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INTERPRETATION OF SECTION 52, 74 AND 100 OF THE COMPANIES ACT, 2013

(Term paper towards the fulfilment of assessment in the subject of Interpretation of Statutes)

INTERPRETATION OF SECTION 52, 74 AND 100 OF THE COMPANIES ACT, 2013 (Term paper towards the

Submitted By:

Lokesh Vasita (Roll No: 1332) Vishal Suresh (Roll No: 1377) Anindo Teji (Roll No: 1302) U.G. Semester-V B.A., LL.B. (Hons.)

Submitted To:

Dr. Ajay Kumar Sharma

Assistant Professor

NATIONAL LAW UNIVERSITY, JODHPUR SUMMER SESSION (JULY-NOVEMBER 2017)

Total Word Count: 5985

ACKNOWLEDGMENT

On the completion of this project, we take the opportunity of thanking the people who contributed in the completion of it, without whose aid, contribution and help this project

wouldn’t have seen practicability.

First we extend my heartfelt gratitude to, our mentor and Interpretation of Statutes Teacher, Dr. Ajay Kumar Sharma, Faculty of Law whose continuous guidance and support provided me with the much needed impetus and gave me a better insight into the topic. We are grateful to the IT

Staff for providing all necessary facilities for carrying out this work. We thank all members of the Library Staff for providing me the assistance anytime needed. We also thank our friends and batch mates for providing us the much needed aid whenever needed. Most importantly, we would like to thank our parents for providing us the much needed force for accomplishing this project.

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INTRODUCTION

The Companies Act 2013 is an Act of the Parliament of India which regulates incorporation of a company, responsibilities of a company, directors, dissolution of a company. The 2013 Act is divided into 29 chapters containing 470 sections as against 658 Sections in the Companies Act, 1956 and has 7 schedules. The Act has replaced The Companies Act, 1956 (in a partial manner) after receiving the assent of the President of India on 29 August 2013. The Act came into force on 12 September 2013 with few changes like earlier private companies maximum number of member was 50 and now it will be 200. A new term of "one person company" is included in this act that will be a private company and with only 98 provisions of the Act notified. A total of another 184 sections came into force from 1 April 2014.

The Ministry of Company Affairs thereafter published a notification for exempting private companies from the ambit of various sections under the Companies Act.

In this paper, we have specifically selected Section 52, 74 and 100 of the Companies Act, 2013 so we can understand and make out their proper meaning by using interpretation and various tools of construction that we have read in the subject of Interpretation of Statutes.

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TABLE OF CONTENTS

Contents

 

2

INTRODUCTION

3

TABLE OF CONTENTS ................................................................................................................

4

SECTION

52 ...................................................................................................................................

5

SECTION

74

10

SECTION

100

14

BIBLIOGRAPHY

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4

SECTION 52

Introduction

The term ‘Securities’ under Section 2(81) of the Companies Act, 2013 has been defined to mean

‘securities’ as defined in Clause (h) of Section 2 of the Securities Contracts (Regulation) Act, ’56 (SCRA). The term ‘securities’ include: shares, scrips, stocks, bonds, debentures, debenture stock

and other marketable securities of a like nature in or in any incorporated company or body corporate. 1

If the market exists, a company may issue its shares or securities at a price higher than their nominal value. 2 There is no restriction whatever on the sale of shares at a premium in Companies Act which is silent about the same and only lays down the restrictions regulating the issue of shares by a Company at premium. But SEBI guidelines have to be observed as they indicate when an issue has to be at par and when premium is chargeable. 3 As per SEBI guidelines, issuer can issue shares at any price. However offer document should indicate justification for the price.

Thus, issuer can’t issue share at a price that the market can’t bear. In case of private issue SEBI

guidelines do not apply. Shares at a Premium may be received in cash or in kind. Where the value of the assets received by a company as a consideration for allotment is greater than the nominal value of shares, it is in essence an allotment at a premium. So a company may issue securities at a premium when it is able to sell them at a price above par or above value, for example Rs. 100 per share at a price of Rs. 120, thereby earning a premium of Rs. 20 per share.

This project focuses only over Section 52(corresponding to section 78 of The Companies Act, 1956) of The Companies Act, 2013 which enunciates the restrictions regulating the utilization of the amount of premium collected on such securities.

Interpretation of Section 52(1)

Section 52(1) of the Companies Act, 2013 regulates the disbursement of the amount collected as premium. It is clearly provided that the amount so received whether in cash or kind, shall be carried to a separate account to be known as The Securities Premium Account (SPA). In Henry

  • 1 Dr. G.K. Kapoor, Sanjay Dhamija, Taxamann’s Company Law, 17 th edn., 2014.

  • 2 Avtar Singh, Company Law, 16 th edn., 2013.

  • 3 V.S. Datey, Taxmann’s Company Law Ready Reckoner, 1 st edn., 2014.

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Head & Co. Ltd. v. Ropner Holdings Ltd., the Court held that an amount equal to the extra value of assets would have to be carried to the SPA. The amount to the credit has to be maintained with the same sanctity as share capital. 4

In Thorn EMG plc Case, the court held that the amount of securities premium can be reduced only in the manner of share capital. 5 The decision of the Court below in Re Ransomes Plc., 6 affirmed the decision of the court below in sanctioning reduction of share premium account irrespective of irregularities like short notice of meeting, increasing the number of shareholders to assure smooth passage of the resolutions and highly abbreviated notice, because the interests of the shareholders were not prejudiced there being otherwise good resources for paying them back in full in case of need.

The SPA can be only reduced if the Articles of Association authorizes it and a special resolution with consent as may be required by the law. Reduction in Share Capital Account will also entail reduction in Securities Premium Account. Both have to tally, if shares have been issued at premium. In Hyderabad Industries Ltd. Re., 7 reduction of the SPA for wiping out losses incurred in trading in securities was allowed. The Articles of Association enabled the company to reduce

its SPA. The reduction of capital didn’t involve either diminution of liability in respect of unpaid

capital or payment to any shareholder of paid-up capital. Unless and until there is diminution of the share capital and corresponding reduction of the share premium account, no company can be allowed to write off or adjust the loss against share premium account.

In India Infoline Ltd. Re, 8 the Company proposed to write off accumulated losses by utilizing the SPA and by reducing the face value of its shares. The need and purpose of the reduction was duly explained and discussed at an extraordinary general meeting at which a special resolution was unanimously passed. The company had no secured creditors. The unsecured creditors have given their written consent. Nothing was shown to be there either against public interest or against law. The court in this case allowed the proposed reduction. In Global Trust Bank Ltd. Re, the Court held that the SPA is treated as a paid up share capital for a limited purpose, but not as a

  • 4 Head (Henry) & Co. Ltd. v. Ropner Holdings Ltd., (1951) 2 All ER 994 (Ch D).

  • 5 Thorn EMI plc, [1989] BCLC 612 (Ch D).

  • 6 Re Ransomes Plc., [1999] 2 BCLC 591 CA.

  • 7 Hyderabad Industries Ltd. Re., 2004 CLC 1385.

  • 8 India Infoline Ltd. Re, (2004) 53 SCL 396 (Bom).

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reserve fund. A company can be allowed to write off or adjust a loss against SPA if there is no diminution of the SPA and corresponding reduction in the SPA.

Interpretation of Section 52(2)

Section 52(2) entails the liberty by which the SPA can be used in the following five ways: (a) towards the issue of unissued shares of the company to the 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; (d) in providing for the premium payable on the redemption of any redeemable preference shares or of any 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; or (e) for the purchase of its own shares or other securities under section 68.

The court in Drown v Gaumont- British Picture Corporation Ltd., 9 and catena of cases, the court held that the SPA cannot be treated as profit and, therefore can’t be distributed as dividend. However, the same can be capitalized and distributed in form of bonus shares. Section 63 (1) (ii) of the Companies Act, 2013 also provides that SPA can be utilized to issue fully paid bonus shares. In EIC Services Ltd v. Phipps, 10 the court held that the bonus shares weren’t allowed to be issued by capitalization of the SPA without authority of an ordinary resolution of the

company and to shareholders whose shares weren’t fully paid. It couldn’t be regularized by an

agreement of the shareholders. The DCA is of the opinion that the amount of premium cannot be treated as a free reserve as it is in nature of a capital reserve. In Hillcrest Reality v. Ram Parshotam Mittal, 11 the company wanted to utilize the SPA for upgrading the business, renovations etc. It was held that if the account is to be used for any other purpose other than specified in section 78 of Companies Act, 1956, the procedure as prescribed in the Act for reduction of share capital are required to be followed. In Comat Infoscribe Private Ltd., In re., 12 it was held that while sanctioning scheme of amalgamation, reduction of SPA as reduction in capital is permissible. However, if such reduction is not for purposes as stipulated in section 78(2) of the Companies Act, 1956, the procedure as prescribed in the Act for reduction of share

9 Drown v Gaumont- British Picture Corporation Ltd., (1937) Ch 402.

  • 10 EIC Services Ltd v. Phipps, [2004] EWCA Civ 1069.

  • 11 Hillcrest Reality v. Ram Parshotam Mittal, [2010] 156 Com Cases 597.

  • 12 Comat Infoscribe Private Ltd., In re., [2004] 53 SCL 41(Kar.).

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capital are required to be followed. In Zee Tele films Ltd. Re, 13 the court held that a reduction of the SPA is allowed under a scheme which experts had approved as fair, just and proper.

In Hyderabad Industries Ltd. Re, 14 the court held that unless the Articles of Association permit utilization of share premium account for purposes other than those mentioned in Section 52 (2),

the court can’t approve the resolution to that effect. For utilization of the Securities Premium

Account for purposes mentioned in Section 52(2), no approval or sanction of the court is required. In In Re: D.S.M. Anti Infectives India Ltd., 15 it was held that SPA can be applied for the purposes other than section 78 (2) of the 1956 Act while approving a scheme under section

391 of the 1956 Act (Section 230 of the 2013 Act). In this case utilization of SPA towards business construction reserve was allowed. In In Re: Nestle India Ltd., 16 a special resolution was passed in meeting of members approving a scheme of utilizing the amount in SPA to distribute

the same to members as ‘special dividend’. Secured creditors had approved the scheme and

unsecured creditors had raised no objection. The scheme was approved by the court.

Interpretation of Section 52(3)

Subsection (3) of section 52 is a new provision which wasn’t earlier there in Section 78 of the

Companies Act, 1956. Section 52 (3) provides that SPA may also be applied to such classes of companies as may be prescribed and whose financial statements comply with accounting standards prescribes for such classes of companies under Section 133 for the following:

(a) in paying up unissued equity shares of the company to be issued to members of the company as fully paid bonus shares; or (b) in writing off the expenses of or the commission paid or discount allowed on any issue of equity shares of the company; or (c) for the purchase of its own

shares or other securities under section 68.

Conclusion

It can be concluded that the issue of securities at premium has many restrictions in its utilization.

Firstly, the premium can’t be treated as profit and therefore, cannot be distributed as dividends.

Secondly, the amount of premium, whether received in cash or in kind, must be recorded in a

  • 13 Zee Telefilms Ltd. Re, (2004) 53 SCL 387 (Bom).

  • 14 Supra 4.

  • 15 In Re: D.S.M. Anti Infectives India Ltd., Company Petition No. 59 of 2010 (High Court of Punjab & Haryana,

17/09/2010).

  • 16 In Re: Nestle India Ltd., Company Petition No. 141 of 2007 (Delhi High Court, 30/09/2008).

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separate account i.e.; SPA. Thirdly, the amount of share premium is to be maintained with the same sanctity as the share capital. The SPA can be reduced only if there is authorization by

Articles of Association and has to be reduced in a way as the share capital is reduced. The SPA

can’t be treated as profit and can’t be distributed as dividends but can be distributed in form of

bonus shares. There has been an inclusion of a new provision which is concerned about certain specific classes of companies.

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SECTION 74

Section 74 of the Companies Act, 2013 which is about repayment of deposits, etc., accepted before commencement of this Act states that -

  • 1. Where in respect of any deposit accepted by a company before the commencement of this act, the amount of such deposit or part thereof or any interest due thereon remains unpaid on such commencement or becomes due at any time thereafter, the company shall(a) file, within a period of three months from such commencement or from the date on which such payments, are due, with the Registrar a statement of all the deposits accepted by the company and sums remaining unpaid on such amount with the interest payable thereon along with the arrangements made for such repayment, notwithstanding anything contained in any other law for the time being in force or under the terms and conditions subject to which the deposit was accepted or any scheme framed under any law; and (b) repay within one year from such commencement or from the date on which such payments are due, whichever is earlier.

  • 2. The Tribunal may on an application made by the company, after considering the financial condition of the company, the amount of deposit or part thereof and the interest payable thereon and such other matters, allow further time as considered reasonable to the company to repay the deposit.

  • 3. If a company fails to repay the deposit or part thereof or any interest thereon within the time specified in sub-section (1) or such further time as may be allowed by the Tribunal under sub-section (2), the company shall, in addition to the payment of the amount of deposit or part thereof and the interest due, be punishable with fine which shall not be less than one crore rupees but which may extend to ten crore rupees and every officer of the company who is in default shall be punishable with imprisonment which may extend to seven years or with fine which shall not be less than twenty-five lakh rupees but which may extend to two crore rupees, or with both.

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Introduction

The words of a statute are first understood in their natural, ordinary or popular sense and phrases and sentences are construed according to their grammatical meaning. 17 Similarly this section has been interpreted in its natural and ordinary meaning or in its literal sense.

The section 74 of the 2013 act deals with deposits accepted before the commencement of the Companies Act 2013. It prescribes the procedure to be complied with by a company which had accepted deposits before the commencement of the 2013 Act and deals with circumstances:

where the deposit or part thereof or interest thereon has remain unpaid on such commencement and where the deposit falls due after any time after the commencement of Companies Act, 2013.

Use of Aid

Use of same words in similar connection in later statute gives rise to a presumption that they are intended to convey the same meaning as in the earlier statute 18 , hence as an external aid to understand the meaning of the word deposit I take the assistance of earlier statute which is

section 58A of the Companies Act, 1956 which defines the expression ‘deposit’ to mean 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. 19

The expression ‘deposit’ has been further elaborated by Companies (Acceptance of Deposits) Rules, 1975. Rule 2(b) provides that ‘deposit’ means any deposit of money with and includes any amount borrowed by a company. However according to rule 2(b) the expression ‘deposit’

does not include: Any amount received from the Central Government or a State Government or any amount received from any other source, and whose repayment is guaranteed by the Central Government or State Government or any amount received from a local authority or a foreign government or any other foreign citizen, authority or person; Any amount received as a loan from any banking company, State Bank of India, a nationalized bank including a co-operative bank; Any amount received as a loan from any of the notified financial institutions; Any amount received by a company from any other company; Any amount received from an employee of the

  • 17 Justice G P Singh, Principles of Statutory Interpretation, 14 th Edition, LexisNexis.

  • 18 Robinson Bros. (Brewers) Ltd. v. Durham Country Assessment Committee,(1938) 2 All ER 79, pp. 87, 88 (HL) (LORD MACMILLAN)

  • 19 Supra 3

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company by way of security deposit; Any amount received by way of security or as an advance from any purchasing agent, selling agent or other agents in course of or for the purpose of the business of the company or any advance received against orders for the supply of goods or properties or for rendering any service; Any amount received in trust or any amount in transit. 20

The Interpretation

Section 74 (1) (a) of 2013 Act talks about filing of statement with the Registrar; it is construed that the statement is required to be filed with the Registrar of Companies within three months from the commencement of the Act or from the date the deposits are falling due for payment. The month here refers to the one in the British calendar. 21

The 2013 Act is silent on casting an obligation on filing such statement within three months of commencement of the 2013 Act as the words “whichever is earlier” is not stated in section 74 of the Act, although this may have been the intention of the statute. As the term “whichever is earlier” is not specified, it is possible to interpret that the statement of overdue deposits is required to be filed only after the deposits fall due for payment. if the deposits are already overdue on the date of commencement of 2013 Act then a statement is required to be filed within three months. 22

Section 74 (1)(b) talks of repayment of a deposit accepted after commencement of the 2013 Act, which will be governed by section 73 (3) of the 2013 Act while deposits accepted before such commencement are governed by section 74. Section 74 of the act covers both cases where the deposits are overdue and unpaid as on the date of commencement of the Act or where the deposits fall due for payment after commencement of the Act irrespective of whether they are paid on the due date or not. 23

Section 74 (2) of the 2013 Act empowers the tribunal to grant an extension of time to repay the deposit. The tribunal will consider the financial condition of the company, the amount which has remained unpaid whether towards deposit or part thereof or interest thereon and such other

  • 20 Ibid.

  • 21 Section 2 (35) of the General Clauses Act, 1897.

  • 22 A RAMAIYA Guide to Companies Act, 18 th Edition, LexisNexis.

  • 23 Ibid.

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matters before passing any order. The tribunal cannot assume power suo motu and such an order can be passed only on an application made by the company.

This has been applied in the case In Re: Birla Cotsyn (India) Limited 24 where the Company Law Board Mumbai granted an extension of time.

Sub section (3) of section 74 provides for steep penalty if repayment is not made as per section 74 (1) or within such extended time that the tribunal may allow under section 74(2). The penalty on the company shall be for an amount of not less than rupees one crore but can extend upto rupee ten crores and every officer of the company shall be further punishable with imprisonment for a period upto seven years and a fine of a minimum amount of rupees twenty-five lakhs which may extend upto two crores or both, this offence is compoundable only with the permission of the Special Court as per section 441 (6)(a) of the 2013 Act. 25

The provisions of section 74 of the 2013 Act and the powers of tribunal are similar to powers of Company Law Board under section 58 A of the 1956 Act in particular sub section 8, 9, 10 and the Companies (Acceptance of deposits) Rules, 1975.

Power of extension and exemption

Under sub section (8) of section 58(A) of the 1956 Act, government could grant extension of time to a company or class of companies for complying with the provisions or exempt the companies from complying with the provisions of the section. Government has framed rules called ‘the Companies (Application for Extension of time or Exemption under sub section (8) of section 58A) Rules, 1979’, and exemption from the provisions of the section may be sought under these rules. Exemption or extension of time could be granted either retrospectively or prospectively. And as per section 74(2) of the 2013 Act, the tribunal may on an application made by the company, after considering the financial condition of the company, the amount of deposit or part thereof or interest thereon and such other matters, allow further time as considered reasonable to the company to repay the deposits. 26

24 In Re: Birla Cotsyn (India) Ltd. (19.05.2015 - CLB) Company Application No. 05/2014. 25 Supra 22 26 Ibid.

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SECTION 100

Introduction

This section corresponds to section 169 and Regulation 48(1) of Table A of Schedule I of the 1956 Act.

Section 100 makes provisions as regards: Power of Board of Directors to call Extraordinary General Meeting [sub-section (1)], Board of Directors legally bound to call Extraordinary General Meeting on receiving valid requisition from members [sub-section (4)], Ingredients of a valid requisition [sub-sections (2) and (3)], and Power of requisitionists to call Extraordinary General Meeting if board of directors do not proceed to call an extraordinary general meeting within 21 days of the receipt of a valid requisition [sub-sections (4), (5) and (6)].

Difference Between the 2013 and the 1956 Companies Act:

The requirements of Reg. 48(1) of Table A of Sch. I to 1956 Act are now engrafted in the 2013 Act as section 100(1). Section 100(1) of the 2013 Act affords that the Board may, whenever it deems fit, call an extraordinary general meeting of the company.

Explanation to Rule 18 of the Companies (Management and Administration) Rules, 2014 notified under the 2013 Act clarifies that the extraordinary general meeting shall be held at a place within India. There was no provision along the lines of the above Explanation in the 1956 Act or the rules thereunder. Rule 17(2), Explanation also provides that requisitionists should convene meeting at registered office or in the same city or town where registered office is situated and such meeting should be convened on working day.

Rule 17 of the Companies (Management and Administration) Rules, 2014 notified under the 2013 Act contains provisions as regards procedure for calling of extraordinary general meeting by requisitionists on failure of Board of Directors to call such meeting on requisition. The 1956 Act contained no such provisions along the above lines as regards calling of meeting by requisitionists.

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Section 169 of the 1956 Act provided that in case ofjointly held shares, a requisition signed by one or some only of the joint shareholders shall be as valid as if it had been signed by all of them. Section 100 of the 2013 Act omits this provision regarding signing of requisition by joint holders.

Section 169 of the 1956 Act categorically provided that if meeting called by the requisitionists themselves shall not be held after the expiration of three months from the date of the requisition. However, a meeting commenced within 3 months may be adjourned to a date after the said 3 months. The 2013 Act omits these provisions of the 1956 Act. There is nothing in section 100 of the 2013 Act which says categorically that a meeting called by the requisitionists themselves shall not be held after the expiration of three months

from the date of the requisition. So, it appears that under the 2013 Act, there is no bar on

holding such meeting after expiration of 3 months’ period as aforesaid. In other words, the 3 months’ time-limit in 2013 Act appears to be directory and not mandatory.

Extraordinary General Meeting

All general meetings further than annual general meeting shall be called extraordinary general meeting. [Article II (42) of Table F of Schedule I]. Extraordinary general meeting cannot be called to discuss the veracity of appointment of director. The combined gratitude of sections 173 and 186 of the 1956 Act [corresponding to sections 102 and 98 of the 2013 Act] reveals that appointment of directors in the place of those retiring shall be made only in the annual general meeting and appointment of respondents in the place of retiring directors by rotation, which is impugned herein, cannot be transacted in the extraordinary general meeting; as such, the relief sought for in the company petition calling for extraordinary general meeting to discuss the authenticity of the appointment of respondents is not maintainable. 27

Powers of Board of Directors To Call Extraordinary General Meeting

The Board may, on its own, whenever it deems fit, call an extraordinary general meeting in regard to somewhat matter [Section 100(1)]. If at any point directors capable of acting who are adequate in number to form a quorum are not within India, any director or any two members of

27 Kumbakonam Mutual Benefit fund Ltd. v. S. Kalyanasundaram, 2012 SCC OnLine Mad 5293.

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the company may call an extraordinary general meeting in the same way, as nearly as possible, as that in which such a meeting may be called by the Board [Article II (forty two and forty three) of Table F of the Schedule I].

Right of Members To Requisition a Extraordinary General Meeting

Shareholders have a right to requisition an extraordinary general meeting subject to statutorily prescribed procedural and numerical requirements and it is not necessary for them to disclose reasons for resolution they propose to move at meeting. When the government or an instrumentality of the public (such as LIC) ventures into the corporate world and purchases the shares of the company, it assumes to itself the ordinary role of a shareholder, and dons the robes of a shareholder, with all the rights available to such a shareholder. 28 When a requisitionists urge for an extraordinary general meeting under section 169 of the 1956 Act [corresponding to section 100 of the 2013 Act], there is no duty on requisitionists to annex an explanatory statement to notice of meeting. The duty to annex an explanatory statement to the notice of the meeting is only on the company when it calls for a meeting for special occassion. 29

Other Instances: Ingredients of a Valid Requisition [Section 100(2)/100(3)]

Section 100 provides as under:

  • In the case of a company having a share capital, the requisition should be complete by such number of members as hold 10% or more of the paid up share capital of the company having a right to vote as at the date of deposit of the requisition.

  • In the case of a company not having a share capital, the requisition should be made by such number of members as have 10% or more of the total voting power of all the members as at the date of deposit of the requisition.

  • The requisition shall set out the matters for the consideration of which the meeting is to be called.

  • The requisition shall be sent to the registered office of the company.

The Words “Valid Requisition” in Section 100(4)

  • 28 Life Insurance Corporation. of India v. Escorts Ltd., AIR 1986 SC 1370.

  • 29 S. Varadarajanv. Venkateswara Solvent Extraction (P.) Ltd., [1994] 80 Company Case 693 (Madaras).

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All that is required to be seen before the provisions of the section become applicable would be to consider whether the requisition deposited was in accordance with the provisions of the section as to its contents, the number of signatories and similar matters, and it would not be open to the board of directors of a company to refuse to act on a requisition on the grounds that, though such requisition was in accordance with the requirements of the section, it was otherwise invalid. 30

What section 169(6) of the 1956 Act [corresponding to section 100(4) of the 2013 Act] provides

is that requisitionists may themselves call a meeting, if the board does not call a meeting within

  • 21 days since date of deposit of a valid requisition. The word ‘valid’ provided in this sub-section

clearly shws that the requisition which was made must be valid and lawful. In additional words, such a requisition was for consideration of a resolution which would amount per se to a valid requisition; otherwise, it would clearly mean that the directors were not required to call a meeting. 31

Arithmetic majority required for a valid requisition (10% or more of paid-up capital of the company)

In order to be allowed to requisition a meeting, the requisitionists must, on the date of the deposit of the requisition, hold not less than one-tenth of the paid-up capital of the company. 32 In the said case the company’s authorized share capital was 5 lakhs divided into 50 equity shares of 10,000 each. But the paid-up value of each share was only 8,000. This made the total paid-up share capital 4 lakhs. Ten per cent of this value was 40,000. The company had increased the number of members to 52 by assigning two additional shares. The issue was whether the requisitionists who were eight in number held qualifying number of shares prescribed by section 169(4) of the 1956 Act [corresponding to section 100 of the 2013 Act]. The Court held that the issue of two more shares having been done without raising the share capital was illegal.

Requirements of section 100 would be satisfied even if one member holding requisite number of shares or voting rights shows requisition

  • 30 Cricket Club of India Ltd. v. Madhav L. Apte, [1975] 45 Company Case 574 (Bombay).

  • 31 B. Sivaraman v. Egmore Benefit Society Ltd., [1992] 75 Company Case 198 (Madras).

  • 32 Queens Kuries & Loans (P.) Ltd. v. Sheena Jose, [1993] 76 Company Case 821 (Ker.).

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However the section uses the expression ‘such number of members of the company’ in the

plural, however the requirements of the section would be content even if one member holding the requisite number of shares or voting rights makes the requisition, as it is well-settled that words in the plural include the singular. 33 Section 169 of the 1956 Act [corresponding to section 100 of the 2013 Act] says that the number of members entitled to requisition a meeting in regard to any matter shall be in the case of a company having a share capital, such figure 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 bring the right of voting in regard to that matter. Only

those shareholders who have a right of voting can requisition a meeting. Section 181 of the 1956 Act [corresponding to section 106 of the 2013 Act] affords that the articles of a company may bar a member from exercising any voting right in respect of any shares registered in his name on which any calls or other moneys presently payable by him have not been paid. 34

Calling of extraordinary general meeting by requisitionists [Section 100(4)/100(5)/100(6)]

If the Board does not, within twenty-one days from the date of receipt of valid requisition in regard to any matter, proceed to call a meeting for the consideration of that matter on a day not later than forty-five days from the date of receipt of such requisition. The meeting may be called and held by the requisitionists themselves within a period of three months from the date of the requisition. A meeting called and held by the requisitionists themselves as above shall be called and held in the same manner in which the meeting is called and held by the Board. Any reasonable expenses incurred by the requisitionists in calling a meeting shall be reimbursed to the requisitionists by the company. The sums so paid to requisitionists shall be deducted from any fee or other remuneration payable to such of the directors who were in default in calling the meeting.

33 Supra 29

34 Col. Kuldip Singh Dhillon v. Paragaon Utility Financiers (P.) Ltd., [1986] 60 Company Case 1075 (Punjab. & Haryana).

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BIBLIOGRAPHY

Cases

  • B. Sivaraman v. Egmore Benefit Society Ltd., [1992] 75 Company Case 198

(Madras). ...........

17

Col. Kuldip Singh Dhillon v. Paragaon Utility Financiers (P.) Ltd., [1986] 60 Company Case

1075 (Punjab. &

18

Comat Infoscribe Private Ltd., In re., [2004] 53 SCL

7

Cricket Club of India Ltd. v. Madhav L. Apte, [1975] 45 Company Case 574

17

Drown v Gaumont- British Picture Corporation Ltd., (1937) Ch

7

EIC Services Ltd v. Phipps, [2004] EWCA Civ

7

Head (Henry) & Co. Ltd. v. Ropner Holdings Ltd., (1951) 2 All ER 994 (Ch

6

Hillcrest Reality v. Ram Parshotam Mittal, [2010] 156 Com Cases

7

Hyderabad Industries Ltd. Re., 2004 CLC

6

In Re: D.S.M. Anti Infectives India Ltd., Company Petition No. 59 of 2010 (High Court of

Punjab & Haryana,

8

In Re: Nestle India Ltd., Company Petition No. 141 of 2007 (Delhi High Court, 30/09/2008)

.....

8

India Infoline Ltd. Re, (2004) 53 SCL 396

6

Kumbakonam Mutual Benefit fund Ltd. v. S. Kalyanasundaram, 2012 SCC OnLine Mad 5293.

 

15

Life Insurance Corporation. of India v. Escorts Ltd., AIR 1986 SC

16

Queens Kuries & Loans (P.) Ltd. v. Sheena Jose, [1993] 76 Company Case 821

17

Re Ransomes Plc., [1999] 2 BCLC 591

6

Robinson Bros. (Brewers) Ltd. v. Durham Country Assessment Committee,(1938) 2 All ER 79,

pp. 87, 88 (HL) (LORD MACMILLAN)

.................................................................................

11

  • S. Varadarajan v. Venkateswara Solvent Extraction (P.) Ltd., [1994] 80 Company Case 693

(Madras). ...................................................................................................................................

18

  • S. Varadarajanv. Venkateswara Solvent Extraction (P.) Ltd., [1994] 80 Company Case 693

 

16

Thorn EMI plc, [1989] BCLC 612 (Ch

6

Zee Telefilms Ltd. Re, (2004) 53 SCL 387

8

Statutes

19

Section 2 (35) of the General Clauses Act, 1897

12

Treatises

A RAMAIYA Guide to Companies Act, 18 th Edition, LexisNexis

12

Avtar Singh, Company Law, 16 th edn.,

5

Dr. G.K. Kapoor, Sanjay Dhamija, Taxamann’s Company Law, 17 th edn.,

5

In Re: Birla Cotsyn (India) Ltd. (19.05.2015 - CLB) Company Application No.

13

Justice G P Singh, Principles of Statutory Interpretation, 14 th Edition,

11

V.S. Datey, Taxmann’s Company Law Ready Reckoner, 1 st edn.,

5

20