided by this Act in the case of a winding up by the Court. 288

(4) If on any report to the Registrar under sub-section (2), it appears to him that the case is not one in which proceedings ought to be taken by him, he shall inform the liquidator accordingly, and thereupon, subject to the previous sanction of the Court, the liquida- tor may himself take proceedings against the offender.

(5) If it appears to the Court in the course of a voluntary winding up that any past or present officer, or any member, of the company has been guilty as aforesaid, and that no report with respect to the matter has been made by the liquidator to the Registrar under

sub-section (2), the Court may, on the application of any person interested in the winding up or of its own motion, direct the liquida- tor to make such a report, and on a report being made accordingly, the provisions of this section shall have effect as though the report had

been made in pursuance of the provisions of sub-section (2).

(6) If, where any matter is reported or referred to the Registrar under this section, he considers that the case is one in which a prosecution ought to be instituted, he shall report the matter to the Central Government; and that Government may, after taking such legal advice as it thinks fit, direct the Registrar to institute pro- ceedings: Provided that no report shall be made by the Registrar under this sub-section without first giving the accused person an opportunity of making a statement in writing to the Registrar and of being heard thereon.

(7) When any proceedings are instituted under this section, it shall be the duty of the liquidator and of every officer and agent of the company past and present (other than the defendant in the proceedings) to give all assistance in connection with the prosecution which he is reasonably able to give. For the purposes of this sub-section, the expression "agent", in relation to a company, shall be deemed to include any banker or legal adviser of the company and any person employed by the company as auditor.

(8) If any person fails or neglects to give assistance in the

manner required by sub-section (7), the Court may, on Die application of the Registrar, direct that person to comply with the requirements of that sub-section.

(9) Where any such application is made with respect to a liquidator, the Court may, unless it appears that the failure or neglect was due to the liquidator not having in his hands sufficient assets of the company to enable him so to do, direct that the costs of the application shall be borne by the liquidator personally. Miscellaneous provisions

Liquidator to exercise certain powers subject to sanction. 546. Liquidator to exercise certain powers subject to sanction.-

(1) The liquidator may- (a) with the sanction of the Court, when the company is being wound up by or subject to the supervision of the Court; and 289 (b) with the sanction of a special resolution of the company, in the case of a voluntary winding up,- (i) pay any classes of creditors in full; (ii) make any compromise or arrangement with creditors or persons claiming to be creditors, or having or alleging themselves to have any claim, present or future, certain or contingent, ascertained or sounding only in damages, against the company, or whereby the company may be rendered liable; or (iii) compromise any call or liability to call, debt, and liability capable of resulting in a debt, and any claim, present or future, certain or contingent, ascertained or sounding only in damages, subsisting or alleged to subsist between the company and a contributory or alleged contributory or other debtor or person apprehending liability to the company, and all questions in any way relating to or affecting the assets or liabilities or the winding up of the company, on such terms as may be agreed, and take any security for the discharge of any such call, debt, liability or claim, and give a complete discharge in respect thereof.

(2) In the case. of a voluntary winding up, the exercise by the

liquidator of the powers conferred by sub-section (1) shall be subject to the control of the Court.

(3) Any creditor or contributory may apply to the Court with respect to any exercise or proposed exercise of any such power.

Notification that a company is in liquidation.

547. Notification that a company is in liquidation.-(1) Where company is being wound up, whether by or under the supervision of the Court or voluntarily, every invoice, order for goods or business letter issued by or on behalf of the company or a liquidator of the company, or a receiver or manager of the property of the company being a document. on or in which the name of the company appears, shall contain a statement that the company is being wound up.

(2) If default is made in complying with this section, the com- pany, and every- one of the following persons who wilfully authorises or permits the default, namely, any officer of the company, any liqui- dator of the company and any receiver or manager, shall be punishable with fine which may extend to five hundred rupees.

Books and papers of company to be evidence. 548. Books and papers of company to be evidence.--Where a company is being wound up, all 'books and papers of the company and of the liquidators shall, as between the contributories of the company, be prima-facie evidence of the truth of all matters purporting to be therein recorded.

Inspection of books and papers by creditors and contributories. 549. Inspection of books and papers by creditors and contribu-

tories.-(1) At any time after the making of an order for the winding up of a company by or subject to the supervision of the Court, any creditor or contributory of the company may, if the Central Govern- ment, by rules prescribed so permit and in accordance with and subject to such rules but not further or otherwise, inspect the books and papers of the company. 290

(2) Nothing in subsection (1) shall be taken as excluding or restricting Any rights conferred by any law for the time being in force- (a) on the Central or a State Government; or (b) on any authority or officer thereof; or (c) on any person acting under the authority of any such Government or of any such authority or officer.

Disposal of books and papers of company.

550. Disposal of books and papers of company.-(1) When the affairs of a company have been completely wound up and it is about to be dissolved, its books and papers and those of the liquidator may be disposed of as follows, that is to say:- (a) in the case of a winding up by or subject to the super- vision of the Court, in such manner as the Court directs; (b) in the case of a members' voluntary winding up, in such manner as the company by special resolution directs; and (c) in the case of a creditors' voluntary winding up, in such manner as the committee of inspection or, if there is no such committee, as the creditors of the company may direct.

(2) After the expiry of five years from the dissolution of the company, no responsibility shall rest on the company, the liquidator, or any person to whom the custody of the books and papers has been committed, by reason of any book or paper not being forthcoming to any person claiming to be interested therein.

(3) The Central Government may, by rules,- (a) prevent for such period (not exceeding five years from the dissolution of the company) as the Central Government thinks proper, the destruction of the books and papers of a company which has been wound up and of its liquidator; and (b) enable any creditor or contributory of the company to make representations to the Central Government in respect of the matters specified in clause (a) and to appeal to the Court from any direction which may be given by the Central Government in the matter.

(4) If any person acts in contravention of any such rules or of any direction of the Central Government thereunder, he shall be punishable with imprisonment for a term which may extend to six months, or with fine which may extend to five thousand rupees, or with both.

Information as to pending liquidations.

551. Information as to pending liquidations-(1) If the winding up of a company is not concluded within one year after its commencement, the liquidator shall, within one month of the expiry of such year and thereafter until the winding up is concluded, at intervals of not more than one year or at such shorter intervals, if any, as may be prescribed, file a statement in the prescribed form and containing the prescribed particulars, with respect to the proceedings in, and position of, the liquidation- (a) in the case of a winding up by or subject to the supervision of the Court, in Court; and (b) in the case of a voluntary winding up, with the Registrar 291

(2) When the statement is filed in Court under clause (a) of

subsection (1), a copy shall simultaneously be filed with the Registrar and shall be kept by him along with the other records of the company.

(3) Any person stating himself in writing to be a creditor or Contributory of the company shall be entitled, by himself or by his agent, at all reasonable times, on payment of the prescribed fee, to inspect the statement, and to receive a copy thereof or an extract therefrom.

(4) Any person untruthfully stating himself to be a creditor or contributory for the above purpose shall be deemed to be guilty of an offence under section 182 of the Indian Penal Code (Act 45 of 1860), and shall, on the application of the liquidator, be punishable accordingly.

(5) If a liquidator fails to comply with any of requirements of this section, he shall be punishable with fine which may extend to five hundred rupees for every day during which the failure continues.

Official Liquidator to make payments into the public account of India. 552. Official Liquidator to make payments into the public account of India.-Every Official Liquidator shall, in such manner and at such times as may be prescribed, pay the moneys received by him as liquidator of any company, into the public account of India in the Reserve Bank of India.

Voluntary liquidator to make payments into Scheduled Bank. 553. Voluntary liquidator to make payments into Scheduled Bank.-

(1) Every liquidator of a company, not being an Official Liquidator, shall, in such manner and at such times as may be prescribed, pay the moneys received by him in his capacity as such into a Scheduled Bank to the credit of a special banking account opened by him in that behalf, and called "the Liquidation Account of Company Limited": ------------------- Company Private Limited": -------------------------- Company": Provided that if the Court is satisfied that for the purpose of carrying on the business of the company or of obtaining advances or for any other reason, it is to the advantage of the creditors or contributories that the liquidator should have an account with any other bank, the Court may authorise the liquidator to make his payments into or out of such other bank- as the Court may select; and thereupon those payments shall be made in the described manner and at the prescribed times into or out of such other bank.

(2)If any such liquidator at any time retains for more than ten days a sum exceeding five hundred rupees or such other amount as the Court may, on the application of the liquidator, authorise him to retain, then, unless he explains the retention to the satisfaction of the Court, he shall- (a) pay interest on the amount so retained in excess, at the rate of twelve per cent. per annum and also pay such penalty as may be determined by the Registrar; (b) be liable to pay any expenses occasioned by reason of his default; and (c) also be liable to have all or such part of his remuneration as the Court may think just disallowed, and to be removed from his office by the Court. 292

Liquidator not to pay moneys into private banking account. 554. Liquidator not to pay moneys into private banking account.- Neither the Official Liquidator nor any other liquidator of a company shall pay any moneys received by him in his capacity as such into any private banking account.

Unclaimed dividends and undistributed assets to be paid into theCompanies Liquidation Account. 555. Unclaimed dividends and undistributed assets to be paid into

the Companies Liquidation Account.-(1) Where any company is being wound up, if the liquidator has in his hands or under his control any money representing unclaimed dividends payable to any creditor or undistributed assets refundable to any contributory, which have remained unclaimed or undistributed for six months after the date on which they became payable or refundable, the liquidator shall forthwith pay the said money into the public account of India in the Reserve Bank of India.

(2) The liquidator shall, on the dissolution of the company, similarly pay into the said account any money representing unclaimed dividends or undistributed assets in his hands at the date of dis- solution.

(3) The liquidator shall, when making any payment referred to in

sub-sections (1) and (2), furnish to such officer as the Central Government may appoint in this behalf, a statement in the prescribed form, setting forth, in respect of all sums included in such payment, the nature of the sums, the names and last known addresses of the per- sons entitled to participate therein, the amount to which each is en- titled and the nature of his claim thereto, and such other particulars as may be prescribed.

(4) The liquidator shall be entitled to a receipt from the

Reserve Bank of India for any, money paid to it under sub-sections (1)

and (2); and such receipt shall be an effectual discharge of the liquidator in respect thereof.

(5) Where the company is being wound up by the Court, the

liquidator shall make the payments referred to in sub-sections (1) and

(2) by transfer from the account referred to in section 552.

(6) Where the company is being wound up voluntarily or subject to the supervision of the Court, the liquidator shall, when filing a

statement in pursuance of sub-section (1) of section 551, indicate the sum of money which. is payable to the Reserve Bank of India under sub-

sections (1) and (2) of this section which he has had in his hands or under his control during the six months preceding the date to which the said statement is brought down, and shall, within fourteen days of the date of filing the said statement, pay that sum into the Companies Liquidation Account.

(7) (a) Any person claiming to be entitled to any money paid into the Companies Liquidation Account (whether paid in pursuance of this section or under the provisions of any previous companies law) may apply to the Court for an order for payment thereof, and the Court if satisfied that the person claiming is entitled, may make an order for the payment to that person of the sum due: Provided that before making such an order, the Court shall cause a notice to be served on such officer as the Central Government may appoint in this behalf, calling on the officer to show cause within one month from the, date of the service of the notice why the order should not be made. 293 (b) Any person claiming as aforesaid may, instead of applying to the Court, apply to the Central Government for an order for payment of the money claimed; and the Central Government may, if satisfied whether on a certificate by the liquidator or the Official Liquidator or otherwise, that such person is entitled to the whole or any part of the money claimed and that no application made in pursuance of clause (a) is pending in the Court, make an order for the payment to that person of the sum due to him, after taking such security from him as it may think fit.

(8) Any money paid into the Companies Liquidation Account in pursuance of this section, which remains unclaimed thereafter for a period of fifteen years, shall be transferred to the general revenue account of the Central Government; but a claim to any money so trans-

ferred may be preferred under sub-section (7) and shall be dealt with as if such transfer had not been made, the order, if any, for payment on the claim being treated as an order for refund of revenue.

(9) Any liquidator retaining any money which should have been paid by him into the Companies Liquidation Account under this section shall- (a) pay interest on the amount retained at the rate of twelve per cent per annum and also pay such penalty as may be determined by the Registrar; (b) be liable to pay any expenses occasioned by reason of his default; and (c) where the winding up is by or under the supervision of the Court, also be liable to have all or such part of his remuneration as the Court may think just to be disallowed, and to be reMoved from his office by the Court.

Enforcement of duty of liquidator to make returns etc.

556. Enforcement of duty of liquidator to make returns etc.-(1) If any liquidator. who has made any default in filing, delivering or making any return, account or other document, or in giving any notice which he is by law required to file, deliver, make or give, fails to make good the default within fourteen days after the service on him of a notice requiring him to do so, the Court may, on an application made to the Court by any contributory or creditor of the company or by the Registrar, make an order directing the liquidator to make good the default within such time as may be specified in the order.

(2) Any such order may provide that all costs of and incidental to the application shall be borne by the liquidator.

(3) Nothing in this section shall be taken to prejudice the operation of any enactment imposing penalties on a liquidator in respect of any such default as aforesaid. Supplementary powers of Court

Meetings to ascertain wishes of creditors or contributories. 557. Meetings to ascertain wishes of creditors or

contributories.- (1) In all matters relating to the winding up of a company, the Court may- (a) have regard to the wishes of creditors or contributories of the company, as proved to it by any sufficient evidence; 294 (b) if it thinks fit for the purpose of ascertaining those wishes, direct meetings of the creditors or contributories to be called, held and conducted in such manner as the Court directs; and (c) appoint a person to act as chairman of any such meeting and to report the result thereof to the Court.

(2) When ascertaining the wishes of creditors, regard shall be had to the value of each creditor's debt.

(3)When ascertaining the wishes of contributories, regard shall be had to the number of votes which may be cast by each contributory.

Court or person before whom affidavit may be sworn.

558. Court or person before whom affidavit may be sworn.-(1) Any affidavit required to be sworn under the provisions, or for the purposes, of this Part may be sworn- (a) in India, before any Court, Judge or person lawfully authorised to take and receive affidavits; and (b) in any other country, either before any Court, Judge or person lawfully authorised to take and receive affidavits in that country or before an Indian Consul or Vice-Consul. Explanation.-In this sub-section, "India" includes the State of Jammu and Kashmir.

(2) All Courts, Judges, Justices, Commissioners and persons acting judicially in India shall take judicial notice of the seal, stamp or signature, as the case may be, of any such Court, Judge, person, Consul or Vice-Consul, attached, appended or subscribed to any such affidavit or to any other document to be used for the purposes of this Part. Provisions as to dissolution

Power of Court to declare dissolution of company void.

559. Power of Court to declare dissolution of company void.- (1) Where a company has been dissolved, whether in pursuance of this Part or of section 394 or otherwise, the Court may at any time--within two years of the date of the dissolution, on application by the liquidator of the company or by any other person who appears to the Court to be interested, make an order, upon such terms as the Court thinks fit, declaring the dissolution to have been void; and thereupon such proceedings may be taken as might have been taken if the company had not been dissolved.

(2) It shall be the duty of the person on whose application the order was made, within twenty-one days after the making of the order or such further time as the Court may allow, to file a certified copy of the order with the Registrar who shall register the same; and if such person fails so to do, he shall be punishable with fine which may extend to fifty rupees for every day during which the default continues.

Power of Registrar to strike defunct company off register. 560. Power of Registrar to strike defunct company off register.-

(1) Where the Registrar has reasonable cause to believe that a com- pany is not carrying on business or in operation, he shall send to the company by post a letter inquiring whether the company is carrying on business or in operation. 295

(2) If the Registrar does not within out month of sending the letter receive any answer thereto, he shall, within fourteen days after the expiry of the month, send to the company by post a registered letter referring to the first letter, and stating that no answer thereto has been received and that, if an answer is not received to the second letter within one month from the date thereof, a notice will be published in the Official Gazette with a view to striking the name of the company off the register.

(3) If the Registrar either receives an answer from the company to the effect that it is not carrying on business or in operation, or does not within one month after sending the second letter receive any answer, he may publish in the Official Gazette, and send to the company by registered post, a notice that, at the expiration of three months from the date of that notice, the name of the company mentioned therein will, unless cause is shown to the contrary, be struck off the register and the company will be dissolved.

(4) If, in any case where a company is being wound up, the Registrar has reasonable cause to believe either that no liquidator is acting, or that the affairs of the company have been completely wound up, and any returns required to be made by the liquidator have not been made for a period of six consecutive months, the Registrar shall publish in the Official Gazette and send to the company or the

liquidator, if any, a like notice as is provided in subsection (3).

(5) At the expiry of the time mentioned in the notice referred

to in sub-section (3) or (4), the Registrar may, unless cause to the contrary is previously shown by the company, strike its name off the register, and shall publish notice thereof in the Official Gazette; and on tile publication in the Official Gazette of this notice, the company shall stand dissolved: Provided that- (a) the liability, if any, of every director, the managing agent, secretaries and treasurers, manager or other officer who was exercising any power of management, and of every member of the company, shall continue and may be enforced as if the company had not been dissolved; and (b) nothing in this sub-section shall affect the power of the Court to wind up a company the name of which has been struck off the register.

(6) If a company, or any member or creditor thereof, feels aggrieved by the company having been struck off the register, the Court, on an application made by the company, member or creditor before the expiry of twenty years from the publication in the Official Gazette of the notice aforesaid, may, if satisfied that the company was, at the time of the striking off, carrying on business or in operation or otherwise that it is just that the company be restored to the register, order the name of the company to be restored to the register; and the Court may, by the order, give such directions and make such provisions as seem just for placing the company and all other persons in the same position as nearly as may be as if the name of the company had not been struck off.

(7) Upon a certified copy of the order under subsection (6) being delivered to the Registrar for registration, the company shall be 296 deemed to have continued in existence as if its name had not been struck off.

(8)A letter or notice to be sent under this section to a company may be addressed to the company at its registered office, or if no office has been registered, to the care of some director, the managing agent, secretaries and treasurers, manager or other officer of the company, or if there is no director, managing agent, secretaries and treasurers, manager or officer of the company whose name and address are known to the Registrar, may be sent to each of the persons who subscribed the memorandum, addressed to him at the address mentioned in the memorandum.

(9) A notice to be sent under this section to a liquidator may be addressed to the liquidator at his last known place of business. PART APPLICATION OF ACT TO COMPANIES FORMED OR REGISTERED UNDER PREVIOUSCOMPANIES LAWS. PART VIII. APPLICATION OF ACT TO COMPANIES FORMED OR REGISTERED UNDER PREVIOUS COMPANIES LAWS

Application of Act to companies formed and registered under previouscompanies laws. 561. Application of Act to companies formed and registered under previous companies laws.-This Act shall apply to existing companies as follows:- (a) in the case of a limited company other than a company limited by guarantee, this Act shall apply in the same manner as if the company had been formed and registered under this Act as a company limited by shares; (b) in the case of a company limited by guarantee, this Act shall apply in the same manner as if the company had been formed and registered under this Act as a company limited by guarantee; and (c) in the case of a company other than a limited company, this Act shall apply in the same manner as if the company had been formed and registered under this Act as an unlimited company: Provided that- (i) nothing in Table A in Schedule I shall apply to a company formed and registered under Act 19 of 1857 and Act 7 of 1860, or either of them, or under the Indian Companies Act, 1866 (10 of 1866), or the Indian Companies Act, 1882 (6 of 1882); (ii) reference, express or implied, to the date of registration shall be construed as a reference to the date at which the company was registered under the previous companies law concerned.

Application of Act to companies registered but not formed underprevious companies laws. 562. Application of Act to companies registered but not formed under previous companies laws.-This Act shall apply to every company registered but not formed under any previous companies law in the same manner as it is in Part IX of this Act declared to apply to companies registered but not formed under this, Act: Provided that reference, express or implied, to the date of registration shall be construed as a reference to the date at which the company was registered under the previous companies law concerned.

Application of Act to unlimited companies registered under previouscompanies laws. 563. Application of Act to unlimited companies registered under previous companies laws.-This Act shall apply to every unlimited company registered as a limited company in pursuance of 297 any previous companies law, in the same manner as it applies to an unlimited company registered in pursuance of this Act as a limited company: Provided that reference, express or implied, to the date of registration shall be construed as a reference to the date at which the company was registered as a limited company under the previous companies law concerned.

Mode of transferring shares in the case of companies registered underActs 19 of 1857 and 7 of 1860. 564. Mode of transferring shares in the case of companies regis- tered under Acts 19 of 1857 and 7 of 1860.-A company registered under Act 19 of 1857 and Act 7 of 1860 or either of them may cause its shares to be transferred in the manner hitherto in use, or in such other manner as the company may direct. PART COMPANIES AUTHORISED TO REGISTER UNDER THIS ACT. PART IX. COMPANIES AUTHORISED TO REGISTER UNDER THIS ACT

Companies capable of being registered.

565. Companies capable of being registered.-(1) With the ex- ceptions and subject to the provisions contained in this section,- (a) any company consisting of seven or more members, which was in existence on the first day of May, 1882, including any company registered under Act No. 19 of 1857 and Act No. 7 of 1860 or either of them or under any laws or law in force in a Part B State, corresponding to those Acts or either of them; and (b) any company formed after the date aforesaid, whether before or after the commencement of this Act, in pursuance of any Act of Parliament other than this Act or of any other Indian law (including a law in force in a Part B State), or of any Act of Parliament of the United Kingdom or Letters Patent in force in India, or being otherwise duly constituted according to law, and consisting of seven or more members; may at any time register under this Act as an unlimited company, or as a company limited by shares, or as a company limited by guarantee; and the registration shall not be invalid by reason only that it has taken place with a view to the company's being wound up: Provided that (i) a company registered under the Indian Companies Act, 1882 (6 of 1882), or under the Indian Companies Act, 1913 (7 of 1913), shall not register in pursuance of this section; (ii) a company having the liability of its members limited by any Act of Parliament other than this Act or by any other Indian law (including a law in force in a Part B State), or by any Act of Parliament of the United Kingdom or Letters Patent in force in India, and not being a joint stock company as defined in section 566, shall not register in pursuance of this section; (iii)a company having the liability of its members limited by any Act of Parliament other than this Act or by any other Indian law (including a law in force in a Part B State), or any Act of Parliament of the United Kingdom or Letters Patent In force in India, shall not register in pursuance of this section as an unlimited company or as a company limited by, guarantee; 298 (iv) a company that is not a joint-stock company as defined in section 566 shall not register in pursuance of this section as a company limited by shares; (v)a company shall not register in pursuance of this section without the assent of a majority of such of its members as are present in person, or where proxies are allowed, by proxy, at general meeting summoned for the purpose; (vi) where a company not having the liability of its members limited by any Act of Parliament or any other Indian law (including a law in force in a Part B State) or by any Act of Parliament of the United Kingdom or Letters Patent in force in India, is about to register as a limited company, the majority required to assent as aforesaid shall consist of not less than three-fourths of the members present in person, or where proxies are allowed, by proxy, at the meeting; (vii) where a company is about to register as a company limited by guarantee, the assent to its being so registered shall be accompanied by a resolution declaring 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 as may have been contracted before he ceases to be a member, and of the costs, charges and expenses of winding up, and for the adjustment of the rights of the contributories among themselves, such amount as may be required, not exceedIng a specified amount.

(2) In computing any majority required for the purposes of sub-

section (1) when a poll is demanded, regard shall be had to the number of votes to which each member is entitled according to the regulations of the company.

(3) Nothing in this section shall be deemed to apply to any company the registered office whereof at the commencement of this Act is in Burma, Aden or Pakistan, or in the State of Jammu and Kashmir.

Definition of "joint-stock company".

566. Definition of "joint-stock company".-(1) For the Purposes of this Part, so far as it relates to the registration of companies as companies limited by shares, a joint-stock company means a company having a permanent paid up or nominal share capital of fixed amount divided into shares, also of fixed amount, or held and transferable as stock, or divided and held partly in the one way and partly in the other, and formed on the principle of having for its members the holders of those shares or that stock, and no other persons.

(2) Such a company, when registered with limited liability under this Act, shall be deemed to be a company limited by shares.

Requirements for registration of joint-stock companies. 567. Requirements for registration of joint-stock companies.- Before the registration in pursuance of this Part of a joint-stock company, there shall be delivered to the Registrar the following documents: - (a) a list showing the names, addresses and occupations of all persons who on a day named in the list, not being more than. 299 six clear days before the day of registration,, were members of the company, with the addition of the shares or stock held by them respectively, distinguishing, in cases where the shares are numbered, each share by its number; (b) a copy of any Act of Parliament or other Indian law, Act of Parliament of the United Kingdom, Royal Charter, Letters Patent, deed of settlement, deed of partnership or other instrument constituting or regulating the company; and (c) if the company is intended to be registered as a limited company, a statement specifying the following particulars:- (i) the nominal share capital of the company and the number of shares into which it is divided or the amount of stock of which it consists; (ii) the number of shares taken and the amount paid on each share; (iii) the name of the company, with the addition of the word "Limited" or "Private Limited" as the case may require, as the last word or words thereof;. and (iv) in the case of a company intended to be registered as a company limited by guarantee, a copy of the resolution declaring the amount of the guarantee.

Requirements for registration of companies not being joint-stockcompanies. 568. Requirements for registration of companies not being joint- stock companies.-Before the registration in pursuance of this Part of any company not being a joint-stock company, there shall be delivered to the Registrar the following documents:- (a) a list showing the names, addresses and occupations of the directors, the managing agent, if any, the secretaries and treasurers, if any, and the manager, if any, of the company; (b) a copy of any Act of Parliament or other Indian law, Act of Parliament of the United Kingdom, Letters Patent, deed of settlement, deed of partnership or other instrument constituting or regulating the company; and (c) in the case of a company intended to be registered as a company limited by guarantee, a copy of the resolution declaring the amount of the guarantee.

Authentication of statements of existing companies. 569. Authentication of statements of existing companies.-The lists of members and directors and any other particulars relating to the company required to be delivered to the Registrar shall be duly verified by the declaration of any two or more directors or other principal officers of the company.

Power of Registrar to require evedence as to nature of company. 570. Power of Registrar to require evidence as to nature 'of company.-The Registrar may require such evidence as he thinks necessary for the purpose of satisfying himself whether any company proposing to be registered is or is not a joint-stock company as defined in section 566. 300

Notice to customers on registration of banking company with limitedliability. 571. Notice to customers on registration of banking company with

limited liability.-(1) Where a banking company which was in existence on the first day of May, 1882, proposes to register as a limited company under this Part, it shall, at least thirty days before so registering, give notice of its intention so to register, to every person who has a banking account with the company, either by delivery of the notice to him, or by posting it to him at, or deliverIng it at, his last known address.

(2) If the banking company omits to give the notice required by

sub-section (1), then, as between the company and the person for the time being interested in the account in respect of which the notice ought to have been given, and so far as respects the account down to the time at which notice is given, but not further or otherwise, the certificate of registration with limited liability shall have no operation.

Change of name for purposes of registration. 572. Change of name for purposes of registration.-Where the name of a company seeking registration under this Part is one which in the opinion of the Central Government is undesirable, the company may, with the approval of the Central Government signified in writing, change its name with effect from the date of its registration under this Part: Provided that the like assent of the members of the company shall be required to the change of name as is required by section 565 to the registration of the company under this Part.

Addition of "Limited" of "Private Limited" to name. 573. Addition of "Limited" or "Private Limited" to name.-When a company registers in pursuance of this Part with limited liability, the word "Limited" or the words "Private Limited", as the case may be, shall form, and be registered as, the last word or words of its name: Provided that this section shall not be deemed to exclude the operation of section 25.

Certificate of registration of existing companies. 574. Certificate of registration of existing companies.-On com- pliance with the requirements of this Part with respect to registra- tion, and on payment of such fees, if any, as are payable under Schedule X, the Registrar shall certify under his hand that the com- pany applying for registration is incorporated as a company under this Act, and in the case of a limited company that it is limited and thereupon the company shall be so incorporated.

Vesting of property on registration. 575. Vesting of property on registration.-All property, movable and immovable (including actionable claims), belonging to or vested in a company at the date of its registration in pursuance of this Part, shall, on 'such registration, pass to and vest in the' company as incorporated under this Act for all the estate and interest of the company therein.

Saving for existing liabilities. 576. Saving for existing liabilities.-The registration of a com- pany in pursuance of this Part shall not affect its rights or liabilities in respect of any debt or obligation incurred, or any contract entered into, by, to, with, or on behalf of, the company before registration. 301

Continuation of pending legal proceedings. 577. Continuation of pending legal proceedings.-All suits and other legal proceedings taken by or against the company, or any public officer or member thereof, which are pending at the time of the registration of a company in pursuance of this Part, may be continued in the same manner as if the registration had not taken place: Provided that execution shall not issue against the property or person of any individual member of the company on any decree or order obtained in any such suit or proceeding; but, in the event of the property of the company being insufficient to satisfy the decree or order, an order may be obtained for winding up the company.

Effect of registration under Part.

578. Effect of registration under Part.-(1) When a company is

registered in pursuance of this Part, sub-sections (2) to (7) shall apply.

(2) All provisions contained in any Act of Parliament or other Indian law, or other instrument constituting or regulating the company, including, in the case of a company registered as a company limited by guarantee, the resolution declaring the amount of the guarantee, shall be deemed to-be conditions and regulations of the company, in the same manner and with the same incidents as if so much thereof as would, if the company had been formed under this Act, have been required to be inserted in the memorandum, were contained in a registered memorandum, and the residue thereof were contained in registered articles.

(3) All the provisions of this Act shall apply to the company and the members, contributories and creditors thereof, in the same manner in all respects as if it had been formed under this Act, subject as follows:- (a) Table A in Schedule I shall not apply unless and except in so far as it is adopted by special resolution, (b) the provisions of this Act relating to the numbering of shares shall not apply to any joint-stock company whose shares are not numbered; (c) subject to the provisions of this section, the company shall not have power to alter any provision contained in any Act of Parliament or other Indian law relating to the company; (d) subject to the provisions of this section, the company shall not have power, without the sanction of the Central Government, to alter any provision contained in any Act of Parliament of the United Kingdom, Royal Charter or Letters Patent, relating to the company; (e) the company shall not have power to alter any provision contained in any Act of Parliament or other Indian law or in any Act of Parliament of the United Kingdom, Royal Charter or Letters Patent, with respect to the objects of the company; 302 (f) in the event of the company being wound up, every person shall be a contributory, in respect of the debts and liabilities of the company contracted before registration, who is liable to pay or contribute to the payment of any debt or liability of the company contracted before registration, or to pay or contribute to the payment of any sum for the adjustment of the rights of the members among themselves in respect of any such debt or liability, or to pay or contribute to the payment of the costs, charges and expenses of winding up the company, so far as relates to such debts or liabilities as aforesaid; (g) in the event of the company being wound up, every contributory shall be liable to contribute to the assets of the company, in the course of the winding up, all sums due from him in respect of any such liability as aforesaid; and in the event of the death or insolvency of any contributory, the provisions of this Act with respect to the legal representatives of deceased contributories, or with respect to the assignees of insolvent contributories, as the case may be, shall apply.

(4) The provisions of this Act with respect to- (a) the registration of an unlimited as a limited company; (b) the powers of an unlimited company on registration as a limited company, to increase the nominal amount of its share capital and to provide that a portion of its share capital shall not be capable of being called up except in the event of winding up; (c) the power of a, limited company to determine that a portion of its share capital shall not be capable of being called up except in the event of winding up; shall apply, notwithstanding any provisions contained in any Act of Parliament or other Indian law, or other instrument constituting or regulating the company.

(5) Nothing in this section shall authorise the company to alter any such provisions contained in any instrument constituting or regulating the company as would, if the company had originally been formed under this Act, have been required to be contained in the memorandum and are not authorised to be altered by this Act.

(6) None of the provisions of this Act (apart from those of section 404) shall derogate from any power of altering its constitution or regulations which may be vested in the company, by virtue of any Act of Parliament or other Indian law, or other instrument constituting or regulating the company.

(7) In this section, the expression "instrument" includes deed of settlement, deed of partnership, Act of Parliament of the United Kingdom, Royal Charter and Letters Patent. 303

Power to substitute memorandum and articles for deed of settlement. 579. Power to substitute memorandum and articles for deed of

settlement.-(1) Subject to the provisions of this section, a company registered in pursuance of this Part may, by special resolution, alter the form of its constitution by substituting a memorandum and articles for a deed of settlement.

(2) The provisions of sections 17 to 19 with respect to an alteration of the objects of a company shall, so far as applicable, apply to any alteration under this section, with the following modifications:- (a)there shall be substituted for the printed copy of the altered memorandum required to be filed with the Registrar a printed copy of the substituted memorandum and articles; and (b) on the registration of the alteration being certified by the Registrar, the substituted memorandum and articles shall apply to the company in the same manner as if it were a company registered under this Act with that memorandum and those articles, and the company's deed of settlement shall cease to apply to the company.

(3) An alteration under this section may be made either with or without any alteration of the objects of the company under this Act.

(4) In this section, the expression "deed of settlement" includes any deed of partnership, Act of Parliament of the United Kingdom, Royal Charter or Letters Patent, or other instrument constituting or regulating the company, not being an Act of Parliament or other Indian law.

Power of Court to stay or restrain proceedings. 580. Power of Court to stay or restrain proceedings.-The provisions of this Act with respect to staying and restraining suits and other legal proceedings against a company at any time after the presentation of a petition for winding up and before the making of a winding up order shall, in the case of a company registered in pursuance of this Part, where the application to stay or restrain is by a creditor, extend to suits and other legal proceedings against any contributory of the company.

Suits stayed on winding up order. 581. Suits stayed on winding up order.-Where an order has been made for winding up, or a provisional liquidator has been appointed for, a company registered in pursuance of this Part, no suit or other legal proceeding shall be proceeded with or commenced against the company or any contributory of the company in respect of any debt of the company, except by leave of the Court and except on such terms as the Court may impose. PART WINDING UP OF UNREGISTERED COMPANIES. PART X.-WINDING 'UP OF UNREGISTERED COMPANIES

Meaning of "unregistered company". 582. Meaning of "unregistered company".-For the purposes of Part, the expression "unregistered company"- (a) shall not include- (i) a railway company incorporated by any Act of Parliament or other Indian law or any Act of Parliament of the United Kingdom; 304 (ii) a company registered under this Act; or (iii) a company registered under any previous companies law and not being a company the registered office whereof was in Burma, Aden or Pakistan immediately before the separation of that country from India or in the State of Jammu and Kashmir immediately before the 26th January, 1950; and (b) save as aforesaid, shall include any partnership, as- sociation or company consisting of more than seven members.

Winding up of unregistered companies.

583. Winding up of unregistered companies.-(1) Subject to the provisions of this Part, any unregistered company may be wound up under this Act, and all the provisions of this Act with respect to winding up shall apply to an unregistered-company, with the exceptions

and additions mentioned in sub-sections (2) to (5).

(2) For the purpose of determining the Court having jurisdiction in the matter of the winding up, an unregistered company shall be deemed to be registered in the State where its principal place of business is situate or, if it has a principal place of business situate in more than one State, then, in each State where it has a principal place of business; and the principal place of business situate in that State in which proceedings are being instituted shall, for all the purposes of the winding up, be deemed to be the registered office of the company.

(3) No unregistered company shall be wound up under this Net voluntarily or subject to the supervision of the Court.

(4) The circumstances in which an unregistered company may be wound up are as follows: - (a) if the company is dissolved, or has ceased to carry on business or is carrying on business only for the purpose of windIng up its affairs; (b) if the company is unable to pay its debts; (c)if the Court is of opinion that it is just and equitable that the company should be wound up.

(5) An unregistered company shall, for the purposes of this Act, be deemed to be unable to pay its debts- (a) if a credit-or, by assignment or otherwise, to whom the company is indebted in a sum exceeding five hundred rupees then due, has served on the company, by leaving at Its principal place of business, or by delivering to the secretary, or some director, managing agent, secretaries and' treasurers, manager or principal officer of the company, or by otherwise serving in such manner as the Court may approve or direct, a demand under his hand requiring the company to pay the sum so due, and the company has, for three weeks after the service of the demand, neglected to pay the sum or to secure or compound for it to the satisfaction 'of the creditor; 305 (b) if any suit or other legal proceeding has been instituted against any member for any debt or demand due, or claimed to be due, from the company, or from him in his character of member, and notice in writing of the institution of the suit or other legal proceeding having been served on the company by leaving the same at its principal place of business or by delivering it to the secretary, or some director, managing agent, secretaries and treasurers, manager or principal officer of the company or by otherwise serving the same in such manner as the Court may approve or direct, the company has not, within ten days after service of the notice,- (i)paid, secured or compounded for the debt or demand; or (ii) procured the suit or other legal proceeding to be stayed; or (iii) indemnified the defendant to his satisfaction against the suit or other legal proceeding, and against all costs, damages and expenses to be incurred by him by reason of the same; (c) if execution or other process issued on a decree or order of any Court in favour of a creditor against the company, or any member thereof as such, or any person authorised to be sued as nominal defendant on behalf of the company, Is returned unsatisfied in whole or in part; (d) if it is otherwise proved to the satisfaction of the Court that the company is unable to pay its debts.

Power to wind up foreign companies, although dissolved. 584. Power to wind up foreign companies, although dissolved.Where a body corporate incorporated outside India which has been carrying on business in India, ceases to carry on business in India, it may be wound up as an unregistered company under this Part, notwithstanding that the body corporate has been dissolved or otherwise ceased to exist as such under or by virtue of the laws of the country under which it was incorporated.

Contributories in winding up of unregistered company.

585. Contributories in winding up of unregistered company.-(1) In the event of an unregistered company being wound up, every person shall be deemed to be a contributory, who is liable to pay, or contribute to the payment of,- (a) any debt or liability of the company; or (b) any sum for the adjustment of the rights of the members among themselves; or (c) the costs, charges and expenses of winding up the com- pany.

(2) Every contributory shall be liable to contribute to the assets of the company all sums due from him in respect of any liability to pay or contribute-as aforesaid. 306

(3) In the event of the death or insolvency of any contributory, the provisions of this Act with respect to the legal representatives of deceased contributories, or with respect to the assignees of insolvent contributories, as the case may be, shall apply.

Power to stay or restrain proceedings. 586. Power to stay or restrain proceedings.-The provisions of this Act with respect to staying and restraining suits and legal pro- ceedings against a company at any time after the presentation of a petition for winding up and before the making of a winding up order, shall, in the case of an unregistered company, where the application to stay or restrain is by a creditor, extend to suits and legal proceedings against any contributory of the company.

Suits etc. stayed on winding up order. 587. Suits etc. stayed on winding up order.-Where an order has been made for winding up an unregistered company, no suit or other legal proceeding shall be proceeded with or commenced against any contributory of the company in respect of any debt of the company, except by leave of the Court and except on such terms as the Court may impose.

Directions as to property in certain cases.

588. Directions as to property in certain cases.-(1) If an un- registered company has no power to sue and be sued in a common name, or if for any reason it appears expedient, the Court may, by the winding up order or by any subsequent order, direct that all of any part of the property, movable or immovable (including actionable claims), belonging to the company or held by trustees on its behalf, shall vest in the Official Liquidator by his official name; and thereupon the property or the part thereof specified in the order shall vest accordingly.

(2) The Official Liquidator may, after giving such indemnity, if any, as the Court may direct, bring or defend in his official name any suit or legal proceeding relating to that property, or which it is necessary to bring or defend for the purpose of effectually winding up the company and recovering its property.

Provisions of Part cumulative.

589. Provisions of Part cumulative.-(1) The provisions of this Part with respect to unregistered companies shall be in addition to, and not in derogation of, any provisions hereinbefore in this Ad contained with respect to the winding up of companies by the Court.

(2) The Court or Official Liquidator may exercise any powers or do any act in the case of unregistered companies which might be exercised or done by the Court or Official Liquidator in winding up companies formed and registered under this Act: Provided that an unregistered company shall not, except in the event of its being wound up, be deemed to be a company under this Act, and then only to the extent provided by this Part.

Saving and construction of enactments conferring power to wind uppartnership, association or company in certain cases. 590. Saving and construction of enactments conferring power to wind up partnership, association or company in certain cases.Nothing in this Part shall affect the operation of any enactment which provides for any partnership, association or company being wound up, or being wound up as a company or as an unregistered company under the Indian Companies Act, 1913 (7 of 1913) or' any Act repealed by that Act: Provided that references in any such enactment to any provision contained in the Indian Companies Act, 1913 (7 of 1913) or 307 in any Act repealed by that Act shall be read as references to the corresponding provision, if any contained in this Act. PART COMPANIES INCORPORATED OUTSIDE INDIA. PART XI.-COMPANIES INCORPORATED OUTSIDE INDIA Provisions as to establishment of places of business in India

Application of sections 592 to 602 to foreign companies. 591. Application of sections 592 to 602 to foreign companies.- Sections 592 to 602, both inclusive, shall apply to all foreign com- panies, that is to say, companies falling under the following two lasses, namely:- (a) companies incorporated outside India which, after the commencement of this Act, establish a place of business within India; and (b) companies incorporated outside India which have, before the commencement of this Act, established a place of business within India and continue to have an established place of business within India at the commencement of this Act.

Documents, etc. to be delivered to Registrar by foreign companiescarrying on business in India. 592. Documents, etc. to be delivered to Registrar by foreign com-

panies carrying on business in India.-(1) Foreign companies which, after the commencement of this Act, establish a place of business within India shall, within one month of the establishment of the place of business, deliver to the Registrar for registration- (a) a certified copy of the charter, statutes, or memorandum and articles, of the company or other instrument constituting or defining the constitution of the company; and, if the instrument is not in the English language, a certified translation thereof; (b) the full address of the registered or principal office of the company; (c) a list of the directors and secretary of the company,

containing the particulars mentioned in sub-section (2); (d) the name and address or the names and addresses of some one or more persons resident in India, authorised to accept on behalf of the company service of process and any notices or other documents required to be served on the company; and (e) the full address of the office of the company in India which is to be deemed its principal place of business in India.

(2) The list referred to in clause (c) of sub-section (1) shall contain the following particulars, that is to say:- (a) with respect to each director,- (i) in the case of. an individual, his present name and surname in full, any former name or names and surname or surnames in full, his usual residential address, his nationality, and if that nationality is not the nationality of origin, his nationality of origin, and his business occupation, if any, or if he has no business occupation but holds any other directorship or directorships, particulars of that directorship or of some one of those directorships; and 308 (ii) in the case of a body corporate, its corporate name and registered or principal office; and the full name, address, nationality, and nationality of origin, if different from that nationality, of each of its directors-, (b) with respect to the secretary, or where there are joint secretaries, with respect to each of them- (i) in the case of an individual, his present name and surname, any former name or names and surname or surnames, and his usual residential address; and (ii) in the case of a body corporate, its corporate name and registered or principal office: Provided that, where all the partners in a firm are joint secretaries of the company, the name and principal office of the firm may be stated instead of the particulars mentioned in clause (b) of this sub-section.

(3) Clauses (2) and (3) of the Explanation to sub-section (1) of section 303 shall apply for the purpose of the construction of

references in sub-section (2) to present and former names and surnames as they apply for the purposes of the construction of such references

in sub-section (1) of section 303.

(4) Foreign companies, other than those mentioned in sub-section

(1), shall, if they have not delivered to the Registrar before the commencement of this Act the documents and particulars specified in

sub-section (1) of section 277 of the Indian Companies Act, 1913 (7 of 1913), continue to be subject to the obligation to deliver those documents and particulars in accordance with that Act.

Return to be delivered to Registrar by foreign company wheredocuments, etc., altered. 593. Return to be delivered to Registrar by foreign company where documents, etc., altered.-If any alteration is made or occurs In- (a) the charter, statutes, or memorandum and articles of a foreign company or other instrument constituting or defining the constitution of a foreign company; or (b) the registered or principal office of a foreign company,or (c) the directors or secretary of a foreign company or the particulars contained in the list of the directors and secretary: or (d) the name or address of any of the persons authorised to accept service on behalf of a foreign company: or (e) the principal place of business of the company in India the company shall, within the prescribed time, deliver to the Registrar for registration a return containing the prescribed particulars of the alteration.

Accounts of foreign company.

594.Accounts of foreign company.-(1) Every foreign company shall, in every calendar year,- (a) make out a balance-sheet and profit and loss account in such form, containing such Particulars and including or having annexed or attached there to such documents (including, in particular documents relating to every subsidiary of the foreign company) as under the provisions of this Act it would, if it had been a Company within the meaning of this Act, have been 309 required to make out and lay before the company in general meeting; and (b) deliver three copies of those documents to the Registrar: Provided that the Central Government may, by notification in the Official Gazette, direct that, in the case of any foreign company or class of foreign company the requirements of clause (a) shall not apply, or shall apply subject to such exceptions and modifications as may be specified in the notification.

(2) If any such document as is mentioned in sub-section (1) is not in the English language, there shall be annexed to it a certified translation thereof.

(3) Every foreign company shall send to the Registrar with the

documents required to be delivered to him under sub-section (1) three copies of a list in the prescribed form of all places of business established by the company in India as at the date with reference to

which the balance-sheet referred to in sub-section (1) is made out.

Obligation to state name of foreign company, whether limited, andcountry where incorporated. 595. Obligation to state name of foreign company, whether limited, and country where incorporated-Every foreign company shall- (a) in every prospectus inviting subscriptions in India for its shares or debentures, state the country in which the company incorporated; (b) conspicuously exhibit on the outside of every office or place where it carries on business in India, the name of the company and the country in which it is incorporated, in letters easily legible in English characters, and also in the characters of the language or one of the languages in general use in the locality in which the office or place is situate; (c) cause the name of the company and of the country in which the company is incorporated, to be stated in legible English characters in all business letters, bill-heads and letter paper, and in all notices, advertisements and other official publications of the company; and (d) if the liability of the members of the company is limited. cause notice of that fact- (i) to be stated in every such prospectus as aforesaid and in all business letters, bill-heads, letter paper, notices. advertisements and other official publications of the com- pany, in legible English characters; and (ii) to be conspicuously exhibited on the outside of every office or place where. it carries on business in India, in legible English characters and also in legible characters of the language or one, of the languages in general use in the locality in which the office or place is situate.

Service on foreign company. 596. Service on foreign company.-Any process, notice, or other document required to be served on a foreign company shall be deemed to be sufficiently served if addressed to any person whose name has been delivered to the Registrar under the foregoing provisions 310 of this Part and left at, or sent by post to, the address which has been so delivered: Provided that- (a) where any such company makes default in delivering to the Registrar the name and address of a person resident in India who is authorised to accept on behalf of the company service of process, notices or other documents; or (b) if at any time all the persons whose names and addresses have been so delivered are dead or have ceased so to reside, or refuse to accept service on behalf of the company, or for any reason, cannot be served; a document may be served on the company by leaving it at, or sending it by post to, any place of business established by the company in India.

Office where documents to be delivered.

597. Office where documents to be delivered.-(1) Any document which any foreign company is required to deliver to the Registrar shall be delivered to the Registrar having jurisdiction over New Delhi, and references to the Registrar in this Part [except in sub-

section (2)] shall be construed accordingly.

(2) Any such document as is referred to in sub-section (1) shall also be delivered to the Registrar of the State in which the principal place of business of the company is situate.

(3) If any foreign company ceases to have a place of business in India, it shall forthwith give notice of the fact to the Registrar, and as from the date on which notice is so given, the obligation of the company to deliver any document to the Registrar shall cease, pro- vided it has no other place of business in India.

Penalties. 598. Penalties.-If any foreign company fails to comply with any of the foregoing provisions of this Part, the company, and every officer or agent of the company who is in default, shall be punishable with fine which may extend to one thousand rupees, and in the case if a continuing offence, with an additional fine which may extend to one hundred rupees for every day during which the default continues.

Company's failure to comply with Part not to affect its liabilityunder contracts etc. 599. Company's failure to comply with Part not to affect its liability under contracts etc.-Any failure by a foreign company to comply with any of the foregoing provisions of this Part shall not affect the validity of any contract, dealing or transaction entered into by the company or its liability to be sued in respect thereof; but the company shall not be entitled to bring any suit, claim any set-off, make any counter-claim or institute any legal proceeding in respect of any such contract, dealing or transaction, until it has complied with the provisions of this Part.

Registration of charges, appointment of receiver and books of account. 600. Registration of charges, appointment of receiver and books

of account.-(1) The provisions of Part V (sections 124 to 145) shall apply mutatis mutandis to- (a) charges on properties in India which are created by a foreign company after the 15th day of January, 1937; and 311 (b) charges on property in India which is acquired by any foreign company after the day aforesaid: Provided that where a charge is created, or the completion of the acquisition of the property takes place, outside India, sub-

section (5) of section 125 and the proviso to sub-section (1) of section 127 shall have effect as if the property, wherever situated, were situated outside India.

(2) The provisions of section 118 shall apply mutatis mutandis to a foreign company.

(3) The provisions of section 209 shall apply to a foreign com- pany to the extent of requiring it to keep at its principal place of business in India the books of account referred to in that section, with respect to moneys received and expended, sales and purchases made, and assets and liabilities, in the course of or in relation to its business in India.

(4) In applying the sections referred to in sub-sections (1),

(2) and (3) to a foreign company as aforesaid, references in those sections to the Registrar shall be deemed to be references to the Registrar having jurisdiction over New Delhi, and references to the registered office of the foreign company shall be deemed to be references to its principal place of business in India.

Fees for registration of documents under Part. 601. Fees for registration of documents under Part.-There shall be paid to the Registrar for registering any document required by the foregoing provisions of this Part to be registered by him, such fees as may be prescribed.

Interpretation of foregoing sections of Part. 602. Interpretation of foregoing sections of Part.-For the pur- poses of the foregoing provisions of this Part- (a) the expression "certified" means certified in the prescribed manner to be a true copy or a correct translation; (b) the expression "director", in relation to a company, includes any person in accordance with whose directions or instructions the Board of directors of the company is accustomed to act; (c) the expression "place of business" includes a share transfer or share registration office; (d) the expression "prospectus" has the same meaning as when used in relation to a company incorporated under this Act; and (e) the expression "secretary" includes any person occupying the position of secretary, by whatever name called. Prospectuses

Dating of prospectus and particulars to be contained therein. 603. Dating of prospectus and particulars to be contained

therein.-(1) No person shall issue, circulate or distribute in India any prospectus offering for subscription shares in or debentures of a company incorporated or to be incorporated outside India, whether the company has or has not established, or when formed will or will 312 not establish, a place of business in India, unless the prospectus is dated; and (a) contains particulars with respect to the following matters: - (i) the instrument constituting or defining the consti- tution of the company; (ii) the enactments or provisions having the force of enactments, by or under which the incorporation of the company was effected; (iii) an address in India where the said instrument, enactments, or provision, or copies thereof, and if the same are not in English, a translation thereof certified in the prescribed manner, can be inspected; (iv) the date on which and the country in which the company was incorporated; (v) whether the company has established a place of business in India, and, if so, the address of its principal office in India; and (b) subject to the provisions of this section, states the matters specified in Part 1 of Schedule II and sets out the reports specified in Part II of that Schedule, subject always to the provisions contained in Part III of that Schedule: Provided that sub-clauses (i), (ii) and (iii) of clause (a) shall not apply in the case of a prospectus issued more than two years after the date at which the company is entitled to commence business; and in the application of Part I of Schedule II for the purposes of this sub- section, clause 2) thereof shall have effect with the substitution, for references to the articles, of references to the constitution of a company.

(2) Any condition requiring or binding an applicant for shares or debentures to waive compliance with any requirement imposed by

virtue of clause (a) or (b) of sub-section (1), or purporting to affect him with notice of any contract, document or matter not specifically referred to in the prospectus, shall be void.

(3) No person shall issue to any person in India a form of application for shares in or debentures of such a company or intended

company as is mentioned in sub-section (1), unless the from is issued with a prospectus which complies with the provisions of this Part and the issue whereof in India does not contravene the provisions of section 604: Provided that this sub-section shall not apply if it is shown that the form of application was issued in connection with a bona-fide invitation to a person to enter into an underwriting agreement with respect to the shares or debentures.

(4) In the event of non-compliance with or contravention of any

of the requirements imposed by clauses (a) and (b) of sub-section (1), a director or other person responsible for the prospectus shall 313 not incur any liability by reason of the non-compliance or contra- vention, if- (a) as regards any matter not disclosed, he proves that he had no knowledge thereof; or (b) he proves that the non-compliance or contravention arose from an honest mistake of fact on his part; or (c) the non-compliance or contravention was in respect of matters which, in the opinion of the Court dealing with the case, were immaterial, or was otherwise such as ought in the opinion of that Court, having regard to all the circumstances of the case, reasonably to be excused: Provided that, in the event of failure to include in a prospectus a statement with respect to the matters contained in clause 18 of Schedule II, no director or other person shall incur any liability in respect of the failure, unless it be proved that he had knowledge of the matters not disclosed.

(5) This section- (a) shall not apply to the issue to existing members or debenture holders of a company of a prospectus or form of application relating to shares in or debentures of the company, whether an applicant for shares or debentures will or will not have the right to renounce in favour of other persons; and (b) except in so far as it requires a prospectus to be dated, shall not apply to the issue of a prospectus relating to shares of debentures which are or are to be in all respects uniform with shares or debentures previously issued and for the time being dealt in or quoted on a recognised stock exchange; but, subject as aforesaid, this section shall apply to a prospectus of form of application whether issued on or with reference to the for- mation of a company or subsequently.

(6) Nothing in this section shall limit or diminish any liability which any person may incur under the general law or under this Act apart from this section.

Provisions as to expert's consent and allotment.

604. Provisions as to expert's consent and allotment.-(1) No person shall issue, circulate or distribute in India any prospectus offering for subscription shares in or debentures of a company in- corporated or to be incorporated outside India, whether the company has or has not established, or when formed will or will not establish, a place of business in India- (a) if, where the prospectus includes a statement purporting to be made by an expert, he has not given, or has before delivery of the prospectus for registration withdrawn, his written consent to the issue of the prospectus with the statement included in the form and context in which it is included, or there does not appear in the prospectus a statement that he has given and has not withdrawn his consent as aforesaid; or (b) if the prospectus does not have the effect, where an application is made in pursuance thereof, of rendering all persons concerned bound by all the provisions (other than penal provisions) of sections 72, 73 and 74, so far as applicable. 314

(2) In this section, the expression "expert" includes an engineer, a valuer, an accountant and any other person whose profession gives authority to a statement made by him; and for the purposes of this section a statement shall be deemed to be included in a prospectus if it is contained in any report or memorandum appearing on the face thereof or by reference incorporated therein or issued therewith.

Registration of prospectus.

605. Registration of prospectus.-(1) No person shall issue, circulate or distribute in India any prospectus offering for subscrip- tion shares in or debentures, of a company incorporated or to be in- corporated outside India, whether the company has or has not established, or when formed will or will not establish, a place of business in India, unless before the issue, circulation or distribution of the prospectus in India, a copy thereof certified by the chairman and two other directors, of the company as having been approved by resolution of the managing body has been delivered for registration to the Registrar and the prospectus states on the face of it that a copy has been so delivered, and there is endorsed on or attached to the copy- (a) any consent to the issue of the prospectus required by section 604; (b) a copy of any contract required by clause 16 of Schedule II to be stated in the Prospectus or, in the case of a contract not reduced into writing, a memorandum giving full particulars thereof; and (c) where the persons making any report required by Part II of Schedule II 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 therefore.

(2) The references in clause (b) of sub-section (1) to the copy of a contract required thereby to be endorsed on or attached to a copy of the prospectus shall, in the case of a contract wholly or partly in a language other than English, be taken as references to a copy of a translation of the contract in English or a copy embodying a transla- tion in English of the parts which are not in English, as the case may be, being a translation certified in the prescribed manner to be a correct translation.

Penalty for contravention of sections 603, 604, and 605. 606. Penalty for contravention of sections 603, 604 and 605.-Any person who is knowingly responsible- (a) for the issue, circulation or distribution of a prospectus; or (b) for the issue of a form of application for shares or debentures; in contravention of any of the provisions of sections 603, 604 and 605, shall be punishable with imprisonment for a term which may extend to six months, or with fine which may extend to five thousand rupees, or with both.

Civil liability for mis-statements in prospectus. 607. Civil liability for mis-statements in prospectus.-Section 62 shall extend to every prospectus offering for subscription shares in 315 or debentures of a company incorporated or to be incorporated outside India, whether the company has or has not established, or when formed will or will not establish, a place of business in India, with the substitution for references in section 62 to section 60 of this Act of references to section 604 thereof.

Interpretation of provisions as to prospectuses.

608. Interpretation of provisions as to prospectuses.-(1) Where any document by which any shares in, or debentures of, a company incorporated outside India are offered for sale to the public, would, if the company concerned had been a company within the meaning of this Act, have been deemed by virtue of section 64, to be a prospectus issued by the company, that document shall be deemed, for the purposes of this Part, to be a prospectus issued by the company offering such shares or debentures for subscription.

(2) An offer of shares or debentures for subscription or sale to any person whose ordinary business it is to buy or sell shares or debentures, whether as principal or as agent, shall not be deemed to be an offer to the public for the purposes of this Part.

(3) In this Part, the expressions "prospectus", "shares" and "debentures" have the same meanings as when used in relation to a company incorporated under this Act. PART REGISTRATION OFFICES AND OFFICERS AND FEES. PART XII-REGISTRATION OFFICES AND OFFICERS AND FEES

Registration Offices.

609. Registration Offices.-(1) For the purposes of the registration of companies under this Act, there shall be offices at such places as the Central Government thinks fit.

(2) The Central Government may appoint such Registrars, and such Additional, Joint, Deputy and Assistant Registrars as it thinks necessary for the registration of companies under this Act, and may make regulations with respect to their duties.

(3) The salaries of the persons appointed under this section shall be fixed by the Central Government.

(4) The Central Government may direct a seal or seals to be pre- pared for the authentication of documents required for, or connected with, the registration of companies.

(5) Whenever any act is by this Act directed to be done to or by the Registrar, it shall, until the Central Government otherwise directs, be done to or by the existing Registrar of companies or joint stock companies, or in his absence, to or by such person as the Central Government may for the time being authorise: Provided that in the event of the Central Government altering the constitution of the existing registry offices or any of them, any such act shall be done to or by such officer and at such place, with reference to the local situation of the registered offices of the com- panies concerned, as the Central Government may appoint. 316

Inspection, production and evidence of documents kept by Registrar. 610. Inspection, production and evidence of documents kept by

Registrar.-(1) Any person may- (a) inspect any documents kept by the Registrar, being documents filed or registered by him in pursuance of this Act, or making a record of any fact required or authorised to be recorded or registered in pursuance of this Act, on payment for each inspection, of a fee of one rupee; (b) require a certificate of the incorporation of any com- pany, or a copy or extract of any other document or any part of any other document to be certified by the Registrar, on payment of a fee of five rupees in the case of a certificate of incorporation, and of six annas for every one hundred words or fractional part thereof required to be copied in the case of a certified copy of extract: Provided that the rights conferred by this sub-section shall be exercisable- (i) in relation to documents delivered to the Registrar with a prospectus in pursuance of sub-clause (i) of clause

(b) of subsection (1) of Section 60, only during the fourteen days beginning with the date of publication of the prospectus; and at other times, only with the permission of the Central Government, and (ii) in relation to documents so delivered in pursuance of

clause (b) of sub-section (1) of section 605, only during the fourteen days beginning with the date of the prospectus; and at other times, only with the permission of the Central Government.

(2) No process for compelling the production of any document kept by the Registrar shall issue from any Court except with the leave of that Court; and any such process, if issued, shall bear thereon a statement that it is issued with the leave of the Court.

(3) A copy of, or extract from, any document kept and registered at any of the offices for the registration of companies under this Act, certified to be a true copy under the hand of the Registrar (whose official position it shall not be necessary to prove), shall, in all legal proceedings, be admissible in evidence as of equal validity with the original document.

(4) Amy person untruthfully stating himself in writing for the

purposes of clause (ii) of the proviso to sub-section (1), to be a member or creditor of a company shall be punishable with fine which may extend to five hundred rupees.

Fees in Schedule X to be paid. 611. Fees in Schedule X to be paid.-In respect of the several matters mentioned in Schedule X, there shall, subject to the limita- tions imposed by that Schedule, be paid to the Registrar the several fees therein specified: Provided that no fees shall be charged in respect of the registration in pursuance of Part IX of a company, if it is not registered as a limited company, or if, before its registration as a limited company, the liability of the shareholders was limited by some other Act of Parliament or any other Indian law or by an Act f Parliament ad the United Kingdom, Royal Charter or Letters Patent in force in India. 317

Fees, etc. paid to Registrar and other officers to be accounted forto Central Government. 612. Fees, etc. paid to Registrar and other officers to be accounted for to Central Government.-All fees, charges, and other sums paid to any Registrar, any Additional, Joint, Deputy, or Assistant Registrar, or any other officer of the Central Government in pursuance of this Ad shall be paid into the public account of India in the Reserve Bank of India.

Power of Central Government ot reduce fees, charges, etc.

613.Power of Central Government to reduce fees, charges, etc.-(1) The Central Government may, by order notified in the Official Gazette, reduce the amount of any fee, charge or other sum specified in any provision contained in this Act, as payable in respect of any matter, either to the Central Government or to any Registrar, any Additional, Joint, Deputy, or Assistant Registrar or any other officer of the Central Government; and thereupon such provision shall, during the period for which the order is in force, have effect as if the reduced fee had been substituted for the fee specified in such provision.

(2) Any order notified under sub-section (1) may-, by a like order, be cancelled or varied at any time by the Central Government.

(3) Nothing in this section shall be deemed to affect the power of the Central Government under section 641 to alter any of the fees specified in Schedule X.

Enforcement of duty of company to make returns etc. to Registrar. 614. Enforcement of duty of company to make returns etc. to

Registrar.-(1) If a company, having made default in complying with any provision of this Act which requires it to file or register with, or deliver or send to, the Registrar any return, account or other document, or to give notice to him of any matter, fails to make good the default within fourteen days after the service of a notice on the company requiring it to do so, the Court may, on an application made to it by any member or creditor of the company or by the Registrar, make an order directing the company and any officer thereof to make good the default within such time as may be specified in the order.

(2) Any such order may provide that all costs of and incidental to the application shall be borne by the company or by any officer., of the company responsible for the default.

(3) Nothing in this section shall be taken to prejudice the operation of any provisions in this or any other Act imposing penalties on a company or its officers in respect of any such default as aforesaid. PART GENERAL. PART XIII.-GENERAL Collection of information and statistics from companies

Power of Central Government to direct companies to furnish informationor statistics. 615.Power of Central Government to direct companies to furnish

Information or statistics.-(1) The Central Government may, by order, require companies generally, or any class of companies, or any company, to furnish such information or statistics with regard to their or its constitution or working, and within such time as may be specified In the order. 318

(2) (a) Every order under sub-section (1) addressed to companies generally or to any class of companies, shall be published in the Official Gazette and in such other manner, if any, as the Central Government may think fit. (b) The date of publication of the order in the Official Gazette shall be deemed to be the date on which the demand for information or statistics is made on such companies or class of companies, as the case may be.

(3) Every order under sub-section (1) addressed to an in. dividual company shall be served on it in the manner laid down in section 51.

(4) For the purpose of satisfying itself that any information or statistics furnished by a company in pursuance of any order under sub-

section (1) is correct and complete, the Central Government may require such company- (a) to produce such records or documents in its possession or under its control for inspection, before such officer and at such time as may be specified by the Central Government; or (b) to furnish such further information as may be specified by the Central Government and within such time as may be fixed by it.

(5) The Central Government may also, by order, direct an inquiry to be made by any person or persons named in the order- (a) for the purpose of obtaining any information or statistics which a company has failed to furnish as required

of it by an order under sub-section (1); or (b) for the purpose of satisfying itself that any infor- mation or statistics furnished by a company in pursuance of

an order made under sub-section (1) is correct and complete; and in so far as such information or statistics may be found to be incorrect or incomplete, for the purpose of obtaining such information or statistics as may be necessary to make the information or statistics furnished correct and complete; and a person or persons so appointed shall, for the purposes of such inquiry, have such powers as may be prescribed.

(6) If any company fails to comply with an order made under sub-

section (1) or (4), or knowingly furnishes any information or statistics which is incorrect or incomplete in any material respect, the company, and every officer thereof who is in default, shall be punishable with imprisonment which may extend to three months, or with fine which may extend to one thousand rupees, or with both.

(7) An order requiring any information or statistics to be furnished by a company may also be addressed to any person who is, or has at any time been, an officer or employee of the company, and all the provisions of this section, so far as may be, shall apply in relation to such person as they apply in relation to the company: 319 Provided that no such person shall be punishable under subsection

(6), unless the Court is satisfied that he was in a position to comply with the order and made wilful default in doing so.

(8) Where a body corporate incorporated outside India and having established an office within India, carries on business in India, all references to a company in this section shall be deemed to include references to the body corporate in relation, and only in relation, to such business. Application-of Act to Companies governed by special Acts

Application of Act to insurance, banking electricity supply and othercompanies governed by special Acts. 616. Application of Act to insurance, banking, electricity supply and other companies governed by special Acts.-The provisions of this Act shall apply- (a)to insurance companies, except in so far as the said provisions are inconsistent with the provisions of the Insurance Act, 1938 (4 of 1938) ; (b) to banking companies, except in so far as the said pro- visions are inconsistent with the provisions of the Banking Companies Act, 1949 (10 of 1949); (c) to companies engaged in the generation or supply of electricity, except in so far as the said provisions are inconsistent with the provisions of the Electricity Supply Act, 1948 (54 of 1948); (d) to any other company governed by any special Act for the time being in force, except in so far as the said provisions are inconsistent with the provisions of such special Act. Application of Act to Government Companies

Definition of "Government Company". 617. Definition of "Government Company".-For the purposes of sections 618, 619 and 620, Government company means any company in which not less than fifty-one per cent. of the share capital is held by the Central Government, or by any State Government or Governments, or partly by the Central Government and partly by one or more State Governments.

Future Government companies not to have managing agents. 618. Future Government companies not to have managing agents.-No Government company formed after the commencement of this Act shall appoint a managing agent.

Application of sections 224 to 233 to Government companies. 619. Application of sections 224 to 233 to Government companies.-

(1) In the case of a Government company, the following provisions shall apply, notwithstanding anything contained in sections 224 to

(2) The auditor of a Government company shall be appointed or re-appointed by the Central Government on the advice of the Comp- troller and Auditor-General of India. 320

(3) The Comptroller and Auditor-General of India shall have power- (a) to direct the manner in which the company's accounts shall be audited by the auditor appointed in pursuance of

subsection (2) and to give such auditor instructions in regard to any matter relating to the performance of his functions as such; (b) to conduct a supplementary or test audit of the com- pany's accounts by such person or persons as he may authorise in this behalf; and for the purposes of such audit, to require information or additional information to be furnished to any person or persons so authorised, on such matters, by such person or persons, and in such form, as the Comptroller and Auditor General may, by general or special order, direct.

(4) The, auditor aforesaid shall submit a copy of his audit report to the Comptroller and Auditor-General of India who shall have the right to comment upon, or supplement, the audit report in such. manner as he may think fit.

(5) Any such comments upon, or supplement to, the audit report shall be placed before the annual general meeting of the company at the same time and in the same manner as the audit report.

Power ot modify Act in relation to Government companies.

620. Power to modify Act in relation to Government companies.-(1) The Central Government may, by notification in the Official Gazette, direct that any of the provisions of this Act (other than sections 618, 619 and 639) specified in the notification:- (a) shall not apply to any Government company; or (b) shall apply to any Government company, only with such exceptions, modifications and adaptations, as may be specified in the notification.

(2) A copy of every notification proposed to be issued under

subsection (1) shall be laid in draft before both Houses of Parliament for a period of not less than thirty days while they are in session and if within that period, either House disapproves of the issue of the notification or approves of such issue only with modifications, the notification shall not be issued or, as the case may require, shall be issued only with such modifications as may be agreed on by both the Houses. Offences

Offences against Act to be cognizable only on complaint by Registrar,shareholder or Government. 621. Offences against Act to be cognizable only on complaint by

Registrar, shareholder or Government.-(1) No Court shall take cog- nizance of any offence against this Act (other than an offence with respect to which proceedings are instituted under section 545), which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or of a shareholder of the company, or of a person authorised by the Central Government in that behalf: Provided that nothing in this sub-section shall apply to a prosecution by a company of any of its officers. 321

(2) Sub-section (1) shall not apply to any action taken by the liquidator of a company in respect of any offence alleged to have been committed in respect of any of the matters included in Part VII (sections 425 to 560) or in any other provision of this Act relating to the winding up of companies.

(3) A liquidator of a company shall not be deemed to be in

officer of the company, within the meaning of sub-section (1).

Jurisdiction to try offences. 622. Jurisdiction to try offences.-No Court inferior to that of a Presidency Magistrate or a Magistrate of the first class shall try any offence against this Act.

Certain offences triable summarily in Presidency towns. 623. Certain offences triable summarily in Presidency towns.If any offence against this Act which is punishable with fine only Is committed by any person within a Presidency town, such person may be tried summarily and punished by any Presidency Magistrate of that Presidency town.

Offences to be non-cognizable. 624. Offences to be non-cognizable.-Notwithstanding anything in the Code of Criminal Procedure, 1898 (5 of 1898), every offence against this Act shall be deemed to be non-cognizable within the meaning of the said Code.

Payment of compensation in cases of frivolous or vesatiousprosecution. 625. Payment of compensation in cases of frivolous or vexatious

prosecution.-(1) In respect of any case instituted upon the complaint of a shareholder against the company or any officer thereof in pursu- ance of section 621, the provisions of section 250 of the Code of Criminal Procedure, 1898 (5 of 1898), shall not apply; and the following provisions shall apply instead.

(2) If the Magistrate by whom any such case is heard discharges or acquits all or any of the accused, and is of opinion that the accusation against them or any of them was false and either frivolous or vexatious, the Magistrate may, by his order of discharge or acquittal, if the shareholder upon whose complaint the accusation was made is present, call upon him forthwith to show cause why he should not pay compensation to such accused, or to each or any of such accused when there is more than one, or if such shareholder is not present, direct the issue of a summons to him to appear and show cause as aforesaid.

(3) The Magistrate shall record and consider any cause which such shareholder may show; and if the Magistrate is satisfied that the accusation was false and either frivolous or vexatious, he may, for reasons to be recorded, direct that compensation to such amount as he may determine be paid by such shareholder to the accused or to each or any of them, not exceeding one thousand rupees in all.

(4) The Magistrate may, by the order directing payment of the

compensation under sub-section (3), further order that, in default of payment, the shareholder ordered to pay such compensation shall suffer simple imprisonment for a term not exceeding two months.

(5) When any person is imprisoned under sub-section (4), the provisions of sections 68 and 69 of the Indian Penal Code (45 of 1860) shall, so far as may be, apply. 322

(6) No person who has been directed to pay compensation under this section shall, by reason of such order, be exempted from any civil or criminal liability in respect of the complaint made by him: Provided that any amount paid to an accused person under this section shall be taken into account in awarding compensation to such person in any subsequent civil suit relating to the same matter.

(7) A complainant who has been ordered to pay compensation under

sub-section (3) by a Magistrate may appeal from the order, In so far as it relates to the payment of compensation, as if such complainant had been convicted on a trial held by such Magistrate.

(8) Where an order for payment of compensation to an accused person is made, the compensation shall not be paid to him before the

period allowed for the presentation of the appeal under subsection (7) has elapsed; or, if an appeal is presented, before the appeal has been decided.

Application of fines. 626. Application of fines.-The Court imposing any fine under this Act may direct that the whole or any part thereof shall be applied in or towards payment of the costs of the proceedings, or in or in towards the rewarding of the person on whose information or at whose instance the fine is recovered.

Production and inspection of books where offences suspected. 627. Production and inspection of books where offence suspected.-

(1) if, on an application made to a Judge of a High Court in chambers by the Public Prosecutor of the State or by the Central Government, it is shown that there is reasonable cause to believe that any person has, while he was an officer of a company, committed an offence in connection with the management of the company's affairs, and that evidence of the commission of the offence is to be found in any books or papers of or under the control of the company, an order may be made- (i) authorising any person named therein to inspect the said books or papers or any of them for the purpose of investigating, and obtaining evidence of the commission of, the offence; or (ii) requiring the managing agent, secretaries and treasurers or manager of the company or such other officer thereof as may he named in the order, to produce the said books or papers or any of them to a person, and at a place and time, named in the order.

(2) Sub-section (1) shall apply also in relation to any books or Papers of a person carrying on the business of banking so far as they relate to the company's affairs, as it applies to any books or papers of or under the control of the company, except that no such order As is referred to in clause (ii) thereof shall be made by virtue of this slab-section.

(3) No appeal shall lie from the decision of a judge of the High Court under this section 323

Penalty for false statements. 628. Penalty for false statements.-If in any return, report, certificate, balance sheet, prospectus, statement or other document required by or for the purposes of any of the provisions of this Act, any person makes a statement- (a) which is false in any material particular, knowing it to be false; or (b) which omits any material fact knowing it to be material: he shall, save as otherwise expressly provided in this Act, be punishable with imprisonment for a term which may extend to two years, and shall also be liable to fine.

Penalty for false evidence. 629. Penalty for false evidence.-If any person intentionally gives false evidence- (a) upon any examination upon oath or solemn affirmation, authorised under this Act; or (b) in any affidavit, deposition or solemn affirmation, in or about the winding up of any company under this Act, or other.wise in or about any matter arising under this Act; he shall be punishable with imprisonment for a term which may to seven years, and shall also be liable to fine.

Penalty for wrongful withholding of property.

630. Penalty for wrongful withholding of property.-(1) If any Officer or employee of a company-- (a) wrongfully obtains possession of any property of a company; or (b) having any such property in his possession, wrongfully withholds it or knowingly applies it to purposes other than those expressed or directed in the articles and authorised by this Act; he shall, on the complaint of the company or any creditor or contri-- butory thereof, be punishable with fine which may extend to one thousand rupees.

(2) The Court trying the offence may also order such officer or employee to deliver up or refund, within a time to be fixed by the Court, any such property wrongfully obtained or wrongfully withheld or knowingly misapplied, or in default, to suffer imprisonment for a term which may extend to two years.

Penalty for improper use of words "Limited" and "Private Limited". 631. Penalty for improper use of words "Limited" and "Private Limited".--If any person or persons trade or carry on business under any name or title of which the word "Limited" or the words "Private Limited", or any contraction or imitation thereof is or are the last word or words, that person or each of those persons shall, unless duly incorporated with limited liability, or unless duly incorporated as a private company with limited liability, as the case may be, be punishable with fine which may extend to fifty rupees for every day upon which that name or title has been used. Legal proceedings

Power to require limited company to give security for costs. 632. Power to require limited company to give security for costs. Where a limited company is plaintiff or petitioner in any suit or other legal proceeding, any Court having jurisdiction in the matter 324 may, if there is reason to believe that the company will be unable to pay the costs of the defendant if he is successful in his defence, require sufficient security to be given for those costs, and may stay all proceedings until the security is given.

Power of Court to grant relief in certain cases.

633. Power of Court to grant relief in certain cases.-(1) If in any proceeding for negligence, default, breach of duty, misfeasance or breach of trust against an officer of a company, it appears to the Court hearing the case that he is or may be liable in respect of the negligence, default, breach of duty, misfeasance or breach of trust, but that he has acted honestly and reasonably, and that having regard to all the circumstances of the case, including those connected with his appointment, he ought fairly to be excused. the Court may relieve him, either wholly or partly" from" 'his 'liability' on such terms as it may think fit.

(2) Where any such officer has reason to apprehend that any claim will or might be made against him in respect of any negligence, default, breach of duty, misfeasance or breach of trust, he may apply to the Court for relief, and the Court on any such application shall have the same power to relieve him as it would have had under this section if it had been a Court before which proceedings against that person for negligence, default, breach of duty, misfeasance or breach of trust had been brought.

Enforcement of orders of Courts. 634. Enforcement of orders of Courts.-Any order made by a Court under this Act may be enforced in the same manner as a decree made by the Court in a suit pending therein.

Enforcement of orders of one Court by other Courts.

635. Enforcement of orders of one Court by other Courts.--(1) Where any order made by one Court is required to: be enforced by another Court, a certified copy of the order shall be produced to the proper officer of the Court required to enforce the order.

(2) The production of such certified copy shall be sufficient evidence of the order.

(3) Upon the production of such certified copy, the Court shall take the requisite.,steps for enforcing the order, in the same manner is if it had been made by itself. Reduction of fees payable to company

Reduction of fees, charges, etc. payable to company.

636. Reduction of fees, charges, etc. payable to company.- (1) A company which is entitled to any specified fee, charge or other sum by virtue of any provision contained in this Act or in its articles, may reduce the amount thereof to such extent as it thinks fit; and thereupon such provision shall, so long as the reduction is in force, have effect as if the reduced amount had been substituted for the fee, charge or sum specified in such provision.

(2) Any reduction made under sub-section (1) may, at any time, be cancelled or varied by the company. Delegation of powers and functions of Central Government

Delegation by Central Government of its powers and functions underAct. 637. Delegation by Central Government of its powers and functions

under Act.-(1) The Central Government may, by notification in the Official Gazette, delegate any of its powers or functions 325

under this Act, other than those specified in sub-section (2), to such authority or officer, and subject to such conditions, restrictions and limitations, as may be specified in the notification.

(2) The Central Government shall not delegate its powers or functions under the following provisions of this Act, namely,

sections, 10, 89 (4), 211 (3) and (4), 212, 213, 235, 237, 239, 241,

242, 243, 244, 245, 247, 248, 249, 250, 259, 268, 269, 274(2), 295,

300, 310, 311, 324 326, 328, 329, 332, 343, 345, 346, 347(2), 349,

352, 369, 372, 396, 399(4) and (5), 401, 408, 409, 410, 411 (b), 448, 609, 613, 620, 638, 641 and 642.

(3) A copy of every notification issued under sub-section (1) shall, as soon as may be after it is issued, be placed before both Houses of Parliament. Annual report on working of Act

Annual report by Central Government. 638. Annual report by Central Government.-The Central Government shall cause a general annual report on the working and administration of this Act to be prepared and laid before both Houses of Parliament, within one year of the close of the year to which the report relates. Annual reports on Government companies

Annual reports on Government companies to be places before Parliamentetc. 639. Annual reports on Government companies to be placed before

Parliament etc.-(1) In addition to the general annual report referred to in section 638, the Central Government shall cause an annual reports on the working and affairs of each Government company to be prepares and laid before both Houses of Parliament, together with a copy of the audit report and any comments upon, or supplement to, the audit report, made by the Comptroller and Auditor-General of India.

(2) Where any State Government is a member of a Government company, the annual report on the working and affairs of the company, the audit report, and the comments upon or supplement to the audit

report referred to in subsection (1), shall be placed by the State Government before the State Legislature or where the State Legislature has two Houses, before both Houses of that Legislature. Validation of registration of firm in certain cases

Validation of registration of firms as members of charitable and othercompanies. 640. Validation of registration of firms as members of charitable and other companies.-Any firm which stood registered at the com- mencement of this Act, as a member of any association or company licensed under section 26 of the Indian Companies Act, 1913 (7 of 1913) shall be deemed to have been validly so registered with effect on and from the date of Its registration. Schedules. Forms and Rules

Power to alter Schedules.

641. Power to alter Schedules.-(1) Subject to the provisions of this section, the Central Government may, by notification in the Official Gazette, alter any of the regulations, rules, tables, forms and other provisions contained in any of the Schedules to this Act, except Schedules XI and XII 326

(2) Any alteration notified under sub-section (1) shall have effect as if enacted in this Act and shall come into force on the date of the notification, unless the notification otherwise directs: Provided that no such alteration in Table A of Schedule I shall apply to any company registered before the date of such alteration.

(3) All rules made by the Central Government under sub-section

(1) shall, as soon as may be after they are made, be laid before both Ho-uses of Parliament.

Power of Central Government to make rules.

642. Power of Central Government to make rules.-(1) In addition to the powers conferred by section 641, the Central Government may, by notification in the Official Gazette, make rules- (a) for all or any of the matters which by this Act are to be, or may be, prescribed by the Central. Government; and (b) generally to carry out the purposes of this Act.

(2) Every rule so notified shall have effect as if enacted in this Act; and shall come into force on the date of the notification, unless the notification otherwise directs.

(3) All rules made by the Central Government under sub-section

(1) shall, as soon as may be after they are made, be laid before both Houses of Parliament.

Power of Supreme Court to make rules.

643. Power of Supreme Court to make rules.-(1) The Supreme Court, after consulting the High Courts,- (a) shall make rules providing for all matters relating to the winding up of companies which, by this Act, are to be prescribed; and may make rules providing for all such matters as may be prescribed, except those reserved to the Central

Government by sub-section (5) of section 503, sub-section (1)

of section 549 and sub-section (3) of section 550; and (b) may make rules consistent with the Code of Civil Procedure, 1908 (5 of 1908)-- (i) as to the mode of proceedings to be had for winding up a company in High Courts and in Courts subordinate thereto; (ii) for the voluntary winding up of companies, whether by members or by creditors" (iii) for the Holding of meetings of creditors and members in connection with proceedings under section 391; (iv) for giving effect to the provisions of this Act as to me reduction of the capital and the sub-division of the shares of a company; and (v) Generally for all applications to be made to the Court under the provisions of this Act.

(2) Without prejudice to the generality of the foregoing power, the Supreme Court may, by such rules, enable or require all or any 327 of the powers and duties conferred and imposed on the Court by this Act, in respect of the following matters, that is to say:- (a) the holding and conducting of meetings to ascertain the wishes of creditors and contributories; (b) the settling of lists of contributories and the rectifying of the register of members where required, and collecting and applying the assets; (c) the payment, delivery, conveyance, surrender or transfer of money, property, books or papers to the liquidator; (d) the making of calls; and (e) the fixing of a time within which debts and claims shall be proved; to be exercised or performed by the Official Liquidator or any other liquidator as an officer of the Court, and subject to the control of the Court: Provided that the liquidator shall not, without the special leave of the Court, rectify the register of members or make any call.

(3) Until rules are made by the Supreme Court as aforesaid, all rules made by any High Court on the matters referred to in this section and in force at the commencement of this Act, shall continue to be in force in so far as they are not inconsistent with the provisions of this Act in that High Court and in Courts subordinate thereto. Repeals and savings

Repeal of Acts specified in Schedule XII. 644. Repeal of Acts specified in Schedule XII.-The enactments mentioned in Schedule XII are hereby repealed.

Saving of orders, rules, etc., in force at commencement of Act. 645. Saving of orders, rules, etc., in force at commencement of Act.-Nothing in this Act shall affect any order, rule, regulation, appointment, conveyance, mortgage, deed, document or agreement made, fee directed, resolution passed, direction given, proceeding taken, instrument executed or issued, or thing done, under or in pursuance of any previous companies law; but any such order, rule, regulation, appointment, conveyance, mortgage, deed, document, agreement, fee, resolution, direction, proceeding, instrument or thing shall, if in force at the commencement of this Act, continue to be in force, and so far as it could have been made, directed, passed, given, taken, executed, issued or done under or in pursuance of this Act, shall have effect as if made, directed, passed, given, taken, executed, issued or done under or in pursuance of this Act.

Saving of operation of section 138 of Act VII of 1913. 646. Saving of operation of section 138 of Act VII of 1913.- Nothing in this Act shall affect the operation of section 138 of the Indian Companies Act, 1913 (7 of 1913), as respects inspectors, or as respects the continuation of an inspection begun by inspectors, appointed before the commencement of this Act; and the provisions of this Act shall apply to or in relation to a report of inspectors appointed under the said section 138 as they apply to or in relation to a report of inspectors appointed under section 235 or 237 of this Act. 328

Saving of pending proceedings for winding up. 647. Saving of pending proceedings for winding up.--Where the winding up of a company has commenced before the commencement it this Act-

(i) sub-section (7) of section 555 shall apply in respect of any moneys paid into the Companies Liquidation Account whether before or after such commencement; and (ii) the other provisions with respect to winding up contained in this Act shall not apply, but the company shall be wound up in the same manner and with the same incidents as if this Act had not been passed.

Saving of prosecutions instituted by liquidator or Court under section237 of Act 7 of 1913. 648. Saving of prosecutions instituted by liquidator or Court under section 237 of Act 7 of 1913-Nothing in this Act shall affect any prosecution instituted or ordered by the Court to be instituted under section 237 of the Indian Companies Act, 1913 (7 of 1913); and the Court shall have the same power of directing how any costs, charges, and expenses properly incurred in any such prosecution are to be defrayed as it would have had, if this Act had not been passed.

Construction of references to former enactments in documents. 649. Construction of references to former enactments in docu- ments.-Any document referring to any former enactment relating to companies shall be construed as referring to the corresponding enact- ment in this Act.

Construction of "registrar of joint stock companies" in Act 21 of1860. 650. Construction of "registrar of joint stock companies" in Act 21 of 1860.-In sections 1 and 18 of the Societies Registration Act. 1860 (21 of 1860), the words "registrar of joint-stock companies" shall be construed to mean the Registrar under this Act.

Construction of references to extraordinary resolution in articlesetc. 651. Construction of references to extraordinary resolution in articles etc.-Any reference to an extraordinary resolution in the articles of a company, or in any resolution passed in general meeting by the company, or in any other instrument, or in any law in force immediately before the commencement of this Act, shall, with effect on and from such commencement, be construed as a reference to a special resolution.

Appointment under previous companies laws to have effect as if madeunder Act. 652. Appointment under previous companies laws to have effect as if made under Act.-Any person appointed to any office under or by virtue of any previous companies law shall be deemed to have been appointed to that office under or by virtue of this Act.

Former registration offices continued. 653. Former registration offices continued.-The offices existing at commencement of this Act-for the registration of companies shall be continued as if they had been established under this Act.

Registers under previous companies laws to be deemed to be part ofregisters under Act. 654. Registers under previous companies laws to be deemed to be part of registers under Act.-Any register kept tinder the provisions of any previous companies law shall be deemed to be part of the register to be kept under the corresponding provisions of this Act.

Funds and accounts under Act to be in continuation of funds andaccounts under previous companies law. 655. Funds and accounts under Act to be in continuation of funds and accounts under previous companies law.-All funds constituted and accounts kept under this Act shall be deemed to be in continuation of the corresponding funds constituted and accounts kept under previous companies laws. 329

Saving of incorporation under repealed Acts. 656. Saving of incorporation under repealed Acts.-Nothing in this Act shall affect the incorporation of any company registered under any enactment hereby repealed.

Saving of certain Tables under previous companies laws. 657. Saving of certain Tables under previous companies laws.,- Nothing in this Act shall affect- (a) Table B in the Schedule annexed to Act No. 19 of 1857, or any part thereof, so far as the same applies to any com- pany existing at the commencement of this Act; (b) Table A in the First Schedule annexed to the Indian Companies Act, 1882 (6 of 1882), or any part thereof, so far as the same applies to any company existing at the commencement of this Act; (c) Table A in the First Schedule to the Indian Companies Act, 1913 (7 of 1913); either as originally contained in that Schedule or as altered in pursuance of section 151 of that Act, so far as the same applies to any company existing at the commencement of this Act.

Section 6 of the General Clauses Act, 1897 (10 of 1897) to apply inaddition to sections 645 to 657 of Act. 658. Section 6 of the General Clauses Act, 1897 (10 of 1897) to apply in addition to sections 645 to 657 of Act.-The mention of parti- cular matters in sections 645 to 657 or in any other provision of this Act shall not prejudice the general application of section 6 of the General Clauses Act, 1897 (10 of 1897), with respect to the effect of repeals. SCHE

[See sections 2 (2), 14, 28, (1), 29 and 223].

[See sections 2 (2), 14, 28 (1), 29 and 223]

1. (1) In these regulations- (a) "the Act" means the Companies Act, 1956. (b) "the seal" means the common seal of the company.

(2) Unless the context otherwise requires, words or expressions contained in these regulations shall bear the same meaning as in the Act or any statutory modification thereof in force at the date at which these regulations become binding on the company. Share capital and variation of rights 2. Subject to the provisions of section 80, any preference shares may, with the sanction of an ordinary resolution, be issued on the terms that they are, or at the option of the company are liable, to be redeemed on such terms and in such manner as the company before the issue of the shares may, by special resolution, determine. 330

3.(1) If at any time the share capital is divided into different classes of shares, the rights attached to any class (unless otherwise provided by the terms of issue of the shares of that class) may, sub- ject to the provisions of sections 106 and 107, and whether or not the company is being wound up, be varied with the consent in writing of the holders of three-fourths of the issued shares of that class, or with the sanction of a special resolution passed at a separate general meeting of the holders of the shares of that class.

(2) To every such separate general meeting, the provisions of these regulations relating to general meetings shall mutatis Mutandis apply, but so that the necessary quorum shall be two persons at least holding or representing by proxy one-third of the issued shares of the class in question. 4.The rights conferred upon the holders of the shares of any class issued with preferred or other rights shall not, unless otherwise expressly provided by the terms of issue of the shares of that class, be deemed to be varied by the creation or issue of further shares ranking pari passu therewith.

5.(1) The company may exercise the powers of paying commissions conferred by section 76, provided that the rate per cent. or the amount of the commission paid or agreed to be paid shall be disclosed in the manner required by that section.

(2) The rate of the commission shall not exceed the rate of five per cent. of the price at which the shares in respect whereof the same is paid are issued or an amount equal to five per cent. of such price, as the case may be.

(3) The commission may be satisfied by the payment of cash or the allotment of fully or partly paid shares or partly in the one way and partly in the other.

(4) The company may also, on any issue of shares, pay such brokerage as may be lawful. 6. Except as required by law, no person shall be recognised by the company as holding any share upon any trust, and the company shall not be bound by, or be compelled in any way to recognise (even when having notice thereof) any equitable, contingent, future or partial interest in any share, or any interest in any fractional part of a share, or (except only as by these regulations or by law otherwise provided) any other rights in respect of any share except an absolute right to the entirety thereof in the registered holder.

7. (1) Every person whose name is entered as a member in the register of members shall be entitled to receive within three months after allotment or registration of transfer (or within such other period as the conditions of issue shall provide)- (a) one certificate for all his shares without payment; or (b) several certificates, each for one or more of his shares, upon payment of one rupee for every certificate after the first.

(2) Every certificate shall be under the seal and shall specify the shares to which it relates and the amount paid up thereon.

(3)In respect of any share or shares held jointly by several persons, the company, shall not be bound to issue more than one certi- ficate, and delivery of a certificate for a share to one of several joint holders shall be sufficient delivery to all such holders. 331 8. If a share certificate is defaced, lost or destroyed, it may be renewed on payment of such fee, if any, not exceeding eight annas, and on such terms, if any, as to evidence and indemnity and the payment of out-of-pocket expenses incurred by the company in investigating evidence. as the directors think fit. Lien

9. (1) The company shall have a first and paramount lien- (a) on every share (not being a fully-paid share), for all moneys (whether presently payable or not) called, or payable at a fixed time. in respect of that share; and (b) on all shares (not being fully-paid shares) standing registered in the name of a single person, for all moneys presently payable by him or his estate to the company: Provided that the Board of directors may at any time declare any share to be wholly or in part exempt from the provisions of this clause.

(2) The company's lien, if any, on a share shall extend to all dividends payable thereon. 10. The company may sell, in such manner as the Board thinks tit, any shares on which the company has a lien: Provided that no sale shall be made- (a) unless a sum in respect of which the lien exists is presently payable; or (b) until the expiration of fourteen days after a notice in writing stating and demanding payment of such part of the amount in respect of which the lien exists as is presently payable, has been given to the registered holder for the time being of the share or the person entitled thereto by reason of his death or insolvency.

11. (1) To give effect to any such sale, the Board may authorise some person to transfer the shares sold to, the purchaser thereof.

(2) The purchaser shall be registered as the holder of the shares comprised in any such transfer.

(3) The purchaser shall not be bound to see to the application of the purchase money, nor shall his title to the shares be affected by any irregularity or invalidity in the proceedings in reference to the sale.

12. (1) The proceeds of the sale shall be received by the company and applied in payment of such part of the amount in respect of which the lien exists as is presently payable.

(2) The residue, if any, shall, subject to a like lien for sums not presently payable as existed upon the shares before the sale, be paid to the person entitled to the shares at the date of the sale. Calls on shares

13. (1) The Board may, from time to time, make calls upon the members in respect of any moneys unpaid on their shares (whether on account of the nominal value of the shares or by way of premium) and not by the conditions of allotment thereof made payable at fixed times: 332 Provided that no call shall exceed one-fourth of the nominal value of the share or be payable at less than one month from the, date fixed for the payment of the last preceding call.

(2) Each member shall, subject to receiving at least fourteen days' notice specifying the time or times and place of payment, pay to the company, at the time or times and place so specified, the amount called on his shares.

(3) A call may be revoked or postponed at the discretion of the Board. 14. A call shall be deemed to have been made at the time when the resolution of the Board authorising the call was passed and may be required to be paid by instalments. 15. The joint holders of a share shall be jointly and severally liable to pay all calls in respect thereof.

16. (1) If a sum called in respect of a share is not paid before or on the day appointed for payment thereof, the person from whom the sum is due shall pay interest thereon from the day appointed for payment thereof to the time of actual payment at five per cent. per annum or at such lower rate, if any, as the Board may determine.

(2) The Board shall be at liberty to waive payment of any such interest wholly or in part.

17. (1) Any sum which by the terms of issue of a share becomes payable on allotment or at any fixed date, whether on account of the nominal value of the share or by way of premium, shall, for the purposes of these regulations, be deemed to be a call duly made and payable on the date on which by the terms of issue such sum becomes payable.

(2) In case of non-payment of such sum, all the relevant pro- visions of these regulations as to payment of interest and expenses, forfeiture or otherwise shall apply as if such sum had become payable by virtue of a call duly made and notified. 18. The Board- (a) may, if it thinks fit, receive from any member willing to advance the same, all or any part of the moneys uncalled and unpaid upon any shares held by him; and (b) upon all or any of the moneys so advanced, may (until the same would, but for such advance, become presently pay- able) pay interest at such rate not exceeding, unless the company in general meeting shall otherwise direct, six per cent. per annum, as may be agreed upon between the Board and the member paying the sum in advance. Transfer of shares

19. (1) The instrument of transfer of any share in the company shall be executed by or on behalf of both the transferor and transferee.

(2) The transferor shall be deemed to remain a holder of the share until the name of the transferee is entered in the register of members in respect thereof. 333 20. Shares in the company shall be transferred in the following form, or in any usual or common form which the Board shall approve:- "I, A. B. of ...........in consideration of the sum......of rupees paid to me by C. D. of (hereinafter called "the transferee"), do hereby transfer to the transferee the share [or shares] numbered- ... .. to inclusive, in the undertaking called the Company, Limited, to hold unto the said transferee, his executors, administrators and assigns, subject to the several conditions on which I held the same immediately before the execution hereof; and I, the transferee, do hereby agree to take the said share (or shares) subject to the conditions aforesaid. As witness our hands this day of Witness to the signatures of, etc." 21. The Board may, subject to the right of appeal conferred by section 111, decline to register- (a) the transfer of a share, not being a fully-paid share, to a person of whom they de not approve; or (b) any transfer of shares on which the company has a lien. 22. The Board may also decline to recognise any instrument of transfer unless- (a) a fee of two rupees is paid to the company in respect thereof; (b) the instrument of transfer is accompanied by the certi- ficate of the shares to which it relates, and such other evidence as the Board may reasonably-require to show the right of the transferor to make the transfer; and (c) the instrument of transfer is in respect of only one class of shares. 23. The registration of transfers may be suspended at such times and for such periods as the Board may from time to time determine: Provided that such registration shall not be suspended for more than forty-five days in any year. 24. The company shall be entitled to charge a fee not exceeding two rupees on the registration of every probate, letters of adminis- tration, certificate of death or marriage, power of attorney, or other instrument. Transmission of shares

25. (1) On the death of a member, the survivor or survivors where the member was a joint holder, and his legal representatives where he was a sole holder, shall be the only persons recognised by the company as having any title to his interest in the shares.

(2) Nothing in clause (1) shall release the estate of a deceased joint holder from any liability in respect of any share which had been jointly held by him with other persons. 334

26. (1) Any person becoming entitled to a share in consequence of the death or insolvency of a member may, upon such evidence being produced as may from time to time properly be required by the Board and subject as hereinafter provided, elect, either- (a) to be registered himself as holder of the share; or (b) to make such transfer of the share as the deceased or insolvent member could have made.

(2) The Board shall, in either case, have the same right to decline or suspend registration as it would have had, if the deceased or insolvent member had transferred the share before his death or insolvency.

27. (1) If the person so becoming entitled shall elect to be registered as holder of the share himself, he shall deliver or send to the company a notice in writing signed by him stating that he so elects.

(2) If the person aforesaid shall elect to transfer the share, he shall testify his election by executing a transfer of the share.

(3) All the limitations, restrictions and provisions of these regulations relating to the right to transfer and the registration of transfers of shares shall be applicable to any such notice or transfer as aforesaid as if the death or insolvency of the member had not occurred and the notice or transfer were a transfer signed by that member. 28. A person becoming entitled to a share by reason of the death or insolvency of the holder shall be entitled to the same dividends and other advantages to which he would be entitled if he were the registered holder of the share, except that he shall not, before being registered as a member in respect of the share, be entitled in respect of it to exercise any right conferred by membership in relation to meetings of the company: Provided that the Board may, at any time, give notice requiring any such person to elect either to be registered himself or to transfer the share, and if the notice is not complied with within ninety days, the Board may thereafter withhold payment of all dividends, bonuses or other moneys payable in respect of the share, until the requirements of the notice have been complied with. Forfeiture of shares 29. If a member fails to pay any call, or instalment of a call, on the day appointed for payment thereof, the Board may, at any time thereafter during such time as any part of the call or instalment remains unpaid, serve a notice on him requiring payment of so much of the call or instalment as is unpaid, together with any interest which may have accrued. 30. The notice aforesaid shall- (a) name a further day (not being earlier than the expiry of fourteen days from the date of service of the notice) on or 335 before which the payment required by the notice is to be made; and (b) state that, in the event of non-payment on or before the day so named, the shares in respect of which the call was made will be liable to be forfeited. 31. If the requirements of any such notice as aforesaid are not complied with, any share in respect of which the notice has been given may, at any time thereafter, before the payment required by the notice has been made, be forfeited by a resolution of the Board to that effect.

32. (1) A forfeited share may be sold or otherwise disposed of on such terms and in such manner as the Board thinks fit.

(2) At any time before a sale or disposal as aforesaid, the Board may cancel the forfeiture on such terms as it thinks fit.

33. (1) A person whose shares have been forfeited shall cease to be a member in respect of the forfeited shares, but shall, not- withstanding the forfeiture, remain liable to pay to the company all moneys which, at the date of forfeiture, were presently payable by him to the company in respect of the shares.

(2) The liability of such person shall cease if and when the company shall have received payment in full of all such moneys in res- pect of the shares.

34. (1) A duly verified declaration in writing that the declarant is a director, the managing agent, the secretaries 'and treasurers, the manager or the secretary, of the company, and that a share in the company has been duly forfeited on a date stated in the declaration, shall be conclusive evidence of the facts therein stated as against all persons claiming to be entitled to the share.

(2) The company may receive the consideration, if any, given for the share on any sale or disposal thereof and may execute a transfer of the share in favour of the person to whom the share is sold or dis- posed of.

(3) The transferee shall thereupon be registered as the holder of the share.

(4) The transferee shall not be bound to see to the application of the purchase money, if any, nor shall his title to the share be affected by any irregularity or invalidity in the proceedings in reference to the forfeiture, sale or disposal of the share. 35. The provisions of these regulations as to forfeiture shall apply in the case of non-payment of any sum which, by the terms of issue of a share, becomes payable at a fixed time, whether on account of the nominal value of the share or by way of premium, as If the same had been payable by virtue of a call duly made and notified. 336 Conversion of shares into stock 36. The company may, by ordinary resolution,- (a) convert any paid-up shares into stock; and (b) reconvert any stock into paid-up shares of any denomination. 37. The holders of stock may transfer the same or any part thereof in the same manner as, and subject to the same regulations under which, the shares from which the stock arose might before the conversion have been transferred, or as near thereto as circumstances admit: Provided that the Board may, from time to time, fix the minimum amount of stock transferable, so however that such minimum shall not exceed the nominal amount of the shares from which the stock arose. 38. The holders of stock shall, according to the amount of stock held by them, have the same rights, privileges and advantages as regards dividends, voting at meetings of the company, and other matters, as if they held the shares from which the stock arose; but no such privilege or advantage (except participation in the dividends and profits of the company and in the assets on winding up) shall be conferred by an amount of stock which would not, if existing in shares, have conferred that privilege or advantage. 39. Such of the regulations of the company (other than those relating to share warrants), as are applicable to paid-up shares shall ,apply to stock and the words "share" and "shareholder" in those regulations shall include "stock" and "stockholder" respectively. Share warrants 40. The company may issue share warrants subject to, and in accordance with, the provisions of sections 114 and 115; and accord- ingly the Board may in its discretion, with respect to any share which is fully paid up, on application in writing signed by the person registered as holder of the share, and authenticated by such evidence (if any) as the Board may, from time to time, require as to the iden- tity of the person signing the application, and on receiving the certificate (if any) of the share, and the amount of the stamp duty on the warrant and such fee as the Board may from time to time require, issue a share warrant.

41. (1) The bearer of a share warrant may at any time deposit the warrant at the office of the company, and so long as the warrant remains so deposited, the depositor shall have the same right of signing a requisition for calling a meeting of the company, and of attending, and voting and exercising the other privileges of a member at any meeting held after the expiry of two clear days from the time of deposit, as if his name were inserted in the register of members as the holder of the shares included in the deposited warrant.

(2) Not more than one person shall be recognised as depositor of the share warrant. 337

(3) The company shall, on two days' written notice, return the deposited share warrant to the depositor.

42. (1) Subject as herein otherwise expressly provided, no per- son shall, as bearer of a share warrant, sign a requisition for calling a meeting of the company, or attend, or vote or exercise any other privilege of a member at a meeting of the company, or be entitled to receive any notices from the company.

(2) The bearer of a share warrant shall be entitled in all other respects to the same privileges and advantages as if he were named in the register of members as the holder of the shares included in the warrant, and he shall be a member of the company. 43. The Board may, from time to time, make rules as to the terms on which (if it shall 'think fit) a new share warrant or coupon may be issued by way of renewal in case of defacement, loss or destruction. Alteration of capital 44. The company may, from time to time, by ordinary resolution Increase the share capital by such sum, to be divided into shares of such amount, as may be specified in the resolution. 45. The company may, by ordinary resolution,- (a) consolidate and divide all or any of its share capital into shares of larger amount than its existing shares; (b) sub-divide its existing shares or any of them into shares of smaller amount than is fixed by the memorandum, subject, nevertheless, to the provisions of clause (d) of sub-section

(1) of section 94; (c) cancel any shares which, at the date of the passing of the resolution, have not been taken or agreed to be taken by any person. 46. The company may, by special resolution, reduce in any manner and with, and subject to, any incident authorised and consent required by law,- (a) its share capital; (b) any capital redemption reserve fund; or (c) any share premium account. General meetings 47. All general meetings other than annual general meetings shall be called extraordinary general meetings.

48. (1) The Board may, whenever it thinks fit, call an extra. ordinary general meeting.

(2) If at any time there are not within India directors capable of acting who are sufficient in number to form a quorum, any director or any two members of the company may call an extraordinary general meeting in the same manner, as nearly as possible, as that in which such a meeting may be called by the Board. 338 Proceedings at general meetings

49. (1) No business shall be transacted at any general meeting unless a quorum of members is present at the time when the meeting proceeds to business.

(2) Save as herein otherwise provided, five members present In person (in the case of a public company-two members present. in person, in the case of a private company) shall be a quorum. 50. The chairman, if any, of the Board shall preside as chairman at every general meeting of the company. 51. If there is no such chairman, or if he is not present within fifteen minutes after the time appointed for holding the meeting, or is unwilling to act as chairman of the meeting, the directors present shall elect one of their number to be chairman of the meeting. 52. If at any meeting no director is willing to act as chairman or if no director is present within fifteen minutes after the time appointed for holding the meeting, the members present shall choose one of their number to be chairman of the meeting.

53. (1) The chairman may, with the consent of any meeting at which a quorum is present, and shall, if so directed by the meeting, adjourn the meeting from time to time and from place to place,

(2) No business shall be transacted at any adjourned meeting other than the business left unfinished at the meeting from which the adjournment took place.

(3) When a meeting is adjourned for thirty days or more, notice of the adjourned meeting shall be given as in the case of an original meeting.

(4) Save as aforesaid, it shall not be necessary to give any notice of an adjournment or of the business to be transacted at an adjourned meeting. 54. In the case of an equality of votes, whether on a show of hands or on a poll, the chairman of the meeting at which the show of hands takes place, or at which the poll is demanded, shall be entitled to a second or casting vote. 55. Any business other than that upon which a poll has beer demanded may be proceeded with, pending the taking of the poll. Votes of members 56. Subject to any rights or restrictions for the time being attached to any class- or classes of shares,- (a) on a show of hands, every member present in person shall have one vote; and (b) on a poll, the voting rights of members shall be as laid down in section 87. 339 57. In the case of joint holders, the vote of the senior who tenders a vote, whether in person or by proxy, shall be accepted to the exclusion of the votes of the other joint holders. For this purpose, seniority shall be determined by the order in Which the names stand in the register of members. 58. A member of unsound mind or in respect of whom an order has been made by any Court having jurisdiction in lunacy, may vote, whether on a show of hands or on a poll, by his, committee or other legal guardian, and any such committee or guardian may, on a poll, vote by proxy. 59. No member shall be entitled to vote at any general meeting unless all calls or other sums presently payable by him in respect of shares in the company have been paid.,

60. (1) No objection shall be raised to the qualification of any voter except at the meeting or adjourned meeting at which the vote objected to is given or tendered, and every vote not disallowed at such meeting shall be valid for all purposes.

(2) Any such objection made in due time shall be referred to the chairman of the meeting, whose decision shall be final and conclusive. 61. The instrument appointing a proxy and the power of attorney or other authority, if any, under which it is signed or a notarially certified copy of that power or authority, shall be deposited at the registered office of the company not less than 48 hours before the time for holding the meeting or adjourned meeting at which the person named in the instrument proposes to vote, or, in the case of a poll, not less than 24 hours before the time appointed for the taking of the poll; and in default the instrument of proxy shall not be treated as valid. 62. An instrument appointing a proxy shall be in either of the forms in Schedule IX to the Act or a form as near thereto as circumstances admit. 63. A vote given in accordance with the terms of an instrument of proxy shall be valid, notwithstanding the previous death or insanity of the principal or the revocation of the proxy or of the authority under which the proxy was executed, or the transfer of the shares in respect of which the proxy is given: Provided that no intimation in writing of such death, insanity, revocation or transfer shall have been received by the company at its office before the commencement of the meeting or adjourned meeting at which the proxy is used. Board of directors 64. The number of the directors and the names of the first directors shall be determined in writing by the subscribers of the memorandum or a majority of them.

65. (1) The remuneration of the directors shall, in so far as it consists of a monthly payment, be deemed to accrue from day to day. 340

(2) In addition to the remuneration payable to them in pursuance of the Act, the directors may be paid all travelling, hotel and other expenses properly incurred by them- (a) in attending and returning from meetings of the Board of directors or any committee thereof or general meetings of the company; or (b) in connection with the business of the company. 66. The qualification of a director shall be the holding of at least one share in the company. 67. The Board may pay all expenses incurred in getting up and registering the company. 68. The company may exercise the powers conferred by section 50 with regard to having an official seal for use abroad, and such powers shall be vested in the Board. 69. The company may exercise the powers conferred on it by sections 157 and 158 with regard to the keeping of a foreign register; and the Board may (subject to the provisions of those sections) make and vary such regulations as it may think fit respecting the keeping of any such register. 70. All cheques, promissory notes, drafts, hundis, bills of ex- change and other negotiable instruments, and all receipts for moneys paid to the company, shall be signed, drawn, accepted, endorsed, or otherwise executed, as the case may be, by the managing agent or secretaries and treasurers of the company, or where there is no managing agent or secretaries and treasurers, by such person and in such manner as the Board shall from time to time by resolution determine. 71. Every director present at any meeting of the Board or of a committee thereof shall sign his name in a book to be kept for that purpose.

72. (1) The Board shall have power at any time, and from time to time, to appoint a person as an additional director who shall hold office until the next following general meeting.

(2) Such person shall however be eligible for appointment by the company at that meeting as a director, after the meeting has, if necessary, increased the number of the directors. Proceedings of Board

73. (1) The Board of directors may meet for the despatch of business, adjourn and otherwise regulate its meetings, as it thinks fit.

(2) A director may, and the managing agent, secretaries and treasurers, manager or secretary on the requisition of a director shall, at any time, summon a meeting of the Board.

74. (1) Save as otherwise expressly provided in the Act, ques- tions arising at any meeting of the Board shall be decided by a majority of votes. 341

(2) In-case of an equality of votes, the chairman of the Board, if any, shall have a second or casting vote. 75. The continuing directors may act notwithstanding any vacancy in the Board; but, if and so long as their number is reduced below the quorum fixed by the Act for a meeting of the Board, the continuing directors or director may act for the purpose of increasing the number of directors to that fixed for the quorum, or of summoning a general meeting of the company, but for no other purpose.

76. (1) The Board may elect a chairman of its meetings and determine the period for which he is to hold office.

(2) If no such chairman is elected, or if at any meeting the chairman is not present within five minutes after the time appointed for holding the meeting, the directors present may choose one of their number to be chairman of the meeting.

77. (1) The Board may, subject to the provisions of the Act, delegate any of its powers to committees consisting of such member or members of its body as it thinks fit.

(2) Any committee so formed shall, in the exercise of the powers so delegated, conform to any regulations that may be imposed on it by the Board.

78. (1) A committee may elect a chairman of its meetings.

(2) If no such chairman is elected, or if at any meeting the chairman is not present within five minutes after the time appointed for holding the meeting, the members present may choose one of their number to be chairman of the meeting.

79. (1) A committee may meet and adjourn as it thinks proper.

(2) Questions arising at any meeting of a committee shall be determined by a majority of votes of the members present, and in case of an equality of votes, the chairman shall have a second or Casting vote. 80. All acts done by any meeting of the Board or of a committee thereof or by any person acting as a director, shall, notwithstanding that it may be afterwards discovered that there was some defect in the appointment of any one or more of such directors or of any person acting as aforesaid, or that they or any of them were disqualified, be as valid as if every such director or such person had been duly appointed and was qualified to be a director. 81. Save as otherwise expressly provided in the Act, a reso- lution in writing, signed by all the members of the Board or of a committee thereof, for the time being entitled to receive notice of a meeting of the Board or committee, shall be as valid and effectual as if it had been passed at a meeting of the Board or committee, duly convened and held. Manager or Secretary

82. (1) A manager or secretary may be appointed by the Board for such term, at such remuneration and upon such conditions as 342 it may think fit; and any manager or secretary so appointed may be removed by the Board.

(2) A director may be appointed as manager or secretary. 83. A provision of the Act or these regulations requiring or authorising a thing to be done by or to a director and the manager or secretary shall not be satisfied by its being done by or to the same person acting both as director and as, or in place of, the manager or secretary. The Seal

84. (1) The Board shall provide for the safe custody of the seal.

(2) The seal of the company shall not be affixed to any instrument except by the authority of a resolution of the Board or of a committee of the Board authorised by it in that behalf, and except in the presence of at least two directors and of the secretary or such other person as the Board may appoint for the purpose; and those two directors and the secretary or other person aforesaid shall sign every instrument to which the seal of the company is so affixed in their presence. Dividends and Reserve 85. The company in general meeting may declare dividends, but no dividend shall exceed the amount recommended by the Board. 86. The Board may from time to time pay to the members such interim dividends as appear to it to be justified by the profits of the company.

87. (1) The Board may, before recommending any dividend. set aside out of the profits of the company such sums as it thinks proper as a reserve or reserves which shall, at the discretion of the Board, be applicable for any purpose to which the profits of the company may be properly applied, including provision for meeting contingencies or for equalising dividends; and pending such application, may, at the like discretion,' either be employed in the business of the company or be invested in such investments (other than shares of the company) as the Board may, from time to time, think fit.

(2) The Board may also carry forward any profits which it may think prudent not to divide, without setting them aside as a reserve.

88. (1) Subject to the rights of persons, if any, entitled to shares with special rights as to dividends, all dividends shall be declared and paid according to the amounts paid or credited as paid on the shares in respect whereof the dividend is paid, but if and so long as nothing is paid upon any of the shares in the company, dividends may be declared and paid according to the amounts of the shares. 343

(2) No amount paid or credited as paid on a share in advance of calls shall be treated for the purposes of this regulation as paid on the share.

(3) All dividends shall be apportioned and paid proportionately to the amounts paid or credited as paid on the shares during any portion or portions of the period in respect of which the dividend is paid; but if any share is issued on terms providing that it shall rank for dividend as from a particular date such share shall rank for dividend accordingly. 89.The Board may deduct from any dividend payable to any member all sums of money, if any, presently payable by him to the company on account of calls or otherwise in relation to the shares of the company.

90. (1) Any general meeting declaring a dividend or bonus may direct payment of such dividend or bonus, wholly or partly, by the distribution of specific assets; and the Board shall give effect to the resolution of the meeting.

(2) Where any difficulty arises in regard to such distribution, the Board may settle the same as it thinks expedient, and in particular may issue fractional certificates and fix the value for distribution of such specific assets or any part thereof and may determine that cash payments shall be made to any members upon the footing of the value so fixed in order to adjust the rights of all parties, and may vest any such specific assets in trustees as may seem expedient to the Board.

91. (1) Any dividend, interest or other moneys payable in cash in respect of shares may be paid by cheque or warrant sent through the post directed to the registered address of the holder or, in the case of joint holders, to the registered address of that one of the joint holders who is first named on the register of members, or to such person and to such address as the holder or joint holders may in writing direct.

(2) Every such cheque or warrant shall be made payable to the order of the person to whom it is sent. 92. Any one of two or more joint holders of a share may give effectual receipts for any dividends, bonuses or other moneys payable in respect of such share. 93. Notice of any dividend that may have been declared shall be given to the persons entitled to share therein in the manner mentioned in the Act. 94. No dividend shall bear interest against the company. Accounts

95. (1) The Board shall from time to time determine whether and to what extent and at what times and places and under what conditions or regulations, the accounts and books of the company, or any of them, shall be open to the inspection of members not being directors. 344

(2) No member (not being a director) shall have any right of inspecting any account or book or document of the company except as conferred by law or authorised by the Board or by the company in general meeting. Capitalisation of profits

96. (1) The company in general meeting may, upon the recom- mendation of the Board, resolve- (a) that it is desirable to capitalise any part of the amount for the time being standing to the credit of any of the company's reserve accounts, or to the credit of the profit and loss account, or otherwise available for distribution; and (b) that such sum be accordingly set free for distribution

in the manner specified in clause (2) amongst the members who would have been entitled thereto, if distributed by way of dividend and in the same proportions.

(2) The sum aforesaid shall not be paid in cash but shall be

applied, subject to the provision contained in clause (3), either in or towards- (i) paying up any amounts for the time being unpaid on any shares held by such members respectively; (ii) paying up in full, unissued shares or debentures of the company to be allotted and distributed, credited as fully paid up, to and amongst such members in the proportions aforesaid; or (iii) partly in the way specified in sub-clause (i) and partly in that specified in sub-clause (ii).

(3) A share premium account and a capital redemption reserve fund may, for the purposes of this regulation, only be applied in the paying up of unissued shares to be issued to members of the company as fully paid bonus shares.

(4) The Board shall give effect to the resolution passed by the company in pursuance of this regulation.

97. (1) Whenever such a resolution as aforesaid shall have been passed, the Board shall- (a) make all appropriations and applications of the un- divided profits resolved to be capitalised thereby, and all allotments and issues of fully paid shares or debentures, if any; and (b) generally do all acts and things required to give effect thereto.

(2) The Board shall have full power- (a) to make such provision, by the issue of fractional cer- tificates or by payment in cash or otherwise as it thinks fit, for the case of shares or debentures becoming distributable in fractions; and also (b) to authorise any person to enter, on behalf of all the members entitled thereto, into an agreement with the company 345 providing for the allotment to them respectively, credited as fully paid up, of any further shares or debentures to which they may be entitled upon such capitalisation, or (as the case may require) for the payment up by the company on their behalf, by the application thereto of their respective proportions of the profits resolved to be capitalised, of the amounts or any part of the amounts remaining unpaid on their existing shares.

(3) Any agreement made under such authority shall be effective and binding on all such members. Winding up

98. (1) If the company shall be wound up, the liquidator may, with the sanction of a special resolution of the company and any other sanction required by the Act, divide amongst the members, in specie or kind, the whole or any part of the assets. of the company, whether they shall consist of property of the same kind or not.

(2) For the purpose aforesaid, the liquidator may set such value as he deems fair upon any property to be divided as aforesaid and may determine how such division shall be carried out as between the members or different classes of members.

(3) The liquidator may, with the like sanction, vest the whole or any part of such assets in trustees upon such trusts for the bene- fit of the contributories as the liquidator, with the like sanction, shall think fit, but so that no member shall be compelled to accept any shares or other securities whereon there is any liability. 99. Every officer or agent for the time being of the company shall be indemnified out of the assets of the company against any liability incurred by him in defending any proceedings, whether civil or criminal, in which judgment is given in his favour or in which he is acquitted or in connection with any application under section 633 in which relief is granted to him by the Court. TABLE B MEMORANDUM OF ASSOCIATION OF A COMPANY LIMITED BY SHARES 1st.-The name of the company is "The Eastern Steam Packet Company, Limited". 2nd.-The registered office of the company will be situated in the State of Bombay. 3rd.-The objects for which the company is established are "the conveyance of passengers and goods in ships or boats between such places as the company may from time to time determine, and the doing of all such other things as are incidental or conducive to the attainment of the above object". 346 4th.-The liability of the members is limited. 5th.-The share capital of the company is two hundred thousand rupees, divided into one thousand shares of two hundred rupees each. We, the several persons whose names and addresses are subscribed, are desirous of being formed into a company in pursuance of this memorandum of association, and we respectively agree to take the number of shares in the capital of the company set opposite our respective names. Names, Addresses, Descriptions and Occupations of Subscribers. (Number of shares taken by each subscriber). 1. A. B. of ..............,merchant.....200 2. C.D. of ...............,merchant.....25 3. E.F. of .............., merchant....30 4. G.H. of .............., merchant....40 5. I.J. of ...............,merchant....15 6. K.L. of .............., meerchant...5 7. M.N. of .............., merchant...10 Total shares taken 325 Dated the day of 19 Witness to the above signatures X. Y. of TABLE C MEMORANDUM AND ARTICLES OF ASSOCIATION OF A COMPANY LIMITED BY GUARANTEE AND NOT HAVING A SHARE CAPITAL Memorandum of Association 1st.-The name of the company is "The Mutual Calcutta Marine Association, Limited". 2nd.-The registered office of the company will be situate in the State of West Bengal. 3rd.-The objects for which the company is established are "the mutual insurance of ships belonging to members of the company, and the doing of all such other things as are incidental or conducive to the attainment of the above object". 4th.-The liability of the members is limited. 5th.-Every member of the company 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 contracted before he ceases to be a member, and the costs, charges and expenses of winding up and for the adjustment of the rights of the contributories among themselves, such amount as may be required, not exceeding one hundred rupees. 347 We, the several persons whose names and addresses are subscribed, are desirous of being formed into a company, in pursuance of this memorandum of association. Names, Addresses, Descriptions and Occupations of Subscribers, 1. A. B. of...merchant. 2. C. D. of...merchant. 3. E. F. of...merchant. 4. G. H. of...merchant. 5. I. J. of...merchant. 6. K. L. of...merchant. 7. M. N. of...merchant. Dated the day of Witness to the above signatures X. Y. Of ARTICLES OF ASSOCIATION OF A COMPANY LIMITED By GUARANTEE AND NOT HAVING A SHARE CAPITAL Interpretation

1. (1) In these articles- (a) "the Act" means the Companies Act, 1956. (b) "the seal" means the common seal of the company.

(2) Unless the context otherwise requires, words or expressions contained in these regulations shall bear the same meaning as in the Act or any statutory modification thereof in force at the date at which these regulations become binding on the company. Members 2. The number of members with which the company proposes to be registered is 500, but the Board of directors may, from time to time, whenever the company or the business of the company requires it, register an increase of members. 3. The subscribers to the memorandum and such other persons as the Board shall admit to membership shall be members of the company. General meetings 4. All general meetings other than annual general meetings shall be called extraordinary general meetings.

5. (1) The Board may, whenever it thinks fit, call an extra- ordinary general meeting.

(2) If at any time there are not within India directors capable of acting, who are sufficient in number to form a quorum, any director or any two members of the company may call an extraordinary general meeting in the same manner as nearly as possible, as that in which such a meeting may be called by the Board. 348 Proceedings at general meetings

6. (1) No business shall be transacted at any general meeting unless a quorum of members is present at the time when the meeting proceeds to business.

(2) Save as herein otherwise provided, five members present in person shall be a quorum.

7. (1) If within half an hour from the time appointed for holding the meeting a quorum is not present, the meeting, if called upon the requisition of members, shall be dissolved.

(2) In any other case, the meeting shall stand adjourned to the same day in the next week, at the same time and place, or to such other day and at such other time and place as the Board may determine.

(3) If at the adjourned meeting a quorum is not present within half an hour from the time appointed for the meeting, the members present shall be a quorum. 8. The chairman, if any, of the Board shall preside as chairman at every general meeting of the company. 9. If there is no such chairman, or if he is not present within fifteen minutes after the time appointed for holding the meeting, or is unwilling to act as chairman of the meeting, the directors present shall elect one of their number to be chairman of the meeting. 10. If at any meeting no director is willing to act as chairman or if no director is present within fifteen minutes after the time appointed for holding the meeting, the members present shall choose one of their number to be chairman of the meeting.

11. (1) The chairman may, with the consent of any meeting at which a quorum is present, and shall if so directed by the meeting; adjourn the meeting from time to time and from place to place.

(2) No business shall be transacted at any adjourned meeting other than the business left unfinished at the meeting from which the adjournment took place.

(3) When a meeting is adjourned for thirty days or more, notice of the adjourned meeting shall be given as in the case of an original meeting.

(4) Save as aforesaid, it shall not be necessary to give any notice of an adjournment or of the business to be transacted at an adjourned meeting. 12. In the case of an equality of votes, whether on a show of hands or on a poll, the chairman of the meeting at which the show of hands takes place, or at which the poll is demanded, shall be entitled to a second or casting vote. 13. Any business other than that upon which a poll has been demanded may be proceeded with, pending the taking of the poll. 349 Votes of members 14. Every member shall have one vote. 15. A member of unsound mind, or in respect of whom an order has been made by any Court having jurisdiction in lunacy, may vote, whether on a show of hands or on a poll, by his committee or other legal guardian, and any such committee or guardian may, on a poll, vote by proxy. 16. No member shall be entitled to vote at any general meeting unless all sums presently payable by him to the company have been paid.

17. (1) No objection shall be raised to the qualification of any voter except at the meeting or adjourned meeting at which the vote objected to is given or tendered, and every vote not disallowed at such meeting shall be valid for all purposes.

(2) Any such 'objection made in due time shall be referred to the chairman of the meeting, whose decision shall be final and con- clusive. 18. A vote given in accordance with the terms of an instrument of proxy shall be valid, notwithstanding the previous death or in- sanity of the principal or the revocation of the proxy or of the authority under which the proxy was executed: Provided that no intimation in writing of such death, insanity, revocation or transfer shall have been received by the company at its office before the commencement of the meeting or adjourned meeting at which the proxy is used. Board of directors 19. The number of the directors and the names of the first directors shall be determined in writing by the subscribers of the memorandum or a majority of them.

20. (1) The remuneration of the directors shall, in so far as it consists of a monthly payment, be deemed to accrue from day to day.

(2) The directors may also be paid all travelling, hotel and other expenses properly incurred by them- (a) in attending and returning from meetings of the Board or any committee thereof or general meetings of the company; or (b) in connection with the business of the company. Proceedings of meetings of Board

21. (1) The Board of directors may meet for the despatch of business, adjourn and otherwise regulate its meetings, as it thinks fit.

(2) A director may, and the managing agent, secretaries and treasurers, manager or secretary on the requisition of a director shall, at any time, summon a meeting of the Board. 350

22. (1) Save as otherwise expressly provided in the Act, ques- tions arising at any meeting of the Board shall be decided by a majority of votes.

(2) In case of an equality of votes, the chairman shall have a second or casting vote. 23. The continuing directors may act notwithstanding any vacancy in the Board; but, if and so long as their number is reduced below the quorum fixed by the Act for a meeting of the Board, the continuing directors or director may act for the purpose of increasing the number of directors to that fixed for the quorum, or of summoning a general meeting of the company, but for no other purpose.

24., (1) The Board may elect a chairman of its meetings determine the period for which he is to hold office.

(2) If no such chairman is elected, or if at any meeting the chairman is not present within five minutes after the time appointed for holding the meeting, the directors present may choose one of their number to be chairman of the meeting.

25. (1) The Board may, subject to the provisions of the Act, delegate any of its powers to committees consisting of such member or members of its body as it thinks fit.

(2) Any committee so formed shall, in the exercise of the powers so delegated, conform to any regulations that may be imposed on it by the Board.

26. (1) A committee may elect a chairman of its meetings.

(2) If no such chairman is elected, or if at any meeting the chairman is not present within five minutes after the time appointed for holding the meeting, the members present may choose one of their number to be chairman of the meeting.

27. (1) A committee may meet and adjourn as it thinks proper.

(2) Questions arising at any meeting of a committee shall be deter-mined by a majority of votes of the members present, and in case of an equality of votes, the chairman shall have a second or casting vote. 28. All acts done by any meeting of the Board or of a committee thereof, or by any person acting as a director, shall, notwithstanding that it may be afterwards discovered that there was some defect in the appointment of any one or more of such directors or of any person acting as aforesaid, or that they or any of them were disqualified be as valid as if every such director or such person had been duly appointed and was qualified to be a director. 29. Save as otherwise expressly provided in the Act, a resolution in writing, signed by all the members of the Board or a committee thereof for the time being entitled to receive notice of a meeting of the Board or committee, shall be as valid and effectual as if it had been passed at a meeting of the Board or committee duly convened and held. 351 Manager or Secretary

30. (1) A manager or secretary may be appointed by the Board for such term, at such remuneration and upon such conditions as it may think fit; and any manager or secretary so appointed may be removed by the Board.

(2) A director may be appointed as manager or secretary. 31. A provision of the Act or these regulations requiring or authorising a thing to be done by or to a director and the manager or secretary shall not be satisfied by its being done by or to the same person acting both as director and as, or in place of, the manager or secretary. The seal

32. (1) The Board shall provide for the safe custody of the seal

(2) The seal of the company shall not be affixed to any instrument except by the authority of a resolution of the Board of directors, and except in the presence of at least two directors and of the secretary or such other person as the Board may appoint for the purpose; and those two directors and the secretary or other person an aforesaid shall sign every instrument to which the seal of the company is so affixed in their presence. Names, addresses, Descriptions and Occupations of Subscribers 1. A. B. of...Merchant 2. C. D. of...Merchant 3. E. F. of...Merchant 4. G. H. of...Merchant 5. I. J. of...Merchant 6. K. L. of Merchant 7. M. N. of Merchant Dated the day of..........19 Witness to the above signatures X Y. of TABLE D MEMORANDUM AND ARTICLES OF ASSOCIATION OF A COMPANY LIMITED By GUARANTEE AND HAVING A SHARE CAPITAL Memorandum of Association 1st.-The name of the company is "The Snowy Range Hotel company, Limited". 2nd.-The registered office of the company will be situate in the State of West Bengal. 3rd.-The objects for which the company is established are "the facilitating of travelling in the Snowy Range, by providing hotels and conveyances by sea and by land for the accommodation of 352 Travellers and the doing of all such other things as are incidental or conducive to the attainment of the above object". 4th.-The liability of the members is limited. 5th.-Every member of the company 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, contracted before he ceases to be a member, and the costs, charges and expenses of winding up the same and for the adjustment of the rights of the contributories among themselves, such amount as may be required, not exceeding fifty rupees. 6th.-The share capital of the company shall consist of five hundred thousand rupees, divided into five thousand shares of one hundred rupees each'. We, the several persons whose names and addresses are subscribed are desirous of being formed into a company, in pursuance of this memorandum of association, and we respectively agree to take the number of shares in the capital of the company set opposite our res- pective names. Number of sharer Names, Addresses, Descriptions and Occupations taken by each of Subscribers .. subscriber 1. A. B. of Merchant................200 2. C. D. of Merchant................ 25 3. E. F. of Merchant.................30 4. G. H. of Merchant................40 5. I. J. of Merchant................15 6. K. L. of Merchant...................5 7. M. N. of Merchant..................10 ----------- Total shares taken 325 Dated the day of 19. Witness to the above signatures. X. Y. of ARTICLES OF ASSOCIATION OF A COMPANY LIMITED BY GUARANTEE AND HAVING A SHARE CAPITAL. 1.The number of members with which the company proposes to be registered is 100, but the directors may from time to time register an increase of members. 353 2. All the articles of Table A in Schedule I annexed to the Companies Act, 1956, shall be deemed to be incorporated with these articles and to apply to the company. Names, Addresses, Descriptions and Occupations of Subscribers 1. A. B. of Merchant. 2. C. D. of Merchant. 3. E. F. of Merchant. 4. G. H. of Merchant. 5. I. J. of Merchant. 6. K. L. of Merchant. 7. M. N. of Merchant. Dated the day of 19 Witness to the above signatures. X. Y. of TABLE E MEMORANDUM AND ARTICLES OF ASSOCIATION OF AN UNLIMITED COMPANY Memorandum of Association 1st.-The name of the company is "The Patent Stereotype Company". 2nd.-The registered office of the company will be situate in the State of West Bengal. 3rd.-The objects for which the company is established are "the working of a patent method of founding and casting stereotype plates of which method P. Q., of Bombay, is the sole patentee". We, the several persons whose names are subscribed, are desirous of being formed into a company in pursuance of this memorandum of association, and we respectively agree to take the number of shares in the capital of the company set opposite our respective names. Number of shares Names Addresses, Descriptions and Occupations taken by each of Subscribers subscriber 1. A. B. of...Merchant 3 2. C. D. of...Merchant 2 3. E. F. of...Merchant 1 4. G. H. of...Merchant 2 5. I. J. of...Merchant 2 6. K. L. of...Merchant 1 7. M. N. of...Merchant 1 ---------- Total shares taken 12 Dated the day of 19 Witness to the above signatures. X. Y. of 354 ARTICLES OF ASSOCIATION OF AN UNLIMITED COMPANY 1. The number of members with which the company proposes to be registered is 20, but the Board may from time to time register an increase of members. 2. The share capital of the company is twenty thousand rupees, divided into twenty shares of one thousand rupees each. 3. The company may by special resolution- (a) increase the share capital by such sum to be divided into shares of such amount as the resolution may prescribe; (b)consolidate its shares into shares of a larger amount than its existing shares; (c) sub-divide its shares into shares of a smaller amount than its existing shares; (d) cancel any shares which at the date of the passing of the resolution have not been taken or agreed to be taken by any person; (e) reduce its share capital in any way. 4. All the articles of Table A in Schedule I to the Companies Act, 1956, except articles (36, 37, 38, 39, 44, 45 and 46) shall be deemed to be incorporated with these articles and to apply to the company. Names, Addresses, Descriptions and Occupations of Subscribers. 1. A. B. of Merchant. 2. C. D. of Merchant. 3. E. F. of Merchant. 4. G. H. of Merchant. 5. I. J. of Merchant. 6. K. L. of Merchant. 7. M. N. of Merchant. Dated the day of 19 Witness to the above signatures. X. Y. of TABLE F FORM OF STATEMENT TO BE PUBLISHED By LIMITED BANKING COMPANIES, INSURANCE COMPANIES AND DEPOSIT, PROVIDENT OF BENEFIT SOCIETIES. *The share capital of the company is Rs divided into shares of Rs each. --------------------------------------------------------------------- *If the company has no capital divided into shares, the portion of the statement relating to capital and shares must be omitted. 355 The number of shares issued is Calls to the amount of Rs per share have been made, under which the sum of Rs has been received. The liabilities of the company on the thirty-first day of December (or thirtieth day of June) were- Debts owing to sundry persons by the company: Under decree, Rs. On mortgages or bonds, Rs. On notes, bills or hundis, Rs. On other contracts, Rs. On estimated liabilities, Rs. The assets of the company on that day were: Government securities [stating them], Rs. Bills of exchange, hundis, and promissory notes, Rs. Cash at the Bankers, Rs. Other securities, Rs. SCHE

[See sections 44 (2) (a) and 56]

[See sections 44 (2) (a) and 56]

1. (1) Save as hereinafter provided in clause 27, the main objects of the company, with the names, addresses, descriptions and occupations of the signatories of the memorandum and the number of shares subscribed for by them.

(2) The number and classes of shares, if any, and the nature and extent of the interest of the holders in the property and profits of the company.

(3) The number of redeemable preference shares intended to be issued, with the date of redemption or, where no date is fixed, the period of notice required for redeeming the shares and the proposed method of redemption.

2. (1) The number of shares, if any, fixed by the articles as the qualification of a director.

(2) Any provision in the articles as to the remuneration of the directors whether for their services to the company as directors, managing directors or otherwise.

3. (1)The names, addresses, descriptions and occupations of- (a) the directors or proposed directors; (b) the managing director or proposed managing director, if any; 356 (c) the managing agent or proposed managing agent, if any; (d) secretaries and treasurers or proposed secretaries and ,treasurers, if any; (e) the manager or proposed manager, if any.

(2) Any provision in the articles or in any contract which has been entered into as to the appointment of a managing director, managing agent, secretaries and treasurers or manager, the remuneration payable to him or them, and the compensation, if any, payable to him or them for loss of office. 4.In the case of a company managed by a managing agent or secretaries and treasurers which is a body corporate, the subscribed capital of that body. 5.Where shares are offered to the public for subscription, parti- culars as to- (a) the minimum amount which, in the opinion of the directors or of the signatories of the memorandum arrived at after due inquiry, must be raised by the issue of those shares in order to provide the sums, or, if any part thereof is to be defrayed in any other manner, the balance of the sums, required to be provided in respect of each of the following heads and distinguishing the amount required under each head : - (i) the purchase price of any property purchased or to be purchased which is to be defrayed in whole or in part out of the proceeds of the issue; (ii) any preliminary expenses payable by the company, and any commission so payable to any person in consideration of his agreeing to subscribe for, or of his procuring or agree- ing to procure subscriptions for, any shares in the company; (iii) the repayment of any moneys borrowed by the company in respect of any of the foregoing matters; (iv) working capital; (v) any other expenditure, stating the nature and purpose thereof and the estimated amount in each case; and (b) the amounts to be provided in respect of the matters aforesaid otherwise than out of the proceeds of the issue and the sources out of which those amounts are to be provided. 6. The time of the opening of the subscription lists. 7. The amount payable on application and allotment on each share, and in the case of a second or subsequent offer of shares, the amount offered for subscription on each previous allotment made within the two preceding years, the amount actually allotted, and the amount, It any, paid on the shares so allotted. 357 8.The substance of any contract or arrangement or proposed contract or arrangement, whereby any option or preferential right of any kind has been or is proposed to be given to any person to subscribe for any shares in or debentures of, a company, giving the number, description and amount of any such shares or debentures and including the following particulars of "he option or right: - (a) the period during which the option or right is exercis- able; (b) the price to be paid for shares or debentures subscribed for under the option or right; (c) the consideration, if any, given or to be given for the option or right or for the right thereto; (d) the names, addresses, descriptions and occupations, of, the persons to whom the option or right or the right thereto has been given or is proposed to be given or, if given to existing shareholders or debenture holders as such, the description and numbers of the relevant shares or debentures; (e) any other material fact or circumstances relevant to the grant of the option or right. Explanation. Subscribing for shares or debentures shall, for the purposes of this clause, include acquiring them from a person to whom they have been allotted or agreed to be allotted with a view to his offering them for sale. 9. The number, description and amount of shares and debentures which within the two preceding years have been issued, or agreed to be issued, as fully or partly paid up otherwise than in cash, and in the latter case the extent to which they are so paid up, and in either case the consideration for which those shares or debentures have been issued or agreed to be issued. 10. The amount paid of payable by way of premium, if any, on each share which has been issued within the two years preceding the date of the prospectus, or is to be issued, stating the dates or proposed dates of issue and, where some shares have been or are to be issued at a premium and other shares of the same class at a lower premium, or at par or at a discount, the reasons for the differ- entiation and how any premiums received have been or are to be disposed of. 11. Where any issue of shares or debentures is underwritten, the names of the underwriters, and the opinion of the directors that the resources of the underwriters are sufficient to discharge their obligations.

12, (1) As respects any property to which this clause applies- (a) the names, addresses, descriptions and occupations of the vendors; (b) the amount paid or payable in cash, shares or debentures to the vendor and, where there is more than one separate vendor, or the company is a sub-purchaser, the amount so paid or pay- 358 able to each vendor, specifying separately the amount, if any, paid or payable for goodwill; (c) the nature of the title or interest in such property acquired or to be acquired by the company; (d) short particulars of every transaction relating to the property completed within the two preceding years, in which any vendor of the property to the company or any person who is, or was at the time of the transaction, a promoter or a director or proposed director of the company had any interest, direct or indirect, specifying the date of the transaction and the name of such promoter, director or proposed director and stating the amount payable by or to such vendor, promoter, director or proposed director in respect of the transaction.

(2) The property to which sub-clause (1) applies is property purchased or acquired by the company or proposed so to be purchased or acquired, which is to be paid for wholly or partly out of the proceeds of the issue offered for subscription by the prospectus or the purchase or acquisition of which has not been completed at the date of the issue of the prospectus, other than property- (a) the contract for the purchase or acquisition whereof was entered into in the ordinary course of the company's business the contract not being made in contemplation of the issue nor the Issue in consequence of the contract; or (b) as respects which the amount of the purchase money is not material.

(3) For the purposes of this clause, where any of the vendors is a firm, the members of the firm shall not be treated as separate vendors. 13. The amount, if any, or the nature and extent of any consi- deration, paid within the two preceding years, or payable as com- mission to any person (including commission so paid or payable to any sub-underwriter, who is promoter or officer of the company) for subscribing or agreeing to subscribe, or procuring or agreeing to procure subscriptions for any shares in, or debentures of the company; and giving also the following particulars, namely:- (a)the name, address, description and occupation of each such person; (b) particulars of the amounts which each has underwritten or sub-underwritten as aforesaid; (c) the rate of the commission payable to each for such underwriting or sub-underwriting; (d) any other material term or condition of the underwriting or sub-underwriting contract with each such person; and (e) when any such person is a company or a firm, the nature of any interest, direct or indirect, in such company or firm of any promoter or officer of the company in respect of which the prospectus is issued. 357

14. (1) Save as hereinafter provided in clause 27, amount or estimated amount of preliminary expenses and the persons by whom any of those expenses have been paid or are payable.

(2) Save as aforesaid, the amount or estimated amount of the expenses of the issue and the persons by whom any of those expenses have been paid or are payable. 15. Any amount or benefit paid or given within the two preceding years or intended to be paid or given to any promoter or officer, and the consideration for the payment or the giving of the benefit.

16. (1) The dates of, parties to, and general nature of- (a) every contract appointing or fixing the remuneration of a managing director, managing agent, secretaries and treasurers or manager whenever entered into, that is to say, whether within, or more than, two years before the date of the prospectus; (b) every other material contract, not being a contract entered into in the ordinary course of the business carried on or intended to be carried on by the company or a contract entered into more than two years before the date of the prospectus.

(2)A reasonable time and place at which any such contract or a copy thereof may be inspected. 17.The names and addresses of the auditors, if any, of the company.

18. (1) Full particulars of the nature and extent of the interest, if any, of every director or promoter- (a) in the promotion of the company; or (b) in any property acquired by the company within two years of the date of the prospectus or proposed to be acquired by it.

(2) Where the interest of such a director or promoter consists in being a member of a firm or company, the nature and extent of the interest of the firm or company, with a statement of all sums paid or agreed to be paid to him or to the firm or company in cash or shares or otherwise by any person either to induce him to become, or to qualify him as, a director, or otherwise for services rendered by him or by the firm or company in connection with the promotion or formation of the company. 19. If the share capital of the company is divided into different classes of shares, the right of voting at meetings of the company conferred by, and the rights in respect of capital and dividends attached to, the several classes of shares respectively. 20. Where the articles of the company impose any restrictions upon the members of the company in respect of the right to attend, speak or vote at meetings of the company or of the right to transfer shares, or upon the directors of the company in respect of their powers of management, the nature and extent of those restrictions. 360

21. (1) In the case of a company which has been carrying on business, the length of time during which the business of the company has been carried on.

(2) If the company proposes to acquire a business which has been carried on for less than three years, the length of time during which the business has been carried on.

22. (1) If any reserves or profits of the company or any of its subsidiaries have been capitalised, particulars of the capitalisation.

(2) Particulars of the surplus arising from any revaluation of the assets of the company or any of its subsidiaries during the two years preceding the date of the prospectus and the manner in which such surplus has been dealt with. 23.A reasonable time and place at which copies of all balance sheets and profit and loss accounts, if any, on which the report of the auditors under Part II of this Schedule is based, may be inspected. PART II.-Reports to be set out

24. (1) A report by the auditors of the company with respect to- (a) profits and losses and assets and liabilities, in

accordance with sub-clause (2) or (3) of this clause, as the case may require; and (b) the rates of the dividends, if any, paid by the company in respect of each class of shares in the company for each of the five financial years immediately preceding the issue of the prospectus, giving particulars of each class of shares on which such. dividends have been paid and particulars of the cases in which no dividends have been paid in respect of any class 'of shares for any of those years; and, if no accounts have been made up in respect of any part of the period of five years ending on a date three months before the issue of the prospectus, containing a statement of that fact.

(2) If the company has no subsidiaries, the report shall- (a) so far as regards profits and losses, deal with the profits or losses of the company (distinguishing items of a nonrecurring nature) for each of the five financial years immediately preceding the issue of the prospectus; and (b) so far as regards. assets and liabilities, deal with the assets and liabilities of the company at the last date to which the accounts of the company were made up.

(3) If the company has subsidiaries, the report shall- (a) so far as regards profits and losses, deal separately with the company's profits or losses as provided by sub- clause

(2) and in addition, deal either- (i) as a whole with the combined profits or losses of its subsidiaries, so far as they concern members of the company; or 361 (ii) individually with the profits or losses of each subsidiary, so far as they concern members of the company; or, instead of dealing separately with the company's profits or losses, deal-as a whole with the profits or losses of the company, and, so far as they concern members of the company, with the combined profits or losses of its subsidiaries; and (b) so far as regards assets and liabilities, deal separately with the company's assets and liabilities as

provided by subclause (2) and in addition, deal either- (i) as a whole with the combined assets and liabilities of its subsidiaries, with or without the company's assets and liabilities; or (ii) individually with the assets and liabilities of each subsidiary; - and shall indicate as respects the assets and liabilities of the subsidiaries, the allowance to be made for persons other than members of the company. 25. If the proceeds, or any part of the proceeds, of the issue of the shares or debentures- are or is to be applied directly or indirectly- (i) in the purchase of any business; or (ii) in the purchase of an interest in any business and by reason of that purchase or, anything to be done in consequence thereof, or in connection therewith, the company will become entitled to an interest, as respects either the capital or profits and losses or both, in such business exceeding fifty per cent. thereof; a report made by accountants (who shall be named in the prospectus) upon- (a) the profits or losses of the business for each of the five financial years immediately preceding the issue of the prospectus; and (b) the assets and liabilities of the business at the last date to which the accounts of the business were made up; being a date not more than one hundred and twenty days before the date of the issue of the prospectus.

26 (1) If- (a) the proceeds, or any part of the proceeds, of the issue of the shares or debentures are or is to be applied directly or indirectly in any manner resulting in the acquisition by the company of shares in any other body corporate; and 362 (b) by reason of that acquisition or anything to be done in consequence thereof or in connection therewith, that body corporate will become a subsidiary of the company; a report made by accountants (who shall be named in the prospectus) upon- (i) the profits or losses of the, other body corporate for each of the five financial years immediately preceding the issue of the prospectus; and (ii) the assets and liabilities of the other body corporate at the last date to which its accounts were made up.

(2) The said report shall- (a) indicate how the profits or losses of the other body corporate dealt with by the report would, in respect of the shares to be acquired-, have concerned members of the company and what allowance would have fallen to be made, in relation to assets and liabilities so dealt with, for holders of other shares, if the company had at all material times held the shares to be acquired; and (b) where the other body corporate has subsidiaries, deal with the profits or losses and the assets and liabilities of the body corporate and its subsidiaries in the manner

provided by sub-clause (3) of clause 24 of this Schedule in relation to the company and its subsidiaries. PART III.-Provisions applying to Parts I and II of Schedule 27.Clause-1 (so far as it relates to particulars of the signatories of the memorandum and the shares subscribed for by them) and clause 14 (so far as it relates to preliminary expenses) of this Schedule shall not apply in the case of a prospectus issued more than two years after the date at which the company is entitled to commence business. 28. Every person shall, for the purposes of this Schedule, be deemed to be a vendor who has entered into any contract, absolute or conditional, for the sale or purchase, or for any option of purchase, of any property to be acquired by the company, in any case where- (a) the purchase money is not fully paid at the date of the issue of the prospectus; (b) the purchase money is to be paid or satisfied, wholly or in part, out of the proceeds of the issue offered for subscription by the prospectus; (c) the contract depends for its validity or fulfilment on the result of that issue. 363 29. Where any property to be acquired by the company is to be taken on lease, this Schedule shall have effect as if the expression "vendor" included the lessor, the expression "purchase money" included the consideration for the lease, and the expression "sub-purchaser" included a sub-lessee. 30. If in the case of a company which has been carrying on busi- ness, or of a business which has been carried on for less than five financial years, the accounts of the company or business have only been made up in respect of four such years, three such years, two such years or one such year, Part II of this Schedule shall have effect as if references to. four financial years, three financial years, two financial years or one financial year, as the case may be, were substituted for references to five financial years. 31. Where the five financial years immediately preceding the issue of the prospectus which are referred to in Part II of this Schedule or in this Part cover a period of less than five years, references to the said five financial years in either Part shall have effect as if references to a number of financial years the aggregate period covered by which is not less than five years immediately preceding the issue of the prospectus were substituted for references to the five financial years aforesaid. 32. Any report required by Part II of this Schedule shall either- (a) indicate by way of note any adjustments as respects the figures of any profits or losses or assets and liabilities dealt with by the report which appear to the persons making the report necessary; or (b) make those adjustments and indicate that adjustments have been made. 33. Any report by accountants required by Part II of Us Schedule- (a) shall be made by accountants qualified under this Act for appointment as auditors of a company; and (b) shall not be made by any accountant who is an officer or servant, or a partner or in the employment of an officer or servant, of the company or of the company's subsidiary or holding company or of a subsidiary of the company's holding company. For the purposes of this clause, the expression "officer" shall in- clude a proposed director but not an auditor. 364 SCHE (See section 70) SCHEDULE III (See section 70) FORM OF STATEMENT IN LIEU OF PROSPECTUS TO BE DELIVERED To REGISTRAR BY A COMPANY WHICH DOES NOT ISSUE A PROSPECTUS OR WHICH DOES NOT GO To ALLOTMENT ON A PROSPECTUS ISSUED, AND REPORTS TO BE SET OUT THEREIN. PART I.-Form of Statement and Particulars to be contained therein The Companies Act, 1956. Statement in lieu of Prospectus delivered for registration by

[Insert the name of the company.]

4. Consideration 5. Names and addresses- Total purchase price Rs... . Cash Rs... .. Shares Rs..... Debentures Rs... Goodwill Rs... 366 Amount (if any) paid or payable as commission for subscribing or agreeing to subscribe or procuring or agreeing to procure subscriptions for any shares or debentures in the company ; or Rate of the commission The number of shares, if any, which persons have agreed to subscribe for a commission. If it is proposed to acquire any business, the amount, as certified by the persons by whom the accounts of the business have been audited, of the net profits of the business in respect of each of the five years immediately preceding the date of this statement, provided that in the case of a business which has been carried on for less than five years and the accounts of which have only been made up in respect of four years, three years, two years or one year, the above requirements shall have effect as if references to four years, three years, two years or one year, as the case may be, were substituted for references to five years, and in any such case the statement shall say how long the business to be acquired has been carried on. Where the financial year with respect to which the accounts of the business have been made up is greater or less than a year, references to five years, four years, three years, two years, and one year in this paragraph shall have effect as if references to such number of financial years as in the aggregate, cover a period of not less than five years, four years, three years, two years or' one year, as the case may be, were substituted for references to three years, two years and one year respectively. Estimated amount of preliminary ex- penses. By whom those expenses have been paid or are payable. Amount paid or intended to be paid to any promoter. 366 Amount paid.................... Amount paid payable........... Rate per cent................. Rs............................ Name of promoter. Amount Rs.................... Amount Rs.. . 367 Consideration for the payment Any other benefit given or intended to be given to any promoter. Consideration for the benefit. Dates of, parties to, and general nature of- (a) contract appointing or fixing the remuneration of directors, managing director, managing agent, secretaries and treasurers, or manager; and (b) every other material contract (other than (i) contracts entered into in the ordinary course of the business intended to be parried on by the company or (ii) entered into more than two years before the delivery of this statement.) Time and place at which (i) the

contracts or copies thereof or (2) (i) in the case of a contract not reduced into writing, a memorandum giving full particulars thereof, and (ii) in the case of a contract wholly or partly in a language other than English, a copy of a translation thereof in English or embodying a translation in English of the parts in the other language, as the case may be, being a translation certified in the pres- cribed manner to be a correct translation, may be inspected. Names and addresses of the auditors of the company (if any) Full particulars of the nature and extent of the interest of every director, managing director, managing agent, secretaries and treasurers or manager in the promotion of or in the property proposed to be acquired by the company, or where the interest of such a director consists in being a partner in a firm, the nature and extent of the interest of the firm, with a statement of all sums paid or agreed to be paid to him or to the firm in cash or shares, or otherwise, by any person either to induce him to become, or to qualify him as, a director, or otherwise for services 367 Consideration: Name of promoter: Nature and value of benefit Consideration: 368 rendered by him or by the firm in connection with the promotion or formation of the company. ---------------------------------- (Signatures of the persons above- named as directors or proposed directors, or of their agents authorised in writing.) Date. PART II.-REPORTS TO BE SET OUT 1. Where it is proposed to acquire a business, a report made by accountants (who shall be named in the statement) upon- (a) the profits or losses of the business in respect of each of the five financial years immediately preceding the delivery of the statement to the Registrar; and (b) the assets' and liabilities of the business as at the last date to which the accounts of the business were made up.

2.(1) Where it is proposed to acquire shares in a body corporate which by reason of the acquisition or anything to be done in conse- quence thereof or in connection therewith will become a subsidiary of the company, a report made by accountants (who shall be named in the statement) with respect to the profits and losses and assets and liabilities of the other body corporate in accordance with subclause

(2) or (3) of this clause, as the case may require, indicating how the profits or losses of the other body corporate dealt with by the report would, in respect of the shares to be acquired, have concerned members of the company, and what allowance would have fallen to be made, in relation to assets and liabilities so dealt with, for holders of other shares, if the company had at all material times held the shares to be acquired.

(2) If the other body corporate has no subsidiaries, the report

referred to in sub-clause (1) shall- (a) so far as regards profits and losses, deal with the profits or losses of the body corporate in respect of each of the five financial years immediately preceding the delivery of the statement to the Registrar; and (b) so far as regards assets and liabilities, deal with the assets and liabilities of the body corporate as at the last date to which the accounts of the body corporate were made up.

(3) If the other body corporate has subsidiaries, the report

referred to in sub-clause (1) shall- (a) so far as regards profits and losses, deal separately with the other body corporate's profits or losses as provided

by subclause (2), and in addition deal either- (i) as a whole with the combined profits or losses of its subsidiaries so far as they concern members of the other body corporate; or 369 (ii) individually with the profits or losses of each subsi- diary, so far as they concern members of the other body corporate; or, instead of dealing separately with the other body corporate's profits or losses, deal as a whole with the profits or losses of the other body corporate and, so far as they concern members of the other body corporate, with the combined profits or losses of its subsidiaries; and (b) so far as regards assets and liabilities, deal separately with the other body corporate's assets and liabilities as provided by

sub-clause (2) and, in addition, deal either- (i) as a whole with the combined assets and liabilities of its subsidiaries, with or without the other body corporate's assets and liabilities; or (ii) individually with the assets and liabilities of each subsidiary; and shall indicate, as respects the assets and liabilities of the subsidiaries the allowance to be made for persons other than members of the company. PART III.-PROVISIONS APPLYING TO PARTS I AND II OF THIS SCHEDULE

3.(1) In this Schedule, the expression "vendor" includes a vendor as defined in Part III of Schedule II.

(2) Clause 31 of Schedule II shall apply to the interpretation of Part II of this Schedule as it applies to the interpretation of Part II of Schedule II. 4. If in the case of a business which has been carried on, or of a body corporate which has been carrying on business, for less than five financial years, the accounts of the business-or body corporate have only been made up in respect of four such years, three such years, two such years or one such- year, Part II of this Schedule shall have effect as if references to four financial years, three financial years, two financial years or one financial year, as the case may be, were substituted for references to five financial years. 5.Any report required by Part II of this Schedule shall either- (a) indicate by way of note any adjustments as respects the figures of any profits or losses or assets and liabilities dealt with by the report which appear to the person making the report necessary; or (b) make those adjustments and indicate that adjustments have been made. 6.Any report by accountants required by Part II of this Schedule- (a)shall be made by accountants qualified under this Act for appointment as auditors of a company; and (b) shall not be made by any accountant who is an officer or servant, or a partner or in the employment of an officer or servant, of the company or of the company's subsidiary or holding company or of a subsidiary of the company's holding company. For the purposes of this clause, the expression "officer" shall include a proposed director but not in auditor. 370 SCHE

[See section 44 (2) (b)].

[See section 44(2)(b)]

Pursuant to clause (b) of sub-section (2) of section 44 of the Companies Act, 1956. Delivered for registration by The nominal share capital of the company Divided into Amount (if any) of above capital which consists of redeemable preference shares. The earliest date on which the Company has power to redeem these shares. Names, addresses, descriptions and occupations of- (a) directors or proposed directors; (b)managing director or proposed managing director; (c) managing agent or proposed managing agent; (d) secretaries and treasurers or proposed secretaries and treasurers; (e) manager or proposed manager. Any provision in the articles of the company, or in any contract irrespective of the time when it was entered into, as to the appointment of and remuneration payable to the persons referred to in (a),- (b), (c), (d) and (e) above Amount of shares issued Amount of commission paid or payable in connection therewith. Amount of discount, if any, allowed on the issue of any shares, or so much thereof as has not been written off at the date of the statement. 370 Rs..................... ....shares of Rs.....each .... " " ..... " .... " " ..... " ....shares of Rs.....each ....shares 371 Unless more than two years have elapsed since the date on which the company was entitled to commence business :- Amount of preliminary expenses. By whom those expenses have been paid or are payable. Amount paid or intended to be paid to any promoter. Consideration for the payment. Any other benefit given or intended to be given to any promoter. Consideration for the benefit. If the share capital of the company is divided into different classes of shares, the right of voting at meetings of the company conferred by, and the rights in respect of capital and dividends attached to, the several classes of shares respectively. Number and amount of shares and de- bentures issued within the two years preceding the date of this statement as fully or partly paid up otherwise than for cash or agreed to be so issued at the date of this statement. Consideration for the issue of those shares or debentures. Number, description and amount of any shares or debentures which any person has or is entitled to be given an option to subscribe for, or to acquire from. a person to whom they have been allotted or agreed to be allotted with a view to his offering them for sale. Period during which the option is exer- cisable. Price to be paid for shares or debentures subscribed for or acquired under the option. Consideration for the option or right to option. Persons to whom the option or the right to option was given or, if given to existing shareholders or debenture holders as such, the relevant shares or debentures. Names, addresses, descriptions and occupations of vendors of property

(1) purchased or------------------- 371 Rs..... Name of promoter: Amount Rs........ Consideration : Name of promoter: Nature and value of benefit: Consideration : 1.... shares of Rs... fully paid. 2... shares upon which Rs.... per share credited as paid. 3.. debentures for Rs.. each. 4... Consideration : 1...shares of Rs..... and debentures of Rs ..... 2. Until

4.Consideration 5.Names and addresses 372 acquired by the company within the two years preceding the date of

this statement or (2) agreed or proposed to be purchased or acquired by the company, except where the contract for its purchase or acquisition was entered into in the ordinary course of business and there is no connection between the transaction and the company ceasing to be a private company or where the amount of the purchase money is not material. Amount (in gash, shares or debentures) paid or payable to each separate vendor. Amount paid or payable in cash, shares or debentures for each such property, specifying the amount paid or payable for goodwill. Short particulars of every transaction relating to each such property which was completed within the two preceding years and in which any vendor to the company or any person who is, or was at the time thereof, a promoter, director or proposed director of the company had any interest direct or indirect. Amount (if any) paid or payable as commission for subscribing or agreeing to subscribe or procuring or agreeing to procure subscriptions for any shares or debentures in the company ; or rate of the commission. The number of shares, if any, which persons have agreed to subscribe for a commission. If it is proposed to acquire any business, the amount, as certified by the persons by whom the accounts of the business have been audited, of the net profits of the business in respect of each of the five years' immediately preceding the date of this statement, provided that in the case of a business which has been carried on for less than five years,and the accounts of which have only been made up in respect of four years, three years., two years or one year, the above requirements shall have effect as if references to four years, three years, two years or one year, as the case Total purchase price Rs............ Cash Rs............. Shares Rs,............ Debentures Rs............. Goodwill Rs............. -------------- Amount paid...... Amount payable Rate per cent ....... 373 may be, were substituted for refer- ences to five years, and in any such case, the statement shall say low long the business to be acquired has been carried on. Where the financial year with respect to which the accounts of the business have been made up is greater or less than a year, references to five years, four years, three years, two years and one year- in this paragraph shall have effect as if references to such number of financial years as, in the aggregate, cover a period of not less than five years, four years, three years, two years or one year, as the case may be, were substituted for references to three years, two years and one year respectively. Dates of, parties to, and general nature of- (a) contract appointing or fixing the remuneration of directors, managing director, managing agent, secretaries and treasurers or manager; and (b) every other material contract [other than (i) contracts entered into in the ordinary course of the business intended to be carried on by the company or (is) entered into more than two years before the delivery of this statement.]

Time and place at which (1) the

contracts or copies thereof; or (2) (i) in the case of a contract not reduced into writing, a memorandum giving full particulars thereof, and (it) in the case of a contract wholly or partly in a language other than English, a copy of translation thereof in English or embodying a translation in English of the parts in the other language, as the case may be, being a translation certified in the prescribed manner to be a correct translation, may be inspected. Names and addresses of the auditors of the company. 374 Full particulars of the nature and extent of the interest of every director, managing director, managing agent, secretaries and treasurers or manager, in any property purchased or acquired by the company within the two years preceding the date of this statement or proposed to be purchased or acquired by the company or, where the interest of such a director consists in being a partner in a firm, the nature and extent of the interest of the firm, with a statement of all sums paid or agreed to be paid to him or to the firm in cash or shares, or otherwise, by any person either to induce him to become or to qualify him as, a director, or otherwise for services rendered or to be rendered to the company by him or by the firm. Rates of the dividends (if any) paid by the company in respect of each class of shares in the company in each of the five financial years immediately preceding the date of this statement or since the incorporation of the company, whichever period is shorter. Particulars of the cases in which no dividends have been paid in respect of any class of shares in any of these years. ---------------------------------- (Signatures of the persons above- named as directors or proposed directors or of their agents authorised in writing.) Date. PART II.-REPORTS TO BE SET OUT 1.If unissued shares or debentures of the company are to be applied in the purchase of a business, a report made by accountants (who shall be named in the statement) upon- (a) the profits or losses of the business in respect of each of the five financial years immediately preceding the delivery of the statement to the Registrar; and (b) the assets and liabilities of the business as at the last date to which the accounts of the business were made up.

2. (1) If unissued shares or debentures of the company are to be applied directly or indirectly in any manner resulting in the acquisition of shares in a body corporate which by reason of the acquisition 375 or anything to be done in consequence thereof or in connection therewith will become a subsidiary of the company, a report made by accountants (who shall be named in the statement) with respect to the profits and losses and assets and liabilities of the other body

corporate in accordance with sub-clause (2) and (3) of this clause, as the case may require, indicating how the profits or losses of the other body corporate dealt with by the report would, in respect of the shares to be acquired, have concerned members of the company and what allowance would have fallen to be made, in relation to assets and liabilities so dealt with, for holders of other shares, if the company had at all material times held the shares to be acquired.

(2) If the other body corporate has no subsidiaries, the report

referred to in sub-clause (1) shall- (a) so far as regards profits and losses, deal with the profits or losses of the body corporate in respect of each or the five financial years immediately preceding the delivery of the statement to the Registrar; and (b) so far as regards assets and liabilities, deal with the assets and liabilities of the body corporate as at the last date to which the accounts of the body corporate were made up.

(3) If the other body corporate has subsidiaries, the report

referred to in sub-clause (1) shall- (a) so far as regards profits and losses. deal separately with the other body corporate's profits or losses as provided

by sub. clause (2), and in addition deal either- (i) as a whole with the combined profits or losses of its subsidiaries, so far as they concern members of the other body corporate; or (ii) individually with the profits or losses of each subsi- diary, so far as they concern members of the other body corporate; or, instead of dealing separately with the other body corporate's profits or losses, deal as a whole with the profits or losses of the other body corporate and, so far as they concern members of the other body corporate, with the combined profits or losses of its subsidiaries; and (b) so far as regards assets and liabilities, deal separately with the other body corporate's assets and

liabilities as provided by sub-clause (2) and in addition, deal either- (i) as a whole with the combined assets and liabilities of its subsidiaries, with or without the other body corporate's assets and liabilities; or (ii) individually with the assets and liabilities of each subsidiary; and shall indicate, as respects the assets and liabilities of the subsidiaries, the allowance to be made for persons other than members of the company. 376 PART III.-PROVISIONS APPLYING TO PARTS I AND II OF THIS SCHEDULE

3. (1) In this Schedule, the expression "vendor" includes a vendor as defined in Part III of Schedule IL

(2) Clause 31 of Schedule II shall apply to the interpretation of Parts I and II of this Schedule as it applies to the interpretation of Part II of Schedule II. 4.If in the case of a business which has been carried on, or of a body corporate which has been carrying on business, for less than five financial years, the accounts of the 'business or body corporate have only been made up in respect of four such years, three such years, two such years or one such year, Parts I and II of this Schedule shall have effect as if references to four financial years, three financial years, two financial years or one financial year, as the case may be, were substituted for references to five financial years. 5. Any report required by Part II of this Schedule shall either- (a) indicate by way of note any adjustments as respects the figures of any profits or losses or assets and liabilities dealt with by the report which appear to the persons making the report necessary; or (b) make those adjustments and indicate that adjustments have been made. 6. Any report by accountants required by Part II of this Sche- dule shall- (a) be made by accountants qualified under this Act for appointment as auditors of a company; and (b) shall not be made by any accountant who is an officer or servant or a partner or in the employment of an officer or servant, of the company, or of the company's subsidiary or holding company or of a subsidiary of the company's holding company. For the purposes of this clause, the expression "officer" shall include a proposed director but not an auditor. SCHE (See section 159). SCHEDULE V (See section 159) CONTENTS AND FORM OF ANNUAL RETURN OF A COMPANY HAVING A SHARE CAPITAL PART I.-Contents 1. The address of the registered office of the company. 2. If any part of the register of members or debenture holders of a company is, under the Provisions of this Act, kept in any State or 377 country outside India, the name of that State or country and the address of the place where such part of the register is kept. 3. A summary, distinguishing wherever possible between shares issued for cash, bonus shares, and shares other than bonus shares issued as fully or partly paid up otherwise than in cash, and specifying in respect of each class of shares the following particulars:- (a) the amount of the nominal share capital of the company and the number of shares into which it is divided; (b) the number of shares taken, from the commencement of the company up to the date of the company's last annual general meeting; (c) the amount called up on each share up to the date aforesaid; (d) the total amount of calls received up to that date; (e) the total amount of calls unpaid on that date; (f) the total amount of the sums (if any) paid by way of commission in respect of any shares or debentures up to that date; (g) the discount allowed on the issue of any shares issued at a discount or so much of that discount as has not been written off at the date, aforesaid; (h) the total amount of the sums (if any) allowed by way of discount in respect of any debentures since the date of the annual general meeting with reference to which the last return was submitted; (i) the total number of shares forfeited up to the date re- ferred to in sub-clause (b); (j) the total amount of shares for which share warrants are outstanding at the date referred to in sub-clause (b) and of share warrants issued and surrendered respectively since the date referred to in sub-clause (h) and the number of shares comprised in each warrant. 4.Particulars of the total amount of the indebtedness of the company on the date referred to in sub-clause (b) of clause 3 in respect of all charges (including mortgages) which are required to be registered with the Registrar under this Act, or which would have been required so to, be registered, if created on or after the 1st day of April, 1914. 378 5. A list- (a) containing the names, addresses, descriptions and occupations, if any, of all persons who, on the day of the company's last annual general meeting, are members of the company, and of persons who had ceased to be members on or before that day and since the date referred to in sub-clause (h) of clause 3 or, in the case of the first return, since the incorporation of the company; (b) stating the number of shares held by each of the exist- Ing members at the date referred in sub-clause (b) of clause 3, specifying shares transferred since the date referred to in subclause (h) of clause 3 (or, in the case of the first return, since the incorporation of the company) by persons who are still members and by persons who have ceased to be members respectively, and the dates of registration of the transfers; (c) if the names aforesaid are not arranged in alphabetical order, having annexed thereto an index sufficient to enable the name of any person therein to be easily found. 6. All such particulars, with respect to the persons who at the date of the company's last annual general meeting are the directors of the company and with respect to any person who at that date is the managing agent, secretaries and treasurers, the manager or the secretary of the company, as are by this Act required to be contained with respect to directors, the managing agent, secretaries and treasurers, the manager and the secretary respectively in the register of the directors, managing agents, secretaries and treasurers., managers and secretaries of a company together with all such particulars with respect to those who had ceased to hold such office (that is, the office of Director, Managing Agent, Secretaries and Treasurers, manager or Secretary) on or before the date of the last annual general meeting and since the date referred to in sub-clause (h) of clause 3 or in the case of the first return, since the incorporation of the company. PART II.-Form ANNUAL RETURN of Limited ---------------- Private Limited made up to the day of 19 being the date of the last annual general meeting of the company. 1. Address. (Address of the registered office of the company.) --------------------------------------------------------------------- 2.Situation of Foreign Registers of Members and Debenture holders. (a) Name of every State or- country outside India in which foreign register is kept. (b) Address of place in each such State or country in which a foreign register is kept. 3. Summary of Share Capital and Debentures. (a) Nominal Share Capital. Nominal share capital-Rs divided into : (Insert number and class) shares of....each 1. Ins. by notification No. G.S.R.279, dated 17-4-1958, vide Gazette of India, Part II, section 3(i), page-206. 379 (b) Issued Share Capital and Debentures. Number Class Number of shares of each class taken up to ... .... shares the date of the last annual general meet- .... .....shares ing (which number must agree with the .... .....shares total shown in the list as held by mem- .... .....shares bers on that date). .... .....shares Number of shares of each class issued sub- .... .....shares ject to payment wholly in cash. .... .....shares .... .....shares .... .....shares Number of shares of each class issued as .... .....shares fully paid up for a consideration other .... .....shares than cash. .... .....shares .... .....shares Number of shares of each class issued as .... .....shares partly paid up for a consideration other issued as paid up than cash and extent to which each to the extent of such share is so paid up. Rs... per share ..... .....shares issued as paid up to the extent of Rs... per share .... .......shares issued as paid up to the extent of Rs.....per share .... .......shares issued as paid up to the extent of Rs....per share Number of shares (if any) of each class .... ......shares issued at a discount. .... ......shares .... ......shares .... ......shares Amount of discount on the issue of shares Rs which has not been written off at the date of last annual general meeting. Amount called Rs..per share on .... .....shares upon number....Rs..per share on .... .....shares of shares of...Rs..per share on .... .....shares each class.....Rs..per share on .... .....shares Total amount of calls received, including payments on application and allotment and any sums received on shares forfeited. Rs............. 380 Number Class Total amount (if any) agreed to be con- sidered as paid on.. shares number of shares of. Rs...on shares each class issued as shares fully paid up for a shares consideration other than cash. Total amount (if any) ag- reed to be considered as paid on number of..... shares shares of each class..... Rs...on shares issued as partly paid shares up for a considera- shares tion other than cash. Total amount of calls unpaid Rs...... Total amount of the sums (if any) Rs...... paid by way of commission in respect of any shares or debentures. Total amount of the sums (if any) Rs...... allowed by way of discount in respect of any debentures since the date of the annual general meeting with reference to which the last annual return was submitted. Total number of shares of each class shares forfeited. shares shares shares Total amount paid (if any) on shares Rs...... forfeited. Total amount of shares for which share Rs...... warrants to bearer are outstanding. Total amount of share warrants to bearer Issued Rs issued and surrendered respectively Surrendered Rs since the date of the annual general, meeting with reference to which the last annual return was submitted. Number of shares comprised in each share warrant to bearer, specifying in the case of warrants of different kinds, particulars of each kind. --------------------------------------------------------------------- 4. Particulars of Indebtedness, Total amount of indebtedness of the company Rs in respect of all charges (including mortgages) which are required to be registered with the Registrar under the Companies 381 Act, 1956 or which would have been required so to be registered if created on or after the 1st April, 1914 5. List of Past and Present Members. List of persons holding shares or, stock in the company on the day of the annual general meeting, namely, the day of 19 and of persons who have held shares or stock therein at any time since the day of 19 when the previous annual meeting was held, or in the case of the first return, at any time since the incorporation of the company. ---------------------------------------------------------------------- Account of Shares --------------------------------------------------------------------- Particulars of shares transferred Folio in Names, Number since the date of the previous register addresses, of shares annual general meeting or, ledger descriptions held by in the case of the first return, containing and members since the incorporation particulars occupations, atdateof of the company, by (a) persons Remarks if any annual who are still members and (b) general persons who have ceased to meeting be members --------------------------------------------------------------------- Number Date of registration of transfer --------------------------------------------------------------------- (a) (b) --------------------------------------------------------------------- *The aggregate number of shares held by each member must be stated, and the aggregates must he added up so as to agree with the number of shares stated in the summary of share capital and debentures to have been taken up. When the shares are of different classes these columns should be sub-divided so that the number of each class held, or transferred, may be shown separately. Where any shares have been converted into stock, the amount of stock held by each member must be shown. The date of registration of each transfer should be given as well as the number of shares transferred on each date. The particulars should be placed opposite the name of the transferor and not opposite that of the transferee, but the name of the transferee may be inserted in the "]Remarks" column immediately opposite the particulars of each transfer. Notes 1.If either of the two immediately preceding returns has given as at the date of the annual general meeting with reference to which it was submitted, the full Particulars required as to past and present members and the shares and stock held and transferred by them, only such of the particulars need be given as relate to persons ceasing to be or becoming members since that date and to shares transferred since that date or to changes as compared with that date in the amount of stock held by a member. 2.If the names in the list are not arranged in alphabetical order, an index sufficient to enable the name of any person to be readily found must be annexed. 382 C. Particulars of the person who is Manager/Secretary of the company on the day of the last annual general meeting, namely, the .... day of... 19... and of the person (s) who ceased to be Manager/Secretary on or before that date and since the date referred to in sub-clause (h) of clause 3 of Part I of Schedule V to the Act, namely, the.... day of... 19....or, in the case of the first return, since the incorporation of the company. --------------------------------------------------------------------- Present name or Any former name Nationality and names and surname or names and sur- nationality of origin, in full. name in full. if different from pre- sent nationality. Usual reside- Business occu- Date of Date of cess- ntial address. pation and parti- appointment. ation, if any. culars of diretor- ships (d) managing agencies, offices of secretaries and treasures, managerships and secretaryships held in other companies/bodies corporate. --------------------------------------------------------------------- 1 2 3 4 5 6 7 --------------------------------------------------------------------- Note: (d) Where the person holds the office of managing director, the fact should be specifically mentioned. Signed....., Director. Signed....., Director/managing Director/Managing Agent/Sec- retaries & Treasurers/Manager/Secretary.] B. Particulars of the person/persons who is/are managing agent/secretaries and treasurers of the company on the day of the last annual general meeting, namely, the...day of...19...and of those who ceased to hold such offices on or before that date and since the date referred to in sub-clause (h) of clause 3 of Part I of Schedule V to the Act, namely, the....day of....19...., or, in the case of the first return, since the incorporation of the company. --------------------------------------------------------------------- Where the Managing Any former Nationality and Usual residen- Agent is an indivi- name or nationality of tial address. dual, present name names and origin if differ- (In the case or names and surn- surnames in ent from present of a firm or ame in full. Where full. nationality. (b) body corporate, the Managing Agent and (c). the registered is, or secretaries or principal and treasurers office) are, a firm, the firm name (b). Where the managing agent is or secretaries and treasurers are, a body corporate, the cor- porate name (c). Particulars of managing Date of appointment, Date of cess- agencies, offices of se- as managing agent/se- ation if any. cretaries and treasureres, cretaries and treasu- directorships, managerships rers in the company and secretaryships (in the filing the annual case of individuals) held return. in other companies/bodies corporate. --------------------------------------------------------------------- 1 2 3 4 5 6 7 --------------------------------------------------------------------- Note: (b) In the case of a firm, the full name, address and nationality of each partner and the date on which each became a partner should be indicated. (c) In the case of a body corporate, its corporate name and registred or principal office should be shown along with the full name, address and nationality of each of its directors. [6. Particulars of Directors, Managing Agents, Secretaries and Treasurers, Managers and Secretaries, Past and present. A. Particulars of the persons who are directors of the company on the day of the last annual general meeting, namely, the....day of... 19....and of persons who ceased to be directors on or before that date and since the date referred to in sub-clause (h) of clause 3 of Part I of Schedule V to the Company Act, 1956, namely, the.....day of... 19.... or, in the case of the first return, since the incorporation of the company. --------------------------------------------------------------------- Present name Any former Nationality Usual residential or names and name or names and Nation- address. surname in and surname ality of origin full (a). in full. if different from present Nationality. Busines occupation, Date of Date of Date of cessa- and particulars of birth. appointment. tion, if any. directorships (a) managing agencies, managerships and secretaryships held in other companies/ bodies corporate. --------------------------------------------------------------------- 1 2 3 4 5 6 7 --------------------------------------------------------------------- Note: (a) Where the person holds the office of managing director, that fact should be specially xxxx mentioned. 1 Subs. by notification No. G.S.R. 279, dated 17-4-58, vide Gazette of India, Part II, section 3 (i), page-206. 383 "Director" includes any person who occupies the position of a director by whatsoever name called, and any person in accordance with whose directions or instructions the Board of directors of the company is accustomed to act. "Name" includes a "forename", and "surname" in the case of a person usually known by a title different from his surname, means that title. "Former name" and "former surname" de not include- (a) in the case of a person usually known by a title different from his surname, the name by which he was known previous to the adoption of or succession to the title; or (b) in the case of any person, a former name or surname where that name or surname was changed or disused before the person bearing the name attained the age of eighteen years or has been changed or disused for a period of not less than twenty years; or (c) in the case of a married woman the name or surname by which she was known previous to the marriage. The names of all bodies corporate incorporated or carrying on business in India of which the director, managing agent, secretaries and treasurers, manager or secretary is also a director, managing agent, secretaries and treasurers, manager or secretary should be given, except bodies corporate of which the company making the return is the wholly-owned subsidiary or bodies corporate which are the wholly-owned subsidiaries either of the company or of another body corporate of which the company is the whollyowned subsidiary. A body corporate is deemed to be the wholly-owned subsidiary of another if it has no members except that other and that other's wholly-owned subsidiaries and its or their nominees. If the space Provided in the form is insufficient. Particulars of other directorships, managing agencies, offices of secretaries and treasurers, managerships, or secretaryships should be listed on a separate statement attached to this return. Dates of birth need only be given in the case of a company which is subject to section 280 of the Companies Act, 1956, namely, a company which is not a private company or which, being a private company, is the subsidiary of a public company. Where all the partners in a firm are joint secretaries, the name and principal office of the firm may be stated. *Delivered for filing by......................................... CERTIFICATES AND OTHER DOCUMENTS ACCOMPANYING ANNUAL RETURN Certificate to be given by a Director and the Managing Agent/ Secretaries and Treasurers, Manager/Secretary or by two Directors of every Private Company. We certify that the company has not since the date off [the incorporation of the company/the annual general meeting with reference to which the last annual return was submitted] issued any --------------------------------------------------------------------- *This should be printed at the bottom of the first page of the return. [In the case of the first return strike out the second alternative. In the case of a second or subsequent return strike out the first alternative. 384 invitation to the public to subscribe for any shares or debentures of the company. Signed........Director Signed.........Director/Managing Director/Managing Agent/Secretaries and Treasurers/Manager/Secretary.] Further Certificate to be given as aforesaid if the number of Members of the Company exceeds Fifty. We certify that the excess of the number of members of the company over fifty consists wholly of persons who, under sub-clause (b) of clause (iii) of-section 3 of the Companies Act, 1956, are not to be included in reckoning the number of fifty. Signed.........Director Signed.........Director/Managing Director/Managing agent/Secretaries and Treasures/Manager/Secretary.] Certified copies of Accounts There must be annexed to this return a written copy, certified both by a director and by the managing agent/secretaries and treasur- ers/manager/secretary of the company to be a true copy, of every balance-sheet laid before the company in general meeting during the period to which this return relates (including every document required by law to be annexed to the balance-sheet) and a copy (certified as aforesaid) of the report of the auditors on, and of the report of the directors accompanying, each such balance-sheet. If any such balance- sheet or document required by law to be annexed thereto is in a language other than English, there must also be annexed to that balance-sheet a translation in English of the balance-sheet or document certified in the prescribed manner to be a correct translation. If any such balance-sheet as aforesaid or document re- quired by law to be annexed thereto did not comply with the requirements of the law as in force at the date of the audit with respect to the form of balance-sheets or documents aforesaid, as the ease may be, there must be made such additions to and corrections in the copy as would have been required to be made in the balance-sheet or document in order to make it comply with the said requirements, and the fact that the copy has been so amended must be stated thereon. 1. Subs. by notification No. G.S.R. 279, dated 17-4-1958, vide Gazette of India, Part II, section 3(i), page-206. 385 SCHE (See Section 211). SCHEDULE XI (See Section 211) PART I.-Form of balance-sheet Balance Sheet of....(Her enter the name of the company) As at...(Here enter the date as at which the balance-sheet is made out) --------------------------------------------------------------------- LIABILITIES --------------------------------------------------------------------- Instruction in accordance with which liabilities Figures for the Figures for the should be made out previous year current year --------------------------------------------------------------------- Rs. Rs. (b) (b) *Terms of redemption or *I. SHARE CAPITAL: conversion (if any) of any Authorised...shares of Rs...each. Subs- Redeemable Preference Cap- cribed (distinguishing between the va- pital to be stated, together rious classes of capital and stating the with earliest date of rede- particulars specified below, in respect mption or conversion. of each class)..shares of Rs... each. Rs....called up. of the above shares, Particulars of any option are allotted as fully paid up pursuant to on unissued share capital to a contract without payments being rece- be specified ived in cash. shares,... shares are allotted as fully paid up by way of bonus shares. Less: Calls unpaid: (i) By managing agents or secretaries and treasures and where the managing ag- ent or secretaries and treasures are a firm, by the partners thereof, --------------------------------------------------------------------- --------------------------------------------------------------------- ASSETS --------------------------------------------------------------------- Instructions in accordance with Figures for Figures for which assets should be made out the previous the previous year year --------------------------------------------------------------------- Rs. Rs. (b) (b) *I. FIXED ASSETS: *Under each head the original cost, Distinguishing as far as poss- and the additions thereto and dedu- ible between expenditure upon ctions therefrom made during the (a) goodwill, (b) land, (c) year, and the total depreciation buildings, (d) leaseholds, (e) written off or provided upto the railway sidings, (f) plant and end of the year, to be stated. machinery, (g)furniture and fit- tings, (h) development of prop- erty, (i) patents, trade marks and designs, (j) live-stock and In case where figures of original (k)vehicles etc. cost cannot be ascertained, the valuation shown by the books shall be given and where any of the assets are sold and the original cost in respect thereof is not ascertainable, the amount of the sale proceeds shall be shown as deduction. --------------------------------------------------------------------- 386 --------------------------------------------------------------------- LIABILITIES --------------------------------------------------------------------- Instructions in accordance with which liabilities Figures for the Figures for the should be made out previous year current year --------------------------------------------------------------------- Rs. Rs. (b) (b) --------------------------------------------------------------------- and where the managing agent or secretaries and treasures are a private company, by the directors or members of that company. (ii) By directors. (iii) By others. --------------------------------------------------------------------- ASSETS --------------------------------------------------------------------- Instructions in accordance with Figures for Figures for the which assets should be made out. the pre- current year vious year --------------------------------------------------------------------- Rs. Rs. (b) (b) Where sums have been written off on a reduction of capital or a revaluation of assets, every balance-sheet (after the first balance-sheet) subsequent to the reduction or revaluation shall show the reduced figures and with the date of the reduction, in place of the original cost. Each balance-sheet for the first five years subsequent to the date of the reduction, shall show also, the amount of the reduction made. Similarly, where sums have been add- 387 Add: Forfeited shares (amount paid up). Share Premium Account. *Additions and deductions *II. RESERVES AND SURPLUS:

since last Balance-sheet to (1) Capital Reserves not available for be shown under each of the dividend. specified heads.

(2) Capital Redemption Reserve Fund.

(3) Other Reserves specifying the nature of each reserve and the amount in respect thereof. Less: Debit balance in Profit and Loss Account (if any).

(4) Any other Fund created out of net profit.

(5) Surplus, that is, balance in Profit and Loss Account, after providing for proposed allocations, viz., Dividend, Bonus or Reserves.

(6) Proposed additions to Reserves.

(7) Liability Funds.

(8) Sinking Funds.

(9) Pension, Insurance or Provident Funds, etc. --------------------------------------------------------------------- ed by writing up the assets, every bal- ance-sheet sub-sequent to such writing up shall show the increased figures with the date of the increase in place of the original cost. Each Balance-Sheet for the first five years subsequent to the date of writing II. INVESTMENTS: up shall also show the amount of incr- rease made. Showing nature of inves- tments and mode of valu- *Aggregate amount of company's quoted ation, for example, cost investment and also the market value or market value, and dist- thereof shall be shown. ingushing between---

*(1) Investmets in Govern- ments or Trust Securities.

*(2) Investment in shares, Aggregate amount of company's unquoted debentures or bonds. investments shall also be shown. (showing separately shares fully paid up and partly paid up and partly paid up and also distinguishing the different classes of shares).

*(3) Investments in shares, debentures or bonds of sub-sidiary companies (c).

(4) Immovable properties. ------------------------------------------------------------------- 388 PART I.--FORM OF BALANCE-SHEET-contd. --------------------------------------------------------------------- LIABILITIES --------------------------------------------------------------------- Instructions in accordance with which liabilities should be made out Figures for Figures for the the previous current year year --------------------------------------------------------------------- (b) (b) Rs. Rs. --------------------------------------------------------------------- *The nature of the security to III. SECURED LOANS: be specified in each case.

(1) Debentures.

Where leans have been gua- *(2) Loans and Advances from Banks. rantead by managing agents,

secretaries and treasurers, *(3) Loans and Advances from subsi- managers, and/or directors, diaries. a mention thereof shall also

be made and also the aggregate *(4) Other Loans and Advances. amounts of such loans under each head. --------------------------------------------------------------------- ASSETS ---------------------------------------------------------------------- Instructions in accordance with which assets should assets should be made out. Figures for Figures for the previous the current year year --------------------------------------------------------------------- Rs. Rs. (b) (b) INTEREST ACCRUED ON INVEST- Mode of valuation of stock shall MENTS be stated and the amount in respect of raw materials shall also be st- III. CURRENT ASSETS: ated separately where practicable.

(1) Stores and Spare Parts.

(2) Loose Tools.

**(4) Works in Progress. **Mode of valuation of works shall be stated. Less: Reserves. In regard to Sundry Debtors, particulars to be given separately of--(a) debts considered good and in respect of which the company is fully secured; and (b) debts considered good for which the company holds no 389 security other than the debtor's personal security; and (c) debts considered doubtful or bad. Debts due by directors or other officers of the company of any of them either severally or jointly with any other person or debts due by firms or private companies respectively in which any director is a partner or a director or a member to be separately stated. Debts due from other companies under the same management to be disclosed with the name of the companies (vide section 370). The maximum amount due by directors or other officers of the company at any time during the year to be shown by way of a note. IV. UNSECURED LOANS:

(1) Fixed Deposits.

(2) Loans and Advances from subsidiaries. ---------------------------------------------------------------------- 390 --------------------------------------------------------------------- LIABILITIES --------------------------------------------------------------------- Instruction in accordance with which liabilities sho- uld be made out. Figures for Figures for the the previous current year. year. --------------------------------------------------------------------- Rs. Rs. (b) (b) *See note (d) at foot *(Short Term Loans and Advances: of form. (a) From Banks. (b) From others.

(4) Other Loans and Advances: (a) From Banks. (b) From others. V. CURRENT LIABILITIES AND PROVISIONS:

(1) Acceptances.

(2) Sundry Creditors.

(3) Interest accrued and accruing on secured loans.

(4) Interest accrued and accruing on unsecured loans.

(5) Subsidiary Companies.

(6) Provision for Taxation.

(7) Provision for Contingencies.

(8) Proposed Dividends. --------------------------------------------------------------------- ASSETS --------------------------------------------------------------------- Instructions in accordance with which assets should be made out. Figures for Figures for the the previous current year. year. --------------------------------------------------------------------- Rs. Rs. (b) (b) The above instructions regarding

(1)Bills of Exchange. and Advances" also. In addition,

(2) Advances recoverable in Loans. kind or for value to 391

(9) Advance Payments and Unexpired Discounts for the portion for which value has still to be given, e.g., in the case of the following classes of companies :- (Newspaper, Fire Insurance, Theatre, Clubs, Banking, Steamship Companies, etc.)

(10) Unclaimed Dividends.

(11) Other Liabilities (if any).

(12) Contingent Liabilities: (i) Claims against the company not acknowledged as debts. (ii) Uncalled liability on shares partly paid held as investment. VI. CONTINGENT LIABILITIES NOT PROVIDED FOR:

The period for which the div- (1) Arrears of Fixed Comulative idends are in arrear or if Dividends. there is more than one class shares, the period for which the dividends on each such class are in arrear, shall be stated. The amount shall be stated before deduction of income-tax except that in the case of tax-free dividends the amount shall be shown free of income-tax and the fact that it is so shown shall be stated. --------------------------------------------------------------------- be received, e.g., Rates, Taxes, and Advances to subsidiary Insurances, etc. companies shall be separately stated.

(3) Balances on current account with managing agents or secre- taries and treasurers.

(4) Balances with Customs, Port Trust, etc. (where payable on demand). *V CASH AND BANK BALANCES. *The balances lying with Bankers on current accounts, deposit accounts shall be shown separately. 392 --------------------------------------------------------------------- LIABILITIES --------------------------------------------------------------------- Instruction in accordance with which liabilities Figures for Figures for the should be made out. the previous current year. --------------------------------------------------------------------- Rs. Rs. (b) (b) SCHE (See sections 368 and 379). SCHEDULE VII (See sections 368 and 379) Restrictions on powers of managing agent -------------------------- secretaries and treasurers The managing agent ----------------------- shall not exercise any of the secretaries and treasurers following powers except after obtaining the previous approval of the Board of directors of the company in regard to each such exercise:-

(1) Power to appoint (but not to suspend or dismiss) any person as manager of the company;

(2) Power to appoint as an officer or member of the staff 'of the company, payable from its funds (as distinguished from the funds of the managing agent or from out of any remuneration -------------------------- secretaries and treasurers him payable to---------by the company), any person-- them (a) on a remuneration or scale of remuneration exceeding the limits laid down by the Board in this behalf; or (b) who is a relative of the managing agent, or where the managing agent is a firm, of any partner in the firm, -------------------------- secretaries and treasurers are or where the managing agent is a private company, --------------------------------- secretaries and treasurers are of any director --or member of such company; 399

(3) Power to purchase capital assets for the company except where the purchase price is within the limits prescribed by the Board in this behalf;

(4) Power to sell the capital assets of the company, except where the sale price is within the limits prescribed by the Board in this behalf;

(5) Power to compound, or sanction the extension- of time for the satisfaction or payment of, any claim or demand of the company against (including any debt claimed to be due to it from) the managing agent or any associate of the--managing agent. -------------------- ------------------- secretaries and treasurers secretaries and treasurers.

(6)Power to compound any claim or demand made against the company (including any debt claimed to be due from it) by the managing agent managing agent. -------------- --------------- or any associate of the-secretaries and treasurers secretaries and treasurers. SCHE (See sections 347 and 379). SCHEDULE VIII (See sections 347 and 379) DECLARATIONS TO BE MADE BY FIRMS, PRIVATE COMPANIES AND OTHER BODIES CORPORATE ACTING AS MANAGING AGENTS -------------------------- SECRETARIES AND TREASURERS Definition

1. (1) In this Schedule, "relevant date" means- (a)in the case of a firm or body corporate holding office at the commencement of this Act as the managing agent ---------------------------- secretaries and treasurers of a company, the date of such commencement; and (b) in the case of a firm or body corporate appointed or reappointed after the commencement of this Act as the managing agent/ secretaries and treasurers of a company, the date of such appointment or re-appointment.

(2) For the purposes of sub-clause (1), the expressions "reappointment" and "re-appointed" shall have the same

meaning as they have for the purposes of sub-section (1) of section 328. 400 Firms 2. Every firm acting as the--managing agent/secretaries and treasurers of any company or companies shall file with each company, whether public or private, of which it acts as such, a declaration specifying- (a) the names of the partners constituting the firm on the relevant date; (b) the share, or the extent of the interest, of each partner in the firm, on the relevant date; (c) the names of persons, if any, other than partners, who are interested, on the relevant date, in any share of, or amount forming part of, the remuneration payable to the managing agent/secretaries and treasurers by the company; and the extent of the interest of each such person in such remuneration. 3.The declaration shall be signed by a partner of the firm and shall be filed within one month of the relevant date. 4.If any change occurs in regard to any of the matters specified in clause 2 after the relevant date, a declaration specifying the change and signed by a partner of the firm shall be filed, within three weeks of the occurrence of the change, with each of the com- panies referred to in that clause. Private companies 5.Every private company which acts as managing agent/ secretaries and treasurers of any other company or companies, whether public or private, shall file with each of those companies, a declaration specifying- (a) the names of the members of the private company on the relevant date; (b) where the private company has a share capital, the shares held by each member of the company, on that date; (c) where the private company has no share capital,' the extent of the interest of each member of the company in it on that date; (d) the manner in which each such member holds his shares or interest, that is to say, whether he holds the same beneficially, or on behalf of or in trust for any other person; and in the latter case, the name or names of the person or persons on whose behalf or in trust for whom the shares or interest is held and the extent of the interest of each such person; (e) the names of the directors of the private company, and the name of its managing director, if any; 401 (f) the names of persons, if any, who are interested in any share of, or amount forming part of, the remuneration payable to the private company by the company under its management, otherwise than as members of the private company; and the extent of the interest of each such person in such remuneration; (g) that no arrangement has been entered into to the knowledge of the private company, under which the control of the private company is vested in any persons other than the members of the company and the persons referred to in sub-clause (d): Provided that the obligation to furnish information on the matters specified in sub-clauses (d) and (f) shall extend only to such particulars relating to those matters as are within the knowledge of the private company. 6.The declaration shall be signed by a director of the private company and shall be filed within two months of the relevant date. 7.If, to the knowledge of the private company, there is a sale or transfer of any shares in the company or an agreement has been entered into, for the sale or transfer of any such shares, or an other change occurs in regard to any of the matters specified in clause 5 a declaration specifying the sale, transfer, agreement or change and signed by a director of the company shall be filed, within six weeks thereof, with each of the companies referred to in that clause. 8.Where any shares are sold or transferred or agreed to be sold or transferred, the declaration referred to in clause 7 shall specify the name of the person or persons who part with or have agreed to part with the shares and also the name or names of the person or persons who acquire or have agreed to acquire them, with full details of the sale, transfer or agreement Other bodies corporate 9. The provisions of clauses 5 to 8 shall apply to every body corporate (other than a private company) acting as the managing agent/secretaries and treasurers the of any company, unless it is exempt from the operation of the provisions of this Schedule by virtue of section 347/section 379 read with section 347. General

10.(1) All declarations filed with any company in pursuance of this Schedule shall be open to inspection, and extracts may be taken therefrom and copies thereof may be required, by any member of the company to the same extent, in the same manner and on payment of the same fee as in the case of the register of members of the company.

(2) All such declarations shall also be open 'to inspection by any director of the company, free of charge. 402 SCHE

[See Article 62 of the Table A and also section 176 (6)].

[See Article 62 of the Table A and also section 176 (6)]

Penalty for falsification of books. 539. Penalty for falsification of books.-If with intent to defraud or deceive any person, any officer or member of a company in respect of which an application has been made under section 397 or 398- (a) destroys, mutilates, alters, falsifies or secretes any books, papers or securities, or is privy to the destruction, mutilation, alteration, falsification, or secreting of any books, papers or securities; or (b) makes, or is privy to the making of, any false or frau- dulent entry in any register, book of account or document be- LONGING To the company, he shall be punishable with imprisonment for a term which may extend to seven years, and shall also be liable to fine.

Penalty for frauds by officers. 540. Penalty for frauds by officers.-If any person being at the time of the commission of the alleged offence, an officer of a company in respect of which the Court subsequently makes an order under section 397 or 398,- (a)has, by false pretences or by means of any other fraud, induced any person to give credit to the company; (b) with intent to defraud creditors of the company, has made or caused to be made any gift or transfer of or charge on, or has caused or connived at the levying of any execution against, the property of the company; or (c) with intent to defraud creditors of the company, has concealed or removed any Dart of the property of the company since the date of any unsatisfied judgment or order for pay- ment of money obtained against the company, or within two months before that date; he shall be punishable with imprisonment for a term which may extend to two years and shall also be liable to fine.

Liability where proper accounts not kept.

541. Liability where proper accounts not kept.-(1) Where an application has been made to the Court under section 397 or 398 in respect of a company, if it is shown that proper books of account were not kept by the company throughout the period of Two years immediately preceding the making of the application, or the period between the incorporation of the company and the making of the 406 application, whichever is shorter, every officer of the company who is in default shall, unless he shows that he acted honestly and that in the circumstances in which the business of the company was carried on, the default was excusable, be punishable with imprisonment for a term which may extend to one year.

(2) For the purposes of this section, proper books of account shall be deemed not to have been kept in the case of any company, if there have not been kept- (a) such books or accounts as are necessary to exhibit and explain the transactions and financial position of the business of the company, including books containing entries made from day to day in sufficient detail of all cash received and all cash paid; and (b) where the business of the company has involved dealings in goods, statements of the annual stocktakings and (except in the case of goods sold by way of ordinary retail trade) of all goods sold and purchased showing the goods and the buyers and sellers thereof 'in sufficient detail to enable those goods and those buyers and sellers to be identified.

Liability for fraudulent conduct of business.

542. Liability for fraudulent conduct of business.-(1) If in the course of the proceedings on an application made to the Court under section 397 or 398 in respect of a company, it appears that any busi- ness of the company has been carried on with intent to defraud creditors of the company, or any other persons, or for any fraudulent purpose, the Court may, if it thinks it proper so to do, declare that any persons who were knowingly parties to the carrying on of the business in the manner aforesaid shall be personally responsible, without any limitation of liability, for all or any of the debts or other liabilities of the company as the Court may direct.

(2) (a) Where the Court makes any such declaration, it may give such further directions as it thinks proper for the purpose of giving effect to that declaration. (b) In particular, the Court may make provision for making the liability of any such person under the declaration a charge on any debt or obligation due from the company to him, or on any mortgage or charge or any interest in any mortgage or charge on any assets of the company held by or vested in him, or any person on his behalf, or any person claiming as assignee from or through the person liable or any person acting on his behalf. (c) The Court may, from time to time, make such further order as may be necessary for the purpose of enforcing any charge imposed under this sub-section. (d) For the purpose of this sub-section, the expression "assignee" Includes any Person to whom or in whose favour, by the directions of the person liable, the debt, obligation, mortgage or charge was created, issued or transferred or the interest was created, but does not include an assignee for valuable consideration (not including consideration by way of marriages given in good faith and without 407 notice of any of the matters on the ground of which the declaration is made.

(3) Where any business of a company is carried on with such

intent or for such purpose as is mentioned in sub-section (1), every person who was knowingly a party to the carrying on of the business in the manner aforesaid, 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.

(4) This section shall apply, notwithstanding that the person concerned may be criminally liable in respect of the matters on the ground of which the declaration is to be made.

Power of Court to assess damages against delinquent directors, etc. 543. Power of Court to assess damages against delinquent

directors, etc.-(1) If, in the course of the proceedings on an application made to the Court under section 397 or 398, it appears that any person who has taken part in the promotion or formation of the company, or any past or present director, managing agent, secretaries and treasurers, manager or officer of the company- (a) has misapplied or retained or become liable or accountable for any money or property of the company; or (b) has been guilty of any misfeasance or breach of trust in relation to the company; the Court may, on the application of any creditor or member, examine into the conduct of such person, director, managing agent, secretaries and treasurers, manager or officer aforesaid, a compel him to repay or restore the money or property or any part thereof respectively, with interest at such rate as the Court thinks just or to contribute such sum to the assets of the company by way of compensation in respect of the misapplication, retainer, misfeasance or breach of trust as the Court thinks just.

(2) This section shall apply notwithstanding that the matter Is one for which the person concerned may be criminally liable.

Liability under sections 542 and 543 to extend to partners or directors in firm or company. 544. Liability under sections 542 and 543 to extend to partners or directors in firm or company. Where a declaration under section 542 or an order under section 543 is or may be made in respect of a firm or body corporate, the Court shall also have power to make a declaration under section 542 or pass an order under section 543, as the case may be, in respect of any person who is a partner in that firm or a director of that body corporate. 408 SCHE SCHEDULE XII (See section 644) ENACTMENTS REPLACED --------------------------------------------------------------------- Year NO. Subject or short title 1 2 3 --------------------------------------------------------------------- 1913 VII The Indian Companies Act, 1913. 1942 LIV The Registration of Transferred Companies Ordinance. 1951 LII The Indian Companies Amendment Act, 1951. 1952 LI The Indian Companies Amendment Act, 1952. ---------------------------------------------------------------------