Datta Company Law

Date and Time: 03 April 2020 11:13:00 IST
Job Number: 113853887
Documents (100)
1. S. 1. Short title, commencement and extent

Client/Matter: -None-
2. S. 2. Definitions
3. S. 2A. Interpretation of certain words and expressions
4. S. 3. Definitions of “company”, “existing company”, “private company” and “public company”.
5. S. 4. Meaning of “holding company” and “subsidiary”
6. S. 4A. Public financial institutions
7. S. 5. Meaning of “officer who is in default”
8. S. 6. Meaning of “relative”
9. S. 7. Interpretation of “person in accordance with whose directions or instructions directors are accustomed to
act”
10. S. 8. Power of Central Government to declare an establishment not to be a branch office
11. S. 9. Act to override memorandum, articles, etc
12. S. 10. Jurisdiction of Courts
13. S. 10A [Constitution of Tribunal.]
14. S. 10B [Procedure of Tribunal.]
15. S. 10C [Powers of Tribunal.]
16. S. 10D [Appeals against decisions, etc., of the Tribunal.]
17. S. 10E. Constitution of Board of Company Law Administration
18. S. 10F. Appeals against the orders of the Company Law Board
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19. S. 10FA. Dissolution of Company Law Board
20. S. 10FB. Constitution of National Company Law Tribunal
21. S. 10FC. Composition of Tribunal
22. S. 10FD. Qualifications for appointment of President and Members
23. S. 10FE. Term of office of President and Members
24. S. 10FF. Financial and administrative powers of Member Administration
25. S. 10FG. Salary, allowances and other terms and conditions of service of President and other Members
26. S. 10FH. Vacancy in Tribunal
27. S. 10FI. Resignation of President and Member
28. S. 10FJ. Removal and suspension of President or Member
29. S. 10FK. Officers and employees of Tribunal
30. S. 10FL. Benches of Tribunal
31. S. 10FM. Order of Tribunal
32. S. 10FN. Power to review
33. S. 10FO. Delegation of powers
34. S. 10FP. Power to seek assistance of Chief Metropolitan Magistrate and District Magistrate
35. S. 10FQ. Appeal from order of Tribunal
36. S. 10FR. Constitution of Appellate Tribunal
37. S. 10FS. Vacancy in Appellate Tribunal, etc.
38. S. 10FT. Term of office of Chairperson and Members
39. S. 10FU. Resignation of Chairperson and Members
40. S. 10FV. Removal and suspension of Chairperson and Members of Appellate Tribunal
41. S. 10FW. Salary, allowances and other terms and conditions of service of Chairperson and Members
42. S. 10FX. Selection Committee
43. S. 10FY. Chairperson, etc., to be public servants
44. S. 10FZ. Protection of action taken in good faith
45. S. 10FZA. Procedure and powers of Tribunal and Appellate Tribunal
46. S. 10G. Power to punish for contempt
47. S. 10GA. Staff of Appellate Tribunal
48. S. 10GB. Civil court not to have jurisdiction
49. S. 10GC. Vacancy in Tribunal or Appellate Tribunal not to invalidate acts or proceedings
50. S. 10GD. Right to legal representation
51. S. 10GE. Limitation
52. S. 10GF. Appeal to Supreme Court
53. S. 11. Prohibition of associations and partnerships exceeding certain number
54. S. 12. Mode of forming incorporated company
55. S. 13. Requirements with respect to memorandum
56. S. 14. Form of memorandum
57. S. 15. Printing and signature of memorandum
58. S. 15A. Special provision as to alteration of memorandum consequent on alteration of name of State of
Madras
59. S. 15B. Special provision as to alteration of memorandum consequent on alteration of name of State of
Mysore
60. S. 16. Alteration of memorandum
61. S. 17. Special resolution and confirmation by Central Government required for alteration of memorandum
62. S. 17A. Change of registered office within a State
63. S. 18. Alteration to be registered within three months
64. S. 19. Effect of failure to register
65. S. 20. Companies not to be registered with undesirable names
66. S. 21. Change of name by company
67. S. 22. Rectification of name of company
68. S. 23. Registration of change of name and effect thereof
69. S. 24. Change of name of existing private limited companies
70. S. 25. Power to dispense with “Limited” in name of charitable or other company.
71. S. 26. Articles prescribing regulations
72. S. 27. Regulations required in case of unlimited company, company limited by guarantee or private company
limited by shares.
73. S. 28. Adoption and application of Table A in the case of companies limited by shares
74. S. 29. Form of articles in the case of other companies
75. S. 30. Form and signature of articles
76. S. 31. Alteration of articles by special resolution
77. S. 32. Registration of unlimited company as limited, etc.
78. S. 33. Registration of memorandum and articles
79. S. 34. Effect of registration
80. S. 35. Conclusiveness of certificate of incorporation
81. S. 36. Effect of memorandum and articles
82. S. 37. Provision as to companies limited by guarantee
83. S. 38. Effect of alteration in memorandum or articles.
84. S. 39. Copies of memorandum and articles, etc., to be given to members
85. S. 40. Alteration of memorandum or articles, etc., to be noted in every copy
86. S. 41. Definition of “member”
87. S. 42. Membership of holding company
88. S. 43. Consequences of default in complying with conditions constituting a company a private company
89. S. 43A. Private company to become public company in certain cases
90. S. 44. Prospectus or statement in lieu of prospectus to be filed by private company on ceasing to be private
company
91. S. 45. Members severally liable for debts where business carried on with fewer than seven, or in the case of
a private company, two members
92. S. 46. Form of contracts.
93. S. 47. Bills of exchange and promissory notes
94. S. 48. Execution of deeds
95. S. 49. Investments of company to be held in its own name
96. S. 50. Power for company to have official seal for use outside India
97. S. 51. Service of documents on company
98. S. 52. Service of documents on Registrar
99. S. 53. Service of documents on members by company
100. S. 54. Authentication of documents and proceedings
(IN) Datta: Company Law
Datta: Company Law
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Datta: Company Law > Datta: Company Law > Volume 1 > PART I PRELIMINARY
S. 1. Short title, commencement and extent.

—
(1) This Act may be called the Companies Act, 1956.
(2) It shall come into force on such date1 as the Central Government may, by notification in the Official
Gazette, appoint.
2[(3) It extends to the whole of India:
3[ * * * ]]:
4[Provided5[***] 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.]
1. The Act came into force from 1st April, 1956, vide Notification No. S.R.O. 612, dated 8-3-1956, published in the Gazette
of India, Extraordinary, 1956, Part II, Section 3, page 473.
2. Substituted by the Jammu and Kashmir (Extension of Laws) Act, 1956 (62 of 1956) s. 2, and Sch., for sub-section (3)
(w.e.f. 1-11-1956). Prior to substitution sub-section (3) stood as under:
“(3) It extends to the whole of India except the State of Jammu and Kashmir.”
3. First proviso omitted by the Central Laws (Extension to Jammu and Kashmir) Act, 1968 (25 of 1968) s. 2, and Sch.
(w.e.f. 15-8-1968). Prior to omission first proviso stood as under:
“Provided that it shall not apply to the State of Jammu and Kashmir except to the extent to which the provisions of
this Act relate to the incorporation, regulation and winding up of banking, insurance and financial corporations.”
4. Inserted by the Companies (Amendment) Act, 1965 (31 of 1965) s. 2, (w.e.f. 15-10-1965).
5. The word “further” omitted by Act 25 of 1968, s. 2 and Sch. (w.e.f. 15-8-1968).
6. Published in the Gazette of India, Extraordinary, Part II, Section 2, dated 2-9-1953.
7. Gazette of India, Extraordinary, Part II, Section 2 : (1959) 29 Comp. Cas. (St.) 106.
8. Published in the Gazette of India, Extraordinary, Part II, Section 2, page 819, dated 13-11-1962 : (1962) 32 Comp. Cas.
(St.) 200.
(St.) 8.
(St.) 230.
Page 2 of 63
(St.) 247.
12. Published in the Gazette of India, Extraordinary, Part II, Section 2, page 1125, dated 22-11-1965 : (1966) 36 Comp.
Cas. (St.) 1.
(St.) 121.
(St.) 136.
(St.) 88.
16. Published in the Gazette of India, Extraordinary, Part II, Section 2, dated 11-8-1972 : (1972) 42 Comp. Cas. (St.) 234.
(St.) 4.
* State of Bombay v. Bandhan Ram Bhandani, (1961) 31 Comp. Cas. 1 (SC): AIR 1961 SC 186 [LNIND 1960 SC 220].
See detailed Comments under Sections 159, 162, 166 and 220.
† State of Andhra Pradesh v. Andhra Provincial Potteries Ltd., (1973) 43 Comp. Cas. 514 (SC) AIR 1973 SC 2429
[LNIND 1973 SC 238]. See Comments under Sections 159, 162, 166, 168, 210(5) and 220(3).
18. Published in the Gazette of India, Extraordinary, No. 54, Part II, Section 2, dated 22-12-1983 : (1984) 56 Comp. Cas.
(St.) 90.
19. Published in the Gazette of India, Extraordinary, No. 24, Part II, Section 2, dated 9-5-1985 : (1985) 58 Comp. Cas. (St.)
186.
24. Published in the Gazette of India, Extraordinary, Part II, Section 2 : (1997) 89 Comp. Cas. (St.) 241.
27. Published in the Gazette of India, Extraordinary, Part II, Section 2, dated 22-11-2001 : (2001) 107 Comp. Cas. (St.)
485.
(St.) 308.
(St.) 54.
† Published in the Gazette of India, Extraordinary, No. 10, Part II, Section 2, dated 6-3-2006 : (2006) 130 Comp. Cas.
(St.) 198.
31. CIT v. Girdhardas & Co. Pvt. Ltd.,AIR 1967 SC 795 [LNIND 1966 SC 245]: (1967) 1 Comp. LJ 1 (SC) : (1967) 63 ITR
300 (SC) : (1967) 1 SCR 777 [LNIND 1966 SC 245]. Corresponding provisions of the Previous Act, 1913, the English
Act, 1948 and the English Act, 1985 as amended by 1989 Act have been annotated under each Section in this book.
See also Comparative Table at the beginning of this Volume. Decisions enunciating the usefulness of provisions and
decisions under Previous Acts and English Acts have been dealt with under Principles of Interpretation in later
paragraphs and Doctrine of Precedent in Comments under Section 10—Jurisdiction of Courts.
32. Keshavji Ravji and Co. v. CIT,AIR 1991 SC 1806 [LNIND 1990 SC 60]: (1990) 1 Comp. LJ 374 (SC) : (1990) 183 ITR 1
[LNIND 1990 JNK 2] (SC). Oft-quoted rule in Heydon’s case, (1584) 3 Co. Rep. 7a: 76 ER 637, Principles of
Interpretation and Doctrine of Precedent have been dealt with in later paragraphs.
33. See Hind Overseas P. Ltd. v. Raghunath Prasad Jhunjhunwalla, (1976) 46 Comp. Cas. 91 (SC) : AIR 1976 SC 565
[LNIND 1975 SC 403]; Kilpest P. Ltd v. Shekhar Mehra, (1996) 87 Comp. Cas. 615 (SC) under Doctrine of Precedent in
Comments under Section 10—Jurisdiction of Courts.
* The English Companies Act, 1989 has further amended, inserted and substituted several sections of the English
Companies Act, 1985. The corresponding provisions of the English Act, 1948 and the English Act, 1985 as amended by
Page 3 of 63
the 1989 Act have been annotated under relevant Sections in this book. See also Comparative Table at the beginning
of this Volume.
[LNIND 1990 JNK 2] (SC); Utkal Contractors and Joinery P. Ltd. v. State of Orissa,AIR 1987 SC 1454 [LNIND 1987 SC
466]: (1987) 3 SCR 317 [LNIND 1987 SC 466]; Maunsell v. Olins,(1975) 1 All ER 16 (HL).
35. Swedish Match AB v. SEBI, (2004) 122 Comp. Cas. 83 (SC) : AIR 2004 SC 4219 [LNIND 2004 SC 854]; National
Stock Exchange Member v. Union of India, (2006) 133 Comp. Cas. 504 (Del.—DB).
36. Doypack Systems P. Ltd. v. UOI, (1989) 65 Comp. Cas. 1 (SC) : AIR 1988 SC 782 [LNIND 1988 SC 589].
37. Unique Butyle Tube Industries Pvt. Ltd. v. U.P. Financial Corporation, (2003) 113 Comp. Cas. 374 (SC); Rishabh Agro
Industries Ltd. v. P.N.B. Capital Services Ltd., (2000) 101 Comp. Cas. 284 (SC) : AIR 2000 SC 1583 [LNIND 2000 SC
862]; Padmasundara Rao v. State of Tamil Nadu,(2002) 255 ITR 147 [LNIND 2002 SC 201] (SC); Institute of Chartered
Accountants of India v. Price Waterhouse, (1997) 90 Comp. Cas. 113 (SC) : AIR 1998 SC 74 [LNIND 1997 SC 934];
Swift Formulations Pvt. Ltd., In Re, (2004) 121 Comp. Cas. 27 (P&H) (FB). See also Comments under Casus omissus
hereinafter.
38. Colgate Palmolive (India) Ltd. v. MRTP Commission, (2003) 113 Comp. Cas. 14 (SC).
39. IFCI Ltd. v. Cannanore Spg. & Wvg. Mills Ltd., (2002) 110 Comp. Cas. 685 (SC); Patheja Bros. Forgings and Stamping
v. ICICI Ltd., (2000) 102 Comp. Cas. 21 (SC).
40. Raghunath Rai Bareja v. Punjab National Bank, (2007) 135 Comp. Cas. 163 (SC).
41. Lloyd Insulations (India) Ltd. v. Cement Corpn. of India Ltd., (2001) 105 Comp. Cas. 729 (Delhi) (DB); Economic Chit
Funds Pvt. Ltd. v. P.S. Krishnoji Rao, (1985) 58 Comp. Cas. 838 (Kar.); Beejay Engineers Pvt. Ltd., In Re, (1983) 53
Comp. Cas. 918 (Delhi) (DB); Special Steels Ltd. v. Jay Prestressed Products Ltd., (1991) 72 Comp. Cas. 277 (Bom.).
See also Rational Construction, Casus omissus, Legislative Intent, Internal and External Aids in succeeding
paragraphs.
42. Polestar Electronic (Pvt.) Ltd. v. Addl. CST,AIR 1978 SC 897 [LNIND 1978 SC 59](1978) 41 STC 409 (SC); Kailash
Nath Agarwal v. Pradeshiya Industrial and Investment Corporation of U.P. Ltd. (2003) 114 Comp. Cas. 4 (SC).
43. Upendra Kumar Joshi v. Kesoram Industries and Cotton Mills Ltd., (1983) 54 Comp. Cas. 1 (Pat.) (FB). See also Casus
omissus in succeeding paragraphs.
44. Rishabh Agro Industries Ltd. v. P.N.B. Capital Services Ltd., (2000) 101 Comp. Cas. 284 (SC) AIR 2000 SC 1583
[LNIND 2000 SC 862]; Padmasundara Rao v. State of Tamil Nadu,(2002) 255 ITR 147 [LNIND 2002 SC 201] (SC). See
also Literal Construction in earlier paragraphs.
45. State of Kerala v. Mathai Verghese, (1987) 62 Comp. Cas. 857 (SC). See also Internal and External Aids to
Interpretation and Construction explained in later paragraphs.
46. Margadarsi Chit Fund Pvt. Ltd. v. Govt. of A.P., (2001) 103 Comp. Cas. 876 (AP); Surjit Singh Kalra v. Union of
India,(1991) 2 SCC 87 [LNIND 1991 SC 85]. See also Rational Construction hereinafter.
47. Delhi Financial Corporation v. Rajiv Anand, (2006) 131 Comp. Cas. 285 (SC).
48. P. Hema v. M. Muthusamy, (2007) 139 Comp. Cas. 214 (Mad.) (DB).
49. Tata Consultancy Services v. UOI, (2002) 111 Comp. Cas. 292 (Kar.); Tirath Singh v. Bachittar Singh,AIR 1955 SC 830
[LNIND 1955 SC 53]; CIT v. J.H. Gotla,AIR 1985 SC 1698 [LNIND 1985 SC 270]: (1985) 156 ITR 323 [LNIND 1985 SC
270] (SC); K.P. Varghese v. ITO,AIR 1981 SC 1922 [LNIND 1981 SC 373]: (1981) 131 ITR 597 [LNIND 1981 SC 373]
(SC) : (1982) 1 SCR 629 [LNIND 1981 SC 373]; Oxford University Press v. CIT,(2001) 247 ITR 658 [LNIND 2001 SC
219] (SC).
50. Rishabh Agro Industries Ltd. v. P.N.B. Capital Services Ltd., (2000) 101 Comp. Cas. 284 (SC) : AIR 2000 SC 1583
[LNIND 2000 SC 862]; Padmasundara Rao v. State of Tamil Nadu,(2002) 255 ITR 147 [LNIND 2002 SC 201] (SC);
Luke v. IRC,(1963) AC 557 (HL) : (1964) 54 ITR 692 (HL); Prakash Nath Khanna v. CIT,(2004) 266 ITR 1 (SC). See
also Comments under Casus omissus hereinbefore.
51. Allied Motors (P.) Ltd. v. CIT,(1997) 224 ITR 677 [LNIND 1997 SC 1773] (SC); Goodyear India Ltd. v. State of
Haryana,AIR 1990 SC 781 [LNIND 1989 SC 725]: (1991) 188 ITR 402 [LNIND 1989 SC 725] (SC); CWT v.
Kripashankar Dayashankar Worah,AIR 1971 SC 2463 [LNIND 1971 SC 334]: (1971) 81 ITR 763 [LNIND 1971 SC 334]
(SC); R.B. Jodha Mal Kuthiala v. CIT,AIR 1972 SC 126 [LNIND 1971 SC 459]: (1971) 82 ITR 570 (SC).
52. CIT v. Anjum M.H. Ghaswala,(2001) 252 ITR 1 [LNIND 2001 SC 2389] (SC).
53. United Bank of India v. Abhijit Tea Co. Pvt. Ltd., (2000) 102 Comp. Cas. 53 (SC); Allahabad Bank v. Canara Bank,
(2000) 101 Comp. Cas. 64 (SC).
54. Harshad S. Mehta v. Custodian, (1998) 92 Comp. Cas. 936 (SC) : (1998) 231 ITR 871 (SC).
Page 4 of 63
55. D. Vinod Shivappa v. Nanda Belliappa, (2006) 131 Comp. Cas. 663 (SC); Heydon's case (1584) 3 Co. Rep. 7a 76 ER
637.
56. Swedish Match v. SEBI, (2004) 122 Comp. Cas. 83 (SC); Clark and Tokeley Ltd. (T/A Spellbrook) v. Oakes,(1998) 4 All
ER 353 (CA); Anand Rathi v. SEBI, (2002) 110 Comp. Cas. 837 (Bom.) (DB). See detailed Comments on the SEBI Act,
Rules and Regulations under relevant Section 55A of the Companies Act, 1956—Powers of SEBI in this book.
57. Tejkumar Balakrishna Ruia v. A.K. Menon, (1996) 87 Comp. Cas. 539 (SC).
58. Apple Finance Ltd. v. Mantri Housing and Construction Ltd., (2002) 112 Comp. Cas. 480 (Bom.). See also Comments
under Section 433(e).
59. L.I.C. v. Escorts Ltd., (1986) 59 Comp. Cas. 548 (SC) : AIR 1986 SC 1370 [LNIND 1985 SC 362].
60. Pundalik v. District Deputy Registrar, (1991) 72 Comp. Cas. 38 (SC).
61. Grindlays Bank P.L.C. v. UOI, (2001) 106 Comp. Cas. 1 (Cal.); Karimtharuvi Tea Estates Ltd. v. State of Kerala,AIR
1963 SC 760 (1963) 48 ITR 83 (SC).
62. Workmen of Dimakuchi Tea Estate v. Management of Dimakuchi Tea Estate,AIR 1958 SC 353 [LNIND 1958 SC 1].
New India Sugar Mills Co. Ltd. v. CST,AIR 1963 SC 1207 : (1963) 14 STC 316 (SC).
63. L.I.C. v. CIT,(1996) 219 ITR 410 (SC) : (1996) 133 CTR (SC) 82.
64. Assam Company Ltd. v. State of Assam,(2001) 248 ITR 567 [LNIND 2001 SC 3047] (SC).
65. Maharashtra State Financial Corporation v. Jaycee Drugs and Pharmaceuticals P. Ltd., (1991) 71 Comp. Cas. 360
(SC); Mohammad Ali Khan v. CWT,(1997) 224 ITR 672 [LNIND 1997 SC 1969] (SC); J.K. Cotton Spg. and Wvg. Mills
Co. Ltd. v. State of U.P.,AIR 1961 SC 1170 [LNIND 1960 SC 337]: (1961) 3 SCR 185; CIT v. Distributors (Baroda) Pvt.
Ltd.,AIR 1972 SC 288 [LNIND 1971 SC 472]: (1972) 83 ITR 377 (SC).
66. Manian Transports v. Krishna Moorthy, ITO, (1991) 72 Comp. Cas. 746 (Mad.).
67. Thomas v. United Butter Co. of France Ltd., (1909) 2 Ch. 484 : 79 LJ Ch. 14 : 101 LT 388; MacConnell v. E.Prill & Co.
Ltd., (1916) 2 Ch. 57 : (1916-17) All ER Rep. Ext. 1344 : 85 LJ Ch. 674 : 115 LT 71 : 32 TLR 509 60 SJ 556; Food
Controller v. Cork,(1923) AC 647 : (1923) All ER Rep. 463 : 92 LJ Ch. 587 (HL). See also Literal Construction, Prior
Legislation, Doctrine of Precedent and Binding force of Indian and English decisions.
68. UOI v. Elphinstone Spinning and Weaving Co. Ltd., (2001) 105 Comp. Cas. 309 (SC). See also Contextual Meaning
hereinafter.
69. Centre for Public Interest Litigation v. UOI, (2003) 117 Comp. Cas. 123 (SC).
70. Kavalappara Kottarathil Kochuni v. State of Madras,AIR 1960 SC 1080 [LNIND 1960 SC 436].
71. R.K. Garg v. UOI,AIR 1981 SC 2138 [LNIND 1981 SC 434]: (1982) 133 ITR 239 [LNIND 1981 SC 434] (SC).
72. Girdharilal & Sons v. Balbir Nath Mathur,AIR 1986 SC 1499 [LNIND 1986 SC 45].
73. Vacher & Sons v. London Society of Compositors,(1913) AC 107 (HL) : (1911-13) All ER Rep. 241 : 82 LJ KB 232 : 107
LT 722 (HL).
74. Chandroji Rao v. CIT,AIR 1970 SC 1582 [LNIND 1970 SC 241]: (1970) 77 ITR 743 (SC).
75. Western India Theatres Ltd. v. Municipal Corpn. of the City of Poona,AIR 1959 SC 586 [LNIND 1958 SC 204]; Bhinka
v. Charan Singh,AIR 1959 SC 960 [LNIND 1959 SC 77]; Prakash Nath Khanna v. CIT,(2004) 266 ITR 1 (SC).
76. Oriental Insurance Co. Ltd. v. Hansrajbhai (2001) 105 Comp. Cas. 743 (SC); Salaam M. Bavazier v. Mohd. Azgaruddin,
(1998) 93 Comp. Cas. 609 (AP); K.P. Varghese v. ITO,AIR 1981 SC 1922 [LNIND 1981 SC 373](1981) 131 ITR 597
(SC) (1982) 1 SCR 629 [LNIND 1981 SC 373].
77. Meghal Homes P. Ltd. v. Shree Niwas Girni K. K. Samiti, (2007) 139 Comp. Cas. 418 (SC).
78. State of Kerala v. Mathai Verghese, (1987) 62 Comp. Cas. 857 (SC). See also the Principle of Literal Construction and
Casus omissus in earlier paragraphs.
79. Special Steels Ltd. v. Jay Prestressed Products Ltd., (1991) 72 Comp. Cas. 277 (Bom.); Killick Nixon Ltd. v. Bank of
India, (1985) 57 Comp. Cas. 831 (Bom.) (DB); Beejay Engineers Pvt. Ltd., In re, (1983) 53 Comp. Cas. 918 (Delhi)
(DB); Keshavji Ravji and Co. v. CIT,AIR 1991 SC 1806 [LNIND 1990 SC 60]: (1990) 183 ITR 1 [LNIND 1990 JNK 2]
(SC) : (1990) 1 Comp. LJ 374 (SC). See also Literal Construction.
80. Sudarsan Trading Co. Ltd. v. Govt. of India, (1991) 71 Comp. Cas. 265 (Ker.); Institute of Patent Agents v.
Lockwood,(1894) AC 347 (HL); K.M. Nanavati v. State of Bombay,AIR 1961 SC 112 [LNIND 1960 SC 193];Ashok
Kumar Oswal v. S.P. Oswal, (2002) 110 Comp. Cas. 747 (CLB). See also Contextual Meaning in later paragraphs.
81. Madanlal Fakirchand Dudhediya v. Sri Changdeo Sugar Mills Ltd., (1962) 32 Comp. Cas. 604 (SC) : AIR 1962 SC 1543
[LNIND 1962 SC 125]: (1962) Supp. 3 SCR 973
Page 5 of 63
82. Orient Paper and Industries Ltd. v. State of Orissa,AIR 1991 SC 672 [LNIND 1990 SC 643]; South India Corporation
(P) Ltd. v. Secretary, Board of Revenue,AIR 1964 SC 207 [LNIND 1963 SC 182]: (1964) 15 STC 74 (SC); Union of
India v. G.M. Kokil,AIR 1984 SC 1022 [LNIND 1984 SC 87]; T.R. Thandur v. Union of IndiaAIR 1996 SC 1643 [LNIND
1996 SC 749]; Smt. Parayankandiyal E.K.K.A. v. K. Devi, Devi, AIR 1996 SC 1963 [LNIND 1996 SC 869].
83. Maharashtra Tubes Ltd. v. State Industrial and Investment Corporation of Maharashtra Ltd., (1993) 78 Comp. Cas. 803
(SC); Sanwarmal Kejriwal v. Vishwa Co-operative Housing Society Ltd.,AIR 1990 SC 1563 [LNIND 1990 SC 144]. See
also generalia specialibus non derogant hereinafter.
84. Solidaire India Ltd. v. Fairgrowth Financial Services Ltd., (2001) 104 Comp. Cas. 569 (SC); A.S. Nizar Ahmed and Co.
Ltd. v. Collector of Vellore District, (2004) 119 Comp. Cas. 583 (Mad.); Hyderabad Engineering Industries v. A.P.
Industry Facilitation Council, (2004) 120 Comp. Cas. 195 (AP).
85. Official Liquidator v. Haryana Financial Corporation, (1999) 98 Comp. Cas. 683 (P&H); Titus Daniel v. South Indian
Parenterals Pvt. Ltd., (2000) 101 Comp. Cas. 117 (Ker.).
86. Bharat Hari Singhania v. CWT,(1994) 207 ITR 1 (SC) : (1994) 118 CTR (SC) 125.
87. P. Virudhachalam v. Management of Lotus Mills,AIR 1998 SC 554; T.D. Bonny v. Registrar of Co-operative
Societies,AIR 1998 SC 2012 [LNIND 1998 SC 528].
88. Morgan Securities and Credit P. Ltd. v. Modi Rubber Ltd., (2007) 136 Comp. Cas. 113 (SC); Jay Engineering Works
Ltd. v. Industry Facilitation Council, (2006) 133 Comp. Cas. 670 (SC).
89. ICICI Bank Ltd. v. SIDCO Leathers Ltd., (2006) 131 Comp. Cas. 451 (SC).
90. UOI v. India Fisheries Pvt. Ltd, (1965) 35 Comp. Cas. 669 (SC) : AIR 1966 SC 35 [LNIND 1965 SC 460]: (1965) 57
ITR 331 [LNIND 1965 SC 460] (SC) : (1965) 3 SCR 679 [LNIND 1965 SC 460]; P. George Philip v. Official Liquidator,
(2004) 120 Comp. Cas. 444 (Cal.) (FB). See also Comments under Section 483.
91. J.K. Cotton Spg. and Wvg. Mills Co. Ltd. v. State of U.P.,AIR 1961 SC 1170 [LNIND 1960 SC 337]; South India Corpn.
(P) Ltd. v. Secy., Board of Revenue,AIR 1964 SC 207 [LNIND 1963 SC 182]: (1964) 15 STC 74 (SC).
92. CIT v. Shahzada Nand & Sons,AIR 1966 SC 1342 [LNIND 1966 SC 25](1966) 60 ITR 392 (SC).
93. Allahabad Bank v. Canara Bank, (2000) 101 Comp. Cas. 64 (SC)explained and distinguished in Pennar Paterson Ltd.
v. State Bank of Hyderabad, (2001) 106 Comp. Cas. 338 (AP) (DB); Raghunath Rai Bareja v. Punjab National Bank,
(2007) 135 Comp. Cas. 163 (SC). See also Comments under Sections 442, 446, 529, 529A and 537.
94. Ashoka Marketing Ltd. v. Punjab National Bank, (1992) 74 Comp. Cas. 482 (SC)
95. South India Corpn. (P) Ltd. v. Secy., Board of Revenue,AIR 1964 SC 207 15 STC 74 (SC).
96. Surana Steels Pvt. Ltd. v. Dy. CIT,(1999) 237 ITR 777 [LNIND 1999 SC 1473] (SC).
97. Singhai Rakesh Kumar v. UOI,(2001) 247 ITR 150 (SC).
98. P.C. Agarwala v. Payment of Wages Inspector, (2005) 127 Comp. Cas. 787 (SC).
1. J.K. Industries Ltd. v. Chief Inspector of Factories and Boilers, (1997) 88 Comp. Cas. 285 (SC); Swedish Match AB v.
SEBI, (2004) 122 Comp. Cas. 83 (SC); CIT v. Indo-Mercantile Bank Ltd.,AIR 1959 SC 713 [LNIND 1959 SC 23]:
(1959) 36 ITR 1 [LNIND 1959 SC 23] (SC) : (1959) Supp. 2 SCR 256;Abdul Jabar Butt v. State of J&K,AIR 1957 SC
281 1957 SCR 51; H.E.H. Nizam’s Religious Endowment Trust v. CIT,AIR 1966 SC 1007 [LNIND 1965 SC 273]:
(1966) 59 ITR 582 (SC).
2. Tahsildar Singh v. State of U.P.,AIR 1959 SC 1012 [LNIND 1959 SC 96].
3. Marybong and Kyel Tea Estate Ltd., In Re, (1977) 47 Comp. Cas. 802 (Cal.); CIT v Ajax Products Ltd.,AIR 1965 SC
1358 [LNIND 1964 SC 263]: (1965) 55 ITR 741 [LNIND 1964 SC 263] (SC) : (1965) 1 SCR 700 [LNIND 1964 SC 263];
State of Orissa v Debaki Debi,AIR 1964 SC 1413 : (1964) 15 STC 153 (SC); Hindusthan Ideal Insurance Co. Ltd. v
L.I.C.,AIR 1963 SC 1083 [LNIND 1962 SC 164](1963) 1 Comp. LJ 49 (SC).
4. Madhu Gopal v. Sixth Addl. District Judge,(1988) 4 SCC 644 [LNIND 1988 SC 482]..
5. Allied Motors (P.) Ltd. v. CIT,(1997) 224 ITR 677 [LNIND 1997 SC 1773] (SC). See also Reasonable Construction.
6. S. Sundaram Pillai v. V.R. Pattabhiraman,AIR 1985 SC 582 [LNIND 1985 SC 20]; Swedish Match AB v. SEBI, (2004)
122 Comp. Cas. 83 (SC).
7. Aphali Pharmaceuticals Ltd. v. State of Maharashtra,AIR 1989 SC 2227 [LNIND 1989 SC 454]; Keshavji Ravji and Co.
v. CIT,AIR 1991 SC 1806 [LNIND 1990 SC 60]: (1990) 183 ITR 1 [LNIND 1990 JNK 2] (SC) : (1990) 1 Comp. LJ 374
(SC).
8. State of Bombay v. United Motors (India) Ltd.,AIR 1953 SC 252 [LNIND 1953 SC 42].
9. Patel Roadways Ltd. v. Prasad Trading Co.,AIR 1992 SC 1514 [LNIND 1991 SC 347].
Page 6 of 63
10. ITO v. D. Manoharlal Kothari, (1999) 96 Comp. Cas. 275 (Mad.).

11. Murlidhar Chatterjee v. International Film Co. Ltd.,AIR 1943 PC 34 70 IA 1 (PC).
12. T. Devadasan v. UOI,AIR 1964 SC 179 [LNIND 1963 SC 204].
13. Sham Sunder v. State of Haryana, (1990) 67 Comp. Cas. 1 (SC) : AIR 1989 SC 1982 [LNIND 1989 SC 405]; Tolaram
Relumal v. State of Bombay,AIR 1954 SC 496 [LNIND 1954 SC 91]: 1955 SCR 158 [LNIND 1954 SC 91]; Grindlays
Bank P.L.C. v. UOI, (2001) 106 Comp. Cas. 1 (Cal.). See detailed Comments under Sections 5 and 621 to 631.
14. Lalita Jalan v. Bombay Gas Co. Ltd., (2003) 114 Comp. Cas. 515 (SC); Goaplast Pvt. Ltd. v. Chico Ursula D’Souza,
(2003) 114 Comp. Cas. 644 (SC); Standard Chartered Bank v. Directorate of Enforcement, (2005) 125 Comp. Cas. 513
(SC).
15. Swedish Match AB v. SEBI, (2004) 122 Comp. Cas. 83 (SC); Balram Kumawat v. UOI,(2003) 7 SCC 628 [LNIND 2003
SC 714]. See also Comments under Section 55A.
16. CIT v. Ashoka Engineering Co.,(1992) 194 ITR 645 (SC) : (1993) 109 CTR (SC) 491. See detailed Comments under
Section 10—Jurisdiction of Courts.
17. R. v. Legal Aid Committee No. 1 (London) Legal Aid Area, ex p. Rondel,(1967) 2 QB 482..
18. IRC v. Littlewoods Mail Order Stores Ltd.,(1963) AC 135 (HL) : (1962) 2 All ER 279 (HL).
19. Qualter, Hall & Co. Ltd. v. Board of Trade, (1962) Ch. 273 : (1961) 2 WLR 63 : (1961) 31 Comp. Cas. 445.
20. Premier Mills Ltd. v. CIT,(1985) 152 ITR 457 (Mad.).
21. CWT v. R. Susheela,(1989) 176 ITR 232 (Kar.) : (1989) 79 CTR (Kar.) 138.
22. East End Dwellings Co. Ltd. v. Finsbury Borough Council,(1952) AC 109 (HL) : (1951) 2 All ER 587 (HL); A.S. Glittre
D/5 I/S Garonne v. CIT,(1997) 225 ITR 739 [LNIND 1997 SC 1962] (SC); CIT v. Godavari Sugar Mills Ltd. (1967) 37
Comp. Cas. 68 (SC) : AIR 1967 SC 556 [LNIND 1966 SC 247]: (1967) 63 ITR 310 (SC) : (1967) 1 SCR 798 [LNIND
1966 SC 247]; CIT v. Jaykrishna Harivallabhdas (1998) 93 Comp. Cas. 875 (Guj.) (DB); S. and D. Securities Pvt. Ltd. v.
Union of India (2004) 119 Comp. Cas. 210 (Cal.)See also Comments under Sections 481, 497, 509, 547, 577.
23. CIT v. Narasimhan,(1999) 236 ITR 327 [LNIND 1998 SC 1486] (SC); CIT v. S. Teja Singh,AIR 1959 SC 352 [LNIND
1958 SC 138]: (1959) 35 ITR 408 (SC).
24. CIT v. Mother India Refrigeration Industries P. Ltd.,(1985) 155 ITR 711 [LNIND 1985 SC 252] (SC) : (1985) 48 CTR
(SC) 176; Bengal Immunity Co. Ltd. v. State of Bihar,AIR 1955 SC 661 [LNIND 1955 SC 122]: (1955) 6 STC 446
[LNIND 1955 SC 122] (SC) : (1955) 2 SCR 603 [LNIND 1955 SC 122]; Har Charan Singh v. Shiv RaniAIR 1981 SC
1284 [LNIND 1981 SC 100].
25. State of Bombay v. Pandurang Vinayak Chaphalkar,AIR 1953 SC 244 [LNIND 1953 SC 33]: 1953 SCR 773 [LNIND
1953 SC 33]; Consolidated Coffee Ltd v. Coffee Board,AIR 1980 SC 1468 [LNIND 1980 SC 187]: (1980) 46 STC 164
[LNIND 1980 SC 187] (SC); CIT v. Maharaj Kumar Kamal Singh,AIR 1973 SC 1056 [LNIND 1973 SC 460]: (1973) 89
ITR 1 (SC).
26. S.K. Gupta v. K.P. Jain, (1979) 49 Comp. Cas. 342 (SC) : AIR 1979 SC 734 [LNIND 1979 SC 75]: (1979) 2 SCR 1184
[LNIND 1979 SC 75]. See fuller discussion in Comments under Section 2—Definitions.
27. R.D. Goyal v Reliance Industries Ltd., (2003) 113 Comp. Cas. 1 (SC); United Bank of India v. Debts Rocovery Tribunal,
(1999) 96 Comp. Cas. 602 (SC) : AIR 1999 SC 1381 [LNIND 1999 SC 371].
28. Central Bank of India v Ravindra, (2001) 107 Comp. Cas. 416 (SC).
29. L. Hazari Mal Kuthiala v. ITO,AIR 1961 SC 200 [LNIND 1961 SC 481](1961) 41 ITR 12 (SC); State of U.P. v.
Manbodhan Lal Srivastava,AIR 1957 SC 912 [LNIND 1957 SC 93]: 1958 SCR 533 [LNIND 1957 SC 93]; Govind Lal
Chaggan Lal Patel v. Agriculture Produce Market Committee,AIR 1976 SC 263 [LNIND 1975 SC 300]; Manohar Gunaji
Anubhawne v. State of Maharashtra, (2004) 120 Comp. Cas. 94 (Bom.). See also Comments u/s. 630.
30. State of U.P. v. Babu Ram Upadhya,AIR 1961 SC 751 [LNIND 1960 SC 292]; Rubber House v. Excellsior Needle
Industries P. Ltd.,AIR 1989 SC 1160 [LNIND 1989 SC 148]: (1989) 1 JT 488 [LNIND 1989 SC 148] (SC); CWT v.
Mahadeo Jalan,(1972) 86 ITR 621 [LNIND 1972 SC 434] (SC) AIR 1973 SC 1023; Hemalatha Gargya v. CIT,(2003)
259 ITR 1 (SC).
31. CIT v. Anjum M.H. Ghaswala,(2001) 252 ITR 1 [LNIND 2001 SC 2389] (SC); Jaywant S. Kulkarni v. Minochar Dosabhai
Shroff,AIR 1988 SC 1817 [LNIND 1988 SC 372].
32. CIT v. Hardeodas Agarwalla Trust,(1992) 198 ITR 511 (Cal.).
33. New Piece Goods Bazaar Co. Ltd. v. CIT,AIR 1950 SC 165 [LNIND 1950 SC 28]: (1950) 18 ITR 516 [LNIND 1950 SC
28] (SC) : 1950 SCR 553 [LNIND 1950 SC 28]. See also Literal Construction in earlier paragraphs.
34. Doypack Systems P. Ltd. v. UOI, (1989) 65 Comp. Cas. 1 (SC) : AIR 1988 SC 782 [LNIND 1988 SC 589]. See also
Literal Construction in earlier paragraphs.
Page 7 of 63
35. Workmen of Dimakuchi Tea Estate v. Management of Dimakuchi Tea Estate,AIR 1958 SC 353 [LNIND 1958 SC 1]:
(1958) 14 FJR 41 (SC). See also Contextual Meaning and Legislative Intent hereinafter.
36. Aswini Kumar Ghose v. Arabinda Bose,AIR 1952 SC 369 [LNIND 1952 SC 94]: (1953) SCR 1 [LNIND 1952 SC 94].
37. Luby v. Newcastle-under-Lyme Corporation,(1965) 1 QB 214.
38. Naranjan Singh Re,(1962) 1 QB 211 : (1961) 2 All ER 565.
39. CIT v. Puthuthotam Estates (1943) Ltd.,(1981) 127 ITR 481 (Mad.).
40. Punjab Agro Industries Corporation Ltd. v. Superior Genetics (India) Ltd., (2002) 108 Comp. Cas. 349 (CLB). See also
Comments under Section 235.
41. CIT v. N.C. Budharaja & Co.,(1993) 204 ITR 412 (SC) : (1993) 114 CTR (SC) 420 : (1993) 70 Taxman 312 (SC); Indian
Hotels Co. Ltd. v. ITO,(2000) 245 ITR 538 (SC). See also Contextual Meaning and Dictionary Meaning in subsequent
paragraphs.
42. CIT v. Taj Mahal Hotel,AIR 1972 SC 168 [LNIND 1971 SC 375]: (1971) 82 ITR 44 [LNIND 1971 SC 375] (SC); CGT v.
N.S. Getti Chettiar,AIR 1971 SC 2410 [LNIND 1971 SC 469]: (1971) 82 ITR 599 [LNIND 1971 SC 469] (SC);
Commissioner of Customs v. Parasrampuria Synthetics Ltd.,(2002) 253 ITR 274 (SC). See also Interpretation of
Definitions, Meanings and Inclusive definition in Comments Section 2.
43. CIT v. Mahindra and Mahindra Ltd., (1983) 54 Comp. Cas. 651 (SC) : AIR 1984 SC 1182 [LNIND 1983 SC 232]:
(1983) 144 ITR 225 [LNIND 1983 SC 232] (SC).
44. CIT v. Venkateswara Hatcheries (P.) Ltd.,(1999) 237 ITR 174 [LNIND 1999 SC 299] (SC); Jagatram Ahuja v.
CGT,(2000) 246 ITR 609 [LNIND 2000 SC 1356] (SC); D.N. Banerji v. P.R. Mukherjee,AIR 1953 SC 58 [LNIND 1952
SC 85]; S. Mohan Lal v. Kondiah,AIR 1979 SC 1132 [LNIND 1979 SC 87]. See also Analogous Acts in pari materia in
later paragraphs.
45. RBI v. Peerless General Finance and Investment Co. Ltd., (1987) 61 Comp. Cas. 663 (SC) : AIR 1987 SC 1023
[LNIND 1987 SC 86]; S. Gopal Reddy v. State of A.P.,AIR 1996 SC 2184 [LNIND 1996 SC 1040]D.K. Kapur v. RBI,
(2001) 105 Comp. Cas. 643 (Delhi) (DB).
46. UOI v. Elphinstone Spinning and Weaving Co. Ltd., (2001) 105 Comp. Cas. 309 (SC).
47. Bhagirathi Shenoy v. K.P. Balakuraiya,AIR 1999 SC 2143 [LNIND 1999 SC 350]; United Bank of India v. Debts
Rocovery Tribunal, (1999) 96 Comp. Cas. 602 (SC) : AIR 1999 SC 1381 [LNIND 1999 SC 371]Municipal Board v.
Imperial Tobacco Co. of India Ltd.,AIR 1999 SC 264 [LNIND 1998 SC 1044].
48. CIT v. Venkateswara Hatcheries (P.) Ltd.,(1999) 237 ITR 174 [LNIND 1999 SC 299] (SC).
49. Allied Motors (P.) Ltd. v. CIT,(1997) 224 ITR 677 [LNIND 1997 SC 1773] (SC).
50. Indian Hotels Co. Ltd. v. ITO,(2000) 245 ITR 538 (SC); CIT v. N.C. Budharaja & Co.,(1993) 204 ITR 412 (SC) : (1993)
114 CTR (SC) 420; CGT v. N.S. Getti Chettiar,AIR 1971 SC 2410 [LNIND 1971 SC 469]: (1971) 82 ITR 599 [LNIND
1971 SC 469] (SC); Bolani Ores Ltd. v. State of Orissa,AIR 1975 SC 17 [LNIND 1974 SC 286]: (1975) 2 SCR 138
[LNIND 1974 SC 286]. See also Ordinary and Contextual Meaning in earlier paragraphs.
51. CIT v. Anand Theatres,(2000) 244 ITR 192 [LNIND 2000 SC 2239] (SC); Dy. Chief Controller of Imports and Exports v.
K.T. Kosalram,AIR 1971 SC 1283 [LNIND 1970 SC 399]: (1971) 2 SCR 507 [LNIND 1970 SC 399].
52. Kavalappara Kottarathil Kochuni v. State of Madras,AIR 1960 SC 1080 [LNIND 1960 SC 436]; Jagdish Chandra Gupta
v. Kajaria Traders (India) Ltd.,AIR 1964 SC 1882 [LNIND 1964 SC 166]; Gwalior Sugar Co. Ltd. v. Shyam Saran Gupta
and Co., (1969) 39 Comp. Cas. 657 (MP) (DB) : AIR 1969 MP 74 [LNIND 1968 MP 118](DB).
53. CIT v. The Statesman Ltd.,(1992) 198 ITR 582 (Cal.).
54. Siddeshwari Cotton Mills (P.) Ltd. v. UOI,AIR 1989 SC 1019 [LNIND 1989 SC 28]: (1989) 75 STC 75 (SC); Amar
Chandra Chakraborty v. Collector of Excise,AIR 1972 SC 1863 [LNIND 1972 SC 280]; Calcutta National Bank Ltd. v.
Rangaroon Tea Co. Ltd., (1970) 40 Comp. Cas. 565 (Cal.) (DB); Aluminium Industries Ltd. v. State of Orissa, (1991) 72
Comp. Cas. 436 (Orissa)
55. M.K. Ranganathan v. Govt. of Madras, (1955) 25 Comp. Cas. 344 (SC) : AIR 1955 SC 604 [LNIND 1955 SC 41];
Stonecraft Enterprises v. CIT,(1999) 237 ITR 131 (SC).
56. State of Bombay v. Hospital Mazdoor Sabha,AIR 1960 SC 610 [LNIND 1960 SC 19]; Rohit Pulp and Paper Mills Ltd. v.
CCE,AIR 1991 SC 754 [LNIND 1990 SC 281]: 1990 (47) ELT 491 (SC) : 1990 (30) ECR 1 (SC).
57. Keshavji Ravji and Co. v. CIT,AIR 1991 SC 1806 [LNIND 1990 SC 60]: (1990) 183 ITR 1 [LNIND 1990 JNK 2] (SC) :
(1990) 1 Comp. LJ 374 (SC); F.S. Ghandhi v. CWT,(1990) 184 ITR 34 (SC) : (1990) 84 CTR (SC) 35; Ahmed G.H. Ariff
v. CWT,AIR 1971 SC 1691 [LNIND 1969 SC 281]: (1970) 76 ITR 471 [LNIND 1969 SC 281] (SC). See also Doctrine of
Precedent in later paragraphs and Comments under Section 10—Jurisdiction of Courts.
58. New Bank of India Ltd. v. UOI, (1981) 51 Comp. Cas. 375 (Delhi) (DB).
Page 8 of 63
59. Bank of England v. Vagliano Bros.(1891) AC 107 (HL); Stock v. Frank Jones (Tipton) Ltd.(1978) 1 All ER 948 (HL);
Upendra Kumar Joshi v. Kesoram Industries and Cotton Mills Ltd. (1983) 54 Comp. Cas. 1 (Pat.) (FB). See Literal
Construction in earlier paragraphs.
60. Heydon’s case, (1584) 3 Co. Rep. 7a : 76 ER 637: 42 Digest 614; Dr. Baliram Waman Hiray v. Mr. Justice B.
Lentin,AIR 1988 SC 2267 [LNIND 1988 SC 442]: 1989) 176 ITR 1 (SC); Bengal Immunity Co. Ltd. v. State of Bihar,AIR
1955 SC 661 [LNIND 1955 SC 122]: (1955) 6 STC 446 [LNIND 1955 SC 122] (SC) : (1955) 2 SCR 603 [LNIND 1955
SC 122]; CIT v. Sodra Devi,AIR 1957 SC 832 [LNIND 1957 SC 59]: (1957) 32 ITR 615 [LNIND 1957 SC 59] (SC) :
(1958) SCR 1 [LNIND 1957 SC 59];; Project and Equipment Corpn. of India Ltd. v. Aluminium Industries Ltd., (2003)
115 Comp. Cas. 522 (Ker.) (DB).
62. Shin-Etsu Chemical Co. Ltd. v. Aksh Optifibre Ltd., (2005) 127 Comp. Cas. 97 (SC).
63. Padmasundara Rao v. State of Tamil Nadu,(2002) 255 ITR 147 [LNIND 2002 SC 201] (SC). See also Literal
Construction, Casus omissus and rational Construction in earlier paragraphs.
(1990) 1 Comp. LJ 374 (SC); Doypack Systems P. Ltd. v. UOI, (1989) 65 Comp. Cas. 1 (SC) : AIR 1988 SC 782
[LNIND 1988 SC 589]. See also Literal Construction and Grammatical Meaning in earlier paragraphs.
65. B.N. Muttoo v. Dr. T.K. Nandi,AIR 1979 SC 460 [LNIND 1978 SC 353]: (1979) 2 SCR 409 [LNIND 1978 SC 353].
66. Kehar Singh v. State (Delhi Admn.),AIR 1988 SC 1883 [LNIND 1988 SC 887];; Shree Sajjan Mills Ltd. v. CIT,(1985)
156 ITR 585 [LNIND 1985 SC 325] (SC) : (1985) 49 CTR (SC) 193 : AIR 1986 SC 484 [LNIND 1985 SC 325]. See also
Literal Construction and Reasonable Construction in earlier paragraphs.
67. Imperial Chit Funds (P.) Ltd. v. ITO, (1996) 86 Comp. Cas. 555 (SC) : (1996) 219 ITR 498 [LNIND 1996 SC 628] (SC) :
(1996) 133 CTR (SC) 505 : (1996) 85 Taxman 513 [LNIND 1996 SC 628] (SC).
68. Transport Corporation of India v. E.S.I. Corpn.,AIR 2000 SC 238 [LNIND 1999 SC 1503]; Madan Singh Shekhawat v.
Union of India,(1998) 6 SCC 459.
69. CCE v. Parle Exports (P.) Ltd.,AIR 1989 SC 488 [LNIND 1988 SC 565]: (1990) 183 ITR 624 (SC).
70. Girdharilal & Sons v. Balbir Nath Mathur,AIR 1986 SC 1499 [LNIND 1986 SC 45]: Municipal Corpn. of Greater Bombay
v. Hindustan Petroleum Corpn.,(2001) 8 SCC 143 [LNIND 2001 SC 1796].
71. Govind Saran Ganga Saran v. CST,AIR 1985 SC 1041 [LNIND 1985 SC 152]: (1985) 155 ITR 144 [LNIND 1985 SC
152] (SC).
72. A. Thangal Kunju Musaliar v. Venkatachalam Potti, ITO,AIR 1956 SC 246 [LNIND 1955 SC 116]: (1956) 29 ITR 349
[LNIND 1955 SC 116] (SC) : (1955) 2 SCR 1196 [LNIND 1955 SC 116]; M.K. Ranganathan v. Govt. of Madras, (1955)
25 Comp. Cas. 344 (SC) : AIR 1955 SC 604 [LNIND 1955 SC 41].
73. Shashikant Laxman Kale v. UOI,(1990) 185 ITR 104 [LNIND 1990 SC 362] (SC) : (1990) 3 JT 267 (SC); State of West
Bengal v. UOI,AIR 1963 SC 1241 [LNIND 1962 SC 438]: (1964) 1 SCR 371 [LNIND 1962 SC 438]; Central Bank of
India v. Workmen, (1959) 29 Comp. Cas. 367 (SC) : AIR 1960 SC 12 [LNIND 1959 SC 113].; Rib Tapes (India) Pvt.
Ltd. v. UOI,AIR 1986 SC 2014 [LNIND 1986 SC 296]: 1986 (26) ELT 193 [LNIND 1986 SC 296] (SC); YKM Holdings
Pvt. Ltd. In Re (2001) 105 Comp. Cas. 249 (Delhi) (DB). See also Legislative Intent in earlier aragraphs.
74. Gopal Khaitan v. State, (1969) 39 Comp. Cas. 150 (Cal.) : AIR 1969 Cal. 132 [LNIND 1968 CAL 122]: 73 CWN 22.
75. Girdharilal & Sons v. Balbir Nath Mathur,AIR 1986 SC 1499 [LNIND 1986 SC 45]; Imperial Chit Funds (P.) Ltd. v. ITO,
(1996) 86 Comp. Cas. 555 (SC) : (1996) 219 ITR 498 [LNIND 1996 SC 628] (SC). See also Legislative Intent and
Statement of Objects and Reasons in preceding paragraphs.
(1996) 86 Comp. Cas. 555 (SC) : (1996) 219 ITR 498 [LNIND 1996 SC 628] (SC); Mithilesh Kumari v. Prem Behari
Khare,AIR 1989 SC 1247 [LNIND 1989 SC 96]: (1989) 177 ITR 97 [LNIND 1989 SC 96] (SC); CIT v. Vadilal
Lallubhai,AIR 1973 SC 1016 [LNIND 1972 SC 400]: (1972) 86 ITR 2 (SC); CIT v. Sodra Devi,AIR 1957 SC 832
[LNIND 1957 SC 59]: (1957) 32 ITR 615 [LNIND 1957 SC 59] (SC) : (1958) SCR 1 [LNIND 1957 SC 59]. See also
Legislative Intent in earlier paragraphs.
77. K.P. Varghese v. ITO,AIR 1981 SC 1922 [LNIND 1981 SC 373]: (1981) 131 ITR 597 [LNIND 1981 SC 373] (SC) :
(1982) 1 SCR 629 [LNIND 1981 SC 373]; Anandji Haridas & Co. Pvt. Ltd. v. Engg. Mazdoor Sangh,AIR 1975 SC 946
[LNIND 1975 SC 65]: (1975) 99 ITR 592 (SC) : (1975) 3 SCR 542 [LNIND 1975 SC 65]; Sole Trustee, Loka Shikshana
Trust v. CIT,AIR 1976 SC 10 [LNIND 1975 SC 305]: (1975) 101 ITR 234 [LNIND 1975 SC 305] (SC). See also
78. Kamal Kumar Dutta v. Ruby General Hospital Ltd., (2006) 134 Comp. Cas. 678 (SC).
79. Yadlapati Venkateswarlu v. State of A.P.,AIR 1991 SC 704 [LNIND 1990 SC 517]: (1991) 190 ITR 375 [LNIND 1990
SC 517] (SC).
Page 9 of 63
80. V.M. Salgaocar and Bros. Pvt. Ltd. v. CIT,(2000) 243 ITR 383 (SC).
81. CIT v. Doraiswamy Chetty,(1990) 183 ITR 559 (SC) : (1990) 86 CTR (SC) 192; Manickam & Co. v. State of T.N.,AIR
1977 SC 518 [LNIND 1976 SC 392]: (1977) 39 STC 12 (SC).
82. ITO v. Mani Ram,AIR 1969 SC 543 [LNIND 1968 SC 222]: (1969) 72 ITR 203 [LNIND 1968 SC 222] (SC) (1969) 1
SCR 724 [LNIND 1968 SC 222].
83. CIT v. Podar Cement Pvt. Ltd.,(1997) 226 ITR 625 (SC).
84. Jagatram Ahuja v. CGT,(2000) 246 ITR 609 [LNIND 2000 SC 1356] (SC); Board of Muslim Wakfs, Rajasthan v. Radha
Kishan,AIR 1979 SC 289 [LNIND 1978 SC 302]: (1979) 2 SCR 148 [LNIND 1978 SC 302]; Mrs. Sheila Kaushish v.
CIT,AIR 1981 SC 1729 [LNIND 1981 SC 348]: (1981) 131 ITR 435 (SC); Amolak Ram Khosla v. CIT,(1981) 131 ITR
589 (SC); Poothundu Plantations Pvt. Ltd. v. Agril. ITO,(1996) 221 ITR 557 (SC).
85. Rabindra Chamaria v. Registrar of Companies, (1992) 73 Comp. Cas. 257 (SC).
87. CIT v. Taj Mahal Hotel,AIR 1972 SC 168 [LNIND 1971 SC 375]: (1971) 82 ITR 44 [LNIND 1971 SC 375] (SC).
88. CST v. Auraiya Chamber of Commerce,AIR 1986 SC 1556 [LNIND 1986 SC 119]: (1987) 167 ITR 458 (SC).
89. Chandra Kishore Jha v. Mahavir Prasad,(1999) 8 SCC 266 [LNIND 1999 SC 845]; M.I. Builders P. Ltd. v. Radhey
Shyam Sahu,AIR 1999 SC 2467.
1. CIT v. Sirpur Paper Mills,(1999) 237 ITR 41 [LNIND 1999 SC 269] (SC). See detailed Comments u/s. 637.
2. Grasim Industries Ltd. v. State of M.P.,AIR 2000 SC 66 [LNIND 1999 SC 1414].
3. Swedish Match AB v. SEBI, (2004) 122 Comp. Cas. 83 (SC). See detailed Comments on the SEBI (Substantial
Acquisition of Shares and Takeovers) Regulations, 1997 under relevant Section 55A of the Companies Act, 1956—
Powers of SEBI in this book.
4. Clariant International Ltd. v. SEBI, (2004) 122 Comp. Cas. 112 (SC). See also Comments under Section 55A of the
Companies Act, 1956—Powers of SEBI in this book.
5. State of U.P. v. Modi Industries Ltd.,AIR 1977 SC 513 [LNIND 1977 SC 1]: (1977) 40 STC 73 [LNIND 1977 SC 1] (SC).
6. R. Rajagopal Reddy v. Padmini Chandrasekharan,(1995) 213 ITR 340 (SC) : (1995) 124 CTR (SC) 311 : (1995) 79
Taxman 92 (SC). See also Comments u/s. 10—Jurisdiction of Courts.
7. UOI v. Raghubir Singh, (1989) 66 Comp. Cas. 466 (SC) : AIR 1989 SC 1933 [LNIND 1989 SC 328]: (1989) 178 ITR
548 [LNIND 1989 SC 328] (SC). See detailed Comments under Section 10—Jurisdiction of Courts.
8. CWT v. Sharvan Kumar Swarup & Sons,(1994) 210 ITR 886 [LNIND 1994 SC 1444] (SC) : (1994) 122 CTR (SC) 380 :
(1994) 76 Taxman 620 (SC). See also Comments under Section 10—Jurisdiction of Courts.
9. R.D. Goyal v. Reliance Industries Ltd., (2003) 113 Comp. Cas. 1 (SC).
10. National Stock Exchange Member v. Union of India, (2006) 133 Comp. Cas. 504 (Delhi) (DB).
11. CCE v. Dhiren Chemical Industries,(2002) 254 ITR 554 [LNIND 2001 SC 2838] (SC) : (2002) 139 ELT 3 [LNIND 2001
SC 2838] (SC); Commissioner of Customs v. Indian Oil Corporation Ltd.,(2004) 267 ITR 272 (SC). See detailed
Comments on Binding force of Supreme Court and High Court decisions under Section 10 and Binding force of
Department’s views or Circulars under Section 637.
12. CIT v. Hero Cycles Pvt. Ltd.,(1997) 228 ITR 463 [LNIND 1997 SC 1895] (SC); M.D. Mundhra v. Asst. ROC, (1980) 50
Comp. Cas. 346 (Cal.) (DB); Sudhir Kumar Seal v. Asst. ROC, (1979) 49 Comp. Cas. 462 (Cal.) (DB); Harrisons and
Crosfield (India) Ltd. v. ROC, (1980) 50 Comp. Cas. 426 (Ker.); ITO v. Manoharlal Kothari, (1999) 96 Comp. Cas. 275
(Mad.).
13. Raymond Synthetics Ltd. v. UOI, (1992) 73 Comp. Cas. 762 (SC); Desh Bandhu Gupta & Co. v. Delhi Stock Exchange
Association Ltd., (1980) 50 Comp. Cas. 84 (SC) : AIR 1979 SC 1049 [LNIND 1979 SC 151]: (1979) 3 SCR 373 [LNIND
1979 SC 151]; K.P. Varghese v. ITO,AIR 1981 SC 1922 [LNIND 1981 SC 373]: (1981) 131 ITR 597 [LNIND 1981 SC
373] (SC); Shrabony Dey v. Howrah Motor Co. Ltd., (2004) 122 Comp. Cas. 597 (Cal.) (DB). See detailed Comments
on Binding force of Department’s views or Circulars and the Doctrine of contemporanea expositio under Section 637
and Powers of SEBI under Section 55A.
14. Indian Banks’ Association v. Devkala Consultancy Service, (2004) 120 Comp. Cas. 612 (SC) (2004) 267 ITR 179 (SC).
15. Union of India v. V.M. Salgaonkar,AIR 1998 SC 1367 [LNIND 1998 SC 1218].
16. CIT v. Anjum M.H. Ghaswala,(2001) 252 ITR 1 [LNIND 2001 SC 2389] (SC). See detailed Comments on Binding force
of Department’s views or Circulars under Section 637.
17. M.N. Dastur and Co. Ltd. v. Union of India, (2005) 128 Comp. Cas. 618 (Cal.) (DB).
Page 10 of 63
18. Smt. Hemlata Kantilal Shah v. State of Mah., (1983) 54 Comp. Cas. 559 (SC) : AIR 1982 SC 8 [LNIND 1981 SC 422].
19. UOI v. Godfrey Philips India Ltd., (1986) 59 Comp. Cas. 526 (SC) AIR 1986 SC 806 [LNIND 1985 SC 311](1986) 158
ITR 574 (SC); State of Punjab v. Nestle India Ltd.,(2004) 269 ITR 97 (SC). See detailed Comments under Section 10—
Jurisdiction of Courts.
548 [LNIND 1989 SC 328] (SC); Sundarjas Kanyalal Bhatija v. Collector, (1990) 68 Comp. Cas. 20 (SC) : AIR 1991 SC
261 : (1990) 183 ITR 130 (SC); M.A. Murthy v. State of Karnataka(2003) 264 ITR 1 (SC). See detailed Comments on
Doctrine of precedent or stare decisis, Binding force of Supreme Court and jurisdictional High Court decisions under
21. ACCE v. Dunlop India Ltd., (1985) 58 Comp. Cas. 145 (SC) : AIR 1985 SC 330 [LNIND 1984 SC 367]: (1985) 154 ITR
172 [LNIND 1984 SC 367] (SC); Cassell & Co. Ltd. v. Broome,(1972) AC 1027 (HL) : (1972) 1 All ER 801 (HL) (1972) 2
WLR 645 (HL). Per incuriam rule and Binding force of Supreme Court decisions have been fully dealt with at the end of
22. CIT v. Sun Engineering Works P. Ltd.,(1992) 198 ITR 297 (SC). See detailed Comments on Binding force of Supreme
Court decisions under Section 10—Jurisdiction of Courts.
23. East India Commercial Co. Ltd. v. Collector of Customs,AIR 1962 SC 1893 [LNIND 1962 SC 228]: (1963) 3 SCR 338
[LNIND 1962 SC 228]; State of A.P. v. CTO, (1988) 63 Comp. Cas. 273 (AP) : (1988) 169 ITR 564 [LNIND 1987 AP
190] (AP). See detailed Comments under Section 10—Jurisdiction of Courts.
24. Nawab Sir Mir Osman Ali Khan v. CWT,(1986) 162 ITR 888 [LNIND 1986 SC 395] (SC) : (1986) 57 CTR (SC) 89;
Daryao v. State of U.P.,AIR 1961 SC 1457 [LNIND 1961 SC 133]: (1962) 1 SCR 574 [LNIND 1961 SC 133];, CIT v.
Shree Manjunathesware Packing Products and Camphor Works,(1998) 231 ITR 53 (SC). See detailed Comments on
Special Leave Petition under Binding force of Supreme Court decisions at the end of Comments under Section 10—
25. Indian Oil Corpn. Ltd. v. State of Bihar, (1987) 62 Comp. Cas. 541 (SC) : AIR 1986 SC 1780 [LNIND 1986 SC 262]:
(1987) 167 ITR 897 (SC); Kunhayammed v. State of Kerala,(2000) 245 ITR 360 [LNIND 2000 SC 933] (SC). See
detailed Comments on Special Leave Petition and Doctrine of Merger under Binding force of Supreme Court decisions
at the end of Comments under Section 10—Jurisdiction of Courts.
26. L. Chandra Kumar v. UOI,(1997) 228 ITR 725 (SC). See detailed discussion in Comments under Section 10—
27. Workmen v. Board of Trustees of Cochin Port Trust,AIR 1978 SC 1283 [LNIND 1978 SC 158]: (1978) 53 FJR 80 (SC);
Daryao v. State of U.P.,AIR 1961 SC 1457 [LNIND 1961 SC 133]: (1962) 1 SCR 574 [LNIND 1961 SC 133]; S.
Balwant Singh v. Krishna Bus Service Pvt. Ltd., (1967) 37 Comp. Cas. 471 (C.T.). for fuller discussion see Comments
under Section 10—Jurisdiction of Courts.
28. Hind Overseas P. Ltd. v. Raghunath Prasad Jhunjhunwalla, (1976) 46 Comp. Cas. 91 (SC) : AIR 1976 SC 565 [LNIND
1975 SC 403];, Kilpest P. Ltd. v. Shekhar Mehra, (1996) 87 Comp. Cas. 615 (SC); Madanlal Fakirchand Dudhediya v.
Sri Changdeo Sugar Mills Ltd., (1962) 32 Comp. Cas. 604 (SC) : AIR 1962 SC 1543 [LNIND 1962 SC 125]. See
detailed Comments under Section 10—Jurisdiction of Courts.
29. Tuticorin Alkali Chemicals and Fertilizers Ltd. v. CIT,(1997) 227 ITR 172 (SC); Challapalli Sugars Ltd. v. CIT,AIR 1975
SC 97 [LNIND 1974 SC 336]: (1975) 98 ITR 167 [LNIND 1974 SC 336] (SC) : (1975) 2 SCR 538 [LNIND 1974 SC
336]. See detailed Comments under Sections 10, 208 and 211.
COMMENTS
English Act, 1948: Section 462 Previous Act, 1913: Section 1
Amending Acts and Adaptation Orders.— The Companies Act, 1956 (Act No. 1 of 1956), which came into force
from 1st April, 1956, has been further amended by the following Amending Acts and Adaptation Orders:
1. The Jammu and Kashmir (Extension of Laws) Act, 1956 (62 of 1956)
2. The Adaptation of Laws (No. 3) Order, 1956.
3. The Repealing and Amending Act, 1957 (36 of 1957).
4. The Companies (Amendment) Act, 1960 (65 of 1960).
5. The Companies (Amendment) Act, 1962 (43 of 1962)
Page 11 of 63
6. The Goa, Daman and Diu (Laws) No. 2 Regulation, 1963 (11 of 1963)
9. The Repealing and Amending Act, 1964 (52 of 1964).
12. The Companies (Second Amendment) Act, 1966 (37 of 1966).
13. The Companies Tribunal (Abolition) Act, 1967 (17 of 1967).
14. The Central Laws (Extension to Jammu and Kashmir)Act,1968 (25 of 1968).
16. The Madras State (Alteration of Name) (Adaptation of Laws on Union Subjects) Order, 1970..
19. The Mysore State (Alteration of Name) (Adaptation of Laws on Union Subjects) Order, 1974.
21. The Monopolies and Restrictive Trade Practices (Amendment) Act, 1984 (30 of 1984).
24. The Monopolies and Restrictive Trade Practices (Amendment) Act, 1991 (58 of 1991).
25. The Depositories Act, 1996 (22 of 1996).
27. The Depositories Related Laws (Amendment) Act, 1997 (8 of 1997).
29. The Trade Marks Act, 1999 (47 of 1999).
32. The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002
(54 of 2002).
34. The Companies (Second Amendment) Act, 2002 (11 of 2003).
35. The Election and Other Related Laws (Amendment) Act, 2003 (46 of 2003).
36. The Enforcement of Security Interest and Recovery of Debts Laws (Amendment) Act, 2004 (30 of 2004).
Legislative History of the principal Act and Amending Acts has been annotated at the beginning of Comments under
each Section.
Legislative History.—
The Statement of Objects and Reasons for the principal Act and various Amending Acts with reference to the Bills
to which these have been appended are reproduced below.
The Companies Act, 1956 (1 of 1956).—The Statement of Objects and Reasons appended to the Companies Bill,
1953 (46 of 1953)6 is reproduced below:
Page 12 of 63
“The object of this Bill is to amend and consolidate the law relating to Companies. The last major amendment of the
Indian Companies Act, 1913 (VII of 1913) was undertaken in 1936 when the Indian Companies (Amendment) Act,
1936 (XXII of 1936) was passed. At the end of World War II the need was felt for a further extensive revision of the
Companies Act. Apart from the experience gained of the actual working of the Amendment Act of 1936, which
disclosed the necessity for an early amendment of some of its provisions, many changes had taken place in the
intervening years in the organisation and management of joint stock companies, and over a wide sector that was
dominated by new elements in trade and industry, the character of company management had also materially
altered. Further, at the end of the War, the Company Law Amendment Committee in the United Kingdom, more
familiarly known as the Cohen Committee, had submitted its Report after a laborious enquiry spread over two
years. This Report recommended several far-reaching changes in the English Companies Act, 1929. As the Indian
company law had been always largely based on the prevailing English law, the then Government felt that the time
was ripe for a further review of the Indian Companies Act. A good deal of exploratory work was done between 1946
and 1950. Two distinguished company lawyers were successively appointed to advise Government on the broad
lines on which the Indian Companies Act should be revised. The recommendations of these two lawyers were
further examined in the then Ministry of Commerce, and certain tentative departmental views which emerged were
circulated in a memorandum to the general public for eliciting opinion on them. Many representations on this
memorandum were duly received from trade and industrial organisations, learned bodies, associations, State
Governments and the general public. At the end of 1950, the Government of India appointed a Committee under
the chairmanship of Shri C.H. Bhabha to go into the entire question of the revision of the Indian Companies Act,
with particular reference to its bearing on the development of Indian trade and industry. This Committee examined a
large number of witnesses in different parts of the country and submitted its Report in March 1952. The Report was
circulated to all State Governments, Chambers of Commerce, many trade associations and several learned bodies
for an expression of their views on the recommendations contained in it. A special officer was also appointed in the
Department of Economic Affairs at the same time to examine the Report and, on the basis of the views expressed
by these organised trade and other associations and the general public, to submit proposals to Government for the
revision of the Indian Companies Act.
2 The present Bill is based largely on the recommendations of the Company Law Committee modified in a few
particulars by the views expressed on these recommendations. The main principles underlying these
recommendations are as follows:
(i) the provisions of the law both in regard to the formation and management of joint stock companies should
be such as would ensure the maintenance of a minimum standard of good behaviour in company
promotion and management without imposing needlessly irksome or rigid rules which may hamper
legitimate business or affect initiative or enterprise;
(ii) the law should provide for the fullest possible disclosure in prospectuses or statements in lieu of
prospectuses issued, both before and after a company is formed, and failure to make such disclosure
should be visited with effective penalties;
(iii) company accounts should be prepared in such a way as to disclose all facts which are material to a full
understanding of the manner in which companies are worked;
(iv) company meetings should be called and conducted in such a way as to ensure that shareholders receive
all reasonable facilities for exercising an intelligent judgment on the activities of the management;
(v) the provisions for investigation into the affairs of a company should be so designed as to enable an
appropriate authority to intervene in its affairs not merely when an offence has been committed, but also
when it is established that the affairs of a company are being managed in a manner prejudicial to the
shareholders of the company or oppressive to any substantial portion of them or when such investigation is
otherwise necessary in the public interest;
(vi) the law should also provide for the establishment of an appropriate authority not merely for enforcing the
provisions of the Companies Act or for carrying out the investigations which may be necessary under it, but
also for generally overseeing the administration of the Act and for exercising in the public interest that
reserve of authority which must necessarily vest in some organ of Government.
The provisions of the Bill in its different Parts follow largely from the above principles. The major changes in the
present Indian Companies Act which the Bill introduces thus relate to the following topics:
(a) the promotion and formation of companies (clauses 50 to 74);
(b) the capital structure of companies (clauses 79 to 83);
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(c) company meetings and procedure (clauses 158 to 189);

(d) the presentation of company accounts, their audit, and the powers and duties of auditors (clauses 195 to
218);
(e) the inspection and investigation of the affairs of companies (clauses 219 to 235);
(f) the constitution of boards of directors, and the powers and duties of directors, managing directors and
managers (clauses 236 to 306);
(g) the appointment of managing agents, terms and conditions of their service, their remuneration, the powers
of managing agents vis-a-vis directors, and the activities of managing agents in regard to borrowings,
loans, contracts, sales and purchases (clauses 307 to 359); and
(h) the administration of company law.
Most of the new provisions contained in the Bill [the Companies Bill, 1953] on all these points are self-explanatory,
and in the case of almost all these provisions the relevant notes on clauses have indicated the recommendations of
the Company Law Committee on which they are based.
3. As has been already mentioned, in a few particulars, the provisions of the Bill have deviated from the
recommendations of the Company Law Committee. These deviations are, however, of a minor nature, and the
notes on clauses have duly indicated and explained them. There is, however, one important deviation from the
recommendations of the Company Law Committee which needs special mention. The Company Law Committee
devoted a good deal of space in its Report to problems of organisation and administration, and recommended that
the Central Government should not only resume its responsibility for the administration of joint stock companies
which it had delegated to the State Governments, but that a statutory authority at the Centre, to be called
‘Corporate Investment and Administration Commission’, should be set up under the new Act for the administration
of the company law as well as for the discharge of other related functions, e.g., capital issue control and regulation
of stock exchanges when a Central measure for this latter purpose was passed. Action has already been taken on
the first recommendation of the Company Law Committee. The State Governments have been addressed regarding
the intention of the Central Government to resume its powers under the Indian Companies Act and the constitution
of a Central Organisation under the administrative control of the Department of Economic Affairs has been
sanctioned. It is, however, proposed that the question of conferring statutory status on this Organisation, if so
necessary, may be considered after this Central Organisation has been set up and functioned for a reasonable
period. For present therefore the duties and responsibilities which the Company Law Committee visualised for the
statutory authority would be carried on by the new departmental organisation.
In the light of the recent experience of the Central Government, provision has also been made in the Bill in respect
of one or two matters which were not covered by the recommendations of the Company Law Committee but which
are considered to be of sufficient importance to the working of joint stock companies in future to justify the making
of special provisions in regard to them (e.g. clause 366). The notes on the relevant clauses will explain the reasons
for these provisions.
4. It is necessary to draw attention in this context to two other recommendations of the Company Law Committee
which have affected the structure of the Bill. In the Indian Companies (Amendment) Act, 1951 (LII of 1951), certain
special powers were conferred on Courts of Law and the Central Government. While the powers conferred on the
Courts by Section 7 of that Act were based largely on the provisions of Section 210 of the English Companies Act,
1948, the other powers conferred on the Central Government were of a quasi-administrative nature to be exercised
on the recommendations of an Advisory Commission provided for under section 8 of the Amendment Act. The
Company Law Committee recommended that if and when the Indian Companies Act was comprehensively revised
on the lines of its recommendations, Government should consider the desirability of repealing Sections 2, 3, 4, 5, 6
and 8 of the Amendment Act of 1951 containing these quasi-administrative powers. While it is not proposed to
retain indefinitely these special powers, which the Central Government assumed in 1951, it is considered that it will
not be expedient for the Central Government in the present circumstances of company management in this country,
to divest itself of these powers till experience of the working of the new Act has shown that these special powers
are no longer necessary. Clause 598 of the Bill, therefore, proposes the retention of these powers for a period of
three years from the commencement of the new Act. The provisions of Sections 2, 3, 4, 5, 6 and 8 of the
Amendment Act of 1951, which have been incorporated in the present Indian Companies Act as sections 86J, 87AA
[second proviso to clause (c)], 87BB,87CC and 289B, have therefore been relegated to a Schedule (Schedule XI)
attached to this Bill. Section 7 of the Amendment Act, which it is proposed to incorporate permanently in the
Page 14 of 63
Companies Act, has been retained as clauses 367 to 377. The notes on these clauses explain these structural
changes.
In regard to Table A in the present Act, the Company Law Committee recommended that having regard to the
importance of the provisions contained in the compulsory regulations of this Table, it was desirable that they should
be inserted as independent sections in the Act itself. The acceptance of this recommendation has involved the
transfer to the body of the Bill of many of the provisions hitherto included in Table A. Further, in order to avoid
unnecessary duplication, those regulations in Table A which merely draw attention to the relevant provisions of the
Act have been omitted. In the result the new Table A has been considerably abridged. The notes on clauses
relating to this Table explain these structural alterations.
5. Advantage has been taken of the opportunity offered for the consolidation of the Act for the first time since 1913
to re-arrange its different Parts in a more logical order. The general principle has been to arrange the different Parts
of the Act in such a way that they follow, as far as possible, the chronological sequence in the formation, growth
and decay of companies. Thus, for example, it has been felt that the provisions of the Act which relate to the
formation of companies should precede those relating to their management. The re-arrangement of matter which
has followed as a consequence of this decision has entailed considerable changes in the structure of the present
Act. It is, however, felt that these changes will eventually result in a better understanding and appreciation of the
scheme of the Indian Companies Act.” [ Statement of Objects and Reasons appended to the Companies Bill, 1953].
The Bill was introduced in the Lok Sabha on the 2nd September, 1953. The motion for reference of the Bill to a
Joint Committee of the Houses was moved by the Minister of Finance, Shri C.D. Deshmukh, on the 28th April,
1954, was discussed on the 29th and 30th April, and the 1st and 3rd May, 1954 and was adopted on the 3rd May,
1954. The Rajya Sabha discussed the motion on the 12th and 13th May, 1954, and concurred in it on the 13th May,
1954. The Committee held 61 sittings in all and submitted its Report proposing certain changes in the Bill.
The recommendations of the Company Law Committee, Notes on Clauses of the Bill and the reasons given by the
Joint Committee in its Report for the changes proposed by them have been reproduced under relevant Sections.
See also Background to the Companies Act, the English Company Law and Applicability of the Companies Act,
1956 after the Statement of Objects and Reasons explaining the Amending Acts given below.
The Companies (Amendment) Act, 1960 (65 of 1960).—The Statement of Objects and Reasons appended to the
Companies (Amendment) Bill, 1959 (37 of 1959)7 is reproduced below:
“The object of this Bill is to amend the Companies Act, 1956. The Act had been in force for about a year when
Government decided that the defects and deficiencies in its working should be examined by a Committee.
Accordingly, in May, 1957, the Government appointed a Committee under the chairmanship of Shri A.V. Visvanatha
Sastri, a former judge of the Madras High Court, to examine the structure of the Act as well as its contents with a
view not only to removing its defects and deficiencies but also ensuring better fulfilment of the purposes underlying
the Act. In November, 1957, the Committee submitted its Report, which the Government published and placed
before both Houses of Parliament in December, 1957.
2. The present Bill is based largely on the recommendations of the Committee, although in some particulars they
have been modified partly in the light of the experience of the working of the Act gained since the submission of the
Report and partly by the views expressed on these recommendations by Chambers of Commerce and others. The
amendments of the Companies Act, as included in the Bill, fall under the following heads:
(i) amendments considered necessary to overcome practical difficulties experienced in the course of the
working of the Act;
(ii) amendments of a clarificatory nature, designed to remove drafting defects and obscurities which have
caused difficulty in the interpretation of the Statute; and
(iii) amendments considered necessary to ensure the better fulfilment of the purposes of the Act and to remove
lacunae in the existing provisions.”
The recommendations of the Companies Act Amendment Committee, Notes on Clauses of the Bill and the reasons
for the changes proposed by the Joint Committee in its Report on the Bill have been reproduced under relevant
Sections.
Page 15 of 63
“Section 293(1)(e) of the Companies Act, 1956, provides that the Board of directors of a public company or of a
private company, which is a subsidiary of a public company, may contribute to charitable and other funds not
directly relating to the business of the company or the welfare of its employees, any amount not exceeding in
aggregate, in any financial year, rupees twenty-five thousand or five per cent. of its average net profits during the
three financial years immediately preceding, whichever is greater. If the Board wishes to exceed this limit, it must
obtain the consent of the company in general meeting. The general meeting of a company can be called by giving
not less than 21 days’ clear notice. Thus, the convening and holding of a general meeting of a public company
necessarily entails time and expense.
2. Although the above-mentioned restrictions regarding contributions to charitable or other funds are not applicable
to the private companies which are not subsidiaries of public companies, it may not be possible for many such
companies to make such contributions in view of the provisions of their memorandum or articles of association.
3. It was felt that companies may like to make generous contributions to the National Defence Fundwhich has
recently been created by the Government to meet the emergency which has arisen as a result of China’s
aggression against India, uninhibited by the limits and conditions imposed by Section 293(1)(e) of the Companies
Act, 1956, or by their memorandum or articles of association. Hence, an Ordinance, namely, the Companies
(Amendment) Ordinance, 1962, was promulgated by the President on the 3rd Nov., 1962, authorising the Board of
directors of companies themselves to make contributions to theNational Defence Fund or any other Fund approved
by the Central Government for the purpose of national defence, without any limit and without obtaining the sanction
of the company in general meeting.
4. The present Bill seeks to replace the aforesaid Ordinance with the addition of a provision for the disclosure in the
profit and loss account of a company of the amounts of contributions made to the National Defence Fund or to any
other Fund approved for the purpose of national defence by the Central Government.”
“In order to facilitate quick action against persons involved in cases of fraud, misfeasance and other such
malpractices and irregularities in the management of companies, it is considered necessary to set up a Tribunal
whose findings would enable the Central Government to remove such persons from positions of managerial
authority in any company. This Tribunal will also be empowered to hear certain applications under section 203 and
397 and 398 of the Companies Act, as these relate to matters of a similar nature. The scope of 397 and 398 and
other related sections is being enlarged to provide for the entertainment of applications on grounds of public interest
as well besides those stated there. This Tribunal will also be empowered to exercise the powers and functions of
the court under such sections of the Companies Act as the Central Govt. may from time to time, notify.
In order to prevent the use of voting rights attached to shares held by trusts for the advancement of personal
interests of the donors, it is considered necessary to regulate the exercise of such rights in suitable cases. For this
purpose, it is proposed to empower the Central Government to appoint a person to exercise voting rights in respect
of trusts with significant shareholding, when necessary, with a view to securing proper management of the company
in the interests of the shareholders.
In cases where Government has advanced a loan to a company, it is considered necessary that Government
should have the power to direct the conversion of such a loan into shares of that company on fair and equitable
terms. Where the loan agreement provides for such conversion, it is proposed to dispense with the procedure
prescribed under section 81 of the Companies Act in regard to such conversion of loans given by Government and
specified financial institutions. Section 81 of the Act is proposed to be amended accordingly.
Further, it is considered desirable, for the better and convenient administration of the Companies Act, to set up a
Board to which will be entrusted most of the powers and functions of the Central Government under the Companies
Act or other laws. The Board will function subject to the control of the Central Govt. in all matters.
The Bill seeks to amend the Companies Act to give effect to the above proposals.”
Page 16 of 63
The Companies (Amendment) Act, 1964(32 of 1964).—The Statement of Objects and Reasons appended to the
“Investigations of the affairs, true ownership and other related matters of companies cannot be effectively
conducted unless there is full disclosure by their employees of factual information in regard to various matters to be
scrutinised by the Inspectors appointed by the Central Government. In order to give to the employees of the
affected companies temporary protection against victimisation in such cases it has been considered necessary to
make a suitable provision in the Companies Act that no company can discharge or take any other action against
any of its employees during the investigation of its affairs and true ownership, etc. by Inspectors or during the
pendency of proceedings against any of its managerial personnel before the Tribunal, unless it has given previous
intimation to the Company Law Board of the proposed action against the employees and the Company Law Board
has not raised any objection to such action.
As it was apprehended that some of the companies whose affairs were under investigation might take action
against their employees if they disclosed full information to the Inspectors, the amendment of the Companies Act on
the lines indicated above was considered to be a matter of extreme urgency and the Companies (Amendment)
Ordinance, 1964, was, therefore, promulgated by the President on the 5th July, 1964. The present Bill seeks to
replace the said Ordinance without any modification in the provisions thereof.”
Companies (Second Amendment) Bill, 1964 (64 of 1964)11 is reproduced below:
“In pursuance of its terms of reference, the Commission of Inquiry on the administration of Dalmia-Jain Companies
made certain recommendations for the amendment of the Companies Act with a view to prevent in future
malpractices of the nature observed by it, and also to ensure due and proper administration of the funds and assets
of companies in the interest of the investing public. Later, at the instance of Government, a Committee consisting of
Shri C.K. Daphtary and Shri A.V. Visvanatha Sastri examined the recommendations of the Commission of Inquiry
and made some suggestions of its own for amending the said Act [the Companies Act, 1956 ]. The Bill, inter alia,
seeks to implement the recommendations of the Commission of Inquiry and the Daphtary-Sastri Committee.
2. Opportunity is also being taken (i) to strengthen the provisions relating to investigation into the affairs of
companies and to provide for more effective audit in dealing with cases of dishonesty and fraud in the corporate
sector, and (ii) to simplify some of the procedural requirements which are at present burdensome to the companies
without being of corresponding advantage to the Government.”
The recommendations of the Commission of Inquiry on the Administration of Dalmia-Jain Companies (Vivian Bose
Commission), the Daphtary-Sastri Committee, Notes on Clauses and observations of Joint Committee on principal
changes proposed in the Bill have been reproduced in Comments under relevant Sections.
“The Vivian Bose Commission of Inquiry had recommended, inter alia, that inter-company loans should rank at par
with inter-company investments and should be subject to the same restrictions as the latter. This recommendation
was sought to be given effect to by amending section 370 of the Companies Act, 1956 by section 46 of the
Companies (Amendment) Act, 1965. It has, however, been noticed that the restrictions placed by this amendment
would equally apply in respect of guarantees given and securities provided by certain classes of companies, viz.,
financial institutions, insurance companies and private companies simpliciter, and would, therefore, act as a serious
hindrance to their normal functioning. Since loans given by such companies have already been exempted from the
scope of the restriction, it has been decided to afford similar exemption to guarantees given and securities provided
by such companies.
2. Opportunity is also being taken to make a consequential amendment to sub-section (1A) of section 240 on the
lines of similar amendments made to clause (a) of sub-section (1) and clause (a) of sub-section (3) of that section
by the Companies (Amendment) Act, 1965.
3. The Bill seeks to achieve the above objects.”
The Companies (Second Amendment) Act, 1966 (37 of 1966).—Sub-sections (1A), (1B) and (1C) of section 108 of
Page 17 of 63
the Companies Act, 1956 were substituted and sub-section (1D) was amended by the Companies (Second
Amendment) Act, 1966 (37 of 1966) (w.r.e.f 1-4-1966). This Amendment Act was originally promulgated as the
Companies (Amendment) Ordinance, 1966 (11 of 1966).13
The Companies Tribunal (Abolition) Act, 1967 (17 of 1967).—The Statement of Objects and Reasons appended to
the Companies Tribunal (Abolition) Bill, 1967 (7 of 1967)14 is reproduced below:
“At the time of the setting up of the Companies Tribunal, it was intended that the findings of the Tribunal, quickly
given, would enable the Central Government to remove from office, even before the expiry of their terms, persons
who have committed acts of fraud, misfeasance or indulged in malpractices and irregularities in the management of
companies. Experience of the functioning of the Tribunal for the first three years has not been very encouraging in
realising these objectives as the Tribunal had to adopt meticulous and time-consuming judicial procedure and
proceedings before it were also liable to be stayed by appeals from its interim orders or by writ petitions before the
High Courts. Moreover the physical work-load of the Tribunal has been very light and persons affected in places
outside Delhi have found it difficult and expensive to avail themselves of its powers. The Tribunal has not been able
to make any impact either by injecting health in the corporate management or by building up a wealth of case law
which could lay down standards and norms for the corporate sector of our economy as was hoped for when it was
created. The Bill, therefore, proposes to abolish the Tribunal and to revert to the old scheme of jurisdiction vesting
in the Central Govt. or the Court, as the case may be, the powers and functions now exercised by the Tribunal. It
also provides for vesting in the High Courts the new powers which were conferred on the Tribunal when it was set
up.”
The Companies (Amendment) Act,1969 (17 of 1969).—The Statement of Objects and Reasons appended to the
“On the 1st Dec., 1967, an assurance was given to the Lok Sabha that Govt. would bring forward during the next
following budget session of Parliament a Bill to ban contributions by companies to any political party, or for any
political purpose to any individual or body and to abolish the system of management of companies by managing
agents. The Bill seeks to fulfil the assurance. It also seeks to abolish simultaneously the system of management of
companies by secretaries and treasurers which is akin to the system of management of companies by managing
agents.
2. The propriety of companies making contributions to any political party, or for any political purpose to any
individual or body has for some time been the subject of discussion both inside and outside the Parliament. A view
has been expressed that such contributions have a tendency to corrupt political life and to adversely affect healthy
growth of democracy in the country, and it has been gaining ground with the passage of time. It is, therefore,
proposed to ban such contributions.
3. Section 324 of the Companies Act, 1956 (1 of 1956),empowers the Central Government to notify that companies
engaged in specified classes of industry or business shall not have managing agents. Under the Rules framed
thereunder, Government appointed the Managing Agency Enquiry Committee to enquire into the desirability of
applying the said provisions to companies engaged in established industries or any other industry or business as
may be deemed fit by the Committee. In pursuance of the Report of the Committee submitted on the 16th March,
1966, Government issued a notification to the effect that the term of office of a managing agent of any company in
the specified industries shall expire at the end of three years from the 2nd April, 1967.
The Monopolies Inquiry Commission observed that the system of managing agencies was one of the most
important causes which hastened the process of concentration of economic power in India.
Taking all the factors into consideration, it is proposed to abolish the system of management of companies by
managing agents altogether at the same time as in the case of specified industries referred to above.
4. The Managing Agencies Enquiry Committee observed that, at one time, the institution of secretaries and
treasurers was thought of as a suitable alternative to the managing agency system but for all practical purposes
secretaries and treasurers exist only in those cases where managing agents already in existence had to shed some
of the managed companies in view of the limit of ten on the total number of companies that a managing agent can
manage. The Committee did not see any particular gain in such a change. Secretaries and treasurers can be given
all the powers and privileges of a managing agent except that they (i.e. the former) cannot appoint their
representative on the Board of directors of the managed company, and cannot draw more than 7.5 per cent. as
their commission while the managing agents can draw up to 10 per cent. of the net profit. It would thus be obvious
Page 18 of 63
that no useful purpose would be served by abolishing the managing agency system alone if the resultant void is to
be filled up by the secretaries and treasurers. Hence the Government proposes to abolish the system of
management of companies by secretaries and treasurers simultaneously with the abolition of the system of
management of companies by managing agents.”
“The Companies Act was brought on the Statute Book with effect from 1st April, 1956. Thereafter it has undergone
amendments by means of Amending Acts, of which those of 1960, 1965 and 1969 may be mentioned as
incorporating some significant changes in the law. As observed in the Report of the Jenkins Committee in the U.K.,
the Company law is not a ‘field of legislation’ in which ‘finality is to be expected’, as the law ‘falls to be applied to a
growing and changing subject matter’ and the ‘growing uses of the company system as an instrument of business
and finance and the possibilities of abuse inherent in that system’.
2. The present Bill seeks to meet cases of such abuse or distortion of the system which have, of late, assumed
comparatively serious proportions. It further represents an instalment of the remedial measures under
contemplation as a result of the process of comprehensive review of the working of the Act, which has been
undertaken by Government, in the light of the report of the Administrative Reforms Commission and its concerned
working group and in the light of various suggestions received by Government from diverse quarters from time to
time for the amendment of the Act.
3. A striking unhealthy phenomenon which has appeared in the corporate sector in recent times is a trend towards
take-over of well established companies by individuals or groups or combines. It may be stated in this connection
that the provisions of section 372 of the Companies Act, 1956, or section 23 of the MR TP Act, 1969 (54 of 1969),
are not adequate to regulate the ‘take-over’ of companies. Such take-overs are often unfair to the non-controlling
shareholders, particularly the financial institutions, who are kept in the dark while secret negotiations are entered
into by third parties with the controlling shareholders who have an edge over the other shareholders in getting better
price for their shareholdings. The non-controlling shareholders are thus constrained to continue with their shares in
the company, while the control passes into possibly undesirable hands. It is, therefore, proposed under this Bill to
provide safeguards against such take-overs.
4. The provisions of the Bill also seek to regulate the transfer of shares by every body corporate, or bodies
corporate under the same management, whether holding singly or in the aggregate ten per cent. or more of the
nominal value of the equity share capital of a company. But where the shares proposed to be transferred are held in
a company engaged in an industry covered by the Industrial Policy Resolution of the Central Government, such
shares shall, if so directed by the Central Government, be transferred to the Central Government or to such
corporation owned or controlled by that Government, as may be specified in the direction. So also restrictions are
sought to be placed on the transfer of shares in a foreign body corporate having an established place of business in
India in cases where the shares proposed to be transferred constitute ten per cent. or more of the nominal capital of
the foreign company concerned.
5. Section 408 is intended as a corrective against oppression and mismanagement in a company. But it has not
proved effective as the directors appointed by the Central Government do not have an effective voice in the
management of the company. The proposed amendment seeks to rectify this position in the interest of the company
and in public interest.
6. Under the present Bill some other practices prevalent in the corporate sector, in so far as they may prove
injurious or undesirable, are also sought to be checked. The provisions contained in the Bill designed for this
purpose deal with the following:
(1) Failure to enlist shares with all the Stock Exchanges mentioned in a prospectus. In legislating on this point,
it is proposed to make an incidental amendment to the Securities Contracts (Regulation) Act, 1956.
(2) Invitation of deposits from the public by non-banking companies.
(3) Benami holding of shares.
(4) Continuation of the same auditors for a company for indefinite period giving rise to complaints of monopoly
of audit work.
(5) Use of reserve funds by way of dividends to the detriment of company’s interest.
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(6) Non-availability of liquid funds for payment of dividends declared.

(7) Use of unclaimed dividends by management.
7. Under the present Bill the concept of the expression ‘under the same management’ is proposed to be amended.
In view of the abolition of the system of management of companies by managing agents and secretaries and
treasurers, the scope of the definition of this expression needs a change so that control by groups in alternative
forms or by alternative methods calculated to cause injury to public interest may be avoided. The amendment
proposed will also help proper implementation of the concept of inter-connected undertakings within the meaning of
section 2(g) of the Monopolies and Restrictive Trade Practices Act, 1969 (54 of 1969). Therefore an incidental
amendment to that Act is also proposed in the present Bill.
8. The Bill proposes to make it compulsory for companies of a comparatively large size to have secretarial
assistance. This will encourage the growth of the profession of Company Secretaries, to which Government is
committed. It will also promote a better observance by the companies of the laws relating to trade, industry and
commerce.
9. It is further proposed in the Bill to put foreign companies of which not less than fifty per cent. of the share capital
is held by one or more citizens of India or by one or more bodies corporate incorporated in India on par with Indian
companies for the purpose of compliance with such of the provisions of the Act as may be prescribed in that behalf.
It is also proposed that the provisions relating to inspection of the books of accounts of companies and investigation
into the affairs of companies shall apply to a foreign company having an established place of business in India. This
meets the demand that there should be more effective control over the working of foreign companies in this country.
10. The Bill provides for an extension of the scope of section 43A of the Act whereby some private companies
satisfying certain conditions shall be deemed to be public companies in certain circumstances. This is meant to
bring such private companies under the discipline applicable to public companies.
11. Powers are proposed to be taken to regulate agreements or arrangements which have been, or may be,
entered into between the former managing agents or secretaries and treasurers of companies with their erstwhile
managed companies in order to ensure that such arrangements are clearly in the interests of the company
concerned and are not a device to circumvent the provisions of law abolishing those systems of management.
12. Further, various existing provisions of the Act, such as those relating to inspection, cost audit, sole selling
agency, appointment or re-appointment of managing or whole-time directors and fixation of their remuneration and
contracts in which directors are interested, have been streamlined for a more effective regulation of the working of
companies and for preventing unhealthy practices. Besides these, some of the powers of the court under the Act
are proposed to be transferred to Government, in line with the recommendation of the Administrative Reforms
Commission. As it is noticed that corporate funds are being misapplied through the instrument of sole purchasing
agencies, necessary provisions have also been incorporated in the Bill regulating sole purchasing agencies on the
same lines as sole selling agencies.” [ Statement of Objects and Reasons appended to the Companies
(Amendment) Bill, 1972 (72 of 1972)].
The Companies (Amendment) Act, 1977 1977 (46 of 1977).—The Statement of Objects and Reasons appended to
the Companies (Amendment) Bill, 1977 (134 of 1977)17 is reproduced below:
“In the Companies Act, 1956, section 58A relating to acceptance of deposits was inserted by the Companies
(Amendment) Act, 1974 (41 of 1974), which came into force on the 1st February, 1975. Prior to the coming into
force of this section, acceptance of deposits by companies was regulated by the directions issued by theReserve
Bank of Indiaunder Chapter IIIB of the Reserve Bank of India Act, 1934. Clause (a) of sub-section (3) of section 58A
provides that every deposit accepted by a company at any time before the commencement of the said amendment
Act of 1974, shall, if it is not renewed by a company in accordance with the provisions of that section, be repaid in
accordance with the terms of such deposit. Clause (c) of that sub-section provides that any deposit received by a
company in contravention of the aforesaid directions of the Reserve Bank shall be repaid in full on or before 1st
April, 1975. Sub-section (5) of that section provides for penalty for the contravention of the provisions of the section.
A review of the cases of contraventions shows that sometimes they are due to circumstances beyond the control of
the companies, namely, strikes, riots, power-cuts, recession, etc. Sub-section (7) of section 58A empowers the
Central Government to give total exemption to a company from the provisions of the section after consulting
theReserve Bank of India. There is, however, no power to grant partial relaxation like extension of time in deserving
cases for the repayment of deposits. A study group constituted by the Reserve Bank of India under the
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chairmanship of Shri James S. Raj recommended that section 58A of the Act may be suitably amended to grant
extension of time to comply with or to exempt any company from the provisions of that section. It is proposed to
accept this recommendation and amend section 58A suitably.
In State of Bombay v. Bandhan Ram Bhandani, (1961) 31 Comp. Cas. 1 (SC) AIR 1961 SC 186 [LNIND 1960 SC
220]*, the question arose as to whether the company and its officers are liable to be prosecuted under the 1913 Act
for not laying the balance sheet and the profit and loss account before the company in annual general meeting
where the annual general meeting of the company was not held. In that case, the Supreme Court took the view that
a person charged with an offence could not rely on his own default as a defence to the charge. If he was
responsible for not calling the annual general meeting, he could not be heard to say in his defence to the charge
that as the annual general meeting was not held, the balance sheet and profit and loss account could not be laid
before the company in annual general meeting. A different view has, however, been taken on the point by the
Supreme Court in the case of State of A.P. v. Andhra Provincial Potteries Ltd., (1973) 43 Comp. Cas. 514 (SC) AIR
1973 SC 2429 [LNIND 1973 SC 238]†.
Persons in charge of the management of some of the companies sometimes omit to convene the annual general
meeting of the company and by such omission keep the shareholders as well as the creditors of the company in the
dark about the affairs of the company and its financial condition. Further, by such omission, they also evade the
necessity of filing the balance sheet and the profit and loss account with the Registrar of Companies. When a
document is filed with the Registrar of Companies, it is open to any shareholder or creditor to inspect such
document and to obtain a copy thereof. In the circumstances, it is absolutely essential that even where the annual
general meeting of the company has not been held, the balance sheet and profit and loss account should be filed
with the Registrar of Companies to enable the shareholders and other persons to find out, from inspection of the
said documents, the affairs of the company and its financial condition. The Bill seeks to amend section 220 of the
Companies Act, 1956 to achieve the said object.
Under section 293 of the Companies Act, 1956, a company is empowered to make donations for charitable
purposes up to five per cent. of its average net profits during the preceding three years or up to Rs. 25,000,
whichever is greater. The ceiling of Rs. 25,000 was fixed long ago and it is felt that, in the present context, the said
ceiling should be raised to Rs. 50,000. The Bill seeks to amend section 293.
Section 620 empowers the Central Government to modify, by notification, any of the provisions of the Act in its
application to a particular Government company or to Government companies in general. Every notification
proposing to make such modification is required to be placed, in draft, before each House of Parliament for a period
of not less than 30 days while it is in session. Since the said period of 30 days cannot, sometimes, be completed in
one session, it is necessary to amend the section to permit the period of 30 days to be completed in one session or
in two or more successive sessions. The Bill seeks to amend section 620 to achieve the said object.
Other amendments included in the Bill are of a consequential or formal nature.”
The Monopolies and Restrictive Trade Practices (Amendment) Act, 1984 (30 of 1984).—The Statement of Objects
and Reasons appended to the MRTP (Amendment) Bill, 1983 (37 of 1983)18 explained the amendments as follows:
“The provisions of sections 108A to 108H of the Companies Act, 1956, regulate the acquisition and transfer of
shares of companies to which the provisions of the Monopolies and Restrictive Trade Practices Act, 1969 (54 of
1969) apply. They are really intended to prevent acquisition or take-over of companies leading to further
concentration of economic power. As recommended by the Sachar Committee, it is considered more appropriate
that these provisions find place in the Monopolies and Restrictive Trade Practices Act, 1969 with necessary
modifications. The provisions in the Companies Act are simultaneously proposed to be omitted.”
Sections 108A to 108H were later re-transferred to the Companies Act, 1956.
“At present, under section 293A of the Companies Act, 1956 (1 of 1956) there is a blanket ban on political
contributions by companies. In his Budget Speech, the Finance Minister has made an announcement that with a
view to permitting the corporate sector to play a legitimate role within the defined norms in the functioning of our
democracy, necessary legislation would be, undertaken to allow companies to make contributions to political parties
from out of their profits. For this purpose, it is proposed to substitute [vide clause 2 of the Companies (Amendment)
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Bill, 1985] a new section for section 293A of the Companies Act, 1956. The new section seeks to continue the
existing blanket ban against political contributions in the case of Government companies and companies which
have been in existence for less than three financial years. The new section seeks to permit any other company to
make political contributions not exceeding five per cent. of its average net profits if a resolution authorising such
contributions is passed at a meeting of the Board of directors. The new section also seeks to impose an obligation
on every company to disclose in its profit and loss account any amount or amounts contributed by it to any political
party or for any political purpose. Under the new section, if a company makes any political contribution in
contravention of the provisions thereof, the company would be liable to fine which may extend to three times the
amount so contributed. Further, every officer of the company in default, would be liable to imprisonment for a term
which may extend to three years and also to fine.
2. Another announcement made by the Finance Minister in his Budget Speech relates to the decision of the
Government to introduce necessary legislation so that legitimate dues of workers rank pari passu with secured
creditors in the event of closure of the company and above even the dues to Government. The resources of the
companies constitute a major segment of the material resources of the community and common good demands that
the ownership and control of the resources of every company are so distributed that in the unfortunate event of its
liquidation, workers, whose labour and effort constitute an invisible but easily perceivable part of the capital of the
company are not deprived of their legitimate right to participate in the product of their labour and effort. It is
accordingly proposed to amend sections 529 and 530 of the Companies Act, 1956 and also to incorporate a new
section in the Companies Act, namely section 529A [vide clauses 4, 5 and 6 of the Companies (Amendment) Bill,
1985 (16 of 1985)].
3. Section 396 of the Companies Act empowers the Central Government to order amalgamation of companies in
public interest. The Committee on Subordinate Legislation (Seventh Lok Sabha) have recommended that the
Company Law Board should be empowered to reassess compensation on appeal from the order of the prescribed
authority assessing the compensation payable under an order of amalgamation under this section. The Committee
have also recommended that the order of amalgamation itself may provide for the continuation of any pending legal
proceedings by and against the transferee company on the lines of the existing provisions of section 394 of the Act
under which the High Court orders amalgamation. Section 396 of the Act is proposed to be amended suitably to
give effect to these recommendations (vide clause 3 of the Bill).
4. The Bill seeks to achieve the above objects.”
“Government has, in the light of the recommendations made by the Expert Committee (Sachar Committee) and in
the light of the experience gained in the administration of the Companies Act, 1956, over the last few years, felt it
necessary to bring certain amendments to that Act.
2. The salient features of the amendments are:

(a) the setting up of an independent Company Law Board to exercise such judicial and quasi-judicial functions
as are presently being exercised either by the Court or the Central Government and are proposed to be
transferred to that Board;
(b) compounding of offences punishable with fine;
(c) dispensing with Government approval for managerial appointments and remuneration subject to the
fulfilment of certain statutory guidelines which are proposed to be incorporated in the Act itself;
(d) de-linking of the rates of depreciation from the rates specified under the Income-tax Act and laying down
the rates of depreciation in the Act itself to reflect the true and fair view of the state of affairs of the
company;
(e) protecting the interests of the investors by providing for intervention by the Company Law Board against
non-repayment of public deposits; compulsory redemption of preference shares in certain cases; requiring
companies to disclose reasons for refusal to register transfer of shares; and protecting the rights of the
transferee pending mutation of his name in the register of members; and also compulsory listing of all
public issues;
(f) reducing unnecessary cost or burden by requiring companies to attach only an abridged form of
prospectus to the application form and only an abridged version of balance sheets and auditors’ report to
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members and also by requiring companies to hold a poll in general meeting only at the instance of the
shareholders having some minimum stake in the company; and further requiring companies to file full
annual return only once in six years;
(g) provision for disclosure of information relating to conservation of energy, technology absorption, foreign
exchange earnings and outgo as well as particulars of employees having some minimum stake in the
company and drawing remuneration in excess of that drawn by managerial personnel.
3. The proposals also include provisions to plug loopholes and remove some lacunae which have come to surface
in the working of the Act. It is also proposed to streamline some of the existing provisions for better working and
administration of the Act. Certain consequential and incidental changes are also sought to be made. The Bill seeks
to achieve the above objectives.
4. The notes on clauses explain in detail the provisions of the Bill.” [ Statement of Objects and Reasons appended
to the Companies (Amendment) Bill, 1987].
The Notes on Clauses and recommendations of the Sachar Committee have been reproduced under relevant
Sections.
The Bill introduced in the Rajya Sabha on 31st August, 1987 was passed with substantial amendments. The Notes
on Clauses under relevant sections have thus been given with reference to these official amendments.
The Monopolies and Restrictive Trade Practices (Amendment) Act, 1991 (58 of 1991).—The Statement of Objects
and Reasons appended to the MRTP (Amendment) Bill, 1991 (198 of 1991)21 is reproduced below:
“The Monopolies and Restrictive Trade Practices Act, 1969, came into force with effect from 1st June, 1970. The
basic philosophy behind the MR TP Act was never to inhibit industrial growth in any manner but to ensure that such
growth is channelised for the public good and is not instrumental in perpetuating concentration of economic power
to the common detriment. With the growing complexity of industrial structure and the need for achieving economies
of scale for ensuring higher productivity and competitive advantage in the international market, the thrust of the
industrial policy has shifted to controlling and regulating the monopolistic, restrictive and unfair trade practices
rather than making it necessary for certain undertakings to obtain prior approval of the Central Government for
expansion, establishment of new undertakings, merger, amalgamation, take over and appointment of directors. It
has been the experience of the Government that pre-entry restriction under the MR TP Act on the investment
decision of the corporate sector has outlived its utility and has become a hindrance to the speedy implementation of
industrial projects. By eliminating the requirement of time-consuming procedures and prior approval of the
Government, it would be possible for all productive sections of the society to participate in efforts for maximisation
of production. It is, therefore, proposed to restructure the MR TP Act by omitting the provisions of sections 20 to 26
and transfer the provisions contained in Chapter III-A regarding restrictions on acquisition and transfer of shares to
the Companies Act, 1956. The Schedule to the MR TP Act is also consequently to be transferred with modification
to the Companies Act, 1956.
2. It is also proposed to enlarge the scope of inquiry by the MRTP Commission with a view to taking effective steps
to curb and regulate monopolistic, restrictive and unfair trade practices which are prejudicial to public interest. It is
also proposed to provide for deterrent punishment for contravention of the orders passed by the MRTP Commission
and the Central Government and empower the Commission to punish for its contempt. Certain other consequential
changes are also found necessary in the MR TP Act.
3. The criteria for determining dominance, applicable to acquisition and transfer of shares under newly inserted
sections 108A, 108B and 108C of the Companies Act, 1956, is proposed to be determined only on the basis of
market share of 25 per cent. of the total goods produced, supplied, distributed or services rendered in India or
substantial part thereof.
4. The Bill seeks to replace the MRTP (Amendment) Ordinance, 1991 (8 of 1991), with modifications and to achieve
the aforesaid objects.”
The Depositories Act, 1996 (22 of 1996).—The Statement of Objects and Reasons appended to the Depositories
Bill, 1996 (29 of 1996)22 is reproduced below:
“Paper based ownership and transfer of securities has been a major drawback of the Indian securities market as
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this often results in delay in settlement and transfer of securities, leads to ‘bad delivery’, theft, forgery, etc., causing
hardship to the investor. In order to enable safe and speedy transfer of securities, it has become essential to enact
a law which provides a legal framework for establishment of depositories.
2. The depositories legislation, inter alia, provides for:

(a) a legal framework for establishment of depositories for maintenance of ownership records of securities and
effect changes in ownership records through book entry;
(b) dematerialisation of securities in the depositories mode. It provides the option to the investor to hold
securities in physical form as at present or in a dematerialised form in depository;
(c) enabling free transferability of securities; and
(d) exempting all transfers of shares within a depository from stamp duty.
3. As Parliament was not in session, the President promulgated the Depositories (Third) Ordinance, 1996, on 21st
June, 1996, for the said purpose.
4. The Bill seeks to replace the said Ordinance.”
“In 1977, Government appointed a Committee for the amendment of the Companies Act, 1956, and the Monopolies
and Restrictive Trade Practices Act, 1969, popularly known as the Sachar Committee. Some of the
recommendations of the Sachar Committee led to the Companies (Amendment) Acts of 1985 and Companies
(Amendment) Acts of 1988. However, while considering the proposals which led to the enactment of the Companies
(Amendment) Act, 1988, a decision was taken by the Government for a comprehensive review of the existing law.
2. Accordingly, the Companies Bill, 1993, was introduced in the Rajya Sabha on 14th May, 1993. The Bill has not
yet been taken up for consideration. In view of suggestions from the different forums, the Government feels that the
Bill would require comprehensive revision keeping in view the changes which have taken place in the capital
market, operation of corporate sector and liberalisation policies. For this purpose and having due regard to the
statement made on 22nd July, 1996, in Parliament, the Government has set up a working group to revise the Act.
Since, this process would take a considerable time to complete its work, it is felt that some changes in the
Companies Act are imminent, therefore, it is proposed to amend the Act, inter alia, as follows, namely:
(i) to provide protection to the depositors;
(ii) to provide protection to employees’ interest in case of winding up of a company;
(iii) to simplify some procedural and legal requirements in the interest of corporate sector.
3. The Bill seeks to achieve the above objectives.”
The Depositories Related Laws (Amendment) Act, 1997 (8 of 1997).—The Statement of Objects and Reasons
appended to the Depositories Related Laws (Amendment) Bill, 1997 (16 of 1997)24 is reproduced below:
“The Depositories Act, 1996, provides, inter alia, for a legal framework for the establishment of depositories for
dealing in securities. However, the said Act allows only securities of companies to be dealt in a depository mode.
The securities of statutory bodies like the Industrial Development Bank of India, the Unit Trust of India, the State
Bank of India and other banks established under the Banking Companies (Acquisition and Transfer of
Undertakings) Act, 1970, and the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980, could
not be dealt with in a depository mode. In order to remove this lacuna and also to give effect to certain
consequential changes, the Depositories Related Laws (Amendment) Ordinance, 1997, was promulgated on the
15th January, 1997, amending the Depositories Act, 1996, the Companies Act, 1956, the Industrial Development
Bank of India Act, 1964, the State Bank of India Act, 1955, the State of Bank of India (Subsidiary Banks) Act, 1959,
the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970, the Banking Companies (Acquisition
and Transfer of Undertakings) Act, 1980, and the Indian Stamp Act, 1899.
2. The Bill seeks to replace the said Ordinance.” [ Statement of Objects and Reasons appended to the Depositories
Related Laws (Amendment) Bill, 1997].
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“The Companies Act, 1956, has been in force for more than four decades and the economy has undergone
considerable changes since its introduction. Further, the law relating to corporate sector has been undergoing
changes in other countries taking into account recent developments in the field of corporate law and practices.
Taking into consideration these developments and on the basis of a report prepared by a working group constituted
in 1996, the Companies Bill, 1997, was introduced in Rajya Sabha on August 14, 1997, to replace the Companies
Act, 1956. The Companies Bill, 1997, stands referred to department related Standing Committee on Home Affairs
and the report of the Standing Committee is awaited.
2. In view of the urgency felt by the Government in this regard and as Parliament was not in session, the President
promulgated the Companies (Amendment) Ordinance, 1998 (19 of 1998), on the 31st October, 1998. It is proposed
to replace the Companies (Amendment) Ordinance, 1998, by a Bill which, inter alia, provides for the following
matters:
(a) to declare Infrastructure Development Finance Company Limited as a public financial institution;
(b) to provide for nomination facility to the holders of shares, debentures and fixed deposit holders;
(c) allowing the companies to buy-back their shares subject to certain safeguards;
(d) to provide for transfer of certain sums to the capital redemption reserve account when a company
purchases its own shares out of free reserves;
(e) to provide for issue of sweat equity subject to fulfilment of certain conditions;
(f) to provide for establishment of an Investors Education and Protection Fund;
(g) to provide for constitution of a National Advisory Committee on Accounting Standards;
(h) to provide for compliance of accounting standards by a company in preparation of profit and loss account
and balance sheet; and
(i) to permit the companies to make inter-corporate investments and loans subject to fulfilment of certain
conditions without prior approval of the Central Government.
3. The corporate sector is going through difficult times. The capital market is also at a low ebb, which requires
immediate morale-boosting efforts on the part of the Government to promote investors’ confidence. Besides, the
economy needs certain impetus for promoting inter-corporate investments considering slow flow of funds in new
investments. In order to overcome these adverse conditions faced by the corporate sector, it was felt that the
company should be permitted to buy-back their own shares, to make investments or loans freely without prior
approval of the Central Government, to provide for nomination facility to the holders of shares, deposits and
debentures and also to make provision in law for establishment of the Investors Education and Protection
Fund(IEPF) broadly on the lines of provisions contained in the Companies Bill, 1997.
4. In the present Bill, as compared to the Ordinance promulgated, some further changes have been made in order
to make some of the legal provisions more simple, practical and specific and to remove ambiguity in respect of
some other provisions. Broadly, the changes are as follows:
(a) buy-back of shares has been restricted to twenty-five per cent. of the paid-up capital and the funds used for
this purpose are not to exceed twenty-five per cent. of the paid-up capital and free reserves. Free reserves
have been defined for the purpose of buy-back;
(b) restriction of twenty-four months, after the buy-back, for further issue of securities will apply only in respect
of issue of the same security. The company will have no restriction to issue other securities during this
period;
(c) prior approval of financial institutions in the case of investment/loan/guarantee up to sixty per cent. of the
net worth will not be required if there is no default in repayment of loan/interest to public financial
institutions;
(d) company shall not be allowed to make any inter-corporate investment if there is a default in repayment of
deposits or interest thereon. Restrictions on inter-corporate investments will also not apply in case of
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wholly owned subsidiary companies or companies established with the object of financing industrial
enterprises and for subscribing to right shares;
(e) in the case of corporate guarantee, the companies would be permitted to obtain ex-post-facto approval of
the shareholders within a specified period;
(f) the powers to the Board of directors to decline or to suspend registration of shares in the case of a
nominee have been withdrawn;
(g) for transfer of unclaimed funds from company to investor protection fund, the period has been increased
from five years to seven years and thereafter no claim to be entertained;
(h) for issue of sweat equity, a special resolution has been provided instead of ordinary resolution.
5. The Bill seeks to replace the said Ordinance.” [ Statement of Objects and Reasons appended to the Companies
Relevant paragraphs of the Statement of Objects and Reasons have been annotated under Legislative History in
Comments under respective Sections.
The Trade Marks Act, 1999 (47 of 1999).—Section 20 and 22 of the Companies Act, 1956 (1 of 1956) regarding
Companies not to be registered with undesirable names and Rectification of name of company have been amended
by the Trade Marks Act, 1999 (47 of 1999) (w.e.f. 15-9-2003).
See detailed Comments under Sections 20 and 22.
The Companies (Amendment) Act, 2000 (53 of 2000). —The Statement of Objects and Reasons appended to the
“The Government introduced a comprehensive Companies Bill, 1997, in Rajya Sabha on 14-8-1997, and the same
was referred to the Standing Committee of Parliament for examination and report thereon. The process of
examination, however, is not yet over and is still to take some more time. The passing of this Bill is thus likely to be
delayed further. It is however considered desirable by the Government that some more important changes in the
Companies Act, 1956, are brought about in order to provide immediately certain measures for good corporate
governance and for protection of investors. These measures are as follows:
(i) to provide a minimum paid up capital of Rs. 1 lakh for private companies and Rs. 5 lakhs for public
companies;
(ii) to delete provisions relating to deemed public companies;
(iii) to reduce the period for disbursing dividend/interim dividend to shareholders from 42 days to 30 days;
(iv) to request the companies to inform the Company Law Board within sixty days if the company fails to make
repayment of deposits on maturity to small deposit holders and the Company Law Board would be enabled
to consider these defaults reported by companies and make an order within thirty days which the company
shall be bound to comply with. A company which fails to report or comply with the order of the Company
Law Board shall be punishable with imprisonment which may extend to three years and shall also be liable
to fine or a fine of not less than Rs. 500 per day during which such default continues;
(v) to provide that the Securities and Exchange Board of India (SEBI) be entrusted with powers with regard to
all matters relating to public issues and transfers including power to prosecute defaulting companies and
their directors;
(vi) to include a Directors’ Responsibility Statement in the Board’s report to highlight the accountability of
directors in good corporate governance;
(vii) to provide that public listed companies with paid up capital of Rs. 5 crores or more shall be required to set
up an audit committee of the Board of directors as a measure for better corporate governance;
(viii) to require companies with paid up capital of Rs. 10 lakhs or more and which do not have whole-time
secretary in their employment to submit a Secretarial Compliance Certificate from a company secretary in
whole-time practice;
(ix) to delete the provisions for appointment of a public trustee by the Central Government with a view to
enabling the trust to directly exercise the voting power;
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(x) to provide that any offer of shares or debentures to more than 50 persons shall be treated as public issue
with suitable modification in the case of public financial institutions and non-banking financial companies;
(xi) to prescribe voting through postal ballot in case of only important items with effect from such date as may
be notified by the Government to ensure good corporate governance;
(xii) to empower the Regional Director to allow change of registered office of companies from jurisdiction of one
Registrar of Companies to another Registrar of Companies within the same State;
(xiii) to empower the Comptroller and Auditor-General of India to appoint the auditors in respect of Government
companies and also to provide that shareholders of such companies will fix their remuneration in annual
general meeting;
(xiv) to provide that in the case of a public company which does not file annual accounts and annual returns
continuously for the last three years, the directors of such companies will be debarred from becoming
directors of other public companies for five years. Similarly, in the case of any public company which fails
to repay its depositors on maturity of deposit amount/debentures, dividend and interest on
deposits/debentures on the due dates, the whole-time directors of defaulting companies as on such date
will be debarred from becoming directors of any other public company for a period of five years;
(xv) to provide that for purpose of managerial remuneration, the amount of depreciation will be the same as
provided in the profit and loss account of the company;
(xvi) to provide that no person can hold office of director in more than fifteen companies at a time;
(xvii) to provide for appointment of one director as a nominee of small shareholders who constitute a
minimum of 1000 in number and having shares of not more than Rs. 20,000 with effect from the date to be
specified and subject to such other conditions as may be prescribed by the Central Government;
(xviii) to provide penal provisions for increased fine for offences under the Act;
(xix) to provide that a shareholder of the company be disqualified for appointment as auditor of the company;
(xx) to delete the provisions relating to managing agent, secretaries and treasurers as they have become
redundant after abolition of the system of managing agent, secretaries and treasurers;
(xxi) to provide that private limited companies shall be excluded in reckoning the number of companies which an
auditor can audit.
2. It is expected that the above amendments in a short Bill will ensure better corporate governance, transparency in
working of companies and also more effective enforcement by enhancing the penalty/punishment for contravention
so as to ensure better compliance with the provisions of the Companies Act, 1956.
3. The notes on clauses explain in detail the provisions of the Bill.” [ Statement of Objects and Reasons appended
to the Companies (Second Amendment) Bill, 1999 (139 of 1999)].
The Notes on Clauses of the Bill explaining the provisions/amendments made by the Act have been reproduced
under Legislative History in Comments under relevant Sections in this book.
The Companies (Amendment) Act, 2001(57 of 2001).—The Statement of Objects and Reasons appended to the
Companies (Third Amendment) Bill, 2001 (100 of 2001)27 is reproduced below:
“For a considerable time, the market sentiment has been very weak. Because of the recent developments in the
United States of America and other places, the situation has become worse.
2. Section 77A of the Companies Act, 1956, permits a company to purchase its own shares or other specified
securities (hereafter referred to as ‘buy-back’) subject to the provisions contained in that section.The Ministry of
Finance (Department of Economic Affairs) has suggested that the provisions for buy-back by companies should be
liberalised with a view to improving the market sentiment. Liberalisation has also been supported by the SEBI,
financial institutions and some others.
3. In view of the above, it was decided to liberalise certain provisions of Section 77A of the Companies Act, 1956,
relating to buy-back and for this purpose, the Companies (Amendment) Ordinance, 2001 (Ordinance 7 of 2001) was
promulgated on the 23rd day of October, 2001, so as to, inter alia,—
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(a) provide that if the buy-back was to the extent of or less than ten per cent. of the total paid-up capital and
free reserves of the company and such buy-back had been authorised by means of a resolution passed at
its Board meeting, such buy-back shall not require special resolution to be passed by a general meeting as
required by clause (b) of sub-section (2) of section 77A which prohibits a company to purchase its own
shares or other specified securities unless a special resolution is passed in general meeting of the
company authorising such buy-back;
(b) provide that no offer of buy-back referred to in (a) above shall be made within a period of three hundred
and sixty-five days reckoned from the date of the preceding offer of buy-back;
(c) reduce the time-limit from twenty-four months specified under sub-section (8) of Section 77A of the
Companies Act, 1956, to six months for issue of the same kind of shares.
4. The Bill seeks to replace the said Ordinance.” [ Statement of Objects and Reasons appended to the Companies
(Third Amendment) Bill, 2001]
The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002(54 of
2002).—Relevant extracts from the Statement of Objects and Reasons appended to the Securitisation and
Reconstruction of Financial Assets and Enforcement of Security Interest Bill, 2002 (53 of 2002)28 are reproduced
below:
“(f) declaration of any securitisation company or reconstruction company registered with the Reserve Bank of India
as a public financial institution for the purpose of section 4A of the Companies Act, 1956.”
“During the last decade, changes have taken place in the Indian economy, in the communication and transportation
infrastructures, as well as in the method of commerce, banking and international trade. Liberalization of the
economy is in the process of changing the terms of trade between rural and urban, labour and industry, finance and
commerce. Biotechnology, the information revolution, computerization can all be used to raise the standard of living
of the rural masses and ultimately link this economy with regional, national and global demand. Institutions are
needed to link the rural economy with the emerging new opportunities. Rural producers are at a potential
disadvantage given their generally limited assets, resources, education and access to advanced technology. In the
present competitive scenario, if co-operative enterprises are to continue to serve rural producers, they require an
alternative to the institutional form presently available under law.
2. Keeping all this in view the Government constituted a committee consisting of experts led by Dr. Y.K. Alagh,
Economist, former Union Minister to examine and make recommendations with regard to (a) framing a legislation
which would enable incorporation of co-operatives as companies and conversion of existing co-operatives into
companies and (b) ensuring that the proposed legislation accommodates the unique elements of co-operative
business within a regulatory framework similar to that of companies. The Committee had a series of meetings
during which it interacted with, and received responses from various co-operatives, institutes and individuals.
3. On the basis of the recommendations of the committee the present Bill has been prepared with the main
objective of facilitating formation of co-operative business as companies and to convert existing business into
companies. The salient features of the Bill are:
(i) To offer a statutory and regulatory framework that creates the potential for producer-owned enterprises to
compete with other enterprises on a competitive footing. The Companies Act envisages and provides for
various forms of companies including private limited, public limited, trusteeship companies and nidhis, each
with specific and appropriate provisions applicable to them.
(ii) To provide for the formation and registration of producer companies which include the mutual assistance
and co-operative principles within the more liberal regulatory framework afforded by the company law with
suitable adaptations.
(iii) To provide an opportunity to co-operative institutions to voluntarily transform themselves into the new form
of producer companies.
(iv) Under the Bill conversion of co-operatives to producer companies is purely voluntary.
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(v) Member equity may not be publicly traded, but may only be transferred, with the approval of the producer
company’s Board of directors. Producer companies would not be vulnerable to the takeover by
multinationals or other companies.
(vi) The conversion option by co-operative society to producer company can be exercised only if two-thirds of
the members of the concerned society vote in favour of a resolution to that effect.
(vii) The new form of company is designated as ‘producer company’ to indicate that only certain categories of
persons can participate in the ownership of such companies. The members of the producer company have
necessarily to be ‘primary producers’, that is persons engaged in an activity connected with, or relatable to,
primary produce.
(viii) The objects of a producer company have been defined to include, among other things, production,
processing, manufacture and sale of primary produce as well as allied matters.
4. The Bill seeks to achieve the above objectives.” [ Statement of Objects and Reasons appended to the
Companies (Second Amendment) Bill, 2001 (88 of 2001)].
See detailed Comments under newly inserted Part IXA [Producer Companies], Chapters I to XII, Sections 581A to
581ZT.
The Companies (Second Amendment) Act, 2002 (11 of 2003).—The Statement of Objects and Reasons appended
to the Companies (Amendment) Bill, 2001 (80 of 2001)30 is reproduced below:
“The latest developments and innovations in corporate laws required that the Companies Act, 1956, and other
related laws concerning winding up of companies should be remodelled in line with the international practices in this
field. Government constituted a Committee consisting of experts under the chairmanship of Justice V. Balakrishna
Eradi, retired Supreme Court Judge to examine the law relating to insolvency and winding up of companies.
2. The Committee examined Companies Act, 1956, and also other laws having a bearing on the subject such as
Sick Industrial Companies (Special Provisions) Act, 1985 (SICA), Recovery of Debts Due to Banks and Financial
Institutions Act, 1993, and Securities Contracts (Regulation) Act, 1956; it also considered laws on corporate
insolvency prevailing in industrially advanced countries. The Committee held wide ranging hearings and
consultations on the subject.
3. On the basis of the recommendations of the Committee the present Bill [the Companies (Amendment) Bill, 2001]
has been prepared with the main objective of facilitating or expediting revival/rehabilitation of sick companies and
protection of workers’ interests and where necessary, winding up of companies. The salient features of the Bill are
as follows:
(i) A National Company Law Tribunal will be set up. The powers and jurisdiction presently being exercised by
various bodies, viz., the Company Law Board or the Board for Industrial and Financial Reconstruction or
the Appellate Authority for Industrial and Financial Reconstruction or High Courts will now be consolidated
and entrusted to the Tribunal. Thus, multiplicity of litigation before various courts or quasi-judicial bodies or
forums regarding revival or rehabilitation or merger or amalgamation or winding up will be avoided as all
these matters will be heard and decided by the proposed National Company Law Tribunal;
(ii) All the parties will be bound by the Tribunal’s orders and in the case of non-availability of a workable
proposal for revival or rehabilitation, etc., the Tribunal can decide the matter on the merits including
introduction of its own scheme;
(iii) The Tribunal shall work through Benches. There shall be ten special Benches which will deal with the
matters relating to revival or reconstruction or rehabilitation or winding up of companies;
(iv) This will reduce the entire process which is presently taking several years in winding up of the companies
to about two years or so;
(v) Stripping of assets of sick companies will be avoided;
(vi) Since individual affidavits will be filed with the National Company Law Tribunal which will have powers of
contempt of court, there will be an in-built seriousness;
(vii) There will be a fund known as rehabilitation and revival fund which will be used to make primarily:
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(a) interim payment of the dues of workmen of the company which has been declared sick or is under
liquidation;
(b) protection of the assets of sick companies;
(c) revival and rehabilitation of sick companies;
(viii) ‘Industrial undertaking’ in terms of sickness does not include:
(a) small scale industrial undertakings, as defined in clause (j) of section 3 of the Industries (Development
and Regulation) Act, 1951
(b) Public sector undertakings, unless a reference is made by the Central Government and/or State Govt.,
as the case may be;
(ix) As a result of this enactment everyone including workers, creditors, investors and the economy as a whole
will stand to benefit.
5. The Bill seeks to achieve the above objectives.
6. The notes on clauses explain, in detail, the provisions of the Bill.”
See detailed Comments on Tribunal (NCLT) under Section 10FB.
The Election and Other Related Laws (Amendment) Act, 2003 (46 of 2003).—In section 293A(5) of the Companies
Act, 1956, an Explanation has been inserted by the Election and Other Related Laws (Amendment) Act, 2003.
The Enforcement of Security Interest and Recovery of Debts Laws (Amendment) Act, 2004(30 of 2004).—Sections
4A and 424A of the Companies Act, 1956 (1 of 1956 ) have been amended.
See detailed Comments under relevant Sections 4A and 424A.
Companies (Amendment) Bill, 2006 (24 of 2006)† is reproduced below:
“In context of the rapid developments witnessed in technology, the Ministry of Company Affairs decided to enable
the operations carried out by the Ministry and its field offices to be performed more efficiently and effectively
through the use of contemporary information technology and computers. It was felt that the earlier efforts at
computerisation had not yielded the desired efficiency in operation of the system and an operating system that took
into account contemporary technology was necessary. Therefore, it was decided to implement a comprehensive e-
Governance system and programme to achieve the above objective.
2. The Ministry of Company Affairson the recommendations of Department of Information Technology is

implementing an e-Governance initiative through a project named as ‘MCA-21’. This project will provide the public,
corporate entities and others an easy and secure online access to the corporate information, including filing of
documents and public access to the information required to be in the public domain under the statute, at any time
and from anywhere. This would also result in efficiency in statutory supervision of corporate processes and efficient
professional services under the Companies Act, 1956 (the Act).
3. The filing and registration of documents is a statutory requirement under the Act. At present, the Act lays down
the procedures for filing of various documents in physical form and the processes associated therewith. While, the
broad enabling framework for such an initiative is available under the Information Technology Act, 2000 (21 of
2000) read with the Companies Act, 1956, enabling provisions would still be required to support certain online
electronic processes which have since become available due to technological advancement for various detailed
procedural requirements under the Companies Act, 1956.
4. It is, therefore, proposed to insert new Section 610B, 610C, 610D and 610E in the Companies Act, 1956 so as to
make provision for electronic filing system and for payment of fees through electronic form under the said Act which
are essential for the successful implementation of the MCA-21 Project. After the proposed amendments to the
Companies Act, 1956 have been enacted, the documents in electronic form duly authenticated with digital
signatures shall be accepted under the provisions of that Act. The proposed electronic system also provides for
multiple modes of payment of statutory fees.
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5. The provisions of the Companies Act, 1956 allow an individual to be a director of up to fifteen companies and
such companies can be located in the jurisdiction in any of the Registrars of Companies. There is a need for
individual identity of person(s) intending to be directors of companies to be established. This would also facilitate
effective legal action against the directors of such companies under the law, keeping in view the possibility of fraud
by companies and the phenomenon of companies that raise funds from the public and vanish thereafter. It is,
therefore, proposed to insert new Sections 266A, 266B, 266C, 266D, 266E, 266F and 266G in the Companies Act,
1956 so as to, inter alia, provide for allotment of a unique Director Identification Number to any individual, intending
to be appointed as a director in a company or to any existing director of a company, for the purpose of his
identification as such, through electronic or other form and to provide for penalty for any violation in this regard.
6. This Bill seeks to achieve the above objectives.” [ Statement of Objects and Reasons appended to the
Companies (Amendment) Bill, 2006 (24 of 2006)].
See detailed Comments, Form and Procedure on Director Identification Number (DIN) under Sections 266A to
266G inserted (w.e.f. 1-11-2006).
See detailed Comments, Form and Procedure, e-Forms, e-Filing, e-Filing Rules and e-Filing Scheme under
Sections 610A to 610E inserted (w.e.f. 16-9-2006).
Notes on Clauses and Committee Reports explaining the provisions have been reproduced under Legislative
History in Comments under relevant Sections.
Background to the Companies Act.—The Companies Act, 1956 (1 of 1956) is a consolidation of the existing
laws, statutory rules and certain principles laid down in decisions of the courts in India and in England. The
Companies Act, 1956 substantially incorporated provisions of the English Companies Act, 194831 which
consolidated the principles of equity. Behind the English as well as Indian Companies Acts, therefore, there is a
general body of laws and equity principles and it is there that most of the fundamental principles will be found and,
as such, they are helpful in understanding the present-day Company Law. So far as the laws have been
consolidated the old decisions will be binding in appropriate cases.32
During the 11th to 13th Centuries, the associations of merchants called the Merchant Guilds obtained charters from
the Crown mainly to secure for its members a monopoly in respect of a particular trade or commodity. Each
member traded on his own account but subject to the regulations of his Guild. Gradually there grew up trading on
joint account subject to the rules of the Guild. This joint account trading was either known as Commenda or
Societas. In Commenda, a trader lent money to another for trading, got a share of the profit and in case of loss his
liability was limited to the money lent. The financier was somewhat a sleeping partner with limited liability. In
Societas all the members took part in the management of the trade and had unlimited liability. The Societas had
now matured into partnership. Commenda is still to be found in the Continental countries.
In the 14th Century, the word ‘Company’ was adopted by certain merchants for trading overseas. By Royal Charters
these merchants were given certain privileges in trading. This was more or less an extension of the Guild in foreign
trade. By the 16th Century such Charters became common granting monopoly of trade to members of the company
and Governmental power over the territory to the company. These companies were called ‘regulated companies’.
By the end of the 16th century these individuals traded separately with their funds or stock, as also jointly with other
members of the company. Gradually the members gave up separate trading and diverted their stock to the joint
trading. Thus there became joint fund or joint stock with which the members started trading on a joint account. The
regulated companies thus became joint commercial enterprises instead of trade protection associations.
East India Company was established by a Charter in 1600. It had monopoly of trade in the Indies, its members
could carry on trade individually and had the option to subscribe to the joint fund or stock of the Company. After
each voyage the profits made, together with the subscription amount, were redivided among the members. In 1614,
it was decided that the subscription should be for a number of years. In 1653, a permanent subscribed fund was
introduced. Thus, there came into existence a permanent joint stock of the East India Company.
In 1692, private trading by the members of the Company was prohibited. The term ‘Joint Stock Company’ was used
at that time in relation to such a company to distinguish it from a ‘regulated company’ whose members had the
freedom to trade separately and had options to subscribe to the joint fund or stock of the company. The term ‘Joint
Stock Company’ is now obsolete.
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The principle of limited liability of members of non-trading corporations was accepted in the 15th Century and
subsequently in case of trading companies. This was important for the company as for the separate debts of
members the properties of the company could be attached. Most of the Charters conferred power on the company
to make calls on the members and, as such, the limited liability of members was illusory. Moreover, the creditors
could proceed directly against the members if the company did not take action. To avoid such unlimited liability the
members used to enter into agreements with the company that the company would have no power to make calls on
them.
Monopolistic powers of company were not favoured and after the Revolutions of 1688 the Crown, it was assumed,
had the power to grant a Charter of incorporation but a monopolistic or other special privileges could be conferred
on a company only by a statute. Gradually the foreign companies declined and the domestic companies grew up.
The domestic companies invited the public to subscribe to its capital but in other respects were similar to public
corporations enjoying monopoly. The Bank of England is an instance of such a corporation. These companies were
extensions of the Guilds and partnerships.
The first 20 years of the 18th Century witnessed the flood of speculative and often fraudulent schemes of company
flotations of which the notorious scheme of the South Sea Company is the best-known example. The South Sea
Company had a scheme to acquire virtually the whole of the national debt by purchasing the holdings or
exchanging the holdings for the stocks of the company. The possession of interest-bearing loan owned by the State
was a basis upon which the company might raise vast sums of money for extension of its trade. But the company
had very little trade to expand. It had paid a huge sum of money for obtaining the Charter in competition with the
Bank of England. Ultimately, the company failed. When such speculation and gambling were at its height and a
large number of companies came into existence the Parliament passed the Bubble Act, 1720. The Act prohibited
generally the use of corporations unless the corporation was authorised to act as such by an Act of Parliament or
Royal Charter, but exempted all undertakings established before June 24, 1718. Proceedings were started against
some of the companies operating under obsolete Charters with a view to forfeiting the Charters. This led to a
widespread panic. The stock of the South Sea Company lost its value, and many of the companies disappeared like
the bursting of the bubbles.
To avoid the rigours of the Bubble Act, 1720, large partnerships were formed from the beginning of 19th Century by
a deed of settlement. The parties to the deed agreed to be associated with a joint fund or stock divided into a
number of transferable shares and agreed to alterations of the provisions of the deed by a specified majority. They
delegated the management to the directors. The property was vested in a body of trustees. The trustees were given
power to sue or be sued on behalf of the company as the courts did not at that time permit a suit to be filed in the
firm’s name.
In 1825, the Bubble Act was repealed. It made a provision enabling the Crown to declare the extent of the
members’ liability on the grant of incorporation. To meet the needs of the business community, the Trading
Companies Act of 1834 was passed empowering the Crown to confer by Letters Patent all or any of the privileges
of incorporation, except limited liability, without actually granting a Charter. This enabled companies to sue and be
sued in names of their officials. It was a first general Act requiring public registration of members, but it expressly
preserved their unlimited liability. The Chartered Companies Act, 1837, re-enacted the 1834 Act but provided that
personal liability of members might be expressly limited by the Letters Patent to a specified amount per share.
In 1844, the Joint Stock Companies Act was passed. (1) It provided for the registration of all new companies with
more than 25 members or with shares transferable without the consent of all the members. (2) It provided for
incorporation by registration. Such registration was provisional, authorising the company to function for a limited
purpose. Thereafter, on filing a deed of settlement containing the prescribed particulars and other documents, the
company was finally incorporated. (3) The Act created the office of the ‘Registrar of Companies’ and required
particulars of the company’s constitution, changes therein and annual returns to be filed with the Registrar of
Companies so that there would be full publicity. Limited liability was not granted, but it was provided that after
transfer of shares a member would have no liability on the expiry of three years and that creditors had to proceed
first against the assets of the company. A separate Act of 1844 made provisions for winding up of companies and
application of bankruptcy laws.
In the middle of the 19th Century the limited liability concept was mooted and there were various criticisms. The
proposed statute introducing the limited liability concept was branded as “The Rogues’ Charter” and that the
Parliament was devising means for the encouragement of speculation, over-trading and swindling. If men were
allowed to subscribe for a limited amount in the capital of a company and be no further liable, a spirit of gambling
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would develop to the detriment of the country and its tradition of sober judgement. It would encourage excessive
and reckless enterprises and open the door to dishonesty and fraud.
In practical experience it has been found that during over century-and-half, to be precise, in the last 160 years the
critics of the limited liability concept were wrong and that the limited liability concept has shown expansion and
achievement on a scale that the critics could hardly have dreamt of. Such expansion and achievement, in the
considered view of leading economists, could not have been attained without the limited liability. The institution has
survived and flourished in spite of isolated cases of dishonesty and fraud. The legislature and judiciary have helped
the business to grow and at the same time protecting the interests of the public.
In 1855, the Limited Liability Act was passed providing for limited liability of the members of a company on complete
registration if (1) the company had at least 25 members holding £ 10 shares paid up to the extent of 20 per cent.,
(2) not less than three-fourths of the nominal capital was subscribed, (3) ‘Limited’ was added to the company’s
name, and (4) the Board of Trade’s approval obtained for appointment of auditors. The directors were made
personally liable if they paid dividend knowing the company to be insolvent or made loans to the members and the
company had to wind up and it was found that three-fourths of the capital was lost.
The Act was repealed within a few months by the Joint Stock Companies Act, 1856. It omitted the provisional
registrations and the deed of settlement and introduced the memorandum and articles of associations and made
provisions for winding up. This Act allowed incorporation with limited liability and any seven or more persons could
register a memorandum of association. It omitted some of the restrictive provisions of the 1855 Act. The Joint Stock
Companies Act, 1856, was amended in 1857. In 1862, the law was codified. There were several amendments, and
in 1908 the Companies Consolidation Act was passed. Thereafter several amendments were made and in 1929 the
Act was again consolidated.
The English Companies Act, 1948, was passed consolidating the law and thereafter amended and consolidated in
1967, 1976, 1980, 1981 and 1983.
The English Companies Act, 1985 has again consolidated the English Companies Act. The English Companies Act,
1989 has further inserted and substituted several sections in the English Companies Act, 1985. It is significant to
note that the English Companies Act, 1985 as amended by the English Companies Act, 1989 is not a complete
code in itself. The provisions relating to companies in the United Kingdom are now contained in the Companies and
other related Acts [explained hereinafter]. All these Acts are to be considered to have a complete picture of the
provisions relating to Companies. The Companies Act in the United Kingdom has been rapidly changing and will
change to harmonise its provisions with the ‘Directives’ of the European Economic Community (EEC) to achieve the
economic integration of its members.
In India, in 1850, an Act for ‘Registration of Joint Stock Companies’ was passed in line with the Companies Act,
1844. Under the 1850 Act, the Supreme Courts of Calcutta, Madras and Bombay were the registering authorities of
companies. The Act permitted registration of an unincorporated partnership formed under a deed and containing
provision for transfer of shares in its stock or business without the consent of all the partners, and of non-trading
companies, with or without limited liability. The privilege of limited liability was not granted to banking and insurance
companies until the Act of 1860. The Indian Companies Act, 1866, was passed consolidating and amending ‘the
laws relating to incorporation, regulation and winding up of trading companies and other associations’. The Act was
amended and the law was consolidated from time to time keeping pace with the English Acts.
The Companies Act, 1956 (1 of 1956) was passed consolidating the law and incorporating provisions to meet the
socio-economic needs of the country. The Companies Act, 1956 was largely based on the English Companies Act,
1948. The English system and provisions of the English Acts till 1948 have been transplanted in the (Indian)
Companies Act, 1956 (1 of 1956).
The Indian Companies Act, 1956 is mainly based on the English Companies Act, 1948 and the case laws. There
has since been substantial shift of principles and concepts from those contained in and developed around the
English Companies Act, 1948. There is now a wide gulf between the Indian Companies Act, 1956 and the English
Companies Act, 1985 with the associated enactments.33
In the last over a decade, an attempt has, however, been made to narrow this gulf by amending the Companies Act,
1956 and associated corporate Acts, e.g., the Securities and Exchange Board of India Act, 1992, SEBI Rules,
Regulations, etc., to somewhat keep pace with the English Companies Acts and other associated corporate
legislations in the globalised economic scenario.
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Complexities of English Company Law.—The English Companies Act, 1985* consolidates the greater part of the
Companies Acts. It is significant that the English Companies Act, 1985 as amended by the English Companies Act,
1989 is not a complete code in itself. This will also be evident from the following paragraphs.
The Business Names Act, 1985 consolidates certain enactments relating to the names under which business may
be carried on in Great Britain.
The Company Securities (Insider Dealing) Act, 1985 consolidates the enactments relating to Insider Dealing in
company securities.
The Insolvency Act, 1986 consolidates enactments relating to company insolvency and winding up including the
winding up of companies that are not insolvent and of unregistered companies. It also consolidates the enactments
relating to insolvency and bankruptcy of individuals and other enactments bearing on company insolvency and
individual bankruptcy including the functions and qualifications of insolvency practitioners, the public administration
of insolvency, the penalisation and redress of malpractice and wrongdoing, and the avoidance of certain
transactions at an undervalue. The Insolvency Act, 1986 deals with the appointment of Receivers and Managers of
Companies and its assets, winding up of Companies by the Court, voluntary winding up including members’ and
creditors’ voluntary winding up, appointment, powers and functions of the liquidators, investigations and
prosecutions of company officers, winding up of unregistered companies and miscellaneous provisions as to
management of the assets of the company in liquidation. It also deals with the bankruptcy of individuals and the
procedural aspect of winding up and insolvency proceedings. The provisions of about 200 sections of the English
Companies Act, 1985 relating to receivership and winding up have been transferred to and incorporated in the
Insolvency Act, 1986.
The Company Directors’ Disqualification Act, 1986 consolidates certain enactments relating to disqualification of
persons from being Directors of Companies and from being otherwise concerned with a company’s affairs. The
provisions of several sections relating to the Company Directors have been taken out from the English Companies
Act, 1985 and incorporated in the Company Directors’ Disqualification Act, 1986.
The Financial Services Act, 1986 regulates the carrying on of investment business. This Act makes related
provisions with respect to insurance business and business carried on by friendly societies. It makes new provision
with respect to the final listing of securities and offers of unlisted securities. It makes provision for takeover offers
and Insider Dealing. It makes provision as to disclosure of information obtained under enactments relating to fair
trading, banking companies and insurance. It also makes provision for securing reciprocity with other countries in
respect of facilities for the provision of financial services and for connected purposes. The provisions of certain
sections of the English Companies Act, 1985 as also the Company Securities (Insider Dealing) Act, 1985 have
been transferred to the Financial Services Act, 1986 specially as regards takeover offers and insider dealing.
The English Companies Act, 1985 is not, therefore, a complete code in itself but the said Act has to be read along
with the Business Names Act, 1985, the Company Securities (Insider Dealing) Act, 1985, the Insolvency Act, 1986,
the Company Directors’ Disqualification Act, 1986 and the Financial Services Act, 1986.
The English Companies Act, 1989 has made several amendments in the English Companies Act, 1985. The 1989
Act is not the principal Act but it has amended, inserted and substituted several sections back into the English
Companies Act, 1985.
The salient features of amendments made by the English Companies Act, 1989 are given below:
— The English Companies Act, 1989 has implemented the 7th and 8th EEC Directives on group accounts
and made many technical amendments to the English Companies Act, 1985.
In addition the 1989 Act has:
— Abolished the ultra vires rule and made amendments to the objects clause.
— Made changes to the law on the regulation of company charges and the doctrine of constructive notice.
— Introduced a new deregulation regime for private companies, including written and elective resolutions.
— Created a new definition for groups of companies.
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— Substantially enlarged the powers of inspectors appointed by the Department of Trade and Industry.
We have given in this book the corresponding sections of the English Act, 1948 as well as the sections of the
English Act, 1985 [As amended by the English Companies Act, 1989]. The doctrine of precedent or stare decisis
vis-a-vis Indian and English court structure and persuasive value of English decisions have been dealt with at the
end of Comments under Section 10—Jurisdiction of Courts.
In India, also the companies are now not governed by the Companies Act alone. In addition to the Companies Act,
Rules, Regulations and Guidelines, the SEBI and corporate Acts, Rules, Regulations and Guidelines, etc., are also
to be complied with. These have been dealt with in Comments under each Section.
Applicability of the Companies Act.—The Companies Act, 1956 came into force on April 1, 1956 vide Notification
No. S.R.O. 612, dated 8-3-1956.
The Companies Act, 1956 envisages and provides for various forms of companies including private limited, public
limited, trusteeship companies, nidhis, producer companies, etc., each with specific and appropriate provisions
applicable to them.
The Act extends or applies to the whole of India. [Section 1(3)]. This is subject to certain special provisions,
privileges, exemptions and modifications given below.
State of Nagaland [Section 1(3), proviso].—The Companies Act, 1956 shall apply to the State of Nagaland
subject to modifications, if any, as the Central Government may, by notification specify.
Goa, Daman and Diu [Section 620-B].—The Central Government may, by notification, direct that for such period
or periods (w.e.f. 26-1-1963) 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. See detailed Comments under Section 620-B.
Jammu and Kashmir [Section 620-C].—The Central Government may, by notification, direct that with effect from
the commencement of the Central Laws (Extension to Jammu and Kashmir) Act, 1968 (25 of 1968), or any
subsequent date, any of the provisions of the Act specified in the notification shall not apply, or shall apply only with
such exceptions and modifications or adaptations as may be specified.
The provisions of the Companies Act, 1956 were made applicable to Jammu and Kashmir by omitting first proviso
to section 1(3) of the Companies Act, 1956 by the Central Laws (Extension to Jammu and Kashmir) Act, 1968 (25
of 1968), s. 2 and Sch. (w.e.f. 15-8-1968) [Section 1(3) read with footnotes]. Consequently, aforesaid section 620-C
was inserted. See detailed Comments under Section 620-C.
Sikkim [Article 371F of Constitution].—The State of Sikkim has been granted special status under Article 371F of
the Constitution of India. As per clause (n) of Article 371F containing Special provisions with respect to the State of
Sikkim, the President may, by notification, extend with such restrictions or modifications as he thinks fit to the State
of Sikkim any enactment which is in force in India. Until such a Notification is issued extending the Companies Act,
1956 to the State of Sikkim, the State shall be governed by the Sikkim Registration of Companies Act, 1961.
See also Comments under Section 3.
Private Company [Section 3(1)(iii)].—Certain privileges and exemptions have been given under the Companies
Act, 1956 (1 of 1956) to a Private Company (not being a subsidiary of a public company).
See Comments and List of Privileges and Exemptions under Section 3.
Public Company [Section 3(1)(iv);].—As per Section 3(1)(iv) substituted by the Companies (Amendment) Act,
2000 (53 of 2000) (w.e.f. 13-12-2000)
public company means a company which—(a) is not a private company, (b) has a minimum paid-up capital of Rs.
5 lakhs or higher sum prescribed, and (c) is a private company which is a subsidiary of a company which is not a
private company.
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See detailed Comments under Section 3.
Deemed public company [Section 43A].—The concept of Private Companies to become Public Companies in
certain cases [Section 43A], i.e., Deemed Public Companies, is not applicable (w.e.f. 13-12-2000) vide section
43A(11).
See detailed Comments under Section 43A.
Holding company and subsidiary [Section 4].— See Section 4 for the meaning of “holding company” and
“subsidiary”.
Charitable Companies [Section 25].
— Where an association is formed as a limited company for promoting commerce, art, science, religion, charity or
any other useful object, and 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”. See detailed Comments under Section 25.
Sick Industrial Companies [Sections 424A-424L].—A new Part VIA containing sections 424A to 424L has been
inserted in the Companies Act, 1956 by the Companies (Second Amendment) Act, 2002 (11 of 2003) providing for
revival, rehabilitation and winding up of Sick Industrial Companies. The Sick Industrial Companies (Special
Provisions) Act, 1985 (1 of 1986) (SICA) would consequently be repealed and the Board for Industrial and Financial
Reconstruction(BIFR) would be replaced by theNational Company Law Tribunal(NCLT) to be constituted under
Section 10FB.
See detailed Comments under Sections 424A to 424L and 10FB.
Producer Companies [Sections 581A-581ZT].—A new Part IXA containing Chapters I to XII, Sections 581A to
581ZT has been inserted in the Companies Act, 1956 by the Companies (Amendment) Act, 2002 (1 of 2003) (w.e.f.
6-2-2003) facilitating formation of co-operative business as companies and to convert existing business into
companies on a voluntary basis. The aim is to provide statutory and regulatory framework that creates the potential
for producer-owned enterprises to compete with other enterprises on a competitive footing with more liberal
regulatory framework and certain privileges of a private company.
See detailed Comments under Sections 581A to 581ZT.
Foreign Company [Sections 591-608].—Special provisions have been made in the Companies Act, 1956 for
foreign companies in Part XI—Companies Incorporated Outside India, viz., Provisions as to Establishment of Place
of business in India [Sections 591-602] and Prospectuses [Sections 603-608].
See detailed Comments under Sections 591 to 608.
Banking, Insurance, Electricity and other Companies governed by special Acts [Section 616].—The
provisions of the Companies Act, 1956 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
Banking Regulation 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 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;
(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. See detailed Comments under Section 616.
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Government Company [Sections 617-620].—Special provisions have been made for Application of the
Companies Act, 1956 to Government Companies, viz., Definition of “Government Company” [Section 617],
Application of sections 224 to 233 to Government companies [Section 619], Annual Reports on Government
companies [Section 619A], Provisions of section 619 to apply to certain companies in which not less than 51% of
the paid-up capital is held by one or more of specified Governments or Government companies or any combination
thereof [Section 619B], Power to modify Act in relation to Government companies [Section 620].
See detailed Comments under Sections 617-620.
Nidhior Mutual Benefit Society [Section 620-A].—The Companies Act, 1956 contains provisions as to
modification of Act in its application to Nidhis and Mutual Benefit Societies. Under 620-A, the Central Government
has the power to modify Act in its application to “Nidhi” or “Mutual Benefit Society”.
For Notified Nidhis and Mutual Benefit Societies and Notifications specifying that certain provisions of the
Companies Act, 1956 shall not apply or apply to such Nidhis or Mutual Benefit Societies with exceptions,
modifications and adaptations see detailed Comments under Section 620-A.
Act not Applicable to State Corporations, Universities, etc.—As per Article 246 of the Constitution of India the
legislative powers are distributed between the Union and the States. There are three Lists in the Seventh Schedule
to the Constitution specifying the subjects or topics of legislation.
List I— Union List comprises 97 items. These subjects are within the exclusive competence of the Union
Parliament. [Article 246(1)].
List II— State List contains 66 items over which the State Legislatures alone have the power to legislate. [Article
246(3)].
List III— Concurrent List contains 47 subjects in regard to which both the Union and the State can legislate. [Article
246(2)].
Parliament has exclusive power to make law with respect to matters not enumerated in Concurrent or State List.
[Article 248(1)]. The Companies Act, 1956 (1 of 1956) has been enacted by the Parliament on matters contained in
Items 43 and 44 in List I—Union List, in the Seventh Schedule to the Constitution of India, which read thus:
“43. Incorporation, regulation and winding up of trading corporations, including banking, insurance and financial
corporations but not including co-operative societies.
44. Incorporation, regulation and winding up of corporations, whether trading or not, with objects not confined to one
State, but not including universities.”
The Companies Act, 1956, therefore, does not apply to corporations (other than trading corporations) whose
objects are confined to one State and universities; unincorporated trading, literary, scientific, religious and other
societies and associations; and co-operative societies as mentioned in Item 32 of the State List in the Seventh
Schedule to the Constitution of India.
As already stated a new Part IXA containing Chapters I to XII, Sections 581A to 581ZT has been inserted in the
Companies Act, 1956 (1 of 1956) by the Companies (Amendment) Act, 2002 (1 of 2003) (w.e.f. 6-2-2003)
facilitating the formation of co-operative business as producer companies and to convert existing business into
companies on a voluntary basis.
Interpretation and Construction.—The rules of interpretation and construction are useful servants but quite often
tend to become difficult masters. They are not rules in the ordinary sense of having some binding force. They are
our servants not our masters. They are aids to construction, presumptions or pointers. Not infrequently one ‘rule’
points in one direction, another in a different direction. In each case we must look at all relevant circumstances and
decide as a matter of judgment what weight to attach to any particular ‘rule’.34
It is a well-settled principle of law that where wordings of a statute are absolutely clear and unambiguous recourse
to different principles of interpretations may not be resorted to. But where the words of a statute are not so clear
and unambiguous, the other principles of interpretation should be resorted to.35
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When the language of the section is not clear and there is a need to resort to the aids of construction, such aids can
be either internal or external. Internal aids of construction are Preamble, Sections, Sub-sections, Non obstante
clauses, Headings, Marginal Notes, Provisos, Explanations, Exceptions, Fictions, Deeming provisions, Definitions,
Punctuations, Saving clauses, etc. The Dictionaries, Earlier Acts, History of Legislation, Parliamentary History,
Parliamentary Proceedings, State of Law as it existed when the Act was passed, the mischief sought to be
suppressed and the remedy sought to be advanced by the Act are external aids.36
Fundamental principles or rules of interpretation and construction of statutes, Internal or intrinsic aids to
interpretation and construction, External or extrinsic aids, Interpretation and construction of Subordinate, secondary
or delegated legislation, viz., Rules and Notifications, etc., are enunciated hereinafter.
Literal Construction.—It is well settled that the court cannot read anything into a statutory provision which is plain
and unambiguous. A statute is an edict of the Legislature. The language employed in a statute is the determinative
factor of legislative intent. The first and primary rule of construction is that the intention of the legislation must be
found in the words used by the Legislature itself.37 It is now a well settled principle of law that a literal meaning
should be assigned to a statute unless the same leads to anomaly or absurdity.38 When the words of the legislation
are clear, the court must give effect to them as they stand and cannot demur on the ground that the Legislature
must have intended otherwise.39
The first and foremost principle of interpretation of a statute in every system of interpretation is the literal rule of
interpretation. Recourse can be had to the legislative intent for the purpose of interpreting a provision of law when
the language employed by the Legislature is doubtful or ambiguous or leads to some absurdity. When the language
is plain and explicit and does not admit of any doubt, the Court cannot by reference to an assumed legislative intent
expand or alter the plain meaning of an expression employed by the Legislature. It is also well settled that when
there is a conflict between law and equity, it is the law which has to prevail.40
The primary and golden rule of interpretation is the literal construction. No doubt the object of interpretation is to
discover the intention of Parliament, but the intention of Parliament must be deduced from the language used.
Where the language is plain and admits of but one meaning, that meaning is to be given to the language in the
statute. It is only when words are susceptible of more than one meaning that other rules of interpretation come into
play.41
If there is one principle of interpretation more well-settled than any other, it is that a statutory enactment must
ordinarily be construed according to the plain natural meaning of its language and that no words should be added,
altered or modified unless it is plainly necessary to do so in order to prevent a provision from being unintelligible,
absurd, unreasonable, unworkable, or totally irreconcilable with the rest of the statute. This rule of literal
construction is firmly established. Therefore, where the language of the statute is clear and explicit, effect must be
given to it, for in such a case the words best declare the intention of the Legislature.42
Where alternative constructions are possible, the one is to be chosen which will be consistent with the smooth
working of the system which the statute purports to regulate. A construction which would leave out any part of the
language of a statute will normally be rejected. If the Legislature has not so laid down, the court cannot fill up the
casus omissus. An Act ought not to be so construed as to convict the Legislature of having used an expression
which would be absurd. The principle of casus omissus is not to be created or applied by the court.43
Casus omissus.—The rules of interpretation do not permit the court to read something in a statute which is a clear
omission. The maxim or rule is known as ‘casus omissus’. While interpreting, the court only interprets the law and
cannot legislate it. If a provision of law is misused and subjected to the abuse of process of law, it is for the
Legislature to amend, modify or repeal it by having recourse to appropriate procedure, if deemed necessary.
Legislative casus omissus cannot be supplied by judicial interpretative process.44 The court can merely interpret the
section; it cannot re-write, recast or redesign the section. In interpreting the provision, the exercise undertaken by
the court is to make explicit the intention of the legislature which enacted the legislation. It is not for the court to
reframe the legislation.45
It is true that normally it is not permissible for the court to read words in a statute which are not there. But if the
meaning of the statute is not clear, it is permissible in certain cases to have recourse to a construction by
implication and to draw inferences to supply of obvious omission.46
Court cannot supply words orcasus omissus.—The Court must proceed on the assumption that the Legislature
Page 38 of 63
did not make a mistake and that it intended to say what it said. Assuming there is a defect or an omission in the
words used by the Legislature, the Court cannot correct or make up the deficiency. The Court cannot add words to
a Statute or read words into it which are not there, especially when a literal reading thereof produces an intelligible
result. The Court is not authorised to alter a word or provide a casus omissus.47
Casus omissuscannot be supplied by Court in absence of necessity.—The principal of law of casus omissus
cannot be supplied by the Court in the absence of any necessity. From a plain reading of Sections 542 and 543 of
the Companies Act, 1956 as a whole, as it was evident that the statute itself was very clear and there was no
ambiguity with regard to entitlement to filing an application under Sections 542 and 543 of the Act, the principal of
law of casus omissus could not be supplied by the Court in the absence of any necessity. Application under
Sections 542 and 543 preferred by the Administrator of the company in liquidation was not maintainable nor was
the company judge empowered to impose a fine in lieu of imprisonment under Section 542(3) of the Companies
Act, 1956. The contention that the Administrator had been appointed to complement the work of the Official
Liquidator and could also file a petition under Sections 542 and 543 of the Act could not be accepted as there was
nothing on the record to suggest that the Official Liquidator empowered the Administrator to perform the job on his
behalf.48
Rational Construction.—It is a well-recognised rule of construction that a statutory provision must be so

construed, if possible, that absurdity and mischief may be avoided. It is now a well settled rule of construction that
where the plain literal interpretation of a statutory provision produces a manifestly absurd and unjust result which
could never have been intended by the Legislature, the court may modify the language used by the Legislature or
even ‘do some violence’ to it, so as to achieve the obvious intention of the Legislature and produce a rational
construction.49
Two principles of construction—one relating to casus omissus and the other in regard to reading the statute as a
whole—appear to be well settled. Under the first principle a casus omissus cannot be supplied by the court except
in the case of clear necessity and when reason for it is found in the four corners of the statute itself but at the same
time a casus omissus should not be readily inferred and for that purpose all the parts of a statute or section must be
construed together and every clause of a section should be construed with reference to the context and other
clauses thereof so that the construction to be put on a particular provision makes a consistent enactment of the
whole statute. This would be more so if literal construction of a particular clause leads to manifestly absurd or
anomalous results which could not have been intended by the Legislature. An intention to produce an unreasonable
result is not to be imputed to a statute if there is some other construction available. Where to apply words literally
would defeat the obvious intention of the legislation and produce a wholly unreasonable result the court must do
some violence to the words and so achieve that obvious intention and produce a rational construction.50
Reasonable or Purposive Construction.—It is well-settled that the rule of reasonable construction must be
applied while construing a statute. Literal construction should be avoided if it defeats the manifest object and
purpose of the Act.51 The exercise of purposive interpretation by looking into the object and scheme of the Act and
the legislative intendment would arise only if the language of the statute is either ambiguous or conflicting or gives a
meaning leading to absurdity.52
Legislation has an aim. That aim is evidenced in the language of the statute, as read in the light of other external
manifestations of purpose . The provisions of section 31 of the Recovery of Debts Due to Banks and Financial
Institutions Act, 1993 must be construed in such a manner that, after the Act, no suit by the bank is decided by the
civil court and all such suits are decided by the Debt Recovery Tribunal.53
Section 11(2) of the Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992 (27 of 1992)
was not intended to secure taxes. The purposive interpretation must be resorted to ensure that amounts realised
from the properties attached come back to the banks and financial institutions also.54
Rule of purposive construction or mischief rule.—It is well settled that in interpreting a Statute the Court must
adopt that construction which suppresses the mischief and advances the remedy. This is a rule laid down in
Heydon’s case also known as the rule of purposive construction or mischief rule.55
Two views possible.—It is now trite that when an expression is capable of more than one meaning, the court
would attempt to resolve that ambiguity in a manner consistent with the purpose of the provisions and with regard to
the consequences of the alternative constructions. Where regulations 11 and 12 of the SEBI(Substantial Acquisition
of Shares and Takeovers) Regulations, 1997 were not clear, the rule of purposive construction was taken recourse
to.56
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The courts must interpret the law as it reads. While a purposive interpretation is permissible where two
interpretations are possible, the purposive interpretation must be such as preserves the constitutionality of the
provision.57
If two interpretations are possible, one which furthers the object of the statute and the other defeats it or permits a
cunning person to commit a fraud, the former which furthers the object of the statute must be given.58
National interest.—When construing statutes enacted in the national interest, the court has necessarily to take the
broad factual situations contemplated by the Act and interpret its provisions so as to advance and not to thwart the
particular national interest whose advancement is proposed by the legislation. Traditional norms of statutory
interpretation must yield to broader notions of the national interest.59
Harmonious Construction.—To interpret and in such a way as to harmonize laws with laws is the best mode of
interpretation.60 The different provisions of an Act are to be construed in such manner as to make them
harmonious.61 The expressions used in a statute should ordinarily be understood in the sense in which they best
harmonise with the object of the statute and effectuate the object of the Legislature.62 A harmonious construction of
provisions of two different Acts, e.g., the Life Insurance Corporation Act, 1956 and the Income-tax Act, 1961, is to
be made if it leads to the result which is also in consonance with logic and justice of the cause.63
It is a well established rule of interpretation that, while interpreting a particular provision of a statute, courts should
bear in mind the object and scheme of the entire Act. A particular provision of the Act cannot be considered or
interpreted in isolation so as to give room for conflict inter se between the provisions of the same Act. Courts should
also bear in mind that while interpreting a provision of the Act an interpretation leading to the provision becoming
ultra vires the Legislature should be avoided.64
Not to render provision Meaningless, Redundant or Otiose.—It is a settled rule of interpretation of statutes that, if
the language and words used are plain and unambiguous, full effect must be given to them as they stand and, in
the garb of finding out the intention of the Legislature, no words should be added thereto or deleted therefrom.
Likewise, it is again a settled rule that statutory provisions should be construed in a manner which subserves the
purpose of the enactment and does not defeat it and that no part thereof is rendered surplus or otiose.65
In construing the provisions of a statute, courts should be slow to adopt a construction which tends to make any
part of the statute meaningless, ineffective, redundant or otiose. An interpretation which leads to an anomalous or
mischievous results or renders the working of a statute or provision unworkable, nugatory and otiose must always
be avoided. An attempt must always be made so to reconcile the relevant provisions as to advance the remedy
intended by the statute. Where the statute prescribes a mandatory sentence of imprisonment and fine, a company
or firm which cannot be sent to prison can be punished with the sentence of fine.66
Long title or Preamble.—This Act both consolidates and amends the laws relating to companies existing in 1956. To
the extent the Companies Act, 1956 consolidates, the decisions of courts given on the basis of the previous Acts
will be binding if similar cases arise under the present Act. So far as it amends the previous law, the old decisions
may not be authorities in cases arising out of such amended provisions of the Act. Where the meaning of any
provision of the present Act is clear and unambiguous, full effect must be given to it, even though it effects an
alteration in the law as established by judicial decisions under the earlier Acts.67
An Act consists of a long title which precedes the preamble and the said long title is a part of an Act itself and is
admissible as an aid to its construction. A long title along with preamble or even in its absence is a good guide
regarding the object, scope or purpose of the Act whereas the preamble being only an abbreviation for purposes of
reference is not a useful aid to construction. The preamble to an Act, no doubt can also be read along with the other
provisions of the Act to find out the meaning of the words in enacting provisions to decide whether they are clear or
ambiguous but the preamble in itself not being an enacting provision is not of the same weight as an aid to
construction of a section of the Act as are the other relevant enacting words to be found elsewhere in the Act. The
utility of the preamble diminishes on a conclusion as to clarity of enacting provisions. It is, therefore, said that the
preamble is not to influence the meaning otherwise ascribable to the enacting parts unless there is a compelling
reason for it. If in an Act the preamble is general or brief statement of the main purpose, it may well be of little
value.68
Although the preamble does not control the statute, it is an admissible aid to construction thereof.69 The preamble
or long title may be referred to in case of ambiguity. But, it cannot control circumscribe or widen the scope of the
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legislation, if the provisions are clear and unambiguous. It is a well-settled principle of interpretation that a provision
of law should be interpreted in its ordinary grammatical meaning. When there is no ambiguity in the provision
reference to the preamble would be unwarranted.70 The preamble of an Act ‘affords useful light as to what the
statute intends to reach’ or in other words ‘affords a clue to the scope of the statute’.71
Parliamentary intention may be gathered from several sources. First, of course, it must be gathered from the
Statute itself, next from the Preamble to the statute, next from the Statement of Objects and Reasons, thereafter
from Parliamentary debates, Reports of Committees and Commissions which preceded the legislation and finally
from all legitimate and admissible sources from where there may be light. Regard must be had to legislative history
too.72
Short Title.—It is a title given to the Act solely for the purpose of facility of reference. It may not be taken into
account in construing a statute.73
Headings or Marginal Notes.—Headings prefixed to sections or sets of sections are regarded as preambles to
those sections. The marginal heading to a section cannot control the interpretation of the words of the section
particularly when the language of the section is clear and unambiguous.74 The heading or marginal notes cannot
control the construction of the language used in the section when it is clear and unambiguous. But, in case of doubt,
they can be relied upon as one of the aids for construction. They cannot control plain words of the statute but may
explain ambiguous words.75
The marginal note or heading to a section cannot be referred to for the purpose of construing the section but it can
certainly be relied upon as indicating the drift of the section or to show what the section is dealing with. It cannot
control the interpretation of the words of a section particularly when the language of the section is clear and
unambiguous but, being part of the statute, it prima facie furnishes some clue as to the meaning and purpose of the
section. In case of ambiguity or doubt the heading can be referred to as an aid in construing the provision.76
Provisions of Act or Statute must be read as a whole.—It is a well-settled rule of interpretation that provisions in an
enactment must be read as a whole before ascertaining the scope of any particular provision. The intention of the
Legislature must be found by reading the statute as a whole. Sections 391 to 394A of the Companies Act, 1956,
must be read not in isolation but with reference to the other relevant provisions of the Act. There is no difficulty in
reconciling the need to satisfy the requirements of both Sections 391 to 394A and Section 466 of the Act while
dealing with a company which has been ordered to be wound up. There is no incongruity in looking into the aspects
of public interest, commercial morality and the bona fide intention to revive a company while considering whether a
compromise or arrangement put forward in terms of Section 391 of the Act should be accepted or not. There is no
conflict in applying both the provisions and in harmoniously construing them and in finding that while the Court will
not sit in appeal over the commercial wisdom of the shareholders of a company, it will certainly consider whether
there is a genuine attempt to revive the company that has gone into liquidation and whether such revival is in public
interest and conforms to commercial morality.77
See detailed Comments under Sections 391 to 394A and 466.
Sections and sub-sections.—The court can merely interpret the section; it cannot re-write, recast or redesign the
section. In interpreting the provision, the exercise undertaken by the court is to make explicit the intention of the
legislature which enacted the legislation. It is not for the court to reframe the legislation.78
The question of interpretation of any section or word in a statute arises if and when there is any ambiguity. If the
meaning of the section is clear, in that case the aid of interpretation need not be sought for.79 To ascertain the
meaning of a section, it is not permissible to omit any part of it; the whole section must be read together and an
attempt should be made to reconcile all the parts. When reconciliation, however, is not possible, we have to
determine which is the leading provision and which is the subordinate provision and which must give way to the
other. If this method also is not possible then, we shall have resort to yet another well-established rule, namely, if
two sections are repugnant, the known rule is that the last must prevail.80
The sub-sections of a section must be construed as a whole, ‘each portion throwing light, if need be, on the rest’.81
Non obstante clause.—A clause beginning with ‘notwithstanding anything contained in’ is sometimes appended to a
section in the beginning with a view to give the enacting part of the section in case of conflict an overriding effect
over the provision of the same Act or some other enactment mentioned in the non obstante clause.82
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Where two statutes have competing non obstante provisions, the non obstante clause in subsequent enactment
would prevail over non obstante clause in the former Act, unless subsequent enactment is a general statute and the
former Act is a special one, in which event the maxim generalia specialibus non derogant would apply. The Sick
Industrial Companies (Special Provisions) Act, 1985 and the State Financial Corporations Act, 1951 are both
special statutes. Therefore, in case of sick companies, the provisions in 1985 Act would prevail.83
Where both the Acts are special Acts, the non obstante clause in later Act must prevail. The SICA, 1985 and the
Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992 containing non obstante clause
are both special Acts, in such an event the later Act must prevail.84Section 529A of the Companies Act, 1956 having
a non obstante clause inserted in 1985 is later provision and will override the special provisions under the State
Financial Corporations Act, 1951.85
The scope and purport of the non obstante clause has to be ascertained by reading it in the context of the
provisions and consistent with the scheme of the enactment.86 The expression “notwithstanding in any other law” in
a section cannot take away the effect of any provision of the Act.87
Non obstante clause—Harmonious construction.—The ordinary rule of construction is that where there are two non
obstante clauses, the later shall prevail. But it is equally well-settled that the ultimate conclusion would depend upon
the limited context of the statute. The endeavour of the Court would, however, always be to adopt a rule of
harmonious construction. Where both the Acts, viz., the Sick Industrial Companies (Special Provisions) Act, 1985 (1
of 1986) and the Arbitration and Conciliation Act, 1996 (26 of 1996) contained non obstante clauses. The Supreme
Court held that the provisions of Section 22(3) of the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of
1986) have been made to seek to achieve a higher goal and, thus, the provisions thereof would be applicable,
despite Section 5 of the Arbitration and Conciliation Act, 1996 (26 of 1996).88
The Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986) (SICA) shall be repealed on constitution
of National Company Law Tribunal(NCLT) under Section 10FB of the Companies Act, 1956 and replaced by
Sections 424A-424L of the Companies Act, 1956 (w.e.f. date to be notified).
See Comments on the SICA, 1985, Repeal of the SICA, Dissolution of the BIFR and the AAIFR, Statement of
Objects and Reasons and the Sick Industrial Companies (Special Provisions) Repeal Act, 2003 (1 of 2004) under
Section 424A.
See detailed Comments under Sections 10FB and 424A to 424L.
Non obstante clause—Special Statute vis-a-vis General Statute.—A non obstante clause must be given effect to, to
the extent the Parliament intended and not beyond the same. The provisions of the Companies Act, 1956 may be a
Special Statute but if the special statute does not contain any specific provision dealing with the contractual and
other statutory rights between different kinds of secured creditors, the specific provisions contained in the General
Statute shall prevail. Section 529A of the Companies Act, 1956 does not ex facie contain a provision on the aspect
of priority amongst the secured creditors and, hence, it would not be proper to read thereinto things, which
Parliament did not comprehend. The subject of mortgage, apart from having been dealt with under the common
law, is governed by the provisions of the Transfer of Property Act, 1882 (4 of 1882). It is also governed by the terms
of the contract. While enacting a statute, Parliament cannot be presumed to have taken away a right in property.
Right to property is a Constitutional right. Right to recover the money lent by enforcing a mortgage would also be a
right to enforce an interest in the property. In terms of Section 48 of the Transfer of Property Act, 1882 the claim of
the first charge holder shall prevail over the claim of the second charge holder. Thus, while enacting the Companies
Act, 1956, the Parliament cannot be held to have intended to deprive the first charge holder of the said right. Such a
valuable right, therefore, must be held to have been kept preserved. Deprivation of legal right existing in favour of a
person cannot be presumed in construing the Statute.89
See detailed Comments under Sections 529 and 529A.
Generalia specialibus non derogant.— Special provisions or Acts prevail over general.—The maxim generalia
specialibus non derogant means that when there is a conflict between a general and a special provision, the latter
shall prevail. In other words, if there is an apparent conflict between two independent provisions of law, the special
provision must prevail.90 It may be laid down as a rule for the construction of statutes that, where a special provision
and a general provision are inserted which cover the same subject-matter, a case falling within the words of the
special provision must be governed thereby, and not by the terms of the general provision.91 The doctrine generalia
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specialibus non derogant embodies a rule of construction, but this rule is not of universal application. It is subject to
the condition that there is nothing in the general provision, expressed or implied, indicating an intention to the
contrary. To invoke it, the general and special provisions should occupy the same field.92
Where both the Acts are special Acts the later Act must prevail. The Companies Act, 1956 is a general Act and
does not prevail over the Recovery of Debts Due to Banks and Financial Institutions Act, 1993. Alternatively, the
Companies Act and the RDB Act can both be treated as special laws and the principle that when there are two
special laws, the latter will normally prevail over the former if there is a provision in the latter special Act giving it
overriding effect. Such a provision is there in s. 34 of the RDB Act. Therefore, the RDB Act, 1993 overrides the
Companies Act, 1956.93
In case of inconsistency between the provisions of two enactments, both of which can be regarded as special in
nature, the conflict has to be resolved by reference to the purpose and policy underlying the two enactments and
the clear intendment conveyed by the language of the relevant provisions therein.94
Sections ‘subject to other provisions’.—The distinction between the expression ‘subject to other provisions’ and the
expression ‘notwithstanding anything contained in other provisions of the Act’ was explained by a Constitution
Bench of the Supreme Court. The expression ‘subject to’ conveys the idea of a provision yielding place to another
provision or other provisions to which it is made subject. The non obstante clause, i.e., the phrase ‘notwithstanding
anything in’ is equivalent to saying that in spite of the other provisions, or that the other provisions shall not be an
impediment to the operation of that provision.95
Legislation by incorporation.— Inclusion of provision of other Act.—Where a provision is borrowed from one
enactment and incorporated into another, the provision must be construed in the sense it bore in the statute from
which it was taken. Where, the provisions of section 205 of the Companies Act, 1956 stood bodily lifted and
incorporated into section 115J of the Income-tax Act, 1961. The term “loss” occurring in section 205(1), proviso
clause (b) of the Companies Act, 1956 had to be understood and read as the amount arrived at after taking into
account the depreciation.96
Referential incorporation.—A statute which refers to the law of a subject generally adopts the law on the subject as
of the time the law is invoked, i.e., with all the changes made from time to time. This will include all the amendments
and modifications of the law subsequent to the time the reference statute was enacted.97
Principles of legislation by incorporation or by reference.—The principles of legislation by incorporation or by

reference have been dealt with by the Supreme Court in many cases. A distinction has been made between a mere
reference or citation of one of the Statutes into another and incorporation. A Statute may instead of referring to a
particular previous Statute or to any specific provision therein refer to the Law on the subject generally. In such
cases a reference is construed to mean that the law is as it reads thereafter including amendments subsequently to
the time of adoption. If a subsequent Act brings into itself by reference some of the Clauses of a former Act, the
legal effect of that, as has often been held, is to write those Sections into the new Act just as if they had been
actually written in it with the pen, or printed on it. If there is mere reference to a provision without incorporation, then
unless a different intention appears it has to be considered as reference to the provision. If a provision is
incorporated in another, any subsequent amendment or even its repeal would not affect the provision as
incorporation in the latter Statute.98
Proviso.—A proviso qualifies the generality of the main enactment by providing an exception and taking out from
the main provision, a portion, which, but for the proviso would be a part of the main provision. A proviso must,
therefore, be considered in relation to the principal matter to which it stands as a proviso. A proviso should not be
read as if providing something by way of addition to the main provision which is foreign to the main provision itself.
Indeed, in some cases, a proviso may be an exception to the main provision though it cannot be inconsistent with
what is expressed in the main provision and if it is so, it would be ultra vires the main provision and struck down. As
a general rule in construing an enactment containing a proviso, it is proper to construe the provisions together
without making either of them redundant or otiose. Even, where the enacting part is clear, it is desirable to make an
effort to give meaning to the proviso with a view to justify its necessity.1
Only in case of ambiguity the proviso may throw some light on the section. An attempt should be made to reconcile
the section with its proviso if there is an inconsistency.2 There may be cases in which the language of the statute
may be so clear that a proviso may be construed as a substantive clause. But whether a proviso is construed as
restricting the main provision or as a substantive clause, it cannot be divorced from the provision to which it stands
as a proviso. It must be construed harmoniously with the main enactment.3
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The proviso cannot take away substantive right conferred by the main provision in absence of a clear indication.4 A
proviso which is inserted to remedy unintended consequences and to make the provision workable, a proviso which
supplies an obvious omission in the section and is required to be read into the section to give the section a
reasonable interpretation, requires to be treated as retrospective in operation, so that a reasonable interpretation
can be given to the section as a whole.5
Explanation.—It is well-settled that an Explanation added to a statutory provision is not a substantive provision in
any sense of the term but as the plain meaning of the word itself shows it is merely meant to explain or clarify
certain ambiguities which may have crept in the statutory provision. The object of an Explanation to a statutory
provision is—(a) to explain the meaning and intendment of the Act itself, (b) where there is any obscurity or
vagueness in the main enactment, to clarify the same so as to make it consistent with the dominant object which it
seems to subserve, (c) to provide an additional support to the dominant object of the Act in order to make it
meaningful and purposeful, (d) an Explanation cannot in any way interfere with or change the enactment or any part
thereof but where some gap is left which is relevant for the purpose of the Explanation, in order to suppress the
mischief and advance the object of the Act it can help or assist the court in interpreting the true purport and
intendment of the enactment, and (e) it cannot, however, take away a statutory right with which any person under a
statute has been clothed or set at naught the working of an Act by becoming a hindrance in the interpretation of the
same.6
The mere use of the label ‘Explanation’ is not decisive of the true meaning and scope of the provision. Ordinarily,
the purpose of an Explanation in a statute is to clarify or explain or settle any doubt or ambiguity or controversy. It
may even widen the scope of the main provision in rare cases. The words used alone can reflect the true intent and
they should be construed on their own terms. In this regard, the context, background and history of the legislation
may be looked into.7
An Explanation cannot be decisive of the true meaning of the section. But where two interpretations are sought to
be put upon a provision, that which fits the Explanation is to be adopted.8 Where a section contains a number of
clauses, and there is an Explanation at the end of the section, it should be seen as to which clause it applies and
the clarification contained in it.9 When the Explanation serves the purpose of the clarification of the existing law,
there is no question of any prospective or retrospective operation of the Explanation.10
Illustration.—In construing a section an illustration to it cannot be ignored or brushed aside because it is not part of
the body of the section.11
Exception clause.—On principle as well as on authority, it is settled position in law that an exception clause must
be construed strictly and cannot be interpreted so as to nullify or destroy the main provision.12
Penal provisions.—The penal provision must be strictly construed. When two interpretations are possible of a
penal provision, that which is less onerous to the accused should be preferred.13
The principle that a statute enacting an offence or imposing a penalty is strictly construed is not of universal
application which must necessarily be observed in every case. The provisions have to be specially construed in a
manner which will suppress the mischief and advance the remedy or object which the Legislature had in view.14
A penal statute indisputably is required to be strictly construed. But a different situation may arise if the penalty is
sought to be levied as a result of failure on the part of the person statutorily obliged to comply with the statutory
provisions which are imperative in nature. When words employed in a penal statute are not clear, the principle
“against doubtful penalisation” would be applied.15
See detailed Comments under Sections 5 and 621 to 631.
Appeals and remedies.—There is no inherent right of appeal. It has to be spelt from the words of the statute, if
any, providing for an appeal. But it is an equally well settled proposition of law that, if there is a provision conferring
a right of appeal, it should be read in a reasonable, practical and liberal manner.16
See detailed Comments under Sections 10, 10E, 10FB, 10FQ and 10GF.
Schedules.—Schedules are part of the statute and may be used in construing provisions of the sections;17 the
provisions in the Schedules may be construed with reference to the sections18 and the ambiguous words within the
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Schedule may be construed by reference to the cross-headings.19 Ordinary rules of statutory construction should
not be applied to an understanding of the entries in Schedules.20 Rules under the Act cannot prevail over Schedule
to the Act.21
Legal fictions or Deeming provisions.—If you are bidden to treat an imaginary state of affairs as real, you must
surely, unless prohibited from doing so, also imagine as real the consequences and incidents which, if the putative
state of affairs had in fact existed, must inevitably have flowed from or accompanied it. The statute says that you
must imagine a certain state of affairs; it does not say that having done so, you must cause or permit your
imagination to boggle when it comes to the inevitable corollaries of that state of affairs.22 In construing the scope of
a legal fiction it would be proper and even necessary to assume all those facts on which alone the fiction can
operate. A legal fiction has to be carried to its logical conclusion.23
Deeming provisions or legal fictions are only for a definite purpose and they are limited to the purpose for which
they are created and should not be extended beyond that legitimate field.24 The legal fiction is of course to be
carried to its logical conclusion but that must be within the framework of the purpose for which it is created. When a
statute enacts that something shall be deemed to have been done, which in fact and truth was not done, the court is
entitled and bound to ascertain for what purposes and between what persons the statutory fiction is to be resorted
to and full effect must be given to the statutory fiction and it should be carried to its logical conclusion.25
Repeals and Savings.—By sections 644 to 657 and Sch. XII of the Companies Act, 1956 certain provisions of the
repealed Act, viz., the Indian Companies Act, 1913 (7 of 1913) have been made applicable to the present Act.
Section 6 of the General Clauses Act, 1897 (10 of 1897) shall apply in addition to sections 645 to 657 of the
Companies Act, 1956 [Section 658]. See detailed Comments on interpretation of provisions relating to repeals,
savings, omissions, etc., under Section 658.
Definitions and Meanings.—Normally the definition and meaning of words and expressions given in the section
should be applied and given effect to but this normal rule may, however, be departed from if there be something in
the context to show that the definition should not be applied.26 When there exists a statutory definition in respect of
an expression, the dictionary meaning thereof cannot be applied. When a statutory definition uses the word
“includes”, it provides an extended meaning thereto but the words are required to be construed in terms of the
legislative intent. If the words are general and not precise, their interpretations are to be restricted to the fitness of
the matter.27 A construction which leads to absurdity, repugnancy or inconsistency has to be avoided. Ordinarily, a
word or expression used at several places in one enactment should be assigned the same meaning so as to avoid
“a head-on clash” between two meanings assigned to the same word or expression occurring at two places in the
same enactment. When the Legislature uses the same word or expression in different parts of the same section or
statute, there is a presumption that the word is used in the same sense throughout.28
See detailed Comments on interpretation of Definitions or Meanings given in the Act and meaning of words “means”
or “includes” under Section 2.
Mandatory or directory provision.—Meaning of words ‘shall’ or ‘may’.—There is no general rule which can be
laid down whether a particular provision is mandatory or directory. It is always the duty of the courts to try to get at
the real intention of the Legislature by carefully construing the whole scope of the statute.29
When a statute uses the word “shall”, prima facie, it is mandatory, but the court may ascertain the real intention of
the Legislature by carefully attending to the whole scope of the statute. For ascertaining the real intention of the
Legislature, the court may consider, inter alia, the nature and the design of the statute, and the consequences
which could flow from construing it one way or the other, the impact of other provisions whereby the necessity of
complying with the provisions in question is avoided, the circumstances that the statute provides for a contingency
of the non-compliance with the provisions, the fact that the non-compliance with the provisions is or is not visited by
some penalty, the serious or trivial consequences that flow therefrom, and, above all, whether the object of the
legislation will be defeated or furthered.30
When the Legislature changes the expression “may” to “shall” by amendment of the statute, it is clear that it
intended to make the provision mandatory from the existing directory provision.31 It is now well-settled that a
procedural provision, ordinarily, should not be construed as mandatory.32
Grammatical Meaning.—The elementary rule of construction is that the words used in a section must be given
their plain grammatical meaning. The recourse to extrinsic aids in interpreting a statutory provision would be fortified
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only within well recognised limits. The language which is plain and easily understood should be looked to without
extensive aid for the meaning intended.33
The words in the statute must, prima facie, be given their ordinary meanings. Where the grammatical construction is
clear, manifest and without doubt, that construction ought to prevail unless there are some strong and obvious
reasons to the contrary. A literal construction should be given effect to.34
It is equally well settled that the words of a statute, when there is doubt about their meaning, are to be understood
in the sense in which they best harmonise with the subject of the enactment and the object which the Legislature
has in view. Their meaning is found not so much in a strictly grammatical or etymological propriety of language, nor
even in its popular use, as in the subject or in the occasion on which they are used, and the object to be attained.35
Punctuation.—
Punctuation is a minor element in the interpretation and construction of a statute, and very little attention is paid to
it by English courts
. When a statute is carefully punctuated and there is doubt about its meaning, weight should undoubtedly be given
to the punctuation. Punctuation may have its uses in some cases, but it cannot certainly be regarded as a
controlling element and cannot be allowed to control the plain meaning of a text.36
Punctuation is disregarded in the construction of a statute with the result that if required the Court or Tribunal may
read a punctuation as if it is not there;37 or read a punctuation where there is none.38
Conjunctives and disjunctives.— Meaning of words ‘and’, ‘or’.—In ordinary usage ‘and’ is conjunctive and ‘or’ is
disjunctive. The circumstances under which the word ‘and’ may be construed as ‘or’ and vice versa should be
somewhat rare. Otherwise, if the two are taken to be interchangeable terms, then it would result in Parliament
throwing into the statute the two expressions indiscriminately and leave them to the courts to sort out the
meaning.39
Gender, singular and plural.—One of the basic principles of interpretation of a statute is that the singular always
includes the plural and vice versa.40
Section 13 of the General Clauses Act, 1897 (10 of 1897) provides that in all Central Acts and Regulations, unless
there is anything repugnant in the subject or context, the words importing the masculine gender shall be taken to
include females; and the words in the singular shall include the plural, and vice versa.
Undefined Words.—The principles of interpretation and construction of words defined and meanings given in the
Act or statute have been enunciated hereinbefore. See also Comments under Section 2—Definitions.
Principles of interpretation and construction of words not defined in the Act or statute, e.g., the words ought to be
given Normal, Ordinary, Popular, Common Parlance, Contextual, Technical and Dictionary Meaning, etc., are dealt
with hereinafter.
Normal, Ordinary or Popular Meaning.—The words not defined in the Act or the Rules must be understood in its
normal connotation—the sense in which it is understood in the commercial world. It is equally well to keep in mind
the context since a word takes its colour from the context. A statute cannot always be construed with the dictionary
in one hand and the statute in the other. Regard must also be had to the scheme, context and legislative history of
the provision.41 It is well-settled that where the definition of a word has not been given in the statute, it must be
construed in its popular sense if it is a word of every day use. Popular sense means that sense which people
conversant with the subject-matter with which the statute is dealing, would attribute to it. An interpretation clause
which extends the meaning of a word does not take away its ordinary meaning.42 The expressions occurring in the
context of amalgamation of companies will have to be understood in its popular sense, that is to say, the sense or
meaning that is attributed to it by men of business, trade or commerce and by persons or institutions interested in or
dealing with companies.43
It is well established that, in the absence of any definition in the statute, the words occurring in a statute have to be
understood with reference to the objects of the Act and in the context in which they occur. The meaning or definition
of words in a different provision or a different statute cannot automatically be imported for the interpretation of the
same words in another statute.44
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Contextual Meaning.—Interpretation must depend on the text and the context. They are the bases of
interpretation. If the text is the texture, context is what gives the colour. Neither can be ignored. Both are important.
That interpretation is best which makes the textual interpretation match the contextual. A statute is best interpreted
when we know why it was enacted. With this knowledge, the statute must be read, first as a whole and then section
by section, clause by clause, phrase by phrase and word by word. If a statute is looked at in the context of its
enactment, with the glasses of the statute-maker provided by such context, its scheme, sections, clauses, phrases
and words may take colour and appear different. With those glasses, we must look at the Act as a whole and
discover what each section, clause, phrase and word is meant and designed to say as to fit into the scheme of the
entire Act. No part of a statute and no word of a statute can be construed in isolation. Statutes have to be construed
so that every word has a place and everything is in its place.45
When the question arises as to the meaning of a certain provision in a statute it is not only legitimate but proper to
read that provision in its context. The context means; the statute as a whole, the previous state of law, other
statutes in pari materia, the general scope of the statute and the mischief that it was intended to remedy.46 In
interpreting the Act, emphasis on one word ‘disjuncted’ from its preceding and succeeding words is not permissible.
If the word is not defined in the Act, then the dictionary meaning or the ordinary meaning could be taken.47
When the word is not defined in the Act it may be permissible to refer to the dictionary to find out the meaning of
that word as understood in the common parlance. But where the dictionary gives divergent or more than one
meaning, it is not safe to construe the said word according to the suggested dictionary meaning. In such a situation,
the word has to be construed in the context of the provisions of the Act and regard must also be had to the
legislative history and scheme of the Act. It is a settled principle of interpretation that the meaning of the words,
occurring in the provisions of the Act must take their colour from the context in which they are so used.48
Dictionary Meaning.—In the well known words of Judge Learned Hand, one cannot make a fortress out of the
dictionary; and should remember that statutes have some purpose and object to accomplish whose sympathetic
and imaginative discovery is the surest guide to their meaning.49
A statute cannot always be construed with the dictionary in one hand and the statute in the other. Regard must also
be had to the scheme, context and legislative history of the provision.50 Dictionary meanings, however helpful in
understanding the general sense of the words, cannot control where the scheme of the statute or the instrument
considered as whole clearly conveys a somewhat different shade of meaning. The words have to be so construed
as to fit in with the idea which emerges on a consideration of the entire context.51
Ejusdem generisrule.— General words following specific words confined to the same kind as those specified.—
The
ejusdem generis rule means when general words follow particular and specific words of the same nature, the
general words must be confined to the things of the same kind as those specified.
However, the specific words must form a distinct genus or category. Further, it is not an inviolable rule of law, but it
is only permissible inference in the absence of an indication to the contrary. Interpretation ejusdem generis or
noscitur a sociis need not always be made when words showing particular classes are followed by general words.
Before the general words can be so interpreted, there must be a genus constituted or a category disclosed with
reference to which the general words can and are intended to be restricted.52
The legal maxim
ejusdem generis means ‘of the same kind’.

The ejusdem generis rule serves to restrict the meaning of a general word to things or matters of the same genus
as the preceding particular words. This, however, is only the application of a commonsense rule of language: if a
man tells his wife to go out and buy butter, milk, eggs and anything else she needs, he will not normally be
understood to include in the term ‘anything else she needs’ a new hat or an item of furniture.53
The ejusdem generis rule strives to reconcile the incompatibility between specific and general words. The doctrine
applies when (i) the statute contains an enumeration of specific words; (ii) the subject of the enumeration
constitutes a class or category; (iii) that class or category is not exhausted by the enumeration; (iv) the general term
follows the enumeration; and (v) there is no indication of a different legislative intent.54
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Doctrine ofNoscitur a sociis.— Analogous words take colour from each other.—It is a well recognised rule of
construction that when two or more words which are susceptible of analogous meaning are coupled together
noscitur a sociis, they are understood to be used in their cognate sense. They take, as it were, their colour from
each other, that is, the more general is restricted to a sense analogous to the less general. A word is known by the
company it keeps.55
The doctrine or maxim noscitur a sociis is merely a rule of construction and it cannot prevail in cases where it is
clear that the wider words have been deliberately used in order to make the scope of the defined word
correspondingly wider. It is only where the intention of the Legislature in associating wider words with words of
narrower significance is doubtful, or otherwise not clear that this rule of construction can be usefully applied. It can
also be applied where the meaning of the words of wider import is doubtful; but, where the object of the Legislature
in using wider words is clear and free of ambiguity, the rule cannot be pressed into service.56
Judicially interpreted words used by Legislature.—When words acquire a particular meaning or sense because
of their authoritative construction by superior courts, they are presumed to have been used in the same sense when
used in a subsequent legislation in the same or similar context.57 When certain terms have become words of well-
recognised legal import, they have to be understood as such when found introduced in any statute, unless they are
defined otherwise or are stated in a different context. There is, therefore, no reason to ascribe a different meaning
to the word ‘trust’ occurring in section 153B of the Companies Act, 1956 from what has come to be understood in
the context of the Indian Trusts Act, 1882.58
Prior Legislation, Previous Acts and English Law.—The Companies Act, 1956 is a consolidation of the existing
laws, statutory rules and certain principles laid down in decisions of Courts in India and in England. The Companies
Act, 1956 substantially incorporated provisions of the English Companies Act, 1948. So far as the laws have been
consolidated the old decisions will be binding in appropriate cases.
The words of a statute are to be taken as they stand and to be interpreted ordinarily without any reference to the
previous state of the law on the subject or the English law upon which it may be founded. The proper course in the
first instance is to examine the language of the statute and to ask what is its natural meaning, uninfluenced by any
consideration derived from the previous state of the law.59
It is now well settled that regard must be had not only to the existing law but also to the prior legislation and to the
judicial interpretation thereof.60
When the question arises as to the meaning of a certain provision in a statute it is not only legitimate but proper to
read that provision in its context. The context means; the statute as a whole, the previous state of law, other
statutes in pari materia, the general scope of the statute and the mischief that it was intended to remedy.61
See also Comments under Long title or Preamble in earlier paragraphs.
Decisions under old law—Ratio decidendior principle of law.—In case of change of law, the decisions under
the old law are to be referred to with caution. Decisions rendered under the Arbitration Act, 1940 (10 of 1940) or
under the Foreign Awards (Recognition and Enforcement) Act, 1961 (45 of 1961) should be considered with caution
as the Arbitration and Conciliation Act, 1996 (26 of 1996) purports to bring a new approach to the Arbitration.
Further, it is a well settled proposition that the ratio decidendi of a case is the principle of law that decided the
dispute in the facts of the case and, therefore, a decision on a point which did not arise for decision cannot be relied
upon in support of a proposition that it did not decide. Judgments of Courts are not to be construed as statutes. To
interpret words, phrases and provisions of a statute, it may become necessary for judges to embark into lengthy
discussions but the discussion is meant to explain and not to define. Judges interpret statutes, they do not interpret
judgments. They interpret words of statutes; their words are not to be interpreted as statutes. A case is an authority
for what it actually decides and not for what may seem to follow logically from it.62
Legislative Intent.—It is well settled principle in law that the court cannot read anything into a statutory provision
which is plain and unambiguous. A statute is an edict of the Legislature. The language employed in a statute is the
determinative factor of legislative intent. The first and primary rule of construction is that the intention of the
legislation must be found in the words used by the Legislature itself.63 As long as there is no ambiguity in the
statutory language, resort to any interpretative process to unfold the legislative intent becomes impermissible. The
supposed intention of the Legislature cannot then be appealed to to whittle down the statutory language which is
otherwise unambiguous. If the intendment is not in the words used, it is nowhere else. The need for interpretation
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arises when the words used in the statute are, on their own terms, ambivalent and do not manifest the intention of
the Legislature.64
The court has to determine the intention as expressed by the words used. If the words of a statute are themselves
precise and unambiguous then no more can be necessary than to expound those words in their ordinary and
natural sense. The words themselves alone do in such a case best declare the intention of the law-giver.65
There is a perceivable change now in the approach to interpretation of statutes. The emphasis is now on garnering
legislative intent, and not on grammatical meaning. The principle of literal construction does not rule out the
application of the principles of reasonable construction to give effect to the purpose or intention of any particular
provision as apparent from the scheme of the Act, with the assistance of such external aids as are permissible
under the law.66 Due importance must be given to the legislative history and background that led to the enactment
of the provision.67 A construction which will assist the legislative intent is to be adopted. A beneficial provision is to
be liberally construed to advance the object.68
The fairest and most rational method to interpret the will of the law-maker is by exploring his intentions at the time
when the law was made, by signs the most natural and probable. And these signs are either the words, the context,
the subject-matter, the effects and consequences or the spirit and reason of the law.69
Parliamentary intention may be gathered from several sources. First, of course, it must be gathered from the statute
itself, next from the preamble to the statute, next from the Statement of Objects and Reasons, thereafter from
Parliamentary debates, reports of Committees and Commissions which preceded the legislation and finally from all
legitimate and admissible sources from where there may be light. Regard must be had to legislative history too.70
Statement of Objects and Reasons.—It is well-settled that when the language of the statute is clear and admits of
no ambiguity, recourse to the Statement of Objects and Reasons for the purpose of construing a statutory provision
is not permissible.71
The Statement of Objects and Reasons appended to a Bill is not admissible as an aid to the construction of the
provisions of the Act, though it may be referred to for ascertaining the objects underlying the legislation and the
conditions which necessitated the enactment.72 For determining the purpose or object of the legislation, it is
permissible to look into the circumstances which prevailed at the time when the law was passed and which
necessitated the passing of that law. For the limited purpose of appreciating the background and the antecedent
factual matrix leading to the legislation, it is permissible to look into the Statement of Objects and Reasons of the
Bill which actuated the step to provide a remedy for the then existing malady.73
One of the objects of the Companies Act is to prevent snow-balling of finance and formation of bubble companies. It
accepts the organic theory and makes the company liable for the acts of directors and officers.74
Notes on Clauses.—It is now well-settled that in cases of doubt or difficulties encountered in ascribing proper
meaning to a provision or word in a provision, the Statement of Objects and Reasons or the explanatory Notes on
Clauses relating to the amendment or the Report of the Joint Parliamentary Committee which preceded the
legislation concerned will be useful to ascertain the intention of the Legislature in enacting a particular provision.75
Reports of Committees.—If the words used in the Act are obscure and ambiguous, the background of the law,
including Committee Reports, may be examined, but the court should not be unduly influenced by the same.76
Speech of the Minister and Parliamentary Debates.—Now, it is true that the speeches made by the Members of
the Legislature on the floor of the House when the Bill is being debated are inadmissible for the purpose of
interpreting the statutory provision but the speech made by the mover of the Bill explaining the reason for the
introduction of the Bill can certainly be referred to for the purpose of ascertaining the mischief sought to be
remedied by the legislation and the object and purpose for which the legislation was enacted. This is in accord with
the recent trend in juristic thought not only in Western countries but also in India that interpretation of a statute
being an exercise in the ascertainment of meaning, everything which is logically relevant should be admissible.77
Statement by Law Minister cannot change clear words of Statute.—When the statute is very clear, whatever
statement by the Law Minister made in the floor of the House, cannot change the words and intendment which is
borne out from the words. The letter of the Law Minister cannot be read to interpret the provisions of Section 100A
of the Code of Civil Procedure, 1908 (5 of 1908). The intendment of the Legislature is more than clear in the words
and the same has to be given its natural meaning and cannot be subject to any statement made by the Law
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Minister in any communication. The words speak for themselves. It does not require any further interpretation by
any statement made in any manner. Therefore, the power of the High Court in exercising Letters Patent in a matter
where a single judge has decided the appeal from original order, has been taken away and it cannot be invoked in
the present context. There are no two opinions in the matter that when the CLB exercises its power under Sections
397 and 398 of the Act, it exercised its quasi-judicial power as an original authority. It may not be a court but it has
all the trappings of a Court. Therefore, the CLB while exercising its original jurisdiction under Sections 397 and 398
of the Act passed the order and against that order appeal lies to the learned Single Judge of the High Court and
thereafter no further appeal could be filed. The second appeal from the order of the Company Judge under Section
10F of the Companies Act, 1956 was not valid in view of Section 100A of the Code of Civil Procedure, 1908 (5 of
1908)(w.e.f. 1-7-2002). The Supreme Court held that no further appeal lies to the Division Bench of the High
Court.78
See detailed Comments on Appeal—Change of law—No further Appeal to Division Bench under Sections 10E,
10F, 10FA, 10FB-10GF, 397, 398 and 483.
Subsequent Amendments.—An Amendment Act must be read as if the words of the amendment had been written
into the Act except where that would lead to an inconsistency.79 An amending provision can certainly give guidance
to interpretation of the existing provisions.80 Speaking generally, subsequent legislation cannot be used for
construction of an earlier statute but if an enactment is really ambiguous, subsequent legislation can be used as a
parliamentary exposition of the former.81
Subsequent Acts.—Generally speaking, a subsequent Act of Parliament affords no useful guide to the meaning of
another Act which came into existence before the later one was ever framed. Under special circumstances, the law
does, however, admit of a subsequent Act to be resorted to for this purpose but the conditions under which the later
Act may be resorted to for the interpretation of the earlier Act are strict; both must be laws on the same subject and
the part of the earlier Act which it is sought to construe must be ambiguous and capable of different meanings.82
Updating construction.—It is presumed that Parliament intends the court to apply to an ongoing Act a
construction that continuously updates its wording to allow for changes since the Act was initially framed (an
updating construction). While it remains law, it is to be treated as always speaking. This means that in its
application on any date, the language of the Act, though necessarily embedded in its own time, is nevertheless to
be construed in accordance with the need to treat it as current law. In construing an ongoing Act, the interpreter is
to presume that Parliament intended the Act to be applied at any future time in such a way as to give effect to the
true original intention. Accordingly the interpreter is to make allowances for any relevant changes that have
occurred, since the Act’s passing, in law, social conditions, technology, the meaning of words, and other matters.83
Analogous Acts or provisions inpari materia.—The words and expressions defined in one Act or statute or as
judicially interpreted do not afford a guide to the construction of the same words or expressions in another Act or
statute unless both the statutes are pari materia legislations or it is specifically so provided in one statute to give the
same meaning to the words as defined in other statute.84
It is a sound rule of construction to confine the provisions of a statute to itself. The relief under section 633 of the
Companies Act, 1956, cannot be granted in respect of liability under any Act other than the Companies Act.85
Rules.—The power to make rules under an Act is derived from the enabling provision found in such Act. Therefore,
it is fundamental that a delegate on whom such power is conferred has to act within the limits of the authority
conferred by the Act and it cannot enlarge the scope of the Act. A delegate cannot override the Act either by
exceeding the authority or by making provision which is inconsistent with the Act. Any rule made in exercise of such
delegated power has to be in consonance with the provisions of the Act, and if the rule goes beyond what the Act
contemplates, the rule becomes in excess of the power delegated under the Act. If the rule-making authority does
any of the above, the rule becomes ultra vires the Act.86 The Rules are meant only for the purpose of carrying out
the provisions of the Act and they cannot take away what is conferred by the Act or whittle down its effect.87
See detailed Comments under Section 642. [Power of Central Government to make Rules]. For SEBI Rules and
Regulations see Comments under Section 55A.
Procedural provisions.—The rules or procedures are handmaids of justice, not its mistress. It is a fundamental
rule of construction that the rules of procedure are to subserve the purpose of the Act and are the handmaid of
justice and should not be allowed to become the mistress to defeat the justice of the Act.88
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Prescribed manner.—If an Act provides that a thing is to be done in a particular manner then it cannot be done in
any other manner. It is mandatory for a body corporate to comply with the statutory provisions in performing a
particular act. A meeting is to be held in the manner permissible under the Act, or under the Articles.89
Notifications.—The Notifications cannot curtail the scope of deductions, etc., granted by the provisions of the Act.1
Notifications can be relied on and the same have to be read in its entirety and not in parts.2
See detailed Comments under Section 637—Delegation by Central Government of its powers and functions under
the Companies Act.
Regulations.—Regulations being regulatory in nature, the intent and object sought to be achieved thereby must be
firmly applied.3
When any criteria are fixed by a statute or by a policy, an attempt should be made by the authority making the
delegated legislation to follow the policy formulation broadly and substantially and in conformity therewith.4
Retrospective Legislation.—When the law is amended with retrospective effect, the court, when it decides any
proceeding, has to apply such retrospectively amended law as if it were in force at all material times. A court cannot
ignore the retrospective operation of a law which is in existence when it decides a matter.5
Where a statutory provision not expressly made retrospective by the Legislature seeks to affect vested rights and
corresponding obligations of parties, such provision cannot be said to have any retrospective effect by necessary
implication.6 The degree of retrospectivity is to be spelt out from the language of the provision itself.7
Procedural law, generally speaking, is applicable to pending cases. No suitor can be said to have a vested right in
procedure. A change in law of procedure operates retrospectively and unlike the law relating to vested right, is not
only prospective.8
See detailed Comments under Section 10—Jurisdiction of Courts.
Restrictive Legislation.—Provisions enabling regulation or restriction of rights, e.g., the MR TP Act, 1969 (54 of
1969)[now the Competition Act, 2002 (12 of 2003)] which restrict or control the rights of the traders must be strictly
construed.9
Circulars cannot override Act, Rules and Regulations.—In every legal system there is a hierarchy of laws, and
the general principle is that if there is a conflict between a norm in a higher layer of the hierarchy and a norm in a
lower level of the hierarchy, then the norm in the higher layer prevails, and the norm in the lower layer becomes
ultra vires. In our Country this hierarchy is as follows: (1) The Constitution of India. (2) Statutory law, which may be
either Parliamentary law or law made by the State Legislature. (3) Delegated legislation which may be in the form of
Rules, Regulations, etc., made under the Act. (4) Administrative instructions which may be in the form of GOS,
Circulars, etc. The SEBI Act, 1992 is in the second layer of this hierarchy and the SEBI Rules and Regulations are
in the third layer, whereas the SEBI Circular is in the fourth and the lowest layer in the hierarchy. Hence, if there is a
conflict between the Act and the Rules and Regulations the Act will prevail, and if there is a conflict between the
Act, Rules and Regulations on the one hand, and the Circular on the other, the former will prevail and the latter
becomes ultra vires. In the instant case, the SEBI Rules and Regulations support the interpretation that only one
registration of Stock Broker with the SEBI is required and multiple registration with the SEBI is not necessary for a
Stock Broker even if he functions from several Stock Exchanges. It was contended that the Circular No. SMD Policy
Cir-11/98, dated March 16, 1998, clause 7(e) refers to SEBI registration numbers and multiple registration with the
SEBI is contemplated by the law. Negativing this contention, it was held that Section 12(1) of the SEBI Act, 1992 is
very clear and it clearly envisages only one registration by the SEBI. Hence, it is really not necessary to look into
the Rules and Regulations in this connection, far less looking into any Circular. In view of this, the Circular
inconsistent with Section 12 (1) was quashed.10
See detailed Comments, SEBI Circulars, Clarifications and Press Notes, and the List of the SEBI Act, Rules,
Regulations, Guidelines and Schemes under relevant Section 55A of the Companies Act, 1956 —Powers of SEBI.
Binding force of Department’s views or Circulars.—The benevolent Circulars or instructions given by the Board
(CLB) or the Department (DCA) are binding in law on the Authorities under the Act regardless of interpretation
placed on that phrase by the Courts.11 It is well-settled that Circulars or Department’s views can bind the
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Department or Authorities but will not bind the Appellate Authority or the Tribunal or the Court or even the
assessee, the company or the subject.12
See detailed Comments on Binding force of Circulars under Section 637.
Doctrine ofcontemporanea expositio.—The rule of construction by reference to contemporanea expositio is a

well-established rule for interpreting a statute by reference to the exposition it has received from contemporary
authority, though it must give way where the language of the statute is plain and unambiguous. The
contemporaneous construction placed upon an ambiguous section by the administrators entrusted with the task of
executing the statute, e.g., the Department, the Government of India and the SEBI, is extremely significant in the
interpretation of a statute.13
Contemporary exposition only by officers charged with the enforcement and administration of the relevant statute
are to be given weight.14
Clarificatory Circulars and Press Notes.—Clarificatory Circulars and Press Notes issued by the Government can
be relied on.15 A Clarificatory Note or Press Release is however not binding like Department’s views or Circulars.16
Circulars—Service Tax—Firm to include Company—Valid.—Two Circular Nos. 43/5/97-TRU, dated July 2,

1997 and Trade Circular, dated July 3, 1997, issued by the Ministry of Finance clarifying that “Firm” includes a
Company for the purposes of Service Tax, were declared to have been issued within the parameters of delegated
legislation flowing from the parent Act and were valid pieces of delegated legislation in consonance with the
provisions of the parent Act. As per these Circulars the word “firm” used in the definition of “consulting engineer”
interpreted in the context and scheme of Section 65 of the Finance Act, 1994 (32 of 1994) in consonance with
Sections 66 and 68 and the meaning conferred to the word “Firm” elsewhere in the statute includes a Company
since there is nothing to support an intelligible differentia or a rational classification between a Company and a Firm
providing Taxable Service defined under Section 65(48)(g) [ now Section 65(105)(g)] of the Finance Act, 1994 to
exclude a company from the tax net when both providing the same Taxable Service being the taxable event in a
statute, which is not meant for providing special provisions for or benefit to a company. The two Circulars cannot be
held to be contrary to the provisions of the Statute or inconsistent with the scheme and the context of the Service
Tax Law or repugnant to the clear legislative provisions defining “consulting engineer” under Section 65(13) [ now
Section 65(31)] of the Finance Act, 1994. The Circulars were not issued in excess of the parameters limited by the
legislation delegating the power. It is well within the parameters and, therefore, can never be ultra vires the parent
Act or void. Since it is well within the enactment, it is not a case that a tax is being imposed by reason of the said
two Circulars on the company though not liable through subordinate legislation without being authorised by the
parent Act.17
Guidelines.—In a case under the Cofeposa, the Supreme Court held that the guidelines laid down and published
by the Government were intended to guide the customs or intelligence officers as to how to act and what to do in
the detection and apprehension of smugglers. They do not have any force of law and there cannot be any valid
complaint of discrimination.18 Guidelines may, however, be a ground in support in an application for relief under
section 633 of the Companies Act, 1956.
Promissory Estoppel.—The true principle of promissory estoppel is that where one party has by his word or
conduct made to the other a clear and unequivocal promise or representation which is intended to create legal
relations or affect a legal relationship to arise in the future, knowing or intending that it would be acted upon by the
other party to whom the promise or representation is made and it is in fact so acted upon by the other party, the
promise or representation would be binding on the party making it and he would not be entitled to go back upon it, if
it would be inequitable to allow him to do so, having regard to the dealings which have taken place between the
parties. It is now well-settled in India that the doctrine of promissory estoppel is not limited in its application only to
defence but it can also found a cause of action. The doctrine may operate as a shield and sometime as a sword.
The doctrine of promissory estoppel is applicable against the Government in the exercise of its governmental,
public or executive functions. In this case, the representation made by the Central Board of Excise and Customs
(CBEC) to the Manufacturers’ Association with approval of the Central Government was held to be valid until
withdrawn. The Central Government and the CBEC were bound by promissory estoppel.19
Doctrine of precedent orstare decisis.—India is governed by a judicial system identified by a hierarchy of courts,
where the doctrine of binding precedent is a cardinal feature of its jurisprudence. The doctrine of precedent has the
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merit of promoting a certainty and consistency in judicial decisions, and enables an organic development of the law,
besides providing assurance to the individual as to the consequence of transactions forming part of his daily affairs.
And, therefore, the need for a clear and consistent enunciation of legal principles in the decisions of a court.20
The doctrine of precedent or stare decisis, which is part of English jurisprudence and is concerned with the binding
force of decisions or judge-made law, has been enshrined in Articles 141 and 227 of the Constitution of India, which
make the decisions of the Supreme Court and the jurisdictional High Court absolutely binding.
Binding force of Supreme Court, High Court and English decisions has been briefly outlined below. As
understanding the working of the doctrine of precedent or stare decisis depends upon having a sound grasp of the
court structure, these have been fully dealt with in Comments under Section 10—Jurisdiction of Courts.
Binding force of Supreme Court decisions.—In the hierarchical system of courts which exists in our country, it is
necessary for each lower tier, including the High Court, to accept loyally the decisions of the higher tiers. It is
inevitable in a hierarchical system of courts that there are decisions of the supreme appellate tribunal which do not
attract the unanimous approval of all members of the judiciary. But the judicial system only works if someone is
allowed to have the last word and that last word, once spoken, is loyally accepted. The better wisdom of the court
below must yield to the higher wisdom of the court above. That is the strength of the hierarchical judicial system.
The High Court cannot disregard the decision of the Supreme Court by applying to it the label per incuriam. That
label is relevant only to the right of an appellate court to decline to follow one of its own previous decisions, not to its
right to disregard a decision of a higher appellate court or to the right of a Judge of the High Court to disregard a
decision of the Supreme Court. It is needless to add that in India under Article 141 of the Constitution of India, the
law declared by the Supreme Court shall be binding on all courts within the territory of India.21
A decision of the Supreme Court takes its colour from the questions involved in the case in which it is rendered and,
while applying the decision to a later case, the courts must carefully try to ascertain the true principle laid down by
the decision.22
See detailed Comments on ratio decidendi, obiter dicta, sub silentio, per incuriam, etc., decisions of the Supreme
Court, decisions of different Benches of the Supreme Court, Supreme Court decisions vis-a-vis Privy Council
decisions, etc., how far binding at the end of Comments under Section 10—Jurisdiction of Courts.
Jurisdictional High Court decisions binding in the State.—Under Article 227 of the Constitution of India, the
High Court has jurisdiction over all courts and tribunals throughout the territories in relation to which it exercises
jurisdiction. It would be anomalous to suggest that a Tribunal over which the High Court has superintendence can
ignore the law declared by that court and start proceedings in direct violation of it. If a tribunal can do so, all the
subordinate courts can equally do so, for there is no specific provision, just like in the case of the Supreme Court,
making the law declared by the High Court binding on subordinate courts. It is implicit in the power of supervision
conferred on a superior tribunal that all the tribunals subject to its supervision should conform to the law laid down
by it. Such obedience would also be conducive to their smooth working: otherwise, there would be confusion in the
administration of law and respect for law would irretrievably suffer. The law declared by the highest Court in the
State is binding on Authorities or Tribunals under its superintendence, and that they cannot ignore it.23
See detailed Comments including, inter alia, jurisdictional High Court decisions binding even if appeal is pending in
the Supreme Court, decisions of different Benches of the High Court how far binding, persuasive value of outside
High Court decisions, etc., under Section 10—Jurisdiction of Courts.
Contempt of Court.—For decisions on contempt of court see Binding force of Supreme Court decisions and
Binding force of jurisdictional High Court decisions in Comments under Section 10—Jurisdiction of Courts.
Special Leave Petition.—It is well-settled that dismissal by the Supreme Court of a Special Leave Petition (SLP) in
limine does not lay down any binding principle under Article 141 of the Constitution of India.24
It is not the policy of the Supreme Court to entertain Special Leave Petitions (SLPs) and grant leave under Article
136 of the Constitution of India save in those cases where some substantial question of law of general or public
importance is involved or there is manifest injustice resulting from the impugned order or judgment. The dismissal of
a special leave petition in limine by a non-speaking order does not, therefore, justify any inference that by
necessary implication the contentions raised in the special leave petition on the merits of the case have been
rejected by the Supreme Court. The dismissal of special leave petition (SLP) does not preclude the party from
moving the High Court for seeking relief under Article 226 of the Constitution. Neither on the principle of res judicata
Page 53 of 63
nor on any principle of public policy, would the order of the Supreme Court dismissing the special leave petition
operate to bar the trial of identical issues in the writ proceeding before the High Court.25
See detailed Comments under Special Leave Petition and Doctrine of Merger under Binding force of Supreme
Court and jurisdictional High Court decisions in Comments under Section 10—Jurisdiction of Courts.
Writs, Judicial review and Constitutional validity.—The power of judicial review over legislative action vested in
the High Courts under Article 226 and in the Supreme Court under Article 32 of the Constitution of India is an
integral and essential feature of the Constitution, constituting part of its basic structure. Ordinarily, therefore, the
power of the High Courts and the Supreme Court to test the constitutional validity of legislations can never be
ousted or excluded. The power vested in the High Courts to exercise judicial superintendence over the decisions of
all courts and tribunals within their respective jurisdictions under Article 227 is also part of the basic structure of the
Constitution. All decisions of Tribunals, whether created pursuant to Article 323A or Article 323B of the Constitution,
will be subject to the High Court’s writ jurisdiction under Article 226/227 of the Constitution, before a Division Bench
of the High Court within whose territorial jurisdiction the particular Tribunal falls.26
See detailed Comments on Writs, Judicial Review, Special Leave Petitions (SLPs), and Constitutional Validity
Res judicata.—The doctrine of res judicata is codified in section 11 of the Code of Civil Procedure, 1908 (5 of
1908). Section 11 generally comes into play in relation to civil suits. The doctrine of res judicata has been applied
since long in various other kinds of proceedings and situations by courts in England, India and other countries. If by
any judgment or order any matter in issue has been directly and explicitly, or necessarily by implication, decided,
the decision operates as res judicata and bars the trial of an identical issue in a subsequent proceeding between
the same parties. Before a plea of res judicata can be given effect to, the following conditions must be proved (1)
the litigating parties must be the same; (2) the subject-matter of the suit also must be identical; (3) the matter must
be finally decided between the parties; and (4) the suit must be decided by a court of competent jurisdiction.27
English decisions.—The Indian Companies Act is modelled on the English Companies Act. Therefore, if the words
used in the Act are obscure, ambiguous and identical, assistance can be had of English decisions. But having
regard to socio economic provisions of the Act they should be cautiously applied. It is well settled that the English
decisions are not binding precedents but only persuasive.28
See detailed Comments on English decisions persuasive precedents and the English Court structure under Section
10—Jurisdiction of Courts.
Tribunals and Appellate Authorities.—From the constitution of the National Company Law Tribunal(NCLT) under
section 10FB of the Companies Act, 1956, as inserted by the Companies (Second Amendment) Act, 2002 (11 of
2003), the jurisdiction of the CLB and High Court shall be vested in the Tribunal (NCLT). Person aggrieved by order
or decision of the Tribunal (NCLT) may prefer an appeal to the Appellate Tribunal except consent orders [Section
10FQ]. Person aggrieved by order of Appellate Tribunal may file an appeal to the Supreme Court on question of law
arising out of such order [Section 10GF].
See detailed Comments on Jurisdiction and Binding force of decisions of Courts [Section 10], Company Law Board
[Sections 10E-10FB], National Company Law Tribunal [Sections 10FB-10FP] and Appellate Tribunal [Sections
10FQ-10GF].
Views of ICAI.—The views of the Institute of Chartered Accountants of India (ICAI) and the principles of
accountancy cannot override the provisions of the Act and the binding decisions of the Supreme Court or the
jurisdictional High Court and to the extent they are in conflict with such decisions, they have to be ignored.29
See Accounting and Auditing Practices under Sections 205 to 233-B.
1. The Act came into force from 1st April, 1956, vide Notification No. S.R.O. 612, dated 8-3-1956, published in the Gazette
of India, Extraordinary, 1956, Part II, Section 3, page 473.
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2. Substituted by the Jammu and Kashmir (Extension of Laws) Act, 1956 (62 of 1956) s. 2, and Sch., for sub-section (3)
(w.e.f. 1-11-1956). Prior to substitution sub-section (3) stood as under:
“(3) It extends to the whole of India except the State of Jammu and Kashmir.”
3. First proviso omitted by the Central Laws (Extension to Jammu and Kashmir) Act, 1968 (25 of 1968) s. 2, and Sch.
(w.e.f. 15-8-1968). Prior to omission first proviso stood as under:
“Provided that it shall not apply to the State of Jammu and Kashmir except to the extent to which the provisions of
this Act relate to the incorporation, regulation and winding up of banking, insurance and financial corporations.”
4. Inserted by the Companies (Amendment) Act, 1965 (31 of 1965) s. 2, (w.e.f. 15-10-1965).
5. The word “further” omitted by Act 25 of 1968, s. 2 and Sch. (w.e.f. 15-8-1968).
6. Published in the Gazette of India, Extraordinary, Part II, Section 2, dated 2-9-1953.
(St.) 200.
(St.) 8.
(St.) 230.
(St.) 247.
12. Published in the Gazette of India, Extraordinary, Part II, Section 2, page 1125, dated 22-11-1965 : (1966) 36 Comp.
Cas. (St.) 1.
(St.) 121.
(St.) 136.
(St.) 88.
(St.) 4.
* State of Bombay v. Bandhan Ram Bhandani, (1961) 31 Comp. Cas. 1 (SC): AIR 1961 SC 186 [LNIND 1960 SC 220].
† State of Andhra Pradesh v. Andhra Provincial Potteries Ltd., (1973) 43 Comp. Cas. 514 (SC) AIR 1973 SC 2429
[LNIND 1973 SC 238]. See Comments under Sections 159, 162, 166, 168, 210(5) and 220(3).
(St.) 90.
19. Published in the Gazette of India, Extraordinary, No. 24, Part II, Section 2, dated 9-5-1985 : (1985) 58 Comp. Cas. (St.)
186.
24. Published in the Gazette of India, Extraordinary, Part II, Section 2 : (1997) 89 Comp. Cas. (St.) 241.
Page 55 of 63
27. Published in the Gazette of India, Extraordinary, Part II, Section 2, dated 22-11-2001 : (2001) 107 Comp. Cas. (St.)
485.
(St.) 308.
(St.) 54.
† Published in the Gazette of India, Extraordinary, No. 10, Part II, Section 2, dated 6-3-2006 : (2006) 130 Comp. Cas.
(St.) 198.
31. CIT v. Girdhardas & Co. Pvt. Ltd.,AIR 1967 SC 795 [LNIND 1966 SC 245]: (1967) 1 Comp. LJ 1 (SC) : (1967) 63 ITR
300 (SC) : (1967) 1 SCR 777 [LNIND 1966 SC 245]. Corresponding provisions of the Previous Act, 1913, the English
Act, 1948 and the English Act, 1985 as amended by 1989 Act have been annotated under each Section in this book.
See also Comparative Table at the beginning of this Volume. Decisions enunciating the usefulness of provisions and
decisions under Previous Acts and English Acts have been dealt with under Principles of Interpretation in later
paragraphs and Doctrine of Precedent in Comments under Section 10—Jurisdiction of Courts.
[LNIND 1990 JNK 2] (SC). Oft-quoted rule in Heydon’s case, (1584) 3 Co. Rep. 7a: 76 ER 637, Principles of
Interpretation and Doctrine of Precedent have been dealt with in later paragraphs.
33. See Hind Overseas P. Ltd. v. Raghunath Prasad Jhunjhunwalla, (1976) 46 Comp. Cas. 91 (SC) : AIR 1976 SC 565
[LNIND 1975 SC 403]; Kilpest P. Ltd v. Shekhar Mehra, (1996) 87 Comp. Cas. 615 (SC) under Doctrine of Precedent in
* The English Companies Act, 1989 has further amended, inserted and substituted several sections of the English
Companies Act, 1985. The corresponding provisions of the English Act, 1948 and the English Act, 1985 as amended by
the 1989 Act have been annotated under relevant Sections in this book. See also Comparative Table at the beginning
of this Volume.
[LNIND 1990 JNK 2] (SC); Utkal Contractors and Joinery P. Ltd. v. State of Orissa,AIR 1987 SC 1454 [LNIND 1987 SC
466]: (1987) 3 SCR 317 [LNIND 1987 SC 466]; Maunsell v. Olins,(1975) 1 All ER 16 (HL).
35. Swedish Match AB v. SEBI, (2004) 122 Comp. Cas. 83 (SC) : AIR 2004 SC 4219 [LNIND 2004 SC 854]; National
Stock Exchange Member v. Union of India, (2006) 133 Comp. Cas. 504 (Del.—DB).
36. Doypack Systems P. Ltd. v. UOI, (1989) 65 Comp. Cas. 1 (SC) : AIR 1988 SC 782 [LNIND 1988 SC 589].
37. Unique Butyle Tube Industries Pvt. Ltd. v. U.P. Financial Corporation, (2003) 113 Comp. Cas. 374 (SC); Rishabh Agro
Industries Ltd. v. P.N.B. Capital Services Ltd., (2000) 101 Comp. Cas. 284 (SC) : AIR 2000 SC 1583 [LNIND 2000 SC
862]; Padmasundara Rao v. State of Tamil Nadu,(2002) 255 ITR 147 [LNIND 2002 SC 201] (SC); Institute of Chartered
Accountants of India v. Price Waterhouse, (1997) 90 Comp. Cas. 113 (SC) : AIR 1998 SC 74 [LNIND 1997 SC 934];
Swift Formulations Pvt. Ltd., In Re, (2004) 121 Comp. Cas. 27 (P&H) (FB). See also Comments under Casus omissus
hereinafter.
38. Colgate Palmolive (India) Ltd. v. MRTP Commission, (2003) 113 Comp. Cas. 14 (SC).
39. IFCI Ltd. v. Cannanore Spg. & Wvg. Mills Ltd., (2002) 110 Comp. Cas. 685 (SC); Patheja Bros. Forgings and Stamping
v. ICICI Ltd., (2000) 102 Comp. Cas. 21 (SC).
40. Raghunath Rai Bareja v. Punjab National Bank, (2007) 135 Comp. Cas. 163 (SC).
41. Lloyd Insulations (India) Ltd. v. Cement Corpn. of India Ltd., (2001) 105 Comp. Cas. 729 (Delhi) (DB); Economic Chit
Funds Pvt. Ltd. v. P.S. Krishnoji Rao, (1985) 58 Comp. Cas. 838 (Kar.); Beejay Engineers Pvt. Ltd., In Re, (1983) 53
Comp. Cas. 918 (Delhi) (DB); Special Steels Ltd. v. Jay Prestressed Products Ltd., (1991) 72 Comp. Cas. 277 (Bom.).
See also Rational Construction, Casus omissus, Legislative Intent, Internal and External Aids in succeeding
paragraphs.
42. Polestar Electronic (Pvt.) Ltd. v. Addl. CST,AIR 1978 SC 897 [LNIND 1978 SC 59](1978) 41 STC 409 (SC); Kailash
Nath Agarwal v. Pradeshiya Industrial and Investment Corporation of U.P. Ltd. (2003) 114 Comp. Cas. 4 (SC).
43. Upendra Kumar Joshi v. Kesoram Industries and Cotton Mills Ltd., (1983) 54 Comp. Cas. 1 (Pat.) (FB). See also Casus
omissus in succeeding paragraphs.
44. Rishabh Agro Industries Ltd. v. P.N.B. Capital Services Ltd., (2000) 101 Comp. Cas. 284 (SC) AIR 2000 SC 1583
[LNIND 2000 SC 862]; Padmasundara Rao v. State of Tamil Nadu,(2002) 255 ITR 147 [LNIND 2002 SC 201] (SC). See
also Literal Construction in earlier paragraphs.
45. State of Kerala v. Mathai Verghese, (1987) 62 Comp. Cas. 857 (SC). See also Internal and External Aids to
Interpretation and Construction explained in later paragraphs.
Page 56 of 63
46. Margadarsi Chit Fund Pvt. Ltd. v. Govt. of A.P., (2001) 103 Comp. Cas. 876 (AP); Surjit Singh Kalra v. Union of
India,(1991) 2 SCC 87 [LNIND 1991 SC 85]. See also Rational Construction hereinafter.
48. P. Hema v. M. Muthusamy, (2007) 139 Comp. Cas. 214 (Mad.) (DB).
49. Tata Consultancy Services v. UOI, (2002) 111 Comp. Cas. 292 (Kar.); Tirath Singh v. Bachittar Singh,AIR 1955 SC 830
[LNIND 1955 SC 53]; CIT v. J.H. Gotla,AIR 1985 SC 1698 [LNIND 1985 SC 270]: (1985) 156 ITR 323 [LNIND 1985 SC
270] (SC); K.P. Varghese v. ITO,AIR 1981 SC 1922 [LNIND 1981 SC 373]: (1981) 131 ITR 597 [LNIND 1981 SC 373]
(SC) : (1982) 1 SCR 629 [LNIND 1981 SC 373]; Oxford University Press v. CIT,(2001) 247 ITR 658 [LNIND 2001 SC
219] (SC).
50. Rishabh Agro Industries Ltd. v. P.N.B. Capital Services Ltd., (2000) 101 Comp. Cas. 284 (SC) : AIR 2000 SC 1583
[LNIND 2000 SC 862]; Padmasundara Rao v. State of Tamil Nadu,(2002) 255 ITR 147 [LNIND 2002 SC 201] (SC);
Luke v. IRC,(1963) AC 557 (HL) : (1964) 54 ITR 692 (HL); Prakash Nath Khanna v. CIT,(2004) 266 ITR 1 (SC). See
also Comments under Casus omissus hereinbefore.
51. Allied Motors (P.) Ltd. v. CIT,(1997) 224 ITR 677 [LNIND 1997 SC 1773] (SC); Goodyear India Ltd. v. State of
Haryana,AIR 1990 SC 781 [LNIND 1989 SC 725]: (1991) 188 ITR 402 [LNIND 1989 SC 725] (SC); CWT v.
Kripashankar Dayashankar Worah,AIR 1971 SC 2463 [LNIND 1971 SC 334]: (1971) 81 ITR 763 [LNIND 1971 SC 334]
(SC); R.B. Jodha Mal Kuthiala v. CIT,AIR 1972 SC 126 [LNIND 1971 SC 459]: (1971) 82 ITR 570 (SC).
52. CIT v. Anjum M.H. Ghaswala,(2001) 252 ITR 1 [LNIND 2001 SC 2389] (SC).
53. United Bank of India v. Abhijit Tea Co. Pvt. Ltd., (2000) 102 Comp. Cas. 53 (SC); Allahabad Bank v. Canara Bank,
(2000) 101 Comp. Cas. 64 (SC).
54. Harshad S. Mehta v. Custodian, (1998) 92 Comp. Cas. 936 (SC) : (1998) 231 ITR 871 (SC).
55. D. Vinod Shivappa v. Nanda Belliappa, (2006) 131 Comp. Cas. 663 (SC); Heydon's case (1584) 3 Co. Rep. 7a 76 ER
637.
56. Swedish Match v. SEBI, (2004) 122 Comp. Cas. 83 (SC); Clark and Tokeley Ltd. (T/A Spellbrook) v. Oakes,(1998) 4 All
ER 353 (CA); Anand Rathi v. SEBI, (2002) 110 Comp. Cas. 837 (Bom.) (DB). See detailed Comments on the SEBI Act,
Rules and Regulations under relevant Section 55A of the Companies Act, 1956—Powers of SEBI in this book.
57. Tejkumar Balakrishna Ruia v. A.K. Menon, (1996) 87 Comp. Cas. 539 (SC).
58. Apple Finance Ltd. v. Mantri Housing and Construction Ltd., (2002) 112 Comp. Cas. 480 (Bom.). See also Comments
under Section 433(e).
60. Pundalik v. District Deputy Registrar, (1991) 72 Comp. Cas. 38 (SC).
61. Grindlays Bank P.L.C. v. UOI, (2001) 106 Comp. Cas. 1 (Cal.); Karimtharuvi Tea Estates Ltd. v. State of Kerala,AIR
1963 SC 760 (1963) 48 ITR 83 (SC).
62. Workmen of Dimakuchi Tea Estate v. Management of Dimakuchi Tea Estate,AIR 1958 SC 353 [LNIND 1958 SC 1].
New India Sugar Mills Co. Ltd. v. CST,AIR 1963 SC 1207 : (1963) 14 STC 316 (SC).
63. L.I.C. v. CIT,(1996) 219 ITR 410 (SC) : (1996) 133 CTR (SC) 82.
65. Maharashtra State Financial Corporation v. Jaycee Drugs and Pharmaceuticals P. Ltd., (1991) 71 Comp. Cas. 360
(SC); Mohammad Ali Khan v. CWT,(1997) 224 ITR 672 [LNIND 1997 SC 1969] (SC); J.K. Cotton Spg. and Wvg. Mills
Co. Ltd. v. State of U.P.,AIR 1961 SC 1170 [LNIND 1960 SC 337]: (1961) 3 SCR 185; CIT v. Distributors (Baroda) Pvt.
Ltd.,AIR 1972 SC 288 [LNIND 1971 SC 472]: (1972) 83 ITR 377 (SC).
66. Manian Transports v. Krishna Moorthy, ITO, (1991) 72 Comp. Cas. 746 (Mad.).
67. Thomas v. United Butter Co. of France Ltd., (1909) 2 Ch. 484 : 79 LJ Ch. 14 : 101 LT 388; MacConnell v. E.Prill & Co.
Ltd., (1916) 2 Ch. 57 : (1916-17) All ER Rep. Ext. 1344 : 85 LJ Ch. 674 : 115 LT 71 : 32 TLR 509 60 SJ 556; Food
Controller v. Cork,(1923) AC 647 : (1923) All ER Rep. 463 : 92 LJ Ch. 587 (HL). See also Literal Construction, Prior
Legislation, Doctrine of Precedent and Binding force of Indian and English decisions.
68. UOI v. Elphinstone Spinning and Weaving Co. Ltd., (2001) 105 Comp. Cas. 309 (SC). See also Contextual Meaning
hereinafter.
69. Centre for Public Interest Litigation v. UOI, (2003) 117 Comp. Cas. 123 (SC).
70. Kavalappara Kottarathil Kochuni v. State of Madras,AIR 1960 SC 1080 [LNIND 1960 SC 436].
71. R.K. Garg v. UOI,AIR 1981 SC 2138 [LNIND 1981 SC 434]: (1982) 133 ITR 239 [LNIND 1981 SC 434] (SC).
Page 57 of 63
72. Girdharilal & Sons v. Balbir Nath Mathur,AIR 1986 SC 1499 [LNIND 1986 SC 45].
73. Vacher & Sons v. London Society of Compositors,(1913) AC 107 (HL) : (1911-13) All ER Rep. 241 : 82 LJ KB 232 : 107
LT 722 (HL).
74. Chandroji Rao v. CIT,AIR 1970 SC 1582 [LNIND 1970 SC 241]: (1970) 77 ITR 743 (SC).
75. Western India Theatres Ltd. v. Municipal Corpn. of the City of Poona,AIR 1959 SC 586 [LNIND 1958 SC 204]; Bhinka
v. Charan Singh,AIR 1959 SC 960 [LNIND 1959 SC 77]; Prakash Nath Khanna v. CIT,(2004) 266 ITR 1 (SC).
76. Oriental Insurance Co. Ltd. v. Hansrajbhai (2001) 105 Comp. Cas. 743 (SC); Salaam M. Bavazier v. Mohd. Azgaruddin,
(1998) 93 Comp. Cas. 609 (AP); K.P. Varghese v. ITO,AIR 1981 SC 1922 [LNIND 1981 SC 373](1981) 131 ITR 597
(SC) (1982) 1 SCR 629 [LNIND 1981 SC 373].
77. Meghal Homes P. Ltd. v. Shree Niwas Girni K. K. Samiti, (2007) 139 Comp. Cas. 418 (SC).
78. State of Kerala v. Mathai Verghese, (1987) 62 Comp. Cas. 857 (SC). See also the Principle of Literal Construction and
Casus omissus in earlier paragraphs.
79. Special Steels Ltd. v. Jay Prestressed Products Ltd., (1991) 72 Comp. Cas. 277 (Bom.); Killick Nixon Ltd. v. Bank of
India, (1985) 57 Comp. Cas. 831 (Bom.) (DB); Beejay Engineers Pvt. Ltd., In re, (1983) 53 Comp. Cas. 918 (Delhi)
(DB); Keshavji Ravji and Co. v. CIT,AIR 1991 SC 1806 [LNIND 1990 SC 60]: (1990) 183 ITR 1 [LNIND 1990 JNK 2]
(SC) : (1990) 1 Comp. LJ 374 (SC). See also Literal Construction.
80. Sudarsan Trading Co. Ltd. v. Govt. of India, (1991) 71 Comp. Cas. 265 (Ker.); Institute of Patent Agents v.
Lockwood,(1894) AC 347 (HL); K.M. Nanavati v. State of Bombay,AIR 1961 SC 112 [LNIND 1960 SC 193];Ashok
Kumar Oswal v. S.P. Oswal, (2002) 110 Comp. Cas. 747 (CLB). See also Contextual Meaning in later paragraphs.
[LNIND 1962 SC 125]: (1962) Supp. 3 SCR 973
82. Orient Paper and Industries Ltd. v. State of Orissa,AIR 1991 SC 672 [LNIND 1990 SC 643]; South India Corporation
(P) Ltd. v. Secretary, Board of Revenue,AIR 1964 SC 207 [LNIND 1963 SC 182]: (1964) 15 STC 74 (SC); Union of
India v. G.M. Kokil,AIR 1984 SC 1022 [LNIND 1984 SC 87]; T.R. Thandur v. Union of IndiaAIR 1996 SC 1643 [LNIND
1996 SC 749]; Smt. Parayankandiyal E.K.K.A. v. K. Devi, Devi, AIR 1996 SC 1963 [LNIND 1996 SC 869].
83. Maharashtra Tubes Ltd. v. State Industrial and Investment Corporation of Maharashtra Ltd., (1993) 78 Comp. Cas. 803
(SC); Sanwarmal Kejriwal v. Vishwa Co-operative Housing Society Ltd.,AIR 1990 SC 1563 [LNIND 1990 SC 144]. See
also generalia specialibus non derogant hereinafter.
84. Solidaire India Ltd. v. Fairgrowth Financial Services Ltd., (2001) 104 Comp. Cas. 569 (SC); A.S. Nizar Ahmed and Co.
Ltd. v. Collector of Vellore District, (2004) 119 Comp. Cas. 583 (Mad.); Hyderabad Engineering Industries v. A.P.
Industry Facilitation Council, (2004) 120 Comp. Cas. 195 (AP).
85. Official Liquidator v. Haryana Financial Corporation, (1999) 98 Comp. Cas. 683 (P&H); Titus Daniel v. South Indian
Parenterals Pvt. Ltd., (2000) 101 Comp. Cas. 117 (Ker.).
86. Bharat Hari Singhania v. CWT,(1994) 207 ITR 1 (SC) : (1994) 118 CTR (SC) 125.
87. P. Virudhachalam v. Management of Lotus Mills,AIR 1998 SC 554; T.D. Bonny v. Registrar of Co-operative
Societies,AIR 1998 SC 2012 [LNIND 1998 SC 528].
88. Morgan Securities and Credit P. Ltd. v. Modi Rubber Ltd., (2007) 136 Comp. Cas. 113 (SC); Jay Engineering Works
Ltd. v. Industry Facilitation Council, (2006) 133 Comp. Cas. 670 (SC).
89. ICICI Bank Ltd. v. SIDCO Leathers Ltd., (2006) 131 Comp. Cas. 451 (SC).
90. UOI v. India Fisheries Pvt. Ltd, (1965) 35 Comp. Cas. 669 (SC) : AIR 1966 SC 35 [LNIND 1965 SC 460]: (1965) 57
ITR 331 [LNIND 1965 SC 460] (SC) : (1965) 3 SCR 679 [LNIND 1965 SC 460]; P. George Philip v. Official Liquidator,
(2004) 120 Comp. Cas. 444 (Cal.) (FB). See also Comments under Section 483.
91. J.K. Cotton Spg. and Wvg. Mills Co. Ltd. v. State of U.P.,AIR 1961 SC 1170 [LNIND 1960 SC 337]; South India Corpn.
(P) Ltd. v. Secy., Board of Revenue,AIR 1964 SC 207 [LNIND 1963 SC 182]: (1964) 15 STC 74 (SC).
92. CIT v. Shahzada Nand & Sons,AIR 1966 SC 1342 [LNIND 1966 SC 25](1966) 60 ITR 392 (SC).
93. Allahabad Bank v. Canara Bank, (2000) 101 Comp. Cas. 64 (SC)explained and distinguished in Pennar Paterson Ltd.
v. State Bank of Hyderabad, (2001) 106 Comp. Cas. 338 (AP) (DB); Raghunath Rai Bareja v. Punjab National Bank,
(2007) 135 Comp. Cas. 163 (SC). See also Comments under Sections 442, 446, 529, 529A and 537.
94. Ashoka Marketing Ltd. v. Punjab National Bank, (1992) 74 Comp. Cas. 482 (SC)
95. South India Corpn. (P) Ltd. v. Secy., Board of Revenue,AIR 1964 SC 207 15 STC 74 (SC).
96. Surana Steels Pvt. Ltd. v. Dy. CIT,(1999) 237 ITR 777 [LNIND 1999 SC 1473] (SC).
97. Singhai Rakesh Kumar v. UOI,(2001) 247 ITR 150 (SC).
Page 58 of 63
98. P.C. Agarwala v. Payment of Wages Inspector, (2005) 127 Comp. Cas. 787 (SC).
1. J.K. Industries Ltd. v. Chief Inspector of Factories and Boilers, (1997) 88 Comp. Cas. 285 (SC); Swedish Match AB v.
SEBI, (2004) 122 Comp. Cas. 83 (SC); CIT v. Indo-Mercantile Bank Ltd.,AIR 1959 SC 713 [LNIND 1959 SC 23]:
(1959) 36 ITR 1 [LNIND 1959 SC 23] (SC) : (1959) Supp. 2 SCR 256;Abdul Jabar Butt v. State of J&K,AIR 1957 SC
281 1957 SCR 51; H.E.H. Nizam’s Religious Endowment Trust v. CIT,AIR 1966 SC 1007 [LNIND 1965 SC 273]:
(1966) 59 ITR 582 (SC).
2. Tahsildar Singh v. State of U.P.,AIR 1959 SC 1012 [LNIND 1959 SC 96].
3. Marybong and Kyel Tea Estate Ltd., In Re, (1977) 47 Comp. Cas. 802 (Cal.); CIT v Ajax Products Ltd.,AIR 1965 SC
1358 [LNIND 1964 SC 263]: (1965) 55 ITR 741 [LNIND 1964 SC 263] (SC) : (1965) 1 SCR 700 [LNIND 1964 SC 263];
State of Orissa v Debaki Debi,AIR 1964 SC 1413 : (1964) 15 STC 153 (SC); Hindusthan Ideal Insurance Co. Ltd. v
L.I.C.,AIR 1963 SC 1083 [LNIND 1962 SC 164](1963) 1 Comp. LJ 49 (SC).
4. Madhu Gopal v. Sixth Addl. District Judge,(1988) 4 SCC 644 [LNIND 1988 SC 482]..
5. Allied Motors (P.) Ltd. v. CIT,(1997) 224 ITR 677 [LNIND 1997 SC 1773] (SC). See also Reasonable Construction.
6. S. Sundaram Pillai v. V.R. Pattabhiraman,AIR 1985 SC 582 [LNIND 1985 SC 20]; Swedish Match AB v. SEBI, (2004)
122 Comp. Cas. 83 (SC).
7. Aphali Pharmaceuticals Ltd. v. State of Maharashtra,AIR 1989 SC 2227 [LNIND 1989 SC 454]; Keshavji Ravji and Co.
v. CIT,AIR 1991 SC 1806 [LNIND 1990 SC 60]: (1990) 183 ITR 1 [LNIND 1990 JNK 2] (SC) : (1990) 1 Comp. LJ 374
(SC).
8. State of Bombay v. United Motors (India) Ltd.,AIR 1953 SC 252 [LNIND 1953 SC 42].
9. Patel Roadways Ltd. v. Prasad Trading Co.,AIR 1992 SC 1514 [LNIND 1991 SC 347].
10. ITO v. D. Manoharlal Kothari, (1999) 96 Comp. Cas. 275 (Mad.).
11. Murlidhar Chatterjee v. International Film Co. Ltd.,AIR 1943 PC 34 70 IA 1 (PC).
12. T. Devadasan v. UOI,AIR 1964 SC 179 [LNIND 1963 SC 204].
13. Sham Sunder v. State of Haryana, (1990) 67 Comp. Cas. 1 (SC) : AIR 1989 SC 1982 [LNIND 1989 SC 405]; Tolaram
Relumal v. State of Bombay,AIR 1954 SC 496 [LNIND 1954 SC 91]: 1955 SCR 158 [LNIND 1954 SC 91]; Grindlays
Bank P.L.C. v. UOI, (2001) 106 Comp. Cas. 1 (Cal.). See detailed Comments under Sections 5 and 621 to 631.
14. Lalita Jalan v. Bombay Gas Co. Ltd., (2003) 114 Comp. Cas. 515 (SC); Goaplast Pvt. Ltd. v. Chico Ursula D’Souza,
(2003) 114 Comp. Cas. 644 (SC); Standard Chartered Bank v. Directorate of Enforcement, (2005) 125 Comp. Cas. 513
(SC).
15. Swedish Match AB v. SEBI, (2004) 122 Comp. Cas. 83 (SC); Balram Kumawat v. UOI,(2003) 7 SCC 628 [LNIND 2003
SC 714]. See also Comments under Section 55A.
16. CIT v. Ashoka Engineering Co.,(1992) 194 ITR 645 (SC) : (1993) 109 CTR (SC) 491. See detailed Comments under
17. R. v. Legal Aid Committee No. 1 (London) Legal Aid Area, ex p. Rondel,(1967) 2 QB 482..
18. IRC v. Littlewoods Mail Order Stores Ltd.,(1963) AC 135 (HL) : (1962) 2 All ER 279 (HL).
19. Qualter, Hall & Co. Ltd. v. Board of Trade, (1962) Ch. 273 : (1961) 2 WLR 63 : (1961) 31 Comp. Cas. 445.
20. Premier Mills Ltd. v. CIT,(1985) 152 ITR 457 (Mad.).
21. CWT v. R. Susheela,(1989) 176 ITR 232 (Kar.) : (1989) 79 CTR (Kar.) 138.
22. East End Dwellings Co. Ltd. v. Finsbury Borough Council,(1952) AC 109 (HL) : (1951) 2 All ER 587 (HL); A.S. Glittre
D/5 I/S Garonne v. CIT,(1997) 225 ITR 739 [LNIND 1997 SC 1962] (SC); CIT v. Godavari Sugar Mills Ltd. (1967) 37
Comp. Cas. 68 (SC) : AIR 1967 SC 556 [LNIND 1966 SC 247]: (1967) 63 ITR 310 (SC) : (1967) 1 SCR 798 [LNIND
1966 SC 247]; CIT v. Jaykrishna Harivallabhdas (1998) 93 Comp. Cas. 875 (Guj.) (DB); S. and D. Securities Pvt. Ltd. v.
Union of India (2004) 119 Comp. Cas. 210 (Cal.)See also Comments under Sections 481, 497, 509, 547, 577.
23. CIT v. Narasimhan,(1999) 236 ITR 327 [LNIND 1998 SC 1486] (SC); CIT v. S. Teja Singh,AIR 1959 SC 352 [LNIND
1958 SC 138]: (1959) 35 ITR 408 (SC).
24. CIT v. Mother India Refrigeration Industries P. Ltd.,(1985) 155 ITR 711 [LNIND 1985 SC 252] (SC) : (1985) 48 CTR
(SC) 176; Bengal Immunity Co. Ltd. v. State of Bihar,AIR 1955 SC 661 [LNIND 1955 SC 122]: (1955) 6 STC 446
[LNIND 1955 SC 122] (SC) : (1955) 2 SCR 603 [LNIND 1955 SC 122]; Har Charan Singh v. Shiv RaniAIR 1981 SC
1284 [LNIND 1981 SC 100].
25. State of Bombay v. Pandurang Vinayak Chaphalkar,AIR 1953 SC 244 [LNIND 1953 SC 33]: 1953 SCR 773 [LNIND
1953 SC 33]; Consolidated Coffee Ltd v. Coffee Board,AIR 1980 SC 1468 [LNIND 1980 SC 187]: (1980) 46 STC 164
Page 59 of 63
[LNIND 1980 SC 187] (SC); CIT v. Maharaj Kumar Kamal Singh,AIR 1973 SC 1056 [LNIND 1973 SC 460]: (1973) 89
ITR 1 (SC).
[LNIND 1979 SC 75]. See fuller discussion in Comments under Section 2—Definitions.
27. R.D. Goyal v Reliance Industries Ltd., (2003) 113 Comp. Cas. 1 (SC); United Bank of India v. Debts Rocovery Tribunal,
28. Central Bank of India v Ravindra, (2001) 107 Comp. Cas. 416 (SC).
29. L. Hazari Mal Kuthiala v. ITO,AIR 1961 SC 200 [LNIND 1961 SC 481](1961) 41 ITR 12 (SC); State of U.P. v.
Manbodhan Lal Srivastava,AIR 1957 SC 912 [LNIND 1957 SC 93]: 1958 SCR 533 [LNIND 1957 SC 93]; Govind Lal
Chaggan Lal Patel v. Agriculture Produce Market Committee,AIR 1976 SC 263 [LNIND 1975 SC 300]; Manohar Gunaji
Anubhawne v. State of Maharashtra, (2004) 120 Comp. Cas. 94 (Bom.). See also Comments u/s. 630.
30. State of U.P. v. Babu Ram Upadhya,AIR 1961 SC 751 [LNIND 1960 SC 292]; Rubber House v. Excellsior Needle
Industries P. Ltd.,AIR 1989 SC 1160 [LNIND 1989 SC 148]: (1989) 1 JT 488 [LNIND 1989 SC 148] (SC); CWT v.
Mahadeo Jalan,(1972) 86 ITR 621 [LNIND 1972 SC 434] (SC) AIR 1973 SC 1023; Hemalatha Gargya v. CIT,(2003)
259 ITR 1 (SC).
31. CIT v. Anjum M.H. Ghaswala,(2001) 252 ITR 1 [LNIND 2001 SC 2389] (SC); Jaywant S. Kulkarni v. Minochar Dosabhai
Shroff,AIR 1988 SC 1817 [LNIND 1988 SC 372].
32. CIT v. Hardeodas Agarwalla Trust,(1992) 198 ITR 511 (Cal.).
33. New Piece Goods Bazaar Co. Ltd. v. CIT,AIR 1950 SC 165 [LNIND 1950 SC 28]: (1950) 18 ITR 516 [LNIND 1950 SC
28] (SC) : 1950 SCR 553 [LNIND 1950 SC 28]. See also Literal Construction in earlier paragraphs.
34. Doypack Systems P. Ltd. v. UOI, (1989) 65 Comp. Cas. 1 (SC) : AIR 1988 SC 782 [LNIND 1988 SC 589]. See also
Literal Construction in earlier paragraphs.
35. Workmen of Dimakuchi Tea Estate v. Management of Dimakuchi Tea Estate,AIR 1958 SC 353 [LNIND 1958 SC 1]:
(1958) 14 FJR 41 (SC). See also Contextual Meaning and Legislative Intent hereinafter.
36. Aswini Kumar Ghose v. Arabinda Bose,AIR 1952 SC 369 [LNIND 1952 SC 94]: (1953) SCR 1 [LNIND 1952 SC 94].
37. Luby v. Newcastle-under-Lyme Corporation,(1965) 1 QB 214.
38. Naranjan Singh Re,(1962) 1 QB 211 : (1961) 2 All ER 565.
39. CIT v. Puthuthotam Estates (1943) Ltd.,(1981) 127 ITR 481 (Mad.).
40. Punjab Agro Industries Corporation Ltd. v. Superior Genetics (India) Ltd., (2002) 108 Comp. Cas. 349 (CLB). See also
41. CIT v. N.C. Budharaja & Co.,(1993) 204 ITR 412 (SC) : (1993) 114 CTR (SC) 420 : (1993) 70 Taxman 312 (SC); Indian
Hotels Co. Ltd. v. ITO,(2000) 245 ITR 538 (SC). See also Contextual Meaning and Dictionary Meaning in subsequent
paragraphs.
42. CIT v. Taj Mahal Hotel,AIR 1972 SC 168 [LNIND 1971 SC 375]: (1971) 82 ITR 44 [LNIND 1971 SC 375] (SC); CGT v.
N.S. Getti Chettiar,AIR 1971 SC 2410 [LNIND 1971 SC 469]: (1971) 82 ITR 599 [LNIND 1971 SC 469] (SC);
Commissioner of Customs v. Parasrampuria Synthetics Ltd.,(2002) 253 ITR 274 (SC). See also Interpretation of
Definitions, Meanings and Inclusive definition in Comments Section 2.
43. CIT v. Mahindra and Mahindra Ltd., (1983) 54 Comp. Cas. 651 (SC) : AIR 1984 SC 1182 [LNIND 1983 SC 232]:
(1983) 144 ITR 225 [LNIND 1983 SC 232] (SC).
44. CIT v. Venkateswara Hatcheries (P.) Ltd.,(1999) 237 ITR 174 [LNIND 1999 SC 299] (SC); Jagatram Ahuja v.
CGT,(2000) 246 ITR 609 [LNIND 2000 SC 1356] (SC); D.N. Banerji v. P.R. Mukherjee,AIR 1953 SC 58 [LNIND 1952
SC 85]; S. Mohan Lal v. Kondiah,AIR 1979 SC 1132 [LNIND 1979 SC 87]. See also Analogous Acts in pari materia in
later paragraphs.
45. RBI v. Peerless General Finance and Investment Co. Ltd., (1987) 61 Comp. Cas. 663 (SC) : AIR 1987 SC 1023
[LNIND 1987 SC 86]; S. Gopal Reddy v. State of A.P.,AIR 1996 SC 2184 [LNIND 1996 SC 1040]D.K. Kapur v. RBI,
(2001) 105 Comp. Cas. 643 (Delhi) (DB).
47. Bhagirathi Shenoy v. K.P. Balakuraiya,AIR 1999 SC 2143 [LNIND 1999 SC 350]; United Bank of India v. Debts
Rocovery Tribunal, (1999) 96 Comp. Cas. 602 (SC) : AIR 1999 SC 1381 [LNIND 1999 SC 371]Municipal Board v.
Imperial Tobacco Co. of India Ltd.,AIR 1999 SC 264 [LNIND 1998 SC 1044].
48. CIT v. Venkateswara Hatcheries (P.) Ltd.,(1999) 237 ITR 174 [LNIND 1999 SC 299] (SC).
49. Allied Motors (P.) Ltd. v. CIT,(1997) 224 ITR 677 [LNIND 1997 SC 1773] (SC).
Page 60 of 63
50. Indian Hotels Co. Ltd. v. ITO,(2000) 245 ITR 538 (SC); CIT v. N.C. Budharaja & Co.,(1993) 204 ITR 412 (SC) : (1993)
114 CTR (SC) 420; CGT v. N.S. Getti Chettiar,AIR 1971 SC 2410 [LNIND 1971 SC 469]: (1971) 82 ITR 599 [LNIND
1971 SC 469] (SC); Bolani Ores Ltd. v. State of Orissa,AIR 1975 SC 17 [LNIND 1974 SC 286]: (1975) 2 SCR 138
[LNIND 1974 SC 286]. See also Ordinary and Contextual Meaning in earlier paragraphs.
51. CIT v. Anand Theatres,(2000) 244 ITR 192 [LNIND 2000 SC 2239] (SC); Dy. Chief Controller of Imports and Exports v.
K.T. Kosalram,AIR 1971 SC 1283 [LNIND 1970 SC 399]: (1971) 2 SCR 507 [LNIND 1970 SC 399].
52. Kavalappara Kottarathil Kochuni v. State of Madras,AIR 1960 SC 1080 [LNIND 1960 SC 436]; Jagdish Chandra Gupta
v. Kajaria Traders (India) Ltd.,AIR 1964 SC 1882 [LNIND 1964 SC 166]; Gwalior Sugar Co. Ltd. v. Shyam Saran Gupta
and Co., (1969) 39 Comp. Cas. 657 (MP) (DB) : AIR 1969 MP 74 [LNIND 1968 MP 118](DB).
53. CIT v. The Statesman Ltd.,(1992) 198 ITR 582 (Cal.).
54. Siddeshwari Cotton Mills (P.) Ltd. v. UOI,AIR 1989 SC 1019 [LNIND 1989 SC 28]: (1989) 75 STC 75 (SC); Amar
Chandra Chakraborty v. Collector of Excise,AIR 1972 SC 1863 [LNIND 1972 SC 280]; Calcutta National Bank Ltd. v.
Rangaroon Tea Co. Ltd., (1970) 40 Comp. Cas. 565 (Cal.) (DB); Aluminium Industries Ltd. v. State of Orissa, (1991) 72
Comp. Cas. 436 (Orissa)
55. M.K. Ranganathan v. Govt. of Madras, (1955) 25 Comp. Cas. 344 (SC) : AIR 1955 SC 604 [LNIND 1955 SC 41];
Stonecraft Enterprises v. CIT,(1999) 237 ITR 131 (SC).
56. State of Bombay v. Hospital Mazdoor Sabha,AIR 1960 SC 610 [LNIND 1960 SC 19]; Rohit Pulp and Paper Mills Ltd. v.
CCE,AIR 1991 SC 754 [LNIND 1990 SC 281]: 1990 (47) ELT 491 (SC) : 1990 (30) ECR 1 (SC).
(1990) 1 Comp. LJ 374 (SC); F.S. Ghandhi v. CWT,(1990) 184 ITR 34 (SC) : (1990) 84 CTR (SC) 35; Ahmed G.H. Ariff
v. CWT,AIR 1971 SC 1691 [LNIND 1969 SC 281]: (1970) 76 ITR 471 [LNIND 1969 SC 281] (SC). See also Doctrine of
Precedent in later paragraphs and Comments under Section 10—Jurisdiction of Courts.
58. New Bank of India Ltd. v. UOI, (1981) 51 Comp. Cas. 375 (Delhi) (DB).
59. Bank of England v. Vagliano Bros.(1891) AC 107 (HL); Stock v. Frank Jones (Tipton) Ltd.(1978) 1 All ER 948 (HL);
Upendra Kumar Joshi v. Kesoram Industries and Cotton Mills Ltd. (1983) 54 Comp. Cas. 1 (Pat.) (FB). See Literal
Construction in earlier paragraphs.
60. Heydon’s case, (1584) 3 Co. Rep. 7a : 76 ER 637: 42 Digest 614; Dr. Baliram Waman Hiray v. Mr. Justice B.
Lentin,AIR 1988 SC 2267 [LNIND 1988 SC 442]: 1989) 176 ITR 1 (SC); Bengal Immunity Co. Ltd. v. State of Bihar,AIR
1955 SC 661 [LNIND 1955 SC 122]: (1955) 6 STC 446 [LNIND 1955 SC 122] (SC) : (1955) 2 SCR 603 [LNIND 1955
SC 122]; CIT v. Sodra Devi,AIR 1957 SC 832 [LNIND 1957 SC 59]: (1957) 32 ITR 615 [LNIND 1957 SC 59] (SC) :
(1958) SCR 1 [LNIND 1957 SC 59];; Project and Equipment Corpn. of India Ltd. v. Aluminium Industries Ltd., (2003)
115 Comp. Cas. 522 (Ker.) (DB).
62. Shin-Etsu Chemical Co. Ltd. v. Aksh Optifibre Ltd., (2005) 127 Comp. Cas. 97 (SC).
63. Padmasundara Rao v. State of Tamil Nadu,(2002) 255 ITR 147 [LNIND 2002 SC 201] (SC). See also Literal
Construction, Casus omissus and rational Construction in earlier paragraphs.
(1990) 1 Comp. LJ 374 (SC); Doypack Systems P. Ltd. v. UOI, (1989) 65 Comp. Cas. 1 (SC) : AIR 1988 SC 782
[LNIND 1988 SC 589]. See also Literal Construction and Grammatical Meaning in earlier paragraphs.
65. B.N. Muttoo v. Dr. T.K. Nandi,AIR 1979 SC 460 [LNIND 1978 SC 353]: (1979) 2 SCR 409 [LNIND 1978 SC 353].
66. Kehar Singh v. State (Delhi Admn.),AIR 1988 SC 1883 [LNIND 1988 SC 887];; Shree Sajjan Mills Ltd. v. CIT,(1985)
156 ITR 585 [LNIND 1985 SC 325] (SC) : (1985) 49 CTR (SC) 193 : AIR 1986 SC 484 [LNIND 1985 SC 325]. See also
Literal Construction and Reasonable Construction in earlier paragraphs.
67. Imperial Chit Funds (P.) Ltd. v. ITO, (1996) 86 Comp. Cas. 555 (SC) : (1996) 219 ITR 498 [LNIND 1996 SC 628] (SC) :
(1996) 133 CTR (SC) 505 : (1996) 85 Taxman 513 [LNIND 1996 SC 628] (SC).
68. Transport Corporation of India v. E.S.I. Corpn.,AIR 2000 SC 238 [LNIND 1999 SC 1503]; Madan Singh Shekhawat v.
Union of India,(1998) 6 SCC 459.
69. CCE v. Parle Exports (P.) Ltd.,AIR 1989 SC 488 [LNIND 1988 SC 565]: (1990) 183 ITR 624 (SC).
70. Girdharilal & Sons v. Balbir Nath Mathur,AIR 1986 SC 1499 [LNIND 1986 SC 45]: Municipal Corpn. of Greater Bombay
v. Hindustan Petroleum Corpn.,(2001) 8 SCC 143 [LNIND 2001 SC 1796].
71. Govind Saran Ganga Saran v. CST,AIR 1985 SC 1041 [LNIND 1985 SC 152]: (1985) 155 ITR 144 [LNIND 1985 SC
152] (SC).
Page 61 of 63
72. A. Thangal Kunju Musaliar v. Venkatachalam Potti, ITO,AIR 1956 SC 246 [LNIND 1955 SC 116]: (1956) 29 ITR 349
[LNIND 1955 SC 116] (SC) : (1955) 2 SCR 1196 [LNIND 1955 SC 116]; M.K. Ranganathan v. Govt. of Madras, (1955)
73. Shashikant Laxman Kale v. UOI,(1990) 185 ITR 104 [LNIND 1990 SC 362] (SC) : (1990) 3 JT 267 (SC); State of West
Bengal v. UOI,AIR 1963 SC 1241 [LNIND 1962 SC 438]: (1964) 1 SCR 371 [LNIND 1962 SC 438]; Central Bank of
India v. Workmen, (1959) 29 Comp. Cas. 367 (SC) : AIR 1960 SC 12 [LNIND 1959 SC 113].; Rib Tapes (India) Pvt.
Ltd. v. UOI,AIR 1986 SC 2014 [LNIND 1986 SC 296]: 1986 (26) ELT 193 [LNIND 1986 SC 296] (SC); YKM Holdings
Pvt. Ltd. In Re (2001) 105 Comp. Cas. 249 (Delhi) (DB). See also Legislative Intent in earlier aragraphs.
(1996) 86 Comp. Cas. 555 (SC) : (1996) 219 ITR 498 [LNIND 1996 SC 628] (SC). See also Legislative Intent and
Statement of Objects and Reasons in preceding paragraphs.
(1996) 86 Comp. Cas. 555 (SC) : (1996) 219 ITR 498 [LNIND 1996 SC 628] (SC); Mithilesh Kumari v. Prem Behari
Khare,AIR 1989 SC 1247 [LNIND 1989 SC 96]: (1989) 177 ITR 97 [LNIND 1989 SC 96] (SC); CIT v. Vadilal
Lallubhai,AIR 1973 SC 1016 [LNIND 1972 SC 400]: (1972) 86 ITR 2 (SC); CIT v. Sodra Devi,AIR 1957 SC 832
[LNIND 1957 SC 59]: (1957) 32 ITR 615 [LNIND 1957 SC 59] (SC) : (1958) SCR 1 [LNIND 1957 SC 59]. See also
77. K.P. Varghese v. ITO,AIR 1981 SC 1922 [LNIND 1981 SC 373]: (1981) 131 ITR 597 [LNIND 1981 SC 373] (SC) :
(1982) 1 SCR 629 [LNIND 1981 SC 373]; Anandji Haridas & Co. Pvt. Ltd. v. Engg. Mazdoor Sangh,AIR 1975 SC 946
[LNIND 1975 SC 65]: (1975) 99 ITR 592 (SC) : (1975) 3 SCR 542 [LNIND 1975 SC 65]; Sole Trustee, Loka Shikshana
Trust v. CIT,AIR 1976 SC 10 [LNIND 1975 SC 305]: (1975) 101 ITR 234 [LNIND 1975 SC 305] (SC). See also
79. Yadlapati Venkateswarlu v. State of A.P.,AIR 1991 SC 704 [LNIND 1990 SC 517]: (1991) 190 ITR 375 [LNIND 1990
SC 517] (SC).
80. V.M. Salgaocar and Bros. Pvt. Ltd. v. CIT,(2000) 243 ITR 383 (SC).
81. CIT v. Doraiswamy Chetty,(1990) 183 ITR 559 (SC) : (1990) 86 CTR (SC) 192; Manickam & Co. v. State of T.N.,AIR
1977 SC 518 [LNIND 1976 SC 392]: (1977) 39 STC 12 (SC).
82. ITO v. Mani Ram,AIR 1969 SC 543 [LNIND 1968 SC 222]: (1969) 72 ITR 203 [LNIND 1968 SC 222] (SC) (1969) 1
SCR 724 [LNIND 1968 SC 222].
83. CIT v. Podar Cement Pvt. Ltd.,(1997) 226 ITR 625 (SC).
84. Jagatram Ahuja v. CGT,(2000) 246 ITR 609 [LNIND 2000 SC 1356] (SC); Board of Muslim Wakfs, Rajasthan v. Radha
Kishan,AIR 1979 SC 289 [LNIND 1978 SC 302]: (1979) 2 SCR 148 [LNIND 1978 SC 302]; Mrs. Sheila Kaushish v.
CIT,AIR 1981 SC 1729 [LNIND 1981 SC 348]: (1981) 131 ITR 435 (SC); Amolak Ram Khosla v. CIT,(1981) 131 ITR
589 (SC); Poothundu Plantations Pvt. Ltd. v. Agril. ITO,(1996) 221 ITR 557 (SC).
85. Rabindra Chamaria v. Registrar of Companies, (1992) 73 Comp. Cas. 257 (SC).
87. CIT v. Taj Mahal Hotel,AIR 1972 SC 168 [LNIND 1971 SC 375]: (1971) 82 ITR 44 [LNIND 1971 SC 375] (SC).
88. CST v. Auraiya Chamber of Commerce,AIR 1986 SC 1556 [LNIND 1986 SC 119]: (1987) 167 ITR 458 (SC).
89. Chandra Kishore Jha v. Mahavir Prasad,(1999) 8 SCC 266 [LNIND 1999 SC 845]; M.I. Builders P. Ltd. v. Radhey
Shyam Sahu,AIR 1999 SC 2467.
1. CIT v. Sirpur Paper Mills,(1999) 237 ITR 41 [LNIND 1999 SC 269] (SC). See detailed Comments u/s. 637.
2. Grasim Industries Ltd. v. State of M.P.,AIR 2000 SC 66 [LNIND 1999 SC 1414].
3. Swedish Match AB v. SEBI, (2004) 122 Comp. Cas. 83 (SC). See detailed Comments on the SEBI (Substantial
Acquisition of Shares and Takeovers) Regulations, 1997 under relevant Section 55A of the Companies Act, 1956—
Powers of SEBI in this book.
4. Clariant International Ltd. v. SEBI, (2004) 122 Comp. Cas. 112 (SC). See also Comments under Section 55A of the
Companies Act, 1956—Powers of SEBI in this book.
6. R. Rajagopal Reddy v. Padmini Chandrasekharan,(1995) 213 ITR 340 (SC) : (1995) 124 CTR (SC) 311 : (1995) 79
Taxman 92 (SC). See also Comments u/s. 10—Jurisdiction of Courts.
Page 62 of 63
548 [LNIND 1989 SC 328] (SC). See detailed Comments under Section 10—Jurisdiction of Courts.
8. CWT v. Sharvan Kumar Swarup & Sons,(1994) 210 ITR 886 [LNIND 1994 SC 1444] (SC) : (1994) 122 CTR (SC) 380 :
(1994) 76 Taxman 620 (SC). See also Comments under Section 10—Jurisdiction of Courts.
10. National Stock Exchange Member v. Union of India, (2006) 133 Comp. Cas. 504 (Delhi) (DB).
SC 2838] (SC); Commissioner of Customs v. Indian Oil Corporation Ltd.,(2004) 267 ITR 272 (SC). See detailed
Comments on Binding force of Supreme Court and High Court decisions under Section 10 and Binding force of
Department’s views or Circulars under Section 637.
12. CIT v. Hero Cycles Pvt. Ltd.,(1997) 228 ITR 463 [LNIND 1997 SC 1895] (SC); M.D. Mundhra v. Asst. ROC, (1980) 50
Comp. Cas. 346 (Cal.) (DB); Sudhir Kumar Seal v. Asst. ROC, (1979) 49 Comp. Cas. 462 (Cal.) (DB); Harrisons and
Crosfield (India) Ltd. v. ROC, (1980) 50 Comp. Cas. 426 (Ker.); ITO v. Manoharlal Kothari, (1999) 96 Comp. Cas. 275
(Mad.).
13. Raymond Synthetics Ltd. v. UOI, (1992) 73 Comp. Cas. 762 (SC); Desh Bandhu Gupta & Co. v. Delhi Stock Exchange
Association Ltd., (1980) 50 Comp. Cas. 84 (SC) : AIR 1979 SC 1049 [LNIND 1979 SC 151]: (1979) 3 SCR 373 [LNIND
1979 SC 151]; K.P. Varghese v. ITO,AIR 1981 SC 1922 [LNIND 1981 SC 373]: (1981) 131 ITR 597 [LNIND 1981 SC
373] (SC); Shrabony Dey v. Howrah Motor Co. Ltd., (2004) 122 Comp. Cas. 597 (Cal.) (DB). See detailed Comments
on Binding force of Department’s views or Circulars and the Doctrine of contemporanea expositio under Section 637
and Powers of SEBI under Section 55A.
14. Indian Banks’ Association v. Devkala Consultancy Service, (2004) 120 Comp. Cas. 612 (SC) (2004) 267 ITR 179 (SC).
15. Union of India v. V.M. Salgaonkar,AIR 1998 SC 1367 [LNIND 1998 SC 1218].
16. CIT v. Anjum M.H. Ghaswala,(2001) 252 ITR 1 [LNIND 2001 SC 2389] (SC). See detailed Comments on Binding force
of Department’s views or Circulars under Section 637.
17. M.N. Dastur and Co. Ltd. v. Union of India, (2005) 128 Comp. Cas. 618 (Cal.) (DB).
18. Smt. Hemlata Kantilal Shah v. State of Mah., (1983) 54 Comp. Cas. 559 (SC) : AIR 1982 SC 8 [LNIND 1981 SC 422].
19. UOI v. Godfrey Philips India Ltd., (1986) 59 Comp. Cas. 526 (SC) AIR 1986 SC 806 [LNIND 1985 SC 311](1986) 158
ITR 574 (SC); State of Punjab v. Nestle India Ltd.,(2004) 269 ITR 97 (SC). See detailed Comments under Section 10—
548 [LNIND 1989 SC 328] (SC); Sundarjas Kanyalal Bhatija v. Collector, (1990) 68 Comp. Cas. 20 (SC) : AIR 1991 SC
261 : (1990) 183 ITR 130 (SC); M.A. Murthy v. State of Karnataka(2003) 264 ITR 1 (SC). See detailed Comments on
Doctrine of precedent or stare decisis, Binding force of Supreme Court and jurisdictional High Court decisions under
172 [LNIND 1984 SC 367] (SC); Cassell & Co. Ltd. v. Broome,(1972) AC 1027 (HL) : (1972) 1 All ER 801 (HL) (1972) 2
WLR 645 (HL). Per incuriam rule and Binding force of Supreme Court decisions have been fully dealt with at the end of
22. CIT v. Sun Engineering Works P. Ltd.,(1992) 198 ITR 297 (SC). See detailed Comments on Binding force of Supreme
Court decisions under Section 10—Jurisdiction of Courts.
23. East India Commercial Co. Ltd. v. Collector of Customs,AIR 1962 SC 1893 [LNIND 1962 SC 228]: (1963) 3 SCR 338
[LNIND 1962 SC 228]; State of A.P. v. CTO, (1988) 63 Comp. Cas. 273 (AP) : (1988) 169 ITR 564 [LNIND 1987 AP
190] (AP). See detailed Comments under Section 10—Jurisdiction of Courts.
Daryao v. State of U.P.,AIR 1961 SC 1457 [LNIND 1961 SC 133]: (1962) 1 SCR 574 [LNIND 1961 SC 133];, CIT v.
Shree Manjunathesware Packing Products and Camphor Works,(1998) 231 ITR 53 (SC). See detailed Comments on
Special Leave Petition under Binding force of Supreme Court decisions at the end of Comments under Section 10—
25. Indian Oil Corpn. Ltd. v. State of Bihar, (1987) 62 Comp. Cas. 541 (SC) : AIR 1986 SC 1780 [LNIND 1986 SC 262]:
(1987) 167 ITR 897 (SC); Kunhayammed v. State of Kerala,(2000) 245 ITR 360 [LNIND 2000 SC 933] (SC). See
detailed Comments on Special Leave Petition and Doctrine of Merger under Binding force of Supreme Court decisions
at the end of Comments under Section 10—Jurisdiction of Courts.
26. L. Chandra Kumar v. UOI,(1997) 228 ITR 725 (SC). See detailed discussion in Comments under Section 10—
Page 63 of 63
27. Workmen v. Board of Trustees of Cochin Port Trust,AIR 1978 SC 1283 [LNIND 1978 SC 158]: (1978) 53 FJR 80 (SC);
Daryao v. State of U.P.,AIR 1961 SC 1457 [LNIND 1961 SC 133]: (1962) 1 SCR 574 [LNIND 1961 SC 133]; S.
Balwant Singh v. Krishna Bus Service Pvt. Ltd., (1967) 37 Comp. Cas. 471 (C.T.). for fuller discussion see Comments
1975 SC 403];, Kilpest P. Ltd. v. Shekhar Mehra, (1996) 87 Comp. Cas. 615 (SC); Madanlal Fakirchand Dudhediya v.
Sri Changdeo Sugar Mills Ltd., (1962) 32 Comp. Cas. 604 (SC) : AIR 1962 SC 1543 [LNIND 1962 SC 125]. See
detailed Comments under Section 10—Jurisdiction of Courts.
336]. See detailed Comments under Sections 10, 208 and 211.
End of Document
Datta: Company Law
C R Datta
S. 2. Definitions.
—In this Act, unless the context otherwise requires,—
30[ (1) ]
“abridged prospectus” means a memorandum containing such salient features of a prospectus as

may be prescribed
;
31[(1A)] “alter” and “alteration” shall include the making of additions and omissions;
32[ (1B) ]
“Appellate Tribunal” means the National Company Law Appellate Tribunal constituted under
sub-section (1) of section 10FR
;
(2)
“articles” means the articles of association of a company as originally framed or as altered from time
to time in pursuance of any previous companies law or of this Act
, including, so far as they apply to the company, the regulations contained, as the case may be, in
Table B in the Schedule annexed to Act No. 19 of 1857 or in Table A in the First Schedule annexed to
the Indian Companies Act, 1882 (6 of 1882), or in Table A in the First Schedule annexed to the Indian
Companies Act, 1913 (7 of 1913), or in Table A in Schedule I annexed to this Act;
33[(3) * * * ]
33[(4) * * * ]
(5) “banking company” has the same meaning as in the Banking Companies Act, 1949 (10 of 1949)34;
(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 35[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
Page 2 of 69
;]
(8) “book and paper” and “book or paper” include accounts, deeds,36[vouchers,] writings and documents;
37[(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,
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;
38[(10-A)
“Company Law Board” means the Board of Company Law Administration constituted under
section 10-E
;]
39[(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
;
40[ (12A) “Depository” has the same meaning as in the Depositories Act, 1996 (22 of 1996);]
41[ (12B) “derivative” has the same meaning as in clause (aa) of section 2 of the Securities Contracts
(Regulation) Act, 1956 (42 of 1956);]
(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
;
42[ (14A) ]
Page 3 of 69
“dividend” includes any interim dividend

;
(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
;
43[ (15A) ]
“employees stock option” means the option given to the whole-time directors, officers or
employees of a company, which gives such directors, officers or employees the benefit or right to
purchase or subscribe at a future date, the securities offered by the company at a pre-determined
price
;
(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;
44[(18A) ***]
(19) “holding company” means a holding company within the meaning of section 4;
45[ (19A) ]
“hybrid” means any security which has the character of more than one type of security, including
their derivative
;
46[ (19AA) ]
“industrial company” means a company which owns one or more industrial undertakings
;
47[ (19AB) ]
“industrial undertaking” means any undertaking, pertaining to any industry carried on in one
or more factories or units by any company, as defined in clause (aa) of section 3 of the
Industries (Development and Regulation) Act, 1951 (65 of 1951) but does not include a small-
scale industrial undertaking as defined in clause (j) of that section
;
48[ (19B) ]
Page 4 of 69
“information memorandum” means a process undertaken prior to the filing of a prospectus by

which a demand for the securities proposed to be issued by a company is elicited, and the price
and the terms of issue for such securities is assessed, by means of a notice, circular,
advertisement or document
;
49[(20) * * * ]
(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

;
50[ (23A) ]
“listed public companies” means a public company which has any of its securities listed in any
recognised stock exchange
;
(24)
“manager” means an individual 51[***] 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
;
52[ (25)* * * ]
(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 53[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
:
54[
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;]
Page 5 of 69
(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
;
55[ (29A)
“net worth” means the sum total of the paid-up capital and free reserves after deducting the
provisions or expenses as may be prescribed.
Explanation.—For the purposes of this clause, ]
“free reserves” means all reserves created out of the profits and share premium account but does not
include reserves created out of revaluation of assets, write back of depreciation provisions and
amalgamation
;
56[ (30)]
“officer” includes any director, manager or secretary 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
;
(31) “officer who is in default”, in relation to any provision referred to in section 5, has the meaning specified
in that section;
57[ (31A) “option in securities” has the same meaning as in clause (d) of section 2 of the Securities
Contracts (Regulation) Act, 1956 (42 of 1956);]
58[ (31AA) ]
“operating agency” means any group of experts consisting of persons having special
knowledge of business or industry in which the sick industrial company is engaged and
includes public financial institution, State level institution, scheduled bank or any other person
as may be specified as the operating agency by the Tribunal
;
(32)
“paid-up capital” or “capital paid up” includes capital credited as paid up

;
(33)
Page 6 of 69
“prescribed” means, as respects the provisions of this Act relating to the winding up of companies
except sub-section (5) of section 503, 59[sub-section (3) of section 550, section 552 and sub-section (3)
of section 555], prescribed by rules made by the Supreme Court in consultation with60 [ the Tribunal],
and as respects the other provisions of this Act including sub-section (5) of section 503, 59[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 61[any document described or issued as a prospectus and includes any] notice,
circular, advertisement or other document 62[inviting deposits from the public or] 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)
Page 7 of 69
“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);
63[ (44)* * * ]
64[(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
;]
65[(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 full time employment
;]
66[ (45AA) “securities” means securities as defined in clause (h) of section 2 of the Securities
Contracts (Regulation) Act, 1956 (42 of 1956), and includes hybrids;]
67[ (45B) “Securities and Exchange Board of India” means the Securities and Exchange Board of
India established under section 3 of the Securities 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
;
68[ (46A) ]
“share with differential rights” means a share that is issued with differential rights in accordance
with the provisions of section 86
;
69[ (46AA) ]
“sick industrial company” means an industrial company which has—

(i) the accumulated losses in any financial year equal to fifty per cent. or more of its average
net worth during four years immediately preceding such financial year; or
(ii) failed to repay its debts within any three consecutive quarters on demand made in writing
for its repayment by a creditor or creditors of such company
;
70[ (46AB)
“State level institution” means any of the following institutions, namely:—

Page 8 of 69
(a) the State Financial Corporations established under section 3 or section 3A and institutions
notified under section 46 of the State Financial Corporations Act, 1951 (63 of 1951);
(b) the State Industrial Development Corporations registered under this Act;]
(47)
“subsidiary company” or “subsidiary” means a subsidiary company within the meaning of section 4
;
(48)
“total voting power” , in regard to any matter relating to a body corporate, means the total number of
votes which may be 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
;
71[ (49A) ]
“Tribunal” means the National Company Law Tribunal constituted under sub-section (1) of
section 10FB;
(50) “variation” shall include abrogation; and “vary” shall include abrogate.
30. Inserted by the Companies (Amendment) Act, 2000 (53 of 2000), s. 2 (w.e.f. 13-12-2000).
31. Clause (1) re-numbered as (1A) by Act 53 of 2000, s. 2 (w.e.f. 13-12-2000).
32. Inserted by the Companies (Second Amendment) Act, 2002 (11 of 2003), s. 2 [w.e.f. 1-4-2003 vide Notification
No. S. O. 344(E), dated 31-3-2003, published in the Gazette of India, Extraordinary, No. 290, Part II, Section 3(ii) :
114 Comp. Cas. (St.) 237].
33. Clauses (3) and (4) omitted by the Companies (Amendment) Act, 2000 (53 of 2000)s. 2 (w.e.f. 13-12-2000). The
system of managing agents, secretaries and treasurers had already been abolished videsection 324A of the
Companies Act, 1956 (1 of 1956), as inserted by the s. 4 Companies (Amendment) Act, 1969 (17 of 1969) (w.e.f. 3-4-
1970). For clause (3) “associate”, in relation to managing agents and clause (4) “associate”, in relation to secretaries
and treasurers, as they stood prior to their omission, see Annexure at the end of this Volume.
34. Now the Banking Regulation Act, 1949 (10 of 1949).
35. Substituted by the Companies (Amendment) Act, 1960 (65 of 1960), s. 2 for “does not include a corporation sole”.
37. Substituted by the Companies (Amendment) Act, 1960 (65 of 1960), s. 2. For clause (9) as it stood prior to its
substitution see Annexure at the end of this Volume.
Page 9 of 69
44. Omitted by the MRTP (Amendment) Act, 1984 (30 of 1984), s. 52 (w.e.f. 1-8-1984). For clause (18A) “group” which was
inserted by the Companies (Amendment) Act, 1974 (41 of 1974), s. 2 (w.e.f. 1-2-1975) as it stood prior to its omission
see Annexure at the end of this Volume.
46. Inserted by the Companies (Second Amendment) Act, 2002 (11 of 2003)s. 2[w.e.f. 1-4-2003 vide Notification No.
S.O. 344(E), dated 31-3-200, published in the Gazette of India, Extraordinary, No. 290, Part II, Section 3 (ii) :
(2003) 114 Comp. Cas. (St.) 237].
No. S.O. 344(E), dated 31-3-2003, published in the Gazette of India, Extraordinary, No. 290, Part II, Section 3 (ii) :
(2003) 114 Comp. Cas. (St.) 237].
49. Omitted by the Jammu and Kashmir (Extension of Laws) Act, 1956 (62 of 1956), s. 2. and Sch. (w.e.f. 1-11-1956). For
clause (20) prior to omission see Annexure at the end of this Volume.
51. The words “(not being the managing agent)” omitted as redundant (w.e.f. 3-4-1970).
52. Omitted by the Companies (Amendment) Act, 2000 (53 of 2000), s. 2 (w.e.f. 13-12-2000). The system of managing
agents had already been abolished vide section 324A, as inserted by the Companies (Amendment) Act, 1969 (17 of
1969), s. 4 (w.e.f. 3-4-1970). For Clause (25) “managing agent” as it stood prior to its omission see Annexure at the end
of this Volume.
53. Substituted by Act 65 of 1960, s. 2 for “any powers of management”.
54. Inserted by the Companies (Amendment) Act, 1960 (65 of 1960), s. 2.
(2003) 114 Comp. Cas. (St.) 237].
56. Substituted by the Companies (Amendment) Act, 2000 (53 of 2000), s. 2(w.e.f. 13-12-2000). For clause (30) as it
stood prior to its substitution see Annexure at the end of this Volume.
No. S.O. 344(E), dated 31-3-2003, published in the Gazette of India, Extraordinary, No. 290, Part II, Section 3(ii) :
(2003) 114 Comp. Cas. (St.) 237].
59. Substituted by the Companies (Amendment) Act, 1960 (65 of 1960), s. 2, for “sub-section (1) of section 549 and sub-
section (3) of section 550 ”.
60. Substituted by the Companies (Second Amendment) Act, 2002 (11 of 2003), s. 2, for the words “High Courts”
[w.e.f. 1-4-2003 vide Notification No. S.O. 344(E), dated 31-3-2003, published in the Gazette of India,
Extraordinary, No. 290, Part II, Section 3(ii) : (2003) 114 Comp. Cas. (St.) 237].
61. Substituted by the Companies (Amendment) Act, 1960 (65 of 1960), s. 2, for “any prospectus”.
agents, secretaries and treasurers had already been abolished videsection 324A of the Companies Act, 1956 (1 of
1956), as inserted by the Companies (Amendment) Act, 1969 (17 of 1969), s. 4 (w.e.f. 3-4-1970). For clause (44)
“secretaries and treasurers” as it stood prior to its omission see Annexure at the end of this Volume.
64. Substituted by the Companies (Amendment) Act, 1988 (31 of 1988), s. 2 (w.e.f. 1-12-1988). For clause (45) as it stood
prior to its substitution see Annexure at the end of this Volume.
67. Inserted by the Depositories Act, 1996 (22 of 1996), s. 30 and Sch. (w.r.e.f. 20-9-1995).
(2003) 114 Comp. Cas. (St.) 237].
Page 10 of 69
(2003) 114 Comp. Cas. (St.) 237].
(2003) 114 Comp. Cas. (St.) 237]. For earlier clause (49A) which was inserted by the Companies (Amendment) Act,
1963 (53 of 1963), s. 2 (w.e.f. 1-1-1964) and omitted by the Companies Tribunal (Abolition) Act, 1967 (17 of 1967), s. 4
and Sch. (w.e.f. 1-7-1967) see Annexure at the end of this Volume.
[LNIND 1979 SC 75]; Indira Nehru Gandhi v. Raj Narain,AIR 1975 SC 2299 : (1976) 2 SCR 347.
73. Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd., (1987) 61 Comp. Cas. 663 (SC) : AIR
1987 SC 1023 [LNIND 1987 SC 86]. See also Contextual Meaning under Interpretation and Construction in Comments
under Section 1.
[LNIND 1979 SC 75]; Dilworth v. Commissioner of Stamps,(1899) AC 99 (PC); CIT v. Taj Mahal Hotel,(1971) 82 ITR 44
[LNIND 1971 SC 375] (SC) : AIR 1972 SC 168 [LNIND 1971 SC 375].
76. State of Bombay v. Hospital Mazdoor Sabha,AIR 1960 SC 610 [LNIND 1960 SC 19]; Vanguard Fire and General
Insurance Co. Ltd. v. Fraser & Ross, (1960) 30 Comp. Cas. (Ins.) 13 (SC) : AIR 1960 SC 971 [LNIND 1960 SC 151].
77. S.S. Rajakumar v. Perfect Castings Pvt. Ltd., (1968) 38 Comp. Cas. 187 (Mad.) : (1968) 1 Comp. LJ 41 (Mad.). See
detailed Comments under Section 28.
78. Holmes v. Keyes, (1959) Ch. 199 : (1958) 2 All ER 129 (CA) : (1958) 2 WLR 772 : (1958) 102 SJ 329 (CA); Hartley
Baird Ltd., Re, (1955) Ch. 143 : (1954) 3 All ER 695 : (1954) 3 WLR 964; Rayfield v. Hands, (1960) Ch. 1 : (1958) 2 All
ER 194 : (1958) 2 WLR 851. See detailed Comments under Sections 26-31, 36 and Schedule I.
79. North East Finance Corporation Ltd. v. Union of India, (2000) 101 Comp. Cas. 373 (Sikkim) : AIR 2000 Sikkim 1.
80. Moschip Semiconductor Technology Ltd., In re, (2004) 120 Comp. Cas. 108 (AP). See also Comments under Section
394(4).
81. Board of Trustees v. State of Delhi,AIR 1962 SC 458 [LNIND 1961 SC 337]: (1962) Supp. 1 SCR 156; Star Tile Works
Ltd. v. N. Govindan & Co.,AIR 1959 Ker. 254.
82. Salim Akbarali Nanji v. Union of India, (2003) 113 Comp. Cas. 141 (Bom.)(DB). See also Comments under Sections 35,
565, 566 and 581A to 581ZT.
83. Vibank Housing Finance Ltd., In re, (2006) 130 Comp. Cas. 705 (Karn.).
84. Union of India v. G.A. Randarian Ltd., (1992) 75 Comp. Cas. 486 (Cal.).
85. SAR Schotte Gmbh v. Perfums Rothschild SARL,1992 BCLC 235 (CJEC).
86. Mangilal v. Krishnaji Rao Pawar,AIR 1971 SC 1943 [LNIND 1971 SC 300]; Heavy Engineering Mazdoor Union v. State
of Bihar, (1969) 39 Comp. Cas. 905 (SC) : AIR 1970 SC 82 [LNIND 1969 SC 121]: (1969) 2 Comp. LJ 273 (SC);
Motipur Zamindari Co. Ltd. v. State of Bihar,AIR 1953 SC 320 [LNIND 1953 SC 52]. For an elaborate discussion see
Comments under Sections 3, 34 and 617.
87. Rustom Cavasjee Cooper v. UOI, (1970) 40 Comp. Cas. 325 (SC) : AIR 1970 SC 564 : (1970) 3 SCR 530 : (1970) 1
Comp. LJ 244 (SC); Indo-China Steam Navigation Co. Ltd. v. Jasjit Singh, (1964) 34 Comp. Cas. 435 (SC) : AIR 1964
SC 1140 [LNIND 1964 SC 25]. See detailed Comments u/s. 34.
88. CIT v. Sri Meenakshi Mills Ltd.,AIR 1967 SC 819 [LNIND 1966 SC 266]: (1967) 63 ITR 609 [LNIND 1966 SC 266] (SC)
: (1967) 1 SCR 934 [LNIND 1966 SC 266]; L.I.C. v. Escorts Ltd., (1986) 59 Comp. Cas. 548 (SC) : AIR 1986 SC 1370
[LNIND 1985 SC 362]. See detailed Comments on Lifting the corporate veil under Section 34.
89. Ram Prasad v. State of Punjab,AIR 1966 SC 1607 [LNIND 1966 SC 43]. For matters requiring sanction of
shareholders by Ordinary Resolution and Special Resolution see Comments under Section 189.
90. Shanti Ranjan Bhattacharya v. State, (1971) 41 Comp. Cas. 234 (Cal.) : AIR 1970 Cal. 557 [LNIND 1970 CAL 160].
Now Co-operative societies may become Producer Companies. See Part IXA, Chapters I to XII, Sections 581A to
581ZT inserted by the Companies (Amendment) Act, 2002 (1 of 2003). See also Body corporate or corporation [Section
2(7)].
91. Morgan Stanley Mutual Fund v. Kartick Das, (1994) 81 Comp. Cas. 318 (SC); R.D. Goyal v. Reliance Industries Ltd.,
(2003) 113 Comp. Cas. 1 (SC). See also Comments under Sections 2(46), 55A, 69 and 81.
92. Coastal Roadways Ltd. v. Kanoi Plantation (P.) Ltd., (2006) 132 Comp. Cas. 503 (Cal.) (Kalyan Jyoti Sengupta, J.).
Page 11 of 69
93. K. Sreenivasa Rao v. H. Gangadhar, (2007) 138 Comp. Cas. 555 (AP) (DB).
1. Chief Controlling Revenue Authority v. Manager, State Bank of Mysore, (1989) 65 Comp. Cas. 427 (Kar.) (FB). See
detailed Comments under Sections 117, 118 and 119.
2. Knightsbridge Estates Trust Ltd. v. Byrne,(1940) AC 613 : (1940) 2 All ER 401 : 109 LJ Ch. 200 : 162 LT 388 (HL). See
detailed Comments under Sections 117 and 120.
3. Levy v. Abercorris Slate and Slab Co., (1887) 37 Ch.D. 260 : (1886-90) All ER Rep. 509 : 57 LJ Ch. 202 : 58 LT 218.
See also Comments under Sections 117 and 142.
4. Rayner, Re, (1904) 1 Ch. 176 : 73 LJ Ch. 111 : 89 LT 381.
5. Lemon v. Austin Friars Investment Trust Ltd., (1926) Ch. 1 : (1925) All ER Rep. 255 (CA) : 95 LJ Ch. 97 : 133 LT 790 :
41 TLR 629 : 69 SJ 762 (CA).
6. Essar Steel Ltd. v. Gramercy Emerging Market Fund, (2003) 116 Comp. Cas. 248 (Guj.) (DB). See also Comments
under Sections 2(45AA), 439 and 483.
7. Compagnie Generale de Bellegarde, Re, Campbell’s Case, (1876) 4 Ch.D. 470: 35 LT 900; See also Webb v.
Shropshire Railways Co., (1893) 3 Ch. 307 : 63 LJ Ch. 80 : 69 LT 533 (CA); Anglo-Danubian Steam Navigation and
Colliery Co., Re,(1875) LR 20 Eq. 339 : 44 LJ Ch. 502 : 33 LT 118 : 23 WR 783.
8. Moseley v. Koffyfontein Mines Ltd., (1904) 2 Ch. 108 : 73 LJ Ch. 569 : 91 LT 266 (CA). See also Comments under
Sections 79, 81, 117 and 129.
9. Unit Trust of India v. Om Prakash Berlia, (1983) 54 Comp. Cas. 723 (Bom.) (DB).
10. Murray v. Herring, (1908) 2 Ch. 493 : (1908) WN 153. See Sections 117 to 123.
11. Siel Ltd., In re, (2004) 122 Comp. Cas. 536 (Delhi); Florence Land and Public Works Co., Re, (1878) 10 Ch.D. 530 : 48
LJ Ch. 137 : 39 LT 589 : 27 WR 236 (CA); Illingworth v. Houldsworth,(1904) AC 355 : 73 LJ Ch. 739 : 91 LT 602 : 53
WR 113 (HL). See detailed Comments under Sections 117 and 124. See also Comments under Sections 2(45AA), 391
and Schedule VI.
12. Spiral Globe Ltd., Re, (1902) 1 Ch. 396 : 71 LJ Ch. 128 : 85 LT 778 : 50 WR 187.
13. R.D. Goyal v. Reliance Industries Ltd., (2003) 113 Comp. Cas. 1 (SC); Morgan Stanley Mutual Fund v. Kartick Das,
(1994) 81 Comp. Cas. 318 (SC). See also Comments under Sections 2(46), 55A, 69, 81 and 117.
* See the Depositories Act, 1996 (22 of 1996) in Appendix 231.
† See the Securities Contracts (Regulation) Act, 1956 (42 of 1956) in Appendix 221.
14. Canadian Land Reclaiming and Colonising Co., Re, Coventry and Dixon’s Case, (1880) 14 Ch.D. 660 : 42 LT 559 : 28
WR 775 (CA). See also Comments under Section 543.
15. Faure Electric Accumulator Co., Re, (1888) 40 Ch.D. 141 : 58 LJ Ch. 48 : 59 LT 918. See also Ferguson v.
Wilson,(1866) LR 2 Ch. 77 : 36 LJ Ch. 67 : 15 LT 230 and Gramophone and Typewriter Ltd. v. Stanley,(1908) 2 KB 89 :
(1908-10) All ER Rep. 833 : 77 LJ KB 834 : 99 LT 39 : 24 TLR 480 (CA). See also Comments under Sections 34 and
543.
16. Wincham Shipbuilding, Boiler and Salt Co. IN RE. Poole, Jackson and Whyte’s Case, (1878) 9 Ch.D. 322 : 48 LJ Ch.
48 : 38 LT 659 : 26 WR 823 (CA).
17. K.R. Kothandaraman v. CIT,AIR 1967 Mad. 143 [LNIND 1965 MAD 244]: (1966) 62 ITR 348 [LNIND 1965 MAD 244]
(Mad.); S. Gururaja Rao v. State of Karnataka, (1979) 49 Comp. Cas. 468 (Kar.). See also Comments under Sections
252, 285, 291 and 309.
18. Ashbury Railway Carriage and Iron Co. Ltd. v. Riche,(1875) LR 7 HL 653 : (1874-80) All ER Rep. Ext. 2219 : 44 LJ Ex.
185 : 33 LT 450 : 24 WR 794 (HL).
19. Narasimha Ayyangar v. Official Assignee of Madras,AIR 1931 Mad. 58 [LNIND 1930 MAD 8]; Kathiawar Trading Co. v.
Virchand Dipchand,(1894) ILR 18 Bom. 119.
20. Parker v. Mckenna, (1874) 10 Ch. App. 96 : 44 LJ Ch. 425 : 31 LT 739 : 23 WR 271.
21. Maharashtra Power Development Corporation Ltd. v. Dabhol Power Co., (2004) 120 Comp. Cas. 560 (Bom.) (DB). See
detailed Comments under Sections 260, 262, Schedule I, Table A, Regulations 72, 75 and Table E.
22. Secretary of State for Trade and Industry v. Deverell,(2000) 2 All ER 365 : (2000) 2 WLR 907 : (2002) 111 Comp. Cas.
303 (CA).
23. Hydrodam (Corby) Ltd., Re,(1994) 2 BCLC 180 (Ch.D.).
Page 12 of 69
24. Dale and Carrington Invt. P. Ltd. v. P.K. Prathapan, (2004) 122 Comp. Cas. 161 (SC); Boulting v. Association of
Cinematograph, Television and Allied Technicians,(1963) 2 QB 606 : (1963) 1 All ER 716 : (1963) 2 WLR 529 : (1963)
33 Comp. Cas. 475 (CA). See also Comments under Sections 2(26), 26, 81, 111, 397 and 398.
25. Guru Gobinda Basu v. Sankari Prasad Ghosal, (1963) 33 Comp. Cas. 1132 (SC) : AIR 1964 SC 254 [LNIND 1963 SC
186]: (1964) 4 SCR 311 [LNIND 1963 SC 186] : (1964) 1 Comp. LJ 87 (SC). See detailed Comments under relevant
Sections 617 to 620.
26. Rivers Steam Navigation Co. Ltd., In re, (1967) 2 Comp. LJ 106 (Cal.) : 71 CWN 854.
27. Sunil Kumar Debnath v. Mining & Allied Machinery Corpn. Ltd., (1968) 38 Comp. Cas. 652 (Cal.) (DB) : 72 CWN 144 :
AIR 1968 Cal. 322 [LNIND 1967 CAL 76](DB); Abani Bhusan Biswas v. Hindusthan Cables Ltd., (1968) 38 Comp. Cas.
528 (Cal.) : 72 CWN 410; Malik Ram v. Hindusthan Cables Ltd., (1968) 38 Comp. Cas. 500 (Cal.) : 72 CWN 398.
28. Praga Tools Corpn. v. C.V. Imanual, (1969) 39 Comp. Cas. 889 (SC) : AIR 1969 SC 1306 [LNIND 1969 SC 80]: (1970)
1 Comp. LJ 50 (SC).
29. Heavy Engineering Mazdoor Union v. State of Bihar, (1969) 39 Comp. Cas. 905 (SC) : AIR 1970 SC 82 [LNIND 1969
SC 121]; State Trading Corpn. of India Ltd. v. CTO, (1963) 33 Comp. Cas. 1057 (SC) : AIR 1963 SC 1811 [LNIND
1963 SC 334]: (1963) 2 Comp. LJ 234 (SC); Steel Authority of India Ltd. v. Shri Ambica Mills Ltd., (1998) 92 Comp.
Cas. 120 (SC); Electronics Corpn. of India Ltd. v. Govt. of A.P., (1999) 97 Comp. Cas. 470 (SC). See detailed
30. Woodhouse v. Walsall Metropolitan Borough Council,(1994) 1 BCLC 435. See detailed Comments under Section 5.
31. CIT v. Alagappa Textiles (Cochin) Ltd., (1979) 49 Comp. Cas. 947 (SC) : AIR 1980 SC 235 [LNIND 1979 SC 378]:
(1979) 120 ITR 480 [LNIND 1979 SC 378] (SC). See also Comments under 384.
32. Ferruccio Sias v. Jai Manga Ram Mukhi, (1998) 93 Comp. Cas. 750 (Delhi). See also Comments under Sections 2(26)
and 10.
33. Sand Plast (India) Ltd. v. I.T.C. Bhadrachalam Finance and Investment Ltd., (2002) 111 Comp. Cas. 471 (Raj.) (DB).
See also Comments under Sections 433, 434, 439 and Rules 6, 18 and 21 of the Companies (Court) Rules, 1959.
* See the Companies (Central Government’s) General Rules and Forms, 1956 in Appendix 1.
† See the Companies (Electronic Filing and Authentication of Documents) Rules, 2006 framed under Sections 610A to
610E (w.e.f. 16-9-2006) in Appendix 2.
‡ See the Scheme for Filing of Statutory Documents and Other Transactions by Companies in Electronic Mode (w.e.f. 27-
10-2006) in Comments under Section 610B as inserted by the Companies (Amendment) Act, 2006 (w.e.f. 16-9-2006).
34. Wasava Tyres v. Printers (Mysore) Ltd., (2007) 139 Comp. Cas. 446 (Karn.).
35. Ram Prashad v. CIT, (1972) 42 Comp. Cas. 544 (SC) : AIR 1973 SC 637 [LNIND 1972 SC 388]: 86 ITR 122 (SC).
36. Sishu Ranjan Dutta v. Bhola Nath Paper House Ltd., (1983) 53 Comp. Cas. 883 (Cal.).
37. Major General Shanta Shamsher Jung Bahadur Rana v. Kamani Bros. P. Ltd., (1959) 29 Comp. Cas. 501 (Bom.) : AIR
1959 Bom. 201 [LNIND 1958 BOM 1].
38. Official Liquidator v. Shri Krishna Prasad Singh, (1969) 1 Comp. LJ 327 (Pat.); Boulting v. Association of
33 Comp. Cas. 475 (CA).
39. Shri Ambica Mills Ltd., In re, (1986) 59 Comp. Cas. 368 (Guj.). See also Comments under Sections 2(13), 2(30) and
101.
40. G. Subba Rao v. Rasmi Die-Castings Ltd., (1998) 93 Comp. Cas. 797 (AP); Freeman and Lockyer v. Buckhurst Park
Properties (Mangal) Ltd.,(1964) 2 QB 480 : (1964) 1 All ER 630 : (1964) 2 WLR 618 : (1964) 34 Comp. Cas. 405 (CA).
41. Employees' State Insurance Corporation v. Apex Engineering P. Ltd., (1998) 1 Comp. LJ 10; Happy Home Builders
(Karnataka) P. Ltd. v. Delite Enterprises,(1994) 13 CLA 405 (Kar.).
42. CIT v. B.P. Dalmia, (1994) 3 Comp. LJ 268 (Cal.) : (1994) 207 ITR 267 (Cal.); CIT v. M.S.P. Rajes, (1993) 77 Comp.
Cas. 402 (Kar.) : (1993) 202 ITR 646 (Kar.).
43. Maruti Ltd. v. Pan India Plastic Pvt. Ltd., (1995) 83 Comp. Cas. 888 (P&H).
44. Pandurang Camotim Sancoalcar v. Suresh Prabhakar Prabhu, (2003) 113 Comp. Cas. 600 (Bom.). See detailed
45. Oriental Metal Pressing Works (P.) Ltd. v. Bhaskar Kashinath Thakoor, (1961) 31 Comp. Cas. 143 (SC) : AIR 1961 SC
573 [LNIND 1960 SC 351]. See also Comments under Sections 255 and 312.
Page 13 of 69
46. AES OPGC Holding (Mauritius) v. Orissa Power Generation Corporation Ltd., (2005) 125 Comp. Cas. 299 (CLB); Shaw
(John) & Sons (Salford) Ltd. v. Shaw,(1935) 2 KB 113 : (1935) All ER Rep. 456 : (1935) 5 Comp. Cas. 369 (CA).
47. Howrah Trading Co. Ltd. v. CIT, (1959) 29 Comp. Cas. 282 (SC) : AIR 1959 SC 775 [LNIND 1959 SC 34]: (1959) 36
ITR 215 [LNIND 1959 SC 34] (SC) : (1959) Supp. 2 SCR 448. See detailed Comments under Sections 41.
48. Shri Balaji Textile Mills Pvt. Ltd. v. Ashok Kavle, (1989) 66 Comp. Cas. 654 (Kar.) (DB). See also Comments under
Sections 41 and 399.
49. World Wide Agencies P. Ltd. v. Mrs. Margaret T. Desor, (1990) 67 Comp. Cas. 607 (SC). See also Comments under
Sections 41, 109, 397 and 398.
50. Turner Morrison & Co. Ltd. v. Hungerford Investment Trust Ltd., (1972) 42 Comp. Cas. 512 (SC) : AIR 1972 SC 1311
[LNIND 1972 SC 144]: (1972) 3 SCR 711 [LNIND 1972 SC 144]. See detailed Comments under Section 13.
[LNIND 1979 SC 75]. See also Comments on Inclusive Definition earlier and Comments under Section 392.
52. Official Liquidator v. P.C. Dhadda, (1980) 50 Comp. Cas. 175 (Raj.). See also Comments under Sections 446, 458A
and 538.
53. Poomuli Manakkal Anujan Nambudiripad v. Official Liquidator, (1979) 49 Comp. Cas. 81 (Ker.); Devinder Kishore
Mehra v. Official Liquidator, (1980) 50 Comp. Cas. 699 (Delhi) (DB); Jute and Gunny Brokers Ltd. v. UOI, (1962) 32
Comp. Cas. 845 (SC) : AIR 1961 SC 1214 [LNIND 1961 SC 64]. See also Comments under Sections 52, 451 and 454.
54. Ravinder Kumar Sangal v. Auto Lamps Ltd., (1984) 55 Comp. Cas. 742 (Delhi).
55. Official Liquidator v. Registrar of Companies, (1978) 48 Comp. Cas. 120 (Guj.); Prahallad Bai Lath v. ROC, (1979) 49
Comp. Cas. 317 (Orissa). See also Comments under Section 633.
56. Suryanarayana v. Vijaya Commercial Bank Ltd.,AIR 1958 AP 756; Hanuman Bank Ltd., In re, (1964) 34 Comp. Cas.
640 (Mad.) (DB).
57. T.S. Satyanath v. J. Thomas & Co., (1985) 57 Comp. Cas. 648 (Cal.). See also Comments under. For position of
professional advisers see Comments under Section 630. For position of professional advisers see Comments under
Section 7.
58. Mutual Reinsurance Co. Ltd. v. Post Marwick Mitchell & Co.,(1997) 1 BCLC 1. See also Comments under Sections 201
and 224.
* See the Securities Contracts (Regulation) Act, 1956 (42 of 1956) in Appendix 221.
59. Nash v. Lynde,(1929) AC 158 : 98 LJ KB 127 : 140 LT 146 : 45 TLR 42 (HL). See detailed Comments under Sections
55, 56 and 67.
* Published in the Gazette of India, Extraordinary, No. 640, Part II, Section 3(i), dated 21-12-1989 : (1990) 67 Comp.
Cas. (St.) 341: Chartered Secretary, January 1990, page 61.
60. Added by Notification No. S.O. 406(E), dated 24-5-1990, published in the Gazette of India, Extraordinary, Part II,
Section 3(ii), dated 24-5-1990 : (1990) 68 Comp. Cas. (St.) 88: Chartered Secretary, July 1990, page 602.
61. Added by Notification No. S.O. 343(E), dated 31-5-1993, published in the Gazette of India, Extraordinary, No. 313, Part
II, Section 3(ii), dated 31-5-1993 : (1993) 77 Comp. Cas. (St.) 787: Chartered Secretary, July 1993, page 724.
62. Added by Notification No. S.O. 174(E), dated 15-2-1994 : Gazette of India, Extraordinary, No. 78, Part II, Section 3(ii),
dated 15-2-1994 : (1994) 80 Comp. Cas. (St.) 97.
63. Added by Notification No. S.O. 638(E), dated 14-7-1995 : Gazette of India, Extraordinary, Part II, Section 3(ii), dated
14-7-1995 : (1995) 84 Comp. Cas. (St.) 49.
64. C. Mackertich Ltd. v. Custodian, (2002) 108 Comp. Cas. 811 (Cal.); Rajendra Rathor v. M.P. Stock Exchange, (2000)
102 Comp. Cas. 300 (MP) (DB)See detailed Comments u/s. 29.
65. Maluk Mohamed v. Capital Stock Exchange Kerala Ltd., (1991) 72 Comp. Cas. 333 (Ker.); Coimbatore Texcity Share
Brokers Assciation v. Union of India, (1993) 77 Comp. Cas. 29 (Mad.) (DB). See also Comments under Sections 12, 33
and 149.
66. C.P. Radhakrishnan v. Cochin Stock Exchange Ltd., (1994) 80 Comp. Cas. 247 (Ker.).
* See the Reserve Bank of India Act, 1934 (2 of 1934) Second Schedule containing up-to-date List of Scheduled Banks
in Appendix 305.
* See the Companies (Appointment and Qualifications of Secretary) Rules, 1988 Appendix 12.
** See the Companies (Compliance Certificate) Rules, 2001 in Appendix 22.
* See the Companies (Appointment and Qualifications of Secretary) Rules, 1988 in Appendix 12.
Page 14 of 69
67. Joint Stock Discount Co. v. Brown,(1869) LR 8 Eq. 381 : 17 WR 1037; Maidstone Buildings Provisions Ltd., Re,(1971)
3 All ER 363 : (1971) 1 WLR 1085 : (1971) 115 SJ 464. See also Comments under Sections 383A and 543.
68. State of Wyoming Syndicate, Re, (1901) 2 Ch. 431 : 70 LJ Ch. 727 : 84 LT 868; Haycraft Gold Reduction and Mining
Co. Ltd., Re, (1900) 2 Ch. 230 : 69 LJ Ch. 497 : 83 LT 166 : 16 TLR 350. See detailed Comments under Section 383A.
69. Hooper v. Kerr, Stuart & Co. Ltd.,(1900) 83 LT 729 : 17 TLR 162 : 45 SJ 139. See also Comments under Section 169.
70. Indo-China Steam Navigation Co., Re, (1917) 2 Ch. 100 : (1916-17) All ER Rep. 793 : 86 LJ Ch. 723 : 117 LT 212.
71. Chida Mines Ltd. v. Anderson,(1905) 22 TLR 27; Bishop v. Balkis Consolidated Co. Ltd.,(1890) 25 QBD 512 : 59 LJ QB
565 : 63 LT 601 : 39 WR 99 : 6 TLR 450 (CA); Zinotty Properties Ltd., Re,(1984) 3 All ER 754 : (1984) 1 WLR 1249 :
(1984) 128 SJ 783 : (1984) BCLC 375.
72. Barnett, Hoares & Co. v. South London Tramways Co.,(1887) 18 QBD 815 : 56 LJ QB 452 : 57 LT 436 : 35 WR 640 : 3
TLR 611 (CA).
73. Panorama Developments (Guildford) Ltd. v. Fidelis Furnishing Fabrics Ltd.,(1971) 2 QB 711 : (1971) 3 All ER 16 :
(1971) 3 WLR 440 : (1971) 115 SJ 483 (CA), per Lord Denning M.R.
74. Lloyd v. Grace Smith & Co.,(1912) AC 716 : (1911-13) All ER Rep. 51 : 81 LJ KB 1140 : 107 LT 531 : 28 TLR 547 : 56
SJ 723 (HL). See also Comments under Section 84.
75. Mair v. Himalaya Tea Co.,(1865) LR 1 Eq. 411 : 13 LT 586 : 14 WR 165. See also Bainbridge v. Smith, (1889) 41 Ch.D.
462 : 60 LT 879 : 37 WR 594 : 5 TLR 375 (CA).
76. Bainbridge v. Smith, (1889) 41 Ch.D. 462 : 60 LT 879 : 37 WR 594 : 5 TLR 375 (CA). See also Comments under
Section 270.
77. Green v. Wright,(1876) 1 CPD 591. See also Comments under Section 383A.
78. African Asscn. & Allen, Re,(1910) 1 KB 396 : 79 LJ KB 259 : 102 LT 129 : 26 TLR 234.
79. Amor v. Fearon, (1839) 9 A.&E. 548 : 8 LJ QB 95 ; Pearce v. Foster,(1886) 17 QBD 536 : 55 LJ QB 306 : 54 LT 664 :
34 WR 602; Boston Deep Sea Fishing and Ice Co. v. Ansell, (1888) 39 Ch.D. 339 : (1886-90) All ER Rep. 65 : 59 LT
345 : WR Dig. 117 (CA); Harmer v. Cornelius, (1858) 5 CB (NS) 236 : 28 LJ CP 85 : 6 WR 749; Addis v. Gramophone
Co.,(1909) AC 488 : 78 LJ KB 1122 : 101 LT 466. See also Comments under Sections 383A and 543.
80. Merryweather v. Moore, (1892) 2 Ch. 518 : 61 LJ Ch. 505 : 66 LT 719 : 40 WR 540; Robb v. Green,(1895) 2 QB 315.
81. Daimler Co. Ltd. v. Continental Tyre and Rubber Co. (Great Britain) Ltd.,(1916) 2 AC 307 : (1916-17) All ER Rep. 191 :
85 LJ KB 1333 : 114 LT 1049 (HL).
[LNIND 1972 SC 144]: (1972) 3 SCR 711 [LNIND 1972 SC 144]. See also Comments under Section 383A.
83. Mohan Lal Mittal v. Universal Wires Ltd., (1983) 53 Comp. Cas. 36 (Cal.); Whitechurch (George) Ltd. v.
Cavanagh,(1902) AC 117 : (1900-03) All ER Rep. Ext. 1488 : 71 LJ KB 400 : 85 LT 349 : 17 TLR 746 : 50 WR 218
(HL). See also Comments under Section 398.
* See the Companies (Compliance Certificate) Rules, 2001 in Appendix 22.
84. T.U. Khatri v. Institute of Company Secretaries of India, (2003) 116 Comp. Cas. 621 (Bom.) (DB); Dr. Haniraj L. Chulani
v. Bar Council of Maharashtra and Goa,AIR 1996 SC 1708 [LNIND 1996 SC 743].
85. Essar Steel Ltd. v. Gramercy Emerging Market Fund, (2003) 116 Comp. Cas. 248 (Guj.) (DB); Siel Ltd., In re, (2004)
122 Comp. Cas. 536 (Delhi). See detailed Comments u/s. 2(12).
86. Dahiben Umedbhai Patel v. Norman James Hamilton, (1985) 57 Comp. Cas. 700 (Bom.) (DB); Rye v. Rye,(1962) AC
496 (HL); Hunter v. Hunter,(1936) AC 222 : 105 LJ Ch. 97 : 154 LT 513 (HL); R. Mathalone v. Bombay Life Assurance
Co. Ltd., (1954) 24 Comp. Cas. 1 (SC) : AIR 1953 SC 385 [LNIND 1953 SC 64]: 1954 SCR 117 [LNIND 1953 SC 64].
* See the Securities and Exchange Board of India Act, 1992 (15 of 1992) in Appendix 236.
87. Borland's Trustee v. Steel Bros. & Co. Ltd., (1901) 1 Ch. 279 : 70 LJ Ch. 51 : 49 WR 120 : 17 TLR 45. See also
88. Mrs. Bacha F. Guzdar v. CIT, (1955) 25 Comp. Cas. 1 (SC) : AIR 1955 SC 74 [LNIND 1954 SC 145]: (1955) 27 ITR 1
[LNIND 1954 SC 145] (SC) : (1955) 1 SCR 876 [LNIND 1954 SC 145]; Charanjit Lal Chowdhury v. UOI, (1951) 21
Comp. Cas. 33 (SC) : AIR 1951 SC 41 [LNIND 1950 SC 55]: 1950 SCR 869 [LNIND 1950 SC 55]; H.C. Shastri v.
Dolphin Canpack (P.) Ltd., (1998) 93 Comp. Cas. 201 (Delhi). See detailed Comments under Sections 34, 41 and 82.
89. CIT v. Standard Vacuum Oil Co.,AIR 1966 SC 1393 : (1966) 59 ITR 685 (SC). See detailed Comments under Sections
75 and 78.
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90. L.I.C. v. Escorts Ltd., (1986) 59 Comp. Cas. 548 (SC) : AIR 1986 SC 1370 [LNIND 1985 SC 362]. See detailed
Comments under Sections 34, 41, 111, 111A, 169, 173 and 617.
91. Shree Gopal Paper Mills Ltd. v. CIT,AIR 1970 SC 1750 [LNIND 1970 SC 222]: (1970) 77 ITR 543 (SC). See also
Comments under Sections 84, 205 and 206A.
92. S.N.D.P. Yogam, Quilon, In re, (1970) 40 Comp. Cas. 60 (Ker.). See also Comments under Sections 12, 13, 69, 70, 86,
397, 398 and 399.
(2003) 113 Comp. Cas. 1 (SC). See also Comments under Sections 2(12), 10, 55A, 69 and 81.
94. Bajaj Tempo Ltd. v. Unit Trust of India, (1992) 73 Comp. Cas. 451 (CLB). The MR TP Act, 1969 (54 of 1969) has since
been repealed. Now see the Competition Act, 2002 (12 of 2003). See also Comments under 111A.
COMMENTS
English Act, 1948 : Section 455 Previous Act, 1913 : Section 2
English Act, 1985 : Section 744
Legislative History.—The Companies Act, 1956 (1 of 1956).—Legislative History of Clauses (1) to (50) of Section
2 of the Companies Act, 1956, as amended up-to-date, viz., Notes on Clauses, relevant recommendations of
Committees, etc., explaining the original Clauses and further Amendments has been annotated in Comments under
respective Clauses hereinafter.
For the corresponding clauses of the Indian Companies Act, 1913 (7 of 1913), the corresponding provisions of the
English Companies Act, 1948 and the English Companies Act, 1985 (as amended by the English Companies Act,
1989) see Comparative Table given at the beginning of this Volume.
The Companies (Amendment) Act, 2000 (53 of 2000).—The Notes on clauses explained the amendments in this
section as follows: “Clause 2, inter alia, seeks to amend section 2 of the Companies Act, 1956. It is proposed to
omit clauses (3), (4), (25), (30) and (44) as they have become redundant after the abolition of the system of
managing agent, secretaries and treasurers by Act 17 of 1969 and to insert a new clause (14A) relating to ‘interim
dividend’.” [Clause 2 of the Companies (Second Amendment) Bill, 1999 (139 of 1999)].
The Companies (Second Amendment) Act, 2002 (11 of 2003).—The Notes on clauses explained the amendments
as follows: “Clause 2 seeks to amend section 2 of the Companies Act, 1956, which relates to definitions. It is
proposed to define various expressions occurring in the Bill. It is proposed to insert new clauses (1B), (19AA),
(19AB), (29A), (31AA), (46AA), (46AB) and (49A) in the said Act to define certain expressions.” [Clause 2 of the
For the Statement of Objects and Reasons appended to the principal and Amending Bills see Legislative History in
See Legislative History and Comments on Section 2(1) to (50) under respective Clauses after General Comments
on the Definition provisions given below.
Unless the context otherwise requires.—Where in the definition section of a statute a word is defined to mean a
certain thing, wherever that word is used in that statute, it shall mean what is stated in the definition unless the
context otherwise requires. Where the definition of an expression in a definition clause is preceded by the words
“unless the context otherwise requires”, normally the definition given in the section should be applied and given
effect to but this normal rule may, however, be departed from if there be something in the context to show that the
definition should not be applied. Thus, ordinarily one has to adhere to the definition and if it is an expansive
definition the same should be adhered to.72
Section 2, like definitions section in most of the Acts begins with the words “in this Act, unless the context otherwise
requires”. Section 2 of the Companies Act thus specifically mentions that the meaning given in section 2 may not be
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the same throughout the Act if the context so requires. For instance “Manager” in section 2(24) has different
meaning from the word “Manager” in section 424.
Inclusive definition.—The Legislatures resort to inclusive definitions: (1) to enlarge the meaning of words or
phrases so as to take in the ordinary, popular and natural sense of the words and also the sense which the statute
wishes to attribute to it, (2) to include meanings about which there might be some dispute, or (3) to bring under one
nomenclature all transactions possessing certain similar features but going under different names. Depending on
the context, in the process of enlarging, the definition may even become exhaustive.73
Where in a definition clause the word “includes” is used, it is so done in order to enlarge the meaning of the words
or phrases occurring in the body of the statute and when it is so used, these words or phrases must be construed
as comprehending not only such things which they signify according to their natural import, but also those things
which the interpretation clause declares that they shall include. Where the definition is an inclusive definition, the
word not only bears its ordinary, popular and natural sense whenever that would be applicable but it also bears its
extended statutory meaning. At any rate, such expansive definition should be so construed as not cutting down the
enacting provisions of an Act unless the phrase is absolutely clear in having the opposite effect.74 When there exists
a statutory definition in respect of an expression, the dictionary meaning thereof cannot be applied. When a
statutory definition uses the word “includes”, it provides an extended meaning thereto but the words are required to
be construed in terms of the legislative intent. If the words are general and not precise, their interpretations are to
be restricted to the fitness of the matter.75
Means.—When it is intended to exhaust the signification of the word defined, the term “means” is used. The term
“includes” connotes extension and cannot be treated as restrictive.76
See detailed Comments on Interpretation and construction of Undefined words, Fundamental principles of
Interpretation or construction, Internal aids to Interpretation or construction, External aids, Legislative Intent, etc.,
under Section 1.
Abridged Prospectus [Section 2(1)].—
Abridged prospectus means a memorandum containing salient features of a prospectus as may be prescribed.
Legislative History.—The Companies (Amendment) Act, 2000 (53 of 2000)—Clause (1) of section 2 defining
“abridged prospectus” has been inserted by the Companies (Amendment) Act, 2000 (w.e.f. 13-12-2000) after
renumbering the existing clause (1) of section 2 as clause (1A) thereof.
See detailed Comments and salient features prescribed under Section 56(3). See also Comments under
Prospectus [Section 2(36)] hereinafter.
Alter and Alteration [Section 2(1A)].—Alter and alteration includes the making of additions and omissions.
Addition or omission amounts to alteration as well as modification. See also Modify and Modification [Section 2(29)].
Appellate Tribunal [Section 2(1B)].—Appellate Tribunal means the National Company Law Appellate Tribunal
constituted under sub-section (1) of section 10FR.
Legislative History.—The Companies (Second Amendment) Act, 2002 (11 of 2003).—The Notes on clauses
explained as follows: “Clause (1B) proposes to define
“Appellate Tribunal” which means the National Company Law Appellate Tribunal constituted under the proposed
sub-section (1) of section 10FR of the Companies Act, 1956.
” [ Clause 2 of the Companies (Amendment) Bill, 2001 (80 of 2001)].
See detailed Comments under Part IC—Appellate Tribunal [Ss. 10FQ-10GF]. See also Comments under National
Company Law Tribunal [Section 2(49A)] and Part IB—National Company Law Tribunal [Sections 10FB to 10FP].
Articles [Section 2(2)].—Articles means the articles of association of a company as originally framed or as altered
from time to time. Table A in Schedule I annexed to this Act contains model Regulations for management of a
company limited by shares. See Sections 26 to 31 for provisions relating to Articles of Association.
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Legislative History.—The Companies Act, 1956 (1 of 1956).—The Notes on clauses explained this clause as
follows: “The articles of a company may be altered by the Court [ the Company Law Board (now the Tribunal)] in
pursuance of the power conferred on it by clause 374 [ Section 404] of the Bill which corresponds to section
153C(6) of the existing Act [ the Indian Companies Act, 1913 (7 of 1913)]. Reference has, therefore, been made to
alteration in pursuance of this Act or of any previous companies law. The other alterations made are purely
consequential.” [ Clause 2(1) of the Companies Bill, 1953 (46 of 1953)].
Articles of Association.—The Articles of Association of a company provides for the regulation for internal
management of a company of which each shareholder is attributed with notice. It is a business document and is to
be interpreted strictly.77 Articles should, however, be construed as a business document so as to give them
reasonable business efficacy unless the language is against such construction.78
The Articles inconsistent with the provisions of the Act are void [Section 9]. In view of this, model Regulations in
relevant Tables in Schedule I should be carefully studied while drafting Articles of Association of a company.
See Comments under Sections 26-31 containing provisions relating to Articles of Association and Schedule I
containing Model Regulations in Tables A to F.
Alteration of Articles.—Articles of Association may be altered by Special Resolution [Section 31]; by Special
Resolution and with the approval of the Central Government [Sections 268 and 310]; by Special Resolution and
with the sanction of the Court (now the Tribunal) [Section 100]; by an order of the Company Law Board (now the
Tribunal) [Sections 397, 398 and 404] and by the Central Government [Section 408(1), proviso]. See detailed
Model Articles [Schedule I, Table A ].—Model Articles or Regulations contained in Table ‘A’ of Schedule I to the
Act will apply to a public company limited by shares, if they are not inconsistent with the company’s own Articles, if
any.
Model Articles given in Table ‘A’ of Schedule I to the Companies Act, 1956 have been annotated or referred to in
Comments under relevant Sections.
See detailed Comments under Sections 26-31 and Schedule I.
“Associate” in relation to Managing Agents [S. 2(3) and 2(4)].— Clauses (3) and (4) of section 2 defining
“associate”, in relation to managing agent, secretaries and treasurers, have been omitted by the Companies
(Amendment) Act, 2000.
The system of managing agency had already been abolished videsection 324A of the Companies Act, 1956 (1 of
1956) as inserted by the Companies (Amendment) Act, 1969 (w.e.f. 3-4-1970). See detailed Comments under
Section 324A.
Legislative History.—The Companies (Amendment) Act, 2000 (53 of 2000).—The Notes on clauses explained as
follows: “Clause 2, inter alia, seeks to omit clauses (3), (4) as they have become redundant after the abolition of the
system of managing agent, secretaries and treasurers by Act 17 of 1969.” [ Clause 2 of the Companies (Second
Amendment) Bill, 1999 (139 of 1999)].
See detailed Comments under omitted Sections 204A and 324A.
Banking Company [Section 2(5)].—Clause (5) of section 2 of the Companies Act, 1956 (1 of 1956) defines the
banking company as follows:
“banking company” has the same meaning as in the Banking Companies Act, 1949 (10 of 1949) [ now the Banking
Regulation Act, 1949 (10 of 1949)].
Section 5(b), (c) and (d) of the Banking Regulation Act, 1949 (10 of 1949) define “banking”, “banking company” and
“company” as under:
“(b)
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‘banking’ means the accepting, for the purpose of lending or investment, of deposits of money from the public,
repayable on demand or otherwise, and withdrawable by cheque, draft, order or otherwise.
(c)
‘banking company’ means any company which transacts the business of banking in India.
Explanation.—Any company which is engaged in the manufacture of goods or carries on any trade and which
accepts deposits of money from the public merely for the purpose of financing its business as such manufacturer or
trader shall not be deemed to transact the business of banking within the meaning of this clause.
(d) ‘company’ means any company as defined in section 3 of the Companies Act, 1956 (1 of 1956); and includes a
foreign company within the meaning of section 591 of that Act.”
Section 6 of the Banking Regulation Act, 1949 (10 of 1949) provides for the forms of business in which the banking
companies may engage, in addition to the business of banking.
A Banking company registered under the Registration of Companies Act, Sikkim, 1961 is a company within the
meaning of section 5(d) of the Banking Regulation Act, 1949 and section 3 of the Companies Act, 1956.79
Board of Directors [Section 2(6)].—
“Board of directors” or “Board” , in relation to a company, means the Board of directors of the company.
The company’s powers and functions vest in the directors collectively. In short, all the directors collectively are
called the Board of directors. In general, all the acts of the company must be done by the Board. A single director
has no power to act on behalf of the company. A single director can act on behalf of the company only if the Board
by resolution has delegated its power to him.
For the provisions relating to Directors and the Board of directors see Part VI, Chapter II [Sections 252 to 323]. See
also Director [Section 2(13)].
Body Corporate or Corporation [Section 2(7)].—This includes a company incorporated outside India but 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.
follows: “This definition is based on the definition found in section 455(3) of the English Act, 1948 [ now section 740
of the English Companies Act, 1985]. This term has been defined on the recommendation of the Company Law
Committee Report, page 231, paragraph 28.” [ Clause 2(4) of the Companies Bill, 1953 (46 of 1953)].
The Companies (Amendment) Act, 1960 (65 of 1960).—The Notes on clauses explained the amendments as
follows: “The proposed amendment clarifies that, for purposes of the Companies Act, co-operative societies do not
fall within the purview of the definition (vide para 14 of the Companies Act Amendment Committee Report,
1957).Power is also proposed to be taken to exclude any other body corporate from the scope of the definition by
notification in the Official Gazette.” [ Clause 2(c) of the Companies (Amendment) Bill, 1959 (37 of 1959)].
Foreign Company.—The term “body corporate or corporation” is wider than the term “company” and includes a
foreign company.
A scheme of amalgamation of a foreign company (transferor) and an Indian company (transferee) was sanctioned
as the definition of the term “body corporate” includes foreign company.80
Society or Corporation sole.—Body corporate means an association of persons which has been incorporated
under some statute having perpetual succession, a common seal and having a legal entity different from the
members constituting it. A society registered under the Societies Registration Act, 1860 is not a body corporate
under the Companies Act, 1956, so also a corporation sole, e.g., a Public Trustee.81
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Department’s view.— Society registered under the Societies Registration Act, 1860 not to be deemed to be
a “body corporate”.—“The question whether a society registered under the Societies Registration Act, 1860 (21 of
1860), should be considered a ‘body corporate’ within the meaning of section 2(7) of the Companies Act, 1956, has
been carefully examined further in consultation with theMinistry of Law as well as in the light of recent judgment of
the Supreme Court in the Board of Trustees v. State of Delhi,AIR 1962 SC 458 [LNIND 1961 SC 337]. It has been
decided that such a society should not be deemed to be a ‘body corporate’ within the meaning of the aforesaid
provisions of the Companies Act, although such a society can be treated as a ‘person’ having separate legal entity
apart from the members constituting it and thereby capable of becoming a member of a company under section
41(2) of the Companies Act, 1956. The view expressed in para 1 of the Department’s Letter No. 8/2(7)/56-PR,
dated 30-11-1957 to Registrar of Companies, New Delhi, copy endorsed to all other field officers, may accordingly
be deemed to have been modified to the extent stated above.
Consistent with the revised interpretation of the expression ‘body corporate’ as stated above, the said expression
occurring in various provisions of the Companies Act, 1956, viz., sections 43A, 293, 303, 372, etc., should be so
interpreted as to exclude a society registered under the Societies Registration Act, 1860 (21 of 1860) from the
scope of the expression ‘body corporate’.” [Circular Letter No. 8_48_2(7)_63-PR, dated 24-11-1962 : Government
of India publication, Clarifications and Circulars on Company Law, 1977 Edition, page 1]. See also Comments
under Section 41
Co-operative Societies.—The term “body corporate or corporation” does not include co-operative societies.
Although the definition of “body corporate or corporation” in section 2(7) of the Companies Act, 1956, does not
include a co-operative society, the reference to body corporate under the Act is for the purpose of deposits or
investments being made by one body corporate with another. Part IX of the Companies Act, 1956 does not make
reference to “body corporate” as contemplated under section 370 or 372 of the Act or to “body corporate” as defined
in section 2(7) of the Act. Therefore, a co-operative society would not be disqualified for registration under Part IX
on the ground that the definition of “body corporate” in section 2(7) excludes co-operative societies.82
Co-operatives as producer companies.—Part IXA consisting Chapters I to XII, Sections 581A to 581ZT has been
inserted in the Companies Act, 1956 by the Companies (Amendment) Act, 2002 (11 of 2003) (w.e.f. 6-2-2003)
facilitating formation of co-operative business as companies and to convert existing business into companies on a
voluntary basis. The aim is to provide statutory and regulatory framework that creates the potential for producer-
owned enterprises to compete with other enterprises on a competitive footing with more liberal regulatory
framework and certain privileges of a private company.
Oil and Natural Gas Commission.—In pursuance of section 2(7)(c) of the Companies Act, 1956, the Central
Government had [vide Notification No. G.S.R. 1883, dated 20-12-1965] notified the Oil and Natural Gas
Commission, a body corporate, established under section 3 of the Oil and Natural Gas Commission Act, 1959 (43
of 1959). Act 43 of 1959 has been repealed and undertaking of the Oil and Natural Gas Commission vested in
theOil and Natural Gas Corporation Limited, a company incorporated under the Companies Act, 1956 by the Oil
and Natural Gas Commission (Transfer of Undertaking and Repeal) Act, 1993 (65 of 1993).
Powers of the Central Government.—Earlier the powers and functions of the Central Government under section
2(7) had been delegated to the Company Law Board vide Notification No. G.S.R. 443(E), dated 18-10-1972, this
notification has since been rescinded by Notification No. G.S.R. 287(E), dated 31-5-1991. for details see Comments
under Sections 10E and 637.
See also Comments under Company [Section 2(10)].
Amalgamation—Body Corporate—Banking Company and Public Financial Institutions—Holding Company

and Subsidiary Company—Transferee Company need not file separate Application under Section 394.—The
term “body corporate” in Section 2(7) of the Companies Act, 1956 is wider than the expression “company” and is
used in several Sections of the Act to denote not only a company incorporated in India, but also a Foreign
Company. It includes a Corporation formed under any Special Law ofindia or a Foreign Country, except as
expressly excluded by the definition. It includes allPublic Financial Institutions mentioned in Section 4A of the
Companies Act, 1956 as well as the Nationalised Banks incorporated under Section 3(4) of the Banking Companies
(Acquisition and Transfer of Undertakings) Act, 1970 (5 of 1970) and the Banking Companies (Acquisition and
Transfer of Undertakings) Act, 1980 (40 of 1980). However, it excludes a body corporate, which is not a company
under the Act, and which is specified by the Central Government in the notification in the Official Gazette. In other
Page 20 of 69
words, it includes a body corporate other than those which the Central Government may by notification in the
Official Gazette specify. In the instant case, it was held that Vijaya Bank squarely falls within the aforesaid definition
of the term body corporate. The Transferee Company, a Banking Company, was a Body Corporate and Holding
Company of the Transferor Company, i.e., the Subsidiary Company, a company under the Companies Act, 1956.
Holding Company was, therefore, a company for the purpose of Section 394 of the Companies Act, 1956. Since the
scheme of transfer would not affect the rights of the members or creditors of the Transferee Company as between
themselves and the company. There being no reorganisation of the Share Capital of the Transferor Company, there
was no need for the Transferee Company to file an application and a petition under Sections 392 to 394 of the
Companies Act, 1956.83
See detailed Comments under Sections 2(7), 4, 4A and 391 to 394.
“Book and Paper” and “Book or Paper” [Section 2(8)].—These include accounts, deeds, vouchers, writings and
documents.
follows: “This definition is based on the definition found in section 455(1) of the English Act, 1948. This term has
been defined on the recommendation of the Company Law Committee Report, page 231, para 28.” [ Clause 2(4) of
the Companies Bill, 1953 (46 of 1953)].
follows: “It is proposed to make clear that books and papers which are sometimes interpreted to exclude vouchers
should include such documents. This is necessary to ensure that they are maintained along with other books and
papers, and are available to Inspectors for purposes of investigation.” [ Clause 2(i) of the Companies (Second
Statutory Books, Records and Documents.—For list of statutory books, including inter alia, books of account,
cost accounting records, other statistical books, records and documents, etc., required to be maintained as per
various provisions of the Companies Act read with Rules see Comments under Section 209.
Branch Office [Section 2(9)].—
Branch office means any establishment (a) described as a branch by the company, or (b) carrying on either the
same or substantially the same activity as that carried on by the head office of the company, or (c) engaged in any
production, processing or manufacture, but does not include any establishment specified in any order made by the
Central Government under section 8.
Legislative History.—The Companies (Amendment) Act, 1960 (65 of 1960).—The Notes on clauses explained the
substituted clause as follows: “The redraft seeks mainly to clarify the circumstances in which an establishment of a
company should be deemed to be a ‘branch office’ so that the provisions of section 228, as proposed to be
amended, in regard to audit of accounts of branch office of a company, may be more effective (para 15 of the
Companies Act Amendment Committee Report).” [ Clause 2(d) of the Companies (Amendment) Bill, 1959 (37 of
1959)].
The recommendations of the Companies Act Amendment Committee, 1957 are reproduced below:
“The definition of a ‘branch office’ in section 2(9) is not happy though it has an important bearing on other parts of
the Act like sections 209, 228 and 292. Since sections 2(9) and 8 are interdependent an amendment of both would
be necessary. ‘Branch office’ in section 2(9) might be defined as meaning ‘any establishment described as a branch
by the company or any establishment carrying on either the same or substantially the same activity as that carried
on at the head office of the company or engaged in any production, processing or manufacture.’
To fit in with this suggested amendment, section 8 might be recast as follows: ‘The Central Government may, by
order, declare that in the case of any company, not being a banking or insurance company, any establishment
thereof shall not be treated as a branch office of the company for all or any of the purposes of this Act.’
Though section 8 of the Act refers to ‘head office’ this term is nowhere defined. We think this should be done and
have accordingly attempted a definition of ‘head office’ in paragraph 18 infra.” [ Report: para 15].
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The definition is related to sections 8, 209(2), 228 and 292. Its importance lies in the fact that branch office account
need not be audited by the company’s auditor but may be done by another auditor or an accountant. Usually the
branch sends summarised returns at quarterly or shorter intervals.
The registered office and the head office of a company may be different. In that case the head office will be treated
as a branch. A manufacturing establishment situated within the same locality as that of the registered office or head
office or principal office will not be treated as a branch. The Central Government has power under section 8 to
declare any establishment not to be a branch provided the company has not declared such an establishment as its
branch.
See also Comments under Sections 8, 209, 228 and 292.
Department’s view.—If the establishment is not a branch office of the company, it will form part of the head office
and will be dealt with as such for audit and other purposes. [Circular Letter No. 8/16/(1)/61-PR, dated 9-5-1961 :
Govt. of India publication, Clarifications and Circulars on Company Law, 1977 Edition, page 2].
Foreign Branch.—A Company’s Branch Office outside India is not a foreign concern within the meaning of the
FERA, 1973 [ now the FEMA, 1999].84
Two companies carrying on business in two countries having the same management cannot be treated as Branch
of one another though an independent company with the same name and identical management which negotiates
and conducts its business in its name may amount to an extension of the company itself.85
Company [Section 2(10)].—This means a company as defined in section 3.
follows: “The expressions ‘company’, ‘existing company’, ‘private company’ and ‘public company’ have all been
defined in a separate clause, viz., clause 3 [Section 3], as that course is more convenient from the drafting point of
view. Attention has been drawn to those definitions in clause 3.” [ Notes on Clause 2(7) of the Companies Bill, 1953
(46 of 1953)].
Company a juristic person.—The term company includes existing company, a private company, a government
company and a company incorporated under the Act. It is a juristic person separate and distinct from its members.86
The shareholders are not the owners of the company’s assets, they have merely a right to participate in the profits
of the company subject to the contract contained in the Articles. In a writ petition the jurisdiction of the Court to grant
relief cannot be denied, when by State action the rights of individual shareholder are impaired if that action also
impairs the right of the company. The Court, in such a case, will not, concentrating merely upon the technical
operation of the action, deny itself jurisdiction to grant relief.87
Lifting the veil.—It is a separate juristic personality but the Court is entitled to lift the veil and see the economic
realities behind the legal facade of corporate entity.88 The majority of the members exercise powers of corporation
or a company.89
See detailed Comments under Sections 3, 34 and 41.
Kinds of Companies.—The Companies Act, 1956 envisages and provides for various forms of companies each
with specific and appropriate provisions applicable to them, viz., Private Company [Section 3(1)(iii)], Public
Company [Section 3(1)(iv)], Holding company and subsidiary [Section 4], Charitable Companies [Section 25], Sick
Industrial Companies [Sections 424A-424L], Producer Companies [Sections 581A-581ZT], Foreign Company
[Sections 591-608], Banking, Insurance, Electricity and other Companies governed by Special Acts [Section 616],
Government Company [Sections 617-620], Nidhi and Mutual Benefit Societies [Section 620-A].
Besides, special provisions have been made for: Companies in Goa, Daman and Diu [Section 620-B], Jammu and
Kashmir [Section 620-C], Sikkim [Article 371F of Constitution of India and the Registration of Companies Act,
Sikkim, 1961] and State of Nagaland [Section 1(3), proviso].
See detailed Comments under Section 1 under Applicability of the Act.

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Co-operative society.—A co-operative society is not a corporation, it is not a company.90See detailed Comments
under Section 2(7).
Company Law Board [Section 2(10A)].—Company Law Board (CLB) means the Board of Company Law
Administration constituted under Section 10E.
Dissolution of Company Law Board [Section 10FA].—As per section 10FA, inserted by the Companies (Second
Amendment) Act, 2002 (11 of 2003), on the constitution of the Tribunal (NCLT) under Section 10FB, the CLB shall
stand dissolved and powers and functions of the CLB shall be vested in the Tribunal (NCLT).
See detailed Comments under Section 10E and 10FA-10GF.
Consumer Forum.—The issue of shares or debentures does not come under the Consumer Protection Act, 1986
(68 of 1986) or the MR TP Act, 1969 (54 of 1969) [now the Competition Act, 2002 (12 of 2003)].91
Court [Section 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. See detailed
amendments as follows: “This amendment is merely clarificatory. (See paragraph 16 of the Report.)” [ Clause 2(f) of
the Companies (Amendment) Bill, 1959 (37 of 1959)].
Para 16 of the Companies Act Amendment Committee, 1957 Report is as follows:
“The definition of the word ‘Court’ in section 2(11) refers to s. 10 and section 10 refers only to the jurisdiction of two
types of courts, viz., the High Court and District Courts subordinate thereto. There are, however, several sections in
the Act, where the word ‘Court’ is used in a different sense. In sections 274(1)(d) and 283(1)(c), e.g., the word
‘Court’ is used in the sense of an ordinary criminal court trying an offence punishable under the criminal law of the
land. In ss. 118(3), 144(4), 163(6), 196(4), 219(4) and 304(2), the word ‘Court’ refers to the Court of a Presidency
Magistrate or First Class Magistrate trying offences under the Companies Act by virtue of sections 622 and 623 and
not the ‘Court’ contemplated by section 10 of the Act.
Section 2(11) might, therefore, be recast as follows:—‘The ‘Court’ means with respect to any matter relating to a
company, the Court having jurisdiction with respect to that matter in relation to that company as provided in section
10.’
Section 10 will have to be amended by the omission of the word ‘and’ at the end of sub-section (1), clause (a), the
addition of the word ‘and’ at the end of the clause (b) of sub-section (1) and the following words as clause (c):—
‘(c) in respect of any offence made punishable under this Act, the Court of a Presidency Magistrate or Magistrate of
the First Class having jurisdiction to try such offence’.” [ Report: para 16].
By section 2(11)(b) the jurisdiction has been given to a Magistrate of first class rank. Section 454(5A) provides that
the court by which the winding up order is made or the provisional liquidator is appointed may take cognizance of
an offence under this section and try the offence itself as summons case is tried by the Magistrate under the
Criminal Procedure Code.
See detailed Comments under Section 10, 10E and 10FB.
Court—Jurisdiction—Execution of Orders—Decree passed by Company Court to be executed by Company

Court alone.—The words “any order” in Section 634 of the Companies Act, 1956 mean and include an order for
payment of moneys and this can be enforced by various methods as had been provided under the laws. Unsatisfied
decrees can be enforced by filing execution application or initiating insolvency proceedings, both in the case of
Company judgment debtor or Individual judgment debtor. Section 634 makes it clear that the order for payment may
be enforced in the same manner as a decree may be enforced by the Court in a suit pending thereon. Sections 634
and 634A of the Companies Act, 1956 provide that the order for payment can be executed by the Court which has
Page 23 of 69
passed the order. Section 634A empowers theCompany Law Board(CLB) to execute it. The Court means the High
Court as the Company Court has the exclusive jurisdiction to pass any order including for enforcement of the order
passed by it. In case an order passed by one Company Court cannot be enforced under situation mentioned in
Section 635 of the Companies Act, 1956 then such order can be executed by another Company Court but not by
any other Court, i.e., the High Court as a Court of principal Civil Jurisdiction. The order of the Company Court has to
be executed by a Company Court. Under Sections 2(11) and 10 of the Companies Act, 1956 the authority of any
other Court for any matter is excluded except in case of enforcement of orders passed by theCompany Law Board
(CLB). The application for execution filed before the High Court as a Court of principal Civil Jurisdiction was
therefore not maintainable. The written application is required to be filed before the Company Court which passed
the order.92
Now provisions of Section 634A which provide for enforcement of order of the Company Law Board as if it were a
decree of Court shall not apply on and after the commencement of the Companies (Second Amendment) Act, 2002
(11 of 2003).
NewSection 10FZA of the Companies Act, 1956 (1 of 1956) inserted by the Companies (Second Amendment) Act,
2002 (11 of 2003) provides that any order made by the Tribunal (NCLT) or the Appellate Tribunal (NCLAT) may be
enforced in the same manner as if it were a decree made by a Court. The powers of theCompany Law Board (CLB)
have conferred upon the Tribunal (NCLT).
Consequently, the provisions of Section 634A shall not apply after the constitution of Tribunal (NCLT) under Section
10FB and commencement of the Companies (Second Amendment) Act, 2002 (11 of 2003) (w.e.f. date to be
notified).
See detailed Comments, Form and Procedure under Sections 2(11), 10, 10E, 10FB, 10FZA, 433, 434, 439, 443,
634A, and 635.
Offences and Prosecution—“Court” with respect to Offences against the Act—Magistrate’s Court [Sections
2(11) and 622].—“Court” is defined under Section 2(11) of the Companies Act, 1956, as meaning a Company Court
having jurisdiction under the Act with respect to matters relating to the company as provided under Section 10 of
the Companies Act, 1956 but it excludes such a “Court” from having jurisdiction with respect to offences against the
Act. On petitions filed by the appellants before the Company Court under Section 108A of the Companies Act,
1956, alleging that the respondents had violated the provision contained in Section 108A which imposed restriction
on acquisition of certain shares and seeking to prosecute them, the Company Court relegated the appellants to the
Magistrate’s Court. On appeal, dismissing the appeal, it was held that under Sections 2(11) and 622 of the
Companies Act, 1956 any offence committed under the Companies Act, 1956 or against the provisions of the Act
had to be tried by a Presidency Magistrate or a Magistrate of first class. The order did not need any intervention by
the Appellate Court.93
See detailed Comments under Sections 2(11), 5, 10, 621, 621A and 622.
Debenture [Section 2(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.
follows: “The existing definition has been amplified on the lines of the definition found in the English Act, 1948 viz.,
section 455(1) [English Act, 1985, s. 744]. See para 27 and also page 228 of the Company Law Committee’s
Report.” [ Clause 2(9) of the Companies Bill, 1953 (46 of 1953)].
The recommendations of the Company Law Committee are reproduced below:
“Under the existing definition, ‘debenture’ includes ‘debenture stock’. A
debenture means a document which either creates or acknowledges a debt.

Ordinarily a debenture constitutes a charge on the undertaking of the company or some part of its property, but
there may be debentures without any such charge and under the law, it is not necessary that the debentures should
create a charge. We have, therefore, brought the definition of ‘debenture’ in line with that contained in the English
Companies Act, 1948, which defines ‘debenture’ as including ‘debenture stock, bonds and other securities of a
company whether constituting a charge on the assets of the company or not’.” [ Report: para 27].
Page 24 of 69
Definition of debenture wider.—A debenture means an instrument issued by the company normally called on the
face of it a debenture and providing for the payment of a sum with or without interest after a specified period or on
notice, or it may be irredeemable. It usually gives a charge by way of security. The definition is, however, wider than
the usual meaning in two respects—(i) it includes any securities and (ii) any instrument without creating a charge
may be a debenture.
The term debenture as used in modern commercial parlance is of extremely elastic character.1 Debenture includes
a mortgage by a company issued to a single mortgagee.2 Debenture is the description of an instrument. Debenture
Stock is the description of a debt secured by an instrument. It is a document which creates or acknowledges a
debt.3
In Rayner’s case it has been held that securities in its broad commercial sense include shares. Though, debentures
can hardly be intended to bear the wider meaning to include shares.4 Income Stock Certificates to raise money are
debentures if they contain an acknowledgement of indebtedness notwithstanding that the debt is only payable in
future and upon contingency of profits being earned by the company.5
Section 2(12) and section 2(45AA).—The definition of “securities” in section 2(h) of the Securities Contracts
(Regulation) Act, 1956 has been incorporated in section 2(45AA) of the Companies Act, 1956. Therefore, section
2(12) is to be read with section 2(45AA). Once the definition in SCRA is incorporated by reference it is taken as cut
and paste or written with ink and pen in the Companies Act, 1956. No further reference is required to be made to
the SCRA to determine the scope and ambit of expressions “debenture” and “securities”. The term “debenture” in
section 439(2) has to carry the meaning assigned to it in section 2(12) of the Act and would include “any securities”
which in turn in view of the definition of “securities” incorporated by reference under section 2(45AA) of the Act
would include beneficial right or interest in debentures or securities. Further, securities for the purposes of the
Companies Act need not only be those marketable in India.6
Debentures may be issued at a discount.—The debentures may be issued at a discount.7 But a scheme under
which the debentures so issued as give to the holders an immediate right to exchange them at its nominal value for
shares is void as it may involve issuing the shares at a discount.8
Convertible Debentures.—Convertible debentures may be issued [Section 81], but they cannot be issued at a
discount as it would amount to a colourable scheme to issue shares at a discount which requires fulfilment of
conditions under section 79.
Where in debentures with an option to convert partly into equity shares, the option was exercised without issue of
debentures and the shares were allotted. Held, the issue of debentures, though desirable, would not always be
mandatory. When there is no grievance on the part of the debenture holders and the company has acted in terms of
the debenture deed, the actual issue of debentures would be a procedural aspect and an omission thereof would
not vitiate issue of shares on conversion.9
See detailed Comments and Kinds of Debentures under Section 117.
Debenture Stock.—Debenture stock is a borrowed capital consolidated into one mass for convenience. It is of the
same nature as ordinary debenture except that instead of each bond securing a definite amount, the whole sum
secured is treated as a single stock, and certificates are issued declaring the holder to be entitled to a definite sum
being part of the stock. The debenture stock may be redeemable or irredeemable.10
Fixed and Floating Charges.—The debenture-holders are secured creditors. Mortgage debentures are issued
creating a charge upon the undertaking and properties of the company. The charge may either be “fixed” or
“floating”. When the charge is “fixed” it affects the property and the company can deal with the property only subject
to the charge. But when the charge is a “floating” one, the company may deal with the property in the manner the
business requires till the charge crystallises.11
If the debentures are not secured by the assets of the company, the position of debentureholder is that of an
unsecured creditor.12
Special Provisions as to Debentures.— See detailed Comments under Special Provisions as to Debentures
Page 25 of 69
[Sections 117-123], Prospectus and Allotment [Sections 55-81], Share Capital and Debentures [Sections 82-122],
Registration of Charges [Sections 124-145], Register of debenture-holders [Sections 150-158].
See also Debenture trust deed [Section 117A], Appointment of debenture trustees and duties of debenture trustees
[Section 117B], and Liability of company to create security and debenture redemption reserve [Section 117C],
inserted by the Companies (Amendment) Act, 2000 (53 of 2000), s. 48 (w.e.f. 13-12-2000).
Debentures not goods before allotment.—Debentures are not goods before allotment. Applicant for debentures
is not a consumer. Raising of share capital or debentures by a company is not a trading activity. The issue of
shares or debentures does not come under the Consumer Protection Act, 1986 (68 of 1986) or the MR TP Act,
1969 (54 of 1969) [now the Competition Act, 2002 (12 of 2003)].13
Depository [Section 2(12A)].—Depository has the same meaning as in the Depositories Act, 1996 (22 of 1996).
The Depositories Act, 1996 (22 of 1996)* and related amendments have made consequential amendments in the
Companies Act, 1956 (1 of 1956) and certain other Acts, e.g., the Securities and Exchange Board of India Act,
1992, the Securities Contracts (Regulation) Act, 1956, the Indian Stamp Act, 1899, the Income-tax Act, 1961, the
Benami Transactions (Prohibition) Act, 1988 and the Banking legislations. The provisions of the Depositories Act,
1996 (22 of 1996) and consequential amendments have been dealt with in Comments under Section 68B.
See Comments under relevant Sections of the Companies Act, 1956, viz., Sections 2A, 41(3), 49(5)(c), 51 proviso,
68A, 68B, 83, 108(3), 111(14), 111A, 113(4), 150(1)(b), 152(1)(b), 152A and Schedule II, Part II, Clause C, Sub-
clause 9A.
See detailed Comments under Section 68B.
Issue of Securities in Demat Form [Section 68B].—Every listed public company making initial public offer of any
security for Rs. 10 crores or more shall issue the same only in Dematerialised (Demat) form by complying with
provisions of the Depositories Act, 1996 (22 of 1996) and Regulations made thereunder.
Derivative [Section 2(12B)]—Derivative has the same meaning as in clause (aa) of section 2 of the Securities
Contracts (Regulation) Act, 1956 (42 of 1956).†
This has been inserted by Act 53 of 2000. See also Hybrid [Section 2(19A)].
Director [Section 2(13)].—Director includes any person occupying the position of a director, by whatever name
called14 (but not in respect of rights). Directors are agents for the company in carrying out the business of the
company,15 but they are not agents for the shareholders.16 Only by being a director a person does not become
servant in absence of a contract of service.17 They are not trustees for the creditors of the company.18 The property
of the company is not vested in them in trust for any specific purpose.19 As agents of the company, they cannot
make secret profits.20
Where the company requiring quorum of three directors for the meeting of its Board of Directors had only two
directors. The remaining directors were entitled to appoint a director to make up the quorum. Such director holds
office only until next Annual General Meeting of the company.21
Department’s view.— Definition of Director.—“The word ‘director’ has been defined in section 2(13) of the
Companies Act, 1956 to include any person occupying the position of a Director by whatever name called. The
scheme of the Companies Act, 1956 shows that the ultimate control and management of the affairs of company
vests in the Board of Directors. Under the Indian Iron and Steel Company (Taking Over of Management) Act, 1972
(50 of 1972) however, the management of the affairs ofIndian Iron and Steel Company Limited does not vest in the
Board of Management, but vests in the Central Government; and the Board of Management carries on the general
superintendence, direction and management of the affairs and business of the undertaking of the company only on
behalf of the Central Government as agent thereof. Further, the Board of Management is entitled to exercise in
relation to the undertaking of Indian Iron and Steel Company Limited, all the powers of the Board of directors of a
company subject to the direction, control and supervision of the Central Government. In the premises, it follows that
no member of the Board of Management occupies the position of a director.” [ F. No. 40/9/75-CL-II, dated 25-11-
1975: Govt. of India publication, Clarifications and Circulars on Company Law, 1977 Edition, page 2].
Page 26 of 69
Position of Directors.— See Comments under Section 293.
See provisions relating to Directors in Part VI—Management and Administration, Chapter II—Directors [Sections
252-323].
Dummy Directors.—For recommendations of the Commission of Inquiry on the Administration of Dalmia-Jain

Companies (Vivian Bose Commission ) and the Daphtary-Sastri Committee recommendations on Dummy Directors
see Comments under Officer [Section 2(30)] hereinafter.
Shadow Director.—A person in accordance with whose directions or instructions the directors of the company are
accustomed to act is called a shadow director. An advice in professional capacity is different from the directions and
instructions of the shadow director. The shadow director may be prosecuted for wrongfully acting and dominating
the Board of Directors of a company.22
De factoDirector.—A de facto director is one who claims to act and purports to act as a director although he is not
validly appointed as a director. A shadow director does not claim or purport to act as a director and he claims he is
not a director. He takes shelter behind the others who are the only directors of the company to the exclusion of
himself. He is not held out as a director of the company. To establish that a person is a shadow director it has to be
alleged and proved as to who are the Directors, de facto or de jure that the defendant alone or with others directed
directors how to act in relation to company and the other directors acted in accordance with his directions and they
are accustomed to so act.23
See also Comments under Sections 2(30), 203, 293 and 307.
Duty of Directors.—A company is a juristic person and it acts through its directors who are collectively referred to
as the Board of directors. An individual director has no power to act on behalf of a company of which he is a director
unless by some resolution of the Board of directors of the company specific power is given to him. The directors act
on behalf of a company in a fiduciary capacity and their acts and deeds have to be exercised for the benefit of the
company. To the extent the powers of the directors are delineated in the Memorandum and Articles of Association
of the company, the directors are bound to act accordingly. The fiduciary capacity within which the directors have to
act enjoins upon them a duty to act on behalf of a company with utmost good faith, utmost care and skill and due
diligence and in the interest of the company they represent. They have a duty to make full and honest disclosure to
the shareholders regarding all important matters relating to the company.24
Insider Trading.—As per Regulation 2(c), (g) and (h) of the SEBI (Prohibition of Insider Trading) Regulations,
1992, “connected person” or “person deemed to be connected person” may, inter alia, include Director [Section
2(13)], Deemed Director [Section 307(10)], Officer of a company [Section 2(30)] including an auditor, Director or
employee of Public Financial Institutions defined in Section 4A, Relative of connected persons [Section 6 of the
Companies Act, 1956 and Regulation 2(h)].
See detailed Comments under Section 55A—Powers of SEBI.
District Court [Section 2(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.
See Comments under Section 10.
Dividend [Section 2(14A)].—Dividend includes any interim dividend. This inclusive definition in clause (14A) of
section 2 has been inserted by the Companies (Amendment) Act, 2000 (w.e.f. 13-12-2000).
follows: “Clause 2, inter alia, seeks to insert a new clause (14A) relating to ‘interim dividend’.” [ Clause 2 of the
This definition is relevant for Section 205, which has also been amended.
Page 27 of 69
Document [Section 2(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.
follows: “This definition is based on the definition found in section 455(1) of the English Act, 1948. It has been
enacted on the recommendation of the Company Law Committee Report, page 231.” [ Clause 2(12) of the
Companies Bill, 1953 (46 of 1953)].
Employees Stock Option [Section 2(15A)].—Employees stock option means the option given to the whole-time
directors, officers or employees of a company, which gives such directors, officers or employees the benefit or right
to purchase or subscribe at a future date, the securities offered by the company at a pre-determined price. This
definition has been inserted by the Companies (Amendment) Act, 2000 (53 of 2000) with effect from 13-12-2000.
For SEBI Guidelines on Employees Stock Option Schemes (ESOS) see Comments under Sections 55A and 81 and
relevant Appendices referred to therein.
Existing Company [Section 2(16)].—Existing company means an existing company as defined in section 3. See
Financial Year [Section 2(17)].—Financial year in relation to any body corporate means the period in respect of
which profit and loss account of the body corporate laid before Annual General Meeting is made up, whether that
period is a year or not. Provided that in relation to an insurance company financial year means the calendar year
referred to in section 11(1) of the Insurance Act 1938 (4 of 1938).
follows: “This is based on the definition suggested at page 228 of the Company Law Committee’s Report. See also
paragraph 28 of the Report. The provision that the financial year should not exceed 15 months or in special cases
18 months has been embodied more appropriately in a substantive clause of the Bill, viz., clause 195 [Section 210]
which provides for the laying of the accounts of the company before the annual general meeting.” [ Clause 2(14) of
The Joint Committee added a proviso to make it clear that in relation to an insurance company,
“financial year” means the “calendar year”.

[ Report: para 10].
In case of a company
“” may mean calendar year or any other period of 12 months, or less or more.
This term is important in relation to Sections 166, 198, 205, 210(4), 211(2), 212, 213, 227, 349, 350, Schedule VI
and XIII.
Section 3 of the Income-tax Act, 1961, from Assessment Year 1989-90 onwards requires all assessees to follow
financial year, i.e., April 1 to March 31 as uniform previous year for all the sources of income. Thus, although the
Companies Act, 1956 permits a different period, it would be convenient for the companies to adopt this period, i.e.,
April 1 to March 31, as its financial year.
Section 29 of the Banking Regulation Act, 1949, as amended by Act 66 of 1988 w.e.f. 30-12-1988, enabled the
Central Govt. to change the accounting year of a banking company by a notification. The Government notified that
the accounts of the banking companies shall be closed as on 31st March every year as against 31st December.
Government Company [Section 2(18)].—Government company means a Government company within the
meaning of section 617. A Government company is one in which 51 per cent. or more of the 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. A subsidiary of a Government company is also a government
company. Section 617 defines a Government company. It is a legal entity separate from the Government.25
It is legally possible for the Government of India to buy shares more than 51 per cent. in a foreign company having
Page 28 of 69
a place of business in India. A Government company may, in a proper case, be wound up or, on an application
made by it, a scheme may be sanctioned by the Court.26 However, employees of a Government company are not
Government servants and the protection of Article 311 of the Constitution of India is not available to them,27 it is a
juristic person.28 If the company performs governmental functions as distinct from commercial functions, the
corporate veil may be lifted.29
Holding Company [Section 2(19)].—Holding company means a holding company within the meaning of sections
4. See Comments under Sections 4.
Hybrid [Section 2(19A)].—
Hybrid means any security which has the character of more than one type of security, including their derivatives.
This definition has been inserted by the Companies (Amendment) Act, 2000 (53 of 2000).
See also Derivative [Section 2(12B)].
Industrial Company [Section 2(19AA)].—
Industrial company means a company which owns one or more industrial undertakings.
This definition has been inserted by the Companies (Second Amendment) Act, 2002 (11 of 2003).
Legislative History.—The Companies (Amendment) Act, 2002 (11 of 2003).—The Notes on clauses explained:
“Clause (19AA) proposes to define
‘industrial company’ which means a company which owns one or more industrial undertakings.
Industrial undertaking [Section 2(19AB)].—
Industrial undertaking means any undertaking, pertaining to any industry carried on in one or more factories or
units by any company, as defined in clause (aa) of section 3 of the Industries (Development and Regulation) Act,
1951 (65 of 1951) but does not include a small-scale industrial undertaking as defined in clause (j) of that section.
explained as follows: “Clause (19AB) proposes to define
‘industrial undertaking’ which means any undertaking pertaining to any industry carried on in one or more
factories or units by any company as defined in clause (aa) of section 3 of the Industries (Development and
Regulation) Act, 1951, but does not include a small scale industrial undertaking as defined in clause (j) of that
section.
Information memorandum [Section 2(19B)].—
Information memorandum means a process undertaken prior to the filing of a prospectus by which a demand for
the securities proposed to be issued by a company is elicited, and the price and the terms of issue for such
securities is assessed, by means of a notice, circular, advertisement or document. Clause (19B) has been inserted
by the Companies (Amendment) Act, 2000 (w.e.f. 13-12-2000).
See detailed Comments under Sections 60A and 60B.
Insurance Company [Section 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.
Page 29 of 69
This clause corresponds to section 2(8) of the Indian Companies Act, 1913. The provisions of the Companies Act,
1956 shall apply to insurance companies, except in so far as the said provisions are inconsistent with the provisions
of the Insurance Act, 1938 (4 of 1938). [Section 616].
See Comments under Section 616. See also Financial Year [Section 2(17)].
Issued generally [Section 2(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.
See detailed Comments under Section 56. Provisions relating to Prospectus are contained in Sections 55-68A.
follows: “This is based on the definition found in the English Act—section 455(1). A drafting improvement has been
effected in that definition, making it quite clear that an issue to existing members or debenture holders and others
will also fall within the scope of the definition.” [ Clause 2(18) of the Companies Bill, 1953 (46 of 1953)].
Limited Company [Section 2(23)].—
Limited company means a company limited by shares or by guarantee.
Listed Public Companies [Section 2(23A)].—
Listed public companies means a public company which has any of its securities listed in any Recognised Stock
Exchange.
Clause (23A) has been inserted by the Act 53 of 2000.
Section 55A of the Companies Act, 1956 provides that sections 55 to 58, 59 to 81 (including sections 68A, 77A and
80A), 108, 109, 110, 112, 113, 116, 117, 118, 119, 120, 121, 122, 206, 206A and 207 of the Act, so far as they
relate to issue and transfer of securities and non-payment of dividend shall, in case of listed public companies or
public companies which intend to get their securities listed on any recognized stock exchange in India, be
administered by the Securities and Exchange Board of India(SEBI); and in any other case, by the Central
Government.
See also Comments under Public company [Section 2(37) and Section 3], and Recognised stock exchange
[Section 2(39)].
Manager [Section 2(24)].—
Manager means an individual who, subject to superintendence, control and direction of the Board of directors, has
the management of the whole or substantially the whole of the affairs of the 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.
follows: “The managing agent has been specifically excluded from the definition of ‘manager’ as suggested by the
Company Law Committee, vide paragraph 27 and page 229 of its Report. It has also been made clear that a
manager must be an individual and not a firm or a body corporate.” [ Clause 2(19) of the Companies Bill, 1953 (46
of 1953)].
“The definitions of ‘manager’ [Section 2(24)] and ‘managing agent’ [ Section 2(25) since omitted] gave us a good
deal of anxiety, but in the end we agreed that the distinguishing characteristics of the former should be that he
should be (a) an individual, (b) in charge of the whole or substantially the whole of the management of a company,
Page 30 of 69
(c) whether under a formal contract of service or not, and (d) serving under the administrative control and
supervision of the directors. A managing agent, on the other hand, may be (a) a person, firm or a company, (b) in
charge of the whole or substantially the whole of the management of a company, but (c) deriving his or its authority
by virtue of an agreement with the company or by virtue of the memorandum or articles of association containing
the terms of such agreement. Unlike a manager, who would be administratively under the control and supervision of
the directors, the latter’s control over a managing agent would be exercised only in terms of the agreement or the
provisions of the Act. In this connection, we would refer to the new definition of ‘managing director’ [Section 2(26)]
which we have recommended, and which fills a lacuna in the present Act. The distinction between a manager and a
managing director, as we see it, is that whilst the latter derives his power of management from an agreement with
the company these powers need not necessarily extend to the whole or even substantially the whole of the
company’s affairs but may be and very often are restricted to one particular aspect of such affairs; unlike a
managing agent the managing director must be an individual director of the company. In para 146 of our Report we
have recommended some special provisions about the appointment and terms of office of a manager and a
managing director, which will further bring out the distinction between them and a managing agent.” [ Report: para
27].
See also Comments under Managing Director [Section 2(26)], Officer [S. 2(30)] and Officer who is in default
[Sections 2(31) and 5].
Department's view.— A person who is a Manager as well as a Director of the company, would be a
Managing Director.— See F. No. 8/16(1)/61-PR reproduced in Comments under Managing Director [Section
2(26)].
Factory Manager not Manager within the meaning of Section 2(24).
—“Factory managers incharge of production not concerned with the buying of raw materials or the selling of
finished products and not having control over the company’s finances, would not be ‘managers’ within section 2(24)
of the Act.” [ Extract from the Minutes of the meeting of the Bombay Chamber of Commerce & Industry’s Company
Law Sub-Committee with the Secretary, Department of Company Law Administration on 26-4-1956: Government of
India publication, Clarifications and Circulars on Company Law, 1977 Edition, page 2].
Site Manager for the purposes of Pollution Act.—A Site Manager is not liable unless it can be shown that he
was a decision maker and has the power and responsibility to decide the company’s strategy and policy.30
Financing company not Manager.—Where the management of a company with substantial powers of
management was given to a financing company, but in the exercise of its powers and discharge of its functions it
was never subject to the superintendence, control or direction of the Board of directors of the company. The
financing company was not manager within the meaning of section 2(24) of the Companies Act, 1956 and the
illegality of section 384 of the Companies Act was not attracted. The remuneration paid by the assessee company
to the financing company could not therefore be regarded as being in violation of s. 384 and the expenditure
incurred by way of remuneration was deductible as business expenditure.31
Manager's authority to file suit.—Where the plaintiff in a suit is a corporation, there has to be (1) proper authority
by resolution of the Board of directors, or (2) a power of attorney authorising institution of the suit on behalf of the
corporation, or (3) power conferred by the articles of association of a corporation. Where the articles of the
company conferred authority on the managing director and the joint managing director alone to institute suits on
behalf of the company. A suit filed by a whole-time director in terms of the power of attorney granted to him, which
showed him to be a director of the company and not a managing director within the meaning of section 2(24) of the
Companies Act, 1956, was not maintainable. In this case, the provisions of section 2(26) relating to managing
director were not attracted for the reasons that the plaintiff had himself accepted by the power of attorney given to
him by the company that he was not managing director. He was a whole-time director and general manager, but not
the managing director.32 Affidavit accompanying petition for winding up sworn by the assistant manager under
authorisation/delegation by the managing director was held to be competent.33
See also Comments under section 2(26) and 10.
See detailed Comments in Part VI—Chapter IV—B. Managers: Firm or body corporate not to be appointed
manager [Section 384], Certain persons not to be appointed managers [Section 385], Number of companies of
which a person may be appointed manager [Section 386], Remuneration of manager [Section 387], Application of
Page 31 of 69
sections 269, 310, 311, 312 and 317 to managers [Section 388], Sections 386 to 388 not to apply to certain private
companies [Section 388A].
See also Comments under Section 197A which prohibits simultaneous appointment of different categories of
managerial personnel at the same time.
See also Comments under Managing Director [Section 2(26)], Officer [S. 2(30)] and Officer who is in default
[Sections 2(31) and 5].
Form 25A (substituted w.e.f. 10-2-2006).—See e-Form 25A* of the Companies (Central Government's) General
Rules and Forms, 1956, as substituted for Forms 25A and 26, by the Companies (Central Government's) General
Rules and Forms (Amendment) Rules, 2006 vide Notification No. G.S.R. 56(E), dated 10-2-2006, published in the
Gazette of India, Extraordinary, No. 50, Part II, Section 3(i), page 156 : (2006) 130 Comp. Cas. (St.) 13 in
Appendices.
Now e-Form 25A* [ substituted for earlier Forms 25A and 26 (w.e.f. 10-2-2006)] contains Form of Application to the
Central Government for Approval of Appointment or Re-appointment and Remuneration or Increase in
Remuneration or Waiver for excess or over payment to Managing or Whole-time Director(s) or Manager and
Commission or Remuneration or Expression of opinion to Directors, pursuant to Sections 198(4), 269, 309(3),
309(5B), 310, 311, 387, 388, 2(24), 4(7), 309(1)(b), 309(4)(a) and (b) and 316(4) of the Companies Act, 1956.
Revised e-Form 25A (released 24-12-2006).—See Revised e-Form 25A on the Ministry of Corporate Affairs
(MCA) website http://www.mca.gov.in under the category Provisions relating to Managerial Personnel, Date of Last
Release (24-12-2006).
See Revised e-Form 25A of the Companies (Central Government’s) General Rules and Forms, 1956 [Pursuant to
Sections 198(4), 269, 309(3), 309(5B), 310, 311, 387, 388, 2(24), 4(7), 309(1)(b), 309(4)(a) and (b) and 316(4) of
the Companies Act, 1956] for Form of Application to the Central Government for Approval of Appointment or
Reappointment and Remuneration or Increase in remuneration or Waiver for excess or over payment to Managing
or Whole-time Director(s) or Manager and Commission or Remuneration or Expression of Opinion to Directors.
See detailed Comments, Form and Procedure under Section 388.
Filing of e-Forms (w.e.f. 16-9-2006) [Sections 610A-610E].—See Provisions relating to Filing of Applications,
Documents, Inspection, etc., through Electronic Form under Section 610B of the Companies Act, 1956 inserted by
the Companies (Amendment) Act, 2006 (23 of 2006) (w.e.f. 16-9-2006).
See the Companies (Electronic Filing and Authentication of Documents) Rules, 2006† framed under Sections 610A
to 610E (w.e.f. 16-9-2006) vide Notification No. G.S.R. 557(E), dated 14-9-2006, published in the Gazette of India,
Extraordinary, No. 437, Part II, Section 3(i) : (2006) 133 Comp. Cas. (St.) 81 in Appendices.
See the Scheme for Filing of Statutory Documents and Other Transactions by Companies in Electronic Mode (w.e.f.
27-10-2006)‡vide Notification No. S.O. 1844(E), dated 26-10-2006, published in the Gazette of India, Extraordinary,
No. 1287, Part II, Section 3(ii), page 15, dated 27-10-2006: MCA website http://www.mca.gov.in : (2006) 134 Comp.
Cas. (St.) 91 in Comments under Sections 610B.
See detailed Comments, Form and Procedure under Sections 610A to 610E.
Ministry of Corporate Affairs website [ www.mca.gov.in].—The erstwhile Department of Company Affairs (DCA)
under the Ministry of Finance, was designated as a separate Ministry, viz., ‘Ministry of Company Affairs’ (MCA) vide
Cabinet Secretariat Notification No. DOC.CD-160/2004, dated 27-5-2004.
The erstwhile Department’s website http://www.dca.nic.in was moved to the Ministry of Company Affairs (MCA)
website http://www.mca.gov.in.
‘Ministry of Corporate Affairsx‘ (MCA) (w.e.f. 9-5-2007).—The Ministry of Company Affairs (MCA) has been
renamed as ‘Ministry of Corporate Affairs’ (MCA)vide Presidential Notification, dated 9-5-2007 amending the
Government of India (Allocation of Business) Rules, 1961 (w.e.f. 9-5-2007):
Page 32 of 69
MINISTRY OF CORPORATE AFFAIRS, Government of India, ‘A’ Wing, 5th Floor, Shastri Bhavan, Dr. Rajendra
Prasad Road, New Delhi-110 001.
See Ministry of Corporate Affairs (MCA) website http://www.mca.gov.in.
Chief Executive of Producer Company [Sections 581A(b) and 581W].—The Chief Executive of Producer
Company means an individual appointed as such under Section 581W(1) of the Companies Act, 1956.
A Producer Company shall have full-time Chief Executive who shall be appointed by the Board of Directors of the
Producer Company. A Member of the Producer Company shall not be appointed as the Chief Executive. [Section
581W(1)].
Chief Executive of Producer Company by virtue of his office shall be ex-officio Director of the Board and he will not
be liable to retire by rotation [Section 581W(2)], Chief Executive of the Producer Company shall be entrusted with
substantial powers of management as the Board of the Producer Company may determine [S. 581W(4)], and
Powers and Functions of Chief Executive [Section 581W(5)].
See detailed Comments under Sections 581A and 581W.
Managing Agents [Section 2(25)].—Clause (25) has been omitted by the Companies (Amendment) Act, 2000
(w.e.f. 13-12-2000).
Legislative History.—Companies (Amendment) Act, 2000 (53 of 2000).—The Notes on clauses explained as
follows: “Clause 2, inter alia, seeks to omit clause (25) as it has become redundant after the abolition of the system
of managing agent, secretaries and treasurers by Act 17 of 1969.” [ Clause 2 of the Companies (Second
The system of managing agency had already been abolished vide section 324A as inserted by the Companies
(Amendment) Act, 1969 (w.e.f. 3-4-1970).
Managing Director [Section 2(26)].—A 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 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.
As per proviso inserted by Act 65 of 1960, the power to do administrative acts of a routine nature authorised by the
Board such as power to affix the common seal of the company to documents, draw and endorse cheques,
negotiable instruments, sign certificates of share or direct registration of transfer of any share, shall not be deemed
substantial powers of management. A managing director shall exercise his powers subject to the superintendence,
control and direction of the Board.
Legislative History.—The Companies Act, 1956 (1 of 1956).—See Legislative History under Section 2(24).
The Companies (Amendment) Act, 1960 (65 of 1960).—The Notes on clauses explained as follows: “The proposed
amendment seeks to clarify that the power to do acts of a routine administrative character alone, such as signing of
cheques and share certificates, will not make a director a managing director, and provide that the managing director
is as much subject to the supervision, direction and control of the Board of directors of a company as other
managerial personnel (para 19 of the Report).” [ Clause 2(f) of the Companies (Amendment) Bill, 1959 (37 of
1959)].
“The definition of ‘managing director’ is important in relation to several sections of the Act, as for instance, sections
268, 269, 310, 316 and 317 of the Companies Act, 1956. It has been said that the definition of ‘managing director’
in section 2(26) of the Act is very wide inasmuch as it may include any director exercising powers of a routine
character such as signing share certificates, cheques, receipts etc. by delegation from the Board. This, we feel,
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could hardly have been intended. The directors collectively have the right and duty to manage and supervise the
business of the company but an individual director does not exercise any power of management. Section 2(26)
refers to ‘any powers of management which would not otherwise be exercisable by’ a director. Certain powers like
the power to affix the company's seal to documents, to draw and endorse cheques on the company's bank account
or to draw or endorse negotiable instruments, to sign share certificates and to sanction registration of a transfer of
shares and other acts connected with the routine administration of a company may be exercised by a director, if so
authorised by the Board. Section 2(26) is, however, not intended to refer to or cover such acts. The expression
‘powers of management’ connotes exercise of discretion and capacity to take a decision to do or not to do a thing.
Acts done in pursuance of a direction given by the Board are not an exercise of any power of management. On the
other hand, action taken regarding investment matters or other functions such as buying and selling, being matters
of policy, are in the exercise of powers of management and would attract the provisions of the section. In order,
however, to remove any doubt as to whether acts of a routine administrative character are intended to be included
in this definition, we would suggest that the expression ‘any powers of a management’ may be amended so as to
read ‘any substantial power of management’.” [Companies Act Amendment Committee, 1957 Report: para 19].
The Joint Committee in its report also recommended as follows:
“Specific provision should be made in the definition of ‘managing director’ to the effect that the power to do
administrative acts of a routine nature, when so authorised by the Board of directors, such as the power to affix the
common seal of the company to a document, should not be included within the substantial powers of management.”
[ Report: para 15].
Department's view.— A person who is a Manager as well as a Director of the company, would be a
Managing Director.—“A person who is a manager within the meaning of section 2(24) of the Companies Act, 1956
and is also a director of the company, would be a managing director and would be subject to all restrictions
applicable to a Managing director under the Act. In this connection,
‘Manager’ means an individual who has the management of the whole or substantially the whole of the affairs of a
company and a director of a company may also be its manager.
On the other hand, a ‘Managing director’ means a director who is entrusted with substantial powers of
management of the whole or substantially the whole of the affairs of the company.” [ Clarification F. No. 8/16(1)/61-
PR : Government of India publication, Clarifications and Circulars on Company Law, 1977 Edition, page 2].
A company may have more than one Managing Director.—“Section 2(26) defines ‘Managing director’ as a
director who is entrusted with substantial powers of management which term refers to the nature of the powers and
not the quantum thereof. Section 2(24) of the Act on the other hand has defined the word ‘manager’ as an individual
who has the management of the whole or substantially the whole of the affairs of a company. Thus the managing
director of a company may be entrusted with substantial power of management but not necessarily of the whole or
substantially the whole of the affairs of a company. A company may, therefore, have more than one managing
director.” [ Clarification F. No. 8/16/(1)/61-PR: Govt. of India publication, Clarifications and Circulars on Company
Law, 1977 Edition, page 2].
Whether a Director is to be regarded as a Whole-time Director or as a Managing Director.—“Whether a

director is to be regarded as a whole-time director or as a managing director of the company would depend on the
nature and extent of the duties entrusted to him and that the designation under which the appointment is made
would not make any difference in this regard. Thus, if a director is entrusted with managerial functions, he would be
in the position of a Managing Director notwithstanding the fact that he may be designated as a technical adviser or
as a technical director of the company.” [ Extracts from the Fourth Annual Report on the Working and
Administration of the Companies Act, 1956—Year ended 31st March, 1960: Government of India publication,
Clarifications and Circulars on Company Law, 1977 Edition, page 3].
Managing Director’s authority to file suit.—Where the Articles of the company conferred authority on the
managing director to institute suits on behalf of the company, a suit filed by a whole-time director and general
manager, but not the managing director was held not maintainable. See Comments under Manager [Section 2(24)].
Suit on behalf of company by Managing Director.—The institution of a suit on behalf of the company by the
Managing Director is deemed to be within the meaning of “substantial powers of management” since such a power
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is necessary and incidental for managing the day-to-day affairs and business of the company. The words
“substantial powers of management” specifically exclude certain acts from its purview. Therefore, except the
excluded acts the Managing Director has the power and privilege of conducting the business of the company in
accordance with the Memorandum and Articles of Association of the company.34
Position of Managing Director.—A person who is engaged to manage a business may be a servant or an agent
according to the nature of his service and the authority of his employment. A Director of a company is not a servant
but an agent inasmuch as the company cannot act in its own person but has only to act through directors who qua
the company have the relationship of an agent to its capacity. A Managing Director may have a dual capacity. He
may both be a Director as well as an employee. In the capacity of a Managing Director he may be regarded as
having not only the capacity as persona of a Director but also has the persona of an employee, or an agent
depending upon the nature of his work and the terms of his employment. The nature of his employment may be
determined by the Articles of Association of a company and/or the agreement, if any, under which a contractual
relationship between the Director and the company has been brought about. Where the powers of the Managing
Director have to be exercised within the terms and limitations contained in the Articles and subject to the control
and supervision of the Board of Directors, the Managing Director would be servant of the company and the
remuneration payable to him would be taxable as salary under the Income-tax Act.35
But, as the Managing Directors have got special powers and obligations under the Act they cannot occupy the dual
capacity of both the Managing Director and a Director. It is clear from the intention and object of the Act as laid
down in sections 267-269, 317 and 320 that the managing director and the whole-time or non-rotational directors
and ordinary directors of a company are entirely separate officers having definite rights and obligations under the
Act. The definitions of a director in section 2(13) and managing director in section 2(26) clearly define the two and
having separate and specific provisions they cannot be mixed up and treated alike. Therefore, if the terms of the
Managing Directors expire, they cease to be managing directors and cannot continue as directors without being
validly appointed by the company according to the relative provisions of the Act and the Articles of Association of
the company. Otherwise, it will become that once a managing director always a managing director which is not the
purpose, object and intention of sections 267 and 269 of the Act.36
A Managing Director has no legal status which can amount to a legal character within the meaning of section 42 of
the Specific Relief Act or which can be enforced as such against the company or his co-directors.37 A Managing
Director occupies the position of a trustee for the company and he has to safeguard the interest of the shareholders
and the company.38
Section 2(26) of the Companies Act, 1956, defines “managing directors” and section 2(30) defines “Officer” to
include director. Consequently, the managing directors, being directors, are officers of the company. The managing
directors, being officers of the company, are required to act in support of the company's petition and in the progress
of the petition as envisaged by the scheme of the Act and the rules themselves and they cannot plead total
ignorance of the proceedings nor can they with any justification, say that they are total strangers to these
proceedings.39
Managing Director as an agent of the company does not have all the powers to act for and on behalf of the
company and may derive his powers of management to act for and on behalf of the company only on the basis of
one of the modes provided in the definition in Section 2(26) of the Act. Where the managing director did not have
the actual authority or power to fix the common seal of the company to any document by arriving at any kind of
settlement for and on behalf of the company. He had no “actual” authority or power to act for and on behalf of the
company. The Memorandum of understanding (MoU) entered into between the managing director and the petitioner
was not for and on behalf of the respondent-company, nor was it a valid deed in terms of section 48 of the Act, so
as to bind the company. The Mou or settlement did not create a binding debt. Winding up could not, therefore, be
ordered under section 433 and 434 of the Companies Act, 1956.40
Managing Director is a director as also an employee of the company. He could be regarded as a Principal Employer
for the purpose of the ESI Act, 1948. He is an agent of the company with capacity to bind the company within his
authority in the sphere of management.41 A Managing Director is an agent and his knowledge is knowledge of the
company. He may both be a director as well as an employee or servant of the company.42 For the recovery of dues
from a company a decree was passed against the company and its Managing Director. It was held that the
Managing Director was not liable in his personal capacity and therefore he could not be arrested and detained in a
civil prison for enforcing a Decree.43 The Managing Director is liable for offences as principal officer under several
Acts and as officer in default under section 5 of the Companies Act, 1956 during his tenure.44
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A director cannot assign his office to anybody. Though the office of the director is not assignable, a Director or
Managing Director, if so empowered by the Articles of the company, can appoint his successor by will or otherwise
and such appointment of the successor will not be an “assignment” of office by a director.45
See also Comments under Director [Section 2(13)], Manager [Section 2(24)], Officer [Section 2(30)] and Officer
who is in default [Sections 2(31) and 5].
See detailed Comments in Part VI—Chapter II— Managing Directors, etc.: Certain persons not to be appointed
managing directors [Section 267], Amendment of provision relating to managing, whole-time or non-rotational
directors to require Government approval [Section 268], Appointment of managing or whole-time director or
manager to require Government approval only in certain cases [Section 269], Conditions to be fulfilled for the
appointment of a managing or whole-time Director or a Manager without the approval of the Central Government
[Schedule XIII].
See also other relevant provisions, e.g., Section 197A which prohibits simultaneous appointment of different
categories of managerial personnel and Section 198 for overall maximum managerial remuneration and managerial
remuneration in case of absence or inadequacy of profits.
Powers of Managing Director.—In the system of management of a company, the division of powers is governed
by the Memorandum and Articles of the company and the Act. In terms of Section 2(26) of the Companies Act,
1956, the Managing Director (MD) is one who is entrusted with substantial powers of management 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. In terms of Section 291, subject to the
provisions of the Act, the Board of Directors shall be entitled to exercise all powers and to do all such acts and
things as the company is authorised to do. There are provisions in the Act according to which certain decisions can
be taken only with the approval of the General Body and there are provisions according to which certain decisions
can be taken only by the Board. In terms of the second proviso to Section 291(1), the exercise of the powers by the
Board is, inter alia, also subject to the provisions in the Articles. If a Director or Managing Director (MD) has been
vested with certain powers by the Articles, the Board or the General Body cannot interfere with or alter the same
without amending the Articles. In the instant case, the Managing Director has been entrusted with all day-to-day
affairs of the company by the Articles. Therefore, except those matters reserved for the Board in terms of
company's Articles and the Act, all other matters would fall within the day-to-day affairs of the Managing Director
(MD).46
See detailed Comments under Sections 2(26), 269 and 291.
Position of Directors.— See Comments under Director [Section 2(13)] and Sections 290 and 293. See provisions
relating to Directors in Part VI—Management and Administration, Chapter II—Directors [Sections 252-323].
Member [Section 2(27)].—Member, in relation to a company, does not include a bearer of a sharewarrant of the
company issued in pursuance of section 114.
Member and shareholder.—Member and shareholder are interchangeable terms in a company limited by
shares.47
Members may be ordinary shareholders or preference shareholders. The word “member” may be used in relation to
all kinds of companies. The word “shareholder” is used only in relation to companies having a share capital. A
member may not be owner of shares for the time being, e.g., Signatories to the memorandum [Sections 12 and 15],
Transferees of shares not yet registered by the company [Section 108]. If the company so provides by its articles,
the bearer of a share warrant may be deemed to be a member for the purposes defined in the articles [Section
115(5)].
For the purposes of sections 397, 398 and 399 the definition of a member as contained in section 2(27) is
applicable and not the definition given in section 41(2) of the Companies Act, 1956.48 The legal representatives of a
deceased member are entitled to file a petition under sections 397, and 398 of the Act for relief against
mismanagement or oppression even though the names of the representatives have not been registered in the
register of members.49
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See detailed Comments under Section 41—Definition of “member”. See also Comments under Sections 150, 151
and 163.
Memorandum [Section 2(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. The term includes
the original memorandum as registered or as altered from time to time.
Legislative History.—The Companies Act, 1956 (1 of 1956).—The Notes on clauses explained as follows: “The
definition has been brought into line with the definition of ‘articles’ by referring to alterations made under the
previous companies laws as well as this Act.” [ Clause 22 of the Companies Bill, 1953 (46 of 1953)].
In the case of a company limited by shares it must contain the name of the company with “limited” as the last word,
the State in which the company’s registered office is to be situate, objects of the company, a statement that the
liability of the company's members is limited though the liability of the directors may be made unlimited and the
amount of share capital with which the company proposes to be registered and division thereof of a fixed amount.
Each of the subscribers to the memorandum must write opposite his name the number of shares he would take.
Strictly speaking a minor cannot be a subscriber to the memorandum as he cannot enter into a contract. The
memorandum needs to be carefully drafted in as much as the company and the directors cannot do anything
beyond the scope of the memorandum except those incidental to the business of the company.50
See detailed Comments in Part II—Incorporation of company and matters incidental thereto— Memorandum of
Association: Mode of forming incorporated company [Section 12], Requirements with respect to memorandum
[Section 13], Form of memorandum [Section 14], Printing and signature of memorandum [Section 15], Alteration of
memorandum [Section 16], Special resolution and confirmation by Company Law Board required for alteration of
memorandum [Section 17], Change of registered office within a State [Section 17A], Alteration to be registered
within three months [Section 18], Effect of failure to register [Section 19] and General provisions with respect to
Memorandum and Articles [Sections 33 to 40].
Modify and Modification [Section 2(29)].—Modify and modification includes the making of additions and
omissions. Addition or omission amounts to modification as well as alteration. See also Comments under Alter and
Alteration [Section 2(1A)] and Variation [Section 2(50)].
Section 2(1A) defines “altered” and “alteration” to include making of additions and omissions, while “variation” is
defined in section 2(50) to include “abrogation”. The definition of cognate words is to be noted to arrive at a true
meaning of the word “modification”. Section 2(29) defining “modify” and “modification” gives an inclusive
definition.“Modification” would thus include the making of additions and omissions. Reading section 392 by
substituting the definition of the word “modification” in its place, it was held that in the context of section 392
“modification” would mean addition to the scheme of compromise or arrangement or omission therefrom solely for
the purpose of making it workable. The Court [the CLB (the Tribunal)] may omit or add something to a scheme of
compromise or arrangement for making it workable.51
Net worth [Section 2(29A)].—Net worth means the sum total of paid-up capital and free reserves after deducting
the provisions or expenses as may be prescribed. For the purposes of this clause, “free reserves” means all
reserves created out of the profits and share premium account but does not include reserves created out of
revaluation of assets, write back of depreciation provisions and amalgamation.
explained as follows: “Clause (29A) proposes to define ‘net worth’ which means the sum total of the paid-up capital
and free reserves. For the purposes of this clause,
‘free reserves’ means all reserves created out of the profits and share premium account but does not include
reserves created out of revaluation of assets, write back of depreciation provisions and amalgamation.
This definition is relevant for Sections 424C and 424J relating to revival, rehabilitation and winding up of Sick
Industrial Companies.
See detailed Comments under Sections 424A to 424L.

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Officer [Section 2(30)].—As per clause (30) of section 2, as substituted by the Companies (Amendment) Act,
2000, officer includes any director, manager or secretary 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.
reasons for substitution of this clause as follows: “This clause, inter alia, seeks to omit (the references to the
expression ‘managing agent, secretaries and treasurers’) as they have become redundant after the abolition of the
system of managing agent, secretaries and treasurers by Act 17 of 1969.” [ Clause 2 of the Companies (Second
Legislative History of Clause (30) of sections 2 which was earlier substituted by the Companies (Amendment) Act,
1960 is given below.
The Companies (Amendment) Act, 1960 (65 of 1960).—The Notes on clauses explained the reasons for
substitution thus: “The amendment is consequential on the amendment proposed to definition of ‘secretary’ in
section 2(45). (See para 20 of the Report.)” [ Clause 2(g) of the Companies (Amendment) Bill, 1959 (37 of 1959)].
For para 20 of the Report of the Companies Act Amendment Committee, 1957 see Legislative History under
Secretary [Section 2(45)].
clause as under:
“As recommended in paragraph 24 of Part II of the Report of the Commission of Inquiry on the Administration of
Dalmia-Jain Companies (hereinafter referred to as the Commission’s Report), it is proposed to expand the definition
of ‘Officer’ so as to bring within its ambit any person in accordance with whose instructions the Board or any of the
directors of a company is accustomed to act. This is designed to counter the trend whereby dummy directors are
appointed on Boards of companies to implement policies of a dubious nature, while masterminds mainly
instrumental in evolving these policies remain in the background.” [ Clause 3(ii) of the Companies (Second
Commission’s Report.—The recommendations contained in paragraphs 20 to 24 of the Report of the Commission

of Inquiry on the Administration of Dalmia-Jain Companies (Vivian Bose Commission ) are reproduced below:
“Dummy Directors.—20. Various cases have come to the notice of the Commission in the course of its investigation
where dummy directors were put on the Boards of large companies. These directors were persons occupying
subservient and minor positions in the various companies in the group. The extent of this can be noticed when
steno-typists, typists and personal secretaries were made directors of large companies. The Commission is not
canvassing a case against the appointment of directors who may be employees of companies, or for a prohibition
against such practice. It is concerned only with persons in subservient positions, being placed on the Board of
directors, merely to carry out the dictates and wishes of others having the controlling interest and remaining in the
background, particularly when malpractices were involved. The concept of ‘deemed’ directors has already been
introduced in the Companies Act, 1956, though in a few sections only, by using the following expression:—
‘persons in accordance with whose directions or instructions the Board of directors of a company is accustomed to act.’
This expression has been used in the Act mainly with a view to impose effective restrictions on some special
activities of directors and managing agents [ system of managing agency has been abolished see Section 324A] as
in Sections 295, 369, 370 etc. The expression has also been introduced in Sections 162 and 538 with the object of
casting on persons, who fall within the description, the responsibilities attached to directors under these provisions.
The Act has rightly cast these responsibilities on persons who, though exercising full control over the affairs of a
company, but by concealing their identity behind their dummies, otherwise escape the responsibilities attached to
the office of a director. Time and again we have seen how the master-minds behind the malpractices kept in the
background although they had planned and directed the strategy, but left the implementation only to the
subordinates, who were thereby exposed to all the risks inherent in the adoption of such malpractices.
21. The expression used in the existing provisions of the Act to cover ‘deemed’ directors appears, in our opinion, to
have a limited scope, because a person will fall within this description only if the ‘Board of directors’, which under
Section 252(3) means the directors collectively, is accustomed to act in accordance with the directions. Thus, if a
Page 38 of 69
person acts through the majority of nominee directors on the Board, but not all of them are his nominees, it would
appear that he may escape the mischief of the said provisions. Furthermore, the question as to whether a person is
acting in accordance with the directions or instructions of another or not, being a question of fact, it may not often
be easy to prove this in respect of either all or even the majority of the directors on the Board.
22. It may be mentioned in this connection that the expression used in the different sections of the Companies Act
to cover ‘deemed’ directors appears to have been adopted from the English Act, with the modification that it refers
to the ‘Board of directors’ instead of ‘directors’ as referred to in the English Act. The Bhabha Committee of 1952
suggested the use of the word ‘directors’ only and the reference to the word ‘directors’ instead of ‘Board of directors’
in the description may be preferable, if the enlargement of the penal provisions of the Act to in the ‘deemed’
directors is to be effective.
23. The Jenkins Committee in suggesting that every company should have at least two directors, considered this
problem, and the following is an extract from paragraph 25 of their Report:—
‘Employees are sometimes now appointed as second members and we recognise that, if our proposal is adopted,
some employees may be pressed in future to accept appointment as second directors without being informed of the
responsibilities which this involves. This risk should, in our view, be accepted: the remedy is a wider realisation of
the fact that the office of director carries responsibilities as well as prestige. To reduce the difficulties of
enforcement we suggest that the Act should provide that the first two subscribers to the memorandum of
association shall be deemed to be directors unless and until the company notifies the Registrar of the names of at
least two directors.’ [ see Section 254—Subscribers of memorandum deemed to be directors].
24. However, some kind of legislative measure may be necessary in this country and it is therefore recommended
that—the definition of ‘officer’ contained in Section 2(30) should be expanded by the adding of a sub-clause (d) to
include (as an officer) a person in accordance with whose directions or instructions the directors of a company or
any of them are accustomed to act.” [ Commission’s Report: paras 20 to 24].
Daphtary-Sastri Committee Recommendations.—The recommendations of the Daphtary-Sastri Committee are

reproduced below:
“Dummy Directors.—The position of directors in relation to the shareholders has been likened to that of a trustee in
relation to the beneficiary. Directors are generally under an obligation to see that the company’s assets are in a
proper state of investment and monies of the company are spent only for purposes which are reasonably incidental
to and within the reasonable scope of carrying on the business of the company. They should therefore take active
and immediate steps to prevent any misappropriation or breach of trust on the part of their co-directors. It goes
without saying that a director has positive duties to perform in order to safeguard the interests of the shareholders.
A director who is a mere puppet in the hands of another remaining in the background cannot effectively take any
action in that regard. The report of the Commission of Inquiry discloses a very sorry state of affairs in regard to the
companies which were under investigation. Paid employees and young and inexperienced relatives were all on the
Board of Directors, whereas a person who was not on the Board wielded authority over them, staying in the
background and retaining effective control over the assets and activities of the company. These persons, when it
came to fixing responsibility, pleaded helplessness and pointed to the person who controlled their actions and
called themselves variously as nominee directors or benamidar directors or dummy directors, remaining on the
Board only to carry out the directions of that other person. Some of these persons were not even aware of the full
implications of what they were directed to do and they were mere stooges for the malpractices of the mastermind
behind them.
No legislative measure can provide complete safeguard against such clandestine wielding of control over
companies. The Companies Act, 1956 has attempted to cast directors’ responsibilities on persons who conceal
their identities behind dummies but retain full control over the affairs by including within the meaning of director ‘a
person in accordance with whose directions or instructions the Board of directors of a company is accustomed to
act’ in sections 102, 303, 304, 307, 308, 369, 370, 538 etc. The state of affairs in the companies under investigation
shows that this provision is not enough. A provision requiring each and every director to file a declaration through
the company with the Registrar, in all cases where he holds the shares on behalf of another, to disclose thereby the
person for whose benefit he holds them, might provide some safeguard. A further drastic step may also be
considered, and that is to impose a duty on every director to disclose by a declaration the person whose directions
he is obliged to carry out and by whom his voting is likely to be controlled, if that other person is not on the Board of
directors. The concept of deemed directors must, therefore, be enlarged so as to include ‘persons in accordance
with whose directions or instructions the Board of directors or any one or some of them is or are accustomed to act’,
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in order that the provisions may be effective, and a corresponding amendment should be made in the definition of
‘officer’ in section 2(30).” [Daphtary-Sastri Committee Report: Relevant paras].
Department's view.— When a person is deemed to be an ‘Officer’.—“Whether or not a person would come
within the scope of term ‘Officer’ as contemplated in section 2(30) of the Companies Act, 1956 would depend on the
facts and circumstances of each particular case and the relevant provisions of the Companies Act, 1956. Thus, if in
respect of discharge of any particular duty imposed by the Act any person occupies a position of responsibility in a
company, he will be deemed to be an ‘Officer’ in relation to that duty and answerable as such. In this connection,
attention is also invited to the definition of Officer who is in default in section 2(31) read with section 5 of the Act.”
[Letter No. 8/65/2(20)/63-PR, dated 7-10-1963 : Govt. of India publication, Clarifications and Circulars on Company
De factoDirectors.— See also Comments on Defacto Directors and Shadow Directors under other relevant
Sections, e.g., 2(13), 7, 203 and 293.
Position of Officer.—Section 2(30) gives an inclusive definition of the expression officer and elaborates that it
includes any director, manager or secretary 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. Persons who are regularly
employed as part of their business or occupation in conducting the affairs of the company may be officers of the
company. Officer means a person under a contract of service; a servant of special status holding an appointment to
an office which carries with it an authority to give directions to other servants. The term is wide enough and would
include the secretary, accountant and cashier.52
A director is expressly included in the definition of officer. It may include past directors. The term ‘any person’
should be read ejusdem generis and cannot, therefore, include a person who has no business connection with the
company directly or indirectly. The term shall not include a friend of a director, his guru or his wife though the
director may be accustomed to act in accordance with their directions.53
A marketing manager can be treated as an officer of the company and entitled to seek protection under section
633.54 The liquidator is an officer of the company.55 The term may include assistant secretaries and branch
managers.56
The definition is inclusive, therefore, illustrative and not exhaustive and may include an adviser to a
company.57Section 2(30) does not exclude officials, authorised agents, sectional manager, assistant secretary, etc.
An auditor may be an officer and may seek for indemnity but where an auditor is retained to conduct and carry out
an audit function without appointment as an auditor he will not be an officer.58
See also Comments under Director [Section 2(13)], Manager [Section 2(24)], Managing Director [Section 2(26)],
Secretary [Section 2(45)], Officer who is in default [Sections 2(31) and 5] and Person in accordance with whose
directions or instructions directors are accustomed to act [Sections 7, 162(2) and 303(1)], Power to restrain
fraudulent persons from managing companies [Section 203].
1992, “connected person” or “person deemed to be connected person” may, inter alia, include Director [Section
2(13)], Deemed Director [Section 307(10)], Officer of a company [Section 2(30)] including an auditor, Director or
employee of Public Financial Institutions defined in Section 4A, Relative of connected persons [Section 6 and
Regulations 2(h)(viii) and 2(i)].
Officer—Producer Company [Section 581A(g)].—The term “Officer” in relation to Producer Companies includes
any Director or Chief Executive or Secretary or any person in accordance with whose directions or instructions part
or whole of the business of the Producer Company is carried on.
See also Chief Executive of Producer Company [Sections 581A(b) and 581W(1)], Directors of Producer Company
[Section 581-O to 581-W], and Secretary of Producer Company [Section 581-X] of the Companies Act, 1956.

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Officer who is in default [Section 2(31)].—Officer who is in default, in relation to any provision referred to in
sections 5, has the meaning specified in that section.
See detailed Comments under Sections 5.
Option in Securities [Section 2(31A)].—Option in securities has the same meaning as in clause (d) of section 2 of
the Securities Contracts (Regulation) Act, 1956 (42 of 1956). This definition has been inserted by the Companies
(Amendment) Act, 2000 (53 of 2000) with effect from 13-12-2000.*
Operating Agency [Section 2(31AA)].—
Operating agency means any group of experts consisting of persons having special knowledge of business or
industry in which the sick industrial company is engaged and includes public financial institution, State level
institution, scheduled bank or any other person as may be specified as the operating agency by the Tribunal.
explained this clause as follows: “Clause (31AA) proposes to define
‘operating agency’ which means any group of experts consisting of persons having special knowledge of
business or industry in which the sick industrial company is engaged and includes public financial institution, State
level institution, scheduled bank or any other person as may be specified as operating agency by the Tribunal.
See detailed Comments under Sections 424A to 424L inserted by the Companies (Second Amendment) Act, 2002
(11 of 2003) providing for revival, rehabilitation and winding up of Sick Industrial Companies.
Paid-up Capital [Section 2(32)].—Paid-up capital or capital paid up includes capital credited as paid up. See
Comments under Publication of authorised, subscribed and paid-up capital [Section 148] and Form of balance
sheet [Schedule VI].
Prescribed [Section 2(33)].—The Supreme Court in consultation with the High Courts [the Tribunal (NCLT)
constituted under Section 10FB] may prescribe by rules the procedure for winding up of companies under the
provisions of the Companies Act, 1956except sections 503(5), 550(3), 552 and 555(3).
The Central Government has been given power to make rules in respect of all other matters including also in
respect of winding up under sections 503(5), 550(3), 552 and 555(3) of the Companies Act, 1956.
See detailed Comments under Section 10FB, 642 and 643. See also Comments under Tribunal [Section 2(49A)].
amendments as follows: “So as to accord with the correct constitutional position the changes proposed will firstly
take away from the Supreme Court, and vest in the Central Government, the power to make rules in relation to
withdrawal and payment into the public account of India of moneys handled by the Official Liquidator and secondly,
vest in the Supreme Court, rather than in the Central Government, the power to frame rules for inspection of books
and papers of the company, while in the custody of the Official Liquidator, as liquidation in such cases will be under
the supervision of the Court and should appropriately be subject to uniform rules framed by the Supreme Court.
(See para 21 of the Report.)” [ Clause 2(h) of the Companies (Amendment) Bill, 1959 (37 of 1959)].
“The definition of the word ‘prescribed’ in section 2(33), as it now stands, appears to vest in the Supreme Court of
India powers of rule-making which include matters falling outside its jurisdiction. In the absence of Parliamentary
legislation, Article 283(1) of the Constitution vests the rule-making power in the President with reference to deposits
into or withdrawals from the public account of India, or monies realised by the Official Liquidator. Consequently, the
Supreme Court cannot be empowered to frame rules in respect of the above matter as section 2(33) read with
section 552 purports to do. Under 555(3) of the Act, the Liquidator in the winding up of a company, is required to
furnish to the officer authorised by the Central Government a statement in the prescribed form, giving particulars
relating to monies deposited in the Companies’ Liquidation Account, in the public account of India, in the Reserve
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Bank. For this purpose, the Central Government has appointed the Registrars of Companies as ‘officers’ to whom
the said statement is to be furnished. Under section 555(7)(b) of the Act, the Central Government is empowered to
make an order for payment of the amount due to any claimant on a certificate by the Liquidator or on other
materials. The power to prescribe the form of the statements to be made by the Liquidator to the officer appointed
by the Central Government under section 555(3) should appropriately vest in the Central Government and not in the
Supreme Court. On the other hand, as we have suggested in paras 187 and 204 infra, the power to prescribe rules
for the inspection of the books and papers of a company in liquidation, at present exercisable by the Central
Government under section 549, could appropriately be vested in the Supreme Court. For these reasons, section
2(33) and section 643 would have to be amended by taking away the power of the Supreme Court to frame rules in
respect of matters provided for in sections 552 and section 555(3) of the Act and vesting it with power to make rules
as respects the matter provided for in section 549 of the Companies Act, 1956.” [Report: para 21].
Rules.—Prescribed means prescribed by the Rules. In exercise of the powers conferred by section 642, the Central
Government has, inter alia, made the Companies (Central Government’s) General Rules and Forms, 1956. The
Supreme Court has in exercise of powers conferred by section 643 [ now conferred on the Central Government by
the Companies (Second Amendment) Act, 2002 (11 of 2003)] made the Companies (Court) Rules, 1959. See
Previous Companies Law [Section 2(34)].—Previous companies law means any of the laws specified in section
3(1)(ii). See Comments under Section 3.
Private Company [Section 2(35)].—Private company means a private company as defined in section 3. See
Prospectus [Section 2(36)].—It means a document described as prospectus or issued as such. It includes a
notice, circular, advertisement or other document inviting deposits from the public or inviting offers from the public
for the subscription or purchase of shares in, or debentures of, a body corporate.
follows: “This is based on the definition found in the English Act [section 455(1)]. The words ‘but shall not include
any trade advertisement which shows on the face of it that a formal prospectus has been prepared and filed’, which
occur in the definition in the existing Indian Act have been omitted as suggested in paragraph 27 of the Company
Law Committee’s Report.” [ Clause 2(30) of the Companies Bill, 1953 (46 of 1953)].
“In the definition of ‘prospectus’, we have included trade advertisements, which were in our view erroneously
excluded by the Indian Companies (Amendment) Act, 1936.” [ Report: para 27].
The Companies (Amendment) Act, 1960(65 of 1960).—The Notes on clauses explained as follows: “The
amendment is purely clarificatory. (See para 22 of the Report.)” [ Clause 2(i) of the Companies (Amendment) Bill,
1959 (37 of 1959)].
The recommendations the Companies Act Amendment Committee, 1957 are reproduced below:
“The definition of ‘prospectus’ taken from the English Act is not happy inasmuch as a
‘prospectus’ is defined as meaning ‘any prospectus, notice, etc.’

What is meant is probably that any document, described as a prospectus, has to be regarded as a prospectus
within the meaning of the Act. If so, ‘prospectus’ might be defined as meaning ‘any document described or issued
as a prospectus or any 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.’ The definition includes a newspaper
advertisement. It has been pointed out that advertisement charges for the insertion in a newspaper of a prospectus
with full statutory particulars are inordinately heavy in the case of companies with a modest capital and that a
newspaper advertisement of the fact of the floatation of a company should be excluded from the definition of
‘prospectus’. Sections 56 to 65 of the Companies Act, 1956 (1 of 1956) contain stringent provisions regarding the
contents of prospectuses but section 66 of the Companies Act provides that 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 certain other particulars referred to in the section. There is no reason to exclude newspaper
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advertisements from the definition of ‘prospectus’ if there is an invitation to the public to subscribe for shares or
debentures. A mere announcement in a newspaper about the formation of a company or of the fact of the
publication of a prospectus by the company in connection with the issue of shares or debentures without any
invitation to the public to subscribe need not be included in the definition of prospectus provided the place where a
copy of the prospectus may be obtained is stated in the announcement.” [Report: para 22].
follows: “This amendment is consequential to the insertion of sections 58A and 58B regarding deposits invited by
companies from the public.” [ Clause 2(iv) of the Companies (Amendment) Bill, 1972 (72 of 1972)].
Offer or invitation to public.—The test of a Prospectus is whether the document invites deposits or offers to buy
shares or debentures from the public. For the meaning of invitation from the public see Comments under Section
67.
“Public” is a general term. No particular numbers are prescribed. Anything from two to infinity may serve; perhaps
even one, if he is intended to be the first of a series of subscribers, but makes further proceedings needless by
himself subscribing the whole. The point is that the offer is such as to be open to anyone who brings his money and
applies in due form whether the prospectus was addressed to him on behalf of the company or not.59
Matters to be stated in Prospectus.—For the matters to be stated and reports to be set out in prospectus see
Section 56. See detailed Comments under Prospectus [Sections 55 to 68A]. See also Abridged prospectus [Section
2(1)].
Vetting of Prospectus/Offer Document by SEBI.—As already stated the office of the Controller of Capital Issues
(CCI) has been replaced by the Securities and Exchange Board of India (SEBI). Now instead of consent of CCI the
draft prospectus and the offer document is required to be vetted by the SEBI before issue to see that the same is in
compliance with the requirements of the Companies Act, 1956 and the SEBI Guidelines. See detailed Comments
under Section 55A and 56.
Public Company [Section 2(37)].—Public company means a public company as defined in section 3. See detailed
Public Holiday [Section 2(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.
Under the Negotiable Instruments Act, 1881, ‘public holiday’ includes Sunday and any other day declared by the
Central Government, by notification in the Official Gazette, to be a public holiday. [Explanation to Section 25 of the
Negotiable Instruments Act, 1881 (26 of 1881)].
This definition is important for the purposes of sections 74, 166(2) and 288(1) of the Companies Act, 1956. For the
purposes of section 166(2) a day declared by the Central Government as a public holiday will have no effect if the
notice has already been issued to the shareholders. In such a case even if it is declared a public holiday, the
meeting will have to be held on that day.
Recognised Stock Exchange [Section 2(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.
Notification No. G.S.R. 1060(E), dated 21-12-1989*.— Recognised Stock Exchanges.—“In pursuance of clause
(39) of section 2 of the Companies Act, 1956 (1 of 1956), and in supersession of the Notifications of the
Government of India in the lateMinistry of Law(Department of Company Affairs) G.S.R. 466, dated the 21st March,
1966 and G.S.R. 1157, dated the 16th July, 1966 on the subject, the Company Law Boardhereby notifies, for the
purposes of the provisions of clause (b) of sub-section (5) of section 56, section 73, sub-sections (1A) and (1B) of
section 108, clause (c) of sub-section (1) of section 149, sub-section (1) of section 161, clause (iv) of proviso (b) to
sub-section (1) of section 219 and sub-section (5) of section 603 of the Companies Act, 1956 and clause 8 of Part
III of Schedule VI to the said Act, the following stock exchanges as recognised stock exchanges, namely:—
1. Stock Exchange, Bombay.
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2. Calcutta Stock Exchange Association Ltd., Calcutta.

3. Madras Stock Exchange Ltd., Madras.
4. The Stock Exchange, Ahmedabad.
5. The Delhi Stock Exchange Association Ltd., New Delhi.
6. Madhya Pradesh Stock Exchange, Indore.
7. Bangalore Stock Exchange Ltd., Bangalore.
8. The Hyderabad Stock Exchange Ltd., Hyderabad.
9. Cochin Stock Exchange Ltd., Ernakulam.
10. The Uttar Pradesh Stock Exchange Association Ltd., Kanpur.
11. Pune Stock Exchange Association Ltd., Pune.
12. The Ludhiana Stock Exchange Association Ltd., Ludhiana.
13. The Gauhati Stock Exchange Association Ltd., Gauhati.
14. Kanara Stock Exchange Ltd., Mangalore.
15. Magadh Stock Exchange Association, Patna.
16. Jaipur Stock Exchange Ltd., Jaipur.
17. Bhubaneswar Stock Exchange Association Ltd., Bhubaneswar.
18. Saurashtra Kutch Stock Exchange Ltd., Rajkot.”
60[19. Vadodara Stock Exchange Ltd., Vadodara.]
61[20. OTC Exchange of India, Bombay.]
62[21. Coimbatore Stock Exchange Ltd., Coimbatore.]
63[22. National Stock Exchange of India Limited.]
2(39) had been delegated to the Company Law Boardvide Notification No. G.S.R. 443(E), dated 18-10-1972, this
notification has since been rescinded by Notification No. G.S.R. 287(E), dated 31-5-1991. For details see
Comments under Sections 10E and 637.
Writ.—A Stock Exchange is a “State or other authority” under Article 12 of the Constitution of India. It would be
amenable to writ jurisdiction under Article 226 where it is shown that it is performing a statutory/public duty cast on it
under the statute, rules and bye-laws giving rise to an obligation which it owes to the aggrieved party and which has
been breached in some manner. It would, depend upon the facts and circumstances of each case and existence of
alternative remedy.64
A writ cannot be issued to cancel the registration of the company under the Companies Act, 1956 or the
commencement certificate issued to it under section 149 of the Companies Act, 1956. Writ can be issued against a
stock exchange if at all only after recognition is granted to the stock exchange under the Securities Contracts
(Regulation) Act, 1956 (42 of 1956).65
Stock Exchanges recognised under Section 4 of SCRA.— See Comments under Section 4 of the Securities
Contracts (Regulation) Act, 1956 (42 of 1956). Provisions of the SCRA have been annotated in Comments under
relevant Sections.
Notifications under Sections 3 and 4 of the Securities Contracts (Regulation) Act, 1956—Renewal of
Recognition of Stock Exchanges.—Recent Notifications of the Securities and Exchange Board of India (SEBI)
granting renewal of recognition to the Stock Exchanges under Sections 3 and 4 of the Securities Contracts
(Regulation) Act, 1956 (42 of 1956) (SCRA) are reproduced below.
Renewal of recognition to Jaipur Stock Exchange Ltd.—“The Securities and Exchange Board of India, having
considered the application for renewal of recognition made under section 3 of the Securities Contracts (Regulation)
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Act, 1956, by theJaipur Stock Exchange Limited having its registered office at Stock Exchange Building, JLN Marg,
Malviya Nagar, Jaipur-302 017 and being satisfied that it would be in the interest of the trade and also in the public
interest so to do, hereby grants, in exercise of the powers conferred by section 4 of the Securities Contracts
(Regulation) Act, 1956, renewal of recognition to the said Exchange under section 4 of the said Act for a period of
three years commencing on the 9th day of January, 2006 and ending on the 8th day of January, 2009, in respect of
contracts in securities subject to the conditions stated herein below or as may be prescribed or imposed
hereafter:—
‘The exchange shall commence trading only after obtaining final approval from the Securities and Exchange Board of India
for establishment of the Settlement Guarantee Fund/Trade Guarantee Fund’.” [Notification No. S.O. 24(E) (F. No.
SEBI/LE/57048/06), dated 4-1-2006, published in the Gazette of India, Extraordinary, No. 22, Part II, Section 3(ii), dated 6-
1-2006 : (2006) 129 Comp. Cas. (St.) 24].
Renewal of recognition to Saurashtra Kutch Stock Exchange Ltd.—“The Securities and Exchange Board of
India, having considered the application for renewal of recognition made under section 3 of the Securities Contracts
(Regulation) Act, 1956, bySaurashtra Kutch Stock Exchange Limited, having its registered office at Popatbhai
Sorathia Bhavan, Sadar Bazar, Rajkot-360 001, and being satisfied that it would be in the interest of the trade and
also in the public interest so to do, hereby grants, in exercise of the powers conferred to section 4 of the Securities
Contracts (Regulation) Act, 1956, renewal of recognition to the said Exchange under section 4 of the said Act for a
period of one year commencing on the 10th day of July, 2006, and ending on the 9th day of July, 2007, in respect of
contracts in securities subject to the conditions stated herein below or as may be prescribed or imposed
hereinafter:—
The Exchange shall commence trading only after complying with the suggestions stated in the Report of the
Inspection of the Exchange conducted by the Securities and Exchange Board of India during the period June, 7 to
10, 2006, and communicated to the Exchange vide letter No. MIRSD/DPSIII/PJ/70646/2006, dated June 30, 2006.”
[Notification No. S.O. 1024(E) (F. No. SEBI/LE/70796/2006), dated 7-7-2006, published in the Gazette of India,
Extraordinary, No. 706, Part II, Section 3(ii), dated 7-7-2006 : (2006) 132 Comp. Cas. (St.) 11].
‘The exchange shall commence trading only after operationalisation of Settlement Guarantee Fund/Trade
Guarantee Fund duly approved by SEBI’.” [Notification No. S.O. 1902(E) (F. No. SEBI/LE/79205/06), dated 6-11-
2006, published in the Gazette of India, Extraordinary, No. 1330, Part II, Section 3(ii), dated 6-11-2006 : (2006) 134
Comp. Cas. (St.) 134].
Renewal of recognition to Inter-connected Stock Exchange of India Ltd.—“The Securities and Exchange
Board of India, having considered the application for renewal of recognition made under section 3 of the Securities
Contracts (Regulation) Act, 1956, byInter-connected Stock Exchange of India Limited having its registered office at
International Infotech Park, Tower 7, 5th floor, Vashi, Navi Mumbai-400 703 and being satisfied that it would be in
the interest of the trade and also in the public interest so to do, hereby grants, in exercise of the powers conferred
by section 4 of the Securities Contracts (Regulation) Act, 1956, renewal of recognition to the said exchange under
section 4 of the said Act for a period of one year commencing on the 18th day of November, 2006, and ending on
the 17th day of November, 2007, in respect of contracts in securities subject to the conditions as may be prescribed
or imposed hereafter.” [Notification No. S.O. 1972(E) (F. No. SEBI/LE/79776/2006), dated 15-11-2006, published in
the Gazette of India, Extraordinary, No. 1375, Part II, Section 3(ii), dated 15-11-2006 :(2006) 134 Comp. Cas. (St.)
136].
Renewal of recognition to Vadodara Stock Exchange Ltd.—“The Securities and Exchange Board of India,
having considered the application for renewal of recognition made under section 3 of the Securities Contracts
(Regulation) Act, 1956 byVadodara Stock Exchange Limited having its registered office at Fortune Tower,
Sayajiganj, Vadodara-390 005, and being satisfied that it would be in the interest of the trade and also in the public
interest so to do, hereby grants, in exercise of the powers conferred by section 4 of the Securities Contracts
(Regulation) Act, 1956 renewal of recognition to the said Exchange under section 4 of the said Act for a period of
one year commencing on the 4th day of January, 2007, and ending on 3rd day of January, 2008, in respect of
contracts in securities subject to the conditions as may be prescribed or imposed hereafter.” [Notification No. F. No.
SEBI/LE/82971/06, dated 21-12-2006, published in the Gazette of India, Extraordinary, No. 191, Part III, Section 4,
page 14, dated 27-12-2006 :(2007) 135 Comp. Cas. (St.) 57].
Renewal of recognition to Ludhiana Stock Exchange Ltd.—“The Securities and Exchange Board of India,
having considered the application for renewal of recognition made under Section 3 of the Securities Contracts
(Regulation) Act, 1956, by theLudhiana Stock Exchange Limited having its registered office at Feroze Gandhi
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Market, Ludhiana-141 001, and being satisfied that it would be in the interest of the trade and also in the public
interest so to do, hereby grants, in exercise of the powers conferred by Section 4 of the Securities Contracts
(Regulation) Act, 1956, renewal of recognition to the said Exchange under Section 4 of the said Act, for a period of
one year commencing on the 28th day of April, 2007, and ending on the 27th day of April, 2008, in respect of
contracts in securities subject to the condition as may be prescribed or imposed hereafter.” [Notification No. F. No.
dated 11-4 2007 :(2007) 137 Comp. Cas. (St.) 3].
Renewal of recognition to Guwahati Stock Exchange Ltd.—“The Securities and Exchange Board of India,
(Regulation) Act, 1956, by theGuwahati Stock Exchange Limited having its registered office at Saraf Building
Annexe, A.T. Road, Guwahati-781 001 (Assam) and being satisfied that it would be in the interest of the trade and
also in the public interest so to do, hereby grants, in exercise of the powers conferred by Section 4 of the Securities
Contracts (Regulation) Act, 1956, renewal of recognition to the said Exchange under Section 4 of the said Act for a
period of one year commencing on the 1st day of May, 2007, and ending on 30th day of April, 2008, in respect of
contracts in securities subject to the condition as may be prescribed or imposed hereafter.
The Exchange shall commence trading only after complying with the observations/suggestions stated in the Report
of the inspection of the Exchange conducted by the Securities and Exchange Board of India during the period
March 21-23, 2007, and communicated to the Exchange vide Letter No. SEBI/ERO/BNS/2007/11348, dated April 5,
2007.” [Notification No. F. No. SEBI/LE/2201/2007, dated 18-4-2007, published in the Gazette of India,
Extraordinary, No. 88, Part III, Section 4, dated 18-4-2007 : (2007) 137 Comp. Cas. (St.) 3].
Renewal of recognition to Bhubaneswar Stock Exchange Ltd.—“The Securities and Exchange Board of India,
(Regulation) Act, 1956 byBhubaneswar Stock Exchange Limited, having its registered office at 6th Floor, IDCO
Towers, Janpath, Bhubaneswar-751 022, and being satisfied that it would be in the interest of the trade and also in
the public interest so to do, hereby grants, in exercise of the powers conferred by Section 4 of the Securities
Contracts (Regulation) Act, 1956, renewal of recognition to the said Exchange under Section 4 of the said Act for a
period of one year commencing on the 5th day of June, 2007, and ending on the 4th day of June, 2008, in respect
of contracts in securities subject to the conditions stated hereinbelow or as may be prescribed or imposed hereafter:
‘The Exchange shall commence trading only after obtaining final approval from SEBI for establishment of the
Settlement Guarantee Fund or Trade Guarantee Fund’.” [Notification No. F. No. SEBI/LE/93279/07, dated 16-5-
2007, published in the Gazette of India, Extraordinary, No. 109, Part III, Section 4, dated 17-5-2007 : (2007) 137
Renewal of recognition to Uttar Pradesh Stock Exchange Association Ltd.—“The Securities and Exchange
Board of India, having considered the application for renewal of recognition made under Section 3 of the Securities
Contracts (Regulation) Act, 1956, by theUttar Pradesh Stock Exchange Association Limited having its registered
office at ‘Padam Towers’, 14/113, Civil Lines, Kanpur-208 001 and being satisfied that it would be in the interest of
the trade and also in the public interest so to do, hereby grants, in exercise of the powers conferred by Section 4 of
the Securities Contracts (Regulation) Act, 1956, renewal of recognition to the said Exchange under Section 4 of the
said Act for a period of one year commencing on the 3rd day of June, 2007, and ending on 2nd day of June, 2008,
in respect of contracts in securities subject to the condition as may be prescribed or imposed hereafter.”
[Notification No. F. No. SEBI/LE/94264/07, dated 28-5-2007, published in the Gazette of India, Extraordinary, No.
118, Part III, Section 4, dated 29-5-2007 :(2007) 137 Comp. Cas. (St.) 128].
Renewal of recognition to OTC Exchange of India.—“The Securities and Exchange Board of India, having
considered the application for renewal of recognition made under Section 3 of the Securities Contracts (Regulation)
Act, 1956, by OTC Exchange of India having its registered office at 92, Maker Towers, ‘F’, Cuffe Parade, Mumbai-
400 005 and being satisfied that it would be in the interest of the trade and also in the public interest so to do,
hereby grants, in exercise of the powers conferred under Section 4 of the Securities Contracts (Regulation) Act,
1956, renewal of recognition to the said Exchange under Section 4 of the said Act for a period of one year
commencing on the 23rd day of August, 2007, and ending on the 22nd day of August, 2008, in respect of contracts
in securities subject to the conditions as may be prescribed or imposed hereafter.” [Notification No. F. No.
dated 1-8-2007 :(2007) 138 Comp. Cas. (St.) 37].
Renewal of recognition to Pune Stock Exchange Ltd.—“The Securities and Exchange Board of India, having
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Act, 1956 byPune Stock Exchange Limited, having its registered office at ‘Shivleela Chambers’, 752, Sadashiv
Peth, R.B. Kumthekar Marg, Pune-411 030, and being satisfied that it would be in the interest of the trade and also
in the public interest so to do, hereby grants, in exercise of the powers conferred under Section 4 of the Securities
Contracts (Regulation) Act, 1956, renewal of recognition to the Stock Exchange under Section 4 of the said Act for
a period of one year commencing on the 2nd day of September, 2007 and ending on the 1st day of September
2008, in respect of contracts in securities subject to the conditions as may be prescribed or imposed hereafter.”
[Notification No. F. No. SEBI/LE/102158/2007, dated 29-8-2007, published in the Gazette of India, Extraordinary,
No. 173, Part III, Section 4 :(2007) 139 Comp. Cas. (St.) 9].
Renewal of recognition to Cochin Stock Exchange Ltd.—“The Securities and Exchange Board of India, having
Act, 1956, byCochin Stock Exchange Ltd., having its registered office at MES, Dr. P.K. Abdul Gafoor Memorial
Cultural Complex, 36/1565, 4th Floor, Judges Avenue, Kaloor, Cochin-628 017, and being satisfied that it would be
in the interest of the trade and also in the public interest so to do, hereby grants, in exercise of the powers conferred
under Section 4 of the Securities Contracts (Regulation) Act, 1956, renewal of recognition to the said Exchange
under Section 4 of the said Act for a period of one year commencing on the 8th day of November, 2007, and ending
on the 7th day of November, 2008, in respect of contracts in securities subject to the conditions stated hereinbelow
or as prescribed or imposed hereafter:
‘The exchange shall commence trading only after the operationalisation of Settlement Guarantee Fund/Trade
Guarantee Fund duly approved by SEBI’.” [Notification No. SEBI/LE/105515/2007, dated 15-10-2007, published in
the Gazette of India, Extraordinary, No. 206, Part III, Section 4 : (2007) 140 Comp. Cas. (St.) 6].
Corporatisation and Demutualisation of Stock Exchanges.—The Securities Contracts (Regulation) Act, 1956
(42 of 1956) as amended by the Securities Laws (Amendment) Act, 2004 (1 of 2005) (w.r.e.f. 12-10-2004), inter
alia, provides for:
“Corporatisation” [Section 2(aa) of SCRA].—
“Corporatisation” means the succession of a Recognised Stock Exchange, being a body of individuals or a
society registered under the Societies Registration Act, 1860 (21 of 1860), by another stock exchange, being a
company incorporated for the purpose of assisting, regulating or controlling the business of buying, selling or
dealing in securities carried on by such individuals or society.
“Demutualisation” [Section 2(ab) of SCRA].—
“Demutualisation” means the segregation of ownership and management from the trading rights of the members
of a Recognised Stock Exchange in accordance with a Scheme approved by the Securities and Exchange Board of
India (SEBI).
Scheme for Corporatisation or Demutualisation [Section 2(ga)].—
“Scheme” means a scheme for Corporatisation or Demutualisation of a Recognised Stock Exchange which may
provide for—
(i) the issue of shares for a lawful consideration and provision of trading rights in lieu of membership cards of
members of a recognised stock exchange;
(ii) the restrictions on voting rights;
(iii) the transfer of property, business, assets, rights, liabilities, recognitions, contracts of the recognised stock
exchange, legal proceedings by, or against, the recognised stock exchange, whether in the name of the
recognised stock exchange or any trustee or otherwise and any permission given to, or by, the recognised
stock exchange;
(iv) the transfer of employees of a recognised stock exchange to another recognised stock exchange;
(v) any other matter required for the purpose of, or in connection with, the corporatisation or demutualisation,
as the case may be, of the recognised stock exchange.
Page 47 of 69
Stock Exchange [Section 2(j) of SCRA].—
“Stock exchange” means—

(a) any body of individuals, whether incorporated or not, constituted before corporatisation and
demutualisation under sections 4A and 4B, or
(b) a body corporate incorporated under the Companies Act, 1956 (1 of 1956), whether under a scheme of
corporatisation and demutualisation or otherwise,
for the purpose of assisting, regulating or controlling the business of buying, selling or dealing in securities
.
Corporatisation and demutualisation of stock exchanges [Section 4A].—On and from the appointed date, all
Recognised Stock Exchanges (if not corporatised and demutualised before the appointed date) shall be
corporatised and demutualised in accordance with the provisions contained in Section 4B:
Provided that the Securities and Exchange Board of India may, if it is satisfied that any recognised stock exchange
was prevented by sufficient cause from being corporatised and demutualised on or after the appointed date, specify
another appointed date in respect of that recognised stock exchange and such recognised stock exchange may
continue as such before such appointed date.
Explanation.—For the purposes of this section,
“appointed date” means the date which the Securities and Exchange Board of India may, by notification in the
Official Gazette, appoint and different appointed dates may be appointed for different recognised stock exchanges.
Procedure for corporatisation and demutualisation [Section 4B].—(1) All recognised stock exchanges referred
to in Section 4A shall, within such time as may be specified by the Securities and Exchange Board of India (SEBI),
submit a scheme for corporatisation and demutualisation for its approval:
Provided that the Securities and Exchange Board of India, may, by notification in the Official Gazette, specify name
of the recognised stock exchange, which had already been corporatised and demutualised, and such stock
exchange shall not be required to submit the scheme under this section.
(2) On receipt of the scheme referred to in sub-section (1), the Securities and Exchange Board of India may, after
making such enquiry as may be necessary in this behalf and obtaining such further information, if any, as it may
require and if it is satisfied that it would be in the interest of the trade and also in the public interest, approve the
scheme with or without modification.
(3) No scheme under sub-section (2) shall be approved by the Securities and Exchange Board of India if the issue
of shares for a lawful consideration or provision of trading rights in lieu of membership card of the members of a
recognised stock exchange or payment of dividends to members have been proposed out of any reserves or assets
of that stock exchange.
(4) Where the scheme is approved under sub-section (2), the scheme so approved shall be published immediately
by—
(a) the Securities and Exchange Board of India in the Official Gazette;
(b) the recognised stock exchange in such two daily newspapers circulating in India, as may be specified by
the Securities and Exchange Board of India,
and upon such publication, notwithstanding anything to the contrary contained in this Act or any other law for the
time being in force or any agreement, award, judgment, decree or other instrument for the time being in force, the
scheme shall have effect and be binding on all persons and authorities including all members, creditors, depositors
and employees of the recognised stock exchange and on all persons having any contract, right, power, obligation or
liability with, against, over, to, or in connection with, the recognised stock exchange or its members.
(5) Where the Securities and Exchange Board of India is satisfied that it would not be in the interest of the trade and
Page 48 of 69
also in the public interest to approve the scheme under sub-section (2), it may, by an order, reject the scheme and
such order of rejection shall be published by it in the Official Gazette:
Provided that the Securities and Exchange Board of India shall give a reasonable opportunity of being heard to all
the persons concerned and the recognised stock exchange concerned before passing an order rejecting the
scheme.
(6) The Securities and Exchange Board of India may, while approving the scheme under sub-section (2), by an
order in writing, restrict—
(a) the voting rights of the shareholders who are also stock brokers of the recognised stock exchange;
(b) the right of shareholders or a stock broker of the recognised stock exchange to appoint the representatives
on the governing Board of the stock exchange;
(c) the maximum number of representatives of the stock brokers of the recognised stock exchange to be
appointed on the governing Board of the recognised stock exchange, which shall not exceed one-fourth of
the total strength of the governing Board.
(7) The order made under sub-section (6) shall be published in the Official Gazette and on the publication thereof,
the order shall, notwithstanding anything to the contrary contained in the Companies Act, 1956 (1 of 1956), or any
other law for the time being in force, have full effect.
(8) Every recognised stock exchange, in respect of which the scheme for corporatisation or demutualisation has
been approved under sub-section (2), shall, either by fresh issue of equity shares to the public or in any other
manner as may be specified by the Regulations made by the Securities and Exchange Board of India, ensure that
at least fifty-one per cent of its equity share capital is held, within twelve months from the date of publication of the
order under sub-section (7), by the public other than shareholders having trading rights:
Provided that the Securities and Exchange Board of India may, on sufficient cause being shown to it and in the
public interest, extend the said period by another twelve months.
Stock Exchanges (Corporatisation and Demutualisation) Schemes.—The Stock Exchanges (Corporatisation

and Demutualisation) Schemes issued as Order under Section 4B(6) and 4B(7) of the Securities Contracts
(Regulation) Act, 1956 (42 of 1956) as amended by the Securities Laws (Amendment) Act, 2004 (1 of 2005)
(w.r.e.f. 12-10-2004)vide Notifications are enumerated below:
(1) Delhi Stock Exchange Association Ltd. (Demutualisation) Scheme, 2005 [Notification No. S.O. 1198(E),
dated 29-8-2005, published in the Gazette of India, Extraordinary, No. 899, Part II, Section 3(ii), page 8,
dated 29-8-2005 : (2005) 127 Comp. Cas. (St.) 3].
(2) Calcutta Stock Exchange Association Limited (Demutualisation) Scheme, 2005 [Notification No. S.O.
1199(E), dated 29-8-2005, published in the Gazette of India, Extraordinary, No. 900, Part II, Section 3(ii),
page 8, dated 29-8-2005 : (2005) 127 Comp. Cas. (St.) 7].
(3) Madras Stock Exchange Limited (Corporatisation and Demutualisation) Scheme, 2005 [Notification No.
S.O. 1200(E), dated 29-8-2005, published in the Gazette of India, Extraordinary, No. 901, Part II, Section
3(ii), page 9, dated 29-8-2005 : (2005) 127 Comp. Cas. (St.) 12].
(4) Madhya Pradesh Stock Exchange (Corporatisation and Demutualisation) Scheme, 2005 [Notification No.
(5) Pune Stock Exchange Limited (Corporatisation and Demutualisation) Scheme, 2005 [Notification No. S.O.
(6) Uttar Pradesh Stock Exchange Association Limited (Demutualisation) Scheme, 2005 [Notification No. S.O.
(7) Gauhati Stock Exchange Limited (Corporatisation and Demutualisation) Scheme, 2005 [Notification No.
Page 49 of 69
(8) Bangalore Stock Exchange Limited (Demutualisation) Scheme, 2005 [Notification No. S.O. 1205(E), dated
29-8-2005, published in the Gazette of India, Extraordinary, No. 906, Part II, Section 3(ii), page 8, dated
29-8-2005 : (2005) 127 Comp. Cas. (St.) 60].
(9) Hyderabad Stock Exchange Limited (Corporatisation and Demutualisation) Scheme, 2005 [Notification No.
3(ii), page 8 : (2005) 127 Comp. Cas. (St.) 66].
[Recognition has been withdrawn vide Notification No. S.O. 1573(E), dated 19-9-2007, published in the
Gazette of India, Extraordinary, No. 1143, Part II, Section 3(ii) : (2007) 139 Comp. Cas. (St.) 30].
(10) Cochin Stock Exchange Limited (Demutualisation) Scheme, 2005 [Notification No. S.O. 1207(E), dated 29-
8-2005, published in the Gazette of India, Extraordinary, No. 908, Part II, Section 3(ii), page 8, dated 29-8-
2005 : (2005) 127 Comp. Cas. (St.) 71].
(11) Vadodara Stock Exchange Limited (Corporatisation and Demutualisation) Scheme, 2005 [Notification No.
(12) Jaipur Stock Exchange Limited (Corporatisation and Demutualisation) Scheme, 2005 [Notification No. S.O.
(13) Magadh Stock Exchange Association (Corporatisation and Demutualisation) Scheme, 2005 [Notification
No. S.O. 1316(E), dated 15-9-2005, published in the Gazette of India, Extraordinary, No. 984, Part II,
Section 3(ii), page 10 : (2005) 127 Comp. Cas. (St.) 113].
(14) Ludhiana Stock Exchange Association Limited (Demutualisation) Scheme, 2005 [Notification No. S.O.
(15) Saurashtra Kutch Stock Exchange Limited (Corporatisation and Demutualisation) Scheme, 2005
[Notification No. S.O. 1318(E), dated 15-9-2005, published in the Gazette of India, Extraordinary, No. 986,
Part II, Section 3(ii), page 9 : (2005) 127 Comp. Cas. (St.) 124].
(16) Bhubaneswar Stock Exchange (Corporatisation and Demutualisation) Scheme, 2005 [Notification No. S.O.
(17) Inter-connected Stock Exchange of India Limited (Corporatisation and Demutualisation) Scheme, 2005
[Notification No. S.O. 1320(E), dated 15-9-2005, published in the Gazette of India, Extraordinary, No. 988,
Part II, Section 3(ii), page 11 : (2005) 128 Comp. Cas. (St.) 2].
(18) Ahmedabad Stock Exchange (Corporatisation and Demutualisation) Scheme, 2005 [Notification No. S.O.
Notification under Section 4B(1) of the SCRA— OTC Exchange of India need not submit a scheme for its
corporatisation and demutualisation.—“Whereas OTC Exchange of India having its registered office at 92,
Maker Towers, ‘F’, Cuffe Parade, Mumbai-400 005, has vide its letters No. 0285/05/MD/76, dated January 31,
2005, No. 1749/05/MD, dated August 11, 2005 and No. 1811/05/MD/125, dated August 23, 2005, represented to
the Securities and Exchange Board of India that it is an already corporatised and demutualised stock exchange and
has confirmed that it shall not change its current corporatised and demutualised structure.
Now, therefore, the Securities and Exchange Board of India hereby specifies, under the proviso to sub-section (1)
of section 4B of the Securities Contracts (Regulation) Act, 1956, that the OTC Exchange of India, which had already
been corporatised and demutualised, shall not be required to submit a scheme for its corporatisation and
demutualisation, subject to the following conditions:—
(1) The OTC Exchange of India shall not change its current corporatised and demutualised structure, without
prior approval of the Securities and Exchange Board of India; and
(2) The OTC Exchange of India shall comply with further conditions as may be imposed by the Securities and
Exchange Board of India in this regard from time to time.” [Notification No. S.O. 1313(E) (F. No.
Page 50 of 69
SEBI/MRD/49395/2005, dated 15-9-2005, published in the Gazette of India, Extraordinary, No. 981, Part II,
Section 3(ii), dated 15-9-2005 : (2005) 127 Comp. Cas. (St.) 89].
Withdrawal of recognition [Section 5(2)].—Where the Recognised Stock Exchange has not been corporatised or
demutualised or it fails to submit the scheme referred to in sub-section (1) of section 4B within the specified time
therefor or the scheme has been rejected by the Securities and Exchange Board of India under sub-section (5) of
section 4B, the recognition granted to such stock exchange under Section 4, shall, notwithstanding anything to the
contrary contained in this Act, stand withdrawn and the Central Government shall publish, by notification in the
Official Gazette, such withdrawal of recognition.
See also Proviso to Section 5(2) of the SCRA, 1956.
Clearing corporation [Section 8A].—(1) A recognised stock exchange may, with the prior approval of the
Securities and Exchange Board of India, transfer the duties and functions of a clearing house to a clearing
corporation, being a company incorporated under the Companies Act, 1956 (1 of 1956), for the purpose of—
(a) the periodical settlement of contracts and differences thereunder;
(b) the delivery of, and payment for, securities;
(c) any other matter incidental to, or connected with, such transfer.
Every clearing corporation shall make its bye-laws and submit it to the SEBI for its approval [Sub-section (2)], SEBI
shall grant its approval [Sub-section (3)], Certain provisions of the SCRA shall apply to the Clearing Corporation as
they apply to a Recognised Stock Exchange [Sub-section (4)].
See also Comments on the SCRA, 1956, Powers of SEBI and Listing of Securities under Sections 55A and 73 of
the Companies Act, 1956 in this Book.
Appointed dates for Stock Exchanges by SEBI.—“Whereas, in exercise of the powers conferred upon the
Securities and Exchange Board of India (SEBI) under Section 4B of the Securities Contracts (Regulation) Act, 1956
(SCRA), SEBI had approved and published the Scheme of Corporatisation and Demutualisation for the
undermentioned Stock Exchanges on August, 29, 2005.
And, whereas, the undermentioned Stock Exchanges have ensured compliance with the requirements of Section
4B(8) of the SCRA on the dates of confirmation mentioned below and have completed Corporatisation and
Demutualisation by this date:
Sl. No. Name of Stock Exchanges Date of confirmation
1. The Uttar Pradesh Stock Exchange 21.8.2007

Association Ltd.
2. Madras Stock Exchange Ltd. 25.8.2007
3. Cochin Stock Exchange Ltd. 25.8.2007
4. Bangalore Stock Exchange Ltd. 27.8.2007
5. The Gauhati Stock Exchange Ltd. 27.8.2007
6. The Calcutta Stock Exchange 28.8.2007

Association Ltd.
7. The Delhi Stock Exchange Association 28.8.2007

Ltd.
Now, therefore, in exercise of the powers conferred by Section 4A of the SCRA, SEBI hereby appoints the
aforementioned dates as appointed date in respect of the abovementioned stock exchanges.” [Notification No.
SEBI/MRD/DSA/104459/2007, dated 24-9-2007, published in the Gazette of India, Extraordinary, No. 189, Part III,
Section 4 : (2007) 139 Comp. Cas. (St.) 32].
Page 51 of 69
Appointed dates for Stock Exchanges by SEBI.—“Whereas, in exercise of the powers conferred upon the
Securities and Exchange Board of India (SEBI) under Section 4B of the Securities Contracts (Regulation) Act, 1956
(SCRA), SEBI had approved and published the Scheme of Corporatisation and Demutualisation for the
undermentioned Stock Exchanges on September 15, 2005.
And, whereas, the undermentioned Stock Exchanges have ensured compliance with the requirements of Section
4B(8) of the SCRA on the dates of confirmation mentioned below and have completed Corporatisation and
Demutualisation by this date:
Sl. No. Name of Stock Exchanges Date of confirmation
1. Ahmedabad Stock Exchange Ltd. 8.9.2007
2. Ludhiana Stock Exchange Ltd. 10.9.2007
3. Jaipur Stock Exchange Ltd. 12.9.2007
4. Bhubaneswar Stock Exchange Ltd. 12.9.2007
5. Inter-connected Stock Exchange of India 13.9.2007

Ltd.
6. Vadodara Stock Exchange Ltd. 13.9.2007
Now, therefore, in exercise of the powers conferred by Section 4A of the SCRA, SEBI hereby appoints the
aforementioned dates as appointed date in respect of the abovementioned stock exchanges.” [Notification No.
SEBI/MRD/DSA/105441/2007, dated 9-10-2007, published in the Gazette of India, Extraordinary, No. 202, Part III,
Section 4 : (2007) 139 Comp. Cas. (St.) 70].
Bye-laws of Stock Exchange.—Bye-laws of the Stock Exchange have statutory force. See detailed Comments
under Section 29.
List of SCR Act, Rules, Regulations.— See List of SCR Act, Rules, Regulations, Listing Agreement Form with
Appendix Nos. in Comments under Section 73.
Powers of SEBI.—Powers of the Central Government have been delegated/conferred on the SEBI vide
Notifications under Section 29A of the Securities Contracts (Regulation) Act, 1956 and the Securities Contracts
(Regulation) Rules, 1957 as amended by the Securities Contracts (Regulation) Amendment Rules, 1996.
See detailed Comments and List of SEBI Act, Rules, Regulations and Guidelines under Section 55A of the
Companies Act, 1956—Powers of SEBI.
Injunction.—A recognised stock exchange was granted injunction against a company carrying on business as
parallel stock exchange.66
Department's view.— Securities Contracts (Regulation) Rules, 1957.—Amendments relating to Government

(SEBI) nominees on the governing bodies of recognised stock exchanges.—“The Government have published
today (26-10-1994), a notification in the Gazette of India, Extraordinary, for amending rule 10 of the Securities
Contracts (Regulation) Rules, 1957 (SCR Rules).
Rule 10 of the SCR Rules provides that the Government may nominate one or more persons not exceeding three in
number, as member or members of the governing body of every recognised stock exchange. Such member or
members enjoy the same status and powers as other members of the governing body. At present, the Government
nominees generally consist of officers from the Ministry of Finance, Securities and Exchange Board of India (SEBI)
and the Department of Company Affairs.
The need for the Government nominees on the governing bodies of stock exchanges has been reviewed in the
context of strengthening the regulatory role and powers of SEBI over the stock market. It is the intention of the
Government that SEBI should have the required powers under the SCR Rules to nominate up to three members on
Page 52 of 69
the governing body of every recognised stock exchange, instead of the present practice of the Government making
such nominations. Accordingly, as a consequence of the amendment to rule 10 of the SCR Rules given effect from
today (26-10-1994), SEBI has been empowered to nominate persons of its choice as SEBI nominees in the
governing bodies of every recognised stock exchange. It is envisaged that the system of SEBI nominees would
enable SEBI to participate in the management of stock exchanges and to regulate the stock market in a more
effective manner.” [ Press Note, dated 26-10-1994, Issued by the Department of Economic Affairs, Ministry of
Finance, New Delhi: Chartered Secretary, December 1994, page 1143 : (1994) 81 Comp. Cas. (St.) 179].
Amendment relating to Corporate Membership in Stock Exchanges.—“The Government have published today
(12-10-1994), a notification in the Gazette of India, Extraordinary, for amending sub-clause (iii) in clause (4A) of rule
8 of the Securities Contracts (Regulation) Rules, 1957 (SCR Rules).
Clause (4A) of rule 8 of the SCR Rules provides that a company as defined in the Companies Act, 1956, is eligible
to become a member of a stock exchange if certain conditions are satisfied. One of the conditions as contained in
sub-clause (iii) is that a majority of the directors of a stock broking company are its shareholders and not less than
40 per cent. of the paid-up equity capital of the company is held by these directors themselves or by the body
corporate appointing them as directors on the Board of the company. This condition has been found to be an
onerous requirement and difficult to comply with by widely-held stock broking companies. Besides, experience has
shown that such a condition is not conducive to encouraging the establishment of professionally managed stock
broking companies.
Accordingly, the Government have amended clause (4A) of rule 8 of the SCR Rules by omitting sub-clause (iii). It is
expected that this amendment will encourage the growth of corporate membership in stock exchanges, induce
greater professionalisation and thereby ensure better services to the investing public.” [ Press Note, dated 12-10-
1994: Chartered Secretary, December 1994, page 1041 : (1994) 81 Comp. Cas. (St.) 177].
Joint venture stock-broking companies to have non-Indian citizens on their Board of directors.—“The Govt.
have published today (7-11-1994), a notification in the Gazette of India, Extraordinary, for amending clause (4A) in
rule 8 of the Securities Contracts (Regulation) Rules, 1957 (SCR Rules), in order to allow joint venture stock-
broking companies to have non-Indian citizens on their Board of directors.
The Government have been actively encouraging the corporatisation of stock-broking firms with a view to facilitating
the modernisation and development of the stock market and raising the capital base of stock-broking companies. In
accordance with this policy, the Government have permitted, on a selective basis, joint ventures in stock-broking
with overseas companies. Such joint ventures need the flexibility of having non-Indian citizens on their Board of
directors. While this is possible in all other financial services, it was possible in the case of stock-broking companies
only with the specific permission of the Government in each case. This special restrictive feature is being eliminated
by amendment of clause (4A) of rule 8 to allow non-Indian citizens including NRIS to become directors of stock-
broking companies incorporated in India which are members of stock exchanges in India. Any director of such a
company can also continue as such even if at some stage he ceases to be a citizen of India.
It is expected that this amendment will facilitate the entry of professionally qualified foreign citizens, including non-
resident Indians, as directors of Indian stock-broking companies, thereby leading to globally accepted stock-broking
practices and research, greater competitiveness in the stock-broking business and the provision of better services
to the investing public.” [ Press Note, dated 7-11-1994, Issued by the Department of Economic Affairs, Ministry of
Finance, New Delhi: Chartered Secretary, December 1994, page 1142 : (1994) 81 Comp. Cas. (St.) 178].
Exemption to Stock Exchanges under section 45NC of RBI Act.—“The Reserve Bank of India, on being
satisfied that it is necessary so to do, in exercise of its powers conferred under section 45NC of the Reserve Bank
of India Act, 1934 (2 of 1934), hereby declares that,—
(1) the provisions of sections 45-IA, 45-IB, 45-IC, 45MB and section 45MC of the RBI Act, 1934 (2 of 1934), shall
not apply to any non-banking financial company—
(a) [ not reproduced];
(b) being a stock exchange, recognised under section 4 of the Securities Contracts (Regulation) Act, 1956 (42
of 1956); and
(c) doing the business of a stock-broker or sub-broker holding a valid certificate of registration obtained under
section 12 of the Securities and Exchange Board of India Act, 1992 (15 of 1992).” [Extracts from
Page 53 of 69
Notification No. 99/ED(JRP)/97, dated 6-3-1997, published in the Gazette of India, Part III, Section 4, page
2113, dated 5-7-1997 :(1997) 90 Comp. Cas. (St.) 541].
Registrar [Section 2(40)].—
Registrar means a Registrar, or an Additional Registrar, a Joint Registrar, a Deputy Registrar or an Assistant
Registrar, having the duty of registering companies under the Companies Act, 1956.
See Comments under Sections 609-614A. [Part XII of the Act—Registration Offices and Officers and Fees] and
Offences against Act to be cognizable only on complaint by Registrar, shareholder or Government [Section 621].
Relative [Section 2(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.
Schedule [Section 2(42)].—
Schedule means a Schedule annexed to the Companies Act, 1956 (1 of 1956).

See Comments under Schedules I to XV.
Scheduled Bank [Section 2(43)].—Scheduled Bank has the same meaning as in the Reserve Bank of India Act,
1934 (2 of 1934). As per section 2(e) of the Reserve Bank of India Act, 1934
“” means a bank included in the Second Schedule to the Reserve Bank of India Act, 1934.*
Secretaries and Treasurers [Section 2(44)].—Clause (44) has been omitted by the Companies (Amendment) Act,
2000 (w.e.f. 13-12-2000). The system of managing agency, secretaries and treasurers had already been abolished
videsection 324A of the Companies Act, 1956 (1 of 1956), as inserted by the Companies (Amendment) Act, 1969
(17 of 1969) with effect from 3-4-1970.
follows: “Clause 2, inter alia, seeks to omit clause (44) as it has become redundant after the abolition of the system
of managing agent, secretaries and treasurers by Act 17 of 1969.” [ Clause 2 of the Companies (Second
Secretary [Section 2(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. This clause is as substituted by the Companies (Amendment) Act, 1988
(w.e.f. 1-12-1988).
substituted clause as follows: “Clause 2 brings the existing definition of ‘Secretary’ in section 2(45) of the Act in line
with the definition of ‘Company Secretary’ contained in the Company Secretaries Act, 1980 and seeks to define a
secretary who is in whole-time practice [Section 2(45A)].” [Clause 2 of the Companies (Amendment) Bill, 1987 (32
of 1987)].
For section 2(45) as it stood prior to its substitution see Annexure at the end of this Volume. The Legislative History
of the original clause (45) as it stood prior to its substitution is reproduced below:
The Companies Act, 1956 (1 of 1956).—The definition of the term “Secretary” was first introduced in the Companies
Page 54 of 69
Act, 1956 (1 of 1956) by the Joint Committee on the Companies Bill, 1953 (46 of 1953). Section 2(45) was then
substituted by the Companies (Amendment) Act, 1960 (65 of 1960).
The Companies (Amendment) Act, 1960 (65 of 1960).—The Notes on clauses explained the substituted clause as
follows: “The amendment is of a clarificatory nature and is intended to enable a firm or a body corporate comprising
men of professional competence to function as secretaries of companies. (See para 20 of the Report.)” [ Clause 2(j)
of the Companies (Amendment) Bill, 1959 (37 of 1959)].
“Section 2(30) of the Act defines ‘officer’ as including a secretary and section 2(45) defines a secretary as meaning
a person appointed to perform the duties of a secretary under the Act. The Act does not, however, define his duties
though it imposes penalties upon “officers” (including a secretary) for breach of the duties enjoined by the Act.
Section 177 of the English Act provides that every company shall have a secretary and that a sole director shall not
also be a secretary. The suggestion has been made that a statutory provision requiring every company in India to
have a secretary should now be made. While it is desirable to have a competent secretary to guide the
management in the day-to-day work not only in matters of company law and mercantile law, but also in matters
relating to accounts, taxation, holding of meetings, drafting of resolutions and reports, etc., we doubt if, at present, it
would be possible to find an adequate number of competent secretaries for all companies. Accordingly, we feel that
at this stage it should continue to be left to the judgment of the Board of a company, to arrange for the carrying out
of its secretarial work.
It has been suggested that firms qualified to perform the duties should be allowed to function as secretaries of
companies. It is said that not only the efficiency of company administration would be increased by the appointment
of a firm comprising men of professional competence as secretaries but the cost would be reduced if several
companies employed the same firm. Section 25(4) and the proviso to section 226(1) recognise that a firm might be
a member of a company licensed under section 25 or that a firm might be appointed as auditors of companies.
Under section 2(45), as it stands, an individual or possibly a company but not a firm, is intended to be the secretary
of a company. It has been brought to our notice that persons purporting to be appointed as secretaries of
companies have, in some cases, been entrusted with functions and duties appropriately belonging to managing
agents or secretaries and treasurers, as defined in the Act and have in this manner sought to avoid the limitations
attaching to the holders of these offices. Nothing, of course, turns on the name and the duties and powers assigned
to the office determine its true legal character. The duties of secretaries, as visualised by the Companies Act, 1956
(sections 54 and 220) and in Table ‘A’ [(Regulation 84(2)] contained in Schedule I to the Act, though important, are
not managerial. Though a secretary does not enjoy the same status as a Managing Agent or Manager and though
no specific duties or functions are assigned to him under the Act, still they are not trivial and require administrative
ability besides a good working knowledge of company law and procedure. Being a principal officer of the company,
he is responsible for the correctness of the statements and documents filed with the Registrar. For default in
compliance with the requirements of the Act, knowingly or wilfully, he incurs penalties. If responsibility is to be
distributed among a number of partners then not only section 2(45) but allied sections like sections 539, 540 and
543 of the Act will have to be suitably amended, so as to make each of the partners liable for the default of
misconduct of the others.
If a firm or another company is to be allowed to function as the secretary of a company the word
‘’ may preferably be defined as ‘any individual, firm or company, appointed to perform ministerial and
administrative functions in relation to a company under the Act, but not entrusted with the direction, control or
management of the affairs of the company’.” [ Report: para 20].
clause as follows: “This amendment prohibits any firm or body corporate from acting as secretary of a company.” [
Clause 2(vii)(a) of the Companies (Amendment) Bill, 1972 (72 of 1972)].
This amendment enlarged the scope of functions of a secretary by deleting the word ‘purely’ that appeared before
the words ‘ministerial or administrative duties’.
The Notes on clause 2(vii)(b) of the above Bill (72 of 1972) explained the reasons for the amendments as follows:
“In order to promote the growth of the profession of company secretaries on healthy lines, it is necessary that they
should have requisite qualifications. The sub-clause seeks to empower the Central Government to prescribe the
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qualifications in order that the companies which will be required to employ secretaries may appoint only such
persons as have the requisite qualifications to be prescribed. The scope of the functions and duties of a secretary
has increased considerably under modern conditions and the Court of Appeal also has held that it is no longer true
that a secretary is a ‘purely’ ministerial officer of the company. Hence the definition of secretary has been suitably
amended.” [ Clause 2(vii)(b) of the Companies (Amendment) Bill, 1972 (72 of 1972)].
Thus after this amendment: (a) only an individual could be a secretary; (b) such individual had to possess the
prescribed qualifications; and (c) such secretary could perform, in addition to the duties under the Companies Act,
1956 any other ministerial or administrative duties.
As already stated, section 2(45) as substituted by the Companies (Amendment) Act, 1988 (w.e.f. 1-12-1988), brings
the definition of ‘Secretary’ in section 2(45) of the Companies Act, 1956 (1 of 1956) in line with the definition of
‘Company Secretary’ in the Company Secretaries Act, 1980 (56 of 1980). The Companies (Amendment) Act, 1988
has also defined a secretary in whole-time practice. [Section 2(45A)].
‘Company Secretary’ under the Company Secretaries Act, 1980.—
“Company Secretary” means a person who is a member of the Institute.

[Section 2(1)(c) of the Company Secretaries Act, 1980 (56 of 1980)].
“” means the Institute of Company Secretaries of India constituted under this Act.
[Section 2(1)(g) of the Company Secretaries Act, 1980 (56 of 1980)].
Definition of ‘Secretary’ in the Companies Act, 1956 wider.—The definition of ‘Secretary’ in the Companies Act,
1956 is wider than the definition of ‘Company Secretary’ in the Company Secretaries Act, 1980. Under the
Companies Act, a Secretary will include a person who may not be a Company Secretary under the Company
Secretaries Act, 1980 provided he possesses the prescribed qualifications and is appointed to perform the duties of
a Secretary. There is a scope that the Central Government may allow a company to appoint as “Secretary” a
person who is not a “Company Secretary” or a member of the Institute (ICSI).
Companies with small capital may, without employing whole-time Secretary, obtain the services of a Company
Secretary who is in practice.
Certain companies to have Secretary.—Section 383A of the Companies Act, 1956(1 of 1956) makes it
compulsory for every company having prescribed paid-up share capital [Rs. 2 Crores (w.e.f. 11-6-2002)*] to have a
whole-time secretary. Further, where the Board of directors of such company comprises only two directors, neither
of them shall be the secretary. [Section 383A(1)].
Compliance certificate from a Secretary in whole-time practice.—As per proviso inserted in section 383A(1) by
the Companies (Amendment) Act, 2000, every company not required to employ a whole-time secretary under sub-
section (1) and having a paid-up share capital of Rs. 10 lakhs or more shall file with the Registrar a certificate from
a secretary in whole-time practice in prescribed form** as to whether the company has complied with all the
provisions of the Companies Act, 1956. A copy of certificate shall be attached with Board’s report in section 217 of
the Act.
This is applicable to both public and private companies. See detailed Comments, Form and Procedure under
Section 383A.
See also Comments under Secretary in whole-time Practice [Section 2(45A)].
Companies (Appointment and Qualifications of Secretary) Rules.—Every company having a paid-up share
capital of not less than Rs. 2 Crores shall have a whole-time secretary [Rule 2(1)]. No person shall be appointed as
whole-time secretary unless he is member of the Institute of Company Secretaries of India [Rule 2(2)]. A company
having a paid-up share capital of less than Rs. 2 Crores may appoint any individual having prescribed qualifications
under rule 2(4) as its whole-time secretary to perform the duties of a secretary under the Companies Act, 1956 and
any other ministerial or administrative duties [Rule 2(3)].*
Section 25—Company exempt.—Charitable etc. companies to which a licence is granted under section 25 of the
Companies Act, 1956 shall be exempt from the provisions of section 2(45) in so far as they require the appointment
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of an individual to perform the duties which may be performed by a Secretary under the Act and any other
ministerial or administrative duties only if he possesses the prescribed qualifications. [Notification No. S.O. 1578,
dated 1-7-1961: For text of the Notification see Comments under Section 25].
Powers and duties of Secretary.—The nature of work of a secretary is ministerial and administrative and not
managerial. The secretary is the officer of a company, who is charged with the duty of ensuring that the affairs of
the company are conducted in accordance with the provisions of the Companies Act, the company’s articles and
generally in accordance with the law. Generally, the secretary is not a person liable for breach of trust and
misfeasance by directors.67 But if he deals with the company’s funds without supervision, he might be liable. The
secretary, without approval or express authority from the Board, cannot call a general meeting or issue notices,68
though the Board can ratify such action before the meeting.69 He cannot alter the register of members or strike a
name off the register without the Board’s authority,70 he cannot register a transfer before it has been passed by the
Board.71
The secretary has no authority to bind the company by contract, to make representations as to the company’s
affairs or to induce people to take shares in the company.72 Where a director advanced money for the benefit of a
company at the request of the secretary, without the authority of a properly constituted Board of Directors, he was
held not to be entitled to recover the money. In Barnett, Hoares & Co. v. South London Tramways Co., decided in
1887, it was held that the secretary is a mere servant; his position is that he is to do what he is told, and no person
can assume that he has any authority to represent anything at all. But times have changed. A company secretary is
a much more important person nowadays than he was in 1887. He is an officer of the company with extensive
duties and responsibilities. This appears not only in the modern Companies Acts, but also by the role which he
plays in the day-to-day business of the companies. He is no longer a mere clerk. He regularly makes
representations on behalf of the company and enters into contracts on its behalf which come within the day-to-day
running of the company’s business. So much so that he may be regarded as “held out” as having authority to do
such things on behalf of the company. He is certainly entitled to sign contracts connected with the administrative
side of a company’s affairs, such as employing staff, and ordering cars on hire and so forth. All such matters now
come within the ostensible authority of a company’s secretary.73See detailed Comments under Section 383A.
Within the scope of his express or implied authority, the acts of the secretary will bind the company even if done
wrongfully or fraudulently and even though they enure for the benefit of the secretary himself.74
Secretary should be present at all the general and Board meetings, make proper minutes of proceedings thereat,
issue, under direction of the Board, notices of meetings, conduct correspondence with shareholders and should be
in charge of at least those books relating to internal business of the company such as Register of Members, Share
Ledger, Transfer Book and Register of Debentures; he would certify transfers under the authority of the Board and
perform other administrative functions. He should look after filing of returns with the Registrar of Companies.
However, the duties of the secretary are those which are assigned to him by the company under its articles or under
his contract of service with the company or by the directors. The rights of a secretary as against the company will
depend on his contract. Since his contract is one of personal service, no specific performance of the contract will be
ordered.75 In a case specific performance of contract to employ a managing director was refused.76
The secretary as an employee is entitled to a reasonable notice of dismissal or damages in lieu thereof.77 Where
power of dismissal is reserved at the company’s absolute discretion, proper notice of the company’s intention to
terminate must be given.78 An employee may be dismissed summarily and without notice for acts which go against
the root of the contract, such as, wilful disobedience of order of the company, misconduct, incompetency or
permanent disability or even an act of forgetfulness by an employee having serious results may justify dismissal
without notice.79
A secretary like any other employee or ex-employee may generally be restrained by injunction from revealing trade
secrets.80
The Secretary cannot file suit on behalf of the company without proper authority and if he does so in appropriate
cases he may be made liable for costs. He has no right to commence proceedings on behalf of the company
without approval or authority from the Board of directors.81 However, the acts which the secretary could have done
with authority but done without such authority, might be ratified by the Board. Where under the articles of
association of the company, a suit on behalf of the company had to be filed with the consent of the directors. The
secretary of the company held a general power of attorney from the directors and the Board subsequently ratified
his action. There could be no valid objection to the maintainability of the suit.82
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The secretary has been empowered to discharge various ministerial and administrative duties on behalf of the
company which generally can be performed by an authorised agent. In due course of the company's business, the
secretary has also been given certain statutory powers like signing the annual return, etc. But under no
circumstance he can discharge the functions of the Board or act on behalf of the company in matters of policy or
substantive steps which are not administrative or ministerial in nature. He cannot usurp the functions and powers of
the Board of directors or the company. The secretary cannot present a petition under sections 397 and 398 for relief
in cases of oppression and mismanagement unless specifically authorised by the company and the consent under
section 399 is obtained. In case a secretary verifies any petition or files a proxy or any petition under sections 397
and 398, it must be accompanied by an affidavit verifying the petition along with the statement that he has been
duly authorised by the company. The decision to present it must be taken by the Board of directors or backed by
the authority of the Board by a resolution or by a subsequent ratification by a Board meeting.83
A secretary in whole-time practice if authorised by a party in writing may represent such party before a Bench of the
Company Law Board. A company may authorise its company secretary to appear, in its behalf, in any proceeding
before the Bench. [Regulation 19(2) of the Company Law Board Regulations, 1991].
As per Section 10FA inserted by the Companies (Second Amendment) Act, 2002 (w.e.f. date to be notified), the
Company Law Board (CLB) shall stand dissolved. The powers and jurisdiction of the Company Law Board (CLB)
has been transferred under relevant sections to the National Company Law Tribunal (NCLT).
See detailed Comments under Section 10E and 10FA-10GF.
Department's view.— Authentication of Balance Sheet by a Secretary.—For authentication of Balance Sheet,

Annual Accounts, etc., by the Secretary of a company see Department's views in Comments under Section 215.
Companies (Compliance Certificate) Rules, 2001.—Press Note, dated 13-2-2001 see Department's views in
Comments under Section 383A.
See detailed Comments on the Status, Functions, Powers, Ostensible Authority, Duties including, inter alia,
Statutory Duties under the Companies Act, 1956, Rules, Regulations, SEBI and Corporate Laws, Appointment,
Remuneration, Removal and Termination, etc., of “Secretary” under Section 383A.
See also Comments under Secretary in whole-time Practice [Section 2(45A)], Officer [Section 2(30)], Officer who is
in default [Sections 2(31) and 5].
Secretary in whole-time Practice [Section 2(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 full time employment. This clause has been inserted by the Companies
(Amendment) Act, 1988 with effect from 15-6-1988.
substituted clause as follows: “Clause 2 brings the existing definition of ‘Secretary’ in section 2(45) of the Act in line
with the definition of ‘Company Secretary’ contained in the Company Secretaries Act, 1980 and seeks to define a
secretary who is in whole-time practice [Section 2(45A)].” [Clause 2 of the Companies (Amendment) Bill, 1987 (32
of 1987)].
Clause (45A) of section 2 of the Companies Act, 1956 provides that the term “Secretary in whole-time practice” will
not include a person who is in full time employment. A secretary in full time employment with a company cannot be
treated as in whole time practice. A secretary, however, can be in whole time practice even if he is employed part-
time by one or more companies.
The definition of “Secretary in whole-time practice” in section 2(45A) of the Companies Act, 1956 is relevant in
relation to several sections of the Companies Act which permit certain functions to be performed by a “Secretary in
whole-time practice”, e.g., Sections 33, 149 and 161, 269, Schedule XIII of the Companies Act, 1956 enable a
“Secretary in whole-time practice” to perform the functions mentioned therein. Section 161 contemplates some sort
of secretarial audit.
ICSI’s Note on Recognition to Company Secretary in Practice.—The Institute of Company Secretaries of India
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(ICSI) in a Note on the Companies (Amendment) Bill, 1987 (32 of 1987) which, inter alia, inserted section 2(45A) in
the Companies Act, 1956 (1 of 1956) explained as follows:
“1. Recognition to company secretary in practice.—1.1 For the profession of company secretaries it is another
milestone. The concept of company secretary in practice has been introduced for the first time in the Companies
Act. Section 2(45) of the Companies Act, 1956 defining Secretary is proposed to be amended so that “Secretary”
would mean a “Company Secretary” as defined in the Company Secretaries Act, 1980 (56 of 1980). Thus, the
recognition so far given to the members of the Institute in the Rules is proposed to be enshrined in the statute as in
the case of the other two sister professions. Further, a secretary in whole-time practice would mean a company
secretary in practice as defined in the Company Secretaries Act, 1980 and who is not in full-time employment.
1.2 The responsibility of a secretary has also been increased as he is particularly specified in the Act as an “Officer
who is in default” bracketed along with the managerial personnel. [ Sections 2(30), 2(31) and 5].
1.3 The long awaited recognition for filing the statutory declaration in Form No. 1 prescribed under section 33(2) of
the Companies Act, 1956 for compliance of legal formalities for incorporation of a company has now been given to
a whole-time practising secretary.
1.4 In section 149 of the Companies Act, 1956, for commencement of business, the verified declaration can now be
given by a whole-time practising secretary.
1.5 It is proposed in section 161 of the Companies Act, 1956 that annual return of listed companies shall also be
signed by a whole-time practising company secretary. This recognition has now carved out a core area of practice
and can be construed as a prelude to secretarial audit. There are nearly 6,000 companies listed with the stock
exchanges which may require the services of company secretaries in practice.
1.6 According to statutory guidelines proposed to be prescribed in Schedule XIII to the Companies Act, 1956 for
appointment of managerial personnel and payment of managerial remuneration to them without reference to the
Central Government, the auditor or the secretary of the company or where the company has not appointed a
secretary, a secretary in whole-time practice shall be required to certify that the requirements of Schedule XIII have
been complied with and such certificate shall be incorporated in the return filed with the Registrar under sub-section
(2) of section 269 of the Companies Act, 1956.
1.7 All these aforesaid six measures will strengthen and develop the opportunities of a company secretary in
practice.” [ ICSI's Note, pages 3-4].
See also Comments under Section 383A and the Sections referred above.
Certificate of Practice.—Sub-section (2) of section 2 of the Company Secretaries Act, 1980 (56 of 1980) provides
as to when a member of the Institute shall be deemed to be in practice. SeeSection 6 of the Company Secretaries
Act, 1980 (56 of 1980) and Regulations 10-19 of Company Secretaries Regulations, 1982 for the procedure for
obtaining the Certificate of Practice.
Compliance certificate from a Secretary in whole-time practice.—As per proviso to section 383A(1) inserted by
the Companies (Amendment) Act, 2000, every company not required to employ a whole-time secretary under sub-
section (1) and having a paid-up share capital of Rs. 10 lakhs or more shall file with the Registrar a certificate from
a secretary in whole-time practice in prescribed form* as to whether the company has complied with all the
provisions of the Companies Act, 1956. A copy of certificate shall be attached with Board's report in section 217 of
the Act.
This is applicable to both public and private companies. See detailed Comments, Form and Procedure under
Sections 2(45) and 383A.
Company Secretary not to practice as Advocate.—Changes in company law have brought greater
responsibilities and duties for company secretaries. In view of this, the decision of the Council of the Institute of
Company Secretaries of India (ICSI) to prohibit practising Company Secretaries from practising simultaneously as
Advocates has been held to be reasonable and justified.84
Secretarial Practice and Check List.— See Secretarial Practice and Check List at the end of Comments under
each Section.
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Securities [Section 2(45AA)].—Securities means securities as defined in clause (h) of section 2 of the Securities
Contracts (Regulation) Act, 1956 (42 of 1956), and includes hybrids. This clause has been inserted by the
Companies (Amendment) Act, 2000 (53 of 2000). See also Hybrid [Section 2(19A)].
Section 2(45AA) and section 2(12).—The definition of “securities” in section 2(h) of the Securities Contracts
(Regulation) Act, 1956 has been incorporated in section 2(45AA) of the Companies Act, 1956. Therefore, section
2(12) is to be read with section 2(45AA). Once the definition in SCRA is incorporated by reference it is taken as cut
and paste or written with ink and pen in the Companies Act, 1956. No further reference is required to be made to
the SCRA to determine the scope and ambit of expressions “debenture” and “securities”. The term “debenture” in
section 439(2) has to carry the meaning assigned to it in section 2(12) of the Act and would include “any securities”
which in turn in view of the definition of “securities” incorporated by reference under section 2(45AA) of the Act
would include beneficial right or interest in debentures or securities. Further, securities for the purposes of the
Companies Act need not only be those marketable in India.85
Shares of private company.—Shares of a private company cannot be sold in the market or, in other words, they
cannot be said to be marketable and cannot, therefore, be said to fall within the definition of “securities” as a
“marketable security” as defined in clause (h) of section 2 of the SCR Act, 1956. A contract for sale and purchase of
shares in a private company is thus not governed by the provisions of the Securities Contracts (Regulation) Act,
1956 (42 of 1956).86
Securities and Exchange Board of India [Section 2(45B)].—Securities and Exchange Board of India (SEBI)
means the Securities and Exchange Board of India established under section 3 of the Securities and Exchange
Board of India Act, 1992 (15 of 1992)*. This clause was inserted by the Depositories Act, 1996 (22 of 1996) with
retrospective effect from 20-9-1995.
Powers of SEBI.—Section 55A of the Companies Act, 1956 inserted by the Companies (Amendment) Act, 2000
(w.e.f. 13-12-2000) provides that the provisions contained in sections 55 to 58, 59 to 81(including sections 68A, 77A
and 80A), 108, 109, 110, 112, 113, 116, 117, 118, 119, 120, 121, 122, 206, 206A and 207 of the Companies Act,
1956, so far as they relate to issue and transfer of securities and non-payment of dividend shall in case of—(a)
listed public companies; (b) public companies which intend to get their securities listed on any recognized stock
exchange in India, be administered by the Securities and Exchange Board of India (SEBI); and (c) in any other
case, by the Central Government.
All residuary powers including the matters relating to prospectus, statement in lieu of prospectus, return of
allotment, issue of shares and redemption of irredeemable preference shares shall be exercised by the Central
Government, the Company Law Board [ now the Tribunal] or the Registrar of Companies. [S. 55A, Explanation].
SEBI Act, Rules, Regulations and Guidelines.—The SEBI Act, Rules, Regulations and Guidelines have been
annotated or referred to in Comments under relevant Sections . See detailed Comments and List of SEBI Act,
Rules, Regulations and Guidelines with Appendix Nos. under Section 55A.
Share [Section 2(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. This section corresponds to section 2(16) of the Previous Act.
Position of a shareholder.—A share in a company is to be regarded as the interest of the shareholder in the
company measured, for the purpose of liability and dividend, by a sum of money, but consisting of a series of
mutual covenants entered into by all the shareholders inter se in accordance with the provisions of the Companies
Act, Memorandum and Articles of Association and made up of various rights.87
A share is a right to a specified amount of the share capital of a company carrying with it certain rights and liabilities
while the company is a going concern and in its winding up. A shareholder who buys shares does not buy any
interest in the property of the company which is a juristic person entirely distinct from the shareholders. The true
position of a shareholder in a company is that on buying shares an investor becomes entitled to participate in the
profits of the company if and when the company declares, subject to the articles of association, that the profits or
any portion thereof should be distributed by way of dividends among the shareholders. He has undoubtedly a
further right to participate in the assets of the are personal estate transferable in the manner provided by its articles,
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and are not of the nature of real estate. The undertaking of the company is something different from the totality of
shareholdings. It is the company which owns the property and not the shareholders. The shareholders are not in the
eye of the law part-owners of the undertaking. The shareholders in a company are not partners inter se.88
See detailed Comments under Definition of Member [Section 41], Separate Entity and Lifting of Corporate Veil
[Sections 12 and 34], Nature of Shares [Section 82], Kinds of Share Capital [Section 86], Share in surplus on
winding-up [Section 511].
Share an interest measured by sum of money.—Under the Indian Companies Act shares can be issued for cash
or against transfer of property. The Act also places no restriction upon a company issuing shares for a
consideration which exceeds the par value of the shares. A share is not a sum of money: it represents an interest
measured by a sum of money and made up of diverse rights contained in the contract evidenced by the Articles of
the company. In the absence of any restriction in the law against the issue of shares otherwise than for cash, when
shares are issued for consideration other than cash the value of the assets transferred in excess of the par value of
shares issued would be regarded as premium for purposes of our system of law.89
Rights of shareholder.—A shareholder has an undoubted interest in a company, an interest which is represented
by his shareholding. Share is movable property, with all the attributes of such property. The rights of a shareholder
are (i) to elect directors and thus to participate in the management through them; (ii) to vote on resolutions at
meetings of the company; (iii) to enjoy the profits of the company in the shape of dividends; (iv) to apply to the Court
[the Company Law Board (the Tribunal)] for relief in the case of oppression; (v) to apply to the Court [the CLB (the
Tribunal)] for relief in the case of mismanagement; (vi) to apply to the Court [the Tribunal] for winding up of the
company; and (vii) to share in the surplus on winding up. A share is transferable but while a transfer may be
effective between transferor and transferee from the date of transfer, the transfer is truly complete and the
transferee becomes a shareholder in the true and full sense of the term, with all the rights of a shareholder, only
when the transfer is registered in the company’s register.90
See detailed Comments under relevant Sections, e.g., Separate Legal Entity and Lifting of Corporate Veil [Sections
12 and 34], Definition of Member [Section 41], Allotment of Shares [Sections 69, 70 and 75], Nature of Shares
[Section 82], Kinds of Share Capital [Section 86], Transfer of Shares [Sections 111 and 111A], Dividends [Section
205], Acquisition of Shares of Dissenting Shareholders [Section 395], Application for Relief in cases of Oppression
[Section 397], Application for Relief in cases of Mismanagement [Section 398], Application for winding-up of the
company [Sections 439 and 484] and Share in the surplus on winding-up [Section 511].
Bonus shares.—However, ordinary shareholders become owners of the bonus shares from the date of resolution.
It is erroneous to hold that a share cannot be held to have been issued to a person until a share certificate is given
to him.91
Share capital.—
“”, as defined in the Companies Act, 1956 and as understood in company law, means share in the capital of a
company. It is a tangible property.
The words “capital” and “share capital” are synonymous. It may mean the nominal or the authorised capital, the
issued capital or the paid-up capital; and the meaning depends in the context in which that term is used. A company
having share capital is a company registered with a nominal or authorised capital, which is divided into shares of a
fixed amount. Where a company has no authorised capital, it cannot be said to be a company limited by shares, but
is a company limited by guarantee as mentioned in section 12(1) of the Act. Therefore, an application under
sections 397 and 398 of the Act can only be made by requisite number of members.92
Shares not goods before allotment.—Shares are not goods before allotment. Applicant for shares is not a
consumer. Raising of share capital by a company is not a trading activity. The issue of shares or debentures does
not come under the Consumer Protection Act, 1986 (68 of 1986) or the MR TP Act, 1969 (54 of 1969) [now the
Competition Act, 2002 (12 of 2003)].93
Share with differential rights [Section 2(46A)].—

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Share with differential rights means a share that is issued with differential rights in accordance with the
provisions of section 86
. This section has been inserted by the Companies (Amendment) Act, 2000 (53 of 2000) (w.e.f. 13-12-2000). See
Sick industrial company [Section 2(46AA)].—Sick industrial company means an industrial company which has—
(i) accumulated losses in a financial year equal to 50 per cent. or more of its average net worth during 4
immediately preceding years; or (ii) failed to repay its debts within any 3 consecutive quarters on demand made in
writing for its repayment by a creditor or creditors of such company.
explained Clause (46AA) as follows: “‘Sick industrial company’ which means an industrial company, the
accumulated losses of which are equal to fifty per cent. or more of its average net worth in any one or more of four
immediately preceding financial years; or which has failed to repay its debts within any three consecutive quarters
on demand for its repayment by the creditor of such company.” [ Clause 2 of the Companies (Amendment) Bill,
2001 (80 of 2001)].
A new Part VIA consisting sections 424A to 424L has been inserted in the Companies Act, 1956 by the Companies
(Second Amendment) Act, 2002 (11 of 2003) providing for revival, rehabilitation and winding up of Sick Industrial
Companies.
The Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986) (SICA) would consequently be repealed
and the Board for Industrial and Financial Reconstruction (BIFR) would be replaced by the National Company Law
Tribunal (NCLT) to be constituted under Section 10FB.
State level institution [Section 2(46AB)].—This means any of the following: (a) State Financial Corporations
established under section 3 or 3A and institutions notified under section 46 of the State Financial Corporations Act,
1951 (63 of 1951); (b) the State Industrial Development Corporations registered under this Act.
explained as follows: “Clause (46AB) proposes to define ‘State level institution’ which means any of the institutions,
namely, (a) State Financial Corporations established under section 3 or section 3A and institutions notified under
section 46 of the State Financial Corporations Act, 1951; (b) State Industrial Development Corporations registered
under the Act.” [Clause 2 of the Companies (Amendment) Bill, 2001 (80 of 2001)].
Subsidiary Company [Section 2(47)].—Subsidiary company or subsidiary means a subsidiary company within the
meaning of section 4.
Total voting power [Section 2(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.
This has to be determined with reference to a particular matter in respect of which votes may be cast at a general
meeting on a poll. In a meeting where preference shareholders are also present but they have no right to vote the
total voting power will not include the votes of preference shareholders. Similarly in a class meeting the vote of that
particular class only will be taken into account. In the same meeting the total voting power may vary from matter to
matter. As regards the first item on the agenda, the total voting power may be the voting strength of equity
shareholders. But as regards the second item on the agenda, the total voting power may include the votes of the
equity shareholders and the votes of the preference shareholders.
Interconnection.—For interconnection under section 2(g) of the MR TP Act, 1969 (54 of 1969), the total voting
power must correspond to the total equity shares and the proportionate voting power held by the bodies corporate
must correspond to the proportionate shares held.94
Page 62 of 69
Trading Corporation [Section 2(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. This section corresponds to section 2(17) of the Previous Act.
The Companies Act, 1956 does not apply to corporations (other than trading corporations), State Corporations,
Universities, etc. See detailed Comments under Section 1 under Applicability of the Companies Act.
Tribunal [Section 2(49A)].—The Tribunal means the National Company Law Tribunal (NCLT) constituted under
sub-section (1) of Section 10FB.
explained this clause as follows: “Clause (49A) proposes to define ‘Tribunal’ which means the National Company
Law Tribunal constituted under the proposed sub-section (1) of section 10FB.” [ Clause 2 of the Companies
Sections 2(49A) and 10FB of the Companies Act, 1956 have been inserted by the Companies (Second
Amendment) Act, 2002 (w.e.f. 1-4-2003).
The National Company Law Tribunal (NCLT) will be set up or constituted under section 10FB by a Notification. As
per section 10FA the Company Law Board (CLB) shall stand dissolved on constitution of the Tribunal (NCLT).
From the date of constitution of the National Company Law Tribunal (NCLT) under section 10FB, the powers and
jurisdiction hitherto vested in and exercised by various bodies, viz., the Company Law Board(CLB), the Board for
Industrial and Financial Reconstruction (BIFR(, the Appellate Authority for Industrial and Financial Reconstruction
(AAIFR) or High Courts under various sections of the Companies Act, 1956 would be consolidated and entrusted to
the Tribunal (NCLT).
See detailed Comments under Part IB—National Company Law Tribunal [Sections 10FB to 10FP]. See also
Comments under Appellate Tribunal [Section 2(1B)] and Part IC—Appellate Tribunal [Sections 10FQ-10GF].
Jurisdiction.— See detailed Comments on Jurisdiction of Courts, CLB and Tribunal under Sections 10, 10E, 10FA
and 10FB.
Variation and vary [Section 2(50)].—Variation shall include abrogation and vary shall include abrogate. These
terms include modification and alteration.
See also Comments under Alter and Alteration [Section 2(1A)] and Modify and Modification [Section 2(29)].
Definitions in the Depositories Act, 1996[Section 2A].—Section 2A of the Companies Act, 1956 provides that
the words and expressions used and not defined in the Companies Act, 1956 but defined in the Depositories Act,
1996 shall have the same meanings respectively assigned to them in the Depositories Act, 1996.
See detailed Comments under Section 2A below.
Interpretation and Construction.—For the Principles governing Interpretation and Construction of undefined
words see Comments under Section 1.
31. Clause (1) re-numbered as (1A) by Act 53 of 2000, s. 2 (w.e.f. 13-12-2000).
No. S. O. 344(E), dated 31-3-2003, published in the Gazette of India, Extraordinary, No. 290, Part II, Section 3(ii) :
114 Comp. Cas. (St.) 237].
33. Clauses (3) and (4) omitted by the Companies (Amendment) Act, 2000 (53 of 2000)s. 2 (w.e.f. 13-12-2000). The
system of managing agents, secretaries and treasurers had already been abolished videsection 324A of the
Page 63 of 69
Companies Act, 1956 (1 of 1956), as inserted by the s. 4 Companies (Amendment) Act, 1969 (17 of 1969) (w.e.f. 3-4-
1970). For clause (3) “associate”, in relation to managing agents and clause (4) “associate”, in relation to secretaries
and treasurers, as they stood prior to their omission, see Annexure at the end of this Volume.
34. Now the Banking Regulation Act, 1949 (10 of 1949).
35. Substituted by the Companies (Amendment) Act, 1960 (65 of 1960), s. 2 for “does not include a corporation sole”.
44. Omitted by the MRTP (Amendment) Act, 1984 (30 of 1984), s. 52 (w.e.f. 1-8-1984). For clause (18A) “group” which was
inserted by the Companies (Amendment) Act, 1974 (41 of 1974), s. 2 (w.e.f. 1-2-1975) as it stood prior to its omission
see Annexure at the end of this Volume.
46. Inserted by the Companies (Second Amendment) Act, 2002 (11 of 2003)s. 2[w.e.f. 1-4-2003 vide Notification No.
S.O. 344(E), dated 31-3-200, published in the Gazette of India, Extraordinary, No. 290, Part II, Section 3 (ii) :
(2003) 114 Comp. Cas. (St.) 237].
(2003) 114 Comp. Cas. (St.) 237].
49. Omitted by the Jammu and Kashmir (Extension of Laws) Act, 1956 (62 of 1956), s. 2. and Sch. (w.e.f. 1-11-1956). For
clause (20) prior to omission see Annexure at the end of this Volume.
51. The words “(not being the managing agent)” omitted as redundant (w.e.f. 3-4-1970).
agents had already been abolished vide section 324A, as inserted by the Companies (Amendment) Act, 1969 (17 of
1969), s. 4 (w.e.f. 3-4-1970). For Clause (25) “managing agent” as it stood prior to its omission see Annexure at the end
of this Volume.
53. Substituted by Act 65 of 1960, s. 2 for “any powers of management”.
(2003) 114 Comp. Cas. (St.) 237].
56. Substituted by the Companies (Amendment) Act, 2000 (53 of 2000), s. 2(w.e.f. 13-12-2000). For clause (30) as it
(2003) 114 Comp. Cas. (St.) 237].
59. Substituted by the Companies (Amendment) Act, 1960 (65 of 1960), s. 2, for “sub-section (1) of section 549 and sub-
section (3) of section 550 ”.
60. Substituted by the Companies (Second Amendment) Act, 2002 (11 of 2003), s. 2, for the words “High Courts”
[w.e.f. 1-4-2003 vide Notification No. S.O. 344(E), dated 31-3-2003, published in the Gazette of India,
Page 64 of 69
61. Substituted by the Companies (Amendment) Act, 1960 (65 of 1960), s. 2, for “any prospectus”.
agents, secretaries and treasurers had already been abolished videsection 324A of the Companies Act, 1956 (1 of
1956), as inserted by the Companies (Amendment) Act, 1969 (17 of 1969), s. 4 (w.e.f. 3-4-1970). For clause (44)
“secretaries and treasurers” as it stood prior to its omission see Annexure at the end of this Volume.
64. Substituted by the Companies (Amendment) Act, 1988 (31 of 1988), s. 2 (w.e.f. 1-12-1988). For clause (45) as it stood
(2003) 114 Comp. Cas. (St.) 237].
(2003) 114 Comp. Cas. (St.) 237].
(2003) 114 Comp. Cas. (St.) 237]. For earlier clause (49A) which was inserted by the Companies (Amendment) Act,
1963 (53 of 1963), s. 2 (w.e.f. 1-1-1964) and omitted by the Companies Tribunal (Abolition) Act, 1967 (17 of 1967), s. 4
and Sch. (w.e.f. 1-7-1967) see Annexure at the end of this Volume.
[LNIND 1979 SC 75]; Indira Nehru Gandhi v. Raj Narain,AIR 1975 SC 2299 : (1976) 2 SCR 347.
73. Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd., (1987) 61 Comp. Cas. 663 (SC) : AIR
1987 SC 1023 [LNIND 1987 SC 86]. See also Contextual Meaning under Interpretation and Construction in Comments
under Section 1.
[LNIND 1979 SC 75]; Dilworth v. Commissioner of Stamps,(1899) AC 99 (PC); CIT v. Taj Mahal Hotel,(1971) 82 ITR 44
[LNIND 1971 SC 375] (SC) : AIR 1972 SC 168 [LNIND 1971 SC 375].
76. State of Bombay v. Hospital Mazdoor Sabha,AIR 1960 SC 610 [LNIND 1960 SC 19]; Vanguard Fire and General
Insurance Co. Ltd. v. Fraser & Ross, (1960) 30 Comp. Cas. (Ins.) 13 (SC) : AIR 1960 SC 971 [LNIND 1960 SC 151].
77. S.S. Rajakumar v. Perfect Castings Pvt. Ltd., (1968) 38 Comp. Cas. 187 (Mad.) : (1968) 1 Comp. LJ 41 (Mad.). See
78. Holmes v. Keyes, (1959) Ch. 199 : (1958) 2 All ER 129 (CA) : (1958) 2 WLR 772 : (1958) 102 SJ 329 (CA); Hartley
Baird Ltd., Re, (1955) Ch. 143 : (1954) 3 All ER 695 : (1954) 3 WLR 964; Rayfield v. Hands, (1960) Ch. 1 : (1958) 2 All
ER 194 : (1958) 2 WLR 851. See detailed Comments under Sections 26-31, 36 and Schedule I.
79. North East Finance Corporation Ltd. v. Union of India, (2000) 101 Comp. Cas. 373 (Sikkim) : AIR 2000 Sikkim 1.
80. Moschip Semiconductor Technology Ltd., In re, (2004) 120 Comp. Cas. 108 (AP). See also Comments under Section
394(4).
81. Board of Trustees v. State of Delhi,AIR 1962 SC 458 [LNIND 1961 SC 337]: (1962) Supp. 1 SCR 156; Star Tile Works
Ltd. v. N. Govindan & Co.,AIR 1959 Ker. 254.
82. Salim Akbarali Nanji v. Union of India, (2003) 113 Comp. Cas. 141 (Bom.)(DB). See also Comments under Sections 35,
565, 566 and 581A to 581ZT.
84. Union of India v. G.A. Randarian Ltd., (1992) 75 Comp. Cas. 486 (Cal.).
85. SAR Schotte Gmbh v. Perfums Rothschild SARL,1992 BCLC 235 (CJEC).
Page 65 of 69
88. CIT v. Sri Meenakshi Mills Ltd.,AIR 1967 SC 819 [LNIND 1966 SC 266]: (1967) 63 ITR 609 [LNIND 1966 SC 266] (SC)
: (1967) 1 SCR 934 [LNIND 1966 SC 266]; L.I.C. v. Escorts Ltd., (1986) 59 Comp. Cas. 548 (SC) : AIR 1986 SC 1370
[LNIND 1985 SC 362]. See detailed Comments on Lifting the corporate veil under Section 34.
89. Ram Prasad v. State of Punjab,AIR 1966 SC 1607 [LNIND 1966 SC 43]. For matters requiring sanction of
shareholders by Ordinary Resolution and Special Resolution see Comments under Section 189.
90. Shanti Ranjan Bhattacharya v. State, (1971) 41 Comp. Cas. 234 (Cal.) : AIR 1970 Cal. 557 [LNIND 1970 CAL 160].
Now Co-operative societies may become Producer Companies. See Part IXA, Chapters I to XII, Sections 581A to
581ZT inserted by the Companies (Amendment) Act, 2002 (1 of 2003). See also Body corporate or corporation [Section
2(7)].
(2003) 113 Comp. Cas. 1 (SC). See also Comments under Sections 2(46), 55A, 69 and 81.
93. K. Sreenivasa Rao v. H. Gangadhar, (2007) 138 Comp. Cas. 555 (AP) (DB).
1. Chief Controlling Revenue Authority v. Manager, State Bank of Mysore, (1989) 65 Comp. Cas. 427 (Kar.) (FB). See
2. Knightsbridge Estates Trust Ltd. v. Byrne,(1940) AC 613 : (1940) 2 All ER 401 : 109 LJ Ch. 200 : 162 LT 388 (HL). See
3. Levy v. Abercorris Slate and Slab Co., (1887) 37 Ch.D. 260 : (1886-90) All ER Rep. 509 : 57 LJ Ch. 202 : 58 LT 218.
4. Rayner, Re, (1904) 1 Ch. 176 : 73 LJ Ch. 111 : 89 LT 381.
5. Lemon v. Austin Friars Investment Trust Ltd., (1926) Ch. 1 : (1925) All ER Rep. 255 (CA) : 95 LJ Ch. 97 : 133 LT 790 :
41 TLR 629 : 69 SJ 762 (CA).
6. Essar Steel Ltd. v. Gramercy Emerging Market Fund, (2003) 116 Comp. Cas. 248 (Guj.) (DB). See also Comments
under Sections 2(45AA), 439 and 483.
7. Compagnie Generale de Bellegarde, Re, Campbell’s Case, (1876) 4 Ch.D. 470: 35 LT 900; See also Webb v.
Shropshire Railways Co., (1893) 3 Ch. 307 : 63 LJ Ch. 80 : 69 LT 533 (CA); Anglo-Danubian Steam Navigation and
Colliery Co., Re,(1875) LR 20 Eq. 339 : 44 LJ Ch. 502 : 33 LT 118 : 23 WR 783.
8. Moseley v. Koffyfontein Mines Ltd., (1904) 2 Ch. 108 : 73 LJ Ch. 569 : 91 LT 266 (CA). See also Comments under
Sections 79, 81, 117 and 129.
9. Unit Trust of India v. Om Prakash Berlia, (1983) 54 Comp. Cas. 723 (Bom.) (DB).
10. Murray v. Herring, (1908) 2 Ch. 493 : (1908) WN 153. See Sections 117 to 123.
11. Siel Ltd., In re, (2004) 122 Comp. Cas. 536 (Delhi); Florence Land and Public Works Co., Re, (1878) 10 Ch.D. 530 : 48
LJ Ch. 137 : 39 LT 589 : 27 WR 236 (CA); Illingworth v. Houldsworth,(1904) AC 355 : 73 LJ Ch. 739 : 91 LT 602 : 53
WR 113 (HL). See detailed Comments under Sections 117 and 124. See also Comments under Sections 2(45AA), 391
and Schedule VI.
12. Spiral Globe Ltd., Re, (1902) 1 Ch. 396 : 71 LJ Ch. 128 : 85 LT 778 : 50 WR 187.
13. R.D. Goyal v. Reliance Industries Ltd., (2003) 113 Comp. Cas. 1 (SC); Morgan Stanley Mutual Fund v. Kartick Das,
(1994) 81 Comp. Cas. 318 (SC). See also Comments under Sections 2(46), 55A, 69, 81 and 117.
† See the Securities Contracts (Regulation) Act, 1956 (42 of 1956) in Appendix 221.
14. Canadian Land Reclaiming and Colonising Co., Re, Coventry and Dixon’s Case, (1880) 14 Ch.D. 660 : 42 LT 559 : 28
WR 775 (CA). See also Comments under Section 543.
15. Faure Electric Accumulator Co., Re, (1888) 40 Ch.D. 141 : 58 LJ Ch. 48 : 59 LT 918. See also Ferguson v.
Wilson,(1866) LR 2 Ch. 77 : 36 LJ Ch. 67 : 15 LT 230 and Gramophone and Typewriter Ltd. v. Stanley,(1908) 2 KB 89 :
(1908-10) All ER Rep. 833 : 77 LJ KB 834 : 99 LT 39 : 24 TLR 480 (CA). See also Comments under Sections 34 and
543.
Page 66 of 69
16. Wincham Shipbuilding, Boiler and Salt Co. IN RE. Poole, Jackson and Whyte’s Case, (1878) 9 Ch.D. 322 : 48 LJ Ch.
48 : 38 LT 659 : 26 WR 823 (CA).
17. K.R. Kothandaraman v. CIT,AIR 1967 Mad. 143 [LNIND 1965 MAD 244]: (1966) 62 ITR 348 [LNIND 1965 MAD 244]
(Mad.); S. Gururaja Rao v. State of Karnataka, (1979) 49 Comp. Cas. 468 (Kar.). See also Comments under Sections
252, 285, 291 and 309.
185 : 33 LT 450 : 24 WR 794 (HL).
19. Narasimha Ayyangar v. Official Assignee of Madras,AIR 1931 Mad. 58 [LNIND 1930 MAD 8]; Kathiawar Trading Co. v.
Virchand Dipchand,(1894) ILR 18 Bom. 119.
20. Parker v. Mckenna, (1874) 10 Ch. App. 96 : 44 LJ Ch. 425 : 31 LT 739 : 23 WR 271.
21. Maharashtra Power Development Corporation Ltd. v. Dabhol Power Co., (2004) 120 Comp. Cas. 560 (Bom.) (DB). See
detailed Comments under Sections 260, 262, Schedule I, Table A, Regulations 72, 75 and Table E.
22. Secretary of State for Trade and Industry v. Deverell,(2000) 2 All ER 365 : (2000) 2 WLR 907 : (2002) 111 Comp. Cas.
303 (CA).
23. Hydrodam (Corby) Ltd., Re,(1994) 2 BCLC 180 (Ch.D.).
24. Dale and Carrington Invt. P. Ltd. v. P.K. Prathapan, (2004) 122 Comp. Cas. 161 (SC); Boulting v. Association of
33 Comp. Cas. 475 (CA). See also Comments under Sections 2(26), 26, 81, 111, 397 and 398.
25. Guru Gobinda Basu v. Sankari Prasad Ghosal, (1963) 33 Comp. Cas. 1132 (SC) : AIR 1964 SC 254 [LNIND 1963 SC
186]: (1964) 4 SCR 311 [LNIND 1963 SC 186] : (1964) 1 Comp. LJ 87 (SC). See detailed Comments under relevant
Sections 617 to 620.
26. Rivers Steam Navigation Co. Ltd., In re, (1967) 2 Comp. LJ 106 (Cal.) : 71 CWN 854.
27. Sunil Kumar Debnath v. Mining & Allied Machinery Corpn. Ltd., (1968) 38 Comp. Cas. 652 (Cal.) (DB) : 72 CWN 144 :
AIR 1968 Cal. 322 [LNIND 1967 CAL 76](DB); Abani Bhusan Biswas v. Hindusthan Cables Ltd., (1968) 38 Comp. Cas.
528 (Cal.) : 72 CWN 410; Malik Ram v. Hindusthan Cables Ltd., (1968) 38 Comp. Cas. 500 (Cal.) : 72 CWN 398.
28. Praga Tools Corpn. v. C.V. Imanual, (1969) 39 Comp. Cas. 889 (SC) : AIR 1969 SC 1306 [LNIND 1969 SC 80]: (1970)
1 Comp. LJ 50 (SC).
SC 121]; State Trading Corpn. of India Ltd. v. CTO, (1963) 33 Comp. Cas. 1057 (SC) : AIR 1963 SC 1811 [LNIND
1963 SC 334]: (1963) 2 Comp. LJ 234 (SC); Steel Authority of India Ltd. v. Shri Ambica Mills Ltd., (1998) 92 Comp.
Cas. 120 (SC); Electronics Corpn. of India Ltd. v. Govt. of A.P., (1999) 97 Comp. Cas. 470 (SC). See detailed
30. Woodhouse v. Walsall Metropolitan Borough Council,(1994) 1 BCLC 435. See detailed Comments under Section 5.
31. CIT v. Alagappa Textiles (Cochin) Ltd., (1979) 49 Comp. Cas. 947 (SC) : AIR 1980 SC 235 [LNIND 1979 SC 378]:
(1979) 120 ITR 480 [LNIND 1979 SC 378] (SC). See also Comments under 384.
32. Ferruccio Sias v. Jai Manga Ram Mukhi, (1998) 93 Comp. Cas. 750 (Delhi). See also Comments under Sections 2(26)
and 10.
33. Sand Plast (India) Ltd. v. I.T.C. Bhadrachalam Finance and Investment Ltd., (2002) 111 Comp. Cas. 471 (Raj.) (DB).
See also Comments under Sections 433, 434, 439 and Rules 6, 18 and 21 of the Companies (Court) Rules, 1959.
610E (w.e.f. 16-9-2006) in Appendix 2.
10-2006) in Comments under Section 610B as inserted by the Companies (Amendment) Act, 2006 (w.e.f. 16-9-2006).
35. Ram Prashad v. CIT, (1972) 42 Comp. Cas. 544 (SC) : AIR 1973 SC 637 [LNIND 1972 SC 388]: 86 ITR 122 (SC).
36. Sishu Ranjan Dutta v. Bhola Nath Paper House Ltd., (1983) 53 Comp. Cas. 883 (Cal.).
37. Major General Shanta Shamsher Jung Bahadur Rana v. Kamani Bros. P. Ltd., (1959) 29 Comp. Cas. 501 (Bom.) : AIR
1959 Bom. 201 [LNIND 1958 BOM 1].
38. Official Liquidator v. Shri Krishna Prasad Singh, (1969) 1 Comp. LJ 327 (Pat.); Boulting v. Association of
33 Comp. Cas. 475 (CA).
Page 67 of 69
39. Shri Ambica Mills Ltd., In re, (1986) 59 Comp. Cas. 368 (Guj.). See also Comments under Sections 2(13), 2(30) and
101.
41. Employees' State Insurance Corporation v. Apex Engineering P. Ltd., (1998) 1 Comp. LJ 10; Happy Home Builders
(Karnataka) P. Ltd. v. Delite Enterprises,(1994) 13 CLA 405 (Kar.).
42. CIT v. B.P. Dalmia, (1994) 3 Comp. LJ 268 (Cal.) : (1994) 207 ITR 267 (Cal.); CIT v. M.S.P. Rajes, (1993) 77 Comp.
Cas. 402 (Kar.) : (1993) 202 ITR 646 (Kar.).
43. Maruti Ltd. v. Pan India Plastic Pvt. Ltd., (1995) 83 Comp. Cas. 888 (P&H).
44. Pandurang Camotim Sancoalcar v. Suresh Prabhakar Prabhu, (2003) 113 Comp. Cas. 600 (Bom.). See detailed
46. AES OPGC Holding (Mauritius) v. Orissa Power Generation Corporation Ltd., (2005) 125 Comp. Cas. 299 (CLB); Shaw
(John) & Sons (Salford) Ltd. v. Shaw,(1935) 2 KB 113 : (1935) All ER Rep. 456 : (1935) 5 Comp. Cas. 369 (CA).
ITR 215 [LNIND 1959 SC 34] (SC) : (1959) Supp. 2 SCR 448. See detailed Comments under Sections 41.
49. World Wide Agencies P. Ltd. v. Mrs. Margaret T. Desor, (1990) 67 Comp. Cas. 607 (SC). See also Comments under
Sections 41, 109, 397 and 398.
[LNIND 1972 SC 144]: (1972) 3 SCR 711 [LNIND 1972 SC 144]. See detailed Comments under Section 13.
[LNIND 1979 SC 75]. See also Comments on Inclusive Definition earlier and Comments under Section 392.
52. Official Liquidator v. P.C. Dhadda, (1980) 50 Comp. Cas. 175 (Raj.). See also Comments under Sections 446, 458A
and 538.
53. Poomuli Manakkal Anujan Nambudiripad v. Official Liquidator, (1979) 49 Comp. Cas. 81 (Ker.); Devinder Kishore
Mehra v. Official Liquidator, (1980) 50 Comp. Cas. 699 (Delhi) (DB); Jute and Gunny Brokers Ltd. v. UOI, (1962) 32
Comp. Cas. 845 (SC) : AIR 1961 SC 1214 [LNIND 1961 SC 64]. See also Comments under Sections 52, 451 and 454.
54. Ravinder Kumar Sangal v. Auto Lamps Ltd., (1984) 55 Comp. Cas. 742 (Delhi).
55. Official Liquidator v. Registrar of Companies, (1978) 48 Comp. Cas. 120 (Guj.); Prahallad Bai Lath v. ROC, (1979) 49
Comp. Cas. 317 (Orissa). See also Comments under Section 633.
56. Suryanarayana v. Vijaya Commercial Bank Ltd.,AIR 1958 AP 756; Hanuman Bank Ltd., In re, (1964) 34 Comp. Cas.
640 (Mad.) (DB).
57. T.S. Satyanath v. J. Thomas & Co., (1985) 57 Comp. Cas. 648 (Cal.). See also Comments under. For position of
professional advisers see Comments under Section 630. For position of professional advisers see Comments under
Section 7.
58. Mutual Reinsurance Co. Ltd. v. Post Marwick Mitchell & Co.,(1997) 1 BCLC 1. See also Comments under Sections 201
and 224.
* See the Securities Contracts (Regulation) Act, 1956 (42 of 1956) in Appendix 221.
59. Nash v. Lynde,(1929) AC 158 : 98 LJ KB 127 : 140 LT 146 : 45 TLR 42 (HL). See detailed Comments under Sections
55, 56 and 67.
* Published in the Gazette of India, Extraordinary, No. 640, Part II, Section 3(i), dated 21-12-1989 : (1990) 67 Comp.
Cas. (St.) 341: Chartered Secretary, January 1990, page 61.
60. Added by Notification No. S.O. 406(E), dated 24-5-1990, published in the Gazette of India, Extraordinary, Part II,
Section 3(ii), dated 24-5-1990 : (1990) 68 Comp. Cas. (St.) 88: Chartered Secretary, July 1990, page 602.
61. Added by Notification No. S.O. 343(E), dated 31-5-1993, published in the Gazette of India, Extraordinary, No. 313, Part
II, Section 3(ii), dated 31-5-1993 : (1993) 77 Comp. Cas. (St.) 787: Chartered Secretary, July 1993, page 724.
62. Added by Notification No. S.O. 174(E), dated 15-2-1994 : Gazette of India, Extraordinary, No. 78, Part II, Section 3(ii),
dated 15-2-1994 : (1994) 80 Comp. Cas. (St.) 97.
Page 68 of 69
63. Added by Notification No. S.O. 638(E), dated 14-7-1995 : Gazette of India, Extraordinary, Part II, Section 3(ii), dated
14-7-1995 : (1995) 84 Comp. Cas. (St.) 49.
102 Comp. Cas. 300 (MP) (DB)See detailed Comments u/s. 29.
65. Maluk Mohamed v. Capital Stock Exchange Kerala Ltd., (1991) 72 Comp. Cas. 333 (Ker.); Coimbatore Texcity Share
Brokers Assciation v. Union of India, (1993) 77 Comp. Cas. 29 (Mad.) (DB). See also Comments under Sections 12, 33
and 149.
* See the Reserve Bank of India Act, 1934 (2 of 1934) Second Schedule containing up-to-date List of Scheduled Banks
in Appendix 305.
* See the Companies (Appointment and Qualifications of Secretary) Rules, 1988 Appendix 12.
** See the Companies (Compliance Certificate) Rules, 2001 in Appendix 22.
* See the Companies (Appointment and Qualifications of Secretary) Rules, 1988 in Appendix 12.
67. Joint Stock Discount Co. v. Brown,(1869) LR 8 Eq. 381 : 17 WR 1037; Maidstone Buildings Provisions Ltd., Re,(1971)
3 All ER 363 : (1971) 1 WLR 1085 : (1971) 115 SJ 464. See also Comments under Sections 383A and 543.
68. State of Wyoming Syndicate, Re, (1901) 2 Ch. 431 : 70 LJ Ch. 727 : 84 LT 868; Haycraft Gold Reduction and Mining
Co. Ltd., Re, (1900) 2 Ch. 230 : 69 LJ Ch. 497 : 83 LT 166 : 16 TLR 350. See detailed Comments under Section 383A.
69. Hooper v. Kerr, Stuart & Co. Ltd.,(1900) 83 LT 729 : 17 TLR 162 : 45 SJ 139. See also Comments under Section 169.
70. Indo-China Steam Navigation Co., Re, (1917) 2 Ch. 100 : (1916-17) All ER Rep. 793 : 86 LJ Ch. 723 : 117 LT 212.
71. Chida Mines Ltd. v. Anderson,(1905) 22 TLR 27; Bishop v. Balkis Consolidated Co. Ltd.,(1890) 25 QBD 512 : 59 LJ QB
565 : 63 LT 601 : 39 WR 99 : 6 TLR 450 (CA); Zinotty Properties Ltd., Re,(1984) 3 All ER 754 : (1984) 1 WLR 1249 :
(1984) 128 SJ 783 : (1984) BCLC 375.
72. Barnett, Hoares & Co. v. South London Tramways Co.,(1887) 18 QBD 815 : 56 LJ QB 452 : 57 LT 436 : 35 WR 640 : 3
TLR 611 (CA).
(1971) 3 WLR 440 : (1971) 115 SJ 483 (CA), per Lord Denning M.R.
74. Lloyd v. Grace Smith & Co.,(1912) AC 716 : (1911-13) All ER Rep. 51 : 81 LJ KB 1140 : 107 LT 531 : 28 TLR 547 : 56
SJ 723 (HL). See also Comments under Section 84.
75. Mair v. Himalaya Tea Co.,(1865) LR 1 Eq. 411 : 13 LT 586 : 14 WR 165. See also Bainbridge v. Smith, (1889) 41 Ch.D.
462 : 60 LT 879 : 37 WR 594 : 5 TLR 375 (CA).
76. Bainbridge v. Smith, (1889) 41 Ch.D. 462 : 60 LT 879 : 37 WR 594 : 5 TLR 375 (CA). See also Comments under
Section 270.
77. Green v. Wright,(1876) 1 CPD 591. See also Comments under Section 383A.
78. African Asscn. & Allen, Re,(1910) 1 KB 396 : 79 LJ KB 259 : 102 LT 129 : 26 TLR 234.
79. Amor v. Fearon, (1839) 9 A.&E. 548 : 8 LJ QB 95 ; Pearce v. Foster,(1886) 17 QBD 536 : 55 LJ QB 306 : 54 LT 664 :
34 WR 602; Boston Deep Sea Fishing and Ice Co. v. Ansell, (1888) 39 Ch.D. 339 : (1886-90) All ER Rep. 65 : 59 LT
345 : WR Dig. 117 (CA); Harmer v. Cornelius, (1858) 5 CB (NS) 236 : 28 LJ CP 85 : 6 WR 749; Addis v. Gramophone
Co.,(1909) AC 488 : 78 LJ KB 1122 : 101 LT 466. See also Comments under Sections 383A and 543.
80. Merryweather v. Moore, (1892) 2 Ch. 518 : 61 LJ Ch. 505 : 66 LT 719 : 40 WR 540; Robb v. Green,(1895) 2 QB 315.
85 LJ KB 1333 : 114 LT 1049 (HL).
[LNIND 1972 SC 144]: (1972) 3 SCR 711 [LNIND 1972 SC 144]. See also Comments under Section 383A.
83. Mohan Lal Mittal v. Universal Wires Ltd., (1983) 53 Comp. Cas. 36 (Cal.); Whitechurch (George) Ltd. v.
Cavanagh,(1902) AC 117 : (1900-03) All ER Rep. Ext. 1488 : 71 LJ KB 400 : 85 LT 349 : 17 TLR 746 : 50 WR 218
(HL). See also Comments under Section 398.
* See the Companies (Compliance Certificate) Rules, 2001 in Appendix 22.
84. T.U. Khatri v. Institute of Company Secretaries of India, (2003) 116 Comp. Cas. 621 (Bom.) (DB); Dr. Haniraj L. Chulani
v. Bar Council of Maharashtra and Goa,AIR 1996 SC 1708 [LNIND 1996 SC 743].
85. Essar Steel Ltd. v. Gramercy Emerging Market Fund, (2003) 116 Comp. Cas. 248 (Guj.) (DB); Siel Ltd., In re, (2004)
122 Comp. Cas. 536 (Delhi). See detailed Comments u/s. 2(12).
Page 69 of 69
86. Dahiben Umedbhai Patel v. Norman James Hamilton, (1985) 57 Comp. Cas. 700 (Bom.) (DB); Rye v. Rye,(1962) AC
496 (HL); Hunter v. Hunter,(1936) AC 222 : 105 LJ Ch. 97 : 154 LT 513 (HL); R. Mathalone v. Bombay Life Assurance
Co. Ltd., (1954) 24 Comp. Cas. 1 (SC) : AIR 1953 SC 385 [LNIND 1953 SC 64]: 1954 SCR 117 [LNIND 1953 SC 64].
* See the Securities and Exchange Board of India Act, 1992 (15 of 1992) in Appendix 236.
87. Borland's Trustee v. Steel Bros. & Co. Ltd., (1901) 1 Ch. 279 : 70 LJ Ch. 51 : 49 WR 120 : 17 TLR 45. See also
[LNIND 1954 SC 145] (SC) : (1955) 1 SCR 876 [LNIND 1954 SC 145]; Charanjit Lal Chowdhury v. UOI, (1951) 21
Comp. Cas. 33 (SC) : AIR 1951 SC 41 [LNIND 1950 SC 55]: 1950 SCR 869 [LNIND 1950 SC 55]; H.C. Shastri v.
Dolphin Canpack (P.) Ltd., (1998) 93 Comp. Cas. 201 (Delhi). See detailed Comments under Sections 34, 41 and 82.
89. CIT v. Standard Vacuum Oil Co.,AIR 1966 SC 1393 : (1966) 59 ITR 685 (SC). See detailed Comments under Sections
75 and 78.
Comments under Sections 34, 41, 111, 111A, 169, 173 and 617.
91. Shree Gopal Paper Mills Ltd. v. CIT,AIR 1970 SC 1750 [LNIND 1970 SC 222]: (1970) 77 ITR 543 (SC). See also
92. S.N.D.P. Yogam, Quilon, In re, (1970) 40 Comp. Cas. 60 (Ker.). See also Comments under Sections 12, 13, 69, 70, 86,
397, 398 and 399.
(2003) 113 Comp. Cas. 1 (SC). See also Comments under Sections 2(12), 10, 55A, 69 and 81.
94. Bajaj Tempo Ltd. v. Unit Trust of India, (1992) 73 Comp. Cas. 451 (CLB). The MR TP Act, 1969 (54 of 1969) has since
been repealed. Now see the Competition Act, 2002 (12 of 2003). See also Comments under 111A.
End of Document
Datta: Company Law
C R Datta
95[S. 2A. Interpretation of certain words and expressions.

—Words and expressions used and not defined in this Act but defined in the Depositories Act, 1996 (22 of
1996) shall have the same meanings respectively assigned to them in that Act.]
COMMENTS
Legislative History.—The Depositories Act, 1996 (22 of 1996).—The Notes on clauses explained as follows:
“Clause 30 provides for amendment to certain provisions of the Companies Act, 1956 provided in the Schedule to
the Bill.” [Clause 30 of the Depositories Bill, 1996 (29 of 1996).
Words defined in the Depositories Act,1996.—The words and expressions used and not defined in the
Companies Act, 1956 but defined in the Depositories Act shall have the same meanings assigned to them in the
Depositories Act, 1996.*
For words and expressions defined in the Companies Act, 1956see Comments under Section 2 hereinbefore. See
Principles of Interpretation and Construction of undefined words in Comments under Section 1.
Depository [Section 2(12A)].—Depository has the same meaning as in the Depositories Act, 1996 (22 of 1996).
[S. 2(12A) of the Companies Act, 1956].
The Depositories Act, 1996 (22 of 1996) and further related amendments have made consequential amendments in
the Companies Act, 1956 (1 of 1956).
See Comments under relevant Sections of the Companies Act, 1956, viz., Sections 2(12A), 2A, 41(3), 49(5)(c), 51
proviso, 68A, 68B, 83, 108(3), 111(14), 111A, 113(4), 150(1)(b), 152(1)(b), 152A and Schedule II, Part II, Clause C,
Sub-clause 9A.
Other Consequential Amendments.—The Depositories Act, 1996 (22 of 1996) and further related amendments
have made consequential Amendments in certain other Acts, e.g., the Securities and Exchange Board of India Act,
1992, the Securities Contracts (Regulation) Act, 1956, the Indian Stamp Act, 1899, the Income-tax Act, 1961, the
Page 2 of 2
Benami Transactions (Prohibition) Act, 1988 and the Banking legislations. The provisions of the Depositories Act,
1996 (22 of 1996) and consequential amendments have been briefly dealt with in Comments under Section 68B.
Issue of Securities in Demat Form [Section 68B].—Every listed public company making initial public offer of any
security for Rs. 10 crores or more shall issue the same only in Dematerialised (Demat) form by complying with
provisions of the Depositories Act, 1996 (22 of 1996) and Regulations made thereunder.
End of Document
Datta: Company Law
C R Datta
S. 3. Definitions of “company”, “existing company”, “private company” and

“public company”.
—
(1) In this Act, unless the context otherwise requires, the expressions “company”, “existing company”,
“private company” and “public company” shall, subject to the provisions of sub-section (2), have the
meanings specified below:—
(i)
“company” means a company formed and registered under this Act or an existing company as
defined in clause (ii);
(ii)
“existing company” means a company formed and registered under any of the previous
companies laws
specified below:—
(a) Any Act or Acts relating to companies in force before the Indian Companies Act, 1866 (10 of
1866), and repealed by that Act;
(b) The Indian Companies Act, 1866 (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
96[(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
(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),97[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];] and
1[(g) The Portuguese Commercial Code 2[***], in so far as it relates to “sociedades anonimas”;]
(iii)
]] 3[ means a company which has a minimum paid-up capital of one lakh rupees or such higher
paid-up capital as may be prescribed, and by its articles,—
(a) restricts the right to transfer its shares, if any;
(b) limits the number of its members to fifty not including—
Page 2 of 19
(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;
4[ (d) prohibits any invitation or acceptance of deposits from persons other than its members,
directors or their relatives:]
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;
5[ (iv) “public company” means a company which—

(a) is not a private company;
(b) has a minimum paid-up capital of five lakh rupees or such higher paid-up capital, as may be
prescribed;
(c) is a private company which is a subsidiary of 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);
6[(b) ***]
(3) 7[Every private company, existing on the commencement of the Companies (Amendment) Act, 2000
(53 of 2000), with a paid-up capital of less than one lakh rupees shall, within a period of two years from
such commencement, enhance its paid-up capital to one lakh rupees.
(4) Every public company, existing on the commencement of the Companies (Amendment) Act, 2000 (53
of 2000), with a paid-up capital of less than five lakh rupees shall, within a period of two years from
such commencement, enhance its paid-up capital to five lakh rupees.
(5) Where a private company or a public company fails to enhance its paid-up capital in the manner
specified in sub-section (3) or sub-section (4), such company shall be deemed to be a defunct
company within the meaning of section 560 and its name shall be struck off from the register by the
Registrar.
(6) A company registered under section 25 before or after the commencement of the Companies
(Amendment) Act, 2000,shall not be required to have minimum paid-up capital specified in this
section.]
96. Substituted by the Jammu and Kashmir (Extension of Laws) Act, 1956 (62 of 1956), s. 2 and Sch. (w.e.f. 1-11-1956).
For clause (f) of section 3(1)(ii) as it stood prior to its substitution see Annexure at the end of this Volume.
97. Inserted by the Central Laws (Extension to Jammu and Kashmir) Act, 1968 (25 of 1968), s. 2 and Sch. (w.e.f. 15-8-
1968).
1. Inserted by the Goa, Daman and Diu (Laws) No. 2 Regulation, 1963 (11 of 1963).
2. The words, brackets and figures “(Carta Lei of the 11th April, 1901)” omitted by the Repealing and Amending Act, 1964
(52 of 1964), s. 3 and Sch.11.
3. Substituted by the Companies (Amendment) Act, 2000 (53 of 2000), s. 3 (w.e.f. 13-12-2000), for the words “means
a company which, by its articles,—”.
Page 3 of 19
4. Inserted by the Companies (Amendment) Act, 2000 (53 of 2000)s. 3, (w.e.f. 13-12-2000).
5. Substituted by the Companies (Amendment) Act, 2000 (53 of 2000), s. 3 (w.e.f. 13-12-2000). Prior to substitution
the clause stood as under: “(iv)
“public company” means a company which is not a private company.”

6. Clause (b) omitted by the Jammu and Kashmir (Extension of Laws) Act, 1956 (62 of 1956), s. 2 and Sch. (w.e.f. 1-11-
1956). Prior to substitution the clause stood as follows: “(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.”
7. Sub-sections (3) to (6) inserted by the Companies (Amendment) Act, 2000 (53 of 2000), s. 3, (w.e.f. 13-12-2000).
8. Telesound India Ltd., In re, (1983) 53 Comp. Cas. 926 (Delhi). See detailed Comments under Sections 390 to 394.
9. Rivers Steam Navigation Co. Ltd., In re, (1967) 2 Comp. LJ 106 (Cal.) : 71 CWN 854;. Inland Steam Navigation
Workers' Union v. Rivers Steam Navigation Co. Ltd., (1968) 38 Comp. Cas. 99 (Cal.) (DB) : 71 CWN 897.;. See
detailed Comments under Sections 34, 391, 394 and 617.
10. V.B. Rangaraj v. V.B. Gopalakrishnan, (1992) 73 Comp. Cas. 201 (SC) : AIR 1992 SC 453 [LNIND 1991 SC 637]. See
detailed Comments under 82, 108 and 111.
11. John Tinson & Co. Pvt. Ltd. v. Mrs. Surjeet Malhan, (1997) 88 Comp. Cas. 750 (SC) : AIR 1997 SC 1411 [LNIND 1997
SC 176]. See detailed Comments under Sections 108 and 111.
12. Dahiben Umedbhai Patel v. Norman James Hamilton, (1985) 57 Comp. Cas. 700 (Bom.) (DB).
13. Satyanarayana Rathi v. Annamalaiar Textiles Pvt. Ltd., (1999) 95 Comp. Cas. 386 (CLB); Cruickshank Co. Ltd. v.
Stridewell Leather Pvt. Ltd., (1996) 86 Comp. Cas. 439 (CLB). See detailed Comments under Sections 108 and 111.
14. S.A. Padmanabha Rao v. Union Theatres Pvt. Ltd., (2002) 108 Comp. Cas. 108 (Kar.).
15. Ontario Jockey Club v. Mcbridge,(1927) AC 916 (PC) : AIR 1928 PC 291 : Chiranji Lal v. Mahabir Dhelia,AIR 1966
Assam 48. See also Comments under Sections 82 and 108.
16. Master Silk Mills Pvt. Ltd. v. Dharamdas Hargovandas Mehta, (1980) 50 Comp. Cas. 365 (Guj.) (DB). See also
Comments under Sections 108.
17. M.S. Madhusoodhanan v. Kerala Kaumudi Pvt. Ltd., (2003) 117 Comp. Cas. 19 (SC) : (2003) 4 Comp. LJ 185 (SC)
(Mrs. Ruma Pal and B.N. Srikrishna JJ.).
18. Lyle and Scott Ltd. v. Scott's Trustees,(1959) AC 763 : (1959) 2 All ER 661 : (1959) 3 WLR 133 : (1959) 103 SJ 507 :
(1960) 30 Comp. Cas. 30 (HL).
19. D. Sasidharan v. Sipcot, (1992) 73 Comp. Cas. 44 (Mad.).
20. Rakhra Sports Pvt. Ltd. v. Khraitilal Rakhra, (1993) 76 Comp. Cas. 545 (Kar.) (DB); Bird Precision Bellows Ltd., Re,
(1986) Ch. 658 : (1985) 3 All ER 523 : (1986) 2 WLR 158 : (1986) 130 SJ 51 : (1985) BCLC 493 (CA). See also
21. Dr. Mrs. Banoo J. Coyajee v. Shanta Genevieve Pommeret Parulekar, (1995) 84 Comp. Cas. 534 (Bom.) (DB); Mihir
Chakraborty v. Multi Tech Computers P. Ltd., (2001) 106 Comp. Cas. 150 (Delhi); M. Jones v. R.R. Jones,(1971) 1
WLR 840 : (1971) 41 Comp. Cas. 955 (Ch.). See also Comments under Sections 81, 108, 111, 172 and 286.
22. Babulal Madhavji Varma v. New Standard Coal Co. P. Ltd., (1967) 37 Comp. Cas. 446 (Cal.) : 71 CWN 333. See also
Comments under Sections 26, 111, 397, 398 and 402.
23. New Cedos Engineering Co. Ltd., Re,(1994) 1 BCLC 797 (Ch.D); Stothers v. William Steward (Holdings) Ltd.,(1994) 2
BCLC 266. See also Comments under Section 108.
24. Roberts v. Letter ‘T' Estates Ltd.,(1961) AC 795 : (1961) 3 WLR 176 : 105 SJ 525 (PC) : (1962) 32 Comp. Cas. 80
(PC).
25. Hunter v. Hunter,(1936) AC 222 : 105 LJ Ch. 97 : 154 LT 513 (HL); Champagne Perrier-Jouet S.A. v. H.H. Finch
Ltd.,(1982) 3 All ER 713 : (1982) 1 WLR 1359.
26. Safeguard Industrial Investments Ltd. v. National Westminster Bank Ltd.,(1982) 1 ALL ER 449 : (1982) 1 WLR 589 :
(1982) 126 SJ 205 (CA). See also Comments under Section 108.
27. Shailesh Prabhudas Mehta v. Calico Dyeing and Printing Mills Ltd., (1994) 80 Comp. Cas. 64 (SC). See detailed
28. Anderson v. James Sutherland (Peterhead) Ltd., (1941) SC [Scottish] 203; Trussed Steel Concrete Co. Ltd. v.
Green,(1946) 1 Ch 115 : 115 LJ Ch. 123 : 174 LT 122
Page 4 of 19
29. Jarnail Singh v. Bakshi Singh, (1960) 30 Comp. Cas. 192 (Punj.) : AIR 1960 Punj 455. See also Comments under
Section 36.
30. G. Venkitapathy v. Prakathi Spinners Pvt. Ltd., (2003) 115 Comp. Cas. 443 (CLB).
31. Winfield Agro Services Pvt. Ltd., In re, (1996) 86 Comp. Cas. 587 (AP). See also Comments under Sections 43 and
Section 391.
32. Hillcrest Realty Sdn. Bhd. v. Hotel Queen Road P. Ltd., (2006) 133 Comp. Cas. 742 (CLB).
33. North East Finance Corpn. Ltd. v. UOI, (2000) 101 Comp. Cas. 373 (Sikkim) (DB).
36. L.I.C. v. Escorts Ltd., (1986) 59 Comp. Cas. 548 (SC) : AIR 1986 SC 1370 [LNIND 1985 SC 362]; CIT v. Sri
Meenakshi Mills Ltd.,AIR 1967 SC 819 [LNIND 1966 SC 266]: (1967) 63 ITR 609 [LNIND 1966 SC 266] (SC) : (1967) 1
SCR 934 [LNIND 1966 SC 266]. See detailed Comments on Lifting the corporate veil under Section 34.
37. Salomon v. Salomon & Co. Ltd.,(1897) AC 22 : (1895-99) All ER Rep. 33 : 66 LJ Ch. 35 : 75 LT 426 : 45 WR 193 : 13
TLR 46 : 41 SJ 63 (HL). See detailed Comments under Section 34.
38. Subra Mukherjee v. Bharat Coking Coal Ltd., (2000) 101 Comp. Cas. 257 (SC); New Horizons Ltd. v. UOI,(1997) 89
Comp Cas 849 (SC). See detailed Comments under Section 34.
39. Ram Prasad v. State of Punjab,AIR 1966 SC 1607 [LNIND 1966 SC 43]. for matters requiring sanction of shareholders
by Ordinary Resolution and Special Resolution see Comments under Section 189.
40. Punjab National Bank v. Lakshmi Industrial and Trading Co. Pvt. Ltd., (2002) 111 Comp. Cas. 109 (All.) (DB). See also
Comments under Sections 34 and Section 291.
41. T.M. Devassy v. Periyar Latex P. Ltd., (1994) 81 Comp. Cas. 560 (Ker.); Maluk Mohamed v. Capital Stock Exchange
Kerala Ltd., (1991) 72 Comp. Cas. 333 (Ker.). See also Comments under Sections 10, 12 and Section 617.
42. Bhagwandas J. Patel v. Deputy CIT, (1999) 97 Comp. Cas. 213 (Guj.) (DB); Khaders International Construction Ltd. v.
CIT, (1998) 91 Comp. Cas. 432 (Ker.); K.V. Reddy v. Asst. CIT, (1998) 93 Comp. Cas. 287 (AP) (DB); Gurudas Hazra
v. P.K. Chowdhury, (2002) 109 Comp. Cas. 530 (Cal.). See detailed Comments under Section 34.
43. Dipak Dutta v. Union of India, (2004) 121 Comp. Cas. 516 (Cal.).
44. Kailash Prasad Modi v. Chief General Manager, Orissa Telecommunication, (1995) 82 Comp. Cas. 626 (Orissa) (DB) :
AIR 1994 Orissa 98 (DB).
45. Kenya Airways v. Jinibai B. Kheshwala, (1999) 96 Comp. Cas. 140 (Bom.) (DB). See detailed Comments under Section
617.
46. Ladli Parshad Jaiswal v. Karnal Distillery Co. Ltd., (1963) 33 Comp. Cas. 593 (SC) : AIR 1963 SC 1279 [LNIND 1962
SC 435]. See detailed Comments on Jurisdiction of Courts, CLB and Tribunal (NCLT) under Sections 10, 10E, 10F,
10FA, 10FB, 10FR and 10GF.
* See the Companies (Accounting Standards) Rules, 2006 in Appendix 51.
COMMENTS
English Act, 1948: Section 455 Previous Act, 1913: Sections 2, 2A
English Act, 1985: Section 744
Legislative History.—The Companies Act, 1956 (1 of 1956).—The Notes on clauses explained this provision as
follows: “This combines clauses (2), (7), (13) and (13A) of sub-section (1) of section 2 and section 2A of the existing
Act. The Acts enumerated in clause 3(1)(ii) are previous companies laws. Proviso (i) to section 2A of the existing
Act has become spent and has therefore been omitted.” [ Clause 3 of the Companies Bill, 1953 (46 of 1953)].
Page 5 of 19
The Companies (Amendment) Act, 2000 (53 OF 2000).—The Notes on clauses explained as follows: “This clause
seeks to amend section 3 of the Act so as to provide for a minimum paid up capital of one lakh rupees for private
companies and a minimum paid up capital of five lakhs rupees for public companies or such higher paid up capital
as may be prescribed and also to provide that no private company shall invite or accept deposits from persons
other than its members, directors or their relatives.” [ Clause 3 of the Companies (Second Amendment) Bill, 1999
(139 of 1999)].
Company [Section 3(1)(i)].—In this Act, unless the context otherwise requires, the expression
“company” means a company formed and registered under this Act or an existing company as defined in clause
(ii)
.
Existing Company [Section 3(1)(ii)].—
Existing company means a company formed and registered under any of the previous companies laws and is still
in existence.
A defunct company [section 560] is not an existing company.
Definition subject to definitions in other provisions.—The definition of company in section 3(1)(i) is subject to
definitions in other provisions of the Act, if the context otherwise requires. If the expression “company” for the
purpose of sections 391 and 393 were to be understood as meaning a company in terms of section 3, a large
number of companies, such as, unregistered companies and foreign companies, would be outside the purview of
the provisions contained in Chapter V of the Act, with regard to compromise, arrangement and reconstruction
including amalgamation, even though these categories of companies would be within the winding-up sweep of the
Act by virtue of the provisions in Part X of the Act. It is for this reason that the expression “company” is redefined in
section 390(a) for the purposes of sections 391 and 393, so as to bring these categories of companies within
Chapter V and to enable these companies to become parties to schemes of amalgamation, etc.8
Government Company [Section 617].—A Government company is a company under this Act. Sections 391 and
394 are applicable to it even though the reconstructed company was not registered under this Act but incorporated
in a foreign country.9
“Holding Company” and “Subsidiary”.—For the definition and meaning of “holding company” and “subsidiary”
see Comments under Section 4.
Private Company [Section 3(1)(iii)].—Section 3(1)(iii) as amended by the Companies (Amendment) Act, 2000
(w.e.f. 13-12-2000) defines the private company to mean a company which has a minimum paid-up capital of Rs. 1
lakh or such higher sum as may be prescribed, and by its Articles (a) restricts the right to transfer its shares, (b)
limits the number of its members to 50 not including—(i) persons in the employment of the company, and (ii)
persons former employee-members continuing to be members, (c) prohibits invitation to the public to subscribe for
shares in, or debentures of, the company, and (d) prohibits invitation or acceptance of deposits from persons other
than its members, directors or their relatives. As per proviso joint shareholders are for the purposes of this definition
treated as a single member.
Minimum paid-up capital of Private Company.—Section 3(1)(iii) as amended (w.e.f. 13-12-2000) provides that a
private company shall have a minimum paid-up capital of Rs. 1 lakh or such higher paid-up capital as may be
prescribed.
Four Restrictions in Articles of a Private Company [Section 3(1)(iii)(a) to (d)].—A private company is a ‘close
corporation', its members are connected by bonds of kinship and friendship and the intrusion of an outsider as a
member is undesirable unless he is a persona grata to the existing members.
The Articles of Association of a private company, for this reason, must contain four restrictions, enumerated in
Section 3(1)(iii) (a) to (d) of the Act, as amended by the Companies (Amendment) Act, 2000, as explained below.
Restriction on the Right to Transfer Shares [Section 3(1)(iii)(a)].—Sub-clause (a) of clause (iii) of sub-section
(1) of section 3 provides that a private company must by its Articles restrict the right to transfer its shares, if any.
Page 6 of 19
Restrictions on all shareholders.—The restrictions as to transfer of shares in Articles of a private company must
be made applicable in respect of all the shareholders. There cannot be any discrimination.
Restrictions on transfer of shares.—Sections 108-111 shall not affect the right of a private company under its
Articles to enforce the restrictions regarding transfer of shares of the private company. [Section 111(13)]. Section
111 [Power to refuse registration and appeal against refusal] applies to private companies [Section 111(14)].
Restrictions on transfer in Articles to be binding.—Restrictions contained only in the Articles of Association of a

private company are binding. Additional restrictions on the member's right to transfer his shares contrary to the
articles of the company, contained in an agreement between the members, shall not be binding on the shareholders
or the company. In spite of such an agreement the company can transfer the shares at the request of a member.10
Where the Articles of association of a private company prohibited the transfer of shares without previous sanction of
the directors. There should be written resolution of the Board of Directors passed at the meeting of the Board and
such previous sanction should precede the handing over of the shares.11 The shares of a private company are not
“marketable security” as defined in section 2(h) of the Securities Contracts (Regulation) Act, 1956 (42 of 1956). A
contract for sale and purchase of shares in a private company is thus not governed by the provisions of the
Securities Contracts (Regulation) Act, 1956.12
Transfer of shares of a private company must be in strict compliance with the Articles of Association of the private
company, failing which the transfer will be liable to be set aside. Transfer of shares in violation of Articles of a
private company is not permissible. Where Articles permitted transfer to outsiders only where no member was
willing to purchase. In case of pledge of shares to supplier as security for payment for goods without any notice to
the members, the Board of Directors were right in refusing to transfer the shares in his name.13
Where Articles of a private company prohibited transfer of shares to non-members. The court auction does not
remove this prohibition and the Board of Directors shall be entitled under Articles to refuse to register the shares to
a non-member.14
Articles cannot prohibit transfer.—The Articles of Association of the private company can impose restrictions and
regulate the transfer but cannot prohibit transfer. But, a restriction that gives a right of pre-emption is a valid
restriction and does not amount to prohibition.15 Where absolute discretion is given to the Board of Directors to
refuse sanction for transfer, disapproval must be personal to particular transferee. Absolute ban on transfer to
corporate bodies would not be valid.16
See also Comments under Sections 82, 108 and 111.
Private Company—Transfers of Shares.—Shares are movable property and are transferable. As far as Private
Companies are concerned, the Articles of Association restrict the shareholder's right to Transfer shares and prohibit
any invitations to the public to subscribe for any shares in, or debentures of, the company. Subject to this restriction,
a holder of shares in a Private Company may agree to sell his shares to a person of his choice. Such Agreements
are specifically enforceable under Section 10 of the Specific Relief Act, 1963 (47 of 1963). An agreement may
provide for future fixation of the price of the shares. Such a price may be fixed by a third party or by the parties
themselves and such an agreement is valid. The transfer of shares by one shareholder in favour of another is valid
if it complied with the provisions of the Articles of Association of the Company and the conditions of the Board
Resolution. Where the Board Resolution showed that the Transfer Deeds were placed before the Board for
approval. It would be presumed that the transfers were duly executed and mandatory requirements were satisfied.
The price of the shares may be determined later. It would not render the transfers void.17
See also Comments under Sections 53, 82, 108, 111, 164, 189 and 195.
Pre-emptive rights.—Restriction by the Articles of a private company on sale of shares to strangers so long as
other members are willing to buy them at a price prescribed by the Articles, in exercise of pre-emptive right under
the Articles, is a valid restriction in a private company. The private company has the right to enforce the pre-emptive
provisions in the Articles.18
Page 7 of 19
Civil Suit.—Right of pre-emption available to the members of the family has to be agitated in civil court. This cannot
be done in writ petitions as it is a question of fact which requires evidence to be adduced before any finding is given
thereon.19
Valuation of shares.—Articles may specify the mode of valuation. In case of application for relief in cases of
oppression or mismanagement under sections 397, 398 and 402, the Court [the Company Law Board (the
Tribunal)] may fix the price of shares of private company and may make an order as it thinks fit.20
Where the company registered the shares in names of the purchasers. The Articles provided that the valuation shall
be final and binding on the members. This cannot prevent a member whose shares are subject to valuation from
challenging the validity of the valuation specially when the error appears on the valuation itself.21
Joint-holders. A notice of sale of shares given to the joint-holder, whose name first appears on the register is
binding on other joint-holders. The restriction usually contained in private company's Articles on transfer of shares
to outsiders is not an absolute restriction and a bona fide purchaser for consideration is entitled to have his name
entered in the Register.22
Legal representatives.—Pre-emptive rights contained in a private company's Articles can be exercised in case of
voluntary transfer of shares as also in case of succession of such shares on the death of a member. The Articles
are binding on the representative of a deceased member. Where pre-emptive clause in Articles permitted transfer of
the shares by a member to his relatives. The representative could transfer the shares to the widow of the deceased
member.23 On the death of a member, the person, who inherits or gets shares under a Will, first offers the shares to
the company, if he intends to dispose them off.24
Mortgagees.—Restrictions on the right of transfer or pre-emption in Articles of a private company shall be binding
on mortgagees and even on the company itself if it claims lien on the shares under its Articles.25
Equitable interest.—The pre-emption provisions in Articles apply only when a member proposes to sell or transfer
the legal title in his shares, i.e., the owner of the shares sufficiently evinces a desire to transfer the legal interest in
his shares and not where he merely creates an equitable interest.26
Refusal to record transfer.—The company does not lose the right of refusing to register a transfer or transmission
by reason of its failure to do so within 2 months.27
See also Comments under Sections 82, 108-112, 395, 397, 398 and 402.
Restriction on the Number of Members [Section 3(1)(iii)(b)].—Sub-clause (b) of clause (iii) of sub-section (1) of
section 3 provides that a private company must by its Articles limit the number of its members to 50.
Employees and former employees.—The above limit of 50 members shall be not including—(i) persons who are
in the employment of the company, and (ii) persons who, formerly in the employment, were members of the
company while in that employment and have continued to be members after the employment ceased.
In counting the number of members all employees who obtained shares during their employment would be
excluded. Such employee shareholders may remain employees of the company or they may have left the
employment of the company but have continued to be members and retained their shareholdings.
Director not employee.—A director is not an employee for this purpose. He willbe counted as a member.28
Joint shareholders [section 3(1)(iii), proviso].—For the purposes of this definition, joint-shareholders shall be
treated as a single member. The joint shareholders are therefore counted as one member.
Where Articles of a private company, containing usual pre-emption clause, provided that no shareholder will be
entitled to transfer his shares except to other shareholders of the company. The transfer of shares to one of several
joint-holders shall be permissible. Joint-holders of shares are also shareholders of the company. They are treated
as one member only for the purpose of proviso to section 3(1)(iii). The joint-holders are entitled to register
themselves separately but at the same time the directors may refuse to do so, if it contravenes the provisions of the
Act and is likely to endanger its remaining private company, i.e., it would result in increasing its total number of
members beyond the maximum limit of fifty.29
Page 8 of 19
Company not a single member.—A private company may have a shareholder, which is a private company or a
public company. A shareholder which is a private company or a public company should be treated not as one
member but as many members as there are shareholders in the company holding the shares.
To illustrate, if X Co. Pvt. Ltd. has 50 members and it holds one share in Y Co. Pvt. Ltd. which has 10 shareholders
then Y Co. Pvt. Ltd. will be deemed to have 9 plus 50, that is, 59 members.
Private Companies enjoy certain Privileges and Exemptions (enumerated later), principally on the ground that they
are family concerns in which the public is not directly interested. The main object of giving certain privileges to a
private company was that it would operate as a family business, a partnership on a small scale and without taking
advantage of public money.
See detailed Comments and Privileges and Exemptions to a Private Company (not being a subsidiary of a public
company) hereinafter.
Debenture-holders not members.—Though the number of shareholders or members in a private company cannot
exceed 50, there is no restriction on the number of debenture-holders as they are not members.
However, section 3(1)(iii)(c) prohibits invitation to the public to subscribe for shares in, or debentures of, the
company as explained below.
Restriction on issue of Prospectus [Section 3(1)(iii)(c)].—Sub-clause (c) of clause (iii) of sub-section (1) of
section 3 provides that a private company must by its Articles prohibit any invitation to the public to subscribe for
any shares in, or debentures of, the company.
See detailed Comments on Meaning of Invitation to public or Construction of references to offering shares or
debentures to the public under Section 67.
Department's view.—Private placement of equity shares: Renunciation of rights by a private company

prohibited under section 3(1)(iii)(c).—“It has come to the notice of the Government that some companies utilise
the services of brokers and other intermediaries for private placement of equity shares, out of promotors' quota or
otherwise, insert advertisements in the print media and also mass-mail literature/material/brochures superscribed
by the caption “Confidential/For private circulation only”. It is also noticed that the rights of renunciation are floated
in the market by the companies themselves, charging unofficial premia from the investing public. Under section
67(3) of the Companies Act, 1956, no offer or invitation shall be treated as made to the public, only if the same can
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.
In the context of the above provisions of law, such offers cannot be treated as private placement and provisions
relating to prospectus under the Companies Act, 1956, are applicable. The companies concerned, their promoters
and their intermediaries are hereby warned that making of so-called private placement of shares or collecting
unofficial premia without recording the same in the books of account of the company, are serious contraventions of
the Companies Act and will invite penal action under the Act by the Government. It may be noted that marketing of
rights of renunciation by a private company is prohibited under section 3(1)(iii)(c) of the Companies Act, 1956, as it
cannot make any invitation to the public to subscribe for its shares.” [Clarification F. No. 17/6/92-CL-V, dated 6-7-
1992: Chartered Secretary, August 1992, page 719:(1992) 75 Comp. Cas. (St.) 25].
Restriction on acceptance of Deposits [Section 3(1)(iii)(d)].—A private company must by its Articles prohibit
invitation or acceptance of deposits from persons other than its members, directors or their relatives.
Acceptance of deposits from persons approached individually or by private letters will not be hit by this section.
Acceptance of deposits or renewals of deposits on the basis of personal negotiations will not be within the purview
of this section. There should be an invitation by advertisement just like public issue of shares and debentures
inviting deposits or renewal thereof to attract the provisions of this section.
Section 3(1)(iii)(d) as amended by the Companies (Amendment) Act, 2000 prohibits a private company from inviting
Page 9 of 19
or accepting deposits from persons other than its members, directors or relatives. A company cannot be
incorporated as a private company after the Amendment unless its Articles provide for this prohibition. However, the
absence of such a prohibition in the Articles of an existing private company cannot ipso facto change its character
into a public company.30
For provisions relating to Invitation and Acceptance of Deposits see Comments under Sections 58A and 58B.
Relative [Section 2(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. See detailed Comments under Section 6.
Privileges and Exemptions to a Private Company (not being a subsidiary of a public company).—A Private
Company is entitled to several privileges and exemptions conferred on private companies by or under the
Companies Act, 1956. These are enumerated below. See detailed Comments under respective Sections.
(1) Two or more persons, but not exceeding 50, may form a private company. [Sections 12(1) and 3(1)(iii)].
(2) A private company may allot shares without issuing a prospectus or statement in lieu of prospectus.
[Section 70(3)].
(3) It can give financial assistance for purchase of its shares or its holding company's shares. [Section 77(2)].
(4) Further issue of shares need not be offered to the existing shareholders. [Section 81(3)(a)].
(5) A private company may issue not only equity and preference shares but also deferred shares or any other
kind of shares. It may issue shares with disproportionate voting rights. The restrictions relating to the
nature of shares and the voting rights attached to them applicable to public companies do not apply to a
private company. [Sections 85-89vide Section 90(2)].
(6) Sections 108, 109, 110 and 111 shall not affect the right of a private company under its Articles to enforce
the restrictions regarding transfer of shares of the private company. [Section 111(13)].
(7) The provisions relating to share warrants are not applicable to a private company. [Sections 114 and 115].
(8) As soon as the Certificate of Incorporation is received, a private company may commence business. The
restrictions contained in section 149 of the Act to the commencement of business will not apply to a private
company. The provisions of section 149(2A) do not apply to a private company. [Section 149(7)].
(9) A private company need not hold a statutory meeting or file a statutory report with the Registrar. [Section
165(10)].
(10) A private company may exclude the provisions of the Act relating to general meetings and can make its
own provisions by its Articles. The length of notice for a general meeting may be shorter or longer than 21
days, the manner of service of notice, the election of Chairman, proxies, manner of taking votes, restriction
on the exercise of votes, demand of polls and taking of polls may be different from the provisions of the
Act. [Sections 171-186vide Section 170(1)(ii)].
(11) The restrictions about the remuneration of the managerial personnel and the limit of 11% of the net profits
do not apply to a private company. [Section 198(1)].
(12) The restriction that a body corporate cannot be appointed to any office or place of profits for more than 5
years does not apply to a private company. [Section 204(6)].
(13) The profit and loss account of a private company filed with the Registrar cannot be inspected by the public.
Only a member of the company is entitled to inspect or obtain copies of the profit and loss account.
[Section 220(1)(a)].
(14) A private company may have only two directors, whereas a public company must have at least three
directors. [Section 252(2)].
(15) The restrictions regarding appointment and reappointment of directors, and the provisions relating to
retirement of directors by rotation do not apply to a private company. The directors in a private company
need not retire by rotation. [Sections 255 and 256].
(16) The special notice required to be given by a person seeking election to the post of a director is not
necessary. [Section 257(2)].
Page 10 of 19
(17) To increase the number of directors beyond 12 or the maximum mentioned in the Articles of Association
the approval of the Central Government is not necessary. [Section 259].
(18) The provisions relating to the mode of appointment to casual vacancies in the Board of Directors, the
duration of such appointment, the provisions requiring that each director should be appointed by a
separate resolution, the requirement that the consent of each candidate for directorship should be filed with
the Registrar and provisions relating to proportional representation for the appointment of directors do not
apply to a private company. [Sections 262-265].
(19) The restrictions on the appointment or advertisement for appointment of director do not apply to a private
company. [Section 266(5)].
(20) for the appointment or reappointment or amending the terms and conditions relating to managing or whole-
time director no approval of the Central Government is necessary. [Sections 268 and 269(2)].
(21) A director need not hold the share qualification, he need not acquire qualification shares within two months,
he need not file a declaration of share qualification with the Registrar. [Sections 270 and 272vide Section
273].
(22) The Act has provided certain disqualifications for the appointment of director. A private company may add
to such disqualifications. [Section 274(3)].
(23) The restriction that no person shall be a director of more than 20 companies, does not include directorships
held in a private company which is neither a subsidiary nor a holding company of a public company.
[Sections 275-277vide Section 278].
(24) A private company may provide by its Articles of Association that the office of a director shall be vacated
on any ground in addition to those mentioned in section 283(1). [Section 283(3)].
(25) A private company may exclude the provisions of the Act relating to Board meetings and can make its own
provisions by its Articles. [Sections 285-290 read with Sections 171-186vide Section 170(1)(ii)].
(26) The restrictions on the powers of the Board of Directors as regards (a) sale, lease or disposal of the
undertaking of the company; (b) restrictions to remit or give time for repayment of a debt due by director;
(c) investment of the amount received by the company as compensation for compulsory acquisition of its
assets; (d) borrowing money exceeding paid-up capital and free reserves of the company; or (e)
contribution to charitable and other funds exceeding Rs. 50,000 or 5 per cent. of net profits, do not apply.
[Section 293(1)].
(27) The restriction that without the approval of the Central Government a company cannot make any loan to a
director or give any guarantee or provide any security in connection with a loan does not apply. [Section
295(2)].
(28) The restriction that a director interested in a particular resolution should not participate in the meeting of
the Board of Directors or should not vote at such a resolution does not apply. Age of directors, etc., need
not be entered in the Register of Directors. [Sections 300(2) and 303(1)(a)].
(29) The restriction that the directors cannot be paid remuneration exceeding 3% of the net profits or the
provision that any increase in the remuneration of a director, managing director, or whole-time director will
require the Central Government's permission is not applicable to a private company. [Sections 309(9), 310
and 311].
(30) The restriction that a Managing Director cannot be a managing director of more than two companies does
not apply to a private company. A private company can appoint a managing director for more than 5 years
at a time. [Sections 316(1) and 317(4)].
(31) The provisions relating to determination of net profits (section 349) and ascertainment of depreciation
(section 350) do not apply to a private company. [Section 355].
(32) The provisions relating to inter-corporate loans and investments, e.g., any loan made, any guarantee given
or any security provided or any investment made, do not apply to a private company, unless it is a
subsidiary of a public company. [Section 372A(8)(a)(iii)]. Earlier Sections 370(2)(iv) and 372(14) have been
replaced by new Section 372A inserted by the Companies (Amendment) Act, 1999 (21 of 1999).
(33) The provisions restricting the appointment of a manager and limiting his remuneration to 5 per cent. of the
net profits and subjecting him to provisions of sections 269, 310, 311, 312 and 317 will not apply to a
private company. [Sections 386-388vide Section 388A].
Page 11 of 19
(34) The powers of the Company Law Board [ now the Tribunal] to prevent any change in the Board of directors
a company cannot be exercised in relation to a private company. [Section 409(3)].
(35) The provisions that a manager or other agent who enters into a contract on behalf of the company in which
contract the company is an undisclosed principal shall make a memorandum in writing of the terms of the
contract will not apply to a private company. [Section 416(1)].
The above privileges and exemptions to private companies have been annotated in Comments under relevant
Sections under separate caption Private Company.
See detailed Comments under respective Sections.
Certificate with Annual Return by a Private Company [Sections 3(1)(iii) and Section 161].—Every private
company having a share capital shall file with the Registrar of Companies along with the annual return a certificate
signed by the signatories of the return, stating 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 50, 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 50. [Section 161(2)(b)].
Consequences of default in complying Section 3(1)(iii)[Section 43].
—Where default is made by a private company in complying with any of the provisions of section 3(1)(iii), the
company shall cease to be entitled to the privileges and exemptions conferred on private companies by or under
this Act, and the provisions of the Act shall apply to the company as if it were not a private company. However, the
Company Law Board [ now the Central Government] has power to grant relief from such consequences on an
application by the company or any other person interested on such terms and conditions as the Company Law
Board [ now the Central Government] thinks just and expedient. [Section 43].
Private company ceasing to be private [Section 44].—If a private company, alters its articles in a manner that
they no longer include the four restrictions under section 3(1)(iii), it shall cease to be a private company.
Amalgamation.—Where the Central Government objected to a sanction being granted to a scheme of

amalgamation on the ground that due to amalgamation the number of members of the private transferee-company
would exceed 50 and the transferee company would become a public company. The objection was raised that this
cannot be done. Rejecting the objection the Court [ now the Tribunal] held that it was for the amalgamated company
to take steps in accordance with the provisions of the Act after such amalgamation.31
Deemed public company [Not Applicable w.e.f. 13-12-2000].—Section 43A, viz., Private companies to become
public companies in certain cases is not applicable from the commencement of the Companies (Amendment) Act,
2000 (w.e.f. 13-12-2000) [ vide section 43A(11)].
As already explained, Private Companies enjoy several exemptions and privileges under the Companies Act, 1956,
principally on the ground that they are closely held companies or family concerns in which the public is not directly
interested. The object of Sections 43, 44 and new definition of Public Company [Section 3(1)(iv)] (w.e.f. 13-12-
2000) is that if a private company takes advantage of public money or does not contain the four restrictions in its
Articles it will become a public company and all the provisions of the Act will apply to it excepting certain privileges
explained hereinafter.
Public Company [Section 3(1)(iv)].—Section 3(1)(iv) as substituted by the Companies (Amendment) Act, 2000
(53 of 2000) with effect from 13-12-2000 defines that the public company means a company which—(a) is not a
private company, (b) has a minimum paid-up capital of Rs. 5 lakhs or such higher paid-up capital as may be
prescribed, and (c) is a private company which is a subsidiary of a company which is not a private company. These
sub-clauses are explained below.
Page 12 of 19
Company which is not a Private Company [Section 3(1)(iv)(a)]—Sub-clause (a) of clause (iv) of sub-section (1)
of section 3 provides that public company means a company which is not a private company.
Meaning of Private Company [Section 3(1)(iii)] has already been explained in preceding paragraphs. As already
explained, the Articles of a private company must contain four restrictions enumerated in Section 3(1)(iii) (a) to (d).
Thus, if the articles do not contain these restrictions, it will be a public company.
Minimum paid-up capital of Public Company [Section 3(1)(iv)(b)].—A public company shall have a minimum
paid-up capital of Rs. 5 lakhs or such higher paid-up capital as may be prescribed.
Private company subsidiary of a company which is not a private company. [Section 3(1)(iv)(c)].—Sub-clause
(c) of clause (iv) of sub-section (1) of section 3 as substituted (w.e.f. 13-12-2000) provides that a private company
which is a subsidiary of a company which is not a private company shall be a public company.
See also Section 4—Meaning of “holding company” and “subsidiary”.
Basic characteristics and Advantages of Private Company becoming or treated as Public Company
[Sections 3(1)(iv) and 43].—A Private Company (a) which is a subsidiary of a public company [ see Sections
conferring privileges and Section 4], (b) which makes default in complying with section 3(1)(iii)[Sections 3(1)(iv) and
43], (c) which is a subsidiary of a company which is not a private company [Section 3(1)(iv)], (d) which has altered
its Articles which no longer include four restrictions under section 3(1)(iii) [Section 44] ceases, becomes or is
treated as a public company.
Such a private company is deprived of many of the privileges and exemptions of a private company and cannot
claim the privileges and exemptions enumerated hereinbefore excepting privileges under sections 12(1), 70, 81,
149, 165, 179, 220, 252 and 266 explained below.
(i) Its Articles of Association may include restrictions specified in section 3(1)(iii). See Comments under
Private Company. [Section 3(1)(iii)].
(ii) The number of its members may be below seven. [Section 12(1)].
(iii) It may allot shares without issuing a prospectus or statement in lieu of prospectus. [Section 70(3)].
(iv) It cannot give the right of renunciation while issuing right shares [Section 81(3)(a)].
(v) As soon as the Certificate of Incorporation is received, it may commence business. The restrictions in
section 149 to the commencement of business and section 149(2A) will not apply to it. [Section 149(7)].
(vi) It need not hold a statutory meeting or file a statutory report with the Registrar. [Section 165(10)].
(vii) Restriction on demand of polls and taking of polls may be different. [Section 179(1)(b)].
(viii) Its profit and loss account when filed with the Registrar of Companies may not be open to inspection by the
public if the Central Government so directs in the public interest. [Section 220(1)(a)].
(ix) It may have only two directors, whereas a public company must have at least three directors. [Section
252(2)].
(x) The restrictions on the appointment or advertisement for appointment of director do not apply to a private
company. [Section 266(5)].
And when the necessary conditions do not obtain, it may go back into its old corporate shell and function once
again as a private company with all the rights, privileges and exemptions applicable to private companies, after
observing the formalities required for conversion of a public company into a private company.
Private Company—Subsidiary of Public Company—Treated as Public Company in terms of fiction of

Section 3(1)(iv)(c) in relation to other provisions of Act but not with reference to its Basic Characteristics—
Basic Characteristics of Private Company in terms of Section 3(1)(iii) will continue to govern.—The basic
characteristics of a Private Company in terms of Section 3(1)(iii) of the Companies Act, 1956 do not get altered just
because “Private Company is a subsidiary of a Public Company in view of the fiction in terms of Section 3(1)(iv)(c)
of the Act that it is a public company. May be it is a public company in relation to other provisions of the Act but not
Page 13 of 19
with reference to its basic characteristics. In terms of that section, a company is a private company when its Articles
restrict the right of transfer of shares, restrict its membership to 50 (other than employee shareholders) and
prohibits invitation to public to subscribe to its shares. Therefore, all the provisions in the Articles to maintain the
basic characteristics of a private company in terms of section 3(1)(iii) will continue to govern the affairs of the
company even though it is a subsidiary of a public company. One of the basic characteristics of a private company
in terms of that section is restriction on the right to transfer and the same will apply even if a Private Company is a
subsidiary of a Public Company. In the instant case, it was contended that since at the time of transfer of shares,
the Private Company was a subsidiary of the sixth respondent, in terms of Section 3(1)(iv)(c) of the Companies Act,
1956, the company was a Public Company and therefore, its shares were freely transferable in terms of Section
111A of the Companies Act, 1956. Rejecting this contention, it was held that since transfer of shares of a Private
Company has to be strictly in accordance with Articles, the company should always follow the terms of the
applicable Articles in respect of any transfer.32
See also Comments under Sections 87, 111, 111A, 286, 300, 397 and 398.
Conversion of Private Company into Public Company andvice versa.— See Comments under Sections 31 and
44.
Partnership converted into company.— See Comments under Section 11.
Companies in Burma, Aden or Pakistan [Sub-section (2)].—A company the registered office whereof is in
Burma, Aden or Pakistan shall be deemed, for the purposes of this Act, to have been formed and registered outside
India.
Transitional Provisions as to Minimum capital [Section 3(3) to (5)].—Sub-sections (3) to (5) of section 3
contained transitional provisions for the existing private company or public company with less than minimum paid-
up capital to enhance its paid-up capital within 2 years from 13-12-2000. Failing which, it would be deemed to be a
defunct company under section 560 of the Act and its name shall be struck off from the register by the Registrar of
Companies.
section 25 company exempt [Section 3(6)].—A company registered under section 25 before or after the
commencement of the Companies (Amendment) Act, 2000 shall not be required to have minimum paid-up capital
specified in section 3.
Kinds of Companies.—The Companies Act, 1956 envisages and provides for various forms of companies each
with specific and appropriate provisions applicable to them, viz., Private Company [Section 3(1)(iii)], Public
Company [Section 3(1)(iv)], Holding company and subsidiary [Section 4], Charitable Companies [Section 25], Sick
Industrial Companies [Sections 424A-424L], Producer Companies [Sections 581A-581ZT], Foreign Company
[Sections 591-608], Banking, Insurance, Electricity and other Companies governed by special Acts [Section 616],
Government Company [Sections 617-620], Nidhi or Mutual Benefit Society [Section 620-A].
Besides, special provisions have been made for Companies in Goa, Daman and Diu [Section 620-B], Jammu and
Kashmir [Section 620-C], Sikkim [Article 371F of Constitution and the Sikkim Registration of Companies Act, 1961]
and State of Nagaland [Section 1(3), proviso].
See Comments on Applicability of the Companies Act under Section 1. See detailed Comments under respective
Sections.
Companies in Sikkim [Article 371F of Constitution].—The State of Sikkim has been granted special status
under Article 371F of the Constitution of India. As per clause (n) of Article 371F containing special provisions with
respect to the State of Sikkim, the President may, by notification, extend with such restrictions or modifications as
he thinks fit to the State of Sikkim any enactment which is in force in India. Until such a Notification is issued
extending the Companies Act, 1956 to the State of Sikkim, the State shall be governed by the Sikkim Registration
of Companies Act, 1961. The Banking Regulation Act, 1949 (10 of 1949) has been extended to Sikkim by the
President, by Notification, dated January 15, 1976 (w.e.f. 15-12-1987). “Company” is defined by section 5(d) of the
Banking Regulation Act, 1949 as meaning any company as defined in section 3 of the Companies Act, 1956. As the
Companies Act, 1956 has not been extended to the State of Sikkim, the meaning of company is to be ascertained
with reference to the corresponding law in force in the State of Sikkim, viz., the Sikkim Registration of Companies
Act, 1961.33
Page 14 of 19
Name with “Limited” or “Private Limited” as last words.—The Memorandum of Association of every company
shall, inter alia, 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. [Section 13(1)(a)]. See detailed Comments under Section 13.
Incorporation of Company.— See Part II of the Companies Act, 1956—Incorporation of Company and Matters
Incidental Thereto Sections 11-54.
These, inter alia, provide for: Mode of forming incorporated company [Sections 12], Memorandum of Association
[Sections 12-19], Provisions with respect to names of companies [Sections 20-25], Articles of Association [Sections
26-31], Change of registration of companies [Section 32], General provisions with respect to memorandum and
articles [Sections 33-40], Membership of company [Ss. 41-42], Consequences of default in complying with
conditions constituting a company a private company [Section 43], Prospectus or statement in lieu of prospectus to
be filed by private company on ceasing to be private company [Section 44], Reduction of Number of Members
below Legal Minimum [Section 45].
Company [Section 2(10)].—This means a company as defined in section 3.
Company is a juristic person.—The term company includes company in existence in 1956, a private company, a
government company and a company incorporated under the Act. It is a juristic person separate and distinct from
its members.34 The shareholders are not the owners of the company's assets, they have merely a right to
participate in the profits of the company subject to the contract contained in the Articles of Association. In a writ
petition the jurisdiction of the Court to grant relief cannot be denied, when by State action the rights of individual
shareholder are impaired if that action also impairs the right of the company. The Court, in such a case, will not,
concentrating merely upon the technical operation of the action, deny itself jurisdiction to grant relief.35
It is a separate juristic personality but the Court is entitled to lift the veil and see the economic realities behind the
legal facade of corporate entity.36
The principle laid down in Salomon's case37 more than a century ago in 1897 by the House of Lords that the
company is at law a different person altogether from the subscribers who have limited liability, is the foundation of
joint stock company and a basic incidence of incorporation both under the English law and Indian law. Lifting the
veil of incorporation under statutes and decisions of the courts is an equally settled position of law. This is more
readily done under American law. To look at the realities of the situation and to know the real state of affairs behind
the facade of the principle of the corporate personality, the courts have pierced the veil of incorporation.38
The majority of the members exercise powers of corporation or a company.39 The company is a juristic person. It is
managed by the Board of Directors. The powers of Board of Directors are given under section 291. The members of
the Board of directors may change. They may appoint another person as managing director of the company. This,
however, does not cancel or change the terms of a contract which a person has entered into for or on behalf of the
company.40
See detailed Comments under Sections 34, 41 and 291-294.
Department's view.— Loans to Directors of private companies.—“Loans given to directors of private limited
companies unless they are subsidiaries of public companies are exempted from the approval of the Central
Government and, therefore, guidelines issued for regulating loans given by a public limited company to its directors
are not applicable.
This information was given by the Union Minister of Law, Justice and Company Affairs in a written reply to a
question in the Lok Sabha.” [ PIB Press Release, New Delhi, dated 9-5-2002: (2002) 110 Comp. Cas. (St.) 120].
See Department's views, e.g., Huge loans at low rate to Directors of companies in Comments under Section 295.
See Privileges and Exemptions to a Private Company (not being a subsidiary of a public company) enumerated
hereinbefore.
Page 15 of 19
Writ.—No writ petition lies against a public or private company unless it is “state” or “other authority” exercising
governmental function or public duty.41
See detailed Comments on Writs under Section 10—Jurisdiction of Courts.
Recovery of Income-tax.—As per section 179 of the Income-tax Act, 1961, if it is found that any tax due from a
private company in liquidation cannot be recovered, every person who was a director of the private company during
the relevant year shall be jointly and severally liable for the payment of such tax unless he proves that the non-
recovery cannot be attributed to any gross neglect, misfeasance or breach of duty on his part in relation to the
affairs of the company.42
Private Company—Director when liable to pay Tax assessed on company.—Proceedings were taken by
Department under Section 179 of the Income-tax Act, 1961 (43 of 1961) for recovery of unrealised tax from the
private company. This was challenged by the Director under Article 226 of the Constitution of India. The petition
was allowed on the ground that in the notice issued by the Department to the petitioner who was a director of the
company there has been no averment about the due compliance of the show cause notice issued under Section
179 to the effect that the “tax could not be recovered from the company”. Under Section 179 proceedings can be
initiated against the Director of a private company provided there is the finding that the tax for the relevant period
cannot be recovered from the company. The notice issued by the Department on the director did not contain any
such statement and as such there was non-compliance of provisions of Section 179 of the Income-tax Act, 1961.
The Writ Petition was allowed and the notice was quashed.43
Default in Telephone.—A company is a juristic person having a separate legal entity. When company is the
subscriber to a telephone, its liability is not automatically transferred to the Directors. In a private limited company,
the liabilities of the Directors are limited and they are not the subscribers of the company's telephone. Therefore, a
Director's personal telephone cannot be disconnected on account of any default in respect of the company's
telephone.44
Sovereign immunity.—A private limited company incorporated in foreign country entire share capital of which is
held by the Government of that country would be a Government company. It would be entitled to claim sovereign
immunity under section 86 of the Code of Civil Procedure, 1908 (5 of 1908).45
Dispute between members.—Where in a private company members of the family were the only shareholders. On
dispute between the members certain resolutions were passed in pursuance of a compromise. It was however
challenged on part of one member on the ground of undue influence and coercion. The Supreme Court enunciated
the meaning of burden of proof and substantial question of law.46
Compliance Certificate—Private Limited Company.—Relevant paras of the Form appended to the Companies
(Compliance Certificate) Rules, 2001 and ICSI Guidance Note on Compliance Certificate are dealt with below.
Companies (Compliance Certificate) Rules, 2001.—Every company not required to employ a whole-time
Secretary under sub-section (1) of Section 383A of the Companies Act, 1956 and having a paid-up share capital of
Rs. 10 lakh or more shall obtain a Compliance Certificate from a Secretary in whole-time practice.
Compliance Certificate shall be filed with the Registrar of Companies(ROC), a copy of such Certificate shall be
attached with Board's Report under Section 217 of the Act and laid by the company in its Annual General Meeting
(AGM).
Form of Compliance Certificate [Para 3].—Form of Compliance Certificate appended to the Companies
(Compliance Certificate) Rules, 2001, inter alia, requires the Practising Company Secretary (PCS) to state as
follows:
“3. The company being Private Limited Company has the minimum prescribed paid-up capital and its maximum
number of members during the said financial year was .................. excluding its present and past employees and
the company during the year under scrutiny—
(i) has not invited public to subscribe for its shares or debentures; and
(ii) has not invited or accepted any deposits from persons other than its members, directors or their relatives.”
Page 16 of 19
[Para 3 of Form of Compliance Certificate appended to the Companies (Compliance Certificate) Rules, 2001: See
Full Text under Section 383A].
ICSI Guidance Note on Compliance Certificate.—The Institute of Company Secretaries of India (ICSI) has issued
a Guidance Note on Compliance Certificate to be issued in terms of the newly inserted proviso to sub-section (1) of
Section 383A of the Companies Act, 1956 as prescribed in the Companies (Compliance Certificate) Rules, 2001 by
a Practising Company Secretary (PCS).
Check-List for issue of Compliance Certificate.—Check-List for issue of Compliance Certificate on relevant Para
3 of the Form of Compliance Certificate as contained in ICSI Guidance Note on Compliance Certificate is
reproduced below.
“Status of the Company.— (a) In the case of a Private Company.—Check whether:
(i) the company has a minimum paid up capital of Rs. 1 lakh or such higher paid-up capital as may be
prescribed. In case of an existing Private Company this requirement was required to be complied within a
period of two years from the commencement of the Companies (Amendment) Act, 2000 (53 of 2000) i.e.
13-12-2000;
(ii) Company's Articles contain provisions—
(a) restricting the right to transfer its shares;
(b) limiting the number of members to fifty;
(c) prohibiting any invitation to public to subscribe its shares/debentures; and
(d) prohibiting any invitation or acceptance of deposits from persons other than its members, directors or
their relatives.
Note: The requirement as at (d) above was prescribed by the Companies (Amendment) Act, 2000 (53 of 2000).
Private companies formed before the commencement of the said Amendment Act may not contain the clause. Such
private companies should, therefore, be advised to amend the Articles of Association to include this clause.
(b) In case of a Private Company which is a Subsidiary of a Public Company.—Check whether the company
has a minimum paid-up capital of one lakh rupees or such higher paid up capital, as may be prescribed. In case of
existing company, check that it has enhanced its paid up capital as required within two years from the
commencement of the Companies (Amendment) Act, 2000 i.e. 13-12-2000.
Note: A Company registered under Section 25 before or after the commencement of the Companies (Amendment)
Act, 2000 shall not be required to have minimum paid up capital specified above. However, a Guarantee Company
having share capital should have minimum paid up capital specified above.”
[See Guidance Note on Compliance Certificate, issued by the Institute of Company Secretaries of India(ICSI),
Second Edition, August 2003, page 33].
See Form of Compliance Certificate appended to the Companies (Compliance Certificate) Rules, 2001, ICSI
Guidance Note on Compliance Certificate, e.g., Scope and Specimen of Compliance Certificate, etc., in Comments
under Section 383A.
Producer Company treated as Private Company [Section 581C(5)].—On Registration of the Producer
Company, it will be treated as a Private Limited Company without limitation of its Membership to 50.
Irrespective of the number of Members, the other activities of the Producer Company shall remain as a Private
Company.
Application of provisions relating to Private Company to Producer Company [Section 581ZR].—The

Producer company shall be treated as a Private Company and all provisions of Companies Act shall apply so far as
they are not inconsistent with Sections 581A to 581ZT of the Act.
Privileges and Exemptions of Private Companies may also be available to Producer Company by virtue of
Page 17 of 19
Sections 581C(5) and 581ZR.—Private Companies (not being a subsidiary of a public company) enjoy certain
Privileges and Exemptions, principally on the ground that they are family concerns in which the public is not directly
interested. The main object was that they would operate as a family business, a partnership on a small scale and
without taking advantage of public money.
As the Producer Company is deemed as Private Company under Section 581C(5) and in view of the provisions of
Section 581ZR Privileges and Exemptions available to Private Company shall also be available to a Producer
Company so far as they are not inconsistent with Sections 581A to 581ZT of the Act.
See Privileges and Exemptions to Private Companies (not being a subsidiary of a public company) enumerated
earlier in Comments under Section 3(1)(iii)
These should, however, be read subject to the Special Provisions for Producer Companies under Sections 581A to
581ZT of the Act.
Formation and Incorporation of Company.See Steps to be taken to get incorporated a Private Limited Company
and Steps for formation of a Public Limited Company and other Companies downloaded from the Ministry of
Corporate Affairs(MCA) website http://www.mca.gov.in in Comments under Sections 12 and 33.
See detailed Comments, Form and Procedure, e-Forms, e-Filing, Filing Fees, Registration Fees, Department's
Instructions under relevant Section 33.
See also Comments, Form and Procedure under Sections 12 to 36.
Companies (Accounting Standards) Rules, 2006.—In exercise of the powers conferred by Section 642(1)(a)
read with Section 211(3C) and Section 210A(1) of the Companies Act, 1956 (1 of 1956), the Central Government,
in consultation with National Advisory Committee on Accounting Standards has made the Companies (Accounting
Standards) Rules, 2006* (w.e.f. 7-12-2006) vide Notification No. G.S.R. 739(E), dated 7-12-2006, published in the
Gazette of India, Extraordinary, No. 582, Part II, section 3(i), page 217: (2007) 135 Comp. Cas. (St.) 73.
“Enterprise”—Company as defined in section 3.—As per Rule 2(e) of the Companies (Accounting Standards)
Rules, 2006: “Enterprise” means a Company as defined in Section 3 of the Companies Act, 1956.
See also Definition of “Small and Medium Sized Company” (SMC) [Rule 2(f)] and detailed Comments under
Sections 210A and 211(3C).
Public and Private Company under the English Act.— Under the English Companies Act, 1985 [as further
amended by the English Companies Act, 1989], a public company must have a minimum authorised capital of £
50,000, its shares to the extent of 25% plus the premium must be paid-up and its name must end with “public
limited company” or “plc”.
Every company is a private company if it is not a public company. A private company need not have four restrictions
in its Articles but must have one restriction, viz., it shall not offer any shares or debentures to the public, and its
name must end with the word “Limited” or “Ltd.”. Only two members can form a private company as well as public
company and as such, the minimum and maximum number of members in public and private companies are the
same. There is no maximum limit on the number of members in a private company. Its Memorandum of Association
need not contain a clause stating the nature of the company, it may have only one director, at a meeting of the
shareholders a proxy may speak, the right of pre-emption may be excluded by the Memorandum or the Articles, it
may purchase or redeem its own share out of capital or distributable profits.
See Comparative Table at the beginning of this Volume for Sections of the Companies Act, 1956vis-a-vis the
English Companies Act, 1948 and the English Companies Act, 1985 [as amended by the English Companies Act,
1989].
See salient features of the English Companies Act and associated Legislations in Comments under Section 1. See
Comments on English Court structure, Doctrine of Precedent and persuasive value of English decisions under
Section 10.
Page 18 of 19
96. Substituted by the Jammu and Kashmir (Extension of Laws) Act, 1956 (62 of 1956), s. 2 and Sch. (w.e.f. 1-11-1956).
For clause (f) of section 3(1)(ii) as it stood prior to its substitution see Annexure at the end of this Volume.
97. Inserted by the Central Laws (Extension to Jammu and Kashmir) Act, 1968 (25 of 1968), s. 2 and Sch. (w.e.f. 15-8-
1968).
1. Inserted by the Goa, Daman and Diu (Laws) No. 2 Regulation, 1963 (11 of 1963).
2. The words, brackets and figures “(Carta Lei of the 11th April, 1901)” omitted by the Repealing and Amending Act, 1964
(52 of 1964), s. 3 and Sch.11.
3. Substituted by the Companies (Amendment) Act, 2000 (53 of 2000), s. 3 (w.e.f. 13-12-2000), for the words “means
a company which, by its articles,—”.
4. Inserted by the Companies (Amendment) Act, 2000 (53 of 2000)s. 3, (w.e.f. 13-12-2000).
5. Substituted by the Companies (Amendment) Act, 2000 (53 of 2000), s. 3 (w.e.f. 13-12-2000). Prior to substitution
the clause stood as under: “(iv)
“public company” means a company which is not a private company.”

6. Clause (b) omitted by the Jammu and Kashmir (Extension of Laws) Act, 1956 (62 of 1956), s. 2 and Sch. (w.e.f. 1-11-
1956). Prior to substitution the clause stood as follows: “(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.”
7. Sub-sections (3) to (6) inserted by the Companies (Amendment) Act, 2000 (53 of 2000), s. 3, (w.e.f. 13-12-2000).
8. Telesound India Ltd., In re, (1983) 53 Comp. Cas. 926 (Delhi). See detailed Comments under Sections 390 to 394.
9. Rivers Steam Navigation Co. Ltd., In re, (1967) 2 Comp. LJ 106 (Cal.) : 71 CWN 854;. Inland Steam Navigation
Workers' Union v. Rivers Steam Navigation Co. Ltd., (1968) 38 Comp. Cas. 99 (Cal.) (DB) : 71 CWN 897.;. See
detailed Comments under Sections 34, 391, 394 and 617.
detailed Comments under 82, 108 and 111.
11. John Tinson & Co. Pvt. Ltd. v. Mrs. Surjeet Malhan, (1997) 88 Comp. Cas. 750 (SC) : AIR 1997 SC 1411 [LNIND 1997
SC 176]. See detailed Comments under Sections 108 and 111.
12. Dahiben Umedbhai Patel v. Norman James Hamilton, (1985) 57 Comp. Cas. 700 (Bom.) (DB).
13. Satyanarayana Rathi v. Annamalaiar Textiles Pvt. Ltd., (1999) 95 Comp. Cas. 386 (CLB); Cruickshank Co. Ltd. v.
Stridewell Leather Pvt. Ltd., (1996) 86 Comp. Cas. 439 (CLB). See detailed Comments under Sections 108 and 111.
14. S.A. Padmanabha Rao v. Union Theatres Pvt. Ltd., (2002) 108 Comp. Cas. 108 (Kar.).
15. Ontario Jockey Club v. Mcbridge,(1927) AC 916 (PC) : AIR 1928 PC 291 : Chiranji Lal v. Mahabir Dhelia,AIR 1966
Assam 48. See also Comments under Sections 82 and 108.
16. Master Silk Mills Pvt. Ltd. v. Dharamdas Hargovandas Mehta, (1980) 50 Comp. Cas. 365 (Guj.) (DB). See also
Comments under Sections 108.
17. M.S. Madhusoodhanan v. Kerala Kaumudi Pvt. Ltd., (2003) 117 Comp. Cas. 19 (SC) : (2003) 4 Comp. LJ 185 (SC)
(Mrs. Ruma Pal and B.N. Srikrishna JJ.).
18. Lyle and Scott Ltd. v. Scott's Trustees,(1959) AC 763 : (1959) 2 All ER 661 : (1959) 3 WLR 133 : (1959) 103 SJ 507 :
(1960) 30 Comp. Cas. 30 (HL).
19. D. Sasidharan v. Sipcot, (1992) 73 Comp. Cas. 44 (Mad.).
20. Rakhra Sports Pvt. Ltd. v. Khraitilal Rakhra, (1993) 76 Comp. Cas. 545 (Kar.) (DB); Bird Precision Bellows Ltd., Re,
(1986) Ch. 658 : (1985) 3 All ER 523 : (1986) 2 WLR 158 : (1986) 130 SJ 51 : (1985) BCLC 493 (CA). See also
21. Dr. Mrs. Banoo J. Coyajee v. Shanta Genevieve Pommeret Parulekar, (1995) 84 Comp. Cas. 534 (Bom.) (DB); Mihir
Chakraborty v. Multi Tech Computers P. Ltd., (2001) 106 Comp. Cas. 150 (Delhi); M. Jones v. R.R. Jones,(1971) 1
WLR 840 : (1971) 41 Comp. Cas. 955 (Ch.). See also Comments under Sections 81, 108, 111, 172 and 286.
22. Babulal Madhavji Varma v. New Standard Coal Co. P. Ltd., (1967) 37 Comp. Cas. 446 (Cal.) : 71 CWN 333. See also
23. New Cedos Engineering Co. Ltd., Re,(1994) 1 BCLC 797 (Ch.D); Stothers v. William Steward (Holdings) Ltd.,(1994) 2
BCLC 266. See also Comments under Section 108.
24. Roberts v. Letter ‘T' Estates Ltd.,(1961) AC 795 : (1961) 3 WLR 176 : 105 SJ 525 (PC) : (1962) 32 Comp. Cas. 80
(PC).
Page 19 of 19
25. Hunter v. Hunter,(1936) AC 222 : 105 LJ Ch. 97 : 154 LT 513 (HL); Champagne Perrier-Jouet S.A. v. H.H. Finch
Ltd.,(1982) 3 All ER 713 : (1982) 1 WLR 1359.
26. Safeguard Industrial Investments Ltd. v. National Westminster Bank Ltd.,(1982) 1 ALL ER 449 : (1982) 1 WLR 589 :
(1982) 126 SJ 205 (CA). See also Comments under Section 108.
27. Shailesh Prabhudas Mehta v. Calico Dyeing and Printing Mills Ltd., (1994) 80 Comp. Cas. 64 (SC). See detailed
28. Anderson v. James Sutherland (Peterhead) Ltd., (1941) SC [Scottish] 203; Trussed Steel Concrete Co. Ltd. v.
Green,(1946) 1 Ch 115 : 115 LJ Ch. 123 : 174 LT 122
29. Jarnail Singh v. Bakshi Singh, (1960) 30 Comp. Cas. 192 (Punj.) : AIR 1960 Punj 455. See also Comments under
Section 36.
30. G. Venkitapathy v. Prakathi Spinners Pvt. Ltd., (2003) 115 Comp. Cas. 443 (CLB).
31. Winfield Agro Services Pvt. Ltd., In re, (1996) 86 Comp. Cas. 587 (AP). See also Comments under Sections 43 and
Section 391.
32. Hillcrest Realty Sdn. Bhd. v. Hotel Queen Road P. Ltd., (2006) 133 Comp. Cas. 742 (CLB).
33. North East Finance Corpn. Ltd. v. UOI, (2000) 101 Comp. Cas. 373 (Sikkim) (DB).
36. L.I.C. v. Escorts Ltd., (1986) 59 Comp. Cas. 548 (SC) : AIR 1986 SC 1370 [LNIND 1985 SC 362]; CIT v. Sri
Meenakshi Mills Ltd.,AIR 1967 SC 819 [LNIND 1966 SC 266]: (1967) 63 ITR 609 [LNIND 1966 SC 266] (SC) : (1967) 1
SCR 934 [LNIND 1966 SC 266]. See detailed Comments on Lifting the corporate veil under Section 34.
38. Subra Mukherjee v. Bharat Coking Coal Ltd., (2000) 101 Comp. Cas. 257 (SC); New Horizons Ltd. v. UOI,(1997) 89
Comp Cas 849 (SC). See detailed Comments under Section 34.
39. Ram Prasad v. State of Punjab,AIR 1966 SC 1607 [LNIND 1966 SC 43]. for matters requiring sanction of shareholders
by Ordinary Resolution and Special Resolution see Comments under Section 189.
Comments under Sections 34 and Section 291.
41. T.M. Devassy v. Periyar Latex P. Ltd., (1994) 81 Comp. Cas. 560 (Ker.); Maluk Mohamed v. Capital Stock Exchange
Kerala Ltd., (1991) 72 Comp. Cas. 333 (Ker.). See also Comments under Sections 10, 12 and Section 617.
42. Bhagwandas J. Patel v. Deputy CIT, (1999) 97 Comp. Cas. 213 (Guj.) (DB); Khaders International Construction Ltd. v.
CIT, (1998) 91 Comp. Cas. 432 (Ker.); K.V. Reddy v. Asst. CIT, (1998) 93 Comp. Cas. 287 (AP) (DB); Gurudas Hazra
v. P.K. Chowdhury, (2002) 109 Comp. Cas. 530 (Cal.). See detailed Comments under Section 34.
43. Dipak Dutta v. Union of India, (2004) 121 Comp. Cas. 516 (Cal.).
44. Kailash Prasad Modi v. Chief General Manager, Orissa Telecommunication, (1995) 82 Comp. Cas. 626 (Orissa) (DB) :
AIR 1994 Orissa 98 (DB).
45. Kenya Airways v. Jinibai B. Kheshwala, (1999) 96 Comp. Cas. 140 (Bom.) (DB). See detailed Comments under Section
617.
46. Ladli Parshad Jaiswal v. Karnal Distillery Co. Ltd., (1963) 33 Comp. Cas. 593 (SC) : AIR 1963 SC 1279 [LNIND 1962
SC 435]. See detailed Comments on Jurisdiction of Courts, CLB and Tribunal (NCLT) under Sections 10, 10E, 10F,
10FA, 10FB, 10FR and 10GF.
End of Document
Datta: Company Law
C R Datta
S. 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
47[(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 company which is that other’s subsidiary.
Illustration
Company B is a subsidiary of Company A, and Company C is a subsidiary of Company B. Company C is a

subsidiary of Company A, by virtue of clause (c) above. If Company D is a subsidiary of Company 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 persons, 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, 48[ ***] or
manager of, or to any other office or employment in, that other company; or
49[(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 held or power exercisable by that other company in a fiduciary capacity shall be treated as
not held or exercisable by it;
(b) subject to the provisions of clauses (c) and (d), any shares held or power exercisable—
(i) by any person as a nominee for that other company (except where that other is concerned only in
a fiduciary capacity); or
Page 2 of 17
(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.
50[(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.]
47. Substituted by the Companies (Amendment) Act, 1960 (65 of 1960), s. 3. Prior to substitution the clause stood as
under:“(b) that other holds more than half in nominal value of its equity share capital; or”.
48. The words “managing agent, secretaries and treasurers” omitted by the Companies (Amendment) Act, 2000
(53 of 2000), s. 4 (w.e.f. 13-12-2000). The system of managing agency had already been abolished videsection 324A
of the Companies Act, 1956 (1 of 1956), as inserted by the Companies (Amendment) Act, 1969 (17 of 1969), s. 4
(w.e.f. 3-4-1970).
under:“(c) that the directorship is held by that other company itself or by a subsidiary of it.”
51. Oriental Industrial Investment Corporation Ltd. v. Union of India, (1981) 51 Comp. Cas. 487 (Delhi) (DB). See also
Comments under Sections 9, 255, 257, 372 and 372A.
52. M. Velayudhan v. Registrar of Companies, (1980) 50 Comp. Cas. 33 (Ker.). See also Comments under Sections 260,
372 and 372A.
53. Fatima Tile Works v. Sudarsan Trading Co. Ltd., (1992) 74 Comp. Cas. 423 (Mad.).
54. IRC v. Harton Coal Co. Ltd., (1960) Ch. 563 : (1960) 3 All ER 48 : (1961) 43 ITR 541 (Ch.D).
55. British American Tobacco Co. Ltd. v. IRC,(1943) AC 335 (HL) : (1943) 1 All ER 13 (HL) : (1943) 13 Comp. Cas. 123
(HL) : (1943) 11 ITR (Suppl.) 29 (HL). See also Comments under Sections 34 and 406.
56. Smt. Namita Gupta v. Cachar Native Joint Stock Co. Ltd., (1999) 98 Comp. Cas. 655 (CLB); Cachar Native Joint Stock
Co. Ltd. v. Smt. Namita Gupta, (2004) 122 Comp. Cas. 1 (Gauhati). See also Comments under Section 10F, 87, 89,
111A, 179, 257, 397 and 398.
† See the Companies (Electronic Filing and Authentication of Documents) Rules, 2006 framed under Section 610A to
610E(w.e.f. 16-9-2006) in Appendix 2.
Page 3 of 17
10-2006) in Comments under Section 610B as inserted by the Companies (Amendment) Act, 2006 (23 of 2006) (w.e.f.
16-9-2006).
57. English Serving Cotton Company v. IRC,(1947) 1 All ER 679.
[LNIND 1972 SC 144]: (1972) 3 SCR 711 [LNIND 1972 SC 144]; Alembic Glass Industries Ltd. v. CCE, , (2002) 112
Comp. Cas. 379 (SC). See detailed Comments under Section 34.
59. Spencer & Co. Ltd. v. CWT, , (1969) 39 Comp. Cas. 212 (Mad.) : AIR 1969 Mad. 359 [LNIND 1967 MAD 212].
60. Deutsche Babcock Power Systems Ltd., In Re, (1999) 97 Comp. Cas. 341 (CLB). See also Comments under Sections
17 and 34.
61. Mohta Alloy and Steel Works v. Mohta Finance and Leasing Co. Ltd., , (1997) 89 Comp. Cas. 227 (Delhi). See also
Comments under Section 34 and 46.
Comments on Lifting the corporate veil—Holding company and its subsidiary under Section 34.
63. L.I.C. v. Hari Das Mundhra, (1966) 36 Comp. Cas. 371 (All.) (DB); Spencer & Co. Ltd. v. CWT, (1969) 39 Comp. Cas.
212 (Mad.) : AIR 1969 Mad. 359 [LNIND 1967 MAD 212]: (1969) 72 ITR 33 [LNIND 1967 MAD 212] (Mad.).
64. Tata Engineering and Locomotive Co. Ltd. v. State of Bihar, (1964) 34 Comp. Cas. 458 (SC) : AIR 1965 SC 40 : (1964)
6 SCR 885. See detailed Comments under Section 34.
65. State of U.P. v. Renusagar Power Co., (1991) 70 Comp. Cas. 127 (SC) : AIR 1988 SC 1737 [LNIND 1988 SC 619];
D.H.N. Food Distributors Ltd. v. London Borough of Tower Hamlets,(1976) 3 All ER 462 : (1976) 1 WLR 852 : 120 SJ
215 (CA). See detailed Comments under Section 34.
66. U.K. Mehra v. UOI, , (1997) 88 Comp. Cas. 213 (Delhi) (DB).
67. Hackbridge-Hewittic and Easun Ltd. v. G.E.C. Distribution Transformers Ltd., (1992) 74 Comp. Cas. 543(Mad.)(DB); ICI
v. E.C. Commission,(1972) 11 CMLR 557.
68. Inalsa Ltd. v. UOI, (1996) 87 Comp. Cas. 599 (Delhi).
69. D.H.N. Food Distributors Ltd. v. London Borough of Tower Hamlets, (1976) 3 All ER 462 : (1976) 1 WLR 852 : 120 SJ
215 (CA). See also Comments under Sections 12 and 34.
71. Whale Stationery Products Ltd. v. Union of India, (2007) 140 Comp. Cas. 478 (Delhi).
72. B.D.A. Breweries and Distilleries Ltd. v. Cruickshank and Co. Ltd., (1996) 85 Comp. Cas. 325(Bom.).
73. Ringway Road Making v. Adbruf Ltd.,(1998) 2 BCLC 625.
74. Andhra Bank Housing Finance Ltd., In Re, (2004) 118 Comp. Cas. 295 (AP); Jaypee Cement Ltd., In Re, (2004) 122
Comp. Cas. 854 (All.). See also Comments under Sections 391 and 394.
75. Punjab National Bank v. Bareja Knipping Fasteners Ltd., (2001)103 Comp. Cas. 958(P&H). See detailed Comments
under Section 34.
COMMENTS
English Act, 1948: Section 154 Previous Act, 1913: Section 2
English Act, 1985: Ss. 736, 736A, 736B, 744
Legislative History.—The Companies Act, 1956 (1 of 1956).—The Notes on clauses explained this section as
follows: “As suggested by the Company Law Committee (paragraph 27), the definitions are based on those found in
section 154 of the English Act. The illustration has been added so as to bring out clearly the intention underlying
sub-clause (1)(c). A few minor drafting improvements have also been effected.” [ Clause 4 of the Companies Bill,
1953 (46 of 1953)].
Page 4 of 17
The Company Law Committee recommended thus: “We have entirely recast the definitions of subsidiary and
holding companies and replaced the existing definitions in section 2 of the Act by the provisions of section 154 of
the English Companies Act, 1948.The effect of this new definition would be that company A would be deemed to be
a subsidiary of company B, if one of the following conditions applies:
(i) company B is both a member of company A and controls the composition of the Board of directors, or
(ii) company B holds more than half of company A’s equity share capital in nominal value, or
(iii) company A is a subsidiary of any subsidiary of company B.
As a corollary, a company is defined as a holding company of another, when that other company fulfils the above
conditions so as to make it a subsidiary of the first. It will be noted that a company under the new definition, may be
the subsidiary of another even though it is not a company within the meaning of the Act.” [para 27].
The Companies (Amendment) Act, 1960(65 of 1960).—The Notes on clauses explained the amendments as
follows: “The amendments seek to remove certain drafting defects—(i) in clause (b) of sub-section (1) of section 4
in that the holders of preference shares issued before the commencement of the Act which may carry the same
voting rights as equity share are not covered by it, though such voting rights are preserved under section 90; and (ii)
in clause (c) of sub-section (2) of section 4 which is inconsistent with section 253 which prohibits a body corporate
from being appointed as a director of a company. (See para 25 of the Report).
It is proposed to place a private company registered in India, which is a subsidiary of a foreign public company, at
par with an Indian private company which is a subsidiary of a public company registered in India. An exemption is
proposed to be provided in the case of a private company registered in India which is a wholly owned subsidiary of
a public company incorporated outside India.” [ Clause 3 of the Companies (Amendment) Bill, 1959 (37 of 1959)].
“24. According to competent legal opinion obtained by the management of some companies, a private company
registered as such in India, which is a subsidiary of a public company incorporated outside India, cannot be deemed
to be a subsidiary of a public company within the meaning of the Act. According to this opinion, the
expression‘private company which is a subsidiary of a public company’ occurring in the Act should be taken to
mean a private company which is a subsidiary of a public company registered under the Act and not to include a
private company registered in India which is a subsidiary of a foreign company, described as a ‘body corporate’ in
the Act. It was pointed out that there are private companies registered in India which are subsidiaries of foreign
companies and which have been doing business on a large scale. Logically, it would be difficult to justify a
discrimination between ‘Indian’ subsidiaries of Indian public companies and ‘Indian’ subsidiaries of foreign public
companies. Indian subsidiaries of foreign public companies need not, if they are private companies, file their profit
and loss account with the Registrar [ vide section 220(1)(b)]. They would not also be subject to the ceiling on
managerial remuneration imposed by section 198 or the separate ceilings in respect of different classes of
managerial personnel under sections 309, 348, 381 and 387. Even under the law of the country of incorporation of
the holding company, some of these privileges might not be available to private companies of this type. It was
presumably not intended by the legislature that private companies which are subsidiaries of foreign bodies
corporate, should find themselves in a privileged position vis-a-vis private companies which are subsidiaries of
Indian public companies. So far as we can ascertain, there are about 100 such private companies which are Indian
subsidiaries of foreign bodies corporate which, if they were incorporated in India, would be public companies. The
capital of the majority of these private companies is said to be wholly owned by the foreign bodies corporate. It has
been represented to us that to render such private companies at this stage subject to the provisions of section
198et al is bound, in the long run, to inhibit foreign investment in this country through the medium of an Indian
subsidiary and might also give rise to some measure of disinvestment by existing foreign companies. It is said that,
in the present world-wide shortage of development capital, the restrictions on management remuneration (which are
not generally found in the capital-exporting countries themselves) will tend to drive capital away from India, other
things being equal.
Bearing in mind the prime purpose of the Companies Act, viz., the protection of the interests of the shareholder,
subject always to the overriding requirements of public policy, a distinction might be drawn between private
companies which are wholly-owned subsidiaries of foreign bodies corporate and other private companies which are
subsidiaries of foreign bodies corporate but in which a portion of the capital is nevertheless held by Indian nationals
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or companies. In the first type of cases, it has been argued that the management, having no shareholding interest,
is, in fact, effectively supervised in regard to remuneration and otherwise by the parent company abroad and is
subject to any restrictions which the foreign legislature may care to impose and that there is no necessity for the
Indian Legislature to concern itself with the matter. But this argument is by no means decisive in view of the fact
that the business operations are carried on and profits are earned in India by the subsidiaries and that there is,
therefore, a sufficient economic and territorial connection justifying regulation by Parliament. So far as the second
type of company is concerned, however, it must be conceded that the company being incorporated in India and
Indian capital being in some degree involved, there is no reason for any difference in treatment for the purposes of
the Act between such a company and a company which is a subsidiary of an Indian public company.
We, therefore, recommend that in the case of private companies, which are subsidiaries of foreign bodies
corporate, but in which some part of the capital is beneficially held by Indian nationals or Indian companies, a
provision should be inserted in section 4 to make it clear that such private companies will be treated as subsidiaries
of public companies for all the purposes of the Act. As regards the treatment of private companies, the entire share
capital of which is owned by one or more foreign bodies corporate, it is a matter of economic and financial policy for
Government to decide, having regard to the position of foreign investments in this country generally, whether or not
such private companies should continue, as at present, to remain outside the restrictions imposed on private
companies which are subsidiaries of Indian public companies or whether they should henceforth be made subject to
these restrictions. If an alteration of law in this respect is considered desirable, a provision should be inserted in
section 4 to the effect that ‘a private company, which is registered in India and which is a subsidiary of a foreign
public company, shall be deemed to be a subsidiary of a public company for all the purposes of this Act’.
25. There are a few drafting defects in the definition of a‘subsidiary’in section 4. There are ‘existing’ companies
where preference shareholders have the same voting rights as equity shareholders. Section 90 preserves such
rights. In such cases it is possible that the equity shares of a company may be held by one company and the
preference shares by another and the preference shares might exceed the equity shares in voting strength. In such
cases, it may be inappropriate to treat the company as a subsidiary of both the companies. To avoid this difficulty,
section 4(1)(b) might be amended by adding the following words at the end of the clause after the words ‘share-
capital’:—
‘or, in the case of existing companies, with equity and preference share holders having the same voting rights, that
other holds more than half of its total voting power.’
Section 4(2)(c) refers to a directorship of one company being held by another company or its subsidiary. Section
253 prohibits a body corporate from being appointed as a director of a company. Section 4(2)(c) should be recast
as follows:—
‘(c) that the directorship is held by an individual nominated by that other company or by a subsidiary thereof.’ ” [
Report: paras 24 and 25].
The Joint Committee made further changes and observed as under:
“The amendments made in the clause are clarificatory in nature. The Committee consider it unnecessary to treat an
Indian private company, the entire share capital of which is held by one or more bodies corporate incorporated
outside India, as a private company which is a subsidiary of a public company for the purposes of the Act.” [ Report:
para 16].
The Companies (Amendment) Act 2000 (53 of 2000).—The Notes on clauses explained the amendments as
follows: “This clause seeks to omit the expression ‘managing agent, secretaries and treasurers’ in clause (b) of sub-
section (2) of section 4 of the Act which is of consequential nature.” [ Clause 4 of the Companies (Second
Object.
—The importance of the existence of the relationship of holding and subsidiary companies lies mainly in preserving
operational identity, shareholders’ control over each of the companies, and in the obligation to attach subsidiary’s
Balance Sheet, Profit and Loss Account, Directors’ and Auditors’ Reports and a Statement showing holding
company’s interest in the subsidiary company, to the Balance Sheet of the holding company.
Subsidiary [Sub-section (1)].

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—As per sub-section (1), for the purposes of this Act, a company is deemed to be a subsidiary company of another
if the other—
(a) controls the composition of its Board of directors; or
(b) holds, (i) in case of existing companies having preference shares with voting rights, more than half of the
total voting power of such company and (ii) in other cases, holds more than half in nominal value of its
equity share capital; or
(c) it is a subsidiary of another company which itself is a subsidiary of a third company. [ See also Illustration
to Section 4, (1)(c)].
Clauses (a) to (c) of sub-section (1) of section 4 are explained below.
Controls composition of Board of Directors [ Section 4(1)(a)].
—This requirement is established only if the other company has discretionary power to appoint or remove the
holders of all or majority of the directorships.
Power to appoint when deemed to exist.
—The Act states three circumstances in which the requisite power to appoint is considered or deemed to exist, e.g.,
(a) a person cannot be appointed without exercise in his favour by that other company of such power, (b) a person’s
appointment follows necessarily from his appointment as director, or manager of, or to any other office or
employment in, that other company, or (c) the directorship is held by an individual nominated by that other company
or a subsidiary thereof. [ Section 4(2)].
Investment by holding company in subsidiary.—Where by an agreement a company was given full and absolute
right to appoint 5 directors in another company. That other company altered its Articles providing that right and
establishing the relationship of holding company and subsidiary. Thereafter the first company acquired large
number of shares making it holding company of the other. The alteration of the Articles by the subsidiary was not
contrary to the provisions of sections 255, 256 and 257 nor the holding company violated the provision of section 9
of the Act inasmuch section 372(14)(d) [ now section 372A(8)] excluded the application of section 372(4) to
investments by a holding company in its subsidiary.51
Appointment of additional directors.
—Appointment of additional directors under section 260 is limited in point of time to the date of the next Annual
General Meeting of the company. But, there would still be control in the matter of composition of the Board of
directors for the period up to the next annual general meeting and, therefore, it is possible for the relationship of a
holding company and subsidiary company to subsist during that time. When a holding company invests in a
subsidiary it is protected by section 372(14) [ now section 372A(8)] of the Companies Act, 1956 and no prosecution
lies under that section.52
Board controlled subsidiaries.— Section 372(14)(d) was substituted by the Companies (Amendment) Act, 1988
to plug the above loophole. It provided that exemption from Government approval as regards investment by a
holding company in its subsidiary, ought to be permitted only in the case of genuine subsidiaries controlled by
shareholding and not in the case of Board controlled subsidiaries.
Inter-corporate loans and investments.— Sections 370 and 372 have been replaced by a new section, viz., Inter-
corporate loans and investments [ Section 372A] by the Companies (Amendment) Act, 1999 (21 of 1999) (w.r.e.f.
31-10-1998).
See detailed Comments hereinafter and Comments under Section 372A(8).
Nominee Director.—A company which is controlled by a Nominee of the Board of Directors of another company
becomes a subsidiary of another company.53
Holds more than half equity share capital [Sub-section (1)(b)].—In the case of the second condition, the holding
company must hold more than half in nominal value of its equity share capital. In the second type of cases, where
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more than half the nominal value of the equity share capital is held by another company, then by virtue of such
holding that other company becomes a holding company and the one whose shares are so held becomes a
subsidiary company.
Existing companies.—Clause (i) providing that it holds in case of existing companies having preference shares
with voting rights, more than half of the total voting power is now redundant. [ See Comments under Section 90].
Department’s view.— Section 4(1)(b)—Manner of reckoning “half in nominal value of equity capital”.—In
reply to a query: “If a part of the share capital of a company is fully paid and part partly paid, how should the ‘half in
nominal value of equity capital’ mentioned in the section be reckoned? C the Department is of the view: “The
‘nominal value of equity capital’is a fixed figure at any point of time and readily ascertainable. It is unrelated to the
amount paid up on the equity shares. The words ‘nominal share capital’ in Schedule X of the Companies Act, 1956
indicate the ‘authorised capital’. The words ‘nominal value of equity capital’ in section 4 may be interpreted to mean
the face value of the equity capital which has been subscribed.” [Clarification F. No. 2/25/161-PR: Govt. of India
publication, Clarifications and Circulars on Company Law, 1977 Edition, page 3].
Control or Controlling Interest.
—It is established that the expression
“control” in relation to a company means the power by the exercise of voting rights to carry a resolution at a
general meeting of the company
.54
The holding of a large majority of voting power in a company is in general sufficient to constitute a controlling
interest; it is not necessary to hold such proportion of the shares as would secure the passing of a resolution for
which a special majority is required.55 Voting rights does not mean effective voting rights. In terms of section
87(1)(b) the voting rights are to be on the basis of share in the paid up capital.56
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. [ Section 4(5)]. See also Comments under Section 85.
Subsidiary of subsidiary [ Section 4(1)(c)].— Clause (c) of sub-section (1) of section 4 further provides that a
company is deemed to be a subsidiary company of another if it is a subsidiary of another company which itself is a
subsidiary of a third company. See also Illustration to Section 4(1)(c).
This third case envisaged by section 4(1) provides that a subsidiary company of a holding company may be a
holding company in relation to another company.
Exceptions.—These conditions of the relationship between the holding and subsidiary companies are subject to
the provisions relating to shares held in fiduciary capacity or by nominees or under debenture trust-deed or under
power of appointment exercisable by the potential holding company. [ See Section 4(3)(a) to (d)].
Subsidiary cannot be member of its holding company [ Section 42].
—The separate operational identity of the holding company and of the subsidiary company are to be maintained.
The shareholders’right of control over subsidiary company or the holding company, as the case may be, should be
preserved. With these objects in view it has been provided that a subsidiary or its nominee cannot be a member of
its holding company except as personal representative or as trustee provided that neither a subsidiary nor the
holding company is beneficially interested under the trust apart from an interest by way of security in the ordinary
course of business which includes the lending of money. A holding company therefore cannot allot shares to its
subsidiary. This provision does not prevent a subsidiary company, which was a member of the holding company at
the time of the commencement of the Act, from continuing to be a member, but the right to vote at meetings of the
holding company is withheld.
Holding Company [ Section 4(4)].—For the purposes of the Companies Act, 1956, a company shall be deemed to
be the holding company of another if, but only if, that other company is its subsidiary.
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Company includes body corporate [Sub-section (5)].—In this section, the expression “company” includes any
body corporate.
The term body corporate is wider than the term “company” and includes a foreign company. But it does not include
a corporation sole, a co-operative society, a society registered under the Societies Registration Act, 1860 and a
Public Trustee, etc.
See Comments under Body Corporate or Corporation [ Section 2(7)].
Foreign Company [Sub-section (6)].
—A company which is subsidiary or holding company of foreign company or body corporate incorporated outside
India under the law of such country shall be deemed to be a subsidiary or holding company for the purposes of this
Act even if it does not fulfil the requirements of section 4.
See Special provisions for foreign companies: Part XI—Companies Incorporated Outside India, viz., Provisions as
to Establishment of Place of business in India [ Sections 591-602]and Prospectuses [ Sections 603-608].
Private company subsidiary of foreign company [ Section 4(7)].—A private company which is 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 to be a subsidiary of a public company unless the entire share capital in that
private company is held by foreign bodies corporate.
Chain of subsidiary—holding relationship where holding companies are not Indian companies.—It seems
that in determining a subsidiary-holding company relationship under Section 4(7) of the Act, one should trace the
ownership structure of any given company and examine the applicability of the other provisions of Section 4 back to
its ultimate parent/holding company. Suppose A is a subsidiary of B (an overseas company) (as per Section
4(1)(b)(ii), which, in turn, is subsidiary of C (an overseas company) (as per Section 4(1)(b)(ii), and, therefore, A
would be regarded as a subsidiary of C (as per Section 4(1)(c).
Shares held as nominee.—If any shares are held beneficially on behalf of a foreign company by any individual
acting as a nominee for that foreign company, they would be considered (as per Section 4(3)(b)(i)) as part of the
shareholding of that foreign company both the individual and the foreign company should in terms of Section 187C
make certain disclosures to the company.
Joint Shareholding.—If a small fraction of shareholding in a private company is held by a foreign body corporate
jointly with an individual/Indian company, such shareholding be considered as part of the shareholding of the
foreign company for the purposes of Section 4(7).
Impact of Section 3(1)(iv).—A private subsidiary of a foreign public company which is deemed to be a subsidiary
of a public company under Section 4(7) will not become a “public company” under Section 3(i)(iv).
The definition of “company” in Section 3, which deals with the criteria for identifying companies as private or public,
differs from that in section 4, which deals with the criteria for identifying holding-subsidiary relationship among
companies. The term ‘company’ has been defined (or explained) in the Act at three places viz. Section 2(10),
Section 3(1)(i), and Section 4(5). There is no conflict between the definition under Section 2(10) and Section 3(1)(i);
as Section 2(10) states that “company means a company as defined in Section 3”; and Section 3 clearly states that
company means a “Company formed and registered under the Act.” Section 4(5) is the third place where the term
‘company’,for the limited purpose of Section 4, includes any body corporate.
Section 4(7) deals with the status of the private company registered in India and cannot affect the status of the body
corporate incorporated overseas in the definitional sense. The definition of “public company” in Section 3(1)(iv)
necessarily means that such a company has to be a company incorporated in India.
Department’s view.— Section 4(7) ‘private’ status to Indian private companies where foreign body
corporates hold 100 per cent. shares automatic. Exemption not required after amendment of section 43A.—
“The Registrar of NCT of Delhi and Haryana has sought a clarification on the applicability of section 43A(2A) on the
erstwhile deemed public companies [when section 43A was in operation prior to the Companies (Amendment) Act,
Page 9 of 17
2000, which came into force with effect from 13th December, 2000], to those public companies which are
subsidiaries of foreign body corporates. The matter has been examined in the Department.
2. After amendment of the erstwhile section 43A, since the provisions of section 4 of the Companies Act are
independent, a private company, being a subsidiary of a foreign body corporate, which, if incorporated in India,
would not be a public copany. As such, these deemed public companies are entitled to revert back to their initial
status of private lmimited companies as the effect of section 43A has been nullified by the amendment referred to.
3. Section 4(7) of the Act was an exemption available to Indian private companies when foreign body corporates
were holding 100 per cent. share in them to retain their ‘private’ status. After amendment of section 43A, such
exemption is not required. Therefore, applications under section 43A(2A) shall be dealt with independent of section
4(7) of the Act. The legal position in the above circumstances would be that a private company would be the
subsidiary of another private limited company even if the holding company happens to be a foreign body corporate
and these companies do not need the exemption provided in section 4(7) of the Act. Therefore, the private
company status of such companies is a statutory one, and takes effect automatically. All that the company is
required to do is to make an application to the Registrar that the company has become a private company and
thereupon the Registrar shall substitute the words ‘private limited’ in lieu of the words ‘public limited’.
4. Since no time limit has been prescribed in the statute for the companies to revert back, the Department has
already issued a Departmental Circular No. 3 of 2002, dated 24th July 2002 (F. No. 17/4/2002-CL-V) [ printed under
Section 43A(2A)], wherein it has been clarified that those companies which do not approach the Registrar of
Companies seeking reversion back to private company status, are deemed to have chosen to remain as public
companies.
5. In the circumstances, it is hereby clarified, that in cases falling in the above paragraphs, the Registrar is required
to make the necessary corrections in the certificate of incorporation within four weeks as from the date of receipt of
application from the company as provided in section 43A(2A) of the Companies Act, 1956.” [ General Circular No.
23 of 2002, dated 30-9-2002 (F. No. 17/26/2002-CL-V):(2002) 112 Comp. Cas. (St.) 118].
Section 43A [Deemed public company] except sub-section (2A) is not applicable (w.e.f. 13-12-2000) [ vide Section
43(11)]. See Comments under Section 43A.
Form 25A (substituted w.e.f. 10-2-2006).— See e-Form 25A* of the Companies (Central Government’s) General
Rules and Forms, 1956, as substituted for Forms 25A and 26, by the Companies (Central Government’s) General
Rules and Forms (Amendment) Rules, 2006, vide Notification No. G.S.R. 56(E), dated 10-2-2006, published in the
Gazette of India, Extraordinary, No. 50, Part II, Section 3(i), page 156 : (2006) 130 Comp. Cas. (St.) 13 in
Appendices.
Now e-Form 25A* [ substituted for earlier Forms 25A and 26 (w.e.f. 10-2-2006)] contains Form of Application to the
Central Government for Approval of Appointment or Re-appointment and Remuneration or Increase in
Remuneration or Waiver for excess or over payment to Managing or Whole-time Director(s) or Manager and
Commission or Remuneration or Expression of opinion to Directors, pursuant to Sections 198(4), 269, 309(3),
309(5B), 310, 311, 387, 388, 2(24), 4(7), 309(1)(b), 309(4)(a) and (b) and 316(4) of the Companies Act, 1956.
Revised e-Form 25A (released 24-12-2006).— See Revised e-Form 25A on the Ministry of Corporate Affairs
(MCA) website http://www.mca.gov.in under the category Provisions relating to Managerial Personnel, Date of Last
Release (24-12-2006).
See Revised e-Form 25A of the Companies (Central Government’s) General Rules and Forms, 1956 [Pursuant to
Sections 198(4), 269, 309(3), 309(5B), 310, 311, 387, 388, 2(24), 4(7), 309(1)(b), 309(4)(a) and (b) and 316(4) of
the Companies Act, 1956] for Form of Application to the Central Government for Approval of Appointment or
Reappointment and Remuneration or Increase in remuneration or Waiver for excess or over payment to Managing
or Whole-time Director(s) or Manager and Commission or Remuneration or Expression of Opinion to Directors.
See detailed Comments, Form and Procedure under Sections 2(24), 4(7), 198(4), 269, 309(1)(b), 309(3), 309(4)(a),
(b), 309(5B), 310, 311, 316(4), 387 and 388.
Filing of e-Forms (w.e.f. 16-9-2006) [ Sections 610A-610E].— See Provisions relating to Filing of Applications,
Page 10 of 17
Extraordinary, No. 437, Part II, section 3(i) : (2006) 133 Comp. Cas. (St.) 81 in Appendices.
No. 1287, Part II, Section 3(ii), page 15, dated 27-10-2006: MCA website http://www.mca.gov.in : (2006) 134 Comp.
Cas. (St.) 91 in Comments under Section 610B.
under the Ministry of Finance, was designated as a separate Ministry, viz., ‘Ministry of Company Affairs ’ (MCA)
vide Cabinet Secretariat Notification No.DOC.CD-160/2004, dated 27-5-2004.
The erstwhile Department’s website http://www.dca.nic.in was moved to theMinistry of Company Affairs
(MCA)website http://www.mca.gov.in.
‘Ministry of Corporate Affairs’ (MCA)(w.e.f. 9-5-2007).—The Ministry of Company Affairs (MCA) has been
renamed as ‘Ministry of Corporate Affairs’ (MCA)vide Presidential Notification, dated 9-5-2007 amending the
Government of India(Allocation of Business) Rules, 1961 (w.e.f. 9-5-2007):
Prasad Road,New Delhi-110 001.
SeeMinistry of Corporate Affairs (MCA)website http://www.mca.gov.in
Private Company subsidiary of a Public Company.
—A Private Company is entitled to several privileges and exemptions conferred on the private companies by or
under the Companies Act, 1956. A Private Company which is a subsidiary of a public company or which is a
subsidiary of a company which is not a private company is treated for all practical purposes as a public company
and loses almost all the privileges and exemptions that a private company enjoys under the Act.
See detailed Comments and Privileges and Exemptions for a Private Company (not being a subsidiary of a public
company) under Section 3.
Subsidiary not agent.—A company whose shares are controlled by another company is not by reason only of that
to be described as agent.57 A holding company and a subsidiary are two separate legal entities,58 even though
almost all the shares in the subsidiary are held by the holding company.59
Where a creditor of another group company objected to the shifting of situation clause of its memorandum of
association on the ground that a group company of the petitioner owed it money. Held, though the company
belonged to the same group, under law, the group companies were two different entities.60 Where under the articles
of association of two companies under the same group the director was authorised to enter into and execute all
contracts. The agreement between two group companies could be signed by the single director.61
Lifting the veil of Holding company and its subsidiary.
—The corporate veil may be lifted where associated companies are inextricably connected as to be, in reality, part
of one concern.62 A holding company and its subsidiary are separate legal entities. But, for certain purposes, affairs
of a subsidiary have been treated by the Acts as affairs of the holding company. It is true that occasionally the
corporate veil of a company is pierced through in order to find out the substance but that is only where it is
permitted by a statute or in exceptional cases of fraud.63 It is well-settled that, in a suitable case, the court can lift
the corporate veil where the companies share the relationship of a holding company and a subsidiary company and
also to pay regard to the economic realities behind the legal facade.64
The horizon of the doctrine of lifting of the corporate veil is expanding. It can be lifted even at the invitation of the
company itself.65 Contemporary trend shows that the lifting of the corporate veil is permissible whenever public
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interest so demands. The courts have been pragmatic in their approach in unveiling companies, especially the
subsidiary companies to see their real face in the interests of justice.66 The modern tendency is, where there is
identity and community of interest between companies in the group, especially where they are related as holding
company and wholly owned subsidiary or subsidiaries, to ignore their separate legal entity and look instead at the
economic entity of the whole group tearing of the corporate veil.67
See detailed Comments on Lifting of corporate veil in case of Holding company and its subsidiary under Section 34.
Industries (Development and Regulation) Act.—For registration as small scale industry under the Industries
(Development and Regulation) Act, 1951 (65 of 1951) it was a condition that the undertaking should not be a
subsidiary of or owned or controlled by another undertaking. Where a director in one company was also a director
in another company. Held, the director does not own the company. The legal entity of the company is distinct and
separate from its directors. To say that one undertaking of a company is a subsidiary of the other, a definite finding
must be recorded that the Board of directors of one were controlling the other.68
Proprietary interest.—Where the holding company and its fully owned subsidiary had same directors and the
subsidiary company had a legal title to a property and the holding company was carrying on business on that
property, it was held that on the compulsory acquisition of the property by the local authority the holding company
should be treated as the owner of the property and therefore be entitled to compensation under the law. The
contention of the local authority that the holding company was only a licensee and was not entitled to compensation
was negatived.69
Trade mark used by subsidiary.—A Holding Company exercises supervision and control over the quality of goods
produced by its subsidiary. The use of a Trade Mark by the subsidiary is to be regarded as a use by the Holding
Company. There is a connection between the goods and the owner of Trade Mark within the meaning of the
provisions of the Trade and Merchandise Marks Act, 1958 (43 of 1958).70
Now see the Trade Marks Act, 1999 (47 of 1999).
Company whether subsidiary—Principles of natural justice.—The question as to whether the petitioner-

company was a subsidiary of another company has to be undertaken in the context of the provisions of Section 4 of
the Companies Act, 1956 and not merely on the basis of one of the directors being common to both the companies.
The petitioner-company was blacklisted in respect of dealings with the Government by order of the Court
considering it to be a subsidiary of another company, as one of the directors of the petitioner-company was also a
director of the other blacklisted company. In a writ petition the petitioner-company contended that the company was
not a subsidiary of the other company in terms of section 4 of the Companies Act, 1956, and the company was not
provided with an opportunity to deny that it was a subsidiary of the other company. Allowing the writ petition, it was
held that the question of blacklisting a company is a serious one and it is well-settled that before any person or
company is blacklisted in respect of dealings with the Government, that person or company must be provided with
an opportunity of hearing. As the orders were passed without serving any notice on the petitioner-company and
without providing it an opportunity of hearing, the orders in question were to be set aside for want of following the
principles of natural justice.71
De-subsidiarisation.—Where directors of investment company took collective corporate decision for de-
subsidiarisation by sale of shares in subsidiary held by holding company. De-subsidiarisation was final. Holding
company had no locus standi to challenge independent status of delinked company.72
Transfer of shares among subsidiaries.—A contract for supply of goods provided that the contract could be
terminated if the ‘controlling shareholding’ of either parties was transferred to ‘new ownership’.
New ownership refers to a company which was not under the control of either of the parties. The shares were
transferred to the person who was controlling one of the parties both before and after the transfer. This change of
the ownership did not entitle the party to terminate the contract
.73
Financial year of subsidiary and holding companies [ Section 212].—The Balance Sheet and Financial
Statements of the subsidiary should be according to the provisions of the Act. It should end at the close of the
financial year of the subsidiary company if it coincides with the financial year of the holding company. If it does not
coincide then the balance sheet should be as at the end of the financial year of the subsidiary last before that of the
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holding company. The subsidiary company’s financial year must end within 6 months preceding the end of the
financial year of the holding company.
See detailed Comments under Section 212—Balance sheet of holding company to include certain particulars as to
its subsidiaries.
Accounts.— Section 42 of the Companies Act, 1956, prohibits allotment of shares of the holding company to a
subsidiary. Section 213 confers powers on the Central Government to extend financial year of the subsidiary so that
it ends with that of its holding company. Section 214 provides for inspection of subsidiary company’s books of
accounts. Under the provisions of Section 235 its affairs may be investigated.
Accounting and Auditing Practices.—Para 15.1 of the Statement on Auditing Practices issued by theInstitute of
Chartered Accountants of India(ICAI) enumerated Salient provisions of the Companies Act, 1956 (1 of
1956)concerning Chartered Accountants and stated as follows.
Compliance with the Companies Act.—The Companies Act lays down detailed provisions regarding various
matters and casts an obligation upon directors and officers of the company to carry out the requirements of the law.
Generally speaking, it is the duty of the directors and the management to ensure that the provisions of the
Companies Act have been complied with. However, where non-compliance with the provisions of the Companies
Act has a bearing upon the accounts and transactions of the company, the Auditor would in the normal course of
his inquiry become aware of the breaches of the Act and may have an obligation to bring this to the attention of the
shareholders. In order to facilitate the work of the Auditors, a list of important Sections has been provided in the
Statement.
The List of important Sections provided in the Statement, inter alia, enumerated Section 4 of the Companies Act,
1956 as follows:
Section 4 [Holding company and Subsidiary].—Explains the meaning of Holding Company and Subsidiary
Company.
[See Statement on Auditing Practices, issued by the Institute of Chartered Accountants of India (ICAI), Third
Edition, 1977, para 15.1: Reproduced in Handbook of Auditing Pronouncements, Volume I— Compendium of
Statements and Standards, published by the ICAI, Third Edition, 2005, para 15.1, pages II-30 to 39].
Statement on Auditing Practices (withdrawn).
— Statement on Auditing Practices has since been withdrawn by the Council of the Institute of Chartered
Accountants of India (ICAI), at its 249th Meeting held in March, 2005 pursuant to the issuance of a number of
Auditing and Assurance Standards (AASs) and Guidance Notes on the topics covered by the various paragraphs of
the said Statement.
[See Handbook of Auditing Pronouncements, Volume I— Compendium of Standards and Statements, published by
the Institute of Chartered Accountants of India (ICAI), Fourth Edition, 2007, page IV.1].
Holding Company and Subsidiary Company.— Section 4 of the Companies Act, 1956 explains the Meaning of
Holding Company and Subsidiary Company.
Section 42 of the Companies Act, 1956 (1 of 1956) prohibits allotment of Shares of the Holding Company to a
Subsidiary Company.
The importance relationship of Holding Company and Subsidiary Companies lies in preserving operational identity,
shareholders’ control over each of the companies and in the obligation to attach Subsidiary’s Balance Sheet, Profit
and Loss Account, Directors’ and Auditors’ Reports and a Statement showing Holding Company’s interest in the
Subsidiary Company, to the Balance Sheet of the Holding Company.
Balance sheet of Holding Company.— Section 212 of the Companies Act, 1956 deals with Balance sheet of
Holding Company to include certain particulars as to its Subsidiaries. Section 213 confers powers on the Central
Government to extend financial year of the Subsidiary so that it ends with that of its Holding Company.
Page 13 of 17
Section 214 of the Companies Act, 1956 provides for Inspection of Subsidiary Company’s Books of Accounts.
See Comments under Sections 4, 42, 211-214, 227 and Schedule VI.
Companies (Accounting Standards) Rules, 2006.—In exercise of the powers conferred by Section 642(1)(a)
read with Section 211(3C) and Section 210A(1) of the Companies Act, 1956 (1 of 1956), the Central Government,
in consultation with National Advisory Committee on Accounting Standards has made the Companies (Accounting
Standards) Rules, 2006* (w.e.f. 7-12-2006) vide Notification No. G.S.R. 739(E), dated 7-12-2006, published in the
Gazette of India, Extraordinary, No. 582, Part II, section 3(i), page 217: (2007) 135 Comp. Cas. (St.) 73.
See detailed Comments under Sections 210A and 211(3C).
Consolidated Financial Statements [(AS) 21].— See also Relevant Accounting Standards issued by the Institute
of Chartered Accountants of India (ICAI):
Accounting Standard (AS) 21, ‘Consolidated Financial Statements’ (Issued 2001) and Accounting Standard (AS)
23, ‘Accounting for Investments in Associates in Consolidated Financial Statements’ (Issued 2001), etc.
Accounting Standard (AS) 21, ‘Consolidated Financial Statements’, issued by the Council of the Institute of
Chartered Accountants of India, came into effect in respect of Accounting Periods commencing on or after 1-4-
2001.
An enterprise that presents consolidated financial statements should prepare and present these statements in
accordance with this Standard.
GAAP—Consolidated Financial Statements.—Accounting and Financial Reporting Standards and

Pronouncements under the Indian GAAP (AS), Companies (Accounting Standards) Rules, 2006, Accounting
Standards(AS), Guidance Notes, etc., of the ICAI, the International GAAP (IAS/IFRS) of the IASB, the English
GAAP (FRS) of ICAEW and the US GAAP (FAS) of the FASB, etc., are as follows:
Indian GAAP.—The Companies (Accounting Standards) Rules, 2006 and Consolidated Financial Statements [AS
21] of the ICAI.
Interpretation of the term ‘Near Future’ (Re. AS 21, AS 23 and AS 27) [ASI 8]. Notes to the Consolidated Financial
Statements (Re. AS 21) [ASI 15]. Definition of ‘Control’ (Re. AS 21) [ASI 24]. Exclusion of a subsidiary from
consolidation (Re. AS 21) [ASI 25]. Accounting for taxes on income in the consolidated financial statements (Re. AS
21) [ASI 26]. Disclosure of parent’s/venturer’s shares in post-acquisition reserves of a subsidiary/jointly controlled
entity (Re. AS 21 and AS 27) [ASI 28].
Accounts of Holding Company and Subsidiary [ Sections 212-214].
— See also relevant provisions of the Companies Act, 1956 (1 of 1956), viz., Balance sheet of holding company to
include certain particulars as to its subsidiaries [ Section 212], Financial year of holding company and subsidiary [
Section 213] and Rights of holding company’s representatives and members [ Section 214].
International GAAP.—Consolidated and Separate Financial Statements [IAS 27].
English GAAP.—Accounting for Subsidiary Undertakings [FRS 2].
US GAAP.—Consolidated Financial Statements [ARB 51]. Consolidation of All Majority-Owned Subsidiaries—An

amendment of ARB No. 51, with related amendments of APB Opinion No. 18 and ARB No. 43, Chapter 12 [FAS
94].
See detailed Comments and Lists of Pronouncements under the Indian GAAP, International GAAP, English GAAP
and US GAAP under Section 211(3C).
Accounting Practices.
— See detailed Comments on Accounting Provisions under Sections 209 to 223 and the Companies (Accounting
Page 14 of 17
Standards)Rules,2006, ICAI Accounting Standards (AS), Accounting Standards Interpretations (ASI), Guidance
Notes on Accounting, Authority Attached to Documents Issued by the Institute of Chartered Accountants of India
(ICAI) under Section 211(3C) and Schedule VI.
Auditing Practices.
— See detailed Comments on the Auditing Provisions under Sections 224 to 233B and ICAI Auditing and
Assurance Standards (AAS), Statements and Guidance Notes on Auditing and Authority Attached to Documents
Issued by the Institute of Chartered Accountants of India (ICAI) under Section 227.
Compliance Certificate—Holding Company and Subsidiary Company.
—Relevant paras of the Form appended to the Companies (Compliance Certificate) Rules, 2001 and ICSI
Guidance Note on Compliance Certificate are dealt with below.
Companies (Compliance Certificate) Rules, 2001.
—Every company not required to employ a whole-time Secretary under sub-section (1) of Section 383A of the
Companies Act, 1956 and having a paid-up share capital of Rs. 10 lakh or more shall obtain a Compliance
Certificate from a Secretary in whole-time practice.
Compliance Certificate shall be filed with the Registrar of Companies (ROC), a copy of such Certificate shall be
attached with Board’s Report under Section 217 of the Act and laid by the company in its Annual General Meeting
(AGM).
ICSI Guidance Note on Compliance Certificate.
—The Institute of Company Secretaries of India (ICSI) has issued a Guidance Note on Compliance Certificate to be
issued in terms of the newly inserted proviso to sub-section (1) of Section 383A of the Companies Act, 1956 as
prescribed in the Companies (Compliance Certificate) Rules, 2001 by a Practising Company Secretary (PCS).
Check-List for issue of Compliance Certificate.
—Check-List for issue of Compliance Certificate as contained in ICSI Guidance Note on Compliance Certificate, on,
inter alia, requires a PCS to check as follows.
Check-List for other Compliances.
—Besides 33 paras of Form of Compliance, the ICSI Guidance Note on Compliance Certificate requires a
Practising Company Secretary (PCS) to check certain Sundry Items (General). Relevant paragraphs on Holding
Company and Subsidiary Company are reproduced below.
“(c) Holding Company and Subsidiary Company.—Check whether:
(i) if during the year the company has become a ‘Holding Company’ or ‘Subsidiary Company’ under Section 4
and where the financial year of the subsidiary does not coincide with that of the holding company there
should not have been a gap in excess of six months between the financial year of the holding and
subsidiary company;
(ii) in such cases the Balance Sheet of Holding Company include certain particulars as to its Subsidiaries as
required under Section 212;
(iii) where the Holding Company was unable to obtain the required information from its Subsidiaries check
whether a report in writing to that effect was attached to the Balance sheet of the Holding Company;
(iv) any exemption was obtained from the Central Government and if so whether the directions given by the
Central Government were complied with.”
[See Guidance Note on Compliance Certificate, issued by the Institute of Company Secretaries of India (ICSI),
Page 15 of 17
“(j) Membership of Holding Company.—
Check whether:
(i) the company is a Member of a company which is its Holding Company;
(ii) the company which is a Member of its Holding Company has been allotted any shares or acquired further
shares after it became a Subsidiary as such allotment or transfer is void.”
“(b) In case of a Private Company which is a Subsidiary of a Public Company.—Check whether the company
commencement of the Companies (Amendment) Act, 2000, i.e., 13-12-2000.”
See detailed Comments on Status of Company under Section 3.
under Section 383A.
Inter-corporate loans and investments [ Section 372A(8)].
—Clauses (d) and (e) of sub-section (8) of section 372A, which has been inserted by the Companies (Amendment)
Act, 1999 (21 of 1999) (w.r.e.f. 31-10-1998) in place of section 370, to permit the companies to make inter-
corporate investments and loans subject to fulfilment of certain conditions without prior approval of the Central
Government, provide that section 372A does not apply,—(d) to any guarantee given or any security provided by a
holding company in respect of loan made to its wholly owned subsidiary; or (e) to acquisition by a holding company,
by way of subscription, purchases or otherwise, the securities of its wholly owned subsidiary.
Amalgamation.
—In case of amalgamation of 100% subsidiary with holding company, the holding company need not call separate
meetings or make separate application to the Court [ now the Tribunal] for sanction. Under section 394(4)
“transferee company” does not include any company other than a company within the meaning of the Companies
Act, 1956 although “transferor company” includes a body corporate. Section 394 would have to be read
harmoniously with section 4 of the Act which defines “holding company” and “subsidiary company” so as to give
effect to the object and scheme of the Act.74
See also Comments under Sections 391 to 394.
Stamp duty.
—Stamp duty has been remitted on instruments evidencing transfers of property between companies limited by
shares (i) where at least 90 per cent. of the issued share capital of the transferee company is in the beneficial
ownership of the transferor company; or (ii) where the transfer takes place between a parent company and a
subsidiary company one of which is the beneficial owner of not less than 90 per cent. of the issued share capital of
the other; or (iii) where the transfer takes place between two subsidiary companies of each of which not less than
90 per cent. of the share capital is in the beneficial ownership of a common parent company. Provided that in each
case a certificate is obtained by the parties from the officer appointed in this behalf by the local Government
concerned that the conditions have been fulfilled. The remission of stamp duty is in respect of duty chargeable
Page 16 of 17
under Article 23 and Article 62 of the Indian Stamp Act, 1899. [ Notification No. 1, dated 16-1-1937 under section 9
of the Indian Stamp Act, 1899 (2 of 1899)].
See also Local Amendments by the States.
Decree.—
A decree passed against a company cannot be satisfied by attachment and sale of properties belonging to other
limited companies even if it is assumed that they are being managed by the same group of directors. Other
companies are different and distinct juristic personalities with different sets of shareholders.75
under:“(b) that other holds more than half in nominal value of its equity share capital; or”.
of the Companies Act, 1956 (1 of 1956), as inserted by the Companies (Amendment) Act, 1969 (17 of 1969), s. 4
(w.e.f. 3-4-1970).
under:“(c) that the directorship is held by that other company itself or by a subsidiary of it.”
51. Oriental Industrial Investment Corporation Ltd. v. Union of India, (1981) 51 Comp. Cas. 487 (Delhi) (DB). See also
52. M. Velayudhan v. Registrar of Companies, (1980) 50 Comp. Cas. 33 (Ker.). See also Comments under Sections 260,
372 and 372A.
54. IRC v. Harton Coal Co. Ltd., (1960) Ch. 563 : (1960) 3 All ER 48 : (1961) 43 ITR 541 (Ch.D).
55. British American Tobacco Co. Ltd. v. IRC,(1943) AC 335 (HL) : (1943) 1 All ER 13 (HL) : (1943) 13 Comp. Cas. 123
(HL) : (1943) 11 ITR (Suppl.) 29 (HL). See also Comments under Sections 34 and 406.
56. Smt. Namita Gupta v. Cachar Native Joint Stock Co. Ltd., (1999) 98 Comp. Cas. 655 (CLB); Cachar Native Joint Stock
Co. Ltd. v. Smt. Namita Gupta, (2004) 122 Comp. Cas. 1 (Gauhati). See also Comments under Section 10F, 87, 89,
111A, 179, 257, 397 and 398.
† See the Companies (Electronic Filing and Authentication of Documents) Rules, 2006 framed under Section 610A to
610E(w.e.f. 16-9-2006) in Appendix 2.
16-9-2006).
57. English Serving Cotton Company v. IRC,(1947) 1 All ER 679.
[LNIND 1972 SC 144]: (1972) 3 SCR 711 [LNIND 1972 SC 144]; Alembic Glass Industries Ltd. v. CCE, , (2002) 112
Comp. Cas. 379 (SC). See detailed Comments under Section 34.
59. Spencer & Co. Ltd. v. CWT, , (1969) 39 Comp. Cas. 212 (Mad.) : AIR 1969 Mad. 359 [LNIND 1967 MAD 212].
60. Deutsche Babcock Power Systems Ltd., In Re, (1999) 97 Comp. Cas. 341 (CLB). See also Comments under Sections
17 and 34.
61. Mohta Alloy and Steel Works v. Mohta Finance and Leasing Co. Ltd., , (1997) 89 Comp. Cas. 227 (Delhi). See also
Comments under Section 34 and 46.
Comments on Lifting the corporate veil—Holding company and its subsidiary under Section 34.
212 (Mad.) : AIR 1969 Mad. 359 [LNIND 1967 MAD 212]: (1969) 72 ITR 33 [LNIND 1967 MAD 212] (Mad.).
Page 17 of 17
6 SCR 885. See detailed Comments under Section 34.
215 (CA). See detailed Comments under Section 34.
66. U.K. Mehra v. UOI, , (1997) 88 Comp. Cas. 213 (Delhi) (DB).
67. Hackbridge-Hewittic and Easun Ltd. v. G.E.C. Distribution Transformers Ltd., (1992) 74 Comp. Cas. 543(Mad.)(DB); ICI
v. E.C. Commission,(1972) 11 CMLR 557.
68. Inalsa Ltd. v. UOI, (1996) 87 Comp. Cas. 599 (Delhi).
69. D.H.N. Food Distributors Ltd. v. London Borough of Tower Hamlets, (1976) 3 All ER 462 : (1976) 1 WLR 852 : 120 SJ
71. Whale Stationery Products Ltd. v. Union of India, (2007) 140 Comp. Cas. 478 (Delhi).
72. B.D.A. Breweries and Distilleries Ltd. v. Cruickshank and Co. Ltd., (1996) 85 Comp. Cas. 325(Bom.).
73. Ringway Road Making v. Adbruf Ltd.,(1998) 2 BCLC 625.
74. Andhra Bank Housing Finance Ltd., In Re, (2004) 118 Comp. Cas. 295 (AP); Jaypee Cement Ltd., In Re, (2004) 122
Comp. Cas. 854 (All.). See also Comments under Sections 391 and 394.
75. Punjab National Bank v. Bareja Knipping Fasteners Ltd., (2001)103 Comp. Cas. 958(P&H). See detailed Comments
under Section 34.
End of Document
Datta: Company Law
C R Datta
S. 4A. 76[Public financial institutions.

—
(1) Each of the financial institutions specified in this sub-section shall be regarded, for the purposes of this
Act, as a public financial institution, namely:—
(i) the Industrial Credit and Investment Corporation of India Limited, a company formed and
registered under the Indian Companies Act, 1913 (7 of 1913);
(ii) the Industrial Finance Corporation of India, established under section 3 of the Industrial Finance
Corporation Act, 1948 (15 of 1948);
(iii) the Industrial Development Bank of India, established under section 3 of the Industrial
Development Bank of India Act, 1964 (18 of 1964);
(iv) the Life Insurance Corporation of India, established under section 3 of the Life Insurance
(v) the Unit Trust of India, established under section 3 of the Unit Trust of India Act, 1963 (52 of 1963);
77[(vi) the Infrastructure Development Finance Company Limited, a company formed and
registered under this Act;]
78[(vii) * * *]
(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.]
77. Inserted by the, Companies (Amendment) Act 1999 (21 of 1999), s. 2 (w.r.e.f. 31-10-1998).
78. Omitted by the Enforcement of Security Interest and Recovery of Debts Laws (Amendment) Act, 2004(30 of 2004)
(w.r.e.f. 11-11-2004). Prior to omission clause (vi) which was earlier inserted by the Securitisation and Reconstruction
of Financial Assets and Enforcement of Security Interest Act, 2002 (54 of 2002), s. 41 and Sch. (w.r.e.f. 21-6-2002)
stood as under: “(vii) the securitisation company or reconstruction company which has obtained a certificate of
registration under sub-section (4) of section 3 of the Securitisation and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002 (54 of 2002).”.
* Published in the Gazette of India, Part II, Section 3(ii), page 1302, dated 13-5-1978: (1978) 48 Comp. Cas. (St.) 107.
79. Substituted by Notification No. S.O. 2901, dated 9-10-1987, published in the Gazette of India, Part II, Section 3(iii),
page 3705, dated 24-10-1987: (1988) 63 Comp. Cas. (St.) 177.
Page 2 of 8
80. Inserted by Notification No. S.O. 330, dated 21-2-1988, published in the Gazette of India, Part II, Section 3(iii).
81. Inserted by Notification No. S.O. 7(E), dated 3-1-1990: Gazette of India, Extry., Part II, Section 3(ii): Chartered
Secretary, February 1990, page 140: (1990) 68 Comp. Cas. (St.) 34.
82. Substituted by Notification No. S.O. 322(E), dated 25-3-2003, published in the Gazette of India, Extraordinary, No. 270,
Part II, Section 3(ii), dated 25-3-2003: (2003) 114 Comp. Cas. (St.) 237, for (9) Risk Capital and Technology Finance
Corporation Limited, formed and registered under the Companies Act, 1956 (1 of 1956)” which was earlier inserted by
Notification No. S.O. 238(E), dated 20-3-1990, published in the Gazette of India, Extraordinary, No. 156, Part II, Section
3(ii), dated 20-3-1990:(1990) 68 Comp. Cas. (St.) 144.
83. Inserted by Notification No. S.O. 321(E), dated 12-4-1990, published in the Gazette of India, Extry., No. 203, Part II,
Section 3(ii), dated 12-4-1990: (1991) 70 Comp. Cas. (St.) 27.
84. Inserted by Notification No. S.O. 674(E), dated 31-8-1990, Gazette of India, Extry., Part II, Section 3(ii) : Chartered
Secretary, October 1990, page 877: (1990) 69 Comp. Cas. (St.) 50.
85. Inserted by Notification No. S.O. 484(E), dated 26-7-1991, published in the Gazette of India, Extraordinary, No. 417,
Part II, Section 3(ii): (1991) 72 Comp. Cas. (St.) 193.
Part II, Section 3(ii) : (1992) 74 Comp. Cas. (St.) 25.
89. Inserted by Notification No. S.O. 98(E), dated 15-2-1995, published in the Gazette of India, Extraordinary, Part II,
Section 3(ii) : (1995) 82 Comp. Cas. (St.) 269.
91. Substituted by Notification No. S.O. 859(E), dated 27-10-1995, published in the Gazette of India, Extraordinary, No.
603, Part II, Section 3(ii) : (1996) 85 Comp. Cas. (St.) 185.
4. Inserted by Notification No. S.O. 518(E), dated 9-5-2003, published in the Gazette of India, Extraordinary, No. 426, Part
II, Section 3(ii) : (2003) 116 Comp. Cas. (St.) 40.
Part II, Section 3(ii), for “State Industrial Development Corporation of Maharashtra Limited”: (2004) 121 Comp. Cas.
(St.) 3.
8. Inserted by Notification No. S.O. 20(E), dated 9-1-2007, published in the Gazette of India, Extraordinary, No. 20, Part II,
9. Added by Notification No. S.O. 1583(E), dated 20-9-2007, published in the Gazette of India, Extraordinary, No. 1151,
Part II, Section 3(ii), dated 21-9-2007: (2007) 139 Comp. Cas. (St.) 31 : Chartered Secretary, October 2007, page
1409.
9a Subs. by Notification No. S.O. 200(E), dated 29-11-2007 : (2007) 80 SCL (St.) 115.
9b Added by Notification No. S.O. 298(E), dated 12-2-2006 : (2008) 82 SCL (St.) 41.
Page 3 of 8
10. G.V. Films Ltd. v. Unit Trust of India, (2000) 100 Comp. Cas. 257 (Mad.) (DB).
11. Southern Petrochemicals Industries Corporation Ltd. v. Administrator of Specified Undertaking of Unit Trust of India,
(2007) 135 Comp. Cas. 474 (SC).
12. Suresh Chandra Gupta v. Collector, Kanpur Nagar, (2006) 133 Comp. Cas. 440 (All.) (FB).
COMMENTS
Legislative History.—The Companies (Amendment) Act, 1974 (41 of 1974) .—The Notes on clauses explained
this provision as follows: “This clause introduces a new section, viz., section 4A, defining ‘public financial
institution’.” [ Clause 3 of the Companies (Amendment) Bill, 1972 (72 of 1972)].
The Companies (Amendment) Act, 1999 (21 of 1999).—The Statement of Objects and Reasons explained the
amendments as follows: “(a) to declare Infrastructure Development Finance Company Limited as a public financial
institution;” [Extracts from Statement of Objects and Reasons appended to the Companies (Amendment) Bill, 1998
(174 of 1998)]. See Full Text in Comments under Section 1.
The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (54 of
2002).—The Notes on clauses explained as follows: “This clause seeks to amend the Companies Act, 1956 in the
manner specified in the Schedule.” [Clause 41 of the Securitisation and Reconstruction of Financial Assets and
Enforcement of Security Interest Bill, 2002 (53 of 2002)].
The Statement of Objects and Reasons explained the reasons for insertion of clause (vii) of sub-section (1) as
follows: “(f) declaration of any securitisation company or reconstruction company registered with the Reserve Bank
of India as a public financial institution for the purpose of section 4A of the Companies Act, 1956.”
The Enforcement of Security Interest and Recovery of Debts Laws (Amendment) Act, 2004 (00 of 2004).—Clause
(vii) of sub-section (1) has been omitted (w.r.e.f. 11-11-2004).
Public Financial Institutions [ Section 4A(1)(i) to (vii)].— For the purposes of the Companies Act, 1956 certain
institutions have been specified as public financial institutions. The institutions specified under sub-section (1) of
section 4A as public financial institutions are as follows:
(i) the Industrial Credit and Investment Corporation of India Limited, formed and registered under the Indian
Companies Act, 1913 (7 of 1913);
(ii) the Industrial Finance Corporation of India, established under section 3 of the Industrial Finance
(iii) the Industrial Development Bank of India, established under section 3 of the Industrial Development Bank
of India Act, 1964 (18 of 1964);
(iv) the Life Insurance Corporation of India, established under section 3 of the Life Insurance Corporation Act,
1956 (31 of 1956);
(v) the Unit Trust of India, established under section 3 of the Unit Trust of India Act, 1963 (52 of 1963);
(vi) the Infrastructure Development Finance Company Limited, a company formed and registered under this
Act.
In addition to above public financial institutions specified under section 4(1), the Central Government has notified
public financial institutions under section 4A(2).
Department's view.— Companies (Amendment) Act, 1999.—“As you are aware, the Companies Act, 1956, has
recently been amended through the Companies (Amendment) Act, 1999 (No. 21 of 1999). A copy of the
Amendment Act is enclosed for your information and guidance.
The salient features of this Amendment Act is the following:

Page 4 of 8
—The Infrastructure Development Finance Company Limited has been recognised as one of the public financial
institutions. [ Section 4A].” [Extracts from Circular No. 3 of 1999 (F. No. 3/1/99-CL-V) dated 4-5-1999, : (1999) 97
See Full Text in Comments under Section 77A.
Powers of the Central Government [ Section 4A(2)].—The Central Government has been given power to specify
any institution established by a Central Act or any institution in which not less than 51 per cent. of the share-capital
is held or controlled by the Central Government as a public financial institution.
Earlier the powers and functions of the Central Government under section 4A(2) had been delegated to the
Company Law Boardvide Notification No. G.S.R. 443(E), dated 18-10-1972, this notification has since been
rescinded by Notification No. G.S.R. 287(E), dated 31-5-1991. For details see Comments under Sections 10E and
637.
Public Financial Institutions specified under Section 4A(2)— Notification No. S.O. 1329, dated 8-5-1978.*—
“In exercise of the powers conferred by sub-section (2) of section 4A of the Companies Act, 1956 (1 of 1956), the
Central Government hereby specifies the following institutions to be public financial institutions, namely:—
79[(1) Industrial Reconstruction Bank of India established under the Industrial Reconstruction Bank of
India Act, 1984 (62 of 1984).]
(2) General Insurance Corporation of India established under the General Insurance Business
(Nationalisation) Act, 1972 (57 of 1972).
(3) National Insurance Company Limited, formed and registered under the Companies Act, 1956 (1 of 1956).
(4) New India Assurance Company Limited, formed and registered under the Companies Act, 1956 (1 of
1956).
(5) Oriental Fire and General Insurance Company Limited,formed and registered under the Companies Act,
1956 (1 of 1956).
(6) United Fire and General Insurance Company Limited, formed and registered under the Companies Act,
1956 (1 of 1956).
80[(7) Shipping Credit and Investment Company of India Limited, formed and registered under the
Companies Act, 1956 (1 of 1956).]
81[(8) Tourism Finance Corporation of India Limited, formed and registered under the Companies Act,
1956 (1 of 1956).]
82[(9) IFCI Venture Capital Funds Limited, formed and registered under the Companies Act, 1956 (1 of
1956).]
83[(10) Technology Development and Information Company of India Limited, formed and registered under
the Companies Act, 1956 (1 of 1956).]
84[(11) Power Finance Corporation Limited, formed and registered under the Companies Act, 1956 (1 of
1956).]
85[(12) National Housing Bank, established under the National Housing Bank Act, 1987 (53 of 1987).]
86[(13) Small Industries Development Bank of India, established under the Small Industries Development
Bank of India Act, 1989 (39 of 1989).]
87[(14) Rural Electrification Corporation Limited, formed and registered under the Companies Act, 1956 (1
of 1956).]
88[(15) Indian Railway Finance Corporation Limited, formed and registered under the Companies Act,
1956 (1 of 1956).]
89[(16) Industrial Finance Corporation of India Limited, formed and registered under the Companies Act,
1956 (1 of 1956).]
90[(17) Andhra Pradesh State Financial Corporation.
Page 5 of 8
(18) Assam Financial Corporation.

(19) Bihar State Financial Corporation.
(20) Delhi Financial Corporation.
(21) Gujarat State Financial Corporation.
(22) Haryana Financial Corporation.
(23) Himachal Pradesh Financial Corporation.
(24) Jammu and Kashmir State Financial Corporation.
(25) Karnataka State Financial Corporation.
(26) Kerala Financial Corporation.
(27) Madhya Pradesh Financial Corporation.
(28) Maharashtra State Financial Corporation.
(29) Orissa State Financial Corporation.
(30) Punjab Financial Corporation.
(31) Rajasthan Financial Corporation.
91[(32) Tamil Nadu Industrial Investment Corporation Limited.]
(33) Uttar Pradesh Financial Corporation.
(34) West Bengal Financial Corporation.]
92[(35) Indian Renewable Energy Development Agency Limited.]
93[(36) North Eastern Development Finance Corporation Limited.]
1[(37) Housing and Urban Development Corporation Limited.]
2[(38) Export-Import Bank of India.]
3[(39) National Bank for Agriculture and Rural Development(NABARD).]
4[(40) National Co-operative Development Corporation(NCDC).]
5[(41) National Dairy Development Board.
(42) Pradeshiya Industrial and Investment Corporation of U.P. Limited.
(43) Rajasthan State Industrial Development and Investment Corporation Limited.
6[(44) SICOM Limited.]
(45) West Bengal Industrial Development Corporation Limited.
(46) Tamil Nadu Industrial Development Corporation Limited.
7[(47) Punjab State Industrial Development Corporation Ltd.(PSIDC).]
8[(48) EDC Limited.
(49) Tamil Nadu Power Finance and Infrastructure Development Corporation Limited.]”
9[(50) Tamil Nadu Urban Finance and Infrastructure Development Corporation Limited.
9a(51) Kerala State Power and Infrastructure Finance Corporation Limited.]
9b(52) Jammu and Kashmir Development Financial Corporation Limited.
Conversion of debentures or loans into shares by public financial institutions [ Section 94A(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.
Page 6 of 8
Restrictions on acquisition and transfer of shares [ Section 108F].—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 any financial institution.
See detailed Comments under Sections 94A and 108A-108I.
Debt Recovery Tribunal.— Section 2(h) of the Recovery of Debts Due to Banks and Financial Institutions Act,
1993 (51 of 1993) defines financial institution as (i) a public financial institution within the meaning of section 4A of
the Companies Act, 1956; and (ii) such other institution as the Central Government may, having regard to its
business activity and the area of its operation in India, by notification specify. The Unit Trust of India established
under section 3 of the Unit Trust of India Act, 1963 is a public financial institution under section 4A(1) of the
Companies Act. Therefore, it has the right to bring the claim for adjudication before the Tribunal.10
Unit Trust of India(UTI) and Administrator of specified undertaking.— Section 4A of the Companies Act, 1956
provides that each of the Financial Institutions specified in sub-section (1) shall be regarded for the purpose of this
Act, as a Public Financial Institution. The Financial Institutions specified included the Unit Trust of India(UTI)
established under Section 3 of the Unit Trust of India Act, 1963 (52 of 1963). By operation of Section 18 of the Unit
Trust of India (Transfer of Undertaking and Repeal) Act, 2002 (58 of 2002), “Unit Trust of India”(UTI) is substituted
by the “specified company” or “administrator of the specified undertaking”, as the case may be. Thus, the “specified
company” and the “administrator of the specified undertaking” must be deemed to be Financial Institutions specified
in sub-section (1) of Section 4A of the Companies Act, 1956. Section 2(h) of the Recovery of Debts Due to Banks
and Financial Institutions Act, 1993 (51 of 1993) (the DRT Act) defines “
” to mean a ” to mean a Financial Institution

within the meaning of Section 4A of the Companies Act, 1956. Consequently, by reason of the deemed amendment
of Section 4A of the Companies Act, 1956 the “specified company” and the “administrator of the specified
undertaking” come within the definition of Financial Institutions as defined under Section 2(h) of the DRT Act,
1993.11
State Financial Corporation—Recovery of Loans.—The Recovery of Debts Due to Banks and Financial
Institutions Act, 1993 (51 of 1993) been enacted for expeditious adjudication and recovery of debts due to Banks
and Financial Institutions. However, in view of Section 1(4) of that Act, it does not apply when the amount of debt is
less then Rs. 10 lakhs. Section 2(d) (e), (h), define the words “Bank”, “Banking Company” and “Financial
Institution”. State Financial Corporation is neither a Bank nor a Banking Company. Under Section 2(h)(i) the
Financial Institution has been defined to mean a Public Financial Institution within the meaning of Section 4A of the
Companies Act, 1956 (1 of 1956). TheState Financial Corporation is also not a financial institution within the
meaning of this section. Section 2(h)(ii) of the 1993 Act includes such other institution as financial institution that the
Central Government may by notification specify. The Central Government has specified the State Financial
Corporation under Section 2(h)(ii) of the 1993 Act by Notification, dated March 28, 1995. This means the State
Financial Corporation is a financial institution within the meaning of the 1993 Act. The debt was more than Rs. 10
lakhs and the 1993 Act was applicable for recovery of this debt.12
Insider Trading.— As per Regulation 2(c), (g) and (h) of the SEBI (Prohibition of Insider Trading) Regulations,
1992, “connected person” or “person deemed to be connected person” may, inter alia, include Director [ Section
2(13)], Deemed Director [ Section 307(10)], Officer of a company [ Section 2(30)] including an auditor, Director or
employee of Public Financial Institutions defined in Section 4A, Relative of connected persons [ Section 6 of the
Companies Act, 1956 and Regulations 2(h)(viii) and 2(i) of the SEBI (Prohibition of Insider Trading) Regulations,
1992].
Amalgamation—Banking Company and Financial Institutions.—The term “body corporate” in Section 2(7) of
the Companies Act, 1956 is wider than the expression “company” and is used in several Sections of the Act to
denote not only a company incorporated in India, but also a Foreign Company. It includes a Corporation formed
under any Special Law of India or a Foreign Country, except as expressly excluded by the definition. It includes all
Public Financial Institutions mentioned in Section 4A of the Companies Act, 1956 as well as the Nationalised Banks
incorporated under Section 3(4) of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (5
of 1970) and the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980 (40 of 1980). However,
Page 7 of 8
it excludes a body corporate, which is not a company under the Act, and which is specified by the Central
Government in the notification in the Official Gazette. In other words, it includes a body corporate other than those
which the Central Government may by notification in the Official Gazette specify. In the instant case, it was held that
Vijaya Bank squarely falls within the aforesaid definition of the term body corporate. The Transferee Company, a
Banking Company, was a Body Corporate and Holding Company of the Transferor Company, i.e., the Subsidiary
Company, a company under the Companies Act, 1956. Holding Company was, therefore, a company for the
purpose of Section 394 of the Companies Act, 1956. Since the scheme of transfer would not affect the rights of the
members or creditors of the Transferee Company as between themselves and the company. There being no
reorganisation of the Share Capital of the Transferor Company, there was no need for the Transferee Company to
file an application and a petition under Sections 392 to 394 of the Companies Act, 1956.13
See detailed Comments under Sections 2(7), 4, 4A and 391 to 394.
77. Inserted by the, Companies (Amendment) Act 1999 (21 of 1999), s. 2 (w.r.e.f. 31-10-1998).
78. Omitted by the Enforcement of Security Interest and Recovery of Debts Laws (Amendment) Act, 2004(30 of 2004)
(w.r.e.f. 11-11-2004). Prior to omission clause (vi) which was earlier inserted by the Securitisation and Reconstruction
of Financial Assets and Enforcement of Security Interest Act, 2002 (54 of 2002), s. 41 and Sch. (w.r.e.f. 21-6-2002)
stood as under: “(vii) the securitisation company or reconstruction company which has obtained a certificate of
registration under sub-section (4) of section 3 of the Securitisation and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002 (54 of 2002).”.
* Published in the Gazette of India, Part II, Section 3(ii), page 1302, dated 13-5-1978: (1978) 48 Comp. Cas. (St.) 107.
79. Substituted by Notification No. S.O. 2901, dated 9-10-1987, published in the Gazette of India, Part II, Section 3(iii),
page 3705, dated 24-10-1987: (1988) 63 Comp. Cas. (St.) 177.
80. Inserted by Notification No. S.O. 330, dated 21-2-1988, published in the Gazette of India, Part II, Section 3(iii).
81. Inserted by Notification No. S.O. 7(E), dated 3-1-1990: Gazette of India, Extry., Part II, Section 3(ii): Chartered
Secretary, February 1990, page 140: (1990) 68 Comp. Cas. (St.) 34.
Part II, Section 3(ii), dated 25-3-2003: (2003) 114 Comp. Cas. (St.) 237, for (9) Risk Capital and Technology Finance
Corporation Limited, formed and registered under the Companies Act, 1956 (1 of 1956)” which was earlier inserted by
Notification No. S.O. 238(E), dated 20-3-1990, published in the Gazette of India, Extraordinary, No. 156, Part II, Section
3(ii), dated 20-3-1990:(1990) 68 Comp. Cas. (St.) 144.
83. Inserted by Notification No. S.O. 321(E), dated 12-4-1990, published in the Gazette of India, Extry., No. 203, Part II,
Section 3(ii), dated 12-4-1990: (1991) 70 Comp. Cas. (St.) 27.
84. Inserted by Notification No. S.O. 674(E), dated 31-8-1990, Gazette of India, Extry., Part II, Section 3(ii) : Chartered
Secretary, October 1990, page 877: (1990) 69 Comp. Cas. (St.) 50.
91. Substituted by Notification No. S.O. 859(E), dated 27-10-1995, published in the Gazette of India, Extraordinary, No.
603, Part II, Section 3(ii) : (1996) 85 Comp. Cas. (St.) 185.
Page 8 of 8
4. Inserted by Notification No. S.O. 518(E), dated 9-5-2003, published in the Gazette of India, Extraordinary, No. 426, Part
II, Section 3(ii) : (2003) 116 Comp. Cas. (St.) 40.
Part II, Section 3(ii), for “State Industrial Development Corporation of Maharashtra Limited”: (2004) 121 Comp. Cas.
(St.) 3.
8. Inserted by Notification No. S.O. 20(E), dated 9-1-2007, published in the Gazette of India, Extraordinary, No. 20, Part II,
9. Added by Notification No. S.O. 1583(E), dated 20-9-2007, published in the Gazette of India, Extraordinary, No. 1151,
Part II, Section 3(ii), dated 21-9-2007: (2007) 139 Comp. Cas. (St.) 31 : Chartered Secretary, October 2007, page
1409.
9a Subs. by Notification No. S.O. 200(E), dated 29-11-2007 : (2007) 80 SCL (St.) 115.
9b Added by Notification No. S.O. 298(E), dated 12-2-2006 : (2008) 82 SCL (St.) 41.
10. G.V. Films Ltd. v. Unit Trust of India, (2000) 100 Comp. Cas. 257 (Mad.) (DB).
11. Southern Petrochemicals Industries Corporation Ltd. v. Administrator of Specified Undertaking of Unit Trust of India,
(2007) 135 Comp. Cas. 474 (SC).
12. Suresh Chandra Gupta v. Collector, Kanpur Nagar, (2006) 133 Comp. Cas. 440 (All.) (FB).
End of Document
Datta: Company Law
C R Datta
S. 5. 14[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.]
14. Substituted by the Companies (Amendment) Act, 1988 (31 of 1988), s. 3 (w.e.f 15-7-1988). For section 5 as it stood
15. Herdilia Unimers Ltd. v. Smt. Renu Jain, (1998) 92 Comp. Cas. 841 (Raj.); Pravin Jha v. State of U.P., (2001) 106
Comp. Cas. 554 (All.). See also Comments under Sections 113, 149, 159, 162, 165 and 220.
16. Herdilia Unimers Ltd. v. Smt. Renu Jain, (1998) 92 Comp. Cas. 841 (Raj.).
17. C.V. Siva Prasad v. Registrar of Companies, (1997) 88 Comp. Cas. 420 (AP).
18. Anita Chadha v. Registrar of Companies, (1999) 96 Comp. Cas. 265 (Delhi). See also Comments under Sections 159,
162 and 220.
19. Jayes R. Mor v. State of Gujarat, (2002) 109 Comp. Cas. 232 (Guj.). See detailed Comments under Section 220.
20. Pandurang Camotim Sancoalcar v. Suresh Prabhakar Prabhu, (2003) 113 Comp. Cas. 600 (Bom.). See also
Comments under Section 303(2).
† See the Companies (Appointment and Qualifications of Secretary) Rules, 1988 in Appendix 12.
Page 2 of 25
610E (w.e.f. 16-9-2006) in Appendix 2.
16-9-2006).
† Seethe Companies (Director Identification Number) Rules, 2006 in Appendix 49. See detailed Comments on Director
Identification Number (DIN) under Sections 266A to 266G as inserted by the Companies (Amendment) Act, 2006 (23 of
2006) (w.e.f. 1-11-2006).
21. Ravindra Narayan v. Registrar of Companies, (1994) 81 Comp. Cas. 925 (Raj.); Herdilia Unimers Ltd. v. Smt. Renu
Jain, (1998) 92 Comp. Cas. 841 (Raj.); Smt. G. Vijayalakshmi v. SEBI, (2000) 100 Comp. Cas. 726 (AP); S.C. Bhatia v.
P.C. Wadhawa, (1998) 92 Comp. Cas. 511 (P&H). See also Comments under Sections 73, 113, 159, 162, 220 and
621.
22. Vijay Kumar Gupta v. Registrar of Companies, (2004) 118 Comp. Cas. 604 (HP). See also Comments under Sections
146 and 628.
23. K. Seethalakshmi v. Registrar of Companies, (2001) 103 Comp. Cas. 532 (Mad.). See also Comments under Sections
159, 162 and 220.
24. Madan Gopal Dey v. State, (1969) 39 Comp. Cas. 119 (Cal.) : AIR 1968 Cal. 79 [LNIND 1966 CAL 131]; Ajit Kumar
Sarkar v. Asst. ROC, (1979) 49 Comp. Cas. 909 (Cal.); V.M. Thomas v. ROC, (1980) 50 Comp. Cas. 247 (Ker.);
Ramacast Ltd. v. Asst. ROC, (1988) 63 Comp. Cas. 805 (Cal.); H. Nanjundiah v. V. Govindan, ROC, (1986) 59 Comp.
Cas. 356 (Bom.); Asst. ROC v. Southern Machinery Works Ltd., (1986) 59 Comp. Cas. 670 (Mad.); S.P. Punj v. ROC,
(1991) 71 Comp. Cas. 509 (Delhi); Bachraj Baid v. State of W.B., (1992) 74 Comp. Cas. 809 (Cal.); ROC v. Bipini
Behari Nayak, (1995) 83 Comp. Cas. 95 (Orissa); ROC v. Bipini Behari Nayak, (1996) 86 Comp. Cas. 641 (Orissa).
See detailed Comments under Sections 58A, 159, 161, 162, 168, 210, 220 and 633.
See also Comments under Section 614A and 633.
26. Sukhbir Saran Bhatnagar v. Registrar of Companies, (1972) 42 Comp. Cas. 408 (Delhi). See also Comments under
Section 633.
27. Consolidated Pneumatic Tool Co. (I) Ltd. v. Addl. Registrar of Companies, (1989) 65 Comp. Cas. 259 (Bom.). See
detailed Comments under Sections 205A and 207.
28. A.K. Khosla v. T.S. Venkatesan, (1994) 80 Comp. Cas. 81 (Cal.). See also Comments Sections 5, 293, 621 and 629A.
29. Young and Harston’s Contract, Re, (1886) 31 Ch.D. 168 : 53 LT 837.
30. City Equitable Fire Insurance Co., Re, (1925) Ch. 407 : (1924) All ER Rep. 485 : 94 LJ Ch. 445 : 68 Accountant LR 53
(CA). See also Comments under Sections 119, 133, 168, 210 and 227.
31. Elliott v. Turner, (1843) 13 Sim. 477. See also Comments under Section 169.
32. Bachraj Baid v. State of W.B., (1992) 74 Comp. Cas. 809 (Cal.).
33. Ajit Kumar Sarkar v. Asstt. Registrar of Companies, (1979) 49 Comp. Cas. 909 (Cal.); Bipin Behari Nayak v. ROC,
(1988) 63 Comp. Cas. 271 (Orissa); ROC v. Bipini Behari Nayak, (1995) 83 Comp. Cas. 95 (Orissa); Registrar of
Companies v. Bipini Behari Nayak, (1996) 86 Comp. Cas. 641 (Orissa). See also Comments under Sections 159, 162
and 220.
34. Bimal Kumar Nopany v. Registrar of Companies, (1990) 68 Comp. Cas. 567 (AP). See also Comments under Section
233B.
35. Dantuluri Ranga Devi v. Registrar of Companies, (2007) 135 Comp. Cas. 599 (AP).
36. I.B. Rao v. Registrar of Companies, (2007) 137 Comp. Cas. 469 (AP).
37. Anil Hada v. Indian Acrylic Ltd., (2000) 99 Comp. Cas. 36 (SC); Sheoratan Agarwal v. State of M.P.,AIR 1984 SC 1824
[LNIND 1984 SC 247]: (1984) 4 SCC 352 [LNIND 1984 SC 247]; Rama Bhushanam v. Registrar of Companies, (2002)
112 Comp. Cas. 238 (AP). See also Comments under Section 58A.
38. Bank of Rajasthan Ltd. v. State of Bihar, (2002) 108 Comp. Cas. 556 (Patna) : (2000) 26 SCL 1 (Patna). See also
Comments under Sections 2(11), 10, 10E, 10FB and 113.
39. H.V. Jayaram v. ICICI Ltd., (2000) 99 Comp. Cas. 341 (SC) : AIR 2000 SC 579 [LNIND 1999 SC 1159]; Hanuman
Prasad Gupta v. Hiralal, (1970) 40 Comp. Cas. 1058 (SC) : AIR 1971 SC 206 [LNIND 1970 SC 71]: (1970) 2 Comp. LJ
195 (SC); Karnataka Bank Ltd. v. B. Suresh, (2001) 105 Comp. Cas. 110 (Kar.).
40. First Leasing Co. of India Ltd. v. Addl. ROC, (1997) 89 Comp. Cas. 635 (Mad.). See also Comments under Sections 10,
269A, 297, 621 and 629A.
Page 3 of 25
41. Canara Bank v. Nuclear Power Corporation of India Ltd., (1995) 84 Comp. Cas. 70 (SC); Harshad S. Mehta v. State of
Maharashtra, (2001) 107 Comp. Cas. 365 (SC). See detailed Comments under Section 10—Jurisdiction of Courts.
42. S. Pandit, In re, (1990) 68 Comp. Cas. 129 (Bom.). See detailed Comments under Sections 210, 220 and 633.
* See the Companies (Central Government’s) General Rules and Forms, 1956 in Appendix 1. See detailed Comments,
Form and Procedure, e-Forms and e-Filing earlier in this Section. See also the Companies (Electronic Filing and
Authentication of Documents) Rules, 2006 framed under Sections 610B to 610E (w.e.f. 16-9-2006) in Appendix 2, the
Scheme for Filing of Statutory Documents and Other Transactions by Companies in Electronic Mode (w.e.f. 27-10-
2006) in Comments under Section 610B inserted by the Companies (Amendment) Act, 2006 (23 of 2006) (w.e.f. 16-9-
2006), Comments on the Director Identification Number (DIN) under Sections 266A to 266G as inserted by the
Companies (Amendment) Act, 2006 (23 of 2006) (w.e.f. 1-11-2006) and the Companies (Director Identification Number)
Rules, 2006 in Appendix 49.
43. J.K. Industries Ltd. v. Chief Inspector of Factories and Boilers, (1997) 88 Comp. Cas. 285 (SC); Tesco Supermarkets
Ltd. v. Nattrass,(1972) AC 153 : (1971) 2 All ER 127 : (1971) 2 WLR 1166 : (1971) 115 SJ 285 (HL); Lennard’s
Carrying Co. Ltd. v. Asiatic Petroleum Co. Ltd.,(1915) AC 705 : 84 LJ KB 1281 : 113 LT 195 (HL); M.C. Mehta v.
UOI,(1986) 2 SCC 325. See detailed Comments under the Factories Act, 1948 hereinafter. See also Comments under
Section 34.
44. State of Haryana v. Brij Lal Mittal, (1998) 93 Comp. Cas. 329 (SC) : AIR 1998 SC 2327 [LNIND 1998 SC 519];
Municipal Corporation of Delhi v. Ram Kishan Rohtagi,AIR 1983 SC 67; Sham Sunder v. State of Haryana, (1990) 67
Comp. Cas. 1 (SC) : AIR 1989 SC 1982 [LNIND 1989 SC 405]; V.B.C. Exports Pvt. Ltd. v. Commander S.D. Baijal,
(1998) 91 Comp. Cas. 63 (SC); D.K. Jhaver v. State of Punjab, (1996) 87 Comp. Cas. 236 (P&H); L.P. Mittal v. State of
N.C.T. of Delhi, (2000) 100 Comp. Cas. 737 (Delhi); R. Guruswamy v. Sree Balaji Cotton Industries, (2002) 112 Comp.
Cas. 338 (Kar.). See also Interpretation and Construction of Penal provisions in later paragraphs.
45. R. Banerjee v. H.D. Dubey, (1992) 75 Comp. Cas. 722 (SC).
46. Hindustan Chemicals Industries v. State of Punjab, (1997) 88 Comp. Cas. 794 (P&H).
47. J.K. Industries Ltd. v. Chief Inspector of Factories and Boilers, (1997) 88 Comp. Cas. 285 (SC); R.S. Joshi v. Ajit Mills
Ltd.,AIR 1977 SC 2279 [LNIND 1977 SC 260].
48. U.P. Pollution Control Board v. Modi Distillery, (1988) 63 Comp. Cas. 77 (SC); R. Banerjee v. H.D. Dubey, (1992) 75
Comp. Cas. 722 (SC). See detailed Comments under the Pollution (Prevention and Control) Acts and Prevention of
Food Adulteration Act in later paragraphs.
49. Ravi Kant v. National Consumer Disputes Redressal Commission, (1997) 89 Comp. Cas. 471 (Delhi) (DB); Delhi
Development Authority v. Skipper Construction Co. (P.) Ltd., (1997) 89 Comp. Cas. 362 (SC). See also Comments
under Section 34.
50. FMI Investments Pvt. Ltd. v. State, (2000) 99 Comp. Cas. 17 (Delhi); State of Haryana v. Brij Lal Mittal, (1998) 93
Comp. Cas. 329 (SC) : AIR 1998 SC 2327 [LNIND 1998 SC 519]; Credential Finance Ltd. v. State of Maharashtra,
(2001) 105 Comp. Cas. 864 (Bom.); Rachana Flour Mills P. Ltd. v. Lalchand Bhanagadiya, (1987) 62 Comp. Cas. 15
(AP). See detailed Comments on Vicarious liability of Directors in earlier paragraphs.
51. K. Srikanth Singh v. North East Securities Ltd., (2007) 140 Comp. Cas. 444 (SC).
52. Maksud Saiyed v. State of Gujarat, (2007) 140 Comp. Cas. 590 (SC).
[LNIND 1984 SC 247]: (1984) 4 SCC 352 [LNIND 1984 SC 247]; K.P.G. Nair v. Jindal Menthol India Ltd., (2001) 104
Comp. Cas. 290 (SC); M. Arumugam v. Upasana Finance Ltd., (2001) 105 Comp. Cas. 103 (Mad.); Avon Industries
Ltd. v. Integrated Finance Co. Ltd., (2001) 105 Comp. Cas. 259 (AP); Sadhu Ram Singla v. State, (2002) 111 Comp.
Cas. 52 (Delhi); Renewable Energy Systems Ltd. v. State, (2002) 111 Comp. Cas. 786 (AP); Smt. Neeta Bhalla v.
S.M.S. Pharmaceuticals Ltd., (2002) 111 Comp. Cas. 793 (AP).
54. Modi Cements Ltd. v. Kuchil Kumar Nandi, (1998) 92 Comp. Cas. 88 (SC); Goaplast Pvt. Ltd. v. Chico Ursula D’Souza,
(2003) 114 Comp. Cas. 644 (SC).
55. NEPC Micon Ltd. v. Magma Leasing Ltd., (1999) 96 Comp. Cas. 822 (SC).
56. Rajneesh Aggarwal v. Amit J. Bhalla, (2001) 104 Comp. Cas. 332 (SC); Bilakchand Gyanchand Co. v. A. Chinnaswami,
(1999) 98 Comp. Cas. 573 (SC); K. Pannir Selvam v. M.M.T.C. Ltd., (2000) 99 Comp. Cas. 94 (AP); Suman Sethi v.
Ajay K. Churiwal, (2000) 100 Comp. Cas. 444 (SC); Urjit Singh v. State of Punjab, (2002) 112 Comp. Cas. 183 (P&H);
C.C. Alavi Haji v. Palapetty Muhammed, (2007) 137 Comp. Cas. 692 (SC); Sarav Investment and Financial Consultants
Pvt. Ltd. v. Llyods Register of Shipping Indian Office Staff Provident Fund, (2007) 140 Comp. Cas. 381 (SC); Rahul
Builders v. Arihant Fertilizers and Chemicals Ltd., (2007) 140 Comp. Cas. 600 (SC).
57. Charanjit Singh v. D.B. Merchant Banking Services Ltd., (2001) 105 Comp. Cas. 299 (Delhi).
58. Balakrishnan, Unity Drugs Centre v. Jaison P.V., (2004) 122 Comp. Cas. 820 (Ker.).
Page 4 of 25
59. Anil Kumar Sawhney v. Gulshan Rai, (1994) 79 Comp. Cas. 150 (SC); Gummadi Industries Ltd. v. Khushroo F.
Engineer, (1999) 98 Comp. Cas. 296 (Mad.).
60. C. Antony v. K.G. Raghavan Nair, (2002) 112 Comp. Cas. 611 (SC); John K. John v. Tom Varghese, (2007) 140 Comp.
Cas. 473 (SC).
61. Mrs. Asanammal Kasim v. Ceat Financial Services Ltd., (2002) 112 Comp. Cas. 287 (AP); Smt. P.
Sudhavenkatalakshmi v. Sree Chakra Cotton Co., (2002) 112 Comp. Cas. 60 (AP); S.B. Shankar v. Amman Steel
Corporation, (2002) 110 Comp. Cas. 50 (Mad.).
62. V.K. Jain v. Union of India, (2000) 100 Comp. Cas. 827 (SC).
63. BSI Ltd. v. Gift Holdings Pvt. Ltd., (2000) 100 Comp. Cas. 436 (SC); Kusum Ingots and Alloys Ltd. v. Pennar Peterson
Securities Ltd., (2000) 100 Comp. Cas. 755 (SC).
64. Standard Chartered Bank v. Ravi Bhandari, (2002) 111 Comp. Cas. 544 (Delhi); Gajanand Agarwal v. Sharma Traders
Industries (P.) Ltd., (2002) 109 Comp. Cas. 909 (AP); Shakthi Concrete Industries Ltd. v. Valuable Steels (India) Ltd.,
(2000) 100 Comp. Cas. 429 (Mad.). See also United Bank of India v. Naresh Kumar, (1997) 90 Comp. Cas. 329 (SC) :
AIR 1997 SC 3 [LNIND 1996 SC 1486] under Suit by public Corporations in Comments under Section 10.
65. Sheoratan Agarwal v. State of M.P.,AIR 1984 SC 1824 [LNIND 1984 SC 247]: (1984) 4 SCC 352 [LNIND 1984 SC
247]; Madanlal Agarwalla v. State, (1989) 65 Comp. Cas. 237 (Cal.) (DB); Vidya Wati v. State, (1990) 69 Comp. Cas.
813 (Delhi); Naresh Kumar v. State of Bihar, (1991) 70 Comp. Cas. 358 (Patna); Smt. Peelamedu Rajeswary
Ramkrishna v. B.N. Misra, (1972) 42 Comp. Cas. 489 (Orissa).
66. S. Rajagopalachari v. Bellary Spg. & Wvg. Co. Ltd., (1997) 90 Comp. Cas. 485 (Kar.).
67. R. Dhandayuthapani v. C.R. Kaleel, (2004) 118 Comp. Cas. 167 (Mad.).
68. Employees’ State Insurance Corporation v. K.A. Vijayan, (2000) 99 Comp. Cas. 31 (Ker.); Employees’ State Insurance
Corporation v. Apex Engg. P. Ltd., (1998) 1 Comp. LJ 10 (SC); Siddharth Kejriwal v. Employees’ State Insurance
Corpn., (1997) 90 Comp. Cas. 496 (Kar.).
69. Employees’ State Insurance Corpn. v. S.K. Aggarwal, (1998) 94 Comp. Cas. 75 (SC).
70. P.C. Agarwala v. Payment of Wages Inspector, (2005) 127 Comp. Cas. 787 (SC); Employees’ State Insurance
Corporation v. S.K. Aggarwal, (1998) 94 Comp. Cas. 75 (SC) : (1998) 6 SCC 288Employees’ State Insurance
Corporation v. Gurdial Singh, (1991) Suppl. 1 SCC 204.
71. J.K. Industries Ltd. v. Chief Inspector of Factories and Boilers, (1997) 88 Comp. Cas. 285 (SC). See also Comments
under Vicarious liability of Directors and Mens rea hereinbefore.
72. , Indian Oil Corporation Ltd. v. Chief Inspector of Factories, (1998) 94 Comp. Cas. 64 (SC) : AIR 1998 SC 2456
[LNIND 1998 SC 1498]. See also Comments under Section 617.
73. S.C. Gupta v. State, (2002) 112 Comp. Cas. 121 (Delhi).
74. M.V. Javali v. Mahajan Borewell and Co., (1998) 91 Comp. Cas. 708 (SC): (1998) 230 ITR 1 (SC); M.R. Pratap v. V.M.
Muthukrishnan, ITO, (1992) 74 Comp. Cas. 400 (SC): (1992) 196 ITR 1 (SC): AIR 1994 SC 674 [LNIND 1992 SC 374].
75. Standard Chartered Bank v. Directorate of Enforcement, (2005) 125 Comp. Cas. 513 (SC): (2005) 4 Comp. LJ 464
(SC).
76. ANZ Grindlays Bank Ltd. v. Directorate of Enforcement, (2005) 123 Comp. Cas. 1 (SC): (2005) 3 Comp. LJ 302 (SC):
(2004) 6 SCC 531 [LNIND 2005 SC 471].
77. Krishan Kumar Bangur v. Director General of Foreign Trade, (2006) 133 Comp. Cas. 83 (Delhi).
78. M.L. Lakhotia v. State, (1989) 66 Comp. Cas. 118 (Delhi). See also Comments u/ s. 34.
79. U.P. Pollution Control Board v. Modi Distillery, (1988) 63 Comp. Cas. 77 (SC); U.P. Pollution Control Board v. Mohan
Meakins Ltd., (2000) 101 Comp. Cas. 278 (SC); Haryana State Board for Prevention and Control of Water Pollution v.
Bharat Carpets Ltd., (1995) 84 Comp. Cas. 681 (P&H) (DB); Woodhouse v. Walsall Metropolitan Borough
Council,(1994) 1 BCLC 435.
81. R.K. Krishna Kumar v. State of Assam, (1998) 92 Comp. Cas. 14 (SC).
82. Sham Sunder v. State of Haryana, (1990) 67 Comp. Cas. 1 (SC): AIR 1989 SC 1982 [LNIND 1989 SC 405]; TMT.
Thangalakshmi v. ITO, (1994) 79 Comp. Cas. 246 (Mad.): (1994) 205 ITR 176 (Mad.). See also Comments under
Vicarious liability of Directors in earlier paragraphs. See Sections 621 to 631 for provisions of the Companies Act, 1956
relating to Offences and Penalties.
83. S.K.D. Lakshmanan Fireworks Industries v. K.V. Sivarama Krishnan, (1995) 84 Comp. Cas. 447 (Ker.) (FB). See also
Literal Construction in Comments under Section 1.
Page 5 of 25
84. Thomas Varghese v. P. Jerome, (1993) 76 Comp. Cas. 380 (Ker.). See detailed Comments on Principles of
Interpretation and Construction under Section 1.
85. Smt. Abhilash Vinodkumar Jain v. Cox and Kings (India) Ltd., (1995) 84 Comp. Cas. 28 (SC); Atul Mathur v. Atul Kalra,
(1990) 68 Comp. Cas. 324 (SC). See detailed Comments under Section 630. See Sections 621 to 631 for provisions
87. Tolaram Relumal v. State of Bombay,AIR 1954 SC 496 [LNIND 1954 SC 91]: 1955 SCR 158 [LNIND 1954 SC 91].
88. N.C. Kumaresan v. Ameerappa, (1992) 74 Comp. Cas. 848 (Ker.); Grindlays Bank P.L.C. v. UOI, (2001) 106 Comp.
Cas. 1 (Cal.).
89. State of Andhra Pradesh v. Andhra Provincial Potteries Ltd., (1973) 43 Comp. Cas. 514 (SC) : AIR 1973 SC 2429
[LNIND 1973 SC 238]. See detailed Comments under Section 220 which was amended in 1977 in view of different view
taken by the Supreme Court in State of Bombay v. Bandhan Ram Bhandani, (1961) 31 Comp. Cas. 1 (SC) : AIR 1961
SC 186 [LNIND 1960 SC 220]: (1961) 1 SCR 801 [LNIND 1960 SC 220].
COMMENTS
English Act, 1948: Section 440(2)
Legislative History.— The Companies (Amendment) Act, 1988 (31 of 1988).—The Notes on clauses explained the
substituted section as follows: “This clause revises the definition of ‘officer in default’ so that officers and directors,
who are in charge of management or who have been charged with the responsibility of complying with any of the
provisions of the Act are held responsible for any contravention of the Act.” [ Clause 3 of the Companies
The section originally proposed by the Companies (Amendment) Bill, 1987 was further modified by Notice of
Amendments moved in the Rajya Sabha on 27-4-1988. The salient features of the changes are as follows:
The proposal relating to “officer who is in default” is sought to be amended further so that if the Board of directors
does not specify any director(s), all the directors will be deemed as “officers in default”. Further, the person charged
with the responsibility by the Board will be an officer in default, if that person has given his consent to the Board, in
that behalf.
For the Statement of Objects and Reasons appended to the principal and Amending Bills see Legislative History in
Officer who is in default.—For the purpose of any provision of the Companies Act, 1956 which enacts that an
officer of the company in default shall be liable to any punishment or penalty, by way of imprisonment, fine or
otherwise, the expression “officer who is in default” means all the following officers of the company:
(a) Managing Director(s); (b) Whole-time Director(s); (c) 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 he has given his consent in
this behalf to the Board; and (g) where any company does not have any of the officers specified in clauses (a) to
(c), any director(s) specified by the Board or where no director is so specified, all the directors.
The aim is that the persons in charge of the management or charged with the responsibility of complying with any of
the provisions of the Act are held responsible for any contravention of the Companies Act, 1956 as explained
below.
Managerial personnel [ Section 5(a) to (c)].—Clauses (a) to (c) of section 5 specify (a) Managing Director(s); (b)
Whole-time Director(s); and (c) Manager.
Certain companies to have Managerial personnel.—Every public company, or a private company which is a
subsidiary of a public company, having a prescribed paid up share capital [Rs. 5 Crores or more (w.e.f. 18-9-1990)
Page 6 of 25
vide Rule 10A of the Companies (Central Govt.’s) General Rules and Forms, 1956*] shall have a managing or
whole-time director or a manager. [ Section 269(1)].
See also Comments under Manager [ Section 2(24)], Managing Director [ Section 2(26)], Officer [ Section 2(30)],
Prohibition of simultaneous appointment of Managing Director and Manager [ Section 197A], Managing Directors,
etc. [ Sections 267-269], Managers [ Sections 384 to 388A], etc.
Question of fact.— Section 5 contemplates the managing director, whole-time director and the manager
responsible. It is only where persons specified in clauses (a), (b) and (c) of section 5 are not existing in a company,
that the directors can be made responsible. This by itself is a question of fact as to whether the managing director
or whole-time director or manager exists so as to exclude the directors of the company from being considered “as
officer who is in default”. This can be decided only after evidence before the trial court and complaint cannot be
quashed.15
Chairman or President.—The designation of a person as Chairman cannot be considered as not falling within the
definition of “officer who is in default” unless it is so provided by the memorandum and articles of the company
and/or by agreement entered into with him as to what are his duties.16
Default during tenure in office.—The Officer in default means the default during his tenure in office. Where
defaults are committed, e.g., in regard to accounts before the officer joined the company he is not liable to be
prosecuted for the default. A managing director appointed with effect from 16th September, 1992 could not be
termed as officer in default for offences under sections 209, 211 and 370, relating to periods up to 31st March,
1992.17
Retirement or resignation.—A managing director, director, manager or secretary would come under the definition
of an officer in default even after the retirement. If it is not so held any managing director, director, manager or
secretary would escape the provisions of sections 159 and 220 of the Act by simply tendering their resignation as
the office bearer of the company. This would defeat the provisions of sections 159 and 220 of the Act. The trial
court, however, must consider the question whether after retirement of a managing director, director or secretary of
a company, the records of the company would be available to him or her for filing a return.18
However, where a director resigned his office, the resignation was accepted and the change was effected by filing
Form No. 32 to the ROC prior to the date of default. The director was held not an officer in default.19
Form 32 is not conclusive as to the date of resignation. Where the Director showed contemporaneous documents in
support of his resignation, the date shown in the resignation letter was taken as the date of resignation and he was
held not liable for offences committed after that date. The prosecution for dishonour of cheques under the
Negotiable Instruments Act was quashed.20
Secretary [ Section 5(d)].—Clause (d) of section 5 specifies the Secretary. The secretary is primarily responsible
for compliances with the provisions of the Companies and has therefore been specifically included in the persons
who may be held responsible for any contravention of the Companies Act.
Every company having prescribed paid-up share capital [Rs. 2 crores (w.e.f. 11-6-2002)†] shall have a whole-time
secretary. [ Section 383A(1)].
See also Comments under Secretary [ Section 2(45)], Secretary in whole-time Practice [ Section 2(45A)], Certain
companies to have Secretary [ Section 383A], Officer [ Section 2(30)] and Officer who is in default [ Section 2(31)].
Person in whose directions Board is accustomed to act [ Section 5(e)].—Any person in accordance with
whose directions or instructions the Board of directors of the company is accustomed to act has been included in
the expression “officer who is in default” under section 5(e) as also in definition of Officer in section 2(30).
See Comments under Officer [ Section 2(30)] and Person in accordance with whose directions or instructions
directors are accustomed to act [ Sections 7 and 303(1)].
Person charged by Board with responsibility of complying [ S. 5(f)].—As per clause (f) of section 5 any person
charged by the Board of Directors with the responsibility of complying with that provision shall be officer in default,
provided he has given his consent in this behalf to the Board. Where the Board of Directors exercises any power
Page 7 of 25
under clause (f), it shall, within 30 days, file with the Registrar a return in the prescribed form. [Proviso after section
5(g)].
Where a person is charged with the responsibility of complying with the provision, he must give consent for the
same. Different persons may be charged with the responsibility of complying with different provisions of the
Companies Act, 1956. To give effect to this aspect a return has to be filed with the Registrar of Companies within
30 days of the Board resolution.
In the absence of any such specific charge or delegation of responsibility to any person, which may include an
officer or director, Managing Director(s), Whole-time Director(s), Manager, the Secretary, etc., explained above and
in their absence the Director(s) [ clause (g)], will be treated as an “officer who is in default”.
Department’s Website.— See Press Note on Department’s Website, ROC fee computation, ROC Forms, etc.,
under Sections 33, 609 and 637.
Director(s) [ Section 5(g)].—Where the company does not have any of the officers, i.e., managerial personnel,
specified in clauses (a) to (c), any Director or Directors who may be specified by the Board of directors in this behalf
or where no Director is so specified, all the Directors shall be officers in default. [Clause (g)].
Where the Board of directors exercises any power under clause (g), it shall, within 30 days of the exercise of such
powers, file with the Registrar a return in the prescribed form. [Proviso after section 5(g)].
Form and Procedure (w.e.f. 10-2-2006).—As per Rule 4BB of the Companies (Central Government’s) General
Rules and Forms, 1956, the company shall within 30 days of exercising its powers under Clause (f) or (g) of Section
5 of the Companies Act, 1956, file with the Registrar of Companies (ROC) a Return in Form 1AA of the Companies
(Central Government’s) General Rules and Forms, 1956 [Pursuant to Section 5(g) of the Companies Act, 1956],
viz., Particulars of Person(s) or Director(s) charged or specified for the purpose of clause (f) or (g) of Section 5, duly
signed by the Secretary, or where there is no Secretary, by a Director.
The aforesaid Form 1AA shall be accompanied by the Consent given to the Board of Directors by the person
concerned in Form 1AB of the Companies (Central Government’s) General Rules and Forms, 1956.
Where such Consent is revoked or withdrawn the company shall within 30 days thereof file with the Registrar a
Return in Form 1AA [earlier Form 1AC] of the Companies (Central Government’s) General Rules and Forms, 1956.
Now e-Form 1AA of the Companies (Central Government’s) General Rules and Forms, 1956 has been substituted
for earlier Form Nos. 1AA and 1AC by the Companies (Central Government’s) General Rules and Forms
(Amendment) Rules, 2006 vide Notification No. G.S.R. 56(E), dated 10-2-2006.
Form 1AA (substituted w.e.f. 10-2-2006).— See e-Form 1AA of the Companies (Central Government’s) General
Rules and Forms, 1956 as substituted for earlier Form Nos. 1AA and 1AC by the Companies (Central
Government’s) General Rules and Forms (Amendment) Rules, 2006 vide Notification No. G.S.R. 56(E), dated 10-2-
2006, published in the Gazette of India, Extraordinary, No. 50, Part II, Section 3(i), page 156: the Ministry of
Corporate Affairs (MCA) website www.mca.gov.in: (2006) 130 Comp. Cas. (St.) 13 in Appendices.
Revised e-Form 1AA (released 7-1-2007).— See Revised e-Form 1AA on the Ministry of Corporate Affairs (MCA)
website www.mca.gov.in under the category Informational Services, Date of Last Release (7-1-2007).
See Revised e-Form 1AA of the Companies (Central Government’s) General Rules and Forms, 1956 [Pursuant to
Section 5(g) of the Companies Act, 1956 ] for Particulars of Person(s) or Director(s) charged or specified for the
purpose of clause (f) or (g) of Section 5.
No e-Form 1AB—Existing Form 1AB to continue.—No e-Form 1AB has been substituted for the existing Form
1AB. Therefore, existing Form No. 1AB for Consent of the person charged by the Board with the Responsibility of
Complying with the provisions of the Act shall continue.
Department’s view.—Instructions for filling e-Company Forms.—The Ministry of Corporate Affairs (MCA) has
given Instructions for Filling e-Company Forms containing Specific Instruction Kit, Common Instructions Kit and List
of ISO Country Code. Relevant extracts from these Instructions are dealt with below.
Page 8 of 25
Instructions for filling of e-Form 1AA—Particulars of Person(s) or Director(s) charged or specified for the
purpose of clause (f) or (g) of Section 5.—Specific Instruction Kit for filling e-Form 1AA of the Companies
(Central Government’s) General Rules and Forms, 1956 containing the e-Form Sl. No. and Detailed Instructions is
reproduced below:
Note: Instructions are not provided for the fields which are self explanatory.
Refer the relevant provisions of the Companies Act, 1956 and Rules made thereunder with respect to the matter
dealt in this e-form.
1 (a) Enter the ‘Corporate Identity Number’ (CIN) of the company.
⋅ You may find CIN by entering existing registration number of the company in the ‘Find CIN/GLN’
service at the portal www.mca.gov.in.
2 (a) Click the “Pre-fill” button.
System will automatically display the name and registered office address of the company.
3 Enter the number of persons charged for which details are to be provided.
Details of maximum three persons can be provided in the e-form. If more than three provide the details
of the rest as an attachment.
4 Enter Director Identification Number (DIN) in case of Director and in case of Manager or Secretary—
‘Income-tax Permanent Account Number’ (PAN).
If ‘Yes’ is selected in field “Whether present residential address is same as permanent residential
address”, the present address will automatically be displayed. Otherwise enter the present residential
address.
Attachments
⋅ Copy of Board Resolution passed for Appointment or Revocation of person is to be attached.
⋅ Any other information can be provided as an optional attachment.
Declaration.
—Enter the date of Board Resolution authorising the signatory to sign and submit the e-form.
Digital Signatures.—The e-form should be digitally signed by Managing Director or Director or Manager or
Secretary of the company duly authorised by the Board of Directors.
See also Common Instructions Kit which contains Instructions on Pre Fill, Attach, Remove attachment, Check
Form, Modify, Pre scrutiny, Submit, Country code and enumerates a List of ISO Country Codes.
[ Instructions for Filling e-Company Forms: (2006) 131 Comp. Cas. (St.) 15: Downloaded (on 29-7-2007) from e-
Forms with Instruction Kit on the Ministry of Corporate Affairs (MCA) website www.mca.gov.in].
Filing Fees.—Filing Fee as prescribed in Schedule X to the Companies Act, 1956, based on Authorised Capital,
shall be payable along with e-Form 1AA.
Page 9 of 25
See detailed Comments, Form and Procedure on Filing Fees and Additional Fees under Section 611 and Schedule
X.
See also Fee Calculator on the Ministry of Corporate Affairs (MCA) website www.mca.gov.in. See detailed
Comments on e-Filing under Section 610B.
Details of New e-Forms and Fees.— See Details of New e-Forms and Fees and Statement showing the old
Forms, the corresponding Revised new e-Forms and the method of Fee Calculation or Fee Structure as adapted
from Instructions for Filling e-Company Forms: (2006) 131 Comp. Cas. (St.) 254-264 and the Ministry of Corporate
Affairs (MCA) website www.mca.gov.in along with Relevant Sections of the Companies Act, 1956 or Relevant Rules
in Comments under Section 610B.
No. 1287, Part II, Section 3(ii), page 15, dated 27-10-2006: MCA website www.mca.gov.in: (2006) 134 Comp. Cas.
(St.) 91 in Comments under Section 610B.
Filing Fees on e-Forms.— See Rule 22 of the Companies (Central Govt.’s) General Rules and Forms, 1956 as
amended by the Companies (Central Government’s) General Rules and Forms (Amendment) Rules, 2006 (w.e.f.
10-2-2006) for Mode of Payment of Fees on filing of e-Forms to the Registrars of Companies (ROCs) under
Schedule X to the Companies Act, 1956 or the Central Government under the Companies (Fees on Applications)
Rules, 1999.
See detailed Comments under Sections 611, 637A and Schedule X.
MCA-21 e-Governance Project.—The Ministry of Company Affairs (MCA) launched MCA-21 e-Governance
Project on 18-2-2006 which has been implemented at all Registrars of Companies (ROCs) locations.
Now e-Filing of Forms is mandatory under Section 610A and newly inserted Sections 610B-610E of the Companies
Act, 1956 as inserted by the Companies (Amendment) Act, 2006 (23 of 2006) (w.e.f. 16-9-2006).
E-Governance and e-Filing.—The MCA-21 e-Governance Project shall facilitate e-Filing for all transactions with
the Registrars of Companies (ROCs). Therefore, all Companies, Directors and Professionals must obtain Director
Identification Number (DIN) and Digital Signature Certificates (DSCs) on-line immediately.
See “MCA-21 Handbook” on MCA website www.mca.gov.in.
The erstwhile Department’s website www.mca.gov.in was moved to the Ministry of Company Affairs (MCA) website
www.mca.gov.in
‘Ministry of Corporate Affairs’ (MCA) (w.e.f. 9-5-2007).
—The Ministry of Company Affairs (MCA) has been renamed as ‘Ministry of Corporate Affairs’ (MCA) vide
Presidential Notification, dated 9-5-2007 amending the Government of India (Allocation of Business) Rules, 1961
(w.e.f. 9-5-2007):
Page 10 of 25
SeeMinistry of Corporate Affairs (MCA) website www.mca.gov.in
Director Identification Number (DIN) [ Sections 266A to 266G].— See detailed Comments, Form and Procedure
on Director Identification Number(DIN) under newly inserted Sections 266A to 266G of the Companies Act, 1956
inserted by the Companies (Amendment) Act, 2006 (23 of 2006) (w.e.f. 1-11-2006).
See the Companies (Director Identification Number) Rules, 2006† framed under Sections 266A to 266G(w.e.f. 1-11-
2006) vide Notification No. G.S.R. 649(E), dated 19-10-2006, published in the Gazette of India, Extraordinary, No.
502, Part II, Section 3(i), page 21: Ministry of Company Affairs (MCA) website www.mca.gov.in: (2006) 134 Comp.
Cas. (St.) 112 in Appendices.
Directors must apply for the Director Identification Number (DIN) on-line. See “DIN Issuance Process” on MCA
website www.mca.gov.in
See detailed Comments, Form and Procedure under Sections 266A to 266G.
Digital Signature Certificates (DSCs).—Directors of the company required to sign company Documents,
Authorised Signatories and Professionals have to procure Digital Signature Certificate (DSC).
See Details on applying for DSCS on MCA website www.mca.gov.in.
“Electronic Signature” (e-Signature).—The words “Digital Signature” and “Digital Signature Certificate” (DSC) are
proposed to be substituted by words “Electronic Signature” (e-Signature) and “Electronic Signature Certificate”
(ESC) in various Chapters/ Sections/Sub-sections/Clauses of the Information Technology Act, 2000 (21 of 2000) as
proposed to be amended by the Information Technology (Amendment) Bill, 2006 (96 of 2006) introduced in Lok
Sabha on 15-12-2006.
266G inserted (w.e.f. 1-11-2006).
Sections 610B to 610E inserted (w.e.f. 16-9-2006).
Directors in default only when there is no managerial personnel.—Directors are officers in default only where
the company does not have managing director, whole-time director or manager. Criminal liability of ordinary
directors would arise only if the company has no managing director or whole time director or manager and where
particular directors are not specified to be liable by the company.21
Where the company had Managing Director, it was he who was the officer in default and liable for prosecution along
with the company for failure to inform the Registrar of change in situation of registered office under section 146 of
the Act. The other Directors were not liable for prosecution as per amended section 5. However, for false
information in Form 18, the director who furnished form containing false information was liable to be proceeded
against under section 628 of the Act.22
Where managing director died during pendency of the proceedings. The widow of the managing director who was
also a director during the relevant period was impleaded in his place. Held, it was permissible. Since whereabouts
of the other director could not be traced, the Registrar impleaded the petitioner as the available director. There was
not a question of picking out the petitioner to proceed against.23
See also Comments under Managerial personnel [ Section 5(a) to (c)above], Director [ Section 2(13)] and Officer [
Section 2(30)].
Department’s view.—Prosecution against ordinary Directors only when there is no managerial personnel.—
“The issue relating to correct interpretation of “officer who is in default”, as per provision of section 5 of the
Companies Act, 1956, has been considered by the Department in the light of the judgment of the Hon’ble Rajasthan
High Court in Ravindra Narayan v. ROC, (1994) 81 Comp. Cas. 925 (Raj.). The Department is of the view that this
Page 11 of 25
judgment has correctly interpreted the provisions of section 5 as substituted by Act 31 of 1988. It may, therefore,
please be ensured that where the penal provisions provide for punishment of “officers in default”, prosecution be
filed against the Managing Director(s), Whole-time Director(s) and Manager, apart from the Secretary, if any, and
the company and only in those cases where there is no such managerial personnel (i.e., Managing Director/Whole-
time Director/Manager), prosecution be filed against all ordinary Directors, apart from the Secretary, if any, and the
company.” [ Circular No. 6/94, dated 24-6-1994].
Mens rea not required to be proved.—Prior to substitution of by the section 5 Companies (Amendment) Act, 1988
(31 of 1988), for prosecution of officers for offences under various sections covered by Section 5, that is, where the
words “officer who is in default” has been used, mens rea was required to be proved. The onus was on the
prosecution. Under section 5 substituted by Act 31 of 1988 mens rea is now not required to be proved unless the
words “knowingly” and “wilfully” are used.
The term “officer who is in default” prior to substitution by the Companies (Amendment) Act, 1988 meant an officer
of the company, who knowingly and wilfully authorised or permitted such defaults. An officer was liable if he was
knowingly guilty of default. He was liable for other person’s default only if he permitted or authorised such default
knowingly and at the same time wilfully.24
Statutory offences requiring nomens rea.— Section 5 substituted in 1988 brings the definition of “officer who is
in default” at par with contravention of statutory offences requiring no mens rea. Under section 5mens rea is now
not required to be proved unless the words “knowingly” and “wilfully” are used in that section.
Even prior to substitution of this section 5, under which no mens rea is now necessary, it was held that the offence
under section 614A(2) was really a statutory offence requiring no mens rea. The offence was established ipso facto
on proof of contravention as in the case of the company in offences under sections 162(1), 168, 220(3), etc., of the
Act. The remedy available in a bona fide case was to take proper steps in time by applying to the court for
extension of the time mentioning the genuine difficulties. No such steps having been taken, it was held that the
accused directors had not complied with the mandatory provisions of section 614A(2) of the Act.25
The Companies Act, 1956 specifically excluded mens rea as a constituent element of the offence under certain
sections. In certain other offences under the Act, different considerations applied, e.g., offences to which section 5
prior to substitution in 1988 was applicable, where mens rea had not been excluded. In statutory offences, i.e.,
where mere “failure” to comply with the statutory provisions concerned is made punishable, it is a clear indication
that mens rea is ruled out.26
Offences or defaults covered by Section 5.— Section 5 defines the expression “officer who is in default” only for
the purpose of such provisions of the Companies Act, 1956 which specifically enact that officer of the company who
is in default shall be liable to any punishment or penalty by way of imprisonment, fine or otherwise.
In offences or defaults under such sections the officers defined in section 5 shall be “officer in default”. Now in such
cases, i.e., where relevant section of the Companies Act, 1956 makes “officer who is in default” punishable for
offence, e.g., Sections 162(1), 168, 210, 220(3), etc., under amended section 5, mens rea shall not be required to
be proved like contravention of statutory offences unless that section uses the words “knowingly” and “wilfully” and
requires mens rea to be established.
Lists of Offences or Defaults covered by Section 5..—For Lists of Offences or Defaults covered by Section 5see
Offences or defaults not covered by Section 5.—Where the provisions of the Companies Act, 1956 do not use
the words “officer in default”, the penalty and punishment shall be governed by the language of those provisions.
If such other provision, not covered by section 5 of the Act, uses the words “wilfully” or “knowingly”, requiring mens
rea or guilty knowledge for offence or default for punishing the person, company or officer, the prosecution has to
prove mens rea or guilty knowledge.
Onus or burden of proof.—The onus in such cases is on the prosecution to show that a default has been
committed with knowledge. Once this onus is discharged by the prosecution the burden shifts on to the person,
company or officer to prove that the default was due to circumstances beyond his control.
Page 12 of 25
Decisions prior to substitution of section 5 in 1988 on mens rea dealt with above shall still be applicable to offences
under such other provisions.
Sections requiring mens rea to be established.—Some sections which require mens rea to be established for an
offence are as follows.
Section 207 of the Companies Act, 1956 makes every director of the company punishable for the offence, i.e.,
default or failure to pay dividend within 30 days only if he is knowingly a party to the default. Therefore mens rea is
required to be established for an offence under that section.27
For instance, for imprisonment under sections 209(5), 210(5), 211(7) of the Companies Act, 1956mens rea is
required to be established by the prosecution as these sections make the person liable for imprisonment only for
wilful default.
It must be noted that under section 5 as substituted by Companies (Amendment) Act, 1988, as already explained
hereinbefore, where any section makes officers in default liable for the offence and words such as “knowingly” or
“wilfully” are not used, mens rea is now not required to be proved.
Juristic person cannot be prosecuted for offences requiringmens rea.—The offences under sections 420, 467,
471 and 477A of the Indian Penal Code, 1860 read with section 120B of the Indian Penal Code, 1860 (45 of 1860),
are all offences having mens rea as one of the essential ingredients thereof. The accused committing the offences
must have a guilty mind and as such a juristic person such as a body corporate cannot be prosecuted for the said
offences.28
Lists of Offences or Defaults not covered by Section 5.—For Lists of Offences or Defaults not covered by
Section 5see Comments under Section 621A.
Default.—The term
“default” means not doing what is reasonable under the circumstances, not doing anything which ought to be
done having regard to the position which a person occupies towards the other persons interested in the
transactions.
29
Wilful default.—
“Wilful default” means an act or omission to do an act. It is “wilful” where the person who acts or omits to act
knows what he is doing and intends to do what he is doing. In case of breach of duty it will be considered wilful if it
arises out of being recklessly careless even though there may not be knowledge or intent.30 If the person neglects
or the default arises from the voluntary acts of the parties and not from the pressure of external circumstances over
which they could have no control, the neglect or default is wilful.31 When prima facie case is made out, it is not a
defence to a prosecution that the default was due to circumstances beyond the control of the officer concerned.
This fact will be examined at the trial upon evidence.
32
Offences against Act cognizable only on complaint [ Section 621].—Offences against the Companies Act,
1956 (1 of 1956) are cognizable only on written complaint by the Registrar, a Shareholder or the Central
Government. This does not apply to a prosecution by a company of any of its officers. The Court may take
cognizance of offences relating to issue and transfer of securities and non-payment of dividend on a written
complaint by the SEBI [ Section 621(1), proviso].
See detailed Comments under Section 621. For provisions of the Companies Act, 1956 relating to Offences, Fines
and Penalties see Sections 621 to 631.
Composition of certain offences [ Section 621A].—Notwithstanding anything contained in the Code of Criminal
Procedure, 1973 (2 of 1974), certain offences punishable under the Companies Act, 1956 (whether committed by a
company or any officer thereof) may be compounded by the Central Government under section 621A on payment
or credit of prescribed sum.
Page 13 of 25
See detailed Comments and Lists of Offences compoundable by the Central Government, Offences compoundable
with the permission of the Court and Offences not compoundable under Section 621A as substituted by the
Companies (Second Amendment) Act, 2002 (11 of 2003) (w.e.f. date to be notified).
Complaint to state “officer who is in default”.—Although, as per section 5 as substituted in 1988 the expression
“” means all the officers specified in clauses (a) to (g) of section 5 and the decisions given above show that
whether the managing director or whole-time director or manager exists so as to exclude the directors from being
considered “as officer who is in default” is a question of fact and can be decided only after evidence before the trial
court and complaint cannot be quashed.
See decisions under Question of Fact in earlier paragraphs.
In decisions under old section, it has been held that it is incumbent on the prosecution to fix the liability with respect
to the particular “officer in default” and there should be a specific averment to that effect in the complaint. If all the
directors are liable for every default then the expression “officer who is in default” becomes redundant and
meaningless. In such a case the complaint may be bad and the proceedings may be liable to be quashed.33
Complaints were filed against a company and its directors for violation of section 233B. The directors filed a petition
under section 482 Cr. P.C. for quashing of the complaints. The complaints alleged that in spite of reminders the
directors failed to apply to the Central Government for appointment of a cost auditor and allowed the default to
continue and as such they were officers in default. These allegations were sufficient to sustain the complaints.
Whether the complaints would succeed ultimately or not was a matter of proof. The petition of the directors was
dismissed.34
Directors/Officers in default—Averments in Complaint.—On a complaint filed by the Registrar of Companies

(ROC) for the offence under Section 162 of the Companies Act, 1956, for failure to file the Annual Returns by the
company as required under Sections 159 and 161 of the Companies Act, 1956 the petitioner filed a petition under
Section 482 of the Code of Criminal Procedure, 1973 (2 of 1974) to quash the criminal proceedings, contending that
there were no averments that the accused was the Whole-time Director (WTD) or Managing Director (MD) and it
could not be said that he was officer in default of the company under Section 5 of the Companies Act, 1956 and he
had resigned from the post of the Director. Dismissing the petition, it was held that the offence had been committed
prior to the alleged resignation and therefore the petitioner could not take the defence of resignation as Director. It
was specifically stated in the complaint that accused were the Directors/Officers in default of the company with all
relevant files to which the complaint related for non-filing of Annual Returns. The proceedings could not therefore be
quashed.35
Mis-statements in Prospectus—Directors as Officer in default.—Where a specific averment had been made in

the Complaint that all the Directors were responsible for the mis-statements in the prospectus which induced the
public to subscribe to equity shares of the company. The petitioner had not taken a separate stand in the reply to
the show-cause notice that he was not the Officer in default within the meaning of Section 5 of the Companies Act,
1956. Therefore, there was no merit in the contention that he was not liable for any lapses on the part of the
Managing Director of the company who was looking after its affairs.36
Contravention by and impleading company.—In offences by a company it is not necessary, although it is better
to implead the company also as an accused, the offence must be committed by the company, i.e., before a person
in charge or an officer of a company is held guilty in that capacity it must be established that there has been a
contravention by the company.37
Department’s view.—Prosecution against Directors only when there is no managerial personnel.—See

Circular 6/94, dated 24-6-1994 [ printed earlier].
Court with respect to offences [ Section 2(11)(b)].—The Court with respect to any offence against the
Companies Act, 1956 (1 of 1956) means the Court of a Magistrate of the First Class or, as the case may be, a
Presidency Magistrate, having jurisdiction to try such offence.
Page 14 of 25
Jurisdiction.—Offence committed under section 113 of the Companies Act, 1956 for failure to deliver share
certificates to the transferee within the prescribed time in the name of the complainant can be tried by the
Magistrate having jurisdiction and it cannot be contended that the Company Court or theCompany Law Board (CLB)
[ now the Tribunal (NCLT)] shall have the jurisdiction.38
See detailed Comments under Section 10—Jurisdiction of Courts. See also Comments under Sections 2(11), 5,
10E, 10FB and 631 to 631.
Cause of action.—The cause of action for the offences punishable under sections 39(2), 113(2), 207 and 219(4) of
the Companies Act, 1956 for failure to deliver documents or furnishing the copies of Memorandum and Articles of
Association, Share Certificates, Dividend Warrants or Balance Sheets, etc., within the prescribed time, read with
section 53, would arise where the registered office of the company is situated. Such proceedings are to be
entertained only by the Court having jurisdiction over the registered office of the company.39
See detailed Comments under Sections 39, 53, 113, 207 and 219.
Limitation.—The limitation for initiation of proceedings for offences under the Companies Act, 1956 had not been
prescribed under the Act itself, hence the general law, in the instant case, section 469 of the Code of Criminal
Procedure, 1973 stood attracted. On the available material, the question of limitation was a mixed question of law
and fact which had to be considered by the trial court, in which the petitioners could also contend whether “person
aggrieved” must be construed in a larger sense of the department as a whole, and whether the offence in question
was a complete or continuing offence. The meaning of “officer who is in default” in the instant prosecution had to be
based on section 5 of the Act, as it stood prior to July 15, 1988, when mens rea was essential. Merely because the
exact word “knowingly” found in section 5 of the Act, as it existed earlier, had not been quoted in the complaint, did
not mean that mens rea had not been alleged.40
Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992.—Jurisdiction in case of
notified persons stands transferred to the Special Court having exclusive jurisdiction under section 9A of the Special
Court (Trial of Offences Relating to Transactions in Securities) Act, 1992 (27 of 1992).41
Private Company.—The provisions of section 5 apply to a company. This section is thus applicable to all the
companies under the Companies Act, 1956 and shall apply to both public and private companies. See Comments
under Section 3.
Relief under Section 633.—In any proceeding [ section 633(1)] or apprehended proceeding [ section 633(2)] for
negligence, default, breach of duty, misfeasance or breach of trust against an officer of a company, it appears to the
Court [ section 633(1)] or the High Court [ section 633(2)] 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 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.
Provided that in a criminal proceeding under section 633(1) the Court cannot 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.
The powers of the court to grant relief under section 633 of the Companies Act, 1956 should be used sparingly. The
officers of the company cannot claim relief as of right. Where the Central Excise seized Books of Accounts but
supplied xerox copies but the company failed to lay Balance Sheet and Profit and Loss Account at the Annual
General Meeting and to file the same before the Registrar of Companies, it was held that the Directors responsible
did not act honestly and reasonably and were not entitled to any relief against apprehended proceedings.42
See detailed Comments under Power of Court to grant relief [ Section 633]. See also Comments under respective
Sections.
Legal Proceedings.— See detailed Comments on provisions relating to Legal Proceedings under Sections 632 to
635AA.
Compliance Certificate—Prosecution or Show Cause Notices.—Relevant paras of the Form appended to the
Companies (Compliance Certificate) Rules, 2001 and ICSI Guidance Note on Compliance Certificate are dealt with
below.
Page 15 of 25
attached with Board’s Report under Section 217 of the Act and laid by the company in its Annual General Meeting
(AGM).
follows:
“31. A list of prosecution initiated against or show-cause notices received by the company for alleged offences
under the Act and also the fines and penalties or any other punishment imposed on the company in such cases is
attached.”
[Para 31 of Form of Compliance Certificate appended to the Companies (Compliance Certificate) Rules, 2001: See
reproduced below.
Prosecution or Show Cause Notices.—“Check whether:

(i) the company has been issued any show cause notice by the ROC for non-compliance of any of the
provisions of the Act; if so, verify the explanations given by the company while assessing enormity of the
violations in question;
(ii) the notices of prosecution/show cause have been placed before the Board;
(iii) the company has received any prosecution notice;
(iv) any inspection or investigation has been ordered under the Act and if so, assess the status at the time of
issuing the Compliance Certificate;
(v) any fines and penalties or any other punishment was imposed on the company;
(vi) any order has been issued under the Act for compounding of the offences; if so check whether the
company has complied with the orders passed by the concerned authorities.”
under Section 383A.
Secretarial Practice and Check List.— Section 5. Check whether: (1) the company has (a) Managing Director(s),
(b) Whole-time Director(s) or (c) Manager? every public company or private company subsidiary of a public
company having prescribed paid up share capital [Rs. 5 crores or more (w.e.f. 18-9-1990) vide Rule 10A*] shall
have a managing or whole-time director or manager [ Section 269(1)], (2) if the company does not have managerial
personnel, a Board resolution passed specifying Director(s) in this behalf [Clause (g)]? if so, a Return in e-Form
1AA* filed by the company with the Registrar within 30 days? where no Director is so specified, all the Directors
shall be officers in default, (3) the company has a Secretary [Clause 5(d)]? every company having prescribed paid-
up share capital [Rs. 2 crores (w.e.f. 11-6-2002)] shall have a whole-time secretary [ Section 383A(1)], (4) a Board
resolution passed to charge a person with the responsibility of complying with the provision(s) [Clause 5(f)]? If so, a
Page 16 of 25
Return in e-Form 1AA* filed by the company with the Registrar within 30 days accompanied by the Consent given to
the Board by the person concerned in Form lAB*? (5) where such Consent has been revoked or withdrawn a Return
in e-Form 1AC* filed by the company with the Registrar within 30 days? (6) provisions of other relevant Acts taken
care of and compliances ensured?
The documents involved are: (1) Minutes of Board Meeting, (2) Annual Report (3) Return in e-Form 1AA, (3)
Consent of person in Form 1B, (4) Letter revoking or withdrawing Consent, (5) Return in e-Form 1AC (6)
Correspondence under various other relevant Acts [explained in Comments hereinafter].
Offences by company under other Acts.— Section 5 explained above applies only to the offences against the
Companies Act, 1956. Thus, wherever relevant section of the Companies Act, 1956 makes “officer who is in
default” liable for default this expression shall have the meaning assigned in section 5 of the Companies Act, 1956.
Where the provisions of the Companies Act, 1956 do not use “officer in default”, the penalty and punishment shall
be governed by the language of those provisions.
However, in case of offences by companies under various other Acts, the company, officers or persons liable to be
proceeded or punished shall be governed by penal and other relevant provisions of such other Acts. Generally, for
offences by companies under various Acts following persons are liable to be proceeded or punished.
Vicarious liability of Directors.—Since the company is a legal abstraction without a real mind of its own, it is
those who in fact control and determine the management of the company, who are held vicariously liable for
commission of statutory offences. The directors of the company are, therefore, rightly called upon to answer the
charge, being the directing mind of the company.43
Person/Director in charge or responsible.—In case of offences by companies under various Acts

persons/directors in charge of, responsible or nominated for the purpose of compliance with the legal formalities
under that Act would be liable to be proceeded or punished and not the other directors.
The vicarious liability of a person/director of a company for being prosecuted for an offence committed under
various Acts, e.g., the Drugs and Cosmetics Act, 1940 (23 of 1940), the Essential Commodities Act, 1955 (10 of
1955), etc., by a company arises if at the material time he was in charge of and was also responsible to the
company for the conduct of its business. Simply because a person is a director of the company it does not
necessarily mean that he fulfils the above requirements so as to make him liable. Conversely, without being a
director a person can be in charge of and responsible to the company for the conduct of its business. The directors
cannot ipso facto be prosecuted. They must be shown to be in charge of and responsible to the company for the
conduct of its business.44
Nominated Person/Director.—Where the nominated directors and nobody else controlled the management of the
company, the nominated Directors and the nominating Company could be prosecuted for violation of the provisions
of the Prevention of Food Adulteration Act, 1954 (37 of 1954).45
In a case where it could be proved that nobody was in charge of the affairs of the company at any material time the
company could be prosecuted.46
Mens reanot essential in public welfare offences.—For strict statutory offences, e.g., under the Factories Act,
1948, Economic laws, Industry, Food adulteration, Prevention of pollution, etc., establishment of mens rea is not an
essential ingredient. Such offences are generally known as public welfare offences. Penalty for strict statutory
offences follows actus reus, mens rea being irrelevant.47
See detailed Comments under specific Acts hereinafter.
Defence.—Proviso to relevant provisions under various Acts engrafts an exception in the case of any such person
if he were to prove that the offence was committed without his knowledge or that he exercised all due diligence to
prevent the commission of such offence. Proviso shifts the burden on the delinquent officer or servant of the
company responsible for the commission of the offence. The burden is on him to prove that he did not know of the
offence or connive in it or that he had exercised all due diligence to prevent the commission of such offence.48
Cases on offences under various other Acts.—Having explained the meaning of “officers who is in default”
under section 5 of the Companies Act, 1956 for offences against the Companies Act, 1956 and general principles
Page 17 of 25
applicable in case of default by companies under various other Acts, now specific cases on offences by companies
and directors or persons liable under various other Acts are given below.
Consumer Protection Act.—A company as also the person in charge are both liable to be prosecuted for not
obeying the directions of a Consumer Forum. The corporate veil may be lifted to identify the persons responsible for
statutory offences referred in section 27 of the Consumer Protection Act, 1986 (68 of 1986).49
Dishonour of cheques by company.—Under section 141 of the Negotiable Instruments Act, 1881 (26 of 1881) for
dishonour of cheque by a company under section 138, every person who at the time the offence was committed
was in charge of and responsible to, the company for the conduct of its business, the company and if the offence
has been committed with the consent or connivance of, or is attributable to, any neglect on the part of, any director,
manager, secretary or other officer of the company, such director, manager, secretary or other officer shall be liable
to be proceeded against and punished accordingly. The person in charge shall not be liable to punishment if he
proves that the offence was committed without his knowledge, or he had exercised all due diligence to prevent the
commission of such offence.
Managing Director.—Managing Director or Manager from the very nature of their duties are vicariously liable of an
offence under section 138/141 of the Negotiable Instruments Act. Directors cannot ipso facto be prosecuted. They
must be shown to be in charge of and responsible to the company for the conduct of its business.50
Directors—Vicarious Liability.—A vicarious liability on the part of a Director must be pleaded and proved. It
cannot be a subject-matter of mere inference.51
The Indian Penal Code, 1860 (45 of 1860) does not contain any provision for attaching vicarious liability on the part
of the Managing Director or the Directors of the company when the accused is the company. Statutes indisputably
must contain provision fixing such vicarious liabilities. Even for the said purpose, it is obligatory on the part of the
complainant to make requisite allegations which would attract the provisions constituting vicarious liability. Where
the Bank was a body corporate. Vicarious liability of the Managing Director and Directors would arise provided a
provision existed in that behalf in the Statute. Throughout the complaint petition for defamatory statement in
Prospectus of the Bank against the borrower, no allegation had been made as against any of the respondents that
they had any thing to deal with personally either in discharge of their statutory or official duty. No personal or
vicarious liability could be fixed on the Managing Director and Directors.52
Director who signs cheque.—A Director who signs or authorises the signing of a cheque which was dishonoured
can be prosecuted alone even without prosecution of company. But it is to be shown that the Director was in charge
of and responsible for the conduct of its business at the time the offence was committed. Although the words of
section 141(1) of the Negotiable Instruments Act, 1881 (26 of 1881) need not be incorporated in a complaint as
magic words, the substance of the allegations read as a whole should fulfil the requirements of its ingredients. The
Directors are entitled to show that the company has not committed the offence. A disputed question of fact can be
decided at the trial, the prosecution cannot be quashed.53
Stop payment of cheque.—Even if a cheque is dishonoured because of ‘stop payment’ instruction by the drawer
to the bank, it amounts to dishonour of cheque under section 138 of the Negotiable Instruments Act, 1881 (26 of
1881), even where he has requested payee not to present the cheque.54
Account closed.—Dishonoured of cheque on the ground ‘account closed’ amounts to dishonour and section 138 is
attracted.55
Notice of Dishonour of Cheque.—Notice of demand in case of dishonour of cheque is required to be given to the
drawer. Notice issued to the Director alone and not to the company may be sufficient. Notice is not required to be
issued to each and every director or officer who is sought to be prosecuted. The notice given to a company through
its Managing Director could be sufficient. Offence is complete on failure by the drawer to pay after the notice.
Deposit of sum due under cheque in the course of proceedings in court will not absolve the drawer.56
Complaint against Director.—Where no director or person was mentioned in the complaint by name issue of
process was held to be not valid.57
Where there were no averments in the complaint as to how the directors were liable for offence. There was no
prima facie averment or material available to attribute consent or connivance. The proceedings against the
petitioners were quashed.58
Page 18 of 25
Post-dated cheque.—Post-dated cheque is deemed to be drawn on the date it bears. Six months’ validity period
runs from the date on the cheque.59
Acquittal.—The High Court on appeal must consider reasons given by the Trial Court for acquittal and cannot
reverse the order of acquittal on new grounds.60
Resignation by director.—The questions whether the director had resigned office, whether the resignation was
accepted by the Board of directors and when the particulars of change were filed (Form No. 32) with the Registrar
of Companies are all matters to be determined at the trial and prosecution cannot be quashed.61
Writ.—In a writ by a Director against whom prosecutions were pending in various courts on the ground that he was
unable to attend in all the courts and he was not participating in the company’s affairs. Held, the contention could be
taken as a defence in prosecution but was not a ground to quash prosecutions. Trial courts were directed to grant
exemption from personal appearance upon certain conditions.62
Nominee Director.—As per section 141(1), second proviso, of the Negotiable Instruments Act, 1881 inserted
(w.e.f. 6-2-2003) a director nominated by the Central or State Government or a financial corporation owned or
controlled by the Central or State Government shall not be liable for prosecuction under this chapter.
Sick Industrial Companies.—Prosecution for dishonour of cheque for offence completed before suspension of
legal proceedings under the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986) is not barred.63
Now see Sections 424A to 424L and 10FB of the Companies Act, 1956.
Complaint by company.—A complaint by company for dishonour of cheques may be filed by a manager, director,
managing director or principal officer. A company is a juristic person, a legal entity. In the normal course, it is
managed by manager, director, managing director or principal officers. Explanation to section 141 of the Negotiable
Instruments Act, 1881 expressly recognizes the right of such persons and executives to represent the interest of
legal entity, like corporate body, company, etc. No special and express authorisation is required for initiating any
legal proceedings under section 138 of the Negotiable Instruments Act, 1881.64
Bills of exchange and Promissory notes.— See Comments under Section 47.
Essential Commodities Act.—In offences by a company under the Essential Commodities Act, 1955 (10 of 1955)
and Contract Labour (Regulation and Abolition) Act, 1970 (37 of 1970) it has been held that, (1) it is the person in
charge of and responsible for the conduct of business of the company who is liable for the offence, (2) it is not
necessary, although it is better to implead the company also as an accused, (3) the offence must be committed by
the company, i.e., before a person in charge or an officer of a company is held guilty in that capacity it must be
established that there has been a contravention by the company.65
Employees’ Provident Funds Act.—Under the Employees’ Provident Funds and Miscellaneous Provisions Act,
1952 (19 of 1952) it was held that the definition of “managing director” in section 2(26) of the Companies Act, 1956,
could not be read into section 14A of the Employees’ Provident Funds Act to say that it was the “managing director”
who is in charge of and responsible for the conduct of the business of the company, for, under section 14A(1) of the
EPF Act, the liability does not go with the designation, but it goes with the charge of and responsibility to the
company in the person in the matter of the conduct of business of the company.66
Offences and Prosecution— EPF Act—Directors’ liability.—The company failed to pay its contribution to
Employees’ Provident Fund (EPF). The records of the Registrar of Companies (ROC) showed that the accused
Director ceased to be Director before the Company defaulted the Payment of Contribution (EPF). Form No. 32 of
the Companies (Central Govt.’s) General Rules and Forms, 1956 filed with and issued by the Registrar of
Companies (ROC) is a public document and therefore admissible in evidence under Section 74 of the Indian
Evidence Act, 1872 (1 of 1872). The accused was not in overall charge of the company. The Director was entitled to
the proceedings against him to be quashed. The Limitation for filing the complaint for failure to pay contribution is 3
years. Complaint was filed more than 3 years after the period for which there was default. The prosecution was
liable to be quashed.67
Employees’ State Insurance Act.—Under the Employees’ State Insurance Act, 1948 (34 of 1948), the person in
charge of and responsible to the company for the conduct of its business at the time offence was committed, can be
Page 19 of 25
prosecuted without the company being prosecuted. Managing Director cannot contend that he was not in charge of
or responsible for the conduct of its business. He has to adduce positive evidence to prove that he was not in
charge of or responsible for the conduct of the business of the company during relevant time. The question whether
Director will come within the ambit of the principal employer or person in charge of or responsible for the conduct of
the business of the company, is a matter of evidence.68 Where a company itself owns the factory and is also the
employer of its employees, the directors of the company are not personally liable to pay contributions under the ESI
Act, 1948 as they do not come within definition of section 2(17)(i); defining “principal employer”. The directors of the
company are also not liable to be punished for the offence of criminal breach of trust under section 405 of the Indian
Penal Code, 1860.69
Directors not personally liable for ESI or Wages of company.—Liability of the company can be enforced against
the directors only when the Act or Statute specifically so authorises. Where a company itself owns the factory and is
also the employer of its employees, the Directors of the company cannot be made personally liable to pay the
wages due under the Payment of Wages Act, 1936 (4 of 1936) or ESI contributions under the Employees’ State
Insurance Act, 1948 (34 of 1948) as they do not come within definition of “principal employer” in section 2 of the
said Acts. The directors of the company are also not liable to be punished for the offence of criminal breach of trust
under section 405 of the Indian Penal Code, 1860.70
See detailed Comments on Directors as Officers in default under Section 5 and Status, Position, Powers, Duties
and Liabilities of Directors of the Company under Section 291 of the Companies Act, 1956 in this Book.
Factories Act.—In the case of a company, which owns a factory, the company can nominate only a director as
occupier of the factory for the purposes of the Factories Act, 1948 (63 of 1948). The company cannot nominate any
other officer or employee to be the occupier. Discretion given to the Inspector of Factories can be exercised only
when the director has not been identified or nominated by the company as occupier, treating any one of the
directors as the deemed occupier of the factory, for prosecution and punishment in case of any breach or
contravention of the provisions of the Factories Act or for offences committed under the Act.71
In case of a Government Company, however, the factory is effectively and really owned by the Government and
person appointed to manage the affairs of the company is the occupier and not the directors of the company.72
Income-tax Act.— Section 278B(1) of the Income-tax Act, 1961 (43 of 1961), which deals with the vicarious liability
of the Directors, etc., says that where an offence under the Act is committed by a company, every person who, at
the time of commission of the offence was in charge of and responsible to the company for the conduct of the
business of the company as well as the company shall be deemed to be guilty of the offence and liable to be
proceeded against.73
Sentence of imprisonment and fine.—For failure to deduct and pay tax (TDS), false verification of return, etc.,
prosecution lies for violation of the provisions of the Income-tax Act, 1961 against the company as also against the
officer responsible. For offences punishable mandatorily with imprisonment and fine, the company being corporate
entity or juristic person can be prosecuted and punished with fine. Sentence of imprisonment and fine can be
imposed on persons in charge of and responsible to company for conduct of the business of the company.74
FEMA—Company—Offences and Prosecution—Imprisonment and fine.—A company can be prosecuted and

punished for an offence under Section 56(1)(i) of the Foreign Exchange Regulation Act, 1973 (46 of 1973) (FERA)
[now the FEMA, 1999], even though imprisonment for a term of not less than 6 Months is compulsory. The
legislative intent to prosecute Corporate Bodies for the offence committed by them is clear and explicit and the
statute never intended to exonerate them from being prosecuted. It is sheer violence to commonsense that the
Legislature intended to punish Corporate Bodies for minor and silly offences and extended immunity of prosecution
for major and grave economic crimes. As a company cannot be sentenced to imprisonment the Court cannot
impose that punishment, but when imprisonment and fine is the prescribed punishment the Court can impose the
punishment of fine which can be enforced against the company. Such a discretion is to be read into Section 56 so
far as a juristic person is concerned. Even for offences under Section 56(1)(ii) of the Foreign Exchange Regulation
Act, 1973 (FERA) [now the FEMA, 1999], a company can be prosecuted when the amount involved is less than Rs.
one lakh and there is no mandatory sentence of imprisonment and the prescribed punishment is imprisonment for a
term which may extend to 3 years or with fine or with both. The object of the amendment of the section was to have
more stringent provisions and not to give immunity to Corporate Bodies from prosecution for serious offences.75
Under Section 56 of the Foreign Exchange Regulation Act, 1973 an offender can be given punishment of
imprisonment or fine. The Court should take recourse to the principle of interpretation as may be necessary. In
Page 20 of 25
order to make the statute workable the Court should have recourse to such principles of interpretation as may be
necessary. When a company is tried for commission of an offence a Judgment of Conviction may be passed
against it but having regard to the fact that it is a juristic person no punishment of mandatory imprisonment can be
imposed. Even if the company cannot be punished, it does not mean that the other person referred to under sub-
sections (1) and (2) of Section 68 of the FERA cannot also be punished.76
The Foreign Exchange Regulation Act, 1973 (46 of 1973) (FERA) has been repealed and the Appellate Board
constituted under Section 52(1) of the FERA, 1973 has been dissolved. [ videSection 49(1) of the FEMA, 1999 (42
of 1999)].
The Foreign Exchange Management Act, 1999 (42 of 1999) (w.e.f. 1-6-2000) has been enacted to consolidate and
amend the law relating to Foreign Exchange with the objective of facilitating external trade and payments and for
promoting the orderly development and maintenance of foreign exchange market in India.
See detailed Comments, Legislative History and Lists of the Foreign Exchange Management Act, 1999 (42 of 1999)
(FEMA), the (FEM) Rules and Regulations along with Appendix Numbers under Section 591.
Penalty—Export Obligation—Director, liability of.—Penalty was imposed on a Company and its Directors for
failure to comply with export obligations under the Foreign Trade (Development and Regulation) Act, 1992 (22 of
1992). The appeal against the order was also dismissed. On a writ petition, setting aside the order imposing
penalty, it was held that individual liability of Directors was not proved. A Director is not liable unless it is shown as
to how and to what extent the particular Director is liable. Section 5 of the Companies Act, 1956 (1 of 1956) was not
applicable as it dealt with defaults under the Companies Act, 1956 only and not under any other Statute. In order to
sustain the imposition of punishment on an Individual Director it was incumbent on the respondent to assert the
existence of a duty or obligation on one or all the Directors of the defaulting company and failure to fulfil it. The
show cause notice did not mention the grounds on which individual liability was sought to be fastened on the
Director. The order was set aside.77
MR TP Act [now the Competition Act].—Where the complaint clearly mentioned that the petitioners were being
prosecuted as they were held vicariously liable for the offence committed by the company. If the company was not
prosecuted or punished, the petitioners, under section 53 of the Monopolies and Restrictive Trade Practices Act,
1969 (54 of 1969) could not be held liable.78
The MR TP Act, 1969 (54 of 1969) has since been repealed by the Competition Act, 2002 (12 of 2003). See
Pollution (Prevention and Control) Acts.—In an offence by a company under the Water (Prevention and Control
of Pollution) Act, 1974 (6 of 1974), the Chairman, Vice-chairman, Managing Director and members of the Board of
Directors could be prosecuted as having been in charge of and responsible to the company, for the business of the
industrial unit owned by the company and could be deemed to be guilty of the offence. The technical flaw that the
company has not been impleaded and only industrial unit owned by the company was impleaded as respondent
was not incurable and could not be allowed to defeat the prosecution.79
Prevention of Food Adulteration Act.—If an offence is committed by a company under the Prevention of Food
Adulteration Act, 1954 (37 of 1954), the person nominated under section 17(2) to be in charge of and responsible to
the company for the conduct of its business shall be proceeded against unless it is shown that the offence was
committed with the consent/connivance/negligence of any other director, manager, secretary or officer of the
company in which case the said person can also be proceeded against and punished. It is only where no person
has been nominated under section 17(2) of the PFA Act that every person who at that time was in charge of and
responsible can be proceeded against and punished. Even in such cases the proviso offers a defence that accused
can prove his innocence by showing that the offence was committed without his knowledge and notwithstanding the
exercise of due diligence to prevent it.80
Unlawful Activities (Prevention) Act.—The company owning tea estates in Assam allegedly paid money to
militant organisation ULFA. The officers of the company sought anticipatory bail against the offences. It was held
that it was not a case of unlawful activity under section 13 of the Unlawful Activities (Prevention) Act, 1967 (37 of
1967) and no offence was made out under sections 120B, 121, 121A and 122 of the Indian Penal Code, 1860.
Prima facie case was made out under section 10 of the Unlawful Activities (Prevention) Act, 1967 and the offence
was bailable. The question of granting anticipatory bail under section 438 of the Code of Criminal Procedure, 1973
(2 of 1974) did not arise as a direction under that section could be issued only in respect of a non-bailable offence.81
Page 21 of 25
Interpretation and Construction of Penal provisions.—The principles governing interpretation and construction
of penal provisions are as follows.
Penal provisions to be strictly construed.—The penal provision must be strictly construed in the first place.
Secondly, there is no vicarious liability in criminal law unless the statute takes that also within its fold. Where section
10 of the Essential Commodities Act, 1955 (10 of 1955) did not make all the partners liable for the offence whether
they do business or not. It would be a travesty of justice to prosecute all the partners and ask them to prove that the
offence was committed without their knowledge. The requisite condition was that the partner was responsible for
carrying on the business and was during the relevant time in charge of the business. In the absence of any such
proof, no partner could be convicted.82
Object of the legislation.—The rule of strict interpretation of penal statutes in favour of an accused is not of rigid
or universal application. It must be considered along with other well established rules of interpretation. When it is
seen that the scheme and object of the statute are likely to be defeated by the strict interpretation, courts must
endeavour to resort to that interpretation which furthers the object of the legislation. It is well recognised that a
statutory provision must be construed, if possible, to avoid absurdity and mischief.83 Though penal statutes are to
be strictly construed they are not to be construed so strictly as to defeat the obvious intention of the Legislature.
The intention of the Legislature is to be collected from the words they employ. Where there is no ambiguity in the
words, there is no room for construction.84
Purposive construction.—It has been emphasised that even though the provisions of section 630 of the
Companies Act, 1956 are penal in nature, the object of the provision is required to be given a purposive
interpretation so as not to choke the beneficent provision. The courts are, therefore, obliged to place a broader,
liberal and purposeful construction on the provisions of section 630 of the Act in furtherance of the object and
purpose of the legislation and construe it in a wider sense to effectuate the intendment of the provision.85
While construing the provisions of section 138 of the Negotiable Instruments Act, 1881 (26 of 1881), the Supreme
Court observed that even though section 138 is a penal statute, it is the duty of the court to interpret it consistent
with the legislative intent and purpose so as to suppress the mischief and advance the remedy.86
Two views possible.—It is a well settled rule of construction of penal statutes that if two views are possible and
reasonable constructions can be put upon a penal provision, the court must lean towards that construction which
exempts the subject from penalty rather than the one which imposes penalty.87 It is one of the settled principles of
interpretation of statutes that, when two interpretations are possible of a penal provision, that which is less onerous
to the accused should be preferred.88
Not permissible to give extended meaning.—Where the words of the section are very clear it is unnecessary to
consider whether it embodies any principle and whether that principle is consistent with the principle as embodied in
certain other sections which are differently worded. In interpreting a penal provision it is not permissible to give an
extended meaning to the plain words of the section on the ground that a principle recognised in respect of certain
other provisions of law requires that this section should be interpreted in the same way.89
14. Substituted by the Companies (Amendment) Act, 1988 (31 of 1988), s. 3 (w.e.f 15-7-1988). For section 5 as it stood
15. Herdilia Unimers Ltd. v. Smt. Renu Jain, (1998) 92 Comp. Cas. 841 (Raj.); Pravin Jha v. State of U.P., (2001) 106
Comp. Cas. 554 (All.). See also Comments under Sections 113, 149, 159, 162, 165 and 220.
16. Herdilia Unimers Ltd. v. Smt. Renu Jain, (1998) 92 Comp. Cas. 841 (Raj.).
17. C.V. Siva Prasad v. Registrar of Companies, (1997) 88 Comp. Cas. 420 (AP).
18. Anita Chadha v. Registrar of Companies, (1999) 96 Comp. Cas. 265 (Delhi). See also Comments under Sections 159,
162 and 220.
19. Jayes R. Mor v. State of Gujarat, (2002) 109 Comp. Cas. 232 (Guj.). See detailed Comments under Section 220.
20. Pandurang Camotim Sancoalcar v. Suresh Prabhakar Prabhu, (2003) 113 Comp. Cas. 600 (Bom.). See also
Comments under Section 303(2).
Page 22 of 25
† See the Companies (Appointment and Qualifications of Secretary) Rules, 1988 in Appendix 12.
610E (w.e.f. 16-9-2006) in Appendix 2.
16-9-2006).
† Seethe Companies (Director Identification Number) Rules, 2006 in Appendix 49. See detailed Comments on Director
2006) (w.e.f. 1-11-2006).
21. Ravindra Narayan v. Registrar of Companies, (1994) 81 Comp. Cas. 925 (Raj.); Herdilia Unimers Ltd. v. Smt. Renu
Jain, (1998) 92 Comp. Cas. 841 (Raj.); Smt. G. Vijayalakshmi v. SEBI, (2000) 100 Comp. Cas. 726 (AP); S.C. Bhatia v.
P.C. Wadhawa, (1998) 92 Comp. Cas. 511 (P&H). See also Comments under Sections 73, 113, 159, 162, 220 and
621.
22. Vijay Kumar Gupta v. Registrar of Companies, (2004) 118 Comp. Cas. 604 (HP). See also Comments under Sections
146 and 628.
23. K. Seethalakshmi v. Registrar of Companies, (2001) 103 Comp. Cas. 532 (Mad.). See also Comments under Sections
159, 162 and 220.
24. Madan Gopal Dey v. State, (1969) 39 Comp. Cas. 119 (Cal.) : AIR 1968 Cal. 79 [LNIND 1966 CAL 131]; Ajit Kumar
Sarkar v. Asst. ROC, (1979) 49 Comp. Cas. 909 (Cal.); V.M. Thomas v. ROC, (1980) 50 Comp. Cas. 247 (Ker.);
Ramacast Ltd. v. Asst. ROC, (1988) 63 Comp. Cas. 805 (Cal.); H. Nanjundiah v. V. Govindan, ROC, (1986) 59 Comp.
Cas. 356 (Bom.); Asst. ROC v. Southern Machinery Works Ltd., (1986) 59 Comp. Cas. 670 (Mad.); S.P. Punj v. ROC,
(1991) 71 Comp. Cas. 509 (Delhi); Bachraj Baid v. State of W.B., (1992) 74 Comp. Cas. 809 (Cal.); ROC v. Bipini
Behari Nayak, (1995) 83 Comp. Cas. 95 (Orissa); ROC v. Bipini Behari Nayak, (1996) 86 Comp. Cas. 641 (Orissa).
See detailed Comments under Sections 58A, 159, 161, 162, 168, 210, 220 and 633.
See also Comments under Section 614A and 633.
26. Sukhbir Saran Bhatnagar v. Registrar of Companies, (1972) 42 Comp. Cas. 408 (Delhi). See also Comments under
Section 633.
27. Consolidated Pneumatic Tool Co. (I) Ltd. v. Addl. Registrar of Companies, (1989) 65 Comp. Cas. 259 (Bom.). See
detailed Comments under Sections 205A and 207.
28. A.K. Khosla v. T.S. Venkatesan, (1994) 80 Comp. Cas. 81 (Cal.). See also Comments Sections 5, 293, 621 and 629A.
29. Young and Harston’s Contract, Re, (1886) 31 Ch.D. 168 : 53 LT 837.
30. City Equitable Fire Insurance Co., Re, (1925) Ch. 407 : (1924) All ER Rep. 485 : 94 LJ Ch. 445 : 68 Accountant LR 53
(CA). See also Comments under Sections 119, 133, 168, 210 and 227.
31. Elliott v. Turner, (1843) 13 Sim. 477. See also Comments under Section 169.
32. Bachraj Baid v. State of W.B., (1992) 74 Comp. Cas. 809 (Cal.).
33. Ajit Kumar Sarkar v. Asstt. Registrar of Companies, (1979) 49 Comp. Cas. 909 (Cal.); Bipin Behari Nayak v. ROC,
(1988) 63 Comp. Cas. 271 (Orissa); ROC v. Bipini Behari Nayak, (1995) 83 Comp. Cas. 95 (Orissa); Registrar of
Companies v. Bipini Behari Nayak, (1996) 86 Comp. Cas. 641 (Orissa). See also Comments under Sections 159, 162
and 220.
34. Bimal Kumar Nopany v. Registrar of Companies, (1990) 68 Comp. Cas. 567 (AP). See also Comments under Section
233B.
35. Dantuluri Ranga Devi v. Registrar of Companies, (2007) 135 Comp. Cas. 599 (AP).
36. I.B. Rao v. Registrar of Companies, (2007) 137 Comp. Cas. 469 (AP).
[LNIND 1984 SC 247]: (1984) 4 SCC 352 [LNIND 1984 SC 247]; Rama Bhushanam v. Registrar of Companies, (2002)
112 Comp. Cas. 238 (AP). See also Comments under Section 58A.
Comments under Sections 2(11), 10, 10E, 10FB and 113.
195 (SC); Karnataka Bank Ltd. v. B. Suresh, (2001) 105 Comp. Cas. 110 (Kar.).
Page 23 of 25
40. First Leasing Co. of India Ltd. v. Addl. ROC, (1997) 89 Comp. Cas. 635 (Mad.). See also Comments under Sections 10,
269A, 297, 621 and 629A.
41. Canara Bank v. Nuclear Power Corporation of India Ltd., (1995) 84 Comp. Cas. 70 (SC); Harshad S. Mehta v. State of
Maharashtra, (2001) 107 Comp. Cas. 365 (SC). See detailed Comments under Section 10—Jurisdiction of Courts.
42. S. Pandit, In re, (1990) 68 Comp. Cas. 129 (Bom.). See detailed Comments under Sections 210, 220 and 633.
* See the Companies (Central Government’s) General Rules and Forms, 1956 in Appendix 1. See detailed Comments,
43. J.K. Industries Ltd. v. Chief Inspector of Factories and Boilers, (1997) 88 Comp. Cas. 285 (SC); Tesco Supermarkets
Ltd. v. Nattrass,(1972) AC 153 : (1971) 2 All ER 127 : (1971) 2 WLR 1166 : (1971) 115 SJ 285 (HL); Lennard’s
Carrying Co. Ltd. v. Asiatic Petroleum Co. Ltd.,(1915) AC 705 : 84 LJ KB 1281 : 113 LT 195 (HL); M.C. Mehta v.
UOI,(1986) 2 SCC 325. See detailed Comments under the Factories Act, 1948 hereinafter. See also Comments under
Section 34.
44. State of Haryana v. Brij Lal Mittal, (1998) 93 Comp. Cas. 329 (SC) : AIR 1998 SC 2327 [LNIND 1998 SC 519];
Municipal Corporation of Delhi v. Ram Kishan Rohtagi,AIR 1983 SC 67; Sham Sunder v. State of Haryana, (1990) 67
Comp. Cas. 1 (SC) : AIR 1989 SC 1982 [LNIND 1989 SC 405]; V.B.C. Exports Pvt. Ltd. v. Commander S.D. Baijal,
(1998) 91 Comp. Cas. 63 (SC); D.K. Jhaver v. State of Punjab, (1996) 87 Comp. Cas. 236 (P&H); L.P. Mittal v. State of
N.C.T. of Delhi, (2000) 100 Comp. Cas. 737 (Delhi); R. Guruswamy v. Sree Balaji Cotton Industries, (2002) 112 Comp.
Cas. 338 (Kar.). See also Interpretation and Construction of Penal provisions in later paragraphs.
46. Hindustan Chemicals Industries v. State of Punjab, (1997) 88 Comp. Cas. 794 (P&H).
47. J.K. Industries Ltd. v. Chief Inspector of Factories and Boilers, (1997) 88 Comp. Cas. 285 (SC); R.S. Joshi v. Ajit Mills
Ltd.,AIR 1977 SC 2279 [LNIND 1977 SC 260].
48. U.P. Pollution Control Board v. Modi Distillery, (1988) 63 Comp. Cas. 77 (SC); R. Banerjee v. H.D. Dubey, (1992) 75
Comp. Cas. 722 (SC). See detailed Comments under the Pollution (Prevention and Control) Acts and Prevention of
Food Adulteration Act in later paragraphs.
49. Ravi Kant v. National Consumer Disputes Redressal Commission, (1997) 89 Comp. Cas. 471 (Delhi) (DB); Delhi
Development Authority v. Skipper Construction Co. (P.) Ltd., (1997) 89 Comp. Cas. 362 (SC). See also Comments
under Section 34.
50. FMI Investments Pvt. Ltd. v. State, (2000) 99 Comp. Cas. 17 (Delhi); State of Haryana v. Brij Lal Mittal, (1998) 93
Comp. Cas. 329 (SC) : AIR 1998 SC 2327 [LNIND 1998 SC 519]; Credential Finance Ltd. v. State of Maharashtra,
(2001) 105 Comp. Cas. 864 (Bom.); Rachana Flour Mills P. Ltd. v. Lalchand Bhanagadiya, (1987) 62 Comp. Cas. 15
(AP). See detailed Comments on Vicarious liability of Directors in earlier paragraphs.
51. K. Srikanth Singh v. North East Securities Ltd., (2007) 140 Comp. Cas. 444 (SC).
52. Maksud Saiyed v. State of Gujarat, (2007) 140 Comp. Cas. 590 (SC).
[LNIND 1984 SC 247]: (1984) 4 SCC 352 [LNIND 1984 SC 247]; K.P.G. Nair v. Jindal Menthol India Ltd., (2001) 104
Comp. Cas. 290 (SC); M. Arumugam v. Upasana Finance Ltd., (2001) 105 Comp. Cas. 103 (Mad.); Avon Industries
Ltd. v. Integrated Finance Co. Ltd., (2001) 105 Comp. Cas. 259 (AP); Sadhu Ram Singla v. State, (2002) 111 Comp.
Cas. 52 (Delhi); Renewable Energy Systems Ltd. v. State, (2002) 111 Comp. Cas. 786 (AP); Smt. Neeta Bhalla v.
S.M.S. Pharmaceuticals Ltd., (2002) 111 Comp. Cas. 793 (AP).
54. Modi Cements Ltd. v. Kuchil Kumar Nandi, (1998) 92 Comp. Cas. 88 (SC); Goaplast Pvt. Ltd. v. Chico Ursula D’Souza,
(2003) 114 Comp. Cas. 644 (SC).
56. Rajneesh Aggarwal v. Amit J. Bhalla, (2001) 104 Comp. Cas. 332 (SC); Bilakchand Gyanchand Co. v. A. Chinnaswami,
(1999) 98 Comp. Cas. 573 (SC); K. Pannir Selvam v. M.M.T.C. Ltd., (2000) 99 Comp. Cas. 94 (AP); Suman Sethi v.
Ajay K. Churiwal, (2000) 100 Comp. Cas. 444 (SC); Urjit Singh v. State of Punjab, (2002) 112 Comp. Cas. 183 (P&H);
C.C. Alavi Haji v. Palapetty Muhammed, (2007) 137 Comp. Cas. 692 (SC); Sarav Investment and Financial Consultants
Pvt. Ltd. v. Llyods Register of Shipping Indian Office Staff Provident Fund, (2007) 140 Comp. Cas. 381 (SC); Rahul
Builders v. Arihant Fertilizers and Chemicals Ltd., (2007) 140 Comp. Cas. 600 (SC).
57. Charanjit Singh v. D.B. Merchant Banking Services Ltd., (2001) 105 Comp. Cas. 299 (Delhi).
Page 24 of 25
58. Balakrishnan, Unity Drugs Centre v. Jaison P.V., (2004) 122 Comp. Cas. 820 (Ker.).
59. Anil Kumar Sawhney v. Gulshan Rai, (1994) 79 Comp. Cas. 150 (SC); Gummadi Industries Ltd. v. Khushroo F.
Engineer, (1999) 98 Comp. Cas. 296 (Mad.).
60. C. Antony v. K.G. Raghavan Nair, (2002) 112 Comp. Cas. 611 (SC); John K. John v. Tom Varghese, (2007) 140 Comp.
Cas. 473 (SC).
61. Mrs. Asanammal Kasim v. Ceat Financial Services Ltd., (2002) 112 Comp. Cas. 287 (AP); Smt. P.
Sudhavenkatalakshmi v. Sree Chakra Cotton Co., (2002) 112 Comp. Cas. 60 (AP); S.B. Shankar v. Amman Steel
Corporation, (2002) 110 Comp. Cas. 50 (Mad.).
62. V.K. Jain v. Union of India, (2000) 100 Comp. Cas. 827 (SC).
63. BSI Ltd. v. Gift Holdings Pvt. Ltd., (2000) 100 Comp. Cas. 436 (SC); Kusum Ingots and Alloys Ltd. v. Pennar Peterson
Securities Ltd., (2000) 100 Comp. Cas. 755 (SC).
64. Standard Chartered Bank v. Ravi Bhandari, (2002) 111 Comp. Cas. 544 (Delhi); Gajanand Agarwal v. Sharma Traders
Industries (P.) Ltd., (2002) 109 Comp. Cas. 909 (AP); Shakthi Concrete Industries Ltd. v. Valuable Steels (India) Ltd.,
(2000) 100 Comp. Cas. 429 (Mad.). See also United Bank of India v. Naresh Kumar, (1997) 90 Comp. Cas. 329 (SC) :
AIR 1997 SC 3 [LNIND 1996 SC 1486] under Suit by public Corporations in Comments under Section 10.
247]; Madanlal Agarwalla v. State, (1989) 65 Comp. Cas. 237 (Cal.) (DB); Vidya Wati v. State, (1990) 69 Comp. Cas.
813 (Delhi); Naresh Kumar v. State of Bihar, (1991) 70 Comp. Cas. 358 (Patna); Smt. Peelamedu Rajeswary
Ramkrishna v. B.N. Misra, (1972) 42 Comp. Cas. 489 (Orissa).
66. S. Rajagopalachari v. Bellary Spg. & Wvg. Co. Ltd., (1997) 90 Comp. Cas. 485 (Kar.).
67. R. Dhandayuthapani v. C.R. Kaleel, (2004) 118 Comp. Cas. 167 (Mad.).
68. Employees’ State Insurance Corporation v. K.A. Vijayan, (2000) 99 Comp. Cas. 31 (Ker.); Employees’ State Insurance
Corporation v. Apex Engg. P. Ltd., (1998) 1 Comp. LJ 10 (SC); Siddharth Kejriwal v. Employees’ State Insurance
Corpn., (1997) 90 Comp. Cas. 496 (Kar.).
69. Employees’ State Insurance Corpn. v. S.K. Aggarwal, (1998) 94 Comp. Cas. 75 (SC).
70. P.C. Agarwala v. Payment of Wages Inspector, (2005) 127 Comp. Cas. 787 (SC); Employees’ State Insurance
Corporation v. S.K. Aggarwal, (1998) 94 Comp. Cas. 75 (SC) : (1998) 6 SCC 288Employees’ State Insurance
Corporation v. Gurdial Singh, (1991) Suppl. 1 SCC 204.
71. J.K. Industries Ltd. v. Chief Inspector of Factories and Boilers, (1997) 88 Comp. Cas. 285 (SC). See also Comments
under Vicarious liability of Directors and Mens rea hereinbefore.
72. , Indian Oil Corporation Ltd. v. Chief Inspector of Factories, (1998) 94 Comp. Cas. 64 (SC) : AIR 1998 SC 2456
73. S.C. Gupta v. State, (2002) 112 Comp. Cas. 121 (Delhi).
74. M.V. Javali v. Mahajan Borewell and Co., (1998) 91 Comp. Cas. 708 (SC): (1998) 230 ITR 1 (SC); M.R. Pratap v. V.M.
Muthukrishnan, ITO, (1992) 74 Comp. Cas. 400 (SC): (1992) 196 ITR 1 (SC): AIR 1994 SC 674 [LNIND 1992 SC 374].
75. Standard Chartered Bank v. Directorate of Enforcement, (2005) 125 Comp. Cas. 513 (SC): (2005) 4 Comp. LJ 464
(SC).
76. ANZ Grindlays Bank Ltd. v. Directorate of Enforcement, (2005) 123 Comp. Cas. 1 (SC): (2005) 3 Comp. LJ 302 (SC):
(2004) 6 SCC 531 [LNIND 2005 SC 471].
77. Krishan Kumar Bangur v. Director General of Foreign Trade, (2006) 133 Comp. Cas. 83 (Delhi).
78. M.L. Lakhotia v. State, (1989) 66 Comp. Cas. 118 (Delhi). See also Comments u/ s. 34.
79. U.P. Pollution Control Board v. Modi Distillery, (1988) 63 Comp. Cas. 77 (SC); U.P. Pollution Control Board v. Mohan
Meakins Ltd., (2000) 101 Comp. Cas. 278 (SC); Haryana State Board for Prevention and Control of Water Pollution v.
Bharat Carpets Ltd., (1995) 84 Comp. Cas. 681 (P&H) (DB); Woodhouse v. Walsall Metropolitan Borough
Council,(1994) 1 BCLC 435.
81. R.K. Krishna Kumar v. State of Assam, (1998) 92 Comp. Cas. 14 (SC).
82. Sham Sunder v. State of Haryana, (1990) 67 Comp. Cas. 1 (SC): AIR 1989 SC 1982 [LNIND 1989 SC 405]; TMT.
Thangalakshmi v. ITO, (1994) 79 Comp. Cas. 246 (Mad.): (1994) 205 ITR 176 (Mad.). See also Comments under
Vicarious liability of Directors in earlier paragraphs. See Sections 621 to 631 for provisions of the Companies Act, 1956
Page 25 of 25
83. S.K.D. Lakshmanan Fireworks Industries v. K.V. Sivarama Krishnan, (1995) 84 Comp. Cas. 447 (Ker.) (FB). See also
Literal Construction in Comments under Section 1.
84. Thomas Varghese v. P. Jerome, (1993) 76 Comp. Cas. 380 (Ker.). See detailed Comments on Principles of
Interpretation and Construction under Section 1.
85. Smt. Abhilash Vinodkumar Jain v. Cox and Kings (India) Ltd., (1995) 84 Comp. Cas. 28 (SC); Atul Mathur v. Atul Kalra,
(1990) 68 Comp. Cas. 324 (SC). See detailed Comments under Section 630. See Sections 621 to 631 for provisions
87. Tolaram Relumal v. State of Bombay,AIR 1954 SC 496 [LNIND 1954 SC 91]: 1955 SCR 158 [LNIND 1954 SC 91].
88. N.C. Kumaresan v. Ameerappa, (1992) 74 Comp. Cas. 848 (Ker.); Grindlays Bank P.L.C. v. UOI, (2001) 106 Comp.
Cas. 1 (Cal.).
89. State of Andhra Pradesh v. Andhra Provincial Potteries Ltd., (1973) 43 Comp. Cas. 514 (SC) : AIR 1973 SC 2429
[LNIND 1973 SC 238]. See detailed Comments under Section 220 which was amended in 1977 in view of different view
taken by the Supreme Court in State of Bombay v. Bandhan Ram Bhandani, (1961) 31 Comp. Cas. 1 (SC) : AIR 1961
SC 186 [LNIND 1960 SC 220]: (1961) 1 SCR 801 [LNIND 1960 SC 220].
End of Document
Datta: Company Law
C R Datta
S. 6. 90[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 I-A.]
90. Substituted by the Companies (Amendment) Act, 1960 (65 of 1960), s. 4. For sections 6 as it stood prior to its
* See the Benami Transactions (Prohibition) Act, 1988 (45 of 1988) in Appendix 16.
COMMENTS
English Act, 1948 : Section 455(2)
Legislative History.— The Companies (Amendment) Act, 1960 (65 of 1960)—The Notes on clauses explained the
reasons for the substitution of this section as follows: “The redraft of section 6 is based on the recommendation
contained in para 26 of the Report so that in order to make it practicable for the officers of a company to comply
with the provisions of the several sections in which the expression ‘relative’ occurs, very remote relationships may
be excluded from the purview of the definition.” [ Clause 4 of the Companies (Amendment) Bill, 1959 (37 of 1959)].
“Section 6 contains a definition of the expression ‘relative’, occurring in various contexts in the Act as, for example,
sections 2(3) and (4), 295, 297, 314, 354 to 360 etc. About 67, or according to another calculation, 81 persons
standing in different degrees of relationship would come within the definition and it is highly inconvenient and in
many cases, impracticable, for the director of a company to ascertain the different firms or companies in which any
of the enumerated relatives is a partner or managing agent or director. Various suggestions were put forward, one
of them being that section 6 should be omitted altogether and another to the effect that the words ‘whether by
legitimate or illegitimate descent or by adoption and whether by full blood or half blood’ should be deleted. Any
change in the definition of ‘relative’ would affect the ambit and scope of several other important provisions of the Act
referred to above. The omission of section 6 from the Act would, besides requiring the amendment of many other
sections, run counter to the fundamental policy of the legislature in enacting those provisions. In this connection, it
must be remembered that the practice of resorting to benami transactions in the names of relatives is prevalent in
certain sections of the mercantile community and that this practice is often resorted to for concealing the identity or
interest of the person standing to gain by questionable transactions. Having given our consideration to the
objections put forward by various interests we think that a simpler and narrower definition of ‘relative’ should be
substituted for the existing definition. Section 6 might run thus:—
Page 2 of 3
‘Two persons shall be deemed to be ‘relatives’ if and only if:—

(a) they are members of a Hindu undivided family; or
(b) they are husband and wife; or
(c) the one or the spouse of the one is related to the other or the spouse of the other as parent and child,
grand-parent and grand-child, or brother and sister; or
(d) the one is related to the other directly (and not by marriage only) as uncle or aunt, nephew or niece.’
Since the Mitakshara, the Dayabagha, the Marumakhathayam and the Aliyasanthana are all parts of the Hindu Law,
though some of them are based on custom, specific reference to the different systems of Hindu law in this context
would appear to be unnecessary. The section might be simplified as stated above. The revised definition suggested
above would cut down the number of ‘relatives’ by more than half. The reference to relationship by adoption and
illegitimate descent is out of place in a section which does not deal with the general law of inheritance and may be
omitted.” [ Report: para 26].
Relative [ Section 6].—The list of relatives is based on reasonable classification and to serve a public purpose. A
person shall be deemed to be a relative of another if, and only if, they are—(a) members of a Hindu undivided
family; or (b) husband and wife; or (c) one is related to other in the manner indicated in Schedule I-A.
This definition of “relative” is important so far as the provisions of sections 2(3), 2(4), 204A, 294AA, 295, 297, 314
and 370(1B) [ now 372A], etc., are concerned. List of relatives indicated in Schedule I-A of the Act is given
hereinafter.
See detailed Comments under respective Sections and Schedule I-A.
HUF.—The members of an HUF means all the members including females.
Department’s view.— Hindu undivided family means the entire undivided family.—In reply to a query:
“Section 6 has now been amended. According to this section, the term “relative” includes members of a Hindu
undivided family (HUF). Does the family refer to the coparcenary alone or the entire undivided Family?
The Department of Company Affairs has given its opinion that: “A Hindu undivided family includes and is not
confined to coparcenary.” [ Clarification F. No. 8/16(1)/61-PR : Govt. of India publication Clarifications and Circulars
on Company Law, 1977 Edition, page 4].
List of relatives [ Schedule I-A].—Under Schedule I-A of the Companies Act, 1956, the list of relatives is as
under:
1. Father. 12. Son’s daughter.
2. Mother (including step-mother). 13. Son’s daughter’s husband.
3. Son (including step-son). 14. Daughter’s husband.
4. Son’s wife. 15. Daughter’s son.
5. Daughter (including step-daughter). 16. Daughter’s son’s wife.
6. Father’s father. 17. Daughter’s daughter.
7. Father’s mother. 18. Daughter’s daughter’s husband.
8. Mother’s mother. 19. Brother (including step-brother).
9. Mother’s father. 20. Brother’s wife.
10. Son’s son. 21. Sister (including step-sister).
11. Son’s son’s wife. 22. Sister’s husband.

Page 3 of 3
BenamiTransactions (Prohibition) Act.—The Benami Transactions (Prohibition) Act, 1988 (45 of 1988)* now
prohibits benami transactions.
1992, “connected person” or “person deemed to be connected person” may, inter alia, include Director [ Section
2(13)], Deemed Director [ Section 307(10)], Officer of a company [ Section 2(30)] including an auditor, Director or
employee of Public Financial Institutions defined in Section 4A, Relative of connected persons [ Section 6 of The
Companies Act, 1956 and Regulations 2(h)(viii) and 2(i) of the SEBI (Prohibition of Insider Trading) Regulations,
1992].
90. Substituted by the Companies (Amendment) Act, 1960 (65 of 1960), s. 4. For sections 6 as it stood prior to its
* See the Benami Transactions (Prohibition) Act, 1988 (45 of 1988) in Appendix 16.
End of Document
Datta: Company Law
C R Datta
S. 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.
91. Official Liquidator v. P.C. Dhadda, (1980) 50 Comp. Cas. 175 (Raj.). See detailed Comments under Section 2(30).
92. T.S. Satyanath v. J. Thomas & Co., (1985) 57 Comp. Cas. 648 (Cal.). See also Comments under Section 2(30) and
630.
93. A Company, Re,(1989) BCLC 13; Kuwait Asia Bank EC v. National Mutual Life Nominees Ltd.,(1990) 3 All ER 404
(PC); M.C. Becon Ltd., Re,(1990) BCLC 324.
94. Hydrodam (Corby) Ltd., Re,(1994) 2 BCLC 180; Tasbian Ltd., Re,(1993) 3 BCLC 297; Kuwait Asia Bank EC v. National
Mutual Life Nominees Ltd., All ER 404 (PC); PFTZM Ltd., Re,(1995) 2 BCLC 354; Secy. of State for Trade and Industry
v. Lang,(1996) 2 BCLC 324.
1. Hydrodam (Corby) Ltd., Re,(1994) 2 BCLC 180.
2. Secretary of State for Trade and Industry v. Lang,(1996) 2 BCLC 324; Secy. of State for Trade and Industry v.
Hickling,(1996) BCC 678; Sykes (Butchers) Ltd., Re,(1998) 1 BCLC 110.
3. Secy. of State for Trade and Industry v. Tjalle,(1998) 1 BCLC 333; Kaytech International Plc., Re,(1999) 2 BCLC 351;
Secy. of State for Trade and Industry v. Kaczer,(1999) 2 BCLC 351.
COMMENTS
Legislative History.—The Companies Act, 1956 (1 of 1956).;—This section is based on recommendations of the
Company Law Committee reproduced below:
“Position of professional advisers.—In order to safeguard the position of professional advisers like solicitors,
auditors and others, and to limit their liability, we consider it desirable to incorporate a sub-section similar to sub-
section (2) of section 455 of the English Companies Act, 1948, with the proviso that this sub-section should apply
except where the Act otherwise prescribes. This sub-section provides that a person shall not be deemed to be a
person in accordance with whose directions or instructions the directors of a company are accustomed to act
merely by reason of the fact that the directors of the company act on advice given by him in a professional capacity.
Unless this immunity is given to professional advisers like solicitors and auditors, it will be difficult for them to carry
Page 2 of 3
on their professional work. In several sections of the Act (cf. our redraft of Section 86D —item 11 of the Addendum
to the Annexure) we have recommended that certain prohibitions or restrictions should be imposed on directors and
managing agents and on those persons in accordance with whose directions or instructions they are accustomed to
act, and that the penalties which we have proposed for directors and managing agents who contravene the
provisions of these sections should also extend to the latter category of persons. It is not our desire that
professional advisers should come within these restrictive or penal provisions of the Act merely because they have
tendered advice to directors and managers concerned and the latter have acted on such advice.” [ Report: para 30].
Object.—In England the necessity for making a similar provision in section 455(2) of the English Companies Act,
1948 arose because of two reasons:
(1) There are directors who are not shareholders. The shareholders nominate the directors and the directors
act according to the wishes of such shareholders. These directors are dummies, and for any wrong doings
the directors will be liable but not the shareholders who remain in the background.
(2) Often shares are held by the directors’ nominees. “Accustomed” to act imply more than a casual acting. It
means general conduct on the part of the directors indicating that they are in the habit of carrying out the
instructions or directions of the third persons concerned.
Person with whose instructions directors are accustomed to act to exclude professional advisers [ Section
7].—This is saving provision for professional advisers and provides that except where the Companies Act, 1956
expressly provides otherwise a person shall not be deemed to be 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.
Thus a lawyer, a chartered accountant, a company secretary in practice, technicians or other professional advisors
will not come within this deeming provision. But if any extra-professional instructions are given and the Board is
accustomed to act according to his advice or instructions he may be treated as an officer or director.
Sections 159, 160, 161, 162(2), 248(2)(c), 303(1)Explanation, 305, 307(10)(a) and (b)(i),308(4), 370 [ now section
372A], 538(3) and Schedule V in Part II contain prohibitions and restrictions, duties and responsibilities of persons
in accordance with whose directions or instructions the directors of the company are accustomed to act and
provisions for imposition of penalties for contraventions.
Officer [ Section 2(30)].—As per of clause (30) section 2, officer includes any director, manager or secretary 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. “Any person” is wide enough to include a stranger to the company. But, the
term ‘any person’ should be read ejusdem generis and cannot, therefore, include a person who has no business
connection with the company directly or indirectly. The term shall not include a friend of a director, his guru or his
wife though the director may be accustomed to act in accordance with their directions.91
The definition of officer in section 2(30) is inclusive, therefore, illustrative and not exhaustive and may include an
adviser to a company.92
Accustomed to act.—This term requires some sort of general conduct on part of the directors to show that they
are in the habit of carrying out instructions or directions of the third person concerned. It will depend upon the facts
of each case. A bank of the company had the power to dictate a course of action on the part of the company’s
directors about the way in which they would utilise the moneys received by the company. Where a bank nominated
two directors on the Board of a company it was held that the bank could be treated as a shadow director.93 A
banking company may be a shadow director of its subsidiary.94
Dummy Directors.—For recommendations of the Commission of Inquiry on the Administration of Dalmia-Jain

Companies (Vivian Bose Commission ) and the Daphtary-Sastri Committee see Comments under Section 2(30).
See also Comments under Director [ Section 2(13)].
De factoor Shadow Directors.—This term means a particular individual who holds himself out as a director
without any valid appointment. A Shadow Director is a person who exercises real control over the normal directors
of the Company. However, if a company controls its subsidiary then the holding company’s directors would be
automatically de facto or shadow directors of its subsidiary.1
Page 3 of 3
Even if one particular act could be regarded as amounting to a de facto directorship that would not mean that the
person concerned continues to act as such. A person may cease to be a de facto director by ceasing to act as
such. He has to be given the benefit of doubt whether his acts are of a different nature than those of a director.2
However, there cannot be any one decisive test. It is a matter of degree and all relevant facts have to be taken into
account and to be considered as to whether there was any holding out by the company of the individual as a
director, whether the individual used the title and had proper information such as management accounts on which
he has to base his decisions and as to whether he had to make major decisions. It will not be proper to initiate
misfeasance or disqualification proceedings unless the person was in a position to exercise the powers and
discharge his functions of a director.3
Director of Holding Company.—A Director of a Holding Company does not ipso facto become a director of a
subsidiary company. It is however to be shown that he was a director of the subsidiary or he was controlling the
subsidiary from behind and he was really a de facto or shadow director of the company.4
Officer who is in default [ Section 5].—The “officer who is in default” includes any person in accordance with
whose directions or instructions the Board of directors of the company is accustomed to act. [ Section 5(e)].
Persons liable under penal provisions.— See List or Statements showing Compoundable and Non-
compoundable Offences and officers and persons liable under various penal provisions of the Companies Act, 1956
(1 of 1956) in Comments under Section 621A. See also Comments under Section 5 and 629A.
91. Official Liquidator v. P.C. Dhadda, (1980) 50 Comp. Cas. 175 (Raj.). See detailed Comments under Section 2(30).
92. T.S. Satyanath v. J. Thomas & Co., (1985) 57 Comp. Cas. 648 (Cal.). See also Comments under Section 2(30) and
630.
93. A Company, Re,(1989) BCLC 13; Kuwait Asia Bank EC v. National Mutual Life Nominees Ltd.,(1990) 3 All ER 404
(PC); M.C. Becon Ltd., Re,(1990) BCLC 324.
94. Hydrodam (Corby) Ltd., Re,(1994) 2 BCLC 180; Tasbian Ltd., Re,(1993) 3 BCLC 297; Kuwait Asia Bank EC v. National
Mutual Life Nominees Ltd., All ER 404 (PC); PFTZM Ltd., Re,(1995) 2 BCLC 354; Secy. of State for Trade and Industry
v. Lang,(1996) 2 BCLC 324.
2. Secretary of State for Trade and Industry v. Lang,(1996) 2 BCLC 324; Secy. of State for Trade and Industry v.
Hickling,(1996) BCC 678; Sykes (Butchers) Ltd., Re,(1998) 1 BCLC 110.
3. Secy. of State for Trade and Industry v. Tjalle,(1998) 1 BCLC 333; Kaytech International Plc., Re,(1999) 2 BCLC 351;
Secy. of State for Trade and Industry v. Kaczer,(1999) 2 BCLC 351.
End of Document
Datta: Company Law
C R Datta
S. 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, 5[***] any establishment
carrying on either the same or substantially the same activity as that carried on by the head office of the
company, or 6[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.
5. The words “not being a banking or an insurance company,” omitted by the Companies (Amendment) Act, 1960 (65 of
1960), s. 5.
6. Substituted by Act 65 of 1960, s. 5, for “any production or manufacture”.
COMMENTS
Legislative History.— The Companies (Amendment) Act, 1960 (65 of 1960).—The Notes on clause 5 of the
Companies (Amendment) Bill, 1959 (37 of 1959) explained that the amendments proposed seek to harmonise the
provisions of section 8 with those of the new definition of “branch office” in section 2(9).
See also Legislative History under Section 2(9).
Branch Office [ Section 2(9)].—Branch office means any establishment (a) described as a branch by the
company, or (b) carrying on either the same or substantially the same activity as that carried on by the head office
of the company, or (c) engaged in any production, processing or manufacture, but does not include any
establishment specified in any order made by the Central Government under section 8.
The definition is related to sections 8, 209(2), 228 and 292.
Exemption [ Section 8].—This section gives power to the Central Government to declare any establishment which
though according to section 2(9) is a branch office shall not be treated as a branch for purposes of all or some
provisions of the Act.
Powers of the Central Government.—Earlier the powers and functions of the Central Government under section 8
had been delegated to the Company Law Boardvide Notification No. G.S.R. 443(E), dated 18-10-1972, this
Comments under Sections 10E and 637.
Branch Audit.—This provision is important in relation to audit. Its importance lies in the fact that branch office
Page 2 of 2
account need not be audited by the company’s auditor but may be done by another auditor or an accountant.
Usually the branch sends summarised returns at quarterly or shorter intervals. See detailed Comments and the
Companies (Branch Audit Exemption) Rules, 1961 under Section 228.
Department’s view.—If the establishment is not a branch office of the company, it will form part of the head office
and will be dealt with as such for audit and other purposes. [ Circular Letter No. 8/16/(1)/61-PR, dated 9-5-1961 :
Govt. of India publication, Clarifications and Circulars on Company Law, 1977 Edition, page 2].
5. The words “not being a banking or an insurance company,” omitted by the Companies (Amendment) Act, 1960 (65 of
1960), s. 5.
6. Substituted by Act 65 of 1960, s. 5, for “any production or manufacture”.
End of Document
Datta: Company Law
C R Datta
S. 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.
[LNIND 1962 SC 125]: (1962) Supp. 3 SCR 973. See also Comments under Section 76.
8. Jindal Vijayanagar Steel Ltd., In Re (2006) 129 Comp. Cas. 952 (CLB)
9. S. Ajit Singh v. DSS Enterprises Pvt. Ltd., (2002) 109 Comp. Cas. 597 (CLB).
10. Master Gautam R. Padival (Minor) v. Karnataka Theatres Ltd., (2000) 100 Comp. Cas. 124 (CLB). See also Comments
under Sections 41, 111A and 153.
11. Tarlok Chand Khanna v. Raj Kumar Kapoor, (1983) 54 Comp. Cas. 12 (Delhi).
12. Ayre v. Skelsey's Adamant Cement Co. Ltd.,(1905) 21 TLR 464 (CA).
13. Raghunandan Neotia v. Swadeshi Cloth Dealers Ltd., (1964) 34 Comp. Cas. 570 (Cal.) : AIR 1964 Cal. 347 [LNIND
1963 CAL 187]: 68 CWN 302. See also Comments under Section 41, 166 and 205.
14. Southern Roadways Ltd. v. CIT, (1981) 51 Comp. Cas. 513 (Mad.) (FB) : (1981) 130 ITR 545 [LNIND 1980 MAD 418]
(Mad.) (FB). See also Comments under Section 217.
16. Karnataka Bank Ltd. v. A.B. Datar, (1994) 79 Comp. Cas. 417 (Kar.). See also Comments under Section 188, 190 and
Section 284.
17. Amrit Kaur Puri v. Kapurthala Flour, Oil and General Mills Co. P. Ltd., (1984) 56 Comp. Cas. 194 (P&H). See also
19. Kare Pvt. Ltd., In Re, (1977) 47 Comp. Cas. 276 (Delhi) ; O.P. Gupta v. Shiv General Finance (P.) Ltd., (1977) 47
Comp. Cas. 279 (Delhi). See also Comments u/ s. 397, 398, 399, 433 and 439.
20. Bhadresh Kantilal Shah v. Magotteaux International, (2002) 111 Comp. Cas. 220 (CLB). See also Comments under
Sections 41, 397 and 398.
21. Mrs. Aruna Suresh Mehra v. Jifcon Tools Pvt. Ltd., (1998) 94 Comp. Cas. 329 (CLB). See detailed Comments under
22. Bennett, Coleman and Co. Ltd. v. UOI, (1977) 47 Comp. Cas. 92 (Bom.) (DB). See also Comments under Section 402.
Page 2 of 7
23. Globe Motors Ltd. v. Globe United Engg. and Foundry Co. Ltd., (1975) 45 Comp. Cas. 429 (Delhi) (DB). See also
24. Ramakrishna Industries P. Ltd. v. P.R. Ramakrishnan, (1988) 64 Comp. Cas. 425 (Mad.) (DB). See also Comments
433 and 439.
25. Maruti Ltd. v. B.G. Shirke & Co. Pvt. Ltd., (1981) 51 Comp. Cas. 11 (P&H) (DB). See also Comments Sections 439 and
446.
27. Arantee Manufacturing Corpn. v. Bright Bolts Pvt. Ltd., (1967) 37 Comp. Cas. 758 (Bom.) : AIR 1967 Bom. 440 [LNIND
1965 BOM 78]; Shalagram Jhajharia v. National Coal Co. Ltd., (1965) 35 Comp. Cas. 706 (Cal.) (DB) : (1965) 1 Comp.
LJ 112 (Cal.) (DB) : (1965) 69 CWN 369 (Cal.) (DB). See also Comments under Sections 13, 173, 204 and 294.
28. Cricket Club of India Ltd. v. Madhav L. Apte, (1975) 45 Comp. Cas. 574 (Bom.). See also Comments under Sections
169, 274 and 283.
29. Mohanlal Chandumall v. Punjab Co. Ltd., (1962) 32 Comp. Cas. 937 : AIR 1961 Punj. 485 .
30. Dwarka Prasad Agarwal v. Ramesh Chandra Agarwala, (2003) 117 Comp. Cas. 206 (SC) ; Yokogawa Blue Star Ltd. v.
Soffia Software Ltd., (2004) 119 Comp. Cas. 929 (Mad.). See detailed Comments under Sections 10, 10E and 10FB.
31. Dr. A. Lakshmanaswami Mudaliar v. L.I.C., (1963) 33 Comp. Cas. 420 (SC) : AIR 1963 SC 1185 [LNIND 1962 SC
532]: (1963) 1 Comp. LJ 248 (SC). See also Comments under Sections 13 and 26.
32. Kinetic Engg. Ltd. v. Sadhana Gadia, (1992) 74 Comp. Cas. 82 (CLB) ; Co-operative Central Bank Ltd. v. Additional
Industrial Tribunal, (1970) 40 Comp. Cas. 206 (SC) : AIR 1970 SC 245 [LNIND 1969 SC 152].
COMMENTS
Legislative History .— The Companies Act, 1956 (1 of 1956).—The Notes on clauses explained this section as
follows: “This is intended to make it clear that the provisions of this Act will override the memorandum, articles,
agreements executed by the company, and resolutions passed in general meeting by the company and resolutions
passed by the directors of the company, unless it is expressly provided otherwise in the Act itself. This clause will
apply whether the memorandum or articles, agreements or resolutions, be before or after coming into operation of
this Act.” [ Clause 7 of the Companies Bill, 1953 (46 of 1953)].
Act to have overriding effect. —This section provides that save as otherwise expressly provided in the Act (a) the
provisions of the Companies Act, 1956 shall override the memorandum, articles, agreements or resolutions, and (b)
any provision contained in the memorandum, articles, agreement or resolution shall, to the extent to which it is
repugnant to the provisions of the Act, become or be void.
The provisions of the Act will prevail in case there is a conflict between the Act and the company's Memorandum,
Articles, resolutions or agreements. 7
Act to override Memorandum .—In view of this overriding provision, the Memorandum of association of the
company should be carefully drafted.
See detailed Comments on Definition of Memorandum [ Section 2(28) ], Requirements with respect to
Memorandum [ Section 13 ], other provisions relating to Memorandum of Association [ Section 12-19. ]
Act to override Articles .—According to section 9(b) provisions contained in Articles of Association of the
company are void if these are repugnant to the provisions of the Companies Act, 1956. Decisions enunciating this
are as follows.
Memorandum of Association—Alteration .— Section 17 of the Companies Act, 1956 read with the CLB
Regulations, 1991 provides the procedural framework before the Company Law Board(CLB) [now the Central
Government (w.e.f. date to be notified )] considers a petition for alteration of the Memorandum. The procedural
framework is intended to take care of the interests of the shareholders, creditors and every other person or class of
persons whose interest will be affected by the alteration. The various provisions under the Act provide an
opportunity to the members of the company to air their views with regard to the Alteration of the Memorandum.
When the CLB is satisfied that the company has complied with the prescribed procedure it is only appropriate to
Page 3 of 7
presume that the interests of the concerned parties are taken due care of. A Clause in the Agreement which had
not been incorporated in the Memorandum of Association relating to shifting of the Registered Office with mutual
consent of the objector could not be forced on the company. Such a Clause when incorporated in the Articles of
Association would run against the spirit of Section 17 of the Act and consequently would become void by virtue of
Section 9 of the Act. Though the regulations did not prescribe that public notice shall be effected only after passing
a Special Resolution, yet in the spirit of the Regulations the public notice shall be effected only after passing the
Special Resolution. The objector had neither contended nor established that any prejudice was caused to any
interested person on account of defective publication. General Meetings cannot be conducted at the dictates of a
lone shareholder. The plea of loss of revenue to a State was irrelevant for the purpose of Section 17 of the Act. The
defective publication was to be condoned as the company gave public notice in two newspapers about the results
of the Postal Ballot and filing of the petition before the CLB under Section 17 of the Act. The Alteration in the
Memorandum of Association of the company as approved by the Special Resolution passed by Postal Ballot was
confirmed subject to certain conditions. 8
Articles against voting rights [ section 87(1)(b) ] .—Articles providing for full voting rights in case of partly paid
shares is against the provisions of section 87(1)(b) of the Act according to which the voting right on poll shall be in
proportion to one's share of the paid up capital of the company. Under section 9, any provision in the Articles which
is in derogation of the provisions of the Act is void. 9
Articles against free transferability of shares [ Section 111A ] .— Section 111A stipulates that the shares of a
public company are freely transferable and any stipulation in the articles contrary to the same, putting fetters on the
free transferability, would behit by the provisions of Section 9 of the Act. 10
Private Companies .— See detailed Comments on Restrictions in Articles on Transfer of Shares in case of Private
Companies under Sections 3 and 111.
Where Articles provided that all transfer of shares shall be sanctioned only with the unanimous decision of the
directors, which provision is preserved by section 111(1) of the Act. Such a provision being not inconsistent with
any provision of the Act is outside the reach of section 9 of the Act. A unanimous decision of the directors shall,
therefore, be necessary for a valid sanction of any transfer. 11
Articles against Special/Ordinary Resolution [ Section 189 ] .—An Article which provides that a Special
Resolution would be required to transact any business which is required by the Act to be transacted by Ordinary
Resolution would be invalid. 12
See detailed Comments and List of Matters requiring sanction of shareholders by Ordinary Resolution and Special
Resolution under Sections 189.
Declaration of dividend at EGM [ Sections 166 and 205 ] .—Provision in the Articles for declaration of dividend at
an Extraordinary General Meeting is void. 13
Authority to create a general reserve [ section 217 ] .—Having regard to the language of section 217(1)(b) of the
Act, the authority competent to create a general reserve under the Act, is only the general body, though the general
body acts on the proposals made by the Board of directors. In view of section 9, no clause contained in Table A of
Schedule I to the Companies Act, 1956 [e.g. , Model clause 87 of Table A], and no article contained in the Articles
of Association of any company can override the provisions contained in section 217 of the Act. 14
Articles against removal of directors [ Section 284 ] .— section 9 provides that provisions of the Act would have
effect, notwithstanding anything to the contrary contained in the Articles of the company. While the shareholders
have no power, apart from that given in the statute or the articles, to intervene in the management of the company's
affairs, section 284 was designed to enable them to control the directors by their removal. The only exceptions are
the directors appointed by the Central Government under section 408, the life directors holding office on April 1,
1952 and the nominee directors of financial institutions. Where as per Articles of the company (i) a permanent
director was to hold office for life unless he voluntarily resigned and (ii) if a permanent director died the person
nominated by him in his lifetime should be a permanent director in place of the deceased director. He could
nevertheless be removed, if the requirements of section 284 and of a valid meeting had been satisfied which
applies to all companies, public and private. 15
Page 4 of 7
section 9 provides that the provisions of the Act shall have an overriding effect on the Memorandum or Articles of a
company. Therefore, even where the Articles of the company make section 188 applicable to circulation of
members’ resolutions, section 188 would not apply to special notice under section 284 of the Act. 16
Articles cannot provide lesser quorum [ Section 287 ] .— Section 287(2) provides for a quorum of one-third of
the total strength of the directors or two directors, whichever is higher, but it does not forbid the company to fix a
higher number of directors to form a quorum. It provides the minimum number of directors. That means the
company in its Articles cannot provide a quorum of lesser number of directors than what is provided in Section
287(2). However, it can provide for a quorum of directors on the higher side. 17
Assignment of office by Director [ Section 312 ] .—Powers given by the Articles to the Managing Director to
appoint any person to be a Managing Director by Deed or Will is not hit by Section 312 and is valid. In Section 312
the word “assignment” does not mean “appointment”. 18
Articles against mismanagement or oppression [ Sections 397-399 ] .—The shareholders of a company have a
right to file a petition under section 397 or 398 of the Companies Act, 1956, for relief against mismanagement or
oppression if the provisions of Section 399 are satisfied. This right is a statutory right, which, by section 9 of the Act,
cannot be ousted by a provision in the Articles of Association of the company. An arbitration clause in the Articles of
the company cannot debar the Court's [the Company Law Board's (the Tribunal's)] jurisdiction in the matter of a
petition under sections 397 and 398 of the Companies Act, 1956.19
Arbitration .—The provisions of the Arbitration and Conciliation Act, 1996 are not repugnant to the provisions of
section 9 of the Companies Act, 1956. In view of the mandatory provisions of sections 8 and 45 of the Arbitration
and Conciliation Act, 1996 (26 of 1996), once the CLB [the Tribunal] is convinced that the matters governed in a
petition under sections 397 / 398 of the Companies Act, 1956 relate to or arise out of or in connection with an
arbitration agreement and that the reliefs appropriate to the facts of the case can be determined/granted by an
arbitrator, then, the CLB [the Tribunal] is bound to refer the matter to arbitration.20
Model Articles .—As Articles inconsistent with the provisions of the Act are void [ Section 9 ], Model Regulations in
Tables in Schedule I of the Companies Act, 1956 should be carefully studied while drafting Articles of Association of
a company. These have also been annotated in Comments under relevant Sections.
See detailed Comments under: Articles of Association : Articles prescribing regulations [ Section 26 ], Regulations
required in case of unlimited company, company limited by guarantee or private company limited by shares [
Section 27 ], Adoption and application of Table A in the case of companies limited by shares [ Section 28 ], Form of
articles in case of other companies [ Section 29 ], Form and signature [ Section 30 ], Alteration of articles by special
resolution [ Section 31 ], Schedule I containing Model Regulations in Tables A to F and Definition of Articles [
Section 2(2) ].
Private Company .—The provisions of section 270 of the Act are mandatory in nature. What section 273 provides
is that the mandatory provision is not applicable to a private limited company. However, if the shareholders of a
private company, in their own wisdom, provide in the Articles, qualification shares for a director, the same is not
repugnant to the provisions of section 273 and, therefore, the application of the provisions of section 9 does not
arise. 21
A Private Company (not being a subsidiary of a public company) is entitled to several privileges and exemptions
conferred on private companies by or under the Companies Act, 1956. These have been enumerated in Comments
under Section 3 and also annotated under respective Sections.
Save as otherwise expressly provided in the Act .—Certain sections of the Act expressly provide that the
provision of that section shall be subject to Articles of association of the company. In view of the opening words of
section 9 “save as otherwise expressly provided in the Act”, if the section expressly provides that the Articles will
prevail, then section 9 has no application. 22
Articles may provide for larger quorum [ Section 174 ] .—For instance, section 174 of the Act provides that
unless the Articles provide for a larger number, five members personally present in the case of a public company
and two members in the case of other companies shall be the quorum at the meeting of the company.
Winding up provisions subject to Articles [ Section 511 ] .— Sections 9 and 36 ensure the superiority of the
Page 5 of 7
provisions of the Act as against the Articles which apply to the working of a company as a going concern. Section
511 (which expressly provides unless the Articles otherwise provide) refers to those provisions of the Act which
apply during the winding up of the company. This is why the former override the Articles while the latter is subject to
the Articles. 23
Where the Articles of the company provided for passing of a special resolution by company for winding up in certain
contingencies. It was held that the Article was not opposed to section 433(f) and was not void under section 9 of the
Act. 24
Under section 34 Arbitration Act, 1940 (10 of 1940) [ now the Arbitration and Conciliation Act, 1996 (26 of 1996)], a
winding up petition cannot be stayed, but the arbitration agreement may be enforced against a party who in breach
of the agreement files a suit or makes a claim under section 446(2) of the Companies Act, 1956. The provisions of
section 9 of the Companies Act, 1956 do not in any way conflict with the provisions of section 446(2).25
Act to override Agreements or Resolutions .—An Agreement to pay a percentage of profit to the promoters and
the provision in the Articles embodying the same would be void being in contravention of the provisions of section
76(1)(a) of the Companies Act, 1956.26 Agreement for appointment of a sole selling agent without complying with
section 294(2) is void. 27
Provisions of this Act express or implied .—It is impossible to read the expression “provisions of this Act” in
section 9 as indicative merely of the express provisions and exclude the meanings which have to be read in the
provisions of the Act by the rule of necessary implication. In view of this any provision contained in the
memorandum, articles, agreement or resolution of a company which is repugnant to any provision of the Act,
whether such provision be expressly found in any section or is to be read in the said section by necessary
implication, would be clearly void. 28
As already explained, saving clause of section 9 on the contrary comes into operation only if the section otherwise
expressly provides, e.g. , Articles, etc., shall override the Act, only if relevant provision expressly so provides.
Companies Act to override other Acts .—An amendment of Articles of Association of the company in conformity
with other Acts, e.g. , section 9A of the Forward Contracts (Regulation) Act, 1952 (74 of 1952) would be void if it
contravenes the provisions of the Companies Act, 1956.29
Jurisdiction .—By sections 9, and 10 of the Companies Act, 1956 the jurisdiction of the Civil Court has not been
ousted. In matters of general law and where the jurisdiction of civil court has not been ousted by the Companies
Act, 1956, the civil court would have jurisdiction. The provisions of the Companies Act, 1956 as to jurisdiction would
override any provisions to the contrary contained in the Memorandum, Articles or any Agreement.30
See detailed Comments under Section 10 —Jurisdiction of Courts.
Memorandum and Articles binding [ Section 36(1) ] .—Subject to the provisions of this Act, the Memorandum
and Articles bind the company and members as if signed by the company and each member, and contain
covenants to observe all the provisions of the Memorandum and Articles. See detailed Comments under Section
36.
Construction of Memorandum and Articles.—Memorandum of Association has to be read together with the Articles
of Association, where the terms are ambiguous or silent. Articles may explain the Memorandum, but cannot extend
its scope. 31
Doctrine of ultra vires. — See detailed Comments under Section 13.
Articles or Memorandum contrary to other Acts .—The provisions in the Memorandum and Articles of a
company in conflict with or repugnant to provisions of any other Act, e.g. , the SCRA, 1956 or the SEBI Act, 1992,
etc., would be equally void, if they do not conflict with the Companies Act. Any provision in the Articles or
Memorandum contrary to any other law will be invalid ab initio . Section 22A of the Securities Contracts
(Regulation) Act, 1956 (42 of 1956)[nowsection 111A of the Companies Act, 1956 ] provides for free transferability
and registration of shares or listed securities of public companies. The Board of directors can refuse registration of
transfer of shares only on any of the three grounds enumerated in section 22A(3) of the SCRA [nowsection 111A of
Page 6 of 7
the Companies Act, 1956 ]. The Articles of the company cannot be treated on par with the provisions of the law.
Any provision in Articles which puts any restriction on the free transferability of shares would be a negation of the
expressed provisions of law and would be self-defeating.32
See also Interpretation and Construction: Generalia specialibus non derogant , i.e. , Special provisions or Acts
prevail over general, in Comments under Section 1.
Existing companies .—This section will apply whether the memorandum or articles, agreements or resolutions, be
before or after coming into operation of this Act. The only exception is provided in section 657 [Saving of certain
Tables under previous companies laws] which says that the Act shall not apply to companies existing at the
commencement of the Companies Act, 1956 (1 of 1956) which adopted Table A of Schedule I of the Companies
Act, 1913 (7 of 1913).
8. Jindal Vijayanagar Steel Ltd., In Re (2006) 129 Comp. Cas. 952 (CLB)
9. S. Ajit Singh v. DSS Enterprises Pvt. Ltd., (2002) 109 Comp. Cas. 597 (CLB).
12. Ayre v. Skelsey's Adamant Cement Co. Ltd.,(1905) 21 TLR 464 (CA).
13. Raghunandan Neotia v. Swadeshi Cloth Dealers Ltd., (1964) 34 Comp. Cas. 570 (Cal.) : AIR 1964 Cal. 347 [LNIND
1963 CAL 187]: 68 CWN 302. See also Comments under Section 41, 166 and 205.
14. Southern Roadways Ltd. v. CIT, (1981) 51 Comp. Cas. 513 (Mad.) (FB) : (1981) 130 ITR 545 [LNIND 1980 MAD 418]
(Mad.) (FB). See also Comments under Section 217.
16. Karnataka Bank Ltd. v. A.B. Datar, (1994) 79 Comp. Cas. 417 (Kar.). See also Comments under Section 188, 190 and
Section 284.
17. Amrit Kaur Puri v. Kapurthala Flour, Oil and General Mills Co. P. Ltd., (1984) 56 Comp. Cas. 194 (P&H). See also
19. Kare Pvt. Ltd., In Re, (1977) 47 Comp. Cas. 276 (Delhi) ; O.P. Gupta v. Shiv General Finance (P.) Ltd., (1977) 47
Comp. Cas. 279 (Delhi). See also Comments u/ s. 397, 398, 399, 433 and 439.
21. Mrs. Aruna Suresh Mehra v. Jifcon Tools Pvt. Ltd., (1998) 94 Comp. Cas. 329 (CLB). See detailed Comments under
22. Bennett, Coleman and Co. Ltd. v. UOI, (1977) 47 Comp. Cas. 92 (Bom.) (DB). See also Comments under Section 402.
23. Globe Motors Ltd. v. Globe United Engg. and Foundry Co. Ltd., (1975) 45 Comp. Cas. 429 (Delhi) (DB). See also
24. Ramakrishna Industries P. Ltd. v. P.R. Ramakrishnan, (1988) 64 Comp. Cas. 425 (Mad.) (DB). See also Comments
433 and 439.
25. Maruti Ltd. v. B.G. Shirke & Co. Pvt. Ltd., (1981) 51 Comp. Cas. 11 (P&H) (DB). See also Comments Sections 439 and
446.
27. Arantee Manufacturing Corpn. v. Bright Bolts Pvt. Ltd., (1967) 37 Comp. Cas. 758 (Bom.) : AIR 1967 Bom. 440 [LNIND
1965 BOM 78]; Shalagram Jhajharia v. National Coal Co. Ltd., (1965) 35 Comp. Cas. 706 (Cal.) (DB) : (1965) 1 Comp.
LJ 112 (Cal.) (DB) : (1965) 69 CWN 369 (Cal.) (DB). See also Comments under Sections 13, 173, 204 and 294.
Page 7 of 7
28. Cricket Club of India Ltd. v. Madhav L. Apte, (1975) 45 Comp. Cas. 574 (Bom.). See also Comments under Sections
169, 274 and 283.
29. Mohanlal Chandumall v. Punjab Co. Ltd., (1962) 32 Comp. Cas. 937 : AIR 1961 Punj. 485 .
30. Dwarka Prasad Agarwal v. Ramesh Chandra Agarwala, (2003) 117 Comp. Cas. 206 (SC) ; Yokogawa Blue Star Ltd. v.
Soffia Software Ltd., (2004) 119 Comp. Cas. 929 (Mad.). See detailed Comments under Sections 10, 10E and 10FB.
32. Kinetic Engg. Ltd. v. Sadhana Gadia, (1992) 74 Comp. Cas. 82 (CLB) ; Co-operative Central Bank Ltd. v. Additional
Industrial Tribunal, (1970) 40 Comp. Cas. 206 (SC) : AIR 1970 SC 245 [LNIND 1969 SC 152].
End of Document
Datta: Company Law
C R Datta
S. 10. Jurisdiction of Courts.

—
(1) The Court having jurisdiction under this Act shall be—
(a) the High Court having jurisdiction in relation to the place at which the registered office of the
company concerned is situate, except to the extent to which jurisdiction has been conferred on any
District Court or District Courts subordinate to that High Court in pursuance of sub-section (2); and
(b) where jurisdiction has been so conferred, the District Court in regard to matters falling within the
scope of the jurisdiction conferred, in respect of companies having their registered offices in the
district.
(2) The Central Government may, by notification in the Official Gazette and subject to such restrictions,
limitations and conditions as it thinks fit, empower any District Court to exercise all or any of the
jurisdiction conferred by this Act upon the Court, not being the jurisdiction conferred—
(a) in respect of companies generally, by sections 237, 391, 394, 395 and 397 to 407, both inclusive;
(b) in respect of companies with a paid-up share capital of not less than one lakh of rupees, by Part
VII (sections 425 to 560) and the other provisions of this Act relating to the winding up of
companies.
(3) For the purposes of jurisdiction to wind up companies, the expression “registered office” means the
place which has longest been the registered office of the company during the six months immediately
preceding the presentation of the petition for winding up.
33. The jurisdiction of the High Court under Sections 237 and 391 to 409 was transferred to and vested in the Company
Law Board by the Companies (Amendment) Act, 1988 (31 of 1988) (w.e.f. 31-5-1991). Now it has been transferred to
and vested in “the Tribunal (NCLT)” by the Companies (Second Amendment) Act, 2002 (11 of 2003) on its constitution
under Section 10FB. See detailed Comments under Sections 10E, 10FB, 237 and 391 to 409.
34. Now the jurisdiction of the High Court under Section 425 to 560 has been transferred to and vested in “the Tribunal
(NCLT)” by the Companies (Second Amendment) Act, 2002 (11 of 2003) on its constitution under Section 10FB. See
Comments under Ss. 10FB and 425 to 560.
36. Madhuban Pvt. Ltd. v. Narain Dass Gokul Chand, (1971) 41 Comp. Cas. 685 (Delhi). The jurisdiction of High Court
under Sections 425 to 560 has been vested in “the Tribunal” and Sections 435 to 438 relating to Transfer of winding up
proceedings to District Court have been omitted by the Companies (Second Amendment) Act, 2002 (11 of 2003) ibid.
* The jurisdiction of Court under Sections 113, 118, 141, 144, 163, 196 and 219 (which was delegated vide this
Notification to District Court) was transferred to and vested in the CLB by the Companies (Amendment) Act, 1988 (31 of
1988) (w.e.f. 31-5-1991). Now the same has been conferred on the “Central Government” by the Companies (Second
Amendment) Act, 2002 (11 of 2003). See detailed Comments under respective Sections and Sections 10E and 10FB.
Page 2 of 72
‡ The jurisdiction of Court under Sections 304 and 307 (earlier delegated to District Court) has been transferred to and
vested in the Company Law Board [ now the Central Government or Tribunal, as the case may be] ibid.
37. The reference to Managing Agents and Secretaries and Treasurers omitted by the Companies (Amendment) Act, 2000
(53 of 2000) (w.e.f. 13-12-2000). The system of managing agency had already been abolished videsection 324A of the
Companies Act, 1956 (1 of 1956), as inserted by the Companies (Amendment) Act, 1969 (17 of 1969), s. 4 (w.e.f. 3-4-
1970).
† The jurisdiction of Court under Section 614 (earlier delegated to District Court) has been transferred to and vested in
the Company Law Board [ now the Tribunal] ibid.
38. Vithalrao Narayanrao Patil v. Maharashtra State Seeds Corporation Ltd., (1990) 68 Comp. Cas. 608 (Bom.); Hirendra
Bhadra v. Triton Engg. Co. P. Ltd.,(1975-76) 80 CWN 242 (Cal.). But see Comments under “Civil Courts when may
exercise jurisdiction” in later paragraphs.
39. India Electric Works Ltd., In re, (1969) 1 Comp. LJ 195 (Cal.) : AIR 1970 Cal. 398 [LNIND 1968 CAL 159].
40. Maharaj Kumar Mahendra Singh v. Lake Palace Hotels and Motels P. Ltd., (1985) 58 Comp. Cas. 805 (Raj.). See also
Comments under Sections 10E, 10FB, 163 and 209.
41. Himachal Terpene Products (P.) Ltd. v. ROC, (1976) 46 Comp. Cas. 200 (HP). Powers of the Court under Section 141
have been vested in the Company Law Board (CLB) [ now the Central Government]. See Comments under Section
141.
42. Alleppey Chit Fund Pvt. Ltd., In re, (1961) 31 Comp. Cas. 641 (Ker.); Madhula Devappa Manere v. Jay Maharashtra
Gul and Khandasari Udyog Ltd., (2002) 109 Comp. Cas. 403 (Bom.). The jurisdiction of High Court under sections 425
to 560 has been vested in “the Tribunal” and Sections 435 to 438 relating to Transfer of winding up proceedings to
District Court have been omitted by the Companies (Second Amendment) Act, 2002 (11 of 2003).
43. Thadani Leasing v. Allahabad Patrika Pvt. Ltd., (2002) 111 Comp. Cas. 754 (All.). Ashok Fashions Ltd. v. Meghdoot
Acid and Chemicals, (1998) 91 Comp. Cas. 655 (Guj.) (DB). The jurisdiction of the High Court under Sections 433 and
484, etc., has since been transferred to and vested in “the Tribunal” by the Companies (Second Amendment) Act, 2002
(11 of 2003). See detailed Comments under Sections 10FB, 433, 434, 439 and 484.
44. Kalpana Trading v. N.C.L. Industries Ltd., (1996) 85 Comp. Cas. 946 (Orissa).
45. Vimal Kumar v. Bhilwara Wooltax Ltd., (1996) 86 Comp. Cas. 286 (Raj.).
46. G.T.C. Industries Ltd. v. Parasrampuria Trading and Finance (P) Ltd., (2001) 104 Comp. Cas. 368 (All.) : (1999) 34
CLA 350 (All.).
47. Prakash Timbers Pvt. Ltd. v. Smt. Sushma Shingla, (1997) 89 Comp. Cas. 770 (All.) (DB); Minoo H. Mody v. Hemant D.
Vakil, (1997) 89 Comp. Cas. 456 (Bom.) (DB); Tin Plates Dealers Association Pvt. Ltd. v. Satish Chandra Sanwalka,
(2002) 108 Comp. Cas. 295 (Cal.). See detailed Comments under Sections 10, 10E, 10F, 10FA and 10FB-10GF.
48. Dhulabhai v. State of M.P.,AIR 1969 SC 78 [LNIND 1968 SC 99]: (1968) 3 SCR 662 [LNIND 1968 SC 99] : (1969) 22
STC 416 (SC); Union of India v. Tarachand Gupta & Bros.,AIR 1971 SC 1558 [LNIND 1971 SC 79].
49. Dwarka Prasad Agarwal v. Ramesh Chandra Agarwala, (2003) 117 Comp. Cas. 206 (SC). See detailed Comments
hereinafter. See also Comments under Sections 10E, 10FB and 10GB.
50. Dwarka Prasad Agarwal v. Ramesh Chandra Agarwala, (2003) 117 Comp. Cas. 206 (SC) : AIR 2003 SC 2996 : (2005)
6 SCC 220. See also Comments under Sections 10E, 10FB and 10GB.
51. R. Prakasam v. Sree Narayana Dharma Paripalana Yogam, (1980) 50 Comp. Cas. 611 (Ker.); Niranjan Singh v.
Edward Ganj Public Welfare Asscn., (1981) 51 Comp. Cas. 475 (P&H) (DB); Panipat Woollen and General Mills Co.
Ltd. v. R.L. Kaushik, (1969) 39 Comp. Cas. 249 (P&H); Joseph v. Jose, (1964) 34 Comp. Cas. 391 (Ker.); Maharaja
Exports v. Apparels Exports Promotion Council, (1986) 60 Comp. Cas. 353 (Delhi); Prakash Roadlines Ltd. v. Vijaya
Kumar Narang, (1995) 83 Comp. Cas. 569 (Kar.); Star Tile Works Ltd. v. N. Govindan & Co.,AIR 1959 Ker. 254; Inter
Sales v. Reliance Industries Ltd., (2002) 108 Comp. Cas. 680 (Cal.) (DB); Marina World Shipping Corporation Ltd. v.
Jindal Exports P. Ltd., (2004) 122 Comp. Cas. 399 (Delhi). See also Comments under Sections 41, 399, 433 and
respective Sections.
52. Foss v. Harbottle, (1843) 2 Hare 461 : (1843) 67 ER 189. See also Comments u/s. 41.
53. Avanthi Explosives P. Ltd. v. Principal Subordinate Judge, (1987) 62 Comp. Cas. 301 (AP); Dr. T.M. Paul v. City
Hospital (Pvt.) Ltd., (1999) 97 Comp. Cas. 216 (Ker.) (DB). See also Comments under Sections 41 and 283.
55. ICICI Ltd. v. Parasrampuria Synthetics Ltd., (1998) 92 Comp. Cas. 238 (Delhi). See detailed Comments under Section
41.
Page 3 of 72
56. Poonamchand Kothari v. Rajasthan Tube Mfg. Co. Ltd., (1996) 87 Comp. Cas. 842 (Raj.). See also Comments under
Sections 10E, 10FB, 10GB, 61, 63 and 73.
57. Ammonia Supplies Corporation (P.) Ltd. v. Modern Plastic Containers Pvt. Ltd., (1998) 94 Comp. Cas. 310 (SC);
Gordon Woodroffe and Co. Ltd., U.K. v. Gordon Woodroffe Ltd., Chennai, (1999) 97 Comp. Cas. 582 (Mad.); T.G.
Veera Prasad v. Sree Rayalaseema Alkalies and Allied Chemicals Ltd., (1999) 98 Comp. Cas. 806 (AP); Arun Kumar
Mallick v. Hindustan Lever Ltd., (2002) 112 Comp. Cas. 464 (CLB). See also Comments under Sections 2(11), 10E,
10FB, 10GB, 84, 111(7), 111A(7), 397 and 398.
58. Ammonia Supplies Corporation (P.) Ltd. v. Modern Plastic Containers Pvt. Ltd., (1998) 94 Comp. Cas. 310 (SC). See
also Comments under Sections 10, 10E, 10FB and 10GB.
59. Shirish Finance and Investment P. Ltd. v. M. Sreenivasulu Reddy, (2002) 109 Comp. Cas. 913 (Bom.) (DB). See also
Comments under Sections 10 and 55A.
60. Inter Sales v. Reliance Industries Ltd., (2002) 108 Comp. Cas. 680 (Cal.) (DB). See also Comments under Sections
2(11), 10E, 10FB, 10GB and 84.
61. Tej Prakash S. Dangi v. Coromandal Pharmaceuticals Ltd., (1997) 89 Comp. Cas. 270 (AP). See also Public
Passenger Service Ltd. v. M.A. Khadar, (1966) 36 Comp. Cas. 1 (SC) : AIR 1966 SC 489 [LNIND 1965 SC 209]:
(1966) 1 Comp. LJ 1 (SC). See also Comments under Section 100, 111 and 111A.
62. M.G. Doshit v. Reliance Petrochemicals Ltd., (1994) 79 Comp. Cas. 830 (Guj.).
63. Ravinder Kumar Jain v. Punjab Registered (Iron and Steel) Stockholders Association Ltd., (1978) 48 Comp. Cas. 401
(P&H); R. Prakasam v. Sree Narayana Dharma Paripalana Yogam, (1980) 50 Comp. Cas. 611 (Ker.); Paragaon Utility
Financiers Pvt. Ltd. v. Punjab Iron and Steel Co. Pvt. Ltd., (1985) 57 Comp. Cas. 738 (P&H); Niranjan Singh v. Edward
Ganj Public Welfare Association, (1981) 51 Comp. Cas. 475 (P&H) (DB). See detailed Comments under Sections 166,
171 and 186.
64. Dr. Ashok Mathew Zacharia v. Majestic Kuries and Loans P. Ltd., (1987) 62 Comp. Cas. 865 (Ker.); R. Prakasam v.
Sree Narayana Dharma Paripalana Yogam, (1980) 50 Comp. Cas. 611 (Ker.); Kishore Y. Patel v. Patel Engg. Co. Ltd.,
(1994) 79 Comp. Cas. 53 (Bom.); T.M. Menon v. Universal Film (India) Pvt. Ltd., (1982) 52 Comp. Cas. 371 (Mad.);
Coal Marketing Co. of India Pvt. Ltd., In re, (1967) 37 Comp. Cas. 720 (Cal.) : AIR 1968 Cal. 119 [LNIND 1967 CAL
39]: 71 CWN 449; Nungambakkam Dhanarakshaka Saswatha Nidhi Ltd. v. ROC, (1972) 42 Comp. Cas. 632 (Mad.); R.
Rangachari v. S. Suppiah, (1975) 45 Comp. Cas. 641 (SC) : AIR 1976 SC 73 [LNIND 1975 SC 340]. See detailed
Comments under Sections 10FB, 166 and 186.
65. Prakash Roadlines Ltd. v. Vijaya Kumar Narang, (1995) 83 Comp. Cas. 569 (Kar.); Dhulabhai v. State of M.P.,AIR
1969 SC 78 [LNIND 1968 SC 99]: (1968) 3 SCR 662 [LNIND 1968 SC 99] : (1969) 22 STC 416 (SC); Public
(1966) 1 Comp. LJ 1 (SC); R.R. Rajendra Menon v. Cochin Stock Exchange Ltd., (1990) 69 Comp. Cas. 256 (Ker.)
(DB); Niranjan Singh v. Edward Ganj Public Welfare Asscn., (1981) 51 Comp. Cas. 475 (P&H) (DB). See detailed
Comments under Sections 257 and 284.
66. Maharaja Exports v. Apparels Exports Promotion Council, (1986) 60 Comp. Cas. 353 (Delhi).
67. T.L. Arora v. Ganga Ram Agarwal (No. 1), (1988) 63 Comp. Cas. 736 (Delhi); Star Tile Works Ltd. v. N. Govindan &
Co.,AIR 1959 Ker. 254. See also Comments under Sections 176.
68. T.L. Arora v. Ganga Ram Agarwal (No. 2), (1988) 63 Comp. Cas. 739 (Delhi); T.L. Arora v. Ganga Ram Agarwal (No.
4), (1988) 63 Comp. Cas. 871 (Delhi).
69. C. Shanmugham v. N. Radhakrishnan, (2000) 101 Comp. Cas. 148 (Mad.).
70. Vijay Kumar Gupta v. Ram Naresh Singh, (2004) 122 Comp. Cas. 771 (Patna). See also Comments under Sections
10E, 10FB and 10GB.
71. Vijay Kumar Gupta v. Ram Naresh Singh, (2004) 122 Comp. Cas. 771 (Pat.).
72. Spices Valley Estate Ltd. v. TC Forexpress Ltd., (2007) 137 Comp. Cas. 364 (Mad.).
73. Dr. T.M. Paul v. City Hospital (Pvt.) Ltd., (1999) 97 Comp. Cas. 216 (Ker.) (DB); Avanthi Explosives P. Ltd. v. Principal
Subordinate Judge, (1987) 62 Comp. Cas. 301 (AP). See also Comments under Section 283.
74. Dr. T.M. Paul v. City Hospital (Pvt.) Ltd., (1999) 97 Comp. Cas. 216 (Ker.) (DB).
75. Avanthi Explosives P. Ltd. v. Principal Subordinate Judge, (1987) 62 Comp. Cas. 301 (AP).
76. K. Radhakrishnan v. Thirumani Asphalts & Felts P. Ltd., (1998) 91 Comp. Cas. 31 (Mad.).
77. K. Venkat Rao v. Rockwool (India) Ltd., (2002) 108 Comp. Cas. 494 (AP) (FB).
78. Thiruvalluvar Velanmai Kazhagam P. Ltd. v. M.K. Seethai Achi, (1988) 64 Comp. Cas. 304 (Mad.).
Page 4 of 72
79. CDS Financial Services (Mauritius) Ltd. v. BPL Communications Ltd., (2004) 121 Comp. Cas. 374 (Bom.) (DB). See
detailed Comments under Sections 397 to 409.
80. K.K. Modi v. K.N. Modi, (1998) 92 Comp. Cas. 30 (SC).
81. Cook v. Deeks,(1916) 1 AC 554 : 85 LJ PC 161 : 114 LT 636 (PC).
82. Greenhalgh v. Arderne Cinemas Ltd., (1951) 1 Ch. 286 : (1950) 2 All ER 1120 : 94 SJ 855 (CA).
83. Marikar (Motors) v. M.I. Ravikumar, (1982) 52 Comp. Cas. 362 (Ker.). See also Comments under Sections 41, 111A,
397, 398, 399, 408 and 543.
84. Asansol Electric Supply Co. Ltd. v. Chunilal Daw,AIR 1972 Cal. 19 [LNIND 1971 CAL 60](DB).
85. Cotter v. National Union of Seamen, (1929) 2 Ch. 58 : 98 LJ Ch. 323 : 141 LT 178.
86. Baillie v. Oriental Telephone and Electric Co. Ltd., (1915) 1 Ch. 503 (CA) : 84 LJ Ch. 409 : 112 LT 569 : 31 TLR 140
(CA). See also Comments under Section 41.
87. Heyting v. Dupont,(1964) 2 All ER 273 : (1964) 1 WLR 843 : 108 SJ 277 (CA).
88. Pender v. Lushington, (1877) 6 Ch.D. 70 : 46 LJ Ch. 317 : 25 WR Dig. 64. See detailed Comments under Section 41.
See also Comments under Individual wrongs hereinbefore.
89. Ratenavelumani Chettiar v. Manickkavelu Chettiar,AIR 1951 Mad. 542 [LNIND 1950 MAD 106]; Kaliappa Nadar v.
Kathayee Cotton Mills Ltd., (1964) 34 Comp. Cas. 947 (Ker.) (DB).
90. Mahaliram Santhelia v. Fort Gloster Jute Manufacturing Co. Ltd., (1954) 24 Comp. Cas. 311 (Cal) : AIR 1955 Cal. 132
[LNIND 1954 CAL 69]: 58 CWN 715. See also Comments under Section 183 and Schedule I, Table A, Regulation 60.
91. Prakash Roadlines Ltd. v. Vijaya Kumar Narang, (1995) 83 Comp. Cas. 569 (Kar.); Avanthi Explosives P. Ltd. v.
Principal Subordinate Judge, (1987) 62 Comp. Cas. 301 (AP); L.I.C. v. Escorts Ltd., (1986) 59 Comp. Cas. 548 (SC) :
AIR 1986 SC 1370 [LNIND 1985 SC 362]. See detailed Comments in earlier paragraph “Scope of Section 10”. See
also Comments under Section 41.
92. Rattan Chand Jain v. Uberoi Ltd., (1998) 93 Comp. Cas. 906 (Delhi) (DB).
93. Kishore Y. Patel v. Patel Engg. Co. Ltd., (1994) 79 Comp. Cas. 53 (Bom.) : AIR 1992 Bom. 114 [LNIND 1991 BOM
308]. See fuller discussion in earlier paragraph under Meetings. See also Comments under Sections 186, 643 and Rule
9 of the Companies (Court) Rules, 1959.
94. Morgan Stanley Mutual Fund v. Kartick Das, (1994) 81 Comp. Cas. 318 (SC); Bloom Dekor Ltd. v. Subhash Himatlal
Desai, (1995) 82 Comp. Cas. 591 (SC). See also Comments under Sections 10GB, 56, 62, 65, 69, 72 and 73.
95. Jyoti Bhusan Mukherjee v. Eastern Tea Co. Ltd., (1983) 53 Comp. Cas. 722 (Cal.); Suryanarayana Paper & Boards P.
Ltd. v. V. Padmakumar, (1997) 88 Comp. Cas. 684 (Mad.).
96. Pandian Graphites (India) Ltd. v. Lovvuri Lakshmi, (1996) 87 Comp. Cas. 323 (AP).
1. Vatsa Industries Ltd. v. Shankerlal Saraf, (1996) 87 Comp. Cas. 918 (SC).
2. Patel Roadways Ltd. v. Prasad Trading Co., (1992) 74 Comp. Cas. 11 (SC).
3. B.B. Verma v. National Projects Construction Corpn. Ltd., (1999) 5 Comp. LJ 274 (Delhi).
4. Jyoti Bhusan Mukherjee v. Eastern Tea Co. Ltd., (1983) 53 Comp. Cas. 722 (Cal.).
5. Bhankerpur Simbhaoli Beverages P. Ltd. v. Sarabhjit Singh, (1996) 86 Comp. Cas. 842 (P&H).
6. R.S.D.V. Finance Co. Pvt. Ltd. v. Shree Vallabh Glass Works Ltd., (1993) 78 Comp. Cas. 640 (SC). See also
7. SEBI v. Alka Synthetics Ltd., (1999) 95 Comp. Cas. 772 (Guj.) (DB). See detailed Comments under Section 55A of the
(2003) 113 Comp. Cas. 1 (SC). See also Comments under Sections 2(12), 2(46), 10, 55A, 69 and 81.
9. Estmanco (Kilner House) Ltd. v. Greater London Council,(1982) 1 All ER 437 : (1982) 1 WLR 2 : (1981) 125 SJ 790;
Prudential Assurance Co. Ltd. v. Newman Industries Ltd. (No. 2), (1982) Ch. 204 (CA) : (1982) 1 All ER 354 : (1982) 2
WLR 31 (CA). See fuller discussion in Comments under Sections 41, 399 and 408.
10. BSN (UK) Ltd. v. Janardan Mohandas Rajan Pillai, (1996) 86 Comp. Cas. 371 (Bom.); Giles v. Rhind,(2002) 4 All ER
977. See also Comments under Sections 34, 41, 153B and 187C.
11. Pavlides v. Jensen, (1956) Ch. 565 : (1956) 2 All ER 518 : (1956) 3 WLR 224. See also Comments under Section 41.
12. Birch v. Sullivan,(1958) 1 All ER 56 : (1957) 1 WLR 1247: (1957) 101 SJ 974. See also Comments under Section 69.
Page 5 of 72
14. Daniels v. Daniels, (1978) Ch. 406 : (1978) 2 All ER 89 : (1978) 2 WLR 73.
15. For elaborate discussion see Comments under Section 41.
16. Southern Steelmet and Alloys Ltd. v. Lakshmi Nivas Mittal, (1986) 60 Comp. Cas. 132 (Kar.).
17. Fargo Ltd. v. Godfroy,(1986) 3 All ER 279 : (1986) 1 WLR 1134 : (1986) BCLC 370. See also Comments under Section
398.
18. Vijay M. Shah v. Flex Industries Ltd., (2001) 103 Comp. Cas. 1063 (Delhi). See also Comments under Sections 81, 397
and 398.
19. Mahabir Prasad Jalan v. Bajrang Prasad Jalan, (2001) 104 Comp. Cas. 574 (Cal.) (DB). See also Comments under
Sections 397, 398, 406 and Schedule XI.
20. Hindustan Petroleum Corpn. Ltd. v. Sardar Chand, (1991) 71 Comp. Cas. 257 (P&H).
21. Swadharma Swarajya Sangha v. Indian Commerce and Industries Co. Pvt. Ltd., (1999) 98 Comp. Cas. 151 (Mad.)
(DB).
22. Ferruccio Sias v. Jai Manga Ram Mukhi, (1998) 93 Comp. Cas. 750 (Delhi); Nibro Ltd. v. National Insurance Co. Ltd.,
(1991) 70 Comp. Cas. 388 (Delhi). See also Comments under Sections 2(24), 2(26) and 291.
23. Ganga Saran and Sons Pvt. Ltd. v. Sachdeva Offset and Packing Industries Pvt. Ltd., (1999) 98 Comp. Cas. 351
(Delhi) (DB); Bell South International v. Crompton Greaves Ltd., (2001) 106 Comp. Cas. 437 (Mad.); United Bank of
India v. Naresh Kumar, (1997) 90 Comp. Cas. 329 (SC).
24. Danish Mercantile Co. Ltd. v. Beaumont, (1951) Ch. 680 : (1951) 1 All ER 925 (CA); Ward (Alexander) & Co. Ltd. v.
Samyang Navigation Co. Ltd.,(1975) 2 All ER 424 (HL) : (1975) 1 WLR 673 : (1975) 2 Lloyd's Rep. 1 (HL). See also
25. P.S. Offshore Inter Land Services Pvt. Ltd. v. Bombay Offshore Suppliers and Services Ltd., (1992) 75 Comp. Cas. 583
(Bom.). See also Comments under Sections 293, 397 and 398.
26. BSN (UK) Ltd. v. Janardan Mohandas Rajan Pillai, (1996) 86 Comp. Cas. 371 (Bom.). See also Comments under
Sections 34, 41, 153B, 187C and 399.
27. U. Suresh Mallya v. Okazaki Sekizai Co. Ltd., (2001) 106 Comp. Cas. 354 (Kar.).
28. Mamata Papers Pvt. Ltd. v. State of Orissa, (2000) 99 Comp. Cas. 294 (Orissa); Nagpur Electric Light and Power Co.
Ltd. v. K. Shreepathirao,AIR 1958 SC 658 [LNIND 1958 SC 48]; Perumal Koundan v. Tirumalarayapuram Janankoola
Dhanasekhara Sanka Nidhi,AIR 1918 Mad. 362 [LNIND 1917 MAD 308]. See also Comments under Section 34.
29. Union Bank of India v. Khader International Construction, (2001) 105 Comp. Cas. 856 (SC). See also Comments under
Section 34.
30. Order 7, Rule 1, Order 29, Rule l, Code of Civil Procedure, 1908;Babulal Choukhani v. Caltex (India) Ltd.,AIR 1967 Cal.
205 [LNIND 1965 CAL 195]: 71 CWN 458. See also Comments under Section 599.
31. Pioneer Protective Glass Fibre (P.) Ltd. v. Fibre Glass Pilkington Ltd., (1986) 60 Comp. Cas. 707 (Cal.) (DB). See
detailed Comments under Section 21 and 23.
32. Mehdi Mandil v. Trans Sharjah Aviation Ltd., (1987) 62 Comp. Cas. 606 (Bom.).
33. T.L. Arora v. Ganga Ram Agarwal (No. 3), (1988) 63 Comp. Cas. 775 (Delhi); See also National Textile Corpn. (U.P.)
Ltd. v. Swadeshi Polytex Ltd., (1998) 93 Comp. Cas. 814 (Delhi).
34. Forasol v. Oil and Natural Gas Commission, (1986) 60 Comp. Cas. 286 (SC) : AIR 1984 SC 241 [LNIND 1983 SC
313].
35. Worldwide Agencies P. Ltd. v. Mrs. Margaret T. Desor, (1990) 67 Comp. Cas. 607 (SC) : AIR 1990 SC 737 [LNIND
1989 SC 628]; Arjun Tukaram Shetgaonkar v. Smt. Urmila Vaikunth Desai, (2001) 105 Comp. Cas. 722 (Bom.). See
also Comments under Sections 2(27), 41, 108 and 398.
36. Telesound India Ltd., In re, (1983) 53 Comp. Cas. 926 (Delhi); Mafatlal Industries Ltd., In re, (1997) 90 Comp. Cas. 247
(Guj.) (DB). See detailed Comments under Section 391-395.
37. Memtec Ltd. v. Lunarmech, (2001) 103 Comp. Cas. 1078 (Delhi). See detailed Comments under Section 34 and 394.
38. S.L.M. Industries Ltd. v. Rajendra Electrical Inds. Ltd., (2007) 135 Comp. Cas. 243 (Guj.) (DB); BOI Finance Ltd. v.
Arvin Oxygen P. Ltd., (2006) 134 Comp. Cas. 626 (Guj.); Registrar of Companies v. Kamal Infosys Ltd., (2006) 133
Comp. Cas. 455 (All.) (DB).
39. Data Computer Services v. Northern Digital Exchanges Ltd., (1998) 92 Comp. Cas. 362 (P&H). See also Comments
under Section 10FB, 424A-424L, 433, 434 and 439.
Page 6 of 72
40. Gopalpur Tea Co. Ltd. v. Peshok Tea Co. Ltd., (1982) 52 Comp. Cas. 239 (Cal.) (DB); B. Mookerjee v. State Bank of
India, (1993) 76 Comp. Cas. 292 (Cal.) (DB). See detailed Comments under Section 34 and 443.
41. Jyoti Bhushan Gupta v. Banaras Bank Ltd., (1961) 31 Comp. Cas. 727 (SC) : AIR 1962 SC 403 [LNIND 1961 SC 330]:
(1962) Supp. 1 SCR 73. The jurisdiction of High Court under section 470 has been transferred to and vested in “the
Tribunal” by the Companies (Second Amendment) Act, 2002 (11 of 2003) to be constituted under Section 10FB. See
42. Khosla Fans (India) P. Ltd., In re, (1983) 53 Comp. Cas. 858 (P&H) (DB); S.V. Kondaskar, Official Liquidator v. V.M.
Deshpande, ITO, (1972) 42 Comp. Cas. 168 (SC) : AIR 1972 SC 878 [LNIND 1972 SC 3]: (1972) 83 ITR 685 (SC).
43. Sudarsan Chits (I.) Ltd. v. O. Sukumaran Pillai, (1985) 58 Comp. Cas. 633 (SC) : AIR 1984 SC 1579 [LNIND 1984 SC
214]. See detailed Comments under Section 391, 446 and 450.
44. Yokogawa Blue Star Ltd. v. Soffia Software Ltd., (2004) 119 Comp. Cas. 929 (Mad.).
45. ABG Heavy Industries Ltd. v. Hindustan Shipyard Ltd., (2001) 105 Comp. Cas. 413 (Bom.). See detailed Comments
under Section 433.
46. Canara Bank v. Scanomax India Ltd., (2000) 99 Comp. Cas. 285 (P&H).
47. D.N. Elango v. Sudarsan Chits (India) Ltd., (1997) 88 Comp. Cas. 146 (Mad.); Smt. Kalagara Rama Tulasamma v.
Subhadaya Publications Ltd., (1969) 39 Comp. Cas. 993 (AP). See also Comments under Section 634 and 635.
48. Sumac International Ltd. v. P.N.B. Capital Services Ltd., (1998) 93 Comp. Cas. 236 (All.) (DB).
Comments under Sections 2(11), 10E and 10FB.
195 (SC); Karnataka Bank Ltd. v. B. Suresh, (2001) 105 Comp. Cas. 110 (Kar.). See detailed Comments under Section
39, 53, 113, 207 and 219.
52. R.P. Kapur v. State of Punjab,AIR 1960 SC 866 [LNIND 1960 SC 96];State of Karnataka v. State of Karnataka,AIR
1977 SC 1489 [LNIND 1977 SC 113];Trilok Singh v. Satya Deo Tripathi,AIR 1979 SC 850; Consolidated Pneumatic
Tool Co. (I) Ltd. v. Addl. Registrar of Companies, (1989) 65 Comp. Cas. 259 (Bom.). See also Comments under
Section 5, 205A and 207.
53. Dr. Subramanian Swamy v. Union of India, (2004) 118 Comp. Cas. 126 (Delhi) (DB); Klen and Marshalls Mfrs. &
Exporters Ltd. v. State of J&K, (2000) 100 Comp. Cas. 180 (Kar.).
54. Canara Bank v. Nuclear Power Corporation of India Ltd., (1995) 84 Comp. Cas. 70 (SC); Minoo Mehta v. Shavak D.
Mehta, (1998) 91 Comp. Cas. 895 (SC); Harshad Shantilal Mehta v. Custodian, (1998) 92 Comp. Cas. 936 (SC); Rahul
Subodh Windoors Ltd. v. A.K. Menon, (1999) 96 Comp. Cas. 597 (SC); Standard Chartered Bank v. Custodian, (2000)
102 Comp. Cas. 314 (SC); Western Press Pvt. Ltd. v. Custodian, (2001) 104 Comp. Cas. 105 (SC); Standard
Chartered Bank v. Custodian, (2001) 105 Comp. Cas. 767 (SC); State Bank of Saurashtra v. Punjab National Bank,
(2001) 105 Comp. Cas. 852 (SC); Hiten P. Dalal v. Bratindranath Banerjee, (2001) 106 Comp. Cas. 574 (SC); Dhyan
Investments and Trading Co. Ltd. v. CBI, (2001) 107 Comp. Cas. 1 (SC); Harshad S. Mehta v. State of Maharashtra,
(2001) 107 Comp. Cas. 365 (SC); L.S. Synthetics Ltd. v. Fairgrowth Financial Services Ltd., (2004) 122 Comp. Cas.
185 (SC).
55. United Steel Allied Industries Pvt. Ltd. v. Fairgrowth Financial Services Ltd., (1998) 94 Comp. Cas. 212 (AP) (DB).
* See the Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992 (27 of 1992) in Appendix 334.
56. Canara Bank v. Nuclear Power Corporation of India Ltd., (1995) 84 Comp. Cas. 70 (SC); ABN Amro Bank v. Indian
Railway Finance Corporation Ltd., (1996) 85 Comp. Cas. 716 (Delhi). See also Comments under Section 10E, 10FB
and 111A.
57. Dhyan Investments and Trading Co. Ltd. v. CBI, (2001) 107 Comp. Cas. 1 (SC).
58. Pallav Sheth v. Custodian, (2001) 107 Comp. Cas. 76 (SC).
59. Canbank Financial Services Ltd. v. Custodian, (2004) 122 Comp. Cas. 263 (SC); Kudremukh Iron Ore Co. Ltd. v.
Fairgrowth Financial Services Ltd., (1994) 81 Comp. Cas. 551 (SC). See detailed Comments under Section 111A and
187C.
60. Fairgrowth Investments Ltd. v. Custodian, (2004) 122 Comp. Cas. 683 (SC).
61. Godrej Soap Ltd. v. State, (1991) 70 Comp. Cas. 248 (Cal.) (DB). But see State of Maharashtra v. Nagpur Electric Light
and Power Co. Ltd., (1961) 31 Comp. Cas. 324 (Bom.). See also Comments under Section 34.
Page 7 of 72
62. John Thomas v. Dr. K. Jagadeesan, (2001) 106 Comp. Cas. 619 (SC).
63. M. Gomathinayagam Pillai v. Sri Manthiramurthi High School Committee, (1963) 33 Comp. Cas. 346 (Mad.) : AIR 1963
Mad. 387 [LNIND 1962 MAD 194]; Vohra v. Ms. Balji Kaur Vohra,(2000) 38 Corp. LA 265 (CLB). See detailed
64. Krishna Swami v. South Indian Film Chambers of Commerce,AIR 1969 Mad. 42 [LNIND 1967 MAD 100]. See detailed
65. Dewas Synthetics (P.) Ltd., In re, (2005) 123 Comp. Cas. 214 (MP).
66. Asset Ltd. v. P.T. Garuda Indonesia,(2000) 4 All ER 371. See also Comments u/s. 591.
67. Bhagwandas Garg v. Canara Bank Ltd., (1981) 51 Comp. Cas. 38 (AP). See also Comments under Section 616.
68. United Bank of India v. Naresh Kumar, (1997) 90 Comp. Cas. 329 (SC) : AIR 1997 SC 3 [LNIND 1996 SC 1486]. See
also Comments under Dishonour of cheques by company under Section 5.
69. All India Motor Transport Mutual Insurance Co. Ltd. v. Raphel George, (1963) 33 Comp. Cas. 1166 (Bom.) (DB). See
70. Dwarka Prasad Agarwal v. Ramesh Chandra Agarwala, (2003) 117 Comp. Cas. 206 (SC); Yokogawa Blue Star Ltd. v.
Soffia Software Ltd., (2004) 119 Comp. Cas. 929 (Mad.).
71. S. Balwant Singh v. Krishna Bus Service Pvt. Ltd., (1967) 37 Comp. Cas. 471 (C.T.); Sha Mulchand & Co. Ltd. v.
Jawahar Mills Ltd., (1953) 23 Comp. Cas. 1 (SC) : AIR 1953 SC 98 [LNIND 1952 SC 89]: (1953) SCR 351 [LNIND
1952 SC 89]. See detailed Comments under Section 111 and 111A.
72. Rajan Products v. Jayant Vegoiles and Chemicals P. Ltd., (1991) 72 Comp. Cas. 181 (Bom.); Yashwant Deorao v.
Walchand Ramchand,AIR 1951 SC 16 [LNIND 1950 SC 48].
73. Shiv Dayal Agarwal v. Sidhartha Polyster Pvt. Ltd., (1997) 88 Comp. Cas. 705 (CLB); Remanika Silks Pvt. Ltd. v. J.C.
Augustine, (2000) 100 Comp. Cas. 464 (CLB); Sashi Prakash Khemka v. NEPC Micon Ltd., (1999) 95 Comp. Cas. 583
(CLB); Naveen Kumar v. Karnataka Theatres Ltd., (1998) 93 Comp. Cas. 443 (Kar.); Citi Bank NA v. Power Grid
Corporation of India Ltd., (1995) 83 Comp. Cas. 454 (CLB). See detailed Comments under Section 111 and 111A.
74. Gulzari Lal Bhargava v. Official Receiver-cum-Official Liquidator, (1972) 42 Comp. Cas. 401 (Delhi). See also
75. Collector, Land Acquisition v. Mst. Katiji, (1987) 62 Comp. Cas. 370 (SC) : AIR 1987 SC 1353 [LNIND 1987 SC 899].
76. Union of India v. Visveswaraya Iron and Steel Ltd., (1987) 62 Comp. Cas. 427 (SC).
77. Union of India v. British India Corporation Ltd.,(2004) 268 ITR 481 (SC).
78. T.H. Knittware (Wholesale) Ltd., Re,(1988) 1 All ER 860 (CA).
79. Upendra Kumar Joshi v. Kesoram Industries and Cotton Mills Ltd., (1983) 54 Comp. Cas. 1 (Pat.) (FB); Upendra Kumar
Joshi v. New Victoria Mills Co. Ltd., (1986) 59 Comp. Cas. 798 (Pat.) (FB). Jurisdiction of Court under Section 155 [
now sections 111 and 111A] has been vested in the CLB [ now the Tribunal]. See detailed Comments under Section
111 and 111A. See also Binding force of decisions of Benches of the Jurisdictional High Court hereinafter.
80. Bhenoy G. Dembla v. Prem Kutir P. Ltd., (2003) 117 Comp. Cas. 643 (Bom.) (DB).
81. Maharashtra Power Development Corporation Ltd. v. Dabhol Power Co., (2003) 117 Comp. Cas. 651 (Bom.) (DB).
82. State Bank of India v. State Bank of India Employees’ Union, (1988) 63 Comp. Cas. 260 (SC).
83. Vasudeo Vishwanath Saraf v. New Education Institute, (1986) 60 Comp. Cas. 943 (SC).
84. K. Sreenivasa Rao v. Regional Director, SEBI, (2003) 116 Comp. Cas. 238 (AP) (DB); C. Mackertich Ltd. v. Custodian,
(2002) 108 Comp. Cas. 811 (Cal.). See also Comments under Sections 2(39), 10E, 10FB, 55A and 111A.
85. D. Ganesan v. M.S. Chandra Bose, (1999) 95 Comp. Cas. 88 (Mad.).
86. Ashoka Alloy Steel Ltd. v. Central Bank of India, (2004) 122 Comp. Cas. 777 (HP) (DB).
87. VST Industries Ltd. v. VST Ind. Workers’ Union,(2001) 1 SCC 298 [LNIND 2000 SC 1796] : (2000) 8 Supreme 342.
88. L. Chandra Kumar v. UOI,(1997) 228 ITR 725(SC). For jurisdiction of the National Company Law Tribunal (NCLT) and
Appellate Tribunal constituted under Sections 10FB and 10FR of the Companies Act, 1956 inserted by the Companies
(Second Amendment) Act, 2002 (11 of 2003) (w.e.f. date to be notified)see detailed Comments under Section 10FB to
10GF.
90. Federal Bank Ltd. v. Shamrao Vithal Co-operative Bank Ltd., (2001) 106 Comp. Cas. 419 (Kar.).
91. Haryana Financial Corporation v. Jagadamba Oil Mills, (2002) 110 Comp. Cas. 20 (SC).
Page 8 of 72
92. Ms. Githa Hariharan v. RBI, (1999) 95 Comp. Cas. 913 (SC) : (1999) 236 ITR 380 (SC); K.P. Varghese v. ITO,AIR
1981 SC 1922 [LNIND 1981 SC 373]: (1981) 131 ITR 597 [LNIND 1981 SC 373] (SC) : (1982) 1 SCR 629 [LNIND
1981 SC 373];R.K. Garg v. Union of India,AIR 1981 SC 2138 [LNIND 1981 SC 434]: (1982) 133 ITR 239 [LNIND 1981
SC 434] (SC); Shashikant Laxman Kale v. UOI,(1990) 185 ITR 104 [LNIND 1990 SC 362] (SC) : (1990) 86 CTR (SC)
201.
93. CWT v. Hashmatunnisa Begum,(1989) 176 ITR 98 (SC) : (1989) 75 CTR (SC) 194.
94. R.D. Saxena v. Balram Prasad Sharma, (2001) 105 Comp. Cas. 83 (SC).
95. British Racing Drivers’ Club Ltd. v. Hesstall Erskine & Co.,(1997) 1 BCLC 162.
96. Prudential Capital Markets Ltd. v. State of A.P., (2002) 108 Comp. Cas. 441 (AP); Whirlpool Corporation v. Registrar of
Trade Marks,AIR 1999 SC 22. See also Comments u/s. 58A.
(2003) 113 Comp. Cas. 1 (SC). See also Comments under Sections 2(12), 2(46), 55A, 69 and 81.
98. Harish Sood v. Videocon International Ltd.,(1996) 8 SCL 28 (MRTPC). See also Comments under Section 81.
99. S.J.SD. Chhatwal v. Pushpa Builders Ltd., (1999) 95 Comp. Cas. 128 (Delhi).
1. Tapoban Housing Finance Ltd. v. R. Udaya Kumar, (1999) 98 Comp. Cas. 549 (Kar.).
2. Director-General v. IOFIC Leasing Ltd., (1991) 70 Comp. Cas. 62 (MRTPC).
* See the Competition Act, 2002 (12 of 2003) in Appendix 324.
** Published in the Gazette of India, Extraordinary, No. 11, Part II, Section 2, dated 9-3-2006 : (2006) 131 Comp. Cas.
(St.) 289.
4. Director-General v. Trustwel Inc., (1998) 91 Comp. Cas. 83 (MRTPC).
548 [LNIND 1989 SC 328] (SC); M.A. Murthy v. State of Karnataka,(2003) 264 ITR 1 (SC); Milkfood Ltd. v. GMC Ice
Cream P. Ltd., (2004) 121 Comp. Cas. 581 (SC). See detailed Comments hereinafter under Binding force of Supreme
Court decisions and Supreme Court when can reconsider, review, overrule or overturn its own decisions and principle
of stare decisis when can be departed from.
172 [LNIND 1984 SC 367] (SC) : 1985 (19) ELT 22 [LNIND 1984 SC 367] (SC); Cassell & Co. Ltd. v. Broome,(1972)
AC 1027 (HL) : (1972) 1 All ER 801 (HL) : (1972) 2 WLR 645 (HL). See Per incuriam rule in later paragraphs.
7. CWT v. Aluminium Corporation of India Ltd.,(1972) 85 ITR 167 (SC) : (1972) 1 SCR 484 [LNIND 1971 SC 424]; J.P.
Srivastava and Sons (Rampur) Pvt. Ltd. v. Gwalior Sugar Co. Ltd., (2004), (2004) 121 Comp. Cas. 167 (SC).
8. Shenoy & Co. v. CTO,AIR 1985 SC 621 [LNIND 1985 SC 391]: (1985) 155 ITR 178 (SC); Makhanlal Waza v. State of
J&K,AIR 1971 SC 2206 [LNIND 1971 SC 140]: (1971) 3 SCR 832 [LNIND 1971 SC 140].
9. ICICI Ltd. v. Dhanesh D. Ruparelia, (2000) 99 Comp. Cas. 181 (Bom.); Osborne v. Rowlett, (1880) 13 Ch.D 774;
Scruttons Ltd. v. Midland Silicones Ltd.,(1962) AC 446 (HL) : (1962) 1 All ER 1 (HL).
10. CIT v. Sun Engineering Works P. Ltd.,(1992) 198 ITR 297 (SC) : AIR 1993 SC 43; Madhav Rao Jivaji Rao Scindia
Bahadur v. UOI,AIR 1971 SC 530 [LNIND 1970 SC 481]: (1971) 3 SCR 9 [LNIND 1970 SC 481]; Pennar Paterson Ltd.
v. State Bank of Hyderabad, (2001) 106 Comp. Cas. 338 (AP) (DB).
11. Haryana Financial Corporation v. Jagadamba Oil Mills, (2002) 110 Comp. Cas. 20 (SC); Smith Kline and French (India)
Ltd. v. CIT,(1996) 219 ITR 581 (SC); Padmasundara Rao v. State of Tamil Nadu,(2002) 255 ITR 147 [LNIND 2002 SC
201] (SC); Herrington v. British Railways Board,(1972) 2 WLR 537 (HL).
12. CWT v. Dr. Karan Singh,(1993) 200 ITR 614 (SC).
13. CIT v. Vazir Sultan & Sons,AIR 1959 SC 814 [LNIND 1959 SC 33]: (1959) 36 ITR 175 [LNIND 1959 SC 33] (SC) :
(1959) Supp. 2 SCR 375; State of Maharashtra v. Official Liquidator, (2004) 120 Comp. Cas. 648 (Bom.).
14. Addl. District Magistrate v. Shivakant Shukla,AIR 1976 SC 1207 [LNIND 1976 SC 196]: 1976 Suppl. SCR 172.
15. R. v. Warner, (1661) 1 Keb. 66; Hindustan Machine Tools Ltd. (No. 3) v. CIT,(1989) 175 ITR 220 (Kar.). As explained
below even sub silentio decisions of the Supreme Court are binding.
16. Goodyear India Ltd. v. State of Haryana,AIR 1990 SC 781 [LNIND 1989 SC 725]: (1991) 188 ITR 402 [LNIND 1989 SC
725] (SC); Ambica Quarry Works v. State of Gujarat,AIR 1987 SC 1073 [LNIND 1986 SC 513]; State of Orissa v.
Sudhansu Sekhar Misra,AIR 1968 SC 647 [LNIND 1967 SC 316]: (1968) 2 SCR 154 [LNIND 1967 SC 316]; Quinn v.
Leathem,(1901) AC 495 (HL).
Page 9 of 72
17. Smt. Somawanti v. State of Punjab, (1963) 33 Comp. Cas. 745 (SC) : AIR 1963 SC 151 [LNIND 1962 SC 209]; T.
Govindaraja Mudaliar v. State of Tamil Nadu,AIR 1973 SC 974 [LNIND 1973 SC 3]; Ballabhdas Mathuradas Lakhani v.
Municipal Committee,AIR 1970 SC 1002.
18. Hindustan Machine Tools Ltd. (No. 3) v. CIT,(1989) 175 ITR 220 (Kar.).
19. Suganthi Suresh Kumar v. Jagdeeshan, (2002) 110 Comp. Cas. 133 (SC); Anil Kumar Neotia v. Union of India,AIR
1988 SC 1353 [LNIND 1988 SC 254].
20. Punjab Land Development and Reclamation Corpn. Ltd. v. Presiding Officer, Labour Court,(1990) 77 FJR 17 (SC). See
also Binding force of Jurisdictional High Court decisions later.
21. Mamleshwar Prasad v. Kanahaiya Lal,AIR 1975 SC 907 [LNIND 1975 SC 94]: (1975) 3 SCR 834 [LNIND 1975 SC 94].
22. Warner Lambert Co. v. CIT,(1994) 205 ITR 395 (Bom.); Morelle Ltd. v. Wakeling,(1955) 2 QB 379 (CA) : (1955) 1 All
ER 708 (CA); Johnson v. Agnew, (1978) Ch. 176. See detailed Comments under Per incuriam decision of Jurisdictional
High Court hereinafter.
172 [LNIND 1984 SC 367] (SC) : (1985 (19) ELT 22 [LNIND 1984 SC 367] (SC); Cassell & Co. Ltd. v. Broome,(1972)
AC 1027 (HL) : (1972) 1 All ER 801 (HL) : (1972) 2 WLR 645 (HL). For fuller discussion see Supreme Court decisions
absolutely binding in earlier paragraphs.
24. Ballabhdas Mathuradas Lakhani v. Municipal Committee,AIR 1970 SC 1002.
548 [LNIND 1989 SC 328] (SC). See fuller discussion later under Supreme Court when can reconsider, review,
overrule or overturn its own decisions and principle of stare decisis when can be departed from.
26. Jindal Vijayanagar Steel (JSW Steel Ltd.) v. Jindal Praxair Oxygen Co. Ltd., (2006) 134 Comp. Cas. 119 (SC)
27. Mattulal v. Radhe Lal,AIR 1974 SC 1596 [LNIND 1974 SC 161]: (1975) 1 SCR 127 [LNIND 1974 SC 161].
28. UOI v. K.S. Subramanian,AIR 1976 SC 2433 [LNIND 1976 SC 242]; State of U.P. v. Ram Chandra Trivedi,AIR 1976
SC 2547 [LNIND 1976 SC 307]; Dainik Finance and Chit Fund Co. P. Ltd. v. Agricultural Industries, (1986) 60 Comp.
Cas. 180 (P&H); CIT v. Trilok Nath Mehrotra,(1998) 231 ITR 278 (SC).
29. Distributors (Baroda) P. Ltd. v. UOI,AIR 1985 SC 1585 [LNIND 1985 SC 207]: (1985) 155 ITR 120 [LNIND 1985 SC
207] (SC); UOI v. Raghubir Singh, (1989) 66 Comp. Cas. 466 (SC) : AIR 1989 SC 1933 [LNIND 1989 SC 328]: (1989)
178 ITR 548 [LNIND 1989 SC 328] (SC). See fuller discussion under Supreme Court when can overrule its decisions
hereinafter.
548 [LNIND 1989 SC 328] (SC); Kalyan Municipal Council v. Usha Paper Products (P.) Ltd.,(1990) 184 ITR 80 (SC).
31. Jossy Kondody v. Chacko Thomas, (2002) 109 Comp. Cas. 689 (Ker.). See also discussion under decisions of different
Benches of the jurisdictional High Court in later paragraphs.
32. Bharat Petroleum Corpn. Ltd. v. Mumbai Shramik Sangha,(2001) 249 ITR 669 (SC).
33. Pradip Chandra Parija v. Pramod Chandra Patnaik, (2002) 111 Comp. Cas. 299 (SC) : (2002) 254 ITR 99 (SC); Ujagar
Prints v. UOI, (1987) 62 Comp. Cas. 548 (SC) : AIR 1987 SC 874 [LNIND 1988 SC 548]: (1987) 167 ITR 904 (SC) :
1987 (27) ELT 567 (SC).
548 [LNIND 1989 SC 328] (SC); Bengal Immunity Co. Ltd. v. State of Bihar,AIR 1955 SC 661 [LNIND 1955 SC 122]:
(1955) 2 SCR 603 [LNIND 1955 SC 122]; Keshav Mills Co. Ltd. v. CIT,AIR 1965 SC 1636 [LNIND 1965 SC 28]: (1965)
56 ITR 365 [LNIND 1965 SC 28] (SC) : (1965) 2 SCR 908 [LNIND 1965 SC 28];Girdhari Lal Gupta v. D.N. Mehta,AIR
1971 SC 2162 : (1971) 3 SCR 748; Pillani Investment Corpn. Ltd. v. ITO,AIR 1972 SC 236 [LNIND 1971 SC 589]:
(1972) 83 ITR 217 (SC) : (1972) 2 SCR 502 [LNIND 1971 SC 589].
35. Special Courts Bill, 1978, In re,AIR 1979 SC 478 [LNIND 1978 SC 661]: (1979) 2 SCR 476 [LNIND 1978 SC 661].
172 [LNIND 1984 SC 367] (SC) : 1985 (19) ELT 22 [LNIND 1984 SC 367] (SC). See detailed Comments hereinbefore.
37. CED v. Pratap Singhji Ramsinghji,(1987) 167 ITR 210 (SC); Mundrika Prasad Sinha v. State of Bihar,AIR 1979 SC
1871 [LNIND 1979 SC 383]: (1980) 1 SCR 759 [LNIND 1979 SC 383]; Central Bank of India Ltd. v. Workmen, (1959)
38. Dove Investments Pvt. Ltd. v. Gujarat Industrial Inv. Corporation, (2006) 129 Comp. Cas. 929 (SC).
Daryao v. State of U.P.,AIR 1961 SC 1457 [LNIND 1961 SC 133]: (1962) 1 SCR 574 [LNIND 1961 SC 133]; CIT v.
Shree Manjunathesware Packing Products and Camphor Works,(1998) 231 ITR 53 (SC); Hemalatha Gargya v.
CIT,(2003) 259 ITR 1 (SC). See also Binding force of Jurisdictional High Court decision later.
Page 10 of 72
40. Indian Oil Corporation Ltd. v. State of Bihar, (1987) 62 Comp. Cas. 541 (SC) : AIR 1986 SC 1780 [LNIND 1986 SC
262]: (1987) 167 ITR 897 (SC); Workmen v. Board of Trustees of Cochin Port Trust,AIR 1978 SC 1283 [LNIND 1978
SC 158]: (1978) 53 FJR 80 (SC); Ahmedabad Mfg. and Calico Printing Co. Ltd. v. Workmen,AIR 1981 SC 960 [LNIND
1981 SC 149]: (1981) 58 FJR 294 (SC); S. Shanmugavel Nadar v. State of Tamil Nadu,(2003) 263 ITR 658 (SC).
41. Kalpetta Estates Ltd. v. CIT,(1996) 221 ITR 601 (SC) : (1996) 87 Taxman 281 (SC)
42. Kunhayammed v. State of Kerala,(2000) 245 ITR 360 [LNIND 2000 SC 933] (SC).
43. CED v. Roshan Jahangir Gandhi,(1994) 205 ITR 428 (SC) : (1994) 117 CTR (SC) 47; CST v. S.K. Manekia,(1991) 83
STC 34 (SC); Chunilal v. Mehta & Sons Ltd.AIR 1962 SC 1314 [LNIND 1962 SC 101]: (1962) Supp. 3 SCR 549. See
also Comments u/ s. 10 GF.
44. State of Punjab v. Surinder Kumar, (1992) 73 Comp. Cas. 490 (SC) : (1992) 194 ITR 434 (SC).
45. Indian Bank v. ABS Marine Products Pvt. Ltd., (2006) 131 Comp. Cas. 339 (SC).
46. Textile Labour Association v. Official Liquidator, (2004) 120 Comp. Cas. 505 (SC). See also Comments under Sections
529 and 529A.
47. Mohanlal Maganlal v. State of Gujarat,AIR 1968 SC 733 [LNIND 1967 SC 376]; Manharlal Manilal Shah v. Official
Liquidator, (1969) 39 Comp. Cas. 641 (Guj.) (DB).
48. Packraft (India) P. Ltd. v. U.P.F.C., (1997) 89 Comp. Cas. 269 (SC).
49. CIT v. Kalinga Tubes Ltd,(1996) 218 ITR 164 (SC) : (1996) 84 Taxman 435 (SC).
50. D.V. Bapat, ITO v. Tata Iron & Steel Co. Ltd,(1986) 159 ITR 938 (SC).
51. Poothundu Plantations Pvt. Ltd. v. Agril. ITO,(1996) 221 ITR 557 (SC).
52. CED v. Murarilal Sovasaria,(1989) 179 ITR 380 (Gauhati) : (1989) 80 CTR (Gau.) 250;. A.C. Estates. v. Serajuddin &
Co.,AIR 1966 SC 935 [LNIND 1965 SC 165].
53. State of Kerala v. P.K. Syed Akbar Sahib,AIR 1988 SC 702 : (1988) 173 ITR 1 (SC).
54. Sutlej Cotton Mills Ltd. v. CIT, S.L.P. (Civil) No. 8969 of 1982 : (1984) 150 ITR (St.) 79 (SC)
55. Devi Cine Projector Mfg. Co. v. CIT,(1990) 183 ITR 19 (SC) : (1990) 82 CTR (SC) 142.
56. CIT v. Hindustan Gum and Chemicals Ltd.,(1990) 182 ITR 396 [LNIND 1989 CAL 324] (Cal.).
57. Jai Kaur v. Sher Singh,AIR 1960 SC 1118 [LNIND 1960 SC 435].
58. Raja Baldeodas Birla Santati Kosh v. CIT,(1986) 158 ITR 601 (Raj.).
59. CIT v. Swami & Co. P. Ltd,(1991) 188 ITR 325 (SC) : (1991) 94 CTR (SC) 218.
60. M.A. Murthy v. State of Karnataka,(2003) 264 ITR 1 (SC); India Cement Ltd. v. State of Tamil Nadu,(1991) 188 ITR 690
(SC) : AIR 1990 SC 85 [LNIND 1989 SC 686].
61. ITAT v. V.K. Agarwal,(1999) 235 ITR 175 [LNIND 1998 SC 1026] (SC).
62. Shenoy & Co. v. CTO,AIR 1985 SC 621 [LNIND 1985 SC 391]: (1985) 155 ITR 178 (SC).
63. Maruti Udyog Ltd. v. Mahinder C. Mehta, (2007) 140 Comp. Cas. 449 (SC).
64. B. Shama Rao v. Union Territory of Pondicherry,AIR 1967 SC 1480 [LNIND 1967 SC 39]: (1967) 20 STC 215 (SC);
Deep Chand v. State of U.P.,AIR 1959 SC 648 [LNIND 1959 SC 3]; Sundararamier & Co. v. State of A.P.,AIR 1958 SC
468 [LNIND 1958 SC 20]: (1958) 9 STC 298 (SC); Behram Khurshed Pesikaka v. State of Bombay,AIR 1955 SC 123
[LNIND 1954 SC 116]: (1955) 1 SCR 613 [LNIND 1954 SC 116];Sumatilal Chimanlal Shah v. CED,(1982) 138 ITR 143
(Guj.).
65. Shri Prithvi Cotton Mills Ltd. v. Broach Borough Municipality,(1971) 79 ITR 136 [LNIND 1969 SC 188] (SC) : AIR 1970
SC 192 [LNIND 1969 SC 188].
66. Taurian Tubes v. CIT,(1987) 166 ITR 629 (Pat.) : (1987) 62 CTR (Pat.) 159.
67. Dwarkadas Shrinivas v. Sholapur Spg. and Wvg. Co. Ltd., (1954) 24 Comp. Cas. 103 (SC) : AIR 1954 SC 119 [LNIND
1953 SC 124]: 1954 SCR 674 [LNIND 1953 SC 124].
68. CIT v. Smt. Asrafi Devi Rajgharia,(1983) 142 ITR 380 (Cal.).
69. Salzgitter Industrie Bau Gmbh v. CIT,(1990) 184 ITR 7 (Bom.).
70. East India Commercial Co. Ltd. v. Collector of Customs,AIR 1962 SC 1893 [LNIND 1962 SC 228]: 1983 ELT 1342
(SC) : (1963) 3 SCR 338 [LNIND 1962 SC 228]; M. Padmanabha Setty v. K.P. Papiah Setty,AIR 1966 SC 1824
[LNIND 1966 SC 82]; Smt. Kausalya Devi Bogra v. Land Acquisition Officer,AIR 1984 SC 892 [LNIND 1984 SC 371];
Bishnu Ram Borah v. Parag Saikia,AIR 1984 SC 898 [LNIND 1983 SC 337].
Page 11 of 72
71. State of A.P. v. CTO, (1988) 63 Comp. Cas. 273 (AP) : (1988) 169 ITR 564 [LNIND 1987 AP 190] (AP); Nicco Corpn.
Ltd. v. CIT,(2001) 251 ITR 791 (Cal.); UOI v. Kamlakshi Finance Corpn. Ltd.,AIR 1992 SC 711. See Comments on
Dismissal of Special Leave Petition (SLP) by Supreme Court earlier.
72. Koduru Venkata Reddy v. Land Acquisition Officer, (1988) 63 Comp. Cas. 376 (AP) : (1988) 170 ITR 15 (AP) : (1987)
67 STC 424 (AP).
73. Sundarjas Kanyalal Bhatija v. Collector, (1990) 68 Comp. Cas. 20 (SC) : AIR 1991 SC 261 : (1990) 183 ITR 130 (SC).
74. Asst. CED v. V. Devaki Ammal,(1995) 212 ITR 395 (SC) : (1995) 125 CTR (SC) 134.
75. Kanmula Seshamma v. Bharat Petroleum Corpn. Ltd.,(1991) 187 ITR 326 (AP) (FB); State of H.P. v. Smt. Shanta Devi,
(1989) 66 Comp. Cas. 845 (HP) (FB); C. Mackertich Ltd. v. Custodian, (2002) 108 Comp. Cas. 811 (Cal.).
76. Ashok Organics Industries Ltd. v. Dena Bank, (2007) 135 Comp. Cas. 203 (Bom.).
ER 708 (CA); Johnson v. Agnew, (1978) Ch. 176; Williams v. Faweett,(1986) QB 604 : (1985) 1 All ER 787 (CA); Duke
v. Reliance Systems Ltd,(1988) QB 108 : (1987) 2 All ER 858 (CA); Rakhit v. Carty,(1990) 2 All ER 202 : (1990) 2 WLR
1107.
78. Baradakanta Mishra v. Bhimsen Dixit,AIR 1972 SC 2466 [LNIND 1972 SC 471].
79. Hoshiar Singh v. Gurbachan Singh,AIR 1962 SC 1089 [LNIND 1962 SC 63]: (1962) Suppl. 3 SCR 127; Aligarh
Municipal Board v. Ekka Tonga Mazdoor Union,AIR 1970 SC 1767; Dibakar Satpathy v. Hon'ble the Chief Justice and
his Companion Justices of the Orissa High Court,AIR 1961 SC 1315 [LNIND 1961 SC 106]: (1962) 1 SCR 326 [LNIND
1961 SC 106]; High Court v. S.K. Mathur, CIT,(1975) 101 ITR 180 [LNIND 1975 PNH 54] (P&H); V. Chidambaram v. D.
Venkatesan Assistant Director of Inspection (Intelligence),(1987) 167 ITR 443 [LNIND 1986 MAD 310] (Mad.) : (1987)
66 CTR (Mad.) 252. See also Dy. Director of Inspection (Intelligence) v. Vinod Kumar Didwania,(1986) 160 ITR 969
(SC) : (1986) 58 CTR (SC) 199.
80. Oriental Machinery and Civil Construction Ltd. v. Vikrant Tyres Ltd., (1985) 57 Comp. Cas. 639 (Kar.); Cotton
Corporation of India Ltd. v. United Industrial Bank Ltd., (1984) 55 Comp. Cas. 423 (SC) : AIR 1983 SC 1272 [LNIND
1983 SC 258].
81. Empire Industries Ltd. v. Union of India,AIR 1986 SC 662 [LNIND 1985 SC 176]: (1986) 162 ITR 846 [LNIND 1985 SC
176] (SC) : (1985) Suppl. 1 SCR 292 : 1985 (20) ELT 179 [LNIND 1985 SC 176] (SC); ACCE v. Dunlop India Ltd.,
(1985) 58 Comp. Cas. 145 (SC) : AIR 1985 SC 330 [LNIND 1984 SC 367]: (1985) 154 ITR 172 [LNIND 1984 SC 367]
(SC) : 1985 (19) ELT 22 [LNIND 1984 SC 367] (SC); Siliguri Municipality v. Amalendu Das, (1984) 55 Comp. Cas. 506
(SC) : AIR 1984 SC 653 [LNIND 1984 SC 9].
82. Federal Bank Ltd. v. Shamrao Vithal Co-op. Bank Ltd., (2001) 106 Comp. Cas. 419 (Kar.).
83. Valliama Champaka Pillai v. Sivathanu Pillai,AIR 1979 SC 1937 [LNIND 1979 SC 345]; Geoffrey Manners & Co. Ltd. v.
CIT,(1996) 221 ITR 695 (Bom.); CIT v. Thana Electricity Supply Ltd.,(1994) 206 ITR 727 (Bom.); Patil Vijaykumar v.
Union of India,(1985) 151 ITR 48 (Kar.). Binding force of Supreme Court and jurisdictional High Court decisions has
already been explained hereinbefore.
84. Goculdas Dossa & Co. v. J.P. Shah, ITO,(1995) 211 ITR 706 [LNIND 1994 BOM 239] (Bom.) (FB); Peirce Leslie & Co.
v. CIT,(1995) 216 ITR 176 [LNIND 1995 MAD 178] (Mad.); R.A. Varma, Asst. CIT v. Laxmi Induction,(1995) 216 ITR
555 (Guj.). Meaning of sub silentio, per incuriam, obiter dicta, etc., has already been enunciated under Doctrine of
Precedent or Stare decisis, Binding force of Supreme Court decisions and Binding force of jurisdictional High Court
decisions hereinbefore.
85. T.I. George v. New Bank of India, (2002) 108 Comp. Cas. 277 (Ker.).
1975 SC 403]; Kilpest P. Ltd. v. Shekhar Mehra, (1996) 87 Comp. Cas. 615 (SC); Cotton Corporation of India Ltd v.
United Industrial Bank Ltd., (1984) 55 Comp. Cas. 423 (SC) : AIR 1983 SC 1272 [LNIND 1983 SC 258]; National
Textile Workers’ Union v. P.R. Ramakrishnan, (1983) 53 Comp. Cas. 184 (SC) : AIR 1983 SC 75; Madanlal Fakirchand
Dudhediya v. Sri Changdeo Sugar Mills Ltd., (1962) 32 Comp. Cas. 604 (SC) : AIR 1962 SC 1543 [LNIND 1962 SC
125]: (1962) Supp. 3 SCR 973; State of West Benga v. B.K. Mondal,AIR 1962 SC 779 [LNIND 1961 SC 377]: (1962)
Supp. 1 SCR 876; Forasol v. Oil and Natural Gas Commission, (1986) 60 Comp. Cas. 286 (SC) : AIR 1984 SC 241
[LNIND 1983 SC 313]: (1984) 1 SCR 526 [LNIND 1983 SC 313]; American Home Products Corporation v. Mac
Laboratories Pvt. Ltd.,AIR 1986 SC 137 [LNIND 1985 SC 317]: (1986) 1 SCC 465 [LNIND 1985 SC 317]; ICICI Ltd. v.
Parasrampuria Synthetics Ltd., (1998) 92 Comp. Cas. 238 (Delhi)See also Comments under Sections 34, 397, 398,
402, 433(f) and 443.
87. Suresh Chandra v. Bank of Calcutta, (1951) 21 Comp. Cas. 110 (Cal.) : 54 CWN 834.
88. Joseph Kuruvilla Vellukunnel v. Reserve Bank of India, (1962) 32 Comp. Cas. 514 (SC) : AIR 1962 SC 1371 [LNIND
1962 SC 109]: (1963) 1 Comp. LJ 56 (SC) : (1962) Supp. 3 SCR 632.
Page 12 of 72
89. Maharashtra Power Development Corporation Ltd. v. Dabhol Power Co., (2003) 117 Comp. Cas. 506 (Bom.)affirmed in
(2004) 120 Comp. Cas. 560 (Bom.) (DB).
548 [LNIND 1989 SC 328] (SC). See detailed Comments under Binding force of Supreme Court decisions earlier.
91. CIT v. Ram Narain Hira Lal,(1997) 227 ITR 401 (All.).
93. Union of India v. Kamlakshi Finance Corporation Ltd.,AIR 1992 SC 711; Nicco Corporation Ltd. v. CIT,(2001) 251 ITR
791 (Cal.).
94. Paras Laminates (P.) v. CEGAT, (1990) 68 Comp. Cas. 72 (Delhi) : (1990) 183 ITR 167 (Delhi). See also Sundarjas
Kanyalal Bhatija v. Collector, (1990) 68 Comp. Cas. 20 (SC) : AIR 1991 SC 261 : (1990) 183 ITR 130 (SC) and other
decisions in earlier paragraphs on Binding force of Jurisdictional High Court decisions and Doctrine of Precedent or
Stare decisis.
95. Sayaji Iron and Engineering Co. v. CIT, (2002) 108 Comp. Cas. 675 (Guj.) (DB).
1. Malleswara Finance and Investments Co. P. Ltd. v. Company Law Board, (1995) 82 Comp. Cas. 836 (Mad.) (DB);
Micromeritics Engineers Pvt. Ltd. v. S. Munusamy, (2004) 122 Comp. Cas. 150 (Mad.) (DB); Mohd. Jafar v. Nahar
Industrial Enterprises Ltd., (1998) 93 Comp. Cas. 717 (Delhi); CIT v. Scindia Steam Navigation Co. Ltd.,(1961) 42 ITR
589 [LNIND 1961 SC 159] (SC) : AIR 1961 SC 1633 [LNIND 1961 SC 159]. See detailed Comments under Sections
10F, 10FB and 10GF.
2. Dale and Carrington Invt. P. Ltd. v. P.K. Prathapan, (2004) 122 Comp. Cas. 161 (SC).
3. Sadichha Chitra v. CIT,(1991) 189 ITR 774 (Bom.); S. Ranganatha Rao v. Accountant-General,(1981) 129 ITR 130
(Kar.).
SC 2838] (SC); Commissioner of Customs v. Indian Oil Corporation Ltd.,(2004) 267 ITR 272 (SC).
5. Director-General v. Holy Angels School, (1998) 93 Comp. Cas. 454 (MRTPC) (FB). See also East India Commercial
Co. Ltd v. Collector of Customs,AIR 1962 SC 1893 [LNIND 1962 SC 228]: (1963) 3 SCR 338 [LNIND 1962 SC 228];L.
Chandra Kumar v. UOI,(1997) 228 ITR 725 (SC) dealt with in earlier paragraphs under Binding force of jurisdictional
High Court decisions and Writs.
6. Satyadhyan Ghosal v. Smt. Deorajin Debi,AIR 1960 SC 941 [LNIND 1960 SC 129]; Daryao v. State v. State of
U.P.,AIR 1961 SC 1457 [LNIND 1961 SC 133]: (1962) 1 SCR 574 [LNIND 1961 SC 133]; Workmen v. Board of
Trustees of Cochin Port Trust,AIR 1978 SC 1283 [LNIND 1978 SC 158]: (1978) 53 FJR 80 (SC); S. Balwant Singh v.
Krishna Bus Service Pvt. Ltd., (1967) 37 Comp. Cas. 471 (C.T.).
7. Syed Mohd. Salie Labbai v. Mohd. Hanifa,AIR 1976 SC 1569 [LNIND 1976 SC 115]: (1976) 3 SCR 721 [LNIND 1976
SC 115].
8. T.L. Arora v. Ganga Ram Agarwal (No. 4), (1988) 63 Comp. Cas. 871 (Delhi). See also Comments under Sections 408
and 409.
262]: (1987) 167 ITR 897 (SC). See detailed Comments under Dismissal of Special Leave Petition by Supreme Court
hereinbefore.
10. Kalpetta Estates Ltd. v. CIT,(1996) 221 ITR 601 (SC) : (1996) 87 Taxman 281 (SC).
11. Daryao v. State of U.P.,AIR 1961 SC 1457 [LNIND 1961 SC 133]: (1962) 1 SCR 574 [LNIND 1961 SC 133];
Virudhunagar Steel Rolling Mills Ltd. v. Government of Madras, (1968) 38 Comp. Cas. 928 (SC) : AIR 1968 SC 1196
[LNIND 1968 SC 4]: (1968) 70 ITR 726 (SC).
12. M.M. Ipoh v. CIT,(1968) 67 ITR 106 [LNIND 1967 SC 214] (SC) : AIR 1968 SC 317 [LNIND 1967 SC 214]: (1968) 1
SCR 65 [LNIND 1967 SC 214].
13. Union of India v. Godfrey Philips India Ltd., (1986) 59 Comp. Cas. 526 (SC) : AIR 1986 SC 806 [LNIND 1985 SC 311]:
(1986) 158 ITR 574 [LNIND 1985 SC 311] (SC); State of Punjab v. Nestle India Ltd.,(2004) 269 ITR 97 (SC).
336]. See detailed Comments under Sections 208 and 211.
15. Kiran Singh v. Chaman Paswa,AIR 1954 SC 340 [LNIND 1954 SC 67]: (1955) 1 SCR 117 [LNIND 1954 SC 67]; Smt.
Arati Dutta v. Eastern Tea Estate (P.) Ltd, (1988) 64 Comp. Cas. 313 (SC). Also see K.P. Antony v. Thandiyode
Page 13 of 72
Plantations P. Ltd., (1996) 86 Comp. Cas. 684 (Ker.) (FB). See also Comments under Sections 10F, 10FQ, 10GF, 111
and 938.
16. CIT v. Ashoka Engineering Co.,(1992) 194 ITR 645 (SC) : (1993) 109 CTR (SC) 491.
17. Hukumchand Mills Ltd. v. State of M.P.,AIR 1964 SC 1329 [LNIND 1964 SC 46]: (1964) 52 ITR 583 [LNIND 1964 SC
46] (SC).
18. T.A.K. Mohideen Pichai Taraganar v. Tinnevelly Mills Co. Ltd.,AIR 1928 Mad. 571 [LNIND 1927 MAD 394](DB).
19. CIT v. Dhadi Sahu,(1993) 199 ITR 610 (SC) : (1992) 108 CTR (SC) 444.
20. Union of India v. Raghubir Singh, (1989) 66 Comp. Cas. 466 (SC) : AIR 1989 SC 1933 [LNIND 1989 SC 328]: (1989)
178 ITR 548 [LNIND 1989 SC 328] (SC).
21. M.K. Venkatachalam, ITO v. Bombay Dyeing and Manufacturing Co. Ltd.,AIR 1958 SC 875 [LNIND 1958 SC 66]:
(1958) 34 ITR 143 [LNIND 1958 SC 66] (SC).
23. R. Rajagopal Reddy v. Padmini Chandrasekharan,(1995) 213 ITR 340 (SC); Govinddas v. ITO,AIR 1977 SC 552
[LNIND 1975 SC 666]: (1976) 103 ITR 123 [LNIND 1975 SC 666] (SC); Athlumney, Re,(1898) 2 QB 547.
24. CWT v. Sharvan Kumar Swarup and Sons,(1994) 210 ITR 886 [LNIND 1994 SC 1444] (SC).
25. Anant Gopal Sheorey v. State of Bombay,AIR 1958 SC 915 [LNIND 1958 SC 80]: 1959 SCR 919 [LNIND 1958 SC 80].
26. Nani Gopal Mitra v. State of Bihar,AIR 1970 SC 1636 [LNIND 1968 SC 309].
27. CIT v. Podar Cement Pvt. Ltd.,(1997) 226 ITR 625 (SC); Channan Singh v. Jai Kaur,AIR 1970 SC 349 [LNIND 1969
SC 257]; State of M.P. v. Rameshwar Rathod,AIR 1990 SC 1849 [LNIND 1990 SC 318]; Central Bank of India v.
Workmen, (1959) 29 Comp. Cas. 367 (SC) : AIR 1960 SC 12 [LNIND 1959 SC 113].
28. R. Rajagopal Reddy v. Padmini Chandrasekharan,(1995) 213 ITR 340 (SC).
29. Ujagar Prints v. UOI,AIR 1989 SC 516 [LNIND 1988 SC 548]: (1989) 179 ITR 317 [LNIND 1988 SC 548] (SC) : 1989
(39) ELT 493 (SC).
COMMENTS
English Act, 1948: Section 218(1), (6) to (8) Previous Act, 1913: Section 3
English Act, 1985: Sections 512 and 513
Legislative History.— The Companies Act, 1956 (1 of 1956).—The Notes on clauses explained this provision as
follows: “This is based on the recommendation made by the Company Law Committee in paragraph 31 of its
Report. In regard to winding up, the District Court may be invested with jurisdiction only in respect of companies
whose paid-up share capital is one lakh of rupees or less. In respect of certain other specified matters chief among
which are those relating to investigation, and remedial action where the company acts either oppressively, or
prejudicially to the interests of the company, jurisdiction will vest exclusively in the High Court.” [ Clause 8 of the
“The only important recommendation on the question of jurisdiction that we make is that certain types of suits and
proceedings under the Companies Act should be triable exclusively in the High Courts. In Chapter XIII we have
suggested that of the Indian Companies Act should be so amended as to provide that winding-up proceedings in
respect of companies with a subscribed share capital of rupees one lakh and over should take place only in the
High Courts [ now powers of the Court have been conferred on the Tribunal (see Sections 10FB and 433-438]. We
would further suggest that suits arising out of the new sections 153C and 153D, which we propose on the broad
lines of section 210 of the English Companies Act, 1948, should also similarly be exclusively triable in the High
Courts [conferred on the Company Law Board (now the Tribunal) see Sections 10E, 10FB and 397 to 409]. The
evidence that we received on this subject was, on balance, definitely in favour of the centralisation of jurisdiction in
difficult and complicated matters arising out of the Indian Companies Act like those mentioned above. The only
argument against this recommendation was the possible increase in costs to litigants in the districts, but from the
Page 14 of 72
testimony of well-informed witnesses who appeared before us, we gathered that even at present in all complicated
cases of the type we have in mind, it was usual to obtain legal assistance at considerable cost, from the bars
attached to the High Courts. We do not, therefore, think that the additional cost to litigants in the districts, that is
likely to result from our recommendation, would be appreciable. In any case, the case for the centralisation of
jurisdiction in the type of cases that we have in view is so strong that we do not hesitate to recommend this step.
There is one point arising out of our recommendations to which we would like to draw particular attention. While we
have been unable to accept the suggestion in the Government Memorandum that the jurisdiction of District Courts
should be widened and uniform powers should be conferred on them, and have recommended instead that certain
types of cases under the Indian Companies Act will be triable exclusively by the High Courts, we would like to make
it clear that our recommendations on this point are subject to administrative arrangements being made by the High
Courts concerned to dispose of such suits and proceedings as expeditiously as possible. We were told by
witnesses that congestion of work in some of the High Courts was considerable. If this is so, we suggest that
company cases should receive priority and as far as possible should be allotted to a special judge in each High
Court.” [ Company Law Committee Report: para 31].
The jurisdiction of the High Court under several sections has been transferred to and vested in the Company Law
Board by the Companies (Amendment) Act, 1988 [ See detailed Comments under Section 10E]. This has now been
transferred to the (NCLT) National Company Law Tribunal by the Companies (Second Amendment) Act, 2002 (11
of 2003) on the constitution of the Tribunal under Section 10FB.
See detailed Comments under Section 10FB.
For the Statement of Objects and Reasons appended to the aforesaid Bills see Legislative History in Comments
under Section 1.
Court [ Section 2(11)].—The Court means (a) with respect to any matter relating to a company (other than any
offence against the Companies Act, 1956), 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 the Companies Act,
1956, the Court of a Magistrate of the First Class or, as the case may be, a Presidency Magistrate, having
jurisdiction to try such offence.
See detailed Comments on the Scope of Sections 2(11) and 10 hereinafter.
Jurisdiction of Courts under the Companies Act, 1956.—The Courts having jurisdiction under the Companies
Act, 1956 (1 of 1956) are as follows.
High Court [ Section 10(1)(a) and (2)].—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).
Under section 10(2) the Central Government may by notification 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 40733; (b) in respect of companies with a paid up
share capital of not less than Rs. 1,00,000, by Part VII (sections 425 to 560)34 and other provisions of this Act
relating to the winding up of companies.
The High Court thus had exclusive jurisdiction regarding all companies in respect of matters covered by sections
237, 391, 394, 395.35 It also had jurisdiction as regards companies with a paid up capital of Rs. 1,00,000 and over
in respect of all matters covered by Part VII (Sections 425 to 560)17 and the other provisions relating to winding up.
The provisions relating to winding-up of companies with a paid up capital less than Rs. 1,00,000 could be delegated
to the District Court.36
Notification delegating jurisdiction to District Courts.— Notification No. G.S.R. 663, dated 29-5-1959.—“In
exercise of the powers conferred by sub-section (2) of section 10 of the Companies Act, 1956 (1 of 1956), and in
supersession of all the notifications issued by the Provincial/State Governments under the proviso to sub-section (1)
of section 3 of the Indian Companies Act, 1913 (7 of 1913) the Central Government hereby empowers all the
District Courts in the Union of India except the District Courts in the State of Jammu and Kashmir, to exercise the
jurisdiction conferred upon the Court by the sections hereinafter specified of the said Companies Act, 1956, subject
to the condition that, in the case of the District Courts in the State of Orissa and in the Union Territory of Himachal
Page 15 of 72
Pradesh, such jurisdiction shall be exercisable subject to the orders of the High Court or, as the case may be, the
Judicial Commissioner's Court, namely:—
(1) Section 89—Termination of disproportionately excessive voting rights in existing companies.
*(2) Section 113—Limitation of time for issue of certificates.
*(3) Section 118—Right to obtain copies of and inspect trust deed.
*(4) Section 141—Rectification by Court of Register of Charges.
*(5) Section 144—Right to inspect copies of instruments creating charges and Company's register of charges.
*(6) Section 163—Place of keeping, and inspection of, registers and returns.
*(7) Section 196—Inspection of minute books of general meetings.
*(8) Section 219—Right of member to copies of balance sheet and auditor's report.
(9) Section 234—Power of Registrar to call for information or explanation.
‡(10) Section 304—Inspection of the register of directors.
‡(11) Section 307—Register of 37[ ***] directors’ shareholdings etc.
(12) 20[ ***].
†(13) Section 614—Enforcement of duty of Company to make returns, etc., to Registrar.
2. This notification shall not affect any proceeding under the Indian Companies Act, 1913 (7 of 1913), or under the
Companies Act, 1956 (1 of 1956), which on the date of this notification, is pending before any District Court.” [
Notification No. G.S.R. 663, dated 29-5-1959 as amended by G.S.R. 1926, dated 13-10-1966 : Govt. of India
publication, Clarifications and Circulars on Company Law, 1977 Edition, p. 4].
District Court [ Section 10(1)(b)and (2) ].—Where jurisdiction has been so conferred by the Central Government
on any District Court under sub-section (2), the District Court in regard to matters falling within its scope, will have
jurisdiction in respect of companies having their registered offices in the district.
The District Courts will have jurisdiction over matters expressly conferred by the Act or by Central Government
Notifications. All residuary powers are vested in the High Court. The High Court cannot delegate its powers to the
District Court.
Under sections 10, essentially, it is the jurisdiction of the High Court to entertain any dispute in respect of the affairs
of the company, except such disputes in respect of which powers have explicitly been conferred on the District
Court by the Central Government. The Central Government Notification [ printed above] shows that section 283 of
the Companies Act, 1956, regarding removal of directors, is not one of the sections in respect of which the
jurisdiction has been conferred to the District Court. Therefore, the Civil Court had no jurisdiction to entertain the
suit.38 A suit for declaration that defendant is not a director is not maintainable in a District Court.39
Under Notification No. G.S.R. 663, dated 29-5-1959 [ printed above], the jurisdiction of High Court as a Company
Court for entertaining a petition for inspection of registers and returns of a company under section 163 was
conferred on the District Courts [conferred on CLB by the Companies (Amendment) Act, 1988 (now the Central
Government by the Companies (Second Amendment) Act, 2002)]. In the light of the notification, the High Court had
no jurisdiction to entertain the petition under section 163. However, no notification has been issued by the Central
Government conferring any power on the District Court with regard to seeking any relief in respect of inspection of
books of account and records under section 209(4). Section 209(4) confers on the directors a statutory right of
inspection of all books of account and other books and papers of the company. Section 209(4) confers a statutory
right of inspection and the court which has jurisdiction under the Act possesses powers to enforce that statutory
right. Therefore, the petition was maintainable in the High Court under section 209(4) of the Act and the company
was under an obligation to allow inspection to the petitioner of all the books of account and other books and
papers.40
By Notification under section 10(2) [ printed above] except the District Courts in the State of Jammu and Kashmir all
the remaining District Courts in India have been empowered to exercise jurisdiction conferred by the specified
sections. In respect of the District Courts in Orissa and Himachal Pradesh the conferment of jurisdiction is qualified
by a reservation that the jurisdiction will be exercised by District Courts subject to the orders of the Judicial
Page 16 of 72
Commissioner's Court. Even though the Judicial Commissioner's Court or the High Court succeeding it, made no
orders in this respect, the jurisdiction continued to be exercisable by the District Courts in Himachal Pradesh.
Therefore, the jurisdiction conferred on the Court by section 141 of the Companies Act, 1956, vested in the District
Courts in Himachal Pradesh.41
Proceeding in Court without jurisdiction invalid.—A proceeding taken in a Court without jurisdiction will be
invalid. Under section 437 of the Act, a High Court has been given power to direct that winding up proceedings
wrongly commenced in a District Court might be continued in that Court. Section 437 can apply only to a case
where there is a defect of territorial jurisdiction and not a case where there is an inherent want of competence
regarding the subject matter of the proceeding. The proceedings of a court which has no inherent jurisdiction are
completely void and inoperative. Where the petitioner applied to the District Court for a winding up order, after the
issue of Notification No. G.S.R. 663 [ printed above], which did not confer on District Courts the jurisdiction to order
winding up. The District Court was not entitled to an order of the High Court under section 437 to continue
proceeding and have the proceedings validated by an order of the High Court.42
Territorial jurisdiction [ Section 10(1)(a) and (3)].—The High Court will exercise jurisdiction over companies
having its registered office within the court's territorial jurisdiction. [Sub-section (1)(a)].
For 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.
[Sub-section (3)].
Jurisdiction of High Court where registered office situate.—According to section 10(1)(a) and section 10(3) it is
clear that for the purpose of jurisdiction of winding up of a company under the Companies Act, 1956, the High Court
having jurisdiction at the place at which the registered office of the company was situate has the jurisdiction. Where
the company had its registered office in Calcutta, the High Court of Calcutta alone had the jurisdiction and the
winding up petition was not maintainable by the Allahabad or Gujarat High Court. When the High Court not having
jurisdiction admitted the petition and directed advertisement, appeal shall lie.43
Jurisdiction of High Court under several sections has been transferred to and vested in “Tribunal” to be constituted
under Section 10FB.
Registered office for winding up.— Section 10(3) provides that for the purposes of jurisdiction to wind up
companies, the expression “registered office” means the place which has longest been registered office of company
during 6 months immediately preceding the presentation of winding-up petition. The court having jurisdiction under
the Act is the High Court [ now the National Company Law Tribunal (NCLT)] having jurisdiction in relation to the
place at which the registered office of the company is situate, except to the extent to which jurisdiction has been
conferred on any District Courts subordinate to the High Court in pursuance of sub-section (2). Where the
registered office of the company was at Hyderabad, the petition for winding up the company was not maintainable
in the Orissa High Court.44
In the matter of liquidation of companies section 10 confers jurisdiction in relation to the place at which the
registered office of the company is situated. Proceedings for liquidation cannot be allowed to be continued at two
places. Where the registered office of the company was situated within the jurisdiction of the Bench of the
Rajasthan High Court at Jodhpur, the Bench at Jaipur had no jurisdiction and the proceedings in liquidation were to
be transferred to the company court at Jodhpur.45
Agreement between parties not effective.—Under section 10, the High Court where the registered office of the
company concerned is situate shall have the jurisdiction to entertain the winding up petition. Consequently, even if
there was any agreement to the effect that in case of dispute the same shall be resolved before the courts at
Bombay but as the registered office of the company was at Kanpur, the winding up petition could only be filed
before the Allahabad High Court.46
The jurisdiction of the High Court under Sections 425 to 560 has since been transferred to and vested in “the
Tribunal” by the Companies (Second Amendment) Act, 2002 (11 of 2003) Companies (Second Amendment) Act,
2002 (11 of 2003) (w.e.f. date to be notified). See detailed Comments hereinafter, Comments under Section 10FB
and Sections 425 to 560.
Page 17 of 72
Jurisdiction of Court transferred to the CLB [ Section 10E].—The powers and functions of the Court, i.e., High
Court and District Court under various Sections of the Companies Act, 1956 (1 of 1956) were transferred to and
vested in theCompany Law Board (CLB) [ now conferred on the Tribunal (NCLT) vide Section 10FB] by the
Companies (Amendment) Act, 1974 (41 of 1974) and the Companies (Amendment) Act, 1988 (31 of 1988) (w.e.f.
31-5-1991).
See detailed Comments, List of Sections conferring powers on the CLB, Form and Procedure under Section 10E
[Constitution of Company Law Board] and Appeals against the orders of the Company Law Board [ Section 10F].
Dissolution of Company Law Board [ Section 10FA].—As per Section 10FA of the Companies Act, 1956 from
the date of constitution of the National Company Law Tribunal (NCLT)vide Notification under Section 10FB of the
Companies Act, 1956, as inserted by the Companies (Second Amendment) Act, 2002 (11 of 2003), theCompany
Law Board (CLB) shall stand dissolved.
Jurisdiction of Company Court and CLB vested in the Tribunal (NCLT) [ Section 10FB].—From the date of
constitution of the National Company Law Tribunal (NCLT) vide Notification under Section 10FB of the Companies
Act, 1956, as inserted by the Companies (Second Amendment) Act, 2002 (11 of 2003) (w.e.f. date to be notified),
the jurisdiction, powers and functions hitherto being exercised by theCompany Law Board(CLB) and the Court
under various Sections of the Companies Act, 1956 have been conferred on the Tribunal (NCLT).
The powers and jurisdiction presently being exercised by various bodies, viz., the Company Law Board (CLB), the
BIFR or the AAIFR or High Courts have been consolidated and entrusted to the National Company Law Tribunal
(NCLT).
See detailed Comments, Legislative History, Notification constituting the National Company Law Tribunal (NCLT),
Form and Procedure under Section 10FB.
See also Comments under Sections 10FB-10GF and respective Sections.
Powers and functions of the Tribunal (NCLT).—From the date of constitution of the National Company Law
Tribunal (NCLT) vide Notification under Section 10FB of the Companies Act, 1956, as inserted by the Companies
(Second Amendment) Act, 2002 (11 of 2003) (w.e.f. date to be notified), the powers and functions hitherto being
exercised by theCompany Law Board(CLB), the Central Government, the Court and BIFR under various Sections of
the Companies Act, 1956 [Listed below], SICA and other Acts have been conferred on the Tribunal (NCLT).
Any person aggrieved by an order or decision of the Tribunal (NCLT) may prefer an appeal to the Appellate
Tribunal except consent orders [ Section 10FQ]. Civil court shall have no jurisdiction in such matters [ Section
10GB]. The provisions of the Limitation Act, 1963 (36 of 1963) shall, as far as may be, apply to an appeal made to
the Appellate Tribunal [ Section 10GE]. Any person aggrieved by decision or order of the Appellate Tribunal may file
an appeal to the Supreme Court on any question of law arising out of such decision or order [ Section 10GF].
See detailed Comments, Form and Procedure under Sections 10FB to 10GF.
Sections conferring powers on Tribunal (NCLT).—From the date of constitution of the National Company Law
Tribunal (NCLT) vide Notification under section 10FB of the Companies Act, 1956, as inserted by the Companies
(Second Amendment) Act, 2002 (11 of 2003), the powers and functions under following sections have been
conferred on the National Company Law Tribunal (NCLT):
Sections 55A, 58A(9), 58AA, 75, 80A(1) proviso, 100 to 104, 107, 111, 111A, 117B(4) proviso, 117C, 168, 186,
203, 235(2), 236, 237, 241(2)(dd), 243, 247(1A), 248(1), 250, 251, 269(7)(8)(9), 304(2)(b), 307(9), 318(3)(d), 388B-
388E, 391, 392, 394, 394A, 395, 396, 397, 398, 399, 400, 401, 402, 403, 404, 405, 407(1)(b), 408(1)(2)(5), 409(1),
410, 424, 424A-424L, 425-560, 581, 582, 583, 587-589, 610(2), 614(1), 626, 627, 632, 635, 635B, 637A, 640A,
Schedule XI and 651A of the Companies Act, 1956 (1 of 1956).
See detailed Comments under Sections 10FB-10GF and respective Sections.
This List of Sections conferring jurisdiction on the Tribunal (NCLT) is further bifurcated vis-a-vis powers being
hitherto exercised by the Company Law Board (CLB) or Court or Central Government as follows.
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Powers of CLB conferred on Tribunal (NCLT).—Powers and functions hitherto being exercised by the Company
Law Board (CLB) now conferred on the Tribunal (NCLT) constituted under section 10FB are as follows:
Section 55A, 58A(9), 58AA, 80A(1) proviso, 111, 111A, 117C, 186, 235(2), 236, 237, 241(2)(dd), 247(1A), 250,
251, 269(7)(8)(9), 304(2)(b) [Central Government or Tribunal], 307(9) [Central Government or Tribunal], 388B-
388E, 396, 397, 398, 399, 400, 401, 402, 403, 404, 405, 407(1)(b), 408(1)(2)(5), 409(1), 410, 610(2), 614(1), 635(4)
[CLB or Tribunal], 635B, 637A[Central Government or Tribunal], 640A [Court or Tribunal], 651A and Schedule XI of
Powers of Central Government conferred on Tribunal (NCLT).—Powers and functions hitherto being exercised
by the Central Government conferred on the Tribunal (NCLT) constituted under section 10FB (w.e.f. date to be
notified) are as follows:
Sections 79(3) proviso, 117B(4) proviso, 167(2) proviso, 168[Tribunal or Central Government] of the Companies
Act, 1956 (1 of 1956).
See Comments under Sections 10FB-10GF and respective Sections.
Powers of Court conferred on Tribunal (NCLT).—The jurisdiction, powers and functions hitherto being exercised
by the Court under several provisions of the Companies Act, 1956 now conferred on the National Company Law
Tribunal (NCLT) constituted under section 10FB (w.e.f. date to be notified) are as follows:
Section 75, 80A(2) [Court or Tribunal], 100 to 104, 107, 203 [Court or Tribunal], 243, 318(3)(d), 391, 392, 394,
394A, 395, 424, 425, 426, 427, 433, 434(1)(b) [Court or Tribunal], 434(1)(c), 439, 439A, 440, 441, 441A, 441B,
441D, 441E, 441F, 441G, 443, 444, 446, 446A, 448, 450, 451, 453 to 456, 457, 458, 458A, 459, 460 to 465, 466,
467 to 469, 470, 471, 472, 473 to 477, 478, 479, 480, 481, 490, 492, 494, 497, 502 to 504, 506, 507, 509, 511A,
512, 515, 517, 518, 519, 531, 531A, 533, 535, 536, 537, 538, 540, 542, 543, 544, 545, 546, 547, 549, 550, 551,
553, 555, 556, 557, 558 [Court or Tribunal], 559, 560, 581, 582, 583, 587 to 589, 626 [Court or Tribunal], 627 [Court
or Tribunal], 632 [Court or Tribunal], 635B [Appellate Tribunal], 640A [Court or Tribunal], 647A and 651A of the
Powers of BIFR conferred on Tribunal (NCLT).—The powers and functions being exercised by the BIFR under
SICA conferred on the Tribunal (NCLT) constituted under section 10FB (w.e.f. date to be notified) are as follows:
Sections 424A to 424L of the Companies Act, 1956 (1 of 1956).
See detailed Comments under Sections 10FB-10GF and 424A-424L.
Powers of CLB conferred on Central Government.—The powers and functions hitherto being exercised by the
Company Law Board (CLB) now conferred on the Central Government (w.e.f. date to be notified) are as follows:
Sections 17(2), 18(4), 19, 43, 49(10), 79(2), 113(1), 113(3), 117B(4), 118(3), 141, 144(4), 163(6), 167, 188(5),
196(4), 219(4), 225(3), proviso 284(4), proviso 304(2)(b) [Central Government or Tribunal], 307(9) [Central
Government or Tribunal], 621A and 637A [Central Government or Tribunal] of the Companies Act, 1956.
Powers under some new sections have been conferred on the Central Government, viz., Sections 441A, 441B,
441E, 513(3) proviso. Power of the Supreme Court to make Rules under Section 643 has also been vested in the
Central Government.
See detailed Comments under Sections 10E, 10FA, 10FB, 637, 637A and respective Sections conferring powers.
Appeal from order of Tribunal (NCLT) [ Section 10FQ].
—As per section 10FQ any person aggrieved by an order or decision of the Tribunal (NCLT) may prefer an appeal
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to the Appellate Tribunal. No appeal shall lie to the Appellate Tribunal from an order or decision made by the
Tribunal with the consent of parties.
Appellate Tribunal [ Sections 10FQ-10GF].— See detailed Comments under Part IC [ Sections 10FQ to 10GF]
inserted by the Companies (Second Amendment) Act, 2002 (11 of 2003) (w.e.f. date to be notified).
Civil Court not to have Jurisdiction in matters conferred on Tribunal (NCLT) [ Section 10GB].—As per
section 10GB no civil court shall have jurisdiction to entertain any suit or proceeding in respect of any matter which
the Tribunal or the Appellate Tribunal is empowered to determine by or under this Act or any other law for the time
being in force and no injunction shall be granted by any court or other authority in respect of any action taken or to
be taken in pursuance of any power conferred by or under this Act or any other law.
See detailed Comments hereinafter under Sections 10 and 10GB.
Appeal to Supreme Court [ Section 10GF].—Any person aggrieved by any decision or order of the Appellate
Tribunal may file an appeal to the Supreme Court on any question of law arising out of such decision or order.
See detailed Comments under Sections 10FB to 10GF.
Appropriate Forum.—The matters which are not within the jurisdiction of the Company Law Board (CLB) [ now the
National Company Law Tribunal (NCLT)], are decided by the High Court or the District Court as provided under
section 10 and other provisions of the Companies Act, 1956. The residue may go to ordinary civil court or some
other competent authority.47
Jurisdiction of Civil Courts excluded.—The following matters governed by specific provisions of the Companies
Act, 1956 and other related Acts are excluded or barred from the Jurisdiction of the Civil Courts.
Matters conferred on the National Company Law Tribunal (NCLT).—From the date of constitution of the
National Company Law Tribunal (NCLT) vide Notification under Section 10FB of the Companies Act, 1956, as
inserted by the Companies (Second Amendment) Act, 2002 (11 of 2003), jurisdiction, powers and functions under
various Sections of the Companies Act, 1956 have been conferred on the Tribunal (NCLT) and the Appellate
Tribunal [ Sections 10FB and 10FQ]. Section 10GB of the Companies Act, 1956 provides as follows.
Civil court not to have jurisdiction [ Section 10GB].—As per section 10GB, after the constitution of the Tribunal
(NCLT) and the Appellate Tribunal under Sections 10FB and 10FQ no civil court shall have jurisdiction to entertain
any suit or proceeding in respect of any matter which the Tribunal (NCLT) or the Appellate Tribunal is empowered
to determine by or under this Act or any other law for the time being in force and no injunction shall be granted by
any court or other authority in respect of any action taken or to be taken in pursuance of any power conferred by or
under this Act or any other law for the time being in force.
See detailed Comments under Sections 10, 10E, 10FB and 10GB.
Sick Industrial Companies [ Sections 424A to 424L].—Under Part VIA of the Companies Act, 1956 (1 of 1956)—
Revival and Rehabilitation of Sick Industrial Companies [ Sections 424A to 424L], inserted by the Companies
(Second Amendment) Act, 2002 (11 of 2003) (w.e.f. date to be notified), the jurisdiction, powers and functions are
vested in the Tribunal (NCLT) constituted under Section 10FB.
The Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986) shall consequently be repealed. Under
the Sick Industrial Companies (Special Provisions) Act, 1985 the jurisdiction vested in the BIFR and the AAIFR.
Section 26 of the SICA barred the jurisdiction of Civil Courts.
The Competition Act, 2002 (12 of 2003).— Section 61 of the Competition Act, 2002 (12 of 2003) excludes the
jurisdiction of civil courts in respect of matters to be determined by the Competition Commission of India under the
Act. The MR TP Act, 1969 (54 of 1969) has been repealed by the Competition Act, 2002. [ Section 66].
See detailed Comments later in this Section.
Recovery of Debts Due to Banks Act, 1993.— Section 18 of the Recovery of Debts Due to Banks and Financial
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Institutions Act, 1993 (51 of 1993) bars the jurisdiction of the Civil Courts except the Supreme Court, and a High
Court exercising jurisdiction under Articles 226 and 227 of the Constitution of India.
See detailed Comments on Articles 141, 226 and 227, Judicial Review, Writs, Doctrine of Precedent and Binding
force of Supreme Court and Jurisdictional High Court Decisions at the end of this Section 10.
The Family Courts Act, 1984.— Section 8 of the Family Courts Act, 1984 (66 of 1984) excludes the jurisdiction of
the Civil Courts.
Principles regarding exclusion of jurisdiction of Civil Courts.—The principles regarding the exclusion of the
jurisdiction of Civil Courts have been discussed by the Supreme Court in certain cases.48
Special Forums.—However, application of other laws is not barred under the following Acts which provide special
forums. Provisions of these Acts are in addition to and not in derogation of provisions of any other law for the time
being in force.
The SEBI Act, 1992 (15 of 1992).— See the Securities and Exchange Board of India Act, 1992 (15 of 1992) (SEBI)
[ Section 32].
See detailed Comments and List of the SEBI Act, Rules, Regulations and Guidelines under Section 55A of the
The Consumer Protection Act, 1986 (68 of 1986).— See the Consumer Protection Act, 1986 (68 of 1986) [
Section 3].
See detailed Comments later in this Section. Relevant decisions on jurisdiction of Consumer Forums have been
annotated under respective Sections.
Jurisdiction of the Civil Courts.—In company matters specifically conferred on or governed by the Court, the
Company Law Board(CLB) or the Tribunal (NCLT) under various Sections of the Companies Act, 1956, the
jurisdiction of the Civil Courts is excluded. But, in company matters not governed by the Company Court, the
jurisdiction of the Civil Courts is not excluded.
See detailed Comments and List of Sections conferring powers on the Court, the Company Law Board (CLB) [the
Tribunal (NCLT) constituted under Section 10FB] under Section 10, 10E, 10FB, 10GB and relevant Sections.
Matters of general law or civil disputes.—In matters of general law and where the jurisdiction of civil court has
not been ousted by the Companies Act, 1956, the civil courts would have jurisdiction. Section 9 of the Code of Civil
Procedure, 1908 (5 of 1908) confers jurisdiction upon the civil courts to determine all disputes of civil nature unless
it is barred under a statute either expressly or by necessary implication. Bar of jurisdiction of a civil court is not to be
readily inferred. A provision seeking to bar the jurisdiction of the civil court requires strict interpretation. The court, it
is well-settled, would normally lean in favour of the construction, which would uphold retention of jurisdiction of the
civil court. The burden of proof in this behalf shall be on the party who asserts that the civil court's jurisdiction is
ousted. Even otherwise, the civil court's jurisdiction is not completely ousted under the Companies Act, 1956.
Where the civil court was concerned with the rival claims of the parties as to whether one party had illegally been
dispossessed by the other or not. The dispute between the parties was eminently a civil dispute and not a dispute
under the provisions of the Companies Act. Such a suit apart from the general law, would also be maintainable in
terms of section 6 of the Specific Relief Act, 1963 (47 of 1963). In such matters the court would not be concerned
even with the question as to title/ownership of the property. The matter relating to ownership of the press was a
matter of general law.49
Ouster of Jurisdiction of Civil Court not to be readily inferred.—The ouster of the jurisdiction is not to be readily
inferred as the Companies Act, 1956 does not completely ouster the jurisdiction of any Civil Court. The Court will
lean in favour of the jurisdiction of the Civil Court unless it is specifically ousted by any Statute from doing so. The
provisions of the Companies Act, 1956 has not completely ousted jurisdiction of the Civil Court. The dispute arising
between the parties in the instant case were in the nature of Civil disputes, and the Civil Court had the jurisdiction to
entertain and decide the disputes involving the rival claims of the parties to run and manage the newspaper
business. A Suit was accordingly filed by one of the parties for eviction and issue of a permanent injunction against
the other. But objections were subsequently raised regarding the jurisdiction of Civil Court. The disputes relating to
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the question as to whether the parties were illegally dispossessed are disputes of Civil nature and therefore
maintainable before any Civil Court. Parties filed Suits and made applications for Temporary Injunction thereto. The
High Court allowed the said application made in one case but in another case it held that there was no jurisdiction.
This decision was set aside. The matter was thus remanded to the High Court for fresh decision in the matter.50
As per Section 10GB of the Companies Act, 1956, as inserted by the Companies (Second Amendment) Act, 2002
(11 of 2003), after the constitution of the Tribunal (NCLT) under Section 10FB the civil courts shall have no
jurisdiction in matters conferred on the Tribunal (NCLT). Decisions enunciating the jurisdiction of Civil Courts and
other Forums in company matters are given below.
See also Comments under Section 10FB and 10GB.
Scope of Section 10.—The definition of “Court” in section 2(11) and section 10 of the Companies Act, 1956
dealing with “jurisdiction of courts” read together enable the shareholders to decide as to which court they should
approach for remedy in respect of a particular matter. The conferment of jurisdiction on “the Court” is not under
section 10 but by the particular provisions of the Act, like sections 107, 155, 163(2), 237, 397, 425, etc. [now
jurisdiction and powers under most of these Sections have been transferred to and vested in the National Company
Law Tribunal (NCLT) vide Section 10FB, as inserted by the Companies (Second Amendment) Act, 2002 (11 of
2003) hitherto being exercised by and vested in the Company Law Board(CLB) under Section 10E]. Section 10
does not purport to invest the company court [the CLB (section 10E) or the Tribunal (section 10FB)] with jurisdiction
over every matter arising under the Companies Act, 1956. Under section 9 of the Code of Civil Procedure, 1908 (5
of 1908), the civil courts have jurisdiction to try all suits of a civil nature excepting suits of which their cognisance is
expressly or impliedly barred. Unlike some statutes, the Companies Act did not contain any express provision
barring the jurisdiction of the ordinary civil courts in matters covered by the provisions of the Act [now Section 10GB
inserted by the Companies (Second Amendment) Act, 2002 (11 of 2003) specifically bars the jurisdiction of civil
court in matters conferred on the Tribunal (NCLT)]. In certain cases like winding-up of companies the jurisdiction of
civil courts is impliedly barred [ now powers of winding-up have been transferred to the Tribunal (NCLT) and
jurisdiction of Civil Court in matters conferred on the Tribunal is expressly barred vide Section 10GB]. But, where a
wrong is done to an individual member he can insist by recourse to a civil suit on the strict observance of the legal
rights, statutory provisions and provisions in the memorandum and articles which cannot be waived by a bare
majority of shareholders.51
See detailed Comments under Section 10, 10E, 10FB and 10GB.
Individual wrongs.— Section 10 only proceeds to enumerate or specify “the Court having jurisdiction under this
Act”, wherever such jurisdiction is conferred on “the Court” by the other provisions of the Companies Act, 1956.
Powers are conferred by the Companies Act not only on Courts but also on other authorities like the Central
Government, theCompany Law Board (CLB) [ now the National Company Law Tribunal (NCLT)] and the Registrar.
Where a power is vested in a Court [the CLB or the Tribunal], that Court [the CLB or Tribunal], etc., has to be
specified. Beyond so specifying the Court [the CLB or Tribunal] competent to deal with a matter arising under the
Companies Act, section 10 does not purport to invest the Company Court [the CLB (section 10E) or the Tribunal
(section 10FB)] with jurisdiction over every matter arising under the Companies Act. It may be that, in view of the
elaborate provisions contained in the Companies Act in regard to the management and the conduct of a company's
affairs including important internal matters of administration, the interference by civil court has become limited, but
the power has not at all been taken away [ vide Section 10GB inserted by the Companies (Second Amendment)
Act, 2002) civil court shall have no jurisdiction in matters conferred on Tribunal (NCLT)]. Every suit for redress of
individual wrongs cannot be considered as merely concerned with matters of internal management. The rule of
internal management as stated in Foss v. Harbottle 52 does not apply to: (1) an act which is ultra vires the company
or illegal; (2) an act which constitutes a fraud against the minority and the wrongdoers are themselves in control of
the company; or (3) a resolution which requires a qualified majority but has been passed by a simple majority. The
rule does not apply because the majority cannot sanction those acts. A resolution which is ultra vires or illegal or is
a fraud on the minority or is not bona fide or for the benefit of the company as a whole or is intended to discriminate
between the majority shareholders and the minority shareholders is illegal and can be questioned by a separate
action in a Civil Court. The reason for this is that if the minority were denied that right, their grievance could never
reach the Court because the wrongdoers themselves being in control would not allow the company to take any
action. The rule against interference by Court with internal management of company is not applicable to cases of
infringement of individual membership rights as distinct from corporate membership rights. Unless there is an
exclusion of the jurisdiction of the Civil Court by words express or implied, a suit would be maintainable, and there
is no such exclusion in respect of individual rights. A Director of a company can maintain a suit in a Civil Court
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challenging the validity of resolutions passed by its Board of directors to the effect that he had been disqualified
from being a Director.53
Rule of Internal Management inFoss v. Harbottle, .—In Foss v. Harbottle, it has been laid down that prima facie
every action must be brought in the name of the company to remedy a wrong done to it.54 The rule of internal
management in Foss v. Harbottle, cannot be mechanically applied to Indian companies without taking into
consideration the ground realities of the corporate sector in India.55
Civil Courts when may exercise Jurisdiction.— Section 10 which provides that the location of the registered
office of the company would determine the territorial jurisdiction of the High Court, cannot be construed to mean
that the High Court has jurisdiction with respect to all matters relating to that company.
Most of the powers of High Courts and District Courts as Company Court [under Section 10 read with respective
Sections conferring powers] were transferred to and vested in the Company Law Board (CLB) [ Section 10E read
with respective Sections]. N ow these have been transferred to and vested in the Tribunal (NCLT) from the date of
constitution [ Section 10FB of the Companies Act, 1956 as inserted by the Companies (Second Amendment) Act,
2002 (11 of 2003) read with respective Sections].
NowSection 10GB of the Companies Act, 1956, as inserted by the Companies (Second Amendment) Act, 2002 (11
of 2003) (w.e.f. date to be notified) expressly provides that the Civil Court shall not have Jurisdiction to entertain
Suit or grant Injunction in matters conferred on the Tribunal (NCLT) under various Sections of the Act or any other
law. See detailed Comments under Section 10GB.
High Court as a company court or CLB [ now the Tribunal] with special company jurisdiction is a special court and
that jurisdiction has to be found from specific provisions of the Companies Act, 1956. The High Court as company
court or CLB [now the Tribunal] does not have any general plenary or residuary jurisdiction to deal with all matters
and all questions arising under the Act. These powers cover almost all the allegations of shareholders against the
company and its management.
Nevertheless, a Civil Suit will be competent or maintainable in the appropriate Civil Court in certain cases explained
hereinafter.
Civil Suit when competent or maintainable.—Civil Suit will be competent or maintainable, for instance: (1) Where
no special remedy has been provided in the Companies Act, e.g., to adjudicate the disputes relating to title to
shares, ownership of shares, issue of duplicate share certificates, to decide the validity of forfeiture of the shares, to
challenge the election of a director, appointment or removal of a director, for direction to place the company's
accounts at the meeting, for a declaration that meeting was illegal, to challenge the validity of a notice calling a
meeting, to adjudicate the disputes arising out of underwriting agreement, for refund of the subscription moneys, to
adjudicate the disputes among the warring factions of the directors, etc. (2) Where the act complained of is fraud on
the minority, (3) Where the act complained of is illegal or ultra vires the company, (4) Ordinary Resolution passed
instead of Special Resolution, (5) Where justice demands, e.g., Misfeasance, (6) Violation of Individual Membership
Rights. Decisions enunciating these are as follows.
Where no special remedy provided in the Companies Act.—The jurisdiction or power of the High Court as a
Company Court under Section 10 [CLB under Section 10Enow the Tribunal (NCLT) under Section 10FB] can be
exercised only in respect of matters for which the jurisdiction is conferred by relevant other provisions of the
Companies Act, 1956 or the Rules made thereunder. The High Court [or the Tribunal] when acting as a company
court has special jurisdiction which is conferred by the provisions of the Companies Act or Rules and the power
cannot be exercised as a general power or as plenary or residuary jurisdiction. If there is any dispute between the
subscriber and the company, e.g., subscriber to shares having grievance in the matter of issue and allotment of
shares, the High Court [or the Tribunal] as a company court has no jurisdiction and the same can be tried in a civil
court. Even if any provision is contravened by the company, power has been given for prosecution of the company,
but that has to be exercised by the civil court having jurisdiction and not the High Court as company court [or the
CLB (now the Tribunal)]. The power which is exercised by the High Court as Company Court [or the CLB (the
Tribunal)] is in respect of corporate rights and not individual rights of a citizen.56
Title to Shares [ Sections 84, 111(7) and 111A(7)].—The CLB [the Tribunal] has jurisdiction to decide all matters
in connection with rectification of register of members under section 111(7) and 111A(7) but within the scope of the
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provisions of the Companies Act, 1956. On an application under section 111(7) the CLB [Tribunal] may decide any
question relating to title of shares. But, as regards title, it is well known that the decision by the Civil Court is always
preferable. The expression used in section 111(7) is “may”. That itself is an indication that Parliament intended that
the decision of title relating to the shares should be incidental. The CLB [the Tribunal] has to examine as to whether
any complicated questions of title, forgery, fabrication or similar matters are really involved and if such complicated
questions of facts are involved then the parties should be referred to the Civil Courts. If the CLB [Tribunal] fails to
consider as to whether there are complicated questions then on appeal the matter is liable to be remanded to the
CLB [the Tribunal] for reconsideration.57
Rectification of register on transfer [ Section 111A].—In respect of any question raised within the peripheral
field of rectification of the register of members, it is the Company Court under section 155 [CLB (the Tribunal) under
sections 111 and 111A] alone which would have exclusive jurisdiction to decide all matters raised in connection with
rectification, but within the scope of the provisions of the Act. Where dispute falls outside the scope of the
rectification provisions, it may direct the party get his right adjudicated by the Civil Court.58
There is a common law right of a shareholder to seek rectification of the register of members, and the jurisdiction of
the Civil Court in appropriate cases is not barred where complicated questions of law and fact arise. The Civil Court
also has power to suspend voting rights by way of interim order where shares were acquired in breach of SEBI
Regulations and were void. The Court may also define terms used in the SEBI Regulations, such as, “acquirer”,
“person acting in concert” etc.59
The Company Court [the CLB or the Tribunal (NCLT)] does not have exclusive jurisdiction over all matters relating
to companies but only in respect of matters for which adjudication is provided by the Companies Act, 1956. Suit by
the transferee of shares for declaration of ownership of shares and injunction to company to issue duplicate share
certificates is maintainable in the civil court. Territorial jurisdiction of the court is to be decided on the basis of
averments in the plaint.60
Forfeiture of shares.—Jurisdiction of the Company Court or the Company Law Board [ now the Tribunal (NCLT)]
is restricted to the matters specifically mentioned in the Companies Act, 1956. Where specific provision is not made
in relevant sections the remedy lies in the Civil Court. A petition seeking a declaration that a forfeiture of shares is
void is not amenable to the jurisdiction of either the Company Court or theCompany Law Board [ now the Tribunal]
under section 111 or 111A of the Companies Act, 1956, therefore, remedy lies in the civil court.61
See detailed Comments under Section 100, 111 and 111A.
Annual general meetings [ Section 166].
—The High Court, i.e., the company court [ now the Tribunal (NCLT)] has no jurisdiction to deal with the matters
arising out of violation of section 166 of the Companies Act, 1956 for not holding the Annual General Meeting
(AGM) at the prescribed time and place. As no special remedy is provided in the Companies Act, 1956, the
common law remedy would be available in the ordinary Civil Courts in such cases.62
To declare a meeting illegal and void civil suit is the only procedure for obtaining the relief. A petition under section
166 read with section 171 to seek the primary relief that the annual general meeting of the company be declared
illegal and void is not maintainable before the Company Court [ now the Tribunal] and the only remedy available to
the petitioner is to file a civil suit.63
See detailed Comments under Section 166, 171 and 186.
Meetings—No inherent power of Civil Court to convene [S. 186].—The civil court is not authorised to convene
any meetings of a company, which authority rests under section 186 only with the Company Court [or the Company
Law Board [ now the Tribunal (NCLT)]. Moreover, this authority does not extend to convening annual general
meetings. Inherent powers of civil court cannot be invoked when express provisions exist in the Companies Act,
1956 for reliefs and conferring power on other authorities to convene meetings. Therefore, it would not be proper for
the civil court to convene meetings of a company in exercise of its inherent powers.64
NowSection 10GB of the Companies Act, 1956, inserted by the Companies (Second Amendment) Act, 2002 (11 of
2003) (w.e.f. date to be notified) expressly provides that the Civil Court shall not have Jurisdiction in matters
conferred on the Tribunal (NCLT). See detailed Comments under Sections 10E, 10FB and 10GB.
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Election and removal of Directors [ Sections 257 and 284].
—Right to elect or remove director is inherent right of each shareholder. Sections 257 and 284 of the Companies
Act, 1956 regulate the exercise of power to elect or remove the Directors of a company. As no particular provision
of the Companies Act has created specific jurisdiction to enforce such individual right of shareholders, the Civil
Court retains its jurisdiction to adjudicate such matters. For refusal by company to accept notice of resolution to
elect or remove director at a meeting called by the company a civil suit will be maintainable.65 The Civil Court has
jurisdiction to entertain a suit for declaration that all the members of the Board of directors have retired and fresh
directors are to be re-elected.66 The shareholders of a company have a right to have a Board of directors of their
choice and a right to vote by proxies under section 176 of the Act. Where these rights were adversely affected, the
shareholders have the right to challenge the proceedings of the meeting where these rights had been denied. This
right of the shareholders is joint and several and all such shareholders who have been denied such right can join
together as plaintiffs in the same suit.67
Suit for declaration that a director has been validly re-nominated shall be maintainable in the Civil Court even if
petitions under sections 408 and 409 are pending before the Company Law Board [the Tribunal (NCLT)] as the
relief claimed in the suit cannot be granted by the CLB [the Tribunal].68 In a suit against the company for declaration
that resolution suspending plaintiff from the Board of directors was void, the director coopted in his place would be
entitled to be impleaded in the suit.69
Additional Directors [ Section 260].
—The jurisdiction of the civil court is a very expansive one as is evident from section 9 of the Code of Civil
Procedure, 1908. The ouster of jurisdiction of civil court is not to be readily inferred. Unless the jurisdiction of the
civil court is barred by the statute either expressly or by implication it has the jurisdiction to entertain a suit
concerning a dispute of a civil nature. If a statute creates a special right or liability and a forum for determination of
the same and provides that all questions concerning such right or liability are to be determined by the said Tribunal
or Forum and bars the jurisdiction of the civil court, then such rights and liabilities are to be determined by the
Tribunal or Forum created by the statute and not by the civil court. For the challenge to appointment of additional
directors as without the decision of the Board of directors no specific remedy has been provided in the Companies
Act, 1956. Neither by express provision nor by necessary implication had the suit been barred nor was there any
provision for adequate or efficacious remedy provided under the Companies Act, 1956 with regard to the dispute
raised in the plaint. Therefore the suit was maintainable.70
Jurisdiction of Civil Court—Additional Directors—Suit.—The respondents in a suit complained that the decision
of the appointment of the Additional Directors as well as Employees of the company was illegal and a nullity as the
same were done without a decision of Board of Directors. The respondents prayed for certain other reliefs also. The
petitioner made an application under Section 10 of the Companies Act, 1956 read with Section 9 of the Code of
Civil Procedure, 1908 (5 of 1908) challenging the maintainability of the Suit. The Civil Court dismissed such
application. The petitioner filed a Revision Petition before the Patna High Court. The Revision Petition was
dismissed holding that neither by express provision nor by necessary implication such suit was barred and there
was no provision for adequate or efficacious remedy under the Companies Act, 1956 in regard to the disputes
raised in the plaint. The suit was therefore maintainable.71
See detailed Comments under sections 10, 10GB and 260.
Registered Office shifted—Jurisdiction of Civil Court.—The respondent-company filed a suit before the Civil
Court at Chennai contending that it being a 25% shareholder of the petitioner-company was fraudulently removed
from the Board of Directors of the petitioner-company in the Annual General Meeting held in 1998. Form No. 32
was filed with the Registrar of Companies (ROC), Chennai wherein it had been shown that the nominee of the
respondent-company had resigned, even though there had been no letter of resignation. Further, the petitioner-
company without notice to the respondent-company had shifted its registered office to Calcutta in 2000. Moreover,
the petitioner-company fraudulently transferred the shares of the respondent-company without its due consent. The
petitioner-company filed an application to set aside the plaint on the ground that there was no cause of action which
arose to institute the suit before the city Civil Court at Chennai and therefore there was no territorial jurisdiction for
the Court to entertain the suit. The trial court dismissed the application on the finding that there existed a cause of
action for the respondent-company to file the suit before the Civil Court at Chennai as the respondent-company was
removed from the directorship of the company by a Resolution at Chennai. On a revision petition, dismissing the
petition, the Court held that the jurisdiction of the Civil Court at Chennai was not ousted since the pleadings in the
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plaint revealed that cause of action had arisen for instituting the suit in Chennai and there was allegation of
misrepresentation, fraud, failure to furnish details, dishonest or mala fide intention, suppression of material facts,
removal of the respondent-company from the directorship by a Resolution, etc., which were disputed questions of
fact which had to be necessarily determined and adjudicated only by the Civil Court after letting in oral and
documentary evidence. To file a petition before the Company Law Boardunder Section 10E of the Companies Act,
1956, the respondent-company should be a Member holding not less than one-tenth of the issued share capital.
However, even the shareholding of the respondent-company had been disputed by the petitioner-company. Hence,
the issues involved required the adjudication of the Civil Court and therefore the dismissal of the application by the
trial court did not warrant any interference.72
Vacation of office by Directors [ Section 283].
—Where there is contravention of some of the provisions in the Companies Act as regards the necessity to give
notice for a meeting of the Board of directors, the necessity to disclose the interests of the directors in the
resolutions, rules regarding co-option of directors, disqualification from directorship under section 283(1)(g), etc.,
the rights and liabilities of the parties arise out of the general law of contract and not from the provisions of the
Companies Act, 1956. The civil courts have jurisdiction to entertain the suits and grant relief in these matters arising
out of common law.73
In company matters not governed by the High Court as Company Court [or the Tribunal] the jurisdiction of Civil
Court is not excluded. A suit for declaration that the meeting of the Directors and resolutions passed therein are
invalid is maintainable in a Civil Court. The cause of action arose out of common law and the Civil Court has the
jurisdiction. Where the meeting was convened taking advantage of absence of certain directors to get certain
resolutions passed, it amounted to fraudulent act and the meeting and resolutions were invalid.74 A suit for
declaration that the plaintiff was not disqualified as a Director is maintainable. The Companies Act regulates the
rights of the shareholders but does not create any new rights or remedies. The Act does not exclude the rights of
individual shareholders to approach the Civil Court.75
Section 283 of the Companies Act, 1956 only sets out the circumstances on the occurrences of which the office of
the director shall become vacant. The section does not contemplate any application being made to the company
court either to declare that the office has been vacated or to declare that the office has not been vacated. The
company court cannot, therefore, entertain a petition to declare that the petitioner continues to be a director and
that he has not vacated the office.76
However, a Full Bench of the Andhra Pradesh High Court has held that section 283(1)(f) of the Companies Act,
1956 creates a statutory liability under the Companies Act which is not contemplated under the common law. It is a
statutory right or a statutory disqualification created under a special statute in relation to which an application would
lie before a Company Court [now the Tribunal (NCLT)]. Automatic cessation of office of director of a company has a
direct nexus with the function of the company itself. It is not a case where the court is required to deal with a
transaction by and between a company and the third party. Therefore, the Company Court [ now the Tribunal] has
the requisite jurisdiction to entertain an application made by a director challenging a notice in terms of which his
shares were directed to be forfeited and he was directed to vacate his office.77
Suit against Managing Director for rendition of accounts.—In respect of matters not dealt with by the
Companies Act, 1956 or for which the Companies Act does not provide remedies, the ordinary Civil Court alone will
have the jurisdiction. A suit filed by a company against its former Managing Director for rendition of accounts cannot
be considered to be a matter within the Companies Act and hence the ordinary Civil Court will have jurisdiction in
the matter.78
Oppression and mismanagement [ Sections 397-409].
— Sections 397, 398 and 408 of the Companies Act, 1956 do not confer exclusive jurisdiction on the Company
Court [the CLB now the Tribunal]. In case of disputes arising out of shareholders’ agreement the suit before the
Civil Court would be maintainable.79
Suit to adjudicate disputes.—Where as per memorandum of understanding between the two rival family groups,
the group companies and assets were to be divided on the basis of valuation and scheme for division to be drawn
up by a firm of Chartered Accountants and doubts were to be resolved by the Chairman of the IFCI. The decision or
order of the Chairman of the IFCI was not an award of an arbitrator. Petition challenging it under the Arbitration Act
was not maintainable. However, suit filed against the decision on the same grounds was maintainable.80
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Fraud on the minority.—Where the act complained of is fraud on the minority a suit may be filed to restrain the
company. An individual shareholder may bring an action to recover the company's property from those who have
taken it and who by their voting power prevented the company itself from suing.81 An alteration of articles in fraud of
the minority may be challenged in a suit.82
See detailed Comments under Section 31, 41, 397 and 398.
Suit maintainable.—The right created by the Companies Act, 1956 under section 397 and 398 is to move the
Company Court [the CLB (now the Tribunal)] by the required number of shareholders joining together. Suits by
minority shareholders against oppression and mismanagement have been a time-honoured exception to the rule in
Foss v. Harbottle and in the absence of words expressly or clearly barring them, it is not possible to hold that
sections 397, 398 and 408 of the Companies Act, 1956 exclude the jurisdiction of the ordinary courts.83
Illegal orultra viresacts.—Where the act complained of is illegal or ultra vires the company a suit can be filed to
restrain the company or for declaration that the purported act is invalid.84See detailed Comments under Section 13
and 41.
English Law.—The English Companies Act, 1985 as amended by the Companies Act, 1989 has virtually abolished
the doctrine of ultra vires. It provides that even a single member of the company may bring proceedings to restrain
the doing of an act which but for sub-section (1) of section 35 of the English Act, 1985 would be beyond the
company's capacity. See detailed Comments under Section 13.
Ordinary Resolution passed instead of Special Resolution.—An individual member can sue if the matter is one
which could be validly done or sanctioned not by an ordinary but by a special resolution.85 Otherwise, a company
could in breach of the Article do de facto by ordinary resolution that which according to the Regulations could only
be done by a special resolution. A shareholder may restrain the company from acting on a special resolution of
which insufficient notice had been given.86
See detailed Comments and List of Matters requiring Special Resolution and Ordinary Resolution in Comments
under Section 189.
Where justice demands,e.g., Misfeasance.—Where justice demands and when all that is asserted is damage to
the company arising from misfeasance in withholding an asset of the company.87
Violation of Individual Membership Rights.—Where individual member's right is affected in his own right as
individual a suit can be filed. A shareholder was able to compel the company to record his vote.88
Where the candidature of a shareholder for directorship is rejected by the Chairman, it is an individual wrong in
respect of which a suit is maintainable. For redress of individual wrongs, suit can be filed.89 But the Court will not
interfere except where there is a manifest breach of the Statute or the Articles.90
Under the company law, there is a distinction between individual membership rights and the rights available to
qualified minorities. The qualified minority rights are generally enforceable by recourse to civil suits except in cases
where a specific provision is found in the Companies Act, 1956 for its enforcement elsewhere. The right sought to
be enforced under sections 257, 283 and 284 of the Act is an individual right. No particular provision of the
Companies Act creates a specific jurisdiction to enforce the said right. Therefore, civil suit filed by the plaintiff was
maintainable.91
See detailed Comments under Section 41 and respective Sections.
Inherent Powers of Company Court.—The Company Court has the inherent jurisdiction to compel the due
observance of the mandatory provisions of the Companies Act, 1956. It can pass an Order from time to time as the
exigencies of the facts and circumstances of the case may require.92 The Court must have the jurisdiction to
entertain substantive application and then it will consider when an application under Rule 9 of the Companies
(Court) Rules, 1959 can be entertained. Where the main application is not maintainable Rule 9 cannot be invoked.
The civil court is not authorised to convene meetings of a company, which authority rests under section 186 of the
Companies Act, 1956 only with the Company Court [the CLB now the Tribunal (NCLT)]. Inherent powers of civil
court cannot be invoked when express provisions exist in the Companies Act, 1956 for reliefs and conferring power
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on other authorities to convene meetings. Therefore, it would not be proper for the civil court to convene meetings
of a company in exercise of its inherent powers.93
Inherent powers of Company Law Board (CLB).
— See detailed Comments on inherent powers of the Company Law Board (CLB) under the Company Law Board
Regulations, 1991 under relevant Section 10E.
Inherent powers of Tribunal (NCLT).—For inherent powers of the National Company Law Tribunal (NCLT) see
Comments under Section 10FB and Rules and Regulations framed thereunder.
Suit and Injunction where Registered Office situate.—The residence of the company is where the Registered
Office is located. Normally, cases should be filed only where the registered office of the company is situate. Courts
outside the place where the registered office is located, if approached, must have regard to the following. Invariably,
suits are filed seeking to injunct either the allotment of shares or the meetings of the Board of directors or the
meeting of the general body. The court is approached at the last minute. Could an injunction be granted even
without notice to the respondent which will cause immense hardship and administrative inconvenience? It may be
sometimes difficult even to undo the damage done by such an interim order. Therefore, the court must ensure that
the plaintiff comes to the court well in time so that notice may be served on the defendant and he may have his say
before any interim order is passed. The Supreme Court set out reasons in relation to the factors which should weigh
with the court in the grant of ex parte injunctions.94
The jurisdiction of a Court is to be decided by the place of the registered office of the company and not by the place
at which the Balance Sheet of the company is received. The Shareholders’ suit has to be filed in the court having
jurisdiction over the Registered Office of the Company.95 Failure to allot shares can be questioned only in a Court
having jurisdiction over the registered office of the company.96
Where the shareholders filed suits in several Courts within a particular State and also in different States challenging
the forfeiture of shares by the company, on the application of the company the Supreme Court directed that all the
cases within the State should be transferred to one particular Court but the cases in the respective States will
continue to avoid any hardship to the shareholders of the company, that is, in each State all the cases will be heard
in one Court.1
As per Section 10GB of the Companies Act, 1956, inserted by the Companies (Second Amendment) Act, 2002 (11
of 2003), no civil court shall have jurisdiction to entertain any suit or proceeding and no injunction shall be granted
by any court or other authority in respect of any matter which the Tribunal or the Appellate Tribunal is empowered to
determine. See detailed Comments under Section 10GB.
Suit against company having sub-offices.—The Explanation to section 20 of the Code of Civil Procedure, 1908
(5 of 1908) provides that a corporation shall be deemed to carry on business at its sole or principal office in India or
in respect of any cause of action arising at any place where it has also a subordinate office, at such place. The
Explanation applies to a corporation, which term includes a company. The clear intendment of the Explanation is
that where the corporation has a subordinate office in the place where the cause of action arises, it cannot be heard
to say that it cannot be sued there because it does not carry on business at that place. It would be a great hardship
if, in spite of the corporation having a subordinate office at the place where the cause of action arises, such plaintiff
is to be compelled to travel to the place where the corporation has its principal place. The agreement between the
parties conferring exclusive jurisdiction on the court where the corporation has its principal place shall be of no
avail.2 A company can be sued at the place where the cause of action arises and it has a site or office at that
particular place.3
In a suit against a company and directors challenging investments made by the company under section 372 filed in
the court where the plaintiff received a copy of the balance sheet as a member, it was held that the court had no
jurisdiction as the registered office of the company was outside the jurisdiction of the court. The court can go into
balance of convenience. The fact that a sub-office of the company was in its jurisdiction was not material if no
cause of action arises therefrom.4
Cause of action.—The cause of action must arise within the territorial jurisdiction of the court. Mere allegation that
the branch offices of the defendant companies were within the territorial jurisdiction of the court would not be
sufficient to confer jurisdiction on the court.5
Page 28 of 72
Ouster clause excluding jurisdiction.—Where in a dispute relating to term deposit with a company, the cause of
action, i.e., dishonour of cheques arose at Bombay. The unilateral endorsement “Subject to Anand (Gujarat)
jurisdiction” on the deposit receipt, where the head office of the company was situate, did not contain an ouster
clause using words like “alone”, “only”, “exclusive” and the like. Thus the maxim “expressio unius est exclusio
alterius” could not be applied. It could not be held that the endorsement “Subject to Anand jurisdiction” excluded the
jurisdiction of all other courts which were otherwise competent to entertain the suit.6
Interim orders by SEBI.—As per sections 11 and 11B of the Securities and Exchange Board of India Act, 1992 (15
of 1992), the SEBI has authority to issue directions to protect the interests of investors in securities and regulate the
securities market. The SEBI Act is of remedial nature. The directions of SEBI have authority of law and do not
require pre-decisional hearing as merely ad interim orders.7
See detailed Comments and List of SEBI Act, Rules, Regulations and Guidelines at the end of Comments under
Section 55A—Powers of SEBI.
Injunction by Consumer Forum.—Consumer Forums cannot grant injunction against public issue. Shares are not
goods before allotment. Applicant for shares is not a consumer. Raising of share capital by company is not a trading
activity and there is no question of any unfair trade practice. The Consumer Disputes Redressal Forum has no
jurisdiction to entertain the matters of this kind.8
Derivative action.—This term describes an action brought by a shareholder on behalf of a company to redress a
wrong done to the company. It is the company which has the right to the action and the shareholder derives his
right of action from the company and hence his right is a derivative right.9 A procedure devised to enabling a Court
to do justice to a company controlled by miscreant directors or shareholders is called a derivative action, which is
normally permissible with the leave of the Court. The Court would not lift the veil of incorporation at the instance of a
person having no right of relief against the company or whose name does not appear in the register of members of
the company to enable him to show his beneficial interest in the company through a chain of inter-corporate
investments.10
As already explained, actions by minority shareholders constitute exceptions to the principle of internal
management in Foss v. Harbottle . The power which is exercised by the High Court as a Company Court [the
Company Law Board(CLB) now the Tribunal (NCLT)] is in respect of corporate rights and not individual rights of a
citizen. The High Court as a Company Court [the CLB now the Tribunal] has no jurisdiction in such cases and the
same can be tried in a civil court. See decisions in earlier paragraphs “Civil Courts when may exercise jurisdiction”.
Form of action.—Minority rights.—(a) The minority shareholders may sue as plaintiffs on behalf of themselves
and the other shareholders except those constituting the majority. The company should be made a defendant.11
The directors or majority shareholders are often made defendants. The plaint in the minority shareholders' action
founded on fraud on the minority should contain an allegation that owing to the wrongdoers being in control of the
company, they cannot sue in the name of the company.12 Preferably there should be allegation that the act
complained of is ultra vires the company or illegal or that for the act a special resolution was required but an
ordinary resolution has been passed.13
(b) Minority shareholders may sue in the name of the company, particularly when the purpose of the proceeding is
to recover damages or illicit gains from the directors, promoters or other persons. If the allegations of the minority
shareholders are such as would be covered by the previous paragraph (a) then this form is not advisable. But even
if the Court holds that the minority shareholders had no right to bring the action in the name of the company, the suit
cannot fail, the company's name may be struck out of the plaint or transposed as defendant and the suit may
proceed.14
Where the company's name is used as plaintiff in unavoidable circumstances, the minority shareholders should
take steps to have a general meeting convened on requisition for an extraordinary general meeting under section
169.15
A shareholder in a suit filed for declaration that a resolution passed by the Board of directors of the company
issuing fresh equity shares was invalid was entitled to make an application under Order 1, Rule 8 of the Code of
Civil Procedure, 1908 seeking the court's permission for instituting the suit on behalf of and for the benefit of the
Page 29 of 72
other shareholders of the company and such application may be granted without issuing notice of the application to
the company or to the other shareholders.16
Liquidator to bring action on behalf of company in liquidation.—When a company is in voluntary winding up its
minority shareholders cannot bring an action. The appropriate procedure will be for the Liquidator to bring the action
on behalf of the company in liquidation. If he refuses to do so a contributory may apply to the Court for an order
authorising him to bring an action in the company's name or compelling the Liquidator to do so on such terms as to
indemnity as the Court may consider appropriate. Where such an action has been brought making the company in
voluntary winding up a defendant, the Court may grant leave to transpose the defendant company in liquidation as
a co-plaintiff.17
Fraud and Oppression.—A petition questioning the failure of the company to send letter of rights offer under
section 81 in time, alleging fraud by the company and contending that the action of the company in refusing to issue
the shares and warrants was mala fide, illegal and oppressive can only be preferred under sections 397 and 398.
After the Companies (Amendment) Act, 1988, the jurisdiction to decide and determine matters pertaining to
sections 397 and 398 has been transferred to the Company Law Board [ now the Tribunal (NCLT) by the
Companies (Second Amendment) Act, 2002 (11 of 2003)]. Such a petition would not be maintainable before the
High Court under section 10.18
See also Comments in earlier paragraphs under Individual wrongs, Oppression and mismanagement [ Section 397-
409], Fraud on the minority, Illegal or ultra vires acts, Violation of Individual Membership Rights.
Criminal Jurisdiction.—In a petition for relief under sections 397 and 398, the Company Court [ now the Tribunal]
cannot direct criminal trial. The company court has no criminal jurisdiction under sections 397 and 398. The
jurisdiction to take cognizance of a particular offence has to be conferred by legislation. Such power must be
conferred expressly. Section 539 and Schedule XI of the Act deal with the situation where the alleged falsification,
alteration, etc., has been committed after filing of section 397/398 application and thus any past act before the filing
of such application would not be covered thereunder. Section 454(5A) of the Act expressly provides for a power to
take cognizance of an offence upon receiving a complaint by magistrates. No such provision exists in respect of
offences under the Schedule XI. Had the intention of the Legislature been that the Company Court [ now the
Tribunal] apart from the provision contained in section 454(5A) would have jurisdiction to take cognizance, the
same was required to be stated in general terms.19
See detailed Comments under Offences later.
Power to sue.—The Articles of Association of the company generally empower the Board of Directors to take any
legal proceedings. The Articles also empower the Board of Directors to delegate its powers. Where the Board
delegated the powers to a Director. The Director delegated the powers to an Officer of the company. An appeal filed
by such officer was held valid.20 The suit filed by a Director on behalf of a company without being authorised by the
Board resolution is not maintainable.21
Authority to file suit.—Where the plaintiff in a suit is a corporation, there has to be (1) proper authority by
Resolution of the Board of Directors, or (2) a Power of Attorney authorising institution of the suit on behalf of the
corporation, or (3) power conferred by the Articles of Association of a corporation. The authority to institute a suit is
distinct from and in addition to what is contemplated by Order 29 of the Code of Civil Procedure, 1908 (5 of 1908),
which deals only with signing of plaints and verification of pleadings by certain persons mentioned in that provision.
Where the articles of the company conferred authority on the managing director and the joint managing director
alone to institute suits on behalf of the company. A suit filed by a whole-time director in terms of the power of
attorney granted to him, which showed him to be a director of the company and not a managing director within the
meaning of section 2(24) of the Companies Act, 1956, was not maintainable. In the instant case, the provisions of
section 2(26) relating to managing director were not attracted for the reasons that the plaintiff had himself accepted
by the power of attorney given to him by the company that he was not managing director. He was a whole-time
director and general manager, but not the managing director.22
Action without proper authority may be ratified.—An action brought without proper authority may be ratified.
Where the pleadings were signed by the director or officer, the company could ratify.23 Where the company had no
directors, two individuals brought an action on the company's behalf to recover debts without any authority, it was
held that the liquidator could ratify the action.24
Advocate.—Ordinarily, in any litigation concerning a company, the advocate for the company must derive his
Page 30 of 72
authority either under a Board resolution or under an authorisation supported by the majority shareholders or at
least under a vakalatnama signed by the principal officer of the company.25 An advocate cannot act in a dual
capacity. The same advocate cannot verify the plaint as constituted attorney of the party and also accept
vakalatnama.26
Legal representation before the CLB.—For legal representation before the Company Law Board (CLB) which
shall be dissolved on the constitution of Tribunal under Section 10FB. See Comments under Section 10E and
10FA.
Right to legal representation before Tribunal (NCLT) [ Section 10GD].—The applicant or the appellant may
either appear in person or authorise one or more (a) chartered accountants or (b) company secretaries or (c) cost
accountants or (d) legal practitioners or any officer to present his or its case before the Tribunal or the Appellate
Tribunal as the case may be constituted under Sections 10FB and 10FR.
See detailed Comments under Section 10B, 10FR and 10GD.
Power of Attorney.—Power of attorney remains to be operative until revoked. As long as the power of attorney is
not terminated by the principal, the attorney continues to represent the company for all technical purposes.27
Court Fees.—Under clause (vi) of a State Notification issued under section 35 of the Court Fees Act, 1870 (7 of
1870), all persons whose income does not exceed Rs. 12,000 have been exempted from paying court fee. A similar
provision regarding exemption from paying court fee has been made in Order 33 of the Code of Civil Procedure,
1908 (5 of 1908). The expression “person” has not been defined in the parent Act or Notification issued by the State
Government. It cannot be confined to only natural persons and shall include a juristic person such as a company.28
Company may file suit in forma pauperis.— Rule 1 of Order 33 of the Code of Civil Procedure, 1908 (5 of 1908)
provides for filing of suits in forma pauperis. This enabling provision allows the filing of a suit by an indigent person
without paying the court fee at the initial stage. There is only a provision for the deferred payment of the court fees.
This benevolent provision is intended to help the poor litigants who are unable to pay the requisite court fee to file a
suit. Indigent person is one who is not possessed of sufficient amount as per Explanation I to rule 1 of Order 33.
The word “person” in Order 33, refers to a person who is capable of filing a suit. This being a benevolent provision,
it is to be given an extended meaning and includes not only natural persons but juridical persons also. A public
limited company, which is entitled to maintain a suit as a legal person, can very well maintain an application under
Order 33 for permission to sue as an indigent person. A company being a juristic person, would be represented by
a person competent to represent it.29
Cause title of plaint.—A foreign company wrongly described in the cause title as a company incorporated under
the Companies Act, 1956 is a wrong description which does not affect the jurisdiction of the Court and is curable.30
Suit by company in old name only misdescription.—Suit was filed by a company in its old name even after the
name has been changed. It is only a misdescription and an amendment of cause title will be allowed.31
Suit describing defendant company as a firm.—Where the plaintiff filed a suit against the defendants describing
them as a partnership firm. The defendants claimed that the firm was actually a limited company. Held, though the
licence described the defendants a company, but in absence of any codified Company Law in Sharjah, such
description by itself would not make the defendants a company specially since the licence at the same time
described the second defendant as a partner of the company. Moreover, the second defendant himself in a letter
spoke of his “partner” which made it clear that he himself treated the first defendant as a partnership concern.32
Amendment of pleadings.—A suit was filed for declaration that a Director was validly elected at a meeting and
that the proceedings at the meeting were forged in conspiracy with bogus shareholders. The defendants filed an
application in the suit for striking out certain pleadings including the allegations regarding diversion of funds and
conspiracy. It was held that whether any particular fact in a plaint is unnecessary or frivolous, etc., is a question of
fact. In the facts and circumstances of the case, the allegations were not irrelevant or frivolous or vexatious and had
to be retained. The words “conspired” and “conspiracy” showed the circumstances in which the first defendant was
interested in keeping the plaintiff out of the Board of directors. However, the allegations as to diversion of funds of
the company by the defendant was unnecessary for the purpose of the suit and was struck out.33
Suit or Arbitration involving Foreign Currency.—In suits or arbitration involving foreign currency, the Supreme
Court has set out the following rules of practice. The plaintiff has two courses open to him. He can either claim the
Page 31 of 72
amount in Indian currency or in the foreign currency. If he chooses the first alternative, his prayer in the plaint can
only be for a sum in Indian currency converted at the rate of exchange prevailing on the date the amount became
payable, or, at his option, the date of the filing of the suit. The valuation of suit for court-fees and pecuniary
jurisdiction of the court will be the amount in Indian currency claimed in the suit. The plaintiff may choose the
second course and claim in foreign currency. In such a suit, the prayer would be for a decree in foreign currency
subject to permission of concerned authorities or the rupee equivalent at the rate of exchange prevailing and proved
on the date of the judgment. For court-fees and jurisdiction, the claim shall be converted into Indian rupees at the
rate of exchange on the date of filing the suit with an undertaking to make good the deficiency if sum decreed is
higher. In all such cases, execution can only issue for the rupee equivalent specified in the decree, appellate decree
or final order. On principle, there should be no difference between an award made by arbitrators or an umpire and a
decree of a court.34
Legal representatives.—The legal representatives of a deceased shareholder or member acquire certain rights
including the right to present and continue a suit or petition for oppression and mismanagement.35
See also Comments under Section 41, 108, 111, 111A and 398.
Amalgamation.—Under section 10, the High Court within whose jurisdiction the registered office of the company is
situate, will have exclusive jurisdiction in respect of matters covered by, inter alia, sections 391, 394 and 395 [ now
the jurisdiction of High Court has been transferred to the Tribunal]. Where in an amalgamation two or more
companies are involved having registered offices in different States; each company must obtain sanction of the
High Court [ now the Tribunal] within whose jurisdiction it has its registered office. If registered offices of all the
companies are in the same state, a joint application may be made by all the companies concerned.36
Change in ownership.—A company is a distinct legal entity and should not be confused with its shareholders.
Change in ownership of a company is no ground for dismissal of the suit pending against it. Even where
amalgamation takes place, due care is taken to transfer the assets and debts of one company to the other so as to,
inter alia, protect pending litigation.37
Jurisdiction of Court in Winding up.—Under Section 10 of the Companies Act, 1956, any High Court, which has
jurisdiction in relation to the place at which the Registered Office of the company concerned is situate shall have
jurisdiction to entertain the winding up petition. Section 10(3) clearly provides that 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 6
months immediately preceding the presentation of the petition for winding up
. Change of Registered Office of the company during the pendency of the company petitions, would not oust the
jurisdiction of the High Court which had the jurisdiction to entertain the matter at the time of institution of the
company petitions.38
See detailed Comments under Sections 10, 10FB, 433 and 439.
Powers and functions of Tribunal (NCLT).—From the date of constitution of the National Company Law Tribunal
(NCLT) under Section 10FB of the Companies Act, 1956, as inserted by the Companies (Second Amendment) Act,
2002 (11 of 2003), the powers and functions hitherto being exercised by the Court, i.e., High Court as Company
Court under Sections 425 to 560 of the Companies Act, 1956, have been conferred on the Tribunal (NCLT) (w.e.f.
date to be notified).
See detailed Comments under Sections 10, 10FB-10GF and 425-560.
Jurisdiction.—Where during the pendency of the winding up petition against the company under sections 433, 434
and 439 of the Companies Act, 1956, on the ground that the company was unable to pay its debt in spite of notice,
a reference was made under section 15 of the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986).
The company was declared as a sick industrial company by the BIFR and was directed to be amalgamated with
another company having its registered office in another State. The transferor company loses its corporate
existence. The Court [now the Tribunal] having jurisdiction over the place where the registered office of the
transferee company is situate alone would have the jurisdiction.39
Company taken over by Central Government.—Suit may continue even if the company or the units of a company
Page 32 of 72
are taken over by the Central Government. Takeover does not mean that the company itself is taken over. The
company being distinct entity continues to exist. The Central Government representative is not competent to defend
suit against the company.40
Company Court jurisdiction original, civil and ordinary.—The High Court [ now the Tribunal] in a winding up
proceeding may direct a contributory to pay his debt. There is no difference in the character of the original civil
jurisdiction conferred upon the High Court by Letters Patent and the jurisdiction conferred by special Acts, e.g., the
Companies Act, 1956. When in exercise of its authority conferred by a special statute the High Court, in an
application presented to it as a court of first instance, declares liability to pay a debt, the jurisdiction exercised is
original and civil and if the exercise of that jurisdiction does not depend upon any preliminary step invoking exercise
of discretion of the High Court, the jurisdiction is ordinary.41
Criminal proceedings in winding-up.—The High Court [ now the Tribunal] can exercise jurisdiction in suits and
proceedings, including criminal proceedings in appropriate cases, by or against the company filed by the official
liquidator. Section 446 is a special provision vesting jurisdiction in the High Court [ now the Tribunal] in connection
with any suit or proceeding by or against the company when a winding up order has been passed.42 Where the
winding up order was kept in abeyance pending the implementation of the scheme of arrangement as sanctioned
by the High Court [ now the Tribunal]. The Court [ now the Tribunal] which made that order or the court which kept it
in abeyance will have jurisdiction to give necessary directions to the provisional liquidator to take recourse to
section 446(2).43
Proceedings pending in Foreign Court.—The remedy under section 433(e) of the Companies Act, 1956, for
winding up of the company on the ground of inability to pay debt is a discretionary remedy. Where the company
having registered office in Chennai was doing business through branch office in the State of California in the USA.
The branch office entered into an agreement with branch office of the petitioner in New Jersey also in the USA.
Agreement provided for jurisdiction of California Courts. Action was also initiated by the petitioning creditor in
California Court on the basis of the agreement. Although in the light of sections 9 and 10 of the Companies Act,
1956 and in view of the fact that the respondent company had its registered office at Chennai, the petitioner could
maintain the winding up petition before the court in India, in view of parallel enquiry in relation to the claim under
agreement in the courts of the State of California the winding up petition based on sums due under the agreement
was held to be not maintainable.44
Arbitration or Civil Suit not bar for winding up petition.—It is settled law that arbitration proceedings or civil
suits are not a bar to the maintainability of a petition to wind up the company.45
Stay of suit.—Where the bank filed a suit against the guarantors for declaration that liabilities to the bank were
taken over by the new group. The company went into liquidation. The suit by the bank for recovery against the
guarantors was not the same suit as earlier and could not be stayed.46
Decree.—A subordinate court can execute an order transferred for enforcement by the Company Court [the CLB
(now the Tribunal)]. If a certificate is issued by the winding-up Court [the Tribunal], the certified copy itself is
sufficient for executing the decree and in view of sections 38 and 39 of the Code of Civil Procedure, 1908 the
transferee court gets jurisdiction to execute the decree. In view of production of certified copy of the certificate, no
separate order of transfer is required. For the purpose of execution, the court need not be a Company Court.47
Jurisdiction of High Court Bench.—The Chief Justice of a High Court can exclude the Jurisdiction of a Bench at
a different place. When by a Notification issued by the Chief Justice of the Allahabad High Court, the company
cases could be instituted and heard only at the Principal place of the High Court, the High Court at Allahabad will
have the jurisdiction and not the Lucknow Bench.48
Court—Jurisdiction—Execution of Orders—Decree.—The words “any order” in Section 634 of the Companies

Act, 1956 mean and include an order for payment of moneys and this can be enforced by various methods as had
been provided under the laws. Unsatisfied decrees can be enforced by filing execution application or initiating
insolvency proceedings, both in the case of Company judgment debtor or Individual judgment debtor. Section 634
makes it clear that the order for payment may be enforced in the same manner as a decree may be enforced by the
Court in a suit pending thereon. Sections 634 and 634A of the Companies Act, 1956 provide that the order for
payment can be executed by the Court which has passed the order. Section 634A empowers theCompany Law
Board(CLB) to execute it. The Court means the High Court as the Company Court has the exclusive jurisdiction to
pass any order including for enforcement of the order passed by it. In case an order passed by one Company Court
cannot be enforced under situation mentioned in Section 635 of the Companies Act, 1956 then such order can be
Page 33 of 72
executed by another Company Court but not by any other Court, i.e., the High Court as a Court of principal Civil
Jurisdiction. The order of the Company Court has to be executed by a Company Court. Under Sections 2(11) and
10 of the Companies Act, 1956 the authority of any other Court for any matter is excluded except in case of
enforcement of orders passed by theCompany Law Board (CLB). The application for execution filed before the High
Court as a Court of principal Civil Jurisdiction was therefore not maintainable. The written application is required to
be filed before the Company Court which passed the order. 49
Now provisions of Section 634A which provide for enforcement of order of the Company Law Board as if it were a
decree of Court shall not apply on and after the commencement of the Companies (Second Amendment) Act,
2002(11 of 2003).
NewSection 10FZA of the Companies Act, 1956 (1 of 1956). inserted by the Companies (Second Amendment) Act,
2002 (11 of 2003). provides that any order made by the Tribunal (NCLT) or the Appellate Tribunal (NCLAT) may be
enforced in the same manner as if it were a decree made by a Court. The powers of theCompany Law Board (CLB)
have conferred upon the Tribunal (NCLT).
Consequently, the provisions of Section 634A shall not apply after the constitution of Tribunal (NCLT) under Section
10FB and commencement of the Companies (Second Amendment) Act, 2002 (11 of 2003) (w.e.f. date to be
notified).
See detailed Comments, Form and Procedure under Sections 2(11), 10, 10E, 10FB, 10FZA, 433, 434, 439, 443,
634, 634A and 635.
Court with respect to Offences against Companies Act [ S. 2(11)(b)].—The Court with respect to any offence
against the Companies Act, 1956 means the Court of a Magistrate of the First Class or, as the case may be, a
Presidency Magistrate, having jurisdiction to try such offence. [ Section 2(11)(b)].
Offence committed under section 113 of the Companies Act, 1956 for failure to deliver share certificates to the
transferee within the prescribed time in the name of the complainant can be tried by the Magistrate having
jurisdiction and it cannot be contended that only the Company Court or theCompany Law Board (CLB) [or the
National Company Law Tribunal (NCLT)] shall have the jurisdiction.50
See detailed Comments under Section 5 and 621 to 631.
Cause of action for failure to deliver documents.—The cause of action for the offences punishable under
sections 39(2), 113(2), 207 and 219(4) for failure to deliver documents or furnishing the copies of Memorandum and
Articles of Association, Share Certificates, Dividend Warrants or Balance Sheets, etc., within the prescribed time,
read with section 53, would arise where the registered office of the company is situated. Such proceedings are to
be entertained only by the Court having jurisdiction over the registered office of the company.51
Inherent jurisdiction.—Though the inherent jurisdiction cannot be lightly exercised to quash the criminal
proceeding, yet when it appears to be manifestly clear and even desirable on the ground of propriety not to continue
the proceeding, the Court is entitled to step in, in the interest of justice to quash the proceeding as otherwise
expressing inability and merely assuming the character of a spectator would not really be in the interest of justice.52
Writ—Jurisdiction.—In a writ petition under Article 226 of the Constitution of India, the High Court has to see
where the cause of action has arisen. The High Court which is required to be approached, is the court where the
registered office of the company is situate in view of section 10(1)(a) of the Companies Act, 1956. If a prosecution
or charge sheet had to be filed, it would have to be filed within the territorial limits of the High Court where the
offence alleged to have been committed. As the cause of action arose in Mumbai where the company had its
registered office, writ petition could not be maintained in the Delhi High Court.53
See detailed Comments on Writs, Judicial Review, Doctrine of Precedent, Binding force of Supreme Court and
Jurisdictional High Court decisions hereinafter.
Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992.—Jurisdiction in case of notified
persons stands transferred to the Special Court having exclusive jurisdiction under section 9A of the Special Court
(Trial of Offenc1es Relating to Transactions in Securities) Act, 1992 (27 of 1992).54Section 9A is within the
legislative competence of the Parliament to enact.55
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See the Text of the Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992 (27 of 1992)*
in Appendices.
Special Court to have exclusive jurisdiction.—The CLB [ now the Tribunal] or High Court would not have
jurisdiction to decide a petition or appeal under section 111 [ now section 111A] of the Companies Act, 1956 where
jurisdiction in case of notified persons stands transferred to the Special Court having exclusive jurisdiction under
section 9A of the Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992. The meaning of
court depends on the context. The “Court” under the Special Court Act includes all judicial bodies having jurisdiction
to decide matters arising out of certain transactions and would include CLB [now the Tribunal]. In exercising its
functions, the CLB [ now the Tribunal] acts judicially and its Orders are appealable. It is a permanent body
constituted under a Statute. The Special Court would thus have exclusive jurisdiction to decide any petition for
rectification under section 111A in case of transactions involving notified persons.56
Special Court not subordinate to High Court.—The Special Court is not subordinate to High Court.57 The Special
Court has the power to punish for contempt of itself within the limitation period.58
Right of Custodian.—Right of the custodian to deal with the property would be limited to the title of the notified
person. Where the transactions in securities transferred to the bank were not held benami and were transferred to
bank before coming into force of Special Court Act the custodian was not entitled to attach them.59
Limitation.— Section 29(2) of the Limitation Act, 1963 (36 of 1963) does not apply to proceedings under section
4(2) of the Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992 (27 of 1992). The
limitation of 30 days for filing objections by the notified person is mandatory and the Special Court has no power to
condone the delay.60
Witness.—An incorporated company or corporate bodies cannot make any oath or affirmation and, therefore,
cannot become a witness. However, a body corporate accused in a case can be summoned to produce documents.
It would not thereby become a witness. The employees of the company who are sought to be cited as witnesses in
the prosecution against the company, cannot be equated with the company as to treat the incriminating evidence, if
any, adduced by them, to be self-incriminatory evidence adduced by the accused company itself. If the officers and
employees of a company are not permitted to appear as witnesses for the prosecution against the company on an
extension of the doctrine against self-incrimination, many of the offences committed by companies cannot be
detected, prosecuted and punished.61
Defamation.—Where derogatory remarks about a hospital run by a private limited company were published in a
newspaper. The director of the company would fall within the purview of “person aggrieved” as envisaged in section
199(1) of the Code of Criminal Procedure, 1973 to file a complaint against the editor of the newspaper alleging
defamation and can maintain prosecution.62
Charitable or Section 25-Company.—In respect of a Charitable Trust registered as a company under section 25
of the Companies Act, 1956, a suit filed for administration or framing of a scheme of management can be
maintained under sections 398 by the members in a Company Court under Section 10 [the CLB under Section
10Enow the Tribunal (NCLT) under Section 10FB]. Beneficiaries can file suit under section 92 of the Civil Procedure
Code, 1908 (5 of 1908). The Court directed that all decisions of Board of Directors of a Section 25 company should
be taken up at meeting to be attended by all its three original Directors. A resolution passed at a Board Meeting
which was not so attended was declared null and void.63
Societies Registration Act.—A non-profit Charitable, Institution, or Club, etc., may be registered under the
Societies Registration Act, 1860 (21 of 1860) or under Section 25 of the Companies Act, 1956 but general process
governing the rights of members are not the same as in the case of the shareholders or the members of a
company. An ordinary Civil Court cannot have the jurisdiction in respect of the proceedings concerning the internal
management of the society to the same extent as in the case of a company.64
Sick Industrial Companies.— See detailed Comments under Sections 10FB and 424A to 424L. See also
Comments under Scope of Sections 10 hereinbefore.
Sick Companies—Reference by BIFR to concerned High Court.— Section 10(1)(a) of the Companies Act, 1956
provides that the High Court having jurisdiction under the Act shall be the High Court having jurisdiction in relation
to the place at which the Registered Office of the company is situated. So, in order to determine the territorial
Page 35 of 72
jurisdiction of a High Court to entertain a petition filed for winding up a company, the Court is only required to see
where the Registered Office of the company is situated. The expression “concerned High Court” in Section 20 of the
SICA, 1985, has to be seen in the context of Section 10 of the Companies Act, 1956.65
Now the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986) (SICA) has been repealed and
replaced by New Sections 424A-424L of the Companies Act, 1956 and the Board for Industrial and Financial
Reconstruction (BIFR) shall be replaced by the National Company Law Tribunal(NCLT) to be constituted under
Section 10FB of the Companies Act, 1956 as inserted by the Companies (Second Amendment) Act, 2002 (11 of
2003) (w.e.f. date to be notified).
Foreign Company.—Foreign Company having a Branch in India can be sued in India even though the cause of
action arose against the company's office in a foreign country. The processes can be served in accordance with
Indian Laws and appropriate proceedings can be taken against the company in the appropriate Forum in India.66
Banking Companies.—Civil actions are cognizable by a civil court under section 9 of the Code of Civil Procedure,
1908 (5 of 1908), unless the jurisdiction of the civil court is expressly or by necessary implication barred. Ouster of
jurisdiction of a civil court ought not to be lightly inferred. Section 45B of the Banking Regulation Act, 1949 (10 of
1949) confers exclusive jurisdiction on the High Court in respect of matters relating to winding up of banking
companies. Section 616(b) of the Companies Act, 1956 provides that the provisions of the Act shall apply to
banking companies in so far as they are not inconsistent with those of the Banking Regulation Act, 1949. Section
45A of the Banking Regulation Act, 1949 overrides the provisions of any law which is repugnant. A suit for recovery
of money due from a shareholder of a banking company does not relate to the winding up of the company and,
therefore, the civil court has the jurisdiction to entertainthe suit.67
Suits by public Corporations.—Where suits are instituted or defended on behalf of a public corporation, e.g., for
recovery of bank loan, public interest should not be permitted to be defeated on a mere technicality. Procedural
defects which do not go to the root of the matter should not be permitted to defeat a just cause. There is sufficient
power in the courts under the Code of Civil Procedure, 1908 (5 of 1908) to ensure that injustice is not done to any
party who has a just cause. As far as possible a substantive right should not be allowed to be defeated on account
of a procedural irregularity which is curable. In a suit by or against a corporation, the secretary, director or principal
officer may sign and verify on behalf of the company. As a company is a juristic entity, a person may be expressly
authorised to sign the pleadings on behalf of the company by the Board resolution or by a power of attorney. A
corporation can ratify the action of its officers. Such rati-fication can be express or implied.68
Insurance Companies.—There is a clear inconsistency between the court having jurisdiction for winding up of a
company under the Companies Act, 1956 and the Insurance Act, 1938 (4 of 1938). Therefore, the special provision
made in the Insurance Act, 1938 for jurisdiction of the court to order winding up of an insurance company shall
prevail over the general provisions made under the Companies Act, 1956.69
Jurisdiction provisions to override Articles, Agreement.—By sections 9 and 10 of the Companies Act, 1956,
the jurisdiction of the Civil Court has not been ousted. In matters of general law and where the jurisdiction of civil
court has not been ousted by the Companies Act, 1956, the civil court would have jurisdiction. The provisions of the
Companies Act, 1956 as to jurisdiction would override any provisions to the contrary contained in the Memorandum,
Articles or any Agreement.70
See detailed Comments under Sections 9, 10, 10E and 10FB.
Limitation for filing suit.—The period of limitation for filing a suit for rectification of register of members of a
company is governed by residuary Article 113 of the Limitation Act, 1963 (36 of 1963), which has replaced Article
120 of the Limitation Act, 1908 (9 of 1908), and which provides a period of 3 years for filing a suit from the time the
right to sue accrues.71
Acknowledgment of liability.—The consent terms cannot be treated as acknowledgment of liability or as waiver of

plea of limitation. The court has no power to extend the period of limitation. The period spent in insolvency
proceedings or prosecuting petition cannot be excluded.72
See detailed Comments on Balance Sheet of the company as Acknowledgment of Liability under Sections 210, 215
and 220.
Page 36 of 72
Limitation for petitions.—Normally, where no period of limitation is prescribed under any Act, e.g., the Companies
Act, 1956, limitation period for any action before a Court is 3 years from the cause of action under residuary Article
137 of the Limitation Act, 1963 (36 of 1963). Section 111(4) does not prescribe any time limit within which theCLB [
now the Tribunal] shall be approached unlike section 111(3), according to which, an appeal shall be made within 2
months of the receipt of the notice of refusal or where no notice has been sent by a company within 4 months from
the date on which the instrument was delivered. But, the CLB is not a court for the purposes of the Limitation Act,
1963, which does not apply to proceedings before the CLB. Even where the Limitation Act, 1963 applies, then also
the power of condonation under section 5 of the Act is available.73
Winding up.— Article 117 of the Limitation Act, 1963 prescribing a period of 30 days for filing appeal from an order
of High Court to the same Court did not apply to an order of the District Judge where after the winding up order of
the High Court all subsequent proceedings were transferred to the District Judge. Under section 435 of the
Companies Act, 1956 [omitted on constitution of Tribunal under Section 10FB], the transferee District Court had
been given all the jurisdiction and powers of a High Court. But, the District Judge did not become a judge of the
High Court, nor did his order become the order of a single judge of the High Court.74
Jurisdiction of the “High Court” or Company Court under Sections 425 to 560 of the Companies Act, 1956 has now
been conferred on “the Tribunal (NCLT)” to be constituted under Section 10FB of the Companies Act, 1956 as
inserted by the Companies (Second Amendment) Act, 2002 (11 of 2003).
Sections 435 to 438 [Transfer of winding up proceedings to the District Court] have been omitted as a consequence
of transfer of powers to Tribunal (NCLT).
See detailed Comments under Section 10FB, 10GE and 425 to 560.
Condonation of delay.—The Legislature has conferred the power to condone delay by enacting section 5 of the
Limitation Act, 1963 in order to enable the courts to do substantial justice to parties by disposing of matters on
merits. The expression “sufficient cause” is adequately elastic to enable the courts to apply the law in a meaningful
manner which subserves the ends of justice—that being the life-purpose of the existence of the institution of courts.
A justifiably liberal approach has to be adopted on principle. “Every day's delay must be explained” does not mean
a pedantic approach. The doctrine must be applied in a rational, commonsense and pragmatic manner. When
substantial justice and technical considerations are pitted against each other, the cause of substantial justice
deserves to be preferred, for the other side cannot claim to have a vested right in injustice being done because of a
non-deliberate delay. The doctrine of equality before law demands that all litigants, including the State, are
accorded the same treatment and the law is administered in an evenhanded manner. There is no warrant for
according step-motherly treatment when the “State” is the applicant praying for the condonation of delay.75 Where
the Government, the UOI, filed a petition under Article 136 of the Constitution of India for special leave of the
Supreme Court to appeal against a judgment of the High Court beyond the period of limitation and the application
for condonation of delay did not contain grounds for condonation excepting list of dates and governmental
procedures, the prayer for condonation and the prayer for filing supplemental affidavit were refused.76
See also Comments under relevant Sections, e.g., Sections 111 and 111A.
Writ petition—Limitation.—Limitation is a mandate on judicial forum and even if it is not raised, it must be
considered and applied. The High Court before granting writ petition must also consider limitation.77
Legal right contrary to natural justice or equity not enforceable.—The Court's discretionary jurisdiction to
prevent the enforcement of a legal right contrary to natural justice only applied to an officer of the Court and did not
apply to a liquidator in a voluntary winding up because he was not an officer of the Court and was not subject to the
control of the Court until an interested party chose to bring before the Court a matter relating to the discharge of his
responsibilities.78
Natural Justice.—The CLB [ Section 10E(5)] now the Tribunal [ Section 10FZA] is not be bound by procedure laid
down in the Code of Civil Procedure, 1908 (5 of 1908) but shall be guided by the principle of natural justice.
See detailed Comments on Principles of natural justice: (1) Rule of audi alteram partem, (2) Reasoned order, etc.,
under Sections 10E and 10FZA.
Appeal.—From the order of the trial Court an appeal lies to the proper Appeal Court. Where a High Court consists
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of three or more Judges, the appeal against the judgment or order of single Judge shall lie before a Division Bench
of two Judges and not a Full Court. Where High Court consists of less than three Judges, the appeal would lie to a
Division Bench which would include Trial Judge.79
Appeal from orders of CLB to High Court.— See detailed Comments under Section 10F —Appeals against the
orders of the Company Law Board.
Company Law Board (CLB) shall stand dissolved on the constitution of the National Company Law Tribunal (NCLT)
under section 10FB.
See detailed Comments under Section 10E, 10F, 10FA and 10F.
No further appeal to Division Bench (w.e.f. 1-7-2002).—As there is no express conferment of a right of a further
appeal to the Division Bench of the High Court against the decision of a single judge under section 10F of the
Companies Act, 1956 an appeal to the Division Bench would not be maintainable against the decision of the single
judge rendered after July 1, 2002 in view of new section 100A of the Code of Civil Procedure, 1908 (5 of 1908).80
Bar of appeal to Division Bench (w.e.f. 1-7-2002) would not be applicable where special provision exists for such
appeal. Appeal under section 483 of the Companies Act, 1956 would not therefore be barred by section 100A of the
Code of Civil Procedure, 1908 (5 of 1908) as amended by the CPC (Amendment) Act, 1999.81
Certificate for appeal to Supreme Court.— Article 134A of the Constitution of India does not constitute an
independent provision under which a certificate can be issued by a High Court for appeal to the Supreme Court
from its decision. It is ancillary to Articles 132(1), 133(1), 134(1)(c) and the High Court can issue a certificate only
when it is satisfied that the conditions in any of those Articles are satisfied. Such a certificate cannot be issued by a
single Judge of the High Court because Article 133(3) states that no appeal shall lie to the Supreme Court from the
judgment, decree or final order of one Judge of a High Court. The Supreme Court, however, treated the petition of
appeal as a Special Leave Petition (SLP) under Article 136.82
See detailed Comments on Binding force of Supreme Court and Jurisdictional High Court decisions, Dismissal of
Special Leave Petition (SLP) hereinafter.
Tribunals and Appellate Authorities.—From the constitution of the National Company Law Tribunal (NCLT) under
Section 10FB of the Companies Act, 1956, as inserted by the Companies (Second Amendment) Act, 2002 (11 of
2003), the jurisdiction of the CLB and High Court shall be vested in the Tribunal (NCLT). Person aggrieved by order
or decision of the Tribunal (NCLT) may prefer an appeal to the Appellate Tribunal except consent orders [ Section
10FQ].
See detailed Comments under National Company Law Tribunal [ Ss. 10F-10FP] and Appellate Tribunal [ Section
10F-GF].
Appeal to Supreme Court [ Section 10GF].—Any person aggrieved by order of Appellate Tribunal may file an
appeal to the Supreme Court on question of law arising out of such order [ Section 10GF].
Writ Petition—Speaking order.—The High Court cannot simply reject a writ petition without considering and
deciding the merits and giving any reasons therefor. The order dismissing a writ petition as “rejected” was set aside
and the Supreme Court directed the High Court to dispose of the petition in accordance with law after giving hearing
to the parties and by passing a speaking order.83
No Writ where Act provides alternative remedy.—Where the petitioner did not evoke the alternative or effective
remedy available under section 111A of the Companies Act, 1956 which provides a wider remedy than a writ
petition. Moreover delay and laches is one of the recognised grounds for refusal of the discretionary relief. The
petition in this case filed before theCompany Law Board(CLB) was later withdrawn. In view of existence of
alternative remedy the writ under Article 226 of the Constitution of India could not be granted.84
Where injunction was granted by the Subordinate Judge restraining persons from participating in meetings of the
company. The writ petition was not maintainable as remedy by way of appeal to the District Court was available.85
Where appeal against decree of Debt Recovery Tribunal against the company was pending, all issues could be
raised before the Tribunal. Therefore, writ petition was not maintainable.86
Page 38 of 72
Writ jurisdiction.—A company having a Canteen in its factory run by a Contractor and carrying on the
manufacturing of cigarettes does not perform any public duty. Canteen is run by contractor. Employees of the
contractor are not entitled to invoke the writ jurisdiction of the High Court for declaration that they are or be treated
as employees of the company.87
Writ petition and res judicata.— See Dismissal of Special Leave Petition by the Supreme Court in Binding force
of Supreme Court decisions dealt with after the Doctrine of Precedent or stare decisis in later paragraphs.
Writs, Judicial review and Constitutional validity.—The power of judicial review over legislative action vested in
the High Courts under Article 226 and in the Supreme Court under Article 32 of the Constitution of India is an
integral and essential feature of the Constitution, constituting part of its basic structure. Ordinarily, therefore, the
power of the High Courts and the Supreme Court to test the constitutional validity of legislations can never be
ousted or excluded. The power vested in the High Courts to exercise judicial superintendence over the decisions of
all courts and tribunals within their respective jurisdictions under Article 227 is also part of the basic structure of the
Constitution. The Tribunals have the power to test the vires of subordinate legislations and rules except the vires of
their parent statute. The Tribunals act as the courts of first instance in respect of the areas of law for which they
have been constituted. It will not be open for litigants to directly approach the High Courts even in cases where they
question the vires of statutory legislations (except, where the legislation which creates the particular Tribunal is
challenged) by overlooking the jurisdiction of the concerned Tribunal. The jurisdiction conferred upon the High
Courts under Article 226/227 and upon the Supreme Court under Article 32 is part of the inviolable basic structure
of our Constitution. While this jurisdiction cannot be ousted, other courts and Tribunals may perform a supplemental
role.88
Writ or revision petition.—A writ or revision petition is not maintainable where alternative remedy by way of
appeal is available. Where injunction was granted by the Subordinate Judge restraining certain persons from
participating in meeting of company, the appeal lies to the District Court. Therefore revision petition to the High
Court under Article 227 of the Constitution of India was not maintainable.89
Power to Review.—Once the court realises that a mistake has been committed and a grave error has crept in the
earlier order by judicial fallibility, the court can entertain a writ petition and review its earlier order to prevent
miscarriage of justice and correct palpable errors committed by it.90
Review of administrative action.—Power of the Courts while reviewing administrative action is not that of an
appellate court. The scope of interference by the court is limited.91See also Comments under Section 637.
Jurisdiction of Court and CLB vested in Tribunal (NCLT) [ S. 10 FB].—As already explained, from the date of
constitution of the National Company Law Tribunal (NCLT) vide Notification under Section 10FB of the Companies
Act, 1956, as inserted by the Companies (Second Amendment) Act, 2002 (11 of 2003), the jurisdiction, powers and
functions hitherto being exercised by theCompany Law Board(CLB) and the High Court as Company Court under
various Sections of the Companies Act, 1956 [Listed earlier in this Section and Section 10FB] have been conferred
on the Tribunal (NCLT). See detailed Comments under Section 10FB.
Power of Tribunal to review [ Section 10FN].—The Tribunal (NCLT) shall have power to review its own orders.
Constitutional validity.—There is always a presumption in favour of the constitutionality of a statute. It is well

settled that if on one construction a given statute will become unconstitutional, whereas on another construction,
which may be open, the statute remains within the constitutional limits, the court will prefer the latter on the ground
that the Legislature is presumed to have acted in accordance with the Constitution and courts generally lean in
favour of the constitutionality of the statutory provisions.92 However, if the words of the statute, on a proper
construction, can be read only in a particular way, then they cannot be read in another way by a court of
construction anxious to avoid unconstitutionality.93
Advocates' Professional Misconduct.—It is the duty of the Advocate to return to the client papers relating to the
case. Refusal to return amounts to professional misconduct. He has no right of lien to retain the case papers
against unpaid fees.94
Lawyer's Liability.—The lawyer of a company who failed to properly advise on the impact of Substantial Property
Transactions Rules under Section 30 of the English Companies Act, 1985 was held to be negligent and liable for
the resulting loss to the company.95See Comments on Advocate and Legal representation earlier.
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Consumer Forums.—As per section 3 of the Consumer Protection Act, 1986, the provisions of the Consumer
Protection Act, 1986 (68 of 1986) are in addition to, and not in derogation of, the provisions of any other law.
Additional remedy.—The provisions of section 58A(9) of the Companies Act, 1956 and sections 45Q and 45QA of
the Reserve Bank of India Act, 1934 do not bar the jurisdiction of the Consumer Forums constituted under the
Consumer Protection Act, 1986. In view of section 3 of the Consumer Protection Act, 1986, remedy under the
Consumer Protection Act, 1986 is an additional remedy and the same cannot be taken away either by the RBI Act
or by the Companies Act.96
Applicant for shares not consumer.—Shares are not goods before allotment. Applicant for shares is not a
consumer. Raising of share capital by company is not a trading activity and there is no question of any unfair trade
practice. The Consumer Disputes Redressal Forum has no jurisdiction to entertain the matters of this kind. The
issue of shares or debentures does not come under the Consumer Protection Act, 1986 (68 of 1986) or the MR TP
Act, 1969 (54 of 1969) [now replaced by the Competition Act, 2002 (12 of 2003)].97
Rights Shares.—The Consumer Protection Act, 1986 is not applicable for failure on the part of a company to give
to the shareholder his proportion of the Rights Shares. The MR TP Act, 1969 [since replaced by the Competition
Act, 2002] does not apply here. The remedy lies within the framework of the Companies Act, 1956 and also by way
of a Civil Suit.98
Jurisdiction of winding up Court.—The jurisdiction of the winding up Court [the Tribunal (NCLT)] is not affected
by the pendency of petition before the National Consumer Disputes Redressal Commission. The Company Court
[the Tribunal] can direct the company to deposit the amount as directed by the Commission.99
Decree by Consumer Forum.—Decree against company must be sent for execution by the Consumer Disputes
Redressal Forum/Commission to the Court within whose territorial jurisdiction the company's registered office is
situate. Where the company had its registered office at New Delhi, the Consumer Forum was wrong in sending the
order for execution to the Civil Judge, Bangalore.1
Remedy under the MR TP Act.—Where a public limited company under the guise of “pact gold bond scheme”,
accepted deposits from investors in contravention of section 58A of the Companies Act, 1956 and the rules framed
thereunder. Further, false claims were made by the company. There was enough evidence to come to the
conclusion that the company had been indulging in unfair trade practices within the meaning of section 36A of the
Monopolies and Restrictive Trade Practices Act, 1969 (54 of 1969). The company was ordered to cease and
desist.2
The MR TP Act, 1969 has since been repealed by the Competition Act, 2002.
Competition Commission of India (CCI).— The Monopolies and Restrictive Trade Practices Act, 1969(54 of
1969) has been repealed by the Competition Act, 2002 (12 of 2003), s. 66. The MRTP Commission has been
replaced by the (CCI) Competition Commission of India. The remedy for unfair trade practices shall now lie with the
Consumer Forum under the Consumer Protection Act, 1986 (68 of 1986).*
The provisions of the Competition Act, 2002 (12 of 2003) have been enforced (w.e.f. 31-3-2003) [ Notification No.
S.O. 340(E), dated 31-3-2003, published in the Gazette of India, Extraordinary, No. 287, Part II, Section 3(ii) :(2003)
114 Comp. Cas. (St.) 288] and (w.e.f. 19-6-2003) [ Notification No. S.O. 715(E), dated 19-6-2003, published in the
Gazette of India, Extraordinary, No. 554, Part II, Section 3(ii) : (2003) 116 Comp. Cas. (St.) 133].
The Competition Commission of India (CCI) having its head office at New Delhi has been established by the Central
Government (w.e.f. 14-10-2003). [ Notification No. S.O. 1198(E), dated 14-10-2003, published in the Gazette of
India, Extraordinary, No. 943, Part II, Section 3(ii) : (2003) 117 Comp. Cas. (St.) 267].
Legislative History.—The Statement of Objects and Reasons appended to the Competition Bill, 2001 (67 of
2001)3 is reproduced below.
“In the pursuit of globalisation, India has responded by opening up its economy, removing controls and resorting to
liberalisation. The natural corollary of this is that the Indian market should be geared to face competition from within
the country and outside. The Monopolies and Restrictive Trade Practices Act, 1969, has become obsolete in certain
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respects in the light of international economic developments relating more particularly to competition laws and there
is a need to shift our focus from curbing monopolies to promoting competition.
2. The Central Government constituted a High Level Committee on Competition Policy and Law. The Committee
submitted its report on the 22nd May, 2000, to the Central Government. The Central Government consulted all
concerned including the trade and industry associations and the general public. The Central Government after
considering the suggestions of the trade and industry and the general public decided to enact a law on competition.
3. The Competition Bill, 2001, seeks to ensure fair competition in India by prohibiting trade practices which cause
appreciable adverse effect on competition in markets within India and, for this purpose, provides for the
establishment of a quasi-judicial body to be called Competition Commission of India (hereinafter referred to as CCI)
which shall also undertake competition advocacy for creating awareness and imparting training on competition
issues.
4. The Bill also aims at curbing negative aspects of competition through the medium of CCI. CCI will have a
principal Bench and additional Benches and will also have one or more mergers Benches. It will look into violations
of the Act, a task which could be undertaken by the Commission based on its own knowledge or information or
complaints received and references made by the Central Government, the State Governments or statutory
authorities. The Commission can pass orders for granting interim relief or any other appropriate relief and
compensation or an order imposing penalties, etc. An appeal from the orders of the Commission shall lie to the
Supreme Court. The Central Government will also have powers to issue directions to the Commission on policy
matters after considering its suggestions as well as the power to supersede the Commission if such a situation is
warranted.
5. The Bill also provides for investigation by the Director-General for the Commission. The Director-General would
be able to act only if so directed by the Commission but will not have any suo motu powers for initiating
investigations.
6. The Bill confers power upon the CCI to levy penalty for contravention of its orders, failure to comply with its
directions, making of false statements or omission to furnish material information, etc. The CCI can levy upon an
enterprise a penalty of not more than ten per cent. of its average turnover for the last three financial years. It can
also order division of dominant enterprises. It will also have power to order demerger in the case of mergers and
amalgamations that adversely affect competition.
7. The Bill also seeks to create a fund to be called the competition fund. The grants given by the Central
Government, costs realised by the Commission and application fees charged will be credited into this fund. The pay
and allowances and the other expenses of the Commission will also be borne out of this fund. The Bill provides for
empowering the Comptroller and Auditor-General of India to audit the accounts of the Commission. The Central
Government will be required to lay the annual accounts of the Commission, as audited by the Comptroller and
Auditor-General and also the annual report of the Commission before both the Houses of Parliament.
8. The Bill aims at repealing the Monopolies and Restrictive Trade Practices Act, 1969, and the dissolution of the
Monopolies and Restrictive Trade Practices Commission. The Bill provides that the cases pending before the
Monopolies and Restrictive Trade Practices Commission will be transferred to the CCI except those relating to
unfair trade practices which are proposed to be transferred to the relevant fora established under the Consumer
Protection Act, 1986.
9. The Bill seeks to achieve the above objectives.”
Preamble.—The Preamble to the Competition Act, 2002 (12 of 2003) reads thus: “An Act to provide, keeping in
view of the economic development of the country, for the establishment of a Commission to prevent practices
having adverse effect on competition, to promote and sustain competition in markets, to protect the interests of
consumers and to ensure freedom of trade carried on by other participants in markets, in India, and for matters
connected therewith or incidental thereto.”
Department's view.— Enacting a new law on Competition and repeal of MR TP Act, 1969.— “The draft
Competition Bill, 2001, and repeal of the Monopolies and Restrictive Trade Practices (MRTP) Act, 1969, which
received the approval of the Union Cabinet on June 26, 2001, covers prohibition of anti-competitive agreements,
prohibition of abuse of dominance, regulation of combinations, such as acquisitions, mergers and amalgamation of
certain size, establishment of the Competition Commission of India (CCI) and functions and powers of CCI.
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The objectives of the Bill are to provide for the establishment of a Commission to prevent practices having adverse
effect on competition, to promote and sustain competition in markets in India, to protect the interests of consumers,
and to ensure freedom of economic action of the participants in the market in India and for matters connected
therewith or incidental thereto.
The proposed law will not apply to Government Departments and enterprises performing sovereign functions and
policy making aspects of Governmental activities (decision making by Ministries/Departments/offices of the Central
Government or State Governments)/local bodies—like reservation for SSI, preference in procurement from SSI
units/PSUs and such similar policies.
The proposed law will also provide for exemption of certain classes of enterprises and international agreements
from the applicability of the Act by way of specific Notifications.
The law would curb those practices, which would have an appreciable adverse effect on competition. The proposed
law identifies three such ways in which such practices could occur as under:
Anti-competitive agreements: (Horizontal agreements, vertical agreements) can be inquired into by CCI which could
impose a penalty or an amount up to 10 per cent. of its average turnover in the last three years for the offence.
Abuse of dominant position (the criteria for deciding the dominant position are broader than those included in the
MR TP Act). Enjoying a dominant position will not be a crime but its abuse will be a crime.
Elimination/reduction of competitors in the market achieved through acquisitions, amalgamations or mergers (the
proposed law is not against every acquisition, merger or amalgamation, but it refers only to those acquisitions,
mergers and amalgamations, which are of a certain prescribed size—size in terms of (a) assets or (b) turnover),
acquisition, merger or amalgamation would become ‘combination’ when:
Nature of combination Group status Criterion Value
(a) Acquisition by No group Assets In Indiaworld over < Rs. 1,000 Cr.> US $
enterprises 500 million
(b) Acquisition by Turn over In Indiaworld over < Rs. 3,000 Cr.> US $
individuals 1500 million
(c) Mergers/ Group Assets In Indiaworld over < Rs. 4,000 Cr.> US $
amalgamation 2 billion
Turn over In Indiaworld over < Rs. 12,000 Cr.> US $

6 billion
The proposed law provides for an adjudicating relief machinery by way of establishing the Competition Commission
of India (CCI) which would be a quasi-judicial body. The CCI will have a chairperson and not less than two and not
more than ten other members, as may be specified by the Central Government.
The CCI will have the following powers:
To issue ‘cease and desist’ orders.
To grant such interim relief as would be necessary in each case.
To award compensation.
To impose fines on the guilty.
To order division of dominant undertaking.
Power to order demerger.

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Power to order costs for frivolous complaints.
In addition to the adjudication function, the CCI will have the roles of advocacy, investigation, prosecution and
merger control.
The statutory regulatory authorities can make reference to the CCI for advice.
The proposed law provides for the post of Director-General (and a host of his deputies in various places) to assist
the Competition Commission in its inquiries. Unlike in the MR TP Act, the Director-General will not have powers to
initiate investigations suo motu.
In view of the policy shift from curbing monopolies to promoting competition, there is a need to repeal the
Monopolies and Restrictive Trade Practices Act. Hence, the proposed competition law to be brought in, aims at
doing away with the rigidly structured MR TP Act. The competition law proposed is flexible and behaviour-oriented.
Other reasons are as follows:
The MR TP Act is based on the pre-reforms scenario whereas the new law will be based on the post-reforms
scenario.
The MR TP Act is based on size as a factor whereas the new law will be based on the structure as a factor.
The MR TP Act has 14 per se offences negating the principles of natural justice whereas the new law has 4 per se
offences, all the rest subjected to rule of reason.
The MR TP Act provides for registration of agreements as compulsory whereas in the new law there is no
requirement of registration of the agreement.
Under the new law, dominance per se is not bad but only the abuse of dominance is considered bad whereas under
the MRTP law, dominance itself is bad.
Combination regulation mentioned in the Bill, ensures that competition is not reduced. Combinations are not
regulated by the MR TP Act.
The MR TP Act has powers only to pass ‘cease and desist’ orders and did not have any other powers to prevent or
punish, whereas the competition law contains punitive provisions.
The MR TP Act does not vest the MRTP Commission to inquire into cartels of foreign origin in a direct manner. The
proposed competition law seeks to regulate them.
The concept of ‘group’ under the MR TP Act had wider import and was unworkable whereas the concept has been
simplified in the proposed law.
The proposed law provides for a competition fund which shall be utilised for promotion of competition advocacy,
creating awareness about competition issues and training in accordance with the Rules that may be prescribed.
Pending cases pertaining to unfair trade practices other than those relating to tie-in sales, purchases or cases
falling under clause (x) of sub-section (1) of section 36A of the Monopolies and Restrictive Trade Practices Act,
1969, under the repealed Act shall stand transferred to theNational Commissionconstituted under the Consumer
Protection Act, 1986.” [PIB Press Release, New Delhi, dated 28-6-2001 : (2001) 106 Comp. Cas (St.) 33].
The Competition (Amendment) Act, 2007 (39 of 2007).—The Competition Act, 2002 (12 of 2003) has been
amended by the Competition (Amendment) Act, 2007 (39 of 2007) [(w.e.f. 12-10-2007) notified for certain sections].
The Statement of Objects and Reasons appended to the Competition (Amendment) Bill, 2006 (18 of 2006)** is
reproduced below.
“The Competition Act, 2002 (12 of 2003) was enacted in 2002 keeping in view the economic developments that
have resulted in opening up of the Indian economy, removal of controls and consequent economic liberalisation
which required that the Indian market be geared to face competition from within the country and outside. The
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Competition Act, 2002 (12 of 2003) provided for the establishment of a Commission to prevent practices having
adverse effect on competition, to promote and sustain competition in markets, to protect the interests of consumers
and to ensure freedom of trade carried on by other participants in markets, in India, and for matters connected
therewith or incidental thereto.
2. The Competition Commission of India (CCI) was established on the 14th October, 2003 but could not be made
functional due to filing of a writ petition before the Hon'ble Supreme Court. The Hon'ble Supreme Court delivered its
judgment on the 20th January, 2005. While disposing of the writ petition, the Hon'ble Supreme Court observed that
‘if an expert body is to be created as submitted on behalf of the Union of India consistent with what is said to be the
international practice, it might be appropriate for the respondents to consider the creation of two separate bodies,
one with expertise that is advisory and regulatory and the other adjudicatory. This followed up by an appellate body
as contemplated by the proposed amendment, can go a long way, in meeting the challenge sought to be raised in
this writ petition based on the doctrine of separation of powers recognised by the Constitution. Any way, it is for
those who are concerned with the process of amendment to consider that aspect. It cannot be gainsaid that the
Commission as now contemplated, has a number of adjudicatory functions as well'. The Hon'ble Supreme Court left
open all questions regarding the validity of the Competition Act, 2002 including Rule 3 of the Competition
Commission of India (Selection of Chairperson and Other Members of the Commission) Rules, 2003.
3. The Competition (Amendment) Bill, 2006, inter alia, seeks to make the following amendments to the Competition
Act, 2002 so as to address various legal issues and to make the CCI fully operational on a sustainable basis,
namely:
(a) to provide that CCI would be an expert body which will function as a market regulator for preventing anti-
competitive practices in the country and it would also have advisory and advocacy functions in its role as a
regulator;
(b) to omit the provisions relating to adjudication of disputes between two or more parties by the CCI and to
provide for investigation through the Director General in case there exist a prima facie case relating to anti
competitive agreements or abuse of dominant position under the Competition Act, 2002 and conferring
power upon the CCI to pass orders on completion of an inquiry and impose monetary penalties and in
doing so the CCI would work as a collegium and its decisions would be based on simple majority;
(c) to provide for establishment of the Competition Appellate Tribunal (CAT) which shall be a three-member
quasi-judicial body headed by a person who is or has been a Judge of the Supreme Court or the Chief
Justice of a High Court and selection of the Chairperson and other Members of CAT to be made by a
Selection Committee headed by the Chief Justice of the Supreme Court of India or his nominee, and
having Secretaries of Ministries of Company Affairs and Law as its members;
(d) to provide for hearing and disposing of appeals by the CAT against any direction issued or decision made
or order passed by the CCI;
(e) to provide for adjudication by CAT of claims on compensation and passing of orders for the recovery of
compensation from any enterprise for any loss or damage suffered as a result of any contravention of the
provisions of the Competition Act, 2002;
(f) to provide for implementation of the orders of the CAT as a decree of a Civil Court;
(g) to provide for filing of appeal against the orders of the CAT to the Supreme Court;
(h) to confer powers to sectoral regulators to make suo motu reference to CCI on competition issues, in
addition to the present provision of making reference, when such request is made by any party in a dispute
before it.
4. The Bill also aims at continuation of the Monopolies and Restrictive Trade Practices Commission (MRTPC) till
two years after constitution of CCI, for trying pending cases under the Monopolies and Restrictive Trade Practices
Act, 1969 after which it would stand dissolved. The Bill also provides that MRTPC would not entertain any new
cases after the CCI is duly constituted. Cases still remaining pending after this two year period, would be
transferred to CAT or theNational Commissionunder the Consumer Protection Act, 1986 depending on the nature of
cases.
5. The Bill seeks to achieve the above objectives.” [ Statement of Objects and Reasons appended to the
Competition (Amendment) Bill, 2006 (18 of 2006)].
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Unfair Trade Practices.—Where a firm engaged in providing finance used the word “Inc.” in its name. It was held
that it was misleading and created a false impression that it was incorporated under USA or UK laws. Cease and
desist order was passed under the MR TP Act, 1969 (54 of 1969).4
Nowsection 66 of the Competition Act, 2002 (12 of 2003) has repealed the MR TP Act, 1969. Pending cases before
the MRTPC will go to the CCI except those relating to unfair trade practices which would go to Consumer
Forum/Commission.
Doctrine of Precedent or Stare decisis.—It is a basic principle of administration of justice that like cases should
be decided alike. This principle is known as the doctrine of precedent or stare decisis. As per the doctrine, in the
hierarchical court structure the decisions or precedents created by the Superior or Higher Courts bind Lower or
Inferior Courts and, generally, Courts of equal status. This is known as the principle of stare rationibus decidendis
usually referred to as stare decisis.
Stare rationibus decidendis (keep to the rationes decidendi of previous cases) is the more accurate statement
because it is the reasoning (rationibus) that is the vital binding element in a judicial precedent. However, it is
commonly and more popularly known as the doctrine of stare decisis. The doctrine of
stare decisis means ‘Let the decision stand’ or ‘stand by earlier decisions’ or ‘to abide by former precedents’
. What is binding in a decision, judgment, pronouncement or precedent of the Superior Court is the ratio decidendi
of a judgment.
The doctrine of precedent or stare decisis has been part of English jurisprudence and is concerned with the binding
force of decisions or judge-made law. It has been enshrined in Articles 141 and 227 of the Constitution of India
which make the decisions of the Supreme Court and the Jurisdictional High Court absolutely binding. The decisions
explaining, enunciating and elucidating this are given below.
India is governed by a judicial system identified by a hierarchy of courts, where the doctrine of binding precedent is
a cardinal feature of its jurisprudence. The doctrine of binding precedent or stare decisis has the merit of promoting
a certainty and consistency in judicial decisions, and enables an organic development of the law, besides providing
assurance to the individual as to the consequence of transactions forming part of his daily affairs. And, therefore,
the need for a clear and consistent enunciation of legal principles in the decisions of a court.5
Sound grasp of court structure.—Understanding the working of the doctrine of precedent or stare decisis
depends upon having a sound grasp of court structure.
The courts in any country with respect to a particular field of legislation stand in a defined hierarchy, i.e., which
courts are bound to follow the decisions of which other courts. The doctrine of precedent or stare decisis involves a
fair degree of detail, but the basic principle to keep in mind is that the precedents created by the Superior or Higher
Courts are binding on Lower or Inferior Courts, Courts of equal status, Tribunals and Authorities. The bindingness
depends on hierarchy of courts. The higher courts bind lower courts, never vice versa. The doctrine of precedent or
stare decisis vis-a-vis Indian and English court structure is explained below.
Indian court structure.— Section 10 of the Companies Act, 1956 deals with Jurisdiction of Company Court. This
has to be read withCompany Law Board (CLB) [ Sections 10E-10F] which shall stand dissolved vide Section 10FA
as inserted by the Companies (Second Amendment) Act, 2002 (11 of 2003) on constitution of the National
Company Law Tribunal (NCLT) [ Sections 10FB-10FP], the Appellate Tribunal [ Sections 10FQ-10GE] and Appeal
to the Supreme Court [ Section 10GF]. As already explained in matters not conferred on the Company Court, CLB
or Tribunal, the ordinary Civil Courts also have jurisdiction.
Binding force of Supreme Court decisions.
— Article 141 of the Constitution of India, which enshrines the doctrine of precedent or stare decisis, reads thus:
“Law declared by Supreme Court to be binding on all courts.—The law declared by the Supreme Court shall be
binding on all courts within the territory of India.”
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In view of Article 141 of the Constitution of India, the Supreme Court decisions are law of the land and absolutely
binding on all High Courts, Tribunals and Authorities in the Indian Judicial and company law hierarchy.
The decisions enunciating the binding force of decisions of the Supreme Court, that is, the Apex Court or the
Highest Court of India are given below.
Law laid down by the Supreme Court absolutely binding.—In the hierarchical system of courts which exists in
our country, it is necessary for each lower tier, including the High Court, to accept loyally the decisions of the higher
tiers. It is inevitable in a hierarchical system of courts that there are decisions of the supreme appellate tribunal
which do not attract the unanimous approval of all members of the judiciary. But the judicial system only works if
someone is allowed to have the last word and that last word, once spoken, is loyally accepted. The better wisdom
of the court below must yield to the higher wisdom of the court above. That is the strength of the hierarchical judicial
system. The High Court cannot disregard the decision of the Supreme Court by applying to it the label per incuriam.
That label is relevant only to the right of an appellate court to decline to follow one of its own previous decisions, not
to its right to disregard a decision of a higher appellate court or to the right of a Judge of the High Court to disregard
a decision of the Supreme Court. It is needless to add that under Article 141 of the Constitution of India, the law
declared by the Supreme Court shall be binding on all courts within the territory of India.6
The High Court is bound by the decisions and orders of the Supreme Court and cannot entertain or express any
argument or views challenging their correctness. The judicial tradition and propriety require the High Court not to
attempt to sit on judgment over the decisions and orders of the Supreme Court.7
The law laid down by the Supreme Court is binding on all, notwithstanding the fact that it is against the State or a
private party and that it is binding on even those who were not parties before the court.8
Ratio or true principle laid down by Supreme Court binding.—The only thing in a Judge's decision binding as
an authority upon a subsequent Judge is the ratio decidendi or true principle laid down in the earlier decision.
The Latin term
ratio decidendi means ‘reason for deciding’ or ‘reason for the decision’
. To be the ratio decidendi amongst others the minimum requirements are: (1) that the matter was directly in issue;
(2) that the issue needs to have been decided; and (3) the matter has been decided by giving reasons.9
It is neither desirable nor permissible to pick out a word or a sentence from the judgment of the Supreme Court,
divorced from the context of the question under consideration and treat it to be the complete ‘law’ declared by the
court. The judgment must be read as a whole and the observations from the judgment have to be considered in the
light of the questions which were before the court. A decision of the Supreme Court takes its colour from the
questions involved in the case in which it is rendered and, while applying the decision to a later case, the courts
must carefully try to ascertain the true principle laid down by the decision.10
Observations of courts are not to be read as Euclid's theorems nor as provisions of the statute. They must be read
in the context in which they appear.11 The basic rules of interpreting court judgments are the same as those of
construing other documents. The principle is that, if the language in a judgment is plain and unambiguous and can
be reasonably interpreted in only one way, it has to be understood in that sense. Further, if there be any doubt
about the decision, the entire judgment has to be considered, and a stray sentence or a casual remark cannot be
treated as a decision.12
Ratio decidendi vis-a-vis Obiter dicta.—Above decisions manifest that everything said by the Court or a Judge
when giving a judgment does not constitute a binding precedent. It is only the true principle or ratio decidendi, i.e.,
material facts and the reasons for deciding the case, which constitute a binding precedent.
Anything else said in the judgment by the Judges or the Court that does not relate to the material facts or the matter
directly in issue is called obiter dictum. The decision on a point not necessary for the purpose of the decision or
which does not directly fall to be determined in that decision becomes an obiter dictum. The plural of obiter dictum
is obiter dicta. The
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obiter dicta means ‘statements of opinion upon the law and principles which in some way go beyond the point or
points necessary to be settled in deciding the case’, ‘incidental comments’, etc.
But, not ‘casual observations or remarks’ or ‘mere passing observations’, which have no binding authority.
The obiter dicta are generally not binding on later judges as they can decline to follow anything that is not ratio. This
is why the classification is important.
Although obiter dictum is not binding but in some cases it may be highly persuasive or binding, e.g., obiter dicta of
the Supreme Court.
Obiter dicta of the Supreme Court.
—Even obiter dicta or obiter observations of the Supreme Court are entitled to considerable weight. At any rate, the
High Court cannot ignore the same. It is now well settled that obiter dicta of the Supreme Court are binding on the
High Courts under Article 141 of the Constitution of India.13
Obiter dicta or obiter observations would undoubtedly be entitled to great weight, but an obiter cannot take the
place of the ratio.14
Exceptions to the doctrine of precedent or stare decisis.—A precedent ceases to be a binding precedent in
certain cases, e.g., (i) if it is reversed or overruled by a higher court, (ii) when it is inconsistent with the earlier
decisions of the same rank, (iii) when it is sub silentio and (iv) when it is rendered per incuriam.
These exceptions vis-a-vis Supreme Court decisions are enunciated below.
Precedent sub silentio.—As already explained, the doctrine of precedent or stare decisis means to abide by
former precedents. However, a precedent ceases to be a binding precedent when it is sub silentio. When a point
was not argued or considered by the superior court, although that point was logically involved, although the case
had a specific outcome, the decision is not an authority on that point. Such a point is said to pass sub silentio and
that decision is said to be ‘precedent sub silentio’. Precedent sub silentio are viewed as a general exception to stare
decisis. It was said as long ago as 1661 that precedents sub silentio and without argument are of no moment.15
Sub silentio decisions of the Supreme Court.—It is well-settled that a precedent is an authority only for what it
actually decides and not for what may remotely or even logically follow from it. Therefore, a decision on a question
which has not been argued cannot be treated as a precedent and the ratio of the said decision cannot be properly
applied in a later case.16
The binding effect of a decision does not depend upon whether a particular argument was considered therein or
not, provided that the point with reference to which an argument was subsequently advanced was actually
decided.17
In view of Article 141 of the Constitution of India, it is not open for the High Courts to decline to follow a decision of
the Supreme Court on a question of law regarding it as a ‘precedent sub silentio’.18 It is impermissible for the High
Court to overrule the decision of the Apex Court on the ground that the Supreme Court laid down the legal position
without considering any point. It is not only a matter of discipline for the High Courts, it is the mandate of the
Constitution. The High Court cannot question the correctness of the decision of the Supreme Court even though the
point sought before the High Court was not considered by the Supreme Court.19
Per incuriam rule.— Per incuriam decisions ignoring binding precedent or statutory provision are viewed as a
general exception to stare decisis. A precedent ceases to be a binding precedent when it is rendered per incuriam.
The per incuriam rule is a well established technical rule. Per incuriam decision means that the earlier Court when
deciding the case or rendering the judgment failed to take into account all the relevant and vital statutes or binding
precedents on the point under consideration before the court and this had a major effect on the decision or
judgment being rendered in that case.
The Latin expression per incuriam means through inadvertence. A decision can be said generally to be given per
incuriam when the Supreme Court has acted in ignorance of a previous decision of its own or when a High Court
has acted in ignorance of a decision of the Supreme Court.20
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Certainty of the law, consistency of rulings and comity of courts—all flowering from the same principle—converge to
the conclusion that a decision once rendered must later bind like cases. We do not intend to detract from the rule
that, in exceptional instances, where by obvious inadvertence or oversight a judgment fails to notice a plain
statutory provision or obligatory authority running counter to the reasoning and result reached, it may not have the
sway of binding precedent. It should be a glaring case, an obtrusive omission. Thus, the doctrine of per incuriam will
not be extended to cases which were merely not fully argued or which appear to take a wrong view of the
authorities or to misinterpret a statute.21 A decision can be said to be given per incuriam when it is given in
ignorance of: (1) a statutory provision, or (2) a binding precedent, and (3) had the court had this material, the court
must have reached a contrary decision. The doctrine cannot extend to a case where, if different arguments had
been placed before the court, it might have reached a different conclusion.22
The decisions of the superior courts rendered per incuriam must nevertheless be followed by the lower courts,
tribunals and authorities, as they may adopt such a rule plainly looking for an excuse not to adhere to the doctrine
of stare decisis.
Thus, if a binding decision or precedent of the superior court is ignored on any pretext, it will not only amount as
disregarding the doctrine of stare decisis but in turn render their own decision per incuriam and not a binding
authority of any sort.
Per incuriam decisions of Supreme Court.—The High Court, Tribunals and Authorities cannot disregard the
decision of the Supreme Court by applying to it the label per incuriam. That label is relevant only to the right of the
Supreme Court to decline to follow one of its own previous decisions, not to the right of a Judge of the High Court to
disregard a decision of the Supreme Court.23
A decision of the Supreme Court is binding on the High Court and the High Courtcannot ignore it on the ground that
the relevant provisions were not brought to the notice of the Supreme Court.24
There can be no doubt, that where any relevant and material statutory provision has not been brought to the notice
of the Supreme Court or if a vital point was not considered or any previous decision of the Supreme Court bearing
on the point not noticed the decision may be reviewed by a larger Bench of the Supreme Court.25
Supreme Court—Precedent—Reconsideration— Per incuriam.—A judgment of the Supreme Court will not be
reconsidered unless a subsequent Bench of the Supreme Court believes that it has laid down wrong principles of
law by ignoring a provision of law or otherwise not following a direct binding precedent. Where the Supreme Court
in an earlier case had followed the provisions of law. The judgment of the Supreme Court will not be referred for
reconsideration by a subsequent co-ordinate Bench merely because the subsequent Bench may have arrived at a
different conclusion had there not been an earlier judgment. That law is the principle of stare decisis adopted and
followed in the Indian Courts. None of the conditions necessary for reconsidering an earlier direct precedent arose
in the instant case.26
Decisions of larger Benches of Supreme Court binding.—Article 141 of the Constitution of India enjoins that law
declared by the Supreme Court shall be binding on all courts in the country. When there is a conflict between two
decisions rendered by the Supreme Court, one by a larger Bench and the other by a smaller Bench, the decision
rendered by the larger Bench constitutes a binding precedent.27
The proper course for a High Court, where there are conflicts between decisions of larger Benches of the Supreme
Court and smaller Benches of the Supreme Court, is to try to find out and follow the opinions expressed by larger
Benches of the Supreme Court in preference to those expressed by smaller Benches of the Supreme Court. This is
the practice followed by the Supreme Court itself. The practice has now crystallized into a rule of law declared by
the Supreme Court.28
A larger Bench of the Supreme Court can override and overrule a decision of a smaller Bench of the Supreme
Court.29
Decisions by Division Bench of Supreme Court.—A pronouncement of law by a Division Bench of the Supreme
Court is binding on a Division Bench of the same or a smaller number of judges and in order that such decision be
binding, it is not necessary that it should be a decision rendered by the Full Court or a Constitution Bench of the
Supreme Court.30 If there is a conflict between the decisions of equal Benches of the Supreme Court which cannot
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possibly be reconciled, the courts must follow the judgment which appears to them to state the law accurately and
elaborately.31
Decision of Constitution Bench of the Supreme Court.—The decision of a Constitution Bench of the Supreme
Court comprising five judges binds a Division Bench of two judges of the Supreme Court. Judicial discipline obliges
the Division Bench to follow that decision regardless of doubts about its correctness. At the most, they can refer the
matter to be heard by a Bench of three judges.32
Reference to Larger Bench of the Supreme Court.—Judicial discipline and propriety demands that a Bench of
two judges of the Supreme Court should follow a decision of a Bench of three judges. But if two-judge Bench
concludes that earlier judgment of three judges is incorrect and cannot be followed, the proper course for it to adopt
is to refer the matter to a Bench of three judges setting out the reasons why it could not agree with the earlier
judgment. If, then, the Bench of three judges also comes to the conclusion that the earlier judgment of a Bench of
three judges is incorrect, reference to a Bench of five judges is justified. The only situation when a two-judge Bench
may refer a matter directly to a Constitution Bench (a Bench of five judges) is when the provisions of Article 145(3)
of the Constitution are attracted.33
Supreme Court when can overturn its own decisions.—The Supreme Court is not bound by its own previous
decisions. India is governed by a judicial system identified by a hierarchy of courts, where the doctrine of binding
precedent is a cardinal feature of its jurisprudence. But, like all principles evolved by man for the regulation of the
social order, the doctrine of binding precedent is circumscribed in its governance by perceptible limitations,
limitations arising by reference to the need for readjustment in a changing society, a readjustment of legal norms
demanded by a changed social context. The Supreme Court would, however, do well to ensure that although the
new legal norm chosen in response to the changed social climate represents a departure from the previously ruling
norm, it must, nevertheless, carry within it the same principle of certainty, clarity and stability. The Supreme Court,
reviewing in detail earlier Indian, U.K., U.S.A. and Australian authorities on this score, has laid down broad
guidelines as to under what circumstances and within what limits and in what manner should the highest court
overturn its own pronouncements as follows. The Supreme Court of India should not differ from its earlier decision
merely because a contrary view appeared preferable. But if the previous decision is plainly erroneous, there is a
duty on the Supreme Court to say so and not perpetuate the mistake. A revision of its earlier decision would be
justified if there are compelling and substantial reasons to do so. There can be no doubt that, the decision may be
reviewed (1) where an earlier relevant statutory provision has not been brought to the notice of the court or (2) if a
vital point was not considered. Whether the Supreme Court should review and revise its earlier decisions would
always depend upon several relevant considerations: (a) What is the nature of the infirmity or error on which a plea
for a review and revision of the earlier view is based? (i) On the earlier occasion, did some patent aspects of the
question remain unnoticed, or (ii) was the attention of the court not drawn to any relevant and material statutory
provision, or (iii) was any previous decision of the Supreme Court bearing on the point not noticed? (b) Is the court
hearing such plea fairly unanimous that there is such an error in the earlier view? (c) What would be the impact of
the error on the general administration of law or on public good? (d) Has the earlier decision been followed on
subsequent occasions either by the Supreme Court or by the High Courts? and (e) would the reversal of the earlier
decision lead to public inconvenience, hardship or mischief? These and other relevant considerations must be
carefully borne in mind whenever the Supreme Court is called upon to exercise its jurisdiction to review and revise
its earlier decisions.34
It is always open to the Supreme Court to re-examine the question already decided by it and to overrule, if
necessary, the view earlier taken by it. In so far as all other courts in the territory of India are concerned, they ought
to be bound by the view expressed by the Supreme Court even in exercise of its advisory jurisdiction under Article
143(1) of the Constitution of India.35
High Court cannot disregard Supreme Court decision by applying to it the label per incuriam. That label is relevant
only to the right of the Supreme Court to decline to follow its own previous decisions.36
Dismissal of Special Leave Petition by Supreme Court.—The jurisdiction of the Supreme Court under Article
136 of the Constitution of India extends to the dismissal of the petition for special leave to appeal not merely having
regard to the merits of the controversy between the parties but also on the ground that the Supreme Court does not
consider it fit ex debito justitiae to grant a certificate.37
Supreme Court—SLP—Appeal—Jurisdiction under Article 136.—Where by reason of the impugned decision,

judgment or order of the High Court no injustice as such has been done to the appellants. The Supreme Court in
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exercise of its jurisdiction under Article 136 of the Constitution of India may not interfere with the impugned order,
even if it may be lawful to do so.38
Dismissal of SLP in limine or by non-speaking order.—It is well-settled that dismissal by the Supreme Court of
a Special Leave Petition (SLP) in limine does not clothe the decision under appeal in the special leave petition with
the authority of the decision of the Supreme Court. Special leave is a discretionary jurisdiction under Article 136 of
the Constitution of India and the dismissal of a special leave petition cannot be construed as affirmation by the
Supreme Court of the decision from which special leave was sought for. The dismissal of a special leave petition by
the Supreme Court at the admission stage without giving reasons does not lay down any binding principle under
Article 141 of the Constitution.39
Dismissal of SLP not res judicata for Writ.—It is not the policy of the Supreme Court to entertain Special Leave
Petitions (SLP) and grant leave under Article 136 of the Constitution of India save in those cases where some
substantial question of law of general or public importance is involved or there is manifest injustice resulting from
the impugned order or judgment. The dismissal of SLP in limine by a non-speaking order does not, therefore, justify
any inference that by necessary implication the contentions raised in the SLP on the merits of the case have been
rejected by the Supreme Court. The dismissal of SLP does not preclude the party from moving the High Court for
seeking relief under Article 226. Neither on the principle of res judicata nor on any principle of public policy, would
the order of the Supreme Court dismissing the SLP operate to bar the trial of identical issues in the writ proceeding
before the High Court.40
Dismissal of Special Leave Petition by Supreme Court on merits.—If the Supreme Court dismisses special
leave petition on merits, the matter stands concluded by the dismissal of the Special Leave Petitions by the
Supreme Court.41
Doctrine of merger.—An order refusing special leave to appeal (SLP) may be a non-speaking order or a speaking
one. Speaking order is declaration of law by the Supreme Court within the meaning of Article 141 of the
Constitution. In either case it does not attract the doctrine of merger. Once leave to appeal is granted and the
appellate jurisdiction of the Supreme Court is invoked the order passed in appeal would attract the doctrine of
merger; the order may be of reversal, modification or merely affirmation and the jurisdiction of High Court to
entertain a review petition is lost thereafter as provided by rule 1(1) of Order XLVII of the Code of Civil Procedure,
1908.42
Supreme Court declares ‘Law’.—One of the major functions of the Supreme Court is to declare the law for the
country under Article 141 of the Constitution of India, although under our adversary system it is only when litigation
spirals up the Supreme Court acts and declares the law. The Supreme Court, however, declares law or decides
only ‘substantial question of law’ or question of general public importance, which is needed to be decided by the
Supreme Court.43
A decision is available as a precedent only if it decides a question of law. An order of Supreme Court directing
temporary employee to be regularised in his service without assigning reasons cannot be relied upon as a
precedent.44
Ratio decidendi—Law declared—Directions of Supreme Court.—Many a time, after declaring the law, the
Supreme Court in the operative part of the judgment, gives some directions which may either relax the application
of law or exempt the case on hand from the rigour of the law in view of the peculiar facts or in view of the
uncertainty of law till then, to do complete justice. While doing so, normally it is not stated that such direction/order
is in exercise of power under Article 142 of the Constitution of India. It is not uncommon to find that Courts have
followed not the law declared, but the exemption/relaxation made while moulding the relief in exercise of power
under Article 142. When the High Courts repeatedly follow a direction issued under Article 142, by treating it as the
law declared by the Supreme Court, incongruously the exemption/relaxation granted under Article 142 becomes the
law, though at variance with the law declared by the Supreme Court. The Courts should therefore be careful to
ascertain and follow the ratio decidendi, and not the relief given on the special facts, exercising power under Article
142.45
Supreme Court's power to render justice.—In exercise of its plenary powers under Article 142 of the Constitution
of India to pass orders to render justice the Supreme Court cannot override the provisions of law.46
Appeal to Supreme Court [ Section 10GF].—As already explained, on the constitution of the National Company
Law Tribunal(NCLT) under Section 10FB of the Companies Act, 1956, as inserted by the Companies (Second
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Amendment) Act, 2002 (11 of 2003) (w.e.f. date to be notified), in matters conferred on the Tribunal (NCLT) under
various Sections of the Companies Act, 1956, any person aggrieved by an order or decision of the Tribunal (NCLT)
may prefer an appeal to the Appellate Tribunal. [ Section 10FQ]. Any person aggrieved by any decision or order of
the Appellate Tribunal may file an appeal to the Supreme Court on any question of law arising out of such decision
or order [ Section 10GF].
Leave to Appeal to Supreme Court.—The leave to appeal to the Supreme Court under Article 133(1)(b) of the
Constitution of India can be granted from a final judgment or order, i.e., an order which finally disposes of the
proceedings whether on a preliminary objection or otherwise. The leave to appeal to the Supreme Court could be
granted against an order dismissing an appeal by a creditor against an order of the Court sanctioning sale by a
liquidator of a company's assets.47
Effect of not following Supreme Court orders or decisions.—It has already been explained that not following a
binding decision of the Supreme Court shall render the decision per incuriam. The decisions enunciating the effect
of not following the binding Supreme Court orders or decisions are given hereinafter.
Judicial review.—The law laid down by the Supreme Court is the law under Article 141 of the Constitution of India.
It is needless to say that everyone is bound by the law. But, if there is any infraction of the action in violation of the
law laid down by the Supreme Court, the appropriate remedy is to have it corrected by a judicial review but not by
way of contempt proceedings in the Supreme Court. It would be open to the petitioner to seek appropriate remedy
according to law.48
See Comments on Contempt of Court hereinafter.
Question squarely covered by Supreme Court decision.—Where the question is squarely covered by a binding
Supreme Court decision and the High Court misunderstands and misapplies the ratio of Supreme Court decision,
the High Court decision shall not be sustainable at all and shall be liable to be set aside or reversed.49 When the
provisions of the section had already been construed by the Supreme Court in a decision, the Supreme Court set
aside the judgment of the High Court under appeal and remanded the case to the High Court for a fresh
consideration in the light of the observations made by the Supreme Court in that judgment.50
Contrary decisions error apparent on the record.—It is well-settled that if the Supreme Court has construed the
meaning of a section, then any decision to the contrary given by any other authority must be held to be erroneous
and such error must be treated as an error apparent on the record.51
High Court may rectify mistake.—If a High Court passes a judgment which is contrary to that of the Supreme
Court delivered before such judgment, the High Court has the power to rectify the mistake under Article 141 of the
Constitution of India even if such judgments are not cited.52
Review.—A subsequent binding decision of the Supreme Court may be a good ground for review.53
As already explained, the Tribunal (NCLT) constituted under Section 10FB shall have power to review its own
orders [ Section 10FN].
Special Leave Petition.—Where the High Court merely followed its earlier judgment and the earlier judgment was
reversed by the Supreme Court. The Supreme Court granted Special Leave to the assessee to appeal against the
judgment.54 Where reference was rejected following a decision of the jurisdictional High Court but final
pronouncement of the Supreme Court covering the point resulted in the decision of the High Court being incorrect,
the special leave petition was admitted.55
Supreme Court overruling earlier decision.—If the Supreme Court overrules its earlier decision, the decision of
the High Court following such overruled decision also becomes no longer a good law.56 The High Court is bound to
refuse to follow the decision of its own, which, though not expressly overruled, cannot stand with a decision of the
Supreme Court.57
Suo motu benefit of Supreme Court decisions.—On an appeal before it, the Tribunal can refer to a decision of
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the Supreme Court, which is the law of the land, even if it has not been cited by learned counsels. The order of the
Tribunal, in which such decision of the Supreme Court has been referred to, cannot be held to have been passed in
disregard of the principles of natural justice or the provisions of Act.58
Subsequent binding decision of Supreme Court.—Where the High Court in its order observed that the Income-
tax Officer [ now the Assessing Officer] should dispose of the matter, on remand, in accordance with law. Needless
to say, if there are subsequent binding pronouncements of the Supreme Court in the matter the ITO [ now the AO]
would take due note of them.59
Supreme Court decision retrospective.—Declaration of law by the Supreme Court or overruling of a previous
decision is normally retrospective. Supreme Court decision enunciating principle is normally the law from inception
and applicable to all cases irrespective of the stage of pendency. The Supreme Court may however specify that
such decision or overruling would be prospective. Prospective overruling is a device innovated to avoid reopening
of settled issues. But, there would be no prospective overruling unless so specified by the Supreme Court.60
Contempt of Court.—Article 129 of the Constitution of India provides that the Supreme Court shall be a court of
record and shall have all the powers of such a court including the power to punish for contempt of itself. The
Supreme Court has power under this Article to punish, not merely for contempt of itself, but also for contempt of all
courts and Tribunals subordinate to it. The Supreme Court has, therefore, jurisdiction to punish for contempt of the
Tribunal. Section 15 of the Contempt of Courts Act, 1971 (70 of 1971) which deals with cognizance of criminal
contempt, prescribes that the Supreme Court or the High Court may take action on its own motion. Rule 3(a) of the
Supreme Court Rules regulating proceedings for contempt of the Supreme Court, similarly provides for the
Supreme Court taking action suo motu. The case of contempt is not stricto sensu a cause or a matter between the
parties, inter se. It is a matter between the court and the contemner. Whenever an act adversely affects the
administration of justice or tends to impede its course, or shake public confidence in a judicial institution, the power
can be exercised to uphold the dignity of the court of law and protect its proper functioning. The Supreme Court
held that a letter from the Law Secretary questioning the bona fides of the Members of the Tribunal (ITAT) in
deciding a case and asking them to explain the judicial order which they had passed, unfairly tampered with the
judicial process and interfered with judicial decision-making and amounted to gross contempt of court.61
The normal procedure is to move the court in contempt when the parties against whom mandamus is issued
disrespect it. When the law of the land has been laid down by the Supreme Court against the mandamus issued by
the High Court the mandamus issued by the High Court becomes ineffective and unenforceable when the basis on
which it was issued falls, by the declaration by the Supreme Court.62
When an undertaking has been recorded in accordance with law, a contempt proceeding would be maintainable.
Where the contemnors accepted their liability at least to the extent of Rs 7.63 crores. They accepted that the
disputes and differences pending between them should be referred to an Arbitrator, agreed that they would furnish
a bank guarantee but despite the undertaking given before the Court did not furnish any bank guarantee. Not only
this, they also sold the only property in their possession. The alleged contemnors did not disclose that the property
offered as security was encumbered and had been claimed by the State of Andhra Pradesh. If they were not in a
position to furnish any bank guarantee or otherwise, they could have taken such an unequivocal stand before the
Courts. The contemnors not only prevaricated at different stages in different proceedings, but also intended to
prolong the litigation one way or the other. They not only suppressed material facts, but also made a wrong
representation. The alleged contemnors misled the Court and committed gross contempt of the Court. The alleged
contemnors being the Managing Director and Director of the company were held liable to be punished for Contempt
of Court. No action was taken against the Director who had resigned.63
Supreme Court declaring an Act to be void.—The effect of the decision of the Supreme Court holding an Act to
be void or invalid is to render that Act ‘still-born’, ‘dead’, ‘non-existent’ or non est for all intents and purposes and is
tantamount to saying that the statute did not exist on the statute book at all.64
Validation Act.—If the Legislature has the power over the subject-matter and competence to make a valid law, it
can pass a Validation Act and even make it retrospectively so as to bind past transactions.65
Supreme Court declaring provision valid.—Where the Supreme Court declares a provision valid the provision
remains a valid piece of legislation at all times.66
Privy Council and Federal Court decisions.—All courts in India are bound to follow the decisions of the Supreme
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Court even though they are contrary to the decisions of the Privy Council.67 Even the obiter dicta of the Supreme
Court is binding on the High Court and must be held to override the view of the Privy Council.68
According to the theory of precedents, so long as the Supreme Court does not take a view different from the view
taken by the Privy Council, the decision of the Privy Council is still binding upon the High Courts. The position
regarding a Federal Court judgment cannot be different. While the English decisions of the House of Lords and
Chancery Division deserve full respect and have great persuasive value, the Privy Council decision will be binding
on the High Court unless the Supreme Court is shown to have taken a contrary view.69
See detailed Comments on Binding force of Supreme Court decisions hereinbefore and persuasive value of English
decisions after the Binding force of jurisdictional High Court decisions in view of Article 227 of the Constitution given
below.
Jurisdictional High Court decisions binding in the State [ Article 227].—Under Article 215 of the Constitution of
India, every High Court shall be a court of record and shall have all the powers of such a court including the power
to punish for contempt of itself. Under Article 226, it has a plenary power to issue orders or writs for the
enforcement of the fundamental rights and for any other purpose to any person or authority, including in appropriate
cases any Government, within its territorial jurisdiction. Under Article 227, it has jurisdiction over all courts and
tribunals throughout the territories in relation to which it exercises jurisdiction. It would be anomalous to suggest that
a Tribunal over which the High Court has superintendence can ignore the law declared by that court and start
proceedings in direct violation of it. If a tribunal can do so, all the subordinate courts can equally do so, for there is
no specific provision, just like in the case of the Supreme Court, making the law declared by the High Court binding
on subordinate courts. It is implicit in the power of supervision conferred on a superior tribunal that all the tribunals
subject to its supervision should conform to the law laid down by it. Such obedience would also be conducive to
their smooth working: otherwise, there would be confusion in the administration of law and respect for law would
irretrievably suffer. The law declared by the highest Court in the State is binding on Authorities or Tribunals under
its superintendence, and that they cannot ignore it.70
Jurisdictional High Court decisions binding even if Appeal or SLP pending in Supreme Court.—The
Authorities and Tribunals functioning within the jurisdiction of the High Court in respect of whom the High Court has
the power of superintendence under Article 227 of the Constitution are bound to follow the decisions of the High
Court unless, on an appeal, the operation of the judgment is suspended. It is not permissible for the Authorities and
the Tribunals to ignore the decisions of the High Court or to refuse to follow the decisions of the High Court on the
pretext that an appeal is filed in the Supreme Court which is pending or that steps are being taken to file an appeal.
If any authority or the tribunal refuses to follow any decision of the High Court on the above grounds, it would be
clearly guilty of committing contempt of the High Court and is liable to be proceeded against.71
Full Bench decision of High Court under Appeal binding.—When a judgment of the Full Bench of the High
Court is the subject-matter of an appeal and the said judgment is suspended, the only effect of such suspension is
that that judgment cannot be executed or implemented. But so long as the Full Bench judgment stands, the dicta
laid down therein are binding on all courts including single Judges and Division Benches of that High Court. The
dicta laid down therein cannot be ignored unless the court after hearing a particular case doubts the correctness of
the dicta and thinks it appropriate that it should be reconsidered.72
Decisions of Division Bench or Co-ordinate Bench.—In a multi-Judge court, the Judges are bound by
precedents and procedure. They could use their discretion only when there is no declared principle to be found, no
rule and no authority. Judicial decorum and legal propriety demand that, where a learned single Judge or a Division
Bench of the High Court does not agree with the decision of a Bench of co-ordinate jurisdiction, the matter shall be
referred to a larger Bench. It is subversion of judicial process not to follow this procedure.73
Reference to larger Bench.—Judicial discipline demands that one Division Bench of a High Court should,
ordinarily, follow the judgment of another Division Bench of that High Court. In extraordinary cases, where the later
Division Bench finds it difficult, for stated reasons, to follow the earlier Division Bench judgment, the proper course
is to order that the papers be placed before the learned Chief Justice of the High Court for constituting a larger
Bench. Certainly, where one Division Bench has held a statutory provision to be constitutional it is not open to
another Division Bench to hold otherwise.74
It is not open to a single Judge of the High Court to refer any matter straightaway to a Full Bench. He has first to
refer the matter to a Division Bench of the High Court, giving his reasons, it will then be for the Division Bench to
consider whether it is necessary to refer the matter to a Full Bench.75
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Precedent—Single Judge—Judicial propriety— Per incuriam.—Judicial discipline requires the Single Judge of
a High Court not to ignore the judgments rendered by a co-ordinate Bench of the High Court. The co-ordinate
Benches judgments and observations therein are binding and cannot be ignored unless they are per incuriam. If a
Single Judge doubts the view of another Single Judge, the matter must be referred for decision by a larger Bench.76
Per incuriam decisions of High Court.—It is well-settled that the per incuriam rule is of limited application. A
decision can be said to be given per incuriam when it is given in ignorance of: (1) a statutory provision, or (2) a
binding precedent, and (3) had the court had this material, the court must have reached a contrary decision. The
doctrine cannot extend to a case where, if different arguments had been placed before the court, it might have
reached a different conclusion. Where in an earlier decision the question was decided by the High Court on
consideration of all the relevant sections of the Act which had also been set out in the body of the judgment itself,
the decision could not be brought within the per incuriam rule. This was a clear judgment on the point in issue and
was fully binding on the High Court.77
Contempt of Court.—Where the Commissioner of Hindu Religious Endowments refused to follow the decision of
the High Court, contempt proceedings were initiated against him and he was punished by the High Court. On
appeal, the Supreme Court observed that the conduct of the appellant in not following the previous decision of the
High Court was calculated to create confusion in the administration of law. It would undermine respect for law laid
down by the High Court and impair the constitutional authority of the High Court.78
It has to be proved that the contemner wilfully disobeyed the decision or order passed by the superior court. Where
the contemner had knowledge of the decision or prohibitory or stay order passed by the High Court, disobedience
of the order amounted to contempt of court. An apology must be offered at the earliest opportunity.79
Injunction.—No inferior court may pass an order of any kind that will have the effect of interfering with matters
which are already in issue before a superior court. It is alien and unknown to our country's legal system. Such an
order, apart from being an order without jurisdiction, amounts to contempt of the superior court, more so when the
inferior court is apprised of the issues before the superior court.80
Interim Orders.—The interim orders passed by particular courts on certain considerations are not precedents for
other cases which may be on similar facts. Every Bench hearing a matter on the facts and circumstances of each
case should have the right to grant interim orders on such terms as it considers fit and proper and if it had granted
the interim order at one stage, it should have the right to vary or alter such interim orders.A consensus has to be
made in the matter of interim orders.81
Writ, Review.—The High Court can entertain a writ petition and review its earlier order to prevent miscarriage of
justice and correct palpable errors.82
Binding Precedents.—The decisions of the higher or superior courts, e.g., Supreme Court and jurisdictional High
Court decisions, which are absolutely binding on lower or inferior courts, tribunals and authorities in view of Articles
141 and 227 of the Constitution of India, are called binding precedents for the lower or inferior courts, tribunals and
authorities. The binding precedents are also termed as ‘authoritative’, or ‘indistinguishable’ precedents or of
‘coercive effect’. In all like cases, the lower courts, tribunals and authorities are obliged to follow the binding
precedent, the only other alternative is to distinguish the case. Only decisions or precedents created by the higher
or superior courts are binding precedents.
Persuasive Precedents.—The precedents which are not binding are called persuasive precedents, e.g., decisions
of outside High Courts and English decisions are not binding but only persuasive precedents as explained below.
Decisions of outside High Courts only persuasive.—It is well settled that the decision of a High Court will have
the force of binding precedent only in the State or territories on which the court has jurisdiction. In other States or
outside the territorial jurisdiction of that High Court it may, at best, have only persuasive effect. By no amount of
stretching of the doctrine of stare decisis, can judgments of one High Court be given the status of a binding
precedent so far as other High Courts or Courts or Tribunals within their territorial jurisdiction are concerned. That
status is reserved only for the decisions of the Supreme Court which are binding on all courts in the country by
virtue of Article 141 of the Constitution of India.83
In an all-India statute, as per general practice a High Court should follow the decision of another High Court in the
interest of uniformity. However, this rule of practice has no universal application and does not apply to cases where
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the decisions have omitted to consider certain provisions of law, are grossly erroneous, per incuriam, sub silentio,
obiter dicta, etc.84
When the same or jurisdictional High Court has taken a view on an issue or point, reliance cannot be placed on the
decisions of other High Courts.85
English Court structure.—As learned readers will find a plethora of English decisions on Company Law in this
commentary, an insight into the English Court structure and persuasive value of English decisions is given below.
House of Lords.—The House of Lords (HL) is the highest Court in the English Court Structure. It is at the top of the
hierarchy of English Courts. The judges of the House of Lords are known as Lords of Appeal in Ordinary or ‘Law
Lords’ and referred to by prefix Lord, e.g., Lord Denning.
Court of Appeal.—The Court of Appeal (CA) is next in the hierarchy. It is divided into two Divisions, Civil and
Criminal. Its judges are called Lords Justices of Appeal or ‘Lord Justice’ (L.J.), e.g., Denning L.J. The Civil Division
is headed by a senior Judge known as the Master of the Rolls (M.R.) and his name is referred to with this suffix,
e.g., Denning M.R.
High Court.—The High Court in England is sub-divided into three divisions. These divisions are: Queen's Bench
(QB), which deals with the main areas of common law such as Contract and Tort; Family (Fam), which deals with
family matters, such as matrimonial, wardship, adoption of children; and the Chancery (Ch.), which deals chiefly
with property, corporate and tax matters.
The Crown Courts, Magistrates’ Courts, County Courts, Lower Courts, Tribunals and Authorities do not merit much
discussion as the precedents are created only by Superior Courts, viz., the House of Lords, Court of Appeal and the
High Court.
English decisions only persuasive precedents.—Although the Indian Companies Act is modelled on the English
Companies Act, the Indian law is developing on its own lines. Our law is also making significant progress of its own
as and when necessary. Where the words used in both the Acts are identical or in pari materia, the English
decisions may throw good light and reasons may be persuasive. But, where there is a positive enactment of the
Indian legislature, the proper course is to examine the language of that statute and to ascertain its proper meaning,
uninfluenced by any consideration derived from the previous state of the law—or of the English law upon which it
may be founded. The courts have to adjust and adapt, limit or extend, the principles derived from English decisions,
entitled as they are to great respect, suiting the conditions of our society and the country in general, always,
however, with one primary consideration in view that the general interests of the shareholders may not be readily
sacrificed at the altar of squabbles of directors of powerful groups for power to manage the company.86
Foreign decisions.—Where the words in the Act are the same as in the English Act, the English decisions can be
referred to as a guide in construing the Act; but American, Australian and Canadian decisions, even where words
and expressions used are the same, should be treated with great caution, for a word or phrase may take a colour
from its context and bear different senses accordingly.87
No useful purpose will be served by drawing similarities between the Foreign laws and the Indian laws and the
decisions by the Indian Courts cannot be given on the analogies of foreign decisions.88
Foreign law.—Order passed by the Highest Court of another country must be accepted by the Court in India. Such
an order cannot be tested on the principles of Indian law. Where the Supreme Court of another country directed
directors of the company to continue to manage the company despite appointment of provisional liquidators, the
Court in India cannot question power of directors to nominate persons to the Board of Indian subsidiary.89
Precedents, value attached by later Judges.—The later Judges on appeal from the same case or while
considering in a case before them past, previous or earlier decisions or precedents, may follow, apply, affirm,
approve, interpret, reinterpret, explain, criticise, narrow, widen, modify, limit, weaken, reverse, overrule, obliterate,
distinguish or ignore the ratio decidendi or principle laid down in earlier cases. The meaning of some important and
useful terms is explained below.
Followed or Applied.—An earlier binding decision or case of the superior or higher court and court of equal status,
e.g., co-ordinate Bench may be followed in its strictest form or applied in a later case.
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The term
followed means the court has regarded itself as bound by an earlier binding decision or precedent and has
employed the same reasoning or ratio in the instant case
. The term
applied means that after perceiving the likeness between the previous case and the one before the court, the court
has applied the same reasoning, ratio decidendi or ratio of the previous case to the instant case
.
The only alternative to following a binding decision or precedent of the superior court is to distinguish the earlier
case.
Affirmed or Approved.—If the superior or higher court on appeal from a decision of the lower or inferior court
agrees with the reasoning, ratio decidendi or ratio of the lower or inferior court in the same or instant case it is said
to have affirmed the decision of the lower or inferior court.
The term approved is used where the superior court agrees with the ratio decidendi or reasoning of a lower or
inferior court in another case and states that such and such case of some other lower or inferior court was correctly
decided.
Such affirmation or approval increases the binding authority or status of that earlier case or decision to that of the
superior court or the larger Bench.
Reversed or overturned.—The term reversed or overturned is the opposite of affirmed. If a court's decision is
subject to an appeal, the higher or superior court obviously has to allow or dismiss the appeal. If the higher or
superior court on appeal from the decision in the same or instant case reaches a different decision it is said to have
reversed or overturned the decision of the lower court.
Such reversal obliterates, destroys, diminishes or weakens the authority of that case or decision of the lower court.
In that case the decision of the superior court or the larger Bench is the binding precedent.
Overruled or disapproved.—The term overruled or disapproved is the opposite of approved. If the superior or
higher court disagrees, rejects, invalidates or disapproves the decision, reasoning or ratio of the lower or inferior
court in another case and states that that another case before the lower court was not correctly decided, i.e., the
lower court had come to the wrong decision, that decision of the lower or inferior court is said to have been
overruled or disapproved by the superior court.
Such overruling or disapproval obliterates, destroys, diminishes or weakens the authority of that case or decision of
the lower court. In that case the decision of the superior court or the larger Bench is the binding precedent.
In the case of overruling or disapproval the earlier case or decision ceases to be an authority of any sort, unless an
even more superior court reinstates it at a later date. To the extent the decision has been overruled or disapproved,
the earlier decision of the lower court is considered to be not a binding precedent or good law on the courts,
tribunals and authorities subordinate to that lower court.
Overruling is not that common, at least where the principle has been established for some time; but it does happen.
For instance, the Supreme Court can also overrule or overturn its decisions departing from the principle of stare
decisis, if considerations of a substantial and compelling character make it necessary to do so. The Supreme Court
has laid down broad guidelines as to under what circumstances and within what limits and in what manner should
the highest court overrule or overturn its own decisions.90
Distinguished.—The doctrine of precedent or stare decisis does not mean that all Judges are simply machines,
applying fixed rules already laid down. If that were so then the two sides would probably not be arguing the point.
The doctrine demands that like cases should be decided alike or in the same way. This always leaves room for
deciding when two cases are sufficiently similar.
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The principle of treating or deciding like cases alike, in itself poses problems, e.g., what exactly is a like case? The
decisions or cases of the superior or higher court can thus very often be distinguished on their facts, e.g., when the
facts of the earlier binding precedent and the case in hand are dissimilar.
The art of distinguishing cases is a major weapon used by learned counsels or practitioners when confronted with
problems of stare decisis. In such cases the attack is usually concentrated on showing a difference in the material
facts of the two cases because the doctrine of stare decisis is applicable only in like cases or when the material
facts of the two decisions are sufficiently similar.
If the later court on facts arrives at a different decision than the otherwise binding precedent the later court is said to
have distinguished the earlier case or decision. Conversely speaking, the earlier case or decision is said to have
been distinguished in the later case or distinguished on facts.
For instance, it is well-settled that the decision in a case is rendered on its own facts. It is the ratio decidendi of a
binding decision that may be relied upon as a precedent in another case, but it must be shown that the decision
relied upon applies to the facts obtaining in a given case.91
It is well-settled that a precedent is an authority only for what it actually decides and not for what may remotely or
even logically follow from it. Therefore, a decision on a question or point which has not been decided cannot be
treated as a precedent and the ratio of the said decision cannot be properly applied in a later case.92
See detailed Comments under Doctrine of Precedent or Stare decisis and Binding force of Supreme Court
decisions, e.g., Exceptions to the Doctrine of Precedent or Stare decisis, Per incuriam rule, Sub silentio decisions of
the Supreme Court, Ratio decidendi or true principle to be binding hereinbefore.
Dissented from.—As already explained, decisions of one High Court are not binding on another High Court.
Therefore, if the High Court does not agree with the ratio or principle laid down by another High Court, the decision
is said to have been dissented by that High Court. See detailed Comments under Decisions of Outside High Courts
only persuasive precedents hereinbefore.
Binding force of orders of Tribunal or Appellate Authorities.—The orders of the Tribunal and Appellate
Authorities are binding on the Appellate Authorities and Authorities working within its jurisdiction. The principles of
judicial discipline require that the orders of the higher appellate authorities should be followed unreservedly by the
subordinate authorities. The mere fact that the order is not ‘acceptable’ to the Department—in itself an
objectionable phrase—and is the ‘subject-matter of an appeal’ can furnish no ground for not following it unless its
operation has been suspended by a competent court. If this healthy rule is not followed, the result will only be
undue harassment to and chaos in administration of laws.93
Decision of larger Bench of Tribunal binding.—Judicial propriety and decorum require that if a two-member
Bench of a Tribunal or court is apprised of a decision given by a larger Bench on the same subject-matter, the said
Bench should accept and follow the same and not embark upon to reconsider the matter even if they are inclined to
take a different view. The doctrine of precedent has the merit of promoting certainty and consistency in judicial
decisions and enables an organic development of the law, besides providing assurance to the individual as to the
consequences of transactions forming part of his daily affairs.94
Decision of co-ordinate Bench of Tribunal.—The decision of a co-ordinate Bench of the Tribunal on the same
facts is binding on another Bench of the Tribunal. If the Tribunal wants to take a different opinion, it should place the
matter before the President of the Tribunal so that he can have the case referred to a Full Bench of the Tribunal
consisting of three or more members.95
Jurisdiction of Tribunal (NCLT).—As already explained, on the constitution of the National Company Law
Tribunal (NCLT) under Section 10FB of the Companies Act, 1956, as inserted by the Companies (Second
Amendment) Act, 2002 (11 of 2003), the powers and functions hitherto being exercised by the Company Court
andCompany Law Board (CLB) have been conferred on the Tribunal (NCLT). Any person aggrieved by an order or
decision of the Tribunal (NCLT) may prefer an appeal to the Appellate Tribunal except consent orders [ Section
10FQ]. Any person aggrieved by decision or order of the Appellate Tribunal may file an appeal to the Supreme
Court on any question of law arising out of such decision or order [ Section 10GF].

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Appeal on Question of Law.—An appeal under section 10F before the High Court [the Supreme Court under
Section 10GF] can be entertained only on a question of law arising out of the order of CLB [the Appellate Tribunal].
The jurisdiction of the High Court under section 10F [the Supreme Court under section 10GF] is limited. The High
Court [the Supreme Court] cannot go into the question of facts.1
See Comments under Sections 10E, 10F, 10FA and 10FB to 10GF.
Finding of fact appealable, if perverse.—It is settled law that if a finding of fact is perverse and is based on no
evidence, it can be set aside in appeal even though the appeal is permissible only on the question of law. The
perversity of the finding itself becomes a question of law.2
Circulars accepting decisions of outside High Courts.—When a decision of the outside High Court was
accepted by the CBDT in a benevolent Circular, the jurisdictional High Court reprimanded the attitude of the
Department and observed that it was surprised to find that the controversy was still being pursued by the
Department notwithstanding the CBDT circular accepting the decision.3
Department's views vis-a-vis Decisions.—The benevolent circulars or instructions given by the Board or
Department are binding in law on the Authorities under the Act regardless of interpretation placed on that phrase by
the Courts.4
See detailed Comments on Binding force of Department's views or Circulars and the Doctrine of contemporanea
expositio under Sections 1 and 637.
MRTP/Competition Commission (CCI) bound by Precedents.—The MRTP Commission [ now the Competition
Commission of India (CCI)] is bound by the precedents, decisions or rulings of the Supreme Court in view of Article
141 of the Constitution of India. A ruling of the jurisdictional High Court is also binding on the MRTPC [now the
CCI]. Though the seat of the Commission is in Delhi. The jurisdiction of the Commission is throughout the whole of
India. Therefore, if the order of the Commission affects a party in the State, the Commission would be bound by
ruling of that High Court. The MRTPC [the CCI] would be subject to the writ jurisdiction of every High Court in the
country. By virtue of Article 227, every High Court would be empowered to exercise its superintending jurisdiction
over all courts and Tribunals throughout the territories in relation to which it exercises jurisdiction. Simply because a
High Court might refuse to exercise its jurisdiction under Article 226 and/or 227 in view of the alternative remedy of
appeal available under relevant Act, it could not be said that the High Court had no jurisdiction under Article
226/227 of the Constitution of India to examine the legality and validity of orders of the Commission.5
Doctrine ofres judicata.—The principle or doctrine of res judicata is embodied in relation to suits in section 11 of
the Code of Civil Procedure, 1908 (5 of 1908). The doctrine is based on the need of giving finality to judicial
decisions and has been applied by Courts even where section 11 does not apply for achieving finality in litigation.
Primarily it applies as between past and future litigation and when a matter, whether on question of fact or law, has
been decided between two parties in one suit or proceeding and the decision is final either because no appeal was
taken to a higher court or because the appeal was dismissed, or no appeal lay, neither party would be allowed in a
future suit or proceeding between the same parties to canvass the matter again. The rule of res judicata is founded
on considerations of public policy. It is in the interest of the public at large that a finality should attach to the binding
decisions pronounced by courts of competent jurisdiction, and it is also in the public interest that individuals should
not be vexed twice over with the same kind of litigation.6
Before a plea of res judicata can be given effect to, following conditions must be proved (1) that the litigating parties
must be the same; (2) that the subject-matter of the suit also must be identical; (3) that the matter must be finally
decided between the parties, and (4) that the suit must be decided by a court of competent jurisdiction.7
In order to attract section 11 it is not enough that the parties to the previous and pending proceedings are the same,
the subject-matter in the two proceedings should also be same, similar or identical and the said subject-matter must
have been finally decided between the parties and by a court or authority of competent jurisdiction. Where the
subject-matter of the suit was not identical with the matter which was pending before the Company Law Board
(CLB) and which had not been even decided by the Board much less finally and consequently the provisions of
section 11 of the Code of Civil Procedure were not attracted in the suit.8
Dismissal of SLP in limine not res judicata for Writ.—The dismissal of Special Leave Petition (SLP) in limine by
the Supreme Court does not preclude the party from moving the High Court for seeking relief under Article 226 of
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the Constitution of India. Neither on the principle of res judicata nor on any principle of public policy, would the order
of the Supreme Court dismissing the SLP operate to bar the trial of identical issues in a separate proceeding,
namely, the writ proceeding before the High Court merely on the basis of an uncertain assumption that the issues
must have been decided by the Supreme Court at least by implication. It is not correct or safe to extend the
principle of res judicata or constructive res judicata to such an extent so as to found it on mere guesswork.9 If the
Supreme Court dismisses Special Leave Petition on merits, the matter stands concluded by the dismissal of the
SLP.10
See detailed Comments under Dismissal of Special Leave Petition by Supreme Court and Doctrine of Merger in
earlier paragraphs.
Dismissal of writ on merits res judicata.—if a writ petition under Article 226 of the Constitution of India is
dismissed by the High Court on merits by a speaking order it would amount to res judicata and bar a petition to the
Supreme Court under Article 32 on the same facts for the same relief. If the petition is dismissed in limine without
passing a speaking order then such dismissal cannot be treated as creating a bar of res judicata. The petitioner's
only proper remedy in such a case would be to appeal to the Supreme Court from such a speaking order.11
Res judicatanot applicable to Tax proceedings.—The doctrine of res judicata does not apply to tax proceedings
and the decisions or findings of Tax Authorities and Appellate Tribunal (ITAT) in one Assessment Year are not
binding, conclusive or res judicata in subsequent A.Y. between the Department and the Assessee.12
Promissory Estoppel.—The true principle of promissory estoppel is that where one party has by his word or
conduct made to the other a clear and unequivocal promise or representation which is intended to create legal
relations or affect a legal relationship to arise in the future, knowing or intending that it would be acted upon by the
other party to whom the promise or representation is made and it is in fact so acted upon by the other party, the
promise or representation would be binding on the party making it and he would not be entitled to go back upon it, if
it would be inequitable to allow him to do so, having regard to the dealings which have taken place between the
parties. It is now well-settled in India that the doctrine of promissory estoppel is not limited in its application only to
defence but it can also found a cause of action. The doctrine may operate as a shield and sometime as a sword.
The doctrine of promissory estoppel is applicable against the Government in the exercise of its governmental,
public or executive functions and the doctrine of executive necessity or freedom of future executive action cannot
be invoked to defeat the applicability of the doctrine. There can be no promissory estoppel against the legislature in
the exercise of its legislative functions nor can the Government or public authority be debarred by promissory
estoppel from enforcing a statutory prohibition. It is equally true that promissory estoppel cannot be used to compel
the Government or a public authority to carry out a representation or promise which is contrary to law or which was
outside the authority or power of the officer. The doctrine of promissory estoppel being an equitable doctrine, it must
yield when the equity so requires, if it can be shown by the Government or public authority that having regard to the
facts as they have transpired, it would be inequitable to hold the Government or public authority to the promise or
representation, the court would not raise an equity in favour of the person to whom the promise or representation
was made and enforce the promise or representation against the Government or public authority. The doctrine of
promissory estoppel would be displaced in such a case, because on the facts, equity would not require that the
Government or public authority should be held bound by the promise or representation made by it. Representations
made by Central Board of Excise and Customs to Manufacturers' Association with the approval of the Central
Government, within its power and not contrary to law, were valid until withdrawn. The CBEC and the Central
Government were clearly bound by promissory estoppel.13
Views of ICAI cannot override Decisions.—The views of the Institute of Chartered Accountants of India (ICAI)
and the principles of accountancy cannot override the provisions of the Act and the binding decisions of the
Supreme Court or the jurisdictional High Court and to the extent they are in conflict with the statutory provisions or
such binding decisions, they have to be ignored.14
Decree without jurisdiction a nullity.—It is a fundamental principle well established that a decree passed by a
court without jurisdiction is a nullity, and that its invalidity could be set up whenever and wherever it is sought to be
enforced or relied upon even at the stage of exemption and even in collateral proceedings. A defect of jurisdiction,
whether it is pecuniary or territorial, or whether it is in respect of the subject-matter of the action, strikes at the very
authority of the court to pass any decree, and such a defect cannot be cured even by consent of parties.15
Interpretation, Appeals and Remedies.—There is no inherent right of appeal. It has to be spelt from the words of
the statute, if any, providing for an appeal. But it is an equally well settled proposition of law that, if there is a
provision conferring a right of appeal, it should be read in a reasonable, practical and liberal manner.16
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It is well settled that even a vested right of appeal can be taken away by express legislation or by legislation which,
though it may not expressly repeal the vested right of appeal, has the effect of such repeal by necessary
implication.17
A mode of obtaining relief under the Act which is not expressed to be the only mode does not preclude an
aggrieved party from pursuing any other relief.18
See detailed Comments on Appeals under Section 10F which provides for an appeal to the High Court against
orders of the Company Law Board (CLB).
On the constitution of the National Company Law Tribunal(NCLT) under Section 10FB of the Companies Act, 1956,
as inserted by the Companies (Second Amendment) Act, 2002 (11 of 2003), person aggrieved by order or decision
of the Tribunal (NCLT) may prefer an appeal to the Appellate Tribunal except consent orders [ Section 10FQ].
Person aggrieved by order of Appellate Tribunal may file an appeal to the Supreme Court on question of law arising
out of such order [ Section 10GF].
See detailed Comments under Sections 10E, 10F, 10FA and 10FB to 10GF.
Change in Forum, pending proceedings.—The general principle is that a law which brings about a change in the
forum does not affect pending actions unless an intention to the contrary is clearly shown. One of the modes by
which such an intention is shown is by making a provision for change over of proceedings from the court or the
Tribunal where they are pending to the court or the Tribunal which, under the new law, gets jurisdiction to try them.
It is also true that no litigant has any vested right in the matter of procedural law but, where the question is of
change of forum, it ceases to be a question of procedure only. The forum of appeal or proceedings is a vested right
as opposed to pure procedure to be followed before a particular forum. The right becomes vested when the
proceedings are initiated in the Tribunal or the court of first instance and unless the Legislature has, by express
words or by necessary implication, clearly so indicated, that vested right will continue in spite of the change of
jurisdiction of the different Tribunals or forums.19
For instance, section 10FA(3) provides that all pending proceedings before the Company Law Board on the
constitution of the Tribunal under section 10FB, shall stand transferred to the National Company Law Tribunal
(NCLT).
Retrospective Legislation.—It is necessary to spell out the degree of retrospectivity of statutory provision from the
language of the relevant provision itself. The application of the general principle that an appeal is a continuation of
the proceedings initiated before the trial court must yield to the limiting terms of the statutory provision itself.20 It is
well-settled that the effect of the provision that a particular amendment shall be deemed to come into force from a
particular date with retrospective effect is that the amendment must be deemed to have been included in the
principal Act as from that date for all purposes.21
When the law is amended with retrospective effect, the court or Tribunal, when it decides any proceeding, has to
apply such retrospectively amended law as if it were in force at all material times. A court or Tribunal cannot ignore
the retrospective operation of a law which is in existence when it decides a matter.22
Law relating to vested right generally prospective.—It is now well-settled that where a statutory provision which
is not expressly made retrospective by the Legislature seeks to affect vested rights and corresponding obligations
of parties, such provision cannot be said to have any retrospective effect by necessary implication. Perhaps no rule
of construction is more firmly established than this—that a retrospective operation is not to be given to a statute so
as to impair an existing right or obligation, otherwise than as regards matters of procedure, unless that effect cannot
be avoided without doing violence to the language of the enactment. If the enactment is expressed in language
which is fairly capable of either interpretation, it ought to be construed as prospective only. The rule involves
another subordinate rule, to the effect that a statute is not to be construed so as to have a greater retrospective
operation than its language renders necessary.23
Procedural law generally retrospective.—Procedural law, generally speaking, is applicable to pending cases. No
suitor can be said to have a vested right in procedure.24 A change in the law of procedure operates retrospectively
and unlike the law relating to vested right, is not only prospective. No person has a vested right in any course of
procedure and if, by an Act of Parliament, the mode of procedure is altered, he has no other right than to proceed
according to the altered mode.25
Page 60 of 72
It is true that as a general rule alterations in the form of procedure are retrospective in character unless there is
some good reason or other why they should not be.26
Declaratory and explanatory statutes retrospective.—The presumption against retrospective operation is not
applicable to declaratory, explanatory or clarificatory statutes. For modern purposes, a declaratory Act may be
defined as an Act to remove doubts existing as to the common law, or the meaning or effect of any statute. Such
Acts are usually held to be retrospective. The usual reason for passing a declaratory Act is to set aside what
Parliament deems to have been a judicial error, whether in the statement of the common law or in the interpretation
of statutes. An explanatory Act is generally passed to supply an obvious omission or to clear up doubts as to the
meaning of the previous Act. It is well settled that if a statute is curative or merely declaratory of the previous law
retrospective operation is generally intended.27 The Benami Transactions (Prohibition) Act, 1988 (45 of 1988) is not
declaratory.28
Validating Acts.—No individual can acquire a vested right from a defect in a statute and seek a windfall from the
Legislature's mistakes. Validity of legislations retroactively curing defects in taxing statutes is well-recognised and
courts, except under extraordinary circumstances, would be reluctant to override the legislative judgment as to the
need for, and the wisdom of, the retrospective legislation.29
34. Now the jurisdiction of the High Court under Section 425 to 560 has been transferred to and vested in “the Tribunal
(NCLT)” by the Companies (Second Amendment) Act, 2002 (11 of 2003) on its constitution under Section 10FB. See
Comments under Ss. 10FB and 425 to 560.
36. Madhuban Pvt. Ltd. v. Narain Dass Gokul Chand, (1971) 41 Comp. Cas. 685 (Delhi). The jurisdiction of High Court
under Sections 425 to 560 has been vested in “the Tribunal” and Sections 435 to 438 relating to Transfer of winding up
proceedings to District Court have been omitted by the Companies (Second Amendment) Act, 2002 (11 of 2003) ibid.
* The jurisdiction of Court under Sections 113, 118, 141, 144, 163, 196 and 219 (which was delegated vide this
Notification to District Court) was transferred to and vested in the CLB by the Companies (Amendment) Act, 1988 (31 of
1988) (w.e.f. 31-5-1991). Now the same has been conferred on the “Central Government” by the Companies (Second
Amendment) Act, 2002 (11 of 2003). See detailed Comments under respective Sections and Sections 10E and 10FB.
‡ The jurisdiction of Court under Sections 304 and 307 (earlier delegated to District Court) has been transferred to and
vested in the Company Law Board [ now the Central Government or Tribunal, as the case may be] ibid.
37. The reference to Managing Agents and Secretaries and Treasurers omitted by the Companies (Amendment) Act, 2000
(53 of 2000) (w.e.f. 13-12-2000). The system of managing agency had already been abolished videsection 324A of the
1970).
† The jurisdiction of Court under Section 614 (earlier delegated to District Court) has been transferred to and vested in
the Company Law Board [ now the Tribunal] ibid.
38. Vithalrao Narayanrao Patil v. Maharashtra State Seeds Corporation Ltd., (1990) 68 Comp. Cas. 608 (Bom.); Hirendra
Bhadra v. Triton Engg. Co. P. Ltd.,(1975-76) 80 CWN 242 (Cal.). But see Comments under “Civil Courts when may
exercise jurisdiction” in later paragraphs.
39. India Electric Works Ltd., In re, (1969) 1 Comp. LJ 195 (Cal.) : AIR 1970 Cal. 398 [LNIND 1968 CAL 159].
40. Maharaj Kumar Mahendra Singh v. Lake Palace Hotels and Motels P. Ltd., (1985) 58 Comp. Cas. 805 (Raj.). See also
Comments under Sections 10E, 10FB, 163 and 209.
Page 61 of 72
41. Himachal Terpene Products (P.) Ltd. v. ROC, (1976) 46 Comp. Cas. 200 (HP). Powers of the Court under Section 141
have been vested in the Company Law Board (CLB) [ now the Central Government]. See Comments under Section
141.
42. Alleppey Chit Fund Pvt. Ltd., In re, (1961) 31 Comp. Cas. 641 (Ker.); Madhula Devappa Manere v. Jay Maharashtra
Gul and Khandasari Udyog Ltd., (2002) 109 Comp. Cas. 403 (Bom.). The jurisdiction of High Court under sections 425
to 560 has been vested in “the Tribunal” and Sections 435 to 438 relating to Transfer of winding up proceedings to
District Court have been omitted by the Companies (Second Amendment) Act, 2002 (11 of 2003).
43. Thadani Leasing v. Allahabad Patrika Pvt. Ltd., (2002) 111 Comp. Cas. 754 (All.). Ashok Fashions Ltd. v. Meghdoot
Acid and Chemicals, (1998) 91 Comp. Cas. 655 (Guj.) (DB). The jurisdiction of the High Court under Sections 433 and
484, etc., has since been transferred to and vested in “the Tribunal” by the Companies (Second Amendment) Act, 2002
(11 of 2003). See detailed Comments under Sections 10FB, 433, 434, 439 and 484.
44. Kalpana Trading v. N.C.L. Industries Ltd., (1996) 85 Comp. Cas. 946 (Orissa).
45. Vimal Kumar v. Bhilwara Wooltax Ltd., (1996) 86 Comp. Cas. 286 (Raj.).
46. G.T.C. Industries Ltd. v. Parasrampuria Trading and Finance (P) Ltd., (2001) 104 Comp. Cas. 368 (All.) : (1999) 34
CLA 350 (All.).
hereinafter. See also Comments under Sections 10E, 10FB and 10GB.
6 SCC 220. See also Comments under Sections 10E, 10FB and 10GB.
51. R. Prakasam v. Sree Narayana Dharma Paripalana Yogam, (1980) 50 Comp. Cas. 611 (Ker.); Niranjan Singh v.
Edward Ganj Public Welfare Asscn., (1981) 51 Comp. Cas. 475 (P&H) (DB); Panipat Woollen and General Mills Co.
Ltd. v. R.L. Kaushik, (1969) 39 Comp. Cas. 249 (P&H); Joseph v. Jose, (1964) 34 Comp. Cas. 391 (Ker.); Maharaja
Exports v. Apparels Exports Promotion Council, (1986) 60 Comp. Cas. 353 (Delhi); Prakash Roadlines Ltd. v. Vijaya
Kumar Narang, (1995) 83 Comp. Cas. 569 (Kar.); Star Tile Works Ltd. v. N. Govindan & Co.,AIR 1959 Ker. 254; Inter
Sales v. Reliance Industries Ltd., (2002) 108 Comp. Cas. 680 (Cal.) (DB); Marina World Shipping Corporation Ltd. v.
Jindal Exports P. Ltd., (2004) 122 Comp. Cas. 399 (Delhi). See also Comments under Sections 41, 399, 433 and
respective Sections.
Hospital (Pvt.) Ltd., (1999) 97 Comp. Cas. 216 (Ker.) (DB). See also Comments under Sections 41 and 283.
55. ICICI Ltd. v. Parasrampuria Synthetics Ltd., (1998) 92 Comp. Cas. 238 (Delhi). See detailed Comments under Section
41.
56. Poonamchand Kothari v. Rajasthan Tube Mfg. Co. Ltd., (1996) 87 Comp. Cas. 842 (Raj.). See also Comments under
Sections 10E, 10FB, 10GB, 61, 63 and 73.
57. Ammonia Supplies Corporation (P.) Ltd. v. Modern Plastic Containers Pvt. Ltd., (1998) 94 Comp. Cas. 310 (SC);
Gordon Woodroffe and Co. Ltd., U.K. v. Gordon Woodroffe Ltd., Chennai, (1999) 97 Comp. Cas. 582 (Mad.); T.G.
Veera Prasad v. Sree Rayalaseema Alkalies and Allied Chemicals Ltd., (1999) 98 Comp. Cas. 806 (AP); Arun Kumar
Mallick v. Hindustan Lever Ltd., (2002) 112 Comp. Cas. 464 (CLB). See also Comments under Sections 2(11), 10E,
10FB, 10GB, 84, 111(7), 111A(7), 397 and 398.
58. Ammonia Supplies Corporation (P.) Ltd. v. Modern Plastic Containers Pvt. Ltd., (1998) 94 Comp. Cas. 310 (SC). See
also Comments under Sections 10, 10E, 10FB and 10GB.
59. Shirish Finance and Investment P. Ltd. v. M. Sreenivasulu Reddy, (2002) 109 Comp. Cas. 913 (Bom.) (DB). See also
2(11), 10E, 10FB, 10GB and 84.
61. Tej Prakash S. Dangi v. Coromandal Pharmaceuticals Ltd., (1997) 89 Comp. Cas. 270 (AP). See also Public
(1966) 1 Comp. LJ 1 (SC). See also Comments under Section 100, 111 and 111A.
Page 62 of 72
62. M.G. Doshit v. Reliance Petrochemicals Ltd., (1994) 79 Comp. Cas. 830 (Guj.).
63. Ravinder Kumar Jain v. Punjab Registered (Iron and Steel) Stockholders Association Ltd., (1978) 48 Comp. Cas. 401
(P&H); R. Prakasam v. Sree Narayana Dharma Paripalana Yogam, (1980) 50 Comp. Cas. 611 (Ker.); Paragaon Utility
Financiers Pvt. Ltd. v. Punjab Iron and Steel Co. Pvt. Ltd., (1985) 57 Comp. Cas. 738 (P&H); Niranjan Singh v. Edward
Ganj Public Welfare Association, (1981) 51 Comp. Cas. 475 (P&H) (DB). See detailed Comments under Sections 166,
171 and 186.
64. Dr. Ashok Mathew Zacharia v. Majestic Kuries and Loans P. Ltd., (1987) 62 Comp. Cas. 865 (Ker.); R. Prakasam v.
Sree Narayana Dharma Paripalana Yogam, (1980) 50 Comp. Cas. 611 (Ker.); Kishore Y. Patel v. Patel Engg. Co. Ltd.,
(1994) 79 Comp. Cas. 53 (Bom.); T.M. Menon v. Universal Film (India) Pvt. Ltd., (1982) 52 Comp. Cas. 371 (Mad.);
Coal Marketing Co. of India Pvt. Ltd., In re, (1967) 37 Comp. Cas. 720 (Cal.) : AIR 1968 Cal. 119 [LNIND 1967 CAL
39]: 71 CWN 449; Nungambakkam Dhanarakshaka Saswatha Nidhi Ltd. v. ROC, (1972) 42 Comp. Cas. 632 (Mad.); R.
Rangachari v. S. Suppiah, (1975) 45 Comp. Cas. 641 (SC) : AIR 1976 SC 73 [LNIND 1975 SC 340]. See detailed
Comments under Sections 10FB, 166 and 186.
65. Prakash Roadlines Ltd. v. Vijaya Kumar Narang, (1995) 83 Comp. Cas. 569 (Kar.); Dhulabhai v. State of M.P.,AIR
1969 SC 78 [LNIND 1968 SC 99]: (1968) 3 SCR 662 [LNIND 1968 SC 99] : (1969) 22 STC 416 (SC); Public
(1966) 1 Comp. LJ 1 (SC); R.R. Rajendra Menon v. Cochin Stock Exchange Ltd., (1990) 69 Comp. Cas. 256 (Ker.)
(DB); Niranjan Singh v. Edward Ganj Public Welfare Asscn., (1981) 51 Comp. Cas. 475 (P&H) (DB). See detailed
66. Maharaja Exports v. Apparels Exports Promotion Council, (1986) 60 Comp. Cas. 353 (Delhi).
67. T.L. Arora v. Ganga Ram Agarwal (No. 1), (1988) 63 Comp. Cas. 736 (Delhi); Star Tile Works Ltd. v. N. Govindan &
Co.,AIR 1959 Ker. 254. See also Comments under Sections 176.
68. T.L. Arora v. Ganga Ram Agarwal (No. 2), (1988) 63 Comp. Cas. 739 (Delhi); T.L. Arora v. Ganga Ram Agarwal (No.
4), (1988) 63 Comp. Cas. 871 (Delhi).
69. C. Shanmugham v. N. Radhakrishnan, (2000) 101 Comp. Cas. 148 (Mad.).
70. Vijay Kumar Gupta v. Ram Naresh Singh, (2004) 122 Comp. Cas. 771 (Patna). See also Comments under Sections
10E, 10FB and 10GB.
71. Vijay Kumar Gupta v. Ram Naresh Singh, (2004) 122 Comp. Cas. 771 (Pat.).
72. Spices Valley Estate Ltd. v. TC Forexpress Ltd., (2007) 137 Comp. Cas. 364 (Mad.).
73. Dr. T.M. Paul v. City Hospital (Pvt.) Ltd., (1999) 97 Comp. Cas. 216 (Ker.) (DB); Avanthi Explosives P. Ltd. v. Principal
Subordinate Judge, (1987) 62 Comp. Cas. 301 (AP). See also Comments under Section 283.
74. Dr. T.M. Paul v. City Hospital (Pvt.) Ltd., (1999) 97 Comp. Cas. 216 (Ker.) (DB).
75. Avanthi Explosives P. Ltd. v. Principal Subordinate Judge, (1987) 62 Comp. Cas. 301 (AP).
76. K. Radhakrishnan v. Thirumani Asphalts & Felts P. Ltd., (1998) 91 Comp. Cas. 31 (Mad.).
77. K. Venkat Rao v. Rockwool (India) Ltd., (2002) 108 Comp. Cas. 494 (AP) (FB).
78. Thiruvalluvar Velanmai Kazhagam P. Ltd. v. M.K. Seethai Achi, (1988) 64 Comp. Cas. 304 (Mad.).
79. CDS Financial Services (Mauritius) Ltd. v. BPL Communications Ltd., (2004) 121 Comp. Cas. 374 (Bom.) (DB). See
detailed Comments under Sections 397 to 409.
80. K.K. Modi v. K.N. Modi, (1998) 92 Comp. Cas. 30 (SC).
81. Cook v. Deeks,(1916) 1 AC 554 : 85 LJ PC 161 : 114 LT 636 (PC).
82. Greenhalgh v. Arderne Cinemas Ltd., (1951) 1 Ch. 286 : (1950) 2 All ER 1120 : 94 SJ 855 (CA).
83. Marikar (Motors) v. M.I. Ravikumar, (1982) 52 Comp. Cas. 362 (Ker.). See also Comments under Sections 41, 111A,
397, 398, 399, 408 and 543.
84. Asansol Electric Supply Co. Ltd. v. Chunilal Daw,AIR 1972 Cal. 19 [LNIND 1971 CAL 60](DB).
85. Cotter v. National Union of Seamen, (1929) 2 Ch. 58 : 98 LJ Ch. 323 : 141 LT 178.
86. Baillie v. Oriental Telephone and Electric Co. Ltd., (1915) 1 Ch. 503 (CA) : 84 LJ Ch. 409 : 112 LT 569 : 31 TLR 140
(CA). See also Comments under Section 41.
88. Pender v. Lushington, (1877) 6 Ch.D. 70 : 46 LJ Ch. 317 : 25 WR Dig. 64. See detailed Comments under Section 41.
See also Comments under Individual wrongs hereinbefore.
Page 63 of 72
89. Ratenavelumani Chettiar v. Manickkavelu Chettiar,AIR 1951 Mad. 542 [LNIND 1950 MAD 106]; Kaliappa Nadar v.
Kathayee Cotton Mills Ltd., (1964) 34 Comp. Cas. 947 (Ker.) (DB).
90. Mahaliram Santhelia v. Fort Gloster Jute Manufacturing Co. Ltd., (1954) 24 Comp. Cas. 311 (Cal) : AIR 1955 Cal. 132
[LNIND 1954 CAL 69]: 58 CWN 715. See also Comments under Section 183 and Schedule I, Table A, Regulation 60.
91. Prakash Roadlines Ltd. v. Vijaya Kumar Narang, (1995) 83 Comp. Cas. 569 (Kar.); Avanthi Explosives P. Ltd. v.
Principal Subordinate Judge, (1987) 62 Comp. Cas. 301 (AP); L.I.C. v. Escorts Ltd., (1986) 59 Comp. Cas. 548 (SC) :
AIR 1986 SC 1370 [LNIND 1985 SC 362]. See detailed Comments in earlier paragraph “Scope of Section 10”. See
92. Rattan Chand Jain v. Uberoi Ltd., (1998) 93 Comp. Cas. 906 (Delhi) (DB).
93. Kishore Y. Patel v. Patel Engg. Co. Ltd., (1994) 79 Comp. Cas. 53 (Bom.) : AIR 1992 Bom. 114 [LNIND 1991 BOM
308]. See fuller discussion in earlier paragraph under Meetings. See also Comments under Sections 186, 643 and Rule
9 of the Companies (Court) Rules, 1959.
Desai, (1995) 82 Comp. Cas. 591 (SC). See also Comments under Sections 10GB, 56, 62, 65, 69, 72 and 73.
95. Jyoti Bhusan Mukherjee v. Eastern Tea Co. Ltd., (1983) 53 Comp. Cas. 722 (Cal.); Suryanarayana Paper & Boards P.
Ltd. v. V. Padmakumar, (1997) 88 Comp. Cas. 684 (Mad.).
96. Pandian Graphites (India) Ltd. v. Lovvuri Lakshmi, (1996) 87 Comp. Cas. 323 (AP).
1. Vatsa Industries Ltd. v. Shankerlal Saraf, (1996) 87 Comp. Cas. 918 (SC).
2. Patel Roadways Ltd. v. Prasad Trading Co., (1992) 74 Comp. Cas. 11 (SC).
3. B.B. Verma v. National Projects Construction Corpn. Ltd., (1999) 5 Comp. LJ 274 (Delhi).
4. Jyoti Bhusan Mukherjee v. Eastern Tea Co. Ltd., (1983) 53 Comp. Cas. 722 (Cal.).
5. Bhankerpur Simbhaoli Beverages P. Ltd. v. Sarabhjit Singh, (1996) 86 Comp. Cas. 842 (P&H).
6. R.S.D.V. Finance Co. Pvt. Ltd. v. Shree Vallabh Glass Works Ltd., (1993) 78 Comp. Cas. 640 (SC). See also
7. SEBI v. Alka Synthetics Ltd., (1999) 95 Comp. Cas. 772 (Guj.) (DB). See detailed Comments under Section 55A of the
(2003) 113 Comp. Cas. 1 (SC). See also Comments under Sections 2(12), 2(46), 10, 55A, 69 and 81.
WLR 31 (CA). See fuller discussion in Comments under Sections 41, 399 and 408.
10. BSN (UK) Ltd. v. Janardan Mohandas Rajan Pillai, (1996) 86 Comp. Cas. 371 (Bom.); Giles v. Rhind,(2002) 4 All ER
977. See also Comments under Sections 34, 41, 153B and 187C.
11. Pavlides v. Jensen, (1956) Ch. 565 : (1956) 2 All ER 518 : (1956) 3 WLR 224. See also Comments under Section 41.
12. Birch v. Sullivan,(1958) 1 All ER 56 : (1957) 1 WLR 1247: (1957) 101 SJ 974. See also Comments under Section 69.
14. Daniels v. Daniels, (1978) Ch. 406 : (1978) 2 All ER 89 : (1978) 2 WLR 73.
15. For elaborate discussion see Comments under Section 41.
16. Southern Steelmet and Alloys Ltd. v. Lakshmi Nivas Mittal, (1986) 60 Comp. Cas. 132 (Kar.).
17. Fargo Ltd. v. Godfroy,(1986) 3 All ER 279 : (1986) 1 WLR 1134 : (1986) BCLC 370. See also Comments under Section
398.
18. Vijay M. Shah v. Flex Industries Ltd., (2001) 103 Comp. Cas. 1063 (Delhi). See also Comments under Sections 81, 397
and 398.
Sections 397, 398, 406 and Schedule XI.
(DB).
(1991) 70 Comp. Cas. 388 (Delhi). See also Comments under Sections 2(24), 2(26) and 291.
Page 64 of 72
23. Ganga Saran and Sons Pvt. Ltd. v. Sachdeva Offset and Packing Industries Pvt. Ltd., (1999) 98 Comp. Cas. 351
(Delhi) (DB); Bell South International v. Crompton Greaves Ltd., (2001) 106 Comp. Cas. 437 (Mad.); United Bank of
India v. Naresh Kumar, (1997) 90 Comp. Cas. 329 (SC).
(Bom.). See also Comments under Sections 293, 397 and 398.
Sections 34, 41, 153B, 187C and 399.
28. Mamata Papers Pvt. Ltd. v. State of Orissa, (2000) 99 Comp. Cas. 294 (Orissa); Nagpur Electric Light and Power Co.
Ltd. v. K. Shreepathirao,AIR 1958 SC 658 [LNIND 1958 SC 48]; Perumal Koundan v. Tirumalarayapuram Janankoola
Dhanasekhara Sanka Nidhi,AIR 1918 Mad. 362 [LNIND 1917 MAD 308]. See also Comments under Section 34.
29. Union Bank of India v. Khader International Construction, (2001) 105 Comp. Cas. 856 (SC). See also Comments under
Section 34.
30. Order 7, Rule 1, Order 29, Rule l, Code of Civil Procedure, 1908;Babulal Choukhani v. Caltex (India) Ltd.,AIR 1967 Cal.
205 [LNIND 1965 CAL 195]: 71 CWN 458. See also Comments under Section 599.
31. Pioneer Protective Glass Fibre (P.) Ltd. v. Fibre Glass Pilkington Ltd., (1986) 60 Comp. Cas. 707 (Cal.) (DB). See
detailed Comments under Section 21 and 23.
32. Mehdi Mandil v. Trans Sharjah Aviation Ltd., (1987) 62 Comp. Cas. 606 (Bom.).
33. T.L. Arora v. Ganga Ram Agarwal (No. 3), (1988) 63 Comp. Cas. 775 (Delhi); See also National Textile Corpn. (U.P.)
Ltd. v. Swadeshi Polytex Ltd., (1998) 93 Comp. Cas. 814 (Delhi).
34. Forasol v. Oil and Natural Gas Commission, (1986) 60 Comp. Cas. 286 (SC) : AIR 1984 SC 241 [LNIND 1983 SC
313].
also Comments under Sections 2(27), 41, 108 and 398.
36. Telesound India Ltd., In re, (1983) 53 Comp. Cas. 926 (Delhi); Mafatlal Industries Ltd., In re, (1997) 90 Comp. Cas. 247
(Guj.) (DB). See detailed Comments under Section 391-395.
37. Memtec Ltd. v. Lunarmech, (2001) 103 Comp. Cas. 1078 (Delhi). See detailed Comments under Section 34 and 394.
38. S.L.M. Industries Ltd. v. Rajendra Electrical Inds. Ltd., (2007) 135 Comp. Cas. 243 (Guj.) (DB); BOI Finance Ltd. v.
Arvin Oxygen P. Ltd., (2006) 134 Comp. Cas. 626 (Guj.); Registrar of Companies v. Kamal Infosys Ltd., (2006) 133
Comp. Cas. 455 (All.) (DB).
39. Data Computer Services v. Northern Digital Exchanges Ltd., (1998) 92 Comp. Cas. 362 (P&H). See also Comments
under Section 10FB, 424A-424L, 433, 434 and 439.
40. Gopalpur Tea Co. Ltd. v. Peshok Tea Co. Ltd., (1982) 52 Comp. Cas. 239 (Cal.) (DB); B. Mookerjee v. State Bank of
India, (1993) 76 Comp. Cas. 292 (Cal.) (DB). See detailed Comments under Section 34 and 443.
41. Jyoti Bhushan Gupta v. Banaras Bank Ltd., (1961) 31 Comp. Cas. 727 (SC) : AIR 1962 SC 403 [LNIND 1961 SC 330]:
(1962) Supp. 1 SCR 73. The jurisdiction of High Court under section 470 has been transferred to and vested in “the
Tribunal” by the Companies (Second Amendment) Act, 2002 (11 of 2003) to be constituted under Section 10FB. See
42. Khosla Fans (India) P. Ltd., In re, (1983) 53 Comp. Cas. 858 (P&H) (DB); S.V. Kondaskar, Official Liquidator v. V.M.
Deshpande, ITO, (1972) 42 Comp. Cas. 168 (SC) : AIR 1972 SC 878 [LNIND 1972 SC 3]: (1972) 83 ITR 685 (SC).
43. Sudarsan Chits (I.) Ltd. v. O. Sukumaran Pillai, (1985) 58 Comp. Cas. 633 (SC) : AIR 1984 SC 1579 [LNIND 1984 SC
214]. See detailed Comments under Section 391, 446 and 450.
44. Yokogawa Blue Star Ltd. v. Soffia Software Ltd., (2004) 119 Comp. Cas. 929 (Mad.).
45. ABG Heavy Industries Ltd. v. Hindustan Shipyard Ltd., (2001) 105 Comp. Cas. 413 (Bom.). See detailed Comments
under Section 433.
46. Canara Bank v. Scanomax India Ltd., (2000) 99 Comp. Cas. 285 (P&H).
47. D.N. Elango v. Sudarsan Chits (India) Ltd., (1997) 88 Comp. Cas. 146 (Mad.); Smt. Kalagara Rama Tulasamma v.
Subhadaya Publications Ltd., (1969) 39 Comp. Cas. 993 (AP). See also Comments under Section 634 and 635.
Page 65 of 72
48. Sumac International Ltd. v. P.N.B. Capital Services Ltd., (1998) 93 Comp. Cas. 236 (All.) (DB).
Comments under Sections 2(11), 10E and 10FB.
195 (SC); Karnataka Bank Ltd. v. B. Suresh, (2001) 105 Comp. Cas. 110 (Kar.). See detailed Comments under Section
39, 53, 113, 207 and 219.
52. R.P. Kapur v. State of Punjab,AIR 1960 SC 866 [LNIND 1960 SC 96];State of Karnataka v. State of Karnataka,AIR
1977 SC 1489 [LNIND 1977 SC 113];Trilok Singh v. Satya Deo Tripathi,AIR 1979 SC 850; Consolidated Pneumatic
Tool Co. (I) Ltd. v. Addl. Registrar of Companies, (1989) 65 Comp. Cas. 259 (Bom.). See also Comments under
Section 5, 205A and 207.
53. Dr. Subramanian Swamy v. Union of India, (2004) 118 Comp. Cas. 126 (Delhi) (DB); Klen and Marshalls Mfrs. &
Exporters Ltd. v. State of J&K, (2000) 100 Comp. Cas. 180 (Kar.).
54. Canara Bank v. Nuclear Power Corporation of India Ltd., (1995) 84 Comp. Cas. 70 (SC); Minoo Mehta v. Shavak D.
Mehta, (1998) 91 Comp. Cas. 895 (SC); Harshad Shantilal Mehta v. Custodian, (1998) 92 Comp. Cas. 936 (SC); Rahul
Subodh Windoors Ltd. v. A.K. Menon, (1999) 96 Comp. Cas. 597 (SC); Standard Chartered Bank v. Custodian, (2000)
102 Comp. Cas. 314 (SC); Western Press Pvt. Ltd. v. Custodian, (2001) 104 Comp. Cas. 105 (SC); Standard
Chartered Bank v. Custodian, (2001) 105 Comp. Cas. 767 (SC); State Bank of Saurashtra v. Punjab National Bank,
(2001) 105 Comp. Cas. 852 (SC); Hiten P. Dalal v. Bratindranath Banerjee, (2001) 106 Comp. Cas. 574 (SC); Dhyan
Investments and Trading Co. Ltd. v. CBI, (2001) 107 Comp. Cas. 1 (SC); Harshad S. Mehta v. State of Maharashtra,
(2001) 107 Comp. Cas. 365 (SC); L.S. Synthetics Ltd. v. Fairgrowth Financial Services Ltd., (2004) 122 Comp. Cas.
185 (SC).
55. United Steel Allied Industries Pvt. Ltd. v. Fairgrowth Financial Services Ltd., (1998) 94 Comp. Cas. 212 (AP) (DB).
* See the Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992 (27 of 1992) in Appendix 334.
Railway Finance Corporation Ltd., (1996) 85 Comp. Cas. 716 (Delhi). See also Comments under Section 10E, 10FB
and 111A.
57. Dhyan Investments and Trading Co. Ltd. v. CBI, (2001) 107 Comp. Cas. 1 (SC).
58. Pallav Sheth v. Custodian, (2001) 107 Comp. Cas. 76 (SC).
59. Canbank Financial Services Ltd. v. Custodian, (2004) 122 Comp. Cas. 263 (SC); Kudremukh Iron Ore Co. Ltd. v.
Fairgrowth Financial Services Ltd., (1994) 81 Comp. Cas. 551 (SC). See detailed Comments under Section 111A and
187C.
60. Fairgrowth Investments Ltd. v. Custodian, (2004) 122 Comp. Cas. 683 (SC).
61. Godrej Soap Ltd. v. State, (1991) 70 Comp. Cas. 248 (Cal.) (DB). But see State of Maharashtra v. Nagpur Electric Light
and Power Co. Ltd., (1961) 31 Comp. Cas. 324 (Bom.). See also Comments under Section 34.
62. John Thomas v. Dr. K. Jagadeesan, (2001) 106 Comp. Cas. 619 (SC).
Mad. 387 [LNIND 1962 MAD 194]; Vohra v. Ms. Balji Kaur Vohra,(2000) 38 Corp. LA 265 (CLB). See detailed
64. Krishna Swami v. South Indian Film Chambers of Commerce,AIR 1969 Mad. 42 [LNIND 1967 MAD 100]. See detailed
65. Dewas Synthetics (P.) Ltd., In re, (2005) 123 Comp. Cas. 214 (MP).
66. Asset Ltd. v. P.T. Garuda Indonesia,(2000) 4 All ER 371. See also Comments u/s. 591.
67. Bhagwandas Garg v. Canara Bank Ltd., (1981) 51 Comp. Cas. 38 (AP). See also Comments under Section 616.
68. United Bank of India v. Naresh Kumar, (1997) 90 Comp. Cas. 329 (SC) : AIR 1997 SC 3 [LNIND 1996 SC 1486]. See
also Comments under Dishonour of cheques by company under Section 5.
69. All India Motor Transport Mutual Insurance Co. Ltd. v. Raphel George, (1963) 33 Comp. Cas. 1166 (Bom.) (DB). See
70. Dwarka Prasad Agarwal v. Ramesh Chandra Agarwala, (2003) 117 Comp. Cas. 206 (SC); Yokogawa Blue Star Ltd. v.
Soffia Software Ltd., (2004) 119 Comp. Cas. 929 (Mad.).
Page 66 of 72
71. S. Balwant Singh v. Krishna Bus Service Pvt. Ltd., (1967) 37 Comp. Cas. 471 (C.T.); Sha Mulchand & Co. Ltd. v.
Jawahar Mills Ltd., (1953) 23 Comp. Cas. 1 (SC) : AIR 1953 SC 98 [LNIND 1952 SC 89]: (1953) SCR 351 [LNIND
1952 SC 89]. See detailed Comments under Section 111 and 111A.
72. Rajan Products v. Jayant Vegoiles and Chemicals P. Ltd., (1991) 72 Comp. Cas. 181 (Bom.); Yashwant Deorao v.
Walchand Ramchand,AIR 1951 SC 16 [LNIND 1950 SC 48].
73. Shiv Dayal Agarwal v. Sidhartha Polyster Pvt. Ltd., (1997) 88 Comp. Cas. 705 (CLB); Remanika Silks Pvt. Ltd. v. J.C.
Augustine, (2000) 100 Comp. Cas. 464 (CLB); Sashi Prakash Khemka v. NEPC Micon Ltd., (1999) 95 Comp. Cas. 583
(CLB); Naveen Kumar v. Karnataka Theatres Ltd., (1998) 93 Comp. Cas. 443 (Kar.); Citi Bank NA v. Power Grid
Corporation of India Ltd., (1995) 83 Comp. Cas. 454 (CLB). See detailed Comments under Section 111 and 111A.
74. Gulzari Lal Bhargava v. Official Receiver-cum-Official Liquidator, (1972) 42 Comp. Cas. 401 (Delhi). See also
75. Collector, Land Acquisition v. Mst. Katiji, (1987) 62 Comp. Cas. 370 (SC) : AIR 1987 SC 1353 [LNIND 1987 SC 899].
76. Union of India v. Visveswaraya Iron and Steel Ltd., (1987) 62 Comp. Cas. 427 (SC).
77. Union of India v. British India Corporation Ltd.,(2004) 268 ITR 481 (SC).
78. T.H. Knittware (Wholesale) Ltd., Re,(1988) 1 All ER 860 (CA).
79. Upendra Kumar Joshi v. Kesoram Industries and Cotton Mills Ltd., (1983) 54 Comp. Cas. 1 (Pat.) (FB); Upendra Kumar
Joshi v. New Victoria Mills Co. Ltd., (1986) 59 Comp. Cas. 798 (Pat.) (FB). Jurisdiction of Court under Section 155 [
now sections 111 and 111A] has been vested in the CLB [ now the Tribunal]. See detailed Comments under Section
111 and 111A. See also Binding force of decisions of Benches of the Jurisdictional High Court hereinafter.
80. Bhenoy G. Dembla v. Prem Kutir P. Ltd., (2003) 117 Comp. Cas. 643 (Bom.) (DB).
81. Maharashtra Power Development Corporation Ltd. v. Dabhol Power Co., (2003) 117 Comp. Cas. 651 (Bom.) (DB).
82. State Bank of India v. State Bank of India Employees’ Union, (1988) 63 Comp. Cas. 260 (SC).
83. Vasudeo Vishwanath Saraf v. New Education Institute, (1986) 60 Comp. Cas. 943 (SC).
86. Ashoka Alloy Steel Ltd. v. Central Bank of India, (2004) 122 Comp. Cas. 777 (HP) (DB).
87. VST Industries Ltd. v. VST Ind. Workers’ Union,(2001) 1 SCC 298 [LNIND 2000 SC 1796] : (2000) 8 Supreme 342.
88. L. Chandra Kumar v. UOI,(1997) 228 ITR 725(SC). For jurisdiction of the National Company Law Tribunal (NCLT) and
Appellate Tribunal constituted under Sections 10FB and 10FR of the Companies Act, 1956 inserted by the Companies
(Second Amendment) Act, 2002 (11 of 2003) (w.e.f. date to be notified)see detailed Comments under Section 10FB to
10GF.
90. Federal Bank Ltd. v. Shamrao Vithal Co-operative Bank Ltd., (2001) 106 Comp. Cas. 419 (Kar.).
91. Haryana Financial Corporation v. Jagadamba Oil Mills, (2002) 110 Comp. Cas. 20 (SC).
92. Ms. Githa Hariharan v. RBI, (1999) 95 Comp. Cas. 913 (SC) : (1999) 236 ITR 380 (SC); K.P. Varghese v. ITO,AIR
1981 SC 1922 [LNIND 1981 SC 373]: (1981) 131 ITR 597 [LNIND 1981 SC 373] (SC) : (1982) 1 SCR 629 [LNIND
1981 SC 373];R.K. Garg v. Union of India,AIR 1981 SC 2138 [LNIND 1981 SC 434]: (1982) 133 ITR 239 [LNIND 1981
SC 434] (SC); Shashikant Laxman Kale v. UOI,(1990) 185 ITR 104 [LNIND 1990 SC 362] (SC) : (1990) 86 CTR (SC)
201.
93. CWT v. Hashmatunnisa Begum,(1989) 176 ITR 98 (SC) : (1989) 75 CTR (SC) 194.
94. R.D. Saxena v. Balram Prasad Sharma, (2001) 105 Comp. Cas. 83 (SC).
95. British Racing Drivers’ Club Ltd. v. Hesstall Erskine & Co.,(1997) 1 BCLC 162.
(2003) 113 Comp. Cas. 1 (SC). See also Comments under Sections 2(12), 2(46), 55A, 69 and 81.
99. S.J.SD. Chhatwal v. Pushpa Builders Ltd., (1999) 95 Comp. Cas. 128 (Delhi).
1. Tapoban Housing Finance Ltd. v. R. Udaya Kumar, (1999) 98 Comp. Cas. 549 (Kar.).
Page 67 of 72
2. Director-General v. IOFIC Leasing Ltd., (1991) 70 Comp. Cas. 62 (MRTPC).

* See the Competition Act, 2002 (12 of 2003) in Appendix 324.
** Published in the Gazette of India, Extraordinary, No. 11, Part II, Section 2, dated 9-3-2006 : (2006) 131 Comp. Cas.
(St.) 289.
548 [LNIND 1989 SC 328] (SC); M.A. Murthy v. State of Karnataka,(2003) 264 ITR 1 (SC); Milkfood Ltd. v. GMC Ice
Cream P. Ltd., (2004) 121 Comp. Cas. 581 (SC). See detailed Comments hereinafter under Binding force of Supreme
Court decisions and Supreme Court when can reconsider, review, overrule or overturn its own decisions and principle
of stare decisis when can be departed from.
172 [LNIND 1984 SC 367] (SC) : 1985 (19) ELT 22 [LNIND 1984 SC 367] (SC); Cassell & Co. Ltd. v. Broome,(1972)
AC 1027 (HL) : (1972) 1 All ER 801 (HL) : (1972) 2 WLR 645 (HL). See Per incuriam rule in later paragraphs.
7. CWT v. Aluminium Corporation of India Ltd.,(1972) 85 ITR 167 (SC) : (1972) 1 SCR 484 [LNIND 1971 SC 424]; J.P.
Srivastava and Sons (Rampur) Pvt. Ltd. v. Gwalior Sugar Co. Ltd., (2004), (2004) 121 Comp. Cas. 167 (SC).
8. Shenoy & Co. v. CTO,AIR 1985 SC 621 [LNIND 1985 SC 391]: (1985) 155 ITR 178 (SC); Makhanlal Waza v. State of
J&K,AIR 1971 SC 2206 [LNIND 1971 SC 140]: (1971) 3 SCR 832 [LNIND 1971 SC 140].
9. ICICI Ltd. v. Dhanesh D. Ruparelia, (2000) 99 Comp. Cas. 181 (Bom.); Osborne v. Rowlett, (1880) 13 Ch.D 774;
Scruttons Ltd. v. Midland Silicones Ltd.,(1962) AC 446 (HL) : (1962) 1 All ER 1 (HL).
10. CIT v. Sun Engineering Works P. Ltd.,(1992) 198 ITR 297 (SC) : AIR 1993 SC 43; Madhav Rao Jivaji Rao Scindia
Bahadur v. UOI,AIR 1971 SC 530 [LNIND 1970 SC 481]: (1971) 3 SCR 9 [LNIND 1970 SC 481]; Pennar Paterson Ltd.
v. State Bank of Hyderabad, (2001) 106 Comp. Cas. 338 (AP) (DB).
11. Haryana Financial Corporation v. Jagadamba Oil Mills, (2002) 110 Comp. Cas. 20 (SC); Smith Kline and French (India)
Ltd. v. CIT,(1996) 219 ITR 581 (SC); Padmasundara Rao v. State of Tamil Nadu,(2002) 255 ITR 147 [LNIND 2002 SC
201] (SC); Herrington v. British Railways Board,(1972) 2 WLR 537 (HL).
12. CWT v. Dr. Karan Singh,(1993) 200 ITR 614 (SC).
13. CIT v. Vazir Sultan & Sons,AIR 1959 SC 814 [LNIND 1959 SC 33]: (1959) 36 ITR 175 [LNIND 1959 SC 33] (SC) :
(1959) Supp. 2 SCR 375; State of Maharashtra v. Official Liquidator, (2004) 120 Comp. Cas. 648 (Bom.).
14. Addl. District Magistrate v. Shivakant Shukla,AIR 1976 SC 1207 [LNIND 1976 SC 196]: 1976 Suppl. SCR 172.
15. R. v. Warner, (1661) 1 Keb. 66; Hindustan Machine Tools Ltd. (No. 3) v. CIT,(1989) 175 ITR 220 (Kar.). As explained
below even sub silentio decisions of the Supreme Court are binding.
17. Smt. Somawanti v. State of Punjab, (1963) 33 Comp. Cas. 745 (SC) : AIR 1963 SC 151 [LNIND 1962 SC 209]; T.
Govindaraja Mudaliar v. State of Tamil Nadu,AIR 1973 SC 974 [LNIND 1973 SC 3]; Ballabhdas Mathuradas Lakhani v.
Municipal Committee,AIR 1970 SC 1002.
18. Hindustan Machine Tools Ltd. (No. 3) v. CIT,(1989) 175 ITR 220 (Kar.).
19. Suganthi Suresh Kumar v. Jagdeeshan, (2002) 110 Comp. Cas. 133 (SC); Anil Kumar Neotia v. Union of India,AIR
1988 SC 1353 [LNIND 1988 SC 254].
20. Punjab Land Development and Reclamation Corpn. Ltd. v. Presiding Officer, Labour Court,(1990) 77 FJR 17 (SC). See
also Binding force of Jurisdictional High Court decisions later.
21. Mamleshwar Prasad v. Kanahaiya Lal,AIR 1975 SC 907 [LNIND 1975 SC 94]: (1975) 3 SCR 834 [LNIND 1975 SC 94].
ER 708 (CA); Johnson v. Agnew, (1978) Ch. 176. See detailed Comments under Per incuriam decision of Jurisdictional
High Court hereinafter.
172 [LNIND 1984 SC 367] (SC) : (1985 (19) ELT 22 [LNIND 1984 SC 367] (SC); Cassell & Co. Ltd. v. Broome,(1972)
AC 1027 (HL) : (1972) 1 All ER 801 (HL) : (1972) 2 WLR 645 (HL). For fuller discussion see Supreme Court decisions
absolutely binding in earlier paragraphs.
24. Ballabhdas Mathuradas Lakhani v. Municipal Committee,AIR 1970 SC 1002.
Page 68 of 72
548 [LNIND 1989 SC 328] (SC). See fuller discussion later under Supreme Court when can reconsider, review,
overrule or overturn its own decisions and principle of stare decisis when can be departed from.
26. Jindal Vijayanagar Steel (JSW Steel Ltd.) v. Jindal Praxair Oxygen Co. Ltd., (2006) 134 Comp. Cas. 119 (SC)
27. Mattulal v. Radhe Lal,AIR 1974 SC 1596 [LNIND 1974 SC 161]: (1975) 1 SCR 127 [LNIND 1974 SC 161].
28. UOI v. K.S. Subramanian,AIR 1976 SC 2433 [LNIND 1976 SC 242]; State of U.P. v. Ram Chandra Trivedi,AIR 1976
SC 2547 [LNIND 1976 SC 307]; Dainik Finance and Chit Fund Co. P. Ltd. v. Agricultural Industries, (1986) 60 Comp.
Cas. 180 (P&H); CIT v. Trilok Nath Mehrotra,(1998) 231 ITR 278 (SC).
29. Distributors (Baroda) P. Ltd. v. UOI,AIR 1985 SC 1585 [LNIND 1985 SC 207]: (1985) 155 ITR 120 [LNIND 1985 SC
207] (SC); UOI v. Raghubir Singh, (1989) 66 Comp. Cas. 466 (SC) : AIR 1989 SC 1933 [LNIND 1989 SC 328]: (1989)
178 ITR 548 [LNIND 1989 SC 328] (SC). See fuller discussion under Supreme Court when can overrule its decisions
hereinafter.
548 [LNIND 1989 SC 328] (SC); Kalyan Municipal Council v. Usha Paper Products (P.) Ltd.,(1990) 184 ITR 80 (SC).
31. Jossy Kondody v. Chacko Thomas, (2002) 109 Comp. Cas. 689 (Ker.). See also discussion under decisions of different
Benches of the jurisdictional High Court in later paragraphs.
32. Bharat Petroleum Corpn. Ltd. v. Mumbai Shramik Sangha,(2001) 249 ITR 669 (SC).
33. Pradip Chandra Parija v. Pramod Chandra Patnaik, (2002) 111 Comp. Cas. 299 (SC) : (2002) 254 ITR 99 (SC); Ujagar
Prints v. UOI, (1987) 62 Comp. Cas. 548 (SC) : AIR 1987 SC 874 [LNIND 1988 SC 548]: (1987) 167 ITR 904 (SC) :
1987 (27) ELT 567 (SC).
548 [LNIND 1989 SC 328] (SC); Bengal Immunity Co. Ltd. v. State of Bihar,AIR 1955 SC 661 [LNIND 1955 SC 122]:
(1955) 2 SCR 603 [LNIND 1955 SC 122]; Keshav Mills Co. Ltd. v. CIT,AIR 1965 SC 1636 [LNIND 1965 SC 28]: (1965)
56 ITR 365 [LNIND 1965 SC 28] (SC) : (1965) 2 SCR 908 [LNIND 1965 SC 28];Girdhari Lal Gupta v. D.N. Mehta,AIR
1971 SC 2162 : (1971) 3 SCR 748; Pillani Investment Corpn. Ltd. v. ITO,AIR 1972 SC 236 [LNIND 1971 SC 589]:
(1972) 83 ITR 217 (SC) : (1972) 2 SCR 502 [LNIND 1971 SC 589].
35. Special Courts Bill, 1978, In re,AIR 1979 SC 478 [LNIND 1978 SC 661]: (1979) 2 SCR 476 [LNIND 1978 SC 661].
172 [LNIND 1984 SC 367] (SC) : 1985 (19) ELT 22 [LNIND 1984 SC 367] (SC). See detailed Comments hereinbefore.
37. CED v. Pratap Singhji Ramsinghji,(1987) 167 ITR 210 (SC); Mundrika Prasad Sinha v. State of Bihar,AIR 1979 SC
1871 [LNIND 1979 SC 383]: (1980) 1 SCR 759 [LNIND 1979 SC 383]; Central Bank of India Ltd. v. Workmen, (1959)
38. Dove Investments Pvt. Ltd. v. Gujarat Industrial Inv. Corporation, (2006) 129 Comp. Cas. 929 (SC).
Daryao v. State of U.P.,AIR 1961 SC 1457 [LNIND 1961 SC 133]: (1962) 1 SCR 574 [LNIND 1961 SC 133]; CIT v.
Shree Manjunathesware Packing Products and Camphor Works,(1998) 231 ITR 53 (SC); Hemalatha Gargya v.
CIT,(2003) 259 ITR 1 (SC). See also Binding force of Jurisdictional High Court decision later.
262]: (1987) 167 ITR 897 (SC); Workmen v. Board of Trustees of Cochin Port Trust,AIR 1978 SC 1283 [LNIND 1978
SC 158]: (1978) 53 FJR 80 (SC); Ahmedabad Mfg. and Calico Printing Co. Ltd. v. Workmen,AIR 1981 SC 960 [LNIND
1981 SC 149]: (1981) 58 FJR 294 (SC); S. Shanmugavel Nadar v. State of Tamil Nadu,(2003) 263 ITR 658 (SC).
41. Kalpetta Estates Ltd. v. CIT,(1996) 221 ITR 601 (SC) : (1996) 87 Taxman 281 (SC)
42. Kunhayammed v. State of Kerala,(2000) 245 ITR 360 [LNIND 2000 SC 933] (SC).
also Comments u/ s. 10 GF.
45. Indian Bank v. ABS Marine Products Pvt. Ltd., (2006) 131 Comp. Cas. 339 (SC).
529 and 529A.
47. Mohanlal Maganlal v. State of Gujarat,AIR 1968 SC 733 [LNIND 1967 SC 376]; Manharlal Manilal Shah v. Official
Liquidator, (1969) 39 Comp. Cas. 641 (Guj.) (DB).
Page 69 of 72
49. CIT v. Kalinga Tubes Ltd,(1996) 218 ITR 164 (SC) : (1996) 84 Taxman 435 (SC).
50. D.V. Bapat, ITO v. Tata Iron & Steel Co. Ltd,(1986) 159 ITR 938 (SC).
52. CED v. Murarilal Sovasaria,(1989) 179 ITR 380 (Gauhati) : (1989) 80 CTR (Gau.) 250;. A.C. Estates. v. Serajuddin &
Co.,AIR 1966 SC 935 [LNIND 1965 SC 165].
54. Sutlej Cotton Mills Ltd. v. CIT, S.L.P. (Civil) No. 8969 of 1982 : (1984) 150 ITR (St.) 79 (SC)
55. Devi Cine Projector Mfg. Co. v. CIT,(1990) 183 ITR 19 (SC) : (1990) 82 CTR (SC) 142.
56. CIT v. Hindustan Gum and Chemicals Ltd.,(1990) 182 ITR 396 [LNIND 1989 CAL 324] (Cal.).
57. Jai Kaur v. Sher Singh,AIR 1960 SC 1118 [LNIND 1960 SC 435].
59. CIT v. Swami & Co. P. Ltd,(1991) 188 ITR 325 (SC) : (1991) 94 CTR (SC) 218.
60. M.A. Murthy v. State of Karnataka,(2003) 264 ITR 1 (SC); India Cement Ltd. v. State of Tamil Nadu,(1991) 188 ITR 690
(SC) : AIR 1990 SC 85 [LNIND 1989 SC 686].
61. ITAT v. V.K. Agarwal,(1999) 235 ITR 175 [LNIND 1998 SC 1026] (SC).
62. Shenoy & Co. v. CTO,AIR 1985 SC 621 [LNIND 1985 SC 391]: (1985) 155 ITR 178 (SC).
64. B. Shama Rao v. Union Territory of Pondicherry,AIR 1967 SC 1480 [LNIND 1967 SC 39]: (1967) 20 STC 215 (SC);
Deep Chand v. State of U.P.,AIR 1959 SC 648 [LNIND 1959 SC 3]; Sundararamier & Co. v. State of A.P.,AIR 1958 SC
468 [LNIND 1958 SC 20]: (1958) 9 STC 298 (SC); Behram Khurshed Pesikaka v. State of Bombay,AIR 1955 SC 123
[LNIND 1954 SC 116]: (1955) 1 SCR 613 [LNIND 1954 SC 116];Sumatilal Chimanlal Shah v. CED,(1982) 138 ITR 143
(Guj.).
65. Shri Prithvi Cotton Mills Ltd. v. Broach Borough Municipality,(1971) 79 ITR 136 [LNIND 1969 SC 188] (SC) : AIR 1970
SC 192 [LNIND 1969 SC 188].
66. Taurian Tubes v. CIT,(1987) 166 ITR 629 (Pat.) : (1987) 62 CTR (Pat.) 159.
67. Dwarkadas Shrinivas v. Sholapur Spg. and Wvg. Co. Ltd., (1954) 24 Comp. Cas. 103 (SC) : AIR 1954 SC 119 [LNIND
1953 SC 124]: 1954 SCR 674 [LNIND 1953 SC 124].
68. CIT v. Smt. Asrafi Devi Rajgharia,(1983) 142 ITR 380 (Cal.).
69. Salzgitter Industrie Bau Gmbh v. CIT,(1990) 184 ITR 7 (Bom.).
70. East India Commercial Co. Ltd. v. Collector of Customs,AIR 1962 SC 1893 [LNIND 1962 SC 228]: 1983 ELT 1342
(SC) : (1963) 3 SCR 338 [LNIND 1962 SC 228]; M. Padmanabha Setty v. K.P. Papiah Setty,AIR 1966 SC 1824
[LNIND 1966 SC 82]; Smt. Kausalya Devi Bogra v. Land Acquisition Officer,AIR 1984 SC 892 [LNIND 1984 SC 371];
Bishnu Ram Borah v. Parag Saikia,AIR 1984 SC 898 [LNIND 1983 SC 337].
71. State of A.P. v. CTO, (1988) 63 Comp. Cas. 273 (AP) : (1988) 169 ITR 564 [LNIND 1987 AP 190] (AP); Nicco Corpn.
Ltd. v. CIT,(2001) 251 ITR 791 (Cal.); UOI v. Kamlakshi Finance Corpn. Ltd.,AIR 1992 SC 711. See Comments on
Dismissal of Special Leave Petition (SLP) by Supreme Court earlier.
72. Koduru Venkata Reddy v. Land Acquisition Officer, (1988) 63 Comp. Cas. 376 (AP) : (1988) 170 ITR 15 (AP) : (1987)
67 STC 424 (AP).
73. Sundarjas Kanyalal Bhatija v. Collector, (1990) 68 Comp. Cas. 20 (SC) : AIR 1991 SC 261 : (1990) 183 ITR 130 (SC).
74. Asst. CED v. V. Devaki Ammal,(1995) 212 ITR 395 (SC) : (1995) 125 CTR (SC) 134.
75. Kanmula Seshamma v. Bharat Petroleum Corpn. Ltd.,(1991) 187 ITR 326 (AP) (FB); State of H.P. v. Smt. Shanta Devi,
(1989) 66 Comp. Cas. 845 (HP) (FB); C. Mackertich Ltd. v. Custodian, (2002) 108 Comp. Cas. 811 (Cal.).
76. Ashok Organics Industries Ltd. v. Dena Bank, (2007) 135 Comp. Cas. 203 (Bom.).
ER 708 (CA); Johnson v. Agnew, (1978) Ch. 176; Williams v. Faweett,(1986) QB 604 : (1985) 1 All ER 787 (CA); Duke
v. Reliance Systems Ltd,(1988) QB 108 : (1987) 2 All ER 858 (CA); Rakhit v. Carty,(1990) 2 All ER 202 : (1990) 2 WLR
1107.
78. Baradakanta Mishra v. Bhimsen Dixit,AIR 1972 SC 2466 [LNIND 1972 SC 471].
Page 70 of 72
79. Hoshiar Singh v. Gurbachan Singh,AIR 1962 SC 1089 [LNIND 1962 SC 63]: (1962) Suppl. 3 SCR 127; Aligarh
Municipal Board v. Ekka Tonga Mazdoor Union,AIR 1970 SC 1767; Dibakar Satpathy v. Hon'ble the Chief Justice and
his Companion Justices of the Orissa High Court,AIR 1961 SC 1315 [LNIND 1961 SC 106]: (1962) 1 SCR 326 [LNIND
1961 SC 106]; High Court v. S.K. Mathur, CIT,(1975) 101 ITR 180 [LNIND 1975 PNH 54] (P&H); V. Chidambaram v. D.
Venkatesan Assistant Director of Inspection (Intelligence),(1987) 167 ITR 443 [LNIND 1986 MAD 310] (Mad.) : (1987)
66 CTR (Mad.) 252. See also Dy. Director of Inspection (Intelligence) v. Vinod Kumar Didwania,(1986) 160 ITR 969
(SC) : (1986) 58 CTR (SC) 199.
80. Oriental Machinery and Civil Construction Ltd. v. Vikrant Tyres Ltd., (1985) 57 Comp. Cas. 639 (Kar.); Cotton
Corporation of India Ltd. v. United Industrial Bank Ltd., (1984) 55 Comp. Cas. 423 (SC) : AIR 1983 SC 1272 [LNIND
1983 SC 258].
81. Empire Industries Ltd. v. Union of India,AIR 1986 SC 662 [LNIND 1985 SC 176]: (1986) 162 ITR 846 [LNIND 1985 SC
176] (SC) : (1985) Suppl. 1 SCR 292 : 1985 (20) ELT 179 [LNIND 1985 SC 176] (SC); ACCE v. Dunlop India Ltd.,
(1985) 58 Comp. Cas. 145 (SC) : AIR 1985 SC 330 [LNIND 1984 SC 367]: (1985) 154 ITR 172 [LNIND 1984 SC 367]
(SC) : 1985 (19) ELT 22 [LNIND 1984 SC 367] (SC); Siliguri Municipality v. Amalendu Das, (1984) 55 Comp. Cas. 506
(SC) : AIR 1984 SC 653 [LNIND 1984 SC 9].
82. Federal Bank Ltd. v. Shamrao Vithal Co-op. Bank Ltd., (2001) 106 Comp. Cas. 419 (Kar.).
83. Valliama Champaka Pillai v. Sivathanu Pillai,AIR 1979 SC 1937 [LNIND 1979 SC 345]; Geoffrey Manners & Co. Ltd. v.
CIT,(1996) 221 ITR 695 (Bom.); CIT v. Thana Electricity Supply Ltd.,(1994) 206 ITR 727 (Bom.); Patil Vijaykumar v.
Union of India,(1985) 151 ITR 48 (Kar.). Binding force of Supreme Court and jurisdictional High Court decisions has
already been explained hereinbefore.
84. Goculdas Dossa & Co. v. J.P. Shah, ITO,(1995) 211 ITR 706 [LNIND 1994 BOM 239] (Bom.) (FB); Peirce Leslie & Co.
v. CIT,(1995) 216 ITR 176 [LNIND 1995 MAD 178] (Mad.); R.A. Varma, Asst. CIT v. Laxmi Induction,(1995) 216 ITR
555 (Guj.). Meaning of sub silentio, per incuriam, obiter dicta, etc., has already been enunciated under Doctrine of
Precedent or Stare decisis, Binding force of Supreme Court decisions and Binding force of jurisdictional High Court
decisions hereinbefore.
85. T.I. George v. New Bank of India, (2002) 108 Comp. Cas. 277 (Ker.).
1975 SC 403]; Kilpest P. Ltd. v. Shekhar Mehra, (1996) 87 Comp. Cas. 615 (SC); Cotton Corporation of India Ltd v.
United Industrial Bank Ltd., (1984) 55 Comp. Cas. 423 (SC) : AIR 1983 SC 1272 [LNIND 1983 SC 258]; National
Textile Workers’ Union v. P.R. Ramakrishnan, (1983) 53 Comp. Cas. 184 (SC) : AIR 1983 SC 75; Madanlal Fakirchand
Dudhediya v. Sri Changdeo Sugar Mills Ltd., (1962) 32 Comp. Cas. 604 (SC) : AIR 1962 SC 1543 [LNIND 1962 SC
125]: (1962) Supp. 3 SCR 973; State of West Benga v. B.K. Mondal,AIR 1962 SC 779 [LNIND 1961 SC 377]: (1962)
Supp. 1 SCR 876; Forasol v. Oil and Natural Gas Commission, (1986) 60 Comp. Cas. 286 (SC) : AIR 1984 SC 241
[LNIND 1983 SC 313]: (1984) 1 SCR 526 [LNIND 1983 SC 313]; American Home Products Corporation v. Mac
Laboratories Pvt. Ltd.,AIR 1986 SC 137 [LNIND 1985 SC 317]: (1986) 1 SCC 465 [LNIND 1985 SC 317]; ICICI Ltd. v.
Parasrampuria Synthetics Ltd., (1998) 92 Comp. Cas. 238 (Delhi)See also Comments under Sections 34, 397, 398,
402, 433(f) and 443.
87. Suresh Chandra v. Bank of Calcutta, (1951) 21 Comp. Cas. 110 (Cal.) : 54 CWN 834.
88. Joseph Kuruvilla Vellukunnel v. Reserve Bank of India, (1962) 32 Comp. Cas. 514 (SC) : AIR 1962 SC 1371 [LNIND
1962 SC 109]: (1963) 1 Comp. LJ 56 (SC) : (1962) Supp. 3 SCR 632.
89. Maharashtra Power Development Corporation Ltd. v. Dabhol Power Co., (2003) 117 Comp. Cas. 506 (Bom.)affirmed in
(2004) 120 Comp. Cas. 560 (Bom.) (DB).
548 [LNIND 1989 SC 328] (SC). See detailed Comments under Binding force of Supreme Court decisions earlier.
91. CIT v. Ram Narain Hira Lal,(1997) 227 ITR 401 (All.).
791 (Cal.).
94. Paras Laminates (P.) v. CEGAT, (1990) 68 Comp. Cas. 72 (Delhi) : (1990) 183 ITR 167 (Delhi). See also Sundarjas
Kanyalal Bhatija v. Collector, (1990) 68 Comp. Cas. 20 (SC) : AIR 1991 SC 261 : (1990) 183 ITR 130 (SC) and other
decisions in earlier paragraphs on Binding force of Jurisdictional High Court decisions and Doctrine of Precedent or
Stare decisis.
95. Sayaji Iron and Engineering Co. v. CIT, (2002) 108 Comp. Cas. 675 (Guj.) (DB).
Page 71 of 72
1. Malleswara Finance and Investments Co. P. Ltd. v. Company Law Board, (1995) 82 Comp. Cas. 836 (Mad.) (DB);
Micromeritics Engineers Pvt. Ltd. v. S. Munusamy, (2004) 122 Comp. Cas. 150 (Mad.) (DB); Mohd. Jafar v. Nahar
Industrial Enterprises Ltd., (1998) 93 Comp. Cas. 717 (Delhi); CIT v. Scindia Steam Navigation Co. Ltd.,(1961) 42 ITR
589 [LNIND 1961 SC 159] (SC) : AIR 1961 SC 1633 [LNIND 1961 SC 159]. See detailed Comments under Sections
10F, 10FB and 10GF.
3. Sadichha Chitra v. CIT,(1991) 189 ITR 774 (Bom.); S. Ranganatha Rao v. Accountant-General,(1981) 129 ITR 130
(Kar.).
SC 2838] (SC); Commissioner of Customs v. Indian Oil Corporation Ltd.,(2004) 267 ITR 272 (SC).
5. Director-General v. Holy Angels School, (1998) 93 Comp. Cas. 454 (MRTPC) (FB). See also East India Commercial
Co. Ltd v. Collector of Customs,AIR 1962 SC 1893 [LNIND 1962 SC 228]: (1963) 3 SCR 338 [LNIND 1962 SC 228];L.
Chandra Kumar v. UOI,(1997) 228 ITR 725 (SC) dealt with in earlier paragraphs under Binding force of jurisdictional
High Court decisions and Writs.
6. Satyadhyan Ghosal v. Smt. Deorajin Debi,AIR 1960 SC 941 [LNIND 1960 SC 129]; Daryao v. State v. State of
U.P.,AIR 1961 SC 1457 [LNIND 1961 SC 133]: (1962) 1 SCR 574 [LNIND 1961 SC 133]; Workmen v. Board of
Trustees of Cochin Port Trust,AIR 1978 SC 1283 [LNIND 1978 SC 158]: (1978) 53 FJR 80 (SC); S. Balwant Singh v.
Krishna Bus Service Pvt. Ltd., (1967) 37 Comp. Cas. 471 (C.T.).
7. Syed Mohd. Salie Labbai v. Mohd. Hanifa,AIR 1976 SC 1569 [LNIND 1976 SC 115]: (1976) 3 SCR 721 [LNIND 1976
SC 115].
8. T.L. Arora v. Ganga Ram Agarwal (No. 4), (1988) 63 Comp. Cas. 871 (Delhi). See also Comments under Sections 408
and 409.
262]: (1987) 167 ITR 897 (SC). See detailed Comments under Dismissal of Special Leave Petition by Supreme Court
hereinbefore.
10. Kalpetta Estates Ltd. v. CIT,(1996) 221 ITR 601 (SC) : (1996) 87 Taxman 281 (SC).
11. Daryao v. State of U.P.,AIR 1961 SC 1457 [LNIND 1961 SC 133]: (1962) 1 SCR 574 [LNIND 1961 SC 133];
Virudhunagar Steel Rolling Mills Ltd. v. Government of Madras, (1968) 38 Comp. Cas. 928 (SC) : AIR 1968 SC 1196
[LNIND 1968 SC 4]: (1968) 70 ITR 726 (SC).
12. M.M. Ipoh v. CIT,(1968) 67 ITR 106 [LNIND 1967 SC 214] (SC) : AIR 1968 SC 317 [LNIND 1967 SC 214]: (1968) 1
SCR 65 [LNIND 1967 SC 214].
13. Union of India v. Godfrey Philips India Ltd., (1986) 59 Comp. Cas. 526 (SC) : AIR 1986 SC 806 [LNIND 1985 SC 311]:
(1986) 158 ITR 574 [LNIND 1985 SC 311] (SC); State of Punjab v. Nestle India Ltd.,(2004) 269 ITR 97 (SC).
336]. See detailed Comments under Sections 208 and 211.
15. Kiran Singh v. Chaman Paswa,AIR 1954 SC 340 [LNIND 1954 SC 67]: (1955) 1 SCR 117 [LNIND 1954 SC 67]; Smt.
Arati Dutta v. Eastern Tea Estate (P.) Ltd, (1988) 64 Comp. Cas. 313 (SC). Also see K.P. Antony v. Thandiyode
Plantations P. Ltd., (1996) 86 Comp. Cas. 684 (Ker.) (FB). See also Comments under Sections 10F, 10FQ, 10GF, 111
and 938.
16. CIT v. Ashoka Engineering Co.,(1992) 194 ITR 645 (SC) : (1993) 109 CTR (SC) 491.
17. Hukumchand Mills Ltd. v. State of M.P.,AIR 1964 SC 1329 [LNIND 1964 SC 46]: (1964) 52 ITR 583 [LNIND 1964 SC
46] (SC).
18. T.A.K. Mohideen Pichai Taraganar v. Tinnevelly Mills Co. Ltd.,AIR 1928 Mad. 571 [LNIND 1927 MAD 394](DB).
19. CIT v. Dhadi Sahu,(1993) 199 ITR 610 (SC) : (1992) 108 CTR (SC) 444.
20. Union of India v. Raghubir Singh, (1989) 66 Comp. Cas. 466 (SC) : AIR 1989 SC 1933 [LNIND 1989 SC 328]: (1989)
178 ITR 548 [LNIND 1989 SC 328] (SC).
21. M.K. Venkatachalam, ITO v. Bombay Dyeing and Manufacturing Co. Ltd.,AIR 1958 SC 875 [LNIND 1958 SC 66]:
(1958) 34 ITR 143 [LNIND 1958 SC 66] (SC).
23. R. Rajagopal Reddy v. Padmini Chandrasekharan,(1995) 213 ITR 340 (SC); Govinddas v. ITO,AIR 1977 SC 552
[LNIND 1975 SC 666]: (1976) 103 ITR 123 [LNIND 1975 SC 666] (SC); Athlumney, Re,(1898) 2 QB 547.
24. CWT v. Sharvan Kumar Swarup and Sons,(1994) 210 ITR 886 [LNIND 1994 SC 1444] (SC).
Page 72 of 72
25. Anant Gopal Sheorey v. State of Bombay,AIR 1958 SC 915 [LNIND 1958 SC 80]: 1959 SCR 919 [LNIND 1958 SC 80].
26. Nani Gopal Mitra v. State of Bihar,AIR 1970 SC 1636 [LNIND 1968 SC 309].
27. CIT v. Podar Cement Pvt. Ltd.,(1997) 226 ITR 625 (SC); Channan Singh v. Jai Kaur,AIR 1970 SC 349 [LNIND 1969
SC 257]; State of M.P. v. Rameshwar Rathod,AIR 1990 SC 1849 [LNIND 1990 SC 318]; Central Bank of India v.
Workmen, (1959) 29 Comp. Cas. 367 (SC) : AIR 1960 SC 12 [LNIND 1959 SC 113].
28. R. Rajagopal Reddy v. Padmini Chandrasekharan,(1995) 213 ITR 340 (SC).
29. Ujagar Prints v. UOI,AIR 1989 SC 516 [LNIND 1988 SC 548]: (1989) 179 ITR 317 [LNIND 1988 SC 548] (SC) : 1989
(39) ELT 493 (SC).
End of Document
Datta: Company Law
C R Datta
S. 10A. [Constitution of Tribunal.]

Repealed by the Companies Tribunal (Abolition) Act, 1967 (17 of 1967), s. 4and Sch. (w.e.f. 1-7-1967).*
* Sections 10A to 10D omitted by the Companies Tribunal (Abolition) Act, 1967 (17 of 1967), s. 4 and Sch. (w.e.f. 1-7-
1967). Earlier sections 10A to 10D were inserted by the Companies (Amendment) Act, 1963 (53 of 1963), s. 3 (w.e.f. 1-
1-1964). For sections 10A to 10D as they stood prior to their omission see Annexure at the end of this Volume.
End of Document
Datta: Company Law
C R Datta
S. 10B. [Procedure of Tribunal.]

Repealed by the Companies Tribunal (Abolition) Act, 1967 (17 of 1967), s. 4 and Sch. (w.e.f. 1-7-1967).*
End of Document
Datta: Company Law
C R Datta
S. 10C. [Powers of Tribunal.]

Repealed by the Companies Tribunal (Abolition) Act, 1967 (17 of 1967), s. 4and Sch. (w.e.f. 1-7-1967).*
End of Document
Datta: Company Law
C R Datta
S. 10D. [Appeals against decisions, etc., of the Tribunal.]

Repealed by the Companies Tribunal (Abolition) Act, 1967 (17 of 1967), s. 4 and Sch. (w.e.f. 1-7-1967).*
COMMENTS
Legislative History.— The Companies Tribunal (Abolition) Act, 1967 (17 of 1967).— See the Statement of Objects
and Reasons appended to the Companies Tribunal (Abolition) Bill, 1967 (7 of 1967) in Comments under Section 1.
Now the (NCLT)National Company Law Tribunalhas been re-introduced and will be set up under Section 10FB of
the Companies Act, 1956, as inserted by the Companies (Second Amendment) Act, 2002. The CLB shall stand
dissolved.
See detailed Comments under Sections 10E, Sections 10FA and Sections 10FB to 10GF.
End of Document
Datta: Company Law
C R Datta
Datta: Company Law > Datta: Company Law > Volume 1 > PART IA BOARD OF COMPANY
LAW ADMINISTRATION
S. 10E. Constitution of Board of Company Law Administration.

—
2[(1) As soon as may be after the commencement of the Companies (Amendment) Act, 1988 (31 of
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 3[
conferred on it before the commencement of the Companies (Second Amendment) Act, 2002 (11 of
2003)], 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 3[ conferred on it
before the commencement of the Companies (Second Amendment) Act, 2002 (11 of 2003)] by the
Central Government, by notification in the Official Gazette under the provisions of this Act or that other
law.]
(2) The Company Law Board shall consist of such number of members, not exceeding 4[nine], as the
Central Government deems fit, to be appointed by that Government by notification in the Official
Gazette:
5[Provided that the Central Government may, by notification in the Official Gazette, continue the
appointment of the chairman or any other member of the Company Law Board functioning as such
immediately before the commencement of the Companies (Amendment) Act, 1988, as the chairman or
any other member of the Company Law Board, after such commencement for such period not
exceeding three years as may be specified in the notification.]
6[(2A) The members of the Company Law Board shall possess such qualifications and experience as may
be prescribed.]
(3) One of the members shall be appointed by the Central Government to be the Chairman of the
Company Law Board.
(4) No act done by the Company Law Board shall be called in question on the ground only of any defect in
the constitution of, or the existence of any vacancy in, the Company Law Board.
7[(4A) * * * ]
8[(4B) 9[The Board] may, by order in writing, form one or more Benches from among its members and
authorise each such Bench to exercise and discharge such of the Board's powers and functions as
may be specified in the order; and every order made or act done by a Bench in exercise of such
powers or discharge of such functions shall be deemed to be the order or act, as the case may be, of
the Board.
(4C)Every Bench referred to in sub-section (4B) shall have powers which are vested in a Court under the
Code of Civil Procedure, 1908 (5 of 1908), while trying a suit, in respect of the following matters,
namely:—
(a) discovery and inspection of documents or other material objects producible as evidence;
(b) enforcing the attendance of witnesses and requiring the deposit of their expenses;
Page 2 of 22
(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 10[ Chapter XXVI
of the Code of Criminal Procedure, 1973 (2 of 1974), and every proceeding before the Bench shall be
deemed to be a judicial proceeding within the meaning of sections 193 and 228 of the Indian Penal
Code, 1860 (45 of 1860) and for the purpose of section 196 of that Code.]
11[(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.]]
2. Substituted by the Companies (Amendment) Act, 1988 (31 of 1988), s. 4 (w.e.f. 31-5-1991). For sub-section (1) as it
3. Substituted by the Companies (Second Amendment) Act, 2002 (11 of 2003), s. 3, for “conferred on it” [(w.e.f.)
date to be notified].
4. Subs. by the Companies (Amdt.) Act, 1974 (41 of 1974), s. 4, for “five” (w.e.f. 1-2-1975).
5. Proviso added by Act 31 of 1988, s. 4 (w.e.f. 31-5-1991).
7. Omitted by the Companies (Amendment) Act, 1988 (31 of 1988), s. 4 (w.e.f. 31-5-1991). For sub-section (4A), which
was inserted by Act 31 of 1965, s. 4 (w.e.f. 15-10-1965), as it stood prior to its omission see Annexure at the end of this
Volume.
8. Sub-sections (4B), (4C) and (4D) inserted by the Companies (Amendment) Act, 1974 (41 of 1974), s. 4 (w.e.f. 1-2-
1975).
9. Substituted by the Companies (Amendment) Act, 1988 (31 of 1988), s. 4 (w.e.f. 31-5-1991), for “Without prejudice to
the provisions of sub-section (4A), the Board, with the previous approval of the Central Government,”.
10. Substituted by the Companies (Amendment) Act, 1977 (46 of 1977), s. 2, for “Chapter XXXV of the Code of Criminal
Procedure, 1898 (5 of 1898) ” (w.e.f. 24-12-1977).
11. Substituted by Act 31 of 1988, s. 4 (w.e.f. 31-5-1991). For sub-sections (5) and (6) as they stood prior to their
12. Prakash Timbers P. Ltd. v. Smt. Sushma Shingla, (1997) 89 Comp. Cas. 770 (All.) (DB); RDF Power Projects Ltd. v. M.
Muralikrishna, (2005) 124 Comp. Cas. 184 (AP). See detailed Comments under Section 10—Jurisdiction of Courts. See
also Comments under Sections 10F, 10FA and 10FB-10GF.
13. RDF Power Protects Ltd. v. M. Muralikrishna, (2005) 124 Comp. Cas. 184 (AP).
* Powers and jurisdiction presently exercised by the Company Law Board (CLB) under Sections 111 and 111A have now
been transferred to and vested in the National Company Law Tribunal (NCLT) to be constituted under Section 10FB, as
inserted by the Companies (Second Amendment) Act, 2002 (11 of 2003). The CLB shall stand dissolved on the
constitution of Tribunal under Section 10FB. See detailed Comments under Sections 10FA and 10FB-10GF.
† Jurisdiction of the CLB has been transferred to and vested in the Tribunal (NCLT) by the Companies (Second
Amendment) Act, 2002 (11 of 2003). The CLB shall stand dissolved on the constitution of the Tribunal under Section
10FB. See Sections 10FA and 10FB-10GF.
** Powers of the Company Law Board (CLB) under Section 621A as substituted by the Companies (Second Amendment)
Act, 2002 (11 of 2003) have been transferred to and vested in the Central Government. See detailed Comments under
Section 621A.
†† See the Securities Contracts (Regulation) (42 of 1956) Act, 1956 in Appendix 221 and the Securities Contracts
(Regulation) (Appeal to Securities Appellate Tribunal) Rules, 2000 in Appendix 224.
Page 3 of 22
14. Kinetic Engineering Ltd. v. Unit Trust of India, (1995) 84 Comp. Cas. 910 (Bom.). See also Comments under Sections
10F and 111A.
* See the Company Law Board Regulations, 1991 in Appendix 5.
** See the Reserve Bank of India Act, 1934—Extracts from in Appendix 305.
15. Prudential Capital Markets Ltd. v. State of Andhra Pradesh, (2002) 108 Comp. Cas. 441 (AP); Whirlpool Corporation v.
Registrar of Trade Marks,AIR 1999 SC 22. See detailed Comments under Section 10—Jurisdiction of Courts.
† See the Competition Act, 2002 (12 of 2003) in Appendix 324.
16. Company Law Board v. Upper Doab Sugar Mills Ltd., (1977) 47 Comp. Cas. 173 (SC) : AIR 1977 SC 831 [LNIND 1976
SC 503]; Barium Chemicals Ltd. v. CLB, (1966) 36 Comp. Cas. 639 (SC) : AIR 1967 SC 295 [LNIND 1966 SC 132]:
(1966) Supp. SCR 311 : (1966) 2 Comp. LJ 151 (SC); New Central Jute Mills Co. Ltd. v. Deputy Secretary, Ministry of
Finance, (1970) 40 Comp. Cas. 102 (Cal.) (DB) : 73 CWN 557; Alak Prokash Jain v. UOI, (1973) 43 Comp. Cas. 68
(Cal.) (DB); Shri Krishna Tiles and Potteries (Madras) P. Ltd. v. CLB, (1979) 49 Comp. Cas. 409 (Delhi) (DB). See
detailed Comments under Sections 237, 388B-388E, 399, 637, 637A and 637AA.
17. V. Balachandran v. Union of India, (1993) 76 Comp. Cas. 67 (Mad.) (DB). See fuller discussion in Comments under
Section 10F.
* See the Company Law Board (Qualifications, Experience and other Conditions of Service of Members) Rules, 1993 in
Appendix 7.
† See the Company Law Board Regulations, 1991 in Appendix 5.
18. Anand Shrivastav v. Union of India, (2006) 129 Comp. Cas. 664 (Delhi); T.P.G. Nambiar v. BPL Communications Ltd.,
(2006) 129 Comp. Cas. 713 (CLB).
19. Prakash Timbers P. Ltd. v. Smt. Sushma Shingla, (1997) 89 Comp. Cas. 770 (All.) (DB). See fuller discussion in
Comments under Section 10F.
20. Smt. Nupur Mitra v. Basubani Pvt. Ltd.,(1999) 35 CLA 97 (Cal.) (DB) : (1999) 2 Cal. LJ 264; Khurshid Alam v. P.
Pagnon Co. Pvt. Ltd., (2002) 108 Comp. Cas. 523 (CLB); Tommy Mathew v. Duroflex Ltd., (2004) 122 Comp. Cas. 741
(CLB). See also Comments under Ss. 111 and 111A.
21. Karnataka Theatres Ltd. v. S. Venkatesan, (1998) 93 Comp. Cas. 433 (Kar.) : AIR 1996 Kar. 18. See also Comments
under Sections 111 and 111A.
22. Shiv Dayal Agarwal v. Sidhartha Polyster Pvt. Ltd., (1997) 88 Comp. Cas. 705 (CLB); Carbon Corporation Ltd. v.
Abhudaya Properties Pvt. Ltd., (1992) 73 Comp. Cas. 572 (CLB). See detailed Comments under Sections 111 and
111A.
23. Smt. Nupur Mitra v. Basubani Pvt. Ltd., (2002) 108 Comp. Cas. 359 (CLB); C. Mathew v. Cochin Stock Exchange Ltd.,
(1998) 91 Comp. Cas. 344 (CLB). See also Jagjit Rai Maini v. Punjab Machinery Works (P.) Ltd., (2001) 103 Comp.
Cas. 979 (P&H); Anil Gupta v. Delhi Cloth and General Mills Co. Ltd., (1983) 54 Comp. Cas. 301 (Delhi).
24. Union of India v. Kopran Ltd., (2006) 134 Comp. Cas. 665 (CLB).
25. Bombay Oil Industries P. Ltd. v. UOI, (1984) 55 Comp. Cas. 356 (SC) : AIR 1984 SC 160 [LNIND 1983 SC 334];
Gharib Ram Sharma v. Daulat Ram Kashyap, (1994) 80 Comp. Cas. 267 (Raj.). See detailed Comments under
Sections 10F and 10FZA.
26. Barium Chemicals Ltd. v. CLB, (1966) 36 Comp. Cas. 639 (SC) : AIR 1967 SC 295 [LNIND 1966 SC 132]: (1966)
Supp. SCR 311. See also Comments under Section 237.
CIT v. Mahindra & Mahindra Ltd., (1983) 54 Comp. Cas. 651 (SC) : AIR 1984 SC 1182 [LNIND 1983 SC 232]: (1983)
144 ITR 225 [LNIND 1983 SC 232] (SC) : (1983) 3 SCR 773 [LNIND 1983 SC 232]. See also Comments under Section
394.
† See the CLB (Fees on Applications and Petitions) Rules, 1991 in Appendix 6.
28. Rajinder Kumar Malhotra v. Harbanslal Malhotra and Sons Ltd., (1996) 87 Comp. Cas. 146 (CLB). See also Comments
under Sections 397 and 398.
29. Sri Ramdas Motor Transport Ltd. v. Karedla Suryanarayana, (2002) 110 Comp. Cas. 193 (AP); Shoe Specialities P.
Ltd. v. Standard Distilleries and Breweries P. Ltd., (1997) 90 Comp. Cas. 1 (Mad.) (DB); Rajinder Kumar Malhotra v.
Harbanslal Malhotra and Sons Ltd.,(1999) 34 CLA 360 (Cal.); Shree Cement Ltd. v. Power Grid Corporation Ltd.,
(1998) 93 Comp. Cas. 854 (CLB). See also Comments under Sections 397, 398 and 402.
30. Jindal Praxair Oxygen Co. P. Ltd. v. Praxair Pacific Ltd., (2006) 129 Comp. Cas. 905 (CLB).
Page 4 of 22
31. N. Venkata Swamy Naidu v. Sri Sri Surya Teja Constructions P. Ltd., (2007) 140 Comp. Cas. 412 (AP); Canara Bank v.
Nuclear Power Corporation of India Ltd., (1995) 84 Comp. Cas. 70 (SC). See also Comments under Sections 10E, 10F,
10FB, 397, 398 and 402.
32. Edpuganti Bapanaiah v. K.S. Raju, (2007) 139 Comp. Cas. 545 (AP).
34. Sri Ramdas Motor Transport Ltd. v. Karedla Suryanarayana, (2002) 110 Comp. Cas. 193 (AP). See detailed Comments
under Section 10F.
36. Rajinder Kumar Malhotra v. CLB, (1996) 85 Comp. Cas. 176 (SC); Mrs. Saroj Goenka v. Nariman Point Building
Services and Trading Pvt. Ltd., (1997) 90 Comp. Cas. 205 (Mad.) (DB); BPL Communications Ltd. v. T.P.G. Nambiar,
(2006) 132 Comp. Cas. 13 (CLB). See also Comments under Sections 397 and 398.
37. Bank of Rajasthan Ltd. v. State of Bihar, (2002) 108 Comp. Cas. 556 (Patna). See also Comments under Sections
2(11), 5, 10, 10FB and 113.
38. Ammonia Supplies Corporation (P.) Ltd. v. Modern Plastic Containers Pvt. Ltd., (1998) 94 Comp. Cas. 310 (SC); T.G.
Veera Prasad v. Sree Rayalaseema Alkalies and Allied Chemicals Ltd., (1999) 98 Comp. Cas. 806 (AP). See also
Comments under Sections 10, 10FB, 111 and 111A.
Railway Finance Corporation Ltd., (1996) 85 Comp. Cas. 716 (Delhi). See also Comments under Sections 10, 10F, 111
and 111A.
* See the Offices of the CLB Benches (Destruction of Records) Rules, 1980 in Appendix 39.
* Power transferred to the Central Government from the commencement of the Companies (Second Amendment) Act,
2002 (11 of 2003) [ w.e.f. date to be notified].
** Power transferred to the Central Government and in respect of Sick Industrial Companies power vested with National
Company Law Tribunal (NCLT) from the commencement of the Companies (Second Amendment) Act, 2002 (11 of
2003) [ w.e.f. date to be notified].
*** Power transferred to National Company Law Tribunal (NCLT) from the commencement of the Companies (Second
Amendment) Act, 2002 (11 of 2003) [ w.e.f. date to be notified].
COMMENTS
Legislative History.— The Companies (Second Amendment) Act, 2002 (11 of 2003).—The Notes on clauses
explained the amendments as follows: “This clause seeks to amend section 10E of the Companies Act, 1956.
Under the existing provisions contained in the said section 10E, theCompany Law Boardexercises and discharges
such powers and functions which are conferred on it under the Companies Act, 1956. The powers and functions of
theCompany Law Board are proposed to be conferred upon the Tribunal proposed to be constituted under new
section 10FB which is proposed to be inserted by clause 6. It is, therefore, proposed to provide that the Company
Law Board shall exercise and discharge such powers and functions before the commencement of the proposed
legislation [ the Companies (Second Amendment) Act, 2002 (11 of 2003)]. The proposed amendment is of
consequential nature.” [ Clause 3 of the Companies (Amendment) Bill, 2001 (80 of 2001)].
The CLB shall stand dissolved on the constitution of the Tribunal (NCLT) under Section 10FB. See Legislative
History under Sections 10FA and 10FB.
The Companies (Amendment) Act, 1963 (53 of 1963).—Part IA relating to the Board of Company Law
Administration was inserted by the Companies (Amendment) Act, 1963, s. 4, with effect from 1-1-1964.
The Statement of Objects and Reasons appended to the Companies (Amendment) Bill, 1963 (46 of 1963) stated as
follows: “It is considered desirable, for the better and convenient administration of the Companies Act, to set up a
Board to which will be entrusted most of the powers and functions of the Central Government under the Companies
Act or other laws. The Board will function subject to the control of the Central Government in all matters.”
The Companies (Amendment) Act, 1965 (31 of 1965).—The Notes on clauses explained new sub-section (4A) as
follows: “The Act, as it stands, does not provide for delegation of powers by the Company Law Board to the officers
of the Board. This creates administrative difficulties and causes unnecessary delays. This clause is intended to
Page 5 of 22
provide for such delegation with the approval of Government.” [ Clause 4 of the Companies (Second Amendment)
Bill, 1964 (64 of 1964)].
This sub-section was later omitted by the Companies (Amendment) Act, 1988 (31 of 1988), s. 4 (w.e.f. 31-5-1991).
The Companies (Amendment) Act, 1974 (41 of 1974).—The amendments were proposed by the Joint Committee.
The Joint Committee in its Report on the Companies (Amendment) Bill, 1972 (72 of 1972) recommended as
follows: “In view of the proposal to transfer to the Company Law Board some of the powers which were so long
exercised by the courts, the Committee feel that the strength of the Company Law Board might be raised to nine so
that the matters in relation to which the powers of the court are proposed to be transferred to the Company Law
Board might be disposed of expeditiously by one or more Benches formed by the Board. In order to enable the
Company Law Board to discharge its quasi-judicial functions it is also necessary to clothe it with the powers of a
civil court to enforce the attendance of witnesses and production of documents, etc., and also to provide for
punishment for its contempt. The Committee also recommend that it should be ensured that persons having
adequate legal qualifications and experience are appointed as members of the Company Law Board to discharge
its quasi-judicial powers.
New clause 4 has, accordingly, been inserted by the Committee to provide for the above matters.” [ Report : para
19].
The Companies (Amendment) Act, 1988 (31 of 1988).—The Notes on clauses explained the reasons for the
amendments as follows: “Clause 4 seeks to provide for the constitution of a Company Law Board which will
exercise and discharge powers or functions conferred on it by the Act or under any other law. It also provides for
the continued appointment by the Central Government of the existing Chairman and members thereof. The
qualifications and experience of the members will be provided in Rules and the Board will, in the exercise of its
functions, be guided by the principles of natural justice and will have power to regulate its own procedure.” [ Clause
4 of the Companies (Amendment) Bill, 1987 (32 of 1987)].
The Statement of Objects and Reasons appended to the Companies (Amendment) Bill, 1987 (32 of 1987) further
stated that one of the salient features of the amendment is: “The setting up of an independent Company Law Board
to exercise such judicial and quasi-judicial functions as are presently being exercised either by the Court or the
Central Government and are proposed to be transferred to that Board.”
Sachar Committee Recommendations.—The High-Powered Expert Committee on Companies and MR TP Act s

constituted under the Chairmanship of Justice Shri Rajindar Sachar in its report recommended for the constitution
of an independent quasi-judicial Company Law Board. The relevant paragraphs of the Report [paras 16.1 to 16.12]
containing the observations and recommendations on the Administrative set-up are reproduced below:
“Introduction.
—16.1 The terms of reference of the Committee, as given in para 5(v), specifically require us to consider and report
on improvements, if any, which are required to be made in the present administrative structure and procedure
regarding the enforcement of the provisions of the Companies Act, 1956.
16.2 The Companies Act, 1956, incorporates a social philosophy which visualises the dominance of public interest
which our country has accepted in its Constitution. At the time when the Company Law Amendment Bill, which later
became the Companies Act, 1956, was debated in the Parliament, the question arose as to whether or not the
administration of Company Law ought not be entrusted to a statutory Board or Commission independent of
Government Department. This necessity was emphasised because the Government was taking the power to
regulate some of the important functions of private management like managerial remuneration, inter-corporate
investment, or the appointment of directors on Board of companies to prevent oppression or mis-management. This
view, however, did not prevail. Instead, with a view to ensuring that matters will be examined objectively and
uninfluenced by executive considerations, the Act, as originally stood, constituted an Advisory Commission whose
duties were to enquire into and advise the Central Government on various important matters mentioned in the
statute and all other matters specifically referred to the Commission by the Central Government. Subsequently, the
provisions constituting the Commission, viz., sections 410 to 415, were deleted by the Companies (Amendment)
Act, 1963. By the same Amendment Act, Part IA was incorporated in the Act and by virtue of section 10E of this
Part, a Board of Company Law Administration, to be called the Company Law Board (CLB), was constituted. In
recommending this amendment, the then Finance Minister who introduced the Bill in the Lok Sabha stated that it
was felt that it would be better if the administration of Company Law was carried on by a Board acting in a quasi-
Page 6 of 22
judicial manner and exercising quasi-judicial powers. It was also mentioned that the Board would carry on the work
delegated to it by the Government and that apart from policy matters which would be considered at a higher level,
wherever necessary, the Board would be fairly free to carry on the duties that are delegated to it.
16.3 At the same time, the Department of Company Law and Investment Administration which had been constituted
in 1955 was merged with the Ministry of Finance at the end of October, 1963. Simultaneously, Board of Company
Law Administration (or Company Law Board) was created by the Companies (Amendment) Act, 1963, which started
functioning in February, 1964. The Company Law Board, as it was constituted, consisted of officers from the old
Department of Company Law and Investment Administration and was not different from other Departments of the
Government. Soon thereafter there was some rethinking and the separate Department of Company Law
Administration was revived within a period of 10 months, though under a new name, viz., Department of Company
Affairs. The close affinity between and almost a complete identity of the Department and the Board was apparent
from the fact that the Chairman and Members of Board were none other than the Secretary, Joint Secretaries, etc.
The Working Group of Administrative Reforms Commission (1968) headed by Mr. D.L. Mazumdar, ex-Secretary of
the Department of Company Law Administration, found this co-existence of the Company Law Board and the
Department of Company Affairs rather incongruous. It, therefore, recommended that the Company Law Board be
abolished and the responsibility for administering the Act be put on the Department of Company Affairs alone. This
recommendation was obviously motivated by the fact that by the very existence of the Company Law Board, an
impression was sought to be given that the decision was taken by an independent authority whereas in fact the
decision was made in the same manner as in any other Government Department. The Working Group, however,
did not advert to the question which, in our opinion, is the real crux of the matter, namely, whether for the proper
and effective administration of the Act, it was not necessary to constitute a genuinely independent Company Law
Board manned by persons acting in a quasi-judicial capacity, the functions and powers of the Board and the
Department being clearly defined and demarcated by statutory provisions.
Role of the Company Law Board.
—16.4 Section 637 of the Companies Act, 1956 empowers the Central Government, with some restrictions, to
delegate, by notification in the Official Gazette, any of its powers and functions to theCompany Law Board. The
Central Government has been issuing various notifications delegating powers to the Company Law Board. The last
and the present notification delegating the powers to the Company Law Board was issued on 18th October, 1972 [
since rescinded]. By the said notification, the Central Government has delegated to the Company Law Board the
powers and functions of the Central Government under the Act other than those excepted in the notification.
16.5 The Company Law Board has also with the previous approval of the Central Government prescribed the
Company Law Board (Procedure) Rules, 1964 [ now the CLB Regulations, 1991], in order to discharge its
delegated functions.
16.6 In addition to the powers to administer the Act under delegation from the Central Government, some of the
judicial powers which were previously vested in the High Courts have now been conferred on the Company Law
Board [ now conferred on Tribunal (NCLT)/Central Government] statutorily under the Amendment Act of 1974.
These powers are those under sections 17, 18 and 19 relating to the amendment of the memorandum of
association, section 79 relating to the sanction of issues of shares at a discount, section 141 regarding extension of
time for filing of particulars or for registration of charges and section 186 dealing with the powers to order calling of
general meeting other than the annual general meeting of a company. It may be emphasised that this amendment
in the Act was brought in the wake of the recommendation of the Administrative Reforms Commission which had
taken the view that the powers exercised by these sections are more of administrative than judicial nature and
should be taken away from the Court and given to the Central Government. The Joint Select Committee of the
Parliament which went into the Bill, however, felt that the powers to be exercised under the said sections were of
quasi-judicial nature, should not, therefore, be exercised by the Central Government, and must be conferred upon
the Company Law Board which, in its view, was fit to exercise such powers. It was in this context that the statute
substituted the ‘Company Law Board’—and not the Central Government—for the Court in those sections. While
powers under sections 17, 18 and 19 are exercised by the Company Law Board through a Bench of two members,
those under section 79 can be exercised by a single member in pursuance of the rules framed by the Board called
the Company Law Board (Bench) Rules, 1975 [ now the CLB Regulations, 1991]. Three Benches—one each at
Bombay, Calcutta and Madras—are functioning in addition to the Headquarters of the Board at Delhi. Section
2(18A) of the Act also empowers the Company Law Board to decide the question as to whether two or more
individuals, associations, etc., constitute or fall within a ‘group’. The Company Law Board has also been delegated
by the Central Government its powers under section 111(4) of the Act to hear the appeals against refusal to register
transfer of shares. The procedure for hearing appeals under this section is specifically laid down under the
Page 7 of 22
Companies (Appeals to Central Government) Rules, 1957 [ since repealed], and the appeals are heard by a single
member of the Company Law Board.
Proposed Administrative Set-up—The Approach.—16.7 Certain broad considerations which we have, therefore,
kept in view when making our suggestions for structural changes in the existing administrative machinery are:—
(a) the need for speed and efficiency with which decisions are made both on the judicial and the administrative
side;
(b) the need for identifying functions which are purely administrative and those which have an adjudicative
element, necessitating a judicial approach;
(c) the need for having a fresh look at the system of prosecutions in the Act in order to see whether or not it is
possible to provide for a more effective deterrent by way of imposition of penalty without imprisonment
where this is feasible, and to limit cases of imprisonment to more serious offences involving the affairs of
the companies;
(d) the need for bringing in greater decentralisation of authority, thus taking the authority exercising the power
as near to the company's seat of operation as possible, especially keeping in view the question of costs
likely to be incurred by smaller companies.
16.8 There is also the strong feeling, expressed almost without any reservation, by all the organisations and
individuals who had submitted their memoranda to the Committee or had appeared before it that there is a definite
need for a quasi-judicial Tribunal, independent of the executive authority of the Central Government, which should
not only ensure that the Act is administered in a manner which gives the affected party a right to be heard but also
see that the decisions are taken uninfluenced by executive considerations. In the circumstances, what needs to be
ensured is an in-built system which combines the application of judicial mind with speed and administrative
efficiency, first, in respect of those matters which are at present with the Central Government though delegated to
the Company Law Board and, secondly, in respect of such matters as are statutorily with the Company Law Board.
16.9 We, therefore, feel that appropriate solution would lie in statutorily constituting an independent quasi-judicial
Company Law Board broadly on the lines of the Income-tax Appellate Tribunal, as provided in section 252 of the
Income-tax Act, 1961 with Benches permanently located at different Regions, including Delhi, so that matters are
heard at places not far removed from the offices of the companies. In order to see that the Company Law Board
(CLB) functions independently as a statutorily constituted Tribunal and is independent of the Department of
Company Affairs, it would be necessary to frame rules for recruitment and conditions of service of the persons
appointed as members of the Company Law Boardby a Presidential notification under Article 309 of the Constitution
of India, read with the relevant section of the Companies Act dealing with the constitution of theCompany Law
Board, as in the case of the Income-tax Appellate Tribunal (ITAT). We are also anxious to see that suitable
qualifications are prescribed for recruitment as members of the Company Law Board.
16.10 Under rule 3(2)(ii)of the Income-tax Appellate Tribunal (Recruitment and Conditions of Service) Rules, 1963,
the Assistant Commissioners of Income-tax, who are members of the Indian Revenue Service and who have
served for at least three years as such are eligible to be appointed as accountant members. The rules also provide
for induction of the members of the Central Legal Service as judicial members of the Tribunal. Besides, the rules
also permit direct recruitment of practising lawyers and accountants or members of the Judicial Service. In the case
of the Department of Company Affairs, there exists a specialised service, namely, the Central Company Law
Service which has two distinct branches, the legal branch and the accounts branch and the members of this Service
are persons drawn from the legal and the accounting profession. We feel that on the same analogy, members of
this Service should be eligible to be appointed to the Company Law Board. In addition, provision may also be made
for direct recruitment of members from the accounting and the legal professions.
16.11 The Income-tax Appellate Tribunal Members (Recruitment and Conditions of Service) Rules, 1963, also
provide for the constitution of a Selection Board for recruitment of the members of the Tribunal. The Selection
Board consists of a nominee of the Minister for Law, Justice and Company Affairs, the Secretary to the Department
of Legal Affairs, the President of the Tribunal and such other persons, if any, not exceeding two as the Minister for
Law, Justice and Company Affairs may appoint. On similar lines, we would suggest that the recruitment rules for the
Company Law Board should provide for a Selection Board consisting of a nominee of the Minister for Law, Justice
and Company Affairs, the Secretary to the Department of Company Affairs, the Chairman of the Company Law
Board and two other persons to be appointed by the Minister for Law, Justice and Company Affairs. In general, we
would recommend that the recruit rules for the members of the Income-tax Tribunal may be advantageously looked
into and adapted suitably for the purpose of laying down the rules for recruitment of the members of the Company
Page 8 of 22
Law Board. We would also recommend the modification of the existing provisions relating to the constitution and the
function of the Company Law Board in the following manner:—
(a) The power to constitute the Company Law Board shall remain with the Central Government as at present,
but the power to constitute the Regional Benches with permanent secretariat which we recommend for the
purpose of administering the Act shall be with the Company Law Board.
(b) The Company Law Board alone shall have powers to frame the rules and procedures for the conduct of its
business and the business of its Regional Benches.
(c) The Company Law Board including its Regional Benches shall have powers of the Court under the Code of
Civil Procedure not only in respect of matters specified in the present sub-section (4C) and (4D) of section
10E, but also in respect of the powers conferred upon it or the Regional Benches by the Act.
(d) The Chairman of the Company Law Board shall ordinarily be one who is qualified to be appointed as a
judicial member. He shall hold office until he attains the age of 65 years or until he has served for a period
of five years as the Chairman of the Company Law Board, whichever is earlier. The other members of the
Board must be persons having legal and accounting qualification, in addition to the experience of the
working and administration of the Companies Act and allied statutes and of corporate sector.
(e) The present sub-section (6) of section 10E should be modified to provide that the Company Law Board or
any of its Regional Benches, in exercise of their powers and discharge of their functions, shall not be
subject to the control of the Central Government.
16.12 We have gone through the provisions of the Act, which confer certain powers and functions on the Central
Government, the Company Law Board and the Court and also the powers and functions of the Central Government
which are being at present exercised by the Company Law Board under delegation from the Central Government.
We have reallocated these powers and functions to these authorities on the lines of our thinking expressed in paras
16.7 and 16.8 of this Chapter. Broadly, we have favoured the retention of the existing powers under the Act with the
Central Government itself where a more intimate and detailed knowledge arising out of day-to-day administration of
the Act is an essential pre-requisite for the exercise of the power or the function. The powers relating to certain
approvals under the Act have also been retained with the Central Government on the reasoning that, besides the
considerations mentioned earlier, there is also an economic angle, or the question of public interest, involved.
Certain powers, like the rule making power, have to be necessarily retained with the Central Government. In some
cases, we have also suggested for a reference being made by the Central Government to the Company Law
Board.” [ Report : paras 16.1 to 16.12].
under Section 1.
Dissolution of Company Law Board [ Section 10FA].
—As per section 10FA of the Companies Act, 1956, as inserted by the Companies (Second Amendment) Act, 2002
(11 of 2003), theCompany Law Board constituted under Section 10E(1) shall stand dissolved on the constitution of
the National Company Law Tribunal (NCLT) under Section 10FB. The powers and jurisdiction of the CLB, under
various sections have been transferred to and vested in the Tribunal (NCLT).
The following commentary on the CLBunder Section 10E shall be applicable till setting up of the Tribunal
(NCLT) under section 10FB of the Companies Act, 1956, as inserted by the Companies (Second
Amendment) Act, 2002 (11 of 2003), and will be useful in cases before the Tribunal (NCLT).
Constitution of the Company Law Board [Sub-section (1)].
—In exercise of the powers conferred by section 10E(1) of the Companies Act, 1956, as substituted by the
Companies (Amendment) Act, 1988 (31 of 1988), the Central Government constituted theBoard of Company Law
Administration (w.e.f. 31-5-1991) [vide Notification No. S.O. 364(E), dated 31-5-1991 : (1991) 71 Comp. Cas. (St.)
77].
Powers and functions of the CLB [Sub-section (1A)] [Till constitution of the Tribunal under Section 10FB].
—The Company Law Boardshall exercise and discharge powers and functions conferred on it, by or under the
Page 9 of 22
Companies Act, 1956 or any other law as also powers and functions of the Central Government conferred on it by
the Central Government, by notification in the Official Gazette.
With coming into force of the Companies (Amendment) Act, 1988 (31 of 1988) (w.e.f. 31-5-1991) and further
amendments in the Companies Act, 1956, theCompany Law Board (CLB) [ till constitution of the Tribunal (NCLT)
under Section 10FB] has been conferred independent powers under the following sections.
Sections 10E(4B), 17(2), 18(4), 19, 43, 49(10), 55A, 58A(9), 58AA, 79(2), 80A(1) proviso, 111, 111A, 113(1),
113(3), 117B(4), 117C, 118(3), 141(1) and (3), 144(4), 163(6), 167, 186, 188(5), 196(4), 219(4), 225(3) proviso,
235(2), 236, 237, 241(2)(dd), 247(1A), 248(1), 250, 251, 269(7)(8)(9), 284(4) proviso, 304(2)(b), 307(9), 388B-
388E, 394(1) proviso, 396, 397, 398, 399, 400, 401, 402, 403, 404, 405, 407(1)(b), 408(1)(2)(5), 409(1), 410,
610(2), 614(1), 621A, 635 and 635B.
National Company Law Tribunal (NCLT) [ Sections 10FB].
—By Section 10FB of the Companies Act, 1956 as inserted by the Companies (Second Amendment) Act, 2002 (11
of 2003) (w.e.f. date to be notified), the powers and jurisdiction presently being exercised by various bodies, viz.,
the Company Law Board (CLB), the BIFR or the AAIFR or High Courts have been consolidated and entrusted to the
National Company Law Tribunal (NCLT) to be constituted under Section 10FB(1). Powers under some sections
have been transferred to “the Central Government”.
Appeal from order of the Tribunal (NCLT) shall lie to the Appellate Tribunal [ Section 10FQ]. Civil court shall not
have jurisdiction in matters which the Tribunal or the Appellate Tribunal is empowered to determine [ Section 10GB]
and an appeal from order Appellate Tribunal shall lie to the Supreme Court [ Section 10GF].
See detailed Comments and List of Sections conferring powers on the Tribunal (NCLT) under Section 10FB.
Powers of CLB have been transferred as follows.
Powers of CLB conferred on Tribunal (NCLT).
—Powers and functions hitherto being exercised by the Company Law Board (CLB) now conferred on the Tribunal
(NCLT) constituted under section 10FB (w.e.f. date to be notified) are as follows:
Sections 55A, 58A(9), 58AA, 80A(1) proviso, 111, 111A, 117C, 186, 235(2), 236, 237, 241(2)(dd), 247(1A), 250,
251, 269(7)(8)(9), 304(2)(b) [Central Government or Tribunal], 307(9) [ ], 388B-388E, 396, 397, 398, 399, 400, 401,
402, 403, 404, 405, 407(1)(b), 408(1)(2)(5), 409(1), 410, 610(2), 614(1), 635(4) [CLBor Tribunal], 635B, 637A
[Central Government or Tribunal], 640A [Court or Tribunal], 651A and Schedule XI of the Companies Act, 1956 (1
of 1956).
Powers of CLB conferred on Central Government.—The powers and functions hitherto being exercised by the
Company Law Board (CLB) now conferred on the Central Government (w.e.f. date to be notified) are as follows:
Sections 17(2), 18(4), 19, 43, 49(10), 79(2), 113(1), 113(3), 117B(4), 118(3), 141, 144(4), 163(6), 167, 188(5),
196(4), 219(4), 225(3)proviso, 284(4) proviso, 304(2)(b) [Central Government or Tribunal], 307(9) [Central
Government or Tribunal], 621A and 637A [Central Government or Tribunal] of the Companies Act, 1956.
Appropriate Forum.—The matters which are not within the jurisdiction of the CLB [ now the Tribunal (NCLT)], are
decided by the High Court or the District Court as provided under Section 10 and other provisions of the Companies
Act, 1956. The residue may go to ordinary Civil Court or some other competent authority. TheCLB [ now the
Tribunal (NCLT)] has to decide the matters placed before it in a judicial or quasi-judicial manner equipped with
certain powers which are possessed by the courts but considering its scope, functions and the special jurisdiction
conferred on it, the CLB can be held only a tribunal and not a court. An appeal against its order lies to the High
Court under Section 10F [ now Appellate Tribunal under Section 10FQ].12
CLB's jurisdiction.—The Company Law Boardhas no exclusive jurisdiction over all the matters relating to
companies but only in respect of matters provided by the Companies Act, 1956. TheCompany Law Board (CLB) is
Page 10 of 22
a Tribunal and not a Court. Proceedings before the Company Law Board (CLB) are not suit. The Company Law
Board (CLB) has some of the trappings of a Court yet given the scope, functions, the special jurisdiction conferred
upon it and the control of the Central Government over it the CLB cannot be regarded as a Court. A comparison of
reliefs sought by the appellants before the Civil Court and the respondents before the CLB showed that they were
different. The scope of enquiry in the Company Petition filed by the respondent before the Company Law Board
(CLB) was different and distinct from the scope of enquiry in the Suit previously instituted by the appellants in the
Civil Court. In facts of the case, the order of Company Law Board(CLB) was not interfered with by the Appeal Court
under Section 10F of the Companies Act, 1956.13
See also Comments under Sections 10, 10F, 10FA, 10FB and 397.
Department's view.—Constitution of CLB (w.e.f. 31-5-1991).—“The Companies Act, 1956 has been amended by
the Companies (Amendment) Act, 1988 (31 of 1988), making several changes in the Act. Some of the provisions of
the Companies (Amendment) Act, 1988 have been already brought into force and the remaining provisions which
could not be brought into force pending setting up of theCompany Law Board in terms of the amended provisions of
section 10E of the Act are now being implemented. The Government has now reconstituted the Board with effect
from 31-5-1991 with Shri S.P. Upasani as Chairman and Sarvashri A.M. Chakraborti, C.R. Mehta, K.K. Dhar, S.
Balasubramanian and A.R. Ramanathan as Members. Simultaneously, the Government has enforced the remaining
provisions of the Amendment Act of 1988 from that date.
2. The Company Law Board will be a quasi-judicial body to exercise some of the judicial and quasi-judicial
functions as are presently being exercised either by the Court or the Central Government. The orders of
the Board will be appealable to High Court on questions of law. Some of the important changes resulting
from the enforcement of the remaining provisions of the Amendment Act of 1988 are as under:
(i) The existing section 111* empowers the Central Government (power delegated to the Company Law
Board) [ now transferred to the Tribunal (NCLT)] to hear appeals against refusal to register transfer or
transmission of shares. Section 111* has been amended and the provisions of section 155 have been
assimilated therein empowering the Company Law Board also to rectify register of members. Earlier,
the powers under section 155 vested in the High Court.
(ii) The power under sections 397/398† for relief in cases of oppression and mismanagement is presently
exercised by the High Court. This power has now been conferred on the Company Law Board.
(iii) Section 621A** is a new provision empowering the Company Law Board and the Regional Director to
compound offences punishable by fine by imposing penalties in lieu of prosecution. Where the
maximum amount of fine, which may be imposed for an offence, does not exceed Rs. 5000/- [Rs.
50,000 (w.e.f. 13-12-2000)] the same can be compounded by the Regional Director and other offences
can be compounded by the Company Law Board [ now the Central Government]. It is hoped that these
provisions will ensure compliance of law by the companies and save their time and expense in
litigation.
3. With the creation of the Company Law Board, certain administrative powers, hitherto delegated to the
Board, under section 637 of the Act, have now been withdrawn. Some of these powers are powers to grant
extension of time for repayment of deposit, exemption from holding Annual General Meeting at the
registered offices; allowing payment of dividend without providing for depreciation and making changes in
the format of the annual accounts; permission for appointment of sole selling agents and approval for
entering into contracts in which directors are interested. These powers will now be exercised by the Central
Government.
4. The Government has also made consequential changes in the rules and regulations made under the
Companies Act, 1956. Since theCLB will regulate its own procedure under section 10E(6) of the Act, the
Companies (Appeal to the Central Government) Rules, 1957, the Company Law Board (Procedure) Rules,
1964 and the Company Law Board (Bench) Rules, 1975 have been rescinded [ vide Notification G.S.R.
286(E), dated 31-5-l991 : (1991) 71 Comp. Cas. (St.) 82]. The Board will now be guided by the Company
Law Board Regulations, 1991 in the conduct of its business. The Government has also prescribed fees for
making an application to the CLBvide the CLB (Fees on Applications and Petitions) Rules, 1991. During
the transitional period, section 68 of the Companies (Amendment) Act, 1988 provides for the manner for
disposal of pending applications by the court (in respect of which powers have been conferred on the
Board) and the CLB (in respect of which the powers of the Central Government were earlier delegated to
the Board) as under:—
Page 11 of 22
(1) Any matter or proceeding which, immediately before the commencement of the Companies
(Amendment) Act, 1988 was pending before any court, shall, notwithstanding that such matter or
proceeding would be heard by the CLBafter such commencement, be continued and disposed of by
that court after such commencement in accordance with the provisions of the principal Act (the
Companies Act, 1956) as they stood immediately before such commencement.
(2) Any matter or proceeding which, immediately before the commencement of the Companies
(Amendment) Act, 1988 was pending before the CLB by virtue of any notification issued by the Central
Government shall, unless such matter or proceeding would be heard by the CLB after such
commencement, be heard and disposed of by the Central Government.
5. In view of the aforesaid, the applications under sections 211, 212 and 213 of the Act pending consideration
by the Regional Benches of the CLB shall stand transferred to the Central Government. These applications
will now be entertained in the Department of Company Affairs (5th Floor, ‘A’ Wing, Shastri Bhavan, Dr.
Rajendra Prasad Road, New Delhi).” [ Press Note 6/91 (F. No. 3/7/87-CL-V), dated 31-5-1991 : Chartered
Secretary, June 1991 (Suppl.), p. 2 : (1991) 71 Comp. Cas. (St.) 71].
Powers conferred on CLB under other laws.—As per sub-section (1A) the Company Law Boardshall exercise
and discharge powers and functions conferred on it by or under the Companies Act, 1956 or any other Law†. The
powers and jurisdiction under certain sections of other Acts has been conferred on the CLB.
Section 22A of the Securities Contracts (Regulation) Act, 1956.— Section 22A of the Securities Contracts
(Regulation) Act, 1956 (42 of 1956)[since omitted as a consequence of insertion of Section 111A of the Companies
Act, 1956] providing for free transferability and registration of transfers of listed securities of companies inserted by
the Securities Contracts (Regulation) (Amendment) Act, 1985 (w.e.f. 17-1-1986) had conferred powers of reference
to the Company Law Board under sub-section (4). See also the Securities Contracts (Reference to CLB) Rules,
1986.††
An appeal was maintainable under section 10F of the Companies Act, 1956, against decisions of theCLB rendered
in exercise of the powers conferred on it under other laws also. An appeal under section 10F against an order of the
CLB under section 22A of the SCRA, 1956 was therefore held to be maintainable.14
Section 22A of SCRA omitted.—As a consequence of insertion of section 111A of the Companies Act, 1956,
which now applies to rectification of register on transfer in case of all listed and unlisted Public Companies, section
22A of the Securities Contracts (Regulation) Act, 1956 which was applicable to listed public companies, had been
omitted by the Depositories Act, 1996 (22 of 1996) (w.r.e.f. 20-9-1995).
Section 45QA of the Reserve Bank of India Act, 1934.—“By virtue of Section 45QA of the Reserve Bank of India
Act, 1934 (2 of 1934), theCompany Law Board(CLB) constituted under section 10E of the Companies Act, 1956 (1
of 1956), is now clothed with powers to order repayment of deposits accepted by the Non-Banking Financial
Companies (NBFC) in case of default in making the payment of principal amount and interest thereon. Regulation
37 of theCompany Law Board Regulations, 1991*, has accordingly been amended, vide Notification No. G.S.R.
433(E), dated August 1, 1997. Applications for refund of deposits and interest thereon under section 45QA of the
Reserve Bank of India Act, 1934**, can be made in the prescribed Form No. 4 of the Company Law Board
Regulations, 1991*, in duplicate along with a fee of Rs. 50 by way of a demand draft/pay order in favour of the Pay
and Accounts Officer, Department of Company Affairs to the Bench Officer, Company Law Board (CLB) at New
Delhi/Calcutta/Mumbai/Chennai, under whose jurisdiction the registered office of the defaulting company falls.” [
Press Note 1 of 1997 (F. No. 1(10)88-CLB), dated 10-9-1997, Issued by the Govt. of India, Ministry of Finance,
Company Law Board, 5th Floor, ‘A’ Wing, Shastri Bhavan, New Delhi-110 001 : (1997) 90 Comp. Cas. (St.) 531].
Consumer Forums.—The provisions of sections 45Q and 45QA of the Reserve Bank of India Act, 1934 and
section 58A(9) of the Companies Act, 1956, do not either expressly or impliedly bar the jurisdiction of the Consumer
Forums constituted under the Consumer Protection Act, 1986 (68 of 1986) from entertaining a consumer dispute
case at the instance of the depositor claiming repayment of the deposit from a non-banking finance company. In
view of section 3 of the Consumer Protection Act, 1986, remedy under the Consumer Protection Act is an additional
remedy and the same cannot be taken away either by the RBI Act or by the Companies Act.15
Section 2A of the MR TP Act, 1969.—“In exercise of the powers conferred by section 2A of the Monopolies and
Restrictive Trade Practices Act, 1969 (54 of 1969) [now the Competition Act, 2002 (12 of 2003)], and in
Page 12 of 22
supersession of the notification of the Government of India in the erstwhileMinistry of Law, Justice and Company
Affairs, (Department of Company Affairs) No. S.O. 583(E) dated the 1st August, 1984,except as respects things
done or omitted to be done before such supersession, the Central Government hereby authorises the Board of
Company Law Administrationconstituted under section 10E of the Companies Act, 1956 (1 of 1956), to decide all
questions of the nature referred to in the said section 2A.” [ Notification No. S.O. 365(E), dated 31-5-1991 :
Chartered Secretary, June 1991 (Supplement), page 3 :(1991) 71 Comp. Cas. (St.) 82].
The MR TP Act, 1969 (54 of 1969) has since been repealed and replaced by the Competition Act, 2002 (12 of
2003)†. See detailed Comments under Section 10.
Notification withdrawing powers delegated to Company Law Board by the Central Government (w.e.f. 31-5-
1991).—“In exercise of the powers conferred by of clause (a) of sub-section (1)section 637 of the Companies Act,
1956 (1 of 1956), the Central Government hereby rescinds the Notification No. G.S.R. 443(E), dated the 18th
October, 1972, No. G.S.R. 343(E), dated 24th June, 1975 and No. G.S.R. 477, dated 31st March, 1978, delegating
the powers and functions of the Central Government to the Company Law Board, with effect from 31st May, 1991.” [
Notification No. G.S.R. 287(E), dated 31-5-1991 : Chartered Secretary, June 1991 (Suppl.), page 4 : (1991) 71
Under old Notifications 443(E), 343(E), 477 [ rescinded above (w.e.f. 31-5-1991)] powers of the Central
Government under following Sections stood delegated to the CLB: Sections 2(7), 2(39), 4A(2), 8, 20, 58A, 94A,
108(1C)(B)(iii), 114(1), 149(2B), 158(3), 166(2) 1st proviso, 187D, 204(1) proviso, 205(1) proviso (c), 205(2)(c),
205(2)(d), 205B, 208(3)(4)(5)(6), 209(1)(d), 209A(1), 211-13, 220(1)(a) clause (iii) of 2nd proviso, 227(4A), 233A(1),
233B(1) proviso, 233B(2), 233B(8)(9)(10), 240(1)(a), 240(1A), 240(2), 283(1)(f), 285 proviso, 293B(1), 294(5)(6),
294AA(2)(3), 297(1) proviso, 314(1B), 314(2)(b), 373, 396A, 463(1)(3), 572, 578(3)(d), 594(1) proviso, 615(1)(5),
619(2), 621(1), 624B, 637A(1), 637AA and 637B.
The powers under these Sections are now exercised by the Central Government. See detailed Comments under
Delegation by Central Government of its powers and functions under Act [ Section 637]. Under sub-section 10(1A)
read with Section 637 the powers of the Central Government under the Act may still be conferred on the Company
Law Board by notification in the Official Gazette.
Executive powers must be exercised in conformity with Statute.—The powers of the Central Government, if
delegated to the Company Law Board, being executive powers must be exercised in conformity with the Statute.16
Number of members of the Board [Sub-section (2)].—The Company Law Board shall consist of such number of
members not exceeding nine as the Central Government deems fit to be appointed by notification in the Official
Gazette.
Constitutional validity.— Sections 10E and 10F are constitutionally valid. However, as the Company Law Board
has to function as a judicial body vested with powers hitherto exercised by the High Courts and there was no
provision in the Company Law Board Members (Qualifications and Experience) Rules, 1989 for appointment of
persons with legal knowledge or experience, Rules 5, 4, 5 and 10 were held to be constitutionally invalid.17
After the foregoing decision the Company Law Board Members (Qualifications and Experience) Rules, 1989 were
substituted by the Company Law Board (Qualifications, Experience and other Conditions of Service of Members)
Rules, 1993 as explained below.
Qualifications and experience of CLB members [Sub-s. (2A)].—The members of the CLB shall possess such
qualifications and experience as may be prescribed.
In exercise of the powers conferred by section 10E(2A) and in supersession of the Company Law Board Members
(Qualifications and Experience) Rules, 1989, the Central Government has made the Company Law Board
(Qualifications, Experience and other Conditions of Service of Members) Rules, 1993.*
Department's view.—Appointment of Company Secretaries as Member/CLB.—“I am directed to refer to your

letter No. 1004 : 7 : DR, dated 10th August 1989 and to clarify that the members of the Institute of Company
Secretaries of India, having 15 years' working experience, including experience as “Secretary in whole-time
practice” within the meaning of section 2(45A) of the Companies Act 1956, read with section 2(2) of the Company
Secretaries Act, 1980, ever since the Company Secretaries Act, 1980, came into force w.e.f. 1-1-1981, will be
qualified for being considered for appointment as Member/CLB pursuant to the Company Law Board Members
Page 13 of 22
(Qualifications and Experience) Rules, 1989. This would mean that experience prior to 1-1-1981 will not be as
“Secretary in whole-time practice”, but as Company Secretary.” [ Clarification No. 1/19/87-CL-V, dated 25-8-1989 in
response to the Institute's letter : Chartered Secretary, September 1989, page 692].
Secretary in whole-time practice.— Rule 3(2)(e)* of the Company Law Board(Qualifications, Experience and
other Conditions of Service of Members) Rules, 1993 provides for at least 15 years' working experience as a
Secretary in whole-time practice as defined in section 2(45A) of the Companies Act, 1956 for a Member of the
Institute of Company Secretaries of India (ICSI) constituted under the Company Secretaries Act, 1980 (56 of 1980).
Section 2(45A) was inserted by the Companies (Amendment) Act, 1988. On analogy of above Circular, prior to this
date, experience will not be as “Secretary in whole-time practice”, but as Company Secretary.
Chairman [Sub-section (3)].—One of the members shall be appointed by the Central Government to be the
Chairman of the Company Law Board.
Validity of acts done by CLB [Sub-section (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.
Formation of Benches [Sub-section (4B)].—The Company Law Board may by order in writing form one or more
Benches from among its members and authorise each Bench to exercise and discharge specified powers and
functions. Every order made or act done by a Bench shall be the order or act of the Board.
Composition and Jurisdiction of CLB Benches.—For composition and jurisdiction of CLB Benches formed under
Section 10E(4B)see relevant Regulations, viz., Composition of Benches of the Board [ Regulation 3], Power of the
Chairman to specify matters which may be dealt with by a Bench [ Regulation 4], Jurisdiction of the Bench [
Regulation 4] of the CLB Regulations, 1991.†
Jurisdiction of the CLB Benches— Caveat.—The place of situation of the Registered Office of the company
determines the jurisdiction of the CLB Bench. Matters can be dealt with by one or more Members of the Principal
Bench. Where an Additional Principal Bench of the Company Law Board (CLB) has been constituted with specific
territorial jurisdiction with all the powers of the Principal Bench, the petitions relating to companies having their
Registered Offices in that region have to be filed and dealt with by the Additional Principal Bench of the CLB alone
and the Principal Bench ceases to have any jurisdiction to entertain such petitions. Filing of caveat does not clothe
a Forum with jurisdiction.18
Department's view.—No shortcoming in the functioning of CLB.—“The Company Law Board, a quasi-judicial
body has been constituted to exercise and discharge such powers and functions as may be conferred on it by or
under the Companies Act, 1956 or any other law. The principal Bench of theCompany Law Boardhas jurisdiction all
over the country and adjudicates on matters falling under sections 235, 237, 247, 248, 250, 388B, 397/398, 408
and 409 and under Chapter VI, Part VI of the Companies Act, 1956 [Prevention of Oppression and Mismanagement
(sections 397-409)]. The Regional Benches have jurisdiction within their respective areas and adjudicate on all
matters falling under sections 17, 18, 19, 58A, 80A, 111, 111A, 113, 141, 163, 167, 186, 219, 614, 621A and 634 of
the Companies Act, 1956, and section 45QA of the Reserve Bank of India Act, 1934. Maximum number of
applications received by theCompany Law Boardfall under section 58A(9) of the Companies Act, 1956 and section
45QA of the Reserve Bank of India Act, 1934, regarding non-refund of public deposits by companies.
So far, there is no shortcoming in the functioning of the Company Law Board.” [Written reply by the Minister for
Law, Justice and Company Affairs in Rajya Sabha : Press Release, dated 12-12-2000 : (2001) 104 Comp. Cas.
(St.) 107].
Powers of the Bench [Sub-sections (4C) and (4D)].—Every Bench of the CLBshall have powers of a Civil Court
under the Code of Civil Procedure, 1908 (5 of 1908), while trying a suit, namely: (a) discovery and inspection of
documents, (b) enforcing the attendance of witnesses, (c) compelling the production and impounding of documents
or other material objects, (d) examining witnesses on oath, (e) granting adjournments, and (f) reception of evidence
on affidavits.
Every Bench shall be deemed to be a Civil Court for the purposes of section 195 and Chapter XXVI [Ss. 340-52] of
the Code of Criminal Procedure, 1973 (2 of 1974) containing provisions as to contempt and offences affecting
administration of justice will apply. The proceedings before the Bench shall be deemed to be judicial proceedings
Page 14 of 22
within the meaning of sections 193, 196 and 228 of the Indian Penal Code, 1860 (45 of 1860) relating to giving and
using false evidence and insulting or interrupting a public servant sitting in judicial proceedings will apply.
The CLB exercises its powers conferred by the Companies Act or other statutes and is not a civil court. Section
10E(4D) treats the Board as a court for limited purpose. This, however, does not render the Board an ordinary civil
or criminal court.19
Limitation.—There are contrary decisions on this score. By virtue of the decision of the Calcutta High Court which
was confirmed by the Supreme Court holding that the Limitation Act, 1963 is applicable to cases filed under section
111 of the Companies Act, 1956, the provisions of section 5 of the Limitation Act, 1963 regarding power to condone
delay would also be applicable.20 An appeal against refusal to register the transfer of shares has to be filed within 2
months from the date of refusal. The Company Law Board [ now the Tribunal] may condone the delay only on
cogent reasons.21
In some cases it has, however, been held that CLBis not a court for the purposes of the Limitation Act, 1963, which
does not apply to proceedings before theCLB. Where the Companies Act prescribes limitation period, the CLB [
now the Tribunal] has no power of condonation under section 5 of the Limitation Act.22
The Limitation Act, 1963 (36 of 1963) is not applicable to proceedings before theCLB [ now the Tribunal]. However,
if there is unexplained long delay, laches or acquiescence, then, the CLB [ now the Tribunal] would not allow such
petitions.23
CLB is Court in restricted sense—Limitation.—Under the provisions of the Companies Act, 1956, theCompany
Law Board(CLB) is a Court in a restricted sense. Under Section 10E(4C) of the Companies Act, 1956, theCLBwould
have powers under the Code of Civil Procedure, 1908 (5 of 1908) only in respect of the matters specified in Section
10E(4C) (a) to (f) of the Companies Act, 1956. TheCompany Law Board(CLB) is a quasi-judicial authority to be
guided by the principles of natural justice in the exercise of its powers and discharge of its functions under the
Companies Act, 1956 and it shall act in its discretion. On the plea of application of the Limitation Act, 1963 (36 of
1963) to the proceedings before the it has been consistently held by theCLB that the Limitation Act as applied by
the Civil Court is not applicable to the proceedings before the CLB, a quasi-judicial authority and not a Court in the
strict sense of the term. However, this does not preclude the Company Law Board (CLB) from rejecting/dismissing
petitions on account of delay and laches in appropriate cases. In the present case, the CLB had no hesitation in
rejecting the respondents plea of action being barred by limitation.24
See also Comments under Sections 111, 111A, 388B and 397.
Principles of Natural Justice [Sub-section (5)].—The Company Law Board shall in the exercise of its powers and
the discharge of its functions be guided by the principles of natural justice and shall act in its discretion.
The Order of the Company Law Board [ now the Tribunal (NCLT)] must be a speaking or reasoned order. An order
in violation of the principles of natural justice or amounting to denial of natural justice shall be liable to be
quashed.25
See detailed Comments on the Principles of Natural Justice, viz., (1) Rule of audi alteram partem, (2) Reasoned
order, etc., under Section 10FZA.
Shall act in its discretion.—The Company Law Board shall subject to the principles of natural justice explained
above act in its discretion.
Where the discretion or the opinion to be formed is subjective, the court can examine the grounds disclosed by the
Company Law Board. The order of the Company Law Board can be challenged if it was mala fide.26
The exercise of powers, whether legislative or administrative, will be set aside if there is a manifest error in the
exercise of such power or the exercise of the power is manifestly arbitrary. Similarly, if the power has been
exercised on non-consideration or non-application of mind to relevant factors, the exercise of power will be
regarded as manifestly erroneous. If a power, (whether legislative or administrative), is exercised on the basis of
facts which do not exist and which are patently erroneous, such exercise of power will stand vitiated. Indisputably, it
is a settled position that if an action or decision is perverse or is such that no reasonable body of persons, properly
Page 15 of 22
informed, could come to or has been arrived at by the authority misdirecting itself by adopting a wrong approach or
has been influenced by irrelevant or extraneous matters, the court would be justified in interfering with the same.27
See also Comments under Appeal to High Court from orders of CLB in later paragraphs and Comments under
Section 10F.
Consent Order.— See Comments under Section 10F.
CLB to regulate its own procedure [Sub-section (6)].—The Company Law Board shall have power to regulate its
own procedure.
Company Law Board Regulations.—In exercise of the powers conferred by sub-section (6) of section 10E of the
Companies Act, 1956 (1 of 1956), theCompany Law Board has made the Company Law Board Regulations, 1991.*
In exercise of the powers conferred by section 642 read with section 637A(2) of the Companies Act, 1956 (1 of
1956), the Central Government has made the Company Law Board (Fees on Applications and Petitions) Rules,
1991.†
The practice and procedure of the Company Law Boardhave to be considered within the framework of the principles
of natural justice and the Company Law Board Regulations. The Evidence Act, 1872 or the Code of Civil Procedure,
1908 is not applicable to the proceedings before theCompany Law Board.28
Form and Procedure.—By the Companies (Second Amendment) Act, 2002, the powers and jurisdiction of the
Company Law Board(CLB) under various sections of the Companies Act, 1956 have been transferred to and vested
in the National Company Law Tribunal (NCLT), and in some cases to the Central Government.
See Lists of Powers conferred on the Company Law Board (CLB), Powers of CLB conferred on Tribunal (NCLT)
and Powers of CLB conferred on the Central Government hereinbefore. See also Comments under Sections 10 and
10FB.
Petitions under various Sections shall therefore be made as follows.
Petitions to Company Law Board [Till constitution of Tribunal].—Till enforcement of the Companies (Second
Amendment) Act, 2002 (11 of 2003), that is, the constitution of the National Company Law Tribunal (NCLT) under
Section 10FB (w.e.f. date to be notified) Applications or Petitions under various sections conferring powers and
jurisdiction on the Company Law Board shall be made to the Company Law Board as per the Company Law Board
Regulations, 1991.*
See Procedure for filing Petition [ Regulations 14, 35-40], Forms [Annexure II], Documents to be attached with the
Petition [ Regulation 18 and Annexure III] and Fees [ Regulation 34 ] of the Company Law Board Regulations,
1991.*
See also Fees on application or petition [ Rule 3 and Schedule] of the Company Law Board (Fees on Applications
and Petitions) Rules, 1991.**
Petitions to Tribunal [ After constitution of the Tribunal (NCLT)].—After the enforcement of the Companies
(Second Amendment) Act, 2002, i.e., on the constitution of the Tribunal (NCLT) under Section 10FB (w.e.f. date to
be notified) Applications or Petitions under various Sections of the Companies Act, 1956 conferring powers and
jurisdiction on the Tribunal (NCLT) shall be made to the Tribunal in accordance with Rules and Regulations framed
under Sections 10FB to 10FP.
See detailed Comments, Form and Procedure under Section 10FB and various Sections of the Companies Act,
1956 conferring powers.
Central Government.
—For powers conferred on the Central Government [Listed hereinbefore] Applications or Petitions shall be made to
the Central Government.
See detailed Comments, Form and Procedure under Sections 637 and 637A.
Page 16 of 22
Inherent powers of the Company Law Board.—Under Regulation 44 of the Company Law Board Regulations,
1991, the Company Law Boardhas the inherent powers to do substantial justice, akin to inherent powers of civil
court in section 151 of the Civil Procedure Code, 1908 (5 of 1908) and the company court under rule 9 of the
Companies (Court) Rules, 1959. It is permissible to adjust the rights of the parties on the basis of events happening
after initiation of proceedings and subsequent events may be taken into account to do justice to the parties.29
CLB—Power to call AGM—Inherent powers.—The Company Law Board(CLB) is empowered to exercise and
discharge such powers and functions as are conferred under the Companies Act, 1956, or any other law. By virtue
of Section 167 of the Act, it is clothed with the power of directing the calling of the Annual General Meeting (AGM)
as specified therein, which shall include the requisite ancillary or consequential directions in relation to the calling,
holding and conducting of the Meeting (AGM). Section 224(3) authorises the Central Government to appoint
Auditors in the event of non-appointment of Auditors at the Annual General Meeting for which an application has to
be made to the Regional Director to whom the powers of the Central Government have been delegated. The power
of appointment of Auditors is under the exclusive domain of the Regional Director. TheCLB has the inherent power
to pass such orders as may be necessary to meet the ends of justice and to prevent abuse of the process of the
Company Law Board (CLB).30
Now the powers and jurisdiction of the Company Law Board (CLB) under Section 167 has been transferred to and
vested in “the Central Government” by the Companies (Second Amendment) Act, 2002 (11 of 2003) (w.e.f. date to
be notified).
See detailed Comments under Sections 10E, 10FB, 167 and 637.
Contempt of Court.—The Company Law Board(CLB) is deemed to be a Court as envisaged in Regulation 47 for
the purposes of the Contempt of Courts Act, 1971. In exercise of inherent powers under Regulation 44 and powers
under Regulation 47 of theCLB Regulations, 1991, the CLBis empowered to invoke the provisions of Section 10 of
the Contempt of Courts Act, 1971 (70 of 1971) for punishing the defaulters for wilful disobeyance or violation of its
orders. Where theCLB ordered to maintain status quo with regard to disputed properties. The report of the
Advocate Commissioner showed that there was violation of the CLB order. It was contempt of the CLB order.31
On failure by the company to repay the deposits as undertaken by the company before the CLB and deliberately
denying the liability by taking contrary stands. The Directors were held guilty of Contempt of Court.32
When an undertaking has been recorded in accordance with law, a contempt proceeding would be maintainable.
Where the contemnors accepted their liability at least to the extent of Rs 7.63 crores. They accepted that the
disputes and differences pending between them should be referred to an Arbitrator, agreed that they would furnish
a bank guarantee but despite the undertaking given before the Court did not furnish any bank guarantee. Not only
this, they also sold the only property in their possession. The alleged contemnors did not disclose that the property
offered as security was encumbered and had been claimed by the State of Andhra Pradesh. If they were not in a
position to furnish any bank guarantee or otherwise, they could have taken such an unequivocal stand before the
Courts. The contemnors not only prevaricated at different stages in different proceedings, but also intended to
prolong the litigation one way or the other. They not only suppressed material facts, but also made a wrong
representation. The alleged contemnors misled the Court and committed gross contempt of the Court. The alleged
contemnors being the Managing Director and Director of the company were held liable to be punished for Contempt
of Court. No action was taken against the Director who had resigned.33
See also Comments under Sections 10F, 10FA, 10FB, 58A, 397-402 and 634A.
Appeal to High Court from orders of CLB.—Where the order passed by the Company Law Board was neither in
accordance with the rules of procedure nor based on the principles of natural justice. A question of law arose from
the order of the Board to be decided by the High Court under section 10F of the Act.34
See detailed Comments under Section 10F.
Appeals from Orders of CLB to Single Judge of High Court—No further Appeal to Division Bench (w.e.f. 1-
7-2002).—There are no two opinions in the matter that when the Company Law Board(CLB) exercises its powers
under the Companies Act, 1956, e.g., under Sections 397 and 398 of the Act, it exercised its quasi-judicial power as
an original authority. It may not be a Court but it has all the trappings of a Court. Therefore, the CLBwhile exercising
its original jurisdiction under Sections 397 and 398 passed the order and against that order appeal lies to the
Page 17 of 22
learned Single Judge of the High Court under Section 10F of the Act and thereafter no further appeal can be filed.
The second appeal from the order of the Company Judge under Section 10F of the Companies Act, 1956 is not
valid in view of Section 100A of the Code of Civil Procedure, 1908 (5 of 1908) (w.e.f. 1-7-2002). The Supreme Court
held that no further appeal lies to the Division Bench of the High Court. When the statute is very clear, whatever
where a Single Judge has decided the appeal from original order, has been taken away and it cannot be invoked in
the present context.35
See detailed Comments on Appeals from the Orders of CLB to the High Court—Change of law—No further Appeal
to Division Bench under Sections 10F.
See also Comments under Sections 10FA, 10FB-10FG, 397, 398 and 483.
Appeal after Tribunal (NCLT) [ Sections 10FB-10GF].—After commencement of the Companies (Second
Amendment) Act, 2002 (11 of 2003), the jurisdiction of the CLBand the High Court under various provisions of the
Companies Act, 1956 has been transferred to and vested in the Tribunal (NCLT).
An appeal shall lie to the Appellate Tribunal (NCLAT) [ Section 10FQ]. Person aggrieved by order of Appellate
Tribunal may file an appeal to the Supreme Court on question of law arising out of such order [ Section 10GF].
See detailed Comments under Sections 2(11), 10, 10F and 10FA-10GF.
Interlocutory or interim orders.—The Company Law Board has the right to pass such interlocutory or interim
orders as are necessary in the interests of the subject-matter of the proceedings and also of the parties.36
Appeal from order of Tribunal (NCLT).—On the constitution of Tribunal (NCLT) under Section 10FB of The
Companies Act, 1956, as inserted by the Companies (Second Amendment) Act, 2002 (11 of 2003), the jurisdiction
hitherto exercised by theCLB shall be conferred on the Tribunal (NCLT). Any person aggrieved by an order or
decision of the Tribunal (NCLT) may prefer an appeal to the Appellate Tribunal except consent orders [ Section
10FQ]. Any person aggrieved by decision or order of the Appellate Tribunal may file an appeal to the Supreme
Court with respect to Offences against the Companies Act.
—From a perusal of definition of Court under section 2(11) read with sections 10 and 10E [ now 10FB], it is
manifest that irrespective of any matter relating to companies other than any offences against the Companies Act,
the Court or the CLB [ now the Tribunal] shall have the jurisdiction to decide and adjudicate the matters relating to
companies. However, with respect to any offence against the Companies Act, 1956 the court of a Magistrate of the
First Class or, as the case may be, a Presidency Magistrate having jurisdiction to try the case, shall decide the
cases.37
See detailed Comments under Sections 5, 10 and 621 to 631.
Title to shares [ Sections 111 and 111A].—The CLB [ now the Tribunal (NCLT)] has jurisdiction to decide all
matters in connection with rectification of register of members under sections 111 and 111A but within the scope of
the provisions of the Companies Act, 1956. TheCLB [ now the Tribunal] has to examine as to whether the
complicated questions of title, forgery, fabrication or similar matters are really involved and if such complicated
questions of facts are involved then the parties should be referred to Civil Courts. If the CLB fails to consider as to
whether there are complicated questions then on appeal the matter is liable to be remanded to the CLB.38
Special Court (Trial of Offences in Securities) Act.—The Company Law Boardis “court” for the purposes of the
Page 18 of 22
Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992 (27 of 1992). As the jurisdiction in
case of notified persons stands transferred to the Special Court which has exclusive jurisdiction in such cases
under section 9A of the Special Court Act, 1992, theCLBwould not have jurisdiction to decide a petition or appeal
under section 111 or 111A of the Companies Act, 1956 in respect of transaction involving notified persons.39
Power of CLB to accord approval subject to conditions [ S. 637A].—The Company Law Board (CLB) [ now the
Central Government or the Tribunal (NCLT)] may accord approval, etc., subject to conditions, limitations or
restrictions and may, in case of contravention, rescind or withdraw such approval, etc.
Enforcement of orders of CLB [ Section 634A].—Any order made by the Company Law Board may be enforced
by that Board in the same manner as if it were a decree made by a Court. See detailed Comments under Section
634A.
CLB Benches (Destruction of Records) Rules.—In exercise of the powers conferred by section 3 of the
Destruction of Records Act, 1917 (5 of 1917), the Central Government has made the Offices of the Company Law
Board Benches (Destruction of Records) Rules, 1980.*
Compliance Certificate—Filing of Court/CLB Orders with the Registrar of Companies (ROC).—Relevant

paras of the Form appended to the Companies (Compliance Certificate) Rules, 2001 and ICSI Guidance Note on
Compliance Certificate are dealt with below.
Companies (Compliance Certificate) Rules, 2001 .—Every company not required to employ a whole-time Secretary
under sub-section (1) of Section 383A of the Companies Act, 1956 and having a paid-up share capital of Rs. 10
lakh or more shall obtain a Compliance Certificate from a Secretary in whole-time practice.
(AGM).
follows:
“2. The company has duly filed the Forms and Returns as stated in Annexure ‘B’ to this Certificate with the
Registrar of Companies, Regional Director, Central Government, Company Law Board or other Authorities within
the time prescribed under the Act and the Rules made thereunder.”
[Para 2 of Form of Compliance Certificate appended to the Companies (Compliance Certificate) Rules, 2001 : See
Full Text under 383A].
Check-List for issue of Compliance Certificate.—Check-List for issue of Compliance Certificate on Para 2 of the
Form of Compliance Certificate as contained in ICSI Guidance Note on Compliance Certificate, inter alia, requires
as follows.
Forms, Returns and Documents—To be Filed with the Registrar of Companies.—Check whether the company
has filed with the ROC the Requisite Forms, Returns and Documents within the prescribed time or with payment of
additional fees in the event of delayed filing. While a detailed List is given in Appendix-1 [See Appendix 1 to the
ICSI Guidance Note: See also List of Forms in Comments under Section 610B of this Book], Check List for
verification of frequently filed Forms, Returns and Documents is given hereunder [ relevant portion]:
Page 19 of 22
Other Important Returns.—(e) Court/CLB Orders.—Check whether Form No. 21 [ now e-Form 21] has been filed
with the ROC along with certified copies of the following orders :
Section
17(2) Order of the Company Law Board* approving the shifting of the
Registered Office from one State to other.
79 Order of the Company Law Board** approving Issue of Shares

at Discount.
81(3) Order of the Central Government approving the terms of issue

of debentures relating to conversion of debenture or loan into
shares.
94A(2) Order of the Central Government permitting public financial

institution to convert debentures or loan into shares.
102(1) Order of the Court*** confirming the reduction of capital.
107(3) Order of the Court*** disallowing or confirming variation of the

shareholders' rights.
111(5) or 111A Order of the Company Law Board*** dismissing the appeal or
rejecting the application in respect of refusal of Registration of
Transfer and directing that the transfer or transmission shall be
registered by the company/directing the rectification of the
Register of Members.
113 Order of the Company Law Board* granting extension of time

for issue of Debenture Certificate.
141 Order of the Company Law Board* extending time for filing
particulars of registration, modification or satisfaction of
charges or rectifying the Register of Charges.
186 Order of the Company Law Board*** for a meeting of the

company to be called, held and conducted in terms of the
Order.
391(2) Order of the Court*** sanctioning any Compromise or

Arrangement.
394(3) Order of the Court*** making provisions for several matters

specified in Section 394(1) for implementing the Compromise
or Arrangement.
404(3) Order of the Company Law Board*** providing for change in

Memorandum or Articles.
See detailed Comments under Sections 159, 220 and 610B.
under Section 383A.
Page 20 of 22
2. Substituted by the Companies (Amendment) Act, 1988 (31 of 1988), s. 4 (w.e.f. 31-5-1991). For sub-section (1) as it
3. Substituted by the Companies (Second Amendment) Act, 2002 (11 of 2003), s. 3, for “conferred on it” [(w.e.f.)
date to be notified].
4. Subs. by the Companies (Amdt.) Act, 1974 (41 of 1974), s. 4, for “five” (w.e.f. 1-2-1975).
5. Proviso added by Act 31 of 1988, s. 4 (w.e.f. 31-5-1991).
7. Omitted by the Companies (Amendment) Act, 1988 (31 of 1988), s. 4 (w.e.f. 31-5-1991). For sub-section (4A), which
was inserted by Act 31 of 1965, s. 4 (w.e.f. 15-10-1965), as it stood prior to its omission see Annexure at the end of this
Volume.
8. Sub-sections (4B), (4C) and (4D) inserted by the Companies (Amendment) Act, 1974 (41 of 1974), s. 4 (w.e.f. 1-2-
1975).
9. Substituted by the Companies (Amendment) Act, 1988 (31 of 1988), s. 4 (w.e.f. 31-5-1991), for “Without prejudice to
the provisions of sub-section (4A), the Board, with the previous approval of the Central Government,”.
10. Substituted by the Companies (Amendment) Act, 1977 (46 of 1977), s. 2, for “Chapter XXXV of the Code of Criminal
Procedure, 1898 (5 of 1898) ” (w.e.f. 24-12-1977).
11. Substituted by Act 31 of 1988, s. 4 (w.e.f. 31-5-1991). For sub-sections (5) and (6) as they stood prior to their
12. Prakash Timbers P. Ltd. v. Smt. Sushma Shingla, (1997) 89 Comp. Cas. 770 (All.) (DB); RDF Power Projects Ltd. v. M.
Muralikrishna, (2005) 124 Comp. Cas. 184 (AP). See detailed Comments under Section 10—Jurisdiction of Courts. See
also Comments under Sections 10F, 10FA and 10FB-10GF.
13. RDF Power Protects Ltd. v. M. Muralikrishna, (2005) 124 Comp. Cas. 184 (AP).
* Powers and jurisdiction presently exercised by the Company Law Board (CLB) under Sections 111 and 111A have now
been transferred to and vested in the National Company Law Tribunal (NCLT) to be constituted under Section 10FB, as
inserted by the Companies (Second Amendment) Act, 2002 (11 of 2003). The CLB shall stand dissolved on the
constitution of Tribunal under Section 10FB. See detailed Comments under Sections 10FA and 10FB-10GF.
† Jurisdiction of the CLB has been transferred to and vested in the Tribunal (NCLT) by the Companies (Second
Amendment) Act, 2002 (11 of 2003). The CLB shall stand dissolved on the constitution of the Tribunal under Section
10FB. See Sections 10FA and 10FB-10GF.
** Powers of the Company Law Board (CLB) under Section 621A as substituted by the Companies (Second Amendment)
Act, 2002 (11 of 2003) have been transferred to and vested in the Central Government. See detailed Comments under
Section 621A.
†† See the Securities Contracts (Regulation) (42 of 1956) Act, 1956 in Appendix 221 and the Securities Contracts
(Regulation) (Appeal to Securities Appellate Tribunal) Rules, 2000 in Appendix 224.
14. Kinetic Engineering Ltd. v. Unit Trust of India, (1995) 84 Comp. Cas. 910 (Bom.). See also Comments under Sections
10F and 111A.
* See the Company Law Board Regulations, 1991 in Appendix 5.
** See the Reserve Bank of India Act, 1934—Extracts from in Appendix 305.
15. Prudential Capital Markets Ltd. v. State of Andhra Pradesh, (2002) 108 Comp. Cas. 441 (AP); Whirlpool Corporation v.
Registrar of Trade Marks,AIR 1999 SC 22. See detailed Comments under Section 10—Jurisdiction of Courts.
† See the Competition Act, 2002 (12 of 2003) in Appendix 324.
16. Company Law Board v. Upper Doab Sugar Mills Ltd., (1977) 47 Comp. Cas. 173 (SC) : AIR 1977 SC 831 [LNIND 1976
SC 503]; Barium Chemicals Ltd. v. CLB, (1966) 36 Comp. Cas. 639 (SC) : AIR 1967 SC 295 [LNIND 1966 SC 132]:
(1966) Supp. SCR 311 : (1966) 2 Comp. LJ 151 (SC); New Central Jute Mills Co. Ltd. v. Deputy Secretary, Ministry of
Finance, (1970) 40 Comp. Cas. 102 (Cal.) (DB) : 73 CWN 557; Alak Prokash Jain v. UOI, (1973) 43 Comp. Cas. 68
(Cal.) (DB); Shri Krishna Tiles and Potteries (Madras) P. Ltd. v. CLB, (1979) 49 Comp. Cas. 409 (Delhi) (DB). See
detailed Comments under Sections 237, 388B-388E, 399, 637, 637A and 637AA.
17. V. Balachandran v. Union of India, (1993) 76 Comp. Cas. 67 (Mad.) (DB). See fuller discussion in Comments under
Section 10F.
* See the Company Law Board (Qualifications, Experience and other Conditions of Service of Members) Rules, 1993 in
Appendix 7.
† See the Company Law Board Regulations, 1991 in Appendix 5.
Page 21 of 22
18. Anand Shrivastav v. Union of India, (2006) 129 Comp. Cas. 664 (Delhi); T.P.G. Nambiar v. BPL Communications Ltd.,
(2006) 129 Comp. Cas. 713 (CLB).
19. Prakash Timbers P. Ltd. v. Smt. Sushma Shingla, (1997) 89 Comp. Cas. 770 (All.) (DB). See fuller discussion in
Comments under Section 10F.
20. Smt. Nupur Mitra v. Basubani Pvt. Ltd.,(1999) 35 CLA 97 (Cal.) (DB) : (1999) 2 Cal. LJ 264; Khurshid Alam v. P.
Pagnon Co. Pvt. Ltd., (2002) 108 Comp. Cas. 523 (CLB); Tommy Mathew v. Duroflex Ltd., (2004) 122 Comp. Cas. 741
(CLB). See also Comments under Ss. 111 and 111A.
21. Karnataka Theatres Ltd. v. S. Venkatesan, (1998) 93 Comp. Cas. 433 (Kar.) : AIR 1996 Kar. 18. See also Comments
under Sections 111 and 111A.
22. Shiv Dayal Agarwal v. Sidhartha Polyster Pvt. Ltd., (1997) 88 Comp. Cas. 705 (CLB); Carbon Corporation Ltd. v.
Abhudaya Properties Pvt. Ltd., (1992) 73 Comp. Cas. 572 (CLB). See detailed Comments under Sections 111 and
111A.
23. Smt. Nupur Mitra v. Basubani Pvt. Ltd., (2002) 108 Comp. Cas. 359 (CLB); C. Mathew v. Cochin Stock Exchange Ltd.,
(1998) 91 Comp. Cas. 344 (CLB). See also Jagjit Rai Maini v. Punjab Machinery Works (P.) Ltd., (2001) 103 Comp.
Cas. 979 (P&H); Anil Gupta v. Delhi Cloth and General Mills Co. Ltd., (1983) 54 Comp. Cas. 301 (Delhi).
24. Union of India v. Kopran Ltd., (2006) 134 Comp. Cas. 665 (CLB).
Gharib Ram Sharma v. Daulat Ram Kashyap, (1994) 80 Comp. Cas. 267 (Raj.). See detailed Comments under
Sections 10F and 10FZA.
26. Barium Chemicals Ltd. v. CLB, (1966) 36 Comp. Cas. 639 (SC) : AIR 1967 SC 295 [LNIND 1966 SC 132]: (1966)
Supp. SCR 311. See also Comments under Section 237.
CIT v. Mahindra & Mahindra Ltd., (1983) 54 Comp. Cas. 651 (SC) : AIR 1984 SC 1182 [LNIND 1983 SC 232]: (1983)
144 ITR 225 [LNIND 1983 SC 232] (SC) : (1983) 3 SCR 773 [LNIND 1983 SC 232]. See also Comments under Section
394.
† See the CLB (Fees on Applications and Petitions) Rules, 1991 in Appendix 6.
28. Rajinder Kumar Malhotra v. Harbanslal Malhotra and Sons Ltd., (1996) 87 Comp. Cas. 146 (CLB). See also Comments
29. Sri Ramdas Motor Transport Ltd. v. Karedla Suryanarayana, (2002) 110 Comp. Cas. 193 (AP); Shoe Specialities P.
Ltd. v. Standard Distilleries and Breweries P. Ltd., (1997) 90 Comp. Cas. 1 (Mad.) (DB); Rajinder Kumar Malhotra v.
Harbanslal Malhotra and Sons Ltd.,(1999) 34 CLA 360 (Cal.); Shree Cement Ltd. v. Power Grid Corporation Ltd.,
(1998) 93 Comp. Cas. 854 (CLB). See also Comments under Sections 397, 398 and 402.
30. Jindal Praxair Oxygen Co. P. Ltd. v. Praxair Pacific Ltd., (2006) 129 Comp. Cas. 905 (CLB).
31. N. Venkata Swamy Naidu v. Sri Sri Surya Teja Constructions P. Ltd., (2007) 140 Comp. Cas. 412 (AP); Canara Bank v.
Nuclear Power Corporation of India Ltd., (1995) 84 Comp. Cas. 70 (SC). See also Comments under Sections 10E, 10F,
10FB, 397, 398 and 402.
32. Edpuganti Bapanaiah v. K.S. Raju, (2007) 139 Comp. Cas. 545 (AP).
34. Sri Ramdas Motor Transport Ltd. v. Karedla Suryanarayana, (2002) 110 Comp. Cas. 193 (AP). See detailed Comments
under Section 10F.
36. Rajinder Kumar Malhotra v. CLB, (1996) 85 Comp. Cas. 176 (SC); Mrs. Saroj Goenka v. Nariman Point Building
Services and Trading Pvt. Ltd., (1997) 90 Comp. Cas. 205 (Mad.) (DB); BPL Communications Ltd. v. T.P.G. Nambiar,
(2006) 132 Comp. Cas. 13 (CLB). See also Comments under Sections 397 and 398.
37. Bank of Rajasthan Ltd. v. State of Bihar, (2002) 108 Comp. Cas. 556 (Patna). See also Comments under Sections
2(11), 5, 10, 10FB and 113.
38. Ammonia Supplies Corporation (P.) Ltd. v. Modern Plastic Containers Pvt. Ltd., (1998) 94 Comp. Cas. 310 (SC); T.G.
Veera Prasad v. Sree Rayalaseema Alkalies and Allied Chemicals Ltd., (1999) 98 Comp. Cas. 806 (AP). See also
Comments under Sections 10, 10FB, 111 and 111A.
Railway Finance Corporation Ltd., (1996) 85 Comp. Cas. 716 (Delhi). See also Comments under Sections 10, 10F, 111
and 111A.
* See the Offices of the CLB Benches (Destruction of Records) Rules, 1980 in Appendix 39.
Page 22 of 22
** Power transferred to the Central Government and in respect of Sick Industrial Companies power vested with National
Company Law Tribunal (NCLT) from the commencement of the Companies (Second Amendment) Act, 2002 (11 of
2003) [ w.e.f. date to be notified].
*** Power transferred to National Company Law Tribunal (NCLT) from the commencement of the Companies (Second
Amendment) Act, 2002 (11 of 2003) [ w.e.f. date to be notified].
End of Document
Datta: Company Law
C R Datta
LAW ADMINISTRATION
40[S. 10F. Appeals against the orders of the Company Law Board.
—Any person aggrieved by any decision or order of the Company Law Board41[ made before the
commencement of the Companies (Second Amendment) Act, 2002 (11 of 2003)] 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.]
41. Inserted by the Companies (Second Amendment) Act, 2002 (11 of 2003) s. 4 [(w.e.f.) date to be notified].
42. Stridewell Leathers (P.) Ltd. v. Bhankerpur Simbhaoli Beverages (P.) Ltd., , (1994) 79 Comp. Cas. 139 (SC). See also
Comments under Section 10E and 10FB.
43. Minoo H. Mody v. Hemant D. Vakil, , (1997) 89 Comp. Cas. 456 (Bom.) (DB) : AIR 1994 Bom. 39 [LNIND 1993 BOM
463]; Smt. Arati Dutta v. Eastern Tea Estate (P.) Ltd., , (1988) 64 Comp. Cas. 313 (SC); Manohar Rajaram Chhabria v.
UOI, , (2002) 110 Comp. Cas. 162 (Cal.) (DB). See also Comments under Interpretation of provisions relating to
Appeals and Remedies under Section 10.
44. Tin Plates Dealers Association Pvt. Ltd. v. Satish Chandra Sanwalka, , (2002) 108 Comp. Cas. 295 (Cal.). See also
Comments under Section 10, 10FB-10GF and 483. From the commencement of the Companies (Second Amendment)
Act, 2002, the jurisdiction of the CLB and High Court has been transferred to the Tribunal. An appeal lies to the
Appellate Tribunal [ Section 10FQ]. Person aggrieved by order of Appellate Tribunal may file an appeal to the Supreme
Court on question of law arising out of such order [ Section 10GF].
45. Bhenoy G. Dembla v. Prem Kutir P. Ltd., , (2003) 117 Comp. Cas. 643 (Bom.) (DB).
46. Prakash Timbers P. Ltd. v. Smt. Sushma Shingla, , (1997) 89 Comp. Cas. 770 (All.) (DB).
47. Maharashtra Power Development Corporation Ltd. v. Dabhol Power Co., , (2003) 117 Comp. Cas. 651 (Bom.) (DB).
48. Kamal Kumar Dutta v. Ruby General Hospital Ltd., , (2006) 134 Comp. Cas. 678(SC).
49. Mineria Nacional Limitada v. Sociedade De Fomento Industrial P. Ltd., , (2007) 136 Comp. Cas. 290 (Bom.) (FB).
50. Vinod K. Patel v. Industrial Finance Corporation of India Ltd., , (2001) 103 Comp. Cas. 557 (Delhi). See also Comments
under Section 111 and 11A.
51. Malleswara Finance and Investments Co. P. Ltd. v. Company Law Board, , (1995) 82 Comp. Cas. 836 (Mad.) (DB);
Caparo India Ltd. (U.K.) v. Caparo Maruti Ltd., , (2007) 140 Comp. Cas. 481 (Delhi). See also Comments under
52. Micromeritics Engineers Pvt. Ltd. v. S. Munusamy, , (2004) 122 Comp. Cas. 150 (Mad.) (DB). See also Comments
under Section 53, 193, 195, 397, 398 and 402.
53. Trackparts of India Ltd. v. K.N. Bhargava, , (2002) 109 Comp. Cas. 350 (All.). See also Comments under Sections 397,
398 and 402.
Page 2 of 14
54. Mohd. Jafar v. Nahar Industrial Enterprises Ltd., , (1998) 93 Comp. Cas. 717 (Delhi); CIT v. Scindia Steam Navigation
Co. Ltd., , (1961) 42 ITR 589 [LNIND 1961 SC 159] (SC) : AIR 1961 SC 1633 [LNIND 1961 SC 159]. For Jurisdiction of
Central Government, Tribunal (NCLT), Appellate Tribunal and the Supreme Court after the commencement of the
Companies (Second Amendment) Act, 2002 (11 of 2002) see Comments under Sections 10E, 10FA, 10FB, 10GF and
17.
55. Shoe Specialities Ltd. v. Tracstar Investment Ltd., , (1997) 88 Comp. Cas. 471 (Mad.) (DB).
56. Gordon Woodroffe and Co. Ltd., U.K. v. Gordon Woodroffe Ltd., Chennai, , (1999) 97 Comp. Cas. 582 (Mad.). See also
Comments under Sections 10, 10E, 111, 397 and 398.
57. Cachar Native Joint Stock Co. Ltd. v. Smt. Namita Gupta, , (2004) 122 Comp. Cas. 1 (Gauhati). See also Comments
under Sections 111A, 179, 257, 397 and 398.
59. Manohar Rajaram Chhabria v. UOI, , (2002) 110 Comp. Cas. 162 (Cal.) (DB). See also Comments under Sections 10E,
10FA and 10FB to 10GF.
60. Dale and Carrington Invt. P. Ltd. v. P.K. Prathapan, , (2004) 122 Comp. Cas. 161 (SC) : (2004) 4 Comp. LJ 1 (SC) :
AIR 2004 SCW 5143 : (2004) 7 JT 434 (SC) : (2004) 7 Supreme 209 : (2004) 7 Scale 583 (SC) (Mrs. Ruma Pal and
Arun Kumar JJ.).
61. VLS Finance Ltd. v. Sunair Hotels Ltd., , (2007) 137 Comp. Cas. 434 (Delhi).
62. Cachar Native Joint Stock Co. Ltd. v. Smt. Namita Gupta, , (2004) 122 Comp. Cas. 1 (Gauhati).
63. S. Ashok v. Tamil Nadu Mercantile Bank Ltd., , (2005) 127 Comp. Cas. 351 (Mad.) (DB).
64. Vinod Kumar v. Sigmalon Equipment P. Ltd., , (2005) 127 Comp. Cas. 54 (Bom.).
65. Maharashtra Power Development Corporation Ltd. v. Dabhol Power Co., , (2003) 117 Comp. Cas. 506 (Bom.) affirmed
in Maharashtra Power Development Corporation Ltd. v. Dabhol Power Co., , (2004) 120 Comp. Cas. 560 (Bom.) (DB).
66. Bhagwati Developers Pvt. Ltd. v. Peerless General Finance and Investment Co. Ltd., , (2005) 128 Comp. Cas. 444
(Cal.).
67. Mrs. Saroj Goenka v. Nariman Point Building Services and Trading Pvt. Ltd., , (1997) 90 Comp. Cas. 205 (Mad.) (DB).
68. Baljit Kaur Vohra v. Dr. Vikramjit Singh Vohra, , (2003) 115 Comp. Cas. 194 (P&H) (DB).
69. Scientific Instrument Co. Ltd. v. Rajendra Prasad Gupta, , (1999) 95 Comp. Cas. 615 (All.) approving Satish Chand
Sanwalka v. Tinplate Dealers Association Pvt. Ltd., , (1998) 93 Comp. Cas. 70 (CLB). See also Comments under
Sections 84, 164 and 397 to 399.
70. Chand Mall Pincha v. Hathimal Pincha, , (1999) 95 Comp. Cas. 368 (Gauhati) : (1999) 2 Comp. LJ 108 (Gauhati). Now
see Comments under Section 10GF.
71. Boiron v. SBL Pvt. Ltd.,(1999) 33 CLA 51 (Delhi) : (1998) 16 SCL 578 (Delhi).
72. J.P. Srivastava and Sons (Rampur) P. Ltd. v. Gwalior Sugar Co., , (2000) CLC 1792 (MP). See also Comments under
73. Gillette International v. R.K. Malhotra,(1998) 31 CLA 73 (Cal.).
74. Dove Investments Pvt. Ltd. v. Gujarat Industrial Inv. Corporation, (2006) 129 Comp. Cas. 929 (SC). See also
75. J.P. Srivastava and Sons Pvt. Ltd. v. Gwalior Sugar Co. Ltd., , (2004) 122 Comp. Cas. 696 (SC) : AIR 2005 SC 83
[LNIND 2004 SC 1096]: (2004) 9 JT 507 (SC) : (2004) 7 Supreme 794 (Mrs. Ruma Pal and Arun Kumar JJ.). See also
76. Micromeritics Engineers Pvt. Ltd. v. S. Munusamy, , (2004) 122 Comp. Cas. 150 (Mad.) (DB).
77. Prakash Timbers P. Ltd. v. Smt. Sushma Shingla, , (1997) 89 Comp. Cas. 770 (All.) (DB) : AIR 1995 All. 320 [LNIND
1995 ALL 64]; M.V. Paulose v. City Hospital (P.) Ltd., , (1999) 96 Comp. Cas. 588 (CLB).
78. Dr. Dheep Rajappa v. A. Sivasubramanian, ,(2002) 110 Comp. Cas. 45 (CLB).
79. M.V. Paulose v. City Hospital (P.) Ltd., , (1999) 96 Comp. Cas. 588 (CLB) : (1998) 28 CLA 46 (CLB) : (1998) 15 SCL 49
(CLB).
80. Shree Cement Ltd. v. Power Grid Corporation Ltd., (1998) 93 Comp. Cas. 854 (CLB) : (1998) 4 Comp. LJ 148 (CLB).
81. V. Sundararajan v. R.R. Spinning Mills Ltd., , (1999) 98 Comp. Cas. 105 (CLB). See also Comments under Sections
397, 398 and 402.
Page 3 of 14
82. PPN Power Generating Co. Ltd. v. PPN (Mauritius) Co., , (2006) 129 Comp. Cas. 849 (Mad.) (DB). See also
Comments under Sections 10E, 10FA, 291 and 402.
83. United India Insurance Co. Ltd. v. Rajendra Singh, , (2000) 100 Comp. Cas. 705 (SC) : (2000) 37 CLA 405 (SC).
84. Gharib Ram Sharma v. Daulat Ram Kashyap, , (1994) 80 Comp. Cas. 267 (Raj.). See also Comments under Section
10E(5).
85. C. Sri Hari Rao v. Sri Ramdas Motor Transport Ltd., , (1999) 97 Comp. Cas. 685 (AP) (DB) : (1999) 1 Comp. LJ 280
(AP) (DB).
86. Dr. Bais Surgical and Medical Institute Pvt. Ltd. v. Dhananjay Pande, , (2005) 128 Comp. Cas. 273 (Bom.); Serum
Institute of India Ltd. v. Inderjit Properties P. Ltd., , (2006) 129 Comp. Cas. 757 (CLB). See also Comments under
Sections 10E, 397 and 398.
87. Subhash Mohan Dev v. Santosh Mohan Dev, , (2001) 104 Comp. Cas. 404 (Gauhati).
88. Birla Corporation Ltd. In re, , (2006) 133 Comp. Cas. 515 (Cal.).
89. Kinetic Engineering Ltd. v. Unit Trust of India, , (1995) 84 Comp. Cas. 910 (Bom.). See detailed Comments under
Sections 10E and 111A.
90. United Western Bank Ltd. v. Company Law Board, , (2001) 107 Comp. Cas. 63 (Kar.) (DB). See also Comments under
Section 58A.
91. Sri Ramdas Motor Transport Ltd. v. Karedla Suryanarayana, , (2002) 110 Comp. Cas. 193 (AP). See also Comments
under Section 10E.
92. Malleswara Finance and Investments Co. P. Ltd. v. Company Law Board, , (1995) 82 Comp. Cas. 836 (Mad.) (DB).
93. L. Chandra Kumar v. Union of India, , (1997) 228 ITR 725 (SC). For fuller discussion see Comments under Sections 10,
10FB and 10GB.
94. V. Balachandran v. Union of India, (1993) 76 Comp. Cas. 67 (Mad.) (DB); Minerva Mills Ltd. v. UOI,AIR 1980 SC 1789
[LNIND 1980 SC 257]; S.P. Sampath Kumar v. UOI,AIR 1987 SC 386 [LNIND 1986 SC 500]:,(1987) 1 SCR 435
[LNIND 1989 SC 328]. See also Comments under Sections 10, 10E and 10FB-10GF.
95. Apparel Export Promotion Council v. A.K. Chopra,AIR 1999 SC 625 [LNIND 1999 SC 33]; CBDT v. Oberoi Hotels
(India) P. Ltd.,AIR 1998 SC 1666 [LNIND 1998 SC 378]:,(1998) 231 ITR 148 [LNIND 1998 SC 378] (SC) : (1998) 4
SCL 552 (SC).
96. Smt. Sudershan Chopra v. Vijay Kumar Chopra, , (2003) 117 Comp. Cas. 660 (P&H) (DB).
COMMENTS
Legislative History.— The Companies (Amendment) Act, 1988 (31 of 1988).—The Notes on clauses explained
this section as follows: “This clause provides that the orders of the Company Law Board will be appealable to High
Court on questions of law.” [ Clause 5 of the Companies (Amendment) Bill, 1987 (32 of 1987)].
The Companies (Second Amendment) Act, 2002(11 of 2003).—The Notes on clauses explained as follows: “This
clause seeks to amend the provisions of section 10F, to provide that appeal against any decision or order of the
Company Law Board made before the commencement of Companies (Amendment) Act, 2002, shall lie with the
High Court. The proposed amendment is of consequential nature.” [ Clause 4 of the Companies (Amendment) Bill,
2001 (80 of 2001)].
See also Legislative History under Sections 10E, 10FA and 10FB.
Jurisdiction of CLB transferred to the Tribunal from the commencement of the Companies (Second
Amendment) Act, 2002.—From the commencement of the Companies (Second Amendment) Act, 2002, i.e., on
the Constitution of the National Company Law Tribunal (NCLT) under Section 10FB, the Company Law Board(CLB)
shall stand dissolved [ Section 10FA] and the jurisdiction, powers and functions hitherto exercised by the CLB shall
be transferred to and vested in the Tribunal.
Person aggrieved by order or decision of the Tribunal (NCLT) may prefer an appeal to the Appellate Tribunal except
Page 4 of 14
consent orders [ Section 10FQ]. Person aggrieved by order of Appellate Tribunal may file an appeal to the Supreme
See detailed Comments under Sections 10E, 10FA and 10FB to 10GF.
The following commentary on Appeal against orders of the CLBunder Section 10F shall be applicable till
setting up of the Tribunal (NCLT) and Appellate Tribunal (NCLAT) under Sections 10FB and Sections 10FR
of the Companies Act, 1956, inserted by the Companies (Second Amendment) Act, 2002 (11 of 2003), and
will be useful in Appeal to the Appellate Tribunal (NCLAT) [ Section 10FQ] and the Supreme Court [ Section
10GF].
Appeals against the orders of the Company Law Board.—A person aggrieved by the decision or order of the
Company Law Board may prefer an appeal to the High Court. The limitation is 60 days from the date of receipt of
the communication of the decision or order of the CLBby the appellant. The appeal would lie only on question of law
which arises out of the decision or order. The High Court has been given the power to condone the delay in filing
appeal upto 60 days. By implication section 5 of the Limitation Act, 1963 will have no application.
However, this right of appeal will not prevent the aggrieved persons from resorting to the remedies available under
Articles 226 or 32 of the Constitution of India.
See Writs, Judicial review and Constitutional validity in later paragraphs.
Appeal from CLB Order to the High Court.—The expression “the High Court” in section 10F of the Companies
Act, 1956 means the High Court having jurisdiction in relation to the place at which the registered office of the
company concerned is situate as indicated by section 2(11) read with section 10(1)(a) of the Act and not the High
Court having jurisdiction in relation to the place where the concernedBench of the Company Law Board sits.
Therefore, appeal from the order of the CLB lies to the High Court having jurisdiction over the place where the
registered office of the company concerned is situate and not to the High Court where the concerned Bench of the
Company Law Board sits.42 An appeal to the High Court on a question of law under section 10F against an order of
the Company Law Board can be entertained by the High Court only on the Original Side as a Company Matter. A
Memorandum of Appeal has to be filed and there may be a petition for stay of the operation of CLB Order.
However, as the right of appeal under section 10F is a valuable statutory right, it cannot be whittled down for the
mistake in the form.43
Appeals under section 10F should be taken up by the company judge of the High Court sitting singly and not by the
Division Bench. The forum of appeal under section 10F is different from the forum of appeal under section 483 of
the Act.44
No further appeal to Division Bench (w.e.f. 1-7-2002).—As there is no express conferment of a right of a further
appeal to the Division Bench of the High Court against the decision of a single judge under section 10F of the
Companies Act, 1956 an appeal to the Division Bench would not be maintainable against the decision of the single
judge rendered after July 1, 2002 in view of new section 100A of the Code of Civil Procedure, 1908 (5 of 1908).45
Earlier, it was held that a special appeal to the Division Bench against an order of single judge on appeal under
section 10F was maintainable.46
Bar of appeal to Division Bench (w.e.f. 1-7-2002) would not be applicable where special provision exists for such
appeal. Appeal under section 483 of the Companies Act, 1956 would not therefore be barred in view section 100A
of the CPC.47
Appeals from Orders of CLB to Single Judge of High Court—No further Appeal to Division Bench (w.e.f. 1-
7-2002).—There are no two opinions in the matter that when the Company Law Board(CLB) exercises its powers
under the Companies Act, 1956, e.g., under Sections 397 and 398 of the Act, it exercised its quasi-judicial power as
an original authority. It may not be a Court but it has all the trappings of a Court. Therefore, the CLBwhile exercising
its original jurisdiction under Sections 397 and 398 passed the order and against that order appeal lies to the
learned Single Judge of the High Court under Section 10F of the Act and thereafter no further appeal can be filed.
The second appeal from the order of the Company Judge under Section 10F of the Companies Act, 1956 is not
Page 5 of 14
valid in view of Section 100A of the Code of Civil Procedure, 1908 (5 of 1908) (w.e.f. 1-7-2002). The Supreme Court
held that no further appeal lies to the Division Bench of the High Court. When the statute is very clear, whatever
where a Single Judge has decided the appeal from original order, has been taken away and it cannot be invoked in
the present context.48
See detailed Comments on Appeals from the Orders of CLB to the High Court—Change of law—No further Appeal
to Division Bench under Sections 10F.
See also Comments under Sections 10FA, 10FB-10GF, 397, 398 and 483.
Companies Act, 1956 has been transferred to and vested in the Tribunal (NCLT).
An appeal shall lie to the Appellate Tribunal (NCLAT) [ Section 10FQ]. Person aggrieved by order of Appellate
Tribunal may file an appeal to the Supreme Court on question of law arising out of such order [ Section 10GF].
See detailed Comments under Section 2(11), 10, 10E and 10FA-10GF.
Appeal to Single Judge of High Court not Division Bench.—The provisions of Chapter I, Rule 2(1)(a)(v) of the
Bombay High Court (Appellate Side) Rules, 1960, provide that it is a Single Judge who is required to entertain and
dispose of appeals from orders under local or special Acts not having the force of a decree. Therefore, an appeal
from a decision or order of the Company Law Board(CLB), filed under Section 10F of the Companies Act, 1956, is
required to be entertained and disposed of by a Single Judge of the High Court and not by the Division Bench.49
Aggrieved person.—As per section 10F “any person aggrieved” by the decision or order of the CLB may file an
appeal to the High Court. Therefore, only the person competent to move the CLB for substantive relief is entitled to
file appeal to the High Court. A person other than the transferor or transferee cannot file an appeal before the CLB
under section 111 or 111A of the Act. Thus, a stranger to section 111(2) cannot be an aggrieved person entitled to
appeal to the High Court against the order of the Company Law Board refusing relief under section 111 of the Act.50
Appeal to High Court only on Question of Law.—An appeal under section 10F before the High Court can be
entertained only on a question of law which arises from the order of the Company Law Board. The only question
whether the increased share capital was proper and whether the same was offered to the petitioners was purely a
question of fact. In that view of the matter, the decision of the Company Law Board was proper and no interference
was called for.51
Question of law arising out of order of CLB.—The High Court in an appeal under section 10F is empowered to
decide any question of law arising out of the order of the CLB. But on a question of fact, the High Court is not
entitled to reappraise the evidence let in before the CLB. The findings rendered by the CLB that no notice was
issued, shareholders were not present at the meeting, increase in share capital was not bona fide, appointment and
removal of directors was not validly done were all questions of fact and supported by evidence. Decision of the CLB
was rendered after elaborate discussion. No fresh material was placed before the Appellate Court. The High Court
in appeal would not interfere with factual findings based on evidence.52
An appeal under section 10F, of the Companies Act, 1956 lies only on a question of law arising out of the order
ofCLB. The scope of the appeal cannot be stretched beyond this permissible limit.53 The dispute as to the service of
notice for the meeting and the validity of demand for the poll are questions of facts and an Order of CLB on this
point will not be appealable. Under section 10F, the High Court would not interfere with an order of the Company
Law Board if the question canvassed was not raised before the CLB and it did not arise out of the order of CLB.54
Page 6 of 14
Appellate Jurisdiction after constitution of Tribunal (NCLT).—From the commencement of the Companies
(Second Amendment) Act, 2002 (11 of 2003), that is, on Constitution of the Tribunal (NCLT) under Section 10FB,
the jurisdiction, powers and functions of the CLBunder various Sections of the Companies Act, 1956 shall be
transferred to and vested in the Tribunal (NCLT).
Supreme Court decisions under similar provisions, that is, Question of law arising out of the order of the Tribunal
(ITAT) under section 256 of the Income-tax Act, 1961 have been dealt with in Comments under Section 10GF.
See detailed Comments under Section 10E, 10FA and 10FB to 10GF.
Finding of fact.—A finding of fact based on proven facts is not a question of law. A finding that the requirements of
of the Companies Act, 1956 were not fulfilled for issuing the duplicate share certificates can be a finding of fact.55
The jurisdiction of the High Court under section 10F [the Supreme Court under section 10GF] of the Companies
Act, 1956 is limited. It can go into the question of law arising out of the order of theCLB [the Appellate Tribunal]. The
High Court cannot go into the question of facts such as the validity of transfer of shares which requires
consideration of evidence including examination of witnesses. Where proper parties are not before the CLB or the
High Court it cannot exercise the jurisdiction at the request of a third party as the order would be a futile exercise.56
No perversity in findings, High Court will not disturb.—Where validity of election held in EGM and sale and
transfer of shares was challenged. Shareholders' register was not produced before the CLB to controvert
allegations of manipulations of record. No denial was made before the CLB of allegations of false proxies, casting
dead shareholders' votes and other manipulations. No attempt was made to justify sale and transfer of shares.
Finding of the CLB that election held was invalid and sale and transfer of shares was only to increase voting power
was based on factual details. There was no perversity in findings. The High Court will not disturb in appeal.57
perversity of the finding itself becomes a question of law.58
As the Company Law Board(CLB) [the Tribunal (NCLT) and Appellate Tribunal under Section 10FB and 10FQ] is
the final fact-finding authority, the conclusions arrived at by it have to be given due weight and unless the same are
held to be perverse, no interference with the same by the High Court in appeal under section 10F [the Supreme
Court under section 10GF] is warranted. But a Tribunal cannot base its findings on mere suspicion, surmises and
conjectures.59
After the commencement of the Companies (Second Amendment) Act, 2002, appeal from orders of the Appellate
Tribunal shall lie to the Supreme Court on similar grounds. See detailed Comments under Sections 10FB, 10FQ
and 10GF.
CLB Order—Appealable—High Court's power in appeal.—From Order of Company Law Board(CLB), an appeal
can be preferred to the High Court. The Appeal Court may interfere in the Order of the Company Law Board(CLB) if
the finding of the facts by the CLB is perverse. Such perversity of finding itself is a question of law. Additional
shares were issued in favour of the Managing Director of the Company. On an application the Company Law
Board(CLB) held that the said issue of additional shares was an act of oppression. However, the CLB gave option
to other shareholders to sell their shares in favour of the appellant. On appeal the High Court set aside the issue of
additional shares and held that the manipulation of records of the company by the Managing Director was an act of
fraud. On appeal from the order of the High Court the Apex Court upheld the order of the High Court. The Supreme
Court held that the interference of the Calcutta High Court with the order of the Company Law Board(CLB) by
setting aside the allotment of shares was justified. It was held that the CLB's finding of fact was perverse and was
based on no evidence and it can be set aside in appeal even though appeal is permissible only on question of law.
A perversity of finding itself becomes a question of law.60
Page 7 of 14
See detailed Comments on Jurisdiction of Courts, CLB and Tribunal (NCLT) under Section 2(11), 10, 10E, 10FA,
10FB-10GF, 81, 397, 398, 402 and 483.
High Court to deal with question of law—Matter on facts remanded.—Where the Company Law Board(CLB)
considered in detail the pre-Memorandum of Understanding transactions and events and the post-Memorandum of
Understanding conduct of the parties but failed to deal with the terms of the Memorandum of Understanding(MoU).
As the vital piece of evidence in favour of the appellant was not considered by the CLB, the High Court had the
jurisdiction under Section 10F of the Companies Act, 1956 to look into the order passed by theCLB. The questions
whether the conduct of the respondents breached the Memorandum of Understanding(MoU) were issues of fact
which required to be determined by the CLB after taking into account the plea put forth by both the sides. The
impact of the Mou had to be considered in the light of the evidence on record which required fresh investigation of
facts. Since the CLB had not gone into the entire genesis of the dispute originating from the Mou the High Court
could not delve into the facts to record findings either in favour or against the appellant or respondents under
Section 10F of the Act. The order of the CLB was set aside and matter was remanded to the CLB to consider the
entire dispute afresh by taking into account the observations made.61
See Comments on Oppression and Mismanagement under Ss. 397 and 398.
Companies Act, 1956 has been transferred to and vested in the National Company Law Tribunal(NCLT) to be
constituted under Section 10FB (w.e.f. date to be notified).
An appeal from the order of the National Company Law Tribunal(NCLT) shall lie to the National Company Law
Appellate Tribunal(NCLAT) [ Section 10FQ].
Person aggrieved by order of Appellate Tribunal may file an appeal to the Supreme Court on question of law arising
out of such order [ Section 10GF].
See detailed Comments on Jurisdiction of Courts, CLB and Tribunal (NCLT) Section 2(11), 10, 10E, 10FA and
10FB-10GF.
Election of Directors—Validity of—Appeal.—Application was made before the Company Law Board(CLB)
challenging the Election of Directors, Sale and Transfer of the Shares alleging manipulation of Records. The
Company or the respondents did not produce any materials or Shareholders' Register, did not deny allegations of
false Proxies, Casting of dead shareholder's votes and other manipulations. The Company Law Board (CLB) came
to the conclusion that the allegations were substantially correct and directed that the applicants were duly elected
and directed the existing Board of Directors to hand over the management to the applicant Group. On an appeal
from Order of the CLB, the High Court held that the decision of Company Law Board (CLB) was justified. The High
Court directed to constitute an interim Board of Directors to examine the Transfer of the Shares subsequent to a
particular date and determine the legality and validity thereof including the increase in paid-up capital of the
applicant and fresh Election.62
See also Comments under Section 111A, 179, 257, 397 and 398.
Banking Company—Powers of RBI to give directions.—On a petition by the Central Government, the Company
Law Board(CLB) [ now the Tribunal (NCLT)] ordered appointment of minority directors on the Board of the
respondent Bank. Under Section 35A of the Banking Regulation Act, 1949 (10 of 1949), the parties aggrieved can
approach the Reserve Bank of India(RBI) for appropriate orders. The powers of the RBI to give directions under
Section 35A of the Banking Regulation Act, 1949 as well as the guidelines thereunder are intended to protect the
public interest and the interests of the Banking Companies, which are in consonance with Section 408 read with
Sections 397 and 398 of the Companies Act, 1956.63
Oppression and Mismanagement—Independent Valuer.—The Company Law Board (CLB) [ now the Tribunal
(NCLT)] in a proceeding under Sections 397 and 398 of the Companies Act, 1956 may reject the valuation done by
the parties independently and appoint another Valuer for making the valuation of the shares. It is the duty of the
Page 8 of 14
Valuer to give opportunities to the parties and disclose to them relevant facts in valuing the shares. Independent
Valuer must have independent approach and method for valuing the assets of the company. Where the valuer
proceeded to value the shares as if the valuation was at the behest of the company and on parameters set by the
company. It was not an independent approach. While exercising jurisdiction under Section 10F of the Companies
Act, 1956, the Court cannot accept one part of the Valuation Report and reject the other. Valuation was set aside
and theCompany Law Board(CLB) was directed by the Court to appoint another Chartered Accountant as valuer.64
See also Comments under Sections 10E, 10FB, 397 and 398.
Questions of law.—Interpretation of provisions of Articles of Association of the company is a question of law and
appeal was maintainable.65
Appeal only on Question of law.—In view of Section 10F of the Companies Act, 1956, appeal lies from the order
of theCompany Law Board(CLB) to the High Court only on a question of law arising from any decision or order of
the Company Law Board(CLB). As a consequence thereof a finding of fact recorded by the CLB is final and cannot
be reversed by the High Court. In the instant case, refusal to register the Transfer of Shares where the transaction
was illegal and void was justified. The finding of the Company Law Board(CLB) was sustainable on the reasoning
given by the CLB and could not be interfered with in appeal.66
Maintainability of a petition.—Maintainability of a petition cannot be regarded as pure question of law in all the
cases. It is a mixed question of law and fact. From an Order of CLB, the question of maintainability cannot be
decided along with the merits in an Order on pure question of law. Such an order is not appealable.67
In view of the Rules and Orders of the Punjab and Haryana High Court (Practice and Procedure), appeals from the
orders of CLB could be laid for admission before Division Bench. Disposal on merits could be by the Company
Judge. The court observed that there was a need for amendment of the High Court Rules.68
As already explained, appeal to Division Bench would not be maintainable against the decision of the single judge
after 1-7-2002 in view of section 100A of C.P.C.
Oppression and Mismanagement— Locus standi for petition.—The question whether Share Certificates are
genuine or not to ascertain locus standi for a petition under Sections 397 and 398 read with Section 399 of the
Companies Act, 1956 requiring detailed inquiry has to be decided by theCLB[the Tribunal (NCLT)] along with
question of maintainability of petition. Even though as per Section 164 of the Companies Act, 1956, the Register of
Members is prima facie evidence of matters contained therein, yet, as per Section 84 of the Companies Act, 1956,
the Share Certificate is prima facie evidence of title of a shareholder to the shares indicated therein. In the normal
circumstances the provisions of both the sections can go together, but, when a dispute arises, the prima facie
evidence through Share Certificates under Section 84 gets precedence over prima facie evidence of the Register of
Members under Section 164, for the reason that Register of Members, being under the control of the company, is
susceptible to manipulations. The matter was remanded to the CLB to dispose of the preliminary objection afresh
with other issues on merits.69
See also Comments under Sections 10FB, 84164 and 397-399.
Non-interference by Appeal Court.—A decision by the Company Law Board on facts will not be interfered with on
an appeal to the High Court. Fact finding by CLB will not usually be disturbed by the High Court on appeal. The
High Court will not interfere with the Order if CLB has solved the factual problem.70
Questions of fact.—When the Company Law Board came to a conclusion on examination of the facts on an
appeal the High Court will not interfere in the matter.71 The High Court will not interfere with the order of CLB based
on finding of facts in a petition for prevention of oppression and mismanagement. The Court refused to interfere the
factual evidence.72 Where the CLB directed a Multinational Company to be added as a party to the petition for
prevention of oppression and mismanagement the Appeal Court held that this was a question of law and the order
was appealable but the order not being perverse did not demand any interference.73
Page 9 of 14
Supreme Court—SLP—Appeal—Jurisdiction under Article 136.—Where by reason of the impugned decision,

judgment or order of the High Court no injustice or prejudice has been done to the appellants by the order appealed
against. The Supreme Court in exercise of its jurisdiction under Article 136 of the Constitution of India may not
interfere with the impugned order, even if it may be lawful to do so.74
Grounds not taken before CLB or High Court.—Generally it is not permissible to raise an issue not argued
earlier by the party either before the Company Law Board or the High Court for the first time before the Supreme
Court.75
Scope of Directions by CLB [Tribunal (NCLT)].—The shareholders were common to two companies. The
Company Law Board (CLB) directed one Group to take one company and the rival group to take another company
by drawing a lot. There was no direction to third parties to purchase shares. The directions were given on the basis
of complaint of shareholders and not by third parties. It was not a direction to third parties to purchase the shares of
the company. On an appeal, it was held that such directions were valid. The appeals by the appellant were
dismissed. Decision was rendered by the CLB after elaborate discussion. No fresh materials were placed before the
Appellate Court. The decision of the CLB did not warrant interference with the factual findings based on evidence.76
Consent Order.—An appeal would lie as to the jurisdiction of Company Law Board to pass a Consent Order but
the Appeal Court will not normally interfere with such a Consent Order. The CLB also cannot review its own
Order.77
From the commencement of the Companies (Second Amendment) Act, 2002, the jurisdiction of CLB has been
transferred to the Tribunal (NCLT). Appeal from orders or decisions of the Tribunal (NCLT) shall lie to the Appellate
Tribunal except consent orders [ Section 10FQ]. Appeal from the order of the Appellate Tribunal shall lie to the
Supreme Court on question of law arising out of such order [ Section 10GF].
No power to Review.—The CLB has no power to review its own Order.78
From the commencement of the Companies (Second Amendment) Act, 2002, the jurisdiction of the CLB has been
transferred to the Tribunal (NCLT). The Tribunal shall have power to review its own orders [ Section 10FN].
Inherent powers.—In exercise of its inherent powers the CLB may make necessary orders for the ends of justice
to prevent abuse of the process of CLB.79
The Company Law Board cannot review its own Order dismissing a petition as being withdrawn but in exceptional
cases, the CLB may exercise its inherent power to restore a proceeding which was dismissed as withdrawn.80
Application for the oppression and mismanagement with consent was allowed to be withdrawn with the leave of the
Company Law Board.81
Inherent powers of CLB—Arbitration Clause—Injunction.—The Company Law Board(CLB) under Regulation

44 of the Company Law Board Regulations, 1991 and Section 402 of the Companies Act, 1956 exercises inherent
powers to meet the ends of justice and to prevent abuse of the process of theCompany Law Board(CLB). Where
the majority directors decided not to invoke the Arbitration Clause for recovery of sums due to the company from
the Electricity Board. Derivative action in the name of the company, by minority shareholders through Nominee
Directors, was held to be permissible before the Arbitral Tribunal. The action could not be restrained by the
Company Law Board by anti-suit injunction or injunction against proceedings in a Foreign Court against
international arbitration clause. Maintainability of the derivative action may be decided by the Arbitral Forum.82
See also Comments under Sections 10E, 10FA, 291 and 402.
Inherent powers of Tribunal (NCLT).—For inherent powers of Tribunal (NCLT) after its constitution under Section
10FB of the Companies Act, 1956, as inserted by the Companies (Second Amendment) Act, 2002 (11 of 2003)
(w.e.f. date to be notified), see detailed Comments under Sections 10FB to 10GF.
Page 10 of 14
Recalling an order.—A Court or a Tribunal is not powerless to review or recall its own Orders if it is convinced that
the Order was obtained through fraud or misrepresentation affecting the very basis of the claim made. A petition for
recalling an Order on the basis of newly discovered facts amounting to fraud can be made.83
Any decision or order.—The use of the words “any decision or order” section 10F of the Companies Act, 1956
shows that an appeal can be filed against any order of theCompany Law Board. That would obviously include an
order which may not finally decide the rights of the parties. Where the Company Law Board passed the order in
violation of the principles of natural justice, by not hearing the appellants, the order of the Company Law Board was
illegal and liable to be quashed.84
Interlocutory or interim order.— Section 10F permits an appeal only on question of law arising out of order of the
CLB and not otherwise. Where the order under challenge was only an interlocutory order for the purpose of
appointment of an administrator at the interim stage. The Company Law Board, in the contextual facts, had
exercised discretion and the user of discretion could not by any stretch be termed to be so perverse in any event,
so as to warrant interference or intervention of the appellate court as provided in terms of the statute.85
Interim Order—No appeal.—An appeal under Section 10F before the High Court can be entertained only on a
question of law which arises from the order of the Company Law Board(CLB). Interim order in case of Oppression
and Mismanagement is only an interim arrangement. No appeal lies against the interim order.86
See also Comments under Sections 10E, 397, 398 and 402.
Order within discretionary powers of CLB not appealable.—Powers conferred on the CLBunder section 402 are
wide and discretionary in nature. Sections 397, 398 read with section 402 of the Companies Act, 1956 clotheCLB
with ample jurisdiction to achieve the object set out in the statute. If an order is made by the authority within its
discretion the appellate court in the matter arising out of the discretionary power will not interfere with its exercise
unless the appellate court finds that the discretion has been exercised on wrong principle or that there is failure of
justice.87
Investigation—Finding of CLB—Not interfered with.—The power to direct investigation under Section 247(1A)
of the Companies Act, 1956, is to be invoked bona fide and in public interest. The death of a shareholder, is not in
itself a ground for an order of investigation under Section 247 or Section 247(1A) of the Act into the true persons in
control of the company. Whether there is any necessity for an investigation would directly depend on the manner of
conduct of the business and affairs of the company, the policies adopted, commission of wrongful, illegal or
fraudulent acts and the like. The Company Law Board's finding that there was no ground for an investigation under
Section 247(1A) of the Act and that the estate of Priyamvada Birla was in the control of the majority shareholders of
the company was not to be interfered with. Application was based on unfounded apprehensions. Investigation was
not necessary. Appeal under Section 10F was dismissed.88
Appeal against decisions of CLB under other laws.—An appeal would be maintainable under section 10F of the
Companies Act, 1956, against decisions of theCLB rendered in exercise of the powers conferred on it under other
laws also. An appeal under section 10F against an order of the CLBunder Section 22A of the Securities Contracts
(Regulation) Act, 1956 [since omitted as a consequence of insertion of Section 111A of the Companies Act, 1956 ]
was held maintainable.89
An appeal against any decision or order of the CLB is maintainable only on a question of law arising out of such
order. Where the CLBin exercise of its powers under section 45QA of the RBI Act, 1934 directed the NBFC to repay
deposits. The company appealed on the ground that the directions were unworkable due to a slump in the real
estate market and a general industrial recession. It was held that the challenge to theCLB order did not involve the
interpretation of any provision of law or document. It was also not a case, where the order could be said to be
vitiated by perversity or irrationality of any kind. The challenge was not based even on the ground that the order
was without any evidence or material in support of the same. No question of law arose to maintain the appeal or
justify interference by the High Court.90
Page 11 of 14
Order of CLB in disregard of rules of procedure.—Where the order passed by the CLBwas neither in
accordance with the rules of procedure prescribed under the provisions of the Civil Procedure Code nor based on
the principles of natural justice. TheCLB passed the impugned order in a manner unknown to law and in an arbitrary
manner apart from the fact that the findings recorded by it on the merits of the case were not only perverse but
unknown to adjudicatory process of the land. There being an error apparent on the face of the orders of the Board,
definitely a question of law arose from out of the order of the Board to be decided by the High Court under section
10F of the Act.91
Writ Petition.—If an effective remedy by way of an appeal has been provided by the Legislature then a Writ petition
will not be maintainable. The remedy is an appeal. An appeal would lie against the decision of the CLB on all
questions of law. No appeal would lie on questions of facts. A decision of CLBunder sections 397 and 398 cannot
be challenged by a writ petition. Section 10F having provided for effective remedy by way of appeal to the High
Court, the High Court would not exercise its writ jurisdiction under Article 226 Constitution of India.92
Writs, Judicial review and Constitutional validity.
—The writ jurisdiction of High Courts under Article 226 and the Supreme Court under Article 32 of the Constitution
of India cannot be ousted.93 So long as a judicial review of the actions of Tribunals and Boards is available to the
person affected by the decision of such Tribunals/Boards, it cannot be said that the mechanism of the
Tribunal/Board in lieu of the courts is unconstitutional or invalid.94
Judicial review of a decision is confined to the examination of only the decision making process and not with the
correctness of the decision. The judicial review will examine whether the process of law, the principles of natural
justice and fairness have been fulfilled. Review Court cannot substitute its own judgement for that of the
administrative authority.95
Dissolution of Company Law Board [ Section 10FA].—As per section 10FA inserted by the Companies (Second
Amendment) Act, 2002 (11 of 2003) (w.e.f. date to be notified), the CLB constituted under section 10E(1) shall
stand dissolved.
National Company Law Tribunal(NCLT) [ Sections 10FB-10GF].—The jurisdiction, powers and functions
presently being exercised by various bodies, viz., the Company Law Board(CLB), High Courts, the BIFRor the
AAIFR under various sections of the Companies Act, 1956 have been consolidated and entrusted to the National
Company Law Tribunal(NCLT) to be constituted under Section 10FB of the Companies Act, 1956 as inserted by the
See detailed Comments under Sections 10E, 10FA and 10FB to 10GF.
Arbitration.—The appellate remedy under section 10F of the Companies Act, 1956 would not get attached to the
proceedings which come to be decided by theCLB under section 8 of the Arbitration and Conciliation Act, 1996.96
41. Inserted by the Companies (Second Amendment) Act, 2002 (11 of 2003) s. 4 [(w.e.f.) date to be notified].
42. Stridewell Leathers (P.) Ltd. v. Bhankerpur Simbhaoli Beverages (P.) Ltd., , (1994) 79 Comp. Cas. 139 (SC). See also
Comments under Section 10E and 10FB.
43. Minoo H. Mody v. Hemant D. Vakil, , (1997) 89 Comp. Cas. 456 (Bom.) (DB) : AIR 1994 Bom. 39 [LNIND 1993 BOM
463]; Smt. Arati Dutta v. Eastern Tea Estate (P.) Ltd., , (1988) 64 Comp. Cas. 313 (SC); Manohar Rajaram Chhabria v.
UOI, , (2002) 110 Comp. Cas. 162 (Cal.) (DB). See also Comments under Interpretation of provisions relating to
Appeals and Remedies under Section 10.
Page 12 of 14
44. Tin Plates Dealers Association Pvt. Ltd. v. Satish Chandra Sanwalka, , (2002) 108 Comp. Cas. 295 (Cal.). See also
Comments under Section 10, 10FB-10GF and 483. From the commencement of the Companies (Second Amendment)
Act, 2002, the jurisdiction of the CLB and High Court has been transferred to the Tribunal. An appeal lies to the
Appellate Tribunal [ Section 10FQ]. Person aggrieved by order of Appellate Tribunal may file an appeal to the Supreme
45. Bhenoy G. Dembla v. Prem Kutir P. Ltd., , (2003) 117 Comp. Cas. 643 (Bom.) (DB).
46. Prakash Timbers P. Ltd. v. Smt. Sushma Shingla, , (1997) 89 Comp. Cas. 770 (All.) (DB).
47. Maharashtra Power Development Corporation Ltd. v. Dabhol Power Co., , (2003) 117 Comp. Cas. 651 (Bom.) (DB).
48. Kamal Kumar Dutta v. Ruby General Hospital Ltd., , (2006) 134 Comp. Cas. 678(SC).
49. Mineria Nacional Limitada v. Sociedade De Fomento Industrial P. Ltd., , (2007) 136 Comp. Cas. 290 (Bom.) (FB).
50. Vinod K. Patel v. Industrial Finance Corporation of India Ltd., , (2001) 103 Comp. Cas. 557 (Delhi). See also Comments
under Section 111 and 11A.
51. Malleswara Finance and Investments Co. P. Ltd. v. Company Law Board, , (1995) 82 Comp. Cas. 836 (Mad.) (DB);
Caparo India Ltd. (U.K.) v. Caparo Maruti Ltd., , (2007) 140 Comp. Cas. 481 (Delhi). See also Comments under
52. Micromeritics Engineers Pvt. Ltd. v. S. Munusamy, , (2004) 122 Comp. Cas. 150 (Mad.) (DB). See also Comments
under Section 53, 193, 195, 397, 398 and 402.
53. Trackparts of India Ltd. v. K.N. Bhargava, , (2002) 109 Comp. Cas. 350 (All.). See also Comments under Sections 397,
398 and 402.
54. Mohd. Jafar v. Nahar Industrial Enterprises Ltd., , (1998) 93 Comp. Cas. 717 (Delhi); CIT v. Scindia Steam Navigation
Co. Ltd., , (1961) 42 ITR 589 [LNIND 1961 SC 159] (SC) : AIR 1961 SC 1633 [LNIND 1961 SC 159]. For Jurisdiction of
Central Government, Tribunal (NCLT), Appellate Tribunal and the Supreme Court after the commencement of the
Companies (Second Amendment) Act, 2002 (11 of 2002) see Comments under Sections 10E, 10FA, 10FB, 10GF and
17.
55. Shoe Specialities Ltd. v. Tracstar Investment Ltd., , (1997) 88 Comp. Cas. 471 (Mad.) (DB).
56. Gordon Woodroffe and Co. Ltd., U.K. v. Gordon Woodroffe Ltd., Chennai, , (1999) 97 Comp. Cas. 582 (Mad.). See also
Comments under Sections 10, 10E, 111, 397 and 398.
57. Cachar Native Joint Stock Co. Ltd. v. Smt. Namita Gupta, , (2004) 122 Comp. Cas. 1 (Gauhati). See also Comments
under Sections 111A, 179, 257, 397 and 398.
59. Manohar Rajaram Chhabria v. UOI, , (2002) 110 Comp. Cas. 162 (Cal.) (DB). See also Comments under Sections 10E,
10FA and 10FB to 10GF.
60. Dale and Carrington Invt. P. Ltd. v. P.K. Prathapan, , (2004) 122 Comp. Cas. 161 (SC) : (2004) 4 Comp. LJ 1 (SC) :
AIR 2004 SCW 5143 : (2004) 7 JT 434 (SC) : (2004) 7 Supreme 209 : (2004) 7 Scale 583 (SC) (Mrs. Ruma Pal and
Arun Kumar JJ.).
61. VLS Finance Ltd. v. Sunair Hotels Ltd., , (2007) 137 Comp. Cas. 434 (Delhi).
62. Cachar Native Joint Stock Co. Ltd. v. Smt. Namita Gupta, , (2004) 122 Comp. Cas. 1 (Gauhati).
63. S. Ashok v. Tamil Nadu Mercantile Bank Ltd., , (2005) 127 Comp. Cas. 351 (Mad.) (DB).
64. Vinod Kumar v. Sigmalon Equipment P. Ltd., , (2005) 127 Comp. Cas. 54 (Bom.).
65. Maharashtra Power Development Corporation Ltd. v. Dabhol Power Co., , (2003) 117 Comp. Cas. 506 (Bom.) affirmed
in Maharashtra Power Development Corporation Ltd. v. Dabhol Power Co., , (2004) 120 Comp. Cas. 560 (Bom.) (DB).
66. Bhagwati Developers Pvt. Ltd. v. Peerless General Finance and Investment Co. Ltd., , (2005) 128 Comp. Cas. 444
(Cal.).
67. Mrs. Saroj Goenka v. Nariman Point Building Services and Trading Pvt. Ltd., , (1997) 90 Comp. Cas. 205 (Mad.) (DB).
68. Baljit Kaur Vohra v. Dr. Vikramjit Singh Vohra, , (2003) 115 Comp. Cas. 194 (P&H) (DB).
69. Scientific Instrument Co. Ltd. v. Rajendra Prasad Gupta, , (1999) 95 Comp. Cas. 615 (All.) approving Satish Chand
Sanwalka v. Tinplate Dealers Association Pvt. Ltd., , (1998) 93 Comp. Cas. 70 (CLB). See also Comments under
Sections 84, 164 and 397 to 399.
70. Chand Mall Pincha v. Hathimal Pincha, , (1999) 95 Comp. Cas. 368 (Gauhati) : (1999) 2 Comp. LJ 108 (Gauhati). Now
see Comments under Section 10GF.
71. Boiron v. SBL Pvt. Ltd.,(1999) 33 CLA 51 (Delhi) : (1998) 16 SCL 578 (Delhi).
Page 13 of 14
72. J.P. Srivastava and Sons (Rampur) P. Ltd. v. Gwalior Sugar Co., , (2000) CLC 1792 (MP). See also Comments under
73. Gillette International v. R.K. Malhotra,(1998) 31 CLA 73 (Cal.).
74. Dove Investments Pvt. Ltd. v. Gujarat Industrial Inv. Corporation, (2006) 129 Comp. Cas. 929 (SC). See also
75. J.P. Srivastava and Sons Pvt. Ltd. v. Gwalior Sugar Co. Ltd., , (2004) 122 Comp. Cas. 696 (SC) : AIR 2005 SC 83
[LNIND 2004 SC 1096]: (2004) 9 JT 507 (SC) : (2004) 7 Supreme 794 (Mrs. Ruma Pal and Arun Kumar JJ.). See also
76. Micromeritics Engineers Pvt. Ltd. v. S. Munusamy, , (2004) 122 Comp. Cas. 150 (Mad.) (DB).
77. Prakash Timbers P. Ltd. v. Smt. Sushma Shingla, , (1997) 89 Comp. Cas. 770 (All.) (DB) : AIR 1995 All. 320 [LNIND
1995 ALL 64]; M.V. Paulose v. City Hospital (P.) Ltd., , (1999) 96 Comp. Cas. 588 (CLB).
78. Dr. Dheep Rajappa v. A. Sivasubramanian, ,(2002) 110 Comp. Cas. 45 (CLB).
79. M.V. Paulose v. City Hospital (P.) Ltd., , (1999) 96 Comp. Cas. 588 (CLB) : (1998) 28 CLA 46 (CLB) : (1998) 15 SCL 49
(CLB).
80. Shree Cement Ltd. v. Power Grid Corporation Ltd., (1998) 93 Comp. Cas. 854 (CLB) : (1998) 4 Comp. LJ 148 (CLB).
81. V. Sundararajan v. R.R. Spinning Mills Ltd., , (1999) 98 Comp. Cas. 105 (CLB). See also Comments under Sections
397, 398 and 402.
82. PPN Power Generating Co. Ltd. v. PPN (Mauritius) Co., , (2006) 129 Comp. Cas. 849 (Mad.) (DB). See also
Comments under Sections 10E, 10FA, 291 and 402.
83. United India Insurance Co. Ltd. v. Rajendra Singh, , (2000) 100 Comp. Cas. 705 (SC) : (2000) 37 CLA 405 (SC).
84. Gharib Ram Sharma v. Daulat Ram Kashyap, , (1994) 80 Comp. Cas. 267 (Raj.). See also Comments under Section
10E(5).
85. C. Sri Hari Rao v. Sri Ramdas Motor Transport Ltd., , (1999) 97 Comp. Cas. 685 (AP) (DB) : (1999) 1 Comp. LJ 280
(AP) (DB).
86. Dr. Bais Surgical and Medical Institute Pvt. Ltd. v. Dhananjay Pande, , (2005) 128 Comp. Cas. 273 (Bom.); Serum
Institute of India Ltd. v. Inderjit Properties P. Ltd., , (2006) 129 Comp. Cas. 757 (CLB). See also Comments under
Sections 10E, 397 and 398.
87. Subhash Mohan Dev v. Santosh Mohan Dev, , (2001) 104 Comp. Cas. 404 (Gauhati).
88. Birla Corporation Ltd. In re, , (2006) 133 Comp. Cas. 515 (Cal.).
89. Kinetic Engineering Ltd. v. Unit Trust of India, , (1995) 84 Comp. Cas. 910 (Bom.). See detailed Comments under
Sections 10E and 111A.
90. United Western Bank Ltd. v. Company Law Board, , (2001) 107 Comp. Cas. 63 (Kar.) (DB). See also Comments under
Section 58A.
91. Sri Ramdas Motor Transport Ltd. v. Karedla Suryanarayana, , (2002) 110 Comp. Cas. 193 (AP). See also Comments
under Section 10E.
92. Malleswara Finance and Investments Co. P. Ltd. v. Company Law Board, , (1995) 82 Comp. Cas. 836 (Mad.) (DB).
93. L. Chandra Kumar v. Union of India, , (1997) 228 ITR 725 (SC). For fuller discussion see Comments under Sections 10,
10FB and 10GB.
94. V. Balachandran v. Union of India, (1993) 76 Comp. Cas. 67 (Mad.) (DB); Minerva Mills Ltd. v. UOI,AIR 1980 SC 1789
[LNIND 1980 SC 257]; S.P. Sampath Kumar v. UOI,AIR 1987 SC 386 [LNIND 1986 SC 500]:,(1987) 1 SCR 435
[LNIND 1989 SC 328]. See also Comments under Sections 10, 10E and 10FB-10GF.
95. Apparel Export Promotion Council v. A.K. Chopra,AIR 1999 SC 625 [LNIND 1999 SC 33]; CBDT v. Oberoi Hotels
(India) P. Ltd.,AIR 1998 SC 1666 [LNIND 1998 SC 378]:,(1998) 231 ITR 148 [LNIND 1998 SC 378] (SC) : (1998) 4
SCL 552 (SC).
96. Smt. Sudershan Chopra v. Vijay Kumar Chopra, , (2003) 117 Comp. Cas. 660 (P&H) (DB).
Page 14 of 14
End of Document
Datta: Company Law
C R Datta
LAW ADMINISTRATION
97[S. 10FA. Dissolution of Company Law Board.

—
(1) On and from the commencement of the Companies (Second Amendment) Act, 2002 (11 of 2003), the
Board of Company Law Administration constituted under sub-section (1) of section 10E shall stand
dissolved.
(2) On the dissolution of the Company Law Board, the persons appointed as Chairman, Vice-Chairman
and members and officers and other employees of that Board and holding office as such immediately
before such commencement shall vacate their respective offices and no such Chairman, Vice-
Chairman and member and officer and other employee shall be entitled to claim any compensation for
the premature termination of the term of his office or of any contract of service:
Provided that every officer or other employee, who has been, immediately before the dissolution of
the Company Law Board, appointed on deputation basis to that Board, shall, on such dissolution,
stand reverted to his parent cadre, Ministry or Department, as the case may be:
Provided further that every officer and other employee of the Company Law Board employed on
regular basis by that Board, shall become, on and from the dissolution of the Board, the officer and
employee, respectively, of the Central Government with the same rights and privileges as to
pension, gratuity and other like benefits as would have been admissible to him if the rights in
relation to that Board had not been transferred to, and vested in, the Central Government and shall
continue to do so unless and until his employment in the Central Government is duly terminated or
until his remuneration, terms and conditions of employment are duly altered by that Government:
Provided also that notwithstanding anything contained in the Industrial Disputes Act, 1947 (14 of
1947), or in any other law for the time being in force, the transfer of the services of any officer or
other employee employed in theCompany Law Board, to the Central Government shall not entitle
such officer or other employee to any compensation under this Act or under any other law for the
time being in force and no such claim shall be entertained by any court, tribunal (including the
Tribunal under this Act) or other authority:
Provided also that where the Company Law Board has established a provident fund,
superannuation fund, welfare fund or other fund for the benefit of the officers and other employees
employed in that Board, the monies relatable to the officers and other employees whose services
have been transferred by or under this Act to the Central Government shall, out of the monies
standing, on the dissolution of the Company Law Board to the credit of such provident fund,
superannuation fund, welfare fund or other fund, stand transferred to, and vest in, the Central
Government and such monies which stand so transferred shall be dealt with by that Government in
such manner as may be prescribed.
(3) All matters or proceedings or cases pending before the Company Law Board on or before the
constitution of the Tribunal under section 10FB, shall, on such constitution, stand transferred to the
Page 2 of 3
National Company Law Tribunal and the said Tribunal shall dispose of such cases in accordance with
the provisions of this Act.]
97. Inserted by the Companies (Second Amendment) Act, 2002 (11 of 2003), s. 5 [(w.e.f.) date to be notified].
COMMENTS
explained this section as follows: “This clause seeks to insert a new section 10FA in the Companies Act, 1956, to
provide for dissolution of theCompany Law Board as the National Company Law Tribunal is proposed to be
constituted under that Act. The chairman, vice-chairman and members of the Company Law Board shall cease to
function from the date the National Company Law Tribunal is constituted. The officers and other employees
appointed on deputation basis shall be reverted to their parent cadre. Further, the officers and other employees of
the Company Law Board employed on regular basis by that Board shall become the officers and employees of the
Central Government with the same rights and privileges as to pension, gratuity and other like matters as would
have been admissible to them if the rights in relation to that Board had not been transferred to, and vested in, the
Central Government and shall continue to do so until and unless their employment in the Central Government is
duly terminated or until their remunerations, terms and conditions of employment are duly altered by that
Government. It is further provided that all matters or proceedings or cases pending before the Company Law Board
on or before the constitution of the National Company Law Tribunal shall, on its constitution, stand transferred to the
National Company Law Tribunal.” [ Clause 5 of the Companies (Amendment) Bill, 2001 (80 of 2001)].
See also Legislative History in Comments under Sections 10E and 10FB.
Dissolution of Company Law Board [Sub-section (1)].—On and from the commencement of the Companies
(Second Amendment) Act, 2002 (11 of 2003), the Company Law Board constituted under section 10E(1) shall stand
dissolved.
Transfer of jurisdiction to Tribunal (NCLT) [ Section 10FB].—On constitution of the National Company Law
Tribunal (NCLT) under Section 10FB, the CLB shall stand dissolved. Jurisdiction exercised and matters pending
shall be transferred to and vested in the Tribunal (NCLT). The Tribunal shall dispose off these transferred matters in
accordance with the provisions of the Act. [ Section 10FA(3)].
See detailed Comments and List of Sections conferring powers of CLB on the Tribunal (NCLT) and Central
Government under Sections 10, 10E and 10FB.
Staff stand discharged [Sub-section (2)].—On the dissolution of the Company Law Board (Board of Company
Law Administration) all the officers and staff of every kind shall vacate their respective offices and for which they will
not be paid any compensation irrespective of law or any contract.
Exceptions [Sub-section (2), provisos].—(i)An officer or employee who was on deputation shall go back to the
parent cadre, Ministry or Department.
(ii) An officer or employee employed on regular basis by the Board (CLB) shall become the officer or employee of
the Central Government with the same rights and privileges as regards Pension, Gratuity and other benefits that
would have been admissible to him under the Board. Such rights will continue until the Central Government
terminates his services or his remuneration, terms and conditions of employment are altered by the Central
Government.
(iii) Such transfer from employment of the Board to Central Government shall not entitle the officer or employee to
any compensation under the Industrial Disputes Act, the Companies Act or under any other Law. The Court, any
Tribunal or National Company Law Tribunal or any other authority shall not have any jurisdiction to entertain any
claim from any such officer or employee.
Page 3 of 3
(iv) Where the CLB has established Provident Fund, Superannuation fund, Welfare Fund or other fund for the
benefit of officers and employees the amounts of such fund shall stand transferred to and vested in the Central
Government. The Central Government will deal with the said fund in the manner that may be prescribed.
Transfer of pending matters to the Tribunal (NCLT) [Sub-section (3)].—All matters pending before the CLB on
or before the constitution of the Tribunal (NCLT) under section 10FB shall stand transferred to the Tribunal (NCLT).
The Tribunal (NCLT) shall dispose off these transferred matters in accordance with the provisions of the Companies
Act, 1956. The Tribunal may dispose off the matters after de novo hearing or from the stage upto which the CLB
had heard the matter at the discretion of the Tribunal.
See detailed Comments under Sections 10, 10E, 10F and 10FB-10GF.
97. Inserted by the Companies (Second Amendment) Act, 2002 (11 of 2003), s. 5 [(w.e.f.) date to be notified].
End of Document
Datta: Company Law
C R Datta
Datta: Company Law > Datta: Company Law > Volume 1 > PART IB NATIONAL COMPANY
LAW TRIBUNAL
1[S. 10FB. Constitution of National Company Law Tribunal.

—The Central Government shall, by notification in the Official Gazette, constitute a Tribunal to be known as the
National Company Law Tribunal to exercise and discharge such powers and functions as are, or may be,
conferred on it by or under this Act or any other law for the time being in force.]
1. Part IB comprising Sections 10FB to 10FP inserted by the Companies (Second Amendment) Act, 2002 (11 of
2003), s. 6 [(w.e.f. 1-4-2003)videNotification No. S.O. 344(E), dated 31-3-2003, published in the Gazette of India,
2. President, Madras Bar Association v. Union of India, (2004) 2 Comp. LJ 274 (Mad.); R. Gandhi v. Union of India, (2004)
120 Comp. Cas. 510 (Mad.) (DB).
3. R. Gandhi v. Union of India, (2004) 120 Comp. Cas. 510 (Mad.) (DB). See also Comments under Sections 10FD, 10FE,
10FF, 10FK, 10FL, 10FT and 10FR.
4. Prakash Timbers P. Ltd. v. Smt. Sushma Shingla, (1997) 89 Comp. Cas. 770 (All.) (DB); Minoo H. Mody v. Hemant D.
(2002) 108 Comp. Cas. 295 (Cal.). See also Comments under Section 10, 10E, 10F, 10FA and 10FB-10GF.
5. Poonamchand Kothari v. Rajasthan Tube Mfg. Co. Ltd., (1996) 87 Comp. Cas. 842 (Raj.); Avanthi Explosives P. Ltd. v.
Principal Subordinate Judge, (1987) 62 Comp. Cas. 301 (AP); Dr. T.M. Paul v. City Hospital (Pvt.) Ltd., (1999) 97
Comp. Cas. 216 (Ker.) (DB). See also Comments under Section 10, 10E, 10GB, 41, 61, 63 and 283.
6. L. Chandra Kumar v. Union of India,(1997) 228 ITR 725 (SC). See detailed Comments under Section 10, 10F, 10GB
and 10GF.
7. Bank of Rajasthan Ltd. v. State of Bihar, (2002) 108 Comp. Cas. 556 (Patna).
791 (Cal.).
9. Paras Laminates (P.) Ltd. v. CEGAT, (1990) 68 Comp. Cas. 72 (Delhi) (1990) 183 ITR 167 (Delhi); Sundarjas Kanyalal
Bhatija v. Collector, (1990) 68 Comp. Cas. 20 (SC) AIR 1991 SC 261 (1990) 183 ITR 130 (SC); Sayaji Iron and
Engineering Co. v. CIT, (2002) 108 Comp. Cas. 675 (Guj.) (DB). See also Comments under Section 10FL. See detailed
Comments on Doctrine of Precedent or Stare decisis and Binding force of decisions of Tribunal under Section 10.
COMMENTS
Legislative History.
— The Companies (Second Amendment) Act, 2002 (11 of 2003).

Page 2 of 9
—The Notes on clauses explained new Part IB [ Sections 10FB to 10FP] and Part IC [ Sections 10FQ to 10GF] as
follows:
“This clause seeks to insert new sections 10FB, 10FC, 10FD, 10FE, 10FF, 10FG, 10FH, 10FI, 10FJ, 10FK, 10FL,
10FM, 10FN, 10FO, 10FP, 10FQ, 10FR, 10FS, 10FT, 10FU, 10FV, 10FW, 10FX, 10FY, 10FZ, 10FZA, 10G, 10GA,
10GB, 10GC, 10GD, 10GE and 10GF in the Companies Act, 1956, relating to the Tribunal and the Appellate
Tribunal. It is proposed to provide for the constitution of the National Company Law Tribunal which shall exercise
and discharge powers and functions conferred on it by the Companies Act, 1956, or under any other law. The
Tribunal shall consist of a President and such number of Judicial and Technical Members not exceeding sixty-two
who shall be appointed by the Central Government by notification in the Official Gazette. The President of the
Tribunal, who is, or has been, or is qualified to be a Judge of a High Court, shall be appointed by the Central
Government in consultation with the Chief Justice of India or his nominee. The qualifications for appointment of
Judicial and Technical Members of the Tribunal shall be such as specified in section 10FD. The term of office of the
President shall be sixty-seven years and for any other Member it shall be sixty-five years or three years from the
date on which he enters upon office, whichever is earlier. The President shall exercise such financial and
administrative powers as may be vested in him under the rules made by the Central Government and the President
shall have authority to delegate such powers to any other Member or any other officer of the Tribunal subject to
certain conditions. The President of the Tribunal shall be paid such salary and allowances as admissible, and other
terms and conditions as applicable, to a Judge of a High Court in case a sitting High Court Judge is appointed as
the President. The salary and allowances and other terms and conditions of service of the President other than a
sitting judge of a High Court and Members shall be such as may be prescribed by the Central Government. The
seniormost Member or any other Member of the Tribunal shall act as the President in certain circumstances like
death, resignation, or otherwise. The President or a Member may resign his office by giving notice in writing. The
Central Government may, in consultation with the Chief Justice of India, remove from office the President or any
Member of the Tribunal who has been adjudged an insolvent, convicted of an offence, become physically or
mentally incapable, has acquired financial or other interest prejudicial to his functions as President or Member. The
Central Government shall also have power to remove the President or a Member on the ground of proved
misbehaviour or incapacity after an inquiry made in this behalf. The salaries and allowances and other conditions of
service of officers and other employees of the Tribunal shall be such as may be prescribed by the Central
Government. It also provides that Benches shall be constituted by the President of the Tribunal with two Members
out of whom one shall be a Technical Member and the other a Judicial Member and such Bench shall be presided
over by the Judicial Member. It shall also be competent for the President to constitute a Bench consisting of a single
Member. It is further provided that at least ten Special Benches consisting of three or more Members, one of whom
shall be a Judicial Member and other two Members shall be those appointed under clauses (a) to (f) of sub-section
(3)of section 10FD and clause (g) or clause (h) of sub-section (3) of that section shall be constituted for the disposal
of any case relating to rehabilitation, restructuring or winding up of the companies. The Tribunal shall pass such
orders as it thinks fit after an opportunity of being heard is given to the parties concerned. The Tribunal may, within
two years from the date of orders, amend any order to rectify apparent mistake on the record if it is brought to the
notice of the Tribunal by the parties. The Tribunal shall have power to review its own orders. The Tribunal may by
special or general order delegate its powers to any Member or officer or other employee of the Tribunal. The
Tribunal shall have power to seek assistance in writing of the Chief Metropolitan Magistrate or the District
Magistrate to take into custody or under its control all property, effects and actionable claims of a sick industrial
company. Any person aggrieved by an order or decision of the Tribunal may prefer an appeal to the Appellate
Tribunal in such form and accompanied by such fee as may be prescribed. The Appellate Tribunal shall pass an
order after giving the parties to the appeal an opportunity of being heard. The Central Government shall by
notification in the Official Gazette constitute the National Company Law Appellate Tribunal which shall consist of a
Chairperson and not more than two Members. The Chairperson of the Appellate Tribunal shall be a person who is,
or has been, a Judge of the Supreme Court or Chief Justice of a High Court. A Member of the Appellate Tribunal
shall be a person who is qualified for appointment as a Judicial Member of the Tribunal and other Member shall be
a person of ability, integrity and standing having special knowledge and professional experience of not less than
twenty years in science, technology, economics, banking, industry, law, etc. It further provides that the seniormost
Member or any other Member of the Appellate Tribunal shall act as the Chairperson in certain circumstances like
death, resignation, or otherwise. The term of office of the Chairperson shall be seventy years and for any other
Member it shall be sixty-seven years or three years from the date he enters upon office, whichever is earlier. It
provides that the Chairperson or a Member shall resign his office by giving notice in writing. The Central
Government may, in consultation with the Chief Justice of India, remove from office the Chairperson or any Member
of the Appellate Tribunal who has been adjudged an insolvent, convicted of an offence, become physically or
mentally incapable, has acquired financial or other interest prejudicial to his functions as such Chairperson or
Page 3 of 9
Member. The Central Government shall also have power to remove the Chairperson or a Member on the ground of
proved misbehaviour or incapacity after an enquiry made in this behalf. The Chairperson of the Appellate Tribunal
shall be paid salary equivalent to that of a Judge of the Supreme Court and a Member shall be paid salary
equivalent to that of a Judge of a High Court. The other terms and conditions of service of the Chairperson and
Members shall be such as may be prescribed by the Central Government. The Chairperson and Members of the
Appellate Tribunal and President and Members of the Tribunal shall be appointed on the recommendation of a
Selection Committee specified in the proposed section 10FX. The Chairperson, Members, officers and other
employees of the Appellate Tribunal, the President, Members, officers and other employees of the Tribunal shall be
deemed to be public servants.
No suit, prosecution or other legal proceeding shall lie against the Appellate Tribunal or its Chairperson, Member,
officer or other employee of the Appellate Tribunal, or against the Tribunal, its President, its Member, officer or
employees or operating agent or liquidator or any person authorised by the Appellate Tribunal or the Tribunal for
any action which is in good faith done or intended to be done in pursuance of this Act. The Tribunal and the
Appellate Tribunal shall not be bound by the procedure laid down in the Code of Civil Procedure, 1908 but shall be
guided by the principles of natural justice. The Appellate Tribunal shall have power to punish for contempt. The
Central Government shall provide such officers and other employees to the Appellate Tribunal as that Government
may think fit. The salaries and allowances and other terms and conditions of service of such officers and employees
shall be prescribed by the Central Government. The appellant or applicant may appear either in person or authorise
one or more chartered accountants or company secretaries or cost accountants or legal practitioners to present its
or his case before the Tribunal or the Appellate Tribunal. The provisions of the Limitation Act, 1963 (36 of 1963)
shall apply to an appeal preferred to the Appellate Tribunal. It is also provided that any party aggrieved by any
decision or order of the Appellate Tribunal may file an appeal to the Supreme Court within a period of sixty days
from the date of communication of the decision or order of the Appellate Tribunal to him on any question of law
arising out of such decision or order.” [Clause 6 of the Companies (Amendment) Bill, 2001 (80 of 2001)].
Constitution of National Company Law Tribunal [ Section 10FB].
—The Central Government shall constitute by Notification published in the Official Gazette the National Company
Law Tribunal (NCLT). The Tribunal (NCLT) will exercise and discharge the powers and functions under the
Companies Act, the Insurance Act and any other law which may confer jurisdiction on it.
National Company Law Tribunal (NCLT) —Constitutionality.
—The new provisions in Parts IB and IC [ Sections 10FB to 10GF] of the Companies Act, 1956 as inserted by the
Companies (Second Amendment) Act, 2002 (11 of 2003) (w.e.f. date to be notified) have transferred the powers of
the Company Law Board(CLB) and High Court, i.e., Company Court under the Companies Act, 1956 to the newly
constituted National Company Law Tribunal (NCLT) to be constituted under Section 10FB of the Companies Act,
1956 as inserted by the Companies (Second Amendment) Act, 2002 (11 of 2003) and the National Company Law
Appellate Tribunal (NCLAT) to be constituted under Section 10FR of the Companies Act, 1956 inserted by the
Companies (Second Amendment) Act, 2002 (11 of 2003) (w.e.f. date to be notified). The incorporation of the
aforesaid Part IB [ Sections 10FQ to 10GF] in the Companies Act, 1956 (1 of 1956) has been held by the Hon'ble
Madras High Court to be unconstitutional being in breach of the basic Constitutional scheme of separation of the
powers and independence of the judicial functions.2
Constitutional validity.
—Parliament is competent to make Tribunals and Appellate Tribunals. But, an independent judiciary and its power
of judicial review are among the basic features of the Constitution of India. Therefore, until the provisions in Part IB [
Sections 10FB-10FP] and Part IC [ Sections 10FQ-10GF] of the Companies Act, 1956 introduced by the
Companies (Second Amendment) Act, 2002 (11 of 2003), e.g., Sections 10FD, 10FE, 10FF, 10FK, 10FR and 10FT,
which have been found to be defective inasmuch as they are in breach of the basic constitutional scheme of
separation of powers and independence of the judicial function, are duly amended, by removing the defects pointed
out in the judgment, it would be unconstitutional to constitute a Tribunal and Appellate Tribunal to exercise the
jurisdiction now exercised by the High Courts or the CLB. The provisions whereby certain powers currently
exercised by CLB, some of which were earlier exercised by the Court, were transferred to the Central Government.
Page 4 of 9
Most of those powers are only tangentially judicial and are primarily administrative. There is no illegality in such
transfer.3
National Company Law Tribunal (NCLT) [ Sections 10FB-10FP].
—By the Companies (Second Amendment) Act, 2002 (11 of 2003), the powers and jurisdiction hitherto exercised
by various bodies, viz., the Company Law Board (CLB), the BIFRor the AAIFR or High Courts have been
consolidated and entrusted to the National Company Law Tribunal (NCLT) on the constitution of the Tribunal
(NCLT) constituted under Section 10FB of the Companies Act, 1956 (w.e.f. date to be notified). Powers under some
sections have been transferred to “the Central Government”.
Most of the powers in respect of the Companies Act, 1956 have been transferred to the Tribunal. Applications or
petitions relating to most of the company matters are to be made to Tribunal. Generally the powers of theCompany
Law Board, the BIFR, and the Court will now be exercised by the Tribunal. Any application relating to Company
Matters by Central Government, State Government or the Reserve Bank of India have to be made to the Tribunal
and the Tribunal will exercise all the powers of the BIFR, the Company Law Board and the Company Court.
See detailed Comments, Form and Procedure under Sections 10FB to 10FP.
Powers and functions of the Tribunal (NCLT).
—From the date of constitution of the National Company Law Tribunal (NCLT) vide Notification under Section 10FB
of the Companies Act, 1956, as inserted by the Companies (Second Amendment) Act, 2002 (11 of 2003) (w.e.f.
date to be notified), the powers and functions hitherto being exercised by the Company Law Board (CLB), the
Central Government, the Court and BIFRunder various Sections of the Companies Act, 1956 [Listed below], SICA
and other Acts have been conferred on the Tribunal (NCLT).
Sections conferring powers on Tribunal (NCLT).
—From the date of constitution of the National Company Law Tribunal (NCLT) vide Notification under section 10FB
inserted by the Companies (Second Amendment) Act, 2002 (11 of 2003) (w.e.f. date to be notified), the powers and
functions under following sections have been conferred on the National Company Law Tribunal (NCLT):
Sections 55A, 58A(9), 58AA, 75, 80A(1) proviso, 100 to 104, 107, 111, 111A, 117B(4) proviso, 117C, 168, 186,
203, 235(2), 236, 237, 241(2)(dd), 243, 247(1A), 248(1), 250, 251, 269(7)(8)(9), 304(2)(b), 307(9), 318(3)(d), 388B-
388E, 391, 392, 394, 394A, 395, 396, 397, 398, 399, 400, 401, 402, 403, 404, 405, 407(1)(b), 408(1)(2)(5), 409(1),
410, 424, 424A-424L, 425-560, 581, 582, 583, 587-589, 610(2), 614(1), 626, 627, 632, 635, 635B, 637A, 640A,
Schedule XI and 651A of the Companies Act, 1956 (1 of 1956)
This foregoing List of Sections conferring jurisdiction on the Tribunal (NCLT) is further bifurcated vis-a-vis powers
being hitherto exercised by the Company Law Board (CLB) or Court or Central Government as follows.
Powers of CLB conferred on Tribunal (NCLT).
—Powers and functions hitherto being exercised by the Company Law Board(CLB) now conferred on the Tribunal
(NCLT) constituted under section 10FB (w.e.f. date to be notified) are as follows:
Page 5 of 9
Sections 55A, 58A(9), 58AA, 80A(1) proviso, 111, 111A, 117C, 186, 235(2), 236, 237, 241(2)(dd), 247(1A), 250,
251, 269(7)(8)(9), 304(2)(b) [Central Government or Tribunal], 307(9) [Central Government or Tribunal], 388B-
388E, 396, 397, 398, 399, 400, 401, 402, 403, 404, 405, 407(1)(b), 408(1)(2)(5), 409(1), 410, 610(2), 614(1),
635(4)[CLBor Tribunal], 635B, 637A [Central Government or Tribunal], 640A [Court or Tribunal], 651A and
Schedule XI of the Companies Act, 1956 (1 of 1956).
On constitution of the Tribunal (NCLT) under Section 10FB, the CLB shall stand dissolved [ Section 10FA].
Jurisdiction exercised and matters pending shall be transferred to and vested in the Tribunal (NCLT). The Tribunal
shall dispose off these transferred matters in accordance with the provisions of the Act [ Section 10FA(3)].
See detailed Comments under Section 10E, 10FA, 10FB-10GF and respective Sections conferring power on the
Tribunal (NCLT).
Dissolution of Company Law Board [ Section 10FA].
—As per Section 10FA of the Companies Act, 1056, as inserted by the Companies (Second Amendment) Act, 2002
(11 of 2003) on the constitution of the Tribunal (NCLT) vide Notification under Section 10FB, the Company Law
Board (CLB) shall stand dissolved.
Powers of Central Government conferred on Tribunal (NCLT).
—Powers and functions hitherto being exercised by the Central Government conferred on the Tribunal (NCLT)
constituted under section 10FB (w.e.f. date to be notified) are as follows:
Sections 79(3) proviso, 117B(4) proviso, 167(2) proviso, 168 [Tribunal or Central Government] of the Companies
Act, 1956 (1 of 1956).
See Comments under Sections 10FB-10GF and respective Sections.
Powers of Court conferred on Tribunal (NCLT).
—The powers and functions hitherto being exercised by the Court now conferred on the Tribunal (NCLT)
constituted under section 10FB (w.e.f. date to be notified) are as follows:
Sections 75, 80A(2) [Court or Tribunal], 100 to 104, 107, 203 [Court or Tribunal], 243, 318(3)(d), 391, 392, 394,
394A, 395, 424, 425, 426, 427, 433, 434(1)(b) [Court or Tribunal], 434(1)(c), 439, 439A, 440, 441, 441A, 441B,
441D, 441E, 441F, 441G, 443, 444, 446, 446A, 448, 450, 451, 453 to 456, 457, 458, 458A, 459, 460 to 465, 466,
467 to 469, 470, 471, 472, 473 to 477, 478, 479, 480, 481, 490, 492, 494, 497, 502 to 504, 506, 507, 509, 511A,
512, 515, 517, 518, 519, 531, 531A, 533, 535, 536, 537, 538, 540, 542, 543, 544, 545, 546, 547, 549, 550, 551,
553, 555, 556, 557, 558 [Court or Tribunal], 559, 560, 581, 582, 583, 587 to 589, 626 [Court or Tribunal], 627 [Court
or Tribunal], 632 [Court or Tribunal], 635B [Appellate Tribunal], 640A; [Court or Tribunal], 647A and 651A of the
Jurisdiction of Courts [ Section 10].—The jurisdiction, powers and functions of the Court, i.e., High Court and
District Court under various Sections of the Companies Act, 1956 read with section 10 and 10E were earlier
transferred to and vested in theCompany Law Board (CLB). The jurisdiction hitherto exercised by the High Court as
Company Court under section 10 and the CLBunder section 10E read with relevant sections of the Companies Act,
1956 conferring powers has now been transferred to and vested in the Tribunal (NCLT) constituted under section
10FB.
See detailed Comments under Sections 10, 10E, 10F, 10FA and 10FB.
Powers of BIFR conferred on Tribunal (NCLT).—The powers and functions being exercised by the BIFR under
Page 6 of 9
SICAnow conferred on the Tribunal (NCLT) constituted under section 10FB (w.e.f. date to be notified) are as
follows:
Sections 424A to 424L of the Companies Act, 1956 (1 of 1956).
The Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986) would consequently be repealed and
theBoard for Industrial and Financial Reconstruction(BIFR) dissolved. See detailed Comments under Sections
424A-424L.
Powers of CLB conferred on Central Government.—The powers and functions hitherto being exercised by
theCompany Law Board(CLB) now conferred on the Central Government (w.e.f. date to be notified) are as follows:
Sections 17(2)18(4)19, 43, 49(10), 79(2), 113(1), 113(3), 117B(4), 118(3), 141, 144(4), 163(6), 167, 188(5), 196(4),
219(4), 225(3) proviso, 284(4) proviso, 304(2)(b) [Central Government or Tribunal], 307(9) [Central Government or
Tribunal], 621A and 637A [Central Government or Tribunal] of the Companies Act, 1956.
Powers under some new sections have been conferred on the Central Government, viz., Sections 441A, 441B,
441E, 513(3) proviso. Power of the Supreme Court to make Rules under Section 643 has also been vested in the
Central Government.
Form and Procedure.—By the Companies (Second Amendment) Act, 2002, the powers and jurisdiction of the
Company Law Board(CLB) under various sections of the Companies Act, 1956 have been transferred to and vested
in the National Company Law Tribunal (NCLT), and in some cases to the Central Government.
See Lists of Powers conferred on the Company Law Board (CLB), Powers of CLB conferred on Tribunal (NCLT)
and Powers of CLB conferred on the Central Government hereinbefore. See also Comments under Sections 10 and
10E Petitions under various Sections shall therefore be made as follows.
Petitions to CLB [Till constitution of Tribunal (NCLT)].—Till enforcement of the Companies (Second
Amendment) Act, 2002 (11 of 2003), that is, the constitution of the National Company Law Tribunal (NCLT) under
Section 10FB of the Companies Act, 1956 (w.e.f. date to be notified) the Applications or Petitions under various
sections conferring powers and jurisdiction on the CLB shall be made to the Company Law Board as per the
Company Law Board Regulations, 1991.
See Procedure for filing Petition [ Regulations 14, 35-40], Forms [Annexure II], Documents to be attached with the
Petition [ Regulation 18 and Annexure III] and Fees [ Regulation 34] of the Company Law Board Regulations, 1991.
See also Fees on application or petition [ Rule 3 and Schedule] of the Company Law Board (Fees on Applications
and Petitions) Rules, 1991.
See detailed Comments, Form and Procedure under Section 10E.
Petitions to Tribunal (NCLT) [ After constitution of NCLT].—After enforcement of the Companies (Second
Amendment) Act, 2002, that is, on the constitution of the National Company Law Tribunal (NCLT) under Section
10FB of the Companies Act, 1956 (w.e.f. date to be notified) Applications or Petitions under sections conferring
powers and jurisdiction on the Tribunal (NCLT) shall be made to the Tribunal in accordance with Rules and
Regulations framed under Sections 10FB to 10FP.
See detailed Comments, Form and Procedure under Sections 10FB-10GF and respective Sections conferring
powers on the Tribunal (NCLT).
Central Government.—For powers conferred on the Central Government listed above Applications or Petitions
shall be made to the Central Government.
Page 7 of 9
See detailed Comments, Form and Procedure under Sections 637 and 637A.
Appeal to Appellate Tribunal [ Section 10FQ].—Any person aggrieved by an order or decision of the Tribunal
(NCLT) may prefer an appeal to the National Company Law Appellate Tribunal (NCLAT) constituted under Section
10FR.
Consent Order.—No appeal shall lie to the Appellate Tribunal from an order or decision made by the Tribunal with
the consent of parties. [ Section 10FQ(2)].
Appellate Tribunal [ Sections 10FQ-10GF].
— See Comments under Part IC [ Sections 10FQ to 10GF ] of the Companies Act, 1956 as inserted by the
Power to Review [ Section 10FN].—From the decisions of the Tribunal (NCLT) a Review Petition can be made
against the Order to the Tribunal (NCLT).
Procedure, Powers and Natural Justice [ Section 10FZA].—(1) The Tribunal and the Appellate Tribunal, shall
not be bound by the Code of Civil Procedure, 1908 but shall be guided by the principles of natural justice and shall
have the power to regulate its own procedure. (2) The Tribunal and Appellate Tribunal will have the same powers
as the Civil Courts under the Code of Civil Procedure, 1908 (5 of 1908) as regards (a) summoning and enforcing
the attendance of any person and examining him on oath; (b) requiring discovery and production of documents; (c)
receiving evidence on affidavits; (d) requisitioning public records; (e) issuing commissions for examination of
witnesses or documents; (f) reviewing its decisions; (g) dismissing any representation for default or deciding the
matter ex-parte; (h) setting aside its own order of dismissal for default or any order passed ex-parte; and (i) hearing
any other matter which may be prescribed by the Central Government. (3) The Tribunal and the Appellate Tribunal
may enforce its order as a decree of a Court.
Contempt of Court [ Section 10G].—The Appellate Tribunal shall have the same powers as the High Court has
under the Contempt of Courts Act, 1971.
Civil Court not to have Jurisdiction [ Section 10GB].—No Civil Court shall have jurisdiction to entertain any suit
or proceeding which the Tribunal or the Appellate Tribunal has the jurisdiction to entertain. No Court or authority
shall grant any injunction against the Tribunal or the Appellate Tribunal. No act or proceeding of the Tribunal or the
Appellate Tribunal can be questioned in any Civil Court.
See detailed Comments under Sections 10 and 10GB.
Limitation [ Section 10GE.
— The Limitation Act, 1963 (36 of 1963) is applicable to an appeal made to the Appellate Tribunal (NCLAT).
Appeal to Supreme Court [ Section 10GF].
—On the constitution of the National Company Law Tribunal (NCLT) under Section 10FB, as inserted by the
Companies (Second Amendment) Act, 2002 (11 of 2003), in matters conferred on the Tribunal (NCLT) under
various Sections of the Companies Act, 1956, any person aggrieved by an order or decision of the Tribunal (NCLT)
may prefer an appeal to the Appellate Tribunal [ Section 10FQ]. Any person aggrieved by any decision or order of
the Appellate Tribunal may file an appeal to the Supreme Court on any question of law arising out of such decision
or order [ Section 10GF].
See detailed Comments under Sections 10, 10E, 10FB, 10FQ and 10GF.
Page 8 of 9
Suits and Writ Petitions.
—The Courts will retain jurisdiction to entertain suits or writ petitions on matters which are outside the jurisdiction of
the Tribunal or the Appellate Tribunal or the Supreme Court under the Act.
Appropriate Forum.
—The matters which are not within the jurisdiction of the Company Law Board(CLB) [ now the National Company
Law Tribunal (NCLT)], are decided by the High Court or the District Court as provided under Section 10 and other
provisions of the Companies Act, 1956. The residue may go to ordinary Civil Court or some other competent
authority.4
Civil Courts when may exercise Jurisdiction.
—The jurisdiction or power of the High Court as a Company Court under Section 10 [CLB under Section 10Enow
the Tribunal (NCLT) under Section 10FB] can be exercised only in respect of matters for which the jurisdiction is
conferred by relevant other provisions of the Companies Act, 1956. The High Court [theCLBnow Tribunal] when
acting as a Company Court has special jurisdiction which is conferred by the provisions of the Companies Act and
the power cannot be exercised as a general power or as plenary or residuary jurisdiction. If there is any dispute
between the subscriber and the company, e.g., subscriber to shares having grievance in the matter of issue and
allotment of shares, the High Court [the CLBnow the Tribunal (NCLT)] as a Company Court has no jurisdiction and
the same can be tried in a Civil Court. Even if any provision is contravened by the company, power has been given
for prosecution of the company, but that has to be exercised by the Civil Court having jurisdiction and not the High
Court as Company Court [the CLBnow the Tribunal (NCLT)]. The power which is exercised by the Company Court
[the CLBnow the Tribunal (NCLT)] is in respect of corporate rights and not individual rights of a citizen.5
—The writ jurisdiction of High Courts under Article 226 and the Supreme Court under Article 32 of the Constitution
of India cannot be ousted.6
Court with respect to Offences against Companies Act [ S. 2(11)(b)].
—The Court with respect to any offence against the Companies Act, 1956 means the Court of a Magistrate of the
First Class or, as the case may be, a Presidency Magistrate, having jurisdiction to try such offence. [ Section
2(11)(b).
Offence committed under section 113 of the Companies Act, 1956 for failure to deliver share certificates to the
transferee within the prescribed time in the name of the complainant can be tried by the Magistrate having
jurisdiction and it cannot be contended that only the Company Court or theCompany Law Board (CLB) [or the
National Company Law Tribunal (NCLT) ] shall have the jurisdiction.7
See detailed Comments under Sections 2(11), 5, 10 and 621 to 631.
Binding force of Tribunal decisions.
—The orders of the Tribunal are binding on the Appellate Authorities and Authorities working within its jurisdiction.8
Judicial propriety and decorum require that the decisions of larger and co-ordinate Benches should be followed by
another Bench of the Tribunal. If it wants to take a different opinion, it should place the matter before the President
so that he can have the case referred to a Full Bench of the Tribunal consisting of three or more members.9
Page 9 of 9
2. President, Madras Bar Association v. Union of India, (2004) 2 Comp. LJ 274 (Mad.); R. Gandhi v. Union of India, (2004)
120 Comp. Cas. 510 (Mad.) (DB).
3. R. Gandhi v. Union of India, (2004) 120 Comp. Cas. 510 (Mad.) (DB). See also Comments under Sections 10FD, 10FE,
10FF, 10FK, 10FL, 10FT and 10FR.
(2002) 108 Comp. Cas. 295 (Cal.). See also Comments under Section 10, 10E, 10F, 10FA and 10FB-10GF.
Comp. Cas. 216 (Ker.) (DB). See also Comments under Section 10, 10E, 10GB, 41, 61, 63 and 283.
6. L. Chandra Kumar v. Union of India,(1997) 228 ITR 725 (SC). See detailed Comments under Section 10, 10F, 10GB
and 10GF.
7. Bank of Rajasthan Ltd. v. State of Bihar, (2002) 108 Comp. Cas. 556 (Patna).
791 (Cal.).
9. Paras Laminates (P.) Ltd. v. CEGAT, (1990) 68 Comp. Cas. 72 (Delhi) (1990) 183 ITR 167 (Delhi); Sundarjas Kanyalal
Bhatija v. Collector, (1990) 68 Comp. Cas. 20 (SC) AIR 1991 SC 261 (1990) 183 ITR 130 (SC); Sayaji Iron and
Engineering Co. v. CIT, (2002) 108 Comp. Cas. 675 (Guj.) (DB). See also Comments under Section 10FL. See detailed
Comments on Doctrine of Precedent or Stare decisis and Binding force of decisions of Tribunal under Section 10.
End of Document
Datta: Company Law
C R Datta
LAW TRIBUNAL
10[S. 10FC. Composition of Tribunal.

—The Tribunal shall consist of a President and such number of Judicial and Technical Members not exceeding
sixty-two, as the Central Government deems fit, to be appointed by that Government, by notification in the
Official Gazette.]
10. Inserted by the Companies (Second Amendment) Act, 2002 (11 of 2003), s. 6 [w.e.f. 1-4-2003videNotification No.
S.O. 344(E), dated 31-3-2003, published in the Gazette of India, Extraordinary, No. 290, Part II Section 3(ii) :
(2003) 114 Comp. Cas. (St.) 237].
COMMENTS
Legislative History.— The Companies (Second Amendment) Act, 2002. (11 of 2003).— See Legislative History in
Comments under Section 10FB.
Composition of Tribunal.—There shall be a President and Judicial and Technical Members not exceeding 62.
They are to be appointed by Central Government by Notification in the Official Gazette. The Central Government
shall constitute the Tribunal by the Gazette Notification under Section 10FB.
S.O. 344(E), dated 31-3-2003, published in the Gazette of India, Extraordinary, No. 290, Part II Section 3(ii) :
(2003) 114 Comp. Cas. (St.) 237].
End of Document
Datta: Company Law
C R Datta
LAW TRIBUNAL
11[S. 10FD. Qualifications for appointment of President and Members.

—
(1) The Central Government shall appoint a person who has been, or is qualified to be, a Judge of a High
Court as the President of the Tribunal.
(2) A person shall not be qualified for appointment as Judicial Member unless he—
(a) has, for at least fifteen years, held a judicial office in the territory of India; or
(b) has, for at least ten years been an advocate of a High Court, or has partly held judicial office and
has been partly in practice as an advocate for a total period of fifteen years; or
(c) has held for at least fifteen years a Group ‘A’ post or an equivalent post under the Central
Government or a State Government [including at least three years of service as a Member of the
Indian Company Law Service (Legal Branch) in Senior Administrative Grade in that service]; or
(d) has held for at least fifteen years a Group ‘A’ post or an equivalent post under the Central
Government (including at least three years of service as a Member of the Indian Legal Service in
Grade I of that service).
(3) A person shall not be qualified for appointment as Technical Member unless he—
(a) has held for at least fifteen years a Group ‘A’ post or an equivalent post under the Central
Government or a State Government [including at least three years of service as a Member of the
Indian Company Law Service (Accounts Branch) in Senior Administrative Grade in that service]; or
(b) is, or has been, a Joint Secretary to the Government of India under the Central Staffing Scheme,
or held any other post under the Central Government or a State Government carrying a scale of
pay which is not less than that of a Joint Secretary to the Government of India, for at least five
years and has adequate knowledge of, and experience in, dealing with problems relating to
company law; or
(c) is, or has been, for at least fifteen years in practice as a chartered accountant under the Chartered
Accountants Act, 1949 (38 of 1949) or
(d) is, or has been, for at least fifteen years in practice as a cost accountant under the Costs and
Works Accountants Act, 1959 (23 of 1959) or
(e) is, or has been, for at least fifteen years working experience as a Secretary in whole-time practice
as defined in clause (45A) of section 2 of this Act and is a member of the Institute of the Company
Secretaries of India constituted under the Company Secretaries Act, 1980 (56 of 1980) or
(f) is a person of ability, integrity and standing having special knowledge of, and professional
experience of not less than twenty years in, science, technology, economics, banking, industry,
law, matters relating to industrial finance, industrial management, industrial reconstruction,
administration, investment, account-ancy, marketing or any other matter, the special knowledge of,
or professional experience in, which would be in the opinion of the Central Government useful to
the Tribunal; or
(g) is, or has been, a Presiding Officer of a Labour Court, Tribunal or National Tribunal constituted
under the Industrial Disputes Act, 1947 (14 of 1947) or
Page 2 of 3
(h) is a person having special knowledge of, and experience of not less than fifteen years in, the
matters relating to labour.
Explanation.—For the purposes of this Part,—

(i) “Judicial Member” means a Member of the Tribunal appointed as such under sub-section (2) of section
10FD and includes the President of the Tribunal;
(ii) “Technical Member” means a Member of the Tribunal appointed as such under sub-section (3) of
section 10FD.]
11. Inserted by Act 11 of 2003, s. 6 (w.e.f. 1-4-2003).

12. R. Gandhi v. Union of India, , (2004) 120 Comp. Cas. 510 (Mad.) (DB). See also Comments under Sections 10FB,
10FE, 10FF, 10FK, 10FL, 10FR and 10FT.
COMMENTS
Legislative History.—The Companies (Second Amendment) Act, 2002 (11 of 2003).— See Legislative History in
President of the Tribunal [Sub-section (1).—A person who is or has been a Judge of a High Court or is qualified
to be a Judge of a High Court is eligible to be appointed as President of the Tribunal.
Judicial Member [Sub-section (2).—A person to be qualified or eligible to be appointed Judicial Member of the
Tribunal must have (a) held a Judicial office at least for 15 years; or (b) Practised at least for 10 years as an
Advocate of a High Court or partly held Judicial office and partly practiced as Advocate for total 15 years; or (c) has
been a member of Indian Company Law Service (Legal Branch) and is or has held a post in Senior Administrative
Grade for at least 5 years; or (d) a Member of the Indian Legal Service and held or holding a post in Grade I for at
least 5 years.
“Judicial Member” includes the President of the Tribunal [ Explanation(i)].
Technical Member [Sub-section (3).—A person to be eligible to be appointed Technical Member of the Tribunal
must have (a) held for at 15 years a Group ‘A’ or equivalent post under the Central or State Government (including
3 years as a Member of the Indian Company Law Service (Accounts Branch) in Senior Administrative Grade; or (b)
a Joint Secretary to the Government of Indiaor post under the Central or State Government carrying scale of a Joint
Secretary, for 5 years with adequate knowledge and experience in dealing with company law problems; or (c)
Practised for at least 15 years as a Chartered Accountant; or (d) Cost Accountant; or (e) Secretary in whole-time
practice; or (f) is a person of ability, integrity and standing with special knowledge and professional experience of
not less than 20 years in science, technology, economics, banking, industry, law, industrial finance, industrial
management, industrial reconstruction, administration, investment, accountancy, marketing or any other matter
useful to the Tribunal; or (g) a Presiding Officer of a Labour Court, Tribunal or National Tribunal constituted under
the Industrial Disputes Act, 1947; or (h) a person with special knowledge and experience for 15 years in labour
matters.
Constitutional validity.—Parliament is competent to make Tribunals and Appellate Tribunals. But, until the
provisions in Parts IB and Parts IC of the Companies Act, 1956 introduced by the Companies (Second Amendment)
Act, 2002 (11 of 2003), including, inter alia, Sections 10FD, 10FE, 10FF, 10FK, 10FR and 10FT which have been
found to be defective inasmuch as they are in breach of the basic constitutional scheme of separation of powers
and independence of the judicial function, are duly amended, by removing the defects pointed out in the judgment,
it would be unconstitutional to constitute a Tribunal and Appellate Tribunal to exercise the jurisdiction now exercised
by the High Courts or the CLB.12
Page 3 of 3

12. R. Gandhi v. Union of India, , (2004) 120 Comp. Cas. 510 (Mad.) (DB). See also Comments under Sections 10FB,
10FE, 10FF, 10FK, 10FL, 10FR and 10FT.
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LAW TRIBUNAL
13[S. 10FE. Term of office of President and Members.

—The President and every other Member of the Tribunal shall hold office as such for a term of three years from
the date on which he enters upon his office, but shall be eligible for re-appointment:
Provided that no President or other Member shall hold office as such after he has attained,—
(a) in the case of the President, the age of sixty-seven years;
(b) in the case of any other Member, the age of sixty-five years:
Provided further that the President or other Member may retain his lien with his parent cadre or Ministry or
Department, as the case may be, while holding office as such.]
S.O. 344(E), dated 31-3-2003, published in the Gazette of India, Extraordinary, No. 290, Part II, Section 3(ii) :
(2003) 114 Comp. Cas. (St.) 237].
COMMENTS
—The Companies (Second Amendment) Act, 2002 (11 of 2003).
— See Legislative History in Comments under Section 10FB.
Tenure of office.
—The President and every Member of the Tribunal shall hold office for 3 years, but shall be eligible for re-
appointment. A President cannot hold office after he has attained the age of 67 years. A Member cannot hold office
after he has attained the age of 65 years.
(2003) 114 Comp. Cas. (St.) 237].
Page 2 of 2
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14[S. 10FF. Financial and administrative powers of Member Administration.

—The Central Government shall designate any Judicial Member or Technical Member as Member
Administration who shall exercise such financial and administrative powers as may be vested in him under the
rules which may be made by the Central Government:
Provided that the Member Administration shall have authority to delegate such of his financial and
administrative powers as he may think fit to any other officer of the Tribunal subject to the condition that such
officer shall, while exercising such delegated powers continue to act under the direction, superintendence and
control of the Member Administration.]
COMMENTS
Legislative History.— The Companies (Second Amendment) Act, 2002(11 of 2003).— See Legislative History in
Powers of Member Administration.—The Central Government shall designate any Judicial or Technical Member
as Member Administration who shall exercise financial and administrative powers vested in him by the Rules. The
Member Administration may delegate such powers to any other officer who shall act under the direction,
superintendence and control of the Member Administration.
Constitutional validity.—Until sections 10FD, 10FE, 10FF, 10FK, 10FL, 10FR and 10FT are duly amended it
would be unconstitutional to constitute a Tribunal and Appellate Tribunal. See detailed Comments under Section
10FB and 10FD.
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LAW TRIBUNAL
15[S.
10FG. Salary, allowances and other terms and conditions of service of
President and other Members.
—The salary and allowances and other terms and conditions of service of the President and other Members of
the Tribunal shall be such as may be prescribed:
Provided that neither the salary and allowances nor the other terms and conditions of service of the President
and other Members shall be varied to their disadvantage after their appointment.]
S.O. 344(E), dated 31-3-2003, published in the Gazette of India, Extraordinary, No. 290, Part I Section 3(ii) :
(2003) 114 Comp. Cas. (St.) 237].
COMMENTS
Legislative History.—The Companies (Second Amendment) Act, 2002 (11 of 2003)— See Legislative History in
Salary and Allowances.—The salary, allowances and other terms and conditions of service of the President and
other Members of the Tribunal shall be as prescribed and shall not be varied to their disadvantage after
appointment.
S.O. 344(E), dated 31-3-2003, published in the Gazette of India, Extraordinary, No. 290, Part I Section 3(ii) :
(2003) 114 Comp. Cas. (St.) 237].
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LAW TRIBUNAL
16[S. 10FH. Vacancy in Tribunal.

—
(1) In the event of the occurrence of any vacancy in the office of the President of the Tribunal by reason of
his death, resignation or otherwise, the senior-most Member shall act as the President of the Tribunal
until the date on which a new President, appointed in accordance with the provisions of this Act to fill
such vacancy, enters upon his office.
(2) When the President is unable to discharge his functions owing to absence, illness or any other cause,
the senior-most Member or, as the case may be, such one of the Members of the Tribunal, as the
Central Government, may, by notification, authorise in this behalf, shall discharge the functions of the
President until the date on which the President resumes his duties.
(3) If, for reason other than temporary absence, any vacancy occurs in the office of the President or a
Member, the Central Government shall appoint another person in accordance with the provisions of
this Act to fill the vacancy and the proceedings may be continued before the Tribunal from the stage at
which the vacancy is filled.]
COMMENTS
—The Companies (Second Amendment) Act, 2002(11 of 2003).
— See Comments under Sections 10FB and 10FX.
Vacancy.
—(1) If office of the President becomes vacant by death, resignation or otherwise, the senior-most Member shall act
as the President until new President is appointed. (2) If President is unable to act owing to absence, illness the
senior-most Member or Member authorised by the Central Government by notification shall discharge functions of
President. (3) Apart from temporary vacancy, any vacancy in office of President or Member shall be filled up by the
Central Government

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17[S. 10FI. Resignation of President and Member.

—The President or a Member of the Tribunal may, by notice in writing under his hand addressed to the Central
Government, resign his office:
Provided that the President or a Member shall, unless he is permitted by the Central Government to relinquish
his office sooner, continue to hold office until the expiry of three months from the date of receipt of such notice
or until a person duly appointed as his successor enters upon his office or until the expiry of the term of office,
whichever is the earliest.]
(2003) 114 Comp. Cas. (St.) 237].
COMMENTS
Resignation.—The President or a Member of the Tribunal may by notice in writing to the Central Government
resign his office. But, he should not be permitted to relinquish his office until expiry of 3 months or until a person is
appointed as his successor or until the expiry of his term, whichever is the earliest.
(2003) 114 Comp. Cas. (St.) 237].
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LAW TRIBUNAL
18[S. 10FJ. Removal and suspension of President or Member.

—
(1) The Central Government may, in consultation with the Chief Justice of India, remove from office the
President or any Member of the Tribunal, who—
(a) has been adjudged an insolvent; or
(b) has been convicted of an offence which, in the opinion of the Central Government, involves moral
turpitude; or
(c) has become physically or mentally incapable of acting as such President or Member of the
Tribunal; or
(d) has acquired such financial or other interest as is likely to affect prejudicially his functions as such
President or Member of the Tribunal; or
(e) has so abused his position as to render his continuance in office prejudicial to the public interest:
Provided that no such President or a Member shall be removed on any of the grounds specified in
clauses (b) to (e) without giving him reasonable opportunity of being heard in respect of those charges.
(2) The President or a Member of the Tribunal shall not be removed from his office except by an order
made by the Central Government on the ground of proved misbehaviour or incapacity after an inquiry
made by a Judge of the Supreme Court in which such President or a Member had been informed of
the charges against him and given a reasonable opportunity of being heard in respect of those
charges.
(3) The Central Government may suspend from office the President or Member of the Tribunal in respect
of whom a reference has been made to the Judge of the Supreme Court under sub-section (2) until the
Central Government has passed orders on receipt of the report of the Judge of the Supreme Court on
such reference.
(4) The Central Government may, by rules, regulate the procedure for the investigation of misbehaviour or
incapacity of the President or a Member referred to in sub-section (2).]
COMMENTS
Page 2 of 2
Grounds for Removal of President or Member [Sub-section (1)].—The Central Government may remove the
President or any Member of the Tribunal in consultation with the Chief Justice of India. But, the President or
Member shall be removed on any of the grounds specified in clauses (b) to (e) of sub-section (1) after giving him
reasonable opportunity of being heard in respect of those charges.
Inquiry [Sub-section (2)].—The President or Member shall be removed by an order by the Central Government on
the ground of proved misbehaviour or incapacity after an inquiry made by a Judge of the Supreme Court. President
or Member must be informed of the charges and given a reasonable opportunity of being heard.
Suspension [Sub-section (3)].—The Central Government may suspend the President or Member until the Central
Government has passed orders on receipt of the report of the Judge of the Supreme Court on such reference.
Rules [Sub-section (4)].—The Central Government may make Rules for investigation of misbehaviour or
incapacity of the President or Member.
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LAW TRIBUNAL
19[S. 10FK. Officers and employees of Tribunal.
(1) The Central Government shall provide the Tribunal with such officers and other employees as it may
deem fit.
(2) The officers and other employees of the Tribunal shall discharge their functions under the general
superintendence of the Member Administration.
(3) The salaries and allowances and other terms and conditions of service of the officers and other
employees of the Tribunal shall be such as may be prescribed.]
(2003) 114 Comp. Cas. (St.) 237].
COMMENTS
Legislative History.— The Companies (Second Amendment) Act, 2002 (11 of 2003).— See Legislative History in
Staff of Tribunal.—The Central Government shall provide the Tribunal with such officers and employees who shall
discharge their functions under superintendence of the Member Administration. Salaries, allowances and terms
may be prescribed.
(2003) 114 Comp. Cas. (St.) 237].
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LAW TRIBUNAL
20[S. 10FL Benches of Tribunal.

—
(1) Subject to the provisions of this section, the powers of the Tribunal may be exercised by Benches,
constituted by the President of the Tribunal, out of which one shall be a Judicial Member and another
shall be a Technical Member referred to in clauses (a) to (f) of sub-section (3) of Section 10FD :
Provided that it shall be competent for the Members authorised in this behalf to function as a
Bench consisting of a single Member and exercise the jurisdiction, powers and authority of the
Tribunal in respect of such class of cases or such matters pertaining to such class of cases, as the
President of the Tribunal may, by general or special order, specify:
Provided further that if at any stage of the hearing of any such case or matter, it appears to the
Member of the Tribunal that the case or matter is of such a nature that it ought to be heard by a
Bench consisting of two Members, the case or matter may be transferred by the President of the
Tribunal or, as the case may be, referred to him for transfer to such Bench as the President may
deem fit.
(2) The President of the Tribunal shall, for the disposal of any case relating to rehabilitation, restructuring
or winding up of the companies, constitute one or more Special Benches consisting of three or more
Members, each of whom shall necessarily be a Judicial Member, a Technical Member appointed under
any of the clauses (a) to (f) of sub-section (3) of Section 10FD, and a Member appointed under clause
(g) or clause (h) of sub-section (3) of Section 10FD :
Provided that in case a Special Bench passes an order in respect of a company to be wound up,
the winding up proceedings of such company may be conducted by a Bench consisting of a single
Member.
(3) If the Members of a Bench differ in opinion on any point or points, it shall be decided according to the
majority, if there is a majority, but if the Members are equally divided, they shall state the point or
points on which they differ, and the case shall be referred by the President of the Tribunal for hearing
on such point or points by one or more of the other Members of the Tribunal and such point or points
shall be decided according to the opinion of the majority of Members of the Tribunal who have heard
the case, including those who first heard it.
(4) There shall be constituted such number of Benches as may be notified by the Central Government.
(5) In addition to the other Benches, there shall be a Principal Bench at New Delhi presided over by the
President of the Tribunal.
(6) The Principal Bench of the Tribunal shall have powers of transfer of proceedings from any Bench to
another Bench of the Tribunal in the event of inability of any Bench from hearing any such proceedings
for any reason:
Page 2 of 3
Provided that no transfer of any proceedings shall be made under this sub-section except after
recording the reasons for so doing in writing.]
20. Inserted by the Companies (Second Amendment) Act, 2002 (11 of 2003), s. 6 [w.e.f. 1-4-2003vide Notification No.
S.O. 344(E), dated 31-3-2003, published in the Gazette of India, Extraordinary, No. 290, Part II, Section 3(ii) : (2003)
114 Comp. Cas. (St.) 237 ].
21. Paras Laminates (P.) Ltd. v. CEGAT, (1990) 68 Comp. Cas. 72 (Delhi) : (1990) 183 ITR 167 (Delhi); Sundarjas
Kanyalal Bhatija v. Collector, (1990) 68 Comp. Cas. 20 (SC) : AIR 1991 SC 261 : (1990) 183 ITR 130 (SC); Sayaji Iron
and Engineering Co. v. CIT, (2002) 108 Comp. Cas. 675 (Guj.) (DB). See detailed Comments under Section 10.
22. ITAT v. Dy. CIT (Assessments),(1996) 218 ITR 275 (SC) : (1996) 131 CTR (SC) 59 : (1996) 85 Taxman 60 (SC).
COMMENTS
Legislative History. — The Companies (Second Amendment) Act, 2002 (11 of 2003).
— See Legislative History in Comments under Section 10FB.
Benches of Tribunal [Sub-section (1)].—The President of the Tribunal shall constitute the Benches to exercise
the powers of the Tribunal. There should be in each Bench at least a Judicial Member and a Technical Member.
Single Member Bench [Sub-s. (1), Provisos].—The President may by general or special order authorise a Bench
of a single Member to exercise the jurisdiction, powers and authority of the Tribunal in respect of specified cases.
However, if at any stage of the hearing, it appears to the Member of the Tribunal that the case or matter ought to be
heard by a Bench of two Members, the President may transfer it to such Bench.
Special Benches for rehabilitation, winding up [Sub-section (2)].—President shall for disposal of cases relating
to rehabilitation, restructuring or winding up of the companies constitute one or more Special Benches consisting 3
or more Members. Such Bench shall consist a Judicial Member, a Technical Member appointed under section
10FD (3)(a) to (f) and a Member appointed under Section 10FD (3)(g) or (h).
In case the Special Bench orders a company to be wound up, the winding up proceedings may be conducted by a
Bench consisting of a single Member.
Constitutional validity.—Until Section 10FD, 10FE, 10FF, 10FK, 10FL, 10FR and 10FT are duly amended it would
be unconstitutional to constitute a Tribunal and Appellate Tribunal. See detailed Comments under Sections 10FB
and Section 10FD.
Majority Rule [Sub-section (3)].—If the Members of a Bench differ in opinion on any point or points, it shall be
decided according to the majority. In case the Members are equally divided, the point of difference shall be referred
to the President for hearing by one or more of the other Members of the Tribunal. Such point or points shall be
decided according to the opinion of the majority of Members of the Tribunal who have heard the case, including
those who first heard it.
Binding force of Tribunal decisions.—Judicial propriety and decorum require that the decisions of larger and co-
ordinate Benches should be followed by another Bench of the Tribunal. If it wants to take a different opinion, it
should place the matter before the President so that he can have the case referred to a Full Bench of the Tribunal
consisting of three or more members.21
See detailed Comments on Doctrine of Precedent or Stare decisis, Binding force of Supreme Court, jurisdictional
High Court, Outside High Courts and Tribunal decisions under Section 10 —Jurisdiction of Courts.
Page 3 of 3
Power of President to constitute Special Bench.—In a decision on power of the President of the Tribunal to
constitute a Special Bench of the Income-tax Appellate Tribunal (ITAT), the Supreme Court held that Special Bench
can be constituted by the President both in exercise of his administrative powers as also on the basis of judicial
order passed by any Bench making reference to President. Even independent of such a reference on the judicial
side the President can, in an appropriate case even suo motu move in the matter and can constitute a Special
Bench of course on appropriate and germane grounds. It is, however, true that the President in exercise of its
administrative powers cannot just constitute a Special Bench without any rhyme or reason. Such an administrative
exercise can be demonstrated to be unreasonable, capricious, mala fide, arbitrary, whimsical or fanciful.22
Number of Benches [Sub-section (4)].—The Central Government shall constitute such number of Benches as
may be notified.
Principal Bench at New Delhi [Sub-section (5)].—The Principal Bench shall be at New Delhi presided over by the
President of the Tribunal.
Transfer of proceedings [Sub-section (6)].—The Principal Bench of the Tribunal may transfer proceedings from
one Bench to another Bench of the Tribunal in case of inability of any Bench from hearing such proceedings after
recording reasons.
20. Inserted by the Companies (Second Amendment) Act, 2002 (11 of 2003), s. 6 [w.e.f. 1-4-2003vide Notification No.
S.O. 344(E), dated 31-3-2003, published in the Gazette of India, Extraordinary, No. 290, Part II, Section 3(ii) : (2003)
114 Comp. Cas. (St.) 237 ].
21. Paras Laminates (P.) Ltd. v. CEGAT, (1990) 68 Comp. Cas. 72 (Delhi) : (1990) 183 ITR 167 (Delhi); Sundarjas
Kanyalal Bhatija v. Collector, (1990) 68 Comp. Cas. 20 (SC) : AIR 1991 SC 261 : (1990) 183 ITR 130 (SC); Sayaji Iron
and Engineering Co. v. CIT, (2002) 108 Comp. Cas. 675 (Guj.) (DB). See detailed Comments under Section 10.
22. ITAT v. Dy. CIT (Assessments),(1996) 218 ITR 275 (SC) : (1996) 131 CTR (SC) 59 : (1996) 85 Taxman 60 (SC).
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LAW TRIBUNAL
23[S. 10FM. Order of Tribunal.

—
(1) The Tribunal may, after giving the parties to any proceeding before it, an opportunity of being heard,
pass such orders thereon as it thinks fit.
(2) The Tribunal may, at any time within two years from the date of the order, with a view to rectifying any
mistake apparent from the record, amend any order passed by it under sub-section (1), and shall make
such amendment if the mistake is brought to its notice by the parties.
(3) The Tribunal shall send a copy of every order passed under this section to all the parties concerned.]
(2003) 114 Comp. Cas. (St.) 237].
25. CED v. Murarilal Sovasaria,(1989) 179 ITR 380 (Gauhati) : (1989) 80 CTR (Gau.) 250; A.C. Estates v. Serajuddin &
Co., , AIR 1966 SC 935 [LNIND 1965 SC 165].
COMMENTS
Order of Tribunal [Sub-section (1)].—In any proceeding before the Tribunal the parties are to be given
opportunity of being heard and thereafter the Tribunal may pass such orders as it may think fit.
Procedure, Powers and Natural Justice.—The Tribunal shall not be bound by the Code of Civil Procedure, 1908
(5 of 1908) but shall be guided by the principles of natural justice and shall have power to regulate its own
procedure. However, the Tribunal will have the powers of the Civil Courts under the Code of Civil Procedure, 1908
regarding summoning, evidence, etc.
See detailed Comments on Powers of Tribunal and Principles of Natural Justice, viz., (1) Rule of audi alteram
partem, (2) Reasoned order under Section 10FZA.
Rectification [Sub-section (2)].—Within 2 years from the date of the order the Tribunal may rectify any mistake
apparent from the record. It may also amend any order suo motu. The Tribunal shall amend the mistake if such
mistake is brought to the notice of the Tribunal by any of the parties.
Page 2 of 2
Error apparent on the record.—It is well-settled that if the Supreme Court has construed the meaning of a section,
then any decision to the contrary given by any other authority must be held to be erroneous and such error must be
treated as an error apparent on the record.24 The Tribunal may rectify the mistake under Article 141 of the
Constitution of India even if such judgments are not cited.25
See detailed Comments under Section 10, 10FN and 10GF.
Suo motubenefit of Supreme Court decisions.—The Tribunal can refer to a decision of the Supreme Court,
which is the law of the land, even if it has not been cited by learned counsels. The order of the Tribunal, in which
such decision of the Supreme Court has been referred to, cannot be held to have been passed in disregard of the
principles of natural justice or the provisions of Act.26
See detailed Comments on the Doctrine of Precedent or Stare decisis, Binding force of Supreme Court decisions
and Binding force of jurisdictional High Court decisions under Section 10—Jurisdiction of Courts.
Copies to be sent [Sub-section (3)].—The Tribunal shall send copy of every order to each of the parties
concerned. Here, there is a departure from the practice of the court where the party interested has to apply for and
obtain copy of the order.
(2003) 114 Comp. Cas. (St.) 237].
25. CED v. Murarilal Sovasaria,(1989) 179 ITR 380 (Gauhati) : (1989) 80 CTR (Gau.) 250; A.C. Estates v. Serajuddin &
Co., , AIR 1966 SC 935 [LNIND 1965 SC 165].
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LAW TRIBUNAL
27[S. 10FN. Power to review.

—The Tribunal shall have power to review its own orders.]
(2003) 114 Comp. Cas. (St.) 237 ].
COMMENTS
— The Companies (Second Amendment) Act, 2002 (11 of 2003)— See Legislative History in Comments under
Section 10FB.
Power to Review.
—Though the Code of Civil Procedure, 1908 is not applicable to the proceedings before the Tribunal it has been
given power to review its own orders. From the decisions or orders of the Tribunal a Review Petition can be made
against the Order to the Tribunal.
Review.
—A subsequent binding decision of the Supreme Court may be a good ground for review.28See detailed Comments
under Sections 10 and 10GF.
(2003) 114 Comp. Cas. (St.) 237 ].
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LAW TRIBUNAL
29[S. 10FO. Delegation of powers.

—The Tribunal may, by general or special order, delegate, subject to such conditions and limitations, if any, as
may be specified in the order, to any Member or Officer or other employee of the Tribunal or other person
authorised by the Tribunal to manage any industrial company or industrial undertaking or any operating agency,
such powers and duties under this Act as it may deem necessary.]
COMMENTS
Delegation of Powers.—The Tribunal may delegate to any Member, Officer or Employee of the Tribunal, or to an
Authorised Person to manage any industrial company or undertaking, or to an Operating Agency, the powers and
duties of the Tribunal. The delegation may be, by general or special order. The delegation may be on terms and
conditions and limitations specified in the order of delegation. The Tribunal may at its discretion withdraw such
power.
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LAW TRIBUNAL
30[S.10FP Power to seek assistance of Chief Metropolitan Magistrate and

District Magistrate.
—
(1) The Tribunal or any operating agency, on being directed by the Tribunal may, in order to take into
custody or under its control all property, effects and actionable claims to which a sick industrial
company is or appears to be entitled, request, in writing, the Chief Metropolitan Magistrate or the
District Magistrate within whose jurisdiction any property, books of account or any other document of
such sick industrial company, be situate or be found, to take possession thereof, and the Chief
Metropolitan Magistrate or the District Magistrate, as the case may be, shall, on such request being
made to him,—
(a) take possession of such property, books of account or other documents; and
(b) cause the same to be entrusted to the Tribunal or the operating agency.
(2) For the purpose of securing compliance with the provisions of sub-section (1), the Chief Metropolitan
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.
(3) No act of the Chief Metropolitan Magistrate or the District Magistrate done in pursuance of this section
shall be called in question in any court or before any authority on any ground whatsoever.]
COMMENTS
Magistrate to assist Tribunal [Sub-section (1)].—The Tribunal may request, in writing the Chief Metropolitan
Magistrate or District Magistrate to take possession of property, books of account or other documents of sick
industrial company. The Tribunal may also direct an Operating Agency to apply for such assistance. Application is
to be made to the Magistrate within whose jurisdiction the property etc. is situate. Such Magistrate shall (a) take
possession; and (b) cause the same to be entrusted to the Tribunal or the operating agency.
Compliance by Magistrate [Sub-section (2)].—For securing the compliance with the provisions of section
10FP(1), the Chief Metropolitan 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.
Page 2 of 2
Immunity of Magistrate [Sub-section (3)].—The act of the Chief Metropolitan Magistrate or District Magistrate
done in pursuance of this section are not to be called in question in any court or before any authority on any ground
whatsoever.
Writ Petition.—It appears that Suit or Writ jurisdiction of the High Court and the Supreme Court cannot be invoked
against any act of the Chief Metropolitan Magistrate or District Magistrate.
See detailed Comments on Suit, Writs, Judicial review and Constitutional validity under Sections 10, 10FB, 10GB
and 10GF.
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Datta: Company Law > Datta: Company Law > Volume 1 > PART IC APPELLATE TRIBUNAL
1[S. 10FQ. Appeal from order of Tribunal.

—
(1) Any person aggrieved by an order or decision of the Tribunal may prefer an appeal to the Appellate
Tribunal.
(2) No appeal shall lie to the Appellate Tribunal from an order or decision made by the Tribunal with the
consent of parties.
(3) Every appeal under sub-section (1) shall be filed within a period of forty-five days from the date on
which a copy of the order or decision made by the Tribunal is received by the appellant and it shall be
in such form and accompanied by such fee as may be prescribed:
Provided that the Appellate Tribunal may entertain an appeal after the expiry of the said period of
forty-five days from the date aforesaid if it is satisfied that the appellant was prevented by sufficient
cause from not filing the appeal in time.
(4) On receipt of an appeal preferred under sub-section (1), the Appellate Tribunal shall, after giving
parties to the appeal, an opportunity of being heard, pass such orders thereon as it thinks fit,
confirming, modifying or setting aside the order appealed against.
(5) The Appellate Tribunal shall send a copy of every order made by it to the Tribunal and parties to the
appeal.
(6) The appeal filed before the Appellate Tribunal under sub-section (1) shall be dealt with by it as
expeditiously as possible and endeavour shall be made by it to dispose of the appeal finally within six
months from the date of the receipt of the appeal.]
1. Part IC comprising Sections 10FQ to 10GF inserted by the Companies (Second Amendment) Act, 2002 (11 of
COMMENTS
Legislative History.—The Companies (Second Amendment) Act, 2002(11 of 2003).— See Legislative History in
Appeal to Appellate Tribunal [Sub-section (1)].—A person aggrieved by any order or decision of the National
Company Law Tribunal (NCLT) constituted under Section 10FB may prefer an appeal to the Appellate Tribunal.
National Company Law Tribunal (NCLT) [ Sections 10FB-10GF].—By the Companies (Second Amendment)
Act, 2002 (11 of 2003), the powers and jurisdiction presently being exercised by various bodies, viz., the Company
Page 2 of 3
Law Board (CLB), the High Courts as Company Court, the BIFR or the AAIFR have been consolidated and
entrusted to the National Company Law Tribunal (NCLT).
See detailed Comments under Part IB [ Sections 10FB to 10FP] inserted by the Companies (Second Amendment)
Act, 2002 (11 of 2003).
exercised by the CLB, the Court, the Central Government and BIFRunder various Sections of the Companies Act,
1956 have been conferred on the Tribunal (NCLT). See List of Sections conferring powers under Section 10FB.
Tribunal except consent orders [ Section 10FQ]. Civil Court shall have no jurisdiction in such matters [ Section
Appellate Tribunal [ Sections 10FQ-10GF].— See detailed Comments on Appellate Tribunal under Part IC [
Sections 10FQ to 10GF] inserted by the Companies (Second Amendment) Act, 2002 (11 of 2003). The Appellate
Tribunal shall be constituted by the Central Government vide Notification under Section 10FR.
Appeal to Supreme Court [ Section 10GF].—On the constitution of the National Company Law Tribunal (NCLT)
under Section 10FB, as inserted by the Companies (Second Amendment) Act, 2002 (11 of 2003), in matters
conferred on the Tribunal (NCLT) under various Sections of the Companies Act, 1956, any person aggrieved by an
order or decision of the Tribunal (NCLT) may prefer an appeal to the Appellate Tribunal [ Section 10FQ]. Any
person aggrieved by any decision or order of the Appellate Tribunal may file an appeal to the Supreme Court on
any question of law arising out of such decision or order [ Section 10GF].
See detailed Comments under Sections 10FB, 10FQ and 10GF.
No appeal from Consent Order [Sub-section (2)].—No appeal shall lie to the Appellate Tribunal from an order of
the Tribunal made with the consent of parties.
Limitation and Form [Sub-section (3)].—The appeal shall be filed within 45 days from the date of receipt of the
order or decision made by the Tribunal. The appeal shall be in prescribed form and accompanied by prescribed fee.
Condonation of delay [Sub-section (3), proviso].—The Appellate Tribunal may entertain appeal after the expiry
of 45 days if it is satisfied that the appellant was prevented by sufficient cause in not filing the appeal in time.
Limitation [ Section 10GE].—The Limitation Act, 1963 (36 of 1963) is applicable to Appeal before the Appellate
Tribunal. Therefore, section 5 of the Limitation Act, 1963 will also be applicable and the Appellate Tribunal may
condone the delay and admit the appeal preferred beyond the period of 45 days.
See detailed Comments under Section 10GE.
Order of Appellate Tribunal [Sub-section (4)].—The Appellate Tribunal shall after giving parties to the appeal, an
opportunity of being heard, pass such orders as it thinks fit. The Appellate Tribunal may confirm, modify or set aside
the order of the Tribunal (NCLT) appealed against.
Procedure, Powers and Natural Justice [ Section 10FZA].—(1) The Tribunal and the Appellate Tribunal, shall
not be bound by the Code of Civil Procedure, 1908 but shall be guided by the principles of natural justice and shall
have the power to regulate its own procedure. (2) The Tribunal and Appellate Tribunal will have the same powers
as the Civil Courts under the Code of Civil Procedure, 1908 (5 of 1908) as regards (a) summoning and enforcing
the attendance of any person and examining him on oath; (b) requiring discovery and production of documents; (c)
receiving evidence on affidavits; (d) requisitioning public records; (e) issuing commissions for examination of
witnesses or documents; (f) reviewing its decisions; (g) dismissing any representation for default or deciding the
matter ex-parte; (h) setting aside its own order of dismissal for default or any order passed ex-parte; and (g) hearing
Page 3 of 3
any other matter which may be prescribed by the Central Government. (3) The Tribunal and the Appellate Tribunal
may enforce its order as a decree of a Court and may send the order to the appropriate Court for execution.
See detailed Comments on Principles of Natural Justice, viz., (1) Rule of audi alteram partem, (2) Reasoned order,
etc., under Section 10FZA.
See detailed Comments under Sections 10 and 10G.
Copies of order to be sent [Sub-section (5)].—The Appellate Tribunal shall send a copy of the Appellate Order to
the Tribunal and each party concerned.
Here, there is a departure from the practice of the Court where the party interested has to apply for and obtain copy
of the order.
Disposal of Appeal [Sub-section (6)].—The Appellate Tribunal is expected to hear the parties and dispose of the
appeal within 6 months.
Civil Court not to have Jurisdiction in matters conferred on Appellate Tribunal [ Section 10GB].—No Civil
Court shall have jurisdiction to entertain any suit or proceeding which the Tribunal or the Appellate Tribunal has the
jurisdiction to entertain. No Court or authority shall grant any injunction against the Tribunal or the Appellate
Tribunal. No act or proceeding of the Tribunal or the Appellate Tribunal can be questioned in any Civil Court.
End of Document
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2[S. 10FR. Constitution of Appellate Tribunal.

—
(1) The Central Government shall, by notification in the Official Gazette, constitute with effect from such
date as may be specified therein, an Appellate Tribunal to be called the “National Company Law
Appellate Tribunal” consisting of a Chairperson and not more than two Members, to be appointed by
that Government, for hearing appeals against the orders of the Tribunal under this Act.
(2) The Chairperson of the Appellate Tribunal shall be a person who has been a Judge of the Supreme
Court or the Chief Justice of a High Court.
(3) A Member of the Appellate Tribunal shall be a person of ability, integrity and standing having special
knowledge of, and professional experience of not less than twenty-five years in, science, technology,
economics, banking, industry, law, matters relating to labour, industrial finance, industrial management,
industrial reconstruction, administration, investment, accountancy, marketing or any other matter, the
special knowledge of, or professional experience in which, would be in the opinion of the Central
Government useful to the Appellate Tribunal.]
2. Inserted by the Companies (Second Amendment) Act, 2002 (11 of 2003), s. 6[w.e.f. 1-4-2003videNotification No.
(2003) 114 Comp. Cas. (St.)237].
3. R. Gandhi v. Union of India, (2004) 120 Comp. Cas. 510 (Mad.) (DB). See also Comments under Sections 10FB, 10FD,
10FE, 10FF, 10FK, 10FL, 10FT.
COMMENTS
Constitution of Appellate Tribunal [Sub-section (1)].—The Central Government shall constitute the National
Company Law Appellate Tribunal, called, Appellate Tribunal by a Notification in the Official Gazette.
The Appellate Tribunal would consist of a Chairperson and not more than 2 Members. They are to be appointed by
the Central Government.
The Appellate Tribunal would hear appeals against the orders of the Tribunal (NCLT) constituted under Section
10FB.
See detailed Comments on the Tribunal (NCLT) [ Sections 10FB-10FP] and Appellate Tribunal [ Sections 10FQ-
10GF].
Page 2 of 2
Qualification of Chairperson [Sub-section (2)].—The Chairperson of the Appellate Tribunal shall be a person
who has been a Judge of the Supreme Court or the Chief Justice of a High Court.
Qualification of Member [Sub-section (3)].—A Member of the Appellate Tribunal shall be a person of ability,
integrity and standing having special knowledge and professional experience of not less than 25 years in, science,
technology, economics, banking, industry, law, matters relating to labour, industrial finance, industrial management,
industrial reconstruction, administration, investment, accountancy, marketing or any other matter, the special
knowledge of or professional experience in which, would be in the opinion of the Central Government useful to the
Appellate Tribunal.
Constitutional validity.—Parliament is competent to make Tribunals and Appellate Tribunals. But, an independent
judiciary and its power of judicial review are among the basic features of the Constitution of India. Therefore, until
the provisions in Part IB [ Sections 10FB-10FP] and Part IC [ Sections 10FQ-10GF] of the Companies Act, 1956
introduced by the Companies (Second Amendment) Act, 2002 (11 of 2003), including, inter alia, Sections 10FD,
10FE, 10FF, 10FK, 10FL, 10FR and 10FT, which have been found to be defective inasmuch as they are in breach
of the basic constitutional scheme of separation of powers and independence of the judicial function, are duly
amended, by removing the defects pointed out, it would be unconstitutional to constitute a Tribunal and Appellate
Tribunal to exercise the jurisdiction now exercised by the High Courts or the CLB.3
See detailed Comments under Section 10FB.
(2003) 114 Comp. Cas. (St.)237].
10FE, 10FF, 10FK, 10FL, 10FT.
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4[S. 10FS. Vacancy in Appellate Tribunal, etc.

—
(1) In the event of the occurrence of any vacancy in the office of the Chairperson of the Appellate Tribunal
by reason of his death, resignation or otherwise, the senior-most Member of the Appellate Tribunal
shall act as the Chairperson of the Appellate Tribunal until the date on which a new Chairperson
appointed in accordance with the provisions of this Act to fill such vacancy enters upon his office.
(2) When the Chairperson of the Appellate Tribunal is unable to discharge his functions owing to absence,
illness or any other cause, the senior-most Member or, as the case may be, such one of the Member of
the Appellate Tribunal, as the Central Government may, by notification, authorise in this behalf, shall
discharge the functions of the Chairperson until the date on which the Chairperson resumes his duties.
(3) If, for reason other than temporary absence, any vacancy occurs in the office of the Chairperson or a
Member, the Central Government shall appoint another person in accordance with the provisions of
this Act to fill the vacancy and the proceedings may be continued before the Appellate Tribunal from
the stage at which the vacancy is filled.]
(2003) 114 Comp. Cas. (St.) 237].
COMMENTS
Vacancy.—(1) If the office of the Chairperson of the Appellate Tribunal becomes vacant by death, resignation or
otherwise the senior-most Member of the Appellate Tribunal shall act as the Chairperson until new Chairperson is
appointed. (2) If Chairperson is unable to act owing to absence, illness the senior-most Member or Member
authorised by the Central Government by notification shall discharge functions of the Chairperson. (3) Apart from
temporary vacancy, any vacancy in office of the Chairperson or Member shall be filled up by the Central
Government.
(2003) 114 Comp. Cas. (St.) 237].
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5[S. 10FT. Term of office of Chairperson and Members.

—The Chairperson or a Member of the Appellate Tribunal shall hold office as such for a term of three years
from the date on which he enters upon his office, but shall be eligible for re-appointment for another term of
three years:
Provided that no Chairperson or other Member shall hold office as such after he has attained,—
(a) in the case of the Chairperson, the age of seventy years;
(b) in the case of any other Member, the age of sixty-seven years.]
(2003) 114 Comp. Cas. (St.) 237].
10FE, 10FF, 10FK, 10FL and 10FR.
COMMENTS
Tenure of office.—The Chairperson and Members of the Appellate Tribunal shall hold office for 3 years, but shall
be eligible for re-appointment for another 3 years.
Age limit.
—A Chairperson cannot hold office after he has attained the age of 70 years. A Member cannot hold office after he
has attained the age of 67 years.
Constitutional validity.
—Parliament is competent to make Tribunals and Appellate Tribunals. But, until the provisions in Parts IB and IC of
the Companies Act, 1956 introduced by the Companies (Second Amendment) Act, 2002 (11 of 2003), including,
inter alia, Sections 10FD, 10FE, 10FF, 10FK, 10FR and 10FT which have been found to be defective inasmuch as
they are in breach of the basic constitutional scheme of separation of powers and independence of the judicial
function, are duly amended, by removing the defects pointed out in the judgment, it would be unconstitutional to
constitute a Tribunal and Appellate Tribunal to exercise the jurisdiction now exercised by the High Courts or the
CLB.6
Page 2 of 2
(2003) 114 Comp. Cas. (St.) 237].
10FE, 10FF, 10FK, 10FL and 10FR.
End of Document
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7[S. 10FU. Resignation of Chairperson and Members.

—The Chairperson or a Member of the Appellate Tribunal may, by notice in writing under his hand addressed
to the Central Government, resign his office :
Provided that the Chairperson or a Member of the Appellate Tribunal shall, unless he is permitted by the
Central Government to relinquish his office sooner, continue to hold office until the expiry of three months from
the date of receipt of such notice or until a person duly appointed as his successor enters upon his office or
until the expiry of his term of office, whichever is the earliest.]
(2003) 114 Comp. Cas. (St.) 237].
COMMENTS
Resignation.—The Chairperson or a Member of the Appellate Tribunal may by notice in writing to the Central
Government resign his office.
But, the Chairperson or a Member of the Appellate Tribunal shall not be permitted to relinquish his office until expiry
of 3 months or until a person is appointed as his successor or until the expiry of his term, whichever is the earliest.
(2003) 114 Comp. Cas. (St.) 237].
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8[S.
10FV. Removal and suspension of Chairperson and Members of
Appellate Tribunal.
—
(1) The Central Government may, in consultation with the Chief Justice of India, remove from office the
Chairperson or any Member of the Appellate Tribunal, who—
(a) has been adjudged an insolvent; or
(b) has been convicted of an offence which, in the opinion of the Central Government, involves moral
turpitude; or
(c) has become physically or mentally incapable of acting as such Chairperson or Member of the
Appellate Tribunal; or
(d) has acquired such financial or other interest as is likely to affect prejudicially his functions as such
Chairperson or Member of the Appellate Tribunal; or
(e) has so abused his position as to render his continuance in office prejudicial to the public interest.
(2) The Chairperson or a Member of the Appellate Tribunal shall not be removed from his office except by
an order made by the Central Government on the ground of proved misbehaviour or incapacity after an
inquiry made by a Judge of the Supreme Court in which such Chairperson or Member had been
informed of the charges against him and given a reasonable opportunity of being heard in respect of
those charges.
(3) The Central Government may suspend from office the Chairperson or a Member of the Appellate
Tribunal in respect of whom a reference has been made to the Judge of the Supreme Court under sub-
section (2) until the Central Government has passed orders on receipt of the report of the Judge of the
Supreme Court on such reference.
(4) The Central Government may, by rules, regulate the procedure for the investigation of misbehaviour or
incapacity of the Chairperson or a Member referred to in sub-section (2).]
COMMENTS
— The Companies (Second Amendment) Act, 2002 (11 of 2003).— See Legislative History in Comments under
Section 10FB.
Page 2 of 2
Grounds for Removal of Chairperson or Member [Sub-section (1)].—The Central Government may remove the
Chairperson or any Member of the Appellate Tribunal in consultation with the Chief Justice of India.
The grounds for removal of the Chairperson or any Member of the Appellate Tribunal have been enumerated in
clauses (a) to (e) of section 10FV(1).
Inquiry [Sub-section (2)].—The Chairperson or Member of the Appellate Tribunal shall be removed by an order by
the Central Government on the ground of proved misbehaviour or incapacity after an inquiry made by a Judge of
the Supreme Court. The Chairperson or Member must be informed of the charges and given a reasonable
opportunity of being heard.
Suspension [Sub-section (3)].—The Central Government may suspend the Chairperson or Member until the
Central Government has passed orders on receipt of the report of the Judge of the Supreme Court on such
reference.
Rules [Sub-section (4)].—The Central Government may make Rules for investigation of misbehaviour or
incapacity of the Chairperson or Member.
See Comments vis-a-vis President and Member of Tribunal u/s. 10FJ.
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9[S.
10FW. Salary, allowances and other terms and conditions of service of
Chairperson and Members.
—
(1) The salary and allowances and other terms and conditions of service of the Chairperson and other
Members of the Appellate Tribunal shall be such as may be prescribed.
(2) The salary, allowances and other terms and conditions of service of the Chairperson and other
Members of the Appellate Tribunal shall not be varied to their disadvantage after appointment.]
(2003) 114 Comp. Cas. (St.) 237].
COMMENTS
Salary and Allowances.—The salary, allowances and other terms and conditions of service of the Chairperson
and other Members of the Appellate Tribunal shall be as prescribed and shall not be varied to their disadvantage
after appointment.
(2003) 114 Comp. Cas. (St.) 237].
End of Document
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10[S. 10FX. Selection Committee.

—
(1) The Chairperson and Members of the Appellate Tribunal and President and Members of the Tribunal
shall be appointed by the Central Government on the recommendations of a Selection Committee
consisting of—
(a) Chief Justice of India or his nominee Chairperson;

...........
(b) Secretary in the Ministry of Finance Member;

and Company Affairs
..........................................
(c) Secretary in the Ministry of Labour Member;

.............
(d) Secretary in the Ministry of Law and Member;

Justice (Department of Legal Affairs
or Legislative Department)
.................................................
(e) Secretary in the Ministry of Finance Member.

and Company Affairs (Department
of Company Affairs) ...............
(2) The Joint Secretary in the Ministry or Department of the Central Government dealing with this Act shall
be the Convenor of the Selection Committee.
(3) The Central Government shall, within one month from the date of occurrence of any vacancy by reason
of death, resignation or removal of the Chairperson and Members of the Appellate Tribunal and
President and Members of the Tribunal and six months before the superannuation or end of tenure of
the Chairperson and Members of the Appellate Tribunal and President and Members of the Tribunal,
make a reference to the Selection Committee for filling up of the vacancy.
(4) The Selection Committee shall recommend within one month a panel of three names for every vacancy
referred to it.
(5) Before recommending any person for appointment as the Chairperson and Members of the Appellate
Tribunal and President and Members of the Tribunal, the Selection Committee shall satisfy itself that
such person does not have financial or other interest which is likely to affect prejudicially his functions
as such Chairperson or Member of the Appellate Tribunal or President or Member of the Tribunal, as
the case may be.
(6) No appointment of the Chairperson and Members of the Appellate Tribunal and President and
Members of the Tribunal shall be invalidated merely by reason of any vacancy or any defect in the
constitution of the Selection Committee.]
Page 2 of 2
COMMENTS
Selection Committee [Sub-section (1)].—The Chairperson and Members of the Appellate Tribunal and President
and Members of the Tribunal shall be appointed by the Central Government. The appointments shall be made on
the recommendations of a Selection Committee. The Selection Committee shall consist of a Chairperson and 4
Members as follows. (a) The Chief Justice of India or his nominee shall be the Chairperson. The 4 Members would
be the four Secretaries, viz., (b) Secretary in the Ministry of Finance and Company Affairs; (c) Secretary in the
Ministry of Labour; (d) Secretary in the Ministry of Law and Justice (Department of Legal Affairs or Legislative
Department) and (e) Secretary in the Ministry of Finance and Company Affairs (Department of Company Affairs).
Convenor of Selection Committee [Sub-section (2)].—The Joint Secretary in the Ministry or Department of the
Central Government dealing with the Companies Act shall be the Convenor of the Selection Committee.
Filling of Vacancy [Sub-section (3)].—The Central Govt. shall within 1 month from the date of vacancy by reason
of death, resignation or removal of the Chairperson and Members of the Appellate Tribunal and President and
Members of the Tribunal and 6 months before the superannuation or end of their tenure make a reference to the
Selection Committee for filling up of the vacancy.
Recommendation [Sub-section (4)].—The Selection Committee shall give its recommendation within 1 month of
reference to it. The Selection Committee shall recommend a panel of 3 names for every vacancy.
Selection Committee to satisfy [Sub-section (5)].—The Selection Committee shall satisfy itself that the person
recommended does not have financial or other interest which is likely to affect prejudicially his functions as such
Chairperson or Member of the Appellate Tribunal or President or Member of the Tribunal.
Validity of appointment [Sub-section (6)].—No appointment of the Chairperson and Members of the Appellate
Tribunal and President and Members of the Tribunal shall be invalidated merely by reason of any vacancy or any
defect in the constitution of the Selection Committee.
End of Document
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11[S. 10FY. Chairperson, etc., to be public servants.

— The Chairperson, Members, officers and other employees of the Appellate Tribunal and the President,
Members, officers and other employees of the Tribunal shall be deemed to be public servants within the
meaning of section 21 of the Indian Penal Code, 1860 (45 of 1860).]
S.O. 344(E), dated 31-3-2003, published in the Gazette of India, Extraordinary, No. 290, Part II, Section 3)ii) :
(2003) 114 Comp. Cas. (St.) 237].
COMMENTS
Public Servant.—The Chairperson, President, Members, Officers and Employees of the Tribunal and Appellate
Tribunal shall be deemed to be public servants within the meaning of section 21 of the Indian Penal Code, 1860 (45
of 1860).
S.O. 344(E), dated 31-3-2003, published in the Gazette of India, Extraordinary, No. 290, Part II, Section 3)ii) :
(2003) 114 Comp. Cas. (St.) 237].
End of Document
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12[S. 10FZ. Protection of action taken in good faith.

— No suit, prosecution or other legal proceedings shall lie against the Appellate Tribunal or its Chairperson,
Member, officer or other employee or against the Tribunal, its President, Member, officer or other employee or
operating agency or liquidator or any other person authorised by the Appellate Tribunal or the Tribunal in the
discharge of any function under this Act for any loss or damage caused or likely to be caused by any act which
is in good faith done or intended to be done in pursuance of this Act.]
COMMENTS
Protection of action in good faith.—No suit, prosecution or legal proceedings shall lie against the Appellate
Tribunal, Tribunal, Chairperson, President, Members, Officers, Employees, Operating Agency, Liquidator or
Authorised Persons in the discharge of any function for any loss or damage caused or likely to be caused by any
act done or intended to be done in good faith in pursuance of the Companies Act.
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13[S. 10FZA. Procedure and powers of Tribunal and Appellate Tribunal.

—
(1) The Tribunal and the Appellate Tribunal shall not be bound by the procedure laid down in the Code of
Civil Procedure, 1908 (5 of 1908), but shall be guided by the principles of natural justice and, subject to
the other provisions of this Act and of any rules made by the Central Government, the Tribunal and the
Appellate Tribunal shall have power to regulate their own procedure.
(2) The Tribunal and the Appellate Tribunal shall have, for the purposes of discharging its functions under
this Act, the same powers as are vested in a civil court under the Code of Civil Procedure, 1908 (5 of
1908) while trying a suit in respect of the following matters, namely:—
(a) summoning and enforcing the attendance of any person and examining him on oath;
(b) requiring the discovery and production of documents;
(c) receiving evidence on affidavits;
(d) subject to the provisions of sections 123 and 124 of the Indian Evidence Act, 1872 (1 of 1872),
requisitioning any public record or document or copy of such record or document from any office;
(e) issuing commissions for the examination of witnesses or documents;
(f) reviewing its decisions;
(g) dismissing a representation for default or deciding it ex parte;
(h) setting aside any order of dismissal of any representation for default or any order passed by it ex
parte; and
(i) any other matter which may be prescribed by the Central Government.
(3) Any order made by the Tribunal or the Appellate Tribunal may be enforced by that Tribunal 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 the
Tribunal or the Appellate Tribunal to send in case of its inability to execute 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 situate; 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.
(4) All proceedings before the Tribunal or the Appellate Tribunal shall be deemed to be judicial
proceedings within the meaning of section 193 and 228, and for the purposes of section 196 of the
Indian Penal Code, 1860 (45 of 1860) and the Tribunal and the Appellate Tribunal shall be deemed to
be a civil court for the purposes of section 195 and Chapter XXVI of the Code of Criminal Procedure,
1973 (2 of 1974).]

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14. Swadeshi Cotton Mills Co. Ltd. v. UOI, (1981) 51 Comp. Cas. 210 (SC) : AIR 1981 SC 818 [LNIND 1981 SC 28]; Smt.
Maneka Gandhi v. UOI,AIR 1978 SC 597 [LNIND 1978 SC 25]: (1978) 2 SCR 621 [LNIND 1978 SC 25]; A.K. Kraipak
v. UOI,AIR 1970 SC 150 [LNIND 1969 SC 197]: (1970) 1 SCR 457 [LNIND 1969 SC 197]; UOI v. Col. J.N. Sinha,AIR
1971 SC 40 [LNIND 1970 SC 303]: (1971) 1 SCR 791 [LNIND 1970 SC 303]; UOI v. Tulsiram Patel,AIR 1985 SC 1416
[LNIND 1985 SC 219].
15. C.B. Gautam v. UOI,(1993) 199 ITR 530 [LNIND 1992 SC 833] (SC) : (1992) 65 Taxman 440 (SC); Tin Box Company
v. CIT,(2001) 249 ITR 216 (SC); Sona Builders v. UOI,(2001) 251 ITR 197 (SC); Unit Trust of India v. AAIFR, (2002)
109 Comp. Cas. 1 (Delhi) (DB).
16. Walford Transport (Eastern) India Ltd. v. S.K. Mandal, Registrar of Companies, (1980) 50 Comp. Cas. 600 (Gauhati);
CIT v. B.N. Bhattacharjee,(1979) 118 ITR 461 [LNIND 1979 SC 274] (SC) : AIR 1979 SC 1725 [LNIND 1979 SC 274].
See detailed Comments under Section 123(2).
Siemens Engg. & Mfg. Co. of India Ltd. v. UOI,AIR 1976 SC 1785 [LNIND 1976 SC 202]: (1976) Supp. SCR 489; UOI
v. Mohan Lal Capoor,AIR 1974 SC 87 [LNIND 1973 SC 292]: (1974) 1 SCR 797 [LNIND 1973 SC 292]; Uma Charan v.
State of M.P.,AIR 1981 SC 1915 [LNIND 1981 SC 352]: (1982) 1 SCR 353; S.N. Mukherjee v. UOI,AIR 1990 SC 1984
[LNIND 1990 SC 986]; Raipur Development Authority v. Chokhamal Contractors,AIR 1990 SC 1426 [LNIND 1989 SC
306]; Harinagar Sugar Mills Ltd. v. Shyam Sunder Jhunjhunwala, (1961) 31 Comp. Cas. 387 (SC) : AIR 1961 SC 1669
[LNIND 1961 SC 206]; Gharib Ram Sharma v. Daulat Ram Kashyap, (1994) 80 Comp. Cas. 267 (Raj.). See also
Comments under Section 10E, 10F, 111, 111A and 637AA.
18. Carrier Savings and Investment India Ltd. v. UOI, (2002) 110 Comp. Cas. 631 (Raj.). See also Comments under
Section 58A.
19. Ramesh B. Desai v. Union of India, (1990) 69 Comp. Cas. 33 (Delhi). See also Comments under Section 17A, 294AA
and 637.
COMMENTS
Procedure, Powers and Natural Justice [Sub-section (1)].—The Tribunal and the Appellate Tribunal shall not be
bound by the Code of Civil Procedure, 1908. They shall be guided by the principles of natural justice and have the
power to Regulate their own procedure subject to the other provisions of the Companies Act, 1956 and the Rules
made by the Central Government.
See detailed Comments on the Constitution of the Tribunal and Appellate Tribunal, Form, Procedure, Rules,
Regulations under Section 10FB, 10FQ, 10FR and relevant Sections conferring jurisdiction and powers on the
Tribunal (NCLT).
Order of Appellate Tribunal Section 10FQ(4)]. Section 10FQ(4) also lays down that the Appellate Tribunal shall
after giving parties to the appeal, an opportunity of being heard, pass such orders as it thinks fit.
See detailed Comments under Section 10FQ.
Principles of Natural Justice.— Section 10FZA(1) and 10FQ(4) specifically provide that the Tribunal (NCLT) and
the Appellate Tribunal shall be guided by the principles of natural justice. The decisions explaining and enunciating
the principles of natural justice are dealt with below.
Rule of audi alteram partem.—Rules of natural justice are not embodied rules. Being means to an end and not an
end in themselves, it is not possible to make an exhaustive catalogue of such rules. But two fundamental maxims of
natural justice have now become deeply and indelibly ingrained in the common consciousness of mankind, as pre-
eminently necessary to ensure that the law is applied impartially, objectively and fairly. Described in the form of
Latin tags these twin principles are: (i) audi alteram partem, and (ii) nemo judex in re sua. Audi alteram partem is a
highly effective rule devised by the Courts to ensure that a statutory authority arrives at a just decision and it is
calculated to act as a healthy check on the abuse or misuse of power. Hence its reach should not be narrowed and
its applicability circumscribed. The maxim audi alteram partem has many facets. Two of them are: (a) notice of the
Page 3 of 5
case to be met; and (b) opportunity to explain. The rules of natural justice can operate only in areas not covered by
any law validly made. They can supplement the law but cannot supplant it. If a statutory provision either specifically
or by inevitable implication excludes the application of the rules of natural justice, then the Court cannot ignore the
mandate of the Legislature. Whether or not the application of the principles of natural justice in a given case has
been excluded, wholly or in part, in the exercise of statutory power, depends upon the language and basic scheme
of the provision conferring the power, the nature of the power, the purpose for which it is conferred and the effect of
the exercise of that power.14
Audi alteram partem rule means “hear the other side”

. The courts have generally read into the provisions of the relevant sections a requirement of giving a reasonable
opportunity of being heard before an order is made which would have adverse civil consequences for the parties
affected. This would be particularly so in a case where the validity of the section would be open to a serious
challenge for want of such an opportunity. Further, the order must be a reasoned order.15
Law leans in favour of natural justice, where statutory interdict does not forbid it. Registrar of Companies is required
to follow the principles of natural justice. Certain sections engraft the audi alteram partem rule. The Registrar of
Companies has the power to re-hear a case ex post facto or de novo where the principles of natural justice have
been inadvertently violated or breached by him initially.16
Reasoned order.—The Order of the Company Law Board [ now the National Company Law Tribunal (NCLT) or the
Appellate Tribunal] or the Central Government exercising quasi-judicial powers under several provisions of the
Companies Act, 1956 must be a speaking or reasoned order. Otherwise the supervisory jurisdiction of the superior
Courts under Articles 136, 226 or 227 of the Constitution of India shall be rendered nugatory. An order in violation of
the principles of natural justice or amounting to denial of natural justice shall be liable to be quashed. If courts of law
are to be replaced by administrative authorities and Tribunals it is essential that they should accord fair and proper
hearing to the persons sought to be affected by their orders and give sufficiently clear and explicit reasons in
support of the orders. Then alone administrative authorities and Tribunals exercising quasi-judicial function will be
able to justify their existence and carry credibility with the people by inspiring confidence in the adjudicatory
process. The rule requiring reasons to be given in support of an order is, like the principle of audi alteram partem, a
basic principle of natural justice which must inform every quasi-judicial process and this rule must be observed in its
proper spirit and mere pretence of compliance with it would not satisfy the requirement of law. A recording of
reasons excludes the chances of arbitrariness and assures a degree of fairness in the process of the decision-
making.17
See also Comments under Company Law Board [ Sections 10E(5), (6), and 10F] under relevant discussions on
Principles of Natural Justice.
Writ.—Where the representation of the petitioner-company under section 58A(8) of the Companies Act, 1956 was
rejected by the Central Government without hearing the petitioner-company. The writ petition under Article 226 of
the Constitution of India was allowed as the impugned order was passed in flagrant violation of the principle of
natural justice, even though it was an administrative order. The High Court observed that if such order was
appealable then the High Court would not have interfered and relegated the petitioner to avail of the alternate
remedy of appeal. The impugned order was quashed and set aside and the respondent, i.e., the Central
Government was directed to consider and decide the representation of the petitioner-company afresh in accordance
with law after extending an opportunity of hearing to the petitioner-company.18
Adequate notice.—It is now well-settled that an authority or a body which has been given the power to determine
questions affecting the rights of a citizen must exercise such a power in a just and fair manner in conformity with the
principles of natural justice. Natural justice demands that a person who is likely to be directly affected by an
administrative action should be given adequate notice of the action proposed so that an adequate representation
can be made to effectively meet the points raised and the opportunity so given must be reasonable.19
Same powers as a Civil Court [Sub-section (2)].—As per section 10FZA(2), the Tribunal (NCLT) and the
Appellate Tribunal will, however, have the same powers as the Civil Courts under the Code of Civil Procedure, 1908
(5 of 1908) as regards: (a) summoning and enforcing the attendance of any person and examining him on oath; (b)
requiring discovery and production of documents; (c) receiving evidence on affidavits; (d) requisitioning public
records; (e) issuing commissions for examination of witnesses or documents; (f) reviewing its decisions; (g)
dismissing any representation for default or deciding the matter ex-parte; (h) setting aside its own order of dismissal
Page 4 of 5
for default or any order passed ex-parte; and (i) hearing any other matter which may be prescribed by the Central
Government.
Enforcement of Order as decree [Sub-section (3)].—An Order of the Tribunal or the Appellate Tribunal may be
enforced as a Decree of a Court. If the Tribunal or the Appellate Tribunal cannot execute it, it can send the order to
the appropriate Court for execution. The Court within whose jurisdiction: (a) the Registered Office of the company is
situate; or (b) the person resides or carries on business or personally works for gain, will have the jurisdiction to
execute the decree or Order.
Judicial Proceedings [Sub-section (4)].—All the proceedings before the Tribunal and the Appellate Tribunal shall
be deemed to be judicial proceedings within the meaning of section 193 and 228 and for the purposes of section
196 of the Indian Penal Code, 1860 (45 of 1860). The Tribunal and the Appellate Tribunal shall be deemed to be a
civil court for the purposes of Section 195 and Chapter XXVI of the Code of Criminal Procedure, 1973 (2 of 1974).
Section 193 of the Indian Penal Code, 1860 provides for punishment for giving false evidence in any stage of
judicial proceedings. Section 228 of the IPC provides for punishment of a person who offers insults or causes
interruption to any public servant sitting in any stage of a judicial proceeding. Section 196 of the Indian Penal Code,
1860 provides for punishment for use of evidence corruptly or attempt to use as true or genuine evidence knowing it
to be false or fabricated.
Section 195 and Chapter XXVI [Sections 340-352] of the Code of Criminal Procedure, 1973 (2 of 1974) contain
provisions as to contempt and offences affecting administration of justice. Section 195 of the Cr.P.C. provides for
prosecution for contempt of lawful authority of public servants, for offences against public justice and for offences
relating to documents given in evidence. Such prosecution can be lodged on a complaint in writing made before the
Tribunal or the Appellate Tribunal.
See detailed Comments under Section 10 and 10G.
Tribunal may file an appeal to the Supreme Court on any question of law arising out of such decision or order
except consent orders.
See detailed Comments under Section 10FB, 10FQ and 10GF.
Civil Court not to have Jurisdiction [ Section 10GB].—No Civil Court shall have jurisdiction to entertain any suit
or proceeding which the Tribunal or the Appellate Tribunal has the jurisdiction to entertain. No Court or authority
shall grant any injunction against the Tribunal or the Appellate Tribunal. No act or proceeding of the Tribunal or the
Appellate Tribunal can be questioned in any Civil Court.
See detailed Comments under Section 10 and 10GB.
Suits and Writ Petitions.—The Courts will retain jurisdiction to entertain suits or writ petitions on matters which are
outside the jurisdiction of the Tribunal or the Appellate Tribunal or the Supreme Court under the Act.
See detailed Comments under Section 10, 10GB and 10GF.
Natural Justice—Bias—No man can be judge in his own cause.—The doctrine that “no man can be a judge in
his own cause” can be applied only to cases where the person concerned has a personal interest or has himself
already done some act or taken a decision in the matter concerned. Merely because an officer of a State Financial
Corporation is named to be the authority under Section 32G of the State Financial Corporations Act, 1951 (63 of
1951) to issue Recovery Certificate, this does not by itself bring into the operation this doctrine. Of course in
individual cases bias may be shown against a particular officer but in the absence of any proof of personal bias or
connection merely because officers of a particular Corporation are named as the authority does not mean that
those officers would be biased. A Managing Director is a high ranking officer. He is not personally interested in the
transactions. There is no question of any bias or conflict between his interest and his duty.20
Page 5 of 5

14. Swadeshi Cotton Mills Co. Ltd. v. UOI, (1981) 51 Comp. Cas. 210 (SC) : AIR 1981 SC 818 [LNIND 1981 SC 28]; Smt.
Maneka Gandhi v. UOI,AIR 1978 SC 597 [LNIND 1978 SC 25]: (1978) 2 SCR 621 [LNIND 1978 SC 25]; A.K. Kraipak
v. UOI,AIR 1970 SC 150 [LNIND 1969 SC 197]: (1970) 1 SCR 457 [LNIND 1969 SC 197]; UOI v. Col. J.N. Sinha,AIR
1971 SC 40 [LNIND 1970 SC 303]: (1971) 1 SCR 791 [LNIND 1970 SC 303]; UOI v. Tulsiram Patel,AIR 1985 SC 1416
[LNIND 1985 SC 219].
15. C.B. Gautam v. UOI,(1993) 199 ITR 530 [LNIND 1992 SC 833] (SC) : (1992) 65 Taxman 440 (SC); Tin Box Company
v. CIT,(2001) 249 ITR 216 (SC); Sona Builders v. UOI,(2001) 251 ITR 197 (SC); Unit Trust of India v. AAIFR, (2002)
109 Comp. Cas. 1 (Delhi) (DB).
16. Walford Transport (Eastern) India Ltd. v. S.K. Mandal, Registrar of Companies, (1980) 50 Comp. Cas. 600 (Gauhati);
CIT v. B.N. Bhattacharjee,(1979) 118 ITR 461 [LNIND 1979 SC 274] (SC) : AIR 1979 SC 1725 [LNIND 1979 SC 274].
Siemens Engg. & Mfg. Co. of India Ltd. v. UOI,AIR 1976 SC 1785 [LNIND 1976 SC 202]: (1976) Supp. SCR 489; UOI
v. Mohan Lal Capoor,AIR 1974 SC 87 [LNIND 1973 SC 292]: (1974) 1 SCR 797 [LNIND 1973 SC 292]; Uma Charan v.
State of M.P.,AIR 1981 SC 1915 [LNIND 1981 SC 352]: (1982) 1 SCR 353; S.N. Mukherjee v. UOI,AIR 1990 SC 1984
[LNIND 1990 SC 986]; Raipur Development Authority v. Chokhamal Contractors,AIR 1990 SC 1426 [LNIND 1989 SC
306]; Harinagar Sugar Mills Ltd. v. Shyam Sunder Jhunjhunwala, (1961) 31 Comp. Cas. 387 (SC) : AIR 1961 SC 1669
[LNIND 1961 SC 206]; Gharib Ram Sharma v. Daulat Ram Kashyap, (1994) 80 Comp. Cas. 267 (Raj.). See also
Comments under Section 10E, 10F, 111, 111A and 637AA.
18. Carrier Savings and Investment India Ltd. v. UOI, (2002) 110 Comp. Cas. 631 (Raj.). See also Comments under
Section 58A.
19. Ramesh B. Desai v. Union of India, (1990) 69 Comp. Cas. 33 (Delhi). See also Comments under Section 17A, 294AA
and 637.
End of Document
Datta: Company Law
C R Datta
21[S. 10G. Power to punish for contempt.

— The Appellate Tribunal shall have the same jurisdiction, powers and authority in respect of contempt of itself
as the High Court has and may exercise, for this purpose under the provisions of the Contempt of Courts Act,
1971 (70 of 1971), which shall have the effect subject to modifications that—
(a) the reference therein to a High Court shall be construed as including a reference to the Appellate
Tribunal;
(b) the reference to the Advocate-General in section 15 of the said Act shall be construed as a reference
to such law officers as the Central Government may specify in this behalf.]
(2003) 114 Comp. Cas. (St.) 237].
22. ITAT v. V.K. Agarwal,(1999) 235 ITR 175 [LNIND 1998 SC 1026] (SC). See detailed Comments under Section 10.
COMMENTS
— The Companies (Second Amendment) Act, 2002 (11 of 2003).— See Legislative History in Comments under
Section 10FB.
Power to punish for Contempt.
—The Appellate Tribunal shall have the same jurisdiction, powers and authority in respect of contempt of itself as
the High Court has. The Appellate Tribunal may exercise the powers under the Contempt of Courts Act, 1971 (70 of
1971) with the modifications that reference to (a) “High Court” shall be read as including “the Appellate Tribunal”
and (b) “Advocate-General” shall be construed as specified “Law Officers” of the Central Government.
Contempt of Court.
—The Supreme Court has power under Article 129 of the Constitution of India, not merely for contempt of itself, but
also for contempt of all courts and Tribunals subordinate to it. The Supreme Court has, therefore, jurisdiction to
punish for contempt of the Tribunal even suo motu. Whenever an act adversely affects the administration of justice
or tends to impede its course, or shake public confidence in a judicial institution, the power can be exercised to
uphold the dignity of the court of law and protect its proper functioning. A letter from the Law Secretary questioning
the bona fides of the Members of the Income-tax Appellate Tribunal (ITAT) in deciding a case and asking them to
explain the judicial order which they had passed, unfairly tampered with the judicial process and interfered with
judicial decision-making and amounted to gross contempt of court.22
Page 2 of 2
See detailed Comments on Binding force of Supreme Court and jurisdictional High Court decisions, Contempt of
Court and Doctrine of Precedent and stare decisis under Section 10—Jurisdiction of Courts.
(2003) 114 Comp. Cas. (St.) 237].
22. ITAT v. V.K. Agarwal,(1999) 235 ITR 175 [LNIND 1998 SC 1026] (SC). See detailed Comments under Section 10.
End of Document
Datta: Company Law
C R Datta
23[S. 10GA. Staff of Appellate Tribunal.

—
(1) The Central Government shall provide the Appellate Tribunal with such officers and other employees
as it may think fit.
(2) The officers and other employees of the Appellate Tribunal shall discharge their functions under the
general superintendence of the Chairperson of the Appellate Tribunal.
(3) The salaries and allowances and other conditions of service of the officers and other employees of the
Appellate Tribunal shall be such as may be prescribed.]
COMMENTS
Staff of Appellate Tribunal.—The Central Government shall provide the Appellate Tribunal with such officers and
employees who shall discharge their functions under superintendence of the Chairperson. Salaries, allowances and
other conditions of service may be prescribed.
End of Document
Datta: Company Law
C R Datta
24[S. 10GB. Civil court not to have jurisdiction.

— No civil court shall have jurisdiction to entertain any suit or proceeding in respect of any matter which the
Tribunal or the Appellate Tribunal is empowered to determine by or under this Act or any other law for the time
being in force and no injunction shall be granted by any court or other authority in respect of any action taken or
to be taken in pursuance of any power conferred by or under this Act or any other law for the time being in
force.]
(2003) 114 Comp. Cas. (St.) 237].
(2002) 108 Comp. Cas. 295 (Cal.). See also Comments under Sections 10, 10E, 10F, 10FA and 10FB-10GF.
Comp. Cas. 216 (Ker.) (DB). See also Comments under Sections 10, 10E, 10GB, 41, 61, 63 and 283.
27. Vijay Kumar Gupta v. Ram Naresh Singh, (2004) 122 Comp. Cas. 771 (Patna). See also Comments under Sections 10,
10E, 10FB and 260.
under Sections 10, 10E and 10FB.
6 SCC 220.
Desai, (1995) 82 Comp. Cas. 591 (SC). See detailed Comments under Sections 10 and 73. See also Comments under
Sections 56, 62, 65, 69 and 72.
32. L. Chandra Kumar v. Union of India,(1997) 228 ITR 725 (SC). See detailed Comments under Sections 10, 10F, 10FB
and 10GF.
34. SEBI v. Alka Synthetics Ltd., (1999) 95 Comp. Cas. 772 (Guj.) (DB).
(2003) 113 Comp. Cas. 1 (SC). See also Comments under Section 2(12), 2(46), 55A, 69 and 81.
Page 2 of 7
COMMENTS
Exclusion of jurisdiction of a Civil Court.— Section 10GB provides for exclusion of jurisdiction of Civil Courts in
respect of matters, the jurisdiction, powers and functions in respect of which has been conferred on the Tribunal
(NCLT) or the Appellate Tribunal under various Sections of the Companies Act or any other Law.
This section has taken away the jurisdiction of Civil Courts in respect of Suits and proceedings as also the power of
granting Injunction by any Civil Court in respect of matters conferred on the Tribunal and the Appellate Tribunal
under various Sections of the Companies Act, 1956 or any other Law.
Civil Court shall not entertain Suit.—No Civil Court shall entertain any suit or proceeding in respect of any matter
which the Tribunal (NCLT) or the Appellate Tribunal is empowered to determine under the Companies Act or any
other Law.
See List of Sections conferring Powers, hitherto exercised by the High Court as Company Court or the CLB, on the
Tribunal (NCLT) under Section 10FB.
No Court shall issue Injunction.—No Court or authority shall issue an Injunction in respect of any action taken or
to be taken by the Tribunal (NCLT) or the Appellate Tribunal under the Companies Act or any other Law.
See List of Sections conferring Powers on Tribunal (NCLT) u/s. 10FB.
Suits and Writ Petitions.—The Courts will retain jurisdiction to entertain suits or writ petitions on matters which are
outside the jurisdiction of the Tribunal or the Appellate Tribunal or the Supreme Court under the Act as explained
below.
See also Comments under Sections 10, 10E and 10FB.
Jurisdiction of Company Court and CLB vested in the Tribunal (NCLT) [ Section 10FB].—On the constitution
of the National Company Law Tribunal (NCLT) vide Notification under Section 10FB of the Companies Act, 1956,
as inserted by the Companies (Second Amendment) Act, 2002 (11 of 2003) (w.e.f. date to be notified), the
jurisdiction, powers and functions hitherto exercised by the Company Law Board(CLB) and the High Court as
Company Court under various Sections of the Companies Act, 1956 have been conferred on the Tribunal (NCLT).
The powers and jurisdiction presently being exercised by various bodies, viz., the Company Law Board (CLB), the
BIFR or the AAIFR or High Courts have been consolidated and entrusted to the National Company Law Tribunal
(NCLT).
See detailed Comments, Legislative History, Notification constituting the National Company Law Tribunal (NCLT),
Form and Procedure under Section 10FB.
See also Comments under Sections 10FB-10GF and respective Sections.
Powers and functions of the Tribunal (NCLT).—On the constitution of the Tribunal (NCLT) under Section 10FB
the powers and functions hitherto being exercised by the CLB, the Central Government, the Court and BIFRunder
various Sections of the Companies Act, 1956 [See List in Comments under Section 10FB], SICA and other Acts
have been conferred on the Tribunal (NCLT).
Page 3 of 7
10GB]. Any person aggrieved by decision or order of the Appellate Tribunal may file an appeal to the Supreme
Civil Suit when competent or maintainable.—The decisions on the scope of section 10 which originally dealt with
Jurisdiction of Courts manifest that section 10 which provided that location of the registered office of the company
would determine the territorial jurisdiction of the High Court, could not be construed to mean that the High Court had
jurisdiction with respect to all matters relating to that company.
Most of the powers conferred on the High Court as Company Court [ Section 10 read with respective Sections of
the Companies Act, 1956 conferring power] were vested in theCompany Law Board (CLB) [ Section 10E read with
respective Sections] and have now been conferred on the National Company Law Tribunal (NCLT) from the date of
constitution [ Section 10FB read with respective Sections].
Now Section 10GB expressly provides that the Civil Court shall not have Jurisdiction to entertain Suit or grant
Injunction in matters conferred on the Tribunal (NCLT) under various Sections of the Act or any other Law.
But, the High Court as a Company Court or the CLB [ now the Tribunal] with special company jurisdiction is a
special court and that jurisdiction has to be found from specific provisions of the Companies Act, 1956 (1 of 1956).
The High Court as Company Court or theCLB [ now the Tribunal (NCLT)] does not have any general plenary or
residuary jurisdiction to deal with all matters and all questions arising under the Companies Act, 1956.
Specific powers have thus been given under provisions of the Companies Act, 1956 to: (1) the High Courts, (2) the
District Courts, (3) the Central Government (4) the Registrars of Companies, and (5) theCLB [ now the Tribunal
(NCLT)]. These powers cover almost all the allegations of shareholders against the company and its management.
For the other Civil Courts very little is left.
Nevertheless, a Civil Suit will be competent or maintainable in the appropriate Civil Court in certain cases. For
instance: (1) Where no special remedy has been provided in the Companies Act, e.g., to adjudicate the disputes
relating to title to shares, ownership of shares, issue of duplicate share certificates, to decide the validity of forfeiture
of the shares, to challenge the election of a director, appointment or removal of a director, for direction to place the
company's accounts at the meeting, for a declaration that meeting was illegal, to challenge the validity of a notice
calling a meeting, to adjudicate the disputes arising out of underwriting agreement, for refund of the subscription
moneys, to adjudicate the disputes among the warring factions of the directors, etc. (2) Where the act complained
of is fraud on the minority, (3) Where the act complained of is illegal or ultra vires the company, (4) Ordinary
Resolution passed instead of Special Resolution, (5) Where justice demands, e.g., Misfeasance, (6) Violation of
Individual Membership Rights.
section 10 and other provisions of the Companies Act, 1956. The residue may go to ordinary Civil Court or some
Civil Courts when may exercise Jurisdiction.—The jurisdiction or power of the High Court as a Company Court
under Section 10 [CLB under Section 10Enow the Tribunal (NCLT) under Section 10FB] can be exercised only in
respect of matters for which the jurisdiction is conferred by relevant other provisions of the Companies Act, 1956.
The High Court [theCLBnow Tribunal] when acting as a Company Court has special jurisdiction which is conferred
by the provisions of the Companies Act and the power cannot be exercised as a general power or as plenary or
residuary jurisdiction. If there is any dispute between the subscriber and the company, e.g., subscriber to shares
having grievance in the matter of issue and allotment of shares, the High Court [the CLBnow the Tribunal (NCLT)]
as a Company Court has no jurisdiction and the same can be tried in a Civil Court. Even if any provision is
contravened by the company, power has been given for prosecution of the company, but that has to be exercised
by the Civil Court having jurisdiction and not the High Court as Company Court [the CLBnow the Tribunal (NCLT)].
Page 4 of 7
The power which is exercised by the Company Court [the CLBnow the Tribunal (NCLT)] is in respect of corporate
rights and not individual rights of a citizen.26
See detailed Comments under Sections 10—Jurisdiction of Courts.
Ouster of jurisdiction of Civil Court not to be readily inferred.—Jurisdiction of the Civil Court is a very
expansive one as is evident from section 9 of the Code of Civil Procedure, 1908. The ouster of jurisdiction of Civil
Court is not to be readily inferred. Unless the jurisdiction of the civil court is barred by the statute either expressly or
by implication it has the jurisdiction to entertain a suit concerning a dispute of a civil nature. If a statute creates a
special right or liability and a forum for determination of the same and provides that all questions concerning such
right or liability are to be determined by the said Tribunal or Forum and bars the jurisdiction of the civil court, then
such rights and liabilities are to be determined by the Tribunal or Forum created by the statute and not by the civil
court. For the challenge to appointment of additional directors as without the decision of the Board of directors no
specific remedy has been provided in the Companies Act, 1956. Neither by express provision nor by necessary
implication had the suit been barred nor was there any provision for adequate or efficacious remedy provided under
the Companies Act, 1956 with regard to the dispute raised in the plaint. Therefore the suit was maintainable.27
Principles regarding exclusion of jurisdiction of Civil Courts.—The principles regarding the exclusion of the
jurisdiction of Civil Courts have been discussed by the Supreme Court in certain cases.28
Matters of general law or civil disputes.—In matters of general law and where the jurisdiction of civil court has
not been ousted by the Companies Act, 1956, the Civil Courts would have jurisdiction. Section 9 of the Code of Civil
Procedure, 1908 (5 of 1908) confers jurisdiction upon the civil courts to determine all disputes of civil nature unless
it is barred under a statute either expressly or by necessary implication. Bar of jurisdiction of a civil court is not to be
readily inferred. A provision seeking to bar the jurisdiction of the civil court requires strict interpretation. The court, it
is well-settled, would normally lean in favour of the construction, which would uphold retention of jurisdiction of the
civil court. The burden of proof in this behalf shall be on the party who asserts that the civil court's jurisdiction is
ousted. Even otherwise, the civil court's jurisdiction is not completely ousted under the Companies Act, 1956.
Where the civil court was concerned with the rival claims of the parties as to whether one party had illegally been
dispossessed by the other or not. The dispute between the parties was eminently a civil dispute and not a dispute
under the provisions of the Companies Act. Such a suit apart from the general law, would also be maintainable in
terms of section 6 of the Specific Relief Act, 1963 (47 of 1963). In such matters the court would not be concerned
even with the question as to title/ownership of the property. The matter relating to ownership of the press was a
matter of general law.29
Ouster of Jurisdiction of Civil Court not to be readily inferred.—The ouster of the jurisdiction is not to be readily
inferred as the Companies Act, 1956 does not completely ouster the jurisdiction of any Civil Court. The Court will
lean in favour of the jurisdiction of the Civil Court unless it is specifically ousted by any Statute from doing so. The
provisions of the Companies Act, 1956 has not completely ousted jurisdiction of the Civil Court. The dispute arising
between the parties in the instant case were in the nature of Civil disputes, and the Civil Court had the jurisdiction to
entertain and decide the disputes involving the rival claims of the parties to run and manage the newspaper
business. A Suit was accordingly filed by one of the parties for eviction and issue of a permanent injunction against
the other. But objections were subsequently raised regarding the jurisdiction of Civil Court. The disputes relating to
the question as to whether the parties were illegally dispossessed are disputes of Civil nature and therefore
maintainable before any Civil Court. Parties filed Suits and made applications for Temporary Injunction thereto. The
High Court allowed the said application made in one case but in another case it held that there was no jurisdiction.
This decision was set aside. The matter was thus remanded to the High Court for fresh decision in the matter.30
See detailed Comments under Sections 10, 10E and 10FB to 10GF.
Jurisdiction of the Civil Courts.—In company matters specifically conferred on or governed by the Court, the
jurisdiction of the Civil Courts is excluded. But, in company matters not governed by the Company Court, the
jurisdiction of the Civil Courts is not excluded.
See detailed Comments and List of Sections conferring powers on the Court, the Company Law Board (CLB) [the
Tribunal (NCLT) constituted under Section 10FB] under Sections 10, 10E and 10FB and relevant Sections.
Page 5 of 7
Ex parteInjunctions or Interim orders.—Invariably, suits are filed seeking to injunct the allotment of shares. The
Court must ensure that the plaintiff comes to the court well in time so that notice may be served on the defendant
and he may have his say before any interim order is passed. It may be sometimes difficult to undo the damage
done by such an interim order. The Supreme Court set out reasons and factors which should weigh with the Court
in the grant of ex parte injunctions. Normally, cases should be filed only where the registered office of the company
is situate.31
Writs, Judicial review and Constitutional validity.—The writ jurisdiction of High Courts under Article 226 and the
Supreme Court under Article 32 of the Constitution of India cannot be ousted.32
See detailed Comments under Sections 10, 10FB and 10GF.
No Writ where Act provides alternative remedy.—Where the petitioner did not evoke the alternative or effective
remedy available under section 111A of the Companies Act, 1956 which provides a wider remedy than a writ
petition. Moreover delay and laches is one of the recognised grounds for refusal of the discretionary relief. The
petition in this case filed before theCompany Law Board(CLB) was later withdrawn. In view existence of alternative
remedy the writ under Article 226 of the Constitution of India could not be granted.33
See detailed Comments under Sections 10, 10FB and 10GF.
Special Forums.—Application of other laws is not barred under the following Acts which provide special forums.
Provisions of these Acts are in addition to and not in derogation of provisions of any other law for the time being in
force.
The SEBI Act, 1992 (15 of 1992).
— See the Securities and Exchange Board of India Act, 1992 (15 of 1992) (SEBI) [ Section 32].
Powers of SEBI.—As per sections 11 and 11B of the Securities and Exchange Board of India Act, 1992 (15 of
1992), the SEBI has authority to issue directions to protect the interests of investors in securities and regulate the
securities market. The SEBI Act, 1992 is of remedial nature. The directions of SEBI have authority of law and do not
require pre-decisional hearing as merely ad interim orders.34
See detailed Comments and List of SEBI Act, Rules, Regulations and Guidelines under Section 55A of the
The Consumer Protection Act, 1986 (68 of 1986).— See the Consumer Protection Act, 1986 (68 of 1986) [
Section 3] explained below.
Consumer Forums.—As per section 3 of the Consumer Protection Act, 1986, the provisions of the Consumer
Protection Act, 1986 (68 of 1986) are in addition to, and not in derogation of, the provisions of any other law.
Additional remedy.—The provisions of section 58A(9) of the Companies Act, 1956 and sections 45Q and 45QA of
the Reserve Bank of India Act, 1934 do not bar the jurisdiction of the Consumer Forums constituted under the
Consumer Protection Act, 1986. In view of section 3 of the Consumer Protection Act, 1986, remedy under the
Consumer Protection Act, 1986 is an additional remedy and the same cannot be taken away either by the RBI Act
or by the Companies Act.35
Applicant for shares not consumer.—Shares are not goods before allotment. Applicant for shares is not a
consumer. Raising of share capital by company is not a trading activity and there is no question of any unfair trade
practice. The Consumer Disputes Redressal Forum has no jurisdiction to entertain the matters of this kind. The
issue of shares or debentures does not come under the Consumer Protection Act, 1986 (68 of 1986) or the MR TP
Act, 1969 (54 of 1969) [now replaced by the Competition Act, 2002 (12 of 2003)]].36
Rights Shares.—The Consumer Protection Act, 1986 is not applicable for failure on the part of a company to give
to the shareholder his proportion of the Rights Shares. The MR TP Act, 1969 [since replaced by the Competition
Page 6 of 7
Act, 2002] does not apply here. The remedy lies within the framework of the Companies Act, 1956 and also by way
of a Civil Suit.37
Unfair Trade Practice.—Where a firm engaged in providing finance used the word “Inc.” in its name. It was held
NowSection 66 of the Competition Act, 2002 (12 of 2003) has repealed the MR TP Act, 1969. Pending cases before
the MRTPC will go to the CCI except those relating to unfair trade practices which would go to Consumer Forum.
Sick Industrial Companies [ Sections 424A to 424L].—Under Sections 424A to 424L of the Companies Act,
1956, inserted by the Companies (Second Amendment) Act, 2002 (11 of 2003), the jurisdiction, powers and
functions shall be vested in the Tribunal (NCLT) constituted under Section 10FB.
The Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986) shall consequently be repealed. In view of
section 10GB, the Jurisdiction of the Civil Courts shall be barred in such cases. Earlier Section 26 of the SICA also
barred the jurisdiction of Civil Courts in respect of matters vested in theBIFR and the AAIFR.
See detailed Comments under Sections 10, 10FB and 424A to 424L.
Jurisdiction of Civil Courts excluded under other Acts.—As explained above, section 10GB excludes the
Jurisdiction of Civil Courts in the matters conferred on or governed by the Tribunal (NCLT) under various sections of
the Companies Act, 1956 and other related Acts. Besides, matters under certain other Acts are also excluded or
barred from the Jurisdiction of the Civil Courts as follows.
The Competition Act, 2002 (12 of 2003).— Section 61 of the Competition Act, 2002 (12 of 2003) excludes the
jurisdiction of Civil Courts in respect of matters to be determined by the Competition Commission of India under the
Act. The MR TP Act, 1969 (54 of 1969) has been repealed by the Competition Act, 2002. [ Section 66].
Recovery of Debts Due to Banks Act, 1993.— Section 18 of the Recovery of Debts Due to Banks and Financial
Institutions Act, 1993 (51 of 1993) bars the jurisdiction of the Civil Courts except the Supreme Court, and a High
Court exercising jurisdiction under Articles 226 and 227 of the Constitution of India.
See detailed Comments on Writs, Judicial Review and Binding force of Supreme Court and Jurisdictional High
Court Decisions under Section 10.
The Family Courts Act, 1984.— Section 8 of the Family Courts Act, 1984 (66 of 1984) excludes the jurisdiction of
the Civil Courts.
(2003) 114 Comp. Cas. (St.) 237].
(2002) 108 Comp. Cas. 295 (Cal.). See also Comments under Sections 10, 10E, 10F, 10FA and 10FB-10GF.
Comp. Cas. 216 (Ker.) (DB). See also Comments under Sections 10, 10E, 10GB, 41, 61, 63 and 283.
27. Vijay Kumar Gupta v. Ram Naresh Singh, (2004) 122 Comp. Cas. 771 (Patna). See also Comments under Sections 10,
10E, 10FB and 260.
Page 7 of 7
6 SCC 220.
Desai, (1995) 82 Comp. Cas. 591 (SC). See detailed Comments under Sections 10 and 73. See also Comments under
Sections 56, 62, 65, 69 and 72.
32. L. Chandra Kumar v. Union of India,(1997) 228 ITR 725 (SC). See detailed Comments under Sections 10, 10F, 10FB
and 10GF.
34. SEBI v. Alka Synthetics Ltd., (1999) 95 Comp. Cas. 772 (Guj.) (DB).
(2003) 113 Comp. Cas. 1 (SC). See also Comments under Section 2(12), 2(46), 55A, 69 and 81.
End of Document
Datta: Company Law
C R Datta
39[S.10GC. Vacancy in Tribunal or Appellate Tribunal not to invalidate acts

or proceedings.
— No act or proceeding of the Tribunal or the Appellate Tribunal shall be questioned or shall be invalid merely
on the ground of existence of any vacancy or defect in the establishment of the Tribunal or the Appellate
Tribunal, as the case may be.]
(2003) 114 Comp. Cas. (St.) 237].
COMMENTS
Vacancy not to invalidate acts.—No act or proceeding of the Tribunal or the Appellate Tribunal can be questioned
or shall be invalid merely because of vacancy or defect in the establishment of the Tribunal or the Appellate
Tribunal.
No writ petition would be maintainable in view of the provisions of this section and section 10GB. See also
Comments under Sections 10FB and 10GF.
(2003) 114 Comp. Cas. (St.) 237].
End of Document
Datta: Company Law
C R Datta
40[S. 10GD. Right to legal representation.

— The applicant or the appellant may either appear in person or authorise one or more chartered accountants
or company secretaries or cost accountants or legal practitioners or any officer to present his or its case before
the Tribunal or the Appellate Tribunal, as the case may be.
Explanation.—For the purposes of this section,—

(a) “chartered accountant” means a chartered accountant as defined in clause (b) of sub-section (1) of
section 2 of the Chartered Accountants Act, 1949 (38 of 1949) and who has obtained a certificate of
practice under sub-section (1) of section 6 of that Act;
(b) “company secretary” means a company secretary as defined in clause (c) of sub-section (1) of section
2 of the Company Secretaries Act, 1980 (56 of 1980) and who has obtained a certificate of practice
under sub-section (1) of section 6 of that Act;
(c) “cost accountant” means a cost accountant as defined in clause (b) of sub-section (1) of section 2 of
the Costs and Works Accountants Act, 1959 (23 of 1959) and who has obtained a certificate of practice
under sub-section (1) of section 6 of that Act;
(d) “legal practitioner” means an advocate, a vakil or any attorney of any High Court, and includes a
pleader in practice.]

(Bom.). See also Comments under Sections 10, 293 and 397 and 398.
COMMENTS
Right to legal representation.—In the proceedings before the Tribunal or the Appellate Tribunal, the applicant or
the appellant may appear through his authorised representative or conduct his case himself. He may engage a
Chartered Accountant or a Company Secretary or a Cost Accountant or Legal Practitioner or any Officer to present
his or its case before the Tribunal or the Appellate Tribunal.
See detailed Comments, Form and Procedure under Sections 10FB and 10FR.
Chartered Accountant [Explanation(a)].—Chartered Accountant means a chartered accountant defined in section

2(1)(b) and who has obtained a certificate of practice under section 6(1) of the Chartered Accountants Act, 1949 (38
of 1949).
Page 2 of 2
Company Secretary [ Explanation (b)].—Company Secretary means a company secretary defined in section
2(1)(c) and who has obtained a certificate of practice under section 6(1) of the Company Secretaries Act, 1980 (56
of 1980).
See also Comments under Sections 2(45), 2(45A) and 383A.
Cost Accountant [ Explanation (c)].—Cost Accountant means a cost accountant defined section 2(1)(b) and who
has obtained a certificate of practice under section 6(1) of the Costs and Works Accountants Act, 1959 (23 of
1959).
Legal Practitioner [Explanation(d)].—Legal Practitioner means an Advocate, a Vakil or any Attorney of any High
Court and includes a pleader in practice.
Power of Attorney.—The person appearing before the Tribunal or the Appellate Tribunal must have proper
authority from the Applicant or the Appellant.
Ordinarily, in any litigation concerning a company, the advocate for the company must derive his authority either
under a Board Resolution or under an authorisation supported by the majority shareholders or at least under a
vakalatnama signed by the principal officer of the company.41 Power of attorney remains to be operative until
revoked. As long as the power of attorney is not terminated by the principal, the attorney continues to represent the
company for all technical purposes.42
See detailed Comments on Power to sue, Authority to file suit, Action without proper authority may be ratified under
Section 10.

(Bom.). See also Comments under Sections 10, 293 and 397 and 398.
End of Document
Datta: Company Law
C R Datta
43[S. 10GE. Limitation.

— The provisions of the Limitation Act, 1963 (36 of 1963) shall, as far as may be, apply to an appeal made to
the Appellate Tribunal.]
COMMENTS
Limitation Act [ Section 10GE].—The provisions of the Limitation Act, 1963 shall, as far as may be, apply to an
appeal made to the Appellate Tribunal.
Condonation of delay.—This implies that section 5 of the Limitation Act, 1963 (36 of 1963) for condonation of
delay will apply and application may be made for condonation of delay in filing the appeal.
See detailed Comments on Limitation under Sections 10, 10E, 10F, 111, 111A and other relevant Sections.
Appeal to Appellate Tribunal [ Section 10FQ(3)].—The appeal to the Appellate Tribunal shall be filed within 45
days from the date of receipt of the order or decision of the Tribunal. The appeal shall be in prescribed form.
See detailed Comments, Form and Procedure under Section 10FQ.
Condonation of delay [ Section 10FQ(3), proviso].—The Appellate Tribunal may entertain appeal after the expiry
of 45 days if it is satisfied that the appellant was prevented by sufficient cause in not filing the appeal in time.
Tribunal may file an appeal to the Supreme Court within 60 days from the date of communication of the decision or
order of the Appellate Tribunal on any question of law arising out of such decision or order.
The Supreme 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 60 days.
See detailed Comments under Section 10GF.

Page 2 of 2
End of Document
Datta: Company Law
C R Datta
44[S. 10GF Appeal to Supreme Court.

— Any person aggrieved by any decision or order of the Appellate Tribunal may file an appeal to the Supreme
Court within sixty days from the date of communication of the decision or order of the Appellate Tribunal to him
on any question of law arising out of such decision or order:
Provided that the Supreme 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.]]
45. Vinod K. Patel v. IFCI Ltd., (2001) 103 Comp. Cas. 557 (Delhi).
* NowSection 260A of the Income-tax Act, 1961 (43 of 1961) provides for direct appeal to the High Court only on
substantial question of law (w.e.f. 1-10-1998).
46. Malleswara Finance and Investments Co. P. Ltd. v. Company Law Board, (1995) 82 Comp. Cas. 836 (Mad.) (DB). See
also Comments under Sections 10F, 397 and 398.
47. CIT v. Scindia Steam Navigation Co. Ltd.,(1961) 42 ITR 589 [LNIND 1961 SC 159] (SC) : AIR 1961 SC 1633 [LNIND
1961 SC 159]; Mohd. Jafar v. Nahar Industrial Enterprises Ltd., (1998) 93 Comp. Cas. 717 (Del.).
48. Sree Meenakshi Mills Ltd. v. CIT,(1957) 31 ITR 28 [LNIND 1956 SC 70] (SC) : AIR 1957 SC 49 [LNIND 1956 SC 70]:
1956 SCR 691 [LNIND 1956 SC 70]; G. Venkataswami Naidu & Co. v. CIT,(1959) 35 ITR 594 [LNIND 1958 SC 150]
(SC) : AIR 1959 SC 359 [LNIND 1958 SC 150].
49. CIT v. Sivakasi Match Exporting Co.,(1964) 53 ITR 204 [LNIND 1964 SC 163] (SC) : AIR 1964 SC 1813 [LNIND 1964
SC 163]; CIT v. Durga Prasad More,(1971) 82 ITR 540 (SC) : 1973 CTR (SC) 500 : AIR 1971 SC 2439.
50. CIT v. Abhijit Iron Processors (P.) Ltd. (No. 2),(2001) 248 ITR 108 (SC).
51. Estate of Late A.M.K.M. Karuppan Chettiar v. CIT,(1969) 72 ITR 403 (SC).
52. CIT v. Indian Molasses Co. P. Ltd.,(1970) 78 ITR 474 [LNIND 1965 CAL 73] (SC) : AIR 1970 SC 2067 [LNIND 1970
SC 304].
53. Micromeritics Engineers Pvt. Ltd. v. S. Munusamy, (2004) 122 Comp. Cas. 150 (Mad.) (DB). See also Comments under
Sections 10F, 53, 193, 195, 397, 398 and 402.
54. Trackparts of India Ltd. v. K.N. Bhargava, (2002) 109 Comp. Cas. 350 (All.). See also Comments under Sections 10F,
397, 398 and 402.
55. Shoe Specialities Ltd. v. Tracstar Investment Ltd., (1997) 88 Comp. Cas. 471 (Mad.) (DB).
56. Mohd. Jafar v. Nahar Industrial Enterprises Ltd., (1998) 93 Comp. Cas. 717 (Del.); CIT v. Scindia Steam Navigation Co.
Ltd.,(1961) 42 ITR 589 [LNIND 1961 SC 159] (SC) : AIR 1961 SC 1633 [LNIND 1961 SC 159].
57. Gordon Woodroffe and Co. Ltd., U.K. v. Gordon Woodroffe Ltd., Chennai, (1999) 97 Comp. Cas. 582 (Mad.). See also
Comments under Sections 10, 10E, 10F, 111, 397 and 398.
Page 2 of 8
58. Cachar Native Joint Stock Co. Ltd. v. Smt. Namita Gupta, (2004) 122 Comp. Cas. 1 (Gauhati). See also Comments
under Sections 10F, 111A, 179, 257, 397 and 398.
59. Dale and Carrington Invt. P. Ltd. v. P.K. Prathapan, (2004) 122 Comp. Cas. 161 (SC). See also Comments under
Section 10F.
60. CIT v. Karam Chand Thapar & Bros. P. Ltd., (1989) 65 Comp. Cas. 728 (SC) : (1989) 176 ITR 535 [LNIND 1989 SC 95]
(SC); Manohar Rajaram Chhabria v. UOI, (2002) 110 Comp. Cas. 162 (Cal.) (DB); Dhirajlal Girdharilal v. CIT,(1954) 26
ITR 736 [LNIND 1954 SC 298] (SC) : AIR 1955 SC 271 [LNIND 1954 SC 298]; Dhakeswari Cotton Mills Ltd. v.
CIT,(1954) 26 ITR 775 [LNIND 1954 SC 149] (SC) : AIR 1955 SC 65 [LNIND 1954 SC 149]; Omar Salay Mohamed
Sait v. CIT,(1959) 37 ITR 151 (SC) : AIR 1959 SC 1238; Lalchand Bhagat Ambica Ram v. CIT,(1959) 37 ITR 288
[LNIND 1959 SC 120] (SC) : AIR 1959 SC 1295 [LNIND 1959 SC 120]: (1960) 1 SCR 301 [LNIND 1959 SC 120]; Bai
Velbai v. CIT,(1963) 49 ITR 130 (SC); CIT v. Daulat Ram Rawatmull,(1973) 87 ITR 349 [LNIND 1972 SC 427] (SC) :
(1973) 2 SCR 184 [LNIND 1972 SC 427]; CIT v. S. P. Jain,(1973) 87 ITR 370 [LNIND 1972 SC 448] (SC) : AIR 1973
SC 997 [LNIND 1972 SC 448]; CIT v. Radha Kishan Nandlal,(1975) 99 ITR 143 (SC) rendered with reference to
CLBunder Section 10F of the Companies Act, 1956 and the ITAT under Section 256 of the Income-tax Act, 1961.
61. Manohar Rajaram Chhabria v. UOI, (2002) 110 Comp. Cas. 162 (Cal.) (DB). See also Comments under Sections 10E,
10F, 10FA and 10FB to 10GF.
62. Maharashtra Power Development Corporation Ltd. v. Dabhol Power Co., (2003) 117 Comp. Cas. 506 (Bom.) affirmed
in Maharashtra Power Development Corporation Ltd. v. Dabhol Power Co., (2004) 120 Comp. Cas. 560 (Bom.) (DB).
63. Chand Mall Pincha v. Hathimal Pincha, (1999) 95 Comp. Cas. 368 (Gauhati) : (1999) 2 Comp. LJ 108 (Gauhati). See
also Comments under Section 10F.
64. Sri Ramdas Motor Transport Ltd. v. Karedla Suryanarayana, (2002) 110 Comp. Cas. 193 (AP). See also Comments
under Section 10E.
65. Malleswara Finance and Investments Co. P. Ltd. v. CLB, (1995) 82 Comp. Cas. 836 (Mad.) (DB)See also Comments
66. L. Chandra Kumar v. Union of India,(1997) 228 ITR 725 (SC). See detailed Comments under Section 10—Jurisdiction
of Courts.
also Comments u/s. 10GF.
529 and 529A.
COMMENTS
Appeal to Supreme Court [ Section 10GF].—Any decision or order of the Appellate Tribunal is appealable. Any
person aggrieved by any decision or order of the Appellate Tribunal may file an appeal to the Supreme Court. Such
appeal should be preferred to the Supreme Court within 60 days from the date of communication of the decision or
order of the Appellate Tribunal. An appeal would lie only on question of law arising out of the decision or order of
the Appellate Tribunal.
Limitation.—The appeal against the decision or order of the Appellate Tribunal must be filed within 60 days from
the date of communication of order.
The provisions of section 5 of the Limitation Act, 1963 for condonation of delay would not apply. But as per proviso
to section 10GF the Supreme Court may condone the delay for a period not exceeding 60 days.
See also Comments under Section 10FQ(5). See detailed Comments on Limitation under Sections 10, 10E, 10F,
10GE, 111, 111A other relevant Sections.
Page 3 of 8
Condonation of delay [ Section 10GF, proviso].—The Supreme Court has the power to condone the delay. If the
Supreme Court is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said
period, it may allow the appeal to be filed within a further period not exceeding 60 days.
However, this right of appeal will not prevent the aggrieved persons from resorting to the remedies available under
Articles 226 or 32 of the Constitution of India.
SeeWrits, Judicial review and Constitutional validity hereinafter.
exercised by the CLB, the Court, the Central Government and BIFRunder various Sections of the Companies Act,
1956 have been conferred on the Tribunal (NCLT). See List of Sections conferring powers under Sections 10FB.
10GB]. The provisions of the Limitation Act, 1963 (36 of 1963)shall, as far as may be, apply to an appeal made to
Aggrieved person.—“Any person aggrieved” by the decision or order may file an appeal. Therefore, only the
person competent to move the Tribunal for substantive relief is entitled to file appeal to the Appellate Tribunal or the
Supreme Court. A person other than the transferor or transferee cannot file an appeal before the Tribunal under
section 111 or 111A of the Companies Act, 1956. Thus, a stranger to section 111(2) cannot be an aggrieved person
entitled to appeal against the order of the Tribunal refusing relief under section 111 of the Act.45
Till constitution of the Tribunal (NCLT) under Section 10FB an aggrieved person may file appeal against the
decisions or orders of the CLB under Section 10E to the High Court under Section 10F.
See detailed Comments under Sections 10E, 10F, 111 and 111A.
Decisions under prior and analogous provisions.—Prior to the commencement of the Companies (Second
Amendment) Act, 2002 (11 of 2003) and constitution of the Tribunal (NCLT) and Appellate Tribunal under Sections
10FB, 10FQ and 10FR an Appeal under Section 10F of the Companies Act, 1956 (which would be inapplicable vide
section 10FA on constitution of the Tribunal) before the High Court could be entertained only on a question of law
which arose from the order of the CLB. Similar provisions vis-a-vis question of law arising out of the order of the
Tribunal were also contained in section 256* of the Income-tax Act, 1961 (43 of 1961).
Some decisions under these sections are briefly dealt with below.
Appeal to Supreme Court only on question of law.—An appeal under section 10F [ now section 10GF] before
the High Court [ now the Supreme Court] can be entertained only on a question of law which arises from the order
of the Company Law Board [ now the Appellate Tribunal]. The only question whether the increased share capital
was proper and whether the same was offered to the petitioners was purely a question of fact. In that view of the
matter, the decision of the Company Law Board was proper and no interference was called for.46
Question of Law arising out of order of Appellate Tribunal.—The Supreme Court in a decision under similar
provisions vis-a-vis question of law arising out of the order of the Tribunal (ITAT) under section 256 of the Income-
tax Act, 1961 laid down four propositions: (1) When a question is raised before the Tribunal and is dealt with by it, it
is clearly one arising out of its order; (2) When a question of law is raised before the Tribunal but the Tribunal fails
to deal with it, it must be deemed to have been dealt with by it, and is, therefore, one arising out of its order; (3)
When a question is not raised before the Tribunal but the Tribunal deals with it, that will also be a question arising
Page 4 of 8
out of its order; (4) When the question of law is neither raised before the Tribunal nor considered by it, it will not be
a question arising out of its order notwithstanding that it may arise on the findings given by it.47
A finding of fact without evidence to support it or if it is perverse will be treated as a question of law. A decision as to
legal effect of a finding of fact is a question of law. The interpretation of an Act or document is a question of law.48
A misconstruction of a Deed will be a question of law. A finding as to the legal effect of the facts is a question of
law.49
Questions not raised before the Tribunal (ITAT) [the Appellate Tribunal] cannot be said to arise out of its order. No
appeal shall lie to the High Court [the Supreme Court] against such question.50 Where a question was raised before
the Tribunal, even if the same was not expressly dealt with by the Tribunal, the said question is to be treated as it
has arisen out of the order.51
Question of law arising out of such order.—The expression “question of law arising out of such order” is not
restricted to take in only those questions which have been expressly argued and decided by the Tribunal. If a
question of law is raised before the Tribunal [the Appellate Tribunal under section 10FQ], even if an aspect of that
question is not raised before the Tribunal, that aspect may be urged before the High Court [the Supreme Court
under section 10GF].52
The High Court in an appeal under section 10F [ now the Supreme Court under section 10GF] is empowered to
decide any question of law arising out of the order of the CLB [ now the Appellate Tribunal]. But on a question of
fact, the High Court [ now the Supreme Court] is not entitled to reappraise the evidence let in before the CLB [ now
the Appellate Tribunal]. The findings rendered by the CLB that no notice was issued, shareholders were not present
at the meeting, increase in share capital was not bona fide, appointment and removal of directors was not validly
done were all questions of fact and supported by evidence. Decision of the CLB was rendered after elaborate
discussion. No fresh material was placed before the Appellate Court. The High Court in appeal would not interfere
with factual findings based on evidence.53
An appeal to High Court under section 10F [ now the Supreme Court under section 10GF] of the Companies Act,
1956, lies only on a question of law arising out of the order ofCLB [ now the Appellate Tribunal]. The scope of the
appeal cannot be stretched beyond this permissible limit.54
Appellate Jurisdiction after constitution of Tribunal (NCLT).—From the commencement of the Companies
(Second Amendment) Act, 2002 (11 of 2003), that is, on Constitution of the Tribunal (NCLT) under Section 10FB,
the jurisdiction, powers and functions of the CLBunder various Sections of the Companies Act, 1956 shall be
transferred to and vested in the Tribunal (NCLT).
See detailed Comments under Sections 10, 10E, 10FA and 10FB to 10GF.
Finding of fact.—A finding of fact based on proven facts is not a question of law. A finding that the requirements of
section 84 of the Companies Act, 1956 were not fulfilled for issuing the duplicate share certificates can be a finding
of fact.55
The dispute as to the service of notice for the meeting and the validity of demand for the poll are questions of facts
and an Order of CLB [ now the Appellate Tribunal] on this point will not be appealable. Under section 10F, the High
Court [ now the Supreme Court under Section 10GF] would not interfere with an order of the CLB [ now the
Appellate Tribunal] if the question canvassed was not raised before and did not arise out of the order of the CLB [
now the Appellate Tribunal].56
The jurisdiction of the High Court under section 10F [the Supreme Court under section 10GF] of the Companies
Act, 1956 is limited. It can go into the question of law arising out of the order of theCLB [the Appellate Tribunal]. The
High Court cannot go into the question of facts such as the validity of transfer of shares which requires
Page 5 of 8
consideration of evidence including examination of witnesses. Where proper parties are not before the CLB or the
High Court it cannot exercise the jurisdiction at the request of a third party as the order would be a futile exercise.57
No perversity in findings, the Supreme Court will not disturb.
—Where validity of election held in EGM and sale and transfer of shares was challenged. Shareholders' register
was not produced before the CLB [ now the Appellate Tribunal] to controvert allegations of manipulations of record.
No denial was made before the CLB [ now the Appellate Tribunal] of allegations of false proxies, casting dead
shareholders' votes and other manipulations. No attempt was made to justify sale and transfer of shares. Finding of
the CLB [ now the Appellate Tribunal] that election held was invalid and sale and transfer of shares was only to
increase voting power was based on factual details. There was no perversity in findings. The High Court under
Section 10F [ now the Supreme Court under Section 10GF] will not disturb in appeal.58
perversity of the finding itself becomes a question of law.59 A finding of fact which is not supported by any evidence
or is unreasonable or perverse or based on suspicions, conjectures or surmises, makes the order of the Tribunal
appealable for this is a question of law. Such a finding may be interfered with or intervened and in an appropriate
case be set aside. In deciding whether a question of law arises out of such order of the Tribunal the court should
read the order of the Tribunal as a whole.60
As the CLB under Section 10E [ now the Tribunal (NCLT) and Appellate Tribunal under Section 10FB and 10FQ] is
the final fact-finding authority, the conclusions arrived at by it have to be given due weight and unless the same are
held to be perverse, no interference with the same by the High Court in appeal under section 10F [the Supreme
Court under section 10GF] is warranted. But a Tribunal cannot base its findings on mere suspicion, surmises and
conjectures.61
After the commencement of the Companies (Second Amendment) Act, 2002, appeal from orders of the Appellate
Tribunal shall lie to the Supreme Court on similar grounds. See detailed Comments under Sections 10FB, 10FQ
and 10GF.
Questions of law.—Interpretation of provisions of Articles of Association of the company is a question of law and
appeal was maintainable.62
Non-interference by Appeal Court.—A decision by the Company Law Board [ now the Appellate Tribunal] on
facts will not be interfered with on an appeal to the High Court [ now the Supreme Court]. Fact finding by CLB [the
Appellate Tribunal] will not usually be disturbed by the High Court [ now the Supreme Court] on appeal. The High
Court [ now the Supreme Court] will not interfere with the Order if CLB [ now the Appellate Tribunal] has solved the
factual problem.63
Questions of fact.— See detailed Comments under Section 10F.
Consent Order [ Section 10FQ(2)].—No appeal would lie to the Appellate Tribunal against Consent Orders.
Any decision or order.— See Comments under Section 10F.
Orders in disregard of rules of procedure.—Where the order passed by the CLB [ now the Appellate Tribunal]
was neither in accordance with the rules of procedure prescribed under the provisions of the Civil Procedure Code
nor based on the principles of natural justice. TheCLB [ now the Appellate Tribunal] passed the impugned order in a
manner unknown to law and in an arbitrary manner apart from the fact that the findings recorded by it on the merits
of the case were not only perverse but unknown to adjudicatory process of the land. There being an error apparent
on the face of the orders, definitely a question of law arose from out of the order of the CLB [ now the Appellate
Tribunal] to be decided by the High Court under section 10F [ now the Supreme Court under section 10GF] of the
Act.64
Procedure, Powers and Natural Justice [ Section 10FZA].—The Tribunal (NCLT) and the Appellate Tribunal
Page 6 of 8
(NCLAT), shall not be bound by the Code of Civil Procedure, 1908 (5 of 1908) but shall be guided by the principles
of natural justice and shall have the power to regulate its own procedure.
See detailed Comments on Principles of Natural Justice viz., (1) Rule of audi alteram partem, (2) Reasoned order,
etc., under Section 10FZA.
Writ Petition.—If an effective remedy by way of an appeal has been provided by the Legislature then a Writ petition
will not be maintainable. The remedy is an appeal. An appeal would lie against the decision of the CLB [the
Appellate Tribunal] in all questions of law arising out of its orders. No appeal would lie on questions of facts. A
decision of CLB under sections 397 and 398 cannot be challenged by a writ petition. Section 10F [ now Section
10GF] having provided for effective remedy by way of appeal to the High Court [ now the Supreme Court], the High
Court would not exercise its writ jurisdiction under Article 226 of the Constitution of India.65
Now after the Constitution of Tribunal (NCLT) under Section 10FB, any person aggrieved by an order or decision of
the Tribunal (NCLT) may prefer an appeal to the Appellate Tribunal except consent orders [ Section 10FQ]. Any
person aggrieved by decision or order of the Appellate Tribunal may file an appeal to the Supreme Court on any
question of law arising out of such decision or order [ Section 10GF].
—The power of judicial review over legislative action vested in the High Courts under Article 226 and in the
Supreme Court under Article 32 of the Constitution of India is an integral and essential feature of the Constitution,
constituting part of its basic structure. Ordinarily, therefore, the power of the High Courts and the Supreme Court to
test the constitutional validity of legislations can never be ousted or excluded. The power vested in the High Courts
to exercise judicial superintendence over the decisions of all Courts and Tribunals within their respective
jurisdictions under Article 227 is also part of the basic structure of the Constitution. The Tribunals have the power to
test the vires of subordinate legislations and rules except the vires of their parent statute. The Tribunals act as the
courts of first instance in respect of the areas of law for which they have been constituted. It will not be open for
litigants to directly approach the High Courts even in cases where they question the vires of statutory legislations
(except, where the legislation which creates the particular Tribunal is challenged) by overlooking the jurisdiction of
the concerned Tribunal. The jurisdiction conferred upon the High Courts under Article 226/227 and upon the
Supreme Court under Article 32 is part of the inviolable basic structure of our Constitution. While this jurisdiction
cannot be ousted, other Courts and Tribunals may perform a supplemental role.66
See also Comments under Sections 10, 10E, 10F, 10FA, 10FB and 10FQ.
Supreme Court declares ‘Law’.—One of the major functions of the Supreme Court is to declare the law for the
country under Article 141 of the Constitution of India, although under our adversary system it is only when litigation
spirals up the Supreme Court acts and declares the law. The Supreme Court, however, declares law or decides
only ‘substantial question of law’ or question of general public importance, which is needed to be decided by the
Supreme Court.67
A decision is available as a precedent only if it decides a question of law. An order of Supreme Court directing
temporary employee to be regularised in his service without assigning reasons cannot be relied upon as a
precedent.68
See detailed Comments on the Doctrine of Precedent or Stare decisis and Binding force Supreme Court and
Jurisdictional High Court decisions in view of Articles 141 and 227 of the Constitution of India under Section 10—
Supreme Court's power to render justice.—In exercise of its plenary powers under Article 142 of the Constitution
of India to pass orders to render justice the Supreme Court cannot override the provisions of law.69
Judicial Review.—The law laid down by the Supreme Court is the law under Article 141 of the Constitution of
India. It is needless to say that everyone is bound by the law. But, if there is any infraction of the action in violation
Page 7 of 8
of the law laid down by the Supreme Court, the appropriate remedy is to have it corrected by a judicial review but
not by way of contempt proceedings in the Supreme Court. It would be open to the petitioner to seek appropriate
remedy according to law.70
See detailed Comments on Contempt of Court, the effect of not following a binding Supreme Court decision, the
Doctrine of Precedent or Stare decisis, Binding force of Supreme Court and Jurisdictional High Court decisions in
view of Articles 141 and 227 of the Constitution of India under Section 10—Jurisdiction of Courts.
Power to Review [ Section 10FN].—From the decisions of the Tribunal a Review Petition can be made against the
Order to the Tribunal.
45. Vinod K. Patel v. IFCI Ltd., (2001) 103 Comp. Cas. 557 (Delhi).
* NowSection 260A of the Income-tax Act, 1961 (43 of 1961) provides for direct appeal to the High Court only on
substantial question of law (w.e.f. 1-10-1998).
46. Malleswara Finance and Investments Co. P. Ltd. v. Company Law Board, (1995) 82 Comp. Cas. 836 (Mad.) (DB). See
also Comments under Sections 10F, 397 and 398.
47. CIT v. Scindia Steam Navigation Co. Ltd.,(1961) 42 ITR 589 [LNIND 1961 SC 159] (SC) : AIR 1961 SC 1633 [LNIND
1961 SC 159]; Mohd. Jafar v. Nahar Industrial Enterprises Ltd., (1998) 93 Comp. Cas. 717 (Del.).
48. Sree Meenakshi Mills Ltd. v. CIT,(1957) 31 ITR 28 [LNIND 1956 SC 70] (SC) : AIR 1957 SC 49 [LNIND 1956 SC 70]:
1956 SCR 691 [LNIND 1956 SC 70]; G. Venkataswami Naidu & Co. v. CIT,(1959) 35 ITR 594 [LNIND 1958 SC 150]
(SC) : AIR 1959 SC 359 [LNIND 1958 SC 150].
49. CIT v. Sivakasi Match Exporting Co.,(1964) 53 ITR 204 [LNIND 1964 SC 163] (SC) : AIR 1964 SC 1813 [LNIND 1964
SC 163]; CIT v. Durga Prasad More,(1971) 82 ITR 540 (SC) : 1973 CTR (SC) 500 : AIR 1971 SC 2439.
50. CIT v. Abhijit Iron Processors (P.) Ltd. (No. 2),(2001) 248 ITR 108 (SC).
51. Estate of Late A.M.K.M. Karuppan Chettiar v. CIT,(1969) 72 ITR 403 (SC).
52. CIT v. Indian Molasses Co. P. Ltd.,(1970) 78 ITR 474 [LNIND 1965 CAL 73] (SC) : AIR 1970 SC 2067 [LNIND 1970
SC 304].
53. Micromeritics Engineers Pvt. Ltd. v. S. Munusamy, (2004) 122 Comp. Cas. 150 (Mad.) (DB). See also Comments under
Sections 10F, 53, 193, 195, 397, 398 and 402.
54. Trackparts of India Ltd. v. K.N. Bhargava, (2002) 109 Comp. Cas. 350 (All.). See also Comments under Sections 10F,
397, 398 and 402.
55. Shoe Specialities Ltd. v. Tracstar Investment Ltd., (1997) 88 Comp. Cas. 471 (Mad.) (DB).
56. Mohd. Jafar v. Nahar Industrial Enterprises Ltd., (1998) 93 Comp. Cas. 717 (Del.); CIT v. Scindia Steam Navigation Co.
Ltd.,(1961) 42 ITR 589 [LNIND 1961 SC 159] (SC) : AIR 1961 SC 1633 [LNIND 1961 SC 159].
57. Gordon Woodroffe and Co. Ltd., U.K. v. Gordon Woodroffe Ltd., Chennai, (1999) 97 Comp. Cas. 582 (Mad.). See also
Comments under Sections 10, 10E, 10F, 111, 397 and 398.
58. Cachar Native Joint Stock Co. Ltd. v. Smt. Namita Gupta, (2004) 122 Comp. Cas. 1 (Gauhati). See also Comments
under Sections 10F, 111A, 179, 257, 397 and 398.
59. Dale and Carrington Invt. P. Ltd. v. P.K. Prathapan, (2004) 122 Comp. Cas. 161 (SC). See also Comments under
Section 10F.
60. CIT v. Karam Chand Thapar & Bros. P. Ltd., (1989) 65 Comp. Cas. 728 (SC) : (1989) 176 ITR 535 [LNIND 1989 SC 95]
(SC); Manohar Rajaram Chhabria v. UOI, (2002) 110 Comp. Cas. 162 (Cal.) (DB); Dhirajlal Girdharilal v. CIT,(1954) 26
ITR 736 [LNIND 1954 SC 298] (SC) : AIR 1955 SC 271 [LNIND 1954 SC 298]; Dhakeswari Cotton Mills Ltd. v.
CIT,(1954) 26 ITR 775 [LNIND 1954 SC 149] (SC) : AIR 1955 SC 65 [LNIND 1954 SC 149]; Omar Salay Mohamed
Sait v. CIT,(1959) 37 ITR 151 (SC) : AIR 1959 SC 1238; Lalchand Bhagat Ambica Ram v. CIT,(1959) 37 ITR 288
[LNIND 1959 SC 120] (SC) : AIR 1959 SC 1295 [LNIND 1959 SC 120]: (1960) 1 SCR 301 [LNIND 1959 SC 120]; Bai
Velbai v. CIT,(1963) 49 ITR 130 (SC); CIT v. Daulat Ram Rawatmull,(1973) 87 ITR 349 [LNIND 1972 SC 427] (SC) :
(1973) 2 SCR 184 [LNIND 1972 SC 427]; CIT v. S. P. Jain,(1973) 87 ITR 370 [LNIND 1972 SC 448] (SC) : AIR 1973
Page 8 of 8
SC 997 [LNIND 1972 SC 448]; CIT v. Radha Kishan Nandlal,(1975) 99 ITR 143 (SC) rendered with reference to
CLBunder Section 10F of the Companies Act, 1956 and the ITAT under Section 256 of the Income-tax Act, 1961.
61. Manohar Rajaram Chhabria v. UOI, (2002) 110 Comp. Cas. 162 (Cal.) (DB). See also Comments under Sections 10E,
10F, 10FA and 10FB to 10GF.
62. Maharashtra Power Development Corporation Ltd. v. Dabhol Power Co., (2003) 117 Comp. Cas. 506 (Bom.) affirmed
in Maharashtra Power Development Corporation Ltd. v. Dabhol Power Co., (2004) 120 Comp. Cas. 560 (Bom.) (DB).
63. Chand Mall Pincha v. Hathimal Pincha, (1999) 95 Comp. Cas. 368 (Gauhati) : (1999) 2 Comp. LJ 108 (Gauhati). See
also Comments under Section 10F.
64. Sri Ramdas Motor Transport Ltd. v. Karedla Suryanarayana, (2002) 110 Comp. Cas. 193 (AP). See also Comments
under Section 10E.
65. Malleswara Finance and Investments Co. P. Ltd. v. CLB, (1995) 82 Comp. Cas. 836 (Mad.) (DB)See also Comments
66. L. Chandra Kumar v. Union of India,(1997) 228 ITR 725 (SC). See detailed Comments under Section 10—Jurisdiction
of Courts.
also Comments u/s. 10GF.
529 and 529A.
End of Document
Datta: Company Law
C R Datta
Datta: Company Law > Datta: Company Law > Volume 1 > PART II INCORPORATION OF
COMPANY AND MATTERS INCIDENTAL THERETO > Certain companies, associations and
partnerships to be registered as companies under Act
S. 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 1 [ ten thousand rupees].
1. Substituted by the Companies (Amendment) Act, 2000 (53 of 2000), s. 5 (w.e.f. 13-12-2000), for “one thousand
rupees”.
2. Smith v. Anderson, , (1880) 15 Ch.D. 247 : (1874-80) All ER Rep. 1121 : 50 LJ Ch. 39 (CA).
3. Armour v. Liverpool Corporation, , (1939) Ch. 422 : (1939) 1 All ER 363 : 108 LJ Ch. 147.
5. Dayal Singh v. Des Raj, , (1963) 1 Comp. LJ 100.
6. V.V. Ruia v. Dalmia, , (1968) 38 Comp. Cas. 572 (Bom.).
7. Senaji Kapurchand v. Pannaji Devichand, , AIR 1930 PC 300 : 34 CWN 1107 (PC); Akola Gin Combination v. Northcot
Ginning Factory, , (1915) 26 IC 613.
8. Mrs. Bacha F. Guzdar v. CIT, , (1955) 25 Comp. Cas. 1 (SC) : AIR 1955 SC 74 [LNIND 1954 SC 145]: (1955) 27 ITR 1
[LNIND 1954 SC 145] (SC): (1955) 1 SCR 876 [LNIND 1954 SC 145]. See also Comments under Sections 2(46), 34
and 41.
9. Sri Murugan Oil Industries Pvt. Ltd. v. A.V. Suryanarayana Chettiar, , (1963) 33 Comp. Cas. 833 (Mad.).
10. Steel Bros. & Co. Ltd. v. CIT, , AIR 1958 SC 315 : (1958) 33 ITR 1 (SC).
11. Newstead v. Frost, , (1980)1 All ER 363 : (1980) 1 WLR 135 : (1980) 124 SJ 116 (HL).
12. M.M. Pulimood v. Registrar of Firms, , (1987) 61 Comp. Cas. 209 (Ker.).
Page 2 of 8
13. Ganga Metal Refining Co. Pte. Ltd. v. CIT, , (1968) 38 Comp. Cas. 117 (Cal.) : AIR 1967 Cal. 429 [LNIND 1966 CAL
147]: (1968) 67 ITR 771 [LNIND 1966 CAL 147] (Cal.).
14. S. Sivashanmugham v. Butterfly Marketing Pvt. Ltd., , (2001) 105 Comp. Cas. 763 (Mad.) (DB). See detailed
Comments on the Doctrine of ultra vires under Section 13.
15. Rudd & Son Ltd., Re, , (1984) Ch. 237 : (1984) 3 All ER 225 : (1984) 2 WLR 831; Burdett-Coutts v. IRC, , (1960) 3 All
ER 153; Garvin (Theo) Ltd., Re, , (1969) 1 Ch. 624 : (1968) 2 WLR 683 : (1968) 38 Comp. Cas. 841; Ayerst v. C & K
(Construction) Ltd., , (1976) AC 167 : (1975) 2 All ER 537 (HL). See also Comments under Section 447.
16. Nibaran v. Lalit, , AIR 1939 Cal. 187; Shyamlal Roy v. Madhusudan Roy, , AIR 1959 Cal. 380 [LNIND 1958 CAL 205].
17. Agarwal and Co. v. CIT, , AIR 1970 SC 1343 [LNIND 1970 SC 193]: (1970) 77 ITR 10 [LNIND 1970 SC 193] (SC).
18. Bholanath v. Lachmi Narain, , AIR 1931 All. 83.
19. Allabux v. Saindad, , AIR 1933 Sind. 29.
20. Badri Prasad v. Nagarmal, , (1959) 29 Comp. Cas. 229 (SC) : AIR 1959 SC 559 [LNIND 1958 SC 198].
21. Thomas, ex parte Poppleton, Re, , (1884) 14 QBD 379 : 54 LJ QB 336 : 51 LT 602, but see Badri Prasad v. Nagarmal, ,
22. Madan v. Janki, , AIR 1927 All. 487; Kumarasamy Chettiar v. Chinnathamani Chettiar, , AIR 1951 Mad. 291 [LNIND
1950 MAD 84]: (1950) 2 MLJ 453 [LNIND 1950 MAD 84]; Badri Prasad v. Nagarmal, , (1959) 29 Comp. Cas. 229 (SC) :
AIR 1959 SC 559 [LNIND 1958 SC 198].
23. R. v. Tankard, , (1894) 1 QB 548 : (1891-94) All ER Rep. Ext. 1483 : 70 LT 42.
24. London Marine Insurance Association, Re, , (1869) LR 8 Eq. 176 : 20 LT 943 : 17 WR 784; Jennings v. Hammond, ,
(1882) 9 QBD 225 : 51 LJ QB 493 : 31 WR 40 (DC).
25. Appa Dada Patil v. Ramkrishna, , AIR 1930 Bom. 5 : ILR 53 Bom. 652.
26. Mewa Ram v. Ram Gopal, , AIR 1926 All. 591; Padstow Total Loss & Collision Assce. Assn., Re, , (1882) 20 Ch.D. 137
: 51 LJ Ch. 344 (CA); Ilfracombe Permanent Mutual Benefit Building Society, Re, , (1901) 1 Ch. 102 : 70 LJ Ch. 66.
27. Sri Gopalji Co. v. CIT, , (1931) 1 Comp. Cas. 299 (Lah.) : AIR 1931 Lah. 376.
28. G.K. Naidu v. G.K. Mouleshwar, , AIR 1962 AP 406 [LNIND 1961 AP 119].
29. Madan v. Shewlal, , AIR 1934 Lah. 882.; New Moffussil Co. v. Rustomji, , ILR 60 Bom. 800.
30. K.N. Eswara Rao v. K.H. Shama Rao and Sons, , (2001) 103 Comp. Cas. 306 (Kar.) (DB).
31. Director-General v. Trustwel Inc., , (1998) 91 Comp. Cas. 83 (MRTPC).
* See the Competition Act, 2002 (12 of 2003)in Appendix 324.
32. L.K.S. Gold Palace v. L.K.S. Gold House P. Ltd., , (2004) 122 Comp. Cas. 896 (Mad.). See also Comments under
Section 575.
33. B. Ramachandra Adityan v. Educational Trustee Co. Pvt. Ltd., , (2003) 113 Comp. Cas. 334 (Mad.).
34. Kilpest P. Ltd. v. Shekhar Mehra, , (1996) 87 Comp. Cas. 615 (SC); Hind Overseas P. Ltd. v. Raghunath Prasad
Jhunjhunwalla, , (1976) 46 Comp. Cas. 91 (SC) : AIR 1976 SC 565 [LNIND 1975 SC 403]; Kapil N. Mehta v. Shree
Laxmi Motors Ltd., , (2001) 103 Comp. Cas. 498 (Guj.); Ashok V. Doshi v. Doshi Time Industries P. Ltd., , (2001) 104
Comp. Cas. 306 (CLB); Col. Dalip Singh Sachar v. Maa Karni Coal Carriers P. Ltd., , (2006) 130 Comp. Cas. 641
(CLB).
COMMENTS
English Act, 1948 : Sections 429, 434 Previous Act, 1913 : Section 4
Legislative History.— The Companies Act, 1956 (1 of 1956).—The Notes on clauses explained this provision as
follows:“The corresponding section of the existing Act is section 4. It is inappropriate that companies should
hereafter be formed either in pursuance of an Act of Parliament of the United Kingdom or of Royal Charter or
Letters Patent. This explains the omissions made from sub-sections (1) and (2) of that section. Sub-clause (3)
Page 3 of 8
makes a few drafting improvements in section 4(3) of the existing Act.” [ Clause 9 of the Companies Bill, 1953 (46
of 1953)].
The Companies (Amendment) Act, 2000 (53 of 2000).
—The Notes on clauses explained as follows:“This clause seeks to enhance the fine specified in sub-section (5) of
section 11 of the Act from one thousand rupees to ten thousand rupees.” [ Clause 5 of the Companies (Second
under Section 1.
Object.—This section has been enacted to redress a public mischief arising from large trade undertakings being
carried on by large fluctuating bodies making it difficult for persons to deal with such fluctuating bodies.2
Prohibition of large Associations and Partnerships [Sub-section (1)].—No company, association or partnership
consisting more than 10 persons shall be formed for the purpose of carrying on the business of banking.
Carrying any business for gain [Sub-section (2)].— Section 11(2) prohibits large company, association or
partnerships for carrying on any business for acquisition of gain comprising more than 20 persons unless it is
registered as a company under the Companies Act, 1956 or formed in pursuance of some other Indian law.
Section does not apply to Non-profit Associations.—This section does not apply to a business which is not for
the purpose of earning profits for its members.
Charitable Companies, Clubs.—All charitable, religious, scientific, literary, social and other associations and clubs
not having for their objects the acquisition of gain are thus excluded from prohibition of this section.
See detailed Comments on Charitable Companies under Section 25—Power to dispense with “Limited” in name of
charitable or other company.
Carry on business for gain.—Whether an association is carrying on business will have to be decided from the
ordinary businessman's point of view.3 The subscribers to an investment trust do not “associate” and do not “carry
on business” for gain.4
“Gain” means acquisition. It is something obtained. It is not limited to pecuniary gain. An association is not formed
for acquisition or gain where the individual members are to give something or to spend something and not to gain
anything.5
Stock Exchange.—In order to attract the prohibition contained in section 11(2), four conditions must be fulfilled:
Firstly, it must be a company, association or partnership consisting of more than 20 persons; secondly, it must not
have been registered as a company under the Companies Act, 1956 nor formed in pursuance of some other Indian
law; thirdly, it must have been formed for the purpose of carrying on any business other than that of banking; and,
fourth, that business must have for its object the acquisition of gain by the company, association or partnership or
the individual members thereof. The Bombay Stock Exchange was admittedly an association of more than 20
persons. But, it was not formed for the purpose of carrying on any business, much less a business which has for its
object the acquisition of gain either by the Stock Exchange itself or by the individual members thereof. Therefore, it
did not contravene the provisions contained in section 11(2) of the Companies Act, 1956 and was not an illegal
association.6
Person.—The word “person” has not been defined in the Companies Act, 1956. As per section 3(42) of the General
Clauses Act, 1897 (10 of 1897), in all Central Acts, “unless there is anything repugnant in the subject or context” the
word “person” shall include any company or association or body of individuals, whether incorporated or not.
According to this definition “associations” or “body of individuals” may form a valid partnership. The word “person”
has been defined in the in a very wide sense. But, in any particular statute the meaning of “person” may get
controlled by the context. Accordingly, notwithstanding this definition, in decisions for the purposes of section 11 of
the Companies Act, the Partnership Act and the Income-tax Act the meaning of “person” has been explained are
follows.
Person means only individuals and not bodies of individuals. To say that persons forming unregistered companies
Page 4 of 8
should be taken as units for the purpose of section 11 of the Companies Act, 1956 [ section 4 of previous Acts]
would be to defeat the intention of the Companies Act. Such extended definition would be repugnant to the subject
and context of this section of the Companies Act.7
Thus, a firm in which bodies of individuals or unregistered companies are partners, all the members or partners
should be counted to see whether the statutory limit of 20 persons has been exceeded. The main object of section
11 is to prevent large number of persons from carrying on business without being registered as a company.
Firm vis-a-vis Company.—A firm is not a person but a company is a separate juristic person. Partnership is
merely an association of persons for carrying on the business of partnership and in law the firm name is a
compendious method of describing the partners. Such is, however, not the case of a company which stands as a
separate juristic entity distinct from the shareholders. The position of shareholders in a company is thus not
analogous to that of partners inter se.8
Company may enter into partnership.—It will not be proper to extend the foregoing Privy Council decision to the
case of a registered company for the purposes of section 11(2) of the Companies Act, 1956. A registered company
entering into a partnership enters it as a single legal person, and not as a group of individuals comprising of its
shareholders.9
The Supreme Court has also held in a tax matter that an agreement of partnership between three companies was
valid and the partnership consisted of 3 partners. Though, registration was refused as application for registration
was not signed by all the three companies.10 In connection with tax matter, the House of Lords has also held that a
partnership agreement between an individual and a limited company is valid.11 A company being a “person” within
the meaning of section 4 of the Indian Partnership Act, 1932 (9 of 1932), registration to a firm under section 59 of
the Indian Partnership Act cannot be declined for the reason of its being a partner the firm.12
In practice it has thus been found that corporate bodies such as limited companies form partnerships among
themselves as also with other individuals.
Company must be authorised by its Memorandum and Articles.— Prima facie a company entering into a
partnership with some other person or some other company would be ultra vires. A company or an incorporated
body cannot lawfully employ funds for purposes not authorised by its constitution which would be normally the
memorandum and the articles of association. Therefore, a company can enter into partnership with an individual
person or with another company if it is specially authorised by its memorandum and articles of association. Such a
partnership however would require very special articles since many of the provisions of the Partnership Act, 1932
would be difficult to apply.13 Where the objects clause of the Memorandum of Association of a company permitted
the company to enter into partnership for the benefit of the company. The company could enter into partnership with
any one for the purpose which would directly or indirectly benefit the company. A third party ought not be allowed
the benefit of the doctrine of ultra vires in order to avoid the performance of obligations voluntarily undertaken with
full opportunity to know the company's power before entering into transaction.14
Department's view.—Whether incorporated companies can enter into partnership.
—“A question has been raised whether an incorporated company can enter into a partnership with some other
person or some other company. The matter has been examined by this Department in consultation with the
Department of Legal Affairs and I am directed to say that prima facie a company entering into a partnership with
some other person or some other company would be ultra vires and will be against the principle that a particular
company or an incorporated body cannot lawfully employ funds for purposes not authorised by its constitution which
would normally be the memorandum and the articles of association. However, a company or an incorporated body,
if so authorised by its constitution, can enter into partnership with an individual person or with another company
irrespective of nationality and residence. This would, however, require the company to adopt very special articles
since many of the provisions of the Partnership Act would be difficult to apply to such a partnership. In view of this,
while considering applications for registration of firms with bodies corporate as partners under the Indian
Partnership Act, 1932 (9 of 1932), the State Governments should examine the applications before them and find out
whether the memorandum and articles of association of the applicant incorporated companies contain any special
articles which authorise the incorporated companies to enter into partnerships and the articles also take care of the
possible anomalies which have been pointed out in the Calcutta High Court's ruling in the case of Ganga Metal
Refining Co. Pte. Ltd. v. CIT, , (1968) 38 Comp. Cas. 117 (Cal.) : AIR 1967 Cal. 429 [LNIND 1966 CAL 147]:
(1968) 67 ITR 771 [LNIND 1966 CAL 147] (Cal.) .” [ Circular No. 1/81-CL-V, dated 14-9-1981, issued by the
Page 5 of 8
Department, addressed to all the State Governments and Union Territories for Registration of firms with bodies
corporate as partners under the Indian Partnership Act, 1932 (9 of 1932) :(1982) 52 Comp. Cas. (St.) 188].
Partnership between Companies: Application of assets.—On the winding up of a partnership carried on by two
companies, the creditors of the partnership have, with respect to the partnership assets, priority over the creditors of
the individual corporate partners whether because of statute which accords such a priority to partnership creditors,
or because of a rule of convenience to the like effect. As between themselves the partnership creditors rank pari
passu. There is no basis for conferring on any class of the partnership creditors a preference with respect to their
claims against the partnership assets similar to that to which they would be entitled under the in the winding up of
the companies composing the partnership.15
Partnership firm cannot be member of a company.— See detailed Comments and Department's view under
Section 12.
Department's view.— A partnership firm cannot be a member of a company.—“A firm, not being a person
cannot be registered as a member of a company except where the company is licenced under section 25 of the
Companies Act, 1956. Companies which have firms registered as shareholders should be advised to take steps to
rectify the position within a specified time. In case the irregularity persists, despite a warning, necessary action can
be taken under section 150(2) of the Companies Act, 1956.” [ Circular No. 4/72, dated 9-3-1972 :Govt. of India
Registration of partnership firm as a company.—“The Registrars of Companies will continue to register

partnership firms under Part IX of the Companies Act as joint stock companies provided they fulfil the conditions
prescribed under the Companies Act, 1956.
This follows doubts whether a partnership firm can be registered as a joint stock company under Part IX of the
It is also clarified that a partnership firm cannot be prevented from being registered as a company under Part IX of
the Companies Act, 1956, provided it fulfils all other requirements of the company law.” [PIB Press Release, New
Delhi, dated 5-8-1999 : (1999) 97 Comp. Cas. (St.) 98]. See detailed Comments under Section 566.
Joint Family exempted [Sub-section (3)].—This section does not apply to a joint family carrying on a business.
Where a business is carried on by two or more joint families, in computing the number of persons in sub-sections
(1) and (2), minor members of families shall be excluded.
Two or more joint families.—If one joint family carries on business for gain with more than 20 persons, this
section will not apply. But, if two or more joint families carry on business with more than 20 adult persons, the
association will be unlawful. Even though in the beginning such an association has less than 20 members but
subsequently if the adult members exceed 20, the association will become illegal from the date when the
membership exceeds the limit.16
HUF cannot be partner.—A Hindu undivided family cannot as such enter into a contract of partnership with
another person or persons. But, the Karta of an HUF or adult coparceners as individuals can enter into
partnership.17
Department's view.— Specified number to include both male and female adult members.—“Both male and
female adult members have to be taken into account in computing the number specified in sub-sections (1) and (2)
for the purpose of sub-section (3) of section 11 of the Companies Act, 1956.” [ Letter No. 8/10(11)/65-CL-V,dated
11-2-1965 :Government of India publication, Clarifications and Circulars on Company Law, 1977 Edition, page 7].
Consequences [Sub-section (4) ].—Every member of a company, association or partnership carrying on business
in contravention of section 11 shall be personally liable for all liabilities incurred in such business.
See alsoPenalty under Sub-section (5) hereinafter.
Unlawful Association.—An association or partnership or company carrying on business for gain without getting
itself registered will be an unlawful association though the Court has refused to declare such an association
unlawful,18 and expressed doubt whether such an association is void.19 An unlawful association will not be able to
sue on a contract. Its members will be liable to an unlimited extent for the acts of the association and they may be
Page 6 of 8
sued. They are also liable to be prosecuted and fined under the Act. But the subscribers will be entitled to sue for
recovery of their subscriptions.20 Though an unlawful association cannot sue on a contract, it can get itself
registered and thereafter file a suit on the contract entered into before its registration.21 A partner in an unlawful
association cannot bring a suit for accounts or partition against other partners. There cannot be any cause of action
on the basis of an illegal association.22 But the individual members of such an association may have beneficial
interest in the property.23 As such, an association cannot enter into contract, it cannot contract any debt and it
cannot be sued on contract by an outsider.24 But if the outsider without notice had bona fide lent money to the
association, his suit would be maintainable against the members.25 Such an association cannot be wound up at the
instance of the association or any of its creditors or members.26
Income-tax.—The profit made by an unlawful association is, however, liable to assessment to income-tax.27
Lawful Association not hit by Section 11.—As already explained, section 11(2) prohibits large partnerships,
associations, etc., for carrying on business for acquisition of gain. All charitable, religious, scientific, literary, social
and other associations and clubs not having for their objects acquisition of gain are thus excluded.
A chit fund with large number of subscribers is not hit by this section.28 A pooling contract is not hit by this section.29
Professional partnerships.—As section 11 of the Companies Act, 1956 uses the word carrying on business for
acquisition of gain, professional partnerships shall not be hit by this section.
English Law.—The English Companies Act, 1985 has expressly exempted professional partnerships from the
applicability of this section.
Penalty [Sub-section (5)].—For becoming a member of a company, association or partnership formed in

contravention of the provisions of section 11, every person who is a member, shall be punishable with fine upto Rs.
10,000.
See also Comments under Sections 621 and 621A.
Member personally liable.—In addition, such an association would become illegal association and every member
shall be personally liable for all liabilities incurred in such business. See Comments on Consequences under Sub-
section (4) above.
Winding up.— Section 583 of the Companies Act, 1956 deals with winding up of unregistered companies and
partnerships consisting of more than seven persons [ section 582(b)]. See detailed Comments under Sections 582
and 583.
A firm with more than 7 and less than 17 partners was not in contravention of section 11 and could be wound up
under section 583. But dispute between the partners regarding profit was not sufficient ground for winding up.30
Unfair Trade Practice.—Where a firm engaged in providing finance used the word “Inc.” in its name. It was held
The Monopolies and Restrictive Trade Practices Act, 1969 (54 of 1969) has been repealed by the Competition Act,
2002 (12 of 2003)*, s. 66. The MRTP Commission has been replaced by the Competition Commission of India. The
remedy for unfair trade practices shall now lie with the Consumer Forum under the Consumer Protection Act, 1986
(68 of 1986). See Statement of Objects and Reasons and detailed Comments under Section 10—Jurisdiction of
Courts.
Partnership converted into company.—Where a partnership firm was converted into a private limited company.
The property of the partnership firm shall vest in the company on registration. No separate transfer of copyright
owned by the firm in favour of the company was involved. Written assignment deed was not necessary. Therefore,
the suit by the company based on the copyright under section 19 of the Copyright Act, 1957 (14 of 1957) was
maintainable.32
Company can be a Trustee.—It is well-settled that a company can act as a trustee. Sections 11 and 12 of the
Companies Act, 1956 show that a company need not always be formed to carry on a business venture with a view
to making profit. Therefore, so long as the company has pursued the main objects for which it was incorporated, the
Page 7 of 8
fact that it has not earned profit would not be relevant for winding up the company under section 433 (c) of the
Companies Act, 1956, on the ground that it has failed to commence business or has suspended its business.33
Limited Company—Applicability of Principle of partnership.—Principles of Dissolution of Partnership may

apply to a Limited Company if apparent structure of the Company is not the real structure and on piercing corporate
veil it is found that in reality it is a partnership. The principle that Limited Company should not be treated as quasi-
partnership should not be easily accepted. When more than one family or several friends or relations form a Limited
Company without reserving any right for active participation of the members, the principles of dissolution of
partnership firm cannot be invoked. The Limited Company should be treated as quasi-partnership. If on lifting the
veil it is found that in reality the Company is a partnership the principles of dissolution of partnership may apply.34
See detailed Comments under Sections 34, 81, 397, 398, 402 and 433(f).
1. Substituted by the Companies (Amendment) Act, 2000 (53 of 2000), s. 5 (w.e.f. 13-12-2000), for “one thousand
rupees”.
3. Armour v. Liverpool Corporation, , (1939) Ch. 422 : (1939) 1 All ER 363 : 108 LJ Ch. 147.
5. Dayal Singh v. Des Raj, , (1963) 1 Comp. LJ 100.
6. V.V. Ruia v. Dalmia, , (1968) 38 Comp. Cas. 572 (Bom.).
7. Senaji Kapurchand v. Pannaji Devichand, , AIR 1930 PC 300 : 34 CWN 1107 (PC); Akola Gin Combination v. Northcot
Ginning Factory, , (1915) 26 IC 613.
8. Mrs. Bacha F. Guzdar v. CIT, , (1955) 25 Comp. Cas. 1 (SC) : AIR 1955 SC 74 [LNIND 1954 SC 145]: (1955) 27 ITR 1
[LNIND 1954 SC 145] (SC): (1955) 1 SCR 876 [LNIND 1954 SC 145]. See also Comments under Sections 2(46), 34
and 41.
9. Sri Murugan Oil Industries Pvt. Ltd. v. A.V. Suryanarayana Chettiar, , (1963) 33 Comp. Cas. 833 (Mad.).
10. Steel Bros. & Co. Ltd. v. CIT, , AIR 1958 SC 315 : (1958) 33 ITR 1 (SC).
11. Newstead v. Frost, , (1980)1 All ER 363 : (1980) 1 WLR 135 : (1980) 124 SJ 116 (HL).
12. M.M. Pulimood v. Registrar of Firms, , (1987) 61 Comp. Cas. 209 (Ker.).
13. Ganga Metal Refining Co. Pte. Ltd. v. CIT, , (1968) 38 Comp. Cas. 117 (Cal.) : AIR 1967 Cal. 429 [LNIND 1966 CAL
147]: (1968) 67 ITR 771 [LNIND 1966 CAL 147] (Cal.).
14. S. Sivashanmugham v. Butterfly Marketing Pvt. Ltd., , (2001) 105 Comp. Cas. 763 (Mad.) (DB). See detailed
Comments on the Doctrine of ultra vires under Section 13.
15. Rudd & Son Ltd., Re, , (1984) Ch. 237 : (1984) 3 All ER 225 : (1984) 2 WLR 831; Burdett-Coutts v. IRC, , (1960) 3 All
ER 153; Garvin (Theo) Ltd., Re, , (1969) 1 Ch. 624 : (1968) 2 WLR 683 : (1968) 38 Comp. Cas. 841; Ayerst v. C & K
(Construction) Ltd., , (1976) AC 167 : (1975) 2 All ER 537 (HL). See also Comments under Section 447.
16. Nibaran v. Lalit, , AIR 1939 Cal. 187; Shyamlal Roy v. Madhusudan Roy, , AIR 1959 Cal. 380 [LNIND 1958 CAL 205].
17. Agarwal and Co. v. CIT, , AIR 1970 SC 1343 [LNIND 1970 SC 193]: (1970) 77 ITR 10 [LNIND 1970 SC 193] (SC).
18. Bholanath v. Lachmi Narain, , AIR 1931 All. 83.
19. Allabux v. Saindad, , AIR 1933 Sind. 29.
20. Badri Prasad v. Nagarmal, , (1959) 29 Comp. Cas. 229 (SC) : AIR 1959 SC 559 [LNIND 1958 SC 198].
21. Thomas, ex parte Poppleton, Re, , (1884) 14 QBD 379 : 54 LJ QB 336 : 51 LT 602, but see Badri Prasad v. Nagarmal, ,
22. Madan v. Janki, , AIR 1927 All. 487; Kumarasamy Chettiar v. Chinnathamani Chettiar, , AIR 1951 Mad. 291 [LNIND
1950 MAD 84]: (1950) 2 MLJ 453 [LNIND 1950 MAD 84]; Badri Prasad v. Nagarmal, , (1959) 29 Comp. Cas. 229 (SC) :
AIR 1959 SC 559 [LNIND 1958 SC 198].
23. R. v. Tankard, , (1894) 1 QB 548 : (1891-94) All ER Rep. Ext. 1483 : 70 LT 42.
24. London Marine Insurance Association, Re, , (1869) LR 8 Eq. 176 : 20 LT 943 : 17 WR 784; Jennings v. Hammond, ,
(1882) 9 QBD 225 : 51 LJ QB 493 : 31 WR 40 (DC).
Page 8 of 8
25. Appa Dada Patil v. Ramkrishna, , AIR 1930 Bom. 5 : ILR 53 Bom. 652.
26. Mewa Ram v. Ram Gopal, , AIR 1926 All. 591; Padstow Total Loss & Collision Assce. Assn., Re, , (1882) 20 Ch.D. 137
: 51 LJ Ch. 344 (CA); Ilfracombe Permanent Mutual Benefit Building Society, Re, , (1901) 1 Ch. 102 : 70 LJ Ch. 66.
27. Sri Gopalji Co. v. CIT, , (1931) 1 Comp. Cas. 299 (Lah.) : AIR 1931 Lah. 376.
28. G.K. Naidu v. G.K. Mouleshwar, , AIR 1962 AP 406 [LNIND 1961 AP 119].
29. Madan v. Shewlal, , AIR 1934 Lah. 882.; New Moffussil Co. v. Rustomji, , ILR 60 Bom. 800.
30. K.N. Eswara Rao v. K.H. Shama Rao and Sons, , (2001) 103 Comp. Cas. 306 (Kar.) (DB).
31. Director-General v. Trustwel Inc., , (1998) 91 Comp. Cas. 83 (MRTPC).
* See the Competition Act, 2002 (12 of 2003)in Appendix 324.
32. L.K.S. Gold Palace v. L.K.S. Gold House P. Ltd., , (2004) 122 Comp. Cas. 896 (Mad.). See also Comments under
Section 575.
33. B. Ramachandra Adityan v. Educational Trustee Co. Pvt. Ltd., , (2003) 113 Comp. Cas. 334 (Mad.).
34. Kilpest P. Ltd. v. Shekhar Mehra, , (1996) 87 Comp. Cas. 615 (SC); Hind Overseas P. Ltd. v. Raghunath Prasad
Jhunjhunwalla, , (1976) 46 Comp. Cas. 91 (SC) : AIR 1976 SC 565 [LNIND 1975 SC 403]; Kapil N. Mehta v. Shree
Laxmi Motors Ltd., , (2001) 103 Comp. Cas. 498 (Guj.); Ashok V. Doshi v. Doshi Time Industries P. Ltd., , (2001) 104
Comp. Cas. 306 (CLB); Col. Dalip Singh Sachar v. Maa Karni Coal Carriers P. Ltd., , (2006) 130 Comp. Cas. 641
(CLB).
End of Document
Datta: Company Law
C R Datta
COMPANY AND MATTERS INCIDENTAL THERETO > Memorandum of Association
S. 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 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”);
or
(c) a company not having any limit on the liability of its members (in this Act termed “an unlimited
company”).
35. Mohori Bibi v. Dharamadas Ghosh,(1903) ILR 30 Cal. 539 (PC) : (1903) 30 IA 114 (PC); Circular No. 312(43)-CL-III/63,
dated 30-9-1963.
[LNIND 1954 SC 145] (SC) : (1955) 1 SCR 876 [LNIND 1954 SC 145]. See also Comments under Sections 2(46), 11,
34 and 41.
37. Vagliano Anthracite Collieries Ltd., Re,(1910) WN 187: 79 LJ Ch. 769 : 103 LT 211; Sadler v. Whiteman,(1910) 1 KB
868; Glory Paper Mills Co., Re, Dunster's Case, (1894) 3 Ch. 473 : 63 LJ Ch. 885 : 71 LT 528 (CA). See also
38. Agarwal and Co. v. CIT,AIR 1970 SC 1343 [LNIND 1970 SC 193]: (1970) 77 ITR 10 [LNIND 1970 SC 193] (SC). See
Comments under Section 11. See also Vickers Systems International Ltd. v. Mahesh P. Keswani, (1992) 73 Comp.
Cas. 317 (CLB) in Comments under Sections 41, 108 and 153.
39. Barned's Banking Co. Re, Peel's Case, (1867) 2 Ch. App. 674 : 36 LJ Ch. 757; Nassau Phosphate Co. Re, (1876) 2
Ch.D. 610 : 45 LJ Ch. 584; Laxon & Co. (No. 2) Re, (1892) 3 Ch. 555 : 61 LJ Ch. 667 : 67 LT 85. See also Comments
under Sections 13, 33, 35 and 41.
40. Sri Arthanari Transport (P.) Ltd. v. K.P. Swami Goundar, (1965) 35 Comp. Cas. 930 (Mad.) : AIR 1966 Mad. 231
[LNIND 1965 MAD 112]: (1965) 2 Comp. LJ 266 : (1965) 2 MLJ 504 [LNIND 1965 MAD 112].
* Reproduced from Incorporation of a Company—Guidelines, published by the Institute of Company Secretaries of India
(ICSI), Second Edition, August 1981, pages 80-81.
41. Mohori Bibi v. Dharamadas Ghosh,(1903) ILR 30 Cal. 539 (PC) : (1903) 30 IA 114 (PC). See also Comments under
Sections 41 and 69.
† See the Foreign Exchange Management Act, 1999 (42 of 1999) in Appendix 325.
Page 2 of 16
42. Alexander v. Automatic Telephone Co., (1900) 2 Ch. 56 : (1900-03) All ER Rep. Ext. 1755 : 69 LJ Ch. 428 : 82 LT 400 :
48 WR 546 (CA). See also Comments u/s. 13, 41, 91 and 543.
43. Lurgan's (Lord) Case Re, (1902) 1 Ch. 707 : 71 LJ Ch. 323 : 86 LT 291. See also Comments under Sections 15 and 41.
TLR 46 : 41 SJ 63 (HL); Booth v. Helliwell,(1914) 3 KB 252 : 83 LJ KB 1548 : 111 LT 542 : 30 TLR 529 (DC). See
45. Pioneer Mutual Benefit and Friend-in-Need Society Ltd. v. Assistant Registrar of Joint Stock Companies, (1933) 3
Comp. Cas. 37 (Mad.) : AIR 1933 Mad. 129 [LNIND 1932 MAD 261]; Universal Mutual Aid and Poor Houses
Association Ltd. v. A.D. Thoppa Naidu, (1932) 2 Comp. Cas. 515 (Mad.) : AIR 1933 Mad. 16 [LNIND 1932 MAD 63].
See also Comments under Section 31, 32 and 433.
46. T.V. Krishna v. Andhra Prabha Pvt. Ltd., (1960) 30 Comp. Cas. 437 (AP) (DB) : AIR 1960 AP 123 (DB); Salomon v.
Salomon & Co. Ltd.,(1897) AC 22 (HL) : (1895-99) All ER Rep. 33 (HL) : 66 LJ Ch. 35 (HL). See detailed Comments
under Section 33.
47. Bowman v. Secular Society Ltd.,(1917) AC 406 : (1916-17) All ER Rep. 1 : 86 LJ Ch. 568 : 117 LT 161 : 33 TLR 376 :
61 SJ 478 (HL); Performing Right Society Ltd. v. London Theatre of Varieties Ltd.,(1922) 2 KB 433 (CA)affirmed in
(1924) AC 1 : 93 LJ KB 33 : 130 LT 450 : 40 TLR 52 (HL). See also Comments under Sections 31 and 35.
48. Risdon Iron and Locomotive Works v. Furness,(1906) 1 KB 49 : 75 LJ KB 83 : 93 LT 687 : 54 WR 324 : 22 TLR 45 : 50
SJ 42 (CA). See also Comments under Section 13.
49. Edwards v. Halliwell,(1950) WN 537 : (1950) 2 All ER 1064 : 94 SJ 803 (CA). See also Comments under Sections 38
and 41.
50. T.V. Krishna v. Andhra Prabha Pvt. Ltd., (1960) 30 Comp. Cas. 437 (AP) (DB) : AIR 1960 AP 123 (DB). See also earlier
para “Lawful purpose”. See detailed Comments under Section 33.
51. Maluk Mohamed v. Capital Stock Exchange Kerala Ltd., (1991) 72 Comp. Cas. 333 (Ker.). See also Comments under
Salomon & Co. Ltd.,(1897) AC 22 : (1895-99) All ER Rep. 33 : 66 LJ Ch. 35 (HL). See also earlier para “Lawful
purpose”. See detailed Comments under Section 33.
53. Section 34; Salomon v. Salomon & Co. Ltd.,(1897) AC 22 : (1895-99) All ER Rep. 33 : 66 LJ Ch. 35 : 75 LT 426 : 45
WR 193 : 13 TLR 46 : 41 SJ 63 (HL); State Trading Corpn. of India Ltd. v. CTO, (1963) 33 Comp. Cas. 1057 (SC) : AIR
1963 SC 1811 [LNIND 1963 SC 334]: (1964) 4 SCR 99 [LNIND 1963 SC 334]; Mrs. Bacha F. Guzdar v. CIT, (1955) 25
Comp. Cas. 1 (SC) : AIR 1955 SC 74 [LNIND 1954 SC 145]: (1955) 27 ITR 1 [LNIND 1954 SC 145] (SC) : (1955) 1
SCR 876 [LNIND 1954 SC 145]. See detailed Comments under Section 34—Effect of registration.
54. D.H.N. Food Distributors Ltd. v. London Borough of Tower Hamlets,(1976) 3 All ER 462 : (1976) 1 WLR 852 : 120 SJ
215 (CA). See detailed Comments under Sections 4 and 34 under Lifting of corporate veil.
55. State Trading Corpn. of India Ltd. v. CTO, (1963) 33 Comp. Cas. 1057 (SC) : AIR 1963 SC 1811 [LNIND 1963 SC
334]: (1963) 2 Comp. LJ 234 (SC); Tata Engineering and Locomotive Co. Ltd. v. State of Bihar, (1964) 34 Comp. Cas.
458 (SC) : AIR 1965 SC 40 : (1964) 6 SCR 885.
56. General Co. for Promotion of Land Credit, Re,(1871) LR 5 HL 176 : 40 LJ Ch. 655 : 24 LT 641; Janson v. Driefontein
Consolidated Mines Ltd.,(1902) AC 484 : (1900-03) All ER Rep. 426 : 71 LJ KB 857 : 87 LT 372 : 51 WR 142 : 18 TLR
796 (HL); Gramophone and Typewriter Ltd. v. Stanley,(1908) 2 KB 89 : (1908-10) All ER Rep. 833 : 77 LJ KB 834 : 99
LT 39 : 24 TLR 480 (CA); Kuenigl v. Donnersmarck,(1955) 1 QB 515 : (1955) 1 All ER 46 : (1955) 2 WLR 82. See also
57. Hilckes Re ex p. Muhesa Rubber Plantations,(1917) 1 KB 48 : 86 LJ KB 204 : 115 LT 490.
58. Gasque v. I.R.C.,(1940) 2 KB 80 : 109 LJ KB 769 : 56 TLR 683.
59. Kuenigl v. Donnersmarck,(1955) 1 QB 515 : (1955) 1 All ER 46 : (1955) 2 WLR 82. See also Comments under Section
34.
60. De Beers Consolidated Mines Ltd. v. Howe,(1906) AC 455 (HL). See also Comments u/s. 34.
61. Section 6(3)(ii) of the Income-tax Act, 1961(43 of 1961) Union Corporation Ltd. v. IRC,(1953) AC 482 : (1953) 1 All ER
729 : (1953) 2 WLR 615 : (1953) 97 SJ 206 (HL); Unit Construction Co. Ltd. v. Bullock,(1960) AC 351 (HL) : (1959) 3
All ER 831 (HL) : (1959) 3 WLR 1022 (HL) : (1959) 103 SJ 1027 (HL).
62. Unit Construction Co. Ltd. v. Bullock,(1960) AC 351 (HL) : (1959) 3 All ER 831 (HL) : (1959) 3 WLR 1022 (HL) : (1959)
103 SJ 1027 (HL).
63. Swedish Central Railway Co. v. Thompson,(1925) AC 495 : (1924) All ER Rep. 710 : 94 LJ KB 527 : 133 LT 97 (HL);
Narottam and Pereira Ltd. v. CIT,(1953) 23 ITR 454 [LNIND 1953 BOM 34] (Bom.).
Page 3 of 16
[LNIND 1972 SC 144]: (1972) 3 SCR 711 [LNIND 1972 SC 144]. See also Comments under Section 13.
85 LJ KB 1333 : 114 LT 1049 (HL). See also Comments under relevant discussions in Sections 34 and 146.
66. Hilckes, Re ex p. Muhesa Rubber Plantations,(1917) 1 KB 48 : 86 LJ KB 204 : 115 LT 490.
67. Kuenigl v. Donnersmarck,(1955) 1 QB 515 : (1955) 1 All ER 46 : (1955) 2 WLR 82.
68. Baelz v. Public Trustee (1926) Ch. 863 : 95 LJ Ch. 400 : 135 LT 763 : 42 TLR 696.
69. See Comments under Sections 146 and 209.
70. B. Ramachandra Adityan v. Educational Trustee Co. Pvt. Ltd., (2003) 113 Comp. Cas. 334 (Mad.). See also Comments
COMMENTS
Legislative History.—The Companies Act, 1956(1 of 1956).
—The Notes on clauses explained this section as follows: “See section 5 of the existing Act and section 1 of the
English Act. No change of substance has been made.” [ Clause 10 of the Companies Bill, 1953 (46 of 1953)].
Mode of forming Company [Sub-section (1)].—Seven or more persons may form a public company. A private
company may be formed by 2 or more persons. They must associate for a lawful purpose by subscribing their
names to a Memorandum of Association and comply with the requirements of the Act as to registration.
Kinds of Companies [Sub-section (2)].—Such a company may be (a) company limited by shares, (b) company
limited by guarantee or (c) an unlimited company.
See Definition of Company and Kinds of Companies under Section 3.
Persons.—This term will not include infant, an undischarged bankrupt, a lunatic, an alien enemy and a person
disqualified by law from entering into a contract. A contract by a minor is ab initio void. A subscriber to the
memorandum of association of a company enters into an implied agreement to become a member of the company
by acceptance of the number of shares of the company written against his name. Since a minor cannot enter into a
contract, he cannot subscribe his name to the memorandum of association of a company.35
A company may be a subscriber. A firm is not a person but a company is a separate juristic person. Partnership is
merely an association of persons for carrying on the business of partnership and in law the firm name is a
compendious method of describing the partners. Such is, however, not the case of a company which stands as a
separate juristic entity distinct from the shareholders. The position of shareholders in a company is thus not
analogous to that of partners inter se.36
A partnership in its firm name cannot be a member of a company. The partners may, however, be registered as
joint-holders of shares.37 A Hindu undivided family cannot as such enter into a contract with other person or
persons. But, the Karta of an HUF or adult coparceners as individuals can become members.38
See Practice Notes, Comments and Department's views hereinafter.
Subscribing their names to a Memorandum.— Section 12(1) says that any persons (two or more in a private
company and seven or more in a public company) may associate for a lawful purpose by subscribing their names to
a Memorandum of association to form a company. See detailed Comments under Section 13.
In English law an infant subscriber may be counted to make up the essential minimum of subscribers. But, under
Page 4 of 16
the Indian law if the Registrar is aware of such fact, he should refuse to register the company as a minor cannot
enter into such a contract. But, where one of the subscribers is a minor and the certificate of incorporation is issued
the company would be duly constituted, the certificate of incorporation being conclusive that the provisions of the
Act had been complied with.39
A person whose signature appears in documents but not in the declaration in the memorandum as signatory to it is
not a subscriber and the certificate of incorporation under section 35 will not cure this defect.40
Practice Notes.—The Institute of Company Secretaries of India (ICSI) has in a publication* enunciated the
meaning of “persons” and the mode of subscription of the Memorandum of Association as follows.
“Subscription clause.—Under section 12, the Memorandum of Association is required to be subscribed by atleast
two persons in the case of a private company and atleast seven persons in the case of a public company who are
desirous of being formed into a company. The section, however, does not prescribe any qualification for persons
who can so subscribe to a memorandum. As the word ‘person’ includes both natural as well as legal persons, the
memorandum can be subscribed by an individual, a non-citizen and a legal person such as a company.
However, a person who is not capable of entering into a contract, cannot subscribe to the memorandum as it
involves a contract of association. Unless the law provides otherwise, any person who is sui juris, i.e., capable of
entering into a contract on his own, can subscribe to the memorandum. The Judicial Committee of the Privy Council
in the leading case Mohori Bibi v. Dharamadas Ghosh41 held that in India a contract by a minor is ab initio void. A
subscriber to the memorandum of association of a company enters into an implied agreement to become a member
of the company by acceptance of the number of shares of the company written against his name. Since a minor
cannot enter into a contract, it follows that he cannot subscribe his name to the memorandum of association of a
company [ videDepartment of Company Affairs’Circular No. 312(43)-CL-III/63, dated 30-9-1963 (reproduced
hereinafter)]. This circular further clarifies that a minor may hold shares in a company through his guardian in the
manner, and subject to the conditions, stated therein. A person who is a non-resident or a foreigner can also
subscribe to the memorandum.
A company can be validly incorporated under the Act even though all the subscribers to its memorandum are non-
resident or foreigners. The company would, however, be regarded as an Indian company. But in case of a non-
resident or a foreigner subscribing to the memorandum of association of the company, necessary permission of the
Reserve Bank of India under the provisions of the Foreign Exchange Regulation Act, 1973(46 of 1973) [Now the
Foreign Exchange Management Act, 1999(42 of 1999)]† would necessarily be required to be obtained.
As a partnership firm is not a legal person, it cannot be a subscriber to the memorandum. In case the partners of a
firm are desirous of subscribing to the memorandum of association of a company, they will have to do so in their
individual capacity and if subscribing together they will be regarded as joint holders of the shares so subscribed. [
See detailed Comments under Section 41].
A Joint Hindu Family not being a legal person also cannot subscribe to the memorandum of association of a
company. If a Joint Hindu Family is desirous of subscribing to the memorandum of association of a company, it can
do so only through the instrumentality of its karta or individual members. The company would, however, recognise,
and deal with, the karta, or, as a case may be, the individual members and will not take any note of the interests of
the other members of the family in its shares.
As a company is regarded a legal person, it can subscribe to the memorandum of association of a company. In
such a case, the memorandum may be signed by a director or any other duly authorised agent on behalf of the
company under its common seal. A company can subscribe to the memorandum of association of another company
only if it is entitled to do so under its articles of association. Where a company subscribing to the memorandum of
association of another company is a public company, then, care should be taken to ensure that such subscription is
in consonance with the provisions of section 372. Section 372 lays down regulatory provisions regarding purchase
by company of shares etc. of other companies. The limit prescribed under section 372 can only be exceeded with
the permission of the Central Government. [ Now see Section 372A—Inter-corporate loans and investments,
inserted by the Companies (Amendment) Act, 1999 (21 of 1999)].
As regards subscription of the memorandum of association by the Central Government or the State Government,
this will be done only in the name of the President of India or the Governor of the State concerned. [ See Sections
617-620].
Page 5 of 16
It can, however, be noted that it is not necessary that subscriber should have any personal beneficial interests in
the shares subscribed by them. It is, therefore, possible that all the subscribers may subscribe for and on behalf of,
one person and themselves have no personal beneficial interest in the shares so subscribed by them. [See
Salomon v. Salomon & Co.]. The same is the case where a person subscribes the memorandum in the name of the
President of India or the Governor of a State or a company.
According to section 3(56) of the General Clauses Act, 1897 (10 of 1897), the word ‘sign’ includes ‘mark’. Hence,
an illiterate subscriber can give his thumb impression or mark which should, however, be described as such by the
scribe or person writing for him.
In the case of a company limited by shares, the subscribers to the memorandum must also state that they agree to
take the number of shares respectively shown against their names in the memorandum. Every subscriber to the
memorandum must take at least one share. [ See Comments under Section 13.
The memorandum should be signed by each subscriber, in the presence of at least one witness who should attest
the signature of the subscriber. Each subscriber should also write opposite to his name the number of shares he
takes. The subscribers should write in their own handwriting in addition to their signatures, their names,
father/husband's name, occupation, address and number of shares subscribed in the memorandum. Likewise, the
witness should write his name, parentage, occupation and address in his own handwriting. It is, however, not
necessary that there should be separate witness to attest the signature of each of the subscribers. Even one person
can be an attesting witness to the signatures of all the subscribers. The memorandum must be properly stamped
before the signatures of the subscribers are affixed to it. [ See Comments under Section 15].” [ Extracts from
Incorporation of a Company—Guidelines, published by ICSI, Second Edition, pages 80-81].
See detailed Comments on Membership of a company, Definition of “Member” and Who can be a Member, e.g.,
Subscribers to Memorandum as Members, Minor cannot be a subscriber, Minors can be Member through Guardian,
Company as Member, Firm cannot be a Member, HUF can be a Member through Karta, Public office, President or
Governor as Member, Non-Residents, Trust, Societies, Trade Union and Co-operative Societies, etc., as Members
under Section 41.
Department's view.— Minor cannot subscribe his name to the memorandum of association.—A subscriber to
the memorandum of association of a company enters into an implied agreement to become a member of the
company by acceptance of the number of shares of the company written against his name. Since a minor cannot
enter into contract, it follows that he cannot subscribe his name to the memorandum of association of a company.”
[Extracts from Circular No. 312(43)-CL-III/63, dated 30-9-1963 : Govt. of India publication, Clarifications and
Circulars on Company Law, 1977 Edition, page 21 : See Full Text in Comments under Section 41].
See detailed Comments and Department's views under Section 41.
A partnership firm cannot be a member of a company.—“A firm, not being a person cannot be registered as a
member of a company except where the company is licenced under section 25 of the Companies Act, 1956.
Companies which have firms registered as shareholders should be advised to take steps to rectify the position
within a specified time. In case the irregularity persists, despite a warning, necessary action can be taken under
section 150(2) of the Companies Act, 1956.” [ Circular No. 4/72, dated 9-3-1972 : Govt. of India publication,
Memorandum of Association and any amendments thereto may be signed by constituted attorneys.—“It has
been brought to the notice of the Company Law Board that some Registrars of Companies have been insisting that
the Memorandum of Association of a company and any amendment thereto should be signed by the subscribers
themselves and not through their constituted attorneys and that this is causing some practical difficulties, especially
where some of the subscribers to the memorandum are foreign parties who may be collaborating with Indian
promoters. The matter has been carefully examined by the Company Law Board and it has been decided that when
it is not possible for a company, it may be signed on his behalf by an agent if the latter is authorised by a power of
attorney to do so. The same course may also be followed in respect of any amendment to the memorandum or
articles which it may be found necessary to make as a result of any suggestions in this behalf made by the
Registrar concerned after the scrutiny of the memorandum and articles presented to him for registration. In this
connection, attention is also invited to the last sentence of para 2 of the former Department of Company Law
Administration'sCircular letter No. 8/15/58, dated 1-9-1958 wherein it was stated that “An agent may sign the
memorandum on behalf of a subscriber if he is authorised by a power of attorney to do so.” [CLBCircular No.
Page 6 of 16
128/HCC/64, dated 27-7-1964 : Govt. of India publication, Clarifications and Circulars on Company Law, 1977
Edition, page 7].
Streamlining the working of Registrars of Companies—Report of the Review Committee.—The Department

vide Circular No. 1 of 1995, dated 16-2-1995 directed the Registrars of Companies (ROCs) to implement certain
recommendations of the Review Committee to study the working of offices of the ROCS with a view to streamline
and simplify procedures involved in dealing with documents and for reduction in the number of documents filed by
the companies.
Relevant extracts from the Circular are reproduced below:
“Registration of a new company : (ii) The Department, vide vide Circular No. 27/1/89/CL-III, dated February 17,
1989, advised the ROCS to ensure that at the time of registration of a new company, the subscribers to the
memorandum of association should tally with the list of promotors/first directors stated in the application for
availability of name, and in case one or more of the promotors are not interested in participating in the promotion of
a new company at a later stage, a ‘no objection’ letter from such promotor(s) is made available to ROC. This
circular was amended on January 5, 1990 (No. 1 of 1990) [ reproduced under Section 20], to the effect that ROCS
should register the company only in case where the promotors, as per the availability of name application, are also
subscribers to the memorandum. On reconsideration, it has now been decided, in partial modification of the above
circular, that so long as there is at least one promotor common, both in the name availability application and the
subscription clause of the memorandum and articles of association, and others have no objection, the company
may be registered.
(vi) It is clarified that there cannot be any restriction for incorporation of a company where all the subscribers to the
memorandum and articles of association/proposed directors are residing abroad, being either foreign nationals or
NRIS subject to the approval of the RBI, where necessary.
Harmonisation of practices : (xvii) It is noticed that various Registrar of Companies (ROCs) have developed certain
practices in their working over the years which has resulted in dealing with the same issue differently by different
ROCS. It is desirable that there should be a common approach to such practices followed by all offices. Some of
these instances are given below:—
(a) Power of attorney : Power of attorney is required for correction in the documents at the time of
incorporation of companies, filing of prospectus and other documents. While in case of correction of
documents, Power of attorney is required from the signatory concerned, in case of correction to be made in
the memorandum and articles of association and prospectus, power of attorney is insisted upon from all
the subscribers of the memorandum and articles of association/directors who have signed the prospectus.
At times, some ROCS insist for either separate power of attorney from each person or jointly executed with
the stamp paper of the adequate value as if executed by the person individually. It is hereby clarified that
only one power of attorney from all subscribers or directors is enough on usual value stamp in such cases.
ROCS should accept the power of attorney in the manner as classified here and no objection be raised in
this behalf. ROCS should also not insist for any authorisation from the Board of Directors for appointing a
power of attorney or where the professionals or company's representative come over to ROC to make oral
enquiry or submission on any matter.” [Extracts from Circular No. 1 of 1995 (F. No. 14/6/94-CL-V), dated
16-2-1995 : (1995) 82 Comp. Cas. (St.) 261].
See Full Text of the Circular in Comments under Section 609. See also Comments under Sections 13, 20 and 33.
Payment.—Signatories to memorandum of association need not pay for the shares till call is made unless the
memorandum provides otherwise.42
The signatory cannot rescind the contract to take shares.43 He need not have beneficial interest in the shares, he
may be a nominee.44
Lawful purpose.— Section 12(1) also provides that the persons must associate for any lawful purpose. It means a
purpose not forbidden by law or contrary to public policy. If one of the objects is unlawful, the purpose is not
lawful.45
A right is given to every citizen to form a limited concern and so long as there is nothing unlawful or illegal in the
objects of the association, that right cannot be denied to him. The fact that the company is calculated to affect the
Page 7 of 16
future interests of its workers would not nullify it. The essence of a validly incorporated company is that it should
consist of a particular number of persons and that it should be associated for a lawful purpose. Unless the purpose
appears to be unlawful ex facie or is transparently illegal or prohibited by any statute it cannot be regarded as an
unlawful purpose. The question of the motive that induced the founders of a company is unrelated to the scope of
section 12 of the Companies Act, 1956, as it is not a field of enquiry which the section recognises as legitimate.46
The Registrar's certificate of incorporation is not conclusive as to the fact that the objects of the company are
lawful.47
Liability [ Section 12(2)].
—A company formed or incorporated under the Companies Act, 1956 may be (a) a company limited by shares, (b)
a company limited by guarantee and (c) an unlimited company.
The extent of liability is indicated in the Memorandum of Association of the company. See detailed Comments
under Section 13.
Where the liability is limited, such liability cannot become unlimited even though the foreign law, where the
company has a business, makes it so.48 A member's liability cannot be increased without his consent except in
cases of clubs where the rate of subscription may be increased.49
Other requirements of Act in respect of registration.
—As already explained, section 12 provides that 2 or more persons, subscribers or signatories to memorandum
may form a private company. Any 7 or more persons may form a public company. They must associate for a lawful
purpose, with or without limited liability, and comply with the requirements of the Companies Act, 1956 in respect of
registration.
The other requirements of the Act in respect of registration are as follows.
Private Company.— Section 12(1) specifies the minimum number of persons. Section 3(1)(iii) of the Companies
Act, 1956 defines Private Company to mean a company which has a minimum paid-up capital of Rs. 1 lakh or such
higher sum as may be prescribed, and by its Articles (a) Restricts the right to transfer its shares, (b) Limits the
number of Members to 50 (c) Prohibits invitation to public to subscribe for shares in, or debentures of, the company,
and (d) Prohibits invitation or acceptance of deposits from persons other than its members, directors or their
relatives. Joint holders of shares are treated as a single member.
See detailed Comments and Privileges and Exemptions for a Private Company (not being a subsidiary of a public
company) under Section 3.
Public Company.— Section 3(1)(iv) of the Companies Act, 1956, as substituted by the Companies (Amendment)
Act, 2000, defines that Public Company means a company which—(a) is not a private company, (b) has a minimum
paid-up capital of Rs. 5 lakhs or such higher paid-up capital as may be prescribed, and (c) is a private company
which is a subsidiary of a company which is not a private company.
Requirements of Act in respect of Registration.—Other requirements of the Companies Act, 1956 in respect of
registration are contained in various Sections, e.g., Memorandum of Association [ Sections 12-19], Provisions with
respect to names of companies [ Sections 20-25], Articles of Association [ Sections 26-31], Registration of
memorandum and articles [ Section 33], Effect of registration [ Section 34] and Conclusiveness of certificate of
incorporation [ Section 35].
See Practice Notes below and detailed Comments under respective Sections.
Practice Notes.— Incorporation.—In addition to the basic requirements in case of (a) Public Company as to
minimum number of persons or subscribers and minimum paid-up capital [ Sections 3(1)(iv) and 12(1)] and (b)
Private Company as to minimum number of persons or subscribers, minimum paid-up capital and four restrictions in
its Articles of a private company [ Sections 3(1)(iii) and 12(1)] the following other requirements of the Companies
Act, 1956 in respect of registration are required to be complied with to form a public company or private company.
Page 8 of 16
(1) Names.—The promoters should select several names for the proposed company. In selecting the names the
provisions of section 20 of the Companies Act, 1956, the Department's views, i.e., Circulars, Instructions and
Guidelines issued under Section 20 and the Emblems and Names (Prevention of Improper Use) Act, 1950 should
be kept in mind. For the approval of the name the promoters should make an application to the Registrar of
Companies in e-Form 1A of Companies (Central Govt.'s) General Rules and Forms, 1956 with requisite fee. The
ROC shall ordinarily inform within 7 days as to which of the several names applied for would be available.
E-Form 1A (substituted w.e.f. 10-2-2006).— Now see e-Form 1A of the Companies (Central Government's)
General Rules and Forms, 1956 for Application form for Availability of Name substituted for Form 1A (w.e.f. 10-2-
2006).
See detailed Comments on e-Filing mandatory (w.e.f. 16-9-2006), e-Forms with Instruction Kit, Director
Identification Number (DIN), Digital Signature Certi (DSC), Check Company Name, Fee Calculator and other
Search facilities on the Ministry of Corporate Affairs (MCA) website http://www.mca.gov.in hereinafter.
See detailed Comments, Form and Procedure, e-Form, e-Filing, Filing Fees and Guidelines on Availability of
Names under Section 20.
(2) Memorandum and Articles of Association.—After the name is available the Memorandum of Association has
to be drafted with objects clauses grouped into three categories. [ Sections 13 and 14]. The Articles of Association
in case of a company limited by shares may adopt any or all the clauses of the model Articles given in Table ‘A’ of
Schedule I to the Companies Act, 1956.[ Sections 26-29].
The typed drafts be vetted or approved by the SEBI or the ROC. If the promoters intend the proposed company to
be enlisted with the Recognised Stock Exchange(s) the Memorandum and Articles of Association must also comply
with the requirements of the Stock Exchange and as such the same should be got approved by the Stock
Exchange(s). These two documents must be printed. Typed, stencilled, zerox or photo copies of Memorandum and
Articles may not be acceptable.
See detailed Comments, Form and Procedure, Model Articles, Secretarial Practice and Check List under relevant
Sections 13-15 and 26-30.
(3) Subscribers.—For incorporating a public company at least 7 persons shall subscribe to the Memorandum of
Association and Articles of Association of the company each agreeing to take at least one share. In case of a
private company at least 2 persons shall be subscribers. The subscribers may be adult individuals or juristic
persons like incorporated companies. The minors, partnership firms and Hindu undivided families as such may not
be acceptable as subscribers. A Power of Attorney holder may sign for his principal and in case of NRIS etc.
See Practice Notes on Subscription Clause hereinbefore. See detailed Comments and Department's views under
Sections 12, 13, 33, 34 and 41.
(4) Stamp.—Appropriate stamp duty according to the local law (State law) has to be put on the Memorandum and
Articles of Association. The ROC Office or local stamp vendor may assist in putting proper stamp.
See detailed Comments and Stamp Duty under Sections 15, 26, 30 and 33.
(5) Form and Procedure.—A declaration of compliance in e-Form No. 1 of the Companies (Central Govt.'s)
General Rules and Forms, 1956 [ Section 33], a notice of situation of registered office in e-Form 18 [ Section 146]
and Particulars of Directors, Manager or Secretary in e-Form 32 in duplicate [ Section 303] be made ready. In case
of a public company a consent letter from each person proposed to be appointed as director should be obtained in
e-Form 32. If there is the provision for share qualification of a director, then an undertaking in e-Form 32 should be
obtained from each of such proposed directors undertaking to pay for the qualification shares. [ Section 266].
E-Forms 1, 18 and 32 (substituted w.e.f. 10-2-2006).— Now relevant e-Forms 1, 18 and 32 of the Companies
(Central Government's) General Rules and Forms, 1956 as substituted (w.e.f. 10-2-2006) are as follows.
E-Form 1 for Application and Declaration for Incorporation of a Company [pursuant to Section 33(1), (2)], e-Form 18
for Notice of Situation or Change of situation of Registered Office [pursuant to Section 146] and e-Form 32
[substituted for existing Forms 29 and 32] for Particulars of Appointment of Managing Director, Directors, Manager
Page 9 of 16
and Secretary and the Changes among them or Consent of candidate to act as a Managing Director or Director or
Manager or Secretary of a company and/or Undertaking to take and pay for Qualification Shares [pursuant to
Sections 303(2), 264(2) or 266(1)(a) and 266(1)(b)(iii)].
See detailed Comments on e-Filing mandatory (w.e.f. 16-9-2006), e-Forms with Instruction Kit, Director
Identification Number (DIN), Digital Signature Certificate (DSC), Fee Calculator and other Search facilities on the
Ministry of Corporate Affairs (MCA) website http://www.mca.gov.in hereinafter.
See detailed Comments, Form and Procedure, e-Forms and e-Filing under relevant Section 33 and respective
Sections 146, 266, 303 and 610B.
E-Form 32 (substituted w.e.f. 4-6-2007).— E-Form 32 of the Companies (Central Government's) General Rules
and Forms, 1956, ‘Particulars of Appointment of Managing Director, Directors, Manager and Secretary and the
Changes among them or Consent of candidate to act as a Managing Director or Director or Manager or Secretary
of a Company and/or Undertaking to take and pay for Qualification Shares [pursuant to Sections 303(2), 264(2) or
266(1)(a) and 266(1)(b)(iii)] of the Companies Act, 1956’ has again been substituted by the Companies (Central
Government's) General Rules and Forms (Amendment) Rules, 2007 Notification No. G.S.R. 399(E), dated 30-5-
2007, published in the Gazette of India, Extraordinary, No. 244, Part II, Section 3(i), page 8 (w.e.f. 4-6-2007) :
(2007) 138 Comp. Cas. (St.) 1 : Ministry of Corporate Affairs (MCA) website http://www.mca.gov.in.
See detailed Comments, Form and Procedure and e-Filing under Sections 33, 264(2), 266(1)(a), 266(1)(b)(iii) and
303(2).
(6) Filing.—By paying the requisite filing fee the following documents are to be delivered to the Registrar of
Companies for registration: (a) the stamped, printed, dated and signed copy of the Memorandum and Articles of
Association with agreement, if any, (b) e-Form No. 1 (c) e-Form No. 18, (d) e-Form No. 32 (in duplicate), (e)
Consent in Form No. e-Form 32 in case of a public company, (f) the Registrar of Company's letter intimating the
availability of name and (g) an authority letter or power of attorney, duly stamped, from the subscribers authorising
the person taking the documents to the Registrar's office to make necessary corrections, if any, required by the
Registrar.
E-Filing mandatory (w.e.f. 16-9-2006).— Now e-Filing or Filing of e-Forms is mandatory as per Section 610B of
the Companies Act, 1956 as inserted by the Companies (Amendment) Act, 2006 (23 of 2006) (w.e.f. 16-9-2006).
See detailed Comments on Filing of e-Forms 1, 18 and 32 of the Companies (Central Government's) General Rules
and Forms, 1956 substituted (w.e.f. 10-2-2006) and Revised from time to time hereinafter.
See detailed Comments on e-Filing made mandatory (w.e.f. 16-9-2006), e-Filing updates, e-Forms, Revised e-
Forms, e-Forms with Instruction Kit, Director Identification Number (DIN), Digital Signature Certificate (DSC), Check
Company Name, Fee Calculator and other Search facilities on the Ministry of Corporate Affairs (MCA) website
http://www.mca.gov.in hereinafter.
See detailed Comments, Form and Procedure under Sections 33 and 610B.
Steps to be taken to incorporate a new Company.— See also Steps to be taken to get a new Company
incorporated. Additional steps to be taken for formation of a Public Limited Company and Additional steps to be
taken for registration of a Part IX Company as downloaded from the MCA website http://www.mca.gov.in and
reproduced under Department's view hereinafter.
(7) Filing Fees.—Filing fee as prescribed in Schedule X, based on authorised capital, shall be payable along with
Forms.
Filing Fees on e-Forms.— See Rule 22 of the Companies (Central Govt.'s) General Rules and Forms, 1956 as
amended by the Companies (Central Government's) General Rules and Forms (Amendment) Rules, 2006 (w.e.f.
Schedule X to the Companies Act, 1956.
See detailed Comments on e-Filing, Fee Calculator and other Search facilities on the MCA website
http://www.mca.gov.in hereinafter. See also Comments under Sections 12 to 33, 146, 303, 609, 610B, 611 and
Schedule X.
Page 10 of 16
(8) Registration Fees.—As per section 611 and Schedule X, the Registration fees (I) in respect of a company
having a share capital based on Authorised or Nominal Capital, and (II) in respect of a company not having a share
capital based on number of Members, shall be paid to the Registrar of Companies.
See detailed Comments under Sections 33, 611 and Schedule X.
(9) Corrections, if any.—On scrutiny of the documents the Registrar of Companies may require certain
modifications or corrections which should be carried out (by duly constituted attorney). [ See Department's view
(reproduced hereinbefore)].
If the promoters do not agree with the Registrar refuses to register the company an appeal or writ petition would lie
to the High Court from the Registrar's order.
See detailed Comments and Department's views under Sections 12 and 33.
(10) Certificate of Incorporation.—After the Registrar is satisfied he enters the name of the company in the
Register, starts a new file and issues a Certificate of Incorporation. The date of the Certificate is the date of birth of
the company. The Certificate will be conclusive evidence that the company after compliance of all formalities has
been duly registered under the Companies Act, 1956 (1 of 1956).
Commencement of Business.— Public Company.— Section 149(1) of the Act applies to a public company which
has issued a Prospectus and section 149(2) applies to a public company which has not issued a Prospectus.
A public company having share capital, if issues a Prospectus inviting the public to subscribe for its shares or
debentures, shall not commence business unless following conditions are satisfied: (a) shares of a nominal value of
not less than minimum subscription have been allotted (payable in cash); (b) every director has paid the application
and allotment moneys on the shares taken or agreed to be taken by him; (c) no portion of the money received is
repayable to the applicants for failure to apply for or to obtain permission for its shares or debentures being dealt in
on any recognised stock exchange; (d) a director or secretary or if there is no Secretary, a Secretary in whole time
practice has duly verified and made a declaration of compliance with the provisions of section 149(1) in Form No.
19 of the Companies (Central Government's) General Rules and Forms, 1956 and the form has been filed with the
Registrar.
See detailed Comments, Form and Procedure, Filing Fees, Stamp Duty and Secretarial Practice and Check List
under Sections 56, 69, 73 and 149(1).
If a public company does not issue a Prospectus, it shall file with the Registrar of Companies: (a) a statement in lieu
of prospectus in accordance with Schedule III to the Act; after the expiry of three days the shares and debentures
may be allotted, (b) every director must pay the application and allotment moneys on the shares taken by him; and
(c) declaration in Form No. 20 verified and signed by a director or secretary about the fact that the directors have
paid for the shares taken.
See detailed Comments, Form and Procedure, Filing Fees, Stamp Duty and Secretarial Practice and Check List
under Sections 70 and 149(2).
The share certificates and debentures are required to be stamped according to the provisions prevailing in the State
in which the company's registered office is situate.
Fees prescribed in Schedule X to the Act, are required to be paid for filing the documents. See Press Notes on
Department of Company Affairs website (www.nic.in/dca) providing, inter alia, Filing of Documents, ROC Fee
Calculations, downloading of important Forms and other search facilities reproduced hereinafter.
After the Registrar of Companies is satisfied about the compliance of the provisions of sections 69, 70, 73 and 149
of the Companies Act, 1956, a Certificate of Commencement of Business is issued.
Page 11 of 16
The Certificate of Commencement of Business shall be conclusive evidence that the company is entitled to
commence business.
Private Company.—A private company may commence business as soon as the Certificate of Incorporation is
received. The restrictions contained in section 149 of the Act as to the commencement of business do not apply to
a private company. The provisions of section 149(2A) do not apply to a private company. [ Section 149(7)].
Formation and Incorporation of Company.
— See detailed Comments, Form and Procedure, e-Forms, e-Filing, Filing Fees, Registration Fees, Department's
views, Instructions, etc., under relevant Section 33.
Registration of Memorandum and Articles [ Section 33].
— See detailed Comments, Form and Procedure on e-Form 1 for Application and Declaration for Incorporation of a
Company [pursuant to Section 33(1), (2)] to be filed along with other e-Forms, Filing Fees, etc., to Form or
Incorporate a new Company:
E-Form 1 for Application and Declaration for Incorporation of a Company [pursuant to Section 33(1), (2)], e-Form 18
for Notice of Situation or Change of situation of Registered Office [pursuant to Section 146] and e-Form 32
[substituted for existing Forms 29 and 32] for Particulars of Appointment of Managing Director, Directors, Manager
and Secretary and the Changes among them or Consent of candidate to act as a Managing Director or Director or
Manager or Secretary of a company and/or Undertaking to take and pay for Qualification Shares [pursuant to
Sections 303(2), 264(2) or 266(1)(a) and 266(1)(b)(iii)].
See detailed Comments, Form and Procedure, e-Forms and e-Filing under relevant Section 33 and respective
Sections 146, 266, 303 and 610B.
E-Forms 1, 18 and 32 (substituted w.e.f. 10-2-2006).
— See detailed Comments, Form and Procedure on e-Filing of e-Forms 1, 18 and 32 of the Companies (Central
Government's) General Rules and Forms, 1956 as substituted (w.e.f. 10-2-2006), Payment of Filing Fees and
Registration Fees, etc., under Section 33.
E-Filing mandatory (w.e.f. 16-9-2006) [ Sections 610B to 610E].
— See detailed Comments on e-Filing made mandatory (w.e.f. 16-9-2006), e-Forms with Instruction Kit, Director
Identification Number (DIN), Digital Signature Certificate (DSC), Fee Calculator and other Search facilities on the
Ministry of Corporate Affairs (MCA) website http://www.mca.gov.in under Sections 33 and 610B to 610E.
See detailed Comments on the Companies (Electronic Filing and Authentication of Documents) Rules, 2006 under
Section 610B(1). See the Scheme for Filing of Statutory Documents and Other Transactions by Companies in
Electronic Mode, 2006 (w.e.f. 27-10-2006) reproduced in Comments under Section 610B(2).
Steps for Formation of a Company.
— See Steps to be taken to get incorporated a Private Limited Company and Steps for formation of a Public Limited
Company and other Companies downloaded from the Ministry of Corporate Affairs (MCA) website
http://www.mca.gov.in are dealt with below.
See detailed Comments, Form and Procedure, e-Filing, e-Forms, Filing Fees Secretarial Practice and Check List,
etc., under Section 33.
See also Comments, Form and Procedure under Sections 12 to 36.
Department's view.— Steps to be taken to incorporate a new company.
—Steps to be taken to get a new Company incorporated, Additional steps to be taken for formation of a Public
Page 12 of 16
Limited Company and Additional steps to be taken for registration of a Part IX Company downloaded from the
Ministry of Corporate Affairs (MCA) website www.mca.gov.in are reproduced below.
“Steps to be taken to get a new Company incorporated:

• Select, in order of preference, at least one suitable name upto a maximum of six names, indicative of the
main objects of the company.
• Ensure that the name does not resemble the name of any other already registered company and also does
not violate the provisions of Emblems and Names (Prevention of Improper Use) Act, 1950 by availing the
services of Checking Name availability on the portal [http://www.mca.gov.in].
• Apply to the concerned Roc [Registrar of Companies] to ascertain the Availability of Name in e-Form 1A [of
the Companies (Central Govt.'s) General Rules and Forms, 1956 ] by logging in to the portal [
www.mca.gov.in ]. A fee of Rs. 500 has to be paid alongside and the Digital Signature of the applicant
proposing the company has to be attached in the Form. If proposed name is not available, the user has to
apply for a fresh name on the same application.
• After the name approval the applicant can apply for registration of the new company by filing the required
Forms (that is Form 1, 18 and 32) [ e-Forms] within six months of name approval.
• Arrange for the drafting of the Memorandum and Articles of Association by the solicitors, vetting of the
same by Roc and printing of the same.
• Arrange for Stamping of the Memorandum and Articles with the appropriate stamp duty.
• Get the Memorandum and the Articles signed by at least two subscribers in his/her own hand, his/her
father's name, occupation, address and the number of shares subscribed for and witnessed by at least one
person.
• Ensure that the Memorandum and Articles is dated on a date after the date of stamping.
• Login to the portal [http://www.mca.gov.in] and fill the following forms and attach the mandatory documents
listed in the e-Form.
Declaration of Compliance—Form-1
Notice of situation of Registered Office of the company—Form-18.
Particulars of the Director's, Manager or Secretary—Form-32.
• Submit the foregoing e-Forms after attaching the Digital Signature, pay the requisite Filing and Registration
Fees and send the physical copy of Memorandum and Articles of Association to the Roc.
• After processing of the Form is complete and Corporate Identity is generated obtain Certificate of
Incorporation from Roc.
Additional steps to be taken for formation of a Public Limited Company:
To obtain Commencement of Business Certificate after incorporation of the company the public company has to
make following compliance:
• File a Declaration in e-Form 20 and attach the Statement in lieu of the Prospectus (Schedule III), or
• File a Declaration in e-Form 19 and attach the Prospectus (Schedule II) to it.
• Obtain the Certificate of Commencement of Business.
Additional steps to be taken for registration of a Part IX Company:

• The Part IX Company is required to file e-Form 37 and e-Form 39 apart from filing e-Form 1, 18 and 32.
• The company is required to file e-Form 1 first and then the company can file all the other e-Forms (18, 32,
37 and 39) simultaneously or separately.”
[ Source : Ministry of Corporate Affairs (MCA) website http://www.mca.gov.in (Downloaded on 16-7-2007) :

SeeMCA website for latest position].
Ministry of Corporate Affairs website [www.mca.gov.in].

Page 13 of 16
—The erstwhile Department of Company Affairs (DCA) under the Ministry of Finance, was designated as a
separate Ministry, viz., ‘Ministry of Company Affairs’ (MCA) vide Cabinet Secretariat Notification No.DOC.CD-
160/2004, dated 27-5-2004.
The erstwhile Department's website http://www.dca.nic.in was moved to the Ministry of Company Affairs (MCA)
‘Ministry of Corporate Affairs’’ (MCA) (w.e.f. 9-5-2007).
—The Ministry of Company Affairs (MCA) has been renamed as ‘Ministry of Corporate Affairs’ (MCA) vide
Presidential Notification, dated 9-5-2007 amending the Government of India (Allocation of Business) Rules, 1961
(w.e.f. 9-5-2007): MINISTRY OF CORPORATE AFFAIRS, Government of India, ‘A’ Wing, 5th Floor, Shastri
Bhavan, Dr. Rajendra Prasad Road, New Delhi-110 001.
SeeMinistry of Corporate Affairs (MCA) website http://www.mca.gov.in.
E-Filing and Search facilities on MCA website [www.mca.gov.in].
— See the following e-Governance, e-Filing, e-Forms and Search Facilities on the Ministry of Corporate Affairs
(MCA) website http://www.mca.gov.in :
(1) Download e-Forms and e-Forms with Instruction kit.
(2) Director Identification Number (DIN) issue Process.
(3) Digital Signature Certificate (DSC), e-Filing made mandatory from 16th September 2006, Apply for your
DSC now.
(4) Fee Calculator.
(5) Check Company Name.
(6) e-Filing updates, Revised e-Forms and e-Forms with Instruction Kit.
See detailed Comments on MCA-21, e-Filing, e-Forms, Search and other Facilities on Ministry of Corporate Affairs
(MCA) website http://www.mca.gov.in, the Companies (Electronic Filing and Authentication of Documents) Rules,
2006 and the Scheme for Filing of Statutory Documents and Other Transactions by Companies in Electronic Mode,
2006 (w.e.f. 27-10-2006) under Section 610B.
Registrar must register.—The Registrar must register the company if the legal formalities have been complied
with.50
Writ.—A writ cannot be issued to cancel the registration of the company or the commencement certificate issued to
it under section 149.51 If a company is born, the method to get it extinguished is not by assailing its incorporation.
The only course open to any one aggrieved by the constitution of company is to get rid of it by resorting to winding
up proceedings. It is not as if such persons are without remedy.52
Legal Entity.—On incorporation the company becomes a legal person having a separate existence from its
members.53 Wholly owned subsidiaries having no separate business operations and the holding company may be
treated in law as one entity.54
See detailed Comments under Section 34 —Effect of registration.
Company not a citizen.—A company is not a citizen of India under the Constitution and does not enjoy
fundamental rights guaranteed by Article 19 of the Constitution of India.55See detailed Comments under Section 34.
Nationality.—It will be decided by the place of its incorporation. A company incorporated in India will be an Indian
company even though its members are foreigners. Incorporation is the nationality of the company and it may have
nationality different from its shareholders. A company having all foreign shareholders may be incorporated in India
and in that case the company will be an Indian company. Similarly a company may be incorporated in England
having shareholders who are all Indian citizens and the company will be a foreign company.56 The nationality of the
company does not change by its becoming an enemy company.57
Page 14 of 16
Domicile.—Similarly the domicile of the company registered in India will be India and that will remain so throughout
the company's existence and it cannot be changed. A Company's domicile is the place of its registration, and it
retains that domicile so long it exists.58 When a company acquires enemy character, it will be subject to the law of
the place where it was registered.59
Residence.— A company resides, at the place where the real business is carried on, that is, the place of central
management and control.60
A company can have only one nationality and one domicile but may have several residences at the same time
depending upon the circumstances. Income-tax law provides that a company is ordinarily resident where the actual
management of the company is carried on,61 even though it ought to be managed elsewhere according to its
Memorandum and Articles of Association62 and it may have dual residence.63 A company cannot either be present
in India or absent from India.64
Enemy character.—A company registered in India may be an alien enemy if its control is in the hands of alien
enemies. The number of alien enemy shareholders is important in ascertaining the status of the company. The
enemy or neutral character of a company in times of war will be determined by reference to the natural persons who
are members or persons really in control.65
Where, the directors and majority of the shareholders of a company were English. The company's rubber estate in
an enemy territory was managed by a manager. It was held that merely doing business in enemy territory did not
make the company an alien enemy.66 An English company which had become an enemy company and its directors
in enemy territory entered into contract with another enemy, the contract was held to be invalid on the ground that
on the outbreak of war the authority of the English company terminated automatically.67
Situs of shares.—The situs of the shares is the registered office of the company. The directors of an English
company resided in Holland, held meetings and carried out administrative work there. In an action by a German
shareholder domiciled in Germany, it was held that the shares were situate in England.68 The statutory books and
documents are also to be kept at the registered office of the company.69
Company can be a Trustee.—It is well-settled that a company can act as a trustee. Sections 11 and 12 show that
a company need not always be formed to carry on a business with a view to making profit. Therefore, so long as the
company has pursued the main objects for which it was incorporated, the fact that it has not earned profit would not
be relevant for winding up the company under section 433(c), on the ground that it has failed to commence
business or has suspended its business.70
Secretarial Practice and Check List.— Section 12. See Secretarial Practice and Check List under Section 33 and
respective Sections 13-40.
Producer Companies [ Sections 581A-581ZT].—A new Part IXA containing Chapters I to XII, Sections 581A to
6-2-2003) facilitating formation of Co-operative business as Companies and to convert existing business into
companies on a voluntary basis. The aim is to provide Statutory and Regulatory framework that creates the
potential for producer-owned enterprises to compete with other enterprises on a competitive footing with more
liberal regulatory framework and certain privileges of a Private Company.
Formation and Registration of Producer Company [ Section 581C].—Any Ten or more Producers or Two or
more Producer Institutions having the objects of production, processing, manufacturing and all other objects
mentioned in Section 581B of the Companies Act, 1956 and also complying with the provisions of the Act may form
and register a Producer Company.
See detailed Comments under Sections 581B to 581C.

Page 15 of 16
35. Mohori Bibi v. Dharamadas Ghosh,(1903) ILR 30 Cal. 539 (PC) : (1903) 30 IA 114 (PC); Circular No. 312(43)-CL-III/63,
dated 30-9-1963.
[LNIND 1954 SC 145] (SC) : (1955) 1 SCR 876 [LNIND 1954 SC 145]. See also Comments under Sections 2(46), 11,
34 and 41.
37. Vagliano Anthracite Collieries Ltd., Re,(1910) WN 187: 79 LJ Ch. 769 : 103 LT 211; Sadler v. Whiteman,(1910) 1 KB
868; Glory Paper Mills Co., Re, Dunster's Case, (1894) 3 Ch. 473 : 63 LJ Ch. 885 : 71 LT 528 (CA). See also
38. Agarwal and Co. v. CIT,AIR 1970 SC 1343 [LNIND 1970 SC 193]: (1970) 77 ITR 10 [LNIND 1970 SC 193] (SC). See
Comments under Section 11. See also Vickers Systems International Ltd. v. Mahesh P. Keswani, (1992) 73 Comp.
Cas. 317 (CLB) in Comments under Sections 41, 108 and 153.
39. Barned's Banking Co. Re, Peel's Case, (1867) 2 Ch. App. 674 : 36 LJ Ch. 757; Nassau Phosphate Co. Re, (1876) 2
Ch.D. 610 : 45 LJ Ch. 584; Laxon & Co. (No. 2) Re, (1892) 3 Ch. 555 : 61 LJ Ch. 667 : 67 LT 85. See also Comments
under Sections 13, 33, 35 and 41.
40. Sri Arthanari Transport (P.) Ltd. v. K.P. Swami Goundar, (1965) 35 Comp. Cas. 930 (Mad.) : AIR 1966 Mad. 231
[LNIND 1965 MAD 112]: (1965) 2 Comp. LJ 266 : (1965) 2 MLJ 504 [LNIND 1965 MAD 112].
* Reproduced from Incorporation of a Company—Guidelines, published by the Institute of Company Secretaries of India
(ICSI), Second Edition, August 1981, pages 80-81.
Sections 41 and 69.
† See the Foreign Exchange Management Act, 1999 (42 of 1999) in Appendix 325.
42. Alexander v. Automatic Telephone Co., (1900) 2 Ch. 56 : (1900-03) All ER Rep. Ext. 1755 : 69 LJ Ch. 428 : 82 LT 400 :
48 WR 546 (CA). See also Comments u/s. 13, 41, 91 and 543.
43. Lurgan's (Lord) Case Re, (1902) 1 Ch. 707 : 71 LJ Ch. 323 : 86 LT 291. See also Comments under Sections 15 and 41.
TLR 46 : 41 SJ 63 (HL); Booth v. Helliwell,(1914) 3 KB 252 : 83 LJ KB 1548 : 111 LT 542 : 30 TLR 529 (DC). See
Comp. Cas. 37 (Mad.) : AIR 1933 Mad. 129 [LNIND 1932 MAD 261]; Universal Mutual Aid and Poor Houses
Association Ltd. v. A.D. Thoppa Naidu, (1932) 2 Comp. Cas. 515 (Mad.) : AIR 1933 Mad. 16 [LNIND 1932 MAD 63].
See also Comments under Section 31, 32 and 433.
Salomon & Co. Ltd.,(1897) AC 22 (HL) : (1895-99) All ER Rep. 33 (HL) : 66 LJ Ch. 35 (HL). See detailed Comments
under Section 33.
47. Bowman v. Secular Society Ltd.,(1917) AC 406 : (1916-17) All ER Rep. 1 : 86 LJ Ch. 568 : 117 LT 161 : 33 TLR 376 :
61 SJ 478 (HL); Performing Right Society Ltd. v. London Theatre of Varieties Ltd.,(1922) 2 KB 433 (CA)affirmed in
(1924) AC 1 : 93 LJ KB 33 : 130 LT 450 : 40 TLR 52 (HL). See also Comments under Sections 31 and 35.
48. Risdon Iron and Locomotive Works v. Furness,(1906) 1 KB 49 : 75 LJ KB 83 : 93 LT 687 : 54 WR 324 : 22 TLR 45 : 50
SJ 42 (CA). See also Comments under Section 13.
49. Edwards v. Halliwell,(1950) WN 537 : (1950) 2 All ER 1064 : 94 SJ 803 (CA). See also Comments under Sections 38
and 41.
50. T.V. Krishna v. Andhra Prabha Pvt. Ltd., (1960) 30 Comp. Cas. 437 (AP) (DB) : AIR 1960 AP 123 (DB). See also earlier
para “Lawful purpose”. See detailed Comments under Section 33.
Salomon & Co. Ltd.,(1897) AC 22 : (1895-99) All ER Rep. 33 : 66 LJ Ch. 35 (HL). See also earlier para “Lawful
purpose”. See detailed Comments under Section 33.
Page 16 of 16
215 (CA). See detailed Comments under Sections 4 and 34 under Lifting of corporate veil.
55. State Trading Corpn. of India Ltd. v. CTO, (1963) 33 Comp. Cas. 1057 (SC) : AIR 1963 SC 1811 [LNIND 1963 SC
458 (SC) : AIR 1965 SC 40 : (1964) 6 SCR 885.
59. Kuenigl v. Donnersmarck,(1955) 1 QB 515 : (1955) 1 All ER 46 : (1955) 2 WLR 82. See also Comments under Section
34.
60. De Beers Consolidated Mines Ltd. v. Howe,(1906) AC 455 (HL). See also Comments u/s. 34.
61. Section 6(3)(ii) of the Income-tax Act, 1961(43 of 1961) Union Corporation Ltd. v. IRC,(1953) AC 482 : (1953) 1 All ER
729 : (1953) 2 WLR 615 : (1953) 97 SJ 206 (HL); Unit Construction Co. Ltd. v. Bullock,(1960) AC 351 (HL) : (1959) 3
All ER 831 (HL) : (1959) 3 WLR 1022 (HL) : (1959) 103 SJ 1027 (HL).
103 SJ 1027 (HL).
[LNIND 1972 SC 144]: (1972) 3 SCR 711 [LNIND 1972 SC 144]. See also Comments under Section 13.
85 LJ KB 1333 : 114 LT 1049 (HL). See also Comments under relevant discussions in Sections 34 and 146.
66. Hilckes, Re ex p. Muhesa Rubber Plantations,(1917) 1 KB 48 : 86 LJ KB 204 : 115 LT 490.
68. Baelz v. Public Trustee (1926) Ch. 863 : 95 LJ Ch. 400 : 135 LT 763 : 42 TLR 696.
69. See Comments under Sections 146 and 209.
70. B. Ramachandra Adityan v. Educational Trustee Co. Pvt. Ltd., (2003) 113 Comp. Cas. 334 (Mad.). See also Comments
End of Document
Datta: Company Law
C R Datta
S. 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; 71[***]
72[(c) in the case of a company in existence immediately before the commencement of the
Companies (Amendment) Act, 1965 (31 of 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 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.
71. The word “and” omitted by Act 31 of 1965, s. 5 (w.e.f. 15-10-1965).

Page 2 of 28
72. Substituted by the Companies (Amendment) Act, 1965 (31 of 1965), s. 5 (w.e.f. 15-10-1965). For clause (c) as it stood
73. Cotman v. Brougham,(1918) AC 514 (HL) : (1918-19) All ER Rep. 265 (HL) : 87 LJ Ch. 379 : 119 LT 162 : 34 TLR 410 :
62 SJ 534 (HL). See detailed Comments on Interpretation of Memorandum, Doctrine of ultra vires, Implied powers Ultra
vires acts and Ratification, Doctrine of constructive notice, Doctrine of ultra vires under English Law, etc., after Clauses
required to be stated in Memorandum explained hereinafter.
[LNIND 1972 SC 144]: (1972) 3 SCR 711 [LNIND 1972 SC 144].
75. Lakshminarayan Ram Gopal and Son Ltd. v. Government of Hyderabad,AIR 1954 SC 364 [LNIND 1954 SC 57]: 1955
SCR 393 : (1954) 25 ITR 449 [LNIND 1954 SC 57] (SC); Bengal and Assam Investors Ltd. v. CIT,AIR 1966 SC 1514
[LNIND 1965 SC 290]: (1966) 1 Comp. LJ 198 (SC) : (1966) 59 ITR 547 [LNIND 1965 SC 290] (SC) : (1966) 2 SCR
471.
76. V.M. Rao v. Rajeswari Ramakrishnan, (1987) 61 Comp. Cas. 20 (Mad.) (DB) : (1986) 1 Comp. LJ 1 (Mad.) (DB);
Introductions Ltd. v. National Provincial Bank Ltd., (1970) Ch. 199 : (1969) 1 All ER 887 : (1969) 2 WLR 791 (CA) :
(1969) 39 Comp. Cas. 919 (CA). See also Comments under Sections 34, 97 and 398.
77. Edwards v. Halliwell,(1950) WN 537 : (1950) 2 All ER 1064 : 94 SJ 803 (CA). See also Comments under Sections 12,
38 and 41.
78. S.N.D.P. Yogam, Quilon, In re, (1970) 40 Comp. Cas. 60 (Ker.). See also Comments under Sections 2(46), 12, 69, 70,
86, 397, 398 and 399.
79. Alexander Ewan Campbell v. T.E. Rofe,AIR 1933 PC 39.
80. Scandinavian Bank Group plc., Re,(1987) 2 All ER 70 : 2 WLR 752 : (1987) BCLC 220.
81. Arthanari Transport P. Ltd. v. K.P. Swami Goundar, (1965) 35 Comp. Cas. 930 (Mad.) (DB). See detailed Comments
under Section 12.
* For Constitution and management of Asset Management Companies see the SEBI (Mutual Funds) Regulations, 1996.
See List of SEBI Act, Rules, Regulations and Guidelines along with Appendix Nos. in Comments under Section 55A of
the Companies Act, 1956—Powers of SEBI.
82. Cotman v. Brougham,(1918) AC 514 (HL) : (1918-19) All ER Rep. 265 (HL) : 87 LJ Ch. 379 : 119 LT 162: 34 TLR 410 :
62 SJ 534 (HL).
532]: (1963) 1 Comp. LJ 248 (SC); Egyptian Salt and Soda Co. Ltd. v. Port Said Salt Association Ltd.,(1931) AC 677
(PC) : 100 LJ PC 147 : 145 LT 313 (PC) : AIR 1931 PC 182; Deuchar v. Gas Light and Coke Co.,(1925) AC 691 :
(1925) All ER Rep. 720 : 94 LJ Ch. 382 : 133 LT 565 : 41 TLR 563 (HL). See also Comments later under ultra vires and
Sections 26 and 36.
84. Charterbridge Corporation Ltd. v. Lloyd's Bank Ltd., (1970) Ch. 62 : (1969) 2 All ER 1185 : (1969) 3 WLR 122 : (1969) 2
Lloyd's Rep. 24 : (1969) 39 Comp. Cas. 824 (Ch.). See also discussion on ultra vires in subsequent paragraphs and
[LNIND 1962 SC 125]: (1962) Supp. 3 SCR 973. See also Comments under Ss. 9 and 76.
86. Dr. A. Lakshmanaswami Mudaliar v. L.I.C. of India, (1963) 33 Comp. Cas. 420 (SC) : AIR 1963 SC 1185 [LNIND 1962
SC 532]; Angostura Bitters and Co. Ltd. v. Kerr,(1933) AC 550 (PC) : 102 LJ PC 161 : (1934) 4 Comp. Cas. 1 (PC).
532]: (1963) 1 Comp. LJ 248 (SC); Tomkinson v. South-Eastern Railway Co., (1887) 35 Ch.D. 675 : 56 LJ Ch. 932 : 56
LT 812. See also Comments under Doctrine of ultra vires and Effect hereinafter and Comments under Sections 26, 36
and 293A.
88. Ferrom Electronics Pvt. Ltd. v. Vijaya Leasing Ltd., (2002) 109 Comp. Cas. 467 (Kar.) (DB). See also Comments under
Sections 108, 111 and 111A.
89. V.M. Rao v. Rajeswari Ramakrishnan, (1987) 61 Comp. Cas. 20 (Mad.) (DB) : (1986) 1 Comp. LJ 1 (Mad.) (DB); Akola
Electric Supply Co. Ltd., In re, (1962) 32 Comp. Cas. 215 (Bom.) : AIR 1962 Bom. 133 [LNIND 1960 BOM 115]; Anglo-
Overseas Agencies Ltd. v. Green,(1961) 1 QB 1 : (1960) 3 All ER 244 : (1960) 3 WLR 561 : (1961) 31 Comp. Cas. 38.
See also Comments under earlier paragraph “Independent Objects”.
90. Rangkala Investments Ltd., In re, (1997) 89 Comp. Cas. 754 (Guj.). See also Comments under Sections 17, 149(2A)
and 394.
91. Attorney-General v. Great Eastern Railway Co., (1880) 5 App. Cas. 473 : (1874-80) All ER Rep. Ext. 1459 : 49 LJ Ch.
545 : 42 LT 810 : 28 WR 769 (HL).
Page 3 of 28
92. Bell Houses Ltd. v. City Wall Properties Ltd.,(1966) 2 QB 656 : (1966) 2 All ER 674 (CA) : (1966) 2 WLR 1323 : 110 SJ
268 : (1966) 36 Comp. Cas. 779 (CA); H.A. Stephenson & Son Ltd. v. Gillanders, Arbuthnot & Co.,(1931) 45 CLR 476 :
5 ALJ 326 : 38 ALR 49; American Home Assurance Co. v. Tjmond Properties Ltd., (1984) NZLR 452 : (1986) BCLC
181.
532]: (1963) 1 Comp. LJ 248 (SC). See also Comments in earlier paragraphs.
94. Egyptian Salt and Soda Co. Ltd. v. Port Said Salt Association Ltd.,(1931) AC 677 (PC) : 100 LJ PC 147 : 145 LT 313
(PC) : AIR 1931 PC 182.
95. Newstead v. Frost,(1980)1 All ER 363 : (1980) 1 WLR 135 : (1980) 124 SJ 116 (HL). See also Comments under
Section 11.
1. Hutton v. West Cork Rly. Co., (1883) 23 Ch.D. 654 : 52 LJ Ch. 689 : 49 LT 420 (CA). See Dr. A. Lakshmanaswami
Mudaliar v. L.I.C., (1963) 33 Comp. Cas. 420 (SC) : AIR 1963 SC 1185 [LNIND 1962 SC 532] in earlier paragraph.
See also Comments under Sections 41, 293A and 484.
2. Evans v. Brunner, Mond & Co., (1921) 1 Ch. 359 : 90 LJ Ch. 294 : 124 LT 469 : 65 SJ 134; Lee, Behrens & Co. Ltd.,
Re, (1932) 2 Ch. 46 : (1932) All ER Rep. 889 : 101 LJ Ch. 183. See also Comments under Sections 46 and 293A as
amended by the Election and Other Related Laws (Amendment) Act, 2003 (46 of 2003).
3. Baroness Wenlock v. River Dee Co., (1885) 10 App. Cas. 354 (HL).
4. Oakbank Oil Co. v. Crum, (1882) 8 App. Cas. 65 : 48 LT 537 : 31 WR Dig. 37 (HL); General Auction Estate and
Monetary Co. v. Smith, (1891) 3 Ch. 432 : 60 LJ Ch. 723; Kingsbury Collieries Ltd. and Moore's Contract, Re, (1907) 2
Ch. 259 : 76 LJ Ch. 469.
6. Introductions Ltd. v. National Provincial Bank Ltd., (1970) Ch. 199 : (1969) 1 All ER 887 : (1969) 2 WLR 791 (CA) :
(1969) 39 Comp. Cas. 919 (CA).
7. Cyclists' Touring Club v. Hopkinson, (1910) 1 Ch. 179 : 79 LJ Ch. 82 : 101 LT 848; Normandy v. Ind, Coope & Co. Ltd.,
(1908) 1 Ch. 84 : 77 LJ Ch. 82 : 97 LT 872; Parke v. Daily News Ltd., (1962) Ch. 927 : (1962) 2 All ER 929 : (1962) 3
WLR 566 : (1962) 32 Comp. Cas. 1060 (Ch.); W. & M. Roith Ltd., Re,(1967) 1 All ER 427 : (1967) 1 WLR 432 : (1966)
110 SJ 963. See also Comments under Section 318.
8. Gujarat Ginning and Mfg. Co. v. Motilal Hirabhai Spg. and Wvg. Co.,AIR 1930 Bom. 84.
9. Choonilal v. Spence's Hotel Co., (1868) 1 BLR (OS) 14. See also Comments u/s. 47.
10. Evans v. Brunner, Mond & Co., (1921) 1 Ch. 359 : 90 LJ Ch. 294 : 124 LT 469 : 65 SJ 134.
11. Wall v. London and Northern Assets Corporation, (1898) 2 Ch. 469 : 67 LJ Ch. 596 : 79 LT 249 : 47 WR 219 : 14 TLR
547 (CA).
545 : 42 LT 810 : 28 WR 769 (HL). See also Comments u/s. 46.
13. Leif Child's Case,(1865) LR 1 Eq. 231.
14. International Contract Corporation's Case,(1869) 20 LT 96.
15. Norwich Provident Insurance Society, Re, Bath's Case, (1878) 8 Ch.D. 334 : 47 LJ Ch. 601 : 38 LT 267 : 26 WR 441
(CA); Irish Provident Assurance Co., Re,(1913) 1 IR 352 (CA).
532]; Birkbeck Permanent Benefit Building Society, Re, (1912) 2 Ch. 183 (CA).
185 (HL); Baroness Wenlock v. River Dee Co., (1885) 10 App. Cas. 354 (HL); Towers v. African Tug Co., (1904) 1 Ch.
558 : (1904-07) All ER Rep. Ext. 1583 (CA) : 73 LJ Ch. 395 (CA); Trevor v. Whitworth, (1887) 12 App. Cas. 409 :
(1886-90) All ER Rep. 46 : 57 LJ Ch. 28 (HL); Dr. A. Lakshmanaswami Mudaliar v. L.I.C., (1963) 33 Comp. Cas. 420
(SC) : AIR 1963 SC 1185 [LNIND 1962 SC 532]. See also Comments under Sections 46 and 290-293. Doctrine of ultra
vires has virtually been abolished under English Law as explained hereinafter.
19. Smt. Premila Devi v. People's Bank of Northern India Ltd.,(1938) 4 All ER 337 : 82 SJ 1008 : AIR 1938 PC 284 : (1939)
9 Comp. Cas. 1 (PC); Bamford v. Bamford, (1970) Ch. 212 : (1969) 1 All ER 969 : (1969) 2 WLR 1107 : 113 SJ 123 :
(1969) 39 Comp. Cas. 838 (CA).
20. IRC v. Ufitec Group Ltd.,(1977) 3 All ER 924 : (1977) Simon's TC 363.
Page 4 of 28
21. Briton Medical, General and Life Assurance Association v. Jones,(1889) 61 LT 384.
22. Portuguese Consolidated Copper Mines Ltd., Re, (1890) 45 Ch.D. 16 (CA) : 63 LT 423 (CA) : 39 WR 25 (CA); Land
Credit Co. of Ireland, Re, (1869) 4 Ch. 460 : 39 LJ Ch. 27 : 20 LT 641.
Lloyd's Rep. 24 : (1969) 39 Comp. Cas. 824 (Ch.); Halt Garage Ltd., Re,(1982) 3 All ER 1016; Horsley and Weight Ltd.,
Re, (1982) Ch. 442 : (1982) 3 All ER 1045 : (1982) 3 WLR 431 : (1982) 126 SJ 429 (CA); Rolled Steel Products
(Holdings) Ltd. v. British Steel Corpn., (1986) Ch. 246 : (1985) 3 All ER 52 : (1985) 2 WLR 908 : (1984) 128 SJ 629 :
(1984) BCLC 466 (CA). See also Comments under Sections 46, 284 and 290.
185 : 33 LT 450. See also Comments under Sections 46. See provisions relating to Alteration of Articles by Special
Resolution [ Section 31]. Doctrine of ultra vires virtually abolished under English Law, Doctrine of Constructive notice
and Directors and Officers' acts and rule in Turquand's case have been explained in later paragraphs.
26. B.V. Thirumalai v. Best Vestures Trading P. Ltd., (2004) 4 Comp. LJ 519 (CLB). See detailed Comments on
Oppression and Mismanagement under Sections 397-409.
27. Trevor v. Whitworth, (1887) 12 App. Cas. 409 : (1886-90) All ER Rep. 46 : 57 LJ Ch. 28 : 57 LT 457 : 36 WR 145 : 3
TLR 745 : 32 SJ 201 (HL); Irish Provident Assurance Co., Re,(1913) 1 IR 352 (CA); Rowell v. John Rowell & Sons Ltd.,
(1912) 2 Ch. 609 : 81 LJ Ch. 759 : 107 LT 374; Sections 77, 100, 104 and 402. Now see also Power of company to
purchase its own securities [ Section 77A] and Prohibition for buy-back in certain circumstances [ Section 77B].
28. Almada and Tirito Co., Re, (1888) 38 Ch.D. 415 : 57 LJ Ch. 706 : 59 LT 159 : 36 WR 593 : 4 TLR 534 (CA); Hongkong
and China Gas Co. Ltd. v. Glen, (1914) 1 Ch. 527 : 83 LJ Ch. 561 : 110 LT 859. Such acts are ultra vires the
Companies Act and not Memorandum or objects clause. See also Comments under Sections 79, 81 and 100.
29. See Comments under Section 205.
532]; Birkbeck Permanent Benefit Building Society, Re, (1912) 2 Ch. 183 (CA). See also Comments under Section 36.
32. Aveling Barford Ltd. v. Perion Ltd.,(1989) BCLC 626. Doctrine of ultra vires has virtually been abolished by the English
Companies Act, 1989. Under English law ultra vires acts of directors may now be ratified by a special resolution and
directors may be absolved by another special resolution. See Doctrine of ultra vires under English Law in later
paragraphs.
33. European Society Arbitration Acts, Re, (1878) 8 Ch.D. 679 : 48 LJ Ch. 118 : 39 LT 136 (CA).
34. National Telephone Co. v. Constables of St. Peter Port,(1900) AC 317 (PC) : 69 LJ PC 74.
35. Port Canning Co., Re,(1871) 7 BLR 853.
36. Harris Calculating Machine Co., Re, (1914) 1 Ch. 920 : 83 LJ Ch. 545 : 110 LT 997; Reversion Fund and Insurance Co.
v. Maison Cosway Ltd.,(1913) 1 KB 364 : 82 LJ KB 512 (CA); Airedale Co-operative Worsted Mfg. Society Ltd., Re,
(1933) Ch. 639 : 102 LJ Ch. 229 : 149 LT 92 : 49 TLR 265 : 77 SJ 267; Introductions Ltd. v. National Provincial Bank
Ltd., (1970) Ch. 199 : (1969) 1 All ER 887 : (1969) 2 WLR 791 (CA) : (1969) 39 Comp. Cas. 919 (CA). See also earlier
paragraphs “ Implied powers ” and Comments under Section 293.
37. Sinclair v. Brougham,(1914) AC 398 : (1914-15) All ER Rep. 622 : 83 LJ Ch. 465 (HL); Diplock, Re, Diplock v. (1948)
Ch. 465 : (1948) 2 All ER 318affirmed sub nom Ministry of Health v. Simpson,(1951) AC 251 : (1950) 2 All ER 1137 : 94
SJ 777 (HL); Agip (Africa) Ltd. v. Jackson, (1991) Ch. 547 (CA). See also Comments under Section 293. Doctrine of
ultra vires has been abolished under English Law as explained hereinafter.
38. Birkbeck Permanent Benefit Building Society, Re, (1912) 2 Ch. 183 (CA); Great Eastern Rly. Co. v. Turner, (1872) 8
Ch. App. 149 : 42 LJ Ch. 83 : 21 WR 163; Blackburn Building Society v. Cunliffe, Brooks & Co., (1884) 9 App. Cas. 857
: (1881-85) All ER Rep. Ext. 1280 : 54 LJ Ch. 376 : 52 LT 225 (HL). See also Doctrine of ultra vires under English Law
in later paragraphs and Comments under Section 293.
39. Watson, ex parte,(1888) 21 QBD 301; Subaratnam v. Official Liquidator,AIR 1943 Mad. 111
40. Irish Provident Assurance Co., Re,(1913) 1 IR 352 (CA).
41. Madras Native Permanent Fund Ltd., In re,AIR 1931 Mad. 792.
42. Steel Equipment and Construction Co. P. Ltd., In re, (1968) 38 Comp. Cas. 82 (Cal.) : (1967) 1 Comp. LJ 172 (Cal.);
Great North-West Central Railway Co. v. Charlebois,(1899) AC 114 (PC) : 68 LJ PC 25 : 79 LT 35; Jon Beauforte
(London) Ltd., Re, (1953) Ch. 131 : (1953) 1 All ER 634 : 2 WLR 465. See also Comments under Section 434. Such
Page 5 of 28
debts can now be proved under English law where the doctrine of ultra vires has been abolished as explained
hereinafter.
43. Finance and Issue Ltd. v. Canadian Produce Corpn. Ltd., (1905) 1 Ch. 37 : 73 LJ Ch. 751 : 91 LT 685 : 53 WR 170 : 20
TLR 807.
44. Shalagram Jhajharia v. National Coal Co. Ltd., (1965) 35 Comp. Cas. 706 (Cal.) (DB) : (1965) 1 Comp. LJ 112 (Cal.)
(DB) : (1965) 69 CWN 369 (Cal.) (DB). See also Comments under Sections 9, 10, 41, 173, 204, 294 and 314.
45. Asansol Electric Supply Company Ltd. v. Chunilal Daw,AIR 1972 Cal. 19 [LNIND 1971 CAL 60](DB) : 75 CWN 704
(DB). See also Comments under Section 10.
46. Foss v. Harbottle, (1843) 2 Hare 461. See also Comments under Sections 10 and 41.
47. Avanthi Explosives P. Ltd. v. Principal Subordinate Judge, (1987) 62 Comp. Cas. 301 (AP)Edwards v. Halliwell,(1950)
WN 537 : (1950) 2 All ER 1064 : 94 SJ 803 (CA); Mozley v. Alston, (1847) 1 Ph. 790 : 16 LJ Ch. 217; Burland v.
Earle,(1902) AC 83 : (1900-03) All ER Rep. Ext. 1452 (PC) : 71 LJ PC 1. See detailed Comments under Sections 10
and 41.
48. Wattau v. Fenwick,(1893) 2 QB 346 . See decisions on ostensible authority in Comments under Sections 293 and
383A.
49. Jon Beauforte (London) Ltd., Re, (1953) Ch. 131 : (1953) 1 All ER 634 : 2 WLR 465. Doctrine of ultra vires and Doctrine
of constructive notice have been virtually abolished under English law. See detailed Comments in later paragraphs.
See also Comments under Sections 290-293.
50. Sinclair v. Brougham,(1914) AC 398 : (1914-15) All ER Rep. 622 : 83 LJ Ch. 465 : 111 LT 1 : 30 TLR 315 : 58 SJ 302
(HL).
51. Royal British Bank v. Turquand, (1856) 6 E. & B. 327 : (1843-60) All ER Rep. 435 (Ex Ch.) : 25 LJ QB 317 : 2 Jur. NS
663 (Ex Ch.). See detailed Comments under Section 293. See also Comments in succeeding paragraphs under
Doctrine of ultra vires and Doctrine of constructive notice have been virtually abolished under English law.
52. Rolled Steel Products (Holdings) Ltd. v. British Steel Corpn., (1986) Ch. 246 : (1985) 3 All ER 52 : (1985) 2 WLR 908 :
(1984) 128 SJ 629 : (1984) BCLC 466 (CA).
53. International Sales and Agencies Ltd. v. Marcus,(1982) 3 All ER 551 : (1982) 2 CMLR 46.
54. U.B.A.F. Ltd. v. European American Banking Corpn.,(1984) QB 713 : (1984) 2 All ER 226 : (1984) 2 WLR 508 : (1984)
128 SJ 243 : (1984) 1 Lloyd's Rep. 258 (CA).
55. Grant v. United Kingdom Switchback Railways Co., (1888) 40 Ch.D. 135 : 58 LJ Ch. 211 : 60 LT 525 : 37 WR 312 : 5
TLR 92 (CA).
185 : 33 LT 450 : 24 WR 794 (HL). The decisions still holds good under the Indian Law. See Doctrine of ultra vires and
Ratification in earlier paragraphs.
57. Underwood (A.L.) Ltd. v. Bank of Liverpool and Martins,(1924) 1 KB 775 : (1924) All ER Rep. 230 : 93 LJ KB 690 : 131
LT 271 (CA); Houghton & Co. v. Nothard, Lowe & Wills,(1927) 1 KB 48 (CA)affirmed in (1928) AC 1 : (1927) All ER
Rep. 97 : 97 LJ KB 76 : 138 LT 210 (HL). See also Rolled Steel Products (Holdings) Ltd. v. British Steel Corpn., (1986)
Ch. 246 : (1985) 3 All ER 52 : (1985) 2 WLR 908 : (1984) BCLC 466 (CA) in earlier paragraphs.
58. Morris v. Kanssen,(1946) AC 459 : (1946) 1 All ER 586 : 115 LJ Ch. 177 : 174 LT 353 (HL); Section 285 of the English
Companies Act, 1985. See also Comments under corresponding Indian provisions, viz., Section 290 of the Companies
Act, 1956 in this book.
59. TCB Ltd. v. Gray, (1986) Ch. 621 : (1986) 1 All ER 587 : (1986) BCLC 113. See also Smith v. Henniker-Major & Co. (A
firm),(2002) 3 WLR 1848 : (2003) 116 Comp. Cas. 359 (CA).
60. Freeman and Lockyer v. Buckhurst Park Properties (Mangal) Ltd.,(1964) 2 QB 480 : (1964) 1 All ER 630 : (1964) 2
WLR 618 (CA); Hely-Hutchinson v. Brayhead Ltd.,(1968) 1 QB 549 : (1967) 3 All ER 98 : (1967) 3 WLR 1408 : (1968)
38 Comp. Cas. 228 (CA); Biggerstaff v. Rowatt's Wharf Ltd., (1896) 2 Ch. 93 : (1895-99) All ER Rep. Ext. 1933 : 65 LJ
Ch. 536 (CA); Clay Hill Brick and Tile Co. Ltd. v. Rawlings,(1938) 4 All ER 100 : 159 LT 482 : 82 SJ 909. See also
Rama Corpn. Ltd. v. Proved Tin and General Investments Ltd.,(1952) 2 QB 147 : (1952) 1 All ER 554 : (1952) 1 TLR
709 : 96 SJ 197. See Comments under Sections 2(26), 267-269, 290 and 293 of the Companies Act, 1956 in this book.
61. Mahony v. East Holyford Mining Co.,(1875) LR 7 HL 869 : (1874-80) All ER Rep. 427 : 33 LT 383 (HL). See also
62. Armagas Ltd. v. Mundogas S.A.,(1986) AC 717 (HL). See Comments under Sections 2(24) and 384-388 of the
Companies Act, 1956 in this book.
(1971) 3 WLR 440 (CA). See detailed Comments under Section 383A.
Page 6 of 28
COMMENTS
English Act, 1948 : Section 2 Previous Act, 1913 : Sections 6, 7 and 8
English Act, 1985 : Sections 2 and 25
Legislative History.—The Companies Act, 1956 (1 of 1956).
—The Notes on clauses explained this provision as follows: “This section combines sections 6, 7 and 8 of the
existing Act. Compare section 2 of the English Act.” [ Clause 11 of the Companies Bill, 1953 (46 of 1953)].
The Joint Committee made certain changes and observed: “The Committee are of the view that the name of a
company should indicate whether it is a private or a public company. It has been accordingly provided that the
name of every private company should end with the words ‘Private Limited’.” [ Report : para 13]. The Companies
(Amendment) Act, 1965 (31 of 1965).
—The Notes on clauses explained the amendments in this section as follows: “This clause seeks to implement the
recommendation of the Daphtary-Sastri Committee based on the observations contained in paragraphs 2 to 5 of the
Commission's Report. The purpose of the amendment is to provide for clear definitions of the main and the
subsidiary objects of a company in its Memorandum of Association.” [ Clause 5 of the Companies (Second
Commission's Report.—The relevant observations in paragraphs 2 to 5 of the Commission of Inquiry on the

Administration of Dalmia-Jain Companies (Vivian Bose Commission) are reproduced below:
“Objects Clause of the Memorandum of Association.—

2. It is a matter of common knowledge that it is customary to make the objects and purposes of a
company's memorandum as wide as possible in order to obviate applications to the Court when some
new venture is contemplated. No objections can normally be taken to make the objects as wide in
scope as possible; but at the same time, this practice holds out ample opportunities for participating in
activities which are neither the main activities nor are ancillary thereto, but are very remote in
character, and far removed from the principal and ancillary objects for which a company has been
incorporated.
3. In case of a public company, which was before the Commission, it was incorporated primarily for the
purpose of carrying on an Airline business, although it transpired that there was never any serious
intention to do such business. The reason for the floating of this company in that form was that, at the
particular time, airline business was very much in the public eye and there was a big demand for
shares in such companies. It is significant that though the ostensible main business was given
prominence in the Memorandum, the activities which the company intended to pursue, viz., business in
all types of surplus motor vehicles and spare parts left by the American fighting forces in India at the
conclusion of the war, were mentioned in an omnibus, clause that spoke of humbler kinds of
conveyance like ‘vehicles of all kinds’ along with ‘cycles, carriages and perambulators’. No one could
have imagined by a simple statement in the Memorandum that the main business was that of dealing
in motor vehicles and spare parts involving an outlay of almost Rupees 6 Crores, and the principal
business was merely to be a small side show with an investment of about Rupees 22 lakhs only.
Although in the prospectus for the issue of capital amounting to Rupees 320 lakhs it was disclosed that
the company would be dealing in surplus vehicles and spare parts, ‘applications with full amount for
about three crores’ had already been received, according to a statement in the Prospectus.
4. Several Committees have so far approached, from different points of view, the subject of the contents
of the Memorandum of Association, particularly the objects of a company stated therein. The Expert
Committee on Company Law, generally known as the Bhabha Committee, considered the question of
imposing certain restrictions on the wide power taken by companies in their Memoranda to carry on
every conceivable business, and though the Committee fully appreciated the necessity of restrictions, it
was unable to evolve a practical method to distinguish between the two types of businesses and to
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recommend the basis of an effective legal provision. The Committee however preferred to rely on the
responsible judgement of the management and the periodical vigilance of the shareholders. However,
the ‘vigilance’ of the shareholders would ordinarily come into the picture when the company seeks to
amend its objects clause, and rarely in cases of utilizing wide powers taken in the Memorandum to
participate in some other activity.
5. In recent times, there have been instances where companies have gone in for diversification and
diversified their activities into lines other than the principal object or objects ancillary thereto. We are
not necessarily condemning diversification as such, and feel that this tendency may largely be due to
the system of inter-corporate taxation of dividends. In countries where inter-corporate taxation does not
exist, the tendency for a group is to form separate subsidiary companies under the main holding
company; but this would prove to be far too expensive from the tax point of view in this country owing
to dividends being taxed at each stage of its corporate travel.
6. Nevertheless, we think that the shareholders should have some say in the matter, and it is, therefore,
recommended that—
(i) The Companies Act, 1956 (1 of 1956) should be suitably amended to provide that every company
shall clearly state its purposes and objects under two separate categories, viz.,
(a) the principal and ancillary objects which the company intends at the time of its incorporation to
pursue; and
(b) all other objects which are separate from the principal and ancillary ones mentioned in item (a)
above.
(ii) A provision should be made in the Act to the effect that a company shall not engage itself in any
activities coming within the scope of Clause (b) unless such activities are sanctioned by a special
resolution of the company in general meeting.” [ Commission's Report : paras 2 to 6].
Recommendations of Daphtary-Sastri Committee.—The recommendations of the Daphtary-Sastri Committee

based on observations contained in paras 2 to 5 of the Commission's Report are reproduced below:
“Statement of objects: Section 13(1)(c) of the Companies Act, 1956, hereinafter referred to as ‘The Act’, requires
the objects of a company to be stated in its memorandum of association. The memorandum states what shall be
the powers of the company and the objects to the attainment of which the powers could be exercised. The objects
specified in the memorandum give a measure of protection to the subscribers to the share capital and persons
dealing with the company, and are intended to indicate plainly and unambiguously the purposes for which the funds
of the company can be used or the field of business within which the company's activities have to be confined. It is
well settled that an act which is beyond the powers of a company as specified in the memorandum is ultra vires.
Further, a change in the memorandum involves the observance of certain formalities including an application to the
court for approval in cases falling within section 17 of the Act. It has, therefore, become normal to specify objects
having a wide scope and variety, and in an anxiety to avoid acts of directors being declared ultra vires, a multitude
of objects are specified without any distinction being made between the objects and the powers. The principal or
real object often gets buried beneath a mass of words and a multitude of other objects and powers brought
indiscriminately into the memorandum. Disapproval has been expressed of this tendency but no attempt has so far
been made to correct it [See Cotman v. Brougham,(1918) AC 514 (HL)].
The report of the Commission of Inquiry discloses the case of a company, Dalmia Jain Airways Ltd., floated
ostensibly for the purposes of carrying on air transport business. But even from its very inception the promoters had
never intended that the huge sum of over 319 lakhs raised by public subscription towards the share capital should
be utilised for such business. They had only intended to form a private company for carrying on a totally unrelated
adventure, namely, purchasing surplus motor vehicles and spare parts and machinery left by U.S.A. and the
American forces at the conclusion of the last War, and reconditioning the vehicles and selling them at a profit. The
attempt was to run a skeleton air transport as a make-believe show. The memorandum of association of the
company included an omnibus clause that gave power to the company to deal in vehicles of all kinds, and which
even specified cycles, carriages and perambulators. The public was misled by the name of the company which
incorporated its main object. The prominence given to the ostensible object made the public believe that the
company would really conduct the business of air transport. The memorandum having comprehended within its
scope the dealing in motor vehicles and spare parts, the persons in control, without reference to the shareholders
and even to the Controller of Capital Issues who had authorised the issue of the share capital, were able to divert
the funds so obtained into the surplus motor vehicles and spare parts business. Though its funds were freely
utilised for acquiring the surplus motor vehicles and spare parts, the public company did not get the profits from the
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deal. The profits went to the private company which entered into the contract for the purchase and the public
company suffered a huge loss in the result. The remedy does not lie merely in making provision for separating the
principal objects from other objects. For even then it is possible to include under the head ‘principal objects’ a
variety of objects not necessarily having any connection with one another nor reflecting the real intention of the
promoters. At the same time, any safeguards provided in this direction should not hamper legitimate corporate
activity. Further statutory provision should be made, therefore, whereby even at the initial stage, the shareholders
have an opportunity to inform themselves of the principal industrial or business activity the company would embark
upon. The promoters, the signatories to the memorandum and the first directors of a company should be required to
obtain the approval of the company in general meeting by a special resolution, of the decision of the directors
regarding the activities the company shall engage in, in the first instance. Thereafter sanction of the company in
general meeting by special resolution should also be obtained, if the directors later on propose to engage in new
activities. Every such resolution shall be incorporated in all copies of the memorandum of the company. Provision
should be made in the Capital Issues (Control) Act [ now the SEBI Act] for informing the Controller of the starting of
a fresh business enterprise in accordance with the special resolutions. A copy of the special resolutions enlarging
the business of the company should be furnished to the ROC of the State.
As the name of the company also influences indirectly the public who apply for allotment of shares, the ROC should
be empowered to scrutinise carefully the objects specified in the memorandum to see whether the name of the
company properly reflects those objects and is not likely to mislead the public. Registration of a company should be
withheld until the Registrar is satisfied on this head.
Provision should be made in the Act imposing an obligation on the promoters of a public company to include in
newspaper advertisements announcing the floatation of the company, a statement calling attention of the public to
the specific objects to which the activities of the company will be confined at the first instance, and to publish
equally prominent advertisements as and when the company proposes to embark upon any other business
enterprise.” [ Daphtary-Sastri Committee Report : relevant paras of recommendations].
The Joint Committee made further changes and recommended as follows:
“It was represented to the Committee that if the existing companies were also to be required to re-draft their objects
clauses, then that would require the passing of special resolution under the Act, which would involve tremendous
time and effort not commensurate with the results intended. The Committee, therefore, feel that this clause should
be amended to provide that the provisions of existing clause (c) of section 13 of the Act should continue to apply to
companies in existence immediately before the commencement of the Companies (Amendment) Act 1965, and the
provisions of the proposed new clause requiring the division of objects into (i) main objects and objects ancillary
thereto and (ii) other objects should apply only to new companies. The clause has been amended accordingly.” [
Report : para 13].
under Section 1.
Memorandum [ Section 2(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. The term includes
the original Memorandum as registered or as altered from time to time.
Thus, the term Memorandum of Association of a Company refers to the Memorandum as originally registered or as
altered from time to time.
Section 13 of the Companies Act, 1956 (1 of 1956) lays down the Requirements with respect to Memorandum [
Section 13].
Other provisions as to Memorandum of Association of a Company are: Form of Memorandum [ Section 14], Printing
and signature of memorandum [ Section 15], Alteration of memorandum [ Sections 16 to 19] and General provisions
with respect to Memorandum and Articles [ Sections 33 to 40].
Constitution or Charter of the Company.—The Memorandum of Association of a company is the constitution or

charter of the company defining its objects. Its purpose is to enable the shareholders, creditors and those dealing
with the company to know what is the company's permitted range of enterprise.73
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Requirements with respect to Memorandum [ Section 13].— Section 13 of the Companies Act, 1956 (1 of 1956)
provides that the Memorandum of Association of every company shall state—
(1)
(a) The Name of the Company. In the case of a Company Limited by Shares the Memorandum of
Association must contain the name of the company with “Limited” as the last word in the case of a
Public Company and with “Private Limited” as the last word in the case of a Private Company.
(b) The State in which the Registered Office of the Company will be situated. The Memorandum of
Association must contain the name of the State in which the company's Registered Office is to be
situate.
(c) Section 13(1)(c) pertains to the Objects clause of the Company in the case of a company in existence
prior to the commencement of the Companies (Amendment) Act, 1965 (31 of 1965) (w.e.f. 15-10-
1965).
(d) Section 13(d)(i) and (ii) of the Companies (Amendment) Act, 1956 as substituted by the Companies
(Amendment) Act, 1965 (31 of 1965) requires a Company incorporated after (15-10-1965) to state
Objects of the Company as follows:
(i) The Main Objects of the Company and Objects incidental or ancillary to the attainment of the main
objects, and (ii) Other Objects of the Company.
(e) In case of Companies (other than Trading Corporations) the Memorandum must also mention the
States to which the objects extend.
(2) In the case of a Company Limited by Shares or by Guarantee, the Memorandum must state that the
Liability of the Members is limited.
Section 13(2) provides that in the case of a Company having a Share Capital or a Guarantee Company the
Memorandum of Association shall also contain a Statement that the liability of the Company's Members is
limited.
(3) Undertaking by Members in a Guarantee Company, and
(4) In case of a Company having a Share Capital—(a) Unless the company is an unlimited company, the
amount of Share Capital and its division;
(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.
Strictly speaking, a Minor cannot be a subscriber to the Memorandum of Association as he cannot enter into a
contract.
See detailed Comments on Subscription Clause under Section 12.
The Memorandum needs to be carefully drafted inasmuch as the company and the directors cannot do anything
beyond the scope of the Memorandum except those incidental to the business of the company.74
Detailed Comments on various Clauses in the Memorandum of Association pursuant to the Requirements of
Section 13 are given below.
See also Comments under Section 12, 14 to 19 and 33 to 40.
Name Clause [ Section 13(1)(a)].—The Memorandum of Association of every Public Limited Company shall state
the name of the company with “Limited” as the last word of the name, and in case of a Private Limited Company
with “Private Limited” as the last words of the name.
Names of Companies.— See detailed Comments, Guidelines, Form and Procedure, e-Forms, e-Filing on
provisions with respect to Names of Companies and Search facilities, e.g., Check Company Name on the Ministry
of Corporate Affairs (MCA) website http://www.mca.gov.in under Sections 20 to 25.
Government Company.— Section 13 of the Act shall apply to a Government Company with the following
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modification: “In clause (a) of sub-section (1) of Section 13, the words “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’” shall be omitted.” [
Notification No. G.S.R. 1234, dated 30-12-1958 : Government of India publication, Clarifications and Circulars on
Company Law, 1977 Edition, page 293].
Registered Office or Situation Clause [ Section 13(1)(b)].—The Memorandum of Association of every company
shall mention the State in which the Registered Office of the company will be situated.
The exact Address of Registered Office need not be given in the Memorandum of Association. This may be given at
the time of or within 30 days of incorporation by filing e-Form No. 18 with the Registrar of Companies (ROC).
See detailed Comments, Form and Procedure under Section 12, 33 and 146.
The situs of the shares is the registered office of the company. The statutory books and documents are also to be
kept at the registered office of the company.
Change of registered office.—For change of registered office of the company see detailed Comments, Form and
Procedure under Sections 16 to 19.
Objects Clause—Existing Companies [ Section 13(1)(c)].—A company in existence before the Companies
(Amendment) Act, 1965 could retain its earlier objects clause, i.e., it need not segregate its objects into main
objects and other objects.
Objects Clause (w.e.f. 1-10-1965) [ Section 13(1)(d)(i) and (ii)].—An Objects Clause should be in every
Company's Memorandum of Association.
Every Company incorporated or formed after 1-10-1965 must state separately the Objects in three categories as
required by substituted sub-clauses (i) and (ii) of clause (d) of sub-section (1) of Section 13 of the Companies Act,
1956.
The Memorandum of Association of every Company shall state separately:
(i) the Main Objects of the Company to be pursued by the company on its incorporation and the Objects incidental
or ancillary to the attainment of the main objects, and (ii) other objects of the company not included in sub-clause
(i).
Purpose of division of Objects Clause.—The purpose of this division of the Objects Clause in the Memorandum
of Association as required by Section 13(1)(d)(i) and (ii) after 1-10-1965 is to enable the shareholders and others
interested to have a clear idea of the Main objects and Other objects.
Section 149 of the Companies Act, 1956 further requires that whenever a Public Company commences any new
business falling in the third category or group, i.e., Other Objects as stated in Section 13(1)(d)(ii) above, sanction of
the shareholders by a Special Resolution shall be obtained.
These two provisions thus seek to afford an opportunity to shareholders to know for what purposes their money
would be utilised.
See Legislative History of the Companies (Amendment) Act, 1965 hereinabove. See detailed Comments under
Section 13 and 149.
Powers necessary to carry out objects.—The objects clause may be as wide as the promoters want it to be.
However, it should state the main and other objects of the company and not the powers necessary to carry out the
objects.
“Carrying on business”.—The objects clause does not conclusively prove that the activities of the company
amount to “carrying on business”.75
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See detailed Comments on Incidental or ancillary Objects, Other Objects, Commencement of new business,
Implied powers, etc., hereinafter.
Non-Trading Companies [Sub-section (1)(e)].—In the case of non-trading companies, with objects not confined
to one State, the objects clause shall also mention the States to whose territories the objects extend.
Department's view.— Arrangement of objects clause.—“The Department of Company Affairsis of the view that
having regard to the provisions of sub-section (l)(d) of section 13 of the Companies Act, 1956, the objects clause of
the Memorandum of Association of a company should be split up as follows:
(a) Main objects to be pursued on its incorporation;
(b) Objects incidental or ancillary to the attainment of the objects specified in (a) above; and
(c) Other objects not indicated in (a) and (b) above.
Such an arrangement, it is felt, would be in line with section 13(1)(d) of the Companies Act, 1956 and at the same
time make clear that clause (d)(i) of the said sub-section included (i) objects other than main objects and also (ii)
objects incidental or ancillary thereto.” [Company News & Notes, dated 1-1-1968 :Govt. of India publication,

the companies.
“New registration : (v) There are divergent practices in the offices of ROCS as to the number of clauses/objects that
can be allowed under ‘Main objects’ to be pursued by the company on its incorporation vide section 13(1)(d)(i) of
the Companies Act, 1956. ROCS are advised to follow the general principle that in case of object oriented names
likeHindustan Sugar Limited, the main object should constitute only that object (like sugar in case of Hindustan
Sugar Ltd.), while in case of non-object oriented names (like Tata Sons Limited), there should be no restriction as to
the number of main objects. Similar should be the approach in case of companies having names with general
expressions like ‘Industries/Enterprises’, etc., without prefixing the nature of industry or enterprise. In either case, it
may be ensured that objects specified in the memorandum of association are those specified against column No. 5
of Form 1A.” [Extracts from Circular No. 1 of 1995 (F. No. 14/6/94-CL-V), dated 16-2-1995 : (1995) 82 Comp. Cas.
(St.) 261]. See Full Text of the Circular under Section 609.
See also Comments under Section 20 for discussion on Form 1A of Companies (Central Government's) General
Rules and Forms, 1956.
Inclusion of items and activities in the Objects Clause of Memorandum and Articles of Association of a
company.—“As you are aware Section 13 of the Companies Act, 1956 was amended by the Companies
(Amendment) Act, 1965 so as to require the companies to specify clearly 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
and other objects of the company not included as main objects or objects incidental or ancillary to the main objects.
It has been, however, observed that while companies comply with these broad outlines in their memorandum of
association, cases are not rare where a very large number of items and activities are being included in the objects
clause. It was noticed that in one case as many as 106 sub-clauses were found included.
It was also noticed in the same case that though the main object of the company was to buy, acquire, hold and deal
etc. in shares, stocks, debentures and other securities, it was found that the company had not carried on any such
business activity and was in fact dealing with plastics and chemicals. The later item of activity was perhaps covered
by items under ‘other objects’.
The matter has been examined in the Department and it is felt that it is necessary for the companies incorporated
under the Companies Act, 1956 to have clearly defined the spheres of business activities and promoters of
companies should be persuaded at the time of incorporation of companies to have a few reasonably well defined
and clear objects under the main objects clause and a limited number of ‘other objects’ which should be consistent
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with the intended or proposed activities of the company and within the financial capability of the company as
determined by its capital structure.
I am directed to bring the above views of the Department to all the Registrars of Companies with a request to
ensure that the above broad outlines are kept in mind while registering companies under the Companies Act, 1956.
They should also ensure that the companies carry on only the business that they are allowed to carry on under their
Memorandum of Association and transgression in this behalf should be taken up with the companies for corrective
action as soon as it comes to notice.” [ Circular Letter No. 8/15(13)/82-CL-V, dated 22-12-1982].
Companies with the main objects of conducting Prize Chit Business.—“The objects clauses of the
Memorandum of Association of Companies may be scrutinized carefully before their incorporation to see that there
is no clause therein which is repugnant to the provisions of the Prize Chits and Money Circulation Scheme
(Banning) Act, 1978 (43 of 1978).” [ Circular No. 3/79 (F. No. 14/20/79-CL-V), dated 16-11-1979]. Further letter
addressed to the Registrars of Companies states thus:
“In continuation of this Department's Circular No. 3/79, dated the 16th November, 1979 [ printed above] on the
above subject, I am directed to enclose a copy of the letter No. 464/Leg.-13A/82-83, dated the 9th August, 1982 of
the Reserve Bank of India [ printed below] and to say that the suggestion made therein may be kept in view while
registering companies with the main objects of conducting Prize Chit Business.” [ Circular Letter No. 14/20/79-CL-V,
dated 20-9-1982].
“We invite a reference to D.O. Letter No. DNBC 322/Leg.-13A/79-80, dated the 6th August 1979. It is observed that
despite the Govt. Circular No. 14/20/79-CL-V (Administration Circular No. 3/79) [ printed above] to all the Registrars
of Companies, incorporation of companies with the main objects of conducting prize chit business continues
unabated especially in Delhi. We enclose a statement showing the names of 54 such companies and the relevant
clause in their Memorandum of Association which is repugnant to the provisions of the Prize Chits and Money
Circulation Schemes (Banning) Act, 1978. A few such companies have filed writ petitions in the High Courts at
Calcutta and Agartala (Bench) contending, inter alia, that the Registrar of Companies has not objected at the time
of registration to the type of business they proposed to carry on and hence they were carrying on lawful business. In
the circumstances we once again request you to instruct all the Registrars of Companies (except in the State of
Jammu & Kashmir) to exercise caution while registering such companies.” [ RBI Letter No. DNBC 464/Leg.-13A/82-
83, dated 9-8-1982].
Scrutiny or vetting of Memorandum.—The promoters of the company may get the Memorandum and Articles of
Association of the proposed company vetted from the Registrar of Companies and if required get the same
approved from the SEBI before they are presented to the ROC for registration.
Department's view.— Scrutiny of the draft Memorandum and Articles by Registrar.—“A suggestion has been
made to the Company Law Board that it would be helpful to promoters if the Registrar of Companies could
scrutinise and approve the draft Memorandum and Articles of a proposed company before they are presented to
him for registration. Though it may not be possible for Registrars of Companies to accept a definite commitment in
this regard, the Board is of the view that the Registrars should to the extent possible offer their help and advice to
those who may approach them in drawing up the Memorandum and Articles. This would be specially desirable in
cases where promoters have no prior experience of company promotion. All the Registrars of Companies are
advised to take necessary action accordingly.” [ Circular No. 128/HCC/64, dated 27-7-1964 : Govt. of India
Memorandum to be approved by SEBI.—Where the Memorandum and Articles of Association are required to be
approved by SEBI, the Registrars of Companies shall not register the company under the Companies Act, 1956,
without the Memorandum and Articles of Association being approved by SEBI.
See Department's views hereinafter. See List of SEBI Act, Rules, Regulations and Guidelines along with Appendix
Nos. in Comments under Section 55A.
Independent Objects.—Where the objects of a company are mentioned in a series of paragraphs in the
Memorandum and it also states that each object should be treated as an independent object, full effect has to be
given to each object.76
See detailed Comments on Interpretation of Memorandum, Doctrine of ultra vires, Implied powers, Ultra vires acts
Page 13 of 28
and Ratification, Doctrine of constructive notice and Officers' acts, etc., after remaining clauses of Memorandum
hereinafter.
Liability Clause [ Section 13(2)].—A company formed or incorporated under the Companies Act, 1956 may be (a)
a company limited by shares, (b) a company limited by guarantee, or (c) an unlimited company. [ Section 12(2)].
The extent of liability is indicated in the Memorandum of Association. The Memorandum of a company limited by
shares or by guarantee shall specifically state that the liability of its members is limited. A company limited by
guarantee should also indicate the amount that a member may be called upon to pay in case the company is wound
up. See Guarantee Clause below.
A member's liability cannot be increased without his consent except in cases of clubs where the rate of subscription
may be increased.77
Guarantee Clause [Sub-section (3)].—The Memorandum of a company limited by guarantee shall also state the
maximum amount 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.
Capital Clause [ Section 13(4)(a)].—In the case of a company limited by shares 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. Thus, the authorised or nominal share capital, the different kinds of shares and the nominal value of
each share should be stated in the Memorandum.
See also Comments under following provisions: Share [ Section 2(46)], Minimum paid-up capital of Private
Company [ Section 3(1)(iii)], Minimum paid-up capital of Public Company [ Section 3(1)(iv)], Nature of Shares [
Section 82], Kinds of Share Capital [ Section 86], Publication of authorised as well as subscribed and paid-up
capital [ Section 148] and Model Articles 2-12 in Table A of Schedule I.
“Share”, as defined in the Companies Act, 1956 and as understood in company law, means share in the capital of a
company. It is a tangible property. The words “capital” and “share capital” are synonymous. It may mean the
nominal or the authorised capital, the issued capital or the paid-up capital; and the meaning depends in the context
in which that term is used. A company having share capital is a company registered with a nominal or authorised
capital, which is divided into shares of a fixed amount. Where a company has no authorised capital, it cannot be
said to be a company limited by shares, but is a company limited by guarantee as mentioned in section 12(2)(b) of
the Act. Therefore, an application under sections 397 and 398 of the Act can only be made by requisite number of
members.78
Provisions as to the nature of the shares and the rights to be attached to them are more properly to be made in the
Articles.79 In changing global scenario, the concept of multi-currency capital companies has been recognised in
English law. Fixed amount in such a case may be stated in different currencies for different classes.80
Section 611 and Schedule X.—Table of Fees to be paid to the Registrar provides that in respect of a company
having a share capital the amount of fees is to be paid in Rupees depending upon nominal or authorised share
capital of the company.
Subscription or Association Clause [ Section 13(4)(b) and (c)].—In the case of a company having a share
capital, (1) Every subscriber of the Memorandum shall take at least one share and (2) Each subscriber of the
Memorandum shall write opposite to his name the number of shares he takes. Where this was not done the person
whose name was mentioned as subscriber was held not to be a subscriber.81
As explained under section 12, a public company must have 7 or more subscribers and a private company must
have 2 or more but not exceeding 50 subscribers. The persons who can be subscribers or signatories to the
Memorandum of Association and the mode of subscription has also been explained.
See detailed Comments on Subscription Clause under Section 12. See also Comments on Signatures by
Subscribers under Section 15.
Department's view.— Streamlining the working of Registrars of Companies—Report of the Review

Committee.—The Department vide Circular No. 1 of 1995, dated 16-2-1995 directed the Registrars of Companies
(ROCs) to implement certain recommendations of the Review Committee to study the working of offices of the
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ROCS with a view to streamline and simplify procedures involved in dealing with documents and for reduction in the
number of documents filed by the companies.
“Registration of a new company : (ii) The Department, vide Circular No. 27/1/89/CL-III, dated February 17, 1989,
advised the ROCS to ensure that at the time of registration of a new company, the subscribers to the memorandum
of association should tally with the list of promotors/first directors stated in the application for availability of name,
and in case one or more of the promotors are not interested in participating in the promotion of a new company at a
later stage, a ‘no objection’ letter from such promotor(s) is made available to ROC. This circular was amended on
January 5, 1990 (No. 1 of 1990) [ reproduced in Comments under Section 20], to the effect that ROCS should
register the company only in case where the promotors, as per the availability of name application, are also
subscribers to the memorandum. On reconsideration, it has now been decided, in partial modification of the above
circular, that so long as there is at least one promotor common, both in the name availability application and the
subscription clause of the memorandum and articles of association, and others have no objection, the company
may be registered.” [Extracts from Circular No. 1 of 1995 (F. No. 14/6/94-CL-V), dated 16-2-1995 : (1995) 82 Comp.
Cas. (St.) 261].
See Full Text of the Circular under Section 609. See also Department's views, Practice Notes and Comments under
Sections 12, 15, 20 and 33.
Guidelines for registration of Asset Management Companies (AMCs).—“The following guidelines are issued in
respect of registration of Asset Management Companies (AMCs), in consultation with the Securities and Exchange
Board of India:
(a) Approval of AMC by SEBI.—As per guidelines, AMC shall be authorised for business by SEBI on the basis
of certain criteria and the memorandum and articles of association of the AMC would have to be approved
by SEBI. Accordingly, you are advised not to register any company under the Companies Act, 1956,
without the memorandum and articles of association being approved by SEBI.*
(b) Authorised capital of AMC.—The primary objective of setting up of an AMC is to manage the assets of the
mutual funds and other activities which it can carry out, such as, financial services consultancy which do
not conflict with the fund management activity and are only secondary and incidental. That being so, it may
not be practical to expect a company to be set up with a paid-up capital of Rs. 5 crores to carry on only
incidental activities, without any assurance of its receiving an approval from SEBI to act also as an Asset
Management Company for a mutual fund. You should, therefore, not have any objection in registering an
AMC if the authorised capital of such a company is approved by SEBI.*
2. A copy of these guidelines may also be placed on the notice board of your office for general information.” [
Circular No. 4 of 1992, dated 4-9-1992 to All Regional Directors and Registrars of Companies : (1992) 75 Comp.
Cas. (St.) 216].
Interpretation of Memorandum.—The Memorandum of Association is the constitution or charter of the company

defining its objects. Its purpose is to enable the shareholders, creditors and those dealing with the company to know
what is the company's permitted range of enterprise.82
The Memorandum of Association must like any other document be construed according to accepted principles
applicable to the interpretation of all legal documents and no rigid canon of construction is to be applied to such a
document. Like any other document, it must be read fairly and its import derived from a reasonable interpretation of
the language which it employs.83 The intention with which the directors put through the transaction is irrelevant in
deciding whether the transaction is ultra vires. The Memorandum has to be construed for this purpose.84
Act to override Memorandum.— Section 9 provides that save as otherwise expressly provided in the Act (a) the
provisions of the Companies Act, 1956 shall override the memorandum, articles, agreements or resolutions, and (b)
any provision contained in the memorandum, articles, agreement or resolution shall, to the extent to which it is
The provisions of the Act will prevail in case there is a conflict between the Act and the company's Memorandum,
Articles, resolutions or agreements.85
In view of this overriding provision, the Memorandum of Association of the company should be carefully drafted.
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Memorandum to override Articles.—The Memorandum of Association has to be read together with the Articles of
Association, where the terms are ambiguous or silent. The Articles may explain the Memorandum, but cannot
extend its scope.86
Memorandum and Articles binding [ Section 36(1)].—Subject to the provisions of this Act, the Memorandum and
Articles of Association bind the company and members as if signed by the company and each member, and contain
covenants to observe all the provisions of the Memorandum and Articles.
Incidental or ancillary.—Acts “incidental or ancillary” or naturally conducive to the main object are those which
have a reasonably proximate connection with the object and some indirect or remote benefit, which the company
may obtain by doing an act not otherwise within the object clause, will not be permitted by this extension. Where the
primary object of the company was to carry on life insurance business, the donation of company's funds for the
benefit of a trust for charitable purposes was not incidental to or naturally conducive to that object. There was no
discernible connection between the donation and the objects of the company. The ultimate benefit which might
result to the company in getting trained personnel in insurance was too indirect to be regarded as incidental or
naturally conducive to that object 87
Where the petitioner-company was unable to carry on the business of setting up the electronic industry, its main
object. But, decided to carry out and diversify in the business of investment in shares, the ancillary object. The
company can carry out ancillary object. The act of acquiring shares by the company for the purpose of investment
was therefore not ultra vires. The registration of transfer of shares could not be refused on this ground. The
respondent-company was directed to rectify the register and pay dividends and costs because the respondent-
company refused to enter the name of the petitioner in the register without sufficient cause.88
In construing the various clauses, the objects clauses should be construed independent of each other so as to give
full effect to each of them.89
See detailed Comments under Implied Powers hereinafter.
Other objects of the company.— Section 149(2A) of the Companies Act, 1956 requires that a company shall not
commence any business falling within the third group, i.e., other objects of the company, unless a special resolution
has been passed and a declaration in Form No. 20A of the Companies (Central Govt.'s) General Rules and Forms,
1956 has been filed with the Registrar of Companies.
Commencement of new business.—An existing company cannot commence new business hitherto not done
without a Special Resolution of the shareholders and a new company will have its Memorandum of Association in
conformity with the provisions of section 13(1)(d) read with section 149.
Therefore, general or miscellaneous clauses in the Memorandum of Association such as “without prejudice to the
generality of the preceding objects” and “the several objects stated hereinabove are independent objects” and “a
paragraph shall not be in any way limited or restricted by reference to or inference from the terms of any other
paragraph” have lost their value to some extent.
Amalgamation.—Where the Memorandum of Association of the transferee company mentioned under “other
objects” the manufacture of “chemicals”, which was the business of the transferor company. The transferee
company followed the procedure and complied with the requirements of section 149(2A) of the Act for shifting the
clause under “other objects” to the “main objects” of its Memorandum of Association. The objection of the Central
Government that the transferee company had no power to take up and carry on the business of the transferor
company was overruled. The Court [ now the Tribunal] has jurisdiction to sanction a scheme of amalgamation under
section 394 even if the scheme contemplates a consequential alteration in the objects clause of the Memorandum
of the transferee company without complying with the procedure in section 17 of the Act.90
Doctrine ofultra vires.—Decisions on behalf of a company are taken by (a) the Board of directors or the
shareholders or members in general meeting or (b) by officers, agents or servants of the company. The Latin
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expression ultra vires means acts undertaken beyond (ultra) the legal powers (vires) of persons acting or purporting
to act for and on behalf of the company.
As per the doctrine of ultra vires, (1) the acts beyond the Memorandum of Association of the company are ultra
vires the company. Such acts are absolutely void and cannot be ratified even if all the shareholders agree, (2) the
acts beyond the powers of directors only are ultra vires the directors and may be ratified by an Ordinary Resolution
at a general meeting and altering Articles of Association of the company by Special Resolution, (3) the acts beyond
the provisions of the Act would be ultra vires the Companies Act and also entail penalty and prosecution, and (4)
the acts which are within the implied powers are not ultra vires.
Doctrine abolished in English Law.—The doctrine of ultra vires has been virtually abolished by the English
Companies Act, 1985 as amended by the English Companies Act, 1989 to bring the English Company law in
conformity with the European Community Directives. Provisions relating to Objects clauses in Memorandum of
Association under the English law and provisions virtually abolishing the doctrine of ultra vires under English Law
have been explained later.
The doctrine of ultra vires which is applicable under the Indian Company Law, Implied Powers, Ultra vires acts and
Ratification, etc., are enunciated below.
Implied Powers.—A company has power to do all that is reasonably necessary for attaining its objects. The courts
have become increasingly ready to imply powers of this nature, i.e., powers which may be implied on a construction
of the powers expressed in the Memorandum of Association and are deemed to be intra vires.
The words “and to do all such other things as are incidental or conducive to the attainment of the above objects” will
be taken to include such incidental or ancillary powers as are necessarily implied in carrying out the main object.91
Any trade or business which the directors bona fide believed could be advantageously carried on by the company in
connection with or as ancillary to its main business was held to be intra vires the company under its memorandum
of association even though it had no objective connection with or relationship to the company's main business.92
Power to carry out an object, undoubtedly includes power to carry out what is incidental or conducive to the
attainment of that object, for such extension merely permits something to be done which is connected with the
objects to be attained, as being naturally, conducive thereto.93 A company in carrying on the trade for which it is
constituted must be in a position to do all such things as may fairly be regarded as incidental to or consequential
upon that trade.94
Where the company had a general object to carry on business as bankers, capitalists, financiers, concessionaires
and merchants and generally to undertake and carry out all such obligations and transactions as an individual
capitalist may lawfully undertake and carry out, the partnership by the company with a person which minimised his
U.K. tax on earnings in the U.S.A. was held to be intra vires.95
Charity cannot sit at the Boardroom table and there are to be no cakes and ale except for the benefit of the
company. An activity not bona fide designed to enhance financial prosperity of the company would necessarily be
ultra vires. A member is entitled to bring an action to restrain the company from doing an ultra vires act.1
This did not necessarily ban charitable or political contributions, grant of pensions to retired employees or research
and education likely to lead to direct and substantial advantage to the company while the company remained a
going concern.2
A non-trading company will exercise only such powers as are necessary to enable it to discharge the duties and
fulfil the purposes for which it is constituted.3
A trading company has implied powers to borrow, give security, to sell or mortgage land, to appoint and act by
agents for purposes of its business. Such powers are incidental or properly to be inferred from the powers
expressed in the Memorandum of Association.4 Any step taken to augment the working capital of the company will
be incidental to the business of the company and conducive to the attainment of its objects.5 Borrowing money is
however not an independent activity but has to be for some purpose. Where the defendant bank's loan was for a
purpose known by it to be ultra vires and was tainted by unlawful purpose for which it was made. The debentures
given as security for it were void.6
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Payment to a retired secretary and member of a club by way of annuity, pension or gratuity is within the powers of
the club although under the Memorandum no dividend or loans are to be paid by way of profit to its members.7
Where a company has power to purchase land, it is implied that it has power to let out or to sell the land.8
Negotiation of the negotiable instruments is within the ordinary course of business of a company, no special power
is necessary.9 A chemical manufacturer may spend money on research and education likely to lead to direct and
substantial advantage to the company.10 A company can sell its personal properties as incidental to the
management of its business.11
Whatever is fairly incidental to these things which the legislature has authorised ought not to be held ultra vires.12
Where a company is formed for working a patented machine, it is not ultra vires to purchase the patent.13 A
company empowered by its Memorandum of Association to assist in the formation of other companies can buy
shares of a railway company.14 A bona fide compromise of a reasonable claim by payment of a sum of money out
of the company's capital is not ultra vires.15
See also Comments under Incidental or ancillary hereinbefore.
Ultra viresacts and Ratification.—A company is competent to carry out its objects specified in the Memorandum
of Association and cannot travel beyond the objects. Where a company does an act which is beyond the objects
mentioned in the Memorandum of Association of the company and is therefore ultra vires, no legal relationship or
effect ensues therefrom. Such an act is absolutely void and cannot be ratified even if all the shareholders agree.16
A company cannot ratify anything which is outside the objects and powers of the company. Such an act cannot be
validated by the assent of a general meeting of the shareholders or by obtaining judgment by consent or by
estoppel. A contract or an act beyond the objects clause will be ultra vires the company and would be void. Such an
act cannot be ratified even by a unanimous resolution of all the shareholders.17
Whether a transaction is ultra vires the company has to be decided on the basis of the facts established and
provisions of the Memorandum and not on the basis of any abstract rule. A company may undertake the tax liability
of another company in respect of the undistributed dividends kept back for being used as a working capital.18
A transaction beyond the powers of the directors but within the company's powers can be ratified by resolution at a
general meeting or by acquiescence.19
In some cases the company may be estopped from denying the authority of the director or chairman.20 A business
transacted at an informal meeting may be ratified in a subsequent properly convened meeting,21 a contract entered
into by directors at a meeting irregularly constituted may be ratified by another properly constituted Board meeting
and even by an action by the company to enforce the contract.22
An action brought without proper authority may be ratified. Where the company had no directors, two individuals
brought an action on the company's behalf to recover debts without any authority, it was held that the liquidator
could ratify the action.23
The scope of the doctrine of ultra vires was narrowed in later English cases thus: (1) ultra vires should be restricted
to the question whether the company has acted within its capacity, (2) this depended solely on the construction of
its objects clause, (3) if it had acted within those objects and the express and implied powers, the act was intra
vires, whether or not it was done bona fide for the benefit of the company and for a proper purpose, (4) an exercise
of an express power could never be ultra vires unless, perhaps, the power was not stated to be an independent
object, and its exercise was undertaken in pursuance of activity beyond its objects.24
Doctrine of ultra vires has virtually been abolished under the English Companies Act, 1985 as amended by the
English Companies Act, 1989. Under the English law ultra vires acts of directors may now be ratified by a Special
Resolution and directors may be absolved by another Special Resolution. See detailed Comments later.
Actsultra viresthe Directors.—The acts beyond the powers of directors are ultra vires the directors and may be
ratified by an Ordinary Resolution at a general meeting and altering Articles of Association of the company by
Special Resolution. A transaction which is beyond the powers of the directors only may be ratified by an Ordinary
Resolution of a general meeting. To authorise the directors to do that act in future a Special Resolution at a general
meeting altering the Articles of Association of the company will be necessary.25
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Article of Association are internal regulations of a company and any act outside the provisions therein would be
irregular unless ratified by members. Such irregular act is wrongful and continuous act of oppression and
irrespective of laches the question of limitation does not arise to take action for such irregular act.26
For acts beyond the powers of the company and acts beyond the authority of the directors see Comments under
Section 293. Doctrine of Constructive notice, Directors and Officers' acts and rule in Turquand's case have been
explained later.
Actsultra viresthe Companies Act.—A company cannot buy its own shares or advance money to a director to do
so or accept surrender of shares involving reduction of shares.27 It is ultra vires of a company to issue unauthorised
capital or reduce or repay capital or issue shares at a discount without complying with the statutory requirements.28
Payment of dividends out of capital,29 unreasonable remuneration paid for services rendered, making payment for
the benefit of a section of shareholders, paying costs of prosecution for libel or suit not instituted by company (even
though for the benefit of the company), avoidance of provisions relieving liability of officers and auditors of
company, etc., would be ultra vires.30
Acts beyond the provisions of the Act would be ultra vires the Companies Act and also entail penalty and
prosecution. See also Comments under Section 293.
Effect ofultra viresacts.—Where a company does an act which is beyond the objects mentioned in the
Memorandum and is ultra vires, no legal relationship or effect ensues therefrom. Such an act is absolutely void and
cannot be ratified even if all the shareholders agree. If any money has been disbursed then the officers responsible
for such unlawful disbursement and not the company will be responsible.31
The directors who throw away the company's money on ultra vires objects are personally liable to make good the
company's loss.32 A contract or transaction which is ultra vires the company is not binding on the company.33
But if property is acquired by ultra vires expenditure, the company's right over it may be protected.34 If the directors
carry on a trade which is ultra vires the company, they cannot bind the company by the contracts and the vendor
cannot recover in respect of the goods supplied.35 A loan which is ultra vires the company cannot be recovered. But
if the loan was used in paying off a creditor of the company or trading debts, then the lender may claim
subrogation.36 Neither the third party nor the company can sue. The only remedy of either is to recover money or
property paid or transferred under the void transaction to the extent to which it was possible to trace it.37
A company can retain property and recover money although the transactions through which they were acquired are
ultra vires.38 There is no estoppel against a company when the act concerned is ultra vires the company.39 A bona
fide transaction with a company, impeachable on ground of being ultra vires, will be set aside only on terms that
both parties be restored to their original position.40
An ultra vires transaction creates no debt, legal or equitable, and upon winding up of the company the contributories
are not liable to pay such debts.41
When guarantee given by the company was ultra vires its Memorandum and no such power could be spelt out from
the Memorandum. Just as a consent decree founded on the incompetency of an infant or minor is void and a nullity.
Likewise, a contract founded on the incompetency of the company is void and a nullity. When a decree is void by
reason of ultra vires, it can be successfully attacked in any collateral proceedings. This rule is applicable with
greater force in winding up proceedings where the court's [ now the Tribunal's] jurisdiction is of wider amplitude.42
And an act of the company will not be ultra vires even though it may be a breach of statutory provision, which
makes the act voidable.43
Injunction.—A shareholder may restrain the company from acting ultra vires by an order or injunction from the
court. He can file a suit for setting aside a contract which has been unlawfully entered into by it.44 Where the act
complained of is illegal or ultra vires the company a suit can be filed to restrain the company or for declaration that
the purported act is invalid.45
The rule of internal management as stated in Foss v. Harbottle46 does not apply to an act which is ultra vires the
company or illegal. A resolution which is ultra vires or illegal or is a fraud on the minority or is not bona fide or for
the benefit of the company as a whole or is intended to discriminate between the majority shareholders and the
Page 19 of 28
minority shareholders is illegal and can be questioned by a separate action in the Civil Court. The reason appears
to be that if the minority were denied that right, their grievance could never reach the Court because the
wrongdoers themselves being in control would not allow the company to take any action.47
Recent Trend.—The doctrine of ultra vires has been virtually abolished by the English Companies Act, 1985 as
amended by the English Companies Act, 1989 to bring the English law in conformity with the European Community
Directives.
Under the English Companies Act, 1985 as amended by the English Companies Act, 1989, which has virtually
abolished the doctrine of ultra vires in English Law, a single member of the company may bring proceedings to
restrain the doing of an act which but for sub-section (1) of section 35 of the English Act, 1985 would be beyond the
company's capacity; but no such proceedings shall lie in respect of an act done in fulfilment of a legal obligation
arising from a previous act of the company. [ Section 35(2) and proviso of the English Companies Act, 1985].
See detailed Comments hereinafter.
In India, this doctrine needs to be made in consonance with the European countries. To suit the requirements of the
business community the doctrine should be further modified so that all transactions between the company and
outsiders could be made binding on the company on the principle of agency. The directors, officers and secretaries
of the company who negotiate the transactions on behalf of the company should be treated as duly authorised
agents for that purpose and acts by them within the actual scope of authority or by subsequent ratification or within
the apparent or ostensible scope of authority should bind the principal, i.e., the company. To have checks on the
directors and officers of the company, the principle of agency should be extended to make them liable to the
company for any transactions entered into by them which might transpire to be ultra vires their company.48
The provisions of the English Companies Act, 1985 relating to Objects clauses in Memorandum of Association as
amended by the English Companies Act, 1989, virtually abolishing the Doctrine of ultra vires and Constructive
notice, Constructive notice and Officers' acts and rule in Turquand's case, etc., are explained below.
Doctrine of constructive notice and Directors' acts.—As per Doctrine of constructive notice, which was
established even before the doctrine of ultra vires, any one dealing with a company is deemed to have notice of the
contents of its ‘public documents’, e.g., Memorandum and Articles of Association. A third party is thus deemed to
have knowledge of the contents of its objects clause.
Where the insolvent company's stated objects were to manufacture dresses but it was making veneered panels.
The claims of the creditors were held to be ultra vires on a combination of actual knowledge of the present nature of
the business and constructive knowledge of objects clause.49
The result of constructive notice rule is that neither the third party nor the company can sue. The only remedy of
either is to recover money or property paid or transferred under the void transaction to the extent it is possible to
trace it.50
In case of acts ultra vires the directors or officers of the company beyond their authority, the effect of the
constructive notice rule was mitigated by refinement of normal agency principles in Royal British Bank v. Turquand.
Rule inRoyal British Bank v. Turquand.—Where under the company's deed of settlement, the Board of Directors
could borrow on bonds such sums as from time to time should be authorised by a resolution of the company in
general meeting. A third party finding that the authority might be made complete by a resolution would have a right
to infer the fact of a resolution authorising that which on the face of the document appeared to be legitimately
done.51
As per rule in Turquand's case also known as Docrtine of internal or indoor management although third parties
dealing with a company are deemed to have notice of the contents of its Memorandum and Articles, they are not
required to satisfy themselves that all the internal regulations set out therein have been complied with. The rule in
Turquand's case does not help when the transaction is ultra vires the company or beyond the company's capacity.
Persons dealing in good faith.—The principle that a company may be assumed to have properly performed acts
which are within its Memorandum of Association is not an absolute and unqualified rule of law applicable in all
circumstances. This principle applies only in favour of persons dealing with the company in good faith. The principle
will not apply if it can be proved that the person dealing with the company knew of the irregularity in the company's
Page 20 of 28
procedures or he was put on enquiry but failed to make proper enquiry. The transaction which was within the
objects of the company or which was capable of being performed as reasonably ancillary or incidental to the objects
is not ultra vires merely because the directors carried out the transaction for purposes which were not within the
Memorandum of Association. Where the directors are held out by the company as having ostensible authority to
bind the company to transactions which, expressly or impliedly, fell within the powers conferred by the
Memorandum of Association, a person dealing in good faith with the company is entitled to assume that the
directors were properly exercising their powers for the purposes of the company and is further entitled to hold the
company to the transaction. Where a transaction is within the powers of the company but in excess or in abuse of
directors' powers, the transaction may be set aside at the instance of a shareholder but a party to the transaction
having such knowledge cannot hold the company to the transaction and may be accountable as a constructive
trustee for any money or property received by him from the company. However, where a third party's money is
obtained by an agent's unauthorised act and applied for the benefit of the principal, the principal is liable to restore
the money even though the third party knew the agent was not authorised to obtain or receive the money.52
Absence of good faith.—A mere absence of good faith on the part of the person dealing with the company will be
sufficient to nullify the transaction.53
Constructive notice—Officers' acts binding on company.—A representation signed on behalf of a limited

company by a duly authorised agent acting within the scope of his authority or by an officer or employee of the
company acting in the course of his duties in the business of the company constitutes a representation made by the
company and signed by it. The plaintiff's claim, based on negligent misrepresentation, was for part of a syndicate
loan organised by the defendant, which was under a fiduciary duty to inform all participants in the syndicate,
including the plaintiff, if at any time it acquired knowledge that the security for the loan was insufficient. The
defendant's continued failure to so inform members of the syndicate would constitute a continuing breach of the
defendant's fiduciary duty which would prevent time from running until the plaintiff discovered the concealment or
could with reasonable diligence have discovered it.54
See also English decisions under Constructive notice and Officers' acts under Doctrine of ultra vires under English
Law explained hereinafter.
Doctrine ofultra viresunder English Law.—The Doctrine of ultra vires and the Doctrine of constructive notice
have been virtually abolished by the English Companies Act, 1985 as amended by the English Companies Act,
1989. To bring the English Company law in conformity with the European Community Directives, the Great Britain
passed the European Communities Act, 1972. Section 9(1) of the European Communities Act 1972, later re-
enacted as section 35 of the English Companies Act, 1985 modified the ultra vires doctrine as follows.
(1) Objects clause.— Section 2 of the English Companies Act, 1985 requires the objects of the company to be
stated in its Memorandum. Section 3A inserted by the English Companies Act, 1989 provides that a company with
the object to carry on business as a ‘general commercial company’ may carry on any trade or business whatsoever,
and has the power to do all such things as are incidental or conducive to the carrying on of any trade or business by
it. The aim of section 3A is to simplify the objects clauses in the Memorandum. As per section 4, a company may
alter the objects clause in its memorandum by a special resolution. But, if an application is made under s. 5 the
alteration will have effect in so far as it is confirmed by the court.
(2) Virtual abolition of ultra vires.—Besides simplifying the objects clauses and making it easier to alter them as
above, sections 35, 35A and 35B have been substituted by the English Companies Act, 1989 for the original section
35 of the English Companies Act, 1985, which inter alia, provide as follows.
(a) The validity of an act done by a company shall not be called into question on the ground of lack of capacity
by reason of anything in the company's Memorandum. [ Section 35(1)]. Thus, the company or third party
cannot invoke strict ultra vires.
(b) A single member of the company may bring proceedings to restrain the doing of an act which but for sub-
section (1) would be beyond the company's capacity; but no such proceedings shall lie in respect of an act
done in fulfilment of a legal obligation arising from a previous act of the company. [ Section 35(2) and
proviso].
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(c) It remains the duty of the directors to observe any limitation on their powers flowing from the company's
Memorandum and action by the directors which, but for sub-section (1), would be beyond the company's
capacity may only be ratified by the company by special resolution. A resolution ratifying such action shall
not affect any liability incurred by the directors or any other person; relief from any such liability must be
agreed to separately by special resolution. [ Section 35(3)].
(d) An act by Directors which is within the company's capacity but beyond the directors' actual or apparent
authority can be ratified by an ordinary resolution.55
Section 35 virtually abolishes the doctrine of ultra vires in relation to third parties or the external relations but,
maintains the status quo between the company and its directors or internal relations. The section affords protection
to the third parties to the transaction. Section 35 enables the acts of the directors and ‘other persons’, which
formerly could not be ratified even by the unanimous consent or resolution of the members,56 to escape liability if
the act is ratified by a special resolution and they are further absolved by a separate special resolution.
(3) Constructive notice and Officers' acts.—Four new sections have been inserted into the English Companies
Act, 1985 by the English Companies Act, 1989, viz., sections 35A, 35B, 711A and section 322A which, inter alia,
provide as follows.
(i) In favour of a person dealing with a company in good faith, the power of the Board of directors to bind the
company, or authorise others to do so, shall be deemed to be free of any limitations under the company's
constitution. [ Section 35A(1)].
For this purpose—(a) a person ‘deals with’ a company if he is a party to any transaction or other act to
which the company is a party; (b) a person shall not be regarded as acting in bad faith by reason only of his
knowing that an act is beyond the powers of the directors under the company's constitution; and (c) a
person shall be deemed to have acted in good faith unless the contrary is proved. [ Section 35A(2)].
(ii) A party to a transaction with a company is not bound to enquire as to whether it is permitted by the
company's memorandum or as to any limitation on the powers of the Board of directors to bind the
company or authorise others to do so. [ S. 35B].
(iii) A person shall not be taken to have notice of any matter merely because of its being disclosed in any
document kept by the registrar of companies (and thus available for inspection) or made available by the
company for inspection. [ Section 711A(1)].
This does not affect the question whether a person is affected by notice of any matter by reason of a failure
to make such inquiries as ought reasonably to be made. [ Section 711A(2)].
(iv) Where the transaction exceeds a limitation on the powers of the Board of directors under the company's
constitution and the other parties, the transaction is voidable at the instance of the company and, whether
or not it is avoided, such parties and any director, who authorised the transaction, knowing that it exceeded
the Board's powers, are liable to account to the company for any gains they make and to indemnify the
company against any loss it suffers. The transaction ceases to be voidable in any of the four events
provided in sub-section (5) of section 322A but this does not affect the company's right to be indemnified,
unless the transaction is ratified by the company in general meeting by ordinary or special resolution or
otherwise as the case may require, e.g., if the transaction exceeds the company's capacity, it must be
ratified under section 35(3) by a special resolution and by an ordinary resolution if it is otherwise beyond
the Board's authority under section 35A. [ Section 322A].
The foregoing provisions of the English Companies Act have abolished the Doctrine of constructive notice
explained hereinbefore.
As the Doctrine of constructive notice has now been abolished under the English law, the rule in Turquand's case is
no longer of relevance to the third party dealing with the company through the Board of directors. Hence, a third
party, who has dealt with the company through its Board of directors (de jure or de facto) or with someone
authorised by the Board, will be protected so long as he has acted in good faith.
As a result of the new sections in the English Act, 1985 as amended by the English Companies Act, 1989, if a
transaction with a third party acting in good faith is effected on behalf of a company by the Board of directors or by
officer or agent authorised by the Board of directors, the transaction will bind the company.
But, where third party's dealings are with some officer or agent other than the Board normal agency principles as
Page 22 of 28
refined in Royal British Bank v. Turquand explained hereinbefore and later decisions shall still be relevant as
explained below.
When dealing with other officers of the company not so authorised by the Board of directors, the third party is not
necessarily protected merely because he acted in good faith and if there are suspicious circumstances, he should,
as under section 711A(2) of the English Act, make such inquiries as ought reasonably to be made and he will be
protected only if the suspicions of a reasonable person would be allayed by the answers to his inquiries.57
Board of directors for the purpose of foregoing new sections of the English Act means the persons occupying the
position of the Board whether or not they have been validly appointed. The Companies Acts have long provided that
the acts of a director are valid notwithstanding any defect that may afterwards be discovered, in his appointment. It
applies only when there has been a valid appointment which has not been vacated and not where there has been
‘no appointment’.58
The minute book of the Board meeting which authorised the transaction, i.e., debenture issue was held to be prima
facie proof and directors were not permitted to say that no such meeting was ever held.59
A person acting as the chief executive or managing director of the company will have the actual or ostensible
authority and his acts will bind the company.60
When there are persons conducting the affairs of the company in a manner which appears to be perfectly
consonant with the articles of association, those so dealing with them externally are not to be affected by any
irregularities which may take place in the internal management of the company.61
A manager or vice president of the company, if he does not have actual authority, will have ostensible authority to
undertake everyday transactions.62 Secretary of the company will similarly have such authority in relation to
administrative matters.63
As already suggested, the doctrine of ultra vires which is still applicable in India, needs to be made in consonance
with the English law and European countries and needs to be further modified on the principle of agency.
(4) Charitable companies.—The English Companies Act, 1989 inserted new sections 30A, 30B and 30C in the
English Charities Act, 1960, to provide modifications of sections 4, 35, 35A and 322A of the English Companies Act,
1985 containing provisions relating to ultra vires in its applicability to charitable companies.
For provisions relating to Charitable companies in India see Section 25.
Accounting and Auditing Practices.—Para 15.1 of the Statement on Auditing Practices issued by the Institute of
Chartered Accountants of India(ICAI) enumerated Salient provisions of the Companies Act, 1956 (1 of 1956)
concerning Chartered Accountants and stated as follows.
Statement.
1956 as follows:
Section 13 [Requirements with respect to the Memorandum].—This Section prescribes requirements with
respect to the Memorandum of Association. In regard to companies incorporated on or after 15th October 1965, a
distinction has been made between main objects and other objects. Attention is invited to the provisions of Section
149 and in particular to sub-section (2A) of the Companies Act, 1956.
Page 23 of 28
Edition, 1977, para 15.1 : Reproduced in Handbook of Auditing Pronouncements, Volume I— Compendium of
Statement on Auditing Practices (withdrawn).— Statement on Auditing Practices has since been withdrawn by
the Council of the Institute of Chartered Accountants of India (ICAI), at its 249th Meeting held in March, 2005
pursuant to the issuance of a number of Auditing and Assurance Standards (AASs) and Guidance Notes on the
topics covered by the various paragraphs of the said Statement.
Authorised Capital—Auditor to examine Memorandum of Association.—Para 8.1 of the Statement on Auditing

Practices issued by the Institute of Chartered Accountants of India(ICAI), inter alia, stated as follows:
In the case of Audit of a Company, the Auditor should examine the Memorandum of Association of the company,
the Minutes of the General Meeting and Office copy of the Return filed with the Registrar of Companies (vide
Section 97) c.
Statements and Standards, published by the ICAI, Third Edition, 2005, para 8.1, page II-17].
See e-Form 5 of the Companies (Central Government's) General Rules and Forms, 1956 (Pursuant to Sections 95,
97 or 94A(2) or 81(4), for Notice of Consolidation, Division, etc., or Increase in Share Capital or Increase in number
of Members.
Accounting Practices.— See detailed Comments on Accounting Provisions under Sections 209 to 223 and the
Companies (Accounting Standards) Rules, 2006, ICAI Accounting Standards (AS), Accounting Standards
Interpretations (ASI), Guidance Notes on Accounting, Authority Attached to Documents Issued by the Institute of
Chartered Accountants of India (ICAI) under Section 211(3C) and Schedule VI.
Auditing Practices.— See detailed Comments on the Auditing Provisions under Sections 224 to 233B and ICAI
Auditing and Assurance Standards (AAS), Statements and Guidance Notes on Auditing and Authority Attached to
Documents Issued by the Institute of Chartered Accountants of India (ICAI) under Section 227.
Secretarial Practice and Check List.— Section 13. See Secretarial Practice and Check List under Section 33.
See also Practice Notes, Form and Procedure and Secretarial Practice and Check List under Sections 12-40.
Objects of the Producer Company [ Section 581B(1)(a) to (k)].— Section 581B(1)(a) to (k) enumerate objects of
the Producer Company which may be related to all or any of the matters referred to therein.
The objects of the Producer Company enumerated in Section 581B(1)(a) to (k) shall, inter alia, be contained with
additional matters required to be stated in the Memorandum of Association of the Producer Company under Section
581F.
Memorandum of Association [ Section 581F].—The Memorandum of Association of a Producer Company shall

contain the particulars specified in Section 581F(a) to (i) of the Companies Act, 1956 in addition to other matters.
Formation of Co-operative business as Companies.—The main object of Part IXA comprising Sections 581A to
581ZT of the Companies Act, 1956 is to facilitate the formation of the Co-operative business as Companies and to
convert the existing business into Companies (w.e.f. 6-2-2003).
Page 24 of 28
Chapter II of this new Part IXA of the Companies Act, 1956 contains relevant provisions for Incorporation of
Producer Companies, e.g.,
Formation of Producer Company and its registration [ Section 581C], Membership and voting rights of Members of
Producer Company [ Section 581D], Benefits to Members [ Section 581E], Memorandum of Producer Company [
Section 581F], Articles of Association [ Section 581G], Amendment of Memorandum [ Section 581H], Amendment
of Articles [ Section 581-I], Option to inter-State co-operative societies to become Producer Companies [ Section
581J], Effect of incorporation of Producer Company [ Section 581K], etc., of the Companies Act, 1956.
See detailed Comments under Sections 581B to 581N.
71. The word “and” omitted by Act 31 of 1965, s. 5 (w.e.f. 15-10-1965).

73. Cotman v. Brougham,(1918) AC 514 (HL) : (1918-19) All ER Rep. 265 (HL) : 87 LJ Ch. 379 : 119 LT 162 : 34 TLR 410 :
62 SJ 534 (HL). See detailed Comments on Interpretation of Memorandum, Doctrine of ultra vires, Implied powers Ultra
vires acts and Ratification, Doctrine of constructive notice, Doctrine of ultra vires under English Law, etc., after Clauses
required to be stated in Memorandum explained hereinafter.
75. Lakshminarayan Ram Gopal and Son Ltd. v. Government of Hyderabad,AIR 1954 SC 364 [LNIND 1954 SC 57]: 1955
SCR 393 : (1954) 25 ITR 449 [LNIND 1954 SC 57] (SC); Bengal and Assam Investors Ltd. v. CIT,AIR 1966 SC 1514
[LNIND 1965 SC 290]: (1966) 1 Comp. LJ 198 (SC) : (1966) 59 ITR 547 [LNIND 1965 SC 290] (SC) : (1966) 2 SCR
471.
76. V.M. Rao v. Rajeswari Ramakrishnan, (1987) 61 Comp. Cas. 20 (Mad.) (DB) : (1986) 1 Comp. LJ 1 (Mad.) (DB);
Introductions Ltd. v. National Provincial Bank Ltd., (1970) Ch. 199 : (1969) 1 All ER 887 : (1969) 2 WLR 791 (CA) :
(1969) 39 Comp. Cas. 919 (CA). See also Comments under Sections 34, 97 and 398.
77. Edwards v. Halliwell,(1950) WN 537 : (1950) 2 All ER 1064 : 94 SJ 803 (CA). See also Comments under Sections 12,
38 and 41.
78. S.N.D.P. Yogam, Quilon, In re, (1970) 40 Comp. Cas. 60 (Ker.). See also Comments under Sections 2(46), 12, 69, 70,
86, 397, 398 and 399.
79. Alexander Ewan Campbell v. T.E. Rofe,AIR 1933 PC 39.
80. Scandinavian Bank Group plc., Re,(1987) 2 All ER 70 : 2 WLR 752 : (1987) BCLC 220.
under Section 12.
* For Constitution and management of Asset Management Companies see the SEBI (Mutual Funds) Regulations, 1996.
See List of SEBI Act, Rules, Regulations and Guidelines along with Appendix Nos. in Comments under Section 55A of
the Companies Act, 1956—Powers of SEBI.
82. Cotman v. Brougham,(1918) AC 514 (HL) : (1918-19) All ER Rep. 265 (HL) : 87 LJ Ch. 379 : 119 LT 162: 34 TLR 410 :
62 SJ 534 (HL).
532]: (1963) 1 Comp. LJ 248 (SC); Egyptian Salt and Soda Co. Ltd. v. Port Said Salt Association Ltd.,(1931) AC 677
(PC) : 100 LJ PC 147 : 145 LT 313 (PC) : AIR 1931 PC 182; Deuchar v. Gas Light and Coke Co.,(1925) AC 691 :
(1925) All ER Rep. 720 : 94 LJ Ch. 382 : 133 LT 565 : 41 TLR 563 (HL). See also Comments later under ultra vires and
Sections 26 and 36.
Lloyd's Rep. 24 : (1969) 39 Comp. Cas. 824 (Ch.). See also discussion on ultra vires in subsequent paragraphs and
[LNIND 1962 SC 125]: (1962) Supp. 3 SCR 973. See also Comments under Ss. 9 and 76.
Page 25 of 28
86. Dr. A. Lakshmanaswami Mudaliar v. L.I.C. of India, (1963) 33 Comp. Cas. 420 (SC) : AIR 1963 SC 1185 [LNIND 1962
SC 532]; Angostura Bitters and Co. Ltd. v. Kerr,(1933) AC 550 (PC) : 102 LJ PC 161 : (1934) 4 Comp. Cas. 1 (PC).
532]: (1963) 1 Comp. LJ 248 (SC); Tomkinson v. South-Eastern Railway Co., (1887) 35 Ch.D. 675 : 56 LJ Ch. 932 : 56
LT 812. See also Comments under Doctrine of ultra vires and Effect hereinafter and Comments under Sections 26, 36
and 293A.
88. Ferrom Electronics Pvt. Ltd. v. Vijaya Leasing Ltd., (2002) 109 Comp. Cas. 467 (Kar.) (DB). See also Comments under
89. V.M. Rao v. Rajeswari Ramakrishnan, (1987) 61 Comp. Cas. 20 (Mad.) (DB) : (1986) 1 Comp. LJ 1 (Mad.) (DB); Akola
Electric Supply Co. Ltd., In re, (1962) 32 Comp. Cas. 215 (Bom.) : AIR 1962 Bom. 133 [LNIND 1960 BOM 115]; Anglo-
Overseas Agencies Ltd. v. Green,(1961) 1 QB 1 : (1960) 3 All ER 244 : (1960) 3 WLR 561 : (1961) 31 Comp. Cas. 38.
See also Comments under earlier paragraph “Independent Objects”.
90. Rangkala Investments Ltd., In re, (1997) 89 Comp. Cas. 754 (Guj.). See also Comments under Sections 17, 149(2A)
and 394.
545 : 42 LT 810 : 28 WR 769 (HL).
92. Bell Houses Ltd. v. City Wall Properties Ltd.,(1966) 2 QB 656 : (1966) 2 All ER 674 (CA) : (1966) 2 WLR 1323 : 110 SJ
268 : (1966) 36 Comp. Cas. 779 (CA); H.A. Stephenson & Son Ltd. v. Gillanders, Arbuthnot & Co.,(1931) 45 CLR 476 :
5 ALJ 326 : 38 ALR 49; American Home Assurance Co. v. Tjmond Properties Ltd., (1984) NZLR 452 : (1986) BCLC
181.
532]: (1963) 1 Comp. LJ 248 (SC). See also Comments in earlier paragraphs.
94. Egyptian Salt and Soda Co. Ltd. v. Port Said Salt Association Ltd.,(1931) AC 677 (PC) : 100 LJ PC 147 : 145 LT 313
(PC) : AIR 1931 PC 182.
95. Newstead v. Frost,(1980)1 All ER 363 : (1980) 1 WLR 135 : (1980) 124 SJ 116 (HL). See also Comments under
Section 11.
1. Hutton v. West Cork Rly. Co., (1883) 23 Ch.D. 654 : 52 LJ Ch. 689 : 49 LT 420 (CA). See Dr. A. Lakshmanaswami
Mudaliar v. L.I.C., (1963) 33 Comp. Cas. 420 (SC) : AIR 1963 SC 1185 [LNIND 1962 SC 532] in earlier paragraph.
See also Comments under Sections 41, 293A and 484.
2. Evans v. Brunner, Mond & Co., (1921) 1 Ch. 359 : 90 LJ Ch. 294 : 124 LT 469 : 65 SJ 134; Lee, Behrens & Co. Ltd.,
Re, (1932) 2 Ch. 46 : (1932) All ER Rep. 889 : 101 LJ Ch. 183. See also Comments under Sections 46 and 293A as
3. Baroness Wenlock v. River Dee Co., (1885) 10 App. Cas. 354 (HL).
4. Oakbank Oil Co. v. Crum, (1882) 8 App. Cas. 65 : 48 LT 537 : 31 WR Dig. 37 (HL); General Auction Estate and
Monetary Co. v. Smith, (1891) 3 Ch. 432 : 60 LJ Ch. 723; Kingsbury Collieries Ltd. and Moore's Contract, Re, (1907) 2
Ch. 259 : 76 LJ Ch. 469.
6. Introductions Ltd. v. National Provincial Bank Ltd., (1970) Ch. 199 : (1969) 1 All ER 887 : (1969) 2 WLR 791 (CA) :
(1969) 39 Comp. Cas. 919 (CA).
7. Cyclists' Touring Club v. Hopkinson, (1910) 1 Ch. 179 : 79 LJ Ch. 82 : 101 LT 848; Normandy v. Ind, Coope & Co. Ltd.,
(1908) 1 Ch. 84 : 77 LJ Ch. 82 : 97 LT 872; Parke v. Daily News Ltd., (1962) Ch. 927 : (1962) 2 All ER 929 : (1962) 3
WLR 566 : (1962) 32 Comp. Cas. 1060 (Ch.); W. & M. Roith Ltd., Re,(1967) 1 All ER 427 : (1967) 1 WLR 432 : (1966)
110 SJ 963. See also Comments under Section 318.
8. Gujarat Ginning and Mfg. Co. v. Motilal Hirabhai Spg. and Wvg. Co.,AIR 1930 Bom. 84.
9. Choonilal v. Spence's Hotel Co., (1868) 1 BLR (OS) 14. See also Comments u/s. 47.
10. Evans v. Brunner, Mond & Co., (1921) 1 Ch. 359 : 90 LJ Ch. 294 : 124 LT 469 : 65 SJ 134.
11. Wall v. London and Northern Assets Corporation, (1898) 2 Ch. 469 : 67 LJ Ch. 596 : 79 LT 249 : 47 WR 219 : 14 TLR
547 (CA).
545 : 42 LT 810 : 28 WR 769 (HL). See also Comments u/s. 46.
13. Leif Child's Case,(1865) LR 1 Eq. 231.
Page 26 of 28
14. International Contract Corporation's Case,(1869) 20 LT 96.

15. Norwich Provident Insurance Society, Re, Bath's Case, (1878) 8 Ch.D. 334 : 47 LJ Ch. 601 : 38 LT 267 : 26 WR 441
(CA); Irish Provident Assurance Co., Re,(1913) 1 IR 352 (CA).
532]; Birkbeck Permanent Benefit Building Society, Re, (1912) 2 Ch. 183 (CA).
185 (HL); Baroness Wenlock v. River Dee Co., (1885) 10 App. Cas. 354 (HL); Towers v. African Tug Co., (1904) 1 Ch.
558 : (1904-07) All ER Rep. Ext. 1583 (CA) : 73 LJ Ch. 395 (CA); Trevor v. Whitworth, (1887) 12 App. Cas. 409 :
(1886-90) All ER Rep. 46 : 57 LJ Ch. 28 (HL); Dr. A. Lakshmanaswami Mudaliar v. L.I.C., (1963) 33 Comp. Cas. 420
(SC) : AIR 1963 SC 1185 [LNIND 1962 SC 532]. See also Comments under Sections 46 and 290-293. Doctrine of ultra
vires has virtually been abolished under English Law as explained hereinafter.
19. Smt. Premila Devi v. People's Bank of Northern India Ltd.,(1938) 4 All ER 337 : 82 SJ 1008 : AIR 1938 PC 284 : (1939)
9 Comp. Cas. 1 (PC); Bamford v. Bamford, (1970) Ch. 212 : (1969) 1 All ER 969 : (1969) 2 WLR 1107 : 113 SJ 123 :
(1969) 39 Comp. Cas. 838 (CA).
20. IRC v. Ufitec Group Ltd.,(1977) 3 All ER 924 : (1977) Simon's TC 363.
21. Briton Medical, General and Life Assurance Association v. Jones,(1889) 61 LT 384.
22. Portuguese Consolidated Copper Mines Ltd., Re, (1890) 45 Ch.D. 16 (CA) : 63 LT 423 (CA) : 39 WR 25 (CA); Land
Credit Co. of Ireland, Re, (1869) 4 Ch. 460 : 39 LJ Ch. 27 : 20 LT 641.
Lloyd's Rep. 24 : (1969) 39 Comp. Cas. 824 (Ch.); Halt Garage Ltd., Re,(1982) 3 All ER 1016; Horsley and Weight Ltd.,
Re, (1982) Ch. 442 : (1982) 3 All ER 1045 : (1982) 3 WLR 431 : (1982) 126 SJ 429 (CA); Rolled Steel Products
(Holdings) Ltd. v. British Steel Corpn., (1986) Ch. 246 : (1985) 3 All ER 52 : (1985) 2 WLR 908 : (1984) 128 SJ 629 :
(1984) BCLC 466 (CA). See also Comments under Sections 46, 284 and 290.
185 : 33 LT 450. See also Comments under Sections 46. See provisions relating to Alteration of Articles by Special
Resolution [ Section 31]. Doctrine of ultra vires virtually abolished under English Law, Doctrine of Constructive notice
and Directors and Officers' acts and rule in Turquand's case have been explained in later paragraphs.
26. B.V. Thirumalai v. Best Vestures Trading P. Ltd., (2004) 4 Comp. LJ 519 (CLB). See detailed Comments on
Oppression and Mismanagement under Sections 397-409.
27. Trevor v. Whitworth, (1887) 12 App. Cas. 409 : (1886-90) All ER Rep. 46 : 57 LJ Ch. 28 : 57 LT 457 : 36 WR 145 : 3
TLR 745 : 32 SJ 201 (HL); Irish Provident Assurance Co., Re,(1913) 1 IR 352 (CA); Rowell v. John Rowell & Sons Ltd.,
(1912) 2 Ch. 609 : 81 LJ Ch. 759 : 107 LT 374; Sections 77, 100, 104 and 402. Now see also Power of company to
purchase its own securities [ Section 77A] and Prohibition for buy-back in certain circumstances [ Section 77B].
28. Almada and Tirito Co., Re, (1888) 38 Ch.D. 415 : 57 LJ Ch. 706 : 59 LT 159 : 36 WR 593 : 4 TLR 534 (CA); Hongkong
and China Gas Co. Ltd. v. Glen, (1914) 1 Ch. 527 : 83 LJ Ch. 561 : 110 LT 859. Such acts are ultra vires the
Companies Act and not Memorandum or objects clause. See also Comments under Sections 79, 81 and 100.
532]; Birkbeck Permanent Benefit Building Society, Re, (1912) 2 Ch. 183 (CA). See also Comments under Section 36.
32. Aveling Barford Ltd. v. Perion Ltd.,(1989) BCLC 626. Doctrine of ultra vires has virtually been abolished by the English
Companies Act, 1989. Under English law ultra vires acts of directors may now be ratified by a special resolution and
directors may be absolved by another special resolution. See Doctrine of ultra vires under English Law in later
paragraphs.
33. European Society Arbitration Acts, Re, (1878) 8 Ch.D. 679 : 48 LJ Ch. 118 : 39 LT 136 (CA).
34. National Telephone Co. v. Constables of St. Peter Port,(1900) AC 317 (PC) : 69 LJ PC 74.
35. Port Canning Co., Re,(1871) 7 BLR 853.
36. Harris Calculating Machine Co., Re, (1914) 1 Ch. 920 : 83 LJ Ch. 545 : 110 LT 997; Reversion Fund and Insurance Co.
v. Maison Cosway Ltd.,(1913) 1 KB 364 : 82 LJ KB 512 (CA); Airedale Co-operative Worsted Mfg. Society Ltd., Re,
Page 27 of 28
(1933) Ch. 639 : 102 LJ Ch. 229 : 149 LT 92 : 49 TLR 265 : 77 SJ 267; Introductions Ltd. v. National Provincial Bank
Ltd., (1970) Ch. 199 : (1969) 1 All ER 887 : (1969) 2 WLR 791 (CA) : (1969) 39 Comp. Cas. 919 (CA). See also earlier
paragraphs “ Implied powers ” and Comments under Section 293.
37. Sinclair v. Brougham,(1914) AC 398 : (1914-15) All ER Rep. 622 : 83 LJ Ch. 465 (HL); Diplock, Re, Diplock v. (1948)
Ch. 465 : (1948) 2 All ER 318affirmed sub nom Ministry of Health v. Simpson,(1951) AC 251 : (1950) 2 All ER 1137 : 94
SJ 777 (HL); Agip (Africa) Ltd. v. Jackson, (1991) Ch. 547 (CA). See also Comments under Section 293. Doctrine of
ultra vires has been abolished under English Law as explained hereinafter.
38. Birkbeck Permanent Benefit Building Society, Re, (1912) 2 Ch. 183 (CA); Great Eastern Rly. Co. v. Turner, (1872) 8
Ch. App. 149 : 42 LJ Ch. 83 : 21 WR 163; Blackburn Building Society v. Cunliffe, Brooks & Co., (1884) 9 App. Cas. 857
: (1881-85) All ER Rep. Ext. 1280 : 54 LJ Ch. 376 : 52 LT 225 (HL). See also Doctrine of ultra vires under English Law
in later paragraphs and Comments under Section 293.
39. Watson, ex parte,(1888) 21 QBD 301; Subaratnam v. Official Liquidator,AIR 1943 Mad. 111
40. Irish Provident Assurance Co., Re,(1913) 1 IR 352 (CA).
41. Madras Native Permanent Fund Ltd., In re,AIR 1931 Mad. 792.
42. Steel Equipment and Construction Co. P. Ltd., In re, (1968) 38 Comp. Cas. 82 (Cal.) : (1967) 1 Comp. LJ 172 (Cal.);
Great North-West Central Railway Co. v. Charlebois,(1899) AC 114 (PC) : 68 LJ PC 25 : 79 LT 35; Jon Beauforte
(London) Ltd., Re, (1953) Ch. 131 : (1953) 1 All ER 634 : 2 WLR 465. See also Comments under Section 434. Such
debts can now be proved under English law where the doctrine of ultra vires has been abolished as explained
hereinafter.
43. Finance and Issue Ltd. v. Canadian Produce Corpn. Ltd., (1905) 1 Ch. 37 : 73 LJ Ch. 751 : 91 LT 685 : 53 WR 170 : 20
TLR 807.
44. Shalagram Jhajharia v. National Coal Co. Ltd., (1965) 35 Comp. Cas. 706 (Cal.) (DB) : (1965) 1 Comp. LJ 112 (Cal.)
(DB) : (1965) 69 CWN 369 (Cal.) (DB). See also Comments under Sections 9, 10, 41, 173, 204, 294 and 314.
45. Asansol Electric Supply Company Ltd. v. Chunilal Daw,AIR 1972 Cal. 19 [LNIND 1971 CAL 60](DB) : 75 CWN 704
(DB). See also Comments under Section 10.
46. Foss v. Harbottle, (1843) 2 Hare 461. See also Comments under Sections 10 and 41.
47. Avanthi Explosives P. Ltd. v. Principal Subordinate Judge, (1987) 62 Comp. Cas. 301 (AP)Edwards v. Halliwell,(1950)
WN 537 : (1950) 2 All ER 1064 : 94 SJ 803 (CA); Mozley v. Alston, (1847) 1 Ph. 790 : 16 LJ Ch. 217; Burland v.
Earle,(1902) AC 83 : (1900-03) All ER Rep. Ext. 1452 (PC) : 71 LJ PC 1. See detailed Comments under Sections 10
and 41.
48. Wattau v. Fenwick,(1893) 2 QB 346 . See decisions on ostensible authority in Comments under Sections 293 and
383A.
49. Jon Beauforte (London) Ltd., Re, (1953) Ch. 131 : (1953) 1 All ER 634 : 2 WLR 465. Doctrine of ultra vires and Doctrine
of constructive notice have been virtually abolished under English law. See detailed Comments in later paragraphs.
See also Comments under Sections 290-293.
50. Sinclair v. Brougham,(1914) AC 398 : (1914-15) All ER Rep. 622 : 83 LJ Ch. 465 : 111 LT 1 : 30 TLR 315 : 58 SJ 302
(HL).
663 (Ex Ch.). See detailed Comments under Section 293. See also Comments in succeeding paragraphs under
Doctrine of ultra vires and Doctrine of constructive notice have been virtually abolished under English law.
52. Rolled Steel Products (Holdings) Ltd. v. British Steel Corpn., (1986) Ch. 246 : (1985) 3 All ER 52 : (1985) 2 WLR 908 :
(1984) 128 SJ 629 : (1984) BCLC 466 (CA).
53. International Sales and Agencies Ltd. v. Marcus,(1982) 3 All ER 551 : (1982) 2 CMLR 46.
54. U.B.A.F. Ltd. v. European American Banking Corpn.,(1984) QB 713 : (1984) 2 All ER 226 : (1984) 2 WLR 508 : (1984)
128 SJ 243 : (1984) 1 Lloyd's Rep. 258 (CA).
55. Grant v. United Kingdom Switchback Railways Co., (1888) 40 Ch.D. 135 : 58 LJ Ch. 211 : 60 LT 525 : 37 WR 312 : 5
TLR 92 (CA).
185 : 33 LT 450 : 24 WR 794 (HL). The decisions still holds good under the Indian Law. See Doctrine of ultra vires and
Ratification in earlier paragraphs.
57. Underwood (A.L.) Ltd. v. Bank of Liverpool and Martins,(1924) 1 KB 775 : (1924) All ER Rep. 230 : 93 LJ KB 690 : 131
LT 271 (CA); Houghton & Co. v. Nothard, Lowe & Wills,(1927) 1 KB 48 (CA)affirmed in (1928) AC 1 : (1927) All ER
Rep. 97 : 97 LJ KB 76 : 138 LT 210 (HL). See also Rolled Steel Products (Holdings) Ltd. v. British Steel Corpn., (1986)
Ch. 246 : (1985) 3 All ER 52 : (1985) 2 WLR 908 : (1984) BCLC 466 (CA) in earlier paragraphs.
Page 28 of 28
58. Morris v. Kanssen,(1946) AC 459 : (1946) 1 All ER 586 : 115 LJ Ch. 177 : 174 LT 353 (HL); Section 285 of the English
Companies Act, 1985. See also Comments under corresponding Indian provisions, viz., Section 290 of the Companies
Act, 1956 in this book.
59. TCB Ltd. v. Gray, (1986) Ch. 621 : (1986) 1 All ER 587 : (1986) BCLC 113. See also Smith v. Henniker-Major & Co. (A
firm),(2002) 3 WLR 1848 : (2003) 116 Comp. Cas. 359 (CA).
60. Freeman and Lockyer v. Buckhurst Park Properties (Mangal) Ltd.,(1964) 2 QB 480 : (1964) 1 All ER 630 : (1964) 2
WLR 618 (CA); Hely-Hutchinson v. Brayhead Ltd.,(1968) 1 QB 549 : (1967) 3 All ER 98 : (1967) 3 WLR 1408 : (1968)
38 Comp. Cas. 228 (CA); Biggerstaff v. Rowatt's Wharf Ltd., (1896) 2 Ch. 93 : (1895-99) All ER Rep. Ext. 1933 : 65 LJ
Ch. 536 (CA); Clay Hill Brick and Tile Co. Ltd. v. Rawlings,(1938) 4 All ER 100 : 159 LT 482 : 82 SJ 909. See also
Rama Corpn. Ltd. v. Proved Tin and General Investments Ltd.,(1952) 2 QB 147 : (1952) 1 All ER 554 : (1952) 1 TLR
709 : 96 SJ 197. See Comments under Sections 2(26), 267-269, 290 and 293 of the Companies Act, 1956 in this book.
61. Mahony v. East Holyford Mining Co.,(1875) LR 7 HL 869 : (1874-80) All ER Rep. 427 : 33 LT 383 (HL). See also
62. Armagas Ltd. v. Mundogas S.A.,(1986) AC 717 (HL). See Comments under Sections 2(24) and 384-388 of the
Companies Act, 1956 in this book.
(1971) 3 WLR 440 (CA). See detailed Comments under Section 383A.
End of Document
Datta: Company Law
C R Datta
S. 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.
COMMENTS
English Act, 1948 : Section 454 Previous Act, 1913 : Section 151(1)
English Act, 1985 : Ss. 3, 3A, 8, 256, 720
Legislative History.— The Companies Act, 1956 (1 of 1956).
—The Notes on clauses explained this section as follows: “This is based on section 151(1) of the Indian Act and
section 454 of the English Act.” [ Clause 595 of the Companies Bill, 1953 (46 of 1953)]. The provisions which were
proposed in the Bill to be enacted in section 595 were recommended to be contained in this Section 14 as this Part
deals with the Memorandum of Association.
Form of Memorandum.—Memorandum of Association of a company shall be in Forms in Tables B, C, D and E in

Schedule I, as applicable, or as near thereto as circumstances admit. The Tables of Schedule I contain following
forms:
Table B Memorandum of Association of a company limited by shares.
Table C Memorandum and Articles of Association of a company limited by Guarantee and not having a
share capital.
Table D Memorandum and Articles of Association of a company limited by Guarantee and having a share
capital.
Table E Memorandum and Articles of Association of an unlimited company.
Requirements with respect to Memorandum [ Section 13].—The Memorandum of Association needs to be

carefully drafted in as much as the company and the directors cannot do anything beyond the scope of the
Memorandum except those incidental to the business of the company. See detailed Comments on Objects and
other Clauses to be contained in the Memorandum of Association under Section 13.
See also Comments under Section 12, 15 to 19 and 33 to 40.
Model Articles [ Schedule I, Table A].—Model Articles or Regulations contained in Table ‘A’ of Schedule I to the
Act will apply to a public company limited by shares, if they are not inconsistent with the company's own Articles, if
any.
Page 2 of 2
See Comments under Section 2(2), 26-31 and Schedule I.
Secretarial Practice and Check List.— Section 14. See Secretarial Practice and Check List under Section 33.
See also Practice Notes, Form and Procedure and Secretarial Practice and Check List under Section 12-40.
End of Document
Datta: Company Law
C R Datta
S. 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.
64. Selvarajan and Co. v. Registrar of Companies, (1987) 62 Comp. Cas. 220 (Mad.). See also Comments under Section
30.
under Section 13.
66. Whitley Partners Ltd., Re, (1886) 32 Ch.D. 337 : 55 LJ Ch. 540 : 54 LT 912 (CA); Chotalal v. Dalsukhram,(1893) ILR 17
Bom. 472. See also Comments under Sections 150 and 432.
67. Mirza Ahmed, In re,(1924) MWN 582 : 83 IC 94; U.P. Oil Mills Co. Ltd., In re, (1931) 1 Comp. Cas. 262 (All.) : AIR 1931
All. 701; Lurgan's (Lord) Case, Re, (1902) 1 Ch. 707 : 71 LJ Ch. 323 : 86 LT 291. See also Comments under Sections
12 and 41.
68. Seal v. Claridge,(1881) 7 QBD 516; Deffell v. White,(1866) LR 2 CP 144 : 36 LJ CP 25 : 15 LT 211 : 15 WR 68; Parrot,
ex parte Cullen, Re,(1891) 2 QB 151 : 60 LJ QB 567 : 64 LT 801 : 39 WR 543. See also Comments under Section 46.
COMMENTS
Legislative History.—The Companies Act, 1956 (1 of 1956).—The Notes on clauses explained as follows: “See
section 9 of the existing Act and section 3 of the English Act.” [ Clause 12 of the Companies Bill, 1953 (46 of 1953)].
Requirements with respect to Memorandum.—For various clauses to be contained in Memorandum of

Association of every company and Form of Memorandum see Comments under Sections 13 and 14.
Printing and Signature.—The Memorandum shall be (a) printed, (b) divided into paragraphs numbered
consecutively and (c) signed by each subscriber, who shall add his address, description and occupation, in
presence of at least one witness who shall attest the signature and likewise add his address, description and
occupation.
Page 2 of 4
Print.—The word “printed” will not include typewritten. Where Parliament desired typewritten, it has specifically
mentioned as in section 192(1).
Printing includes computer printing.—Where the promoters of a company filed with the Registrar of Companies
(ROC) computer printed Memorandum and Articles of Association for the purpose of registering the companies.
The Registrar refused to accept them on the plea that they should be printed. On a writ petition, the High Court held
that computer printing would be equivalent to printing and that the Registrar should accept the computer printed
Memorandum and Articles of Association as printed matters for the purpose of section 15 of the Companies Act,
1956 and issue a certificate of incorporation to the company.64
Department's view.— Memorandum and Articles of Association—Acceptance of Computer printed

documents for registration of companies.
—“The Department has received representations that in view of advancement in computer laser printing
techniques, the documents printed on laser printers have same quality of printing as in letter press. In view of this
fact the memorandum and articles printed on computer laser printers may be accepted by the Registrars for
registration of companies for purposes of sections 15 and 30. This matter has been reviewed by the Government
and it has now been decided that with immediate effect the Registrar should accept and take on record all computer
printed memorandum and articles provided the documents are neatly and legibly printed and comply with the other
requirements of the Act.” [ Circular No. 7 of 1993 (F. No. 3/30/93-CL-V), dated 22-6-1993 : Chartered Secretary,
July 1993, page 727 : (1993) 77 Comp. Cas. (St.) 723].
Acceptance of Memorandum and Articles of Association printed by offset printing method for the purpose
of registration.
—“A question has been raised whether Memorandum and Articles of Association printed by offset printing method
can be accepted by the Registrar of Companies for the purpose of registration. The matter has been carefully
examined by the Department and I am directed to say that offset printing is one of the methods of printing
developed recently. This system is as good as normal printing and hence there does not appear any objection in
accepting the same by the ROCS for the purpose of registration.” [ Circular No. 3/81 (F. No. 8/31/15/80-CL-V),
dated 15-12-1981: Chartered Secretary, January 1982, page 55].
Zerox copies of Memorandum and Articles of Association not acceptable.
—“The question of allowing Zerox copies of Memorandum and Articles of Association has been carefully examined
in the Department. Since there is a specific requirement introduced in our Act, unlike the English Act, requiring the
memorandum and articles of association to be printed, there is no justification for watering it down by allowing
Zerox copies to be filed for the purposes of registration of Companies.” [ Letter No. 8/31/15/80-CL-V, dated 30-4-
1981].
Signatures by each subscriber.—The Memorandum of Association shall be signed by each subscriber, who shall
add his address, description and occupation, in presence of at least one witness who shall attest the signature.
A public company must have 7 or more subscribers and a private company must have 2 or more but not exceeding
50 subscribers. The persons who can be subscribers or signatories to the Memorandum of Association and the
mode of subscription has been explained in Comments under section 12.
As per section 13, in the case of a company having Share Capital, (1) Every subscriber of Memorandum shall take
at least one share, and (2) Each subscriber of the Memorandum shall write opposite to his name the number of
shares he takes.
If the foregoing requirement are not fulfilled the person whose name is mentioned as subscriber shall not to be a
subscriber.65
A company may be a signatory. But the agent must have proper authority to sign.66 However, such a company will
not be deemed a director on failure to appoint the first directors. A signatory cannot rescind or revoke the
agreement to take shares. He is liable to pay the call money on the shares written against his name in the
Memorandum irrespective of the fact whether shares have been issued to him or not. Misrepresentation is no
ground for repudiation.67
Page 3 of 4
See detailed Comments, Department's views and Practice Notes on Subscription Clause under Section 12. See
also Comments under Sections 13, 33 and 41.
Department's view.— Signature by an agent of subscriber.—Memorandum of Association and any

amendments thereto may be signed by an agent on behalf of the subscriber if he is authorised by a power of
attorney to do so. [ Circular No. 128/HCC/64, dated 27-7-1964 : See Full Text in Comments under Section 12].
Illiterate subscriber.
—The Department has clarified that when the executant of the Memorandum of Association is illiterate he shall give
his thumb impression or mark which shall however be described as such by the scribe or person writing for him.
The latter should place the name of the executant against or below the mark and authenticate it by his own
signature. He should also write against the name of the subscriber, the number of shares taken by him. Such a
person should also read and explain the contents of the document to the executant and make an endorsement on
the document that he has so read and explained the contents of the document to the executant.” [ Letter No.
8/15/58, dated 1-9-1958].
See also Department's views and Practice Notes under Sections 12 and 13.
Witness.—Each subscriber shall sign in presence of at least one witness who shall attest the signature and add his
address, description and occupation. Witness attesting the signatures should specify, e.g., ‘witness to the above
signatures’, or ‘witness to the above signatures of A, B, etc.’
The witness who will attest the signature must be somebody other than the subscribers. One witness may attest all
the signatures. However, an improper attestation does not make the Memorandum void.68
Stamp Duty.—Memorandum of Association and Articles of Association of a company require impressed stamp.
The stamp duty varies from State to State and depending upon the nominal share capital in some States.
Appropriate stamp duty according to the local law (State law) has to be put on the Memorandum and Articles of
Association. The Registrar of Company's Office or the stamp vendor may assist in putting the proper stamp.
The Stamp Duty Rates under the Indian Stamp Act, 1899 (2 of 1899) are: (1) Memorandum of Association of a
Company (a) if accompanied by Articles of Association—Rs. 15, (b) if not so accompanied—Rs. 40 [ Article 39 of
Schedule I to the Indian Stamp Act, 1899], and (2) Articles of Association of a Company—Rs. 25. [ Article 10 of
Schedule I to the Indian Stamp Act, 1899 (2 of 1899)].
The Stamp Duty Rates in the NCT of Delhi on (1) Memorandum of Association of a Company are (a) if
accompanied by Articles of Association under Sections 26, 27 and 28 of the Companies Act, 1956—Rs. 200, (b) if
not so accompanied—Rs. 500 [ Article 39 of Schedule IA to the Indian Stamp (Delhi Amendment) Act, 2001], and
(2) Articles of Association of a Company—Rs. 0.15% of Authorised share capital with a monetary ceiling of Rs. 25
lakhs. [ Article 10 of Schedule IA to the Indian Stamp (Delhi Amendment) Act, 2001 (w.e.f. 30-7-2001)].
See also Comments and Practice Notes under Sections 12, 26, 30 and 33.
Section 25 Company.
—Memorandum and Articles of any Association not formed for profit and registered under the Companies Act is
exempted from paying any stamp duty. [ Articles 10 and 39 of the Indian Stamp Act, 1899 (2 of 1899)].
Subscribers as Members.
—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. [ Section 41].
Subscribers deemed Directors.—In default of and subject to any regulations in the articles of a company,
Page 4 of 4
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. [ Section 254].
Secretarial Practice and Check List.— Section 15. See Practice Notes, Form and Procedure and Secretarial
Practice and Check List under Sections 12 and 33.
30.
under Section 13.
66. Whitley Partners Ltd., Re, (1886) 32 Ch.D. 337 : 55 LJ Ch. 540 : 54 LT 912 (CA); Chotalal v. Dalsukhram,(1893) ILR 17
Bom. 472. See also Comments under Sections 150 and 432.
67. Mirza Ahmed, In re,(1924) MWN 582 : 83 IC 94; U.P. Oil Mills Co. Ltd., In re, (1931) 1 Comp. Cas. 262 (All.) : AIR 1931
All. 701; Lurgan's (Lord) Case, Re, (1902) 1 Ch. 707 : 71 LJ Ch. 323 : 86 LT 291. See also Comments under Sections
12 and 41.
68. Seal v. Claridge,(1881) 7 QBD 516; Deffell v. White,(1866) LR 2 CP 144 : 36 LJ CP 25 : 15 LT 211 : 15 WR 68; Parrot,
ex parte Cullen, Re,(1891) 2 QB 151 : 60 LJ QB 567 : 64 LT 801 : 39 WR 543. See also Comments under Section 46.
End of Document
Datta: Company Law
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69[S.15A. Special provision as to alteration of memorandum consequent on

alteration of name of State of Madras.
—Where, in the memorandum of association of a company in existence immediately before the
commencement of the Madras State (Alteration of Name) Act, 1968 (53 of 1968), it is stated that Madras is the
State in which the registered office of that company is situate, then, notwithstanding anything contained in this
Act, the said memorandum shall, as from such commencement, be deemed to have been altered by
substitution of a reference to the State of Tamil Nadu for the reference to the State of Madras and the Registrar
of the State of Tamil Nadu shall make necessary alterations in the memorandum of association and the
certificate of incorporation of the said company.]
69. Inserted by the Madras State (Alteration of Name) (Adaptation of Laws on Union Subjects) Order, 1970 (w.r.e.f. 14-1-
1969).
End of Document
Datta: Company Law
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70[S.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.]
70. Inserted by the Mysore State (Alteration of Name) (Adaptation of Laws on Union Subjects) Order, 1974 (w.r.e.f. 1-11-
1973).
COMMENTS
Transitional Provisions.— Sections 15A and Sections 15B were transitional provisions as to alteration of
Memorandum consequent on alteration of names of States.
70. Inserted by the Mysore State (Alteration of Name) (Adaptation of Laws on Union Subjects) Order, 1974 (w.r.e.f. 1-11-
1973).
End of Document
Datta: Company Law
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S. 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, 71[ ***] 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.
of the Companies Act, 1956, as inserted by the Companies (Amendment) Act, 1969 (17 of 1969), s. 4 (w.e.f. 3-4-1970).
72. Edwards v. Halliwell, , (1950) WN 537 : (1950) 2 All ER 1064 : 94 SJ 803 (CA). See also Comments under Sections 12,
38 and 41.
73. Rampuria Cotton Mills Ltd., In Re, , AIR 1959 Cal. 253 [LNIND 1958 CAL 19]: 63 CWN 11.
74. Shyamapada Chakrabertty v. Controller of Insurance, , (1962) 32 Comp. Cas. 258 (SC) : AIR 1962 SC 1355 : (1962)
Supp. 2 SCR 130. See also Comments under Sections 17 and 102.
* See the Companies (Central Government's) General Rules and Forms, 1956 in Appendix 1.
COMMENTS
Legislative History.— The Companies Act, 1956 (1 of 1956).—The Notes on clauses explained this section as
follows: “Sub-clause (1) corresponds to section 10 of the existing Act and section 4 of the English Act. Sub-section
(2) brings out the intention quite clearly. Sub-section (3) compare the proviso to section 10 of the existing Act. It has
been generalised so as to refer to everything which need not be included in the memorandum.” [ Clause 13 of the
Page 2 of 6
follows: “This clause seeks to omit the expression ‘managing agent, secretaries and treasurers’ in sub-section (3) of
section 16 of the Act which is of consequential nature.” [ Clause 6 of the Companies (Second Amendment) Bill,
1999 (139 of 1999)].
Alteration of Memorandum.—A company shall not alter (1) conditions contained in Memorandum except in cases,
mode and extent expressly provided in the Act, (2) only matters required by section 13 or specific provision to be
stated in Memorandum are deemed conditions, (3) other provisions in Memorandum, e.g., appointment of MD,
manager, etc., may be altered as articles or as expressly provided, (4) all references to articles in the Act shall
include these other provisions.
See also Comments under Sections 13 and 17 to 19.
Conditions [Sub-sections (1) and (2)].—A company shall not alter the conditions contained in its Memorandum
except in cases, mode and to the extent for which express provision is made in this Act. [ Section 16(1)].
Only provisions required by section 13 or by any other specific provision in the Act, to be stated in the Memorandum
shall be deemed to be conditions contained in its Memorandum. [ Section 16(2)].
Clauses in the Memorandum.—The Clauses in the Memorandum as regards Name, Situation of registered office,
Objects, Capital, Guarantee, Liability and Subscription Clauses are conditions. See detailed Comments under
Section 13.
These clauses or conditions can be altered only in accordance with the provisions of the Companies Act, 1956. The
Act provides as follows:
Objects Clause.—Special Resolution is required for Alteration of Objects in the Memorandum of Association of the
company so far as permissible in clauses (a) to (g) of sub-section (1) of section 17. See detailed Comments under
Section 17.
Registered Office.—Special Resolution [ Section 17(1)] and confirmation by Company Law Board (CLB) [ now the
Central Government] on petition [ Section 17(2)] is required for Alteration of Memorandum for change of place of
Registered Office from one State to another. See detailed Comments under Section 17.
See also Change of registered office within a State [ Section 17A], Alteration to be registered within 3 months [
Section 18], Effect of failure to register [ Section 19], Effect of alteration in Memorandum or Articles [ Section 38],
and Alteration of Memorandum or Articles, etc., to be noted in every copy [ Section 40].
Change of Name.—Provisions for Change of Name by a company are contained in sections 21 to 24 To alter the
name the sanction of the Registrar of Companies is necessary in addition to Special (in some cases Ordinary)
Resolution.
Alteration of Share Capital.—For alteration of share capital section 94 is to be complied with. To alter the capital
clause ordinary resolution is sufficient provided it does not amount to Reduction in Share Capital. See Comments
under Section 94.
Reduction of Share Capital can be made in the mode provided in sections 100 to 104 and 402. See Comments
under Sections 100-104 and 402. Reorganisation of share capital is provided in sections 391-394.
Liability.—A member's liability cannot be increased without his consent except in cases of clubs where the rate of
subscription may be increased.72
Liability of directors may be made unlimited under section 323. Registration of unlimited company as limited, etc.,
may be made in accordance with section 32.
Page 3 of 6
Clauses other than Conditions [Sub-sections (3) and (4)].—Other provisions contained in Memorandum, e.g.,
appointment of managing director or manager, etc., may be altered as the Articles of the company or if there is any
express provision in the Act, may also be altered in such other manner.
Clauses other than conditions may be altered generally by Special Resolution, as if they are contained in the
Articles. See detailed Comments under Section 31.
All references to the Articles of a company in the Act shall be construed as including references to these other
provisions contained in its Memorandum.
A clause in the Memorandum regarding the right to dividend of a class of shareholders may be altered by a special
resolution, no confirmation of the Court or Company Law Board [ now the Central Government] is needed.73
The transfer of an undertaking in exercise of the powers contained in the Memorandum does not amount to
alteration of the Memorandum.74
See detailed Comments, Form and Procedure under Section 31—Alteration of articles by special resolution.
Special Resolution.—To alter the provisions contained in the Memorandum of Association subject to sub-section
(1) of section 16 a Special Resolution is required to be passed. [ Section 16(3)].
For provisions relating to Special Resolution and matters requiring sanction of shareholders by Special Resolution
Filing.—A copy of the Special Resolution has to be filed with the Registrar of Companies in e-Form 23* of the
Companies (Central Government's) General Rules and Forms, 1956 within 30 days. [ Section 192].
Form 23 (substituted w.e.f. 10-2-2006).— See e-Form 23* of the Companies (Central Government's) General
Rules and Forms, 1956 as substituted by the Companies (Central Government's) General Rules and Forms
(Amendment) Rules, 2006 vide Notification No. G.S.R. 56(E), dated 10-2-2006, published in the Gazette of India,
Extraordinary, No. 50, Part II, Section 3(i), page 156, dated 10-2-2006 : the Ministry of Company Affairs (MCA)
website http://www.mca.gov.in : (2006) 130 Comp. Cas. (St.) 13 in Appendices.
Revised e-Form 23 (released 16-12-2006).— See Revised e-Form 23 on the Ministry of Corporate Affairs (MCA)
website http://www.mca.gov.in under category Compliance Related Filing/Informational Services, Date of Last
Release (16-12-2006).
See Revised e-Form 23 of the Companies (Central Government's) General Rules and Forms, 1956 [Pursuant to
Section 192 of the Companies Act, 1956] for Registration of Resolution(s) and Agreement(s) [Special Resolution
passed under Section 16(3)].
See detailed Comments, Form and Procedure under Sections 189(2) and 192.
Effect of alteration.— See detailed Comments under relevant provisions: Effect of alteration in memorandum or
articles [ Section 38], Copies of memorandum and articles, etc., to be given to members [ Section 39], Alteration of
memorandum or articles, etc., to be noted in every copy [ Section 40].
Chartered Accountants of India(ICAI) enumerated Salient provisions of the Companies Act, 1956 (1 of 1956)
Compliance with the Companies Act.
—The Companies Act lays down detailed provisions regarding various matters and casts an obligation upon
directors and officers of the company to carry out the requirements of the law. Generally speaking, it is the duty of
the directors and the management to ensure that the provisions of the Companies Act have been complied with.
However, where non-compliance with the provisions of the Companies Act has a bearing upon the accounts and
transactions of the company, the Auditor would in the normal course of his inquiry become aware of the breaches of
Page 4 of 6
the Act and may have an obligation to bring this to the attention of the shareholders. In order to facilitate the work of
the Auditors, a list of important Sections has been provided in the Statement.
The List of important Sections provided in the Statement, inter alia, enumerated Sections 16 to 18 of the
Companies Act, 1956 as follows:
Sections 16, 17 and 18 [Alteration of Memorandum].—Where the Memorandum of Association of a company

has been altered, e.g., as to the Objects clause, Capital structure, etc., it should be seen that prima facie the
alteration has been made in accordance with the law.
pursuant to the issuance of a number of Auditing and Assurance Standards(AASs) and Guidance Notes on the
Section 17A.—Permission of the Regional Director (RD) shall be required for changing the Registered Office of
Company within the same State.
Compliance Certificate—Alteration of Memorandum.—Relevant paras of the Form appended to the Companies

(AGM).
Form of Compliance Certificate [Paras 28 and 29].—Form of Compliance Certificate appended to the
Companies (Compliance Certificate) Rules, 2001, inter alia, requires the Practising Company Secretary (PCS) to
state as follows:
“28. The company has altered the provisions of the Memorandum with respect to Name of the company during the
year under scrutiny and complied with the provisions of the Act.
29. The company has altered the provisions of the Memorandum with respect to Share Capital of the company
during the year under scrutiny and complied with the provisions of the Act.”
[Paras 28 and 29 of Form of Compliance Certificate appended to the Companies (Compliance Certificate) Rules,
2001 : See Full Text under Section 383A].
Page 5 of 6
reproduced below.
Alteration of the Memorandum with respect to Name Clause.—“Check whether:

(i) the company had obtained the availability of new Name from the Registrar of Companies;
(ii) the Board of Directors had called and held the General Meeting within six months of the date of Registrar's
letter intimating the availability of name;
(iii) the company has passed the Special Resolution for the Change of Name and obtained approval of the
Central Government (Registrar of Companies) in this respect;
(iv) the company has filed with the Registrar of Companies certified true copy of the Special Resolution along
with the relevant Explanatory Statement and the letter issued by the Registrar of Companies making the
new Name available with the company;
(v) the ROC has issued a fresh Certificate of Incorporation incorporating the alterations consequent to change
of name;
(vi) every copy of Memorandum issued after the date of alteration is in accordance with the alteration;
(vii) the Name has been painted/affixed/printed on the name board, business letters, bill heads, Memorandum
and Articles; and
(viii) new common seal has been adopted by the Board.”
Check-List for issue of Compliance Certificate on Para 29 of the Form of Compliance Certificate contained in ICSI
Guidance Note is reproduced below.
Alteration of the Memorandum with respect to Share Capital.—“Check whether:

(i) the Articles of Association authorise the alteration of Share Capital;
(ii) the Board of Directors have passed a Resolution approving the alteration of Capital as above;
(iii) the company had called and held the General Meeting and obtained approval of the company in general
meeting by an Ordinary Resolution for the alteration;
(iv) the company has filed Form No. 5 [ now e-Form 5] and Form No. 23 [ now e-Form 23] (if the Articles are
amended), with the ROC; and
(v) every copy of Memorandum and Articles issued after the date of alteration is in accordance with the
alteration.”
under Section 383A.
See also Comments under Sections 13, 17, 17A-23 and 40.
Secretarial Practice and Check List.— Sections 16 to 19.— Alteration of Memorandum.—See Secretarial
Practice and Check List under Section 17.
Page 6 of 6
of the Companies Act, 1956, as inserted by the Companies (Amendment) Act, 1969 (17 of 1969), s. 4 (w.e.f. 3-4-1970).
72. Edwards v. Halliwell, , (1950) WN 537 : (1950) 2 All ER 1064 : 94 SJ 803 (CA). See also Comments under Sections 12,
38 and 41.
73. Rampuria Cotton Mills Ltd., In Re, , AIR 1959 Cal. 253 [LNIND 1958 CAL 19]: 63 CWN 11.
74. Shyamapada Chakrabertty v. Controller of Insurance, , (1962) 32 Comp. Cas. 258 (SC) : AIR 1962 SC 1355 : (1962)
Supp. 2 SCR 130. See also Comments under Sections 17 and 102.
End of Document
Datta: Company Law
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75[S.23 Special resolution and confirmation by Central Government 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; or
(b) to attain its main purpose by new or improved means; or
(c) to enlarge or change the local area of its operations; or
(d) to carry on some business which under the existing circum-stances may conveniently or
advantageously be combined with the business of the company; or
(e) to restrict or abandon any of the objects specified in the memorandum; or
(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 of the provisions of memorandum relating to the change of the place of its registered
office from one State to another shall not take effect unless it is confirmed by the Central Government
on petition.
(3) Before confirming the alteration, the Central Government 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 Central
Government, be affected by the alteration; and
(b) that, with respect to every creditor who, in the opinion of the Central Government, is entitled to
object to the alteration, and who signifies his objection in the manner directed by the Central
Government, either his consent to the alteration has been obtained or his debt or claim has been
discharged or has been determined, or has been secured:
Provided that the Central Government may, in the case of any person or class of persons, for
special reasons, dispense with the notice required by clause (a).
(4) The Central Government 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 of appearing before the
Central Government and state his objections and suggestions, if any, with respect to the confirmation
of the alteration.
(5) The Central Government may make an order confirming the alteration 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 Central Government 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.
Page 2 of 27
(7) The Central Government may, if it thinks fit, adjourn the proceedings in order that an arrangement may
be made to the satisfaction of the Central Government 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 expended for any such purchase.]
75. Substituted by the Companies (Second Amendment) Act, 2002 (11 of 2003), s. 7 [(w.e.f.) date to be notified]. For
section 17, earlier amended by Act 65 of 1960, Act 41 of 1974 and Act 5 of 1997, as it stood prior to its substitution see
Annexure at the end of this Volume.
† See the Companies (Passing of the Resolution by Postal Ballot) Rules, 2001 in Appendix 35.
76. Motilal Hirabhai Spg., Wvg. and Mfg. Co. Ltd., In re, (1970) 40 Comp. Cas. 1216 (Guj.); Drages Ltd., Re,(1942) 1 All ER
194.
77. Cyclists' Touring Club, Re, (1907) 1 Ch. 269 : 23 TLR 220; Bolsom Bros. (1928) Ltd., Re, (1935) Ch. 413 : 104 LJ Ch.
267 : 152 LT 477 : 79 SJ 214.
78. Delhi Bharat Grain Merchants Association Ltd., In re, (1974) 44 Comp. Cas. 214 (Delhi); Rajendra Industries (P.) Ltd.,
In re, (1967) 37 Comp. Cas. 563 (Mad.); New Asiatic Insurance Co. Ltd., In re, (1967) 37 Comp. Cas. 331 (Punj.) : AIR
1967 Punj. 15.
79. Jayantilal v. Tata Iron and Steel Co. Ltd.,AIR 1958 Bom. 155 [LNIND 1957 BOM 101].
80. Government Stock Investment Co. (No. 2), Re, (1892) 1 Ch. 597 : 61 LJ Ch. 381 : 66 LT 608; Reversionary Interest
Society Ltd., Re, (1892) 1 Ch. 615 : 61 LJ Ch. 379 : 66 LT 460; Coats (J&P) Ltd. v. Crossland,(1904) 20 TLR 800; New
Westminster Brewery Co., Re,(1911) WN 247 : 105 LT 946 : 56 SJ 141; John Brown & Co. Ltd., Re,(1914) WN 434;
Marshall Sons and Co., Re,(1919) WN 207. See also Comments under Section 543.
81. Samantaraj Films (P.) Ltd., In re, (1974) 44 Comp. Cas. 477 (Orissa). See also Comments under Section 293A—
Prohibitions and restrictions regarding political contributions, as amended by the Election and Other Related Laws
82. Bolsom Bros. (1928) Ltd., Re, (1935) Ch. 413 : 104 LJ Ch. 267 : 152 LT 477 : 79 SJ 214; Scientific Poultry Breeders'
Association Ltd., Re, (1933) Ch. 227 : 101 LJ Ch. 423 (CA) : 148 LT 68 : 49 TLR 4 : 76 SJ 798 : (1933) 3 Comp. Cas.
89 (CA).
83. Government Stock Investment Co., Re, (1891) 1 Ch. 649; Incorporated Glasgow Dental Hospital v. Lord
Advocate,(1927) SC 400 [Scottish] : (1927) SLT 270.
84. North of England Zoological Society v. Chester Rural District Council,(1959) 3 All ER 116 : (1959) 1 WLR 773 : (1959)
103 SJ 582 (CA).
85. Egyptian Delta Land and Investment Co. Ltd., Re,(1907) WN 16; Indian Mechanical Gold Ex-tracting Co., Re, (1891) 3
Ch. 538.
86. Straw Products Ltd. v. ROC, (1969) 39 Comp. Cas. 974 (Orissa); Juggilal Kamlapat Jute Mills Co. Ltd. v. ROC, (1967)
37 Comp. Cas. 20 (All.) : AIR 1966 All. 417 [LNIND 1965 ALL 173]; New Asiatic Insurance Co. Ltd., In re, (1967) 37
Comp. Cas. 331 (Punj.) : AIR 1967 Punj. 15; Bhutoria Bros. P. Ltd., In re, (1958) 28 Comp. Cas. 122 (Cal.) : AIR 1957
Cal. 593 [LNIND 1957 CAL 106]; Dalmia Cement (Bharat) Ltd., In re, (1964) 2 Comp. LJ 63 (Mad.); Delhi Bharat Grain
Merchants Association Ltd., In re, (1974) 44 Comp. Cas. 214 (Delhi); New Asarwa Mfg. Co. Ltd., In re, (1975) 45
Comp. Cas. 151 (Guj.).
87. Parent Tyre Co. Ltd. Re, (1923) 2 Ch. 222 : 92 LJ Ch. 358 : 129 LT 244 : 39 TLR 426.
88. Punjab Distilling Industries Ltd. v. ROC, (1963) 33 Comp. Cas. 811 (Punj.).
1. Ambala Electric Supply Co. Ltd. In re, (1963) 33 Comp. Cas. 585 (Punj.).
2. Motilal Padampat Sugar Mills P. Ltd., In re, (1964) 34 Comp. Cas. 86 (All.).
3. Cyclists' Touring Club, Re, (1907) 1 Ch. 269 : 23 TLR 220. See also Goneshbari Tea Co. Pvt. Ltd., In re, (1964) 34
Comp. Cas. 556 (Cal.) : 68 CWN 490.
4. Standard General Assurance Co. Ltd., In re,AIR 1965 Cal. 16 [LNIND 1964 CAL 88].
5. Alliance Marine Assurance Co., Re, (1892) 1 Ch. 300 : 61 LJ Ch. 176 : 40 WR 329.
6. National Boiler Insurance Co., Re, (1892) 1 Ch. 306 : 61 LJ Ch. 501 : 65 LT 849.
Page 3 of 27
7. Empire Trust, Re,(1891) 64 LT 221.

8. Ulster Marine Insurance Co., Re, (1891) 27 IR [Irish] 487.
9. Baird & Sons Ltd., Re, (1932) SC [Scottish] 455.
10. Cole (E.K.) Ltd., Re,(1945) 1 All ER 521 N. See also Comments under Section 13.
11. Bharat Mining Corpn. Ltd., In re, (1967) 37 Comp. Cas. 430 (Cal.) : 71 CWN 359; Indian Iron & Steel Co. Ltd., In re,
(1957) 27 Comp. Cas. 361 (Cal.) : 61 CWN 374.
12. Motilal Hirabhai Spg., Wvg. and Mfg. Co. Ltd., In re, (1970) 40 Comp. Cas. 1216 (Guj.).
89 (CA).
14. United Collieries Ltd., In re, (1975) 45 Comp. Cas. 226 (Cal.). See Circular No. 1 of 1995, dated 16-2-1995 Circular No.
1 of 1995, dated 16-2-1995 and Recent Trend under English Law in Comments under Sections 13 and 20.
15. Mahaluxmi Bank Ltd. v. Registrar of Companies, (1961) 31 Comp. Cas. 287 (Cal.).
16. Pondicherry Textile Corporation Ltd. v. K.K. Ramanujam, (1998) 91 Comp. Cas. 441 (CLB); Modi Spg. and Wvg. Mills
Co. Ltd., In re, (1963) 33 Comp. Cas. 901 (All.); Fort Gloster Jute Mfg. Co. Ltd., In re, 68 CWN 481 (Cal.).
17. Industrial Cables (India) Ltd. v. Registrar of Companies, (1973) 43 Comp. Cas. 353 (P&H); Geo Rubber Exports Ltd., In
re, (1991) 72 Comp. Cas. 713 (CLB).
18. SMP Mutual Benefit Ltd., In re, (1994) 4 Comp. LJ 385 (CLB); Balaji Mutual Benefit Ltd., In re, (1994) 4 Comp. LJ 551
(CLB).
19. Mafatlal Consultancy Services (India) Ltd., In re,(1995) 17 Corp. LA 385 (CLB).
20. Sarvin Securities P. Ltd., In re,(1995) 17 Corp. LA 387 (CLB).
21. Sipani Automobiles Ltd., In re, (1993) 78 Comp. Cas. 557 (CLB).
22. Jewish Colonial Trust, Re, (1908) 2 Ch. 287 : 77 LJ Ch. 629 : 99 LT 243 : 24 TLR 595; Strathspey Public Assembly and
Agricultural Hall Co. Ltd. v. Anderson's Trustees, (1934) SC [Scottish] 385 : (1934) SLT 335; Hampstead Garden
Suburb Trust Ltd., Re, (1962) Ch. 806 : (1962) 2 All ER 870 : (1962) 3 WLR 474 : (1963) 33 Comp. Cas. 166 (Ch.).
23. Nagaisuree Tea Co. Ltd. v. Ram Chandra Karnani, (1966) 2 Comp. LJ 208 (Cal.).
24. Hari Krishna Lohia v. Hoolungooree Tea Co. Ltd., (1970) 40 Comp. Cas. 458 (Cal.) (DB) : AIR 1969 Cal. 312 [LNIND
1968 CAL 151](DB); Marybong and Kyel Tea Estate Ltd., In re, (1977) 47 Comp. Cas. 802 (Cal.); Aimco Pesticides
Ltd., In re, (2001) 103 Comp. Cas. 463 (Bom.); Jalpaiguri Tea Co. Ltd., In re, (1974) 44 Comp. Cas. 335 (Cal.). See
also Comments under Sections 391 to 396.
25. Rangkala Investments Ltd., In re, (1997) 89 Comp. Cas. 754 (Guj.). See also Comments under Sections 149(2A) and
394.
26. Hindhivac P. Ltd., In re, (2005) 128 Comp. Cas. 266 (Kar.); Highland Electro Appliances P. Ltd., In re, (2003) 2 Comp.
LJ 16 (Delhi).
27. Liqui Box India P. Ltd., In re, (2006) 131 Comp. Cas. 645 (P&H); Maneckchowk and Ahmedabad Manufacturing Co.
Ltd., In re, (1970) 40 Comp. Cas. 819 (Guj.) : (1970) 2 Comp. LJ 300 (Guj.); PMP Auto Industries Ltd. In re, (1994) 80
Comp. Cas. 289 (Bom.).
28. Santhanalakshmi Investments P. Ltd., In re, (2006) 129 Comp. Cas. 789 (Mad.); Mahaamba Investments Ltd. v. IDI
Ltd., (2001) 105 Comp. Cas. 16 (Bom.).
29. Symphony Comfort Systems Ltd., In re, (1998) 91 Comp. Cas. 404 (CLB); Deutsche Babcock Power Systems Ltd., In
re, (1999) 97 Comp. Cas. 341 (CLB); J.L. Morison (India) Ltd., In re, (1999) 95 Comp. Cas. 907 (CLB); Pondicherry
Textile Corpn. Ltd. v. K.K. Ramanujam, (1998) 91 Comp. Cas. 441 (CLB). See also Comments in earlier paras under
Shifting of Registered Office.
30. Symphony Comfort Systems Ltd., In re, (1998) 91 Comp. Cas. 404 (CLB).
* Powers of the Court were conferred on the CLB. Section 17(2) as to confirmation by the CLB [ now the Central
Government] has been substituted in 1997. But, the Circular shall be useful guide to the shareholders in passing
Special Resolution for alteration of objects.
† Powers of the Court were conferred on the CLB. Section 17(2) as to confirmation by the CLB [ now the Central
Government] has been substituted in 1997 and 2003. But, the Circular shall be useful shareholders in passing Special
Resolution for alteration of objects. See also Circular No. 1 of 1995, dated 16-2-1995 and Recent Trend under English
Law under Sections 13 and 20.
Page 4 of 27
31. NEPC India Ltd. v. Registrar of Companies, (1999) 97 Comp. Cas. 500 (Mad.).
32. Jayantilal Ranchhoddas Koticha v. Tata Iron and Steel Co. Ltd., (1957) 27 Comp. Cas. 604 (Bom.) : AIR 1958 Bom.
155 [LNIND 1957 BOM 101]; Dehri Rohtas Light Railway Co. Ltd., In re, (1960) 30 Comp. Cas. 387 (Patna); Sri
Natesar Spg. and Wvg. Mills Pvt. Ltd., In re, (1960) 30 Comp. Cas. 54 (Mad.); Maharaja Shree Umaid Mills Ltd., In re,
(1961) 31 Comp. Cas. 273 (Raj.); Indian Steel and Wire Products Ltd. v. CIT, (1968) 38 Comp. Cas. 660 (Cal.) : 69 ITR
379; Indo-Pharma Pharmaceutical Works Pvt. Ltd., In re, (1968) 38 Comp. Cas. 313 (Bom.).
33. Lord Mahaveer Goutham Benefit Fund Ltd., In re, (1994) 79 Comp. Cas. 535 (CLB). See also Comments under Section
620A.
34. Ulster S.P.C.A., Re, (1936) NL 97; Dominion Students' Hall Trust v. Attorney-General, (1947) Ch. 183. See also
35. Dorking Villa Building Co., Re, (1939) 1 Ch. 635 : 83 SJ 134 (1939).
36. Prachi Insurance Co. Ltd. v. Choudhury Madhusudan Das, (1964) 2 Comp. LJ 157 (Orissa) : (1964) ILR Cal. 531. See
also Comments under Sections 166 and 172.
37. Metal Box India Ltd., In re, (2001) 105 Comp. Cas. 939 (CLB); Bharat Commerce and Industries Ltd. v. ROC, (1973) 43
Comp. Cas. 275 (Cal.) (DB). See also Comments under Section 172.
38. Bharat Commerce and Industries Ltd. v. Registrar of Companies, (1973) 43 Comp. Cas. 275 (Cal.) (DB). See detailed
39. Parikh Engg. and Body Building Co. Ltd., In re, (1975) 45 Comp. Cas. 157 (Pat.). See also Comments under Section
171.
610E (w.e.f. 16-9-2006) in Appendix 2.
16-9-2006).
† See the Companies (Director Identification Number) Rules, 2006 in Appendix 49. See detailed Comments on Director
2006) (w.e.f. 1-11-2006).
40. Classic Welding Products Pvt. Ltd., In re, (2003) 117 Comp. Cas. 94 (CLB).
41. Jayantilal v. Tata Iron and Steel Co. Ltd.,AIR 1958 Bom. 155 [LNIND 1957 BOM 101]; Dehri Rohtas Light Railway Co.
Ltd., In re, (1960) 30 Comp. Cas. 387 (Patna).
42. Pal-Peugeot Ltd., In re, (1997) 89 Comp. Cas. 808 (CLB); K.G. Khosla Compressors Ltd., In re, (1998) 91 Comp. Cas.
546 (CLB); Upper Ganges Sugar and Industries Ltd., In re, (2001) 105 Comp. Cas. 377 (CLB); Usha Beltron Ltd., In re,
(2001) 104 Comp. Cas. 411 (CLB); Metal Box India Ltd., In re, (2001) 105 Comp. Cas. 939 (CLB); SPML India Ltd., In
re, (2001) 104 Comp. Cas. 486 (CLB); Zuari Agro Chemicals Ltd. v. F.S. Wadia, (1974) 44 Comp. Cas. 465 (Bom.).
43. Metal Box India Ltd., In re, (2001) 105 Comp. Cas. 939 (CLB); Zuari Agro Chemicals Ltd. v. F.S. Wadia, (1974) 44
Comp. Cas. 465 (Bom.); K.G. Khosla Compressors Ltd., In re, (1998) 91 Comp. Cas. 546 (CLB); Mackinnon Mackenzie
& Co. P. Ltd., In re, (1967) 37 Comp. Cas. 516 (Cal.); Dalmia Cement (Bharat) Ltd., In re, (1964) 34 Comp. Cas. 729
(Mad.).
44. Satyashree Balaji Wires and Cables P. Ltd., In re, (2007) 137 Comp. Cas. 283 (CLB).
45. Metal Box India Ltd., In re, (2001) 105 Comp. Cas. 939 (CLB); Usha Beltron Ltd. In re (2001) 104 Comp. Cas. 411
(CLB); Rank Film Distributors of India Ltd. v. ROC and State of W.B., (1968) 38 Comp. Cas. 487 (Cal.) : AIR 1969 Cal.
32 [LNIND 1967 CAL 163]: (1968) 1 Comp. LJ 129 (Cal.) : 72 CWN 384; Mackinnon Mackenzie & Co. P. Ltd., In re,
(1967) 37 Comp. Cas. 516 (Cal.); Bharat Commerce and Industries Ltd. v. ROC, (1973) 43 Comp. Cas. 275 (Cal.)
(DB); Minerva Mills Ltd. v. Govt. of Maharashtra, (1975) 45 Comp. Cas. 1 (Bom.).
46. Orissa Chemicals & Distilleries P. Ltd., In re, (1962) 32 Comp. Cas. 497 : AIR 1961 Orissa 62; Orient Paper Mills Ltd. v.
State, (1958) 28 Comp. Cas. 523 (Orissa) : AIR 1957 Orissa 232.
47. SPML India Ltd., In re, (2001) 104 Comp. Cas. 486 (CLB); Neelachal Auto Ltd., In re, (2001) 105 Comp. Cas. 288
(CLB).
48. Pal-Peugeot Ltd., In re, (1997) 89 Comp. Cas. 808 (CLB). See also Comments u/s. 61.
49. Bharat Commerce and Industries Ltd. v. ROC, (1973) 43 Comp. Cas. 275 (Cal.) (DB); Jayantilal v. Tata Iron and Steel
Co. Ltd.,AIR 1958 Bom. 155 [LNIND 1957 BOM 101]; Northern Enterprises Corporation Pvt. Ltd., In re, (1974) 44
Comp. Cas. 334 (P&H).
50. Jindal Vijayanagar Steel Ltd., In re, (2006) 129 Comp. Cas. 952 (CLB).
Page 5 of 27
51. Perfect Refractories Ltd., In re, (2005) 128 Comp. Cas. 234 (CLB).
52. J.L. Morison (India) Ltd., In re, (1999) 95 Comp. Cas. 907 (CLB); Bharat Commerce and Industries Ltd. v. ROC, (1973)
43 Comp. Cas. 275 (Cal.) (DB).
53. Automobile Products of India Ltd., In re, (2005) 127 Comp. Cas. 941 (CLB).
54. Deutsche Babcock Power Systems Ltd., In re, (1999) 97 Comp. Cas. 341 (CLB); Symphony Comfort Systems Ltd., In
re, (1998) 91 Comp. Cas. 404 (CLB); Pondicherry Textile Corpn. Ltd. v. K.K. Ramanujam, (1998) 91 Comp. Cas. 441
(CLB).
55. Symphony Comfort Systems Ltd., In re, (1998) 91 Comp. Cas. 404 (CLB); Upper Ganges Sugar and Industries Ltd., In
re, (2001) 105 Comp. Cas. 377 (CLB); Metal Box India Ltd., In re, (2001) 105 Comp. Cas. 939 (CLB).
56. Deutsche Babcock Power Systems Ltd., In re, (1999) 97 Comp. Cas. 341 (CLB). See also Comments under Sections 4
and 34.
57. Seaways Maritime Pvt. Ltd., In re, (2002) 111 Comp. Cas. 78 (CLB).
58. K.G. Khosla Compressors Ltd., In re, (1998) 91 Comp. Cas. 546 (CLB).
59. Promode Kumar Mittal v. Southern Steel Ltd., (1980) 50 Comp. Cas. 555 (Cal.).
60. Metal Box India Ltd., In re, (2001) 105 Comp. Cas. 939 (CLB). Now the powers of BIFRhave been vested in the
Tribunal (NCLT) under new Sections 424A to 424L inserted in the Companies Act, 1956, by the Companies (Second
Amendment) Act, 2002 (11 of 2003).
61. Krimens Oil Mills P. Ltd. v. ROC,AIR 1958 Mad. 450 [LNIND 1957 MAD 266]: (1958) 2 MLJ 141 [LNIND 1957 MAD
266].
62. Kold-hold Industries P. Ltd. v. Arabian Exports Ltd., (2004) 119 Comp. Cas. 1 (Bom.).
* See the Companies (Central Government's) General Rules and Forms, 1956 in Appendix 1. See detailed Comments,
** See Standard Equity Listing Agreement Form in Appendix 225.
COMMENTS
English Act, 1948 : Section 5 Previous Act, 1913 : Sections 12, 13, 14
English Act, 1985 : Sections 4, 5, 6
explained the reasons for substitution of this section as follows: “This clause seeks to substitute a new section for
section 17 of the Companies Act, 1956. The existing provisions contained in section 17 of the Act
empowerCompany Law Board to confirm alteration of memorandum of association of a company. It is now
proposed to confer this power upon the National Company Law Tribunal [ power has been conferred upon the
Central Government in the Act]. This amendment is of consequential nature.” [ Clause 7 of the Companies
See also Legislative History under Sections 10E, 10FB and 637.
Legislative History of original section 17, which was earlier amended by the Companies (Amendment) Act, 1960,
the Companies (Amendment) Act, 1974 and the Companies (Amendment) Act, 1996 (5 of 1997) is as follows.
The Companies Act, 1956 (1 1956).

Page 6 of 27
—The Notes on clauses explained as follows: “This combines sections 12, 13 and 14 of the existing Act. Compare
section 5 of the English Act.” [ Clause 14 of the Companies Bill, 1953 (46 of 1953)].
The Joint Committee further recommended as follows:
“The Committee consider it necessary to empower the Registrar to appear before the Court [ the CLB (now the
Central Government)] in case he desires to point out any irregularity in an alteration to its memorandum proposed
by a company. Sub-clause (4) makes the necessary enabling provision in this behalf.” [ Report : para 15].
—The Notes on clauses explained the amendments in this section as follows: “This is to clarify that the Court [ the
CLB (now the Central Government)] shall cause notice of the petition for confirmation of the alteration of
memorandum to be served on the Registrar.” [ Clause 6 of the Companies (Amendment) Bill, 1959 (37 of 1959)].
—The Notes on clauses explained the amendments as follows: “The Administrative Reforms Commission has
recommended that the functions which are now discharged by the Courts under the Companies Act, 1956, may be
reviewed and those which are essentially of an administrative nature may be transferred to the executive. This
recommendation of the ARC has been examined and it is proposed to transfer some of the functions of the Court of
administrative nature to the Central Government.” [Clause 4 of the Companies (Amendment) Bill, 1972 (72 of
1972)].
The Joint Committee recommended to make further changes as follows:
“These clauses seek to transfer to the Central Government the powers to decide certain matters which are at
present decided by the Courts. A point was raised before the Joint Committee that, since these powers are of a
quasi-judicial nature, they should not be exercised by the Central Government. The Committee, therefore, feel that
instead of conferring these powers on the Central Government, these powers should be conferred by the statute
itself on the CLB [ now re-transferred to the Central Government] to enable it to exercise such powers quasi-
judicially. These clauses have been amended accordingly.” [ Report : para 20].
—The Statement of Objects and Reasons explained the object of the amendments “to simplify some procedural
and legal requirements in the interest of corporate sector”. [ Statement of Objects and Reasons appended to the
Powers conferred on the Central Government.—From the commencement of relevant provisions of the
Companies (Second Amendment) Act, 2002 (11 of 2003) the powers which were hitherto being exercised by the
Company Law Board(CLB) under this section have been conferred on the Central Government.
Original section 17 conferred this power upon the “Court”. The powers of the “Court” were earlier conferred upon
the CLB by Act 41 of 1974.
See also Comments under Sections 10E, 10FB and 637.
The following commentary on the Powers of Court, CLB and Principles laid down in disposing Petitions
would be a guide for the Central Government in deciding Applications and to the Members passing Special
Resolution.
Alteration of Memorandum of Association [Sub-section (1)].—A company may by Special Resolution alter its
Memorandum of Association to change: (1) the place of its registered office from one State to another, or (2) the
objects of the company so far as required to enable it—(a) to carry on its business more economically or efficiently;
or (b) to attain its main purpose by new or improved means; or (c) to enlarge or change the local area of its
operations; or (d) to carry on some business which may conveniently or advantageously be combined with its
business; or (e) to restrict or abandon any of the objects; or (f) to sell or dispose of whole or part of the
undertaking(s); or (g) to amalgamate with any other company or body of persons.
Page 7 of 27
Special Resolution.—To alter the provisions of its Memorandum so as to change its Objects a Special Resolution
is required to be passed. [ Section 17(1)].
To alter the provisions of its Memorandum so as to change the place of its Registered Office from one State to
another, a Special Resolution is required to be passed subject to confirmation by the Company Law Board [ now
the Central Government]. [ Section 17(1) and (2)].
Resolution by postal ballot.—As per Rule 4(a)† of the Companies (Passing of the Resolution by Postal Ballot)
Rules, 2001, the resolution for alteration in the object clause of memorandum shall be passed through postal ballot.
website http://www.mca.gov.in : (2006) 130 Comp. Cas. (St.) 13 (2006) 130 Comp. Cas. (St.) 13 in Appendices.
Release (16-12-2006).
Alteration of Objects [ Section 17(1)(a) to (g)].—The alteration of the objects stated in Memorandum of
Association of a company must be for the purposes specified in clauses (a) to (g) of sub-section (1) of section 17
explained hereinafter.
Prior to the substitution of section 17(2) by the Companies (Amendment) Act, 1996 (5 of 1997) (w.e.f. 1-3-1997),
the alteration of objects did not take effect until it was confirmed by the CLB on petition. Now sub-section (2) applies
to shifting of registered office outside the State as explained later.
English Law.—Under the English Companies Act, 1985, section 4, a company may, by special resolution, alter its
objects stated in the Memorandum. The restrictions that the alteration must be for 7 purposes, similar to section
17(1)(a) to (g) of the Indian Companies Act, 1956 have been removed under the English Act. The company may
carry on altered objects unless application for confirmation of court is made under section 5 of the English Act. See
(1)(a) Carry business more economically or efficiently.—This clause presupposes that the company is carrying
on business.76 Alteration must leave the business substantially what was before with only such changes in mode of
conducting it as will enable it to be carried on more economically or more efficiently.77
Where a company seeks to alter the objects clause in its Memorandum of Association, the business must remain
substantially the same. The additions, alterations and changes should only be steps in aid to improve the efficiency
of the company.78 But a company which actively prosecuted the object of production an amendment of the
Memorandum need not be confined to the purpose of increasing the efficiency with regard to production alone.79
A power to borrow and give security, a power to invest reserves in various securities and other ancillary powers
may be authorised.80 Alteration of the objects clause in memorandum providing for giving donations or grants for
Page 8 of 27
any religious, educational, charitable or any other social purposes or for the benefit of humanity or a section thereof
was permitted.81
The Courts refused confirmation where the alteration of Memorandum of Association was unconnected with and
opposed to the existing objects or where the change would alter the basis of the company.82
(1)(b) Attain main purpose by new or improved means.—This sub-clause uses the expression main “purpose”
and not “object”. The word “purpose” is more restricted than “object” and consequently the alteration must be one to
carry out the main purpose of the company rather than one of the objects of the company, although that object may
be described in the memorandum as a main object.83
There will be no difficulty in ascertaining the main purpose of companies registered after 1965 as the Memorandum
of Association of such companies will clearly show the main objects in view of amended section 13. In companies
registered prior to that date, one has first to look to the Memorandum and then get assistance from the evidence as
to what in fact have been the main objects and in case of doubt also have reference to what has actually been
done.84
(1)(c) Enlarge or change local area of operations.—A company was formed to acquire land in Egypt. It desired to
acquire land in the Sudan. It was held that the alteration could be made provided that the company inserted the
words “and Sudan” after the word “Delta” in its name.85
(1)(d) Carry business which may conveniently or advantageously be combined.—The new or additional
business to be carried on may be wholly different from the existing business of the company and yet be capable of
being conveniently or advantageously combined with it. The additional business must not be destructive of, or
inconsistent with, the existing business under the existing circumstances.86
Where the business of a company consisted of holding large investments. A special resolution was passed to
enable the company to carry on business of bankers, financiers, underwriters and dealers in securities (and to buy,
sell and deal in real and personal estate of every description). The court sanctioned alteration excluding the objects
bracketed.87 Where the Memorandum stated that the main object of the company was to purchase, acquire and
carry on the business of distillers, rectifiers, brewers, maltsters, methylators. The company passed a special
resolution to alter its memorandum by adding a new object, viz., to acquire or purchase or take over on hire, picture
houses, cinemas, theatres or similar houses for exhibiting pictures, and films. Held, the cinema business could not
be conveniently or advantageously combined with the existing business of distilling of the company within the
meaning of section 17(1).88
A company formed for generating power was allowed to carry on “cold storage and other allied business”.1 Sugar
and oil manufacturing company was allowed to do the business of steel makers, revetters and steel castings.2
The Cyclists' Touring Club was formed to promote, assist and protect cyclists. The company wanted to include
among the persons to be assisted “all tourists including motorists”. The court refused to sanction such alteration on
the ground that it was impossible to combine the two businesses as one of the objects of the company was to
protect cyclists against motorists.3
In cases alterations would render the name of the company misleading, the Court often directed name to be
changed so as to express alterations in objects and spheres of the company.4 The court sanctioned alteration to a
marine insurance company by adding fire, life and accident business;5 a boiler insurance company by adding other
insurance;6 investment and loan company by adding guarantee and finance company;7 a marine underwriting
company by adding marine insurance and insurance of risk in land transit;8 and a company carrying on business as
malters and hop merchants by adding the business of fruit merchants, canners and preserve manufacturers.9
Where memorandum provided that each clause must be read independently of each other, confirmation could be
refused to an alteration adding new sub-clause except on condition of deleting the provision in question or limiting
its application.10
The addition of the business of selling goods on hire-purchase system, to build hotels and restaurants and doing
business in them with the name of the company as the Bharat Mining Corporation Ltd. would be not only illogical
but misleading to the world dealing with the company to introduce such independent and separate businesses.
These businesses could by no means conveniently or advantageously be combined with the business of the
company as in section 17(1)(d). Nor these new businesses were necessary to enable the company to carry on its
Page 9 of 27
existing business more economically or more efficiently or to attain its “main” purpose by new or improved means
as in section 17(1)(a) of the Act.11
If the alteration in objects is sought to be covered by clause 17(1)(a) it must be shown that by the new business the
existing business of the company can be more economically or efficiently carried on. If the alteration is sought to be
covered by clause 17(1)(d) it must be shown that the new business would be such as could be conveniently or
advantageously combined with the existing business of the company. In either case, the company ought to be
carrying on some business.12
The court refused to confirm an alteration unconnected with and opposed to the existing objects or where the
change would alter the basis of the company.13
Multipurpose Companies.—Where the colliery business was nationalised. The company proposed to venture into
new fields. Normally a diversification was not permitted which would defeat the business already carried. But, as the
business could no longer be carried, the court allowed the alteration subject to reasonable suggestion by counsel
for the Registrar of Companies (ROC) for alteration of company's name appropriately. The Court also observed that
the days of devotion to single purpose or limited purposes both for institutions and men are gone. We are living in
an age of multipurpose institutions and projects, men and institutions must go in for multifarious activities and
ventures. Whether, however, that is a desirable trend or not is another debate outside the realm of company
jurisprudence.14
Where a banking company was prohibited from doing banking business, alteration to confine its objects to non-
banking business was confirmed by the court.15
Additional Business.—Whether one business can be conveniently combined with another is essentially a
business question to be determined by the directors and shareholders of the company. The shareholders of a
company would consider whether any additional business may be conveniently or advantageously combined with
the existing business keeping in mind that the new business is not destructive of or inconsistent with the existing
business.16
New Business.—A company is free to alter its Objects Clause in its Memorandum as it is for its members to decide
as to what business the company should carry on from time to time. It is not necessary that the proposed new
business must be ancillary or similar to the existing business or businesses of the company. “Some business” in
section 17(1) implies some new business not already provided for in the objects clause and not necessarily ancillary
to the existing businesses. The proposed new business may even be entirely new and may amount to a departure
from the old businesses. But, the new business should not be so inconsistent or incongruous with its existing
businesses as to be destructive thereof. This is clearly suggested by the use of the word “combined” in section
17(d) as two mutually destructive things cannot be combined together. This question being essentially a business
proposition has normally to be determined by the persons engaged in the business of the company.17
New Objects.—The alteration of the Object Clause with a negative expression “the company shall not undertake
the following objects” was not allowed.18 The alteration should be in accordance with and within the scope of
section 17.19
A new object undertaken by an amendment of the Memorandum of Association cannot be shown as or under the
“Main Object”.20
See also Comments under Section 13 and 149.
Powers of CLB [nowthe Central Government].—The powers of the Company Law Board (CLB) [ now the Central
Government] under section 17 are discretionary and to be used judiciously and with circumspection. While the CLB
was liberal in allowing the companies to diversify their activities and venture into new fields which were in the
interest of the company and beneficial to the public or the society, it was equally the duty of the CLB to ensure that
the cost and expenditure of the new project was met out of company's own legitimate funds or from sources legally
permitted. If the new business involves any diversion of funds from the ongoing project to a new project then the
CLB refused the permission to do so.21
No Confirmation for alteration of Objects [ Section 17(2) as substituted in 1997 and 2003].— Section 17(2)
which earlier provided that the alteration under section 17(1) shall not take effect unless it was confirmed by the
CLB on petition as substituted by the Companies (Amendment) Act, 1996 (5 of 1997) now provides that alteration
Page 10 of 27
relating to the Change of place of Registered Office from one State to another shall not take effect unless it is
confirmed by CLB [ now Central Government vide the Companies (Second Amendment) Act, 2002 (11 of 2003)] on
petition.
Thus Objects Clause in the Memorandum of Association can be altered simply by passing Special Resolution and
no confirmation is needed.
(1)(e) Restrict or abandon any of the objects.—There is jurisdiction to confirm alterations of objects in
Memorandum which involve the abandonment of objects which are in their character fundamental.22
(1)(f) Sell or dispose whole or part of undertaking(s).—The special resolution is required to alter its objects in
memorandum to sell or dispose of the whole, or any part, of the undertaking, or of any of the undertakings, of the
company.
(1)(g) Amalgamate with other company or body of persons.—A company may by special resolution alter its
memorandum to change the objects to enable it to amalgamate with any other company or body of persons.
A company has inherent power to amalgamate. There is no limitation on the power of the Company Law Board [
now the Central Government] to make an order allowing insertion of a clause empowering the company to
amalgamate.23
Where power to amalgamate does not flow from the Memorandum, the company may by special resolution alter the
Memorandum to have such power. The shareholders and all persons affected by any proposed amalgamation will
have sufficient opportunity of meeting the case of actual amalgamation when the company applies to the Court [
now the Tribunal (NCLT)] with the actual scheme for amalgamation. Further, there is a statutory power of
amalgamating a company with another company without any specific power in the Memorandum under sections
391 to 396 of the Act.24
The Court [ now the Tribunal (NCLT)] has jurisdiction to sanction a scheme of amalgamation under section 394
even if the scheme contemplates a consequential alteration in the objects clause of the Memorandum of
Association of the transferee company without complying with the procedure in section 17 of the Act. Where the
requisite resolution under section 149(2A) for shifting the business under “other objects” to the “main objects” of the
Memorandum of Association was passed objection of the Central Government that the transferee company had no
power to take up and carry on the business of the transferor company was overruled.25
Power of companies to Amalgamate.— Section 17 of the Companies Act, 1956, is an aid to companies seeking
Amalgamation. Sections 391 to 394 in Chapter V of the Companies Act, 1956 are of very wide amplitude so as to
take into their fold compromises or arrangements including alteration of objects. The Legislature in its wisdom has
provided for such wide range of power to be exercised by the Company Court [now the Tribunal (NCLT) (w.e.f. date
to be notified)], since in matters of Amalgamation conducive to the interest of shareholders, there should be no
fetters. The power of companies to amalgamate may flow either from the objects in their Memorandum of
Association or may be acquired by resort to Sections 391 to 394 of the Companies Act, 1956. Even though in the
Objects Clause in the Memorandum of Association of the company there is no power for the Amalgamation of the
company with another company, the company may apply to the Court [the Tribunal (NCLT)] for sanctioning a
Scheme of Amalgamation. The Court [the Tribunal (NCLT)] under Sections 391 to 394 has powers to sanction
Amalgamation of the company.26
See detailed Comments under Sections 17, to 391, 394.
Scheme of Amalgamation—Consequential alterations in Objects Clause.—The procedure for Alteration of the

Memorandum need not be followed in an Amalgamation. The Scheme of Compromise, Arrangement or
Amalgamation requiring change in Objects Clause of the Company can be sanctioned under Sections 391 and 394
of the Companies Act, 1956 by the Company Court [the Tribunal (w.e.f. date to be notified)] after notice being
served to the CLB [the Central Government ( Regional Director)] under Section 394A of the Act. The Court [ now
the Tribunal (NCLT)] can sanction a Scheme of Amalgamation even if it contemplates consequential alterations in
the Objects Clause of the Memorandum of Association of the Company.27
See detailed Comments under Sections 17, 391 to 394A.

Page 11 of 27
Amalgamation or Merger of 100% Subsidiaries with Holding Company.—Where in amalgamation of Transferor

Companies being 100%subsidiaries of the Transferee Company, no new shares are to be issued under the
proposed Scheme to the Transferor Company. Such scheme is approved by the shareholders and creditors of the
respective companies. The proposed scheme will also not affect the members and creditors of the transferee
company. It is not always necessary for the transferee company to make application for such an amalgamation.
However, the transferee company in such cases is not precluded from filing the petition for approval specially when
another High Court while approving the scheme has given a direction that the scheme shall stand approved subject
to the approval of the scheme by the other Court [ now the Tribunal (NCLT)] within whose jurisdiction Registered
Office of the transferee company is situated. The transferee company though not required can file a petition and
seek approval of the scheme by way of abundant caution, or because of any doubt as to whether any member or
creditors are in any way affected by the Scheme of Amalgamation/Merger.28
See detailed Comments, Form and Procedure under Sections 391-394.
Creditors' objection.—In an application for the alteration of the objects clause or adopting of new objects, the
CLB, took into consideration the objections of the creditors and also of the employees. However, the Central
Government cannot direct the company to make payment to the creditors or to the workers first. It may impose
suitable conditions safeguarding the interests of the creditors including the objector before confirming the
alteration.29 Where a creditor objected to alteration of objects clause on the ground that the company owed it
money. The company was financially sound. On facts, the alteration was allowed. The CLB could not adjudicate
claims.30
Section 17(2) as to confirmation by the CLB [ now the Central Government] as substituted in 1997 and 2003 now
applies only to inter-State shifting of Registered Office of the company. The above decisions shall be useful guide to
the Central Government for such confirmation. The following Circulars shall be useful guide to the shareholders in
passing Special Resolution for alteration of objects.
Department's view.— Diversification of Objects.—“It is often seen that companies having inadequate resources
propose to take up objects which may be entirely new, having regard to the existing objects. There have been
cases in which companies having very unsatisfactory financial condition have attempted to insert entirely new
objects in the memorandum on the plea that they expected to do very well if they could take up the newly proposed
business. It has been decided that all such cases of undesirable diversification of activities should be opposed at
the Court*. Whether a proposal for diversification is undesirable or not is to be decided on due consideration of the
facts of the particular case and having regard to the policy of the Government on the subject. Government do not
favour existing companies taking up new lines of activity which are not reasonably connected with the activities in
which they are already engaged.
The reasons for this policy are as follows:—

(1) the need to broad-base investment in industries instead of giving the existing shareholders a preferential
right to increase their investment in the existing companies;
(2) through the spreading of investment in the manner indicated above, to prevent rise in the shares of existing
well-established concerns;
(3) to encourage the growth of managerial talent by enlarging the field for the exercise of top managerial
powers;
(4) to enable the shareholders to obtain information about the performance of an undertaking readily from the
accounts which are statutorily required to be submitted to the shareholders; and
(5) to enable the State to ascertain the relative efficiency of investment and management in different lines of
activity more readily through a scrutiny of the financial accounts which may not be readily available for the
constituent units if they are grouped into one company.
In no case, alteration in the objects clause should be opposed where the industrial licence has been given to the
company enabling it to branch off into other activities.
2. A reference is invited to sub-section (4) of section 17 of the Companies Act, 1956 which enjoins the Court*, to
which a petition has been made by a company for confirmation of an alteration in its memorandum of association, to
give the Registrar a reasonable opportunity to appear before the Court* and state his objections and suggestions
Page 12 of 27
with respect to the confirmation. This provision is new and was inserted in the Act because it was considered
necessary that the Registrar should have the right to appear before the Court in case he desires to point out any
irregularity in the proposed alteration. The Government of India are, however, anxious that this right is judiciously
exercised by the Registrars so as not to create an impression in the mind of the public that the new provision is
being made use of to harass or unnecessarily interfere in the management of companies. This should be borne in
mind whenever any occasion arises for having recourse to the provisions referred to above. In all cases of doubt,
Registrars are advised to consult their Regional Director in the matter before exercising the right conferred on them
by the said sub-section.” [ Circular Letter No. F. 2(7)-PR/56, dated 20-3-1956 Circular Letter No. F. 2(7)-PR/56,
dated 20-3-1956 : Govt. of India publication, Clarifications and Circulars on Company Law, 1977 Edition, page 8].
Change of name by a company during the pendency/hearing of petition for alteration of object clause(s)
under section 17 of the Companies Act, 1956.—“I am directed to state that it has come to the notice of the
Department that in the Northern and Eastern Regions, sometimes the Registrars of Companies are permitting
change of name of a company based on the company pursuing certain provisions listed in ‘other objects’ as
contained in its memorandum of association. This change of name is being done while a petition is already lying
before the Company Law Board [ now the Central Government]† for shifting ‘object(s)’ given in ‘other objects’ to
main objects in the memorandum of association.
The aforesaid action of the Registrars of Companies amounts to prejudging the issue particularly when the matter is
pending before the Company Law Board [ now the Central Government] under section 17 of the Companies Act,
1956, for approval of theCompany Law Board [ now the Central Government] for shifting a provision from other
objects to the main objects clause in the memorandum of association.
In view of the above circumstances, you are advised not to permit change of name during the pendency of a
petition under section 17 of the Act before the Company Law Board [ now the Central Government].” [ Circular No.
4 of 1996, dated 13-5-1996 (F. No. 3/7/96-CL-V) Circular No. 4 of 1996, dated 13-5-1996 (F. No. 3/7/96-CL-V) :
(1996) 86 Comp. Cas. (St.) 126].
See also Comments under substituted Section 17(2) and Section 21.
Filing.— See Comments after Shifting of Registered Office from one State to another [ Section 17(2) to (7)] and
Limitation.—The Registrar of Companies filed a complaint under section 17 read with section 291 of the Act
alleging that air-taxi operation was not included in the Memorandum of association and by carrying such business
without amending objects clause of Memorandum of Association, the company had committed an offence
punishable under section 629A. The complaint ought to be filed within a period of six months of the date of
knowledge. As the prospectus, special resolutions and annual reports were already filed with the ROC, the
respondent was well aware of the business carried on by N.E.P.C. company. The complaint was therefore barred
by time.31
Political Contributions.— Section 293A of the Companies Act, 1956, as substituted by the Companies
(Amendment) Act, 1985 (35 of 1985), has lifted the blanket ban on political contributions by companies and has
allowed the companies to make contributions to political parties from out of their profits. In decisions prior to blanket
ban such contributions, it has been held that the companies could alter their objects in the memorandum under
section 17(1) to enable the company to make contributions towards the funds of the political parties.32
See detailed Comments on Prohibitions and restrictions regarding Political Contributions under Section 293A as
Alteration of objects to convert intoNidhiCompany.—The alteration of Memorandum must be for any of the
seven purposes under section 17(1). The alteration of objects so as to make it a nidhi company was not covered by
section 17 and was not confirmed by the Company Law Board.33
Charitable Companies.—In case of a company formed for charitable purpose the alteration should be in
conformity with the law relating to charities.34
See detailed Comments on Charitable Companies under Section 25.

Page 13 of 27
Unlimited Company.—In case an unlimited company wants to enlarge its objects the sanctioning authority should
be satisfied that every member appreciated that his liability would become unlimited.35
Shifting of Registered Office outside the State [ Sections 17(1) and (2)].—To change the place of its
Registered Office from one State to another a Special Resolution of the company [Sub-section (1)] and sanction of
the Company Law Board [ now the Central Government] are necessary [Sub-section (2)].
Special Resolution.—To alter the provisions of its Memorandum of Association so as to change the place of its
Registered Office from one State to another, a Special Resolution is required to be passed subject to confirmation
by the Company Law Board [ now the Central Government]. [ Section 17(1) and (2)].
Filing.—A copy of the Special Resolution has to be filed with the Registrar of Companies in e-Form 23 of the
See detailed Comments, Form and Procedure under Sections 189 and 192.
Form 23 (substituted w.e.f. 10-2-2006).— See e-Form 23 of the Companies (Central Government's) General
Release (16-12-2006).
Proper resolution.—The special resolution passed must be in a meeting duly convened. If the meeting is not duly
held there is no special resolution and the Company Law Board [ now the Central Government] cannot exercise
jurisdiction.36
All general meetings except the Annual General Meetings of a company are Extraordinary General Meetings, which
are not necessarily required to be held only at the registered office of a company. The EGM for passing a special
resolution for shifting the registered office from one State to another need not be held only at the registered office
and on the said ground a meeting or the resolution passed at the meeting cannot be said to be bad or void.37
Mere omission to state the fact of the closure of registered office of the company at Calcutta while re-moving it to
New Delhi, in the Explanatory Statement calling the Extraordinary General Meeting will not vitiate the notice or the
resolution.38
In case of annual general meeting if all the members entitled to attend and vote at the meeting consent, the meeting
may be convened even by shorter than 21 days’ notice. Such consent may be before the meeting is held or after
the resolutions were passed. Where post-consent validated the special resolution originally passed without
sufficient notice and there was no objection that the resolution was not bona fide, the special resolution changing
the registered office from the State of Bihar to the State of West Bengal could be confirmed.39
Confirmation by Central Government [ Section 17(2)].—The alteration relating to the change of the place of its
Registered Office from one State to another shall not take effect unless it is confirmed by the Central Government
on petition.
Page 14 of 27
This power has hitherto being exercised by the Company Law Board. From the commencement of the Companies
(Second Amendment) Act, 2002 (11 of 2003), the power has been conferred upon the Central Government.
Powers of Central Government.—By the Companies (Second Amendment) Act, 2002 (11 of 2003), the powers
and jurisdiction presently being exercised by the Company Law Board (CLB) has been transferred to and vested in
“the Central Government” (w.e.f. date to be notified).
See detailed Comments under Sections 10E, 10FB and 637.
Form and Procedure.—Petition under Section 17(2) for Confirming Alteration in Memorandum of Association as to
change of place of the Registered Office from one State to another shall be made as follows:
Company Law Board (Till enforcement).— See Form and Procedure for petition (till commencement of the above
amendment) hitherto made to Company Law Board (CLB) in Comments under Section 10E.
See detailed Comments, Form and Procedure, Fees, etc., under Section 10E.
Central Government (After enforcement).—From the commencement of the (11 of 2003) Companies (Second
Amendment) Act, 2002 (w.e.f. date to be notified), the Application shall be made to the Central Government.
See Comments, Form and Procedure, Fees, etc., under Section 637. See detailed Comments under Sections 10E,
10FA, 10FB, 637 and 637A.
Filing of CLB's [nowCentral Government] Order.—Notice of the Company Law Board's (CLB) Order [ now the
Central Government (w.e.f. date to be notified)] under Section 17(1) or 17(5) of the Companies Act, 1956 shall be
given to the Registrar of Companies (ROC) in e-Form 21 of the Companies (Central Government's) General Rules
and Forms, 1956.
Form 21 (substituted w.e.f. 10-2-2006).— See e-Form 21 of the Companies (Central Government's) General
website http://www.mca.gov.in : (2006) 130 Comp. Cas. (St.) 13 (2006) 130 Comp. Cas. (St.) 13 in Appendices.
website http://www.mca.gov.in under category Informational Services, Date of Last Release (2-12-2006).
Section 17(1), 17(5) of the Companies Act, 1956] for Notice of the Court or theCompany Law Board (CLB) Order.
Now the powers of the Company Law Board (CLB) have been vested in the Central Government (w.e.f. date to be
notified).
Department's view.— Instructions for filling e-Company Forms.—The Ministry of Corporate Affairs (MCA) has
Instructions for filling of e-Form 21—Notice of the Court or the Company Law Board [now the Central
Government] order.—Specific Instruction Kit for filling e-Form 21 of the Companies (Central Government's)
General Rules and Forms, 1956 containing the e-Form Sl. No. and Detailed Instructions is reproduced below:
Note : Instructions are not provided for the fields which are self explanatory.
Refer the relevant provisions of the Companies Act, 1956Companies Act, 1956 and Rules made thereunder with
respect to the matter dealt in this e-form.
1
(a) In case of an Indian company, enter the ‘Corporate Identity Number’ (CIN).
Page 15 of 27
In case of a Foreign company, enter the ‘Foreign Company Registration Number’.

• You may find CIN by entering existing registration number in the Find CIN/GLN service at the
portal http://www.mca.gov.in.
2
(a), (b) Click the ‘Pre-fill’ button.
System will automatically display the Name and address of the registered office in case of an Indian
company; and in case of a Foreign company the Name and address of the principal place of business
in India.
3 Enter the name and location of the Court or Bench of the Company Law Board, of which the order is being
filed through this e-form.
6
(a), (b) Select the Section of the Companies Act, 1956 [ Section 17(1), 17(5)] under which the order has
been passed.
If the order has been passed under a Section other than the listed down Sections in 6(a) then select
‘Others’ and specify the section under which order has been passed.
Attachments.
• Copy of the Court order or Company Law Board order is a mandatory attachment.
• Any other information can be provided as an optional attachment.
Declaration.
—Enter the date of Board Resolution authorising the signatory to sign and submit the e-form.
Digital Signature.—The e-form should be digitally signed by:

In case of an Indian company:
• The Managing Director or Director or Manager or Secretary of the company duly authorised by the
Board of Directors.
In case of a Foreign company:
• By an authorised representative of the company duly authorised by the Board of Directors.
Note : The original certified copy of the Court or CLB order is also required to be submitted at the concerned Roc
Office simultaneously of filing e-Form 21, failing which the filing will not be considered and legal action will be taken.
[ Instructions for Filling e-Company Forms : (2006) 131 Comp. Cas. (St.) 90 : Downloaded (on 20-7-2007) from e-
Forms with Instruction Kit on the Ministry of Corporate Affairs (MCA) website http://www.mca.gov.in].
from Instructions for Filling e-Company Forms : (2006) 131 Comp. Cas. (St.) 254-264 and the Ministry of Corporate
Affairs (MCA) website http://www.mca.gov.in along with Relevant Sections of the Companies Act, 1956 or Relevant
Rules in Comments under Section 610B.
the Companies (Amendment) Act, 2006 (23 of 2006)(w.e.f. 16-9-2006).
Page 16 of 27
Extraordinary, No. 437, Part II, Section 3(i) Section 3(i) : (2006) 133 Comp. Cas. (St.) 81 in Appendices.
No. 1287, Part II, Section 3(ii)Section 3(ii), page 15, dated 27-10-2006 : MCA website http://www.mca.gov.in :
(2006) 134 Comp. Cas. (St.) 91 in Comments under Section 610B.
Rules, 1999.
See “MCA-21 Handbook” on MCA website http://www.mca.gov.in.
Ministry of Corporate Affairs website [http://www.mca.gov.in].—The erstwhile Department of Company Affairs

(DCA) under the Ministry of Finance, was designated as a separate Ministry, viz., ‘Ministry of Company Affairs’
(MCA) vide Cabinet Secretariat Notification No.DOC.CD-160/2004, dated 27-5-2004.
‘Ministry of Corporate Affairs’ (MCA) (w.e.f. 9-5-2007).—The Ministry of Company Affairs (MCA) has been
renamed as ‘Ministry of Corporate Affairs’ (MCA) vide Presidential Notification, dated 9-5-2007 amending the
Ministry of Corporate Affairs, Government of India, ‘A’ Wing, 5th Floor, Shastri Bhavan, Dr. Rajendra Prasad Road,
New Delhi-110 001.
on Director Identification Number (DIN) under newly inserted Sections 266A to 266G of the Companies Act, 1956
See the Companies (Director Identification Number) Rules, 2006† framed under Sections 266A to 266G (w.e.f. 1-
11-2006) vide Notification No. G.S.R. 649(E), dated 19-10-2006, published in the Gazette of India, Extraordinary,
No. 502, Part II, Section 3(i), page 21 : Ministry of Company Affairs (MCA) website http://www.mca.gov.in : (2006)
134 Comp. Cas. (St.) 112 in Appendices.
Page 17 of 27
See Details on applying for DSCS on MCA website http://www.mca.gov.in.
(ESC) in various Chapters/Sections/Sub-sections/Clauses of the Information Technology Act, 2000 (21 of 2000) as
Sabha on 15-12-2006.
266G inserted (w.e.f. 1-11-2006).
Powers of Central Government [ Section 17(3) to (7)].—Before confirming the alteration the CLB [ now Central
Government] must be satisfied that—(a) sufficient notice has been given to debenture holders and person or class
of persons whose interests are affected; and (b) with respect to creditor entitled to object, his consent has been
obtained or debt discharged, determined or secured. [Sub-section (3)]. Notice of petition has been served on the
Registrar of Companies and reasonable opportunity given to appear and state objections and suggestions. [Sub-
section (4)].
The CLB [ now the Central Government] has to take into consideration objections of “any person” if his interest is
affected. Therefore, application of a company seeking waiver of requirement of publishing general notice on the
plea that company had to incur expenses on publication charges was held to be not tenable.40
The CLB [ now the Central Government] may make an order confirming the alteration on such terms and
conditions, as it thinks fit [Sub-section (5)].
The words “either wholly or in part” in section 17(5) were omitted by the Companies (Amendment) Act, 1996 (5 of
1997).
Before confirming alteration CLB [ now the Central Government] shall have regard to rights and interests of
members and creditors of every class. [Sub-section (6)]. The Central Government may direct for purchase of the
interests of dissentient members and carrying into effect any such arrangement. [Sub-section (7)].
The Company Law Board (CLB) [ now the Central Government] has very wide discretionary powers to confirm the
alteration of the memorandum, conditionally or unconditionally or not to confirm at all.41
Shifting of the Registered Office.—If a special resolution to shift the registered office of the company is passed,
then the CLB [ now the Central Government] would confirm the alteration of the memorandum of association and
permit shifting of the registered office of the company from one State to another, if it is beneficial for the company in
spite of protests by some of the shareholders, workers or creditors. The CLB [ now the Central Government] has to
consider the interest of the shareholders of all the classes and the creditors as a whole.42
If all the formalities of the statute, i.e., section 17 read with relevant rules and regulations providing procedural
framework before the petition, have been complied with the CLB [ now Central Government] would confirm the
alteration. In so doing, the Central Government is not concerned to consider the wisdom or desirability of the
proposed alteration. It is not the function of the CLB [ now the Central Government] to substitute its own wisdom or
judgment in the place of the collective wisdom or judgment of the company expressed in a special resolution. These
matters must be left to the domestic decision of the shareholders. The company is the best judge of how to run its
business or where to situate its Registered Office.43
Alteration of Situation Clause or Registered Office Clause.— Section 17 of the Companies Act, 1956, read with
theCompany Law Board Regulations, 1991 [power of CLB vested in the Central Government (w.e.f. date to be
notified)], provides the procedural frame-work before the CLB [the Central Government] considers a petition for
Alteration of the Memorandum. The procedural frame-work is intended to take care of the interests of the
Page 18 of 27
shareholders, creditors and every other person or class of persons whose interest will be affected by the alteration.
The various provisions of the Act provide an opportunity to the Members of the company to air their views with
regard to the Alteration of Memorandum. When the CLB[Central Government] is satisfied that the company has
complied with the prescribed procedure it is only appropriate to presume that the interests of the concerned parties
are taken due care of. While the decision to shift the Registered Office of the company to another State being a
domestic matter rests with the shareholders, the company is the best judge of how to run its business more
economically or conveniently or where to locate the Registered Office for efficient running of the business. When
the Special Resolution approving the Alteration of the Situation Clause or Registered Office Clause of the
Memorandum of Association was unanimously passed in accordance with Section 189 of the Companies Act, 1956,
by all the three shareholders present at the Extraordinary General Meeting (EGM). The Registrar of Companies
(ROC) took on record the Form No. 23 [now e-Form 23] filed by the company and had no objection to the
company's proposal for altering the Situation Clause or Registered Office Clause of the Memorandum of
Association of the company. No objections were raised nor filed by any member or creditor to the company's
proposal upon publication of general notice in the Newspaper. The alteration was to be confirmed on condition that
the interest of none of the employees of the company, if any, at its Registered Office shall be prejudiced by way of
retrenchment or otherwise.44
See also Comments under Sections 171, 173(2) and 189.
State has nolocus standi.—The State in which Registered Office is situated has no locus standi or right of its own
to be heard (apart from the Registrar). However, section 17(3)(a) is wide enough to enable the CLB [ now the
Central Government] to direct notice to be served on the State if it is of opinion that the interests of the State will be
affected by the order. But, it is for the members of the company and not for the State to decide whether the
Registered Office of the company should be transferred from one State to another in the interest of the company.
The loss of revenue to, or of employment to the citizens of, a State, facilities afforded to the company by the State
Government, etc., are not relevant factors. The CLB [ now the Central Government] while confirming the alteration
may in exercise of the discretion under section 17(5) impose suitable conditions to safeguard the interests of the
State.45 Decisions of the Orissa High Court to the contrary do not seem to be good law.46
The CLB [ now the Central Government] while confirming the alteration will not adjudicate on the claims of the State
Government, e.g., sales tax, electricity charges and other dues outstanding from the company to the State
Government.47
Discretion to impose conditions.—The CLB [ now the Central Government] has discretion to impose such
conditions as it may deem fit. Where resolution was passed for shifting of registered office from the NCT of Delhi to
the State of Maharashtra by two shareholders and petition for confirmation of CLB filed. The company thereafter
issued shares to the public. Although, alteration was confirmed, as majority of new shareholders were from
Maharashtra and the resolution was a mere formality. The CLB directed the company to seek consent of new
shareholders, since the variation of registered office of the company after issue of prospectus and before allotment
was in violation of the spirit behind section 61 of the Act.48
The Company Law Board (CLB) [ now the Central Government] has very wide discretionary powers to confirm the
alteration of the Memorandum, conditionally or unconditionally or not to confirm at all.49
The words “either wholly or in part” in section 17(5) were omitted by the Companies (Amendment) Act, 1996 (5 of
1997) (w.e.f. 1-3-1997).
Memorandum of Association—Alteration—Registered Office.— Section 17 of the Companies Act, 1956 read

with theCLB Regulations, 1991 provides the procedural framework before the Company Law Board (CLB) [ now the
Central Government (w.e.f. date to be notified)] considers a petition for alteration of the Memorandum. The
procedural framework is intended to take care of the interests of the shareholders, creditors and every other person
or class of persons whose interest will be affected by the alteration. The various provisions under the Act provide an
opportunity to the members of the company to air their views with regard to the Alteration of the Memorandum.
When the CLB is satisfied that the company has complied with the prescribed procedure it is only appropriate to
presume that the interests of the concerned parties are taken due care of. A Clause in the Agreement which had
not been incorporated in the Memorandum of Association relating to shifting of the Registered Office with mutual
consent of the objector could not be forced on the company. Such a Clause when incorporated in the Articles of
Association would run against the spirit of Section 17 of the Act and consequently would become void by virtue of
Section 9 of the Act. Though the regulations did not prescribe that public notice shall be effected only after passing
a Special Resolution, yet in the spirit of the Regulations the public notice shall be effected only after passing the
Page 19 of 27
Special Resolution. The objector had neither contended nor established that any prejudice was caused to any
interested person on account of defective publication. General Meetings cannot be conducted at the dictates of a
lone shareholder. The plea of loss of revenue to a State was irrelevant for the purpose of Section 17 of the Act. The
defective publication was to be condoned as the company gave public notice in two newspapers about the results
of the Postal Ballot and filing of the petition before the CLB under Section 17 of the Act. The Alteration in the
Memorandum of Association of the company as approved by the Special Resolution passed by Postal Ballot was
confirmed subject to certain conditions.50
Objection by Shareholders after Special Resolution.—Pursuant to a Special Resolution passed unanimously by

the shareholders of the petitioner-company for shifting of its Registered Office from the State of Madhya Pradesh to
the State of West Bengal in accordance with Section 189 of the Companies Act, 1956, at its Annual General
Meeting, the company filed a petition under Section 17 of the Act for confirmation of the alteration of the
Memorandum of Association of the company. Four shareholders objected saying that their approval was taken
forcibly. It was held that neither in their objection memo nor during the hearing had the objectors indicated how the
shifting of the Registered Office would be prejudicial to the interest of the company or to the shareholders. If they
had any reservation on the contents of the Explanatory Statement they should have raised their objection in the
General Body Meeting at the time the proposal was being considered by the general body. In accordance with
Section 194 the Minutes of the Meeting signed by the Chairman of the meeting in terms of Section 193 shall be
evidence of the proceedings recorded therein. When the Resolution had been approved unanimously, the objectors
being shareholders could not object to the shifting of the Registered Office in these proceedings. Accordingly, the
objections raised by the four shareholders were to be rejected and the alteration in the Memorandum of Association
of the petitioner-company as approved by the Special Resolution passed confirmed.51
Employees.—In exercise of its discretion under section 17(5) the CLB [ now the Central Government] may confirm
the alteration shifting the Registered Office from one state to another subject to the conditions that the interests of
none of the employees shall be prejudicially affected.52
Shifting of Registered Office from one State to another.—Where the Special Resolution to shift the Registered
Office of the Company from one State to another has been approved by 99.99 per cent. votes by the shareholders
of the company through Postal Ballot. Therefore, by 99.99 per cent. affirmative votes the shareholders confirmed
that it would be in the interest of the company that the Registered Office be shifted from State of Maharashtra to
State of Tamil Nadu. In these circumstances, the objections of the ex-employees/executives/ supervisory staff had
to be considered. Their main apprehension appeared to be that the shifting of the Registered Office might prejudice
their cases in the Labour Court. As by an Affidavit the Company gave an undertaking to comply with the directions
of the Labour Court, the apprehension of the employees no longer survived. Accordingly, the Alteration in the
Memorandum of Association of the petitioner-company as approved by Special Resolution by the shareholders of
the company through Postal Ballot was confirmed as set forth in the Schedule forming part of this order, subject to
the condition that the company shall ensure compliance with the directions of the Labour Court in cases filed by the
ex-employees/executives/supervisory staff thus: “Resolved that pursuant to the provisions of Section 17 of the
Companies Act, 1956, Clause II of the Memorandum of Association be altered by the substitution of the words
‘State of Tamil Nadu’ in place of the words ‘State of Maharashtra’. Further resolved that Clause II of the
Memorandum of Association shall be read as under: ‘The Registered Office of the company shall be situated in the
State of Tamil Nadu.’ Let a copy of this order be sent to all objectors”.53
Creditors.—In approving the shifting of the registered office from one State to another State or adopting of new
objects, the creditors' objections have to be taken into consideration. But, the CLB [ now the Central Government]
would not go into the collective wisdom of the company. It should adopt a business-like approach in approving the
alteration. However, in exercise of its discretion the CLB [ now the Central Government] may impose suitable
conditions safeguarding the interests of the creditors including the objector before confirming the alteration.54
CLB [nowCentral Government] not to adjudicate claims.—The CLB [ now the Central Government] will not
adjudicate claims. Where a creditor objected to alteration of objects clause on the ground that the company owed it
money. The company was financially sound. On facts, the alteration was allowed.55
Where a creditor of another group company objected to the shifting of situation clause of its memorandum of
association on the ground that a group company of the petitioner owed it money. Held, though the company
belonged to the same group, under law, the group companies were two different entities. Moreover, the CLB [ now
the Central Government] will not adjudicate claims or counter-claims.56
Allegations of mala fides and pending prosecution against the managing director of the company is not a ground to
Page 20 of 27
refuse confirmation of resolution to shift registered office of the company. The CLB confirmed the alteration subject
to the condition that the claim of the objectors shall not be adversely affected.57 The litigation between the joint-
holder of shares cannot be a ground for stalling the shifting.58
Refusal to confirm in particular year.—When the Court [Company Law Board (now the Central Government)]
refuses to order the transfer of the Registered Office of the company in a particular year and later when facts and
circumstances are so altered that such transfer is necessary, the application has to be considered in the entirely
different situation and order made accordingly.59
Sick Company.—Under a scheme of rehabilitation the BIFR allowed shifting of the company's registered office. A
petition was made to the CLB [ now required to be made to the Central Government] for confirmation of shifting of
registered office to another State. The CLB held that the creditors could not insist on payment before shifting of
registered office. The CLB [ now the Central Government] cannot direct settlement contrary to BIFR's [ now the
Tribunal's (NCLT)] order.60
See also Comments under Sections 10FB and 424A to 424L.
Not outside India.—A company cannot change its Registered Office from India to another country and the Court
[Company Law Board (now the Central Government)] has no power to sanction such alteration of the
Memorandum.61
Change of registered office within the State [ Section 17A].— See detailed Comments, Form and Procedure
under relevant Section 17A.
Notice of situation and change of registered office [ Section 146].—Notice of situation of registered office and
every change must be given to the ROC within 30 days. [ Section 146(2)]. A Special Resolution is required to
remove the registered office outside the local limits of any city, town or village [S. 146(2) proviso].
A perusal of sections 17, 17A and 146 shows that there are three types of changes of registered office
contemplated—(1) when the registered office is being changed from one State to another; (2) when the registered
office is being changed from the jurisdiction of one Registrar of Companies to the jurisdiction of another Registrar of
Companies; and (3) when the registered office is being changed within the jurisdiction of the same Registrar of
Companies. In the first two cases, the change takes effect only after it is recorded by the competent authority and in
the third case, the notice of change itself has to be given after the change has occurred and the only obligation that
is cast on the Registrar of Companies is to record the same.62
Filing.—The company shall file with the Registrar—(a) the Special Resolution in respect of clauses (a) to (g) of
sub-section (1) of section 17 within one month, (b) the certified copy of the order of the CLB [ now the Central
Government] confirming the alteration in case of shifting of Registered Office from one State to another within three
months, (c) a printed copy of the Memorandum as altered, and (d) in case of transfer of Registered Office from one
State to another, certified copy of the order shall be filed with the Registrars of Companies (ROCs) of each State.
The Registrar shall register and certify the registration within one month.
Alteration of other Clauses in Memorandum.—For alteration of other conditions contained in the memorandum
of association of the company mentioned in section 13(3), viz., Name, Capital, Guarantee, Liability and Subscription
Clauses and Clauses other than aforesaid conditions see Comments under Section 16.
See also Comments under Sections 13, 16, 18, 19 and 31.
Effect of alteration.— See also Effect of alteration in memorandum or articles [ Section 38], Copies of
memorandum and articles to be given to members [S. 39], Alteration of memorandum or articles to be noted in
every copy [ Section 40].
Chartered Accountants of India (ICAI) enumerated Salient provisions of the Companies Act, 1956 (1 of 1956)
Page 21 of 27
Statement.
Sections 16, 17 and 18 [Alteration of Memorandum].—Where the Memorandum of Association of a company

has been altered, e.g., as to the Objects clause, Capital structure, etc., it should be seen that prima facie the
alteration has been made in accordance with the law.
Section 17A.—Permission of the Regional Director (RD) shall be required for changing the Registered Office of
Company within the same State.

(AGM).
Form of Compliance Certificate [Paras 26 and 27].—Form of Compliance Certificate appended to the
Companies (Compliance Certificate) Rules, 2001, inter alia, requires the Practising Company Secretary (PCS) to
state as follows:
“26. The company has altered the provisions of the Memorandum with respect to situation of the company's
Registered Office from one State to another during the year under scrutiny after complying with the provisions of the
Act.
Page 22 of 27
27. The company has altered the provisions of the Memorandum with respect to the Objects of the company during
the year under scrutiny and complied with provisions of the Act.”
[Paras 26 and 27 of Form of Compliance Certificate appended to the Companies (Compliance Certificate) Rules,
2001 : See Full Text under Section 383A].
Check-List for issue of Compliance Certificate.—Check-List for issue of Compliance Certificate on Paras 26 and
reproduced below.
Alteration in the Memorandum of Association with respect to Change in Registered Office from one State to
another and Object Clause.
—“Check whether:
(i) the Board of Directors had passed a Resolution for change in Registered Office of the company/alteration
of object clause;
(ii) the Board had called a General Meeting and necessary Special Resolution has been passed at the said
meeting;
(iii) a certified true copy of the Special Resolution along with the certified true copy of the Explanatory
Statement was filed with the Registrar in Form No. 23 [ now e-Form 23] within thirty days from the date of
passing of the Resolution;
(iv) a petition has been filed before the Company Law Board*, for confirmation of the Alteration of
Memorandum relating to change of place of the company's Registered Office from one State to another;
(v) a certified true copy of the order of the CLB* confirming the Alteration of Memorandum in respect of
Registered Office of the company together with the printed copy of the Memorandum as altered was filed
with the ROC of each State;
(vi) the Registrar of each State registered the same and issued the Certificate of Registration under his hand;
and
(vii) every copy of the Memorandum issued after the date of alteration is in accordance with the alteration.”
Forms, Returns and Documents.— To be Filed with the Registrar of Companies.— Other Important
Returns.— (e) Court/CLB Orders.—Check whether Form No. 21 [ now e-Form 21] has been filed with the ROC
along with certified copies of the following orders :
Section
17(2) Order of the Company Law Board* approving the shifting of
the Registered Office from one State to other.
See Requirements of Para 2 in Comments under Section 10E.
Shifting of Registered Office from a place under the Jurisdiction of one ROC to a place under the
Jurisdiction of another ROC within the same State.— See Relevant paras of ICSI Guidance Note in Comments
under Section 17A.
Page 23 of 27
under Section 383A.
See detailed Comments on Clauses of the Memorandum of Association and Alteration of Memorandum under
Sections 13, 16, 17, 17A-23 and 40.
Secretarial Practice and Check List.— Sections 16 to 19.— Alteration of Memorandum.—Check whether : (1) the
alteration falls under any of the purposes specified in section 17(1)(a) to (g)? (2) a Board resolution passed? (3) a
special resolution passed, minutes recorded, and e-Form 23* of the Companies (Central Government's) General
Rules and Forms, 1956, duly filed along with the statement of material facts and a printed copy of the memorandum
and articles duly altered with the Registrar of Companies within one month? [section 18(1)] (4) when situation of
registered office changed from one State to another, Form and Procedure for petition under section 17(2) to the
CLB [ now the Central Government] complied with? (5) the CLB [ now the Central Government] confirmed the
alteration? (6) the order of the CLB [ now the Central Government] had been filed with the Registrar(s) in e-Form
21* of the Companies (Central Government's) General Rules and Forms, 1956 within three months along with a
printed copy of the memorandum and articles duly altered? [ section 18(1)] (7) the Registrar(s) issued certificates
registering the alterations? (8) any extension of time for filing the CLB [ now the Central Government] order with the
Registrar was sought? [ section 18(4)]. If so, whether the documents filed within the extended period? (9) e-Form
18* of the Companies (Central Government's) General Rules and Forms, 1956 duly filed with Registrars of the
concerned States and Certificates obtained within 30 days of the change? (when situation of registered office
changed) (10) provisions of Clause 33 of the Listing Agreement** complied with? (applicable only to listed
companies) (11) the change had been incorporated in the memorandum, articles and other documents? (12)
members' requests for memorandum and articles, etc., met within seven days [ section 39]?
The documents involved are : (1) Memorandum and Articles, (2) Minutes of Board/General meeting, (3) e-Forms
18, 21 and 23, (4) Order of the Company Law Board [ now the Central Government], (5) Registrar's Certificates, (6)
Intimation to Stock Exchange, (7) Petition under section 17(2) to Company Law Board [ now the Central
Government] along with enclosures.
See also Secretarial Practice and Check List under Sections 17A, 18 and 19.
Producer Company—Alteration of Memorandum [ Section 581H].—The Producer Company may alter the
conditions of its Memorandum of Association in the manner and to the extent provided in this Act, i.e., the
See Comments on Alteration of Memorandum under Sections 16 to 19.
Alteration of Objects by Special Resolution [ Section 581H(2)].—A Producer Company may alter its objects
specified in Memorandum by Special Resolution.
Alteration not inconsistent with Main Objects.—But such alteration of its Memorandum should not be
inconsistent with the Main Objects of the Company as provided in Section 581B of the Act.
Special Resolution.—To alter its objects specified in Memorandum a Special Resolution of the Producer Company
is required to be passed. [ Section 581H(2)].
See detailed Comments on General Meetings under Section 581ZA.
Filing [ Section 581H(3)].—A copy of the amended Memorandum of Association together with a copy of the
Special Resolution amending the Memorandum certified by two Directors shall be filed with the Registrar of
Companies (ROC) within 30 days from the date of passing of the Special Resolution.
Filing with two Registrars [ Section 581H(3), proviso].—Where the company by the aforesaid amendment
Transfers its Registered Office from the jurisdiction of one Registrar of Companies (ROC) to another, certified
copies of the Special Resolution are to be filed with both the Registrars of Companies (ROCs) within 30 days of the
passing of the Special Resolution.
Both the Registrars (ROCs) should record the fact and the Registrar of Companies (ROC) from whose jurisdiction
Page 24 of 27
the Registered Office has been shifted should transfer all documents relating to the company to the Registrar within
whose jurisdiction the Registered Office has been transferred.
Confirmation of Alteration [ Section 581H(4)].—Such Transfer or Alteration of Memorandum of Association of the

Producer Company relating to the change of the place of its Registered Office from one State to another will not
take effect unless on an application the Company Law Board (CLB) confirms the same.
75. Substituted by the Companies (Second Amendment) Act, 2002 (11 of 2003), s. 7 [(w.e.f.) date to be notified]. For
section 17, earlier amended by Act 65 of 1960, Act 41 of 1974 and Act 5 of 1997, as it stood prior to its substitution see
76. Motilal Hirabhai Spg., Wvg. and Mfg. Co. Ltd., In re, (1970) 40 Comp. Cas. 1216 (Guj.); Drages Ltd., Re,(1942) 1 All ER
194.
77. Cyclists' Touring Club, Re, (1907) 1 Ch. 269 : 23 TLR 220; Bolsom Bros. (1928) Ltd., Re, (1935) Ch. 413 : 104 LJ Ch.
267 : 152 LT 477 : 79 SJ 214.
78. Delhi Bharat Grain Merchants Association Ltd., In re, (1974) 44 Comp. Cas. 214 (Delhi); Rajendra Industries (P.) Ltd.,
In re, (1967) 37 Comp. Cas. 563 (Mad.); New Asiatic Insurance Co. Ltd., In re, (1967) 37 Comp. Cas. 331 (Punj.) : AIR
1967 Punj. 15.
79. Jayantilal v. Tata Iron and Steel Co. Ltd.,AIR 1958 Bom. 155 [LNIND 1957 BOM 101].
80. Government Stock Investment Co. (No. 2), Re, (1892) 1 Ch. 597 : 61 LJ Ch. 381 : 66 LT 608; Reversionary Interest
Society Ltd., Re, (1892) 1 Ch. 615 : 61 LJ Ch. 379 : 66 LT 460; Coats (J&P) Ltd. v. Crossland,(1904) 20 TLR 800; New
Westminster Brewery Co., Re,(1911) WN 247 : 105 LT 946 : 56 SJ 141; John Brown & Co. Ltd., Re,(1914) WN 434;
Marshall Sons and Co., Re,(1919) WN 207. See also Comments under Section 543.
81. Samantaraj Films (P.) Ltd., In re, (1974) 44 Comp. Cas. 477 (Orissa). See also Comments under Section 293A—
Prohibitions and restrictions regarding political contributions, as amended by the Election and Other Related Laws
89 (CA).
83. Government Stock Investment Co., Re, (1891) 1 Ch. 649; Incorporated Glasgow Dental Hospital v. Lord
Advocate,(1927) SC 400 [Scottish] : (1927) SLT 270.
84. North of England Zoological Society v. Chester Rural District Council,(1959) 3 All ER 116 : (1959) 1 WLR 773 : (1959)
103 SJ 582 (CA).
85. Egyptian Delta Land and Investment Co. Ltd., Re,(1907) WN 16; Indian Mechanical Gold Ex-tracting Co., Re, (1891) 3
Ch. 538.
86. Straw Products Ltd. v. ROC, (1969) 39 Comp. Cas. 974 (Orissa); Juggilal Kamlapat Jute Mills Co. Ltd. v. ROC, (1967)
37 Comp. Cas. 20 (All.) : AIR 1966 All. 417 [LNIND 1965 ALL 173]; New Asiatic Insurance Co. Ltd., In re, (1967) 37
Comp. Cas. 331 (Punj.) : AIR 1967 Punj. 15; Bhutoria Bros. P. Ltd., In re, (1958) 28 Comp. Cas. 122 (Cal.) : AIR 1957
Cal. 593 [LNIND 1957 CAL 106]; Dalmia Cement (Bharat) Ltd., In re, (1964) 2 Comp. LJ 63 (Mad.); Delhi Bharat Grain
Merchants Association Ltd., In re, (1974) 44 Comp. Cas. 214 (Delhi); New Asarwa Mfg. Co. Ltd., In re, (1975) 45
Comp. Cas. 151 (Guj.).
87. Parent Tyre Co. Ltd. Re, (1923) 2 Ch. 222 : 92 LJ Ch. 358 : 129 LT 244 : 39 TLR 426.
88. Punjab Distilling Industries Ltd. v. ROC, (1963) 33 Comp. Cas. 811 (Punj.).
1. Ambala Electric Supply Co. Ltd. In re, (1963) 33 Comp. Cas. 585 (Punj.).
2. Motilal Padampat Sugar Mills P. Ltd., In re, (1964) 34 Comp. Cas. 86 (All.).
3. Cyclists' Touring Club, Re, (1907) 1 Ch. 269 : 23 TLR 220. See also Goneshbari Tea Co. Pvt. Ltd., In re, (1964) 34
Comp. Cas. 556 (Cal.) : 68 CWN 490.
4. Standard General Assurance Co. Ltd., In re,AIR 1965 Cal. 16 [LNIND 1964 CAL 88].
5. Alliance Marine Assurance Co., Re, (1892) 1 Ch. 300 : 61 LJ Ch. 176 : 40 WR 329.
6. National Boiler Insurance Co., Re, (1892) 1 Ch. 306 : 61 LJ Ch. 501 : 65 LT 849.
Page 25 of 27
7. Empire Trust, Re,(1891) 64 LT 221.

8. Ulster Marine Insurance Co., Re, (1891) 27 IR [Irish] 487.
9. Baird & Sons Ltd., Re, (1932) SC [Scottish] 455.
10. Cole (E.K.) Ltd., Re,(1945) 1 All ER 521 N. See also Comments under Section 13.
11. Bharat Mining Corpn. Ltd., In re, (1967) 37 Comp. Cas. 430 (Cal.) : 71 CWN 359; Indian Iron & Steel Co. Ltd., In re,
(1957) 27 Comp. Cas. 361 (Cal.) : 61 CWN 374.
12. Motilal Hirabhai Spg., Wvg. and Mfg. Co. Ltd., In re, (1970) 40 Comp. Cas. 1216 (Guj.).
89 (CA).
14. United Collieries Ltd., In re, (1975) 45 Comp. Cas. 226 (Cal.). See Circular No. 1 of 1995, dated 16-2-1995 Circular No.
1 of 1995, dated 16-2-1995 and Recent Trend under English Law in Comments under Sections 13 and 20.
15. Mahaluxmi Bank Ltd. v. Registrar of Companies, (1961) 31 Comp. Cas. 287 (Cal.).
16. Pondicherry Textile Corporation Ltd. v. K.K. Ramanujam, (1998) 91 Comp. Cas. 441 (CLB); Modi Spg. and Wvg. Mills
Co. Ltd., In re, (1963) 33 Comp. Cas. 901 (All.); Fort Gloster Jute Mfg. Co. Ltd., In re, 68 CWN 481 (Cal.).
17. Industrial Cables (India) Ltd. v. Registrar of Companies, (1973) 43 Comp. Cas. 353 (P&H); Geo Rubber Exports Ltd., In
re, (1991) 72 Comp. Cas. 713 (CLB).
18. SMP Mutual Benefit Ltd., In re, (1994) 4 Comp. LJ 385 (CLB); Balaji Mutual Benefit Ltd., In re, (1994) 4 Comp. LJ 551
(CLB).
19. Mafatlal Consultancy Services (India) Ltd., In re,(1995) 17 Corp. LA 385 (CLB).
20. Sarvin Securities P. Ltd., In re,(1995) 17 Corp. LA 387 (CLB).
21. Sipani Automobiles Ltd., In re, (1993) 78 Comp. Cas. 557 (CLB).
22. Jewish Colonial Trust, Re, (1908) 2 Ch. 287 : 77 LJ Ch. 629 : 99 LT 243 : 24 TLR 595; Strathspey Public Assembly and
Agricultural Hall Co. Ltd. v. Anderson's Trustees, (1934) SC [Scottish] 385 : (1934) SLT 335; Hampstead Garden
Suburb Trust Ltd., Re, (1962) Ch. 806 : (1962) 2 All ER 870 : (1962) 3 WLR 474 : (1963) 33 Comp. Cas. 166 (Ch.).
23. Nagaisuree Tea Co. Ltd. v. Ram Chandra Karnani, (1966) 2 Comp. LJ 208 (Cal.).
24. Hari Krishna Lohia v. Hoolungooree Tea Co. Ltd., (1970) 40 Comp. Cas. 458 (Cal.) (DB) : AIR 1969 Cal. 312 [LNIND
1968 CAL 151](DB); Marybong and Kyel Tea Estate Ltd., In re, (1977) 47 Comp. Cas. 802 (Cal.); Aimco Pesticides
Ltd., In re, (2001) 103 Comp. Cas. 463 (Bom.); Jalpaiguri Tea Co. Ltd., In re, (1974) 44 Comp. Cas. 335 (Cal.). See
also Comments under Sections 391 to 396.
25. Rangkala Investments Ltd., In re, (1997) 89 Comp. Cas. 754 (Guj.). See also Comments under Sections 149(2A) and
394.
26. Hindhivac P. Ltd., In re, (2005) 128 Comp. Cas. 266 (Kar.); Highland Electro Appliances P. Ltd., In re, (2003) 2 Comp.
LJ 16 (Delhi).
27. Liqui Box India P. Ltd., In re, (2006) 131 Comp. Cas. 645 (P&H); Maneckchowk and Ahmedabad Manufacturing Co.
Ltd., In re, (1970) 40 Comp. Cas. 819 (Guj.) : (1970) 2 Comp. LJ 300 (Guj.); PMP Auto Industries Ltd. In re, (1994) 80
Comp. Cas. 289 (Bom.).
28. Santhanalakshmi Investments P. Ltd., In re, (2006) 129 Comp. Cas. 789 (Mad.); Mahaamba Investments Ltd. v. IDI
Ltd., (2001) 105 Comp. Cas. 16 (Bom.).
29. Symphony Comfort Systems Ltd., In re, (1998) 91 Comp. Cas. 404 (CLB); Deutsche Babcock Power Systems Ltd., In
re, (1999) 97 Comp. Cas. 341 (CLB); J.L. Morison (India) Ltd., In re, (1999) 95 Comp. Cas. 907 (CLB); Pondicherry
Textile Corpn. Ltd. v. K.K. Ramanujam, (1998) 91 Comp. Cas. 441 (CLB). See also Comments in earlier paras under
Shifting of Registered Office.
30. Symphony Comfort Systems Ltd., In re, (1998) 91 Comp. Cas. 404 (CLB).
* Powers of the Court were conferred on the CLB. Section 17(2) as to confirmation by the CLB [ now the Central
Government] has been substituted in 1997. But, the Circular shall be useful guide to the shareholders in passing
Special Resolution for alteration of objects.
† Powers of the Court were conferred on the CLB. Section 17(2) as to confirmation by the CLB [ now the Central
Government] has been substituted in 1997 and 2003. But, the Circular shall be useful shareholders in passing Special
Resolution for alteration of objects. See also Circular No. 1 of 1995, dated 16-2-1995 and Recent Trend under English
Law under Sections 13 and 20.
Page 26 of 27
31. NEPC India Ltd. v. Registrar of Companies, (1999) 97 Comp. Cas. 500 (Mad.).
32. Jayantilal Ranchhoddas Koticha v. Tata Iron and Steel Co. Ltd., (1957) 27 Comp. Cas. 604 (Bom.) : AIR 1958 Bom.
155 [LNIND 1957 BOM 101]; Dehri Rohtas Light Railway Co. Ltd., In re, (1960) 30 Comp. Cas. 387 (Patna); Sri
Natesar Spg. and Wvg. Mills Pvt. Ltd., In re, (1960) 30 Comp. Cas. 54 (Mad.); Maharaja Shree Umaid Mills Ltd., In re,
(1961) 31 Comp. Cas. 273 (Raj.); Indian Steel and Wire Products Ltd. v. CIT, (1968) 38 Comp. Cas. 660 (Cal.) : 69 ITR
379; Indo-Pharma Pharmaceutical Works Pvt. Ltd., In re, (1968) 38 Comp. Cas. 313 (Bom.).
33. Lord Mahaveer Goutham Benefit Fund Ltd., In re, (1994) 79 Comp. Cas. 535 (CLB). See also Comments under Section
620A.
34. Ulster S.P.C.A., Re, (1936) NL 97; Dominion Students' Hall Trust v. Attorney-General, (1947) Ch. 183. See also
35. Dorking Villa Building Co., Re, (1939) 1 Ch. 635 : 83 SJ 134 (1939).
36. Prachi Insurance Co. Ltd. v. Choudhury Madhusudan Das, (1964) 2 Comp. LJ 157 (Orissa) : (1964) ILR Cal. 531. See
37. Metal Box India Ltd., In re, (2001) 105 Comp. Cas. 939 (CLB); Bharat Commerce and Industries Ltd. v. ROC, (1973) 43
Comp. Cas. 275 (Cal.) (DB). See also Comments under Section 172.
38. Bharat Commerce and Industries Ltd. v. Registrar of Companies, (1973) 43 Comp. Cas. 275 (Cal.) (DB). See detailed
39. Parikh Engg. and Body Building Co. Ltd., In re, (1975) 45 Comp. Cas. 157 (Pat.). See also Comments under Section
171.
610E (w.e.f. 16-9-2006) in Appendix 2.
16-9-2006).
2006) (w.e.f. 1-11-2006).
40. Classic Welding Products Pvt. Ltd., In re, (2003) 117 Comp. Cas. 94 (CLB).
41. Jayantilal v. Tata Iron and Steel Co. Ltd.,AIR 1958 Bom. 155 [LNIND 1957 BOM 101]; Dehri Rohtas Light Railway Co.
Ltd., In re, (1960) 30 Comp. Cas. 387 (Patna).
42. Pal-Peugeot Ltd., In re, (1997) 89 Comp. Cas. 808 (CLB); K.G. Khosla Compressors Ltd., In re, (1998) 91 Comp. Cas.
546 (CLB); Upper Ganges Sugar and Industries Ltd., In re, (2001) 105 Comp. Cas. 377 (CLB); Usha Beltron Ltd., In re,
(2001) 104 Comp. Cas. 411 (CLB); Metal Box India Ltd., In re, (2001) 105 Comp. Cas. 939 (CLB); SPML India Ltd., In
re, (2001) 104 Comp. Cas. 486 (CLB); Zuari Agro Chemicals Ltd. v. F.S. Wadia, (1974) 44 Comp. Cas. 465 (Bom.).
43. Metal Box India Ltd., In re, (2001) 105 Comp. Cas. 939 (CLB); Zuari Agro Chemicals Ltd. v. F.S. Wadia, (1974) 44
Comp. Cas. 465 (Bom.); K.G. Khosla Compressors Ltd., In re, (1998) 91 Comp. Cas. 546 (CLB); Mackinnon Mackenzie
& Co. P. Ltd., In re, (1967) 37 Comp. Cas. 516 (Cal.); Dalmia Cement (Bharat) Ltd., In re, (1964) 34 Comp. Cas. 729
(Mad.).
44. Satyashree Balaji Wires and Cables P. Ltd., In re, (2007) 137 Comp. Cas. 283 (CLB).
45. Metal Box India Ltd., In re, (2001) 105 Comp. Cas. 939 (CLB); Usha Beltron Ltd. In re (2001) 104 Comp. Cas. 411
(CLB); Rank Film Distributors of India Ltd. v. ROC and State of W.B., (1968) 38 Comp. Cas. 487 (Cal.) : AIR 1969 Cal.
32 [LNIND 1967 CAL 163]: (1968) 1 Comp. LJ 129 (Cal.) : 72 CWN 384; Mackinnon Mackenzie & Co. P. Ltd., In re,
(1967) 37 Comp. Cas. 516 (Cal.); Bharat Commerce and Industries Ltd. v. ROC, (1973) 43 Comp. Cas. 275 (Cal.)
(DB); Minerva Mills Ltd. v. Govt. of Maharashtra, (1975) 45 Comp. Cas. 1 (Bom.).
46. Orissa Chemicals & Distilleries P. Ltd., In re, (1962) 32 Comp. Cas. 497 : AIR 1961 Orissa 62; Orient Paper Mills Ltd. v.
State, (1958) 28 Comp. Cas. 523 (Orissa) : AIR 1957 Orissa 232.
47. SPML India Ltd., In re, (2001) 104 Comp. Cas. 486 (CLB); Neelachal Auto Ltd., In re, (2001) 105 Comp. Cas. 288
(CLB).
48. Pal-Peugeot Ltd., In re, (1997) 89 Comp. Cas. 808 (CLB). See also Comments u/s. 61.
49. Bharat Commerce and Industries Ltd. v. ROC, (1973) 43 Comp. Cas. 275 (Cal.) (DB); Jayantilal v. Tata Iron and Steel
Co. Ltd.,AIR 1958 Bom. 155 [LNIND 1957 BOM 101]; Northern Enterprises Corporation Pvt. Ltd., In re, (1974) 44
Comp. Cas. 334 (P&H).
50. Jindal Vijayanagar Steel Ltd., In re, (2006) 129 Comp. Cas. 952 (CLB).
Page 27 of 27
51. Perfect Refractories Ltd., In re, (2005) 128 Comp. Cas. 234 (CLB).
52. J.L. Morison (India) Ltd., In re, (1999) 95 Comp. Cas. 907 (CLB); Bharat Commerce and Industries Ltd. v. ROC, (1973)
43 Comp. Cas. 275 (Cal.) (DB).
53. Automobile Products of India Ltd., In re, (2005) 127 Comp. Cas. 941 (CLB).
54. Deutsche Babcock Power Systems Ltd., In re, (1999) 97 Comp. Cas. 341 (CLB); Symphony Comfort Systems Ltd., In
re, (1998) 91 Comp. Cas. 404 (CLB); Pondicherry Textile Corpn. Ltd. v. K.K. Ramanujam, (1998) 91 Comp. Cas. 441
(CLB).
55. Symphony Comfort Systems Ltd., In re, (1998) 91 Comp. Cas. 404 (CLB); Upper Ganges Sugar and Industries Ltd., In
re, (2001) 105 Comp. Cas. 377 (CLB); Metal Box India Ltd., In re, (2001) 105 Comp. Cas. 939 (CLB).
56. Deutsche Babcock Power Systems Ltd., In re, (1999) 97 Comp. Cas. 341 (CLB). See also Comments under Sections 4
and 34.
57. Seaways Maritime Pvt. Ltd., In re, (2002) 111 Comp. Cas. 78 (CLB).
58. K.G. Khosla Compressors Ltd., In re, (1998) 91 Comp. Cas. 546 (CLB).
59. Promode Kumar Mittal v. Southern Steel Ltd., (1980) 50 Comp. Cas. 555 (Cal.).
60. Metal Box India Ltd., In re, (2001) 105 Comp. Cas. 939 (CLB). Now the powers of BIFRhave been vested in the
Tribunal (NCLT) under new Sections 424A to 424L inserted in the Companies Act, 1956, by the Companies (Second
Amendment) Act, 2002 (11 of 2003).
61. Krimens Oil Mills P. Ltd. v. ROC,AIR 1958 Mad. 450 [LNIND 1957 MAD 266]: (1958) 2 MLJ 141 [LNIND 1957 MAD
266].
62. Kold-hold Industries P. Ltd. v. Arabian Exports Ltd., (2004) 119 Comp. Cas. 1 (Bom.).
** See Standard Equity Listing Agreement Form in Appendix 225.
End of Document
Datta: Company Law
C R Datta
63[S. 17A. Change of registered office within a State.

—
(1) No company shall change the place of its registered office from one place to another within a State
unless such change is confirmed by the Regional Director.
(2) The company shall make an application in the prescribed form to the Regional Director for confirmation
under sub-section (1).
(3) The confirmation referred to in sub-section (1) shall be communicated to the company within four
weeks from the date of receipt of application for such change.
Explanation.—For the removal of doubts, it is hereby declared that the provisions of this section shall
apply only to the companies which change the registered office from the jurisdiction of one Registrar of
Companies to the jurisdiction of another Registrar of Companies within the same State.
(4) The company shall file, with the Registrar a certified copy of the confirmation by the Regional Director
for change of its registered office under this section, within two months from the date of confirmation,
together with a printed copy of the memorandum as altered and the Registrar shall register the same
and certify the registration under his hand within one month from the date of filing of such document.
(5) The certificate shall be conclusive evidence that all the requirements of this Act with respect to the
alteration and confirmation have been complied with and henceforth the memorandum as altered shall
be the memorandum of the company. ]
63. Inserted by the Companies (Amendment) Act, 2000 (53 of 2000), s. 7 [(w.e.f. 1-3-2001)videNotification No. S.O.
176(E), dated 27-2-2001, published in the Gazette of India, Extry., No. 128, Part II, Section 3(ii), dated 27-2-2001 :
(2001) 104 Comp. Cas. (St.) 344].
610E (w.e.f. 16-9-2006) in Appendix 2.
16-9-2006).
* See the Companies (Director Identification Number) Rules, 2006 in Appendix 49. See detailed Comments on Director
2006) (w.e.f. 1-11-2006).
64. Ramesh B. Desai v. Union of India, (1990) 69 Comp. Cas. 33 (Delhi). See detailed Comments on Principles of Natural
Justice under Sections 10FZA, 294AA and 637.
65. Hanuman Prasad Bagri v. Bagress Cereals P. Ltd., , (2001) 105 Comp. Cas. 493 (SC). See detailed Comments under
66. Kold-hold Industries P. Ltd. v. Arabian Exports Ltd., , (2004) 119 Comp. Cas. 1 (Bom.).
Page 2 of 9
COMMENTS
Legislative History.— The Companies (Amendment) Act, 2000 (53 of 2000).—The Notes on clauses explained
this section as follows: “This clause seeks to insert new Section 17A to provide that permission of the Regional
Director shall be required for changing the registered office of a company within the same State.” [ Clause 7 of the
Change of registered office within the State.—As per this newly inserted section 17A by the Companies
(Amendment) Act, 2000 (53 of 2000) (w.e.f. 1-3-2001) the change of the place of registered office from one place to
another within the State requires to be confirmed by the Regional Director. [Sub-section (1)].
This section shall apply only to the companies which change the registered office from the jurisdiction of one
Registrar of Companies to the jurisdiction of another Registrar of Companies within the same State. [ Explanation to
sub-section (3)].
Application to Regional Director.—The company shall make an application in the prescribed form to the Regional
Director for confirmation. The confirmation shall be communicated to the company within four weeks from the date
of receipt of application for such change. [Sub-sections (2)and (3)].
Form and Procedure (w.e.f. 10-2-2006).—As per Rule 4BBA* of the Companies (Central Government's) General
Rules and Forms, 1956:
(1) The company seeking confirmation from the Regional Director(RD) for shifting its Registered Office from
jurisdiction of one Registrar of Companies (ROC) to the jurisdiction of another Registrar of Companies
(ROC) within the same State shall make an Application in e-Form 1AD* of the Companies (Central Govt.'s)
General Rules and Forms, 1956 to the Regional Director (RD) along with a fee of Rs. 500.
(2) The Regional Director shall pass an order in writing confirming the change after giving necessary
opportunity of being heard to the parties within four weeks.
(3) The company shall file a copy of the Confirmation Order passed by the Regional Director (RD) with the
concerned Registrar of Companies (ROC) within two months. The Registrar of Companies (ROC) shall
make necessary changes in the Register and transfer the records to the Registrar of Companies (ROC)
under whose jurisdiction the company has shifted its Registered Office.
Form 1AD (substituted w.e.f. 10-2-2006).— See e-Form 1AD* of the Companies (Central Government's) General
(Amendment) Rules, 2006 vide Notification No. G.S.R. 56(E), dated 10-2-2006 : published in the Gazette of India,
Extraordinary, No. 50, Part II, Section 3(i), page 156, dated 10-2-2006 : the Ministry of Corporate Affairs (MCA)
Revised e-Form 1AD (released 10-2-2006).— See Revised e-Form 1AD on the Ministry of Corporate Affairs
(MCA) website http://www.mca.gov.in under category Approval Services (Regional Director), Date of Last Release
(10-2-2006).
See Companies (Central Govt.'s) General Rules and Forms, 1956 [Pursuant to Section 17A of the Companies Act,
1956] for Application for Confirmation by Regional Director for Change of Registered Office of the company within
the State from the jurisdiction of one Registrar of Companies (ROC) to the jurisdiction of another Registrar of
Companies (ROC).
Page 3 of 9
Instructions for filling of e-Form 1AD—Application for Confirmation by Regional Director for Change of
Registered Office of the company within the State from the jurisdiction of one Registrar to the jurisdiction
of another Registrar.—Specific Instruction Kit for filling e-Form 1AD of the Companies (Central Government's)
General Rules and Forms, 1956 containing the e-Form Sl. No. and Detailed Instructions is reproduced below:
If it is required to file e-Form 23 in relation to the Resolution passed for shifting Registered Office from one Registrar
to another Registrar of Companies within the same State; ensure that filing of e-Form 23 precedes filing of this e-
Form.
dealt in this e-Form.
1 (a) Enter Corporate Identity Number (CIN) of the company.
• You may find CIN by entering your existing registration number in the Find CIN/GLN service at the
portal www.mca.gov.in.
2 (a)-(b) Click the “Pre-fill” button.
3 Select the Roc code based on the District where the new Registered Office of the company is situated.
• In the State of Maharashtra, the Districts which comes under the jurisdiction of Roc Pune are as
follows:
Pune, Ahmednagar, Ratnagiri, Satara, Kolhapur, Sangli, Sindhudurg
RoC Mumbai has jurisdiction on the remaining Districts in the State of Maharashtra
• In the State of Tamilnadu, the Districts which comes under the jurisdiction of Roc Coimbatore are as
follows:
Dindigul, Krishnagiri, Dharmapuri, Salem, Nammakkal, Erode, Coimbatore, Nilgiris.
RoC Chennai is having jurisdiction on the remaining Districts in the State.
5 (a) Enter the details of the e-Form 23 filed with Roc for registration of Resolution passed for change of
Registered Office.
Note: In case the existing company does not have the service request number (SRN) of e-Form 23,
enter “Z99999999” as SRN of e-Form 23 and attach the copy of the original resolution passed for the
change of registered office as an optional attachment.
8 Enter the date of advertisement which is required to be published in the newspaper inviting public at large
for any objections against the change of registered office of the company.
Attachments
• Copy of the minutes of meeting is a mandatory attachment.
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• Copy of newspaper of the advertisement is a mandatory attachment.

• Particulars of investor grievances—if any.
• Any attachment to support the details of prosecution filed against the company and its officers in default—if
any.
Declaration.—Enter the date of Board Resolution authorising the signatory to sign and submit the application.
Digital Signature.—The e-Form should be digitally signed by Managing Director or Director or Manager or Secretary
of the company duly authorised by the Board of Directors.
Filing Fees.—Filing fee of Rs. 500 as prescribed in Rule 4BBA Companies (Central Government's) General Rules
and Forms, 1956 shall be payable along with e-Form 1AD of the Companies (Central Govt.'s) General Rules and
Forms, 1956.
the Companies (Amendment) Act, 2006(23 of 2006) (w.e.f. 16-9-2006).
No. 1287, Part II, Section 3(ii), page 15, dated 27-10-2006 : MCA website http://www.mca.gov.in : (2006) 134
Comp. Cas. (St.) 91 in Comments under Section 610B.
Filing Fees on e-Forms.— See Rule 22 Companies (Central Govt.'s) General Rules and Forms, 1956 as amended
by the Companies (Central Government's) General Rules and Forms (Amendment) Rules, 2006 (w.e.f. 10-2-2006)
for Mode of Payment of Fees on filing of e-Forms to the Registrars of Companies (ROCs) under Schedule X to the
Companies Act, 1956 or the Central Government under the Companies (Fees on Applications) Rules, 1999.
See detailed Comments under Section 611, 637A and Schedule X.
MCA-21 e-Governance Project.
—The Ministry of Company Affairs (MCA) launched MCA-21 e-Governance Project on 18-2-2006 which has been
implemented at all Registrars of Companies (ROCs) locations.
E-Governance and e-Filing.

Page 5 of 9
—The MCA-21 e-Governance Project shall facilitate e-Filing for all transactions with the Registrars of Companies
(ROCs). Therefore, all Companies, Directors and Professionals must obtain Director Identification Number (DIN)
and Digital Signature Certificates (DSCs) on-line immediately.
Ministry of Corporate Affairs website [ www.mca.gov.in].
separate Ministry, viz., ‘Ministry of Company Affairs’ (MCA) vide Cabinet Secretariat Notification No.DOC.CD-
160/2004, dated 27-5-2004.
—Ministry of Corporate Affairs (MCA) has been renamed as ‘Ministry of Corporate Affairs’ (MCA) vide Presidential
Notification, dated 9-5-2007 amending the Government of India (Allocation of Business) Rules, 1961 (w.e.f. 9-5-
2007):
Director Identification Number (DIN) [ Sections 266A to 266G].
— See detailed Comments, Form and Procedure on Director Identification Number(DIN) under newly inserted
Sections 266A to 266G of the Companies Act, 1956 inserted by the Companies (Amendment) Act, 2006 (23 of
2006) (w.e.f. 1-11-2006).
See the Companies (Director Identification Number) Rules, 2006* framed under Sections 266A to 266G (w.e.f. 1-
No. 502, Part II, Section 3(i), page 21 : Ministry of Company Affairs(MCA) website http://www.mca.gov.in : (2006)
Directors must apply for the Director Identification Number(DIN) on-line. See “DIN Issuance Process” on MCA
Digital Signature Certificates (DSCs).
—Directors of the company required to sign company Documents, Authorised Signatories and Professionals have
to procure Digital Signature Certificate (DSC).
“Electronic Signature” (e-Signature).
—The words “Digital Signature” and “Digital Signature Certificate” (DSC) are proposed to be substituted by words
“Electronic Signature” (e-Signature) and “Electronic Signature Certificate” (ESC) in various Chapters/Sections/Sub-
sections/Clauses of the Information Technology Act, 2000(21 of 2000) as proposed to be amended by the
Information Technology (Amendment) Bill, 2006 (96 of 2006) introduced in Lok Sabha on 15-12-2006.
266G inserted (w.e.f. 1-11-2006).
Page 6 of 9
For Change of the place of Registered Office of the company from one State to another State see detailed
Comments, Form and Procedure under Section 17.
Department's view.— Companies (Central Government's) General Rules and Forms (Third Amendment) Rules,
2001.
—“The Government (Department of Company Affairs) has issued a Notification amending the Companies (Central
Government's) General Rules and Forms, 1956* with immediate effect. Accordingly, the Companies (Central
Government's) General Rules and Forms (Third Amendment) Rules, 2001, inserted after rule 4BB
“4BBA. Change of registered office within a State.—The company seeking confirmation from the Regional Director
for shifting its registered office from the jurisdiction of one Registrar of Companies to the jurisdiction of another
Registrar of Companies within the same State shall make an application in Form 1AD to the Regional Director
along with a fee of Rs. 500.
The Regional Director shall pass an order in writing confirming the change after giving necessary opportunity of
being heard to the parties within four weeks from the date of receipt of application.
The company shall file a copy of the confirmation order passed by the Regional Director with the concerned
Registrar of Companies within two months from the date of the confirmation order and the Registrar shall make
necessary changes in the register and transfer the records to the Registrar of Companies under whose jurisdiction
the company has shifted its registered office.”
After Form 1AC, Form 1AD has been inserted in the new Rules.
The notification stipulates that application form should be filed with the Registrar of Companies from where the
company proposes to shift its registered office and copy for information to the Registrar of Companies under whose
jurisdiction registered office is proposed to be shifted.
The principal Rules were promulgated on February 18, 1956, and since then these Rules have been amended 80
times.” [ PIB Press Release, New Delhi, dated 20-2-2001 : (2001) 104 Comp. Cas. (St.) 306].
Natural justice.—In approving the change in the registered office the Regional Director should give the company
reasonable opportunity of being heard and give a reasoned decision on the basis of the principles of natural
justice.64
Filing [Sub-section (4)].—The company shall file with the Registrar a certified copy of the confirmation by the
Regional Director within two months from the date of confirmation together with a printed copy of the memorandum
as altered and the Registrar shall register the same and certify the registration under his hand within one month
from the date of filing.
Certificate conclusive [Sub-section (5)].—The certificate of the Registrar shall be conclusive evidence that all the
requirements of the Act with respect to alteration and confirmation have been complied with and altered
memorandum shall be memorandum of the company.
Shifting of Registered Office outside the State [ Section 17(1)].
— See detailed Comments, Form and Procedure under relevant Section 17.
Oppression and mismanagement.—Where shifting of registered office of the company was not shown to be
oppressive to the shareholder. It was not a loss to the company so as to amount to oppression or
mismanagement.65
Notice of situation and change of registered office [ Section 146].—Notice of situation of registered office and
every change must be given to the ROC within 30 days [ Section 146(2)]. A Special Resolution is required to
remove the registered office outside the local limits of any city, town or village [ S. 146(2) proviso].
Page 7 of 9
A perusal of section 17, 17A and 146 shows that there are three types of changes of registered office
contemplated—(1) when the registered office is being changed from one State to another; (2) when the registered
office is being changed from the jurisdiction of one Registrar of Companies to the jurisdiction of another Registrar of
Companies; and (3) when the registered office is being changed within the jurisdiction of the same Registrar of
Companies. In the first two cases, the change takes effect only after it is recorded by the competent authority and in
the third case, the notice of change itself has to be given after the change has occurred and the only obligation that
is cast on the Registrar of Companies is to record the same.66
Statement.
Sections 16, 17 and 18 [Alteration of Memorandum].
—Where the Memorandum of Association of a company has been altered, e.g., as to the Objects clause, Capital
structure, etc., it should be seen that prima facie the alteration has been made in accordance with the law.
Section 17A.
—Permission of the Regional Director (RD) shall be required for changing the Registered Office of Company within
the same State.
Accounting Practices.
— See detailed Comments on Accounting Provisions under Sections 209 to 223 and the Companies (Accounting
Standards) Rules, 2006, ICAI Accounting Standards (AS), Accounting Standards Interpretations (ASI), Guidance
Notes on Accounting, Authority Attached to Documents Issued by the Institute of Chartered Accountants of India
(ICAI) under Section 211(3C) and Schedule VI.
Page 8 of 9

(AGM).
ICSI Guidance Note on Compliance Certificate.
—The Institute of Company Secretaries of India (ICSI) has issued a Guidance Note on Compliance Certificate to be
issued in terms of the newly inserted proviso to sub-section (1) of Section 383A of the Companies Act, 1956 as
prescribed in the Companies (Compliance Certificate) Rules, 2001 by a Practising Company Secretary (PCS).
Check-List for issue of Compliance Certificate.
—Check-List for issue of Compliance Certificate on Paras 26 and 27 of the Form of Compliance Certificate as
contained in ICSI Guidance Note on Compliance Certificate relating to Alteration in the Memorandum with respect
to Change in Registered Office from one State to another and Objects Clause is given in Comments under Section
17.
Alteration in the Memorandum of Association with respect to Change in Registered Office from one State to
another.
— See Relevant paras of ICSI Guidance Note on Compliance Certificate in Comments under Section 17.
Shifting of Registered Office from a place under the Jurisdiction of one ROC to a place under the
Jurisdiction of another ROC within the same State.
—Check whether :
(i) the company has passed a Special Resolution in the General Meeting for shifting its Registered Office from
a place under the jurisdiction of one ROC [Registrar of Companies] to a place under the jurisdiction of
another ROC, within the same State;
(ii) it has made application in Form 1AD [ now e-Form 1AD] to the Regional Director for confirmation of
Special Resolution;
(iii) the RD had passed the confirmation order of the resolution within four weeks from the date of receipt of the
company's application;
(iv) the company has filed with the ROC from whose jurisdiction it proposes to shift the Registered Office, a
copy of the confirmation order of the Regional Director along with the printed copy of the Memorandum as
altered within 2 months from the date of confirmation by the Regional Director; and
(v) the ROC from whose jurisdiction Registered Office has been shifted, has registered the documents and
certified the registration under his hand within one month from the date of filing of such documents.
under Section 383A.

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Secretarial Practice and Check List.— Section 17A. Check whether : (1) a Board resolution passed? (2) e-Form
1AD* of the Companies (Central Government's) General Rules and Forms, 1956, filed along with a fee of Rs. 500 to
the Regional Director? (3) a copy of the confirmation order passed by the Regional Director filed with the concerned
Registrar of Companies within two months along with a printed copy of the Memorandum and Articles duly altered?
(4) the Registrar issued certificates registering the alterations? (5) the change had been incorporated in the
memorandum, articles and other documents? (12) members' requests for memorandum and articles, etc., met
within seven days (section 39)?
The documents involved are: (1) Memorandum and Articles, (2) Minutes of Board, (3) e-Form 1AD, (4) Order of the
Regional Director, (5) Registrar's Certificate.
63. Inserted by the Companies (Amendment) Act, 2000 (53 of 2000), s. 7 [(w.e.f. 1-3-2001)videNotification No. S.O.
176(E), dated 27-2-2001, published in the Gazette of India, Extry., No. 128, Part II, Section 3(ii), dated 27-2-2001 :
(2001) 104 Comp. Cas. (St.) 344].
610E (w.e.f. 16-9-2006) in Appendix 2.
16-9-2006).
2006) (w.e.f. 1-11-2006).
64. Ramesh B. Desai v. Union of India, (1990) 69 Comp. Cas. 33 (Delhi). See detailed Comments on Principles of Natural
Justice under Sections 10FZA, 294AA and 637.
65. Hanuman Prasad Bagri v. Bagress Cereals P. Ltd., , (2001) 105 Comp. Cas. 493 (SC). See detailed Comments under
66. Kold-hold Industries P. Ltd. v. Arabian Exports Ltd., , (2004) 119 Comp. Cas. 1 (Bom.).
End of Document
Datta: Company Law
C R Datta
S. 18. Alteration to be registered within three months.

—67[
(1) A company shall file with the Registrar—
(a) a special resolution passed by a company in relation to clauses (a) to (g) of sub-section (1) of
section 17, within one month from the date of such resolution; or
(b) a certified copy of the order of the 68[ Central Government] made under sub-section (5) of that
section confirming the alteration, within three months from the date of order,
as the case may be, together with a printed copy of the memorandum as altered and the Registrar shall
register the same and certify the registration under his hand within one month from the date of filing of
such documents.]
(2) The certificate shall be conclusive evidence that all the requirements of this Act with respect to the
alteration and the confirmation thereof have been complied with, and 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 69[ Central Government] may, at any time, by order, extend the time for the filing of documents
70[or for the registration of the alteration] under this section by such period as it thinks proper.
67. Substituted by the Companies (Amendment) Act, 1996 (5 of 1997), s. 3 [(w.e.f. 1-3-1997)videNotification No.
G.S.R. 78(E), dated 15-2-1997 : (1997) 88 Comp. Cas. (St.) 228]. For sub-section (1), which was earlier substituted by
Act 65 of 1960, as it stood prior to its substitution see Annexure at the end of this Volume.
68. Substituted by the Companies (Second Amendment) Act, 2002 (11 of 2003), s. 8, for “Company Law Board”
[(w.e.f.) date to be notified]. Earlier the words “Company Law Board” were substituted by Act 41 of 1974, s. 5, for
“Court” (w.e.f. 1-2-1975).
“Court” (w.e.f. 1-2-1975).
71. Saroja Mills Ltd. v. Registrar of Companies, (1964) 34 Comp. Cas. 336 (Mad.) : (1964) 1 Comp. LJ 103 (Mad.); Project
Engineers Pvt. Ltd. v. Registrar of Companies, (1967) 37 Comp. Cas. 566 (Mad.); Beauty Art Dyers and Cleaners (P.)
Ltd. v. ROC, (1974) 44 Comp. Cas. 460 (Bom.); Shri Amba Motors Agencies Pvt. Ltd. v. ROC, (1978) 48 Comp. Cas.
89 (Delhi). See also Comments under Sections 19 and 640A.
Page 2 of 6
72. Project Engineers Pvt. Ltd. v. ROC, (1967) 37 Comp. Cas. 566 (Mad.).
73. Shivalik Steels and Alloys P. Ltd. (No. 2) v. ROC, (1992) 73 Comp. Cas. 195 (CLB); National Industrial Corpn. Ltd. v.
ROC, (1963) 33 Comp. Cas. 265 (Punj.); Janardhana Mills Ltd. v. ROC, (1964) 34 Comp. Cas. 333 (Mad.). See also
74. Ganga Textiles Ltd. v. Registrar of Companies, (1998) 94 Comp. Cas. 36 (CLB).
75. Ishita Properties Ltd., In Re, (2002) 112 Comp. Cas. 547 (CLB).
76. Shivalik Steels and Alloys P. Ltd. (No. 1) v. ROC, (1992) 73 Comp. Cas. 174 (CLB).
COMMENTS
Previous Act, 1913 : Section 15
follows: “Compare section 15 of the existing Act. Sub-section (1) of that section has been split up into two sub-
clauses in the Bill.” [ Clause 15 of the Companies Bill, 1953 (46 of 1953)].
—The Notes on clauses explained as follows: “The amendments are based on the recommendations contained in
para 30 of the Report that the Registrar should be required to certify the registration of the Court's [ the CLB (now
the Central Government)] order made under section 17(5) within one month from the date of filing of the relevant
documents with him and the Court [ CLB (now the Central Government)] should be empowered to extend this
period.” [ Clause 7 of the Companies (Amendment) Bill, 1959 (37 of 1959)].
“Under section 17(2), an alteration of the memorandum under sub-section(1) shall not take effect until and except in
so far as it is confirmed by the Court [ the CLB (now the Central Government)] on petition. Sections 18 and 19
provide for registration of the altered memorandum with the Registrar and for the consequences of a failure to
register. Under section 18(1), read with sub-section (4), a copy of the altered memorandum and a copy of the
Court's [ the CLB (now the Central Government)] order confirming the alteration have to be filed with the Registrar
within three months of the date of the order or such further time as might be granted by the Court [ the CLB (now
the Central Government)]. If the company has done this, it has done all that it is or can be required to do. Section
19(2) provides that 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 for filing the documents under
sub-section (4) of section 18, such alteration and the order of the Court [ the CLB (now the Central Government)]
confirming it shall become void. There is no period prescribed within which after the order of the Court [ the CLB
(now the Central Government)] has been filed, the Registrar should register and certify the alteration. Under section
18(4) the Court [ the CLB(now the Central Government)] has no power to extend the time for registration. For this
purpose, section 18(1) and (4) and 19(2) might be amended.” [ Report : para 30].
—The powers of the Court were conferred on the Company Law Board by Act 41 of 1974 (w.e.f. 1-2-1975). The
powers have now been conferred upon the Central Government see the Companies (Second Amendment) Act,
2002 (11 of 2003)below.
—The Statement of Objects and Reasons appended to the Companies (Amendment) Bill, 1996 (34 of 1996)
explained the object of the amendments “to simplify some procedural and legal requirements in the interest of
corporate sector”.
The Companies (Second Amendment) Act, 2002 (11 of 2003).

Page 3 of 6
—The Notes on clauses explained thus: “This clause seeks to amend section 18 relating to alteration of
memorandum of association to be registered within three months. It is proposed to confer the powers of the
Company Law Board upon the Tribunal [ conferred upon the Central Government in the Act]. This amendment is of
See also Legislative History under Sections 10E and 10FB.
Filing [Sub-section (1)].
—A company shall file with the Registrar of Companies: (a) a Special Resolution passed by a company in relation
to clauses (a) to (g) of sub-section (1) of section 17 of the Act, within 1 month from the date of such resolution; or
(b) a certified copy of the order of the CLB [ now the Central Government] made under section 17(5) confirming the
alteration regarding change of Registered Office from one State to another within 3 months from the date of order,
as the case may be, together with a printed copy of the Memorandum as altered and the Registrar shall register the
same and certify the registration within 1 month. [ Section 18(1)].
For Special Resolution to alter Memorandum, Clauses (a) to (g) of sub-section (1) of Section 17 and Confirmation
by the Company Law Board [ now the Central Government] when required see detailed Comments under Section
17.
Exclusion of Time.— Section 18(1) provides that after the Company Law Board [ now the Central Government]
confirms the alteration the company must file with the Registrar of Companies a certified copy of the Board's [ now
Central Government's] order made under section 17(5) within three months from the date of the order. Under
section 640A of the Companies Act, 1956, the time taken in drawing up the order and obtaining a certified copy of
the order of theCLB [ now the Central government] will be excluded in computing the period of three months.71
Certificate by Registrar conclusive [Sub-section (2)].
—After the company files the necessary documents with the Registrar he shall give a certificate within 1 month from
the date of the filing of the documents. Such certificate shall be conclusive evidence that all the requirements of the
Act have been complied with.
Change of Registered Office: Filing with both Registrars [Sub-s.(3)].—Where the alteration relates to transfer
of registered office from one State to another, the company must file certified copy of the order of the CLB [ now the
Central Government] confirming the alteration with the Registrar of each State. The Registrar of each such State
shall register the same, and certify the registration. 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.
Department's view.— Section 18(3). Filing of CLB order confirming transfer of Registered Office from one
State to another with ROC of each State.—“This Department is of the view that the main spirit behind Section
18(3) of the Companies Act, 1956 in regard to the filing of the Court's [theCLB's (now Central Government)] order
confirming the transfer of the company's Registered Office from one State to another State with the Registrar of
Companies of each State is that the Registrar of Companies from whose State the Registered Office is transferred
should keep the Court [the CLB (now Central Government)] order duly registered in his office as an evidence to
such shifting and should transfer all other records of the company to the Registrar of Companies to whose State the
Registered Office has been so shifted. The other Registrar of Companies will register the other copy of the Court
[the CLB (now Central Government)] order and keep that order with the records transferred to him by his
counterpart.” [ Circular No. 2/75 (F. No. 26/1/75-CL-III) : Govt. of India publication, Clarifications and Circulars on
Filing with Registrar (ROC).—As per Rule 20C* of the Companies (Central Govt.'s) General Rules and Forms,
1956 inserted by the Companies (Central Govt.'s) General Rules and Forms (Amendment) Rules, 2006 vide
Notification No. G.S.R. 56(E), dated 10-2-2006, published in the Gazette of India, Extraordinary, No. 50, Part II,
section 3(i), page 156 : ((2006) 130 Comp. Cas. (St.) 13, the company was required to file Documents with the
Registrar of Companies (ROC) under Section 18 of the Companies Act, 1956 together with Form 62* of the
Companies (Central Govt.'s) General Rules and Forms, 1956.
Form 62 (substituted w.e.f. 16-9-2006) not applicable u/ s. 18.— See Form 62* of the Companies (Central
Page 4 of 6
Government's) General Rules and Forms, 1956 as substituted (w.e.f. 16-9-2006) by the Companies (Central
Government's) General Rules and Forms (Second Amendment) Rules, 2006 vide Notification No. G.S.R. 555(E),
dated 14-9-2006, published in the Gazette of India, Extraordinary, No. 435, Part II, Section 3(i), page 31, dated 14-
9-2006 : MCA website http://www.mca.gov.in : (2006) 133 Comp. Cas. (St.) 130 in Appendices.
Earlier e-Form 62 was required to be filed in pursuance of Section 18. But, substituted e-Form 62 does not make a
reference to Section 18.
Instructions to original e-Form 62 also contained instructions in relation to Section 18. But, Instructions to
substituted e-Form 62 do not contain instructions in relation to Section 18 of the Companies Act, 1956.
[See Instructions for Filling e-Company Forms (original e-Form 62) : (2006) 131 Comp. Cas. (St.) 228 : Instructions
for Filling of e-Form 62 (substituted w.e.f. 16-9-2006) Downloaded (on 29-7-2007) from e-Forms with Instruction Kit
on the Ministry of Corporate Affairs (MCA) website http://www.mca.gov.in reproduced in Comments under Section
44 and other Relevant Sections].
Effect of failure to register.
—If the company fails to file the documents within time or fails to make application to the CLB [ now the Central
Government] for extension of time under section 18(4) within the specified period, all proceedings so far taken shall
become void and inoperative. However, on sufficient cause shown the CLB [ now the Central Government] the may
revive the order provided such application is made within a month from the expiry of the said three months or the
extended period granted by the CLB [ now the Central Government]. [ Section 19].
Extension of Time [Sub-section (4)].
—The CLB [ now the Central Government] may, at any time, by order, extend the time for the filing of documents or
for the registration of the alteration under this section by such period as it thinks proper. The Registrar of
Companies cannot extend the time for filing the CLB [ now the Central Government] order. The CLB [ now the
Central Government] has been given power to extend the time for filing the order.
Powers of Central Government.
—By the Companies (Second Amendment) Act, 2002 (11 of 2003), the powers and jurisdiction presently being
exercised by the Company Law Board (CLB) has been transferred to and vested in “the Central Government”
(w.e.f. date to be notified).
Form and Procedure.—Application under Section 18(4) of the Companies Act, 1956 for Filing documents for
Registration of Alteration in Memorandum of Association shall be made as follows:
Company Law Board (Till enforcement).
— See Form and Procedure for petition (till commencement of the above amendment) hitherto made to Company
Law Board (CLB) in Comments under Section 10E.
Central Government (After enforcement).—From the commencement of the Companies (Second Amendment)
Act, 2002 (11 of 2003) (w.e.f. date to be notified), the Application shall be made to the Central Government.
10FA, 10FB, 637 and 637A.
Scope of sections 18 and 19.—Considering the scope of sections 18 and 19 and with particular reference to
section 640A, the certified copy of the order of the CLB [ now the Central Government] has to be filed within 3
months from the date when the same is handed over and only after such outer limit is finally fixed, the period of one
month referred to in section 19 of the Act starts to run against the company.72
Page 5 of 6
Application for extension in stipulated period.—Although section 18(4) permits the CLB [ now the Central
Government] to extend time for filing or registration this section has to be read along with section 19(2). The
application to the CLB [ now the Central Government] for extension of time should therefore be made within the
stipulated period. Under section 19(2) the documents and all proceedings become void and inoperative after the
expiry of stipulated period. The revival of the order is possible within a further period of one month after the expiry of
stipulated period. Therefore, the extension of time limit cannot be granted after expiry of stipulated period. When an
order has already become void by the operation of law, providing for extension of time cannot in any way help
because the order no longer exists. “Extending time” and “reviving” are two separate acts.73
Where the company passed a special resolution for addition of one more object to the existing main objects clause
in its Memorandum. Under section 18(1)(a) the special resolution is required to be filed with the Registrar within one
month. The special resolution along with Form 23 was filed with the Registrar of Companies after a delay of 60
days. It was held that the resolution had become void on the expiry of 30 days. Therefore, there was no question of
granting any extension of time. The applicant could neither seek remedy under proviso to section 19(2).74
Substantial compliance.—Where the company shifted its registered office from the State of Karnataka to the NCT
of Delhi. Order of the CLB was filed before the Registrar of Companies, Karnataka within 3 months and certificate of
registration was issued by the ROC, Karnataka. However, there was delay of 1 month and 18 days in filing the
order of CLB [ now the Central Government] with the Registrar of Companies, NCT of Delhi and Haryana.
Application under section 18(4) for condoning the delay was granted as there was substantial compliance of this
section.75
In an exceptional case, extension under section 18(4) was granted after four years, where the company filed
certified copy of the order of CLB [ now Central Government], confirming the alteration of Memorandum changing
the company's registered office from one State to another, with the Registrar of Companies within three months.
However, it did not file Form 21, a printed copy of the Memorandum as altered and Filing fees. The Registrar
therefore did not register the alteration. As certified copy of the order, which is the essence, was filed well within the
period of three months, the failure to file the other documents did not nullify the filing of the basic document. The
CLB however directed the Registrar of Companies to initiate proceedings for unauthorised shifting of the registered
office before registration.76
Chartered Accountants of India (ICAI) enumerated Salient provisions of the Companies Act, 1956(1 of 1956)
Statement.
Sections 16, 17 and 18 [Alteration of Memorandum].
—Where the Memorandum of Association of a company has been altered, e.g., as to the Objects clause, Capital
structure, etc., it should be seen that prima facie the alteration has been made in accordance with the law.
Page 6 of 6
Section 17A.
—Permission of the Regional Director (RD) shall be required for changing the Registered Office of Company within
the same State.
67. Substituted by the Companies (Amendment) Act, 1996 (5 of 1997), s. 3 [(w.e.f. 1-3-1997)videNotification No.
G.S.R. 78(E), dated 15-2-1997 : (1997) 88 Comp. Cas. (St.) 228]. For sub-section (1), which was earlier substituted by
Act 65 of 1960, as it stood prior to its substitution see Annexure at the end of this Volume.
“Court” (w.e.f. 1-2-1975).
“Court” (w.e.f. 1-2-1975).
89 (Delhi). See also Comments under Sections 19 and 640A.
75. Ishita Properties Ltd., In Re, (2002) 112 Comp. Cas. 547 (CLB).
76. Shivalik Steels and Alloys P. Ltd. (No. 1) v. ROC, (1992) 73 Comp. Cas. 174 (CLB).
End of Document
Datta: Company Law
C R Datta
S. 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.
77[(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 78[ Central Government] 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 78[ Central Government] may, on sufficient cause shown, revive the order on
application made within a further period of one month.]
77. Substituted by the Companies (Amendment) Act, 1960 (65 of 1960), s. 8. for sub-section (2) as it stood prior to its
78. Substituted by the Companies (Second Amendment) Act, 2002 (11 of 2003) s. 8, for “Company Law Board”
[(w.e.f.) date of enforcement to be notified]. Earlier the words “Company Law Board” were substituted by the
Companies (Amendment) Act, 1974 (41 of 1974), s. 5, for “Court” (w.e.f. 1-2-1975).
89 (Delhi). See detailed Comments under Sections 18 and 640A.
COMMENTS
Previous Act, 1913 : Section 16
Legislative History.—The Companies Act, 1956 (1 of 1956).—The Notes on clauses explained the provisions of
this section as follows: “The first paragraph of section 16 of the existing Act has been split up into two sub-clauses.”
[ Clause 16 of the Companies Bill, 1953 (46 of 1953)].
Page 2 of 4
The Companies (Amendment) Act, 1960(65 of 1960).—The Notes on clauses explained the amendments as
follows: “The amendment to section 19(2) of the Act is consequential on the amendments suggested in section 18.
(See para 30 of the Report.)” [ Clause 8 of the Companies (Amendment) Bill, 1959 (37 of 1959)].
The Companies (Amendment) Act, 1974(41 of 1974).—The powers of the Court have been conferred on the CLB
by Act 41 of 1974 (w.e.f. 1-2-1975).
The Companies (Second Amendment) Act, 2002(11 of 2003).—The Notes on clauses explained the amendments
as follows: “This clause seeks to amend sections 18 and 19 relating to alteration of memorandum of association to
be registered within three months and effect of failure of such registration. It is proposed to confer the powers of the
Company Law Board in the aforesaid sections upon the Tribunal [ conferred on the Central Government in Act].
These amendments are of consequential nature.” [ Clause 8 of the Companies (Amendment) Bill, 2001 (80 of
2001)].
See also Legislative History under Sections 10FB, 17 and 18.
Alteration effective only on registration [ Section 19(1)].—Alteration of Memorandum so as to change the place
of Registered Office from one State to another, or with respect to the objects of the company referred to in section
17 shall have effect only after it has been duly registered under section 18.
Order operative only on filing.—The alteration takes effect only after it has been duly registered with the ROC.
Filing means not merely delivering the documents with the Registrar and paying the fees. Filing means the delivery
of documents, payment of fees, scrutiny by the Registrar's Office, acceptance of the documents to be in order and
issue of a certificate as provided in section 18. Therefore, the alteration will take effect after the Registrar issues the
certificate of registration.
Period within which to file.—A company shall file with the Registrar-(a) a special resolution passed by a company
in relation to clauses (a) to (g) of sub-section (1) of section 17, within one month; or (b) a certified copy of the order
of the Company Law Board [ now the Central Government] made under section 17(5) confirming the alteration
within three months from the date of order, as the case may be, together with a printed copy of the memorandum as
altered and the Registrar shall register the same and certify the registration within one month. [ Section 18(1)].
Effect of failure to register within time [ Section 19(2)].
—If the documents required to be filed with the Registrar of Companies under section 18 are not filed within the
time allowed under section 18(1), i.e., one month from the date of passing of the special resolution or three months
from the date of the Company Law Board's [ now the Central Government's] order, such alteration, the order of the
CLB [ now the Central Government] made under section 17(5) and all proceedings connected therewith, shall, at
the expiry of such period, become void and inoperative.
Extension of time [ Section 18(4)].
—The Company Law Board may, at any time, by order, extend the time for the filing of documents or for the
registration of the alteration under this section by such period as it thinks proper.
Exclusion of time.—The time required to obtain certified copy of the order of the CLB [ now the Central
Government] shall be added to the period of one or three months stipulated under Section 18(1)[ Section 640A].79
Revival [ Section 19(2) proviso].
—If the alteration, i.e., the Special Resolution or the order of the CLB [ now the Central Government] and
proceedings connected therewith become void and inoperative at the expiry of the period stipulated under Section
18(1) or period extended under section 18(4) the CLB [ now the Central Government] may, on sufficient cause
shown, revive the order on application by the company made within a further period of one month.
Scope of sections 18 and 19.

Page 3 of 4
—Considering the scope of sections 18 and 19 and with particular reference to section 640A, the certified copy of
the order of the CLB [ now the Central Government] has to be filed within three months from the date when the
same is handed over and only after such outer limit is finally fixed, the period of one month referred to in section 19
starts to run against the company.80
Revival and extension in stipulated period.
—Although section 18(4) permits the CLB [ now the Central Government] to extend time for filing or registration this
section has to be read along with section 19(2). The application to the CLB [ now the Central Government] for
extension of time should therefore be made within the stipulated period. Under section 19(2) the documents and all
proceedings become void and inoperative after the expiry of stipulated period. The revival of the order is possible
within a further period of one month after the expiry of stipulated period. Therefore, the extension of time limit
cannot be granted after expiry of stipulated period. When an order has already become void by the operation of law,
providing for extension of time cannot in any way help because the order no longer exists. “Extending time” and
“reviving” are two separate acts.81
Where the company passed a special resolution for addition of one more object to the existing main objects clause
in its Memorandum. Under section 18(1)(a) the special resolution is required to be filed with the Registrar within one
month. The special resolution along with Form 23 was filed with the Registrar of Companies after a delay of 60
days. It was held that the resolution had become void on the expiry of 30 days. Therefore, there was no question of
granting any extension of time. The applicant could neither seek remedy under proviso to section 19(2).82
In some exceptional cases, the extension under section 18(4) was granted after the stipulated period when there
was substantial compliance of section 18.
Department's view.— Section 19: Void Order—Revival of order.—“Cases have come to the notice of
Government where, even when the companies failed to apply to the Court [the CLB (now the Central Government)]
within a period of three months for extension of time to file the order or within a further period of one month for
revival of the order, Courts [the CLB (now the Central Government)] have passed orders granting applicant
companies extension of time to file copies of the orders with the Registrars. Such orders of extension are not in
conformity with the law and whenever the Registrars get an opportunity they should bring the above position of law
to the notice of the Court [the CLB (now the Central Government)].” [ Circular No. 20(26)-CL-IV/61, dated 31-7-1961
: Govt. of India publication, Clarifications and Circulars on Company Law, 1977 Edition, page 9].
Powers of Central Government.—By the Companies (Second Amendment) Act, 2002 (11 of 2003), the powers
and jurisdiction presently being exercised by the Company Law Board (CLB) has been transferred to and vested in
“the Central Government” (w.e.f. date to be notified).
Form and Procedure.—Application under Section 19 of the Companies Act, 1956 for Revival of Order shall be
made as follows:
Company Law Board (Till enforcement).— See Form and Procedure for petition (till commencement of the above
amendment) hitherto made to Company Law Board (CLB) in Comments under Section 10E.
Central Government (After enforcement).—From the commencement of the Companies (Second Amendment)
Act, 2002 (11 of 2003) (w.e.f. date to be notified), the Application shall be made to the Central Government.
10FA, 10FB, 637 and 637A.
Form and Procedure.—From the commencement of the Companies (Second Amendment) Act, 2002 (11 of 2003),
to the Central Government. See detailed Comments, Form and Procedure under Section 637.
Page 4 of 4
For Form and Procedure for Application (till commencement of amendment) hitherto made to the Company Law
Boardsee Comments under Section 10E.
78. Substituted by the Companies (Second Amendment) Act, 2002 (11 of 2003) s. 8, for “Company Law Board”
[(w.e.f.) date of enforcement to be notified]. Earlier the words “Company Law Board” were substituted by the
Companies (Amendment) Act, 1974 (41 of 1974), s. 5, for “Court” (w.e.f. 1-2-1975).
89 (Delhi). See detailed Comments under Sections 18 and 640A.
End of Document
Datta: Company Law
C R Datta
COMPANY AND MATTERS INCIDENTAL THERETO > Provisions with respect to names of
companies
S. 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.
83[(2) Without prejudice to the generality of the foregoing power, a name which is identical with, or too nearly
resembles,—
(i) the name by which a company in existence has been previously registered, or
(ii) a registered trade mark, or a trade mark which is subject of an application for registration, of any other
person under the Trade Marks Act, 1999 (47 of 1999),
may be deemed to be undesirable by the Central Government within the meaning of sub-section (1)
(3) The Central Government may, before deeming a name as undesirable under clause (ii) of sub-section (2),
consult the Registrar of Trade Marks.]
83. Sub-sections (2) and (3) subs. for sub-section (2) by the s. 158 and Sch. [(w.e.f. 15-9-2003) vide Notification No.
S.O. 1048(E), dated 15-9-2003, published in the Gazette of India, Extraordinary, No. 834, Part II, Section 3(ii),
dated 15-9-2003 : (2003) 117 Comp. Cas. (St.) 156]. For sub-section (2) as it stood prior to its substitution see
84. M. Mccarthy & Co. (Builders) Ltd. (No. 2) Re, , (1976) 2 All ER 339.
85. Sidhvi Constructions (India) P. Ltd. v. Registrar of Companies, , (1997) 90 Comp. Cas. 299 (AP); Sen and Pandit
Electronics Pvt. Ltd. v. Union of India, , (2003) 115 Comp. Cas. 299 (Cal.). See detailed Comments under Section 22.
86. Executive Board of Methodist Church in India v. UOI, , (1985) 57 Comp. Cas. 443 (Bom.). See also Comments under
Section 33. See revised Instructions on defunct companies in Circular Letter No. 10(1)-RS/65, dated 27-11-1965, para
19, printed hereinafter.
87. Kilburn Electricals Ltd. v. Regional Director, , (2000) 99 Comp. Cas. 243 (Mad.). See also Comments under Section 22.
88. Kothari Products Ltd. v. Registrar of Companies, , (2001) 103 Comp. Cas. 841 (All.).
89. Hira Lal and Sons (Export) P. Ltd. v. Union of India, , (2005) 127 Comp. Cas. 904 (Delhi).
90. Association of Certified Public Accounts of Britain v. Secretary of State for Trade and Industry, , (1997) 2 BCLC 307.
91. British Diabetic Association v. Diabetic Society Ltd., , (1995) 4 All ER 812.
92. Montari Overseas Ltd. v. Montari Industries Ltd., , (1996) 20 Corp. LA 313 (Delhi) (DB) : (1996) PTC 16 (Delhi) (DB).
93. Baker Hughes Ltd. v. Hiroo Khushalani, , (2000) 102 Comp. Cas. 203 (Delhi).
94. Kirloskar Proprietary Ltd. v. Kirloskar Dimensions Pvt. Ltd., , (1999) 96 Comp. Cas. 726 (Kar.); Manipal Housing
Finance Syndicate Ltd. v. Manipal Stock and Share Brokers Ltd., , (1999) 98 Comp. Cas. 432 (Mad.). See detailed
Comments under Passing off action in later paragraphs. See also Comments under Section 22.
* See the Emblems and Names (Prevention of Improper Use) Act, 1950 in Appendix 47.
Page 2 of 23
* See revised edition of this book. See also Press Note No. 1, dated 14-3-2002 on Department of Company Affairs
Website (www.dca.nic.in) which facilitates search on ‘Company Directory’, Names approved by ROCS and in pipeline
for Registration of companies hereinafter.
† See also further Guidelines for use of key words as part of name, while making available the proposed names under
sections 20 and 21 of the Companies Act, 1956 contained in Letter F. No. 27/1/87-CL-III, dated 13-3-1989 reproduced
after this Circular.
† Now see Sections 581A to 581ZT inserted in the Companies Act, 1956 by the Companies (Amendment) Act, 2002 (11
of 2003) facilitating formation and conversion of co-operative business as companies on a voluntary basis.
* See Comments under the Emblems and Names (Prevention of Improper Use) Act, 1950 and Circular No. 24 of 2001,
dated 21-11-2001 printed in earlier paragraphs.
† Guideline No. 14A as replaced by Circular No. 4 of 1993 (F. No. 3/14/93-CL-V, dated 31-3-1993 : (1993) 77 Comp.
Cas. (St.) 723. The Circular also stated that the abbreviated name will be considered only in case of change of name
under section 21 of the Companies Act, 1956, with the prior approval of the Regional Director concerned and should
not be allowed for adoption by new companies. See also Circular No. 1 of 1995, dated 16-2-1995 [printed hereinafter]
which states that no such approval of the Regional Director is now necessary and ROCS may take a final decision on
such applications in the light of existing guidelines.
†† NowSections 20 and 22 of the Companies Act, 1956 (1 of 1956) regarding Companies not to be registered with
undesirable names and Rectification of name of company have been amended by the Trade Marks Act, 1999 (47 of
1999) (w.e.f. 15-9-2003) as already explained.
* Guideline No. 21 relating to Companies in Insurance sector has been partially modified. See para 5 of Circular No. 6 of
1999, dated 13-5-1999 printed hereinafter.
** See also Additional guidelines printed after this Circular and Extracts from Circular No. 1 of 1995, dated 16-2-1995
printed under Application for approval of Names.
† See also further Instructions, e.g., Guidelines for use of key words as part of name, etc., issued by the Department of
Company AffairsCompany Law Board, reproduced after this Circular.
† ROCs may now allow Names with the word Insurance/Assurance or Risk Corporation to new companies without
consulting the Insurance Regulatory Authority. See Circular No. 5 of 2000, dated 30-6-2000 Circular No. 5 of 2000,
dated 30-6-2000, printed hereinafter.
610E (w.e.f. 16-9-2006) in Appendix 2.
16-9-2006).
* See the Companies (Director Identification Number) Rules, 2006 in Appendix 49. See detailed Com-ments on Director
2006) (w.e.f. 1-11-2006).
95. Ewing v. Buttercup Margarine Co. Ltd., , (1917) 2 Ch. 1 : 86 LJ Ch. 441 : 117 LT 67 (CA); British Bata Shoe Co. Ltd. v.
Czechoslavak Bata Co. Ltd., , (1946) 64 RPC 72; Sturtvant Engineering Co. Ltd. v. Sturtevant Mill Co., , (1936) 3 All ER
137.
96. R. v. Registrar of Companies, , (1912) 3 KB 23 : 81 LJ KB 914 (DC). See recent decisions under Undesirable Names
hereinbefore. See also Comments under Section 31, 32 and 33.
1. Jay's Ltd. v. Jacobi, , (1933) 1 Ch. 411 : 102 LJ Ch. 130 : 149 LT 90.
2. Exxon Corporation v. Exxon Insurance Consultants International Ltd., (1982) Ch. 119 : (1981) 2 All ER 945 : (1981) 1
WLR 624.
3. Manipal Housing Finance Syndicate Ltd. v. Manipal Stock and Share Brokers Ltd., , (1999) 98 Comp. Cas. 432. See
4. K.G. Khosla Compressors Ltd. v. Khosla Extractions Ltd.,AIR 1986 Delhi 181 [LNIND 1985 DEL 271]; Kirloskar
Proprietary Ltd. v. Kirloskar Dimensions Pvt. Ltd., , (1999) 96 Comp. Cas. 726 (Kar.). See also Kalpana Polytec India
Ltd. v. Union of India, , (2001) 106 Comp. Cas. 558 (Cal.) (DB) in Comments under Section 22.
Page 3 of 23
COMMENTS
English Act, 1948 : Section 17 Previous Act, 1913 : Section 11(1), (3)
follows: “Sub-clause (1) is based on sections 17 of the English Act. It generalises the specific prohibitions contained
in section 11(3) of the existing Act. Sub-clause (2) is based on the latter portion of section 11(1) of the existing Act.”
The Trade Marks Act, 1999 (47 of 1999).— Sections 20 and sections 22 (1 of 1956)regarding Companies not to be
registered with undesirable names and Rectification of name of company have been amended by the Trade Marks
Act, 1999 (47 of 1999) (w.e.f. 15-9-2003).
Companies with undesirable names not to be registered [Sub-s. (1)].—No company shall be registered by a
name which in the opinion of the Central Government is undesirable. See Department's views and Guidelines
hereinafter.
Undesirable Name [Sub-section (2)].—A name which is identical with, or too nearly resembles, (i) the name by
which a company in existence is already registered, or (ii) a registered trade mark, or a trade mark which is subject
of an application for registration, of any other person under the Trade Marks Act, 1999 (47 of 1999), may be
deemed to be undesirable within the meaning of sub-section (1).
See also Comment under Section 22.
Consultation with the Registrar of Trade Marks [Sub-section (3)].—The Central Government may before
deeming a name as undesirable under section 20(2)(ii) of the Companies Act, 1956 consult the Registrar of Trade
Marks.
Undesirable Names.—This section forbids the use of an undesirable name by an incorporated company. Whether
a name is undesirable or not will be at the discretion of the Central Government, here the Registrar of Companies.
A name which is identical with the name of another existing company will be deemed to be undesirable. Similarly, a
name which resembles to a great extent with the name of another existing company will be deemed undesirable. In
selecting the name the promoters carry the responsibility for any confusion created in future.84
Direction to change name.—It is not open to the registering authority to register a company with a name similar to
that of an existing company or if it resembles closely, such names should be avoided. However, the Registrar of
Companies, while registering the company at the initial stage need not make a thorough investigation. If such an
issue is brought before the Registrar of Companies within the time stipulated under Section 22 of The Companies
Act, 1956, it is open to the Central Government to direct the later company to change its name.85
Name similar to defunct company.—The Registrar cannot refuse registration of a company in a name which is
similar to defunct company for 10 years. Before making an order for obtaining a “No objection” letter from a
company using a name similar to the proposed name, the ROC should be satisfied that the existing company has
been lawfully registered and is entitled to transact its business in that name. In an appropriate case a writ petition
will lie against the order of the ROC.86
No objection letter.—A company was incorporated at Madras with the word “Kilburn” in its name with the
permission or no objection from a Calcutta based company. The Madras company floated two other companies with
name “Kilburn” and got them registered at Madras. Held, no objection or permission of the Calcutta company did
not extend to two other companies. The order for change of names of the two new companies under section
22(1)(b) was therefore justified.87
Page 4 of 23
Where the Registrar of Companies registered a company “Parag International (KNP) Pvt. Ltd.” in violation of the
provisions of section 20 of the Act, as clarified by the Department's Circular which stated that a company will not be
allowed to be registered if it includes the name of a registered trade mark unless the consent or no objection of the
owner of the trade mark has been produced by the promoters. The ROC was directed to take steps for cancellation
of registration of the company, permitting the company to apply for a change of name.88
See revised Circular Letter No. 10(1)-RS/65, dated 27-11-1965, Appendix ‘A’, para 17, printed hereinafter.
Right to use the Family or Surname.—Where the petitioner-company “Hira Lal and Sons (Export) Pvt. Ltd.” was
incorporated in the year 1973. The Registrar of Companies (ROC) allowed respondent-company to be incorporated
with the name “Hira Lall and Sons (I) Pvt. Ltd.” in July 2000. The petitioner filed a representation under Section 22
of The Companies Act, 1956 and the Registrar of Companies (ROC) directed respondent-company to change its
name by suffixing “Anupam” being the name of its Director “Hira Lall and (Sons) (I) Anupam Pvt. Ltd.”. On a writ
petition, contending that name of the respondent-company was identical with that of the petitioner-company.
Dismissing the writ petition, it was held that under Section 20(2) the name which is identical with or too nearly
resembles the name by which a company in existence has been previously registered would be deemed to be
undesirable by the Central Government within the meaning of Section 20(1). If it had been the case of an outsider
using “Hira Lal and Sons” as prefix to its name there might have been some substance in the contention of the
petitioner. That was not so as the petitioner-company as well as respondent-company were persons with common
family roots. From the No Objection Certificate (NOC), dated September 10, 2000 given by the Directors of the
petitioner-company it could be inferred that there was an oral understanding at the time of incorporation of
respondent-company for using the name of their grandfather “Hira Lall”. Moreover, the petitioner-company was
doing different business from respondent-company. Since Hira Lall was the grandfather of the parties the right to
use the family or surname could not be denied or treated as unauthorised. After the change of name of respondent-
company to “Hira Lall and (Sons) (I) Anupam Pvt. Ltd.” it would not come under the mischief of Section 20(2) of the
Act.89
Misleading Name.—A company should not be registered with a name which would mislead the public and cause
harm to them. In considering whether the name is misleading and harmful to public interest, the Court would
consider the expectations of the public from the company, and the probability of their spending their moneys on
such wrongful or misleading name.90 An individual likely to be deceived or confused or aggrieved by misleading
name may file a suit or apply for appropriate reliefs.91
Remedies under Act and Tort.—The remedies available in Law of Tort for the unauthorised use of business name
and trade marks and safeguards provided under the Companies Act, 1956 should operate in different fields.92
Injunction.—A Joint Venture Agreement provided that if the equity participation of the foreign company at any time
fell below 40% then the company would stop using the foreign company's trade name. The foreign company
disposed off the equity shares. On an action the Court injuncted the Indian company from using the foreign
company's trade name.93 The Court refused to issue an Order of Injunction for use of its own name or name of a
place or an ancestral name on a passing off action.94
See detailed Comments under Injunction and Passing off action after Department's views, viz., Circulars, Guiding
Principles and Instructions for Availability of Names reproduced hereinafter. See also Comments under sections 22.
Emblems and Names (Prevention of Improper Use) Act, 1950.—The Emblems and Names (Prevention of
Improper Use) Act, 1950 (12 of 1950)* governs the choice of a name. The Preamble states the aim of the Act thus:
“An Act to prevent the improper use of certain emblems and names for professional and commercial purposes”.
Department's view.— Availability of Name—Instructions regarding.—“Instruction No. 8 of the Guiding

instructions circulated vide this Department's letter No. 10(1)-RS/65, dated 27-11-1965 [ printed below], provides
that a name in the category mentioned below will not generally be made available:—
‘If it attracts the provisions of the Emblems and Names (Prevention of Improper Use) Act, 1950 (12 of 1950), as
amended from time to time, i.e., use of improper names, prohibited under this Act.’
2. It is observed from a communication received from the Department of Consumer Affairs that the above-said
instructions are not being followed scrupulously.
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3. The ROCS are advised to take into account the provisions of the above-said Emblems and Names Act while
making names available to companies under the Companies Act, 1956.
4. All the ROCS are requested to adhere to the above instructions for strict compliance.” [ General Circular No. 24
of 2001 (F. No. 5/46/2001-CL-V and F. No. 27/12/2001-CL-III), dated 21-11-2001 : (2001) 107 Comp. Cas. (St.)
486].
Guiding Principles for Availability of Names.—Besides the Emblems and Names Act and Instructions [ printed
above], there are Circulars, Guiding Principles and Instructions issued by the Department of Company Affairs, by
which the Registrar of Companies decides whether a particular Name is desirable or undesirable.
These Circulars, Guiding Principles and Instructions are reproduced below.
Department's view.— Guiding Instructions for Availability of Names.—“The procedure for scrutinising the
availability of names for new companies has recently been re-examined carefully in this Department, having taken
into account the difficulties experienced by some Registrars in following the instructions given to them vide Letter
No. 10(19)-RS/61, dated 5-5-1962. This Letter [No. 10(1)-RS/65, dated 27-11-1965], together with the enclosed set
of Instructions as revised, consolidates, and is in supersession of all the previous instructions issued from time to
time by this Department. An illustrative list of names considered to be undesirable within the meaning of Section 20
of the Companies Act, has also been given herewith. The guiding instructions for deciding cases of making a name
available for registration are given in Appendix ‘A’ to this letter. In addition to these, the Registrars of Companies
are requested to note the following general instructions also:
1. As the Registrars have hitherto been doing, they should refer only doubtful and hard cases where they
might find it difficult to take a decision, to the Research and Statistics Division at the Headquarters.
2. Where consultation with the Regional Director on the spot is possible, Registrars of Companies would take
advice before referring doubtful and hard cases to the Headquarters.
3. In order to find out the availability of names, the Registrars are advised to consult the All India Index Cards
of companies in their offices, if any kept up-to-date or the alphabetical list of companies contained in the
following publications issued by the Department:
(i) Annual Blue Book on Joint Stock Companies, Part II, 1958-59 and its supplementaries giving newly
registered companies upto March, 1964.*
(ii) All India lists of new company registrations maintained in the field offices from 1st April, 1964 to date.
a(iii) Fortnightly list of names made available to promoters by the Registrars, circulated from the Research
and Statistics Division.
(iv) List of foreign companies having a place of business in India.
4. The Registrars will prepare separate slips and not one consolidated list as per specimen given at Appendix
‘B’ in respect of each of the name allowed by them and send them in a bunch to the Research and
Statistics Division on the 1st and 16th of every month. A consolidated list of such new names allowed by
the Registrars of Companies will be drawn up here and it would then be circulated among the field offices
for their ready information, and use. The advantage of this arrangement is too obvious to need emphasis.
5. The Registrars of Companies may ask the promoters to suggest a panel of three to five names quite
distinct from each other for consideration.
6. The Registrars should adopt a polite attitude and persuade the Company promoters to suggest names
consistent with the guiding principles. They should explain the difficulties of the Administration in approving
names likely to create confusion in the minds of the public and harm the interests of the promoters.
7. In case any of the names proposed by the promoters is not agreed to by the Registrars as available, it
should be open to them to follow up the matter by subsequent letters or application for the same fee within
a reasonable period which may normally be construed to mean three months from the date of rejection of
the name/names proposed.
8. The Registrars may permit the promoters to use the name of the firm in brackets after the duly approved
name as incorporating or successor to (name of the firm) in order to fulfil the desire of the promoters to
retain the goodwill of their business in cases where the names of firms seeking registration under the
Companies Act is considered as undesirable within the meaning of section 20 of the Act.
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9. Registrars should ascertain from the promoters if the proposed name/names were applied for to any other
Registrar of Companies and if so, with what result. In case there is some difference of opinion between the
two Registrars in making the name available, then the case may be referred to the Board for advice.
10. The name of a proposed company allowed by the Registrars to the promoters for registration under the
Companies Act should not be kept reserved for more than three months.
11. It is necessary that the ‘keywords’† of a proposed name/names are checked separately with the names of
the existing companies beginning with those ‘keywords’ so as to avoid any possibility of allowing a name
with a little re-arrangement of the same words of the existing company which may be said to be closely
resembling each other.
I may further add that although it is not possible to lay down any hard and fast rules for determining whether a
particular name or any two names too nearly resemble each other, each case, however, will be decided on its
merits. As already emphasised in the earlier circular letter of this Department on the subject dated 5th May, 1962,
that the various criteria set out in the guiding principles at Appendix ‘A’ are not exhaustive but only illustrative of
what is considered to be undesirable names under section 20 of the Companies Act and that, by the very nature of
the subject all possible cases could not be covered. It is, therefore, suggested that where the Registrars find that
certain proposed names could not be judged in the light of the instructions given above and give rise to doubt, the
same may be referred to the Research and Statistics Division at the Headquarters after availing of the help of the
Regional Director if available on the spot.
APPENDIX ‘A’
GUIDING INSTRUCTIONS FOR DECIDING CASES OF MAKING A NAME AVAILABLE FOR REGISTRATION
UNDER THE COMPANIES ACT, 1956
A name which falls within the categories mentioned below will not generally be made available:
1. If it is not in consonance with the principal objects of the company as set out in its memorandum of
association. This does not necessarily mean that every name should be indicative of its object, but when
there is some indication of business in the name then it should be in conformity with its objects.
2. If the Company/Companies' main business is finance unless the name is indicative of that particular
financial activities, viz., Chit Funds/Investments/Loans etc.
3. If it includes any word or words which are offensive to any section of the people.
4. If the proposed name is the exact Hindi translation of the name of an existing company in English
especially an existing company with a reputation.
5. If the proposed name has a close phonetic resemblance to the name of a company in existence for
example: J.K. Industries Limited. Jay Kay Industries Limited.
6. If the name is only a general one, like Cotton Textile Mills Limited or Silk Manufacturing Limited and not
specific like Calcutta Cotton Textiles Mills Limited or Lakshmi Silk Manufacturing Company Limited.
7. If it includes, the word ‘Co-operative’, ‘Sahakari’ or the equivalent of word ‘Co-operative’ in the regional
languages of the country.†
8. If it attracts the provisions of the Emblems and Names (Prevention of Improper Use) Act, 1950*, i.e., use of
improper names, prohibited under this Act.
9. If it connotes Government's participation or patronage unless circumstances justify it, e.g., a name may be
deemed undesirable in certain context if it includes any of the words such as National, Union, Central,
Federal, Republic, President, Rashtrapathi, Small Scale Industries, Cottage Industries and Financial
Corporation etc.
10. If the proposed name contains the words ‘British India’.
11. If the proposed name implies association or connection with Embassy or Consulate which suggests
connection with local authorities such as Municipal, Panchayat, Delhi Development Authority or any other
body connected with the Union or the State Government.
12. If the proposed name is vague like D.J.M.O. Limited or T.N.V.R. Private Limited or S.S.R.P. Limited.
Page 7 of 23
13. If a proposed name implies association or connection with or patronage of a national hero or any person
held in high esteem or important personages who are occupying important positions in Government so
long as they continue to hold such positions.
14. If it resembles closely the popular or abbreviated descriptions of important companies like TISCO(Tata Iron
& Steel Co. Limited), H.M.T.(Hindustan Machine Tools), I.C.I.(Imperial Chemical Industries)
TEXMACO(Textile Machinery Corporation), WIMCO (Western India Match Company), etc. In some cases,
the first word or the first few words may be the key words and care should be taken that they are not
exploited. Such words should not be allowed even though they have not been registered as trade marks.
†[14A. Where the existing companies are stated and found to be well-known in their respective fields by
their abbreviated names, these companies may be allowed to change their names by way of abbreviation
with the prior approval of the Regional Director concerned.]
15. If it is different from the name/names of the existing company/companies only to the extent of having the
name of a place within brackets before the word ‘Limited’; For example, Indian Press (Delhi) Limited should
not be allowed in view of the existence of the company named Indian Press Limited.
To this rule, however, frequent exceptions are made in the case of subsidiary and in the case of a
company carrying on local business and in other cases on their merits. As for an example, ‘Corner
Garage (Delhi) Private Limited’ may be allowed notwithstanding that there is an existing company
‘Corner Garage Private Limited’ at Calcutta. So would be ‘Regent Cinema Limited’ at Madras, if there
is a company by the name Regent Cinema (Delhi) Limited. These names may also be allowed if they
are in the same group or management.
16. If the proposed name includes common words like ‘Popular’ ‘General’ ‘Janta’, if they are in the same State
doing the same business. But in case of companies in different business in the same State and in all cases
when the registered office of the company is in different States, the name might be allowed. For instance, if
there is ‘Popular Drug House Private Limited’ existing another company by the name of ‘Popular Plastic
Private Limited’ should not be objected to.
17. If it includes a name of a registered trade mark unless the consent of the owner of the trade mark has been
produced by the promoters. It may not be possible in all cases to check up the proposed name with the
trade mark, however, if the Registrars are in the know or some interested party/parties bring to their notice
a trade mark which is included in the proposed name then it should not be allowed unless a no-objection
certificate is obtained from the party who has registered the trade mark in its own name.††
18. If a name is identical with or too nearly resembles the name by which a company in existence has been
previously registered.* [ See few illustrations in Text hereinafter]. However, if a proposed company is to be
under the same management or in the same group and likes to have a closely resembling name to an
existing company under the same management or group with a view to have advantage of the goodwill
attached to the management or group name such a name may be allowed.
Even in the case of unregistered companies or firms which have built up a reputation over a
considerable period, the principle (that if a name is identical with or too closely resembles the name by
which a company has been previously registered and is in existence, it should not be allowed) should
be observed as far as practicable. In view of the difficulty in checking up whether a proposed name is
identical with or too nearly resembling the name of an unregistered company or a firm of repute, it
should at least be ensured that a proposed name is not allowed if it is identical with or too nearly
resembles the name of a firm within the knowledge of the Registrar. The cases of foreign companies of
repute should also be similarly treated even if there are no branches of such companies in India.
A few illustrations of closely resembling names are given below for guidance. The names as proposed
in column 1 should not (normally) be made available in view of the companies in existence as shown in
column 2.
Proposed name Existing company with too nearly

resembling names
(1) (2)
Page 8 of 23
Proposed name Existing company with too nearly

resembling names
(1) (2)
1. The National Steel Manufacturing National Steel Works.

Company Private Limited.
2. Trade Corporation of India Limited. State Trading Corporation of India

Limited.
3. Viswakarma Engineering Works Viswakarma Engineers (India)

Private Limited. Private Limited.
4. India Land and Finance Limited. Northern India Land & Finance
Limited.
5. Hindustan Chemicals & Fertilizers Hindustan Fertilizers Limited.

Limited.
6. Ruby Engineering Limited. Ruby Engineering Corporation

Limited.
7. Hind Finance Limited. Jai Hind Finance Limited.
8. Lakshmi Finance Limited. New Laxmi Finance Limited.
19. If it is identical with or too nearly resembles the names of a company in liquidation, since the name of a
company in liquidation is borne on the register till it is finally dissolved. A name which is identical with or too
closely resembles the name of a company dissolved as a result of liquidation proceedings should also not
be allowed for period of 2 years from the date of such dissolution since the dissolution of the company
could be declared void within the period aforesaid by an order of the court [ now the Tribunal (NCLT)]
under section 559 of the Act.
Further as a company which is dissolved in pursuance of action under section 560 of the Act can be
revived by an order of the Court [ now the Tribunal (NCLT)] before the expiry of 20 years from the
publication in the Official Gazette of the company being so struck off, it is considered desirable to stop
or conditionally allow the registration of a proposed name which is identical with or too nearly
resembling the name of such dissolved company for a period indicated below.
Since the period of 20 years as prescribed under the law is considered an unduly long period, the
registration of a proposed name which is identical with or too nearly resembles the name of a company
dissolved in pursuance of section 560 should not be allowed for a period of first five years only. During
the next five years such a proposed name may be allowed subject to the condition that in the event of
the dissolved company being restored to life by an order of the Court, the new company would have to
change its name. After a lapse of ten years, names identical with or too nearly resembling those of the
dissolved companies may be allowed without any such condition.
20. If it is different from the name of an existing company merely by the addition of words like ‘New’, ‘Modern’,
‘Nav’, etc. Names such as New Bata Shoe Company, Nav Bharat Electronics, etc., should not be allowed.
Different combination of the same words also requires careful consideration. If there is a company in
existence by the name of ‘Builders and Contractors Limited’ the name ‘Contractors and Builders Limited’
should not ordinarily be allowed.
Page 9 of 23
21. If it includes words like ‘Bank’, ‘Banking’, ‘Investment’, ‘Insurance’ and ‘Trust’. These words may, however,
be allowed in cases where the circumstances justify it. In cases of banking companies, the Reserve Bank
of India should be consulted and its advice should be taken before a name is allowed for registration. The
purpose of such consultation is to prevent small banking companies from misleading the general public by
adopting the names of some well-established and leading banks functioning elsewhere than in India. In
case of differences of opinion with the Reserve Bank of India the matter should be referred to the Board for
advice.
22. If the name includes the word ‘Industries’** or ‘Business’ unless the name is indicative of the business of
the proposed company for otherwise it serves as a lever for the company to diversify its activities.
23. If it includes proper name which is not a name or surname of a director—such names should not be
allowed except for valid reasons. For example, for sentimental reasons, sometimes the names of relatives
such as wife, son and daughter of the director may have to be allowed, provided one other word suggested
makes the name quite distinguishable.
24. If it is intended or likely to produce a misleading impression regarding the scope or scale of its activities
which would be beyond the resources at its disposal. For example, names like ‘Water Development
Corporation of India Private Limited’, ‘Telefilm of India P. Ltd.’, ‘All India Sales Organisation Limited’, ‘Inter-
continental Import & Export Company Limited’, etc., should not be allowed, when the authorised capital is
to be only a few lacs, and the area of operation limited to a State. Words like ‘International’, ‘Hindustan’,
‘India’, ‘Bharat’, ‘Continental’, ‘Asiatic’† may be allowed only if the scope and scale of business of the
proposed company justify the use of such words. However, the words ‘Jai Hind’, ‘Jai Bharat’, ‘Nav Bharat’,
‘New India’, etc., included in the proposed name need not stand the same test as ‘Hindustan’, ‘India’, etc.
(as they do not give the same sense). Similarly, the words ‘Bharat’, ‘India’, etc., if stated in the brackets,
before the word ‘Limited’ or ‘Private Limited’ need not stand the same test as the words ‘India’, etc., put at
the beginning of the name. Also, the word ‘India’ or ‘Bharat’ in brackets before the word Limited or Private
Limited does not necessarily mean that the company is an Indian branch of some foreign company. Such
as ‘Marsden Electricals (India) Private Limited’.
25. If the proposed name includes the word ‘State’ along with the name of the State such as Kerala State
Company Limited should not be allowed as it would give an impression of the Kerala State Government
participating in the share capital of the proposed company. However, if the name of a State only is included
without the addition of the word ‘State’ in the proposed name then it may be allowed as it is not likely to
give the impression that the company has the State Govt.'s interest in it.
26. If the proposed name includes the word ‘Corporation’, unless the company could be regarded as a big
sized company. However, the word ‘Corporation’ and ‘Company’ may be regarded as closely resembling
for purposes of allowing a new name. If for example, a company by the name of Rajasthan Finance
Corporation already exists, Rajasthan Finance Company should be regarded as undesirable within the
meaning of section 20 of the Act.
27. If the proposed name includes words like ‘French’, ‘British’, ‘German’, etc., unless the promoters satisfy
that there is some form of collaboration and connection with the foreigners of that particular company or
place the name of which is incorporated in the name. Thus, the name ‘German Tool Manufacturing Co.
Ltd.’ should not be allowed unless the company has some connection with Germany.
28. Even where except for the first word all the other words of the proposed name are similar to those of an
existing company, the first word should be considered to be sufficient to distinguish it from the name of the
existing company. For example, ‘Oriental ......................... Limited’.
APPENDIX ‘B’
INFORMATION WITH REGARD TO THE PROPOSED NAME ALLOWED FOR REGISTRATION
1. Proposed name allowed ..................................................................

2. State in which allowed ..................................................................
3. Date on which allowed ........................................................................” [ Circular Letter No. 10(1)-RS/65,
dated 27-11-1965].
Guidelines for use of key words as part of name.—“With a view to maintain uniformity, the following guidelines
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may be followed in the use of key words, as part of name, while making available the proposed names under
sections 20 and sections 21 of the Companies Act, 1956:
Key words Required authorised capital

Rs.
(1) Corporation 5 crores.
(2) International, Globe, Universal, 1 crore.

Continental, Inter-Continental, Asiatic,
Asia, being the first word of the name.
(3) If any of the words at (2) above is used 50 lakhs.

within the name (with or without
brackets).
(4) Hindustan, India, Bharat, being the first 50 lakhs.

word of the name.
(5) If any of the words at (4) above is used 5 lakhs.

within the name (with or without
brackets).
(6) Industries/Udyog. 1 crore
(7) Enterprises, Products, Business, 10 lakhs.

Manufacturing.
2. These names with key words at Serial Nos. (6) and (7) may be considered when the company proposes to deal
in various business activities or the company is already carrying on various business activities (in the case of
change of name).” [ Letter F. No. 27/1/87-CL-III, dated 13-3-1989 : Chartered Secretary, April 1989, page 279 :
(1989) 65 Comp. Cas. (St.) 536].
In view of above Circular, earlier Circular No. 16/74 (F. No. 27/9/74-CL-III), dated 27-8-1974 regarding availability of
the word ‘Hindustan’ and ‘Corporation’ to the private sector big sized companies, stands superseded.
Changes in Guidelines for Availability of Names.—“As ROCS are aware, this Department had issued exhaustive
guidelines on avoiding undesirable names for companies as mentioned in section 20 of the Companies Act, 1956,
through Circular No. 10(19)-RS/61, dated May 5, 1962 [ Letter No. 10(1)-RS/65, dated 27-11-1965 (printed above)
revised, consolidated and superseded all earlier circulars]. Further guidelines were also issued through Circular No.
1 of 1990 (No. 1/1/90-CL-V : 27/1/89-CL-III), dated January 5, 1990 [ printed later under Availability of Name].
2. In recent times, this Department has received a few references which needed further clarification. The
following guidelines/clarifications are accordingly issued.
3. Names starting with small letters/having small letters:
3.1. In the past the name-search for allowing names for companies used to be a manual search based on
list of names already in existence on a particular date, names made available by different ROCS
(which used to be circulated periodically) etc. The name search is no longer manual. It has become a
computerised operation in all ROC offices. In view of this, some of the old constraints (like alphabetical
listing) which could be a restrictive factor in the manual system do not exist under the present
computerised system.
3.2. ROCs may therefore now allow names starting with small alphabets (like ‘i2 Technologies ........ Ltd.’
etc.), as such names are being increasingly used by many companies in other countries. It should,
however, be ensured that the name starting with small alphabets does not have phonetic or visual
resemblance to the name of a company in existence.
4. Change of name by companies:
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4.1 In recent times it appears that quite a few companies whose principal object was not computer
software and who had actually been involved in financing activities have changed their names to
indicate as if they were in the business of computer software. For this purpose they have included
words like—‘Infosys; Software; Systems; Infosystem; Computers; Cyber; Cyberspace etc.’ in their
names.
4.2. In order that investors are not misled by the strategy adopted by a few companies, ROCS are hereby
advised that in future they should allow change of name to companies to reflect the business of
software only if a substantial portion of their income (as reflected from their audited accounts or
accounts certified by a chartered accountant) is derived from software business. If this is not proved
then such change of name should not be allowed.
5. Companies in insurance sector:
5.1. It may be recalled that in Guideline No. 21 [ See Guideline No. 21 of Circular Letter No. 10(1)-RS/65,
dated 27-11-1965 printed above] you have been advised not to allow the words ‘bank’, ‘banking’,
‘investment’, ‘insurance’, and ‘trust’ unless circumstances justify it. As you may be aware, the
insurance sector is likely to be opened for entry by private sector. The activities of the insurance sector
would be regulated by the Insurance Regulatory Authority which has already been set up.
5.2. In view of this, in partial modification of the above-mentioned guideline, it is hereby clarified that ROCS
may allow companies to be registered by them with the word ‘insurance’ or ‘risk corporation’ as part of
the name only after consulting the Reserve Bank of India and Insurance Regulatory Authority† (Jeevan
Bharti Building, Tower 1, Connaught Circus, New Delhi-110 001), as the case may be.
6. Use of generic names:
6.1. Guideline No. 5 [ See Guideline No. 6 of Circular Letter No. 10(1)-RS/65, dated 27-11-1965 printed
above] relates to inadvisability of allowing companies to have only generic names without any other
proper noun preceding/succeeding it. Under this category would come the word ‘Y2K’ (i.e., Year 2000).
6.2. It may kindly be noted that this is a generic one and cannot be allowed for any company as a ‘stand
alone’ name.” [ Circular No. 6 of 1999 (F. No. 5/35/98-CL-V), dated 13-5-1999 : (1999) 97 Comp. Cas.
(St.) 94].
Change of name by software companies made difficult.—“The Registrars of Companies (ROCs) will allow
change of name to companies to reflect the business of software only if a substantial portion of their income is
reflected in their audited accounts or accounts certified by a chartered accountant is derived from software
business. If this is not proved then such change of name would not be allowed.
This follows the decision of the Government that investors are not misled by the strategy adopted by a few
companies whose principal object was not computer software and who had actually been involved in financing
activities. Such companies have changed their names to indicate as if they were in the business of computer
software. For this purpose, such companies have included words like ‘Infosys, Software, Systems, Info-system,
Computers, Cyber, Cyberspace, etc.’ in their names only to dupe the gullible investors.” [ PIB Press Release, dated
16-8-1999 : (1999) 97 Comp. Cas. (St.) 102]. See Circular No. 6 of 1999 (printed above).
Changes in company name availability starting with small alphabets.—“The Registrars of Companies (ROCs)
will now allow company name changes starting with small alphabets like ‘i2 Technologies .... Ltd.’, etc., as such
names are being used increasingly by many companies in other countries. It shall, however, be ensured that the
name starting with small alphabets does not have phonetic or visual resemblance to the name of a company in
existence.
In the past, the name-search for allowing names for companies used to be a manual search based on list of names
already in existence on a particular date, names made available by different ROCS, which used to be circulated
periodically.
The name-search is no longer manual. It has become a computerised operation in all ROC offices. In view of this,
some of the old constraints like alphabetical listing, which would be a restrictive factor in the manual system, do not
exist under the present computerised system.” [ PIB Press Release, New Delhi, dated 16-9-1999 : (1999) 98 Comp.
Cas. (St.) 27]. See Circular No. 6 of 1999 (printed above).
Registration of private insurance companies allowed.—“The Registrars of Companies (ROCs) will, henceforth,
Page 12 of 23
allow companies to be registered by them under Companies Act, 1956, bearing the word ‘insurance’ or ‘risk
corporation’ as part of name only after consulting the Reserve Bank of India and Insurance Regulatory Authority, as
the case may be.
The modification in the earlier decision of the Department of Company Affairs follows the likely opening up of
insurance sector in the private sector. The activities of the insurance sector would be regulated by the Insurance
Regulatory Authority which has already been set up.
Earlier, the Registrars of Companies had been advised not to allow registration of companies with the ‘bank’
‘banking’ ‘investment’ ‘insurance’ and the ‘trust’. In view of the setting up of the Insurance Regulatory Authority, the
Department of Company Affairs changed its guidelines for registration of insurance related companies in the private
sector as well.” [ PIB Press Release, dated 20-8-1999 : (1999) 97 Comp. Cas. (St.) 103]. See Circular No. 6 of 1999
(printed above). See also further changes made by Circulars No. 5 of 2000 and 19 of 2003 given below.
Further Changes in Guidelines for Availability of Names.—“Attention is invited to this Department's Circular No.
6 of 1999 (5/35/98-CL-V), dated 13th May, 1999 [ printed above], in regard to allowability of names for
entrepreneurs seeking to promote companies for providing insurance services. In terms of the above circular such
names were being given only after consulting the insurance regulatory authority until now. Consequent on the
coming into force of the Insurance Regulatory and Development Authority Act, 1999, with effect from 19th April,
2000, the Department has received a reference from the insurance regulatory authority advising that the embargo
on registration of names by new companies could be lifted. In view of this all ROCS are advised that they may allow
names with the word insurance/assurance or risk corporation as part of the name without any need to consult the
insurance regulatory authority. It is hereby clarified that such names can be allowed only to new companies and not
for change of name as existing companies are not allowed to carry on any insurance activity.” [ Circular No. 5 of
2000 (F. No. 5/14/2000-CL-V), dated 30-6-2000 :(2000) 102 Comp. Cas. (St.) 49].
Change in Name Availability Guidelines.—“In partial modification of General Circular No. 5 of 2000, dated 30th
June,2000 [ printed above], it is hereby further clarified that since the Insurance Regulatory and Development
Authority has notified the Insurance Regulatory and Development Authority (Insurance Brokers) Regulations, 2002
permitting private sector companies to carry on the insurance brokers' business, the Registrars of Companies may
permit change of name of existing companies on their changing the objects to undertake the business of insurance
brokers also.” [ General Circular No. 19 (F. No. 5/6/2003-CL-V), dated 25-4-2003 : (2003) 114 Comp. Cas. (St.)
269].
Application for approval of Name.—As per Rule 4A* of the Companies (Central Government's) General Rules
and Forms, 1956 an application for approval of the proposed name is to be made by the promoters of a company to
the Registrar of Companies of the State in which the registered office of the proposed company is to be situate in
Form No. 1A* of the Companies (Central Govt.'s) General Rules and Forms, 1956 with a fee of Rs. 500. Fees must
preferably be paid through Bank Draft or by deposit in cash at the office of the Registrar [ see Rule 22*]. The
Registrar of Companies will ordinarily inform within a period of 7 days of the receipt of the application whether the
proposed name is available or not.
Form and Procedure.—As per Rule 4A* of the Companies (Central Govt.'s) General Rules and Forms, 1956,
application for approval of name is to be made by the promoters to the Registrar of Companies of the State in which
the registered office of the company is to be situate in e-Form No. 1A* along with a fee of Rs. 500. The Registrar of
Companies will ordinarily inform within a period of 7 days of the receipt of the application whether the proposed
name is available or not.
Rule 4A substituted (w.e.f. 19-11-2007).— Rule 4A* of the Companies (Central Government's) General Rules and
Forms, 1956 has been substituted by the Companies (Central Government's) General Rules and Forms (Third
Amendment) Rules, 2007 vide Notification No. G.S.R. 720 (E), dated 16-11-2007, published in the Gazette of India,
Extraordinary, Part II, Section 3(i) (w.e.f. 19-11-2007) as follows:
Rule 4A (w.e.f. 19-11-2007).—

(1) The promoters of a company under a proposed name or a company seeking to change its name may make
an application to the Registrar of Companies of the State in which the Registered Office of the proposed
company or of the company to be or is situated.
(2) The application shall be in Form 1A [ e-Form 1A] and be accompanied by a fee of Rupees 500 only.
Page 13 of 23
(3) The Registrar of Companies (ROC) shall cause to examine the application as to whether the changed
name or the name with which the proposed company is to be registered, as the case may be, is
undesirable within the meaning of Section 20. In case the name is undesirable, he may reject the same or
ask for resubmission of the application with new names or calls for further information, ordinarily within 3
days of receipt of the application:
Provided that the applicants shall be given only upto two opportunities for re-submission of their
proposal against the fee paid in the first instance for name availability after the original application is
filed. In the event the Registrar does not find the proposals so submitted and resubmitted as fit for
approval, he shall reject the application after the second re-submission. However, the applicant will be
at liberty to file fresh application along with prescribed fee.
(4) Where the Registrar of Companies informs the company or the promoters of the company that the
changed name or the name with which the proposed company is to be registered, as the case may be, is
not undesirable, such name shall be available for adoption by the said company or by the said promoters
of the company for a period of 60 days from the date the name is allowed:
Provided that if the name so allowed is not adopted on or before the expiry of the period of 60 days
from the date it is allowed, the applicant may apply for extension for retention of such name for a
further period of 30 days on payment of 50 per cent. of the fee prescribed for the application at the
initial stage:
Also provided that no further extension will be granted after expiry of 90 days from the date the name is
allowed in the first instance. The name allowed shall lapse after expiry of 60 or 90 days, as the case
may be, from the date it is allowed first:
Provided further that the name allowed by the Registrar of Companies (ROC) before the date of this
Notification comes into force, if not adopted, shall lapse after the expiry of a period of 6 months from
the date on which the name was initially allowed or renewed. However, in case the name has not been
renewed earlier, the applicant on or before the date of expiry, may apply for one time extension of such
name for a further period of 30 days on payment of 50 per cent. of the fee prescribed for the
application at the initial stage.
Form 1A (substituted w.e.f. 10-2-2006).— See e-Form 1A of the Companies (Central Government's) General
website http://www.mca.gov.in: (2006) 130 Comp. Cas. (St.) 13 in Appendices.
Revised e-Form 1A (released 24-12-2006).— See Revised e-Form 1A on the Ministry of Corporate Affairs (MCA)
website http://www.mca.gov.in under the category Company Registration, Date of Last Release (24-12-2006).
See Revised e-Form 1A of the Companies (Central Government's) General Rules and Forms, 1956 [Pursuant to
Sections 20 and Section 21 of the Companies Act, 1956] for Application form for Availability or Change of Name.
Instructions for filling of e-Form 1A—Application form for availability or change of name.—Specific
Instruction Kit for filling e-Form 1A of the Companies (Central Government's) General Rules and Forms, 1956
containing the e-Form Sl. No. and Detailed Instructions is reproduced below:
Page 14 of 23
Before filing this Application, refer the Guidelines, Instructions and Rules framed by the Ministry of Company Affairs,
Government of India [ printed above in Comments] with regard to availability of name.
1 Select option for ‘Incorporating a new company’ or ‘Changing the name of an existing company’.
In case of application for Incorporation of a new company, only Part A is required to be filled.
In case for Change of name, fields 7 & 8 of Part A and Part B are required to be filled.
PART-A : AVAILABILITY OF NAME
1 (i) to (vii) Minimum number of promoters should be two in case of a Private Company and seven in case of a
Public Company. Enter name of such number of promoter as applicable.
5 In case the company has to be registered in the State of Maharashtra or Tamil Nadu, select the concerned
Registrar of Companies having jurisdiction on District in which the Registered Office of the company will be
situated.
Maharashtra:
RoC Pune is having jurisdiction on the following Districts—
Pune, Ahmednagar, Ratnagiri, Satara, Kolhapur, Sangli, Sindhudurg.
RoC Mumbai is having jurisdiction on the remaining Districts in the State.
Tamilnadu:
RoC Coimbatore is having jurisdiction on the following Districts—
Dindigul, Krishnagiri, Dharmapuri, Salem, Nammakkal, Erode, Coimbatore, Nilgiris.
RoC Chennai is having jurisdiction on the remaining Districts in the State.
6 Select the nature of the proposed company, whether ‘Public’ or ‘Private’.
Note that the nature selected cannot be changed at the time of filing e-Form 1 for Incorporation of the Company [
See Comments under section 33].
7 (a) to (f) Name should be entered in order of preference. Roc office will consider the same in the order as
provided by you.
The illustrative list of names based on the type of company is as follows:
In case of a Private Limited Company — ABC Private Limited.
In case of a Public Limited Company — ABC Limited.
In case of a Company licensed under Section 25 of the Companies Act, 1956— ABC.
In case of an Unlimited liability company — ABC (a company with an unlimited liability).
12 Enter the Particulars of the proposed Directors of the company.
Director Identification Number (DIN) — Every person before becoming a director has to get DIN from MCA by filing
e-Form.
If ‘Yes’ is selected in the field ‘Whether present residential address is same as the permanent residential address’,
Page 15 of 23
the present residential address will be displayed same as the permanent residential address otherwise enter the
present residential address.
13 Minimum Authorised Capital required for a Private Company having Share Capital is Rs. 1,00,000/- and in case
of a Public Company having Share Capital is Rs. 5,00,000/-. In case of a Company licensed under Section 25 of the
Companies Act, 1956 the Authorised Capital can be less than the above [See Comments under section 3].
Note that the amount of authorised capital cannot be reduced at the time of filing e-Form 1 [ Pursuant to Section
33(1) and (2) of the Companies Act, 1956] for Incorporation of the Company.
PART-B : CHANGE OF NAME
15 (a)Enter Corporate Identity Number (CIN) of the company
•You may find CIN by entering existing registration number of the company in the ‘Find CIN/GLN’ service at the
16 (a), (b)Click the Pre-fill button.
Attachments
• Ensure that the attachments as mentioned in the e-Form are attached before signing the e-Form.
Declaration.—In case of change of name of an existing company, select the first check box and enter the date of
Board Resolution authorising the signatory to sign and submit the application.
In case of a new company, select the second check box.
Digital Signature.—In case of change of name of an existing company, the e-Form should be digitally signed by the
Managing Director or Director or Manager or Secretary of the company duly authorised by the Board of Directors.
In case of a new company, the e-Form should be digitally signed by the applicant duly authorised by the promoters.
Common Instruction Kit
Common Instruction Kit containing Instructions on Pre Fill, Attach, Remove attachment, Check Form, Modify, Pre
scrutiny, Submit for filling and filing e-Form 1A of the Companies (Central Government's) General Rules and Forms,
1956 containing Buttons and Particulars is reproduced below:
Pre Fill.—When the user clicks the Pre fill Button after entering the Corporate Identity Number in e-Form (excepting
e-Form 1A), the name and address is displayed by the system.
This button may appear more than once in an eFORM, and shall be required to be clicked for displaying the data
pertaining to that field.
You are required to be connected to the internet for pre-filling.
Attach.—You have to click the attach button corresponding to the document you are making an attachment.
In case you wish to attach any other document, please click the optional attach button.
Remove attachment.—You can view the attachments added to eFORM in the rectangle box provided next to the list
of attachment. If the user wants to remove or delete any attachment, select the attachment to be removed and
press the “Remove attachment” button.
Check Form.—Once the form is filled up. The user is required to press the Check Form button. When this button is
pressed form level validation is done such as, Whether all the mandatory fields are filled up or not. If an error is
Page 16 of 23
displayed after pressing the button the user is required to correct the mistake and again press the “Check Form”
button. When all the form level validation is done. A message is displayed that “Form level pre scrutiny is
successful”. The Check Form is done without being connected to the internet.
Modify.—“Modify” button gets enabled after the check form is done. By pressing this button the user can make the
changes in the filled in Form. If the user makes any change in the Form again the user is required to press the
“Check Form” button.
Pre scrutiny.—Once the check form is done the user is required to Pre scrutinize the eFORM. This requires being
connected to the MCA-21 site for uploading the Form. On pre-scrutiny the system level check is performed and if
there are any errors it is displayed to the user and once the error is corrected and again on Pre scrutiny if the
message displayed is “No errors found”. Click on the button below to “Get Form” Press the Get Form button and
make the required corrections.
Note : Before pressing Submit button attach the Digital Signature by clicking on the box appearing on the Signature
field.
Submit.—After pre scrutiny is done the user is required to submit the form. This requires being connected to the
MCA-21 site for uploading the Form.
In case of online filing the user can submit the Form by pressing the “Submit” button.
Once the form is submitted the fee is displayed to the user. When the user press the “Pay” button the mode of
payment option is displayed. On challan payment option, a challan is generated displaying the amount of fee to be
paid. The user is required to take the print out of three copies of challan and submit the payment at authorized bank
branch. The user has to submit three copies at bank and user shall receive one copy with bank acknowledgment for
user's record.
Country Code.—The list of Country Code required to be mentioned in the eFORM are as follows: List of ISO
Country Codes [ SeeMCA website www.mca.gov.in].
Note : User is advised to refer to eFORM Specific Instruction Kit [ printed above].
[ Instructions for Filling e-Company Forms Downloaded (on 22-11-2007) from the Ministry of Corporate Affairs
(MCA) website http://www.mca.gov.in].
See detailed Comments, Form and Procedure, Department's views, Guidelines and Instructions on Undesirable
Names, Approval of Name and Change of Name under Sections 20 to 23 and e-Filing and e-Forms under Section
610B.
Filing Fees.—Filing fee of Rs. 500 as prescribed in Rule 4A of the Companies (Central Govt.'s) General Rules and
Forms, 1956 shall be payable along with e-Form 1A of the Companies (Central Govt.'s) General Rules and Forms,
1956.
the Companies (Amendment) Act, 2006 (w.e.f. 16-9-2006).
Page 17 of 23
Rules, 1999.
under the Ministry of Finance, was designated as a separate Ministry, viz., ‘Ministry of Company Affairs’(MCA) vide
‘Ministry of Corporate Affairs’(MCA) (w.e.f. 9-5-2007).;—The Ministry of Company Affairs (MCA) has been
renamed as ‘Ministry of Corporate Affairs’(MCA) vide Presidential Notification, dated 9-5-2007 amending the
No. 502, Part II, Section 3(i), page 21 : Ministry of Company Affairs (MCA) website http://www.mca.gov.in: (2006)

Page 18 of 23
“Electronic Signature” (e-Signature).—The words “Digital Signature” and “Digital Signature Certificate”(DSC) are
Sabha on 15-12-2006.
266G inserted (w.e.f. 1-11-2006).
E-Filing and Search facilities on MCA website [www.mca.gov.in].— See the following e-Governance, e-Filing,
e-Forms, Search and other Facilities on the Ministry of Corporate Affairs (MCA) website http://www.mca.gov.in :
(1) About MCA—Organizational set-up of the MCA, MCA Offices, About MCA-21/e-Services and Citizen
Charter.
(2) MCA-21 Program.
(4) Director Identification Number (DIN) issue Process, DIN Process Document, FAQ on DIN, Apply for DIN,
Enquire DIN Approval Status, Get DIN Application.
DSC now.
(6) Certified Filing Centres (CFCs), details of the CFC Scheme, Guidelines, List of CFCS, Charges, Applying
for a CFC, etc.
(7) Acts and Bills, Circulars, Notifications, Guidelines, Right to Information Act, 2005, Investor Education and
Protection Fund (IEPF), Nidhi Companies, Press Releases.
(8) Find CIN/GLN.
(9) Fee Calculator.
(11) Help, MCA-21 Handbook, Frequently Asked Questions(FAQs) on User Registration, Other Services,
System Requirements, Director Identification Number, Digital Signature Certificate.
Jurisdiction, e-Governance, MCA-21, e-Filing and e-Forms.— See detailed Comments on the Jurisdiction and
Functions of Registrars of Companies (ROCs), Regional Directors (RDs), the Ministry of Corporate Affairs (MCA),
e-Governance, MCA-21, e-Filing and e-Forms under Section 609 and 610B.
See detailed Comments under Section 609 and 610A to 610E.
Department's view.— Citizen's Charter of DCA.—As per Citizen's Charter of the Department of Company Affairs,
all applications submitted to the Department of Company Affairs, Regional Directors, Registrars of Companies and
Official Liquidators shall be processed within the time frame indicated in Schedules (I), (II), (III) & (IV).
Organisational chart of the Department of Company Affairs and Addresses of Regional Directors and Registrars of
Companies (ROCs) have been given in Schedule (V) annexed to the Citizen's Charter.
As per Schedule (III), the Registrars of Companies shall process Application for approval of name of a company [
Section 20] in 3 working days. [ Press Note No. 9 (1999 Series) (F. No. 5/25/99-CL-V), dated 9-8-1999 :
www.dca.nic.in : (1999) 98 Comp. Cas. (St.) 1 : See Fuller Text under Section 12, 33, 609 and 637].
Application for availability of name.—“I am directed to say that sub-rule (1) of rule 4A* of the Companies (Central
Government's) General Rules and Forms, 1956, has been amended, vide Notification No. G.S.R. 697(E), dated
September 20, 1994, raising the fee from Rs. 100 to Rs. 500 for making application for availability of name of a new
Page 19 of 23
company to the Registrar of Companies, with effect from 1st November, 1994.” [ Circular No. 10 of 1994 (F. No.
3/3/93-CL-V, dated 27-9-1994 : (1994) 81 Comp. Cas. (St.) 160].
Subscribers to Memorandum and Articles should tally with list of Promoters/first Directors stated in Form
No. 1A for Availability of Names.—“I am directed to say that as per the application form for availability of names
(Form No. 1A), prescribed under rule 4A of the Companies (Central Government's) General Rules and Forms,
1956, the promoters are, inter alia, required to give the names and addresses of the prospective directors or
promoters, as also the name(s) and address(es) of the person(s) applying for availability of names. You are
requested to advise your constituents to ensure that the application form is filled up in all respects and the
application is made by one or more amongst the promoters. The Registrars of Companies have been advised to
ensure at the time of registration of a new company that the subscribers to the memorandum and articles of
association tally with the list of promoters/first directors stated in the application for availability of names and in
case, one or more of the promoters are not interested in participating in the promotion of a new company, at a later
stage, a ‘No objection letter’ from such promoter(s) is made available to the Registrar while submitting the
documents for registration. The Registrars of Companies are also being advised to dispose of applications for
availability of names ordinarily within 14 days [ now amended Rule provides for 7 days (Citizen's Charter of DCA
provides for 3 working days)] of the receipt of application and to correspond with the applicant promoter(s), in this
behalf.” [ Circular No. 27/1/89-CL-III, dated 17-2-1989 : Chartered Secretary, March 1989, page 225 : (1989) 65
“I am directed to refer to this Department's Circular No. 27/1/89-CL-III, dated 17th February, 1989 [ printed above],
on the above subject,to ensure that the application form is signed by one or more amongst the promoters and in
case one or more of the promoters are thereafter no more interested in participating in the promotion of the new
company, a no objection letter from such promoter is made available to the Registrar of Companies at the time of
registration of the new company. Instances came to the notice of the Department that some promoters are pre-
empting the names, which is not a healthy practice. It has, accordingly, been decided that, in future, Registrars of
Companies should register the company only in cases where the promoters, as per availability of name application,
are also the subscribers to the memorandum and articles of association of the proposed company at the time of its
registration. In case of any change in the name(s) amongst the subscribers, the changed subscribers are advised to
make fresh application for availability of name. The Registrar may, as per existing procedure, allow the same name,
if otherwise available, after three months from the date when the name was allowed to the original promoter(s).” [
Circular No. 1 of 1990 (F. No. 1/1/90-CL-V : 27/1/89-CL-III), dated 5-1-1990 : Chartered Secretary, February 1990,
page 139 : (1990) 67 Comp. Cas. (St.) 230].
See Circular 1 of 1995 in partial modification below.

the companies.
“Availability of names :
(i) The Government has increased the application fee from Rs. 100 to Rs. 500 with effect from November 1,
1994. In view of computerisation in this area in most of the offices, you are advised to make arrangements
for a computer terminal being available in your office for few hours on all working days to the promoters or
their representatives with a view to ascertain the availability of proposed names. ROC, Bangalore, has
already implemented this procedure with effect from November 1, 1994. This will ensure that the names
applied for would be made available promptly when an application for this purpose is made subsequently
by the promoters.
(ii) The Department, vide Circular No. 27/1/89/CL-III, dated February 17, 1989 [ printed above], advised the
ROCS to ensure that at the time of registration of a new company, the subscribers to the memorandum of
association should tally with the list of promotors/first directors stated in the application for availability of
name, and in case one or more of the promotors are not interested in participating in the promotion of a
new company at a later stage, a ‘no objection’ letter from such promotor(s) is made available to ROC. This
circular was amended on January 5, 1990 (No. 1 of 1990) [ printed above], to the effect that ROCS should
register the company only in case where the promotors, as per the availability of name application, are also
Page 20 of 23
subscribers to the memorandum. On reconsideration, it has now been decided, in partial modification of
the above circular, that so long as there is at least one promotor common, both in the name availability
application and the subscription clause of the memorandum and articles of association, and others have no
objection, the company may be registered. [ See also Comments under Section 12 and 13].
(iii) Presently, there is a restriction on the use of abbreviated names (like ITC Limited) in case of existing
companies requiring approval of the Regional Director concerned. [ Guideline No. 14A printed above]. No
such approval of the Regional Director will now be necessary and ROCS may take a final decision on such
applications in the light of existing guidelines [ printed in earlier paragraphs].
(iv) Rules are being separately amended to extend the validity period of availability of names from three to six
months and to make availability of names within seven days, instead of fourteen days as per existing
Rules. However, the ROCS where computer facility is available may endeavour that name availability
applications are disposed of within three working days after their receipt.
New registration : (v) There are divergent practices in the offices of ROCS as to the number of clauses/objects that
like Hindustan Sugar Limited, the main object should constitute only that object (like sugar in case of Hindustan
of Form 1A. [See also Comments under Section 13].” [Extracts from Circular No. 1 of 1995 (F. No. 14/6/94-CL-V),
dated 16-2-1995 : (1995) 82 Comp. Cas. (St.) 261].
Full Text of this Circular has been reproduced under Section 609.
ROCs advised to be cautious while registering companies as Nidhis or Mutual Funds.—“The Registrars of
Companies (ROCs) have been directed by the Department of Company Affairs not to allow registration of names
with words ‘mutual funds’ forming part of some Non-Banking Financial Companies (NBFCs)/ Nidhis under section
20 of the Companies Act, 1956, unless such companies are going to be incorporated actually as mutual funds.
ROCS have been informed that companies declared as nidhis and mutual benefits societies under section 620A of
the Companies Act are not mutual funds. Therefore, names with words ‘mutual funds’ forming part thereof shall also
not be allowed to companies proposed to be incorporated as ‘nidhi’ or ‘mutual benefit societies’.
It has come to the notice of the Department of Company Affairs that some NBFCS or nidhis have been registered
with words ‘mutual funds’ forming part of their names, although they are not actually mutual funds. This is likely to
create confusion in the minds of investors.
In the cases where NBFCS or nidhis have already been incorporated with words ‘mutual funds’ in their names, the
ROCS have been asked to get their names changed under section 21 of the Companies Act, 1956, within a
reasonable time of six months failing which, report would be sent to theDepartment of Company Affairsfor initiating
action for withdrawal of notification issued in their favour under section 620A of the Companies Act, 1956.” [PIB
Press Release, New Delhi, dated 14-2-2000 : (2000) 99 Comp. Cas. (St.) 560]. See also Comments under Section
620A.
Asset Management Companies (AMCs.)—See Circular No. 4 of 1992, dated 4-9-1992 addressed to all Regional
Directors and Registrars of Companies under Department's views in Comments under Section 13.
Venture Capital Companies.— See SEBI (Venture Capital Funds) Regulations, 1996 and Comments under
Section 55A—Powers of SEBI.
See detailed Comments and List of SEBI Act, Rules, Regulations and Guidelines along with Appendix Nos. under
Section 55A.
20 had been delegated to the Company Law Boardvide Notification No. G.S.R. 443(E), dated 18-10-1972, this
Comments Section 10E and 637.
Page 21 of 23
Injunction.—Any person affected by a proposed name may make an application to the Court for an injunction
restraining the Registrar and also the proposed company to use the name.95 In cases of objections the Registrar
may refuse to register a company if he is satisfied that registration of the company in that name may cause injury to
another person by diverting his customers or affecting his credit or goodwill or may cause confusion or is likely to
deceive the public.96
The above principles will not apply in cases where a company has already carried on business under a particular
name for a considerable time before registration.1
No objection can be raised when a private company is converted into a public company or vice versa. A company is
entitled to an injunction and ancillary relief restraining passing off by another person name which the company has
used for a considerable time and the company is further entitled to an injunction against the defendant restraining it
from allowing its name in a firm incorporating the word ‘exxon’ to remain on the Register of Companies because it
would be unlawful and damaging to the plaintiff to allow the name to remain on the Register of Companies. A
company has no copyright to any particular word in its name it uses but the company has right to prevent any other
company to use that word and to prevent the continuance of such word in the Register of Companies by an action
for passing off.2
See also recent decisions in earlier paragraphs under Undesirable Names.
Commercial use of geographical names.—The commercial use of geographical names is universally well known.
An application was made restraining an associate company from using the word “Manipal” in its name. The Court
held that use of a geographical name such as Manipal cannot be prevented even though it is similar to the name of
the existing company.3
Passing off action.—The jurisdiction of the Central Government under sections 20 and 22 of the Companies Act,
1956 and the jurisdiction of the Civil Court operate in two different fields. A person is not entitled as of right to have
a company registered in a name which happens to be his own name. Passing off action lies for improperly using the
name of another company.4
Secretarial Practice and Check List.— Section 20. (1) Select a few names having some connection with the main
objects of the proposed company, (2) check on computer terminal at the ROC office or from Company Directory on
Department of Company Affairs website (www.dca.nic.in) to ascertain the availability of proposed names, (3) the
name should be in consonance with the Guiding Instructions [ printed above], (4) indicate the names in the
application in order of preference, (5) Submit an application in e-Form No. 1A* of the Companies (Central Govt.'s)
General Rules and Forms, 1956 to the Registrar of Companies of the State along with a fee of Rs. 500, (6) the
name should end with word ‘Limited’ or ‘Private Limited’ as the case may be [ Sections 13], (7) the Registrar shall
ordinarily inform the promoters within seven days whether the name is available or not, (8) if the name is available,
the promoters should register the company within a period of six months, (9) if, for any reason, any extension is
required a fresh application in e-Form No. 1A along with the application fee will have to be lodged with the ROC,
(10) if the name is not available, a fresh application in e-Form No. 1A should be filed along with a fee of Rs. 500,
(11) if at least one promoter is common, both in the name availability application and the subscription clause of the
memorandum and articles of association, and others have no objection, the company may be registered. [ see
Circulars printed above].
The documents involved are : (1) e-Form 1A, (2) Bank Draft, Postal Order, Cheque or Receipt for cash deposited at
the office of the Registrar of Companies, (3) Intimation from the Registrar of Companies (4) Correspondence, if any.
For change of name by a company see Comments and Secretarial Practice and Check List under Section 21
hereinafter.
83. Sub-sections (2) and (3) subs. for sub-section (2) by the s. 158 and Sch. [(w.e.f. 15-9-2003) vide Notification No.
S.O. 1048(E), dated 15-9-2003, published in the Gazette of India, Extraordinary, No. 834, Part II, Section 3(ii),
dated 15-9-2003 : (2003) 117 Comp. Cas. (St.) 156]. For sub-section (2) as it stood prior to its substitution see
Page 22 of 23
84. M. Mccarthy & Co. (Builders) Ltd. (No. 2) Re, , (1976) 2 All ER 339.
85. Sidhvi Constructions (India) P. Ltd. v. Registrar of Companies, , (1997) 90 Comp. Cas. 299 (AP); Sen and Pandit
Electronics Pvt. Ltd. v. Union of India, , (2003) 115 Comp. Cas. 299 (Cal.). See detailed Comments under Section 22.
86. Executive Board of Methodist Church in India v. UOI, , (1985) 57 Comp. Cas. 443 (Bom.). See also Comments under
Section 33. See revised Instructions on defunct companies in Circular Letter No. 10(1)-RS/65, dated 27-11-1965, para
19, printed hereinafter.
87. Kilburn Electricals Ltd. v. Regional Director, , (2000) 99 Comp. Cas. 243 (Mad.). See also Comments under Section 22.
88. Kothari Products Ltd. v. Registrar of Companies, , (2001) 103 Comp. Cas. 841 (All.).
89. Hira Lal and Sons (Export) P. Ltd. v. Union of India, , (2005) 127 Comp. Cas. 904 (Delhi).
90. Association of Certified Public Accounts of Britain v. Secretary of State for Trade and Industry, , (1997) 2 BCLC 307.
91. British Diabetic Association v. Diabetic Society Ltd., , (1995) 4 All ER 812.
92. Montari Overseas Ltd. v. Montari Industries Ltd., , (1996) 20 Corp. LA 313 (Delhi) (DB) : (1996) PTC 16 (Delhi) (DB).
93. Baker Hughes Ltd. v. Hiroo Khushalani, , (2000) 102 Comp. Cas. 203 (Delhi).
94. Kirloskar Proprietary Ltd. v. Kirloskar Dimensions Pvt. Ltd., , (1999) 96 Comp. Cas. 726 (Kar.); Manipal Housing
Finance Syndicate Ltd. v. Manipal Stock and Share Brokers Ltd., , (1999) 98 Comp. Cas. 432 (Mad.). See detailed
Comments under Passing off action in later paragraphs. See also Comments under Section 22.
* See the Emblems and Names (Prevention of Improper Use) Act, 1950 in Appendix 47.
* See revised edition of this book. See also Press Note No. 1, dated 14-3-2002 on Department of Company Affairs
Website (www.dca.nic.in) which facilitates search on ‘Company Directory’, Names approved by ROCS and in pipeline
for Registration of companies hereinafter.
† See also further Guidelines for use of key words as part of name, while making available the proposed names under
sections 20 and 21 of the Companies Act, 1956 contained in Letter F. No. 27/1/87-CL-III, dated 13-3-1989 reproduced
after this Circular.
† Now see Sections 581A to 581ZT inserted in the Companies Act, 1956 by the Companies (Amendment) Act, 2002 (11
of 2003) facilitating formation and conversion of co-operative business as companies on a voluntary basis.
* See Comments under the Emblems and Names (Prevention of Improper Use) Act, 1950 and Circular No. 24 of 2001,
dated 21-11-2001 printed in earlier paragraphs.
† Guideline No. 14A as replaced by Circular No. 4 of 1993 (F. No. 3/14/93-CL-V, dated 31-3-1993 : (1993) 77 Comp.
Cas. (St.) 723. The Circular also stated that the abbreviated name will be considered only in case of change of name
under section 21 of the Companies Act, 1956, with the prior approval of the Regional Director concerned and should
not be allowed for adoption by new companies. See also Circular No. 1 of 1995, dated 16-2-1995 [printed hereinafter]
which states that no such approval of the Regional Director is now necessary and ROCS may take a final decision on
such applications in the light of existing guidelines.
†† NowSections 20 and 22 of the Companies Act, 1956 (1 of 1956) regarding Companies not to be registered with
undesirable names and Rectification of name of company have been amended by the Trade Marks Act, 1999 (47 of
1999) (w.e.f. 15-9-2003) as already explained.
* Guideline No. 21 relating to Companies in Insurance sector has been partially modified. See para 5 of Circular No. 6 of
1999, dated 13-5-1999 printed hereinafter.
** See also Additional guidelines printed after this Circular and Extracts from Circular No. 1 of 1995, dated 16-2-1995
printed under Application for approval of Names.
† See also further Instructions, e.g., Guidelines for use of key words as part of name, etc., issued by the Department of
Company AffairsCompany Law Board, reproduced after this Circular.
† ROCs may now allow Names with the word Insurance/Assurance or Risk Corporation to new companies without
consulting the Insurance Regulatory Authority. See Circular No. 5 of 2000, dated 30-6-2000 Circular No. 5 of 2000,
dated 30-6-2000, printed hereinafter.
610E (w.e.f. 16-9-2006) in Appendix 2.
16-9-2006).
Page 23 of 23
* See the Companies (Director Identification Number) Rules, 2006 in Appendix 49. See detailed Com-ments on Director
2006) (w.e.f. 1-11-2006).
95. Ewing v. Buttercup Margarine Co. Ltd., , (1917) 2 Ch. 1 : 86 LJ Ch. 441 : 117 LT 67 (CA); British Bata Shoe Co. Ltd. v.
Czechoslavak Bata Co. Ltd., , (1946) 64 RPC 72; Sturtvant Engineering Co. Ltd. v. Sturtevant Mill Co., , (1936) 3 All ER
137.
96. R. v. Registrar of Companies, , (1912) 3 KB 23 : 81 LJ KB 914 (DC). See recent decisions under Undesirable Names
hereinbefore. See also Comments under Section 31, 32 and 33.
1. Jay's Ltd. v. Jacobi, , (1933) 1 Ch. 411 : 102 LJ Ch. 130 : 149 LT 90.
2. Exxon Corporation v. Exxon Insurance Consultants International Ltd., (1982) Ch. 119 : (1981) 2 All ER 945 : (1981) 1
WLR 624.
3. Manipal Housing Finance Syndicate Ltd. v. Manipal Stock and Share Brokers Ltd., , (1999) 98 Comp. Cas. 432. See
4. K.G. Khosla Compressors Ltd. v. Khosla Extractions Ltd.,AIR 1986 Delhi 181 [LNIND 1985 DEL 271]; Kirloskar
Proprietary Ltd. v. Kirloskar Dimensions Pvt. Ltd., , (1999) 96 Comp. Cas. 726 (Kar.). See also Kalpana Polytec India
Ltd. v. Union of India, , (2001) 106 Comp. Cas. 558 (Cal.) (DB) in Comments under Section 22.
End of Document
Datta: Company Law
C R Datta
companies
S. 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:
5[ 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.]
6. F.S. Abdul Qayum v. Manindra Land and Building Corpn. Ltd., , (1955) 25 Comp. Cas. 143 (All.) (DB) : AIR 1955 All.
192 [LNIND 1954 ALL 212](DB).
* See the Companies (Central Government's) General Rules and Forms, 1956 in Appendix 1
610E (w.e.f. 16-9-2006) in Appendix 2.
16-9-2006).
7. Reference to Department Letter No. 8/21/56-PR, dated 6-2-1957 has been omitted as that Circular is out of date in view
of the proviso to Section 21 as inserted by Act 31 of 1965.
† Now Section 17(2) as substituted in 1997 and 2003 requires confirmation by the CLB [ now the Central Government]
only for alteration relating to the Change of place of Registered Office from one State to another. Thus Objects Clause
in the Memorandum of Association can be altered simply by passing Special Resolution and no confirmation is needed.
8. Govind Rubber Ltd., In re, (1995) 83 Comp. Cas. 556 (Bom.); Novopan India Ltd., In re, , (1997) 88 Comp. Cas. 596
(AP).
9. Jaypee Cement Ltd., In re, (2004) 122 Comp. Cas. 854 (All.) :, (2004) 2 Comp. LJ 105 (All). See detailed comments
under sections 391 to 394.
10. Pioneer Protective Glass Fibre (P.) Ltd. v. Fibre Glass Pilkington Ltd., , (1986) 60 Comp. Cas. 707 (Cal.) (DB). See
11. Neelachal Auto Ltd., In re, (2001) 105 Comp. Cas. 288 (CLB).
12. Surendra v. Indian Airlines Corpn.,AIR 1966 Cal. 272 [LNIND 1965 CAL 97](DB).
13. Kalipada Sinha v. Mahalaxmi Bank Ltd.,AIR 1966 Cal. 585 [LNIND 1965 CAL 175](DB). See also Comments under
Sections 22 and 23.
14. F.S. Abdul Qayum v. Manindra Land and Building Corpn. Ltd., (1955) 25 Comp. Cas. 143 (All.) (DB) : AIR 1955 All. 192
[LNIND 1954 ALL 212](DB).
Page 2 of 10
15. Solvex Oils and Fertilizers v. Bhandari Crosfields Pvt. Ltd., (1978) 48 Comp. Cas. 260 (P&H). See also Comments
under Sections 3, 23, 31, 43, 43A and 44.
16. Wasava Tyres v. Printers (Mysore) Ltd., , (2007) 139 Comp. Cas. 446 (Karn.).
17. Prasad Technology Park P. Ltd. v. Sub-Registrar, (2005) 128 Comp. Cas. 996 (SC).
COMMENTS
English Act, 1948 : Section 18(1) Previous Act, 1913 : Section 11(4)
follows: “Clause 18 is based on section 11(4) of the existing Act and section 18(1) of the English Act.” [ Clause 18 of
section as follows: “This amendment does away with the technical necessity of obtaining Government's approval
under section 21 for the mere addition or deletion of the word ‘Private’ from a company's name, consequent on its
conversion from a public into a private company or vice versa.” [ Clause 6 of the Companies (Second Amendment)
Bill, 1964 (64 of 1964)].
Change of Name by company.—A company may change its name by Special Resolution and with the approval of
the Central Government. No such approval shall be required where the only change in the name of a company is
the addition or deletion of word “Private” consequent on the conversion in accordance with the provisions of this Act
of a public company into a private company or vice versa.
Special Resolution and the Central Government approval are necessary to change the name of a company.
Whether a company obtained the Central Government sanction or not is a question of fact.6
Special Resolution.—To change the name of company with the approval of the Central Government a Special
Resolution is required to be passed. [ Section 21].
Revised e-Form 23 (released 16-12-2006.)— See Revised e-Form 23 on the Ministry of Corporate Affairs (MCA)
website http://www.mca.gov.in under the category Compliance Related Filing/Informational Services, Date of Last
Release (16-12-2006).
Page 3 of 10
passed under Section 21].
Delegation of Powers to the Registrars of Companies.—The powers and functions of the Central Government
under Section 21 have been delegated to the Registrars of Companies. [ Notification No. G.S.R. 507(E), dated 24-
6-1985 : For text of the Notification see Comments under Section 637].
From the decision of the Registrar of Companies an appeal to the Company Law Board [ now the Central
Government] or a writ petition to High Court may be maintainable. See Comments under Sections 10E and 20.
Form and Procedure.—As per Rule 4A* of the Companies (Central Govt.'s) General Rules and Forms, 1956, the
company seeking to change its name shall make an application to the Registrar of Companies of the State in which
the registered office of the company is situate in e-Form No. 1A* along with a fee of Rs. 500. The Registrar of
Companies will ordinarily inform within a period of 7 days of the receipt of the application whether the changed
name is available or not.
Form 1A (substituted w.e.f. 10-2-2006).— See e-Form 1A* of the Companies (Central Government's) General
website http://www.mca.gov.in under the category Change Services, Date of Last Release (24-12-2006).
Sections 20 and 21 of the Companies Act, 1956] for Application form for Availability or Change of Name.
of ISO Country Code. These Instructions are dealt with in Comments under Section 20.
Instructions for filling of e-Form 1A—Application form for availability or change of name.—Specific
Instruction Kit for filling e-Form 1A of the Companies (Central Govt.'s) General Rules and Forms, 1956 containing
the e-Form Sl. No. and Detailed Instructions have been reproduced in Comments under Section 20.
See detailed Comments and Form and Procedure under Section 20.
Form 1B (substituted w.e.f. 10-2-2006).— See e-Form 1B of the Companies (Central Government's) General
Revised e-Form 1B (released 9-12-2006).— See Revised e-Form 1B of the Companies (Central Govt.'s) General
Rules and Forms, 1956 on the Ministry of Corporate Affairs (MCA) website http://www.mca.gov.in under category
Approval Services—Registrar of Companies/Change Services, Date of Last Release (9-12-2006).
See Revised e-Form 1B of the Companies (Central Government's) General Rules and Forms, 1956 [Pursuant to
Section 21 or 31(1) of the Companies Act, 1956] for Application for approval of the Central Government for Change
of Name or Conversion of a Public Company into a Private Company.
Instructions for filling of e-Form 1B—Application for approval of the Central Government for Change of
Name or Conversion of a Public Company into a Private Company.
Page 4 of 10
—Specific Instruction Kit for filling e-Form 1B of the Companies (Central Government's) General Rules and Forms,
1956 containing the e-Form Sl. No. and Detailed Instructions is reproduced below:
In case of Change of Name
If it is required to file e-Form 23 in relation to the resolution passed for Change of name or Conversion of the status
of public company; ensure that filing of e-Form 23 precedes filing of this e-form.
2
(a) Enter Corporate Identity Number’ (CIN) of the company.
(b) Enter the service request number of e-Form 1A (obtained before filing this application).
Note : Before filing an application in e-Form 1B for approval of Change of name of the company, the
company is required to obtain approval of name availability by filing e-Form 1A.
3, 4 Click the “Pre-fill” button.
System will automatically display the name, registered office address and proposed name of the company.
6 Enter particulars of e-Form 23 filed for registration of Resolution
Note: In case the existing company does not have the service request number (SRN) of e-Form 23, enter
“Z99999999” as SRN of e-Form 23 and attach the copy of the original Resolution passed for change of
name of the company as an optional attachment.
Attachments
• Copy of Minutes of the Meeting of members where resolution has been passed is to be enclosed.
• Copy of any approval order obtained from the concerned Authorities (such as, RBI, IRDA, SEBI etc.) or the
concerned Department.
• If change of name is due to change in main activity of the company, a certificate from Chartered
Accountant regarding turnover details from new activity should be enclosed.
• Copy of any previous approval order taken for change of name of the company.
Declaration.—Select the first option.
Enter the date of Board Resolution authorising the signatory to sign and submit the e-form.
Digital Signature.—To be digitally signed by the Managing Director or Director or Manager or Secretary of the
company authorised by the Board of Directors.
In case of Conversion of a Public Company into a Private Company [ See Comments under Section 31(1)].
See alsoCommon Instructions Kit which contains Instructions on Pre Fill, Attach, Remove attachment, Check Form,
Modify, Pre scrutiny, Submit, Country code and enumerates a List of ISO Country Codes.
Forms with Instruction Kit on the Ministry of Company Affairs (MCA) website http://www.mca.gov.in].
Page 5 of 10
Filing Fees.—Filing Fees of Rs. 500 as prescribed in Rule 4A of the Companies (Central Government's) General
Rules and Forms, 1956 shall be payable along with e-Form 1A of the Companies (Central Govt.'s) General Rules
and Forms, 1956.
Filing Fees along with e-Form 1B of the Companies (Central Government's) General Rules and Forms, 1956 shall
be payable as per the Companies (Fees on Applications) Rules, 1999.
See detailed Comments under Sections 609, 610B, 611 and 637.
Filing of e-Forms (w.e.f. 16-9-2006) [ Sections 610A-610E].
— See Provisions relating to Filing of Applications, Documents, Inspection, etc., through Electronic Form under
Section 610B of the Companies Act, 1956 inserted by the Companies (Amendment) Act, 2006 (23 of 2006) (w.e.f.
16-9-2006).
No. 1287, Part II, Section 3(ii), page 15, dated 27-10-2006 : MCA website http://www.mca.gov.in: (2006) 134 Comp.
Cas. (St.) 91 in Comments under Section 610B.
Filing Fees on e-Forms.
— See Rule 22 of the Companies (Central Govt.'s) General Rules and Forms, 1956 as amended by the Companies
(Central Government's) General Rules and Forms (Amendment) Rules, 2006 (w.e.f. 10-2-2006) for Mode of
Payment of Fees on filing of e-Forms to the Registrars of Companies (ROCs) under Schedule X to the Companies
Act, 1956 or the Central Government under the Companies (Fees on Applications) Rules, 1999.
Ministry of Corporate Affairs website [www.mca.gov.in].—The erstwhile Department of Company Affairs (DCA)
Cabinet Secretariat Notification No.DOC.CD-160/2004, dated 27-5-2004.
Page 6 of 10
Official Liquidators shall be processed within the time frame indicated in Schedules (I), (II), (III) & (IV) annexed to
the Citizen's Charter.
As per Schedule (III), the Registrars of Companies shall process Application for change of name of a company [
Section 21] in 15 working days. [ Press Note No. 9 (1999 Series) (F. No. 5/25/99-CL-V), dated 9-8-1999 :
www.dca.nic.in : (1999) 98 Comp. Cas. (St.) 1 : See Fuller Text under Sections 12, 20, 33, 609 and 637].
Guidelines for Availability of Names.— See Department's views and decisions on undesirable names in
Department's view.— Guidelines regarding change of names.—“Section 21 of the Companies Act lays down
that a company may, by special resolution and with the approval of the Central Government signified in writing,
change its name. 7[***]. As it has been observed that applications under this section received in the Department do
not always contain full particulars necessary to enable Government to take decision without further reference to the
parties concerned, the nature of the information/documents required to be furnished by the applicants is indicated in
the succeeding paragraphs for the information and guidance of all concerned.
In considering an application for change of name not resulting from conversion, the Central Government generally
examines it from the following angles:
(i) Whether the reasons adduced by the company for the change of name are sufficient;
(ii) Whether the proposed name is in consonance with the principal objects of the company as set out in its
memorandum of association and with the business actually carried on by it, where such consideration is
relevant; and
(iii) Whether the proposed name is not undesirable.
As regards (i) and (ii), the question is decided on the merits of each case. As regards (iii) the proposal is considered
in the light of the principles set out in Annexure ‘A’ to this letter. These principles are however, not exhaustive but
only illustrative, their main object being to ensure that a company does not adopt a name likely to mislead the
public, that the proposed name is inoffensive and is consistent with the resources and objects of the company. The
companies will therefore be well-advised to consult the Registrar of Companies concerned in the first instance with
a view to ascertaining whether the name proposed to be adopted by them would be available for registration. While
making such consultation they should furnish the particulars specified in Annexure ‘B’ to this letter in duplicate.
In the case of a Banking company, if it desires to change its name as a result of its decision to give up the business
of Banking, it is required first to alter its memorandum of association so as to eschew the business of banking as
defined in section 5(1)(b) of the Banking Companies Act, 1949 (10 of 1949) [ now the Banking Regulation Act, 1949
(10 of 1949)] and apply to the Central Government under section 21 of the Companies Act, 1956 only after effecting
the said alteration in accordance with the requirements of law. In such cases, the applicant company should also
attach a copy of a certificate from the Reserve Bank of India that the Bank has no objection to the proposed
change. All applications for change of name, not resulting from conversion, should be made after passing the
necessary special resolution and accompanied by the following particulars:
(a) Detailed reasons for the change of name;
(b) An uptodate copy of the Memorandum and Articles of association;
(c) A copy each of the balance-sheet and profit and loss account for the last two financial years;
Page 7 of 10
(d) A certified copy of the communication received from the Registrar in token of his having recorded the
special resolution in terms of section 192 of the Act; and
(e) Where the change is as a result of alterations in the objects of the company as set out in its memorandum
of association, whether or not a certified copy of the Court's [the CLB (now the Central Government)] order
under section 17† has been filed with the Registrar and the requisite certificate of registration obtained from
him under section 18 of the Act.
As regards the change of name due to conversion, it has been decided that in future the company concerned
should furnish all the particulars set forth in Annexure ‘C’ to this Letter. It is also required to pass a separate special
resolution in terms of section 21 of the Act.
ANNEXURE A
A name which falls within the categories mentioned below will not generally be allowed:
[ Not reproduced as they have been consolidated and revised by later Circulars: See Department's views under
Section 20.]
ANNEXURE B
Particulars to be furnished to the Registrar of Companies for ascertaining availability of proposed name:
[ Not reproduced as now these particulars are to be furnished in Form No. 1A of the Companies (Central
Government's) General Rules and Forms, 1956.]
ANNEXURE C
Particulars to be furnished while applying for change of name consequent on conversion from a public company
into a private company or vice-versa:
[ Not reproduced as now the particulars for conversion of a public company into a private company are to be
furnished in Form No. 1B of the Companies (Central Government's) General Rules and Forms, 1956.]” [ Circular
No. 28(64)-CL-IV/57, dated 30-7-1957 :Government of India publication, Clarifications and Circulars on Company
Change of name by a company during the pendency/hearing of petition for alteration of object clause(s)
under section 17 of the Companies Act, 1956.—“I am directed to state that it has come to the notice of the
Department that in the Northern and Eastern Regions, sometimes the Registrars of Companies are permitting
change of name of a company based on the company pursuing certain provisions listed in ‘other objects’ as
contained in its memorandum of association. This change of name is being done while a petition is already lying
before the Company Law Board [ now the Central Government] for shifting ‘object(s)’ given in ‘other objects’ to main
objects in the memorandum of association.
The aforesaid action of the Registrars of Companies amounts to prejudging the issue particularly when the matter is
pending before the Company Law Board [ now the Central Government] under section 17 of the Companies Act,
1956, for approval of theCompany Law Board [ now the Central Government] for shifting a provision from other
objects to the main objects clause in the memorandum of association.
In view of the above circumstances, you are advised not to permit change of name during the pendency of a
petition under section 17 of the Act before the Company Law Board [ now the Central Government].” [ Circular No.
4 of 1996, dated 13-5-1996 (F. No. 3/7/96-CL-V) : (1996) 86 Comp. Cas. (St.) 126].
Change of name only as prescribed.—Under section 21 of the Companies Act, 1956, the company is required to
pass a special resolution and obtain approval of the Central Government for change of its name. The change in the
name of the company cannot be effected merely on the scheme of amalgamation becoming effective. Accordingly,
para 16 of the proposed scheme of amalgamation was required to be deleted therefrom under sections 391 and
394 of the Act.8
Change of name on Amalgamation.—Under section 21 of the Act the change of name can be brought about by
the shareholders irrespective of the amalgamation, by merely passing a special resolution with the approval of the
Page 8 of 10
Central Government signified in writing, which function had been delegated to the Registrar of Companies. The
change of name can be done even de hors amalgamation. Where special resolution approving the scheme
provided for change of name without any further act or deed. The Registrar of Companies also made the name
available. The change of name would not be impediment in sanctioning the scheme.9
Registration of change of name and effect.— Section 21 permits a company to change its name in the manner
as prescribed and nothing else. Ex facie, the section indicates that the company continues in a new name. Section
23 of the Act is mainly a ministerial section and lays down the procedure for recording of the change of name. A
fresh certificate of incorporation is no doubt issued, but the same is only for the purpose of recording the alteration
in the name. The effect of the issue of the new certificate as provided in sub-section (1) of section 23 is to render
the change of name complete and effective. In spite of a change of name, the entity continues.10
Where the certificate of the Registrar of Companies showed that the company had changed its name in compliance
with the prescribed statutory formalities, the validity thereof could not be considered under section 17
proceedings.11
Compliance with this Act and other statutes required.—The change of name can take place on compliance with
the provisions of the Companies Act, 1956 provided it is not prohibited by any other statute. Registration of an air
company under a new name after it has vested in the Airlines Corporation would be evasion of section 28 of the Air
Corporations Act, 1953 (27 of 1953).12
Rights and obligations not affected by change.
—This section is to be read with sections 22 and 23 of the Act. In spite of such change the rights of the company
will not be affected, for instance, the tenancy right continues, the landlord has to recognise the new company and
there should be continuity of tenancy. If pending execution of a certificate debt, the name of the company is
changed, under sections 21-23 of the Act, the identity of the company does not change, no transfer of interest of
decree-holder is involved and the execution court has the power to amend the petition by substituting the name of
the decree-holder company.13
Decree in old name.—A decree obtained in the old name may be executed by the company in its new name.14
Legal proceedings.—A combined reading of the provisions of sections 43A [ since inapplicable], 21 and 23 leaves
no manner of doubt that when a company is converted into a public company, apart from the change in its name,
the constitution and the entity of the company is not affected in any other manner and the legal proceedings
instituted by its former name can be continued by its new name.15
Private Company becoming Public Company—Suit.—A private company becoming a public limited company
and consequent change of name of the company under Section 21 of the Companies Act, 1956 is of no
consequence in so far as the rights and obligations of the company are concerned nor would it render any Suit or
legal proceedings by or against the company defective by virtue of Section 23(3) of the Companies Act, 1956.
Therefore, the contention that the suit should fail since the company had become public limited company was
untenable.16
Change of name of Company—Stamp Duty—Lease-cum-sale Agreement.—By reason of mere change in the

name of the company “Prasad Garments P. Ltd.” the erstwhile lessee cannot be held to have transferred its
leasehold interest in favour of the appellant. Execution of an instrument which would attract payment of Stamp Duty
in terms of Article 5(d) of the Karnataka Stamp Act, 1957 (34 of 1957) must involve Transfer of property or
otherwise a right or liability may, inter alia, be created, transferred, etc., as envisaged in Section 3 thereof. The
Supplementary Lease Agreement cannot be said to be an “instrument”. Having regard to the fact that the entity of
the appellant could not be said to be totally different from Prasad Garments P. Ltd. and as by reason of
Supplementary Agreement, no fresh transaction had been entered into. Once it is held that the Supplementary
Agreement is neither a Deed of lease nor a Deed of sale within the meaning of Section 105 or Section 54 of the
Transfer of Property Act, 1882 (4 of 1882) as the case may be, Article 5(d)of the Karnataka Stamp Act, 1957 will
have no application. If Article 5(d) has no application, indisputably the residuary clause contained in Article 5(f)(i)
would have application. The appellant admittedly paid the Stamp Duty in terms thereof. It is now well-settled that for
the purpose of levy of Stamp Duty, the real and true meaning of the instrument must be ascertained.17
Page 9 of 10
Government Company.—The provisions of section 21 shall apply to a Government Company with the following
modification: To section 21, the following proviso shall be added, namely:
“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.” [ Notification No. G.S.R. 1649, dated 13-11-1965 : Govt. of India
Secretarial Practice and Check List.— Section 21. Check whether: (1) a Board resolution passed? (2) an
application made to the Registrar in e-Form No. 1A* along with a fee of Rs. 500 for ascertaining the availability of
proposed name and the Registrar has approved the name? (3) a special resolution passed and e-Form No. 23* duly
filed with the Registrar? (4) application for approval for change of Name made to the Registrar of Companies in e-
Form 1B* and of the Central Government approval of the Registrar obtained? (5) fresh certificate of incorporation
obtained from the Registrar? (6) intimation sent to the stock exchange in the case of listed companies?
Ensure that the name was changed on the name board, seal, business letters, bill heads, memorandum and
articles, etc. [ section 147].
The documents involved are: (1) Minutes of Board/General Meeting, (2) Approval letter of Registrar of Companies,
(3) e-Forms 1A and 23, (4) Fresh Certificate of Incorporation, (5) Intimation to Stock Exchange, (6) Memorandum
and Articles as altered, (7) Correspondence with Registrar.
6. F.S. Abdul Qayum v. Manindra Land and Building Corpn. Ltd., , (1955) 25 Comp. Cas. 143 (All.) (DB) : AIR 1955 All.
192 [LNIND 1954 ALL 212](DB).
* See the Companies (Central Government's) General Rules and Forms, 1956 in Appendix 1
610E (w.e.f. 16-9-2006) in Appendix 2.
16-9-2006).
7. Reference to Department Letter No. 8/21/56-PR, dated 6-2-1957 has been omitted as that Circular is out of date in view
of the proviso to Section 21 as inserted by Act 31 of 1965.
† Now Section 17(2) as substituted in 1997 and 2003 requires confirmation by the CLB [ now the Central Government]
only for alteration relating to the Change of place of Registered Office from one State to another. Thus Objects Clause
in the Memorandum of Association can be altered simply by passing Special Resolution and no confirmation is needed.
8. Govind Rubber Ltd., In re, (1995) 83 Comp. Cas. 556 (Bom.); Novopan India Ltd., In re, , (1997) 88 Comp. Cas. 596
(AP).
9. Jaypee Cement Ltd., In re, (2004) 122 Comp. Cas. 854 (All.) :, (2004) 2 Comp. LJ 105 (All). See detailed comments
under sections 391 to 394.
10. Pioneer Protective Glass Fibre (P.) Ltd. v. Fibre Glass Pilkington Ltd., , (1986) 60 Comp. Cas. 707 (Cal.) (DB). See
11. Neelachal Auto Ltd., In re, (2001) 105 Comp. Cas. 288 (CLB).
12. Surendra v. Indian Airlines Corpn.,AIR 1966 Cal. 272 [LNIND 1965 CAL 97](DB).
13. Kalipada Sinha v. Mahalaxmi Bank Ltd.,AIR 1966 Cal. 585 [LNIND 1965 CAL 175](DB). See also Comments under
Sections 22 and 23.
14. F.S. Abdul Qayum v. Manindra Land and Building Corpn. Ltd., (1955) 25 Comp. Cas. 143 (All.) (DB) : AIR 1955 All. 192
[LNIND 1954 ALL 212](DB).
under Sections 3, 23, 31, 43, 43A and 44.
Page 10 of 10
16. Wasava Tyres v. Printers (Mysore) Ltd., , (2007) 139 Comp. Cas. 446 (Karn.).
End of Document
Datta: Company Law
C R Datta
companies
S. 22. Rectification of name of company.

—
(1) 18[
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,—
(i) 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, or
(ii) on an application by a registered proprietor of a trade mark, is in the opinion of the Central
Government identical with, or too nearly resembles, a registered trade mark of such proprietor
under the Trade Marks Act, 1999, (Act No. 47 of 1999) such company,—]
(a) may, by ordinary resolution and with the previous approval of the Central Government signified in
writing, change its name or new name; and
(b) shall, if the Central Government so directs within twelve months of its first registration or
registration by its new name, as the case may be, or within twelve months of the commencement
of this Act, whichever is later, by ordinary resolution and with the previous approval of the Central
Government signified in writing, change its name or new name within a period of three months
from the date of the direction or such longer period as the Central Government may think fit to
allow.
19[ Provided that no application under clause (ii) made by a registered proprietor of a trade mark after
five years of coming to notice of registration of the company shall be considered by the Central
Government.]
(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 20[
one thousand rupees] for every day during which the default continues.
18. Substituted by the Trade Marks Act, 1999 (47 of 1999), s. 158 and Sch. [(w.e.f. 15-9-2003)videNotification No.
(2003) 117 Comp. Cas. (St.) 156]. Prior to its substitution the opening portion stood as follows: “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—”.
19. Proviso added by the Trade Marks Act, 1999 (47 of 1999), s. 158 and Sch. [(w.e.f. 15-9-2003)videNotification No.
(2003) 117 Comp. Cas. (St.) 156].
Page 2 of 10
20. Substituted by the Companies (Amendment) Act, 2000 (53 of 2000), s. 8 (w.e.f. 13-12-2000), for “one hundred
rupees”.
* See the Companies Regulations, 1956 in Appendix 3.
610E (w.e.f. 16-9-2006) in Appendix 2.
16-9-2006).
2006) (w.e.f. 1-11-2006).
21. Pino Bisazza Glass Pvt. Ltd. v. Bisazza India Ltd., (2003) 114 Comp. Cas. 165 (Guj.); Sholay.com Pvt. Ltd. v. Regional
Director, Government of India, (2004) 120 Comp. Cas. 114 (Mad.).
22. Sidhvi Constructions (India) P. Ltd. v. ROC, (1997) 90 Comp. Cas. 299 (AP); Hope Textiles Ltd. v. UOI,(1994) 205 ITR
508 (SC). See also Comments under Section 20.
23. Sen and Pandit Electronics Pvt. Ltd. v. Union of India, (2003) 115 Comp. Cas. 299 (Cal.) : AIR 1999 Cal. 289 [LNIND
1999 CAL 168]: (2000) 36 CLA 68 (Cal.).
24. Kalpana Polytec India Ltd. v. UOI, (2001) 106 Comp. Cas. 558 (Cal.) (DB); Concord International (Mauritius) Ltd. v.
Concord Tourist Guide Agency Ltd.,(1985) LRC (Comm) 751 (CA).
25. Lords Insullations India Pvt. Ltd. v. Regional Director, Department of Company Affairs, Southern Region, Chennai,
(2004) 122 Comp. Cas. 892 (Mad.).
(2004) 122 Comp. Cas. 892 (Mad.).
27. Kilburn Electricals Ltd. v. Regional Director, (2000) 99 Comp. Cas. 243 (Mad.). See also Comments under Section 20.
28. Hira Lal and Sons (Export) P. Ltd. v. Union of India, (2005) 127 Comp. Cas. 904 (Delhi).
29. Manipal Housing Finance Syndicate Ltd. v. Manipal Stock and Share Brokers Ltd., (1999) 98 Comp. Cas. 432 (Mad.).
30. Ad Valorem Factors Ltd. v. Ricketts,(2004) 1 All ER 894.
COMMENTS
English Act, 1948 : Section 18(2) Previous Act, 1913 : Section 11(2)
Legislative History.—The Companies Act, 1956 (1 of 1956).—The Notes on clauses explained as follows:
“Compare section 11(2) of the existing Act and section 18(2) of the English Act.” [ Clause 19 of the Companies Bill,
1953 (46 of 1953)].
The Trade Marks Act, 1999 (47 of 1999).— Sections 20 and 22 of the Companies Act, 1956 (1 of 1956) regarding
Companies not to be registered with undesirable names and Rectification of name of company have been amended
by the Trade Marks Act, 1999 (47 of 1999) (w.e.f. 15-9-2003).
The Companies (Amendment) Act, 2000 (53 of 2000)—The Notes on clauses explained the amendments in this
section as follows: “This clause seeks to enhance the fine specified in sub-section (2) of section 22 of the Act from
one hundred rupees to one thousand rupees.” [ Clause 8 of the Companies (Second Amendment) Bill, 1999 (139 of
1999)].
Rectification of Name of company [ Section 22(1)(a)].—If through inadvertence or otherwise the name of a
company is identical or too nearly resembles (i) the name of an existing company registered prior to such company,
Page 3 of 10
or (ii) a trade mark registered under the Trade Marks Act, 1999, the company may change the name by an ordinary
resolution and approval of the Central Government.
Ordinary Resolution.—To rectify the company's Name with the previous approval of the Central Government
[powers delegated to the Regional Directors] an Ordinary Resolution is required to be passed. [ Section 22(1)(a)].
For provisions relating to Ordinary Resolution and matters requiring sanction of shareholders by Ordinary
Resolution see Comments under Section 189.
Direction for Changing the Name [ Section 22(1)(b)].—The Central Government may within 12 months direct the
company to change its name, if in its opinion the name is identical or too nearly resembles (i) the name of an
existing company registered prior to such company, or (ii) a trade mark registered under the Trade Marks Act, 1999
on an application by the registered proprietor. Within 3 months of such direction the company must comply with it.
Limitation [Sub-section (1), Proviso].—No application under clause (ii) made by a registered proprietor of a trade
mark after 5 years of coming to notice of registration of the company shall be considered by the Central
Government.
Delegation of Powers to the Regional Directors.—The powers and functions of the Central Government under
section 22 have been delegated to the Regional Directors at Bombay, Calcutta, Madras and Kanpur. [ Notification
No. G.S.R. 288(E), dated 31-5-1991 : For text of the Notification see Comments under Section 637].
Regional Directors (RDs).—The four Regional Directors (RDs) are in-charge of the respective Regions, each
Region comprising a number of States and Union Territories. They supervise the working of the offices of the
Registrars of Companies (ROCs) and the Official Liquidators (OLs) working in their Regions. Certain powers of the
Central Government have been delegated to the Regional Directors (RDs).
“Regional Director” [ Regulation 2(d) (w.e.f. 26-9-2005)].— Regulation 2(d) of the Companies Regulations,
1956* as inserted by the Companies (Amendment) Regulations, 2005 (w.e.f. 26-9-2005) defines the “Regional
Director” as follows:
“2(d)
‘Regional Director’ means the person appointed by the Central Government in the Ministry of Company Affairs
(MCA) as a Regional Director (RD)
for the respective Regions as under:
Region Jurisdiction
(1) (2) (3)
(i) Regional Director Northern Region Directorate States of Jammu & Kashmir, Punjab,
Headquarter at Noida (Gautam Budh Himachal Pradesh, Haryana, National
Nagar) Capital Territory of Delhi, Rajasthan,
Uttar Pradesh, Uttaranchal and Union
Territory of Chandigarh
(ii) Regional Director Southern Region Directorate States of Andhra Pradesh, Karnataka,
Headquarter at Chennai Tamil Nadu, Kerala and Union Territory
of Lakshadweep and Pondicherry
(iii) Regional Director Eastern Region Directorate Headquarter States of Bihar, Jharkhand, Orissa, West
at Kolkata Bengal, Assam, Arunachal Pradesh,
Nagaland, Meghalaya, Mizoram,
Manipur, Tripura and Union Territory of
Andaman and Nicobar Islands
(iv) Regional Director Western Region Directorate States of Maharashtra, Madhya

Headquarter at Mumbai Pradesh, Chhattisgarh, Gujarat, Goa
and Union Territory of Dadra & Nagar
Haveli and Daman & Diu.
Page 4 of 10
(2) For the words ‘Regional Director at Bombay/Calcutta/Kanpur/Madras’ wherever they occur, the words ‘Regional
Director’ shall be substituted.” [ Notification No. G.S.R. 610(E), dated 23-9-2005, published in the Gazette of India,
Extraordinary, No. 413, Part II, Section 3(i), dated 26-9-2005 : (2005) 127 Comp. Cas. (St.) 95 : the Ministry of
Company Affairs (MCA) website http://www.mca.gov.in].
Regional Director, Kanpur shifted to Noida.—“This is for general information of the public that Central
Government has decided to shift the Headquarter of Regional Directorate, Northern Region, presently at Kanpur to
Noida (Gautam Budh Nagar) with effect from 1st August, 2005.” [ Notification No. G.S.R. 611(E), dated 23-9-2005,
published in the Gazette of India, Extraordinary, Part II, Section 3(i) : the Ministry of Company Affairs (MCA)
website http://www.mca.gov.in].
See detailed Comments, List of Functions falling within the jurisdiction of Regional Directors (RDs) and Addresses
of Regional Directors (RDs) in the Citizen's Charter of the Department of Company Affairs (DCA) [ now the Ministry
of Company Affairs (MCA)] issued vide Press Note No. 9 (1999 Series) as updated from Ministry of Company
Affairs (MCA) website www.mca.gov.in under Section 609.
Form of Application.— Now e-Form 24A of the Companies (Central Govt.'s) General Rules and Forms, 1956
prescribes Form for filing Application to Central Government (Regional Director) under Section 22 of the Act.
Earlier, no Form had been prescribed for Application to the Central Government (Regional Director) for the previous
approval for Rectification of Company's Name under Section 22 of the Companies Act, 1956.
Form 24A (prescribed w.e.f. 10-2-2006).— See e-Form 24A* of the Companies (Central Government's) General
Rules and Forms, 1956 as substituted and prescribed under Section 22 by the Companies (Central Government's)
General Rules and Forms (Amendment) Rules, 2006 vide Notification No. G.S.R. 56(E), dated 10-2-2006 :
published in the Gazette of India, Extraordinary, No. 50, Part II, Section 3(i), page 156, dated 10-2-2006 : the
Ministry of Company Affairs (MCA) website http://www.mca.gov.in : (2006) 130 Comp. Cas. (St.) 13 in Appendices.
website http://www.mca.gov.in under category Approval Services (Regional Director), Date of Last Release (10-2-
2006).
Section 22 of the Companies Act, 1956 ] for Form for filing Application to Central Government (Regional Director).
Instructions for filling of e-Form 24A—Form for filing Application to Central Government (Regional
Director).—Specific Instruction Kit for filling e-Form 24A of the Companies (Central Government's) General Rules
and Forms, 1956 containing the e-Form Sl. No. and Detailed Instructions is reproduced below:
If it is required to file e-Form 23 in relation to filing this application; ensure that filing of e-Form 23 precedes filing of
this e-form.
1 (a) Enter the Corporate Identity Number (CIN) of the company.
portal www.mca.gov.in
Enter e-Form 1A reference number or service request number in case application is filed for issue of
Page 5 of 10
license under Section 25 of Companies Act, 1956 by a new association.
2 (a), (b) Click the “Pre-fill” button.
System will automatically display the name and registered office address of the existing company and
proposed name for new company.
3 Select the purpose of filing an application.
If the purpose is to service a notice for application under Section 391 and 394 then select “Others”
option.
4 If ‘others’ has been selected as purpose of application in field 3 then specify the details.
5 Field 5 (a), (b) are applicable only if option for rectification of name has been selected in field 3.
6 Enter the date of Annual General Meeting.
This field is mandatory to be filled in case option for Appointment of Auditor under Section 224(3) has
been selected.
7 Enter the service request number (SRN) of e-Form 23 and other details relating to the resolution passed.
Note : In case the existing company does not have the service request number (SRN) of e-Form 23,
enter “Z99999999” as SRN of e-Form 23 and attach the Resolution passed as an optional attachment
8 Enter justification and other relevant facts of the application made.
Attachments
For issue of licence u/s. 25 [ See Comments under Section 25].

• In case of new Association
• In case of Company already Registered
For Approval for entering into Contract under Section 297 [ See Comments under Section 297].
For Notice under Section 391 and 394 [ See Comments under Section 391 and 394].
Rectification of Name [under Section 22].
• Copy of Board Resolution.
Removal of Auditor under Section 224(7) [ See Comments under Section 224(7)].
Appointment of Auditor under Section 224(3) [ See Comments under Section 224(3)].
Any other information can be provided as an optional attachment.
Declaration.—Select first radio button in case of existing company and enter the date of Board Resolution
authorizing to sign and submit the application.
Select second radio button for new company.
Page 6 of 10
Filing Fees.—Filing Fees along with e-Form 24A of the Companies (Central Government's) General Rules and
Forms, 1956 shall be payable as per the Companies (Fees on Applications) Rules, 1999.
See detailed Comments under Section 609, 610B, 611 and 637.
Rules, 1999.
Ministry of Corporate Affairs website [www.mca.gov.in].—The erstwhile Department of Company Affairs (DCA)
Page 7 of 10
See The Companies (Director Identification Number) Rules, 2006† framed under Sections 266A to 266G (w.e.f. 1-
No. 502, Part II, Section 3(i), page 21 : Ministry of Company Affairs(MCA) website http://www.mca.gov.in : (2006)
Sabha on 15-12-2006.
266G inserted (w.e.f. 1-11-2006).
E-Filing and Search facilities on MCA website [ www.mca.gov.in].— See the following e-Governance, e-Filing,
(3) Digital Signature Certificate (DSC), e-Filing made mandatory from 16th September 2006.
See detailed Comments on Name of Company and Change of Name under Section 20 and 21 and e-Forms and e-
Filing under Section 610B.
Page 8 of 10
As per Schedule (II), the Regional Directors shall process Application for rectification of name of a company [
Section 22] in 30 days. [ Press Note No. 9 (1999 Series) (F. No. 5/25/99-CL-V), dated 9-8-1999 : www.dca.nic.in :
(1999) 98 Comp. Cas. (St.) 1 : See Fuller Text under Section 12, 33, 609 and 637].
Natural Justice.—Order directing the change of name of the company under section 22(1)(b) of the Companies
Act, 1956 is a quasi-judicial order having civil consequences. Therefore, the authority, i.e., the Regional Director
taking decision must record the reasons for passing the order so that all concerned can come to know on what
ground the order was passed. The order must be a speaking order observing the principles of natural justice. A
non-speaking order or an order denying opportunity of being heard would be liable to be quashed and set aside.21
Writ.—The Central Government [the Regional Director] may direct the company to change its name within 12
months. The provision for a period of 12 months cannot be interfered with or the period cannot be extended in any
writ proceedings.22
Stay or injunction.—But the period of stay or injunction should be excluded in computing the period of 12 months
laid down in section 22(1)(b) of the Act.23
Passing off action.—After expiry of period of 12 months an action to restrain the use of name and passing off is
maintainable. The jurisdiction of the Regional Director is confined to section 22 of the Companies Act, 1956. He
cannot exercise the jurisdiction of a civil court in a passing off action.24
Name of the Company—Similar to existing name.—The Registrar of Companies (ROC) has the power to
restrain use of a name by a Company similar to the name of an Incorporated Company. The Registrar of
Companies (ROC) directed the petitioner Company to change its name. The Company filed a writ petition
challenging the Order of Regional Director (RD). The High Court held by dismissing the writ petition that the order
was legally acceptable and supported by sufficient reasons. The names were found either identical or too similar.
The Order of the Regional Director (RD); was valid and the writ petition was dismissed.25
Phonetic resemblance.—To pass an order under section 22 the requirement is that the names should be found
either identical or too similar or resembling. Where all the words in names of both the companies were exactly the
same and the words “Lloyd” and “Lords” phonetically resembled each other and the products of both the companies
were also the same. The order by the Regional Director directing the company to change the name was for legally
acceptable and sufficient reasons. The writ petition for quashing the order of the Regional Director was dismissed.26
Name with permission or no objection letter.—A company was incorporated at Madras with the word “Kilburn” in
its name with the permission or no objection letter from a Calcutta based company. The Madras company floated
two other companies with name “Kilburn” and got them registered at Madras. It was held that the permission or no
objection of the Calcutta company did not extend to two other companies. The order for change of names of the two
new companies under section 22(1)(b) of the Companies Act, 1956 was therefore justified.27
Right to use the Family or Surname.—Where the petitioner-company “Hira Lal and Sons (Export) Pvt. Ltd.” was
incorporated in the year 1973. The Registrar of Companies (ROC) allowed respondent-company to be incorporated
with the name “Hira Lall and Sons (I) Pvt. Ltd.” in July 2000. The petitioner filed a representation under Section 22
of the Companies Act, 1956 and the Registrar of Companies (ROC) directed respondent-company to change its
name by suffixing “Anupam” being the name of its Director “Hira Lall and (Sons) (I) Anupam Pvt. Ltd.”. On a writ
petition, contending that name of the respondent-company was identical with that of the petitioner-company.
Dismissing the writ petition, it was held that under Section 20(2) the name which is identical with or too nearly
resembles the name by which a company in existence has been previously registered would be deemed to be
undesirable by the Central Government within the meaning of Section 20(1). If it had been the case of an outsider
using “Hira Lal and Sons” as prefix to its name there might have been some substance in the contention of the
petitioner. That was not so as the petitioner-company as well as respondent-company were persons with common
family roots. From the No Objection Certificate (NOC), dated September 10, 2000 given by the Directors of the
petitioner-company it could be inferred that there was an oral understanding at the time of incorporation of
respondent-company for using the name of their grandfather “Hira Lall”. Moreover, the petitioner-company was
doing different business from respondent-company. Since Hira Lall was the grandfather of the parties the right to
use the family or surname could not be denied or treated as unauthorised. After the change of name of respondent-
Page 9 of 10
company to “Hira Lall and (Sons) (I) Anupam Pvt. Ltd.” it would not come under the mischief of Section 20(2) of the
Act.28
Geographical names.—The commercial use of geographical names is universally well known. Merely by using
“Manipal” as part of the corporate name of the companies incorporated by defendants, the names of those
companies could not be said to be identical or so closely resembling the name of plaintiffs, as to mislead, cause
confusion, or result in unfair exploitation of the goodwill earned by plaintiffs companies. The application for
permanent and interim injunction was therefore dismissed.29
Penalty [Sub-section (2)].—For failure to comply with any directions of the Central Government to change the
name of the company, the company and every officer who is in default shall be punishable with fine upto Rs. 1,000
for every day of default. See also Comments under Section 5, 621 and 621A.
Registration of change of name and effect.— See Section 23.
Director's Liability—Misleading name.—Under the English Insolvency Act, a director of a company having name
similar to another company in liquidation is liable for payment of all debts and liabilities of the first company in
Liquidation.
The principle may be followed in India on the basis that such a director misleads the directors, shareholders and
also the public in believing into that the two companies are managed by the same persons as if they are sister
concerns and such a director was in management of both companies.30
Secretarial Practice and Check List.— Section 22 and 23. Check whether any rectification of the name by the
company suo motu or at the instance of the Regional Director was effected? If so, check whether : (1) the previous
approval of the Regional Director obtained or the Regional Director directed the company to effect the change in
name of the company? (2) ordinary resolution passed? (3) a fresh certificate of incorporation obtained from the
Registrar?
Ensure that the name was changed on the name board, seal, memorandum, articles, letters, bill heads, etc. [
section 147].
The documents involved are : (1) Minutes of Board/General Meeting, (2) Approval of Regional Director, (3) Fresh
Certificate of incorporation, (4) Intimation to Stock Exchange, (5) Altered Memorandum and Articles, (6) Common
Seal and documents.
18. Substituted by the Trade Marks Act, 1999 (47 of 1999), s. 158 and Sch. [(w.e.f. 15-9-2003)videNotification No.
(2003) 117 Comp. Cas. (St.) 156]. Prior to its substitution the opening portion stood as follows: “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—”.
19. Proviso added by the Trade Marks Act, 1999 (47 of 1999), s. 158 and Sch. [(w.e.f. 15-9-2003)videNotification No.
(2003) 117 Comp. Cas. (St.) 156].
20. Substituted by the Companies (Amendment) Act, 2000 (53 of 2000), s. 8 (w.e.f. 13-12-2000), for “one hundred
rupees”.
610E (w.e.f. 16-9-2006) in Appendix 2.
16-9-2006).
Page 10 of 10
2006) (w.e.f. 1-11-2006).
21. Pino Bisazza Glass Pvt. Ltd. v. Bisazza India Ltd., (2003) 114 Comp. Cas. 165 (Guj.); Sholay.com Pvt. Ltd. v. Regional
Director, Government of India, (2004) 120 Comp. Cas. 114 (Mad.).
22. Sidhvi Constructions (India) P. Ltd. v. ROC, (1997) 90 Comp. Cas. 299 (AP); Hope Textiles Ltd. v. UOI,(1994) 205 ITR
508 (SC). See also Comments under Section 20.
23. Sen and Pandit Electronics Pvt. Ltd. v. Union of India, (2003) 115 Comp. Cas. 299 (Cal.) : AIR 1999 Cal. 289 [LNIND
1999 CAL 168]: (2000) 36 CLA 68 (Cal.).
24. Kalpana Polytec India Ltd. v. UOI, (2001) 106 Comp. Cas. 558 (Cal.) (DB); Concord International (Mauritius) Ltd. v.
Concord Tourist Guide Agency Ltd.,(1985) LRC (Comm) 751 (CA).
(2004) 122 Comp. Cas. 892 (Mad.).
(2004) 122 Comp. Cas. 892 (Mad.).
27. Kilburn Electricals Ltd. v. Regional Director, (2000) 99 Comp. Cas. 243 (Mad.). See also Comments under Section 20.
28. Hira Lal and Sons (Export) P. Ltd. v. Union of India, (2005) 127 Comp. Cas. 904 (Delhi).
29. Manipal Housing Finance Syndicate Ltd. v. Manipal Stock and Share Brokers Ltd., (1999) 98 Comp. Cas. 432 (Mad.).
30. Ad Valorem Factors Ltd. v. Ricketts,(2004) 1 All ER 894.
End of Document
Datta: Company Law
C R Datta
companies
S. 23. Registration of change of name and effect thereof.

—
(1) Where a company changes its name in pursuance of section 21 or section 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.
32. Kothari Products Ltd. v. Registrar of Companies, (2001) 103 Comp. Cas. 841 (All.); Kilburn Electricals Ltd. v. Regional
Director, (2000) 99 Comp. Cas. 243 (Mad.).
33. Sulphur Dyes Ltd. v. Hickson and Dadajee Ltd., (1995) 83 Comp. Cas. 533 (Bom.). See also Comments under Sections
35 and 111A.
34. Montari Overseas Ltd. v. Montari Industries Ltd.,(1996) 20 Corp. LA 313 (Delhi) (DB) : (1996) PTC 16 (Delhi) (DB). See
35. Pearson Education Inc. (formerly Prentice Hall Inc.) v. Prentice Hall India P. Ltd., (2007) 136 Comp. Cas. 294 (Delhi).
36. D. Srinivasaiah v. Vellore Varalakshmi Bank Ltd., (1954) 24 Comp. Cas. 55 (Mad.) : AIR 1954 Mad. 802 [LNIND 1953
MAD 181]; F.S. Abdul Qayum v. Manindra Land and Building Corpn. Ltd., (1955) 25 Comp. Cas. 143 (All.) (DB) : AIR
1955 All. 192 [LNIND 1954 ALL 212](DB). See also Comments under Section 21.
37. Economic Investment Corporation Ltd. v. CIT, (1970) 40 Comp. Cas. 1 (Cal.) : AIR 1970 Cal. 389 [LNIND 1969 CAL
146]: (1970) 75 ITR 233 [LNIND 1969 CAL 146] (Cal.).
38. Kalipada Sinha v. Mahalaxmi Bank Ltd.,AIR 1966 Cal. 585 [LNIND 1965 CAL 175](DB); Malhati Tea Syndicate Ltd. v.
Revenue Officer, (1973) 43 Comp. Cas. 337 (Cal.) : AIR 1972 Cal. 78.
39. Pioneer Protective Glass Fibre (P.) Ltd. v. Fibre Glass Pilkington Ltd., (1986) 60 Comp. Cas. 707 (Cal.) (DB);
Purushottam Umedbhai and Co. v. Manilal and Sons,AIR 1961 SC 325 [LNIND 1960 SC 231].
under Sections 3, 21, 43A and 44.
42. Dinesh Gandhi v. Bayer Diagnostics India Ltd., (2002) 111 Comp. Cas. 547 (CLB). See also Comments under Section
108.
Page 2 of 4
COMMENTS
English Act, 1948 : Section 18(3), (4) Previous Act, 1913 : Section 11(5), (6)
—The Notes on clauses explained this section as follows:“Compare section 18(3) and (4) of the English Act. It has
been made clear that when the name is changed, the Registrar should himself make the necessary alteration in the
memorandum of the company.”[ Clause 20 of the Companies Bill, 1953 (46 of 1953)].
New Certificate of Incorporation [Sub-section (1)].—A change in name under section 21 or section 22 shall be
recorded by the Registrar of Companies. The Registrar shall issue a fresh certificate of incorporation in the new
name. The change of name shall be complete and effective only on the issue of such a certificate.
See detailed Comments on Certificate of Incorporation and Conclusiveness of Certificate of Incorporation under
Section 35.
Change of Name by company [ Section 21 ].—A company may change its name by Special Resolution and with
the approval of the Central Government.
Change of name of Company—Stamp Duty—Lease-cum-sale Agreement. —By reason of mere change in the
name of the company “Prasad Garments P. Ltd.” the erstwhile lessee cannot be held to have transferred its
leasehold interest in favour of the appellant. Execution of an instrument which would attract payment of Stamp Duty
in terms of Article 5(d) of the Karnataka Stamp Act, 1957 (34 of 1957) must involve Transfer of property or
otherwise a right or liability may, inter alia, be created, transferred, etc., as envisaged in Section 3 thereof. The
Supplementary Lease Agreement cannot be said to be an “instrument”. Having regard to the fact that the entity of
the appellant could not be said to be totally different from Prasad Garments P. Ltd. and as by reason of
Supplementary Agreement, no fresh transaction had been entered into. Once it is held that the Supplementary
Agreement is neither a Deed of lease nor a Deed of sale within the meaning of Section 105 or Section 54 of the
Transfer of Property Act, 1882 (4 of 1882) as the case may be, Article 5(d) of the Karnataka Stamp Act, 1957 will
have no application. If Article 5(d) has no application, indisputably the residuary clause contained in Article 5(f)(i)
would have application. The appellant admittedly paid the Stamp Duty in terms thereof. It is now well-settled that for
the purpose of levy of Stamp Duty, the real and true meaning of the instrument must be ascertained.31
Direction for changing name [ Section 22 ].—A direction can be given for cancellation of a registration of a
company with undesirable name or in a name similar to a registered Trade Mark.32
Mutation of new name.—The certificate of incorporation issued by the Registrar of Companies changing the name
of a company shall be conclusive. After change of name the company shall be entitled to ask other companies in
which it holds shares to substitute its new name in their Register of Members in place of the old name. When the
shareholder was registered as a company in the U.K. The certificate of incorporation issued to the company by the
Registrar in the U.K. would be conclusive of change of name of the shareholder company. The allegation of fraud
were not sufficient to make out a case against rectification. The rectification of name was allowed.33
Suit.—Adoption of a name belonging to an existing company is not permissible. Even if a Certificate of

Incorporation is issued, a suit can be maintained for restraining it from using the name in a passing off action on
account of similarity of a name.34
Oppression—Power to direct Change of name of Company.—In a petition for oppression and mismanagement
the Company Law Board [the Tribunal (NCLT)] may give direction for change of name of the Company as per
agreement. The appellant-company formerly known as Prentice Hall Inc., an internationally known publisher,
incorporated first respondent-company as a wholly e Government of India regulations the appellant had to reduce
its shareholding to 49%. A Collaboration Agreement was entered into between the parties under which the
appellant granted licence to the respondent-company, inter alia, to re-print and sell the books included in the
schedule to such Agreement of which the appellant was the owner of the copyright. The life of this Agreement was
Page 3 of 4
10 years subject to the right of the appellant to terminate it. The collaboration agreement also provided that in the
event the appellant terminated the agreement the respondent company would omit the words “Prentice” and “Hall”
from its name. In view of this, it was held thaowned subsidiary in India. In view of tht in case the petitioner accepted
the alternative of transferring all its shares in favour of the second-respondent without any consideration, the
second respondent in that eventuality would take steps for change of the name of the Indian Company by dropping
the words “Prentice Hall”.35
Alteration in Memorandum [Sub-section (2)].—The Registrar shall also make the necessary alteration in the
memorandum of association of the company.
Rights and obligations not affected [Sub-section (3)].—The change of name shall not affect any rights or
obligations of the company. Legal proceedings by or against it may be continued in its new name.
Issue of new certificate will not affect the company's legal position. Its rights acquired before such change will not
be affected. Similarly its obligations incurred before such change will remain unaffected. For all practical purposes
the company continues as if no change has taken place.36 A change of name does not amount to change in the
constitution of the company.37
Legal proceedings.—But, in legal proceedings the necessary amendment is to be made and an appeal in its
former name will not be maintainable.38
However, after change of its name, if any legal proceeding is commenced or instituted by a company in its old
name, it would be a case of mere misdescription and not a case of initiation of a proceeding by a person not in
existence. Where the suit is filed by a company in its old name even after the name has been changed. It would be
only a misdescription and an amendment of cause title will be allowed.39
Private Company becoming Public Company—Suit.—A private company becoming a public limited company
and consequent change of name of the company under Section 21 of the Companies Act, 1956 is of no
consequence in so far as the rights and obligations of the company are concerned nor would it render any Suit or
legal proceedings by or against the company defective by virtue of Section 23(3) of the Companies Act, 1956.
Therefore, the contention that the suit should fail since the company had become public limited company was
untenable.40
Conversion of private into public company.—A combined reading of the provisions of sections 43A (relating to
deemed public company is since inapplicable), 21 and 23 of the Act leaves no manner of doubt that when a
company is converted into a public company, apart from the change in its name, the constitution and the entity of
the company is not affected in any other manner and the legal proceedings instituted by its former name can be
continued by its new name.41
New share certificates.—Change of name of a company necessitates the issuing of new share certificates. Where
the shareholder lodged transfer deeds with share certificates in old name after cut off date. The transfer could not
be registered as it was in violation of section 108. Section 23(3) is not applicable in such a case.42
Government Company.—The provisions of section 23 shall apply to a Government Company with the following
modification: In section 23, after sub-section (1), the following sub-section shall be inserted, namely:
“(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.”[ Notification No. G.S.R. 1649, dated 13-11-1965 : Govt. of India publication,
Secretarial Practice and Check List.— Sections 22 and 23. See Secretarial Practice and Check List under
Section 22.
Page 4 of 4
32. Kothari Products Ltd. v. Registrar of Companies, (2001) 103 Comp. Cas. 841 (All.); Kilburn Electricals Ltd. v. Regional
Director, (2000) 99 Comp. Cas. 243 (Mad.).
33. Sulphur Dyes Ltd. v. Hickson and Dadajee Ltd., (1995) 83 Comp. Cas. 533 (Bom.). See also Comments under Sections
35 and 111A.
34. Montari Overseas Ltd. v. Montari Industries Ltd.,(1996) 20 Corp. LA 313 (Delhi) (DB) : (1996) PTC 16 (Delhi) (DB). See
35. Pearson Education Inc. (formerly Prentice Hall Inc.) v. Prentice Hall India P. Ltd., (2007) 136 Comp. Cas. 294 (Delhi).
36. D. Srinivasaiah v. Vellore Varalakshmi Bank Ltd., (1954) 24 Comp. Cas. 55 (Mad.) : AIR 1954 Mad. 802 [LNIND 1953
MAD 181]; F.S. Abdul Qayum v. Manindra Land and Building Corpn. Ltd., (1955) 25 Comp. Cas. 143 (All.) (DB) : AIR
1955 All. 192 [LNIND 1954 ALL 212](DB). See also Comments under Section 21.
37. Economic Investment Corporation Ltd. v. CIT, (1970) 40 Comp. Cas. 1 (Cal.) : AIR 1970 Cal. 389 [LNIND 1969 CAL
146]: (1970) 75 ITR 233 [LNIND 1969 CAL 146] (Cal.).
38. Kalipada Sinha v. Mahalaxmi Bank Ltd.,AIR 1966 Cal. 585 [LNIND 1965 CAL 175](DB); Malhati Tea Syndicate Ltd. v.
Revenue Officer, (1973) 43 Comp. Cas. 337 (Cal.) : AIR 1972 Cal. 78.
39. Pioneer Protective Glass Fibre (P.) Ltd. v. Fibre Glass Pilkington Ltd., (1986) 60 Comp. Cas. 707 (Cal.) (DB);
Purushottam Umedbhai and Co. v. Manilal and Sons,AIR 1961 SC 325 [LNIND 1960 SC 231].
under Sections 3, 21, 43A and 44.
42. Dinesh Gandhi v. Bayer Diagnostics India Ltd., (2002) 111 Comp. Cas. 547 (CLB). See also Comments under Section
108.
End of Document
Datta: Company Law
C R Datta
companies
S. 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.
COMMENTS
Transitional provision.—This section made a transitional provision which has no importance any more.
End of Document
Datta: Company Law
C R Datta
companies
S. 25. Power to dispense with “Limited” in name of charitable or other

company.
—
(1) Where it is proved to the satisfaction of the Central Government that an association—
(a) is about to be formed as a limited company for promoting commerce, art, science, religion, charity
or any other useful object, and
(b) intends to apply its profits, if any, or other income in promoting its objects, and to prohibit the
payment of any dividend to its members,
the Central Government may, by licence, direct that the association may be registered as a company
with limited liability, without the addition to its name of the word “Limited” or the words “Private Limited”.
(2) The association may thereupon be registered accordingly; and on registration shall enjoy all the
privileges, and (subject to the provisions of this section) be subject to all the obligations, of limited
companies.
(3) Where it is proved to the satisfaction of the Central Government—
(a) that the objects of a company registered under this Act as a limited company are restricted to those
specified in clause (a) of sub-section (1), and
(b) that by its constitution the company is required to apply its profits, if any, or other income in
promoting its objects and is prohibited from paying any dividend to its members,
the Central Government may, by licence, authorise the company by a special resolution to change its
name, including or consisting of the omission of the word “Limited” or the words “Private Limited”; and
section 23 shall apply to a change of name under this sub-section as it applies to a change of name
under section 21.
(4) A firm may be a member of any association or company licensed under this section, but on the
dissolution of the firm, its membership of the association or company shall cease.
(5) A licence may be granted by the Central Government under this section on such conditions and
subject to such regulations as it thinks fit, and those conditions and regulations shall be binding on the
body to which the licence is granted, and where the grant is under sub-section (1), shall, if the Central
Government so directs, be inserted in the memorandum, or in the articles, or partly in the one and
partly in the other.
43[(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 Government, 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:
Page 2 of 25
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.
44[(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).
(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), 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 21.
(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 45[ five thousand rupees] for every day during which the default
continues.
45. Substituted by the Companies (Amendment) Act, 2000 (53 of 2000), s. 9 (w.e.f. 13-12-2000), for “five hundred
rupees”.
‡ See the Companies (Central Government's) General Rules and Forms, 1956 in Appendix 1.
610E (w.e.f. 16-9-2006) in Appendix 2.
16-9-2006).
2006) (w.e.f. 1-11-2006).
** See the Companies (Fees on Applications) Rules, 1999 in Appendix 4.
† The powers of the Central Government under this section have been delegated to the Regional Directors. See relevant
Notification hereinbefore.
† See the Companies (Central Government's) General Rules and Forms, 1956 in Appendix 1.
Page 3 of 25
* Published in the Gazette of India, Part II, Section 3(ii), page 1547, dated 8-7-1961 : (1961) 31 Comp. Cas. (St.) 350 :
Government of India publication, Clarifications and Circulars on Company Law, 1977 Edition, page 19.
46. Inserted by Notification No. S.O. 35(E), dated 9-1-1976 : Gazette of India, Extraordinary, Part II, Section 3(ii), page 83,
dated 10-1-1976 : (1976) 46 Comp. Cas. (St.) 129.
47. Inserted by Notification No. S.O. 2767, dated 5-8-1964 : Govt. of India publication, Clarifications and Circulars on
Company Law, 1977 Edition, page 20.
48. Inserted by Notification No. G.S.R. 73, dated 30-12-1965 : Govt. of India publication ibid.
49. Inserted by Notification No. S.O. 2767, dated 5-8-1964.
50. Sections 280 and 282 omitted as these sections have been omitted by Act 31 of 1965.
51a The word, figures and brackets “Section 303(2)” in column (1) and words “The whole” in column (2) omitted
vide Notification No. S.O. 2219(E), dated 28-12-2007 (w.e.f. 31-12-2007) : published in the Gazette of India,
Extraordinary, Part II, Section 3(ii) : the Ministry of Company Affairs (MCA) website http://www.mca.gov.in.
Notification also requires that the Existing Companies shall file e-Form 32 of the Companies (Central Government's)
General Rules and Forms, 1956 under Section 303(2) in respect of any change among its Directors, Managing
Director, Manager or Secretary after filing Form DIN-3 regarding Director Identification Number under Section 266A
within 60 days without payment of prescribed Fees and thereafter along with Fees and Additional Fees under Section
611 of the Act.
† Now Section 372A, inserted in place of sections 370 and 372 by the Companies (Amendment) Act, 1999 (21 of 1999),
permits the companies to make inter-corporate investments and loans subject to fulfilment of certain conditions without
prior approval of the Central Government. See detailed Comments and Legislative History under Sections 370, 372 and
372A.
52. C.P. Singhania v. Garware Club House, (2005) 124 Comp. Cas. 561 (Bom.).
Mad. 387 [LNIND 1962 MAD 194]; Vohra v. Ms. Balji Kaur Vohra,(2000) 38 Corp. LA 265 (CLB). See also Comments
54. Thirunageswaram Handloom Textile Manufacturers Association v. T.P. Kuppusamy Mudaliar and Sons, (2002) 112
Comp. Cas. 341 (Mad.). See also Comments under Sections 10 and 41.
55. Apparel Export Promotion Council v. UOI, (1997) 90 Comp. Cas. 309 (Mad.).
56. K. Leela Kumar v. Govt. of India, (2002) 108 Comp. Cas. 610 (Mad.) (DB).
57. M.L. Shaw, In re, (1986) 59 Comp. Cas. 312 (Cal.); Ramana Dayaram Shetty v. International Airport Authority of
India,AIR 1979 SC 1628 [LNIND 1979 SC 275]. See also Comments under Ss. 10 and 617.
58. Jullundur District Registered Factory Owners' Association v. Registrar of Companies, (1961) 31 Comp. Cas. 673
(Punj.). See also Comments under Sections 188, 303 and 306.
59. Baptist Church Trust Association v. Member, CLB, (1986) 60 Comp. Cas. 381(Cal.). See detailed Comments under
Section 186.
60. Maharaja Exports v. Apparel Export Promotion Council, (1986) 60 Comp. Cas. 353 (Delhi). See also Comments under
61. Sunil Dev v. Delhi and District Cricket Association, (1994) 80 Comp. Cas. 174 (Delhi). See also Comments under
62. General Commerce Ltd. v. Apparel Export Promotion Council, (1990) 69 Comp. Cas. 158 (Delhi). See also Comments
under Sections 176 and Schedule IX.
63. Narendera Kumar Agrawal v. Smt. Saroj Maloo, (1996) 85 Comp. Cas. 172 (SC). See also Comments under Sections
28, 29, 108, 111A and Schedule I.
64. Rajendra Prasad Bagaria v. Bhubaneswar Stock Exchange Association Ltd., (1999) 97 Comp. Cas. 182 (Orissa) (DB).
65. Ratnesh H. Bagga v. Central Circuit Cine Association, (2005) 128 Comp. Cas. 370 (CLB).
66. Walvis Flour Mills Co. Pvt. Ltd., In re, (1993) 76 Comp. Cas. 376 (Bom.). See also Comments under Sections 391 to
394.
67. Mohanram Sastry v. Swadharma Swarajya Sangha, (1995) 83 Comp. Cas. 272 (Mad.). See also Comments under
Sections 111A, 397 and 398.
Page 4 of 25
68. Madras Race Club v. Dr. K.R. Lakshmanan, (1997) 88 Comp. Cas. 754 (Mad.); Dr. K.R. Lakshmanan v. State of Tamil
Nadu, (1996) 86 Comp. Cas. 66 (SC). See also Comments under Sections 167 and 391.
69. G.S. Mayawala v. Motion Picture Association, (2006) 132 Comp. Cas. 388 (Delhi).
70. Dineker Rai D. Desai v. R.P. Bhasin, (1986) 60 Comp. Cas. 14 (Delhi) (DB). See also Comments under Sections 111A,
166, 397, 398 and 403.
71. Liverpool and District Hospital for Diseases of the Heart v. Attorney-General, (1981) Ch. 193 : (1981) 1 All ER 994 :
(1981) 2 WLR 379 : (1981) 125 SJ 79.
72. Akhil Deshastha Rigvedi Brahman Madhyawarti Mandal v. Joint Charity Commissioner, (1973) 43 Comp. Cas. 361
(Bom.). See also Comments under Section 34.
73. Cosmopolitan Club v. Dy. CTO,AIR 1952 Mad. 814 [LNIND 1951 MAD 300].
74. K. Leela Kumar v. Govt. of India, (2002) 108 Comp. Cas. 610 (Mad.) (DB). The Supreme Court decision in Bajaj Auto
Ltd. v. N.K. Firodia, (1971) 41 Comp. Cas. 1 (SC) : AIR 1971 SC 321 [LNIND 1970 SC 345] regarding expulsion of a
shareholder of a public limited company [dealt with in Comments under Sections 41, 108, 111 and 111A] was held not
applicable to section 25 company.
75. Major Mella Singh v. President, Jullundur Club Ltd., (1969) 39 Comp. Cas. 1018 (P&H). See detailed Comments under
76. Krishna Swami v. South Indian Film Chambers of Commerce,AIR 1969 Mad. 42 [LNIND 1967 MAD 100]. See also
77. Board of Trustees, Ayurvedic and Unani Tibia College, Delhi v. State of Delhi,AIR 1962 SC 458 [LNIND 1961 SC 337]:
(1962) Supp. 1 SCR 156. See also Comments under Section 2(7).
† See the Societies Registration Act, 1860 (21 of 1860) in Appendix 333.
78. CIT v. Andhra Chamber of Commerce,(1965) 55 ITR 722 [LNIND 1964 SC 248] (SC) : AIR 1965 SC 1281 [LNIND
1964 SC 248]: (1965) 1 SCR 565 [LNIND 1964 SC 248]; Addl. CIT v. Surat Art Silk Cloth Manufacturers
Association,(1980) 121 ITR 1 [LNIND 1979 SC 459] (SC) : AIR 1980 SC 387 [LNIND 1979 SC 459]; CIT v. Andhra
Chamber of Commerce,(1981) 130 ITR 184 (SC); Thiagarajar Charities v. Addl. CIT,(1997) 225 ITR 1010 (SC).
79. Ugar Sen Parsottam Das v. Chamber of Commerce, Hapur,AIR 1937 All. 432.
COMMENTS
English Act, 1989 : Section 111 inserted Ss. 30A-30C in the

Charities Act, 1960
Legislative History.—The Companies Act, 1956 (1 of 1956).—The Notes on clauses explained as follows:
“Compare section 26 of the existing Act and section 19 of the English Act. Sub-clause (4) is based on the Company
Law Committee's recommendation in paragraph 38 of the Report. Sub-clause (6)(d) is intended to give effect to the
recommendation contained in paragraph 37 of the Company Law Committee's Report. The provision has been
drafted in elastic terms. In most other respects the clause is based on section 19 of the English Act with a few
verbal changes here and there.” [ Clause 21 of the Companies Bill, 1953 (46 of 1953)].
“Section 26 of the Indian Companies Act, 1913, provides for the incorporation under this Act of associations formed
not for profit, but for the promotion of commerce, art, science, religion, charity or any other useful object. The
powers of the Central Government in this regard are in practice exercised by the State Governments by delegation
of authority to the latter, but it will be noticed that under section 289A of the Act, the powers of the Central
Government in respect of non-trading companies, with objects confined to a single State are the powers of the
State Government concerned. It follows that as regards associations not for profit, whose objects are confined to a
single State, the powers conferred on the Central Government under this section can be exercised only by the
appropriate State Government. It was suggested to us that a sub-section might be added to this section authorising
a State Govt. to exempt a company to which a licence had been issued under this section from filing returns relating
Page 5 of 25
to directors, although the names and occupations of directors might be required to be supplied. We commend this
suggestion to Government.
There is another important proposal that we make under this section. Recent judicial decisions have thrown doubt
on the point whether a firm as distinct from a company, can be a member of an association not for profit. [Judgment
of the Oudh Chief Court dated the 4th September, 1944 in Ganesh Das Ram Gopal v. R.G. Cotton Mills Co. Ltd.
and another]. We are not unaware of the complications that might result from admission of firms into the
membership of associations incorporated under section 26, but we consider that the balance of advantage is
distinctly in favour of such admission. For, the usefulness of many associations not for profit is likely to be seriously
undermined if important business houses are debarred from participating in the activities of such associations in
their own right merely because they are firms and not companies. We, therefore, recommend that this section
should be suitably amended to enable firms to be members of associations not for profit. We consider it necessary,
however, that those associations should be required to provide in their articles that, on the dissolution of the
partnerships, the memberships of these firms in these associations would also automatically lapse.
Subject to the above proposals, we recommend that the entire section should be replaced by the provisions of
section 19 of the English Companies Act, 1948, with the modification that the powers conferred on the Board of
Trade under this section should be exercised by the proposed Central Authority.” [ Report : paras 37 and 38].
The Joint Committee proposed further changes as follows:
“It was pointed out that if the companies referred to in this clause were exempted from the requirement of
submitting lists of their members to the Registrar, no one could find out who were, in fact, members of that company
and that this might lead to undesirable and harmful results. The power to grant this exemption has therefore been
vested in the Government so that they might use their discretion in restricting the exemption to deserving cases.
Sub-clause (11) of original clause was considered by the Committee to be unnecessary in view of the Constitution,
and the Committee have accordingly deleted it.” [ Report : para 17].
section as follows: “There are several sections in the Act, provisions of which either cannot be fully complied with by
non-profit making companies, e.g., Chambers of Commerce, trade associations, clubs, etc., because of their
peculiar constitution and manner of working, or seldom serve any useful purpose in the case of such bodies.
Government, therefore, propose to take power to modify the requirements of such sections in their application to
such companies. Most of these sections deal with procedural matters, e.g., holding of meetings, election of
directors, proxies, voting by show of hands, etc.” [ Clause 9 of the Companies (Amendment) Bill, 1959 (37 of
1959)].
The Joint Committee further recommended as follows:
“The Committee feel that the Central Government should have a general power to grant exemption to companies
licensed under section 25 of the Act from any provisions of the Act according to the circumstances and exigencies
of each case and that the power need not be confined only to the sections mentioned in the clause. The clause has
been amended accordingly.” [ Report : para 19].
—The Notes on clauses explained as follows: “This clause seeks to enhance the fine specified in sub-section (10)
of section 25 of the Act from five hundred rupees to five thousand rupees.” [ Clause 9 of the Companies (Second
Licence to Charitable Companies or Associations [Sub-section (1)].—An association may be registered under
the Companies Act, 1956 without the words “Limited” or “Private Limited” at the end of its name.
This is a special privilege for Charitable, etc., Companies or Associations for which an Application has to be made
to the Central Government.
The Central Government will grant a licence to an association if it is satisfied that (a) the object of the association is
to promote commerce, art, science, religion, charity or any other useful object, (b) its profits or incomes will be
applied in promoting its objects and it will not pay any dividend to its members.
Page 6 of 25
Delegation of Powers to the Regional Directors.—The powers and functions of the Central Government under
section 25 have been delegated to the Regional Directors at Bombay, Calcutta, Madras and Kanpur. [ Notification
No. G.S.R. 288(E), dated 31-5-1991 : For text of the Notification see Comments under Section 637].
Regional Directors (RDs).—The four Regional Directors (RDs) are in-charge of the respective Regions, each
Region comprising a number of States and Union Territories. They supervise the working of the offices of the
Registrars of Companies (ROCs) and the Official Liquidators (OLs) working in their Regions. Certain powers of the
Central Government have been delegated to the Regional Directors (RDs).
“Regional Director” [Regulation 2(d) (w.e.f. 26-9-2005)].— Regulation 2(d) of the Companies Regulations, 1956*
as inserted by the Companies (Amendment) Regulations, 2005 (w.e.f. 26-9-2005) defines the “Regional Director”
as follows:
“2(d) ‘Regional Director’ means the person appointed by the Central Government in the Ministry of Company Affairs
(MCA) as a Regional Director (RD) for the respective Regions as under:
Region Jurisdiction
(1) (2) (3)
(i) Regional Director Northern Region Directorate States of Jammu & Kashmir, Punjab,
Headquarter at Noida (Gautam Budh Himachal Pradesh, Haryana, National
Nagar) Capital Territory of Delhi, Rajasthan,
Uttar Pradesh, Uttaranchal and Union
Territory of Chandigarh
(ii) Regional Director Southern Region Directorate States of Andhra Pradesh, Karnataka,
Headquarter at Chennai Tamil Nadu, Kerala and Union Territory
of Lakshadweep and Pondicherry
(iii) Regional Director Eastern Region Directorate Headquarter States of Bihar, Jharkhand, Orissa, West
zat Kolkata Bengal, Assam, Arunachal Pradesh,
Nagaland, Meghalaya, Mizoram,
Manipur, Tripura and Union Territory of
Andaman and Nicobar Islands
(iv) Regional Director Western Region Directorate States of Maharashtra, Madhya

Headquarter at Mumbai Pradesh, Chhattisgarh, Gujarat, Goa
and Union Territory of Dadra & Nagar
Haveli and Daman & Diu.
(2) For the words ‘Regional Director at Bombay/Calcutta/Kanpur/Madras’ wherever they occur, the words ‘Regional
Director’ shall be substituted.” [ Notification No. G.S.R. 610(E), dated 23-9-2005, published in the Gazette of India,
Extraordinary, No. 413, Part II, Section 3(i), dated 26-9-2005 : (2005) 127 Comp. Cas. (St.) 95 : the Ministry of
Company Affairs (MCA) website http://www.mca.gov.in].
Regional Director, Kanpur shifted to Noida.—“This is for general information of the public that Central
Government has decided to shift the Headquarter of Regional Directorate, Northern Region, presently at Kanpur to
Noida (Gautam Budh Nagar) with effect from 1st August, 2005.” [ Notification No. G.S.R. 611(E), dated 23-9-2005,
published in the Gazette of India, Extraordinary, Part II, Section 3(i) : the Ministry of Company Affairs (MCA)
website http://www.mca.gov.in].
See detailed Comments, List of Functions falling within the jurisdiction of Regional Directors (RDs) and Addresses
of Regional Directors (RDs) in the Citizen's Charter of the Department of Company Affairs (DCA) [ now the Ministry
of Company Affairs (MCA)] issued vide Press Note No. 9 (1999 Series) as updated from Ministry of Company
Affairs (MCA) website www.mca.gov.in under Section 609.
Form and Procedure.—In exercise of the powers conferred by sections 25 and 609 of the Companies Act, 1956 (1
of 1956), the Central Government has made the Companies Regulations, 1956 providing for the procedure for
Page 7 of 25
application and grant of licence to associations under section 25. See Regulations 3 to 14 and Annexures I to V of
the Companies Regulations, 1956.
Form of Application.— Now e-Form 24A of the Companies (Central Govt.'s) General Rules and Forms, 1956
prescribes Form for filing Application to Central Government (Regional Director) under Section 25 of the Act.
Earlier, no Form had been prescribed for Application to the Central Government (Regional Director) for grant of
licence not to use the word “Limited” of the words “Private Limited” as part of its name under Section 25.
Form 24A (prescribed w.e.f. 10-2-2006).— See e-Form 24A‡ of the Companies (Central Government's) General
Rules and Forms, 1956 as substituted and prescribed under Section 25 by the Companies (Central Government's)
General Rules and Forms (Amendment) Rules, 2006 vide Notification No. G.S.R. 56(E), dated 10-2-2006 :
published in the Gazette of India, Extraordinary, No. 50, Part II, Section 3(i), page 156, dated 10-2-2006 : the
Ministry of Company Affairs (MCA) website http://www.mca.gov.in : (2006) 130 Comp. Cas. (St.) 13 in Appendices.
website http://www.mca.gov.in under category Approval Services (Regional Director), Date of Last Release (10-2-
2006).
Section 25 of the Companies Act, 1956] for Form for filing Application to Central Government (Regional Director).
Instructions for filling of e-Form 24A—Form for filing Application to Central Government (Regional
Director).—Specific Instruction Kit for filling e-Form 24A of the Companies (Central Government's) General Rules
and Forms, 1956 containing the e-Form Sl. No. and Detailed Instructions is reproduced below:
If it is required to file e-Form 23 in relation to filing this application; ensure that filing of e-Form 23 precedes filing of
this e-form.
1
(a) Enter the Corporate Identity Number (CIN) of the company.
Enter e-Form 1A reference number or service request number in case application is filed for issue of
license under Section 25 of Companies Act, 1956 by a new association.
2
(a), (b) Click the “Pre-fill” button.
System will automatically display the name and registered office address of the existing company and
proposed name for new company.
3 Select the purpose of filing an application.
If the purpose is to service a notice for application under Sections 391 and 394 then select “Others” option.
4 If ‘others’ has been selected as purpose of application in field 3 then specify the details.
5 Field 5 (a), (b) are applicable only if option for rectification of name has been selected in field 3.
6 Enter the date of Annual General Meeting.
Page 8 of 25
This field is mandatory to be filled in case option for Appointment of Auditor under Section 224(3) has been
selected.
7 Enter the service request number(SRN) of e-Form 23 and other details relating to the resolution passed.
Note : In case the existing company does not have the service request number(SRN) of e-Form 23, enter
“Z99999999” as SRN of e-Form 23 and attach the Resolution passed as an optional attachment
8 Enter justification and other relevant facts of the application made.
Attachments
For issue of licence u/s. 25
• In case of new Association

• Memorandum of Association (MoA).
• Articles of Association (AoA).
• Declaration as per Annexure V of the Companies Regulations, 1956.
• Declaration by Advocate of Supreme Court or High Court, Attorney or pleader entitled to appear before
a High Court, or a Company Secretary or Chartered Accountant in whole time practice that the Moa
and Aoa have been drawn in conformity with provisions of the Act.
• Details of the promoters and of the proposed directors of the company.
• A list of the names, addresses, descriptions and occupations of its directors and of its managers or
secretary, if any, together with the names of companies, associations and other institutions, in which
the directors of the applicant company are directors or hold responsible positions, if any, with the
descriptions of the positions so held.
• Statement of the grounds on which application is made.
• If any of the above documents is not in English or Hindi, then a translation of such document in English
or Hindi.
• In case of Company already Registered
• Future annual income and expenditure estimates.
• Assets and liability statement with their estimated value as on seven days before making the
application.
• Last two years' accounts, balance sheet and report on working of the association as submitted to the
members of the association.
• Statement of brief description of the work, if already done by the association and work proposed to be
done.
• If any of the above documents is not in English or Hindi, a translation of such document in English or
Hindi.
For Approval for entering into Contract under Section 297[ See Comments under Section 297].
For Notice under Sections 391 and 394[ See Comments under Sections 391 and 394].
Rectification of Name [ See Comments under Section 22].
Removal of Auditor under Section 224(7)[ See Comments under Section 224(7)].
Appointment of Auditor under Section 224(3) [ See Comments under Section 224(3)].
Any other information can be provided as an optional attachment.

Page 9 of 25
Declaration.—Select first radio button in case of existing company and enter the date of Board Resolution
authorizing to sign and submit the application.
Select second radio button for new company.
In case of issue of licence under Section 25 to a new association the e-Form should be digitally signed by the
applicant of the company, who should be the Person named as Managing Director or Director or Manager or
Secretary in the Articles of the company or an authorised signatory on behalf of them.
Note : In case of application by a new association for issue of licence following attachments are required to be
submitted at the concerned Regional Director office on the Stamp Paper simultaneously of filing an Application,
failing which the filing will not be considered and legal action will be taken.
1. Declaration as per Annexure V of the Companies Regulations, 1956.

2. Declaration by Advocate of Supreme Court or High Court, Attorney or pleader entitled to appear before a
High Court, or a Company Secretary or Chartered Accountant in whole time practice that the Moa and Aoa
have been drawn in conformity with provisions of the Act.
Forms with Instruction Kit on the Ministry of Corporate Affairs (MCA)website http://www.mca.gov.in].
Filing Fees.—Filing Fees along with e-Form 24A of the Companies (Central Government's) General Rules and
See detailed Comments and Department's views on Fees on Registration and Fees on Applications dealt with
hereinafter.
See also Comments under Sections 609, 610B, 611 and 637.
the Companies (Amendment) Act, 2006 (23 of 2006).
Filing Fees on e-Forms.— See Rule 22 of Companies (Central Govt.'s) General Rules and Forms, 1956 the as
Page 10 of 25
Rules, 1999.
Act, 1956 as inserted by The Companies (Amendment) Act, 2006 (23 of 2006) (w.e.f. 16-9-2006).
Ministry of Company Affairs website [ www.mca.gov.in].—The erstwhile Department of Company Affairs (DCA)
under the Ministry of Finance, was designated as a separate Ministry, viz., ‘Ministry of Company Affairs’(MCA) vide
‘Ministry of Company Affairs’(MCA) (w.e.f. 9-5-2007).—The Ministry of Company Affairs (MCA) has been
renamed as ‘Ministry of Company Affairs’(MCA) vide Presidential Notification, dated 9-5-2007 amending the
Government of India (Allocation of Business) Rules, 1961(w.e.f. 9-5-2007):
MINISTRY OF COMPANY AFFAIRS, Government of India, ‘A’ Wing, 5th Floor, Shastri Bhavan, Dr. Rajendra
SeeMinistry of Company Affairs (MCA) website http://www.mca.gov.in.
Director Identification Number(DIN)[ Sections 266A to 266G].— See detailed Comments, Form and Procedure
No. 502, Part II, Section (i) page 21 : Ministry of Company Affairs (MCA) website http://www.mca.gov.in : (2006)
“Electronic Signature” (e-Signature).—The words “Digital Signature” and “Digital Signature Certificate”(DSC) are
proposed to be substituted by words “Electronic Signature”(e-Signature) and “Electronic Signature Certificate”(ESC)
in various Chapters/Sections/Sub-sections/Clauses of the Information Technology Act, 2000 (21 of 2000) as
Sabha on 15-12-2006.
Page 11 of 25
266G inserted (w.e.f. 1-11-2006).
e-Forms, Search and other Facilities on the Ministry of Company Affairs (MCA) website http://www.mca.gov.in :
Charter.
(2) MCA-21 Program.
DSC now.
for a CFC, etc.
(8) Find CIN/GLN.
(9) Fee Calculator.
(11) Help, MCA-21 Handbook, Frequently Asked Questions (FAQs) on User Registration, Other Services,
Functions of Registrars of Companies (ROCs), Regional Directors (RDs), the Ministry of Company Affairs (MCA), e-
Governance, MCA-21, e-Filing and e-Forms under Sections 609 and 610B.
See detailed Comments under Sections 609 and 610A to 610E.
Memorandum of Association.—As per Regulation 6 of the Companies Regulations, 1956 the Memorandum of
Association of the proposed section 25 company shall be in the form specified in Annexure I to the Regulations or
as near thereto as circumstances admit.
Fees on Registration.—For registration of a company not having a share capital fees as prescribed in Schedule X
to the Companies Act, 1956, based on number of members stated in the Articles of Association, shall be payable.
See detailed Comments under Section 611 and Schedule X.
Notification prescribing Fee of Rs. 50rescinded(w.e.f. 31-12-2007).—Earlier Notification S.O. 3879, dated 22-
12-1962 prescribing Concessional Fees of Rs. 50 for a Section 25-Company has been withdrawn (w.e.f. 31-12-
2007) as below.
Notification No. S.O. 2218 (E), dated 28-12-2007.—“Whereas in exercise of the powers conferred by Section
613(1) and (2) of the Companies Act, 1956, the Central Government vide S.O. 3879, dated 22nd December, 1962
had ordered that the Fees payable under Section 611 of the said Act read with Schedule X thereto, for registration,
as a company with limited liability, of an association not for profit which is licensed under Section 25 of the said Act,
be fifty rupees.
Now, therefore, in exercise of the powers conferred by sub-section (6) of Section 25 of the said Act read with
Page 12 of 25
Section 21 of the General Clauses Act, 1897 (10 of 1897), the Central Government hereby rescinds the order
published in the Gazette of India dated 22nd December, 1962 vide No. S.O. 3879 with effect from 31st December
2007; such rescission shall not affect anything done or omitted to be done under the said Notification before this
Notification.” [ Notification No. S.O. 2218 (E), dated 28-12-2007 : published in the Gazette of India, Extraordinary,
Part II, Section 3(ii) : the Ministry of Company Affairs (MCA) website http://www.mca.gov.in].
Fees on Applications.—As per Rule 2(1) and Table I of the Companies (Fees on Applications) Rules, 1999** every
application made to the Central Government [Regional Director] in respect of a company proposed to be registered
or registered under section 25 of the Companies Act, 1956 shall be accompanied by prescribed fee, viz.: (iii) By an
association or proposed company for issue of licence under section 25 of the Act—Rs. 500 and (iv) By a company
having a valid licence issued under section 25 of the Act—Rs. 500. See also Comments under Section 637A.
Department's view.— Revision of rates of fees for applications made to Central Government by companies
for approvals under the Companies Act, 1956.—“The rates of application fees payable by companies and
individuals to the Central Government for various applications made by them for approvals under the Companies
Act, 1956, have been revised (w.e.f. 10-8-1999). This revision has been done by notifying the Companies (Fees on
Applications) Rules, 1999 in the Gazette of India, Extraordinary, dated 6th July, 1999. These rules supersede the
earlier 1968 rules, namely, the Companies (Fees on Applications) Rules, 1968. The details of the changes (relevant
extracts) made in the fee structure are given below:
3. Application fee payable by section 25-Companies.— Section 25-Companies (i.e., those companies which do not
have profit-earning as their motive) would now have to pay Rs. 500 for any application made by them. For issue of
licence under section 25 of the Companies Act, 1956, the fees are being increased from Rs. 60 to Rs. 500. Earlier
the rate was Rs. 60.
8. A copy of the Notification(s) has been placed at the Web Page of the Department of Company Affairs at the
Internet Address http://www.nic.in/dca.” [Extracts from Press Noteno. 4 (1999 Series) (F. No. 1/17/97-CL-V), dated
16-7-1999 : (1999) 97 Comp. Cas. (St.) 86]. See full Text in Comments under Section 637A(2).
Department's Website [www.dca.nic.in].—Search facilities on Department of Company Affairs website.—

See Press Note No. 1 (2002 series), dated 14-3-2002 on search facilities on the DCA website (www.nic.in/dca) [
www.dca.nic.in], e.g., (a) Company Directory, (b) Names approved for registration, (c) ROC fee computation, (d)
ROC Forms, (e) Status of investors' grievances, (f) Filing status of balance-sheets and annual returns, in
Comments under Ss. 12, 20, 33, 159, 220, 609 and 637.
As per Schedule (II), the Regional Directors shall process Application for license to charitable companies,
associations, etc. [ Section 25] in 30 days. [ Press Note No. 9 (1999 Series) (F. No. 5/25/99-CL-V), dated 9-8-1999 :
www.dca.nic.in : (1999) 98 Comp. Cas. (St.) 1 : See Fuller Text under Sections 33, 609 and 637.
Procedure for dealing with Application for grant of Licence under the provisions of Section 25.—“With a
view to facilitate quicker disposal of applications received from or on behalf of proposed companies for the grant of
licence under section 25 of the Companies Act, the following procedure will be followed in processing the aforesaid
applications:
(i) The applications be made to the Central Government as hitherto.†
(ii) Notices pursuant to Regulation 11 of the Companies Regulations, 1956 shall be published within one week
before or after the submission of the application in one or more local newspapers. The regulation has been
amended suitably for this purpose.
(iii) Applications will, hereafter, be accompanied by drafts of the memorandum and articles of association of
the proposed company after scrutiny by an advocate of the Supreme Court or of a High Court, an attorney
or pleader entitled to appear before a High Court or a chartered accountant [ now or secretary] practising in
India along with a declaration from such advocate, attorney, pleader or chartered accountant [ now or
secretary] to the effect that he has scrutinised the application and the accompanying documents and that
Page 13 of 25
he is satisfied that they have been drawn up in conformity with the Act. Regulations 4 and 8 have been
amended accordingly.
(iv) Immediately on receipt of a copy of the application under Regulation 10 of the Companies Regulations,
1956, the Registrar concerned will get the draft memorandum and articles of association and other papers
thoroughly scrutinised in his office with a view to ensuring that the various provisions in these documents
conform to the relevant provisions of the Act. The Registrar will then list out the modifications considered
necessary in the draft memorandum and articles of association and forward the same to the Department
within 15 days of the receipt of the copy of the application. If the Registrar considers the matter to be
important enough, his comments would be sent to the Department through the Regional Director who
would transmit the comments of the Registrar within 10 days of their receipt by him to this Department
along with his own comments.
(v) A fuller identity of the promoters and the proposed members of the Board of directors would be available in
the applications themselves. Sub-clause (ii) of Regulations 4 and 8, have been amended accordingly. The
Registrar will also have some personal knowledge of the promoters and the proposed members of the
Boards and it should not be difficult for him to advise the Department whether or not the proposed
company should be granted a licence. Only in doubtful cases, he would send his opinion through the
Regional Director. The Registrar shall also indicate in his report whether there are in existence other
companies with similar objects in or near the place where the registered office is proposed to be situated
and whether the new proposed company is really necessary.
(vi) The existing procedure of referring as a matter of routine all applications to the State Government for their
opinion has been discontinued. The Registrar would, if he thinks such a consultation is necessary, ask for
the views of the District Magistrate concerned within whose jurisdiction the registered office of the
proposed company is proposed to be located. In such cases, the Registrar would send to the Department a
copy of the District Magistrate's letter in reply to him. It is hoped that the Registrar will be able to get a reply
direct from the District Magistrate in most of the cases. In cases, however, where more important
considerations are involved, the Department will make a reference to the State Government concerned but
it is expected that such cases will be very few and will largely be restricted to companies with the object of
promoting religion or social service of a particular community or a group. Immediately on receipt of an
application, the Department will get the draft memorandum and articles and other papers generally
scrutinised. On receipt of the report of the Registrar and/or the Regional Director, the applicants will be
asked to modify the drafts in the light of the scrutiny made by the Registrar and the Departmental Officers.
The Department [ now powers delegated to the Regional Directors] will also consult the Ministries of the
Central Government concerned and also determine the objections, if any, received from the public to a
licence being given to the applicants.
(vii) Having received the views of the Registrar, Regional Directors, the State Government and Ministries of the
Central Government, where necessary and also the objections from the public, if any, the Department [
now the Regional Directors] will take a decision whether or not the licence, applied for, should be granted.
2. If the procedure outlined above is followed, diligently, it is hoped that all formalities would be completed within a
period of eight weeks from the receipt of the applications and it should be possible for the Department to issue the
licence applied for within a period of 10 to 12 weeks [ now 30 days as per Citizen's Charter] of the receipt of their
applications.” [ Circular issued by the Department of Company Law Administration, Company News & Notes, dated
1-7-1963 : Govt. of India publication, Clarifications and Circulars on Company Law, 1977 Edition, page 17].
Registration and Privileges [Sub-section (2)].—On the strength of a licence under sub-section (1), the Registrar
will register the company without the words “Limited” or “Private Limited” as the case may be.
The association on registration shall enjoy all the privileges, and (subject to the provisions of this section) be subject
to all the obligations, of limited companies. It will enjoy the exemptions and privileges specified under sub-section
(6).
Conditions for existing company to obtain licence [Sub-section (3).—An existing company may avail itself of
the privileges of this section by (a) restricting its objects to promoting commerce, art, science, religion, charity or
any other useful object, and (b) changing its constitution to apply its profits or incomes in promoting its objects and
prohibiting payment of any dividend to its members.
If the Central Government is satisfied it may, by licence, authorise the company by a Special Resolution to change
Page 14 of 25
its name, including or consisting of the omission of the words “Limited” or “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.
Change of Name.—For approval, change and registration of name see Comments under Sections 20, 21 and 23.
Alteration of the Objects.—For alteration of the Objects clause see Comments under Section 17. See also
Comments under Sections 11, 12, 13 and 33.
Special Resolution.—To change the name of an existing company on becoming a charitable or non-profit making
company omitting the words “Limited” or “Private Limited” with the approval of the Central Government a Special
Resolution is required to be passed. [ Section 25(3)].
Filing.—A copy of the Special Resolution has to be filed with the Registrar of Companies in e-Form 23† of the
Companies (Central Government's) General Rules and Forms, 1956 within 30 days. [Section 192].
E-Form 23 (substituted w.e.f. 5-8-2007).—See e-Form 23† of the Companies (Central Government's) General
(Second Amendment) Rules, 2007 vide Notification No. G.S.R. 500(E), dated 24-7-2007, published in the Gazette
of India Extraordinary, No. 333, Part II, Section 3(1) page 12, dated 24-7-2007 : (2007) 138 Comp. Cas. (St.) 29 :
the Ministry of Corporate Affairs (MCA) website http://www.mca.gov.in printed in Appendices.
See e-Form 23 of the Companies (Central Government's) General Rules and Forms, 1956 [Pursuant to Section 192
of the Companies Act, 1956] for Registration of Resolution(s) and Agreement(s) [Special Resolution passed under
Section 25(3)] under the category Compliance Related Filing/Informational Services on theMinistry of Corporate
Affairs (MCA) website http://www.mca.gov.in.
Filing of e-Forms mandatory (w.e.f. 16-9-2006).— See detailed Comments on Filing of e-Forms mandatory (w.e.f.
16-9-2006) under Sections 192 and 610B.
Annual Return by company with no share capital.—The Annual Return to be filed by a company having no
share capital pursuant to Section 160 shall be in Form No. e-form 21A† of the Companies (Central Govt.'s) General
Rules and Forms, 1956.
See detailed Comments, Form and Procedure under Sections 160 and 610-B.
Filing Fees.—Filing fee of Rs. 50 as prescribed in Schedule X shall be payable along with documents to be filed by
a company not having a share capital.
Partnership treated as separate entity [Sub-section (4)].—A firm may be a member of such an association and it
will cease to be a member on its dissolution. For purposes of this section a partnership firm has been recognised as
a separate entity. A firm may be a member of such an association (though a firm cannot be a member or
shareholder in a company within the meaning of the Act).
Department's view.— A firm may be a member of company licenced under section 25.—“A firm, not being a
person cannot be registered as a member of a company except where the company is licenced under section 25.” [
Circular No. 4/72, dated 9-3-1972 : Govt. of India publication, Clarifications and Circulars on Company Law, 1977
Edition, page 21].
Central Government may impose conditions [Sub-section (5)].—The licence may be granted on such
conditions as the Central Government may think fit. In case of a new association the Central Government may
direct for incorporation in the Memorandum and Articles such conditions as it thinks fit.
Page 15 of 25
Exemptions and privileges [Sub-section (6).—The Central Government may direct that such an association will
be exempt from certain specified provisions of the Act, unless the Articles of the Association provides, otherwise.
As already explained, as per sub-section (2) of section 25 the association on registration shall enjoy all the
privileges of limited companies.
Notifications under Section 25(6) specifying Exemptions and Privileges to a Section 25-Company.—
Notification No. S.O. 1578, dated 1-7-1961.*
—“In exercise of the powers conferred by sub-section (6) of section 25 of the Companies Act, 1956 (1 of 1956), the
Central Government hereby directs that a body to which a licence is granted under section 25 aforesaid shall be
exempt from the provisions of the said Act specified in column 1 of the Table below to the extent specified in the
corresponding entries in column 2 of the said Table.
TABLE
Provisions of Act Extent of Exemption

46[ Section 2(45) In so far as they require the appointment of an individual to
perform the duties which may be performed by a Secretary
under the said Act and any other ministerial or administrative
duties only if he possesses the prescribed qualifications.]
Section 147
The whole.
Section 160(1)(aa) The whole.
Section 166(2) The whole: Provided that the time, date and place of each
annual general meeting are decided upon beforehand by the
Board of directors having regard to the directions, if any, given
in this regard by the company in general meeting.
Section 171(1) A general meeting may be called by giving a notice in writing

of not less than 14 days.
47[ Section 193 Minutes may be recorded within 30 days of the conclusion of
every meeting in case of companies where the articles of
association provide for confirmation of minutes by circulation.]
Section 209(4A) Books of accounts relating to a period of not less than four
years immediately preceding the current year shall be
preserved.
48[ Section 219(1) The documents mentioned in sub-section (1) of section 219
may be sent not less than fourteen days before the date of the
general meeting.]
Section 257 Shall not apply to companies whose articles provide for
election of directors by ballot.
49[ Section 259 The whole.]
Section 264(1) The whole.
50[* * *]
Section 285 Shall apply only to the extent that the Board of
directors/Executive Committee/or Governing Committee of
such companies shall hold at least one meeting within every
six calendar months.
Section 287 Shall apply only to the extent that the quorum for the Board
Page 16 of 25
Provisions of Act Extent of Exemption

meeting shall be either eight members or l/4th of its total
strength whichever is less provided the quorum shall not be
less than two members in any case.
51[ Section 292 Matters referred to in clauses (c), (d) and (e) of sub-section (1)
may be decided by the Board by circulation instead of at a
meeting.]
Section 299 Shall apply only to cases to which sub-sections (1) and (3) of
section 297 apply.
Section 301 A register shall be maintained only of contracts to which sub-

sections (1) and (3) of section 297 apply.
51a[***] 51a[***].”
[ Notification No. S.O. 1578, dated l-7-1961 : Gazette of India, Part II, Section 3(ii), page 1547, dated 8-7-1961 :
(1961) 31 Comp. Cas. (St.) 350].
Other Notifications under Section 25(6).— Associated Chambers of Commerce and Industry exempted from
Section 370†.—“In exercise of the powers conferred by sub-section (6) of section 25 of the Companies Act, 1956 (1
of 1956), the Central Government hereby directs that Associated Chambers of Commerce and Industry of India, a
body to which a licence is granted under section 25 of the said Act, shall be exempt from the operation of the
provisions of section 370 † thereof in so far as they relate to the requirement of prior approval of the Central
Government.” [Notification dated 14-2-1990, published in the Gazette of India, Part II, Section 3(ii) dated 14-2-1990
: Chartered Secretary, March 1990, page 219].
Bombay Chambers of Commerce and Industry exempted from Sections 370 and 372.—“In exercise of the
powers conferred by sub-section (6) of section 25 of the Companies Act, 1956 (1 of 1956), the Central Government
hereby directs that the Bombay Chambers of Commerce and Industry, a body to which a licence is granted under
section 25 of the said Act, shall be exempt from the operation of the provisions of sections 370 and 372† thereof in
so far as they relate to the requirement of prior approval of the Central Government.” [Notification dated 14-2-1990 :
Gazette of India, Part II, Section 3(ii) : Chartered Secretary, March 1990, page 219].
Western U.P. Chamber of Commerce and Industry exempted from provisions of Section 372.—“In exercise of
the powers conferred by sub-section (6) of section 25 of the Companies Act, 1956 (1 of 1956), the Central
Government hereby directs that the Western U.P. Chamber of Commerce and Industry, a body to which a licence is
granted under section 25 of the said Act, shall be exempt from the operation of the provisions of section 372 thereof
in so far as they relate to the requirement of previous approval of the Central Government.” [ Notification No. S.O.
270(E), dated 26-4-1993, published in the Gazette of India, Extraordinary, No. 246, Part II, Section 3(ii) (1993) 78
Department's view.— Applicability of the provisions of Section 370 of the Companies Act, 1956, to Section
25-Companies limited by guarantee and having no share capital.—“So far as grant of loan is concerned, the
same has to be computed with reference to the lending company's subscribed capital and its free reserves. A
section 25 company may or may not have share capital. If it has share capital, the provisions of section 370 of the
Companies Act, 1956, become applicable in the same manner as these are applicable to any other company. In
case it does not have share capital and is a guarantee company simplicitor, even then it can have free reserves and
percentages under section 370 can be computed in relation to such free reserves alone. Hence, in either case, the
provisions of Section 370 become applicable to the grant of loan by a section 25 company.
2. As regards giving guarantee or providing security by a company, the existence of share capital or free reserves is
not relevant and as such in these cases, the provisions of Section 370 are also attached.
3. In view of the above, it appears that provisions of section 370 of the Act, are applicable to a section 25 company,
unless it qualifies for an exemption under sub-section (2) of section 370 of the Companies Act, 1956.” [ Letter No.
1/6/88-CL-V, dated 28-4-1989 : Chartered Secretary, June 1989, page 458].
Articles to override Exemptions.— Sub-section (6) of section 25 provides that such an association, i.e., section
Page 17 of 25
25-company, will be exempt from specified provisions of the Act, unless the Articles of the Association provides,
otherwise.
Where a section 25-company or association has made its own provisions in respect of the subject matters of above
exemptions and privileges it cannot take advantage of the above exemptions granted by the Central Government.
Privileges under other Sections.—As per sub-section (2) of the section 25, the association on registration shall
enjoy all the privileges of limited companies.
Some more privileges and concessions available to a Section 25-Company under other sections of the Companies
Act, 1956 are as follows.
Minimum paid-up capital— Section 25 company exempt [ Section 3(6)].—A company registered under section
25 of the Companies Act, 1956 before or after the commencement of the Companies (Amendment) Act, 2000, shall
not be required to have minimum paid-up capital specified in section 3. [vide Section 3(6)].
Election by ballot of all directors [ Section 263A].— Section 25-company may make provisions in its Articles for
election of all its directors by ballot at each Annual General Meeting and provisions of Sections 177, 255, 256 and
263 will not apply.
Section 25-Company—Elections of Directors.— Section 263A of the Companies Act, 1956 provides that nothing
contained in sections 177, 255, 256 and 263 shall affect any provision in the Articles of a company for the 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. Section 263A only protects the provisions in the Articles of
Association of a company for the election of all its directors by ballot. The normal rules that the Resolution for
appointment of each director should be put to vote individually [ Section 263] and that the voting should be initially
by show of hands [ Section 177] unless poll is demanded under Section 179, are only permitted to be relaxed by a
suitable provision in the Articles of Association of a Section 25-Company. It is possible for such a company to
provide by its Articles that election of directors shall take place by ballot and not by show of hands and that the
resolution for appointment of each director need not be moved individually. This is the only concession available
under section 263A of the Act. Section 263A cannot mean that all other provisions of Sections 255 and 256 of the
Act relating to the appointment and retirement of directors would also not apply to such a company. It must be
clarified that Section 25(6) of the Act, does not per se exempt a company licensed under section 25 from the
provisions of the Act, in general or Sections 255 and 256 in particular. In the normal circumstances, the exemption
from any of the provisions of the Act, must be stated expressly in the terms of the licence. In rare cases, however,
exemption would be required to be inferred by necessary implication. Where the Articles of Association of a Club
granted licence under Section 25 of the Companies Act, 1956 provided for Elections of Directors not to be held
every year but to be held only once in five years. Approval of this clause of the Articles of Association, by necessary
implication, amounts to grant of exemption from application of Section 255 of the Companies Act, 1956, to the
extent of repugnancy between the two. It is not disputed that Section 25(6) of the Act, the Central Government has
the power to grant such exemption. In view of this, it was not necessary for the company to follow the provisions of
Sections 255 and 256 of the Act regarding electing all directors at every general meeting, or to provide for
retirement of 1/3rd of its directors at each Annual General Meeting.52
See detailed Comments under Sections 25, 255, 256 and 263A.
Department's view.— Election of Directors in case of Section 25 Companies.—In reply to a query: “Section 25
Companies make provisions in their Articles of Association that the companies in their membership will not be
entitled to vote in the election of directors (committee members) unless they have paid their subscription for the
relevant year. The member companies are entitled to nominate their representatives for election to the Committee.
In case, one of the nominees happen to be nominated by a member company, which has not paid the subscription
for the relevant year, the point for clarification is whether such nomination and his subsequent election as
Committee member will be invalid under the law. The Articles of Association of the company concerned do not as
such disqualify a person being nominated for election by a member company which has not paid the subscription.”
The Department has expressed the following views: “There can be no objection to the nomination and election of a
person nominated by a member company which has not paid the subscription for the relevant year.” [ Circular No.
23(29)-CL-IV/64, dated 7-5-1964 : Government of India publication, Clarifications and Circulars on Company Law,
1977 Edition, page 21].
Page 18 of 25
Internal Management : Suit maintainable.—In respect of a Charitable Trust registered as a company under
section 25 of the Companies Act, 1956, a suit filed for administration or framing of a scheme of management can be
maintained under section 398 by the members in a Company Court under Section 10 [theCompany Law Board
under Section 10Enow the Tribunal (NCLT) under Section 10FB]. Beneficiaries can file suit under section 92 of the
Civil Procedure Code, 1908 (5 of 1908). The Court directed that all decisions of Board of Directors of a Section 25
company should be taken up at a meeting to be attended by all its 3 original Directors. A resolution passed at a
Board Meeting which was not so attended was declared null and void.53
Indoor Management.—Where a registered society by a general body resolution decided to convert membership of
firms to individual membership of partners. Refusal to admit all 3 partners of the firm as members was not justified.
No documents were produced to support the claim that only one partner was allowed as member per firm. Suit by
the firm was maintainable. It was not a case of indoor management.54
Central Government directions.—A company licensed under section 25 provided in the Articles that the Central
Government can give directions in the national or public interest. The Central Government directed the Executive
Committee of the company not to exercise any of its powers relating to the staff. The court held that such direction
was arbitrary and without jurisdiction. When the council was created by the Central Government and licenced under
section 25 of the Act, the Central Government cannot divest the Executive Committee of its powers conferred by
the Articles to the Executive Committee by an order and must observe procedure under the Companies Act, 1956
for amendment of Articles if it so desires.55
Writ.—Some members of a Club registered under section 25 were suspended for a few weeks. On their writ
petition the Court held that the Articles of the Club and action of the Club were valid and the writ petition was not
maintainable.56
Voluntary associations created under the Companies Act, 1956 are not statutory authorities exercising
governmental functions. The Bengal Chamber of Commerce which has been granted licence under section 25
cannot be treated as “local authority” or “State” within the meaning of Article 12 and shall not be amenable to writ
jurisdiction of the High Court under Article 226 of the Constitution of India.57
Registrar's duty in case of rival parties claiming management.—If there are rival parties in a company and
each party sends returns or particulars as office-bearers, the Registrar of Companies should not enter any such
particulars in the Register kept by the Registrar until the disputes between the parties are decided by a competent
court. Under section 306, the ROC has no power to pronounce as to the meetings having been validly held or a
particular office-bearer having been duly elected. He cannot also return one of the papers filed under section 303 of
the Act.58
Where rival groups held meetings at separate places and appointed separate sets of office bearers. It was
impracticable to call meeting. The CLB [ now the Tribunal] may order calling of meeting and decide agenda of the
meeting.59
The CLB [ now the Tribunal] has the power to direct calling of meetings, other than an Annual General Meeting, i.e.,
Statutory or Extraordinary General Meeting under Section 186. The power to convene an Annual General Meeting
is vested in the CLB [ now the Central Government] under Section 167.
Annual General Meeting.—As per the Central Government Notification under section 25(6) [ Notification No. S.O.
1578 (printed above)], under section 171(1) the general body meeting may be called by giving a notice in writing of
not less than 14 days instead of 21 days. The expression “not less than 14 days” used in section 171, as amended
by virtue of the Central Government Notification under section 25(6), normally implies notice of 14 whole or clear
days; part of the day, after the hour at which the notice is deemed to have been served, cannot be combined with
the part of the day before the time of the meeting, on the date of the meeting, to form one day. Each of the 14 days
must be a full or a calendar day so that the notice can be said to be “not less than 14 days' notice”.60
The challenge made to the validity of the annual general meeting for the reason that individual members were not
served with notice containing information as to the candidates contesting elections for various offices or for
membership of the executive committee was not prima facie tenable because by virtue of the Exemption
Notification under section 25(6) of the Companies Act, 1956, the provisions of section 257 are not applicable to
Page 19 of 25
such a company. The notification is confined not only to companies where polling is by ballot and would cover
companies where both the modes, namely, show of hands and ballot, are provided.61
Proxy.— Section 176 of the Companies Act, 1956 deals with proxies. As per section 176(1) proviso (a), unless the
articles otherwise provide, this section shall not apply in the case of a company not having a share capital. A
company, not having a share capital, shall not be able to have proxies as the manner of voting by its members,
unless its articles so provide. The articles of the respondent, a guarantee company, provided that it shall be
permissible for members to vote by proxy. Section 176 would therefore apply to the respondent company. It is clear
from a reading of section 176(6) that the only proxy which is required for the purposes of enabling a person to cast
his vote which is provided is in the form set out in Schedule IX to the Companies Act, 1956. That proxy cannot be
added on to or subtracted from. No special proxy form issued by any body of persons which adds to the
requirements of a proxy, by imposing any condition, or requiring it to be on specific proxy paper can be sustained in
law. Election rules of the company providing that proxy forms provided by company alone would be valid were
declared invalid as they go beyond section 176(6).62
Transfer of share or interest by Member.— Section 28 provides that 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 to the Companies Act,
1956. Section 29 provides that the articles of association of other companies shall be in one of such forms in Tables
C, D and E in Schedule I as may be applicable or in a form as near thereto as circumstances admit. In the case of
Magadh Stock Exchange Association (MSEA), registered under section 25, Table C was applicable. If Tables A and
C are compared it becomes apparent that there are material differences between the two. Where, the High Court
disposed of the matter by merely observing that no distinction can be made in the matter of transfer of shares or
other interest between a company limited by shares and a company limited by guarantee, the Supreme Court set
aside the judgment and order passed by the High Court and remitted the matter back to the High Court for deciding
the appeal afresh after hearing both the sides and considering all the relevant aspects and fulfilment of the
requirements of section 108.63
If the Article does not infringe or offend any specific provision of the Act, then it is valid. Articles of Association of a
Stock Exchange providing for cancellation of membership of a defaulting member shall be intra vires the
Companies Act, 1956 and the SEBI Act, 1992 and shall be valid.64
See also Comments under Sections 26, 27, 28, 29, 108 and 111A.
Section 25-Company—Denial by Association to admit a Member.— Section 111 and 111A of the Companies
Act, 1956 apply only to matters of transfer or transmission of shares or membership rights. Section 111(4)(a) deals
with situations wherein the name of a person is entered in the Register of Members without sufficient cause and
when the name of a person which is already on the Register of Members is omitted therefrom without sufficient
cause. In the instant case, the complaint of the petitioner was that the Association had rejected his application for
Membership and thereby refused to put his name in the Register of Members. The two conditions prescribed in
Section 41 of the Act are cumulative in nature in the sense that there should not only be an agreement in writing but
the name also should be entered in the Register of Members to be a member of a company. Merely agreeing to
become a Member of a company and on that basis to claim that the refusal of the company to enter his name in the
Register would entitle a petitioner to file a petition under Section 111 was not sustainable. Whether the refusal by
the Association was mala fide or whether the Articles giving the power to the Association to reject an application for
membership were valid, etc., are beyond the scope of Section 111. The denial of the Association to admit the
petitioner as a Member was not a ground to invoke the provisions of Section 111.65
See also Comments under Sections 41, 111 and 111A.
Amalgamation of Section 25-Company and Trading Company.—Such a scheme of amalgamation can be

granted under sections 391 to 394 provided the court [ now the Tribunal (NCLT)] is satisfied about the
reasonableness of the scheme. If the transferee company, i.e., the Trust, does not carry on business strictly in
accordance with the terms of its own memorandum of association and/or the terms of the licence issued by the
Government under section 25 such a contravention can be taken care of and it would be open to the authorities
under the Companies Act to take appropriate action including the revocation of the licence. However, this would not
be a ground to refuse sanction to the scheme of amalgamation. The transferee company, i.e., the Trust had to file
an undertaking that it would carry on its activities strictly in accordance with the terms of its own memorandum of
association.66
Mismanagement or oppression.—The matters complained of in a petition for relief under section 397 must affect
Page 20 of 25
the member(s) of the company; harsh and unfair treatment to petitioner alone cannot entitle him to any relief. A
member or a director will have no personal interest in the case of a section 25 company since the object of the
company is wholly charitable and no member or director can complain that he was ignored while doing the charity.
The right of a member in section 25 company is only to ensure that charitable objects of the company are carried
out and the personal benefits of the members do not at all come into the picture. The scope of section 397 is rather
curtailed in the case of a section 25 company. Corpus donation by company to Trust was not ultra vires the object
of the company, no relief was granted.67
Where the company was acquired by the State on the ground of mismanagement. The Supreme Court held that the
provisions of the Companies Act, 1956 were adequate to deal with mismanagement and acquisition of the company
was not permissible. The company was not liable to hold the Annual General Meetings for each of the years during
which it remained under acquisition. Therefore, there was no question of directing convening of annual general
meetings for the period. The order of theCLB directing the calling of meetings was set aside.68
Elections of Office Bearers and Executive Members.—In a petition filed under sections 397 and 398 of the
Companies Act, 1956, alleging oppression and mismanagement in the affairs of the respondent, a Section 25-
Company, the petitioner sought amendment of clause 24 of the Articles of Association of the company for putting
restrictions on the retiring Office Bearers and retiring Members of the Executive Committee from re-election on the
ground that it was necessary to prevent oppression by the majority to provide a gap of one year after every two
consecutive years. Dismissing the petition, it was held that in an election nobody could win unless he had the
support of the majority with him. The elections were to be conducted in a democratic manner. Every member had
the right to vote and to vote in a particular manner. If a candidate was able to muster the support of majority
members and with such support he was able to get himself elected again and again every time, it was his right to
seek elections and get elected in this manner. Even if a person were to be debarred by carrying out the proposed
amendment to article 24, such a person could always field another candidate belonging to his group and of his
choice and could get him elected. Therefore, merely by prescribing that there had to be a gap of one year after a
person got elected as Office Bearer/Executive Member for a consecutive period of two years the alleged defect
could not be remedied. The right of the majority to get elected was different from their oppressive conduct. The
contention that if a person was re-elected again and again he would indulge in oppression of the minority and
mismanagement was not tenable as there was remedy under Sections 397 and 398 of the Act. It was for the
Members to lay down the manner in which Elections of Office Bearers and Executive Members were to be
conducted including the eligibility conditions. More than 75% Members had decided to retain article 24 in its present
form and they did not want any amendment therein. Therefore, the respondent Association, a Section 25-Company,
was entitled to retain article 24 in its present form.69
Wrongful removal of members.—Persons who have been removed from membership of a company have a right
to apply under section 155 [ now section 111A] of the Act. In an application under section 155 [ now section 111A]
the Court [the CLB (now the Tribunal)] cannot appoint a Committee to go into the wrongful exclusion of the names
of certain members. The Company Court [the CLB (now the Tribunal)] cannot debar a person from standing for
election or direct that one person should vote only once either as a representative or as a member. The Court
cannot appoint a Committee to go into the alleged wrongful exclusion of the persons. If a case falls under section
155 [ now section 111A] the inherent power of the Court cannot be exercised. If the persons who have been
removed from membership are not before the Court, the Court in a petition under sections 397 and 398 can only
appoint a Chairman for the Annual General Meeting and authorise him to take into consideration any objections
against wrongful removal from the voters' list prepared by the company and allow the vote to be cast under
objection separately if the Chairman thinks that there is some substance in the allegation of wrongful removal.70
Association as Trustee.—A company formed for exclusively charitable purposes is not a trustee of its corporate
assets in the strict sense, although it is in a position analogous to a trustee, because the mere fact that it has assets
which can be applied only for the charitable purposes set out in its Memorandum does not make the company a
trustee of those assets in the strict sense.71
An association or company limited by guarantee, registered under section 25 of the Companies Act, 1956 without
the word “Limited”, is a corporation. It is a juristic person and a distinct legal entity. It may, therefore, act as a
trustee if its memorandum permits. If its purposes constitute public, religious and charitable purpose, the
association or the company would be a public trust liable to be registered under the Public Trusts Act, e.g., the
Bombay Public Trusts Act, 1950 (29 of 1950).72
Page 21 of 25
Club.
—A members' club which is not formed for profit is registerable under this section.73 Where the Articles of
Association of the Madras Cricket Club, a sports and recreational club without any profit motive and registered as a
section 25 company conferred power on the club to suspend a member for a limited period. The article was
approved by the Regional Director under powers delegated to him by the Central Government. Held, the need or
necessity for the retention of a clause of the nature impugned in the articles of association, in order to maintain
internal discipline among members of a private club and protect the fair image and status of the club is a matter
pertaining to private law or personal matters and no public law aspect or any violation of statutory rights or
fundamental rights is involved therein. The wisdom or otherwise of the policy behind the bye-law of a private club is
not a matter for consideration in a writ petition under Article 226 of the Constitution of India. Circular No. 32 of 1975
dealing with expulsion of a shareholder of a public limited company is not applicable to clubs, associations, etc.,
incorporated under section 25 of the Act.74
Voting by secret ballot.—When in a meeting a poll is demanded under section 179 read with 177, it is not
necessary that the voting must be by a secret ballot. The manner in which the voting is to be taken on a poll being
demanded has been left to the discretion of the chairman by section 185. The court, however, by way of obiter,
observed that in an institution like a club, which is not a commercial concern, it is highly desirable, in order to
maintain the proper atmosphere in the institution and to inspire complete confidence in the management that,
whenever a poll is demanded, the chairman should normally have the voting done by secret ballot which would not
indicate the name of the person voting in any particular manner.75
Societies Registration Act.—A non-profit Charitable Association, Institution or Club etc. may be registered under
the Societies Registration Act, 1860 (21 of 1860) or under Section 25 of the Companies Act, 1956. But, general
process governing the rights of members are not the same as in the case of the shareholders or But, general
process governing the rights of members are not the same as in the case of the shareholders or the society to the
same extent as in the case of a company.76 Society registered under the Societies Registration Act, 1860 is not a
juristic person within the meaning of the Companies Act, 1956. A registered society is a mere “Corporation” or a
“Quasi-Corporation”.77
See the Societies Registration Act, 1860 (21 of 1860)† in Appendices.
Exemption Notification under section 45NC of RBI Act.—“The Reserve Bank of India, on being satisfied that it is
necessary so to do, in exercise of its powers conferred under section 45NC of the Reserved Bank of India Act, 1934
(2 of 1934), hereby declares that the provisions of—
(1) Sections 45-IA, 45-IB and 45-IC of the Reserve Bank of India Act, 1934 (2 of 1934), shall not apply to any
non-banking financial company;
(i) which is—
(ii) licensed under section 25 of the Companies Act, 1956.” [Extracts from Notification No.
DNBS.138/CGM(VSNM)-2000, dated 13-1-2000 Notification No. DNBS.138/CGM(VSNM)-2000, dated
13-1-2000 : (2000) 99 Comp. Cas. (St.)299]. See Full Text in Comments under Section 58A.
Income-tax.—An association only by virtue of being registered under section 25 of the Companies Act, 1956 (1 of
1956) is not exempted from income-tax. Although, in view of its objects it shall generally qualify for exemption under
section 11 read with section 2(15) of the Income-tax Act, 1961 (43 of 1961).78
Accounting and Auditing Practices.— The CARO, 2003 not applicable to Section 25-Companies.—The
Companies (Auditor's Report) Order, 2003 is not applicable to a company licensed to operate under section 25 of
the Companies Act, 1956 [ Paragraph 1(2)(iii) of the Companies (Auditor's Report) Order, 2003].
Auditors of these companies are, therefore, not required to give report on matters specified in the CARO, 2003. See
Revocation of Licence [Sub-section (7)].—The Central Government may revoke the licence after giving an
opportunity to the association to present its case. Upon revocation, the Registrar shall enter the words “Limited” or
“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.
Page 22 of 25
This power of the Central Government cannot be used mala fide or arbitrarily. An aggrieved association may
challenge the Central Government order under Article 226 of the Constitution of India. See detailed Comments
under Section 637.
Requisites for alteration of objects clause [Sub-section (8)].— Section 25 company (a) shall not alter its
memorandum with respect to its objects except with the previous approval of the Central Government signified in
writing, (b) if it contravenes the provisions of clause (a), the Central Government may revoke its licence, (c) the
Central Government may vary the licence, (d) where the alteration is with respect to the things specified in clauses
(a) to (g) of section 17(1), the provisions of section 25(8) shall be in addition to the provisions of that section.
Where the Court [the CLB (now the Central Government)] confirmed the alteration under section 17 without
previous approval of the Central Government being obtained, it had the jurisdiction to cancel the order.79See also
Chamber of Commerce to change name after revocation [Sub-s. (9)].—Where the licence was granted to a
Chamber of Commerce, after revocation of the licence that name cannot be used. The name should be
discontinued within 3 months or such longer period as the Central Government may allow. Section 23 shall apply to
a change of name under this sub-section as it applies to a change of name under section 21.
Penalty.—For alteration of memorandum with respect to its object without the approval of the Central Government
[Sub-section (8)]. Since no specific penalty is provided for, the company and every officer who is in default shall be
punishable under section 629A with fine upto Rs. 5,000 and where the contravention is a continuing one, with a
further fine upto Rs. 500 for every day of default.
For omitting to remove the words “Chamber of Commerce” from the name of the company, in accordance with sub-
section (9), the company shall be punishable with fine upto Rs. 5,000 for every day of default. [Sub-section (10)].
See also Comments under Sections 5, 621, 621A and 629A.
Stamp [ Section 25-Company].—Memorandum and Articles of any Association not formed for profit and registered
under the Companies Act is exempted from paying any Stamp Duty. [ Articles 10 and 39 of the Indian Stamp Act,
1899 (2 of 1899)].
See also Comments and Practice Notes under Sections 12, 15, 26, 30 and 33.
Compliance Certificate—Private Limited Company.—Relevant paras of the Form appended to the Companies
Companies (Compliance Certificate) Rules, 2001.—Every company not required to employ a whole-time Secretary
(AGM).
follows:
“3. The company being Private Limited Company has the minimum prescribed paid-up capital and its maximum
number of members during the said financial year was .................. excluding its present and past employees and
the company during the year under scrutiny—
(i) has not invited public to subscribe for its shares or debentures; and
(ii) has not invited or accepted any deposits from persons other than its members, directors or their relatives.”
Page 23 of 25
Check-List for issue of Compliance Certificate.— See Check-List for issue of Compliance Certificate on Para 3
of the Form of Compliance Certificate as contained in ICSI Guidance Note on Compliance Certificate in Comments
under Section 3.
“Note : A Company registered under Section 25 before or after the commencement of the Companies (Amendment)
Act, 2000 shall not be required to have minimum paid up capital specified above. However, a Guarantee Company
having share capital should have minimum paid up capital specified above.”
under Section 383A.
Secretarial Practice and Check List.— Section 25. if the company had licence issued under section 25, check
that : (1) the company had not applied its profits or income by way of dividend to its members; (2) the company had
not altered objects clause of memorandum without prior approval of the Regional Director [This is in addition to the
provisions of Section 17]; (3) conditions of licence complied with; [Also see Regulations 3 to 14 of the Companies
Regulations, 1956].
The documents involved are : (1) Annual Report, (2) Memorandum and Articles, (3) Minutes of
Board/Committee/General Meeting.
45. Substituted by the Companies (Amendment) Act, 2000 (53 of 2000), s. 9 (w.e.f. 13-12-2000), for “five hundred
rupees”.
‡ See the Companies (Central Government's) General Rules and Forms, 1956 in Appendix 1.
610E (w.e.f. 16-9-2006) in Appendix 2.
16-9-2006).
2006) (w.e.f. 1-11-2006).
** See the Companies (Fees on Applications) Rules, 1999 in Appendix 4.
† The powers of the Central Government under this section have been delegated to the Regional Directors. See relevant
Notification hereinbefore.
* Published in the Gazette of India, Part II, Section 3(ii), page 1547, dated 8-7-1961 : (1961) 31 Comp. Cas. (St.) 350 :
Government of India publication, Clarifications and Circulars on Company Law, 1977 Edition, page 19.
Page 24 of 25
46. Inserted by Notification No. S.O. 35(E), dated 9-1-1976 : Gazette of India, Extraordinary, Part II, Section 3(ii), page 83,
dated 10-1-1976 : (1976) 46 Comp. Cas. (St.) 129.
47. Inserted by Notification No. S.O. 2767, dated 5-8-1964 : Govt. of India publication, Clarifications and Circulars on
Company Law, 1977 Edition, page 20.
48. Inserted by Notification No. G.S.R. 73, dated 30-12-1965 : Govt. of India publication ibid.
50. Sections 280 and 282 omitted as these sections have been omitted by Act 31 of 1965.
51a The word, figures and brackets “Section 303(2)” in column (1) and words “The whole” in column (2) omitted
vide Notification No. S.O. 2219(E), dated 28-12-2007 (w.e.f. 31-12-2007) : published in the Gazette of India,
Extraordinary, Part II, Section 3(ii) : the Ministry of Company Affairs (MCA) website http://www.mca.gov.in.
Notification also requires that the Existing Companies shall file e-Form 32 of the Companies (Central Government's)
General Rules and Forms, 1956 under Section 303(2) in respect of any change among its Directors, Managing
Director, Manager or Secretary after filing Form DIN-3 regarding Director Identification Number under Section 266A
within 60 days without payment of prescribed Fees and thereafter along with Fees and Additional Fees under Section
611 of the Act.
† Now Section 372A, inserted in place of sections 370 and 372 by the Companies (Amendment) Act, 1999 (21 of 1999),
permits the companies to make inter-corporate investments and loans subject to fulfilment of certain conditions without
prior approval of the Central Government. See detailed Comments and Legislative History under Sections 370, 372 and
372A.
52. C.P. Singhania v. Garware Club House, (2005) 124 Comp. Cas. 561 (Bom.).
Mad. 387 [LNIND 1962 MAD 194]; Vohra v. Ms. Balji Kaur Vohra,(2000) 38 Corp. LA 265 (CLB). See also Comments
54. Thirunageswaram Handloom Textile Manufacturers Association v. T.P. Kuppusamy Mudaliar and Sons, (2002) 112
Comp. Cas. 341 (Mad.). See also Comments under Sections 10 and 41.
55. Apparel Export Promotion Council v. UOI, (1997) 90 Comp. Cas. 309 (Mad.).
56. K. Leela Kumar v. Govt. of India, (2002) 108 Comp. Cas. 610 (Mad.) (DB).
57. M.L. Shaw, In re, (1986) 59 Comp. Cas. 312 (Cal.); Ramana Dayaram Shetty v. International Airport Authority of
India,AIR 1979 SC 1628 [LNIND 1979 SC 275]. See also Comments under Ss. 10 and 617.
58. Jullundur District Registered Factory Owners' Association v. Registrar of Companies, (1961) 31 Comp. Cas. 673
(Punj.). See also Comments under Sections 188, 303 and 306.
59. Baptist Church Trust Association v. Member, CLB, (1986) 60 Comp. Cas. 381(Cal.). See detailed Comments under
Section 186.
60. Maharaja Exports v. Apparel Export Promotion Council, (1986) 60 Comp. Cas. 353 (Delhi). See also Comments under
61. Sunil Dev v. Delhi and District Cricket Association, (1994) 80 Comp. Cas. 174 (Delhi). See also Comments under
62. General Commerce Ltd. v. Apparel Export Promotion Council, (1990) 69 Comp. Cas. 158 (Delhi). See also Comments
under Sections 176 and Schedule IX.
28, 29, 108, 111A and Schedule I.
66. Walvis Flour Mills Co. Pvt. Ltd., In re, (1993) 76 Comp. Cas. 376 (Bom.). See also Comments under Sections 391 to
394.
67. Mohanram Sastry v. Swadharma Swarajya Sangha, (1995) 83 Comp. Cas. 272 (Mad.). See also Comments under
Sections 111A, 397 and 398.
68. Madras Race Club v. Dr. K.R. Lakshmanan, (1997) 88 Comp. Cas. 754 (Mad.); Dr. K.R. Lakshmanan v. State of Tamil
Nadu, (1996) 86 Comp. Cas. 66 (SC). See also Comments under Sections 167 and 391.
69. G.S. Mayawala v. Motion Picture Association, (2006) 132 Comp. Cas. 388 (Delhi).
Page 25 of 25
70. Dineker Rai D. Desai v. R.P. Bhasin, (1986) 60 Comp. Cas. 14 (Delhi) (DB). See also Comments under Sections 111A,
166, 397, 398 and 403.
71. Liverpool and District Hospital for Diseases of the Heart v. Attorney-General, (1981) Ch. 193 : (1981) 1 All ER 994 :
(1981) 2 WLR 379 : (1981) 125 SJ 79.
72. Akhil Deshastha Rigvedi Brahman Madhyawarti Mandal v. Joint Charity Commissioner, (1973) 43 Comp. Cas. 361
(Bom.). See also Comments under Section 34.
73. Cosmopolitan Club v. Dy. CTO,AIR 1952 Mad. 814 [LNIND 1951 MAD 300].
74. K. Leela Kumar v. Govt. of India, (2002) 108 Comp. Cas. 610 (Mad.) (DB). The Supreme Court decision in Bajaj Auto
Ltd. v. N.K. Firodia, (1971) 41 Comp. Cas. 1 (SC) : AIR 1971 SC 321 [LNIND 1970 SC 345] regarding expulsion of a
shareholder of a public limited company [dealt with in Comments under Sections 41, 108, 111 and 111A] was held not
applicable to section 25 company.
75. Major Mella Singh v. President, Jullundur Club Ltd., (1969) 39 Comp. Cas. 1018 (P&H). See detailed Comments under
76. Krishna Swami v. South Indian Film Chambers of Commerce,AIR 1969 Mad. 42 [LNIND 1967 MAD 100]. See also
77. Board of Trustees, Ayurvedic and Unani Tibia College, Delhi v. State of Delhi,AIR 1962 SC 458 [LNIND 1961 SC 337]:
(1962) Supp. 1 SCR 156. See also Comments under Section 2(7).
† See the Societies Registration Act, 1860 (21 of 1860) in Appendix 333.
Association,(1980) 121 ITR 1 [LNIND 1979 SC 459] (SC) : AIR 1980 SC 387 [LNIND 1979 SC 459]; CIT v. Andhra
Chamber of Commerce,(1981) 130 ITR 184 (SC); Thiagarajar Charities v. Addl. CIT,(1997) 225 ITR 1010 (SC).
79. Ugar Sen Parsottam Das v. Chamber of Commerce, Hapur,AIR 1937 All. 432.
End of Document
Datta: Company Law
C R Datta
COMPANY AND MATTERS INCIDENTAL THERETO > Articles of Association
S. 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.
80. Babulal Madhavji Varma v. New Standard Coal Co. P. Ltd., (1967) 37 Comp. Cas. 446 (Cal.) : 71 CWN 333. See
81. Naresh Chandra Sanyal v. Calcutta Stock Exchange Association Ltd., (1971) 41 Comp. Cas. 51 (SC) : AIR 1971 SC
422 [LNIND 1970 SC 391]. See also Comments under Sections 79, 100 and Schedule I, Table A, Regulations 24 and
31.
82. B.V. Thirumalai v. Best Vestures Trading P. Ltd., (2004) 4 Comp. LJ 519 (CLB).
83. Hanuman Prasad Gupta v. Hiralal, (1970) 40 Comp. Cas. 1058 (SC) : AIR 1971 SC 206 [LNIND 1970 SC 71]: (1970) 2
Comp. LJ 195 (SC). See also Comments under Section 36.
85. IL & FS Trust Co. Ltd. v. Birla Perucchini Ltd., (2004) 121 Comp. Cas. 335 (Bom.).
also Comments under Sections 3, 36, 82 and 111.
87. Baker Hughes Ltd. v. Hiroo Khushalani, (2000) 102 Comp. Cas. 203 (Delhi). See also Comments under Sections 20
and 36.
88. Fertilizer Corporation of India Ltd. v. Workmen,AIR 1970 SC 867 [LNIND 1968 SC 340]. See also Comments under
89. G. Karunakaran v. State of Kerala, (1987) 61 Comp. Cas. 334 (Ker.).
91. Master Gautam R. Padival (Minor) v. Karnataka Theatres Ltd., (2000) 100 Comp. Cas. 124 (CLB). See detailed
92. Ramakrishna Industries P. Ltd. v. P.R. Ramakrishnan, (1988) 64 Comp. Cas. 425 (Mad.) (DB). See detailed Comments
under Section 9
93. Kinetic Engineering Ltd. v. Sadhana Gadia, (1992) 74 Comp. Cas. 82 (CLB); Co-operative Central Bank Ltd. v.
Additional Industrial Tribunal, (1970) 40 Comp. Cas. 206 (SC) : AIR 1970 SC 245 [LNIND 1969 SC 152]. See also
See also Comments under Sections 25, 27, 28, 29 and 111A.
95. Pramod Chopra v. Apparel Export Promotion Council,(1984) 1 ILR 717 (Delhi). See also Comments under Section 29.
Page 2 of 7
96. S.S. Rajakumar v. Perfect Castings Pvt. Ltd., (1968) 38 Comp. Cas. 187 (Mad.).
97. Holmes v. Keyes, (1959) Ch. 199 : (1958) 2 All ER 129 (CA) : (1958) 2 WLR 772 : (1958) 102 SJ 329 (CA). See also
98. Sunil Dev v. Delhi and District Cricket Association, (1994) 80 Comp. Cas. 174 (Delhi). See detailed Comments under
Section 25.
99. Bratton Seymore Co. Ltd. v. Oxborough,(1992) BCLC 693 (CA).
99a R.K. Dalmia v. Delhi Administration, (1962) 32 Comp. Cas. 699 (SC) : AIR 1962 SC 1821 [LNIND 1962 SC 146]:
(1963) 1 SCR 253 [LNIND 1962 SC 146]; Dr. Indramani v. W.R. Natu,AIR 1963 SC 274 [LNIND 1962 SC 159]. See
COMMENTS
English Act, 1948 : Section 6 Previous Act, 1913 : Section 17(1)
follows: “This section corresponds to section 17(1) of the existing Act.” [ Clause 22 of the Companies Bill, 1953 (46
of 1953)].
Articles of public company limited by shares.—It is optional for a public company limited by shares to have its
own Articles of Association. If it has one, the same should be registered along with the Memorandum of Association
with the Registrar of Companies. If it does not have one, then the Model Articles given in Table ‘A’ of Schedule I to
the Companies Act, 1956 (1 of 1956), will govern the company's internal management.
Certain companies must have own Articles.—A company with Unlimited liability, a company limited by
Guarantee and a Private company limited by shares must have an Articles of Association. This document should be
filed along with the Memorandum at the time of registration of the company. This provision does not apply to a
private company existing as on 1st April, 1956.
Private Company.—The Articles of private company must contain four restrictions enumerated in Section 3(1)(iii)
(a) to (d), as amended by the Companies (Amendment) Act, 2000. See detailed Comments under Section 3(1)(iii).
The restriction usually contained in private company's Articles on transfer of shares to outsiders is not an absolute
restriction and a bona fide purchaser for consideration is entitled to have his name entered in the Register.80
Definition of Articles [ Section 2(2)].—Articles means the Articles of Association of a company as originally
framed or as altered from time to time. Table A in Schedule I to the Companies Act, 1956 contains Model
Regulations for management of a company limited by shares. [ Section 2(2)].
See detailed Comments below and Comments under Sections 27-36.
Form of Articles.— See detailed Comments under following Sections: Regulations required in case of unlimited
company, company limited by guarantee or private company limited by shares [ Section 27], Adoption and
application of Table A in the case of companies limited by shares [ Section 28], Form of articles in the case of other
companies [ Section 29], Form and signature of articles [ Section 30] and Schedule I to this Act containing Model
Regulations in Tables A to F.
Articles may be altered by special resolution [ Section 31]. The Articles inconsistent with the provisions of the Act
are void [ Section 9].
Page 3 of 7
In view of this, Model Regulations in relevant Tables in Schedule I should be carefully studied while drafting Articles
of Association of a company.
Appropriate Stamp Duty according to the local law (State law) has to be put on the Memorandum and Articles of
See also Comments and Practice Notes under Sections 12, 15, 30 and 33.
Section 25 Company.—Memorandum and Articles of any Association not formed for profit and registered under
the Companies Act is exempted from paying any stamp duty. [ Articles 10 and 39 of the Indian Stamp Act, 1899 (2
of 1899)].
Articles prescribe regulations for the company.—Subject to the provisions of the Companies Act, 1956, the
company and its members are bound by the provisions contained in the Articles of Association. The Articles
regulate the internal management of the company and define the powers of its officers. They also establish a
contract between the company and the members and between the members inter se.81
Article of Association internal Regulations of a Company.—Articles of Association are internal regulations of a

company and any act outside the provisions therein would be irregular unless ratified by members. Such irregular
act is wrongful and continuous act of oppression and irrespective of laches the question of limitation does not arise
to take action for such irregular act.82
See also Comments under Sections 9, 13, 36, 291-293 and 397-409.
Articles a contract between company and members.—It is well established that the Articles of Association
constitute a contract between a company and its members in respect of their ordinary rights as members.83 The
Articles of a company are its constituent document and are binding on the company and its directors.84
Articles of Association—Contract binding subject to Act.—Subject to the provisions of the Companies Act,
1956, a Company and its Members are bound by the terms and conditions of the Articles of Association. The
Articles of Association regulate the internal management of the company and powers of the officers concerned. It is
a Contract entered into by the Company with its Members and between the Members inter se, that is, amongst the
Members themselves. The Articles or contract governs the ordinary rights and obligations incidental to the
Membership in the company. Further, the Articles of Association of the Company may confer special voting rights
on a preferential class of shares and also provide that any alteration in the Articles of Association cannot be made
without prior consent of a particular person. The Articles of Association may provide that the Nominee Director of
the holder of specified convertible preference shares must be present to form a quorum. Provision may also be
made that affirmative vote of the Director would be essential for all important decisions including the appointment of
Directors. In such cases the appointment of Directors without such quorum and without the vote of the Nominee
Director will be invalid. Similarly, adoption of Annual Accounts without the affirmative Vote of the Nominee Directors
Page 4 of 7
will also be invalid. A meeting of the Directors was held but could not transact any official business for want of
quorum. The meeting was adjourned on the very same day after some hours. The provision that no notice for such
adjourned meeting would be necessary will not be applicable and Adjourned Meeting without notice would be
invalid.85
See also Comments under Sections 9, 13, 26-31, 36 and 290-293.
Articles of Private Company.—As per section 36 the Memorandum and Articles of Association when registered,
bind the company and its members. Section 82 defines the nature of shares and states that shares or other
interests of any member in a company shall be movable property transferable in the manner provided by the
articles. The Articles of Association are the regulations of the company binding on the company and on its
shareholders and the share transfer is regulated by the articles of association. A restriction not specified in the
articles is, therefore, not binding either on the company or on the shareholders. The private agreement between
members of a private company (two brothers) imposing additional restrictions on the member's right to transfer his
shares which were contrary to the provisions of articles of the company were therefore held not binding either on
the shareholders or on the company.86
Agreement not contrary to Articles binding.—Where the basic agreement, i.e., Joint Venture Agreement
provided that if the equity participation of the foreign company at any time fell below 40% then the company would
stop using the foreign company's trade name. The foreign company disposed off equity shares. On an action the
Court injuncted the Indian company from using the foreign company's trade name. Held, it was not contrary to the
Articles and was binding on the Indian company.87
Government Company.—The Articles of Association of a Corporation or a Government company may provide that
the Board of directors will act subject to direction of the President of India88 or hold office at the pleasure of the
Governor.89
Articles cannot override Memorandum.—The Memorandum of Association has to be read together with the
Articles of Association, where the terms are ambiguous or silent. The Articles may explain the Memorandum, but
cannot extend its scope.90
Act to override Articles.—According to section 9(b) of the Companies Act, 1956 the provisions contained in
Articles of Association of the company are void if these are repugnant to the provisions of the Companies Act, 1956.
For instance, Section 111A of the Companies Act, 1956 stipulates that the shares of a public company are freely
transferable. Therefore, any stipulation in the Articles of a public company contrary to the same, putting fetters on
the free transferability, would be hit by the provisions of section 9 of the Act.91
But, where the articles of the company provided for passing of a special resolution by company for winding up in
certain contingencies. It was held that the Article was not opposed to section 433(f) and was not void under section
9 of the Act.92
Articles repugnant to other Acts equally void.—Provisions in the Articles of Association of a company repugnant
to the provisions of other Acts, e.g., the Securities Contracts (Regulation) Act, 1956 (42 of 1956) or the Securities
and Exchange Board of India Act, 1992 (15 of 1992), etc., would be equally void if the provisions of such Acts do
not conflict with the provisions of the Companies Act, 1956. if any provision of the Articles or the Memorandum is
contrary to any provisions of any law, it will be invalid ab initio.Section 22A of the Securities Contracts (Regulation)
Act, 1956 [nowSection 111A of the Companies Act, 1956] provides for free transferability of shares of a public
company and the Board of directors can refuse registration of transfer of shares only on three specified grounds.
Therefore, any provision in the Articles which puts any restriction on the free transferability of shares of public
companies would be a negation of the expressed provisions of law and would be self-defeating.93
Page 5 of 7
Approval of the Central Government or Issue of Certificate of Incorporation does not validate any provision in the
Memorandum or Articles of Association if the same is in conflict with statutory provisions.95
Interpretation and construction of Articles.—The Articles of Association of a company provides for the regulation
for internal management of a company of which each shareholder is attributed with notice. The Articles of
Association of a company is its Magna Carta. It is a business document and is to be interpreted strictly. Where the
Articles vested the right of management exclusively in the Managing Director, it is not open to anybody to contend
that there was an independent contract outside the Articles which contemplated joint management.96
Articles should be construed as a business document so as to give them reasonable business efficacy unless the
language is against such construction.97
If the Articles of Association of a company is understood in a particular sense by members of the company and they
have acted upon such understanding the Court will give effect to such practice if it is not contrary to any other
Statute.98
It may be permissible for the Court to infer a term in the Articles of Association of a company purely by way of
constructional implication but it is not permissible to go further and imply a term from extrinsic circumstances.99
Articles and bye-laws how proved.—Articles and bye-laws may be proved by production of the original or by
other evidence.99a
Form and signature of Articles [ Section 30].—Articles of Association shall be—(a) printed; (b) divided into
paragraphs numbered consecutively; and (c) signed by each subscriber. See detailed Comments under Section 30.
Accounting and Auditing Practices.— Auditor to examine Memorandum and Articles of Association.—The
Guidance Note on Audit of Capital and Reserves, issued by the Institute of Chartered Accountants of India (ICAI),
inter alia, require the Auditors to examine the Memorandum and Articles of Association of the Company. Relevant
paras in respect of Memorandum and Articles are as follows:
Memorandum of Association.—Para 12 of the Guidance Note on Audit of Capital and Reserves, issued by the
ICAI requires the Auditors to examine the Memorandum of Association of the Company as follows:
Authorised capital.—“12. The authorised capital shown in the balance sheet should be checked with the
Memorandum of Association in case of a company, registered bye-laws in case of a co-operative society, relevant
statute or the Government Order in case of a statutory corporation or other body corporate. The auditor may also
refer the audited balance sheet of the immediately preceding year.”
[See Guidance Note on Audit of Capital and Reserves, issued by the ICAI, 2006, para 12 : Reproduced in
Handbook of Auditing Pronouncements, Volume II— Compendium of Guidance Notes, published by the Institute of
Chartered Accountants of India (ICAI), Fourth Edition, 2007, para 12, page I-651].
See detailed Comments on Memorandum under Section 13.
Articles of Association.—Para 19 of the Guidance Note on Audit of Capital and Reserves, issued by the ICAI
requires the Auditors to examine the Memorandum of Association of the Company as follows:
Paid up capital.—“19. If a change in the capital has taken place during the year under audit, inquiries should be
made to ascertain that it is properly authorised in the manner prescribed by the Articles and appropriate resolutions
have been passed with requisite majority.”
[See Guidance Note on Audit of Capital and Reserves, issued by the ICAI, 2006, para 19 : Reproduced in
Handbook of Auditing Pronouncements, Volume II— Compendium of Guidance Notes, published by the Institute of
Chartered Accountants of India (ICAI), Fourth Edition, 2007, para 19, page I-654].
Page 6 of 7
See detailed Comments under Sections 211, 227 and Schedule VI.
Secretarial Practice and Check List.— See Secretarial Practice and Check List under Sections 28, 30, 31 and 33.
Producer Company—Articles to contain Regulations [ Section 581G(3)].—Without prejudice to the generality

of the provisions of Section 581G(1) and (2), the Articles of Producer Company shall, inter alia, contain the
Regulations enumerated in Section 581G(3)(a) to (p) of the Companies Act, 1956 outlined below:
(a)qualifications for membership, (b) patronage and voting rights, (c) manner of constitution of the Board of
Directors subject to the provisions of Section 581N(1), (d) the election of the Chairman, (e) withheld price
determination and distribution, (f) disbursement of patronage bonus in cash or by issue of equity shares, or both, (g)
the contribution to be shared and related matters referred to in Section 581ZI(2), (h) issue of bonus shares out of
general reserves as set out in Section 581ZJ, (i) allotment of equity shares, (j) the amount of reserves and funds,
(k) the credit, loans or advances to a Member, (l) right of Member to obtain information relating to general business
of the company, (m) distribution and disposal of funds in the event of dissolution or liquidation of the Producer
Company, (n) the authorisation for division, amalgamation, merger, creation of subsidiaries and the entering into
joint ventures and other matters connected therewith, (o) laying of the Memorandum and Articles of the Producer
Company before a Special General Meeting to be held within 90 days of its Registration, (p) any other provision by
Special Resolution of Members.
See detailed Comments under Sections 581G and 581A to 581ZT.
80. Babulal Madhavji Varma v. New Standard Coal Co. P. Ltd., (1967) 37 Comp. Cas. 446 (Cal.) : 71 CWN 333. See
422 [LNIND 1970 SC 391]. See also Comments under Sections 79, 100 and Schedule I, Table A, Regulations 24 and
31.
82. B.V. Thirumalai v. Best Vestures Trading P. Ltd., (2004) 4 Comp. LJ 519 (CLB).
Comp. LJ 195 (SC). See also Comments under Section 36.
85. IL & FS Trust Co. Ltd. v. Birla Perucchini Ltd., (2004) 121 Comp. Cas. 335 (Bom.).
87. Baker Hughes Ltd. v. Hiroo Khushalani, (2000) 102 Comp. Cas. 203 (Delhi). See also Comments under Sections 20
and 36.
88. Fertilizer Corporation of India Ltd. v. Workmen,AIR 1970 SC 867 [LNIND 1968 SC 340]. See also Comments under
89. G. Karunakaran v. State of Kerala, (1987) 61 Comp. Cas. 334 (Ker.).
Page 7 of 7
92. Ramakrishna Industries P. Ltd. v. P.R. Ramakrishnan, (1988) 64 Comp. Cas. 425 (Mad.) (DB). See detailed Comments
under Section 9
93. Kinetic Engineering Ltd. v. Sadhana Gadia, (1992) 74 Comp. Cas. 82 (CLB); Co-operative Central Bank Ltd. v.
Additional Industrial Tribunal, (1970) 40 Comp. Cas. 206 (SC) : AIR 1970 SC 245 [LNIND 1969 SC 152]. See also
95. Pramod Chopra v. Apparel Export Promotion Council,(1984) 1 ILR 717 (Delhi). See also Comments under Section 29.
97. Holmes v. Keyes, (1959) Ch. 199 : (1958) 2 All ER 129 (CA) : (1958) 2 WLR 772 : (1958) 102 SJ 329 (CA). See also
Section 25.
99. Bratton Seymore Co. Ltd. v. Oxborough,(1992) BCLC 693 (CA).
99a R.K. Dalmia v. Delhi Administration, (1962) 32 Comp. Cas. 699 (SC) : AIR 1962 SC 1821 [LNIND 1962 SC 146]:
(1963) 1 SCR 253 [LNIND 1962 SC 146]; Dr. Indramani v. W.R. Natu,AIR 1963 SC 274 [LNIND 1962 SC 159]. See
End of Document
Datta: Company Law
C R Datta
S. 27. Regulations required in case of unlimited company, company limited

by guarantee or private company limited by shares.
—
(1) In the case of an unlimited company, the articles shall state the number of members with which the
company is to be registered and, if the company has a share capital, the amount of share capital with
which the company is to be registered.
(2) In the case of a company limited by guarantee, the articles shall state the number of members with
which the company is to be registered.
(3) In the case of a private company having a share capital, the articles shall contain provisions relating to
the matters specified in sub-clauses (a), (b) and (c) of clause (iii) of sub-section (1) of section 3; and in
the case of any other private company, the articles shall contain provisions relating to the matters
specified in the said sub-clauses (b) and (c).
1. Pramod Chopra v. Apparel Export Promotion Council,(1984) 1 ILR 717 (Delhi). See also Comments under Sections 9,
26 and 29.
2. Dharam Pal Bhasin v. B.N. Khanna, (1988) 64 Comp. Cas. 651 (Delhi). See also Comments under Sections 9, 31, 97
and 111A.
COMMENTS
English Act, 1948 : Section 7 Previous Act, 1913 : Section 17(3) and (4)
Legislative History.—The Companies Act, 1956(1 of 1956).—The Notes on clauses explained that this section
“corresponds to section 17(3) and (4) of the existing Act.” [ Clause 23 of the Companies Bill, 1953 (46 of 1953)].
Unlimited Company [Sub-section (1)].—The Articles of an unlimited company shall state the number of members
at the inception of the company. Where such a company has a share capital, the amount of the authorised capital
should also be mentioned in the Articles.
Company Limited by Guarantee [Sub-section (2)].—The Articles of a company limited by guarantee must state
the number of members with which the company is to be registered, i.e., members at the inception of the company.
Page 2 of 2
Articlesultra viresthe Act.—Approval of the Central Government or Issue of Certificate of Incorporation does not
validate any provision in the Memorandum or Articles of Association if the same is in conflict with statutory
provisions.1
Increase in number of Members.—In view of sections 27(2), 9, 31 and 97 of the Companies Act, 1956 increase in
the number of members of a company limited by guarantee calls for an amendment of the Articles of Association
and can only be done by a special resolution by the General Body. Where the Articles of Association of a company
limited by guarantee authorised the General Committee to reduce or increase the number of members, it was held
that the Articles were not valid. Article 2 of Table C of Schedule I does not authorise the Board of directors to usurp
the functions of the company for the purpose of increasing or decreasing the number of members. The Board of
Directors did not have any right to increase the number of members. Therefore, Article 2 of the Articles of
Association of the Delhi and District Cricket Association (DDCA) which authorised that the Board of directors might
increase the number of members with which the company was registered was held to be void. The petition was not
maintainable as the members affected were not made parties. Further, an earlier suit was settled without obtaining
leave of the Court for filing a fresh proceeding on the same issue and as such the petition under section 155 [now
section 111A] was barred by the principle contained in Order 23, Rule 1 Code of Civil Procedure, 1908 (5 of 1908).2
Cancellation of Membership.—If the Article does not infringe or offend any specific provision of the Act, then it is
valid. Articles of Association of a Stock Exchange providing for cancellation of membership of a defaulting member
shall be intra vires the Companies Act, 1956 and the SEBI Act, 1992 and shall be valid.3
Private Company [Sub-section (3)].—A private company having a share capital must provide in its Articles three
restrictions specified in section 3(1)(iii)(a) to (c) [now four restrictions enumerated in Section 3(1)(iii) (a) to (d), as
amended by the Companies (Amendment) Act, 2000 (w.e.f. 13-12-2000)].
Secretarial Practice and Check List.— See Secretarial Practice and Check List under Sections 28, 31 and 33.
1. Pramod Chopra v. Apparel Export Promotion Council,(1984) 1 ILR 717 (Delhi). See also Comments under Sections 9,
26 and 29.
and 111A.
End of Document
Datta: Company Law
C R Datta
S. 28. Adoption and application of Table A in the case of companies limited

by shares.
—(1) The articles of association of a company limited by shares may adopt all or any of the regulations
contained in Table A in Schedule I.
(2) In the case of any such company which is registered after the commencement of this Act, if articles are not
registered, or if articles are registered, in so far as the articles do not exclude or modify the regulations
contained in Table A aforesaid, those regulations shall, so far as applicable, be the regulations of the company
in the same manner and to the same extent as if they were contained in duly registered articles.
4. J. Dalmia v. CIT, (1964) 34 Comp. Cas. 668 (SC) : AIR 1964 SC 1866 [LNIND 1964 SC 119]: (1964) 53 ITR 83 (SC) :
(1964) 2 Comp. LJ 69 (SC); Seth Mohanlal v. Grain Chambers Ltd., (1968) 38 Comp. Cas. 543 (SC) : AIR 1968 SC 772
[LNIND 1967 SC 325]: (1968) 1 Comp. LJ 275 (SC).
5. Seth Mohanlal v. Grain Chambers Ltd., (1968) 38 Comp. Cas. 543 (SC) : AIR 1968 SC 772 [LNIND 1967 SC 325]:
(1968) 1 Comp. LJ 275 (SC).
25, 26, 29, 108, 111, 111A and Schedule I.
8. Holmes v. Keyes, (1959) Ch. 199 : (1958) 2 All ER 129 : (1958) 2 WLR 772 : (1958) 102 SJ 329 (CA); S.S. Rajakumar
v. Perfect Castings Pvt. Ltd., (1968) 38 Comp. Cas. 187 (Mad.) : (1968) 1 Comp. LJ 41 (Mad.). See detailed Comments
under Section 26.
9. Somesh Chandra v. Jiven Lal Chinai, (1956) 26 Comp. Cas. 148 (Bom.) : AIR 1956 Bom. 190 [LNIND 1955 BOM 209].
10. Shiv Onkar Maheswari v. Bansidhar Jagannath, (1957) 27 Comp. Cas. 255 (Bom.) : AIR 1956 Bom. 459 [LNIND 1955
BOM 113]: (1956) ILR Bom. 100 : 1956 Bom. LR 3.
12. Sagar Automotives P. Ltd. v. CIT, (1984) 56 Comp. Cas. 141 (MP) (DB) : 148 ITR 492 (MP) (DB). See also Comments
under Section 309.
13. Khadija v. P.K. Mohammed P. Ltd., (1985) 58 Comp. Cas. 543 (Ker.). See also Comments under Section 181 and
Regulation 9 of Table ‘A’ of Schedule I.
14. R.K. Dalmia v. Delhi Administration, (1962) 32 Comp. Cas. 699 (SC) : AIR 1962 SC 1821 [LNIND 1962 SC 146]:
(1963) 1 SCR 253 [LNIND 1962 SC 146]. See also Comments under Section 26.
COMMENTS
Page 2 of 4
English Act, 1948 : Section 8 Previous Act, 1913 : Sections 17(2) and 18
English Act, 1985 : Section 8(1), (2)
follows: “Sub-clause (1) gives effect to the Company Law Committee's recommendation in para 34. All the
regulations set out in section 17(2) of the existing Act (in addition to some others which, according to the Company
Law Committee, should also be obligatory on all companies) have been embodied in the Bill. The latter portion of
the first paragraph of section 17(2) and the two provisos have accordingly been omitted. Sub-clause (2)
corresponds to section 18 of the existing Act.” [ Clause 24 of the Companies Bill, 1953 (46 of 1953)].
“Sub-section (2) of section 17 of the Act contains a list of the regulations in Table ‘A’ which must be adopted by all
companies incorporated under the Act. In paragraph 239 of our Report, we have commented on the regulations
contained in Table ‘A’ and have recommended the deletion of some of them and the conversion of some others into
compulsory regulations. We have further suggested that the compulsory regulations should be removed from Table
‘A’ and incorporated in the Act as substantive provisions. In view of this, we do not consider it necessary that the
compulsory regulations should again be enumerated in sub-section (2) of section 17. This sub-section should,
therefore, be suitably amended.” [ Report : para 34].
See also Legislative History under section 51.
Company limited by shares.—

(a) A company registered after 1st April, 1956.—A public company limited by shares may not have any
Articles. In such a case Table ‘A’ of Schedule I to the Companies Act, 1956 will be applicable. If such a
company has its Articles, it can exclude Table ‘A’ or modify the regulations of Table ‘A’. But if the Articles
do not expressly exclude or modify Table ‘A’ then the regulations of Table ‘A’ will apply if they are not
inconsistent with the company's own Articles.4
(b) Registered prior to April, 1956.—Such a company may have its own Articles and in that case regulations
contained in its Articles will govern the company. But such Articles may provide that all the regulations of
Table ‘A’ will apply or that some of them only would apply. In absence of exclusion of Table A to 1913 Act
expressly or by implication the regulations will apply to such an existing company.5
Articles of public company limited by shares.— Section 28 provides that 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 to the Act.
It is optional for a public company limited by shares to have its own Articles of Association. If it has one, the same
should be registered along with the Memorandum of Association with the Registrar of Companies. If it does not
have one, then the Model Articles given in Table ‘A’ of Schedule I to the Companies Act, 1956, will govern the
company's internal management
See also Comments under Sections 26, 33 and Schedule I.
Model Articles [ Schedule I, Table A ].—Model Articles or Regulations contained in Table ‘A’ of Schedule I to the
Act will apply to a public company limited by shares, if they are not inconsistent with the company's own Articles, if
any.
See detailed Comments under Sections 2(2), 26-31 and Schedule I.
Certain companies must have own Articles.—A company with unlimited liability, a company limited by guarantee
and a private company limited by shares must have an Articles of Association. This document should be filed along
with the Memorandum at the time of registration of the company.

Page 3 of 4
Private Company.—The Articles of a private company must contain four restrictions enumerated in Section
3(1)(iii)(a) to (d), as amended by the Companies (Amendment) Act, 2000. See detailed Comments under Section
3(1)(iii).
Models Articles for other companies.—In respect of other companies section 29 provides that the Articles of
Association of such company shall be in one of such forms in Tables C, D and E in Schedule I as may be applicable
or in a form as near thereto as circumstances admit. See detailed Comments under Section 29.
In case of companies registered under section 25, Table C is applicable. If Tables A and C are compared it
becomes apparent that there are material differences between the two. Where, the High Court disposed of the
matter by merely observing that no distinction can be made in the matter of transfer of shares or other interest
between a company limited by shares and a company limited by guarantee. The Supreme Court set aside the
judgment and order passed by the High Court and remitted the matter back to the High Court for deciding the
appeal afresh.6
Interpretation.—Articles of Association of a company should be construed as a business document so as to give

them reasonable business efficacy unless the language is against such construction.8 General presumption is that
the parties have expressed every material term in the Articles, but in some cases certain terms may be implied in
the Articles to give effect to the intention of the parties.9 Where the words used in a clause are ambiguous, all
relevant clauses of the Articles should be considered and attempt should be made to reconcile them and adopt
such construction as would avoid conflict.10 Where the Articles vested the right of management exclusively in the
Managing Director, it is not open to anybody to contend that there was an independent contract outside the Articles
which contemplated joint management.11
Remuneration of Director.—Even if the Articles of Association of a company does not provide for payment of
remuneration, the provisions of Table (A) may apply and a resolution by the general meeting sanctioning the
payment retrospectively is valid and the payment to the directors could not be said as unauthorised.12
Lien.—Regulation 9 of Table ‘A’ of Schedule I to the Companies Act, 1956 deals with procedure for exercise of
right of Lien. The proceedings in relation to the exercise of a lien of a company over its shares should be governed
by the provisions of the Companies Act, 1956 and the Memorandum and Articles of Association of the company
framed under section 28 of the Companies Act, 1956 (1 of 1956) and not by the general provisions of the Contract
Act, 1872 (9 of 1872).13
How to prove Articles.—The bye-laws (Memorandum and Articles) of a company need not be proved by
producing the original document approved by Board of directors or general meeting; they can be proved
otherwise.14
See detailed Comments under Section 26. See also Section 610(3) as to admissibility of certified copies from the
Registrar of Companies (ROC) office in evidence as of equal validity with original document.
Secretarial Practice and Check List.— Section 28. Check the extent of applicability of Table A of Schedule I to
the Companies Act, 1956 from Articles of Association of the Company.
4. J. Dalmia v. CIT, (1964) 34 Comp. Cas. 668 (SC) : AIR 1964 SC 1866 [LNIND 1964 SC 119]: (1964) 53 ITR 83 (SC) :
(1964) 2 Comp. LJ 69 (SC); Seth Mohanlal v. Grain Chambers Ltd., (1968) 38 Comp. Cas. 543 (SC) : AIR 1968 SC 772
[LNIND 1967 SC 325]: (1968) 1 Comp. LJ 275 (SC).
5. Seth Mohanlal v. Grain Chambers Ltd., (1968) 38 Comp. Cas. 543 (SC) : AIR 1968 SC 772 [LNIND 1967 SC 325]:
(1968) 1 Comp. LJ 275 (SC).
Page 4 of 4
25, 26, 29, 108, 111, 111A and Schedule I.
v. Perfect Castings Pvt. Ltd., (1968) 38 Comp. Cas. 187 (Mad.) : (1968) 1 Comp. LJ 41 (Mad.). See detailed Comments
under Section 26.
9. Somesh Chandra v. Jiven Lal Chinai, (1956) 26 Comp. Cas. 148 (Bom.) : AIR 1956 Bom. 190 [LNIND 1955 BOM 209].
10. Shiv Onkar Maheswari v. Bansidhar Jagannath, (1957) 27 Comp. Cas. 255 (Bom.) : AIR 1956 Bom. 459 [LNIND 1955
BOM 113]: (1956) ILR Bom. 100 : 1956 Bom. LR 3.
12. Sagar Automotives P. Ltd. v. CIT, (1984) 56 Comp. Cas. 141 (MP) (DB) : 148 ITR 492 (MP) (DB). See also Comments
under Section 309.
13. Khadija v. P.K. Mohammed P. Ltd., (1985) 58 Comp. Cas. 543 (Ker.). See also Comments under Section 181 and
Regulation 9 of Table ‘A’ of Schedule I.
14. R.K. Dalmia v. Delhi Administration, (1962) 32 Comp. Cas. 699 (SC) : AIR 1962 SC 1821 [LNIND 1962 SC 146]:
(1963) 1 SCR 253 [LNIND 1962 SC 146]. See also Comments under Section 26.
End of Document
Datta: Company Law
C R Datta
S. 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:
15[Provided that nothing in this section shall be deemed to prevent a company from including any additional
matters in its articles in so far as they are not inconsistent with the provisions contained in the Form in any of
the Tables C, D and E, adopted by the Company.]
16. Gaiman v. National Association for Mental Health, (1971) Ch. 317 : (1970) 2 All ER 362 : (1970) 3 WLR 42 : (1971) 41
Comp. Cas. 929 (Ch.).
25, 28, 108, 111 and Schedule I.
19. Madras Stock Exchange Ltd. v. S.S.R. Rajkumar, (2003) 116 Comp. Cas. 214 (Mad.) (DB).
20. Madras Stock Exchange Ltd. v. S.S.R. Rajkumar, (2003) 116 Comp. Cas. 214 (Mad.) (DB); Prasad and Co. Pvt. Ltd. v.
Delhi Stock Exchange Association Ltd., (1999) 98 Comp. Cas. 192 (Delhi); R.C. Garg and Sons Capital Services Ltd. v.
National Stock Exchange of India Ltd., (1998) 92 Comp. Cas. 620 (Delhi) (DB); A. Vaidyanathan v. UOI, (2000) 101
Comp. Cas. 224 (Mad.).
21. Vinay Bubna v. Stock Exchange, (1999) 97 Comp. Cas. 874 (SC).
22. Stock Exchange, Ahmedabad v. Asst. CIT, (2001) 105 Comp. Cas. 76 (SC).
23. Stock Exchange v. Vinay Bubna, (2001) 103 Comp. Cas. 584 (Bom.) (DB).
102 Comp. Cas. 300 (MP) (DB); B. Srinivasa Rao v. National Stock Exchange of India Ltd., (2000) 100 Comp. Cas. 600
(AP); Rakesh Gupta v. Hyderabad Stock Exchange Ltd., (1999) 96 Comp. Cas. 645 (AP) (DB); A. Vaidyanathan v. UOI,
(2000) 101 Comp. Cas. 224 (Mad.). See also Comments under Section 2(39).
25. Trilochana K. Doshi v. Stock Exchange of India, (2000) 100 Comp. Cas. 649 (Bom.) (DB); Mrs. Sejal Rikeeh Dalal v.
Stock Exchange, Bombay, (1990) 69 Comp. Cas. 709 (Bom.).
27. S.K. Mukherjee v. Chemical & Allied Products Export Promotion Council, (1961) 31 Comp. Cas. 733 (Cal.).
* See the Companies (Fees on Applications) Rules, 1999 in Appendix 4.
28. Bangalore Turf Club Ltd. v. N. Sundaraswamy, (2005) 124 Comp. Cas. 373 (Kar.) (DB).
Page 2 of 4
COMMENTS
English Act, 1948 : Section 454 Previous Act, 1913 : Sections 151(1)
English Act, 1985 : Secs. 3, 8, 8A, 256, 720
—The Notes on clauses explained thus: “This is based on section 151(1) of the Indian Act and section 454 of the
English Act.” [ Clause 595 of the Companies Bill, 1953 (46 of 1953)].
section as follows: “The amendment seeks to make it permissible to a company, other than a company limited by
shares, to include 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.” [ Clause 10 of the Companies (Amendment) Bill, 1959 (37
of 1959)].
Articles of Companies other than limited by shares.—Such companies shall have Articles of Association in one
of the Forms in Table C, D or E of Schedule I to the Companies Act, 1956 or in a form near to that. In adopting such
a form the company may, however, incorporate some more matters in it. This section is merely directory and not
mandatory and the forms are intended as models.16
Articles of Section 25-Company or Guarantee Company.— Section 28 provides that the Articles of a company
limited by shares may adopt all or any of the regulations in Table A. In respect of other companies section 29
provides that the Articles shall be in one of the Forms in Tables C, D or E in Schedule I as applicable or in a form
near thereto. In case of companies registered under section 25, Table C is applicable. If Tables A and C are
compared it becomes apparent that there are material differences between the two. Where, the High Court
disposed of the matter by merely observing that no distinction can be made in the matter of transfer of shares or
other interest between a company limited by shares and a company limited by guarantee. The Supreme Court set
aside the order passed by the High Court and remitted the matter back to the High Court for deciding the appeal
afresh.17
Cancellation of Membership.—If the Article does not infringe or offend any specific provision of the Act, then it is
valid. Articles of Association of a Stock Exchange providing for cancellation of membership of a defaulting member
shall be intra vires the Companies Act, 1956 and the SEBI Act, 1992 and shall be valid.18
Articles of Association of Guarantee Company.— Section 29 of the Companies Act, 1956 does not prevent a
company from including any additional matters in its Articles in so far as they are not inconsistent with the
provisions contained in the Form in any of the Tables including Table ‘C’, ‘D’ or ‘E’ adopted by the company. A
company limited by Guarantee maintained that the Articles also provided for matters other than those indicated in
Table ‘C’ not inconsistent with the Act. The Articles relating to a Stock Exchange confer powers for disciplining
Members including expulsion of Members incurring disqualification. Such a provision is not contrary to the
provisions of the Companies Act, 1956 and can be enforced. In case of a company limited by Guarantee a provision
in the Articles for expulsion of a Member was not inconsistent with the requirements or provisions of the Companies
Act 1956. None of the Articles in Table ‘C’ or Section 29, proviso of the Companies Act, 1956 prohibits the
suspension or expulsion of any Member and a Stock Exchange company can be formed as a normal company and
registered as such under the Companies Act, 1956 and when so registered the Stock Exchange is subject not only
to the provisions of Companies Act, 1956 but also to the Regulatory framework of the Securities Contracts
(Regulations) Act, 1956. The Government of India in a letter to all Stock Exchanges has expressed its opinion that it
is not permissible for a Member of Stock Exchange to become a Managing Director of a company or Partner in a
Firm carrying on any other business.19
Expulsion of Member of Stock Exchange.—In case of a company limited by guarantee, e.g., a Stock Exchange,
the Articles may provide for matters other than those in Table C in Schedule I to the Companies Act, 1956 so far as
not inconsistent with the Act. The provisions of other statute which regulates activity of the company must also be
Page 3 of 4
seen. Provisions in the Articles of a Stock Exchange for suspension or expulsion of a member would not per se be
inconsistent with the requirements of the Companies Act, 1956 or the Securities Contracts (Regulation) Act, 1956
and would be permissible. None of the Articles in Table C in Schedule I to the Companies Act, 1956 prohibits
suspension and expulsion of a member.20
Membership card of Stock Exchange is not the personal property of the member. Where as per the rules, bye-laws
and regulations of the Stock Exchange the member is declared defaulter, expelled and his membership is
terminated, the rights of membership thereafter vest in the Stock Exchange. The member ceases to have any
interest and cannot pass any right to the assignee.21
Garnishee order for attachment.—As the Stock Exchange card is not the personal property of the member, on
the death or default of a member, garnishee order for attachment cannot be issued against the Stock Exchange.22
Bye-laws of Stock Exchange.—Bye-laws of the Stock Exchange are framed under authority granted under the
Securities Contracts (Regulation) Act, 1956 and have statutory force. Bye-laws for arbitration in respect of matters
relating to stock exchange shall therefore prevail over anything inconsistent in the Arbitration and Conciliation Act,
1996 in view of section 2(4) of the Arbitration Act.23
See List of SCR Act, Rules, Regulations, Listing Agreement Form with Appendix numbers in Comments under
Sections 2(39) and 73.
Powers of SEBI.—Powers of the Central Government have been delegated/conferred on the SEBI vide
Notifications under Section 29A of the Securities Contracts (Regulation) Act, 1956 and the Securities Contracts
(Regulation) Rules, 1957 as amended by the Securities Contracts (Regulation) Amendment Rules, 1996.
The rules and bye-laws of the Stock Exchange have to be approved by the Central Government and the SEBI.
Under section 11 of the SEBI Act, 1992, the SEBI can regulate the business and the functions of the Stock
Exchange.
See detailed Comments and List of SEBI Act, Rules, Regulations and Guidelines with Appendix Nos. under Section
55A of the Companies Act—Powers of SEBI.
Writ against Stock Exchange.—A Stock Exchange is a “State or other authority” under Article 12. It would be
amenable to writ jurisdiction of the High Court under Article 226 of the Constitution of India where it is shown that it
is performing a statutory/public duty cast on it under the statute, rules and bye-laws giving rise to an obligation
which it owes to the aggrieved party and which has been breached in some manner. It would, depend upon the
facts and circumstances of each case and existence of alternative remedy.24 The jurisdiction of the High Court
under Article 226 can be exercised against any person or authority rendering a public utility service. The objective
of writ of mandamus is that it must be easily available to reach injustice wherever it is found. A writ of mandamus
under Article 226 of the Constitution would lie against the Mumbai Stock Exchange.25
Injunction.—A recognised stock exchange was granted injunction against a company carrying on business as
parallel stock exchange.26
Guarantee Company not “public body”.—A company limited by guarantee and incorporated under the
Companies Act, 1956 over which the Central Government exercises some degree of control under the Articles of
Association of the company is not a “public body” or a “public authority” and is not a “local or other authority” within
the meaning of Article 12 of the Constitution of India.27
Fees on Applications.
—As per Rule 2(1) and Table I(ii) of the Companies (Fees on Applications) Rules, 1999* every application made to
the Central Government by a company limited by guarantee shall be accompanied a fee of Rs. 500.
Articles of public company limited by shares [ Section 28].—Model Articles or Regulations contained in Table
Page 4 of 4
‘A’ of Schedule I to the Act will apply to a public company limited by shares, if they are not inconsistent with the
company's own Articles, if any. See detailed Comments under Section 28 and Schedule I.
Articles of Club—Voting rights to Club Members.—Where the Race Club was having different categories of
Members. Articles of the Club gave voting rights only to the Club Members. Stand Members were not given voting
rights. Single judge admitted the winding up petition on just and equitable ground under Section 433(f) of the
Companies Act, 1956. On appeal, the Division Bench held that Stand Members were not entitled to challenge the
Articles or seek to have company wound up. Judicial discretion must be exercised in admitting winding up petition.
No prima facie ground for winding up was made out. The winding up petition was dismissed. An order of admission
of winding up petition has serious Civil consequences and would have to be followed by an Advertisement and
therefore an appeal under Section 483 of the Companies Act, 1956 [now Sections 10FB to 10GF] would lie.
Winding up under just and equitable clause is the remedy of last resort.28
See also Comments under Sections 433(f), 10FB-10GF and 483.
16. Gaiman v. National Association for Mental Health, (1971) Ch. 317 : (1970) 2 All ER 362 : (1970) 3 WLR 42 : (1971) 41
Comp. Cas. 929 (Ch.).
25, 28, 108, 111 and Schedule I.
20. Madras Stock Exchange Ltd. v. S.S.R. Rajkumar, (2003) 116 Comp. Cas. 214 (Mad.) (DB); Prasad and Co. Pvt. Ltd. v.
Delhi Stock Exchange Association Ltd., (1999) 98 Comp. Cas. 192 (Delhi); R.C. Garg and Sons Capital Services Ltd. v.
National Stock Exchange of India Ltd., (1998) 92 Comp. Cas. 620 (Delhi) (DB); A. Vaidyanathan v. UOI, (2000) 101
Comp. Cas. 224 (Mad.).
21. Vinay Bubna v. Stock Exchange, (1999) 97 Comp. Cas. 874 (SC).
22. Stock Exchange, Ahmedabad v. Asst. CIT, (2001) 105 Comp. Cas. 76 (SC).
23. Stock Exchange v. Vinay Bubna, (2001) 103 Comp. Cas. 584 (Bom.) (DB).
102 Comp. Cas. 300 (MP) (DB); B. Srinivasa Rao v. National Stock Exchange of India Ltd., (2000) 100 Comp. Cas. 600
(AP); Rakesh Gupta v. Hyderabad Stock Exchange Ltd., (1999) 96 Comp. Cas. 645 (AP) (DB); A. Vaidyanathan v. UOI,
(2000) 101 Comp. Cas. 224 (Mad.). See also Comments under Section 2(39).
25. Trilochana K. Doshi v. Stock Exchange of India, (2000) 100 Comp. Cas. 649 (Bom.) (DB); Mrs. Sejal Rikeeh Dalal v.
Stock Exchange, Bombay, (1990) 69 Comp. Cas. 709 (Bom.).
27. S.K. Mukherjee v. Chemical & Allied Products Export Promotion Council, (1961) 31 Comp. Cas. 733 (Cal.).
* See the Companies (Fees on Applications) Rules, 1999 in Appendix 4.
End of Document
Datta: Company Law
C R Datta
S. 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.
15.
COMMENTS
follows: “This corresponds to section 19 of the existing Act. Reference has been added to the occupation of the
subscribers of the memorandum, in accordance with the Company Law Committee Report.” [ Clause 25 of the
Form and signature of Articles.—Articles shall—(a) be printed; (b) be divided into paragraphs numbered
consecutively; and (c) be signed by each subscriber.
Articles should be printed [ Section 30(a)].—The term
“” means impression of inked types on paper.

It will have the ordinary meaning and will include Litho, offset and block printing. Cyclostyled and typewritten
matters should not be treated as “printed” matters. The decisions and Department's views are given below.
Printing includes computer printing.—Where the promoters of a company filed with the Registrar of Companies
(ROC) computer printed Memorandum and Articles of Association for the purpose of registering the companies.
The Registrar refused to accept them on the plea that they should be printed. On a writ petition, the High Court held
Page 2 of 3
that computer printing would be equivalent to printing and that the Registrar should accept the computer printed
Memorandum and Articles of Association as printed matters for the purpose of section 15 of the Companies Act,
1956 and issue a certificate of incorporation to the company.29
Department's view.— Memorandum and Articles of Association—Acceptance of Computer printed

documents for registration of companies.—“The Department has received representations that in view of
advancement in computer laser printing techniques, the documents printed on laser printers have same quality of
printing as in letter press. In view of this fact the memorandum and articles printed on computer laser printers may
be accepted by the Registrars for registration of companies for purposes of sections 15 and 30. This matter has
been reviewed by the Government and it has now been decided that with immediate effect the Registrar should
accept and take on record all computer printed memorandum and articles provided the documents are neatly and
legibly printed and comply with the other requirements of the Act.” [ Circular No. 7 of 1993 (F. No. 3/30/93-CL-V),
dated 22-6-1993 : Chartered Secretary, July 1993, page 727 : (1993) 77 Comp. Cas. (St.) 723].
Acceptance of Memorandum and Articles of Association printed by offset printing method for the purpose
of registration.—“A question has been raised whether Memorandum and Articles of Association printed by offset
printing method can be accepted by the Registrar of Companies for the purpose of registration. The matter has
been carefully examined by the Department and I am directed to say that offset printing is one of the methods of
printing developed recently. This system is as good as normal printing and hence there does not appear any
objection in accepting the same by the ROCS for the purpose of registration.” [ Circular No. 3/81 (F. No. 8/31/15/80-
CL-V), dated 15-12-1981: Chartered Secretary, January 1982, page 55].
Zerox copies of Memorandum and Articles of Association not acceptable.—“The question of allowing Zerox
copies of Memorandum and Articles of Association has been carefully examined in the Department. Since there is a
specific requirement introduced in our Act, unlike the English Act, requiring the memorandum and articles of
association to be printed, there is no justification for watering it down by allowing Zerox copies to be filed for the
purposes of registration of Companies.” [ Letter No. 8/31/15/80-CL-V, dated 30-4-1981].
See also Department's view in Comments under Section 15.
Articles to be divided in paras [ Section 30(b)].—The Articles of Association should be divided into paragraphs
and should be numbered consecutively.
Signatures by each subscriber [ Section 30(c)].—The Articles of Association of the company shall be signed by
each subscriber of the memorandum of association, who shall add his address, description, e.g., father's name and
occupation in the presence of at least one witness. The witness shall attest the signature and shall likewise add his
address, description and occupation.
Each subscriber must sign in presence of the attesting witness but all the signatories need not be present at the
same time for the purpose of attestation of their signatures. One of the signatories cannot be the attesting witness.
If the foregoing requirements are not fulfilled the person whose name is mentioned as subscriber shall not to be a
subscriber.30
Stamp Duty.—Memorandum and Articles of Association of a company require impressed stamp. The stamp duty
varies from State to State and depending upon the nominal share capital in some States.
Association. The ROC Office or the stamp vendor may assist in putting the proper stamp.
Secretarial Practice and Check List.— See Secretarial Practice and Check List under Sections 28, 31 and 33.
Page 3 of 3
15.
End of Document
Datta: Company Law
C R Datta
S. 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:
31[
Provided that no alteration made in the articles under this sub-section which has the effect of converting a
public company into a private company, shall have effect unless such alteration has been approved by the
Central Government.]
(2) Any alteration so made shall, subject to the provisions of this Act, be as valid as if originally contained in the
articles and be subject in like manner to alteration by special resolution.
32[(2A) Where any alteration such as is referred to in the proviso to sub-section (1) has been approved by the
Central Government, a printed copy of the articles as altered shall be filed by the company with the Registrar
within one month of the date of receipt of the order of approval.]
(3) The power of altering articles under this section shall, in the case of any company formed and registered
under Act No. 19 of 1857 and Act No. 7 of 1860 or either of them, extend to altering any provisions in Table B
annexed to Act 19 of 1857, and shall also, in the case of an unlimited company formed and registered under
the said Acts or either of them, extend to altering any regulations relating to the amount of capital or its
distribution into shares, notwithstanding that those regulations are contained in the memorandum.
610E (w.e.f. 16-9-2006) in Appendix 2.
16-9-2006).
2006) (w.e.f. 1-11-2006).
33. Cane v. Jones,(1981) 1 All ER 533 : (1980) 1 WLR 1451 : (1980) 124 SJ 542. See also Comments under Section 174.
Comp. Cas. 37 (Mad.) : AIR 1933 Mad. 129 [LNIND 1932 MAD 261]. See also Comments under Sections 12, 32 and
433.
35. R. v. Registrar of Companies,(1912) 3 KB 23 : 81 LJ KB 914 (DC).
Page 2 of 15
36. Bowman v. Secular Society Ltd.,(1917) AC 406 : 86 LJ Ch. 568 : 117 LT 161 (HL).
† The concept of Deemed Public Companies, viz., Private Companies to become Public Companies in certain cases [
Section 43A] is no longer applicable [ vide Section 43A(11) inserted by the Companies (Amendment) Act, 2000 (w.e.f.
13-12-2000)]. Now see new definition of “Public Company” in Section 3(1)(iv) (w.e.f. 13-12-2000). See also Comments
37. Mathrubhumi Printing and Publishing Co. Ltd. v. Vardhaman Publishers Ltd., (1992) 73 Comp. Cas. 80 (Ker.) (DB);
Southern Foundries Ltd. v. Shirlaw,(1940) AC 701 : (1940) 2 All ER 445 : 109 LJ KB 461 (HL). See also Comments
under Sections 108, 111, 397, 398 and Schedule I, Table A, Regulation 22.
38. Gothami Solvent Oils Ltd. v. Smt. Mallina Bharathi Rao, (2001) 105 Comp. Cas. 710 (AP); Naresh Chandra Sanyal v.
Calcutta Stock Exchange Association Ltd., (1971) 41 Comp. Cas. 51 (SC) : AIR 1971 SC 422 [LNIND 1970 SC 391];
Sidebottom v. Kershaw, Leese & Co. Ltd., (1920) 1 Ch. 154 : 89 LJ Ch. 113 (CA). See also Comments under Sections
26, 41 and 108.
39. Bushell v. Faith,(1970) 1 All ER 53 : (1970) 2 WLR 272 : (1970) 40 Comp. Cas. 944 (HL). See also Comments under
Section 284.
40. Allen v. Gold Reefs of West Africa Ltd., (1900) 1 Ch. 656 : (1900-03) All ER Rep. 746 (CA) : 69 LJ Ch. 266 : 82 LT 210
: 48 WR 452 (CA); Sidebottom v. Kershaw, Leese & Co. Ltd., (1920) 1 Ch. 154 : 89 LJ Ch. 113 (CA). See also
41. Allen v. Gold Reefs of West Africa Ltd., (1900) 1 Ch. 656 : 69 LJ Ch. 266 : 82 LT 210 (CA); Greenhalgh v. Arderne
Cinemas Ltd., (1951) 1 Ch. 286 : (1950) 2 All ER 1120 : 94 SJ 855 (CA); Rights and Issues Investment Trust Ltd. v.
Stylo Shoes Ltd., (1965) Ch. 250 : (1964) 3 All ER 628 : (1964) 3 WLR 1077; Sidebottom v. Kershaw, Leese & Co. Ltd.,
(1920) 1 Ch. 154 : 89 LJ Ch. 113 (CA); Shuttleworth v. Cox Bros. & Co. (Maidenhead) Ltd.,(1927) 2 KB 9 : 96 LJ KB
104 (CA); Mathrubhumi Printing and Publishing Co. Ltd. v. Vardhaman Publishers Ltd., (1992) 73 Comp. Cas. 80 (Ker.)
(DB). See also Comments under Sections 41 and 394.
Southern Foundries Ltd. v. Shirlaw,(1940) AC 701 : (1940) 2 All ER 445 (HL). See also Comments under Ss. 108, 111,
397, 398 and Schedule I, Table A, Reg. 22.
43. Gothami Solvent Oils Ltd. v. Smt. Mallina Bharathi Rao, (2001) 105 Comp. Cas. 710 (AP); Sidebottom v. Kershaw,
Leese & Co. Ltd., (1920) 1 Ch. 154 : 89 LJ Ch. 113 (CA); Brown v. British Abrasive Wheel Co. Ltd., (1919) 1 Ch. 290 :
(1918-19) All ER Rep. 308 : 88 LJ Ch. 143 : 120 LT 529. See also Comments Sections 26, 41 and 108.
44. Russell v. Northern Bank Development Corporation Ltd.,(1992) BCLC 1016 (HL) : (1993) 3 Comp. LJ 45 (HL);
Greenhalgh v. Arderne Cinemas Ltd., (1951) 1 Ch. 286 : (1950) 2 All ER 1120 : 94 SJ 855 (CA); Mathrubhumi Printing
and Publishing Co. Ltd. v. Vardhaman Publishers Ltd., (1992) 73 Comp. Cas. 80 (Ker.) (DB); K.G. Khosla v. Rahul C.
Kirloskar, (2001) 103 Comp. Cas. 984 (Delhi).
45. K.G. Khosla v. Rahul C. Kirloskar, (2001) 103 Comp. Cas. 984 (Delhi). See also Comments under Section 169 and
Schedule I, Table A, Regulation 53.
46. M.S. Madhusoodhanan v. Kerala Kaumudi Pvt. Ltd., (2003) 117 Comp. Cas. 19 (SC) : (2003) 6 Supreme 49 : (2003) 6
JT 560 (SC).
47. Bajaj Auto Ltd. v. N.K. Firodia, (1971) 41 Comp. Cas. 1 (SC) : AIR 1971 SC 321 [LNIND 1970 SC 345]. See detailed
48. K. Leela Kumar v. Government of India, (2002) 108 Comp. Cas. 610 (Mad.) (DB). See detailed Comments under
Section 25.
and 111A.
50. State of Karnataka v. Mysore Coffee Curing Works Ltd., (1984) 55 Comp. Cas. 70 (Kar.).
† See Policy Guidelines of the Government relating to Stipulation of Convertibility Clause and Appointment of Nominee
Directors in Appendix 301.
51. Southern Foundries Ltd. v. Shirlaw,(1940) AC 701 : (1940) 2 All ER 445 : 109 LJ KB 461 (HL).
Page 3 of 15
COMMENTS
English Act, 1948 : Sections 10, 380(2) Previous Act, 1913 : Section 20
Legislative History.— The Companies Act, 1956 (1 of 1956).—See Legislative History in Comments under Section
28.
The Companies (Amendment) Act, 1960 (65 of 1960).—The Notes on clauses explained as follows: “It is
considered desirable to subject to Governmental scrutiny any proposals for conversion of public companies into
private companies so as to ensure that such conversions are not resorted to merely with the object of evading the
restrictions placed on the management of public companies (paragraph 34 of the Report).” [ Clause 11 of the
“The Act does not prevent the conversion of a public company into a private company by amending its articles by a
special resolution and otherwise complying with the requirements of the Act. On account of the restrictions placed
by the Act on the management of public companies, there has been in recent months a tendency to convert public
companies into private companies. While such conversions are no doubt primarily matters for the shareholders and,
in fact, the consent of the Court is not required, it seems to us that, having regard to the fact that they can be
effected merely by the adoption of a special resolution which may have commanded the positive support of only a
minority of the members of a company, some form of control of these conversions is necessary if certain of the
objects of the Act are to be achieved. At present, the Department is exercising some control over such conversions
by resorting to section 21 and regarding the addition of the word ‘Private’ consequent upon such conversion as
change in the name of the company which, under the section, requires the approval of the Central Government.
But, this is a change required to be made by the Act and section 21 cannot bear the strain the Department seeks to
put upon it. We recommend the addition of a proviso to section 31(1).
There is no need for the approval of the Government in the converse case of a private company being converted
into a public company and thereby submitting itself to restrictions from which private companies are exempt. Where
there is an alteration of the articles, the articles as altered, should be filed with the Registrar. A provision to that
effect should be made.” [ Report : para 34].
Alteration of Articles by Special Resolution [Sub-section (1)].—A company may by special resolution alter its
Articles subject to the provisions of this Act and conditions in its memorandum. However, an alteration in the articles
which has the effect of converting a public company into a private company, shall not have effect unless such
alteration has been approved by the Central Government.
under Section 31(1) have been delegated to the Registrars of Companies. [ Notification No. G.S.R. 507(E), dated
24-6-1985 as amended by Notification No. G.S.R. 281(E), dated 21-3-1995 : For text of the Notification see
Comments under Section 637]. Earlier, the powers were delegated to the Regional Directors [ Notification No.
G.S.R. 288(E), dated 31-5-1991].
Alteration to be in conformity with Act and Memorandum.— Alterations of Articles will be by Special Resolution.
An alteration will be invalid if it is inconsistent with the provisions of the Act or the company's Memorandum.
Special Resolution.—To alter the Articles of Association a Special Resolution is required to be passed. [ Section
31].
Filing.—A copy of the Special Resolution has to be filed with the Registrar of Companies in Form 23* of the
Companies (Central Government's) General Rules and Forms, 1956 within 30 days. [ Section 192.
Page 4 of 15
Where Articles have been registered, a copy of resolution which has the effect of altering the Articles and a copy of
agreement, if any, 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. [ Section 192(2)].
Form 23 (substituted w.e.f. 10-2-2006).— See e-Form 23† of the Companies (Central Government's) General
Release (16-12-2006).
passed under Section 31].
Resolution by postal ballot.—As per Rule 4(b) of the Companies (Passing of the Resolution by Postal Ballot)
Rules, 2001, the resolution for alteration of articles of associations in relation to insertion of provisions defining
private company shall be passed through postal ballot. See detailed Comments under Section 192A.
Conversion of public into private company [Sub-section (1), proviso].—Where alteration is for converting a
public company into a private company the approval of the Central Government is necessary for such alteration.
Form and Procedure.—As per Rule 4B Companies (Central Govt.'s) General Rules and Forms, 1956, where the
alteration of the Articles of Association of any company has the effect of converting a public company into a private
company, the company shall make an application to the Central Government in Form No. 1B, within three months
from the date of passing of the special resolution.
Form 1B (substituted w.e.f. 10-2-2006).— See e-Form 1B of the Companies (Central Government's) General
Revised e-Form 1B (released 9-12-2006).— See Revised e-Form 1B of the Companies (Central Govt.'s) General
Rules and Forms, 1956 on the Ministry of Corporate Affairs (MCA) website http://www.mca.gov.in under category
Approval Services—Registrar of Companies/Change Services, Date of Last Release (9-12-2006).
See Revised e-Form 1B of the Companies (Central Government's) General Rules and Forms, 1956 [Pursuant to
Section 21 or 31(1) of the Companies Act, 1956] for Application for approval of the Central Government for Change
of Name or Conversion of a Public Company into a Private Company.
Instructions for filling of e-Form 1B—Application for approval of the Central Government for Change of
Name or Conversion of a Public Company into a Private Company.—Specific Instruction Kit for filling e-Form
1B of the Companies (Central Government's) General Rules and Forms, 1956 containing the e-Form Sl. No. and
Detailed Instructions is reproduced below:
In case of Change of Name [ See Comments under Section 21]
Page 5 of 15
If it is required to file e-Form 23 in relation to the resolution passed for Change of name or Conversion of the status
of public company; ensure that filing of e-Form 23 precedes filing of this e-form.
In case of Conversion of a Public Company into a Private Company
2
(a) Enter ‘Corporate Identity Number’ (CIN) of the company.
portal http://www.mca.gov.in.
3
(a), (b) Click the “Pre-fill” button.
System will automatically display the name, registered office address of the company
6 Enter particulars of e-Form 23 filed for registration of Resolution. Ensure that altered Memorandum and
Articles of Association is filed as an attachment to e-Form 23.
Note : In case the existing company does not have the service request number (SRN) of e-Form 23, enter
“Z99999999” as SRN of e-Form 23 and attach the copy of the original Resolution passed for change of
name of the company as an optional attachment.
Attachments
• Copy of Minutes of the Meeting of members where resolution has been passed has to be enclosed.
• Copy of any approval order obtained from the concerned authorities (such as, RBI, IRDA, SEBI etc.) or the
concerned Department.
Declaration.—Select the second option.
Enter the date of Board Resolution authorising the signatory to sign and submit the application.
Digital Signature.—The e-form should be digitally signed by the Managing Director or Director or Manager or
Secretary of the company duly authorised by the Board of Directors.
Filing Fees.—Filing Fees along with e-Form 1B of the Companies (Central Government's) General Rules and
See detailed Comments under Sections 609, 610B, 611 and 637.
Page 6 of 15
Rules, 1999.

(MCA) vide Cabinet Secretariat Notification No.DOC.CD-160/2004, dated 27-5-2004.
Page 7 of 15
See Details on applying for DSCS on MCA website http://www.mca.gov.in.
Sabha on 15-12-2006.
266G inserted (w.e.f. 1-11-2006).
Copy of Application to Registrar of Companies.—As per Rule 20A(1) of the Companies (Central Government's)
General Rules and Forms, 1956 a copy of every Application, i.e., e-Form 1B, together with a copy of each of the
documents enclosed therewith, made in pursuance of Section 31(1) of the Companies Act, 1956 shall be forwarded
by the company to the Registrar of Companies concerned simultaneously with the application to the Central
Government.
Now Powers of the Central Government under this Section 31(1) have been delegated to the Registrar of
Companies (ROC).
Filing with Registrar (ROC).—As per Rule 20C of the Companies (Central Govt.'s) General Rules and Forms,
1956 inserted by the Companies (Central Govt.'s) General Rules and Forms (Amendment) Rules, 2006 vide
Notification No. G.S.R. 56(E), dated 10-2-2006, published in the Gazette of India, Extraordinary, No. 50, Part II,
section 3(i), page 156 : (2006) 130 Comp. Cas. (St.) 13, the company was required to file Documents with the
Registrar of Companies (ROC) under Section 31 of the Companies Act, 1956 together with Form 62 of the
Companies (Central Govt.'s) General Rules and Forms, 1956.
Form 62 (substituted w.e.f. 16-9-2006) not applicable u/s. 31.— See e-Form 62 of the Companies (Central
Government's) General Rules and Forms, 1956 as substituted (w.e.f. 16-9-2006) by the Companies (Central
Government's) General Rules and Forms (Second Amendment) Rules, 2006 vide Notification No. G.S.R. 555(E),
dated 14-9-2006, published in the Gazette of India, Extraordinary, No. 435, Part II, Section 3(i), page 31, dated 14-
9-2006 : MCA website http://www.mca.gov.in : (2006) 133 Comp. Cas. (St.) 130 in Appendices.
Earlier e-Form 62 was required to be filed in pursuance of Section 31. But, substituted e-Form 62 does not make a
reference to Section 31.
Instructions to original e-Form 62 also contained instructions in relation to Section 18. But, Instructions to
substituted e-Form 62 do not contain instructions in relation to Section 31 of the Companies Act, 1956.
[See Instructions for Filling e-Company Forms (original e-Form 62) : (2006) 131 Comp. Cas. (St.) 228 : Instructions
for Filling of e-Form 62 (substituted w.e.f. 16-9-2006) Downloaded (on 29-4-2007) from e-Forms with Instruction Kit
on the Ministry of Corporate Affairs (MCA) website http://www.mca.gov.in reproduced in Comments under Section
44 and other Relevant Sections].
E-Filing and Search facilities on MCA website [http://www.mca.gov.in].— See the following e-Governance, e-
Filing, e-Forms, Search and other Facilities on the Ministry of Corporate Affairs (MCA) website
http://www.mca.gov.in :
Page 8 of 15
Charter.
(2) MCA-21 Program.
(5) Digital Signature Certificate (DSC), e-Filing made mandatory from 16th September 2006.
for a CFC, etc.
(8) Fee Calculator.
See detailed Comments on the Jurisdiction and Functions of Registrars of Companies (ROCs), the Ministry of
Corporate Affairs (MCA), e-Governance, e-Forms and e-Filing under Sections 609 and 610B.
Sections 21/31] in 15 working days. [ Press Note No. 9 (1999 Series) (F. No. 5/25/99-CL-V), dated 9-8-1999 :
http://www.dca.nic.in : (1999) 98 Comp. Cas. (St.) 1 : See Fuller Text under Sections 33, 609 and 637].
Registrar's powers.—The Registrar of Companies cannot withhold its approval to an alteration or articles
arbitrarily. An agreement of all corporators by putting their signatures though not in each others presence is
effective for alteration of articles though no specific resolution at a general meeting is passed.33 The Registrar of
Companies may refuse to register an alteration of the Articles of Association which introduces an illegal object.34 If
the Registrar wrongfully refuses to register, an application under Article 226 of the Constitution of India will lie for
mandamus and other writs or orders,35 as the Registrar's function is quasi-judicial.36
Department's view.— Streamlining the working of Registrars of Companies—Report of the Review

Committee.—The Department vide Circular No. 1 of 1995, dated 16-2-1995 directed the ROCS to implement
certain recommendations of the Review Committee with a view to streamline and simplify procedures involved in
dealing with documents and for reduction in the number of documents filed by the companies. Relevant extracts
from the Circular are reproduced below:
“Delegation of powers to ROCS.—(xvi) It has been decided to delegate the powers under section 31 of the Act to
ROCS, hitherto delegated to RDS. Necessary Notifications (printed hereinbefore) in this behalf will be issued
shortly.” [Extracts from Circular No. 1 of 1995 (F. No. 14/6/94-CL-V), dated 16-2-1995 : (1995) 82 Comp. Cas. (St.)
261]. See Full Text of the Circular in Comments under Section 609.
Alteration of Articles of Association.—“A company can never replace its articles; it is only the regulations
contained therein which may be changed. Accordingly the concerned company can adopt an entirely new set of
regulations in place of those now contained in its existing articles by passing a special resolution to that effect in
accordance with the provisions of section 31 of the Act. The new set of regulations proposed to be adopted should
form a part of the special resolution and the explanatory statement to be annexed to the notice of the general
meeting under section 173(2) should set out all material facts concerning the proposed alterations in the existing
articles.” [ Letter No. 8/32(31)/63-PR, dated 23-10-1963 : Govt. of India publication, Clarifications and Circulars on
Application under section 31(1) proviso to be critically examined.—“Clause 5 of the Companies (Amendment)
Page 9 of 15
Bill, 1972 seeks to amend section 43A [ since inapplicable (w.e.f. 13-12-2000)]† of the Companies Act, 1956, with a
view to enlarging the scope of the section. In view of this applications under the proviso to sub-section (1) of section
31 of the Act for conversion of a public company into a private company should be critically examined and
conversion allowed only if the applicant company is closely held one having no public interest involved in it.” [
Circular No. 34/72, dated 3-10-1972 :Govt. of India publication, Clarifications and Circulars on Company Law, 1977
Edition, page 21].
Two Filings.—A copy of the Special Resolution has to be filed with the Registrar of Companies in Form 23 of the
When the approval of the Central Government [power delegated to the Registrars of Companies] for conversion of
a public company into a private company [ section 31(1) proviso] is obtained, a copy of such approval is also to be
filed within one month of the receipt of the approval. [ Section 31(2A)].
Penalty.—Since no specific penalty for failure to file with the Registrar a copy of the order approving alteration of
articles under sub-section (1) [Sub-section (2A)] is provided in this section, the company and every officer who is in
default, shall be punishable under section 629A with fine upto Rs. 5,000 and where the contravention is a
continuing one, with a further fine upto Rs. 500 for every day of default.
Alterations as valid as originally contained [Sub-section (2)].—An alteration of Articles shall, subject to the
provisions of the Act, be as valid as if originally contained in the Articles and be subject in like manner to alteration
by special resolution.
Retrospective effect.—Once the alteration is made such alteration will be deemed, as if it were there since the
registration of the company. Such altered Articles may again be altered by Special Resolution as provided in this
section.
Altered articles not retrospective for all purposes.—Every company has the power to alter its Articles of
Association by special resolution passed at a general meeting. Such alterations will be valid provided they are not
inconsistent with the provisions of the Companies Act and the memorandum of association of the company. Altered
articles, however, would not have retrospective operation. Section 31(2) provides that the alteration made in
accordance with section 31(1) shall be valid as if it were part of the original articles. It is only for this limited purpose
that the legal fiction is introduced by the said section. The scope of fiction cannot be extended so as to make the
alteration itself retrospective in effect for all purposes. A company will be liable in damages in case the alteration of
the Articles results in a breach of a contract entered into by the company with any person. By effecting alterations in
its Articles a company cannot defeat or escape from its contractual obligation with any person. The power to alter
the Articles subject to what is stated above is indisputably very wide. The Articles cannot also be so altered as to
deprive the minority of their rights. No majority of shareholders can, by altering the Articles, retrospectively, affect,
to the prejudice of the non-consenting owners of shares, the rights already existing under a contract, nor take away
the rights already accrued, e.g., after a transfer of shares is lodged, the company cannot have a right of lien so as
to defeat the transfer.37
Amendment of Articles for compulsory transfer of shares.—The Articles of Association of company are in the
nature of a contract. The rights and liabilities of the members of a company are regulated by the articles of
association. A person on becoming the member of the company agrees to be bound by such a contract. Alteration
of the Articles of Association is permitted under section 31. Section 31(2) declares that the alteration so made shall
be as valid as if originally contained in the articles of association subject, of course, to the provisions of the
Companies Act. A power to expel a member upon terms to get rid of a member as shareholder is a power that
might be resorted in the articles of association. The amendment of the Articles to provide for compulsory transfer of
the shares against the wishes of some of the existing members of the company was held permissible.38
Right given by Act cannot be curtailed.—A clause in the Articles of Association of a company providing that
certain provisions cannot be altered at all or can be altered by a unanimous resolution only can nevertheless be
altered by a special resolution. The right given by the Act cannot be curtailed by the Articles. A provision as to
voting rights in the Articles which has the effect of making a special resolution to alter the articles incapable of being
passed if a particular shareholder or group of shareholders exercise his or their voting rights against it is not a
provision depriving the company of the power to alter its Articles, and is valid. However, an article providing that no
alteration shall be made in the Articles without the consent of a particular person would be invalid.39
Page 10 of 15
Limitation to alterations.—An alteration of Articles cannot increase the liability of the members but, otherwise,
such alteration may have retrospective effect.40
Alteration must bebona fide.—The alteration in Articles must be bona fide in the interest of the general body of
shareholders. There must be honesty in what is done. The power to alter Articles must be exercised bona fide for
the benefit of the company as a whole. A resolution constitutes a fraud on the minority if it is not passed bona fide
for the benefit of the company as a whole or its effect is to discriminate between the majority and the minority
shareholders so as to give to the former an advantage of which the latter was deprived.41
Oppression and Mismanagement.—Under section 31 a company has very wide power to alter its Articles of
Association. The only statutory limitation in the exercise of such power of alteration is the one contained in section
38 of the Act. But, the power conferred on the company under section 31 to alter the Articles of Association of a
company by special resolution shall not be abused by the majority of shareholders so as to oppress the minority.
Minority shareholders can enforce rights affected by alteration in proceedings under Sections 397 and 398.42
The alteration of Articles of Association conferring the power on the company to expel one of the shareholders is
subject to one limitation. The alteration must not be such as to sacrifice the interests of the minority to those of a
majority without any reasonable prospect of advantage to the company as a whole. A compulsory transfer of shares
without the shareholder's consent must be in the interests of the company, but not for the benefit of some of the
shareholders even if they are the majority.43
The shareholders have the right of vote for exercise of a statutory power as they may think fit which cannot be
taken away by the company's constitution or by any contractual undertaking given by the company itself although
they can bind themselves contractually as to how they would exercise their rights. A shareholder has no right to
assume that his company's Articles would always remain in a particular form. He cannot object to any alteration as
fraudulent provided such alteration is passed properly and does not unfairly discriminate against any one.44
Board of Directors may convene EGM.—The Board of Directors have power to convene Extraordinary General
Meeting of shareholders to consider proposed amendments to Articles of Association. Directors who were privy to
decision to call meeting cannot seek order restraining holding of meeting. The amendments were not prejudicial to
their interest but were intended to facilitate smooth functioning of the management. It would finally be for the
shareholders to decide in the meeting whether to opt for the proposals or not. An injunction could not be granted to
restrain the holding of a meeting, when such a meeting was the only way in which the shareholders could decide
the matter. Further, since Table A of Schedule I to the Companies Act, 1956 did not apply to Articles of Association
of the company, the question of issuing fresh notice of the adjourned meeting did not arise.45
Amendment of Articles—Removal of Managing Director.—Disputes arose between the members of a family

company. By a Resolution of the Board Meeting held by the appellant's brother and his mother, the appellant was
removed from the post of Managing Director. The Board of Directors resolved to delete article 74 of the Articles of
Association of the company by which the appellant was appointed as Managing Director of the Company, which
formed no part of the notice of holding Extraordinary General Meeting (EGM). The Special Resolution was passed
on the basis of such defective Notice. If the notice does not specify the Special Resolution to be taken the
Resolution would be invalid. The expression of intention in the notice under Section 189(2)(a) of the Companies
Act, 1956 should be sufficiently specific so as to effectively inform each member of the company of the actual
Resolution sought to be passed in the General Meeting. The notice must be frank, open, clear and satisfactory. If it
is not, the notice is bad and the Special Resolution vitiated and cannot be acted upon. It was held that such
defective Special Resolution cannot effect the deletion of article 74 of the Articles of Association of the company, it
was invalid and the removal of the appellant as Managing Director was invalid.46
Expulsion of Member.—Even if Articles authorise the directors to expel a member under certain circumstances
such powers must be exercised bona fide and in the general interest of the company.47 This decision and Circular
No. 32 of 1975 [ reproduced in Comments under Section 41] dealing with the expulsion of a shareholder of a public
limited company is not applicable to clubs, associations, etc., incorporated under section 25 of the Companies Act,
1956. The wisdom or otherwise of the policy behind the bye law of a private club is not a matter for consideration in
a writ petition under Article 226 of the Constitution of India.48
Page 11 of 15
Increase in members of Guarantee Company.—In view of sections 27(2), 9, 31 and 97 increase in the number of
members of a company limited by guarantee calls for an amendment of the Articles of Association and can only be
done by a Special Resolution by the general body. Article 2 of Table C of Schedule I to the Act does not authorise
the Board of directors to usurp the functions of the company for the purpose of increasing or decreasing the number
of members. Therefore, Article 2 of the Articles of Association of the Delhi and District Cricket Association (DDCA)
which authorised that the Board of directors may increase the number of members with which the company was
registered was held to be void.49
Sections 31(1), 106 and 107.—Where the Government held equity shares in a Company and the Articles provided
for the State to nominate 3 Directors, one of them as Chairman of the Board of Directors. The Company issued
further shares which the State did not subscribe and its shareholding was reduced to 1/5th of the Subscribed
Capital. An objection by the State to restrain the Company from amending the Articles taking away the right of the
State to nominate Directors was not maintainable. The proposed amendment did not affect any class of
shareholders.50
Right to nominate Directors.—But if the right to nominate Directors is contained in an Agreement or in a Statute†,
then such a change would not be lawful.
Injunction.—If the alteration of Articles of Association is not ultra vires the Act or Memorandum or unlawful, the
Court will not issue an injunction at the suit of shareholders or persons affected merely on the ground that such
alteration will cause a breach of contract for which the company may have to pay damages.51
Alteration of Articles—Restrictive provisions.—Articles may be altered by special resolution [ S. 31]; by special

resolution and with the approval of the Central Government [ Sections 268 and 310]; by special resolution and with
the sanction of the Court (now the Tribunal) [ Section 100]; by an order of the Company Law Board (now the
Tribunal) [ Sections 397, 398 and 404] and by the Central Government [ Section 408(1), proviso].
Indian Companies (Foreign Interests) Act [ repealed].—Under the Indian Companies (Foreign Interests) Act,
1918 (20 of 1918), without the consent in writing of the Central Government a company could not alter its Articles
affecting in such a way as to bring the company under the control of foreign interests.
This Act has since been repealed by the Indian Companies (Foreign Interests) Repeal Act, 2000 (24 of 2000). As
per Statement of Objects and Reasons appended to the Bill, the Act had become obsolete and retention thereof as
separate Act was unnecessary. [ (2000) 102 Comp. Cas. (St.) 81].
Definition of Articles [ Section 2(2)].—Articles means the Articles of Association of a company as originally
framed or as altered from time to time.
Form of Articles.— See detailed Comments under Sections: Articles prescribing regulations [ Section 26].
Regulations required in case of unlimited company, company limited by guarantee or private company limited by
shares [ Section 27], Adoption and application of Table A in the case of companies limited by shares [ Section 28],
Form of articles in the case of other companies [ Section 29], Form and signature of articles [ Section 30]. Schedule
I containing Model Regulations in Tables A to F.
The Articles inconsistent with the provisions of the Act are void [ Section 9]. In view of this, Model Regulations in
relevant Tables in Schedule I should be carefully studied while drafting Articles of Association of a company.
Effect of alteration.— See also Effect of alteration in memorandum or articles [ Section 38], Copies of
memorandum and articles to be given to members [ S. 39], Alteration of memorandum or articles to be noted in
every copy [ Section 40].
Page 12 of 15
Statement.
The List of important Sections provided in the Statement, inter alia, enumerated Sections 16 to 18 and 31 of the
Section 16, 17, 18 and 31 [Alteration of Memorandum and Articles].—Where the Memorandum and Articles of
Association of a Company have been altered, e.g., as to the Objects clause, Capital structure, etc., it should be
seen that prima facie the alteration has been made in accordance with the law.
See Comments on Alteration of Memorandum under Sections 16 to 18.
Alteration of Memorandum.— See Comments under Sections 16 to 19.
Compliance Certificate—Alteration of Articles of Association.—Relevant paras of the Form appended to the

below.
(AGM).
follows:
“30. The company has altered its Articles of Association after obtaining approval of Members in the General
Meeting held on .................... and the amendments to the Articles of Association have been duly registered with the
Registrar of Companies.”
Page 13 of 15
reproduced below.
Alteration of the Articles of Association.—“Check whether the Articles were altered during the year. If so, check
whether:
(i) the Board of Directors have passed a Resolution approving the Alteration of Articles;
(ii) the company had called and held the General Meeting and obtained approval of the company in General
Meeting by a Special Resolution for the alteration;
(iii) copy of the Special Resolution containing the amendments to the Articles of Association along with Form
No. 23 [ now e-Form 23] have been duly filed with the ROC within 30 days; and
(iv) the Alteration had been incorporated in all copies of Articles.”
under Section 383A.
See also Comments under Sections 26-40, 189(2) and 192.
Producer Company—Amendment of Articles [ Section 581-I(1)].—For amendment of the Articles of Association

of the Producer Company there must be a proposal by at least 2/3rds of the elected Directors or by at least 1/3rd of
the Members and such proposal should be adopted by the members by a Special Resolution.
Filing [ Section 581-I(2)].—A copy of the amended Articles of Association together with a copy of the Special
Resolution both duly certified by two Directors shall be filed with the Registrar within 30 days of the passing of the
Resolution.
See detailed Comments under Sections 581-I and 581A to 581ZT.
Secretarial Practice and Check List.— Section 31. Whether articles of the company were altered? If so, check
whether a special resolution to alter the articles was passed and e-Form 23* filed with the Registrar? See also the
Companies (Passing of the Resolution by Postal Ballot) Rules, 2001. If the alteration had the effect of converting a
public company into a private company, check whether : (1) approval of the Registrar of Companies obtained? [e-
Form 1B*] (2) within one month of the date of the receipt of the order of approval, a printed copy of the altered
Articles filed with the Registrar? (3) intimation sent to the stock exchange in the case of listed companies?
The documents involved are : (1) Minutes of Board/General Meeting, (2) Forms 1B and 23, (3) Approval of
Registrar of Companies, (4) Correspondence with the stock exchange in case of listed companies, (5) Altered
copies of Articles.
Page 14 of 15
610E (w.e.f. 16-9-2006) in Appendix 2.
16-9-2006).
2006) (w.e.f. 1-11-2006).
33. Cane v. Jones,(1981) 1 All ER 533 : (1980) 1 WLR 1451 : (1980) 124 SJ 542. See also Comments under Section 174.
Comp. Cas. 37 (Mad.) : AIR 1933 Mad. 129 [LNIND 1932 MAD 261]. See also Comments under Sections 12, 32 and
433.
36. Bowman v. Secular Society Ltd.,(1917) AC 406 : 86 LJ Ch. 568 : 117 LT 161 (HL).
† The concept of Deemed Public Companies, viz., Private Companies to become Public Companies in certain cases [
Section 43A] is no longer applicable [ vide Section 43A(11) inserted by the Companies (Amendment) Act, 2000 (w.e.f.
13-12-2000)]. Now see new definition of “Public Company” in Section 3(1)(iv) (w.e.f. 13-12-2000). See also Comments
Southern Foundries Ltd. v. Shirlaw,(1940) AC 701 : (1940) 2 All ER 445 : 109 LJ KB 461 (HL). See also Comments
under Sections 108, 111, 397, 398 and Schedule I, Table A, Regulation 22.
26, 41 and 108.
39. Bushell v. Faith,(1970) 1 All ER 53 : (1970) 2 WLR 272 : (1970) 40 Comp. Cas. 944 (HL). See also Comments under
Section 284.
40. Allen v. Gold Reefs of West Africa Ltd., (1900) 1 Ch. 656 : (1900-03) All ER Rep. 746 (CA) : 69 LJ Ch. 266 : 82 LT 210
: 48 WR 452 (CA); Sidebottom v. Kershaw, Leese & Co. Ltd., (1920) 1 Ch. 154 : 89 LJ Ch. 113 (CA). See also
41. Allen v. Gold Reefs of West Africa Ltd., (1900) 1 Ch. 656 : 69 LJ Ch. 266 : 82 LT 210 (CA); Greenhalgh v. Arderne
Cinemas Ltd., (1951) 1 Ch. 286 : (1950) 2 All ER 1120 : 94 SJ 855 (CA); Rights and Issues Investment Trust Ltd. v.
Stylo Shoes Ltd., (1965) Ch. 250 : (1964) 3 All ER 628 : (1964) 3 WLR 1077; Sidebottom v. Kershaw, Leese & Co. Ltd.,
(1920) 1 Ch. 154 : 89 LJ Ch. 113 (CA); Shuttleworth v. Cox Bros. & Co. (Maidenhead) Ltd.,(1927) 2 KB 9 : 96 LJ KB
104 (CA); Mathrubhumi Printing and Publishing Co. Ltd. v. Vardhaman Publishers Ltd., (1992) 73 Comp. Cas. 80 (Ker.)
Southern Foundries Ltd. v. Shirlaw,(1940) AC 701 : (1940) 2 All ER 445 (HL). See also Comments under Ss. 108, 111,
397, 398 and Schedule I, Table A, Reg. 22.
43. Gothami Solvent Oils Ltd. v. Smt. Mallina Bharathi Rao, (2001) 105 Comp. Cas. 710 (AP); Sidebottom v. Kershaw,
Leese & Co. Ltd., (1920) 1 Ch. 154 : 89 LJ Ch. 113 (CA); Brown v. British Abrasive Wheel Co. Ltd., (1919) 1 Ch. 290 :
(1918-19) All ER Rep. 308 : 88 LJ Ch. 143 : 120 LT 529. See also Comments Sections 26, 41 and 108.
44. Russell v. Northern Bank Development Corporation Ltd.,(1992) BCLC 1016 (HL) : (1993) 3 Comp. LJ 45 (HL);
Greenhalgh v. Arderne Cinemas Ltd., (1951) 1 Ch. 286 : (1950) 2 All ER 1120 : 94 SJ 855 (CA); Mathrubhumi Printing
and Publishing Co. Ltd. v. Vardhaman Publishers Ltd., (1992) 73 Comp. Cas. 80 (Ker.) (DB); K.G. Khosla v. Rahul C.
Kirloskar, (2001) 103 Comp. Cas. 984 (Delhi).
45. K.G. Khosla v. Rahul C. Kirloskar, (2001) 103 Comp. Cas. 984 (Delhi). See also Comments under Section 169 and
46. M.S. Madhusoodhanan v. Kerala Kaumudi Pvt. Ltd., (2003) 117 Comp. Cas. 19 (SC) : (2003) 6 Supreme 49 : (2003) 6
JT 560 (SC).
47. Bajaj Auto Ltd. v. N.K. Firodia, (1971) 41 Comp. Cas. 1 (SC) : AIR 1971 SC 321 [LNIND 1970 SC 345]. See detailed
Page 15 of 15
Section 25.
and 111A.
50. State of Karnataka v. Mysore Coffee Curing Works Ltd., (1984) 55 Comp. Cas. 70 (Kar.).
† See Policy Guidelines of the Government relating to Stipulation of Convertibility Clause and Appointment of Nominee
Directors in Appendix 301.
51. Southern Foundries Ltd. v. Shirlaw,(1940) AC 701 : (1940) 2 All ER 445 : 109 LJ KB 461 (HL).
End of Document
Datta: Company Law
C R Datta
COMPANY AND MATTERS INCIDENTAL THERETO > Change of registration of companies
S. 32. Registration of unlimited company as limited, etc.

—
(1) Subject to the provisions of this section,—
(a) a company registered as unlimited may register under this Act as a limited company; and
(b) a company already registered as a limited company may re-register under this Act.
(2) On registration in pursuance of this section, the Registrar shall close the former registration of the
company, and may dispense with the delivery to him of copies of any documents with copies of which
he was furnished on the occasion of the original registration of the company; but, save as aforesaid,
the registration shall take place in the same manner and shall have effect, as if it were the first
registration of the company under this Act.
(3) The registration of an unlimited company as a limited company under this section shall not affect any
debts, liabilities, obligations or contracts incurred or entered into, by, to, with or on behalf of, the
company before the registration, and those debts, liabilities, obligations and contracts may be enforced
in the manner provided by Part IX of this Act in the case of a company registered in pursuance of that
Part.
52. Pioneer Mutual Benefit and Friend-in-Need Society Ltd. v. Asst. ROC, (1933) 3 Comp. Cas. 37 (Mad.) : AIR 1933 Mad.
129 [LNIND 1932 MAD 261]. See also Comments under Sections 12, 31 and 433.
COMMENTS
follows: “This section corresponds to section 16 of the English Act and section 67 of the existing Act. The provisions
have been generalised so that they may be applicable to all cases which may occur.” [ Clause 27 of the Companies
Bill, 1953 (46 of 1953)].
Re-registration of a Company.—(a) An unlimited company may register itself as a limited company; and (b) A
company may re-register itself.
Form and Procedure.—This involves change of name as the word “limited” has to be added to the name. A special
resolution and the approval of the Central Government will be required. Section 21 will apply to such a change.
Page 2 of 2
Rights and liabilities not affected.—Such registration or re-registration will not affect the rights and liabilities of
the old company. Section 23(3) of the Act regarding effect of registration of change will be applicable in such cases.
Registrar's Powers.—The Registrar of Companies will have the same discretion in refusing to register a company
as in the case of original registration 52 and subject to the interference by the Court.53
52. Pioneer Mutual Benefit and Friend-in-Need Society Ltd. v. Asst. ROC, (1933) 3 Comp. Cas. 37 (Mad.) : AIR 1933 Mad.
129 [LNIND 1932 MAD 261]. See also Comments under Sections 12, 31 and 433.
End of Document
Datta: Company Law
C R Datta
COMPANY AND MATTERS INCIDENTAL THERETO > General provisions with respect to
memorandum and articles
S. 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
54[(c) the agreement, if any, which the company proposes to enter into with any individual for
appointment as its managing or whole-time director or manager.]
(2) A declaration by an advocate of the Supreme Court or of a High Court, an attorney or a pleader entitled
to appear before a High Court, or 55[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, 56[***] 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.
57[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 full-time
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.
55. Substituted by the Companies (Amendment) Act, 1988 (31 of 1988), s. 6 (w.e.f. 15-6-1988), for “a chartered accountant
practising in India”.
56. The words “managing agent, secretaries and treasurers” omitted by the Companies (Amendment) Act, 1988 (31 of
1988), s. 6 (w.e.f. 15-6-1988). The system of managing agency had already been abolished videsection 324A of the
1970).
57. Added by the Companies (Amendment) Act, 1988 (31 of 1988), s. 6 (w.e.f. 15-6-1988).
610E (w.e.f. 16-9-2006) in Appendix 2.
Page 2 of 19
16-9-2006).
2006) (w.e.f. 1-11-2006).
58. Ratanshi Panchan Tank v. Registrar of Companies, (1970) 40 Comp. Cas. 26 (Ker.) (FB) : AIR 1971 Ker. 1 (FB). See
also Comments under Section 611 and Schedule X.
59. T.V. Krishna v. Andhra Prabha Pvt. Ltd., (1960) 30 Comp. Cas. 437 (AP) (DB) : AIR 1960 AP 123 (DB). See also
60. Executive Board of Methodist Church in India v. Union of India, (1985) 57 Comp. Cas. 443 (Bom.); T.V. Krishna v.
Andhra Prabha Pvt. Ltd., (1960) 30 Comp. Cas. 437 (AP) (DB) : AIR 1960 AP 123 (DB). See also Comments under
Sections 12 and 20.
61. Sidhvi Constructions (India) P. Ltd. v. Registrar of Companies, (1997) 90 Comp. Cas. 299 (AP). See also Comments
62. Executive Board of Methodist Church in India v. Union of India, (1985) 57 Comp. Cas. 443 (Bom.). See revised
Instructions on defunct companies in Circular Letter No. 10(1)-RS/65, dated 27-11-1965, para 19, printed in Comments
under Section 20.
63. R. v., Registrar of Companies(1914) 3 KB 1161 : 84 LJ KB 229 (DC).
64. Barned's Banking Co., Peel's Case, Re, (1867) 2 Ch. App. 674 : 36 LJ Ch. 757; R. v. Registrar of Companies,(1912) 3
KB 23 : 81 LJ KB 914 (DC); R. v. ROC,(1931) 2 KB 197 : (1931) All ER Rep. 864 : 100 LJ KB 638 (CA); Cotman v.
Brougham,(1918) AC 514 (HL) : 87 LJ Ch. 379 : 119 LT 162 (HL). See also Comments under Sections 31, 32, 35 and
41.
Sections 12 and 149(3).
Salomon & Co. Ltd.,(1897) AC 22 : (1895-99) All ER Rep. 33 : 66 LJ Ch. 35 (HL). See detailed Comments under
Sections 12 and 34.
69. National Coal Co. Ltd. v. Gyan Ranjan Bhattacharya,AIR 1927 Cal. 299.
70. Jon Beauforte (London) Ltd., Re, (1953) Ch. 131 : (1953) 1 All ER 634 : 2 WLR 465. The doctrine of constructive notice
has been abolished under the English law, but this decision still holds good under the Indian Law. See detailed
Comments under Sections 13 and 290-293.
663 (Ex Ch.). See detailed Comments under Sections 13 and 293.
† See the Companies (Central Government's) General Rules and Forms, 1956 in Appendix 1. See detailed Comments,
COMMENTS
English Act, 1948 : Section 12 Previous Act, 1913 : Sections 22, 23, 24
Page 3 of 19
Legislative History.— The Companies Act, 1956 (1 of 1956).—The Notes on clauses explained that sections 33,
34 and 35 “correspond to sections 22, 23 and 24 of the existing Act. No change of substance has been made.” [
Clauses 28, 29 and 30 of the Companies Bill, 1953 (46 of 1953)].
follows: “With the abolition of the office of managing agents and secretaries and treasurers, reference to such office
in section 33 is being substituted by reference to managing and whole-time directors. Statutory declaration of
compliance of the formalities of incorporation which is presently authorised to be given by a practising advocate or a
Chartered Accountant may as well be given by a practising Company Secretary. The amendment proposed in this
clause seeks to achieve this.” [ Clause 6 of the Companies (Amendment) Bill, 1987 (32 of 1987)].
Sachar Committee Recommendations.—The recommendations of the High Powered Expert Committee on

Companies and MR TP Act s constituted under the Chairmanship of Justice Shri Rajindar Sachar, on the basis of
which the amendments were made by Act 31 of 1988, are reproduced below:
“Clause (c) of sub-section (1) of this section refers to the agreement proposed to be entered into for appointing
managing agents or secretaries and treasurers. While we feel that the reference in this clause to managing agents
etc. is now redundant we would, suggest that this clause should rather be substituted as follows:—
‘(c) the agreement, if any, which the company proposes to enter into with any individual, as Director, Managing
Director or Whole time Director.'
Sub-section (2) of this section provides for a declaration to be filed by an advocate, a pleader, an attorney or a
chartered accountant. We feel that a practising company secretary is equally competent to file this declaration and
should be included in this sub-section. Necessary addition may, therefore, be made in this section providing for a
declaration to be filed alternatively also by a practising member of the Institute of Company Secretaries of India.” [
Report : para 17.8].
Registration of Memorandum and Articles.— Section 33 specifies documents to be presented to the Registrar of
the State in which registered office of the company is stated by the memorandum to be situate for registration.
Documents to be filed for Certificate of Incorporation.—For incorporation of a company the following

documents shall be presented or filed with the concerned Registrar of Companies for registration:
(1) the Memorandum of Association of the company [Sub-section (1)(a)]. See detailed Comments under
Sections 12-19.
(2) the Articles of Association of the company, if any [Sub-section (1)(b)]. See detailed Comments under
Sections 26-31.
(3) the proposed agreement, if any, for appointment of Managing Director or Whole-time Director or Manager
[Sub-section (1)(c)].
(4) A declaration stating that all the requirements of the Companies Act, 1956 and the Rules thereunder in
respect of registration have been complied with. Such a declaration may be signed by (a) an Advocate or
(b) an Attorney or (c) a Secretary in whole-time practice in India or (d) a Chartered Accountant in whole-
time practice in India or (e) a person named in the Articles as a Director, Manager or Secretary of the
company. The Registrar of Companies may accept such a declaration as sufficient evidence of such
compliance. [Sub-section (2)].
Chartered Accountant in whole-time practice in India.—For the purposes of section 33(2), “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 full-time employment. [Explanation to Sub-section (2)].
Secretary in whole-time Practice [ Section 2(45A)].
—
Page 4 of 19
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 full time
employment. See Comments under Section 2(45A).
Formation and Incorporation of Company.— See detailed Comments on Registration of Memorandum and
Articles [ Section 33], Steps for Formation or Incorporation of a Company, Form and Procedure, e-Forms, e-Filing,
Filing Fees, Registration Fees, Department's views, etc., dealt with below.
Registration of Memorandum and Articles [ Section 33].—E-Form 1 of the Companies (Central Government's)
General Rules and Forms, 1956 for Application and Declaration for Incorporation of a Company [Pursuant to
Section 33(1), (2)] is to be filed for Formation or Incorporation of a new Company along with duly stamped
Memorandum of Association and Articles of Association of the Company with other requisite e-Forms, Filing Fees
and Registration Fees.
E-Forms 1, 18 and 32 (substituted w.e.f. 10-2-2006).
—E-Form 1 for Application and Declaration for Incorporation of a Company [Pursuant to Section 33(1), (2)] is to be
filed along with e-Form 18 for Notice of Situation or Change of situation of Registered Office [Pursuant to Section
146] and e-Form 32 [substituted for existing Forms 29 and 32] for Particulars of Appointment of Managing Director,
Directors, Manager and Secretary and the Changes among them or Consent of candidate to act as a Managing
Director or Director or Manager or Secretary of a company and/or Undertaking to take and pay for Qualification
Shares [Pursuant to Sections 303(2), 264(2) or 266(1)(a) and 266(1)(b)(iii)].
See Form and Procedure, e-Forms 1, 18 and 32 of the Companies (Central Govt.'s) General Rules and Forms,
1956 as substituted (w.e.f. 10-2-2006), e-Filing, Filing Fees, Registration Fees, Stamp Duty on Memorandum and
Articles after Steps for Formation and Incorporation of a Company downloaded from the Ministry of Company
Affairs (MCA) website http://www.mca.gov.in dealt with below.
See also Comments under Sections 12 to 36, 146, 266, 303 and 610B.
Incorporation of Company [ Sections 12-40].—Part II—Incorporation of company and matters incidental thereto [
Sections 12 to 40] contains provisions for Incorporation and Requirements in respect of Registration, viz.:
Memorandum of Association [ Sections 12-19], Provisions with respect to Names of Companies [ Sections 20-25],
Articles of Association [ Sections 26-31], Registration of Memorandum and Articles [ Section 33], Effect of
Registration [ Section 34] and Conclusiveness of Certificate of Incorporation [ Section 35], Effect of Memorandum
and Articles [ Section 36], etc., of the Companies Act, 1956.
See detailed Comments, Form and Procedure under Sections 12 to 40.
Steps for Formation of a Company.— See Steps to be taken to get incorporated a Private Limited Company and
Steps for formation of a Public Limited Company and other Companies downloaded from the Ministry of Corporate
Affairs (MCA) website http://www.mca.gov.in are dealt with below.
Department's view.— Steps to be taken to incorporate a new company.—Steps to be taken to get a new
Company incorporated, Additional steps to be taken for formation of a Public Limited Company and Additional steps
to be taken for registration of a Part IX Company downloaded from the Ministry of Corporate Affairs (MCA) website
www.mca.gov.in are reproduced below.
“Steps to be taken to get a new Company incorporated:

• Select, in order of preference, at least one suitable name upto a maximum of six names, indicative of the
main objects of the company.
• Ensure that the name does not resemble the name of any other already registered company and also does
not violate the provisions of Emblems and Names (Prevention of Improper Use) Act, 1950 by availing the
services of Checking Name availability on the portal [ http://www.mca.gov.in].
• Apply to the concerned Roc [Registrar of Companies] to ascertain the Availability of Name in e-Form 1A [of
the Companies (Central Govt.'s) General Rules and Forms, 1956 ] by logging in to the portal [
www.mca.gov.in]. A fee of Rs. 500/- has to be paid alongside and the Digital Signature of the applicant
Page 5 of 19
proposing the company has to be attached in the Form. If proposed name is not available, the user has to
apply for a fresh name on the same application.
• After the name approval the applicant can apply for registration of the new company by filing the required
Forms (that is Form 1, 18 and 32) [ e-Forms] within six months of name approval.
• Arrange for the drafting of the Memorandum and Articles of Association by the solicitors, vetting of the
same by Roc and printing of the same.
• Arrange for Stamping of the Memorandum and Articles with the appropriate stamp duty.
• Get the Memorandum and the Articles signed by at least two subscribers in his/her own hand, his/her
father's name, occupation, address and the number of shares subscribed for and witnessed by at least one
person.
• Ensure that the Memorandum and Articles is dated on a date after the date of stamping.
• Login to the portal [ http://www.mca.gov.in] and fill the following forms and attach the mandatory
documents listed in the e-Form.
Declaration of Compliance—Form-1
Notice of situation of Registered Office of the company—Form-18.
Particulars of the Director's, Manager or Secretary—Form-32.
• Submit the foregoing e-Forms after attaching the Digital Signature, pay the requisite Filing and Registration
Fees and send the physical copy of Memorandum and Articles of Association to the Roc.
• After processing of the Form is complete and Corporate Identity is generated obtain Certificate of
Incorporation from Roc.
Additional steps to be taken for formation of a Public Limited Company:
To obtain Commencement of Business Certificate after incorporation of the company the public company has to
make following compliance:
• File a Declaration in e-Form 20 and attach the Statement in lieu of the Prospectus (Schedule III), or
• File a Declaration in e-Form 19 and attach the Prospectus (Schedule II) to it.
• Obtain the Certificate of Commencement of Business.
Additional steps to be taken for registration of a Part IX Company:

• The Part IX Company is required to file e-Form 37 and e-Form 39 apart from filing e-Form 1, 18 and 32.
• The company is required to file e-Form 1 first and then the company can file all the other e-Forms (18, 32,
37 and 39) simultaneously or separately.”
[ Source : Ministry of Corporate Affairs (MCA) website http://www.mca.gov.in (Downloaded on 23-11-2007) :

SeeMCA website for latest position].
Producer Companies [Part IXA (Sections 581A-581ZT)].— See also Comments on Formation, Incorporation and
Registration of Co-operatives as Producer Companies under Part IXA [ Sections 581A-581ZT] at the end of this
Section.
Page 6 of 19
Form and Procedure (w.e.f. 10-2-2006).—A Declaration of Compliance with the Requirements of the Companies
Act, 1956 on Application for Registration of a Company [Pursuant to Section 33(2)], is to be made in e-Form No. 1*
of Companies (Central Govt.'s) General Rules and Forms, 1956.
Further, a Notice of Situation of Registered Office in e-Form No. 18* [Pursuant to Section 146] and Particulars of
Directors, Manager or Secretary in e-Form No. 32* in duplicate [Pursuant to Section] are also to be filed.
In case of a Public Company a Consent letter from each person proposed to be appointed as Director should be
obtained in e-Form 32*. If there is the provision for Share Qualification of a Director, then an Undertaking in e-Form
32* should be obtained from each of such proposed Directors undertaking to pay for the qualification shares
[Pursuant to Section 266].
Filing with Registrar of Companies (ROC).—By paying the requisite Filing Fee and Registration Fee given
hereinafter, the following documents are to be delivered to the concerned Registrar of Companies (ROC) for
registration:
(i) the Stamped, printed, dated and signed copy of the Memorandum of Association and Articles of
Association with agreement, if any,
(ii) e-Form No. 1* (iii) e-Form No. 18*, (iv) e-Form No. 32* (in duplicate), (v) e-Form No. 32* (Consent or
Undertaking in case of a Public Company),
(vi) the Registrar's (ROC) letter intimating the Availability of Name, and
(vii) an Authority Letter or Power of Attorney, duly stamped, from the subscribers authorising the person taking
the documents to the Registrar's office to make necessary corrections, if any, required by the Registrar of
Companies (ROC).
See detailed Comments, Practice Notes, Form and Procedure under Sections 12, 13-15, 20, 26-30, 33, 146, 303,
609 and 611.
Form 1 (substituted w.e.f. 10-2-2006).— See e-Form 1* of the Companies (Central Government's) General Rules
and Forms, 1956 as substituted by the Companies (Central Government's) General Rules and Forms (Amendment)
Rules, 2006 vide Notification No. G.S.R. 56(E), dated 10-2-2006 : published in the Gazette of India, Extraordinary,
No. 50, Part II, Section 3(i), page 156, dated 10-2-2006 : the Ministry of Company Affairs (MCA) website
http://www.mca.gov.in : (2006) 130 Comp. Cas. (St.) 13 in Appendices.
Section 33(1), (2) of the Companies Act, 1956] for Application and Declaration for Incorporation of a Company.
Instructions for filling of e-Form 1—Application and declaration for incorporation of a company.—Specific
Instruction Kit for filling e-Form 1A of the Companies (Central Government's) General Rules and Forms, 1956
containing the e-Form Sl. No. and Detailed Instructions is reproduced below:
Page 7 of 19
dealt in the e-form.
1
(a) Select option for the proposed Company; whether ‘New company’ or ‘Part IX company’ or ‘Producer
company’.
Details for ‘Part IX company’ are given in Section 565 and for ‘Producer company’ are given in Section
581A to 581ZT of the Companies Act, 1956. You may find the Companies Act, 1956 on the portal
www.mca.gov.in.
(b) Enter “e-Form 1A reference number, i.e. ‘Service Request Number of e-Form 1A’, filed for name
approval.
(c), (d) Click the “Pre-fill” button.
System will automatically display the Name of the company and Status (Private or Public) as per e-
Form 1A.
2
(b) For incorporation of a company licensed under Section 25 of the Companies Act, 1956 obtain a licence
from the Regional Director (RD) by filing an application in e-Form 24A.
The licence number if received from RD will be displayed based on the above mentioned e-Form 1A
reference number.
4, 5 Enter the details in case of a company having share capital.
The amount of authorised capital cannot be less than the amount mentioned in e-Form 1A.
Following are the other requirements with respect to authorised capital (Not applicable in case of a
company licensed under Section 25 of the Companies Act, 1956):
Rs. 1,00,000 or more in case of a Private company
Rs. 5,00,000 or more in case of a Public company.
7
(a) In case an Indian Company is the promoter, enter the Corporate Identity Number (CIN). Click the Pre-
fill button and Name of the promoter company will be displayed. In case a Foreign Company is the
promoter, enter the Name of the promoter company.
Enter Name and Designation of the person authorised to sign on behalf of the promoter company.
(b) Minimum number of subscribers should be two in case of a Private company and seven in case of
Public company.
In case the number of subscribers is more than seven, provide the details of the other subscribers as
an attachment namely ‘Annexure containing details of subscribers’.
(c) Particulars of subscribers:
Enter the details of the subscribers.
If ‘Yes’ is selected in the field ‘Whether present residential address is same as the permanent
residential address’, the present residential address will be displayed same as the permanent
residential address otherwise enter the present residential address.
Attachments
• Memorandum of Association (MoA) and Article of Association (AoA) of the company (Not required for a
company licensed under Section 25 as these are already filed with Regional Director application e-Form—
e-Form 24A).
• Annexure containing details of subscribers (Optional).
Page 8 of 19
• Any other information can be provided as an optional attachment. Copy of Memorandum of Association
(MoA) and Article of Association (AoA) after stamping and physically signed by all the subscribers should
be delivered to the Roc office where company is to be registered.
You can find the addresses of all the Roc offices on the portal www.mca.gov.in.
Signature.—The e-Form should be digitally signed by the following:

• Person named in the Articles as a Director or Manager or Secretary of the company duly Authorised by the
promoters.
OR
• The person giving declaration as professional i.e. Advocate or Attorney or pleader or Company Secretary
or Chartered Accountant (in whole-time practice) engaged in the formation of the company duly authorised
by the promoters.
Note
1. e-Form 18 and e-Form 32 are to be filed simultaneously.

2. The original duly filled in and signed e-Form 1 on stamp paper are required to be sent to concerned Roc
Office simultaneously, failing which the filing will not be considered and legal action will be taken.
3. The original stamped Memorandum of Association and Articles of Association are required to be sent to
concerned Roc Office simultaneously, failing which the filing will not be considered and legal action will be
taken.
Common Instruction Kit
Common Instruction Kit containing Instructions on Pre Fill, Attach, Remove attachment, Check Form, Modify, Pre
scrutiny, Submit for filling and filing e-Form 1 and other e-Forms of the Companies (Central Government's) General
Rules and Forms, 1956 containing Buttons and Particulars is reproduced below:
Pre Fill.—When the user clicks the Pre fill Button after entering the Corporate Identity Number in e-Form (excepting
e-Form 1A), the name and address is displayed by the system.
This button may appear more than once in an eFORM, and shall be required to be clicked for displaying the data
pertaining to that field.
You are required to be connected to the internet for pre-filling.
Attach.—You have to click the attach button corresponding to the document you are making an attachment.
In case you wish to attach any other document, please click the optional attach button.
Remove attachment.—You can view the attachments added to eFORM in the rectangle box provided next to the list
of attachment. If the user wants to remove or delete any attachment, select the attachment to be removed and
press the “Remove attachment” button.
Check Form.—Once the form is filled up. The user is required to press the Check Form button. When this button is
pressed form level validation is done such as, Whether all the mandatory fields are filled up or not. If an error is
displayed after pressing the button the user is required to correct the mistake and again press the “Check Form”
button. When all the form level validation is done. A message is displayed that “Form level pre scrutiny is
successful”. The Check Form is done without being connected to the internet.
Modify.—“Modify” button gets enabled after the check form is done. By pressing this button the user can make the
changes in the filled in Form. If the user makes any change in the Form again the user is required to press the
“Check Form” button.
Page 9 of 19
Pre scrutiny.—Once the check form is done the user is required to Pre scrutinize the eFORM. This requires being
connected to the MCA-21 site for uploading the Form. On pre-scrutiny the system level check is performed and if
there are any errors it is displayed to the user and once the error is corrected and again on Pre scrutiny if the
message displayed is “No errors found”. Click on the button below to “Get Form” Press the Get Form button and
make the required corrections.
Note : Before pressing Submit button attach the Digital Signature by clicking on the box appearing on the Signature
field.
Submit.—After pre scrutiny is done the user is required to submit the form. This requires being connected to the
MCA-21 site for uploading the Form.
In case of online filing the user can submit the Form by pressing the “Submit” button.
Once the form is submitted the fee is displayed to the user. When the user press the “Pay” button the mode of
payment option is displayed. On challan payment option, a challan is generated displaying the amount of fee to be
paid. The user is required to take the print out of three copies of challan and submit the payment at authorized bank
branch. The user has to submit three copies at bank and user shall receive one copy with bank acknowledgment for
user's record.
Country Code.—The list of Country Code required to be mentioned in the eFORM are as follows: List of ISO
Country Codes [ See MCA website www.mca.gov.in].
Note : User is advised to refer to eFORM Specific Instruction Kit [ printed above].
See detailed Comments, Form and Procedure, e-Forms, Instructions for Filling respective e-Company Forms, e-
Filing, Fees, etc., under Sections 3, 12, 13-15, 20, 21, 25, 26-30, 146, 264, 266, 303, 581A to 581ZT, 609, 610B
and 611.
Section 146 of the Companies Act, 1956] for Notice of Situation or Change of situation of Registered Office.
Instructions for filling of e-Form 18.— See Specific Instruction Kit for filling of e-Form 18 in Comments under
relevant Section 146.
Revised e-Form 32 and Addendum.— See Revised e-Form 32 and e-Form 32—Addendum on the Ministry of
Corporate Affairs (MCA) website http://www.mca.gov.in under the category Company Registration.
See Revised e-Form 32 and Addendum of the Companies (Central Govt.'s) General Rules and Forms, 1956
[Pursuant to Sections 303(2), 264(2) or 266(1)(a) and 266(1)(b)(iii) of the Companies Act, 1956] for Particulars of
Appointment of Managing Director, Directors, Manager and Secretary and the Changes among them or Consent of
Page 10 of 19
candidate to act as a Managing Director or Director or Manager or Secretary of a company and/or Undertaking to
take and pay for Qualification Shares.
E-Form 32 (substituted w.e.f. 4-6-2007).—E-Form 32 of the Companies (Central Government's) General Rules
and Forms, 1956, ‘Particulars of Appointment of Managing Director, Directors, Manager and Secretary and the
Changes among them or Consent of candidate to act as a Managing Director or Director or Manager or Secretary
of a Company and/or Undertaking to take and pay for Qualification Shares [pursuant to Sections 303(2), 264(2) or
266(1)(a) and 266(1)(b)(iii)] of the Companies Act, 1956’ has again been substituted by the Companies (Central
Government's) General Rules and Forms (Amendment) Rules, 2007 vide Notification No. G.S.R. 399(E), dated 30-
5-2007, published in the Gazette of India, Extraordinary, No. 244, Part II, Section 3(i), page 8 (w.e.f. 4-6-2007) :
(2007) 138 Comp. Cas. (St.) 1 : Ministry of Corporate Affairs (MCA) website http://www.mca.gov.in.
See detailed Comments, Form and Procedure and e-Filing under Sections 33, 264(2), 266(1)(a), 266(1)(b)(iii) and
303(2).
Instructions for filling of e-Form 32 and Addendum.— See Specific Instruction Kit for filling of e-Form 32 and e-
Form 32—Addendum in Comments under relevant Sections 264(2) or 266(1)(a) and 266(1)(b)(iii) and 303(2).
Filing Fees.—Filing Fees as prescribed in Schedule X, based on Authorised Capital, shall be payable along with e-
Forms 1, 18, 32, Memorandum of Association and Articles of Association at the time of new Incorporation.
Registration Fees.—As per Section 611 and Schedule X, the Registration fees (I) in respect of a Company having
a Share Capital based on Authorised or Nominal Capital, and (II) in respect of a Company not having a Share
Capital based on Number of Members, shall be paid to the Registrar of Companies.
Rules, 1999.
Page 11 of 19
inserted by the Companies (Amendment) Act, 2006.
Sabha on 15-12-2006.
266G inserted (w.e.f. 1-11-2006).
Charter.
(2) MCA-21 Program.
DSC now.
for a CFC, etc.
(8) Fee Calculator.
Page 12 of 19

See detailed Comments on MCA-21, e-Filing, e-Forms, Search and other Facilities on Ministry of Corporate Affairs
(MCA) website http://www.mca.gov.in, the Companies (Electronic Filing and Authentication of Documents) Rules,
2006 and the Scheme for Filing of Statutory Documents and Other Transactions by Companies in Electronic Mode,
2006 (w.e.f. 27-10-2006) under Section 610B.
Functions of Registrars of Companies (ROCs), Regional Directors (RDs), the Ministry of Corporate Affairs (MCA),
e-Governance, MCA-21, e-Filing and e-Forms under Sections 609 and 610B.
See detailed Comments under Sections 609 and 610A to 610E.
As per Schedule (III) the ROCS shall process Application for registration of a company [ Section 33] in 10 working
days. [ Press Note No. 9 (1999 Series) (F. No. 5/25/99-CL-V), dated 9-8-1999 : (1999) 98 Comp. Cas. (St.) 1 :
Department of Company Affairs (DCA) website (www.dca.nic.in)].
Now the Department of Company Affairs (DCA) under the Ministry of Finance has been designated as the Ministry
of Corporate Affairs (MCA), Govt. of India, ‘A’ Wing, 5th Floor, Shastri Bhavan, Dr. Rajendra Prasad Road,New
Delhi-110 001.
The erstwhile Department's website http://www.dca.nic.in has been moved to the Ministry of Corporate Affairs
(MCA) website http://www.mca.gov.in.
See detailed Comments and Full Text under Section 609.
Private Company —Minimum paid-up Capital—Restrictions in Articles [ Section 3(1)(iii)].— Section 3(1)(iii) of
the Companies Act, 1956, as amended by the Companies (Amendment) Act, 2000 (53 of 2000) (w.e.f. 13-12-2000),
defines the Private Limited Company as follows:
Private Company means a Company which has a Minimum paid-up Capital of Rs. 1 lakh or such higher paid-up
Capital as may be prescribed, and by its Articles,—(a) Restricts the right to Transfer its Shares, (b) Limits the
Number of its Members to 50, (c) Prohibits Invitation to the Public to subscribe for Shares in, or Debentures of, the
company, and (d) Prohibits invitation or acceptance of Deposits from persons other than its members, directors or
their relatives.
[ Section 3(1)(iii)].
See detailed Comments under Section 3(1)(iii).
Public Company—Minimum paid-up Capital [ Section 3(1)(iv)].— Section 3(1)(iv) as substituted by the
Companies (Amendment) Act, 2000 (53 of 2000) with effect from 13-12-2000 defines the Public Limited Company
as follows:
Public Company means a Company which—(a) is not a Private Company, (b) has a Minimum paid-up capital of
Rs. 5 lakhs or such higher paid-up capital as may be prescribed, and (c) is a Private Company which is a
Subsidiary of a company which is not a Private Company.
See detailed Comments under Section 3(1)(iv).

Page 13 of 19
Section 25-Company exempt from Minimum capital [ Section 3(6)].—A company registered under Section 25
before or after the commencement of the Companies (Amendment) Act, 2000 (53 of 2000) (w.e.f. 13-12-2000) shall
not be required to have minimum paid-up capital specified in Section 3.
See detailed Comments under Sections 3(6) and 25.
Kinds of Companies.— The Companies Act, 1956 envisages and provides for various forms of companies each
with specific and appropriate provisions applicable to them, viz., Private Company [ Section 3(1)(iii)], Public
Company [ Section 3(1)(iv)], Holding company and subsidiary [ Section 4], Charitable Companies [ Section 25], Sick
Industrial Companies [ Sections 424A-424L], Producer Companies [ Sections 581A-581ZT], Foreign Company [
Sections 591-608], Banking, Insurance, Electricity and other Companies governed by special Acts [ Section 616],
Government Company [ Sections 617-620], Nidhi or Mutual Benefit Society [ Section 620-A].
Besides, special provisions have been made for Companies in Goa, Daman and Diu [ Section 620-B], Jammu and
Kashmir [ Section 620-C], Sikkim [ Article 371F of Constitution and the Sikkim Registration of Companies Act, 1961]
and State of Nagaland [ Section 1(3)].
See Comments on Applicability of the Companies Act and Meaning of Company under Sections 1 and 3. See
detailed Comments under respective Sections.
Producer Company—Formation and Registration [ Section 581C(1)].—Any Ten or more Producers or Two or
and register a Producer Company.
See detailed Comments under Sections 581B to 581C.
Certificate of Incorporation [ Section 581C(2)].—On being satisfied that the Producer Company has complied
with all the requirements, the Registrar of Companies (ROC) shall issue the Certificate of Incorporation.
Effect of Registration [ Section 581C(3)].—The liability of Members of Producer Company shall be limited as
mentioned in the Memorandum of Association in respect of the shares allotted to a Member remaining unpaid.
Company limited by shares.—The Producer Company will be termed as a “Company limited by shares”.
Reimbursement of expenses by company [ Section 581C(4)].—The promoters are entitled to reimbursement by

the Producer Company all the expenses, charges and costs incurred in getting that Producer Company registered.
But this would be subject to the approval at the First General Meeting of the Members of the Producer Company.
Producer Company treated as Private Company [ Section 581C(5)].—On Registration of the Producer
Company, it will be treated as a Private Limited Company without limitation of its Membership to 50.
Irrespective of the number of Members, the other activities of the Producer Company shall remain as a Private
Company.
Application of provisions relating to Private Company [ Section 581ZR].—The Producer company shall be
treated as a Private Company and all provisions of Companies Act shall apply so far as they are not inconsistent
with Sections 581A to 581ZT of the Act.
Page 14 of 19
Privileges and Exemptions of Private Companies to Producer Company.—Private Companies (not being a
subsidiary of a public company) enjoy certain Privileges and Exemptions, principally on the ground that they are
family concerns in which the public is not directly interested. The main object was that they would operate as a
family business, a partnership on a small scale and without taking advantage of public money.
As the Producer Company is deemed as Private Company under Section 581C(5) and in view of the provisions of
Section 581ZR Privileges and Exemptions available to Private Company shall also be available to a Producer
Company so far as they are not inconsistent with Sections 581A to 581ZT of the Act.
See Privileges and Exemptions to Private Companies (not being a subsidiary of a public company) enumerated in
Comments under Section 3(1)(iii).
These should, however, be read subject to the Special Provisions for Producer Companies under Sections 581A to
581ZT of the Act.
Registration of Memorandum and Articles [ Section 581G(1)].—Producer Company shall present for registration
to the Registrar of Companies (ROC) of the State in which the Registered Office of the Producer Company shall be
situated as per its Memorandum of Association:
(a) Memorandum of the Producer Company, and (b) Articles of the Producer Company duly signed by the
Subscribers to the Memorandum.
Memorandum of Association of Producer Company [ Section 581F(c)].—The Memorandum of Association of a

Producer Company shall contain the Main Objects of the Producer Company as specified in Section 581B and the
particulars specified in Section 581F(a) to (i) of the Companies Act, 1956 in addition to other matters.
Articles to contain Mutual assistance principles [ Section 581G(2)].—The Articles of Association of the
Producer Company shall contain the mutual assistance principles enumerated in Section 581G(2)(a) to (g).
See Mutual assistance principles in Section 581G(2)(a) to (g) above.
Mutual assistance principles [ Section 581A(f)].—Mutual assistance principles means the principles set out in
Section 581G(2) of the Companies Act, 1956.
See Definitions and Comments under Sections 581A(f).
Articles to contain Regulations [ Section 581G(3)].—Without prejudice to the generality of the foregoing
provisions of Section 581G(1) and (2), the Articles of Producer Company shall, inter alia, contain the Regulations
enumerated in Section 581G(3)(a) to (p) of the Companies Act, 1956.
See detailed Comments under Sections 581A to 581G.
Fees not refundable.—On presentation of documents to the Registrar the requisite fee is payable which fee is not
refundable even though the documents are refused registration. There is no provision in the Companies Act, 1956
or in the Rules or Regulations made thereunder for the refund of fees once paid. The fees payable for the
registration of a company under section 611 read with Schedule X of the Companies Act, 1956 is payable on the
presentation for registration of the documents specified in section 33(1) of the Act in keeping with the general
scheme by which all statutory fees are invariably made payable before the commencement of the services.58
Page 15 of 19
See also Comments and Practice Notes under Sections 12, 15, 26 and 30
Section 25-Company.—Memorandum and Articles of any Association not formed for profit and registered under
the Companies Act is exempted from paying any stamp duty. [ Articles 10 and 39 of the Indian Stamp Act, 1899 (2
of 1899)].
Practice Notes.— See detailed Comments, Practice Notes, Form and Procedure under Sections 12, 13-15, 20, 26-
30, 146, 303, 609 and 611.
Corrections, if any.—On scrutiny of the documents the Registrar of Companies may require certain modifications
or corrections which should be carried out (by duly constituted attorney). If the promoters do not agree with the
Registrar or the Registrar refuses to register the company an appeal or writ petition would lie to the High Court from
the Registrar's order.
Department's view.— Memorandum of Association and any amendments thereto may be signed by
constituted attorneys.—See Circular No. 128/HCC/64, dated 27-7-1964 reproduced in Comments under Section
12.

the companies.
Availability of names : (ii) The Department, vide Circular No. 27/1/89/CL-III, dated February 17, 1989, advised the
ROCS to ensure that at the time of registration of a new company, the subscribers to the memorandum of
association should tally with the list of promotors/first directors stated in the application for availability of name, and
in case one or more of the promotors are not interested in participating in the promotion of a new company at a later
stage, a ‘no objection’ letter from such promotor(s) is made available to ROC. This circular was amended on
January 5, 1990 (No. 1 of 1990) [ reproduced under Section 20], to the effect that ROCS should register the
company only in case where the promotors, as per the availability of name application, are also subscribers to the
memorandum. On reconsideration, it has now been decided, in partial modification of the above circular, that so
long as there is at least one promotor common, both in the name availability application and the subscription clause
of the memorandum and articles of association, and others have no objection, the company may be registered.
New registration : (v) There are divergent practices in the offices of ROCS as to the number of clauses/objects that
likeHindustan Sugar Limited, the main object should constitute only that object (like sugar in case of Hindustan
of Form 1A. [ See Comments under Sections 13 and 20].
(vi) It is clarified that there cannot be any restriction for incorporation of a company where all the subscribers to the
memorandum and articles of association/proposed directors are residing abroad, being either foreign nationals or
NRIS subject to the approval of the RBI, where necessary. [ See Comments under Section 12].
Harmonisation of practices : (xvii) It is noticed that various Registrars of Companies (ROCs) have developed certain
practices in their working over the years which has resulted in dealing with the same issue differently by different
Page 16 of 19
ROCS. It is desirable that there should be a common approach to such practices followed by all offices. Some of
these instances are given below :—
(a) Power of attorney : Power of attorney is required for correction in the documents at the time of incorporation of
companies, filing of prospectus and other documents. While in case of correction of documents, Power of attorney
is required from the signatory concerned, in case of correction to be made in the memorandum and articles of
association and prospectus, power of attorney is insisted upon from all the subscribers of the memorandum and
articles of association/directors who have signed the prospectus. At times, some ROCS insist for either separate
power of attorney from each person or jointly executed with the stamp paper of the adequate value as if executed
by the person individually. It is hereby clarified that only one power of attorney from all subscribers or directors is
enough on usual value stamp in such cases. ROCS should accept the power of attorney in the manner as classified
here and no objection be raised in this behalf. ROCS should also not insist for any authorisation from the Board of
Directors for appointing a power of attorney or where the professionals or company's representative come over to
ROC to make oral enquiry or submission on any matter.” [Extracts from Circular No. 1 of 1995 (F. No. 14/6/94-CL-
V), dated 16-2-1995 : (1995) 82 Comp. Cas. (St.) 261 : See Full Text of the Circular in Comments under Section
609].
See also Department's views in Comments under Sections 12, 13, 15 and 30.
Registrar's discretion [Sub-section (3)].—If the Registrar of Companies is satisfied that all the requirements have
been complied with by the company and it is authorised to be registered under the Act, he shall register the
Memorandum, the Articles, if any, and the agreement referred to in sub-section (1)(c), if any.
The legal formalities have been outlined in Comments under Section 12.
Registrar must register.—The Registrar of Companies must register the company if the legal formalities have
been complied with. Once the conditions envisaged in sub-sections (1) and (2) of section 33 are satisfied, the
Registrar has no option but to register it. It is not competent for him to refuse registration on any extraneous
considerations or for any reason other than non-compliance with the provisions of sub-sections (1) and (2) of
section 33. The only duty cast on the Registrar before he could register it is to see that the requirements prescribed
by sub-sections (1) and (2) are complied with. It is not within his province to make enquiries into matters, which are
unconnected with the conditions enumerated in sub-sections (1) and (2) of section 33 or into collateral matters to
probe into the motives of the promoters.59
Lawful purpose.—At the stage of registering the name of a company, the Registrar of Companies is not required
to carry out any elaborate investigation. The only duty cast on the Registrar before he registers a company is to see
that the requirements prescribed under section 33(1) and (2) are complied with. Unless the purpose of the company
appears to be unlawful ex facie, or is transparently illegal or prohibited by any statute, it cannot be regarded as an
unlawful purpose.60
Company with similar name.—It is not open to the registering authority to register a company with a name similar
to that of an existing company or if it resembles closely, such names should be avoided. However, the Registrar of
Companies, while registering the company at the initial stage need not make a thorough investigation. If such an
issue is brought before the Registrar within the time stipulated under section 22 of the Act, it is open to the Central
Government to direct the later company to change its name.61 The Registrar of Companies cannot refuse
registration of a company in a name which is similar to defunct company for 10 years. Before making an order for
obtaining a “No objection” letter from a company using a name similar to the proposed name, the Registrar should
be satisfied that the existing company has been lawfully registered and is entitled to transact its business in that
name. In an appropriate case a writ petition will lie against the order of the Registrar of Companies.62
Writ.—Against an improper refusal to register, an application under Article 226 of the Constitution of India for a writ
in the nature of mandamus will lie.63
But, so long as the Registrar of Companies' decision is not perverse or clearly wrong the Court will not interfere.64
Legal Entity.—On incorporation the company becomes a legal person having a separate existence from its
members.65
See detailed Comments under Sections: Effect of registration [ Section 34] and Conclusiveness of certificate of
incorporation [ Section 35].
Page 17 of 19
Certificate of Incorporation [ Section 35].—After the Registrar of Companies is satisfied he enters the name of
the company in the Register, starts a new file and issues a Certificate of Incorporation. The date of the Certificate is
the date of birth of the company. The Certificate will be conclusive evidence that the company after compliance of
all formalities has been duly registered.
Registration cannot be cancelled.—A writ cannot be issued to cancel the registration of the company or the
commencement certificate issued to it under section 149 of the Act.66 If a company is born, the method to get it
extinguished is not by assailing its incorporation. The only course open to any one aggrieved by the constitution of
company is to get rid of it by resorting to winding up proceedings. It is not as if such persons are without remedy.67
Commencement of Business.— Public Company.—A public company must obtain Certificate of

Commencement of Business complying with the requirements of Section 149 of the Act. Section 149(1) applies to
public company which has issued a Prospectus and section 149(2) to a company which has not issued a
Prospectus.
Private Company.
—A private company may commence business as soon as the Certificate of Incorporation is received. The
restrictions contained in section 149 as to the commencement of business will not apply to a private company. The
provisions of section 149(2A) do not apply to a private company. [ Section 149(7)].
See detailed Comments and Practice Notes under Sections 12 and 149.
Documents filed constitute notice to public.—As per Section 36 the Memorandum and Articles of Association
when registered, bind the company and its members.68 The Articles of Association as they are found filed with the
Registrar should be taken as in force unless there are copies of special resolutions filed to show the change. A
stranger cannot assume that directors have more powers than are apparent from the records with the Registrar.69
Doctrine of constructive notice and Directors' acts.—As per the doctrine of constructive notice any one dealing
with a company is deemed to have notice of the contents of its ‘public documents’, e.g., memorandum and articles
of association. A third party is thus deemed to have knowledge of the contents.70
constructive notice rule was mitigated by refinement of normal agency principles in Royal British Bank v. Turquand
.71
In India, the doctrine of ultra vires needs to be made in consonance with the English law and European countries
and needs to be further modified on the principle of agency. See detailed Comments under Sections 13 and 290-
293.
Act to override Memorandum and Articles [ Section 9].— See detailed Comments under Sections 9, 13, 26 and
36.
Secretarial Practice and Check List.— Section 33. if the company is in a pre-incorporation stage, check that : (i)
memorandum and articles of the company and the proposed agreement for appointment of managing director,
whole-time director or manager, registered with the Registrar; (ii) a declaration in e-Form No. 1† by an advocate of
Supreme Court, or of a High Court, an attorney or a pleader entitled to appear before a High Court or a secretary,
or a chartered accountant, in whole-time practice in India, or by a person named in the articles as a director,
manager or secretary of the company filed with the Registrar.
The documents involved are : (1) Memorandum and Articles, (2) Proposed Agreement, (3) e-Form 1.
55. Substituted by the Companies (Amendment) Act, 1988 (31 of 1988), s. 6 (w.e.f. 15-6-1988), for “a chartered accountant
practising in India”.
Page 18 of 19
56. The words “managing agent, secretaries and treasurers” omitted by the Companies (Amendment) Act, 1988 (31 of
1988), s. 6 (w.e.f. 15-6-1988). The system of managing agency had already been abolished videsection 324A of the
1970).
610E (w.e.f. 16-9-2006) in Appendix 2.
16-9-2006).
2006) (w.e.f. 1-11-2006).
58. Ratanshi Panchan Tank v. Registrar of Companies, (1970) 40 Comp. Cas. 26 (Ker.) (FB) : AIR 1971 Ker. 1 (FB). See
also Comments under Section 611 and Schedule X.
59. T.V. Krishna v. Andhra Prabha Pvt. Ltd., (1960) 30 Comp. Cas. 437 (AP) (DB) : AIR 1960 AP 123 (DB). See also
60. Executive Board of Methodist Church in India v. Union of India, (1985) 57 Comp. Cas. 443 (Bom.); T.V. Krishna v.
Andhra Prabha Pvt. Ltd., (1960) 30 Comp. Cas. 437 (AP) (DB) : AIR 1960 AP 123 (DB). See also Comments under
Sections 12 and 20.
61. Sidhvi Constructions (India) P. Ltd. v. Registrar of Companies, (1997) 90 Comp. Cas. 299 (AP). See also Comments
62. Executive Board of Methodist Church in India v. Union of India, (1985) 57 Comp. Cas. 443 (Bom.). See revised
Instructions on defunct companies in Circular Letter No. 10(1)-RS/65, dated 27-11-1965, para 19, printed in Comments
under Section 20.
63. R. v., Registrar of Companies(1914) 3 KB 1161 : 84 LJ KB 229 (DC).
64. Barned's Banking Co., Peel's Case, Re, (1867) 2 Ch. App. 674 : 36 LJ Ch. 757; R. v. Registrar of Companies,(1912) 3
KB 23 : 81 LJ KB 914 (DC); R. v. ROC,(1931) 2 KB 197 : (1931) All ER Rep. 864 : 100 LJ KB 638 (CA); Cotman v.
Brougham,(1918) AC 514 (HL) : 87 LJ Ch. 379 : 119 LT 162 (HL). See also Comments under Sections 31, 32, 35 and
41.
Sections 12 and 149(3).
Salomon & Co. Ltd.,(1897) AC 22 : (1895-99) All ER Rep. 33 : 66 LJ Ch. 35 (HL). See detailed Comments under
Sections 12 and 34.
69. National Coal Co. Ltd. v. Gyan Ranjan Bhattacharya,AIR 1927 Cal. 299.
70. Jon Beauforte (London) Ltd., Re, (1953) Ch. 131 : (1953) 1 All ER 634 : 2 WLR 465. The doctrine of constructive notice
has been abolished under the English law, but this decision still holds good under the Indian Law. See detailed
† See the Companies (Central Government's) General Rules and Forms, 1956 in Appendix 1. See detailed Comments,
Page 19 of 19
End of Document
Datta: Company Law
C R Datta
S. 34. Effect of registration.

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

6 SCR 885.
73. V.B. Rangaraj v. V.B. Gopalakrishnan, (1992) 73 Comp. Cas. 201 (SC) : AIR 1992 SC 453 [LNIND 1991 SC 637];
Naresh Chandra Sanyal v. Calcutta Stock Exchange Association Ltd., (1971) 41 Comp. Cas. 51 (SC) : AIR 1971 SC
422 [LNIND 1970 SC 391]; Hanuman Prasad Gupta v. Hiralal, (1970) 40 Comp. Cas. 1058 (SC) : AIR 1971 SC 206
[LNIND 1970 SC 71]: (1970) 2 Comp. LJ 195 (SC). See also Comments under Sections 3, 9, 12, 13, 26, 33, 35, 36, 41,
82, 111 and 111A.
TLR 46 : 41 SJ 63 (HL); State Trading Corporation of India Ltd. v. CTO, (1963) 33 Comp. Cas. 1057 (SC) : AIR 1963
SC 1811 [LNIND 1963 SC 334]: (1964) 4 SCR 99 [LNIND 1963 SC 334] Mrs. Bacha F. Guzdar v. CIT, (1955) 25
SCR 876 [LNIND 1954 SC 145]. See also Comments under Sections 2(46), 3, 12, 41 and 82.
Comp. LJ 244 (SC) more popularly known as Bank Nationalisation case;,Indo-China Steam Navigation Co. Ltd. v. Jasjit
Singh, (1964) 34 Comp. Cas. 435 (SC) : AIR 1964 SC 1140 [LNIND 1964 SC 25]; Western Coalfields Ltd. v. Special
Area Development Authority,AIR 1982 SC 697 [LNIND 1981 SC 446]: (1982) 1 SCC 125 [LNIND 1981 SC 446]. See
also Comments under Section 2(10).
76. State Trading Corporation of India Ltd. v. CTO, (1963) 33 Comp. Cas. 1057 (SC) : AIR 1963 SC 1811 [LNIND 1963 SC
458 (SC) : AIR 1965 SC 40 : (1964) 6 SCR 885.
77. Bennett, Coleman and Co. Ltd. v. Union of India,AIR 1973 SC 106 [LNIND 1972 SC 514]: (1973) 2 SCR 757 [LNIND
1972 SC 514]. See also Comments under Section 433.
78. Delhi Cloth and General Mills Co. Ltd. v. Union of India, (1983) 54 Comp. Cas. 674 (SC) : AIR 1983 SC 937 [LNIND
1983 SC 175].
79. M.P. Sharma v. Satish Chandra,AIR 1954 SC 300 [LNIND 1954 SC 40]: 1954 SCR 1077 [LNIND 1954 SC 40].
80. Lachminarain Kanoria & Co. v. Victory Jute Mills, (1966) 36 Comp. Cas. 53 (Cal.).
Page 2 of 37
81. Ray Cylinders and Containers v. Hindustan General Industries Ltd., (2001) 103 Comp. Cas. 161 (Delhi). See detailed
83. Tata Engg. and Locomotive Co. Ltd. v. State of Bihar, (1964) 34 Comp. Cas. 458 (SC) : AIR 1965 SC 40 : (1964) 6
SCR 885.
TLR 46 : 41 SJ 63 (HL).
85. Ebbw Vale U.D.C. v. South Wales Traffic Area Licensing Authority,(1951) 2 KB 366 (CA) : (1951) 1 All ER 806 : (1951)
1 TLR 742 (CA).
86. Lee v. Lee's Air Farming Ltd.,(1961) AC 12 : (1960) 3 All ER 420 : (1960) 3 WLR 758 (PC) : (1961) 31 Comp. Cas. 233
(PC).
87. Lee v. Carter Ltd.,(1949) 1 KB 85 : (1948) 2 All ER 690 : 64 TLR 536 : 92 SJ 586 (CA).
88. Mohta Alloy and Steel Works v. Mohta Finance and Leasing Co. Ltd., (1997) 89 Comp. Cas. 227 (Delhi). See also
89. Macaura v. Northern Assurance Co.,(1925) AC 619 : 133 LT 152 : 69 SJ 777 (HL). See also Comments under Section
82.
90. Section 4. See also decisions in later paragraphs under Lifting of corporate veil—Holding company and its subsidiary.
91. Ochberg v. CIR, (1913) AD [S. Africa] 215.
TLR 46 : 41 SJ 63 (HL).
93. L.I.C. v. Escorts Ltd., (1986) 59 Comp. Cas. 548 (SC) : AIR 1986 SC 1370 [LNIND 1985 SC 362]; CDS Financial
Services (Mauritius) Ltd. v. BPL Communications Ltd., (2004) 121 Comp. Cas. 374 (Bom.) (DB). See detailed
Comments under separate headings hereinafter.
94. New Horizons Ltd. v. UOI, (1997) 89 Comp. Cas. 849 (SC).
95. Subra Mukherjee v. Bharat Coking Coal Ltd. (2000) 101 Comp. Cas. 257 (SC).
6 SCR 885.
97. L.I.C. v. Escorts Ltd., (1986) 59 Comp. Cas. 548 (SC) : AIR 1986 SC 1370 [LNIND 1985 SC 362]. See fuller discussion
in earlier paragraph under Lifting the corporate veil.
* See the Foreign Exchange Management Act, 1999 (42 of 1999)in Appendix 325 which has replaced the Foreign
Exchange Regulation Act, 1973 (46 of 1973).
2. Darby, ex parte Brougham, Re,(1911) 1 KB 95 : 80 LJ KB 180 : 18 Mans. 10; R. v. Grubb,(1915) 2 KB 683 : 84 LJ KB
1744 : 113 LT 510 : 31 TLR 429 (CCA).
3. Delhi Development Authority, v. Skipper Construction Co. (P.) Ltd., (1997) 89 Comp. Cas. 362 (SC)Ali Jawad
Ameerhasan Rizvi v. Indo French Biotech Enterprises Ltd., (1999) 95 Comp. Cas. 373 (Bom.) (DB). See also Contempt
of Court in later paragraphs.
4. Delhi Development Authority v. Skipper Construction Co. (P.) Ltd., (1997) 89 Comp. Cas. 362 (SC). See also Holding,
Subsidiary and Associated companies in later paragraphs.
5. Ali Jawad Ameerhasan Rizvi v. Indo French Biotech Enterprises Ltd., (1999) 95 Comp. Cas. 373 (Bom.) (DB). See also
Holding, Subsidiary and Associated companies in later paragraphs.
6. SEBI v. Livra Plantations Ltd., (1999) 1 Comp. LJ 294 (Bom.); Dindas Shankar Thange v. State of Maharashtra, (1999)
1 Comp. LJ 299 (Bom.).
7. S. Shreenivasa Rao alias S. S. Rao v. Inspector of Police, (2002) 109 Comp. Cas. 406 (Mad.).
8. Ravi Kant v. National Consumer Disputes Redressal Commission, (1997) 89 Comp. Cas. 471 (Delhi) (DB).
9. PNB Finance Ltd. v. Shri Shital Prasad Jain, (1983) 54 Comp. Cas. 66 (Delhi) (DB).
Page 3 of 37
10. Singer India Ltd. v. Chander Mohan Chadha, (2004) 122 Comp. Cas. 468 (SC).
11. Singer India Ltd. v. Chander Mohan Chadha, (2004) 122 Comp. Cas. 468 (SC) : AIR 2004 SC 4368 [LNIND 2004 SC
796]: (2004) 4 Comp. LJ 413 (SC) : (2004) 7 SCC 1 [LNIND 2004 SC 796] : (2004) 6 Supreme 259 : (2004) 6 Scale
217 (SC). See detailed Comments under Sections 391 and 394.
12. Miheer H. Mafatlal v. Mafatlal Industries Ltd., (1996) 87 Comp. Cas. 792 (SC) : AIR 1997 SC 506 : (1996) 4 Comp. LJ
124 (SC).
13. Nandh Products Promoters P. Ltd. v. District Forest Officer, (2005) 123 Comp. Cas. 367 (Mad.).
14. Ansuman Singh v. State of U.P.,AIR 2004 All. 260.
85 LJ KB 1333 : 114 LT 1049 (HL). See also Comments under Sections 12, 13 and 146.
334]: (1964) 4 SCR 99 [LNIND 1963 SC 334]. See also Comments under Company not a Citizen in earlier paragraphs
and Government Company in later paragraphs.
23. De Beers Consolidated Mines Ltd. v. Howe,(1906) AC 455 (HL) : (1904-07) All ER Rep. 1256 (HL).
24. Section 6(3)(ii) of the Income-tax Act, 1961 (43 of 1961); Union Corpn. Ltd. v. IRC,(1953) AC 482 : (1953) 1 All ER 729
: (1953) 2 WLR 615 : (1953) 97 SJ 206 (HL); Unit Construction Co. Ltd. v. Bullock,(1960) AC 351 (HL) : (1959) 3 All ER
831 (HL) : (1959) 3 WLR 1022 (HL) : (1959) 103 SJ 1027 (HL).
103 SJ 1027 (HL).
[LNIND 1972 SC 144]: (1972) 3 SCR 711 [LNIND 1972 SC 144]. See also Comments under Sections 12 and 13.
29. Juggilal Kamlapat v. CIT,AIR 1969 SC 932 : (1969) 2 Comp. LJ 188 (SC) : (1969) 73 ITR 702 (SC) : (1969) 1 SCR 988;
CIT v. Sri Meenakshi Mills Ltd.,AIR 1967 SC 819 [LNIND 1966 SC 266]: (1967) 63 ITR 609 [LNIND 1966 SC 266] (SC)
: (1967) 1 SCR 934 [LNIND 1966 SC 266]; Deputy Commissioner v. Cheran Transport Corporation Ltd., (1992) 74
Comp. Cas. 563 (Mad.) (DB); India Waste Energy Development Ltd. v. Government of NCT of Delhi, (2003) 114 Comp.
Cas. 82 (Delhi) (DB).
30. McDowell and Co. Ltd. v. CTO,AIR 1986 SC 649 [LNIND 1985 SC 131]: (1985) 154 ITR 148 [LNIND 1985 SC 131]
(SC) : (1985) 59 STC 277 [LNIND 1985 SC 131] (SC); W.T. Ramsay Ltd. v. IRC,(1981) 1 All ER 865 (HL) : (1982) AC
300 (HL) : (1981) 2 WLR 449 (HL); IRC v. Burmah Oil Co. Ltd., (1982) Simon's Tax Cases 30; Furniss v.
Dawson,(1984) 1 All ER 530 (HL) : (1984) 2 WLR 226 (HL).
31. CWT v. Arvind Narottam,AIR 1988 SC 1824 [LNIND 1988 SC 375]: (1988) 173 ITR 479 [LNIND 1988 SC 375] (SC).
32. UOI v. Playworld Electronics Pvt. Ltd., (1990) 68 Comp. Cas. 582 (SC) : AIR 1990 SC 202 [LNIND 1989 SC 299]:
(1990) 184 ITR 308 (SC) : 1989 (41) ELT 368 [LNIND 1989 SC 299] (SC); Greenberg v. IRC,(1971) 3 All ER 136 :
(1971) 3 WLR 386 : (1971) 47 TC 240 (HL); Sherdeley v. Sherdeley,(1987) 2 All ER 54 (HL); M.V. Valliappan v.
ITO,(1988) 170 ITR 238 [LNIND 1988 MAD 22] (Mad.).
6 SCR 885. See fuller discussion earlier under Lifting the corporate veil and later under Holding Company and its
Subsidiary.
34. Sunil Siddharthabhai v. CIT,(1985) 156 ITR 509 [LNIND 1985 SC 303] (SC) : (1985) 49 CTR (SC) 172.
Page 4 of 37
35. Santanu Ray v. UOI, (1989) 65 Comp. Cas. 196 (Delhi) (DB).
36. Workmen v. Associated Rubber Industry Ltd., (1986) 59 Comp. Cas. 134 (SC) : AIR 1986 SC 1 [LNIND 1985 SC 260]:
(1986) 157 ITR 77 (SC).
212 (Mad.) : AIR 1969 Mad. 359 [LNIND 1967 MAD 212]: (1969) 72 ITR 33 [LNIND 1967 MAD 212] (Mad.); Free
Wheel (India) Ltd. v. Dr. Veda Mitra, (1969) 39 Comp. Cas. 1 (Delhi) (DB) : AIR 1969 Delhi 258 [LNIND 1968 DEL
135](DB); CDS Financial Services (Mauritius) Ltd. v. BPL Communications Ltd., (2004) 121 Comp. Cas. 374 (Bom.)
40. Delhi Development Authority v. Skipper Construction Co. (P.) Ltd., (1997) 89 Comp. Cas. 362 (SC). See also Lifting the
veil to prevent Fraud or Improper Conduct and Lifting the veil in case of Contempt of Court in earlier paragraphs.
Fraud or Improper Conduct in earlier paragraphs.
6 SCR 885. See also discussion under Lifting the corporate veil and Tax Matters in earlier paragraphs.
44. UOI v. Bombay Tyre International Ltd., (1986) 59 Comp. Cas. 460 (SC) : (1983) 3 Comp. LJ 270 (SC) : 1983 (14) ELT
1896 [LNIND 1983 SC 294] (SC) : (1984) 1 SCR 347 [LNIND 1983 SC 294].
45. New Horizons Ltd. v. Union of India, (1997) 89 Comp. Cas. 849 (SC).
46. Progressive Aluminium Ltd. v. Registrar of Companies, (1997) 89 Comp. Cas. 147 (AP). See also Comments under
47. Hackbridge-Hewittic and Easun Ltd. v. G.E.C. Distribution Transformers Ltd., (1992) 74 Comp. Cas. 543 (Mad.) (DB);
Harold Holdsworth & Co. (Wakefield) Ltd. v. Caddies,(1955) 1 All ER 725 (HL) : (1955) 1 WLR 352 (HL); ICI v. E.C.
Commission,(1972) 11 CMLR 557; D.H.N. Food Distributors Ltd. v. London Borough of Tower Hamlets,(1976) 3 All ER
462 : (1976) 1 WLR 852 : 120 SJ 215 (CA).
48. Inalsa Ltd. v. UOI, (1996) 87 Comp. Cas. 599 (Delhi). See also Comments under Section 4.
49. U.K. Mehra v. Union of India, (1997) 88 Comp. Cas. 213 (Delhi) (DB).
50. Fatima Tile Works v. Sudarsan Trading Co. Ltd,. (1992) 74 Comp. Cas. 423 (Mad.). See detailed Comments under
Section 4.
51. Scottish Co-operative Wholesale Society Ltd. v. Meyer,(1959) AC 324 : (1958) 3 All ER 66 : (1958) 3 WLR 404 (HL).
52. SAE (India) Ltd. v. E.I.D. Parry (India) Ltd.,(1998) 18 SCL 481 (Mad.).
53. BSN (UK) Ltd. v. Janardan Mohandas Rajan Pillai (1996) 86 Comp. Cas. 371 (Bom.). See also Comments under
Sections 10, 41, 153B and 187C.
54. Industrial Development Corporation Orissa Ltd. v. Regional Provident Fund Commissioner, (2002) 112 Comp. Cas. 527
(Orissa).
55. Southern v. Watson,(1940) 3 All ER 439 : 85 SJ 8 (CA).
56. Abbey Malvern Wells Ltd. v. Ministry of Local Govt. and Planning, (1951) Ch. 728 : (1951) 2 All ER 154 : (1951) 1 TLR
1050.
57. Willis v. Association of Universities of the British Commonwealth,(1965) 1 QB 140 (CA) : (1964) 2 All ER 39 : (1964) 2
WLR 946 : 108 SJ 197 (CA); Malyon v. Plummer,(1964) 1 QB 330 : (1963) 2 All ER 344 : (1963) 2 WLR 1213; Gilford
Motor Co. v. Horne, (1933) Ch. 935 : (1933) All ER Rep. 109 : 102 LJ Ch. 212 (CA); Jyoti Ltd. v. Kanwaljit Kaur Bhasin,
(1987) 62 Comp. Cas. 626 (Delhi) see ratio of this decision under Contempt in later paragraphs.
58. Smith, Stone & Knight v. Birmingham Corpn.,(1939) 4 All ER 116 : 161 LT 371 : 83 SJ 961.
215 (CA).
Page 5 of 37
60. L.I.C. v. Escorts Ltd., (1986) 59 Comp. Cas. 548 (SC) : AIR 1986 SC 1370 [LNIND 1985 SC 362]; Bijoy Kumar
Agarwal v. Ratanlal BagariaAIR 1999 Cal. 106 [LNIND 1998 CAL 381]. See fuller discussion in earlier paragraphs
under Lifting the corporate veil.
62. Carrasco Investments Ltd. v. Special Director, Enforcement Directorate,(1994) 79 Comp Cas 631 (Delhi).
63. Delhi Development Authority v. Skipper Construction Co. (P.) Ltd., (1997) 89 Comp. Cas. 362 (SC); Rashtriya Mill
Mazdoor Sangh v. Khatau Makanji Spg. and Wvg. Co. Ltd., (2000) 100 Comp. Cas. 33 (Bom.). See also Contempt of
Court in Comments under Section 10.
64. Jyoti Ltd. v. Kanwaljit Kaur Bhasin, (1987) 62 Comp. Cas. 626 (Delhi).
65. Ravi Kant v. National Consumer Disputes Redressal Commission, (1997) 89 Comp. Cas. 471 (Delhi) (DB); Aligarh
Municipal Board v. Ekka Tonga Mazdoor Union,AIR 1970 SC 1767.
66. Rashtriya Mill Mazdoor Sangh v. Khatau Makanji Spg. and Wvg. Co. Ltd., (2000) 100 Comp. Cas. 33 (Bom.).
67. Director General of Fair Trading v. Pioneer Concrete (UK) Ltd.,(1995) 1 BCLC 613 (HL).
SC 121]: (1969) 2 Comp. LJ 273 (SC); State Trading Corpn. of India Ltd. v. CTO, (1963) 33 Comp. Cas. 1057 (SC) :
AIR 1963 SC 1811 [LNIND 1963 SC 334]: (1963) 2 Comp. LJ 234 (SC); Steel Authority of India Ltd. v. Shri Ambica
Mills Ltd., (1998) 92 Comp. Cas. 120 (SC); Dr. S.L. Agarwal v. Hindustan Steel Ltd.,AIR 1970 SC 1150 [LNIND 1969
SC 498]: (1970) 3 SCR 363 [LNIND 1969 SC 498]; Western Coalfields Ltd. v. Special Area Development Authority,AIR
1982 SC 697 [LNIND 1981 SC 446]: (1982) 1 SCC 125 [LNIND 1981 SC 446]; Ranjit Kumar Chatterjee v. UOI, (1969)
39 Comp. Cas. 327 (Cal.) : AIR 1969 Cal. 95 [LNIND 1968 CAL 115]; K.C. Verma v. Bokaro Steel Ltd., (1971) 41
Comp. Cas. 826 (Pat.) (DB) : AIR 1971 Pat. 137. See detailed Comments under Ss. 617-620.
69. Central Inland Water Transport Corpn. Ltd. v. Brojo Nath Ganguly (1986) 60 Comp. Cas. 797 (SC) : AIR 1986 SC 1571
70. Inland Steam Navigation Workers' Union v. Rivers Steam Navigation Co. Ltd. (1968) 38 Comp. Cas. 99 (Cal.) (DB) : 71
CWN 897; Kapila Hingorani v. State of Bihar (2003) 116 Comp. Cas. 133 (SC). See also Comments under Sections
391 and 617.
71. Praga Tools Corporation v. C.V. Imanual (1969) 39 Comp. Cas. 889 (SC) : AIR 1969 SC 1306 [LNIND 1969 SC 80]:
(1970) 1 Comp. LJ 50 (SC); Malik Ram v. Hindusthan Cables Ltd. (1968) 38 Comp. Cas. 500 (Cal.) : 72 CWN 398;
D.M. Nagaraja Rao v. Indian Oil Corpn. Ltd. (1969) 39 Comp. Cas. 896 (Mys.). See detailed Comments under Sections
617 and 2(18).
72. Electronics Corporation of India Ltd. v. Government of Andhra Pradesh (1999) 97 Comp. Cas. 470 (SC) : AIR 1999 SC
1734.
73. Secretary, HSEB v. Suresh1999 (3) SCC 601 [LNIND 1999 SC 1342].
74. M.V. “Dong Do” v. Ramesh Kumar and Co. Ltd. (2002) 109 Comp. Cas. 450 (Cal.) (DB).
75. Kapila Hingorani v. State of Bihar (2003) 116 Comp. Cas. 133 (SC).
76. British American Tobacco Co. Ltd. v. IRC(1943) AC 335 (HL) : (1943) 1 All ER 13 (HL) : (1943) 13 Comp. Cas. 123
(HL). See also Comments under Sections 4 and 406.
77. V.M. Rao v. Rajeswari Ramakrishnan (1987) 61 Comp. Cas. 20 (Mad.) (DB) : (1986) 1 Comp. LJ 1 (Mad.) (DB). See
78. Vikas Jalan v. Nucon Industries Pvt. Ltd., (2001) 103 Comp. Cas. 343 (AP). See also Comments under Section 433.
79. Shyamlal Purohit v. Jagannath Ray, (1970) 40 Comp. Cas. 138 (Cal.) (DB) : AIR 1969 Cal. 424 [LNIND 1968 CAL
198]. See also Comments under Sections 457 and 475.
80. Purna Investment Ltd. v. Bank of India Ltd., (1984) 55 Comp. Cas. 737 (Cal.) (DB); Charanjit Lal Chowdhury v. UOI,
(1951) 21 Comp. Cas. 33 (SC) : AIR 1951 SC 41 [LNIND 1950 SC 55]: 1950 SCR 869 [LNIND 1950 SC 55]; Mrs.
Bacha F. Guzdar v. CIT, (1955) 25 Comp. Cas. 1 (SC) : AIR 1955 SC 74 [LNIND 1954 SC 145]: (1955) 27 ITR 1
[LNIND 1954 SC 145] (SC) : (1955) 1 SCR 876 [LNIND 1954 SC 145]. See also Company a legal person and separate
juristic entity earlier.
81. Subra Mukherjee v. Bharat Coking Coal Ltd., (2000) 101 Comp. Cas. 257 (SC). See also Corporate entity, Corporate
veil and Lifting of corporate veil in earlier paragraphs.
82. Naga Brahma Trust v. Translanka Air Travels P. Ltd., (1997) 88 Comp. Cas. 136 (Mad.).
83. Jai Narain Parasrampuria (Decd.) v. Pushpa Devi Saraf, (2006) 133 Comp. Cas. 794 (SC).
Page 6 of 37
84. Rajdhani Chit Fund Pvt. Ltd. v. Mukesh Maheshwari (1999) 96 Comp. Cas. 837 (Delhi); Kathiawar Industries Ltd. v.
Custodian-General of Evacuee Property,AIR 1967 Punjab 337; Hydro (Sind) Electric Supply Co. Ltd. v. Union of
India,AIR 1959 Punjab 199.
85. Prem Lata Bhatia v. Union of India, (2006) 134 Comp. Cas. 92 (Delhi) (DB).
86. K.M. Basheer v. Lona Chackola, (2003) 115 Comp. Cas. 127 (Ker.) (DB).
87. Martin Burn Ltd. v. Bhagirath Murarka, (1982) 52 Comp. Cas. 127 (Cal.) (DB). See also Comments under Section 439.
88. G.C. Mehrotra v. Deputy Collector (Collections), Sales Tax, (1998) 93 Comp. Cas. 617 (All.); Kailash Prasad Modi v.
Chief General Manager, Orissa Telecommunication, (1995) 82 Comp. Cas. 626 (Orissa) (DB) : AIR 1994 Orissa 98
(DB); V.V. Rama Rao v. Union of India,(1998) 30 Corp. LA 131 (AP); Employees' State Insurance Corporation v. S.K.
Aggarwal, (1998) 94 Comp. Cas. 75 (SC). See detailed Comments under Recovery of Tax, Recovery of Dues, etc., in
later paragraphs. See also Comments under Sections 3 and 5
89. R. v. Tyler & International Commercial Co.,(1891) 2 QB 588 : 65 LT 662 : 7 TLR 720 (CA); Director of Public
Prosecutions v. Kent and Sussex Contractors Ltd.,(1944) 2 KB 146 : (1944) 1 All ER 119 : 113 LJ KB 88 (DC). See
also Comments Sections 5, 293, 621 and 629A.
90. Esso Standard Inc. v. Udharam Bhagwandas Japanwalla, (1975) 45 Comp. Cas. 16 (Bom.) (DB). See also Comments
under Section 542.
91. Bolton (H.L.) Engg. Co. Ltd. v. Graham (T.J.) & Sons Ltd.,(1957) 1 QB 159 : (1956) 3 All ER 624 : (1956) 3 WLR 804 :
(1956) 100 SJ 816 (CA) ; DPP v. Kent and Sussex Contractors Ltd.,(1944) 2 KB 146 : (1944) 1 All ER 119 : 113 LJ
KB 88 (DC); D. & L. Caterers Ltd. v. D'Anjou,(1945) KB 364 : (1945) 1 All ER 563 : 114 LJ KB 386; Neville v. London
Express Newspapers,(1917) 2 KB 564. See also Lifting the veil for Contempt of Court in earlier paragraphs.
92. Linotype Co. Ltd. v. British Empire Typesetting Machine Co. Ltd.,(1899) 81 LT 331 : 15 TLR 524 (HL); South Hetton
Coal Co. v. North-Eastern News Association,(1894) 1 QB 133 : 63 LJ QB 293; Lewis v. Daily Telegraph Ltd.,(1964) 2
QB 601 : (1964) 1 All ER 705 : (1964) 2 WLR 736 (CA).
94. Radhey Shyam Khemka v. State of Bihar, (1993) 77 Comp. Cas. 356 (SC). See also Comments under Sections 62, 63,
69 and 73.
95. A.K. Khosla v. T.S. Venkatesan, (1994) 80 Comp. Cas. 81 (Cal.). See also Comments under Sections 5, 293, 621 and
629A.
96. Tesco Supermarkets Ltd. v. Nattrass,(1972) AC 153 : (1971) 2 All ER 127 : (1971) 2 WLR 1166 : (1971) 115 SJ 285
(HL); Lennard's Carrying Co. Ltd. v. Asiatic Petroleum Co. Ltd.,(1915) AC 705 : 84 LJ KB 1281 : 113 LT 195 : 31 TLR
294 : 59 SJ 411 (HL); Bolton (H.L.) Engg. Co. Ltd. v. Graham (T.J.) & Sons Ltd.,(1957) 1 QB 159 : (1956) 3 All ER 624 :
(1956) 3 WLR 804 : (1956) 100 SJ 816 (CA); R. v. Mcdonnell,(1966) 1 QB 233 : (1966) 1 All ER 193 : (1965) 3 WLR
1138 : 109 SJ 919 : (1966) 36 Comp. Cas. 125; Henshall (John) (Quarries) Ltd. v. Harvey,(1965) 2 QB 233 : (1965) 1
All ER 725 (DC) ; DPP v. Kent and Sussex Contractors Ltd.,(1944) 2 KB 146 : (1944) 1 All ER 119 : 113 LJ KB 88
(DC); R. v. ICR Haulage Ltd.,(1944) KB 551 : (1944) 1 All ER 691 (CCA). But see R. v. Andrews Weatherfoil
Ltd.,(1972) 1 All ER 65 : (1972) 1 WLR 118 : 115 SJ 888 (CA). See also Comments under Sections 5, 293, 621 and
629A.
1. R. v. ICR Haulage Ltd.,(1944) KB 551 : (1944) 1 All ER 691 (CCA) ; Esso Standard Inc. v. Udharam Bhagwandas
Japanwalla, (1975) 45 Comp. Cas. 16 (Bom.) (DB). See also Comments under Sections 5, 542, 621, 621A and 629A.
2. Abdul Aziz v. State of Maharashtra,AIR 1963 SC 1470 [LNIND 1963 SC 26]; Supdt. and Legal Remembrancer v. Balai
Chand Saha,(1974) 78 CWN 757 (Cal.); Karunaketan Dutta v. Coal Board,(1972) 76 CWN 679 (Cal.). See also
3. M.V. Javali v. Mahajan Borewell and Co., (1998) 91 Comp. Cas. 708 (SC) : (1998) 230 ITR 1 (SC); M.R. Pratap v. V.M.
Muthukrishnan, ITO, (1992) 74 Comp. Cas. 400 (SC) : (1992) 196 ITR 1 (SC) : AIR 1994 SC 674 [LNIND 1992 SC
374]; ITO v. D. Manoharlal Kothari, (1999) 96 Comp. Cas. 275 (Mad.) : (1999) 236 ITR 357 (Mad.) ; Modi Industries
Ltd. v. B.C. Goel, (1983) 54 Comp. Cas. 835 (All.) (DB); Oswal Vanaspati and Allied Industries v. State of U.P., (1992)
75 Comp. Cas. 770 (All.) (FB); Manian Transports v. S. Krishna Moorthy, ITO, (1991) 72 Comp. Cas. 746 (Mad.); P.V.
Pai v. R.L. Rinawma, Dy. CIT, (1993) 77 Comp. Cas. 179 (Kar.) : (1993) 200 ITR 717 (Kar.); Vijaya Commercial Credit
Ltd. v. ITO, (1988) 63 Comp. Cas. 581 (Kar.) : (1988) 170 ITR 55 (Kar.). See also Comments under Sections 5, 621,
621A and 629A.
4. Hrushikesh Panda v. State of Orissa, (1997) 89 Comp. Cas. 613 (Orissa).
247]; Madanlal Agarwalla v. State, (1989) 65 Comp. Cas. 237 (Cal.) (DB); Naresh Kumar v. State of Bihar, (1991) 70
Comp. Cas. 358 (Patna); Vidya Wati v. State, (1990) 69 Comp. Cas. 813 (Delhi). See detailed Comments under
Section 5 under Essential Commodities Act.
Page 7 of 37
6. Associated Cement Co. Ltd. v. Keshvanand, (1998) 91 Comp. Cas. 361 (SC). See also Comments under Sections 5,
621, 621A and 629A.
7. Geekay Exim (India) Ltd. v. State of Gujarat, (1998) 94 Comp. Cas. 516 (Guj.). See also Comments under Sections 5,
10 and 621.
SCR 885. See detailed Comments under Characteristics of a company, Corporate entity, Corporate veil, Lifting the
corporate veil and Perpetual succession hereinbefore.
10. Memtec Ltd. v. Lunarmech, (2001) 103 Comp. Cas. 1078 (Delhi). See also Comments under Sections 10 and 394.
11. Gopalpur Tea Co. Ltd. v. Peshok Tea Co. Ltd., (1982) 52 Comp. Cas. 239 (Cal.) (DB). See also Comments under
Section 443.
12. B. Mookerjee v. State Bank of India, (1993) 76 Comp. Cas. 292 (Cal.) (DB).
(DB).
(1991) 70 Comp. Cas. 388 (Delhi); P.S. Offshore Inter Land Services Pvt. Ltd. v. Bombay Offshore Suppliers and
Services Ltd., (1992) 75 Comp. Cas. 583 (Bom.). See detailed Comments under Sections 10, 291, 293, 397 and 398.
(2002) 108 Comp. Cas. 295 (Cal.). See also Comments under Sections 10, 10E, 10FA and 10FB-10GF.
17. Order 29, Rule 1 and Order 6, Rule 14 of the Code of Civil Procedure, 1908 (5 of 1908). See also Comments under
Sections 10 and 41.
18. BSN (UK) Ltd. v. Janardan Mohandas Rajan Pillai, (1996) 86 Comp. Cas. 371 (Bom.); Wallersteiner v. Moir (No.
2),(1975) QB 373 : (1975) 1 All ER 849 : (1975) 2 WLR 389 : (1975) 119 SJ 97 (CA); Nurcombe v. Nurcombe,(1985) 1
All ER 65 : (1985) 1 WLR 370 : (1984) BCLC 557 (CA); Giles v. Rhind,(2002) 4 All ER 977. See detailed Comments
under Section 41.
19. Patel Roadways Ltd. v. Prasad Trading Co., (1992) 74 Comp. Cas. 11 (SC); R.S.D.V. Finance Co. Pvt. Ltd. v. Shree
Vallabh Glass Works Ltd., (1993) 78 Comp. Cas. 640 (SC). See detailed Comments under Section 10.
20. All India General Transport Corporation Ltd. v. Raghunath Sahay, (1970) 40 Comp. Cas. 203 (Pat.). See also
21. Harendra Nath Ghosal v. Superfoam Pvt. Ltd., (1992) 74 Comp. Cas. 740 (Cal.) (DB).
22. Mamata Papers Pvt. Ltd. v. State of Orissa, (2000) 99 Comp. Cas. 294 (Orissa). See detailed Comments under Section
23. Union Bank of India v. Khader International Construction, (2001) 105 Comp. Cas. 856 (SC). See detailed Comments
veil to prevent Fraud or Improper Conduct, Contempt of Court and Lifting the veil in Holding, Subsidiary and Associated
companies in earlier paragraphs.
25. Vivek Kumar v. Pearl Cycle Industries Ltd., (1983) 54 Comp. Cas. 77 (Delhi). See also Comments under Sections 290
and 446.
26. Punjab National Bank v. Bareja Knipping Fasteners Ltd., (2001) 103 Comp. Cas. 958 (P&H). See also Comments
under Section 4.
27. Electrical Cable Development Association v. Arun Commercial Premises Co-operative Housing Society Ltd., (1998) 94
Comp. Cas. 53 (SC).
28. Godrej Soap Ltd. v. State, (1991) 70 Comp. Cas. 248 (Cal.) (DB). See also Comments u/s. 10.
29. Sukhdev Singh v. Bhagatram Sardar Singh Raghuvanshi, (1975) 45 Comp. Cas. 285 (SC) : AIR 1975 SC 1331 [LNIND
1975 SC 79]: (1975) 3 SCR 619 [LNIND 1975 SC 79]. See also Comments under Section 4A.
30. Andhra Pradesh State Road Transport Corpn. v. ITO, (1964) 34 Comp. Cas. 473 (SC) : AIR 1964 SC 1486 [LNIND
1964 SC 61]: (1964) 52 ITR 524 [LNIND 1964 SC 61] (SC). See also Government Company hereinbefore.
Page 8 of 37
6 SCR 885; State Trading Corporation of India Ltd. v. CTO, (1963) 33 Comp. Cas. 1057 (SC) : AIR 1963 SC 1811
[LNIND 1963 SC 334]: (1963) 2 Comp. LJ 234 (SC). See also Comments under Company a legal person and separate
juristic entity, Corporate entity, Corporate veil, Lifting the corporate veil and Government Company, etc., in earlier
paragraphs.
32. Maddi Swarna v. CTO, (2002) 109 Comp. Cas. 308 (AP) (DB); Peter J.R. Prabhu v. Asst. CCT, (2002) 109 Comp. Cas.
299 (Kar.); Nishad Patel v. State of Kerala, (1999) 96 Comp. Cas. 861 (Ker.); Tikam Chand Jain v. State Govt. of
Haryana, (1987) 62 Comp. Cas. 601 (P&H); Surinder Nath Khosla v. Excise and Taxation Commissioner,(1964) 15
STC 838 (P&H); George J. Mathew v. Commercial Tax Officer, (2002) 112 Comp. Cas. 641 (Mad.).
33. G.C. Mehrotra v. Deputy Collector (Collections), Sales Tax, (1998) 93 Comp. Cas. 617 (All.). See also Comments
under Liability of Company in earlier paragraphs.
34. Khaders International Construction Ltd. v. CIT, (1998) 91 Comp. Cas. 432 (Ker.); Bhagwandas J. Patel v. Deputy CIT,
(1999) 97 Comp. Cas. 213 (Guj.) (DB). See also Comments u/s. 3.
35. Satish Chand Singhal v. CIT, (1992) 74 Comp. Cas. 796 (All.) : (1992) 196 ITR 227 (All.).
36. Tata Consultancy Services v. Union of India, (2002) 111 Comp. Cas. 292 (Kar.).
37. Alembic Glass Industries Ltd. v. CCE, (2002) 112 Comp. Cas. 379 (SC).
38. Collector of Central Excise v. I.T.E.C. (P.) Ltd., (2002) 112 Comp. Cas. 470 (SC).
39. Sri Banashankary Leasing Co. Ltd. v. State of Karnataka, (1991) 70 Comp. Cas. 200 (Kar.).
40. Trustor AB v. Smallbone (No. 2),(2001) 3 All ER 987. See also Lifting the veil in Tax Matters, viz., Tax Evasion or
Avoidance in earlier paragraphs.
41. Hrushikesh Panda v. Indramani Swain, (1988) 63 Comp. Cas. 368 (Orissa) (DB). See also Comments under Sections
2(13) and 543.
42. Kundan Singh v. Moga Transport Co. (P.) Ltd., (1987) 62 Comp. Cas. 600 (P&H).
43. Bhabani Prosad Ghosh v. Central Bank of India, (1993) 76 Comp. Cas. 349 (Cal.) (DB); H.S. Sidana v. Rajesh
Enterprises, (1993) 77 Comp. Cas. 251 (P&H); Bank of Maharashtra v. Racmann Auto P. Ltd., (1992) 74 Comp. Cas.
752 (Delhi); Indian Overseas Bank v. A.B. Senan, (1999) 96 Comp. Cas. 639 (Ker.); Indian Overseas Bank v. R.M.
Marketing and Services Pvt. Ltd., (2001) 107 Comp. Cas. 606 (Delhi).
44. Motipur Zamindari Co. Ltd. v. State of Bihar,AIR 1953 SC 320 [LNIND 1953 SC 52].
45. Kailash Prasad Modi v. Chief General Manager, Orissa Telecommunication (1995) 82 Comp. Cas. 626 (Orissa) (DB) :
AIR 1994 Orissa 98 (DB). See also Comments under Section 3.
46. Keshav Kumar Swarup v. Flowmore Pvt. Ltd., (1996) 85 Comp. Cas. 210 (SC). See detailed Comments under Section
630.
47. Larsen and Toubro Ltd. v. State of Gujarat, (1998) 92 Comp. Cas. 373 (SC).
* See the Land Acquisition (Companies) Rules, 1963 in Appendix 43.
48. Link Hire-Purchase and Leasing Co. Pvt. Ltd. v. State of Kerala, (2001) 103 Comp. Cas. 941 (Ker.). See also
COMMENTS
33.
Certificate of incorporation [Sub-section (1)].—On the registration of the Memorandum of Association of the
company, the Registrar of Companies shall certify under his hand that the company is incorporated.
See also Comments on Registration of Memorandum and Articles [ Section 33], Conclusiveness of certificate of
incorporation [ Section 35] and Effect of memorandum and articles [ Section 36].
Page 9 of 37
Form and Procedure.—As per Regulation 16(1)* of the Companies Regulations, 1956 the certificate of
incorporation granted to a company in pursuance of section 34 of the Act shall be in Form I* of the Companies
Regulations, 1956.
The Registrar of Companies shall cause a copy of such certificate to be entered on the Memorandum of
Association of the company. [Regulation 16(2)].*
Effect of Registration [Sub-section (2)].—From the date of incorporation mentioned in the Certificate of
incorporation Subscribers and Members of the company shall be a Body Corporate by the name contained in the
memorandum, capable of exercising all the functions of an incorporated company, and having Perpetual
Succession and a Common Seal, with such liability to contribute to the assets of the company in the event of its
being wound up as is mentioned in the Act.
The effect of registration, characteristics of a company and doctrine of Lifting the corporate veil are elaborately dealt
with hereinafter.
Characteristics of a company.—The true legal position in regard to the character of a corporation or a company
which owes its incorporation to a statutory authority, is not in doubt or dispute. The corporation in law is equal to a
natural person and has a legal entity of its own. The entity of the corporation is entirely separate from that of its
shareholders; it bears its own name and has a seal of its own; its assets are separate and distinct from those of its
members; it can sue and be sued exclusively for its own purpose; its creditors cannot obtain satisfaction from the
assets of its members; the liability of the members or shareholders is limited to the capital invested by them;
similarly, the creditors or the members have no right to the assets of the corporation.72
Company a legal person and separate juristic entity.—From the date of incorporation mentioned in the
certificate, the company becomes a legal person separate from its corporators or members; and there comes into
existence a binding contract between the company and its members as evidenced by the Memorandum and
Articles of Association.73 It has perpetual existence until it is dissolved by liquidation or struck out of the Register
and has a common seal. A shareholder who buys shares does not buy any interest in the property of the company.
A company is a separate juristic entity distinct from the shareholders.74
A company registered under the Companies Act is a legal person, separate and distinct from its individual
members. Property of the company is not the property of the shareholders. A shareholder has merely an interest in
the company arising under its articles of association, measured by a sum of money for the purpose of liability, and
by a share in the profit. A shareholder may not therefore be entitled to move a petition for infringement of the rights
of the company, unless by the action impunged by him, his rights are also infringed. But in certain cases a writ
petition will be maintainable by the company or its shareholders, e.g., if the State action impairs the rights of the
shareholders as well as the company the Court will grant relief.75
See also Comments under Sections 2(10), 3 and 12.
Company not a citizen.—A company, however, is not a citizen of India under the Constitution and does not enjoy
fundamental rights guaranteed by Article 19 of the Constitution of India.76 But a shareholder is entitled to the
protection of Article 19 and to apply under Article 226 along with the company for protection of his rights. A limited
company is more than a mere juridical entity, with a personality in law of its own; that there is room in company law
for recognition of the fact that behind it, or amongst it, there are individuals, with rights, expectations and obligations
inter se which are not necessarily submerged in the company structure.77
The trend is in the direction of holding that in the matter of fundamental freedoms guaranteed by Article 19 of the
Constitution of India, the rights of a shareholder and the company which the shareholders have formed are rather
co-extensive and the denial to one of the fundamental freedom would be denial to the other.78
See Comments on Lifting the veil to ascertain Enemy Character, Nationality, Domicile and Residence in later
paragraphs.
Company can own property.—A company is a person and can enforce its property rights under Article 226 of the
Constitution of India.79 It is legally permissible for a company to own a business in a name other than its registered
name.80
Page 10 of 37
See also Comments under Property of the Company in later paragraphs.
Common Seal.—As per section 34(2) from the date of incorporation subscribers and members of the company
shall be a body corporate by the name contained in the memorandum, capable of exercising all the functions of an
incorporated company, and having perpetual succession and a common seal.
See detailed Comments under Power for company to have official seal for use outside India [ Section 50].
Department's view.— Common Seal—Clarification of section 34 read with sections 50 and 147.—The
relevant provisions of the Act clearly show that a company registered under the Act should have only one common
seal for use within India. [ Letter No. 8/4(255)/63-PR, dated 25-1-1963 : Govt. of India publication, Clarifications and
Circulars on Company Law, 1977 Edition, page 21].
Contracts and Deeds, Investments, Seal, etc.— Sections 46 to 50 contain provisions for execution of contracts,
deeds, etc., on behalf the company.
The company is a legal entity. Where directors in their individual capacity agreed to sell their shares. The company
was not a party to the impugned contract. There was no privity of contract between the company and directors. The
obligations arising out of the said agreement were the personal obligations of the directors. The company was not
bound by obligations under the contract.81
See detailed Comments under Sections: Form of contracts [ Section 46], Bills of exchange and promissory notes [
Section 47], Execution of deeds [ Section 48], Investments of company to be held in its own name [ Section 49] and
Power for company to have official seal for use outside India [ Section 50].
Perpetual Succession.—The members may come and members may go but the company goes on forever.
Section 34(2) and decisions dealt with above manifest that the company is a body corporate having perpetual
succession. It has perpetual existence until it is dissolved by liquidation or struck out of the Register. A shareholder
who buys shares does not buy any interest in the property of the company.
The company has been defined under section 3 of the Companies Act, 1956. It is a juristic person. The company is
managed by the Board of directors. The powers of Board of directors are given under section 291 of the Companies
Act. The Board is empowered to exercise all such powers and do all such acts and things as the company is
authorised to exercise. The members of the Board of directors may change. They may appoint another person as
managing director of the company. This, however, does not cancel or change the terms of a contract which a
person has entered into for the company or on behalf of the company.82
Company can sue and be sued.—The company is a separate legal entity having perpetual succession. It can sue
and be sued exclusively for its own purpose.83
See detailed Comments on Suits after Corporate entity, Corporate veil and Lifting the corporate veil dealt with
below.
Corporate entity.— Section 34 of the Companies Act, 1956 recognises the independent corporate existence of a
company as explained in and emphasised by the House of Lords in the case of Salomon v. Salomon & Co. Ltd. In
that case Salomon, a leather merchant and manufacturer of boots, was the owner of a business. He was solvent.
He converted his business into a limited liability company under the name and style of “Salomon & Company
Limited”. Of the total share capital he took 20,000 shares and his wife and 5 children took one share each. No other
shares were issued. Salomon received mortgage debentures of £ 10,000 in part payment for the purchase of his
business by the company. Due to trade depression the company was in financial difficulty. The company went into
liquidation. Salomon claimed preferential right being the debenture holder over certain unsecured creditors of the
company. The unsecured creditors disputed his right to priority on the ground that the company was a “one-man
company” and a sham. The trial judge held that the company was a mere alias or agent for Salomon and that
Salomon was bound to pay the unsecured creditors of the company out of his own pocket, notwithstanding that his
shares had all been fully paid up. The Appeal Court affirmed the decision on the ground that the whole claim was a
fraud on the Act and that it was never intended by the Legislature that a company should consist of one substantial
person and six mere dummies having no real interest. On further appeal, the House of Lords reversed the decision
on the ground that there was nothing in the Act as to the degree of interest which may be held by each of the seven
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or as to the proportion of interest or influence possessed by one or majority of the shareholders over the others. In
the result, Salomon had a priority, being a debenture holder, over other unsecured creditors.84
In the case of Ebbw Vale U.D.C. v. South Wales Traffic Area Licensing Authority all the shares except two of the
bus company were acquired by the British Transport Commission under a provision of the Transport Act, 1947. The
bus company thereafter applied to the Licensing Authority for permission to increase the fares but the Ebbw Vale
U.D.C. objected on the ground that as the services provided by the company were in fact provided by the British
Transport Commission the Licensing Authority had no jurisdiction to hear the application. The Court of Appeal held
that the bus company had retained its character as a separate legal entity and did not act as agent of the
Commission and that the services were provided by the company and not by the Commission. The licensing
authority was the proper authority to consider the application. In case an application were made by the Commission
under the Transport Act, it would have been heard by the Transport Tribunal.85
In Lee v. Lee's Air Farming Ltd. the company was formed for the purposes of carrying the business of aerial top-
dressing. Lee, a qualified pilot, held all except one of the shares of the company and by the Articles was appointed
Governing Director of the company and the chief pilot. Lee was killed while operating the company's aircraft and his
widow claimed compensation. The Newzealand Workers' Compensation Act, 1922 required an employer to pay the
compensation on the death of a “worker”. The word “worker” was defined as “any person who is entered into work
under a contract of service with an employer”. The company opposed the claim on the instruction of its insurers on
the ground that Lee was not a worker within the definition as the same person could not be both employer and
employee. The Judicial Committee of the Privy Council reversed the decision of the Newzealand Court of Appeal
and held that there was a valid contract of service between Lee and the company, Lee was “worker” and as such
his widow was entitled to compensation.86
Corporate veil.—The foregoing decisions manifest that there exists a veil of incorporation between the company
and its members. This veil is opaque and impassable as an iron curtain. The veil is a partition or curtain between
the company and its members. Following this principle the courts in most cases have refused to go behind the
curtain and see who are the real persons composing the company. Thus, where a company took a lease of a
premises for the residence of its controlling director and shareholder it was held that it was not entitled to the
protection of the Rent Act for an artificial person cannot be a “personal resident”.87
The lease agreements entered into by two group companies, being separate and distinct legal entities could not be
held to be invalid merely because the said documents were signed by one person who was the director of both the
legal entities and was authorised to enter into contract by the articles.88
Where a trader sold his business to a company it was held that he ceased to have an insurable interest in its assets
even though he was the beneficial owner of all the shares and in case of accident if he did not assign the policy also
to the company, nobody would get anything.89 Similarly, a holding company will not have an insurable interest in the
assets of its subsidiary.90
For infringement of any of the fundamental rights conferred by Article 19 of the Constitution of India a company will
have no remedy either under Article 226 or Article 32 of the Constitution of India, even though all the shareholders
of the company are citizens of India. Thus, sometimes “Corporate Entity” works like a boomerang and hits the man
who was trying to use it.91
Though the complete separation of the company and its members has never been doubted, there have been cases
in which the Legislature and to some extent the Courts have allowed the veil of incorporation to be lifted.
Lifting the corporate veil.—Though the courts are generally precluded by the provisions of section 34 of the
Companies Act, 1956 and the principles laid down since Salomon's case92 from treating a company as the “alias,
agent, trustee or nominee” of it members, nevertheless the Companies Act and the Courts have made inroads into
the principle of corporate entity and lifted the corporate veil to see the real persons behind the veil in certain cases.
While it is firmly established ever since Salomon v. Salomon & Co. Ltd. 92 was decided that a company has an
independent and legal personality distinct from the individuals who are its members, it has since been held that the
corporate veil may be lifted, the corporate personality may be ignored and the individual members recognised for
who they are in certain exceptional circumstances. Generally and broadly speaking, the corporate veil may be lifted
where (1) a statute itself contemplates lifting the veil, or (2) fraud or improper conduct is intended to be prevented,
or (3) a taxing statute or a beneficent statute is sought to be evaded or (4) where associated companies are
inextricably connected as to be, in reality, part of one concern. It is neither necessary nor desirable to enumerate
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the classes of cases where lifting the veil is permissible, since that must necessarily depend on the relevant
statutory or other provisions, the object sought to be achieved, the impugned conduct, the involvement of the
element of the public interest, the effect on parties who may be affected, etc. “Lifting the veil” is not necessary or
permissible beyond the essential requirement of the Act.93
It is well settled that, in law, a company is a legal entity distinct from its members. It was so laid down by the House
of Lords in 1897 in the leading case of Salomon v. Salomon & Co. Ltd. Ever since this decision has been followed
by the courts in England as well as in India. But there have been inroads in the doctrine of corporate personality
propounded in Salomon's case by statutory provisions as well as by judicial pronouncements. By the process,
commonly described as “lifting the corporate veil”, the law either goes behind the corporate personality to the
individual members or ignores the separate personality of each company in favour of the economic entity
constituted by a group of associated companies. This course is adopted when it is found that the principle of
corporate personality is too flagrantly opposed to justice, convenience or the interest of the Revenue. This concept
of “lifting the veil” is described as “piercing the veil” in the United States.94
The principle laid down in Salomon's case more than a century ago in 1897 by the House of Lords that the
company is at law a different person altogether from the subscribers who have limited liability, is the foundation of
joint stock company and a basic incidence of incorporation both under the English law and Indian law. Lifting the
veil of incorporation under statutes and decisions of the courts is an equally settled position of law. This is more
readily done under American law. To look at the realities of the situation and to know the real state of affairs behind
the facade of the principle of the corporate personality, the courts have pierced the veil of incorporation.95
The judicial approach in cracking open the corporate shell is somewhat cautious and circumspect. It is only where
the legislative provision justified the adoption of such a course that the veil has been lifted. In exceptional cases
where courts have felt themselves able to ignore the corporate entity and to treat the individual shareholder as
liable for its acts, the same course has been adopted. It would not be possible to evolve a rational, consistent and
inflexible principle which can be invoked in determining the question as to whether the veil of the corporation should
be lifted or not. Broadly stated, where fraud is intended to be prevented, or trading with an enemy is sought to be
defeated, the veil of a corporation is lifted by judicial decisions and the shareholders are held to be the persons who
actually work for the corporation.96
Broadly speaking, to prevent fraud or trading with enemy and in taxation matters the corporate veil has been lifted.
The courts have also lifted the corporate veil in cases of criminal or quasi-criminal cases, trust matters, and to
ascertain whether an agreement is void for being against the public policy of the country.
Corporate veil, when can be lifted.—The exceptional circumstances in which the corporate veil may be lifted are
given below.
(1) Lifting the veil where Statute itself contemplates.—The corporate veil may be lifted where a statute itself
contemplates lifting the veil.97
Companies Act, Taxing, Welfare and other Statutes often contemplate provisions for lifting the corporate veil in
certain cases. The lifting the veil is not necessary or permissible beyond the essential requirement of the Act.
Where a non-resident company sought to make investment in India. The FERA [ now the FEMA*] and portfolio
investment scheme provided for lifting the veil to find out if at least 60 per cent. of the shares were held by non-
residents of Indian nationality or origin. In such a case the corporate veil could be lifted to discover the nationality or
origin of the shareholders to that extent and no more.98
The Companies Act, 1956 itself contemplates or provides for certain circumstances in which the corporate veil may
be lifted and the members or directors of the company shall be personally liable for certain transactions as
explained below.
Reduction of Members below legal minimum [ Section 45].—The liability of the members is limited to the unpaid
amount of face value of shares taken by him or the amount he has guaranteed. In an unlimited company a
member's liability is like that of a partner in a firm, it is for the entire debt of the company. Without a written consent
the company cannot increase the liability of a member [ Section 38].
Section 45, however, provides that if at any time the number of members of a company is reduced below legal
minimum, i.e., (a) below 7 in the case of a public company, or (b) below 2 in the case of a private company, and the
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company carries on business for more than 6 months, every member of the company after those six months shall
be severally liable for the debts contracted during that time.
For instance, if a public company carries on business with less than 7 members for more than six months, every
member who knows of this fact will become liable to an unlimited extent for all the debts contracted by the company
in so carrying on business from the seventh month onwards. He will enjoy the limited liability privilege for the first six
months only. See detailed Comments under Section 45.
Contracts and Deeds, Investments, Seal, etc.— Sections 46 to 50 contain provisions for execution of contracts,
deeds, etc., on behalf the company. Directors may be personally liable if these are not executed on behalf of the
company.
See detailed Comments under Sections Section 46 to 50.
Publication of name by company [ Section 147].—If an officer of the company or any person on its behalf signs
or authorises the signing of any bill of exchange, hundi, promissory note, cheque, order for money or goods, etc.,
without the name of the company mentioned, such officer or person is personally liable to the holder unless the
company pays the same. [ Section 147(4)].
Liability for fraudulent conduct of business [ Section 542].—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 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 [ now the Tribunal (NCLT)] may direct.
Offences and Prosecution.— Section 5, various provisions of the Companies Act, 1956 and penal provisions in
various other Acts, contemplate that in case of offences by companies persons/directors in charge of the
management or charged with the responsibility of complying with any of the provisions of the Act are held
responsible for any contravention. Under section 5 as substituted by Act 31 of 1988 and statutory offences even
mens rea is not required to be proved.
See Comments under Offences and Prosecution in later paragraphs.
(2) Lifting the veil to prevent Fraud or Improper Conduct.—The corporate veil may be lifted where fraud or
improper conduct is intended to be prevented.1 The courts would lift the corporate veil if the corporate personality is
being used as a cloak for fraud or improper conduct.2 The concept of corporate entity was evolved to encourage
and promote trade and commerce but not to commit illegalities or to defraud people. Where, therefore, the
corporate character is employed for the purpose of committing illegality or for defrauding others, the court would
ignore the corporate character and will look at the reality behind the corporate veil so as to enable it to pass
appropriate orders to do justice between the parties concerned.3
The corporate veil can be lifted so as to expose any persons to the liability who have committed a fraud upon the
public from their sheltered position. Where a company booked flats and acted fraudulently with the intending
purchasers, its Directors could be held personally liable for the same though they acted in the name of company.4
Where a fraud was committed by diversion of funds generated by group of companies inviting huge investments
from the public. For the protection of the investors the Police was directed to investigate into the affairs of the
company and by piercing the veil direction was given to freeze the bank accounts of the companies and directors
pending investigation with a view to repay investors. The court directed the Securities and Exchange Board of India
(SEBI) to intimate the banks not to permit the respondents or the group of companies to operate their respective
bank accounts.5
The court can lift the corporate veil to find out and expose the persons who were floating fraudulent investment
schemes at high returns in the name of the company. The court ordered the investigation and also the seizure of
the company's assets.6
As held by apex court in a catena of decisions, in offences relating to the diversion of funds of corporate bodies, the
court can, no doubt pierce through and look at the reality behind the corporate veil, to pass appropriate orders to do
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justice between the parties concerned, as the concept of corporate entity was evolved to encourage and promote
the trade and commerce, but not to commit illegality or to defraud people. The lifting of corporate veil is permissible,
only after filing of final charge sheet and during the trial, in the light of material evidences. It may not be proper for
the court to lift the corporate veil and analyse such contentions of the petitioner while considering petition for
recalling the Non-bailable Warrant (NBW) against the petitioner, one of the directors of Anubhav Agrotech Ltd. It is
for the trial court to decide the question of lifting the corporate veil, at the appropriate stage of the case.7
If the corporate personality is used as a cloak for fraud or improper conduct, the court can go behind the veil. Where
the protection of public interests is of paramount importance the court is entitled to go behind the corporate
personality. The State and National Consumer Disputes Redressal Commissions were right in refusing to permit the
two sole directors of two companies, being husband and wife, to defend themselves under the cloak of corporate
entity. The Commissions were right in lifting the veil and identifying them as the persons responsible for committing
the statutory offences referred to in section 27 of the Consumer Protection Act, 1986 (68 of 1986).8
The doctrine of lifting the corporate veil or cracking open the corporate shell is not confined only to cases of tax
evasion and the court would be well within its right and indeed be justified in lifting even the curtain rather than the
veil and see what goes on behind it, concealed from the public gaze. Surely, the court will refuse to allow the
corporate entity principle to be used as an instrument of fraud.9
Company itself cannot ask for unveiling its own cloak.—The principal grounds where the veil of corporate entity
can be lifted are to protect the interest of the revenue and also where the corporate personality is being blatantly
used as a cloak for fraud or improper conduct. However, it is not open to the company to ask for unveiling its own
cloak and examine as to who are the directors and shareholders and who are in reality controlling the affairs of the
company. Where the American company occupying premises as tenant merged into Indian company for complying
with directions restricting foreign shareholding the transferee company was liable for eviction under section 14(1)(b)
of the Delhi Rent Control Act, 1958 which provides for eviction upon transfer of possession without the consent of
the landlord.10
In a decision on Lifting the veil of Holding and Subsidiary companies, dealt with later, it has however been held that
the horizon of the doctrine of lifting of the corporate veil is expanding. It can be lifted even at the invitation of the
company itself.
Reconstruction, Amalgamation or Merger—Applicability of Rent Control Act—Lifting of Corporate Veil.—An

application for sanction of Scheme for Amalgamation of American Company with Indian Company was made. The
Court could lift the veil where the Corporate Personality is used as a cloak for fraud or improper conduct. However,
the company, itself, cannot ask for lifting its own veil to determine whether there has been no sub-letting or parting
with the possession of the property by the American Company. Where a fraud or trading with enemy is sought to be
prevented the Court can lift the corporate veil to see who are the persons involved and what are their activities. A
person entitled to make an application in any proceeding can request the Court to lift the corporate veil to see who
are the persons involved in the management of the affairs of the company or who are the real controllers of the
affairs of the company. Such persons may be held liable for any wrongful acts of the company. A person aggrieved
or having right under the Companies Act can pray for lifting the corporate veil to see the real persons in the
management or as to who are the directors and shareholders and who are controlling the affairs of the company.
However, the company itself cannot make the application for lifting the corporate veil. In an Amalgamation two or
more companies are fused or consolidated into one by the process of merger, one company takes over the other.
Reconstruction or Amalgamation has no precise legal meaning. The question whether a winding up is for the
purposes of Reconstruction or Amalgamation depends upon the circumstances of the winding up. The Court [the
Tribunal (NCLT)] may sanction a Scheme of Amalgamation whereunder all the rights including lease-hold rights of a
transferor company vest in the Transferee Company. The Rent Control Act applicable to such transfer of property is
enforceable against Transferee Company in respect of the immovable properties covered by the Rent Control Act.
The landlord can take action against the Transferee Company for eviction. The Court sanctioned a Scheme of
Amalgamation of the two companies, whereunder the Leases, Rights of Tenancy or occupancy of the Transferor
Company vested in and had become the property of the Transferee Company. In spite of sanction of the said
Scheme of Amalgamation by the Court, the provisions of the applicable Rent Control Act, shall apply and the
Transferee Company was liable for eviction under the provisions of the applicable Rent Control Act. So far as the
lifting of corporate veil to see as to who are the Directors and Shareholders and who are controlling the affairs of the
company cannot be done on the application of the company itself.11
However, for ascertaining the real purpose underlying the Scheme with a view to be satisfied and to find out that the
proposed Scheme of Compromise, Arrangement or Amalgamation is not violative of any provision of law and is not
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contrary to public policy, the Court, if necessary, can pierce the veil of apparent corporate purpose underlying the
Scheme and can judiciously X-ray the same.12
Lifting of Corporate Veil—Disregarding the corporate entity.—In an Auction for sale for sandalwood held by the
respondent, the District Forest Officer (DFO), the petitioner company was the successful Bidder and paid certain
amount. At the time of taking delivery the respondent issued a notice stating that two of its Directors in the petitioner
company were partners in another firm and the firm was liable to pay a huge amount towards Sales Tax and penal
interest and demurrage charges and called upon the company to show cause as to why the amount paid by the
petitioner at the Auction should not be adjusted against the account of the said firm. In a writ petition filed by the
petitioner the respondent was asked to pass final order pursuant to show cause notice within the stipulated period.
Respondent passed an order to the effect that the confirmation issued was withheld until renewal of the Bank
Guarantee by the firm or until disposal of the pending appeal by the firm. On a writ petition the Court held that it
could disregard the corporate entity. The order of the District Forest Officer did not indicate as to why he considered
the firm and the company to be the same legal entity. Some partners in the firm being directors of the petitioner
company cannot establish that both the entities were the same. To come to any particular conclusion many relevant
facts such as the Date of incorporation of company, the Memorandum of Association, Articles of Association,
Names of promoters and the shareholders who had founded the company and their relationship with the partners of
the firm and the purposes for which the company was incorporated would be material. These aspects were not
considered while passing the order by the Respondent Officer. The order was passed, the matter was remanded
and the respondent Officer (DFO) was directed to consider the matter afresh in view of the relevant
circumstances.13
Doctrine of piercing or lifting the veil.—The Doctrine of piercing or lifting of the veil of a Corporate Personality
marks a change in the attitude that the law as originally adopted towards the concept of separate entity or
personality of the corporation. In suitable cases, the Court will lift the corporate veil.14
(3) Lifting the veil to ascertain Enemy Character.—The courts would lift the corporate veil to ascertain the enemy
character. A company registered in India may be an alien enemy if its control is in the hands of alien enemies. The
number of alien enemy shareholders is important in ascertaining the status of the company. The enemy or neutral
character of a company in times of war will be determined by reference to the natural persons who are members or
persons really in control.15
The judicial attitude towards lifting the corporate veil has been divided by a learned scholar in following categories:
(i) peeping behind the veil; (ii) penetrating the veil; (iii) extending the veil; and (iv) ignoring the veil. The decisions
relating to determination of residence or enemy status of a company have been placed by him in the category of
“peeping behind the veil” where the court peeps behind the veil and concludes from the shareholders or from the
people in control of the company, something about the nature of the company.16
Nationality.—It will be decided by the place of its incorporation. A company incorporated in India will be an Indian
company even though its members are foreigners. Incorporation is the nationality of the company and it may have
nationality different from its shareholders. A company having all foreign shareholders may be incorporated in India
and in that case the company will be an Indian company. Similarly a company may be incorporated in England
having shareholders who are all Indian citizens and the company will be a foreign company.17 The nationality of the
company does not change by its becoming an enemy company.18
A company, however, is not a citizen of India under the Constitution and does not enjoy fundamental rights
guaranteed by Article 19 of the Constitution of India. All citizens of a State are nationals of that State but all
nationals are not necessarily citizens of that State. The corporations may have nationality in accordance with the
country of their incorporation; but that does not necessarily confer citizenship on them. The citizens can only be
natural persons. The fact that corporations may be nationals of the country for purposes of international law will not
make them citizens of the country for purposes of municipal law or the Constitution. It is not permissible to pierce
the veil of the corporation to determine the citizenship of the members and then to give the corporation the benefit
of Article 19 of the Constitution.19
A non-resident company sought to make investment in India. The FERA [ now the FEMA] and portfolio investment
scheme provided for lifting the veil to find out if at least 60 per cent. of the shares were held by non-residents of
Indian nationality or origin. In such a case the corporate veil could be lifted to discover the nationality or origin of the
shareholders to that extent and no more.20
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Domicile.—The domicile of the company registered in India will be India and that will remain so throughout the
company's existence and it cannot be changed. A Company's domicile is the place of its registration, and it retains
that domicile so long it exists.21 Even though a company acquires enemy character, it will be subject to the law of
the place where it was registered.22
Residence.—There are cases where the courts have looked behind the facade of the company and its place of
registration in order to determine its residence and for this purpose the test laid down is the place of the central
management and control. A company resides, at the place where the real business is carried on, that is, the place
of central management and control.23
A company can have only one nationality and one domicile but may have several residences at the same time
depending upon the circumstances. Income-tax law provides that a company is ordinarily resident where the actual
management of the company is carried on,24 even though it ought to be managed elsewhere according to its
Memorandum and Articles of Association25 and it may have dual residence.26 A company cannot either be present
in India or absent from India.27
(4) Lifting the veil in Tax Matters,viz., Tax Evasion or Avoidance.—The corporate veil may be lifted where a
taxing statute or a beneficent statute is sought to be evaded.28 It is true that from the juristic point of view the
company is a legal personality entirely distinct from its members and is capable of enjoying rights and being
subjected to duties which are not the same as those enjoyed or borne by its members. But in certain exceptional
cases the court is entitled to lift the veil of corporate entity and to pay regard to the economic realities behind the
legal facade. For example, the court has power to disregard the corporate entity if it is used for tax evasion or to
circumvent tax obligation or to perpetrate fraud.29
Tax planning may be legitimate provided it is within the framework of law. Colourable devices cannot be part of tax
planning and it is wrong to encourage or entertain the belief that it is honourable to avoid the payment of tax by
resorting to dubious methods. It is the obligation of every citizen to pay the taxes honestly without resorting to
subterfuges. It is up to the court to take stock to determine the nature of the new and sophisticated legal devices to
avoid tax and to expose the devices for what they really are and to refuse to give judicial benediction.30
It is true that tax avoidance in an underdeveloped or developing economy should not be encouraged on practical as
well as ideological grounds. One would wish, as noted by O. Chinnappa Reddy J. in the McDowell's case, that one
could get the enthusiasm of Justice Holmes that taxes are the price of civilization and one would like to pay that
price to buy civilization. But the question which many ordinary taxpayers very often, in a country of shortages with
ostentatious consumption and deprivation for the large masses, ask is, does he with taxes buy civilization or does
he facilitate the waste and ostentation of the few. Unless waste and ostentation in Government spending are
avoided or eschewed, no amount of moral sermons would change people's attitude to tax avoidance.31
Even though a corporation might be a legal personality distinct from its members, the court is entitled to lift the
mask of corporate entity if the conception is used for tax evasion, or to circumvent tax obligation or to perpetrate a
fraud. It is true that tax planning may be legitimate provided it is within the framework of the law. Colourable devices
cannot be part of tax planning and it is wrong to encourage or entertain the belief that it is honourable to avoid the
payment of tax by dubious methods. It is the obligation of every citizen to pay the taxes honestly without resorting to
subterfuges. It is also true that, in order to create an atmosphere of tax compliance, taxes must be reasonably
collected and when collected, should be utilised for proper expenditure and not wasted. It is, however, necessary to
remember that one must find out the true nature of the transaction. It is unsafe to make bad laws out of hard facts
and one should avoid subverting the rule of law.32
It is well-settled that, in a suitable case, the court can lift the corporate veil where the companies share the
relationship of a holding company and a subsidiary company and also to pay regard to the economic realities
behind the legal facade.33
When the Assessing Officer enters upon a scrutiny of the transaction, in the task of determining whether a
transaction is a sham or illusory transaction or a device or ruse, he is entitled to penetrate the veil covering it and
ascertain the truth.34
In certain cases the Court is entitled to lift the veil of corporate entity and to pay regard to the economic realities
beyond the legal facade. Any Director who is a party to a fraud or to the commission of any other tort is personally
liable. Where the Excise Department issued a show cause notice on the company and its Directors alleging removal
Page 17 of 37
of goods without payment of duty and manipulating accounts and sought to realise the Excise Duty and penalty
from the Directors. The petition by the Directors challenging the show cause notice was held not maintainable. It
was permissible to lift the corporate veil of the company to determine whether a particular Director could be
proceeded against in pursuance of the show cause notice.35
(5) Lifting the veil in case of avoidance of Welfare Legislation.—It is the duty of the court, in every case where
ingenuity is expended to avoid taxing and welfare legislations, to get behind the smoke-screen and discover the
true state of affairs. The court is not to be satisfied with form and leave alone the substance of a transaction.
Avoidance of welfare legislation is as common as avoidance of taxation and the approach in considering problems
arising out of such avoidance has necessarily to be the same. Where a subsidiary company was created for
avoidance of welfare legislation and all the investments were transferred to it. It was held that the subsidiary
company was only a device to reduce the amount to be paid as bonus to the workmen. The corporate veil was
ignored, dividends received by the subsidiary company were treated as the dividends of the holding company, and
bonus was calculated on that basis.36
Where a transaction of sale of immovable property by a company in favour of wives of the directors was alleged to
be sham and collusive the court will be justified in piercing the veil of incorporation to ascertain the true nature of
the transaction and whether it was genuine and bona fide or whether it was between the husbands and the wives
behind the facade of the separate entity of the company. The High Court was right in holding that the transaction
was sham, bogus and fictitious and the suit property remained the property of the company and, therefore, vested
in the Central Government under section 3(1) of the Coal Mines (Nationalisation) Act, 1973 (26 of 1973).37
(6) Lifting the veil in Holding, Subsidiary and Associated companies.—The corporate veil may be lifted where
associated companies are inextricably connected as to be, in reality, part of one concern.38 A holding company and
its subsidiary are separate legal entities. But, for certain purposes, affairs of a subsidiary have been treated by the
Acts as affairs of the holding company. It is true that occasionally the corporate veil of a company is pierced through
in order to find out the substance but that is only where it is permitted by a statute or in exceptional cases of fraud.39
Where a Director T and his family members created several corporate bodies. The court lifted the corporate veil and
treated all of them as one entity belonging to and controlled by T and his family where it was found that these
corporate bodies were merely cloaks behind which lurked T and/or members of his family and the device of
incorporation was really a ploy adopted for committing illegalities and/or to defraud people. The properties of the
companies were attached in order to do justice to the persons whom the Directors of the company had duped by
allotting the same flats to more than one person in spite of prohibitory orders.40 Where a fraud was committed by
diversion of funds generated by group of companies inviting huge investments from the public. For the protection of
the investors the Police was directed to investigate into the affairs of the company and by piercing the veil direction
was given to freeze the bank accounts of the companies and directors pending investigation with a view to repay
investors. The court directed SEBI to intimate the banks not to permit the respondents or the group of companies to
operate their bank accounts.41
The concept of lifting the corporate veil is a changing concept. The veil of corporate personality, even though not
lifted sometimes, is becoming more and more transparent in modern jurisprudence. It is high time to reiterate that,
in the expanding horizon of modern jurisprudence, the lifting of the corporate veil is permissible. Its frontiers are
unlimited. It must, however depend primarily on the realities of the situation. The aim of the legislation is to do
justice to all the parties. The horizon of the doctrine of lifting of the corporate veil is expanding. It can be lifted even
at the invitation of the company itself. Where Hindalco made a wholly owned subsidiary company Renusagar in
order to fulfil the conditions of industrial licence of Hindalco. For certain purposes the State or the Electricity Board
also treated Hindalco and Renusagar as one unit. The corporate veil was lifted. In facts of the case, Hindalco and
its wholly owned subsidiary Renusagar were treated as one concern and the reduced rate leviable to such power
consumption was made applicable.42
It is well-settled that, in a suitable case, the court can lift the corporate veil where the companies share the
relationship of a holding company and a subsidiary company and also to pay regard to the economic realities
behind the legal facade.43 In case of holding company and its subsidiary the corporate veil can be lifted to see their
relationship and to ascertain whether they are “related persons”.44
Where a company formed by Joint Venture of group of Indian companies and wholly owned subsidiary of Singapore
Telecom bid for a contract to supply telephone directories. The company was excluded from consideration on the
ground that the company had no experience to its name. The corporate veil could be lifted and the experience of
the shareholders could be treated as experience of the company.45
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It is a matter of ordinary prudence that the experience of a body corporate is always that of the persons manning
the body corporate and not of the body corporate itself. Where promoter company stated in prospectus to have
experience of 25 years as it was formed by taking over business of partnership formed in 1966 there was no mala
fide intention or mis-statement in prospectus. There was no intention to defraud public. The relief was therefore
granted.46
The modern tendency is, where there is identity and community of interest between companies in the group,
especially where they are related as holding company and wholly owned subsidiary or subsidiaries, to ignore their
separate legal entity and look instead at the economic entity of the whole group tearing of the corporate veil. While
a subsidiary company has a distinct legal personality, this does not suffice to dispose of the possibility that its
behaviour might be imputed to the parent company. Such may be the case in particular when the subsidiary,
although being a distinct legal personality, does not determine its behaviour on the market in an autonomous
manner but essentially carries out the instructions given to it by the parent company. When the subsidiary does not
enjoy any real autonomy in the determination of its course of action on the market, it is possible to say that it has no
personality of its own and that it has one and the same as the parent company. An English company covenanted to
supply technical know-how exclusively to an Indian company. English company during subsistence of contract
became subsidiary of another English company. Holding English company was having a subsidiary in India doing
the same business. The question was whether covenant for exclusive supply to Indian company was violated. After
piercing the veil and removing the smoke-screen, it has to be ascertained whether their activities stood apart and
the subsidiaries have not been functioning with the directing mind and the will of the holding company to ascertain
as to whether it could be said that the subsidiary's manufacturing process was the process of the holding company
or of another subsidiary company.47
Where the small scale industries were given certain exemptions only if the company owning the industry was not
subsidiary or controlled by a group of persons or companies, the court will lift the corporate veil of a company to see
whether it was a subsidiary of another company and therefore not entitled to the proposed exemptions. But, a
director in one company is also a director in another company does not make it a subsidiary. To say that a company
is subsidiary of the other, a definite finding must be recorded that the Board of directors of one were controlling the
other.48
Where a subsidiary is wholly owned by principal company which has a pervasive control over it and the former acts
as the hand and voice of the latter, the subsidiary in that event would be nothing but an instrumentality, rather a
part, of the principal company. The two in that event would have to be treated as one concern. Contemporary trend
shows that the lifting of the corporate veil is permissible whenever public interest so demands. Courts have been
pragmatic in their approach in unveiling companies, especially the subsidiary companies to see their real face in the
interests of justice. Where by interim order of the court, a U.S. company was restrained from entering into joint-
venture agreement with any other party in India. U.S. company sought approval under the Electronic Hardware
Technology Park Scheme to set up wholly owned subsidiary in India. It was held to be not a case of joint-venture.
The subsidiary and parent company were treated as one concern. The interim order in suit was not violated and
approval by the Indian Government could not be restrained.49
Since a holding and subsidiary company relationship necessarily implies great control by the former over the latter,
courts have held that use of a trade mark by a subsidiary can fairly be treated as the use by the holding company.50
For wrongful acts of a subsidiary by lifting the corporate veil the holding company can be proceeded against as if it
is responsible for the conduct of the affairs of the subsidiary. The holding company was engaged in the same class
of business and it formed subsidiary. It had obligation to conduct the business of the subsidiary fairly. For wrongful
loss to the subsidiary the holding company may be held liable.51
The veil can be lifting with a view to making the holding company liable for the commitments of its subsidiary.52
Where shares in the Indian company were held by subsidiary of a foreign company. The foreign company and its
nominee director on Board of the Indian company filed suit against directors of the Indian company for diversion of
funds. The plaintiff director claimed to be beneficial holder of benami property invoking the principle of lifting the
corporate veil. Foreign company and nominee director were not registered shareholders of the Indian company.
The court refused to lift corporate veil and ascertain the status of the director in respect of the benami property. The
Court would not lift the veil at the instance of a person having no right of relief or whose name does not appear in
the register of members of the company to enable him to show his beneficial interest in company through a chain of
intercorporate investments.53
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Holding and subsidiary companies are independent incorporated entities. The holding company cannot be made
liable for the dues of the subsidiary company. The sums due to the Employees' Provident Fund by the subsidiary
company cannot be recovered from the holding company.54
Holding Company and Subsidiary [ Section 4].
— See detailed Comments on Meaning of Holding Company and Subsidiary Company under Section 4.
(7) Agency, Trust, Contractual Obligations and other case.—The courts have lifted the corporate veil in several
other cases illustrated below.
(i) if agency can be established in fact either in respect of particular transactions or the whole of the company's
business;55 (ii) to impress company's property with the terms of a trust;56 (iii) to prevent deliberate evasion of
contractual obligations.57
The courts have, however, often lifted the veil for the benefit of the members of the company than for the benefit of
the outside creditors.58
The courts have also lifted or pierced the corporate veil for determination of a company's residence, in cases of
criminal or quasi-criminal cases, trust matters, to ascertain whether an agreement is void for being against the
public policy of the country, etc. The English cases have often pierced the veil to serve the real aim of the parties
and for public purposes.59
The principle of lifting the corporate veil is of general application and not confined to the Companies Act or any
Taxation Act. The principle can be resorted to in all cases depending upon the relevant statutory or other
provisions, the object sought to be achieved, the impugned conduct, the involvement of the element of the public
interest, the effect on parties who may be affected, etc. The lifting the veil is not necessary or permissible beyond
the essential requirement of the Act.60
A non-resident company sought to make investment in India. The FERA [ now the FEMA] and portfolio investment
scheme provided for lifting the veil to find out if at least 60 per cent. of the shares were held by non-residents of
Indian nationality or origin. In such a case the corporate veil could be lifted to discover the nationality or origin of the
shareholders to that extent and no more.61
The policy and purpose of the Foreign Exchange Regulations is to attract investment by Non-resident Indians. The
High Court will not lift the veil if it goes against that policy. The Court will refuse to examine whether the purchase
by one foreign company of shares of another foreign company would amount to purchase of shares of an Indian
subsidiary company.62
See also other cases under Property, Liability, etc., hereinafter.
(8) Lifting the veil in case of Contempt of Court.—Wilful disobedience of a Court Order will be a civil contempt
by the company under the Contempt of Courts Act, 1971 (70 of 1971) as well as Article 215 of the Constitution.
Even though the High Court Rules provide for execution of the order as a decree. The punishment for contempt
does not absolve a contemner from his liability for wrongful acts.63
Where the court issued an injunction against A and B against dealing with third and fourth storeys of a building.
They formed a private company and effected the transfer. The Court held that the corporate veil was being blatantly
used as a cloak to wilfully disobey the orders of the Court—an improper purpose. A
wilful act means an intentional and deliberate act.

Lifting the corporate veil, in such a situation, was imperative to punish the improper conduct. Once the corporate
veil was lifted, it was crystal clear that the orders of the Court were disobeyed by the respondents A and B, the two
ladies, who had promoted the private company and who were the only shareholders and Directors of the company.
The respondents were guilty of flagrant disobedience of the orders of the court. It was a contempt of heinous
character. For such contempt, the sentence of fine would not meet the ends of justice. The apology tendered by A
and B after the conclusion of the arguments was no apology, it was an after-thought and a mere device to escape
punishment and did not purge the contempt. The Court directed A and B to be detained in civil prison for 15 days.64
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Section 12 of the Contempt of Courts Act, 1971 contains specific provision for contempt action against persons in
charge of the management or control of companies. Even though in 1952 Act there was no specific provision, the
Supreme Court held that a command to a Corporation is in fact a command to those who are officially responsible
for the conduct of its affairs. If they, after being apprised of the order directed to the Corporation, prevent
compliance or fail to take appropriate action, within their power, for the performance of the duty of obeying those
orders, they and the corporate body are both guilty of disobedience and may be punished for contempt. For failure
to discharge decrees awarded under the Consumer Protection Act, 1986, the State and National Consumer
Disputes Redressal Commissions were right in lifting the veil and identifying the persons responsible for committing
the statutory offences referred in section 27 of the Consumer Protection Act, 1986 (68 of 1986).65
Where in a writ petition against a Sick industrial company under the BIFR, the court ordered the company to pay its
workers' wages by a certain date. The company did not comply with the order. It was held that there was wilful
disobedience of court's order. The order was a command, disobedience of which attracted contempt proceedings.
All the Directors including Nominees of the Financial Institutions were held guilty of neglect. The Nominee Directors'
apology was accepted and the Directors were cautioned. Promoter Directors were awarded sentence of
imprisonment for one month and fined.66 A company may be liable to punishment for Contempt of Court committed
by the employees.67
(9) Government Company.—The term company under the Companies Act, 1956 includes company in existence in
1956, a private company, a government company and a company incorporated under the Act. A government
company is a juristic person separate and distinct from its members. The company and the shareholders being
distinct entities the fact that the President of India, the Secretaries, the State or Governor hold all its shares does
not make the company an agent either of the President or the Central Government or the State. In the absence of a
statutory provision a commercial corporation acting on its own behalf, even though it is controlled wholly or partially
by a Government department, will be ordinarily presumed not to be a servant or agent of the State. Such an
inference that the corporation is the agent of the Government may be drawn where it is performing in substance
governmental and not commercial functions. Thus, if the company performs any governmental functions as distinct
from commercial functions, the corporate veil may be lifted.68
For the purposes of Article 12 of the Constitution of India one must necessarily see through the corporate veil to
ascertain whether behind that veil is the face of an instrumentality or agency of the State. Where a Government
Company within the meaning of section 617 of the Companies Act, 1956 carried out a governmental activity and
governmental functions of vital public importance, the Government Company would be the “State” within the
meaning of Article 12. In the case ofCentral Inland Water Transport Corporation Ltd. it was nothing but the
Government operating under a corporate veil. In every respect it was a veil behind which the Central Government
operated through the instrumentality of the Government Company.69
A Government Company is entitled to the same rights and privileges as any other company. Piercing the veil is not
allowed in ordinary cases but will apply in finding out the status of a person either in revenue matters or in cases of
fraud, etc.70 As such, no writ application ordinarily lies against a Government company.71
A Government Company is a distinct legal entity from its shareholders. A Government company in which the entire
share capital is held by the Central Government cannot contend that it is the Central Government who owns its
property and as such the company is not liable to pay Property Tax. It would not be a case of State taxation of
Union property under Article 285 of the Constitution of India. Piercing of the veil is not applicable in this case.72
Where contractor engaged workers to carry certain work. To ascertain relationship of master and servant the
corporate veil can be lifted and the relationship between the workers and the company which engaged the
contractor can be ascertained.73
Under the Indian law, the company is a corporate entity or juristic person. The shareholders are not the owners of
its assets. Its right and obligations vis-a-vis the contracting party, unless there exists a provision to the contrary,
must be confined to the terms of the contract. In the case of two Government Companies, despite the fact that the
Government is the majority shareholder in both, a ship belonging to one Government corporation cannot be said to
be a sister ship of a ship belonging to another Government company. Where on an admiralty suit, an order for
arrest of two ships said to be sister ships was made, and the said two ships were shown in the maritime directory as
belonging to two different companies under the Vietnamese Government. No case was established for the arrest of
the ships in question.74
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Corporate Veil—Government Company—Lifting of.—A company incorporated under the Companies Act, 1956
is a juristic person. A company indisputably has a distinct and separate entity vis-a-vis its shareholders. It is now
well-settled that the corporate veil can in certain situations be pierced or lifted. The principle behind the doctrine is a
changing concept and is ever expanding its horizons. Though a Government Company registered under the
Companies Act, 1956 is a juristic person having separate identity from its shareholders. In certain cases, the Court
can lift the Corporate Veil and see who are the persons responsible for the management of the Government
Company. In a Government Company the company is a separate entity. In a Government Company, the
Government acts through the instrumentality or agency of the Company and has certain Constitutional limitations.
The Government Company is a “State” and it would be Constitutionally liable to respect or protect life and liberty of
all persons in terms of Article 21 of the Constitution. Article 298 of the Constitution of India confers a prerogative
right upon the State to carry on trade or business. In doing trade or business the State must fulfil its Constitutional
obligations. It must ensure protection and preservation of the rights as contained in Articles 14, 19, 21 and 300A of
the Constitution of India. The term “life” used in Article 21 of the Constitution of India has a very wide and far-
reaching concept. Several Government Companies and Public Sector Undertakings (PSUs) of State of Bihar did not
pay salaries to their workmen and other employees for a long time resulting in death of several persons and misery
to a large number of families. The Government of Bihar for all practical purposes was the sole shareholder of the
Government Companies. Under the Companies Act its liability towards the company's debtors is confined to the
shares it held. However, having regard to the deep and pervasive control it exercises over the Government
Companies the State has an additional duty to see that the rights of the employees are not infringed. It is liable to
see that the rights of employees to life and liberty is fully safeguarded. The State has a Constitutional obligation to
protect the life and liberty of the employees of the Government owned Companies and Corporations. These
employees are citizens of India. The Government has an additional liability having regard to its supervisory deep
and pervasive control over the Government Company. It cannot be permitted to say that it did not know the actual
state of affairs of the Government Companies and Public Sector Undertakings (PSUs) or that it did not know that
salaries of employees had not been paid for years at a stretch leading to starvation deaths of large number of
employees and suicides. Even though the State is not liable for day-to-day functioning of the Companies but it is
liable for failure to perform its Constitutional duties and for the functioning of the Public Sector Undertakings (PSUs)
and State's Constitutional obligations in relation thereto. The State being a welfare State has a duty to do all things
which they are Statutorily obliged to perform under the Payment of Wages Act, 1936 (4 of 1936), the Minimum
Wages Act, 1948 (11 of 1948) and the provisions of other Statutes. Financial stringency cannot be a ground for not
issuing requisite directions by the State when the question of violation of Fundamental Rights arose. The liability of
the State of Bihar cannot be shifted toUnion of India merely on the ground that the Union of India was the repository
of fund raised by it through Central Excise and other levies and imposts. The Central Government is not directly or
indirectly or vicariously liable for the failure of the State Public Sector Undertakings (PSUs). The investments made
by the State in the Public Sector Undertakings (PSUs) in pursuit of social justice were for public account. The State
was, therefore, accountable to the public through the Legislature. If the State or State Agencies fail to perform their
duties it cannot take wrap or shelter under the financial stringency or shift its liability to the Union of India. However,
it cannot be said that in all situations the State can be directly or vicariously liable to pay salaries or remuneration of
the employees of the Public Sector Undertakings (PSUs) or the Government Company.75
(10) Oppression and mismanagement.—A person in control of the requisite voting power may be made
responsible for wrongful acts of the company by lifting the veil as to who has committed the wrongful acts
complained of.76
Private Company.—The oppression must be in capacity as shareholder and not in any other capacity. The
substratum of the company is mainly decided with reference to the substance of the venture as conceived by the
members of the company at its formation as set out in the objects clause of its Memorandum of Association. It is
inherent right of shareholders to elect directors. Majority shareholders are not bound to accept the view of the
minority. It would not constitute oppression. Shareholder's rights, expectations and obligations to the company are
governed by the Memorandum and Articles of Association and the provisions of the Companies Act. The exercise
of this right of the individual shareholder may be subjected to equitable consideration. However, these equitable
considerations flow from the fact that it originally started as a partnership concern or that there was any agreement,
understanding, e.g., family arrangement that all or some of the shareholders should participate in the conduct of the
business. The principle of the special relationship between the parties forming the substratum of the company can
be invoked only in a case where originally the business was a partnership concern which has later on converted
into a private limited company or where if the veil of corporate character of the company is lifted, it can be found
that in reality it was a partnership.77
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HUF.—It is well-settled that private limited companies are separate legal entities and they cannot, therefore, be
legally called as the properties of the joint Hindu family. Even if the shares in those companies are the properties of
the joint Hindu family, the inter se disputes between the members regarding claims and counter-claims was wholly
inconsequential and irrelevant so far as the claim of the third party, that is, Trust was concerned because the Trust
was not the property of the said joint Hindu family.78
Separate entity.—The company is a separate entity from its shareholders and directors. The decisions enunciating
this are as follows:
Company owner of its assets not shareholders.—A company is a separate entity from its shareholders. It is the
company which is the owner of its assets, including immovable properties, and not the shareholders. As long as the
company exists, that is to say, before its dissolution, no shareholder can be said to have any interest in the
properties and assets of the company, either legal or equitable. When the company is being wound up, their only
right is to participate in the surplus assets after the payment of debts and liabilities. Therefore, a shareholder of a
company which is being compulsorily wound up, has no locus standi under Order 21, Rule 90 Code of Civil
Procedure, 1908 (5 of 1908) to apply for setting aside a sale of the property of the company on the ground of
irregularity or fraud.79 A shareholder has no right or locus standi to intervene or object in suit pending against
company in respect of some of its assets or in dealing with the property independently of the company.80
Property of the Company.—The property of the company irrespective of the provisions in the Articles or any
Resolutions cannot be treated as the property of the shareholders and cannot be utilised for the benefit of any of
the shareholders.81
Where a company was the tenant of a property under a lease deed which prohibited sub-letting. Simply because
the company was trying to sell the shares owned by it to third parties, it did not amount to an attempt to sub-let the
premises under the cover of corporate veil. The property of a company cannot be considered to be the property of
its members. An invitation by a company to subscribe to its shares bringing more shareholders to the company or
selling a portion of the shares retained/owned by it to third parties cannot be considered as a change of the
company itself.82
Property purchased prior to incorporation—Specific Performance.—The promoters of a company before its

registration purchased a property in the name of the company and after incorporation of the company the property
was shown as the property of the company in its Balance Sheet, Income Tax Return, Annual Report, Audit Report
and in other documents. The company on registration also paid a sum of Rs. 2,22,500 to the promoters. The
company filed a suit for declaration that the company was the absolute owner of the property. The Board of
Directors of the company adopted a Resolution for sale of the above property in favour of the appellant and for
leasing out the property to M. The agreement for sale and the deed of lease, both were signed by the promoters. In
view of the above, there could not be any doubt that for all intent and purposes the company was the owner of the
property and at all material times the promoters (Respondent Nos. 1 and 2) had made representation as such to the
appellants as also to others. In terms of Section 15(h) of the Specific Relief Act, 1963 (47 of 1963) the promoters of
the company before its incorporation could enter into the contract for the benefit of the company and such contract
may be warranted by the terms of incorporation of the company subject to the condition that the company should
accept the said transaction. Section 19(e) of the Specific Relief Act, 1963 also provides for grant of a decree of
specific performance of the contract against a company when the promoters of the company before incorporation
entered into a contract for the purchase for the company and such contract is warranted by the terms of
incorporation also applied. The contract could not be ultra vires the purpose for which the company was
incorporated. In the present case the company by filing a suit claimed declaration that it is the owner of the property
showed its acceptance of the contract and communication thereof to the other party. The promoters by their
statements before the Court and by their conduct including creating mortgage of the property and discharge thereof
in favour of the Bank and made representation by which the third party altered its position, the principle of estoppel
would apply as there was no statutory embargo of vesting the title in the company. In the Memorandum of
Association of the company the promoters (Respondents Nos. 1 and 2) alone were shown to be the subscribers
members of the company and in the Articles of Association they were shown as first directors and there was no
other director. The directors had been attempting to use the name of the company for furthering their own personal
object in furtherance of their dishonest and fraudulent design and as such the doctrine of lifting the corporate veil
was applicable. The directors were not entitled to take different stand as against the company. Section 54 of the
Transfer of Property Act, 1882 (4 of 1882) does not lay down a law as to whether in all situations an apparent state
of affairs as contained in a Deed of Sale would be treated with the real state of affairs. It does not bar a benami
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transaction. There is no embargo on getting the property registered in the name of one person although the real
beneficiary thereof could be another.83
Property of the Shareholders.—Similarly, the shareholders' property is not the property of the company. Where a
shareholder of the company was tenant of certain premises. He entered into an agreement with the company
permitting the company to use part of the premises. It was held that the company was merely a licensee and not
tenant. Therefore, suit by the tenant against the company for eviction upon termination of the licence was
maintainable.84
Premises on lease—Lifting or piercing of corporate veil.—Prem Lata Bhatia was allotted a premises for running
a shop at a monthly rent of Rs. 901. The licence prohibited the use of the premises by anybody else without the
written consent of the Government and the licensee was forbidden from transferring the premises or to carry on
business in the premises with any other person or assign, transfer, change or otherwise alienate her interest in the
premises. The petitioner incorporated a Private Limited Company, Romika World Trade P. Ltd., where the petitioner
and her husband held more than 97.93% shares. The company was running its business in the shop. The
respondent, Union of India, initiated proceedings under the Public Premises (Eviction of Unauthorised Occupants)
Act, 1971 (40 of 1971) against the petitioner. The Estate Officer ordered for eviction of the petitioner on the ground
that the shop that was allotted to the petitioner was being run by the Company without any authority and amounted
to sub-letting as the petitioner was doing business with another partner. She was therefore an unauthorised
occupant of the shop. Her appeal was dismissed by the Additional District Judge and a Writ Petition was dismissed
by the High Court. On appeal, the Division Bench held that applying the principle of piercing the veil of corporate
personality Clause 8 of the Licence Deed had not been violated. Here because of the shareholding the same
person remain in possession though technically the company ran the business. The petitioner did not cease to be in
possession and did not hand over possession to any one else but only changed the form of her business and this
was usually done when a business expanded. The appeal was allowed, the respondents were restrained from
dispossessing the petitioner from the shop.85
Property of the Directors.—The company is a corporate personality and separate legal entity. The director owning
the property as landlord cannot file an eviction petition against the tenants under the Rent Control Act for
occupation of the building owned personally by him for functioning of the company merely because he is a director
of the company. Need for occupation of the company is different from the need for director's own occupation.86
Liability of Company.—Two companies having same office bearers are yet distinct and separate legal entities.
The liability of one of them cannot be foisted on the other. Where two companies A and B were carrying on
business separately. Some of the office bearers were common. For the liability of company A the creditor sought to
make liable company B and filed a winding up petition under section 439. In the facts of the case, it was held that
the principle of piercing the corporate veil was not applicable. The petition for winding up of the creditors was an
abuse of the process of the court and the defence of the company was bona fide.87
Liability of company is not the liability of the directors or the employees. A director is not an employer of the
company's employees.88
Breach of contract, Penal Laws and Tort.—A company is liable for breach of contract and for tort. It is liable
under the penal laws where mens rea is not an essential element of the offence.89 A company may be likened to a
human body. It may be guilty of acting with intent to deceive and making statement which it knows to be false or for
conspiracy to defraud. But it must be proved that the officers were acting within the limits of their authority on behalf
of the company and it must be found that the criminal act of the officer including his state of mind, intention and
knowledge or belief was the act of the company.90 It may be guilty for contempt of court. It may be sued for
malicious prosecution, infringement of copyrights, negligence, malicious libel and for molesting a person in the
exercise of his calling.91 It may sue for an injury done to its business reputation by defamation or by imputation of
insolvency and no special damage need be proved.92
Company may own Business Name.—A company may carry on business in a name other than its own. Business
can be carried on in a particular business name. On the principle of lifting the corporate veil the court can ascertain
the owner of the business name and proprietor of the business. On piercing the veil the court can make responsible
the company which was carrying on business in the said business name as proprietor of the business.93
Offences and Prosecution.— Section 5, various provisions of the Companies Act, 1956 and other Acts make
officers in default, viz., persons in charge of the management or charged with the responsibility of complying with
Page 24 of 37
any of the provisions of the Act responsible for any contravention of the Statutory defaults. Under section 5 as
substituted by Act 31 of 1988 mens rea is now not required to be proved.
In statutory offences and offences covered by section 5 no mens rea is required to be proved for offences and
defaults under such sections. Where the provisions of the Companies Act, 1956 do not use the words “officer in
default”, the penalty and punishment shall be governed by the language of those provisions.
Prosecution under Indian Penal Code.—For refund of subscription money the concerned Investor need not be
confined to remedies under the Companies Act alone, resort to prosecution under the Indian Penal Code can also
be taken. It is true that the Companies Act, 1956, contains provisions regarding the issuance of prospectus,
applications for shares and allotment thereof and provides different checks over the misuse of the funds collected
from the public for issuance of shares or debentures, e.g., sections 69 and 73. But where persons issue prospectus
and collect moneys from the public assuring them that they intend to do business with the public money for their
benefit and the benefit of such public, but the real intention is to do no business other than collecting the moneys
from the public for their personal gain, such persons are not immune from the prosecution under the Indian Penal
Code, 1860 (45 of 1860). If the promoters or those in charge of managing the affairs of the company are found to
have committed offences like cheating, criminal breach of trust, criminal misappropriation or the like, these persons
cannot use the juristic entity and corporate personality of the company as a shield to evade themselves from
prosecution for offences under the Indian Penal Code, if it is established that the primary object of the incorporation
and existence of the company is to defraud the public. Such persons cannot claim that the only remedy of the
investor is under the Companies Act, 1956. There is a basic difference between the offences under the Penal Code
and acts and omissions which have been made punishable under different Acts and statutes which are in the nature
of social welfare legislations. For framing charges in respect of those acts and omissions, in many cases, mens rea
is not an essential ingredient; the concerned statute imposes a duty on those who are in charge of the
management, to follow the statutory provisions and once there is a breach or contravention, such persons become
liable to be punished. But for framing a charge for an offence under the Penal Code, the traditional rule of existence
of mens rea is to be followed.94
Mens rea.—The offences under sections 420, 467, 471 and 477A of the Indian Penal Code, 1860 (45 of 1860) read
with section 120B of the Indian Penal Code, are all offences having mens rea as one of the essential ingredients
thereof. The accused committing the offences must have a guilty mind and as such a juristic person such as a body
corporate cannot be prosecuted for the said offences.95
For the acts of a person who is the directing mind of the company, the company will be liable criminally if those acts
are in breach of any of the provisions of the criminal law but if he is only an agent or employee, the company may
not be liable on the basis that the actual actor and not the company is liable. Whether a person is the directing mind
of the company or not will depend to a large extent upon the actual control by him of the company's operation
without effective superior control.96 And in some cases a company may be liable even though mens rea is
necessary,1 and the punishment is imprisonment and fine.2
As already explained, under Section 5 of the Companies Act, 1956, as substituted by Act 31 of 1988 mens rea is
now not required to be proved.
Company, a juristic person, cannot be imprisoned.—The company is a corporate entity and a juristic person. A
company cannot be prosecuted for an offence for which the punishment is only imprisonment. If offence is
punishable mandatorily with both imprisonment and fine, then the company can be prosecuted and only fine can be
imposed on the company, though it cannot be imprisoned. The sentence of imprisonment and fine can be imposed
on persons in charge of, and responsible to, the company for the conduct of the business of the company.3
Directors' Liability.—A company has its own legal identity and personality, in contradistinction to its directors or
shareholders. Where a company was prosecuted and a fine was imposed on the company. There was no decision
or fixation of liability on any other person. The fine could be recovered from the company alone even after the
winding up. The execution of any distress warrant against any director or managing director was therefore invalid.4
Company to be impleaded in Complaint.—Where under an Act an offence is committed by a company, (1) it is

the person in charge of and responsible for the conduct of business of the company who is liable for the offence, (2)
Page 25 of 37
it is not necessary, although it is better to implead the company also as an accused, (3) the offence must be
committed by the company, that is to say, before a person in charge or an officer of a company is held guilty in that
capacity it must be established that there has been a contravention by the company.5
See detailed Comments on Meaning of “officer who is in default”, Vicarious liability of Directors or Persons in
charge or responsible for offences or contraventions under the Companies Act, 1956 and several other Acts under
Section 5.
Offences against Act cognizable on complaint.—Offences against the Companies Act are cognizable only on
written complaint by the Registrar of Companies, a Shareholder or the Central Government. This does not apply to
a prosecution by a company of any of its officers. [ Section 621].
The Court may take cognizance of offences relating to issue and transfer of securities and non-payment of dividend
on a written complaint by the Securities and Exchange Board of India (SEBI). [ Section 621(1), proviso].
Complaint by company or juristic person.—The scheme of the Code of Criminal Procedure, 1973 (2 of 1974)
makes it clear that the complainant must be a corporeal person who is capable of making physical presence in the
court. Its corollary is that even if a complaint is made in the name of an incorporeal person like a company or
corporation it is necessary that a natural person represents such juristic person in the court and it is that natural
person who is looked upon, for all practical purposes, to be the complainant in the case. In other words, when the
complainant is a body corporate it is the de jure complainant, and it must necessarily associate a human being as
de facto complainant to represent the former in court proceedings. Therefore, the absence of the complainant
envisaged in section 256 of the Code of Criminal Procedure, 1973 which empowers the magistrate to acquit the
accused if the complainant fails to appear, would include absence of the corporeal person representing the
incorporeal complainant and the provision is applicable even in a case where the complainant is a company or any
other juristic person. The courts should not insist that the same officer of the company should represent company
throughout.6
A company is a juristic person, a legal entity. A company though a legal entity does not have a soul, mind, body and
limbs to walk to the court for preferring a complaint. The dictates of common sense, practical wisdom, prudence and
experience impel the courts in such a situation to allow a company to be represented by some person concerned
with the affairs of the company. In the normal course, such legal entities are managed by a manager, director,
managing director or principal officers like other executives in charge of affairs and administration. No special and
express authorisation is required for initiating any legal proceedings like a criminal complaint under section 141 of
the Negotiable Instruments Act, 1881. Therefore, these officers of the company are entitled to initiate prosecution.7
Company can sue and be sued.—The company is a separate legal entity having perpetual succession. It can sue
and be sued exclusively for its own purpose.8
A company is a corporate body with a separate existence. It is an artificial person with a perpetual succession. It is
not like a firm whose existence cannot be visualised in the absence of its partners. Where permission was granted
to file a suit against the company it cannot also be treated as permission against the directors as well and the suit
cannot be treated as properly instituted against the directors. Further, where directors entered into agreement for
sale of shares. The company would not be privy to contract and not bound by the obligation under the contract.9
Change in ownership no ground for dismissal of suit.—A company is a distinct legal entity and should not be
confused with its shareholders. Shares of companies are usually freely transferable. The corporate legal entity does
not mutate or transform itself or undergo a transfer with each change in its shareholders. Even if the total
shareholding of a company is purchased by one person or a group of persons acting in concert, the legal
consequence is not that the company ceases to exist or undergoes a cataclysmic metamorphosis leading to its
complete disappearance. The company does not extinguish its existence by a mere change in its name, nor does
this follow even if a change occurs in ownership. There is a further distinction between change in shareholding and
amalgamation. Even where amalgamation takes place, due care is taken to transfer the assets and debts of one
company to the other so as to, inter alia, protect pending litigation. Change in ownership of a company is no ground
for dismissal of the suit pending against it.10
Suit to continue even if company taken over.—Suit may continue even if the units of a company are taken over
by the Central Government. The taking over of the Estate of a company by the Central Government under section
Page 26 of 37
16E of the Tea (Amendment) Act, 1976 did not affect a suit by or against the company and the bar under section
16M of the Act applied only to the Estate. Existence of company is independent of Estates.11 Takeover by the
Central Government of undertakings of a company under the Industries (Development and Regulation) Act, 1951
(65 of 1951) does not mean that the company itself is taken over. The company being distinct entity continues to
exist. The Central Government representative is not competent to defend suit against the company.12
See detailed Comments under Sections 10, 10E and 10FB to 10GF.
legal proceedings. The Articles also empower the Board of Directors to delegate its powers. Where the Board
delegated the powers to a Director. The Director delegated the powers to an Officer of the company. An appeal filed
by such officer was held valid.13
The suit filed by a Director on behalf of a company without being authorised by the Board Resolution is not
maintainable.14
Authority to file suit.—Where the plaintiff in a suit is a corporation, there has to be (1) proper authority by
Resolution of the Board of directors, or (2) a Power of Attorney authorising institution of the suit on behalf of the
corporation, or (3) power conferred by the Articles of Association of a corporation. The authority to institute a suit is
distinct from and in addition to what is contemplated by Order 29 of the Code of Civil Procedure, 1908 (5 of 1908),
which deals only with signing of plaints and verification of pleadings by certain persons mentioned in that provision.
Where the Articles of the company conferred authority on the Managing Director and the joint managing director
alone to institute suits on behalf of the company. A suit filed by a whole-time director was not maintainable.15
Powers and functions of the Tribunal (NCLT).—On the constitution of the Tribunal (NCLT) under Section 10FB
of the Companies Act, 1956 as inserted by the Companies (Second Amendment) Act, 2002 (11 of 2003) (w.e.f.
date to be notified), the jurisdiction, powers and functions hitherto being exercised by the CLB, the Central
Government, the High Court as Company Court and BIFRunder various Sections of the Companies Act, 1956 [See
List in Comments under Section 10FB], SICA and other Acts have been conferred on the Tribunal (NCLT).
10GB]. Any person aggrieved by decision or order of the Appellate Tribunal may file an appeal to the Supreme
Actions by the Company.—For wrongs or injuries done to the company, the action should be brought by the
company. The company should be the plaintiff and the wrong-doers should be made the defendants. The plaint in
such a suit by the company may be signed by the secretary, director or other principal officer able to depose to the
facts. Such plaint may also be signed by a person authorised by the company to sign on its behalf.17
Derivative action.—A procedure devised to enabling a Court to do justice to a company controlled by miscreant
directors or shareholders is called a derivative action, which is normally permissible with the leave of the Court. A
member as defined under Section 41 of the Companies Act, 1956 can maintain an action against the company,—(i)
to enforce a personal right, e.g., the right to vote or attend a meeting; (ii) a representative action under Order 1,
Rule 8 of the Code of Civil Procedure, 1908 on behalf of himself and other shareholders. Under the Indian company
law, only a person who is on the register of members is a member of the company. The Court would not lift the veil
of incorporation at the instance of a person whose name does not appear in the register of members of the
company to enable him to show his beneficial interest in the company through a chain of intercorporate
investments.18
See detailed Comments on Rule of Internal Management in Foss v. Harbottle, Exceptions to the rule and Actions by
Page 27 of 37
minority shareholders, viz., Derivative or Representative action, in respect of Corporate rights and Individual or
personal rights of a Member under Sections 10 and 41.
Suit by a Member.— See detailed Comments under Section 41.
Suit against company having sub-offices.—The Explanation to section 20 of the Code of Civil Procedure, 1908
(5 of 1908) provides that a corporation shall be deemed to carry on business at its sole or principal office in India or
in respect of any cause of action arising at any place where it has also a subordinate office, at such place. The
Explanation applies to a corporation, which term includes a company. The agreement between the parties
conferring exclusive jurisdiction on the court where the corporation has its principal place shall be of no avail.19
Service of summons on Company.—In a suit against a company registered under the Companies Act, 1956, the
affixure of the suit summons at the office of the company is due service as Order 29, Rule 2, of the Code of Civil
Procedure, 1908 provides for service of summons on a corporation by leaving the summons at place where the
corporation carries on business. The word “corporation” has been used in the CPC with reference to section 34 of
the Companies Act, 1956. Under that section when a company is registered, the Registrar of Companies certifies
under his hand the fact of such registration. The effect of incorporation is that the company becomes a body
corporate having perpetual succession and a common seal.20
Rule 2 of Order 29 of the Code of Civil Procedure, 1908 (5 of 1908) provides for service of process in a suit against
a corporation subject, however, to any statutory provision regulating such service. Therefore, in the matter of
service of summons on a limited company, the provisions of rule 2 of Order 29 shall be subject to section 51 of the
Companies Act, 1956 (1 of 1956). The result is that the provision of section 51 of the Companies Act, 1956 would
prevail over Rule 2 of Order 29, Civil Procedure Code. Therefore, a summons on a limited company has to be
served at its Registered Office in terms of section 51 of the Companies Act, 1956.21
See detailed Comments on Service of Documents under Sections 51-53.
Court Fees.—Under clause (vi) of a State Notification issued under section 35 of the Court Fees Act, 1870 (7 of
1870), all persons whose income does not exceed Rs. 12,000 have been exempted from paying court fee. A similar
provision regarding exemption from paying court fee has been made in Order 33 of the Code of Civil Procedure,
1908 (5 of 1908). The expression “person” has not been defined in the parent Act or Notification issued by the State
Government. It cannot be confined to only natural persons and shall include a juristic person such as a company.22
Company can file suits informa pauperis.—A company, which is entitled to maintain a suit as a legal person, can
file suits in forma pauperis as an indigent person under Rule 1 of Order 33 of the Code of Civil Procedure, 1908 (5
of 1908). Indigent person is one who is not possessed of sufficient amount as per Explanation I. This enabling
provision allows the filing of a suit by an indigent person without paying the court fee at the initial stage. There is
only a provision for the deferred payment of the court fees. This being a benevolent provision, includes not only
natural persons but juridical persons also. A company being a juristic person, would be represented by a person
competent to represent it.23
Interim orders.—The mechanical manner in which some of the courts have been granting interim orders—
injunctions and stay orders—without realising the harm such mechanical orders cause to the other side and in
some cases to public interest. It is no answer to say “let us make the order and if the other side is aggrieved, let it
come and apply for vacating it”. This is not a correct attitude. Before making the order, the court must be satisfied
that it is a case which calls for such an order. This obligation cannot be jettisoned and the onus placed upon the
respondents/defendants to apply for vacating it.24
See Ex parte Injunctions and Interim Orders under Sections 10 and 10GB.
Decree.—It is well-settled that joint-stock company is a corporate entity, which is distinct from its members. The
share in a joint-stock-company is the property of the registered holder but the assets of the company are the assets
of the joint stock entity. They are in no sense the assets or property of a shareholder, much less a member of a
coparcenary, which may hold the shares in the name of the karta. If the karta of the family abused his position,
either as a shareholder or as a director of the company, the remedy of the member of the coparcenary or of the
shareholder of the company would lie elsewhere. Neither the decrees nor the course of execution thereof could be
challenged by a shareholder unless his rights as such shareholder are sought to be affected.25 A decree passed
Page 28 of 37
against a company cannot be satisfied by attachment and sale of properties belonging to other limited companies
even if it is assumed that they are being managed by the same group of directors. Other companies are different
and distinct juristic personalities with different sets of shareholders.26
Conversion of unregistered body into company.—Where all that was provided under the articles was that a
member of Electrical Cable Development Association as of right be admitted as a member of the appellant
company subject to certain conditions. It did not say that all the members in the unregistered association become
members of the association. No resolution was passed to show that they were converting themselves into an
incorporated body. Held, the appellant was a distinct legal entity other than the unregistered body and there was no
material to show that it was successor. Therefore the company did not become a tenant in respect of the premises
occupied by the unregistered association without an agreement with the society.27
Company cannot be a witness.—An incorporated company or other corporate bodies cannot make any oath or
affirmation and, therefore, cannot become a witness. However, the employees of the company who are sought to
be cited as witnesses in the prosecution against the company, cannot be equated with the company as to treat the
incriminating evidence, if any, adduced by them, to be self-incriminatory evidence adduced by the accused
company itself. If the officers and employees of a company are not permitted to appear as witnesses for the
prosecution against the company on an extension of the doctrine against self-incrimination, many of the offences
committed by companies cannot be detected, prosecuted and punished.28
Companyvis-a-visStatutory Corporations.—There is a distinction between a company or corporation

incorporated under the Companies Act, 1956 and statutory corporations, e.g., the Life Insurance Corporation or the
Industrial Finance Corporation, etc., which are created under special Acts or statutes. A company makes rules and
regulations in accordance with the provisions of the Companies Act. A statutory body, on the other hand, makes
rules and regulations by and under the powers conferred by the statutes creating such bodies.29
A corporation constituted under the Road Transport Corporations Act, 1950 (64 of 1950), though statutory, has a
personality of its own distinct from that of the State or other shareholders. It cannot be said that a shareholder owns
the property of the corporation or carries on the business with which the corporation is concerned. The income
derived by such a corporation from its trading activity cannot be claimed by the State, which is one of the
shareholders of the corporation. The income derived by the corporation from its trading activity cannot therefore be
said to be the income of the State under Article 289 of the Constitution of India. The exemption from Union taxation
is available only if it is shown that the income derived from the said trading activity is the income of the State.30
Sales Tax.—The company is not a citizen and not entitled to fundamental rights. Corporate veil would not be
pierced where sales tax was levied on the company. The shareholders cannot challenge the levy of sales tax on the
principle that on piercing the veil it will appear that the shareholders are the real persons who will be affected by the
levy of sales tax and such levy will infringe their fundamental rights. In such a case the court will not lift the
corporate veil or allow the shareholders to invoke the Writ Jurisdiction of the court.31
Recovery of Sales Tax.—A company is a legal entity distinct from its shareholders as well as its directors. As such
no proceedings can be initiated against the Directors or the Managing Director of a company for recovery of sales
tax due from the company. Proceedings against personal assets of the Directors or Shareholders would therefore
be void. The piercing of corporate veil is not applicable in this case. According to the Sales Tax Acts of various
States, e.g., the Andhra Pradesh General Sales Tax Act, 1957 (6 of 1957), the Karnataka Sales Tax Act, 1957 (25
of 1957), the Kerala General Sales Tax Act, 1963 (15 of 1963), the Tamil Nadu General Sales Tax Act, 1959 (1 of
1959), etc., Sales tax arrears of a company cannot be recovered from its directors except in the course of winding
up or liquidation.32
The settled law is that for recovery of tax dues against a company, the authorities cannot proceed against the
personal assets of a director of the company, unless that is permitted by a specific provision of law or by an
agreement between the parties.33
See also Comments under Lifting the veil in Tax Matters, viz., Tax Evasion or Avoidance in earlier paragraphs.
Recovery of Income-tax.—According to section 179 of the Income-tax Act, 1961 (43 of 1961), if any tax due from
a private company in liquidation cannot be recovered, every person who was a director of the private company
during the relevant year shall be jointly and severally liable for the payment of such tax unless he proves that the
non-recovery cannot be attributed to any gross neglect, misfeasance or breach of duty on his part in relation to the
affairs of the company.34
Page 29 of 37
Where for arrears of tax due from the Managing Director, his deposits with the company were attached. Further, tax
due from the managing director was adjusted against refunds due to the company from the revenue on the
company agreeing to the adjustment. The petition to direct refund to the company was dismissed.35
Service Tax on Company.—Company shall be liable to pay service tax if the service is of a kind that has been
declared taxable under section 65 of the Finance Act, 1994 (32 of 1994). Every person is wide enough to include a
company.36
Excise Duty.—The shareholders of a public limited company do not, by reason only of their shareholding, have an
interest in the business of the company. Equally, the fact that two public companies have common Chairman and
Directors does not mean that one company has an interest in the business of the other. The two companies could
not be treated as “related persons” and the assessable value of goods sold and purchased inter se could not be
marked up for purposes of excise duty under section 4(4)(c) of the Central Excise Act, 1944 (1 of 1944).37
However, private companies having common directors belonging to the same family were treated as “related
persons” and higher value was taken as the benefits of the companies were being enjoyed by members of the
same family.38
Profession Tax on Companies.—Company is a distinct entity. A company has special immunities, responsibilities,
rights and liabilities. The company stands as a separate class. A company is composed of more than one individual
and enjoys a superior status in the business world having greater capacity to pay tax than individual. Levy of
profession tax on companies at a flat rate of Rs. 2,500 under the Karnataka Tax on Professions, Trades, Callings
and Employments Act, 1976 (35 of 1976) was therefore held to be constitutional and reasonable.39
Company's receipts.—Company's receipts may be treated as Individual's receipts. The Court is entitled to pierce
the corporate veil and recognize the receipts of a company as that of the individual in control of the company if the
company had been used as a device or facade to conceal the true facts, thereby avoiding or concealing any liability
of that individual.40
Debts of Company.—The Directors are not personally liable to pay the debts incurred by the company. The
director may be made personally liable only if he is found guilty of fraudulent trading.41
Recovery of Dues.—There is no provision in the Companies Act, 1956 or in the Industrial Disputes Act, 1947 (14
of 1947), which makes the Managing Director of a company personally liable for recovery of dues against the
company.42
Recovery of Loan.—The company incorporated under the Companies Act, 1956 is a separate legal entity. The
Managing Director or Directors are not personally liable under the statute for company's dues unless they are
guarantors. In case of decree against company and managing director for recovery of bank loan, the Managing
Director or directors cannot be proceeded against unless there is a positive finding that the managing director or
director of the judgment-debtor company was personally liable for discharge of the decretal amount.43
While interpreting the term “proprietor” as defined by section 2(o) of the Bihar Land Reforms Act, 1950 (30 of 1950)
the Supreme Court held that in view of the object of the Bihar Land Reforms Act, there was no reason to
differentiate between an individual proprietor and a company which owned estates or tenures.44
Default in Telephone.—A company is a juristic person having a separate legal entity. When company is the
subscriber to a telephone, its liability is not automatically transferred to the Directors. In a private limited company,
the liabilities of the Directors are limited and they are not the subscribers of the company's telephone. Therefore, a
Director's personal telephone cannot be disconnected on account of any default in respect of the company's
telephone.45
Company Lease: Premises let to company.—Where there was a stipulation in the lease deed that the premises
let out to the company shall be used for the residence and personal use of directors and/or their relatives and for
the purpose of the company. It means residential purpose only. The lease was not for commercial purpose. The
words for the purpose of the company ought to be read in conjunction with residence. The company was ordered to
evict the property.46
Land Acquisition.—In the case of a company previous consent of the State Government, agreement as required
Page 30 of 37
under sections 39 to 41 of the Land Acquisition Act, 1894 (1 of 1894) and compliance with Rules 3 and 4 of the
Land Acquisition (Companies) Rules, 1963 is mandatorily required. After the agreement between the company and
the State Government is so entered and published in the Official Gazette, the State Government cannot unilaterally,
without notice and opportunity of being heard to the company withdraw from the acquisition.47
See the Land Acquisition (Companies) Rules, 1963* in Appendices.
Money Lenders Act.—The company is a person liable to take a licence under the Kerala Money Lenders Act, 1958
(35 of 1958).48
Producer Company—Effect of Registration [ Section 581C].
—Liability of Members of Producer Company shall be limited as mentioned in the Memorandum of Association in
respect of the shares allotted to a Member remaining unpaid.
Suit, Arbitration, Appeal or other Legal Proceedings by or against the Inter-State Co-operative Society shall
continue by or against the Producer Company on its Incorporation as Producer Company under Section 581C or
Transformation of the Inter-State Co-operative Society as a Producer Company under Section 581J.
See detailed Comments under Sections 581C, 581J and 581L.

6 SCR 885.
73. V.B. Rangaraj v. V.B. Gopalakrishnan, (1992) 73 Comp. Cas. 201 (SC) : AIR 1992 SC 453 [LNIND 1991 SC 637];
422 [LNIND 1970 SC 391]; Hanuman Prasad Gupta v. Hiralal, (1970) 40 Comp. Cas. 1058 (SC) : AIR 1971 SC 206
[LNIND 1970 SC 71]: (1970) 2 Comp. LJ 195 (SC). See also Comments under Sections 3, 9, 12, 13, 26, 33, 35, 36, 41,
82, 111 and 111A.
TLR 46 : 41 SJ 63 (HL); State Trading Corporation of India Ltd. v. CTO, (1963) 33 Comp. Cas. 1057 (SC) : AIR 1963
SC 1811 [LNIND 1963 SC 334]: (1964) 4 SCR 99 [LNIND 1963 SC 334] Mrs. Bacha F. Guzdar v. CIT, (1955) 25
SCR 876 [LNIND 1954 SC 145]. See also Comments under Sections 2(46), 3, 12, 41 and 82.
Comp. LJ 244 (SC) more popularly known as Bank Nationalisation case;,Indo-China Steam Navigation Co. Ltd. v. Jasjit
Singh, (1964) 34 Comp. Cas. 435 (SC) : AIR 1964 SC 1140 [LNIND 1964 SC 25]; Western Coalfields Ltd. v. Special
Area Development Authority,AIR 1982 SC 697 [LNIND 1981 SC 446]: (1982) 1 SCC 125 [LNIND 1981 SC 446]. See
also Comments under Section 2(10).
458 (SC) : AIR 1965 SC 40 : (1964) 6 SCR 885.
77. Bennett, Coleman and Co. Ltd. v. Union of India,AIR 1973 SC 106 [LNIND 1972 SC 514]: (1973) 2 SCR 757 [LNIND
1972 SC 514]. See also Comments under Section 433.
78. Delhi Cloth and General Mills Co. Ltd. v. Union of India, (1983) 54 Comp. Cas. 674 (SC) : AIR 1983 SC 937 [LNIND
1983 SC 175].
79. M.P. Sharma v. Satish Chandra,AIR 1954 SC 300 [LNIND 1954 SC 40]: 1954 SCR 1077 [LNIND 1954 SC 40].
SCR 885.
Page 31 of 37
TLR 46 : 41 SJ 63 (HL).
85. Ebbw Vale U.D.C. v. South Wales Traffic Area Licensing Authority,(1951) 2 KB 366 (CA) : (1951) 1 All ER 806 : (1951)
1 TLR 742 (CA).
86. Lee v. Lee's Air Farming Ltd.,(1961) AC 12 : (1960) 3 All ER 420 : (1960) 3 WLR 758 (PC) : (1961) 31 Comp. Cas. 233
(PC).
87. Lee v. Carter Ltd.,(1949) 1 KB 85 : (1948) 2 All ER 690 : 64 TLR 536 : 92 SJ 586 (CA).
89. Macaura v. Northern Assurance Co.,(1925) AC 619 : 133 LT 152 : 69 SJ 777 (HL). See also Comments under Section
82.
90. Section 4. See also decisions in later paragraphs under Lifting of corporate veil—Holding company and its subsidiary.
91. Ochberg v. CIR, (1913) AD [S. Africa] 215.
TLR 46 : 41 SJ 63 (HL).
93. L.I.C. v. Escorts Ltd., (1986) 59 Comp. Cas. 548 (SC) : AIR 1986 SC 1370 [LNIND 1985 SC 362]; CDS Financial
Services (Mauritius) Ltd. v. BPL Communications Ltd., (2004) 121 Comp. Cas. 374 (Bom.) (DB). See detailed
Comments under separate headings hereinafter.
6 SCR 885.
* See the Foreign Exchange Management Act, 1999 (42 of 1999)in Appendix 325 which has replaced the Foreign
Exchange Regulation Act, 1973 (46 of 1973).
2. Darby, ex parte Brougham, Re,(1911) 1 KB 95 : 80 LJ KB 180 : 18 Mans. 10; R. v. Grubb,(1915) 2 KB 683 : 84 LJ KB
1744 : 113 LT 510 : 31 TLR 429 (CCA).
3. Delhi Development Authority, v. Skipper Construction Co. (P.) Ltd., (1997) 89 Comp. Cas. 362 (SC)Ali Jawad
Ameerhasan Rizvi v. Indo French Biotech Enterprises Ltd., (1999) 95 Comp. Cas. 373 (Bom.) (DB). See also Contempt
of Court in later paragraphs.
4. Delhi Development Authority v. Skipper Construction Co. (P.) Ltd., (1997) 89 Comp. Cas. 362 (SC). See also Holding,
Subsidiary and Associated companies in later paragraphs.
Holding, Subsidiary and Associated companies in later paragraphs.
6. SEBI v. Livra Plantations Ltd., (1999) 1 Comp. LJ 294 (Bom.); Dindas Shankar Thange v. State of Maharashtra, (1999)
1 Comp. LJ 299 (Bom.).
7. S. Shreenivasa Rao alias S. S. Rao v. Inspector of Police, (2002) 109 Comp. Cas. 406 (Mad.).
8. Ravi Kant v. National Consumer Disputes Redressal Commission, (1997) 89 Comp. Cas. 471 (Delhi) (DB).
9. PNB Finance Ltd. v. Shri Shital Prasad Jain, (1983) 54 Comp. Cas. 66 (Delhi) (DB).
10. Singer India Ltd. v. Chander Mohan Chadha, (2004) 122 Comp. Cas. 468 (SC).
11. Singer India Ltd. v. Chander Mohan Chadha, (2004) 122 Comp. Cas. 468 (SC) : AIR 2004 SC 4368 [LNIND 2004 SC
796]: (2004) 4 Comp. LJ 413 (SC) : (2004) 7 SCC 1 [LNIND 2004 SC 796] : (2004) 6 Supreme 259 : (2004) 6 Scale
217 (SC). See detailed Comments under Sections 391 and 394.
12. Miheer H. Mafatlal v. Mafatlal Industries Ltd., (1996) 87 Comp. Cas. 792 (SC) : AIR 1997 SC 506 : (1996) 4 Comp. LJ
124 (SC).
Page 32 of 37
13. Nandh Products Promoters P. Ltd. v. District Forest Officer, (2005) 123 Comp. Cas. 367 (Mad.).
14. Ansuman Singh v. State of U.P.,AIR 2004 All. 260.
85 LJ KB 1333 : 114 LT 1049 (HL). See also Comments under Sections 12, 13 and 146.
334]: (1964) 4 SCR 99 [LNIND 1963 SC 334]. See also Comments under Company not a Citizen in earlier paragraphs
and Government Company in later paragraphs.
23. De Beers Consolidated Mines Ltd. v. Howe,(1906) AC 455 (HL) : (1904-07) All ER Rep. 1256 (HL).
24. Section 6(3)(ii) of the Income-tax Act, 1961 (43 of 1961); Union Corpn. Ltd. v. IRC,(1953) AC 482 : (1953) 1 All ER 729
: (1953) 2 WLR 615 : (1953) 97 SJ 206 (HL); Unit Construction Co. Ltd. v. Bullock,(1960) AC 351 (HL) : (1959) 3 All ER
831 (HL) : (1959) 3 WLR 1022 (HL) : (1959) 103 SJ 1027 (HL).
103 SJ 1027 (HL).
[LNIND 1972 SC 144]: (1972) 3 SCR 711 [LNIND 1972 SC 144]. See also Comments under Sections 12 and 13.
29. Juggilal Kamlapat v. CIT,AIR 1969 SC 932 : (1969) 2 Comp. LJ 188 (SC) : (1969) 73 ITR 702 (SC) : (1969) 1 SCR 988;
CIT v. Sri Meenakshi Mills Ltd.,AIR 1967 SC 819 [LNIND 1966 SC 266]: (1967) 63 ITR 609 [LNIND 1966 SC 266] (SC)
: (1967) 1 SCR 934 [LNIND 1966 SC 266]; Deputy Commissioner v. Cheran Transport Corporation Ltd., (1992) 74
Comp. Cas. 563 (Mad.) (DB); India Waste Energy Development Ltd. v. Government of NCT of Delhi, (2003) 114 Comp.
Cas. 82 (Delhi) (DB).
30. McDowell and Co. Ltd. v. CTO,AIR 1986 SC 649 [LNIND 1985 SC 131]: (1985) 154 ITR 148 [LNIND 1985 SC 131]
(SC) : (1985) 59 STC 277 [LNIND 1985 SC 131] (SC); W.T. Ramsay Ltd. v. IRC,(1981) 1 All ER 865 (HL) : (1982) AC
300 (HL) : (1981) 2 WLR 449 (HL); IRC v. Burmah Oil Co. Ltd., (1982) Simon's Tax Cases 30; Furniss v.
Dawson,(1984) 1 All ER 530 (HL) : (1984) 2 WLR 226 (HL).
31. CWT v. Arvind Narottam,AIR 1988 SC 1824 [LNIND 1988 SC 375]: (1988) 173 ITR 479 [LNIND 1988 SC 375] (SC).
32. UOI v. Playworld Electronics Pvt. Ltd., (1990) 68 Comp. Cas. 582 (SC) : AIR 1990 SC 202 [LNIND 1989 SC 299]:
(1990) 184 ITR 308 (SC) : 1989 (41) ELT 368 [LNIND 1989 SC 299] (SC); Greenberg v. IRC,(1971) 3 All ER 136 :
(1971) 3 WLR 386 : (1971) 47 TC 240 (HL); Sherdeley v. Sherdeley,(1987) 2 All ER 54 (HL); M.V. Valliappan v.
ITO,(1988) 170 ITR 238 [LNIND 1988 MAD 22] (Mad.).
6 SCR 885. See fuller discussion earlier under Lifting the corporate veil and later under Holding Company and its
Subsidiary.
34. Sunil Siddharthabhai v. CIT,(1985) 156 ITR 509 [LNIND 1985 SC 303] (SC) : (1985) 49 CTR (SC) 172.
35. Santanu Ray v. UOI, (1989) 65 Comp. Cas. 196 (Delhi) (DB).
36. Workmen v. Associated Rubber Industry Ltd., (1986) 59 Comp. Cas. 134 (SC) : AIR 1986 SC 1 [LNIND 1985 SC 260]:
(1986) 157 ITR 77 (SC).
Page 33 of 37
212 (Mad.) : AIR 1969 Mad. 359 [LNIND 1967 MAD 212]: (1969) 72 ITR 33 [LNIND 1967 MAD 212] (Mad.); Free
Wheel (India) Ltd. v. Dr. Veda Mitra, (1969) 39 Comp. Cas. 1 (Delhi) (DB) : AIR 1969 Delhi 258 [LNIND 1968 DEL
135](DB); CDS Financial Services (Mauritius) Ltd. v. BPL Communications Ltd., (2004) 121 Comp. Cas. 374 (Bom.)
veil to prevent Fraud or Improper Conduct and Lifting the veil in case of Contempt of Court in earlier paragraphs.
Fraud or Improper Conduct in earlier paragraphs.
6 SCR 885. See also discussion under Lifting the corporate veil and Tax Matters in earlier paragraphs.
44. UOI v. Bombay Tyre International Ltd., (1986) 59 Comp. Cas. 460 (SC) : (1983) 3 Comp. LJ 270 (SC) : 1983 (14) ELT
1896 [LNIND 1983 SC 294] (SC) : (1984) 1 SCR 347 [LNIND 1983 SC 294].
45. New Horizons Ltd. v. Union of India, (1997) 89 Comp. Cas. 849 (SC).
46. Progressive Aluminium Ltd. v. Registrar of Companies, (1997) 89 Comp. Cas. 147 (AP). See also Comments under
47. Hackbridge-Hewittic and Easun Ltd. v. G.E.C. Distribution Transformers Ltd., (1992) 74 Comp. Cas. 543 (Mad.) (DB);
Harold Holdsworth & Co. (Wakefield) Ltd. v. Caddies,(1955) 1 All ER 725 (HL) : (1955) 1 WLR 352 (HL); ICI v. E.C.
Commission,(1972) 11 CMLR 557; D.H.N. Food Distributors Ltd. v. London Borough of Tower Hamlets,(1976) 3 All ER
462 : (1976) 1 WLR 852 : 120 SJ 215 (CA).
48. Inalsa Ltd. v. UOI, (1996) 87 Comp. Cas. 599 (Delhi). See also Comments under Section 4.
49. U.K. Mehra v. Union of India, (1997) 88 Comp. Cas. 213 (Delhi) (DB).
50. Fatima Tile Works v. Sudarsan Trading Co. Ltd,. (1992) 74 Comp. Cas. 423 (Mad.). See detailed Comments under
Section 4.
51. Scottish Co-operative Wholesale Society Ltd. v. Meyer,(1959) AC 324 : (1958) 3 All ER 66 : (1958) 3 WLR 404 (HL).
52. SAE (India) Ltd. v. E.I.D. Parry (India) Ltd.,(1998) 18 SCL 481 (Mad.).
53. BSN (UK) Ltd. v. Janardan Mohandas Rajan Pillai (1996) 86 Comp. Cas. 371 (Bom.). See also Comments under
Sections 10, 41, 153B and 187C.
54. Industrial Development Corporation Orissa Ltd. v. Regional Provident Fund Commissioner, (2002) 112 Comp. Cas. 527
(Orissa).
55. Southern v. Watson,(1940) 3 All ER 439 : 85 SJ 8 (CA).
56. Abbey Malvern Wells Ltd. v. Ministry of Local Govt. and Planning, (1951) Ch. 728 : (1951) 2 All ER 154 : (1951) 1 TLR
1050.
57. Willis v. Association of Universities of the British Commonwealth,(1965) 1 QB 140 (CA) : (1964) 2 All ER 39 : (1964) 2
WLR 946 : 108 SJ 197 (CA); Malyon v. Plummer,(1964) 1 QB 330 : (1963) 2 All ER 344 : (1963) 2 WLR 1213; Gilford
Motor Co. v. Horne, (1933) Ch. 935 : (1933) All ER Rep. 109 : 102 LJ Ch. 212 (CA); Jyoti Ltd. v. Kanwaljit Kaur Bhasin,
(1987) 62 Comp. Cas. 626 (Delhi) see ratio of this decision under Contempt in later paragraphs.
58. Smith, Stone & Knight v. Birmingham Corpn.,(1939) 4 All ER 116 : 161 LT 371 : 83 SJ 961.
215 (CA).
60. L.I.C. v. Escorts Ltd., (1986) 59 Comp. Cas. 548 (SC) : AIR 1986 SC 1370 [LNIND 1985 SC 362]; Bijoy Kumar
Agarwal v. Ratanlal BagariaAIR 1999 Cal. 106 [LNIND 1998 CAL 381]. See fuller discussion in earlier paragraphs
under Lifting the corporate veil.
62. Carrasco Investments Ltd. v. Special Director, Enforcement Directorate,(1994) 79 Comp Cas 631 (Delhi).
Page 34 of 37
63. Delhi Development Authority v. Skipper Construction Co. (P.) Ltd., (1997) 89 Comp. Cas. 362 (SC); Rashtriya Mill
Mazdoor Sangh v. Khatau Makanji Spg. and Wvg. Co. Ltd., (2000) 100 Comp. Cas. 33 (Bom.). See also Contempt of
Court in Comments under Section 10.
64. Jyoti Ltd. v. Kanwaljit Kaur Bhasin, (1987) 62 Comp. Cas. 626 (Delhi).
65. Ravi Kant v. National Consumer Disputes Redressal Commission, (1997) 89 Comp. Cas. 471 (Delhi) (DB); Aligarh
Municipal Board v. Ekka Tonga Mazdoor Union,AIR 1970 SC 1767.
66. Rashtriya Mill Mazdoor Sangh v. Khatau Makanji Spg. and Wvg. Co. Ltd., (2000) 100 Comp. Cas. 33 (Bom.).
67. Director General of Fair Trading v. Pioneer Concrete (UK) Ltd.,(1995) 1 BCLC 613 (HL).
SC 121]: (1969) 2 Comp. LJ 273 (SC); State Trading Corpn. of India Ltd. v. CTO, (1963) 33 Comp. Cas. 1057 (SC) :
AIR 1963 SC 1811 [LNIND 1963 SC 334]: (1963) 2 Comp. LJ 234 (SC); Steel Authority of India Ltd. v. Shri Ambica
Mills Ltd., (1998) 92 Comp. Cas. 120 (SC); Dr. S.L. Agarwal v. Hindustan Steel Ltd.,AIR 1970 SC 1150 [LNIND 1969
SC 498]: (1970) 3 SCR 363 [LNIND 1969 SC 498]; Western Coalfields Ltd. v. Special Area Development Authority,AIR
1982 SC 697 [LNIND 1981 SC 446]: (1982) 1 SCC 125 [LNIND 1981 SC 446]; Ranjit Kumar Chatterjee v. UOI, (1969)
39 Comp. Cas. 327 (Cal.) : AIR 1969 Cal. 95 [LNIND 1968 CAL 115]; K.C. Verma v. Bokaro Steel Ltd., (1971) 41
Comp. Cas. 826 (Pat.) (DB) : AIR 1971 Pat. 137. See detailed Comments under Ss. 617-620.
69. Central Inland Water Transport Corpn. Ltd. v. Brojo Nath Ganguly (1986) 60 Comp. Cas. 797 (SC) : AIR 1986 SC 1571
70. Inland Steam Navigation Workers' Union v. Rivers Steam Navigation Co. Ltd. (1968) 38 Comp. Cas. 99 (Cal.) (DB) : 71
CWN 897; Kapila Hingorani v. State of Bihar (2003) 116 Comp. Cas. 133 (SC). See also Comments under Sections
391 and 617.
71. Praga Tools Corporation v. C.V. Imanual (1969) 39 Comp. Cas. 889 (SC) : AIR 1969 SC 1306 [LNIND 1969 SC 80]:
(1970) 1 Comp. LJ 50 (SC); Malik Ram v. Hindusthan Cables Ltd. (1968) 38 Comp. Cas. 500 (Cal.) : 72 CWN 398;
D.M. Nagaraja Rao v. Indian Oil Corpn. Ltd. (1969) 39 Comp. Cas. 896 (Mys.). See detailed Comments under Sections
617 and 2(18).
72. Electronics Corporation of India Ltd. v. Government of Andhra Pradesh (1999) 97 Comp. Cas. 470 (SC) : AIR 1999 SC
1734.
73. Secretary, HSEB v. Suresh1999 (3) SCC 601 [LNIND 1999 SC 1342].
74. M.V. “Dong Do” v. Ramesh Kumar and Co. Ltd. (2002) 109 Comp. Cas. 450 (Cal.) (DB).
75. Kapila Hingorani v. State of Bihar (2003) 116 Comp. Cas. 133 (SC).
76. British American Tobacco Co. Ltd. v. IRC(1943) AC 335 (HL) : (1943) 1 All ER 13 (HL) : (1943) 13 Comp. Cas. 123
(HL). See also Comments under Sections 4 and 406.
77. V.M. Rao v. Rajeswari Ramakrishnan (1987) 61 Comp. Cas. 20 (Mad.) (DB) : (1986) 1 Comp. LJ 1 (Mad.) (DB). See
78. Vikas Jalan v. Nucon Industries Pvt. Ltd., (2001) 103 Comp. Cas. 343 (AP). See also Comments under Section 433.
79. Shyamlal Purohit v. Jagannath Ray, (1970) 40 Comp. Cas. 138 (Cal.) (DB) : AIR 1969 Cal. 424 [LNIND 1968 CAL
198]. See also Comments under Sections 457 and 475.
80. Purna Investment Ltd. v. Bank of India Ltd., (1984) 55 Comp. Cas. 737 (Cal.) (DB); Charanjit Lal Chowdhury v. UOI,
(1951) 21 Comp. Cas. 33 (SC) : AIR 1951 SC 41 [LNIND 1950 SC 55]: 1950 SCR 869 [LNIND 1950 SC 55]; Mrs.
Bacha F. Guzdar v. CIT, (1955) 25 Comp. Cas. 1 (SC) : AIR 1955 SC 74 [LNIND 1954 SC 145]: (1955) 27 ITR 1
[LNIND 1954 SC 145] (SC) : (1955) 1 SCR 876 [LNIND 1954 SC 145]. See also Company a legal person and separate
juristic entity earlier.
81. Subra Mukherjee v. Bharat Coking Coal Ltd., (2000) 101 Comp. Cas. 257 (SC). See also Corporate entity, Corporate
veil and Lifting of corporate veil in earlier paragraphs.
82. Naga Brahma Trust v. Translanka Air Travels P. Ltd., (1997) 88 Comp. Cas. 136 (Mad.).
83. Jai Narain Parasrampuria (Decd.) v. Pushpa Devi Saraf, (2006) 133 Comp. Cas. 794 (SC).
84. Rajdhani Chit Fund Pvt. Ltd. v. Mukesh Maheshwari (1999) 96 Comp. Cas. 837 (Delhi); Kathiawar Industries Ltd. v.
Custodian-General of Evacuee Property,AIR 1967 Punjab 337; Hydro (Sind) Electric Supply Co. Ltd. v. Union of
India,AIR 1959 Punjab 199.
85. Prem Lata Bhatia v. Union of India, (2006) 134 Comp. Cas. 92 (Delhi) (DB).
86. K.M. Basheer v. Lona Chackola, (2003) 115 Comp. Cas. 127 (Ker.) (DB).
87. Martin Burn Ltd. v. Bhagirath Murarka, (1982) 52 Comp. Cas. 127 (Cal.) (DB). See also Comments under Section 439.
Page 35 of 37
88. G.C. Mehrotra v. Deputy Collector (Collections), Sales Tax, (1998) 93 Comp. Cas. 617 (All.); Kailash Prasad Modi v.
Chief General Manager, Orissa Telecommunication, (1995) 82 Comp. Cas. 626 (Orissa) (DB) : AIR 1994 Orissa 98
(DB); V.V. Rama Rao v. Union of India,(1998) 30 Corp. LA 131 (AP); Employees' State Insurance Corporation v. S.K.
Aggarwal, (1998) 94 Comp. Cas. 75 (SC). See detailed Comments under Recovery of Tax, Recovery of Dues, etc., in
later paragraphs. See also Comments under Sections 3 and 5
89. R. v. Tyler & International Commercial Co.,(1891) 2 QB 588 : 65 LT 662 : 7 TLR 720 (CA); Director of Public
Prosecutions v. Kent and Sussex Contractors Ltd.,(1944) 2 KB 146 : (1944) 1 All ER 119 : 113 LJ KB 88 (DC). See
also Comments Sections 5, 293, 621 and 629A.
90. Esso Standard Inc. v. Udharam Bhagwandas Japanwalla, (1975) 45 Comp. Cas. 16 (Bom.) (DB). See also Comments
under Section 542.
91. Bolton (H.L.) Engg. Co. Ltd. v. Graham (T.J.) & Sons Ltd.,(1957) 1 QB 159 : (1956) 3 All ER 624 : (1956) 3 WLR 804 :
(1956) 100 SJ 816 (CA) ; DPP v. Kent and Sussex Contractors Ltd.,(1944) 2 KB 146 : (1944) 1 All ER 119 : 113 LJ
KB 88 (DC); D. & L. Caterers Ltd. v. D'Anjou,(1945) KB 364 : (1945) 1 All ER 563 : 114 LJ KB 386; Neville v. London
Express Newspapers,(1917) 2 KB 564. See also Lifting the veil for Contempt of Court in earlier paragraphs.
92. Linotype Co. Ltd. v. British Empire Typesetting Machine Co. Ltd.,(1899) 81 LT 331 : 15 TLR 524 (HL); South Hetton
Coal Co. v. North-Eastern News Association,(1894) 1 QB 133 : 63 LJ QB 293; Lewis v. Daily Telegraph Ltd.,(1964) 2
QB 601 : (1964) 1 All ER 705 : (1964) 2 WLR 736 (CA).
94. Radhey Shyam Khemka v. State of Bihar, (1993) 77 Comp. Cas. 356 (SC). See also Comments under Sections 62, 63,
69 and 73.
95. A.K. Khosla v. T.S. Venkatesan, (1994) 80 Comp. Cas. 81 (Cal.). See also Comments under Sections 5, 293, 621 and
629A.
96. Tesco Supermarkets Ltd. v. Nattrass,(1972) AC 153 : (1971) 2 All ER 127 : (1971) 2 WLR 1166 : (1971) 115 SJ 285
(HL); Lennard's Carrying Co. Ltd. v. Asiatic Petroleum Co. Ltd.,(1915) AC 705 : 84 LJ KB 1281 : 113 LT 195 : 31 TLR
294 : 59 SJ 411 (HL); Bolton (H.L.) Engg. Co. Ltd. v. Graham (T.J.) & Sons Ltd.,(1957) 1 QB 159 : (1956) 3 All ER 624 :
(1956) 3 WLR 804 : (1956) 100 SJ 816 (CA); R. v. Mcdonnell,(1966) 1 QB 233 : (1966) 1 All ER 193 : (1965) 3 WLR
1138 : 109 SJ 919 : (1966) 36 Comp. Cas. 125; Henshall (John) (Quarries) Ltd. v. Harvey,(1965) 2 QB 233 : (1965) 1
All ER 725 (DC) ; DPP v. Kent and Sussex Contractors Ltd.,(1944) 2 KB 146 : (1944) 1 All ER 119 : 113 LJ KB 88
(DC); R. v. ICR Haulage Ltd.,(1944) KB 551 : (1944) 1 All ER 691 (CCA). But see R. v. Andrews Weatherfoil
Ltd.,(1972) 1 All ER 65 : (1972) 1 WLR 118 : 115 SJ 888 (CA). See also Comments under Sections 5, 293, 621 and
629A.
1. R. v. ICR Haulage Ltd.,(1944) KB 551 : (1944) 1 All ER 691 (CCA) ; Esso Standard Inc. v. Udharam Bhagwandas
Japanwalla, (1975) 45 Comp. Cas. 16 (Bom.) (DB). See also Comments under Sections 5, 542, 621, 621A and 629A.
2. Abdul Aziz v. State of Maharashtra,AIR 1963 SC 1470 [LNIND 1963 SC 26]; Supdt. and Legal Remembrancer v. Balai
Chand Saha,(1974) 78 CWN 757 (Cal.); Karunaketan Dutta v. Coal Board,(1972) 76 CWN 679 (Cal.). See also
3. M.V. Javali v. Mahajan Borewell and Co., (1998) 91 Comp. Cas. 708 (SC) : (1998) 230 ITR 1 (SC); M.R. Pratap v. V.M.
Muthukrishnan, ITO, (1992) 74 Comp. Cas. 400 (SC) : (1992) 196 ITR 1 (SC) : AIR 1994 SC 674 [LNIND 1992 SC
374]; ITO v. D. Manoharlal Kothari, (1999) 96 Comp. Cas. 275 (Mad.) : (1999) 236 ITR 357 (Mad.) ; Modi Industries
Ltd. v. B.C. Goel, (1983) 54 Comp. Cas. 835 (All.) (DB); Oswal Vanaspati and Allied Industries v. State of U.P., (1992)
75 Comp. Cas. 770 (All.) (FB); Manian Transports v. S. Krishna Moorthy, ITO, (1991) 72 Comp. Cas. 746 (Mad.); P.V.
Pai v. R.L. Rinawma, Dy. CIT, (1993) 77 Comp. Cas. 179 (Kar.) : (1993) 200 ITR 717 (Kar.); Vijaya Commercial Credit
Ltd. v. ITO, (1988) 63 Comp. Cas. 581 (Kar.) : (1988) 170 ITR 55 (Kar.). See also Comments under Sections 5, 621,
621A and 629A.
4. Hrushikesh Panda v. State of Orissa, (1997) 89 Comp. Cas. 613 (Orissa).
247]; Madanlal Agarwalla v. State, (1989) 65 Comp. Cas. 237 (Cal.) (DB); Naresh Kumar v. State of Bihar, (1991) 70
Comp. Cas. 358 (Patna); Vidya Wati v. State, (1990) 69 Comp. Cas. 813 (Delhi). See detailed Comments under
Section 5 under Essential Commodities Act.
6. Associated Cement Co. Ltd. v. Keshvanand, (1998) 91 Comp. Cas. 361 (SC). See also Comments under Sections 5,
621, 621A and 629A.
7. Geekay Exim (India) Ltd. v. State of Gujarat, (1998) 94 Comp. Cas. 516 (Guj.). See also Comments under Sections 5,
10 and 621.
SCR 885. See detailed Comments under Characteristics of a company, Corporate entity, Corporate veil, Lifting the
corporate veil and Perpetual succession hereinbefore.
Page 36 of 37
10. Memtec Ltd. v. Lunarmech, (2001) 103 Comp. Cas. 1078 (Delhi). See also Comments under Sections 10 and 394.
11. Gopalpur Tea Co. Ltd. v. Peshok Tea Co. Ltd., (1982) 52 Comp. Cas. 239 (Cal.) (DB). See also Comments under
Section 443.
12. B. Mookerjee v. State Bank of India, (1993) 76 Comp. Cas. 292 (Cal.) (DB).
(DB).
Services Ltd., (1992) 75 Comp. Cas. 583 (Bom.). See detailed Comments under Sections 10, 291, 293, 397 and 398.
(2002) 108 Comp. Cas. 295 (Cal.). See also Comments under Sections 10, 10E, 10FA and 10FB-10GF.
17. Order 29, Rule 1 and Order 6, Rule 14 of the Code of Civil Procedure, 1908 (5 of 1908). See also Comments under
Sections 10 and 41.
18. BSN (UK) Ltd. v. Janardan Mohandas Rajan Pillai, (1996) 86 Comp. Cas. 371 (Bom.); Wallersteiner v. Moir (No.
2),(1975) QB 373 : (1975) 1 All ER 849 : (1975) 2 WLR 389 : (1975) 119 SJ 97 (CA); Nurcombe v. Nurcombe,(1985) 1
All ER 65 : (1985) 1 WLR 370 : (1984) BCLC 557 (CA); Giles v. Rhind,(2002) 4 All ER 977. See detailed Comments
under Section 41.
19. Patel Roadways Ltd. v. Prasad Trading Co., (1992) 74 Comp. Cas. 11 (SC); R.S.D.V. Finance Co. Pvt. Ltd. v. Shree
Vallabh Glass Works Ltd., (1993) 78 Comp. Cas. 640 (SC). See detailed Comments under Section 10.
20. All India General Transport Corporation Ltd. v. Raghunath Sahay, (1970) 40 Comp. Cas. 203 (Pat.). See also
21. Harendra Nath Ghosal v. Superfoam Pvt. Ltd., (1992) 74 Comp. Cas. 740 (Cal.) (DB).
22. Mamata Papers Pvt. Ltd. v. State of Orissa, (2000) 99 Comp. Cas. 294 (Orissa). See detailed Comments under Section
23. Union Bank of India v. Khader International Construction, (2001) 105 Comp. Cas. 856 (SC). See detailed Comments
veil to prevent Fraud or Improper Conduct, Contempt of Court and Lifting the veil in Holding, Subsidiary and Associated
companies in earlier paragraphs.
25. Vivek Kumar v. Pearl Cycle Industries Ltd., (1983) 54 Comp. Cas. 77 (Delhi). See also Comments under Sections 290
and 446.
26. Punjab National Bank v. Bareja Knipping Fasteners Ltd., (2001) 103 Comp. Cas. 958 (P&H). See also Comments
under Section 4.
27. Electrical Cable Development Association v. Arun Commercial Premises Co-operative Housing Society Ltd., (1998) 94
Comp. Cas. 53 (SC).
28. Godrej Soap Ltd. v. State, (1991) 70 Comp. Cas. 248 (Cal.) (DB). See also Comments u/s. 10.
29. Sukhdev Singh v. Bhagatram Sardar Singh Raghuvanshi, (1975) 45 Comp. Cas. 285 (SC) : AIR 1975 SC 1331 [LNIND
1975 SC 79]: (1975) 3 SCR 619 [LNIND 1975 SC 79]. See also Comments under Section 4A.
30. Andhra Pradesh State Road Transport Corpn. v. ITO, (1964) 34 Comp. Cas. 473 (SC) : AIR 1964 SC 1486 [LNIND
1964 SC 61]: (1964) 52 ITR 524 [LNIND 1964 SC 61] (SC). See also Government Company hereinbefore.
6 SCR 885; State Trading Corporation of India Ltd. v. CTO, (1963) 33 Comp. Cas. 1057 (SC) : AIR 1963 SC 1811
[LNIND 1963 SC 334]: (1963) 2 Comp. LJ 234 (SC). See also Comments under Company a legal person and separate
juristic entity, Corporate entity, Corporate veil, Lifting the corporate veil and Government Company, etc., in earlier
paragraphs.
32. Maddi Swarna v. CTO, (2002) 109 Comp. Cas. 308 (AP) (DB); Peter J.R. Prabhu v. Asst. CCT, (2002) 109 Comp. Cas.
299 (Kar.); Nishad Patel v. State of Kerala, (1999) 96 Comp. Cas. 861 (Ker.); Tikam Chand Jain v. State Govt. of
Haryana, (1987) 62 Comp. Cas. 601 (P&H); Surinder Nath Khosla v. Excise and Taxation Commissioner,(1964) 15
STC 838 (P&H); George J. Mathew v. Commercial Tax Officer, (2002) 112 Comp. Cas. 641 (Mad.).
Page 37 of 37
33. G.C. Mehrotra v. Deputy Collector (Collections), Sales Tax, (1998) 93 Comp. Cas. 617 (All.). See also Comments
under Liability of Company in earlier paragraphs.
34. Khaders International Construction Ltd. v. CIT, (1998) 91 Comp. Cas. 432 (Ker.); Bhagwandas J. Patel v. Deputy CIT,
(1999) 97 Comp. Cas. 213 (Guj.) (DB). See also Comments u/s. 3.
35. Satish Chand Singhal v. CIT, (1992) 74 Comp. Cas. 796 (All.) : (1992) 196 ITR 227 (All.).
36. Tata Consultancy Services v. Union of India, (2002) 111 Comp. Cas. 292 (Kar.).
37. Alembic Glass Industries Ltd. v. CCE, (2002) 112 Comp. Cas. 379 (SC).
38. Collector of Central Excise v. I.T.E.C. (P.) Ltd., (2002) 112 Comp. Cas. 470 (SC).
39. Sri Banashankary Leasing Co. Ltd. v. State of Karnataka, (1991) 70 Comp. Cas. 200 (Kar.).
40. Trustor AB v. Smallbone (No. 2),(2001) 3 All ER 987. See also Lifting the veil in Tax Matters, viz., Tax Evasion or
Avoidance in earlier paragraphs.
41. Hrushikesh Panda v. Indramani Swain, (1988) 63 Comp. Cas. 368 (Orissa) (DB). See also Comments under Sections
2(13) and 543.
42. Kundan Singh v. Moga Transport Co. (P.) Ltd., (1987) 62 Comp. Cas. 600 (P&H).
43. Bhabani Prosad Ghosh v. Central Bank of India, (1993) 76 Comp. Cas. 349 (Cal.) (DB); H.S. Sidana v. Rajesh
Enterprises, (1993) 77 Comp. Cas. 251 (P&H); Bank of Maharashtra v. Racmann Auto P. Ltd., (1992) 74 Comp. Cas.
752 (Delhi); Indian Overseas Bank v. A.B. Senan, (1999) 96 Comp. Cas. 639 (Ker.); Indian Overseas Bank v. R.M.
Marketing and Services Pvt. Ltd., (2001) 107 Comp. Cas. 606 (Delhi).
44. Motipur Zamindari Co. Ltd. v. State of Bihar,AIR 1953 SC 320 [LNIND 1953 SC 52].
45. Kailash Prasad Modi v. Chief General Manager, Orissa Telecommunication (1995) 82 Comp. Cas. 626 (Orissa) (DB) :
AIR 1994 Orissa 98 (DB). See also Comments under Section 3.
46. Keshav Kumar Swarup v. Flowmore Pvt. Ltd., (1996) 85 Comp. Cas. 210 (SC). See detailed Comments under Section
630.
47. Larsen and Toubro Ltd. v. State of Gujarat, (1998) 92 Comp. Cas. 373 (SC).
* See the Land Acquisition (Companies) Rules, 1963 in Appendix 43.
48. Link Hire-Purchase and Leasing Co. Pvt. Ltd. v. State of Kerala, (2001) 103 Comp. Cas. 941 (Ker.). See also
End of Document
Datta: Company Law
C R Datta
S. 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.
49. Salim Akbarali Nanji v. Union of India, (2003) 113 Comp. Cas. 141 (Bom.) (DB); Moosa Goolam Arif v. Abrahim
Goolam Ariff,(1912) ILR 40 Cal. 1; Ramasundari Ray v. Shyamendra Lal Ray,(1947) ILR 2 Cal. 1.
50. Bowman v. Secular Society Ltd.,(1917) AC 406: 86 LJ Ch. 568 : 117 LT 161 (HL); Performing Right Society Ltd. v.
London Theatre of Varieties Ltd.,(1922) 2 KB 433 (CA); affirmed in (1924) AC 1 : 93 LJ KB 33 : 130 LT 450 (HL). See
also Comments under Ss. 12, 22, 31 and 33.
51. R v. Registrar of Companies,(1991) BCLC 476 (QBD). See detailed Comments under Sections 12 and 33.
52. Laxon & Co. (No. 2), Re, (1892) 3 Ch. 555 : 61 LJ Ch. 667 : 67 LT 85: 40 WR 621; Nassau Phosphate Co., Re, (1876)
2 Ch.D. 610 : 45 LJ Ch. 584 : 24 WR 692; Barned’s Banking Co., Re, Peel’s Case, (1867) 2 Ch. App. 674: 36 LJ Ch.
757. See also Comments u/s. 33 and 41.
53. Sulphur Dyes Ltd. v. Hickson and Dadajee Ltd., (1995) 83 Comp. Cas. 533 (Bom.). See detailed Comments under
54. Faridabad Spg. and Woollen Mills P. Ltd. v. Janta Builders, (1988) 63 Comp. Cas. 595 (Delhi). See detailed Comments
on Principles of Interpretation under Section 1.
† See also General Circular No. 9 of 2001, dated 15-5-2001 printed hereinafter.
* The codes will be operational once the Roc office opens up in the State.
COMMENTS
Legislative History.— The Companies Act, 1956 (1 of 1956).—See Legislative History under Section 33.
Certificate of Incorporation.—On Registration of Memorandum and documents [ Section 33], the Registrar of
Companies certifies under his hand that the company is incorporated. From date of incorporation mentioned in the
certificate of incorporation subscribers and members of the company shall be a body corporate, capable of
exercising all the functions of an incorporated company, and having perpetual succession and a common seal. [
Section 34].
Page 2 of 10
Certificate of Incorporation conclusive.—The Certificate of Incorporation shall be conclusive evidence that: (i)all
the requirements of the Act have been complied with in respect of registration; (ii) all the preconditions of
registration have been complied with; and (iii) the company is duly registered.
The certificate of incorporation of a company is conclusive and precludes a party from seeking a declaration that the
registration was illegal and the company is not a company or incorporated body within the meaning of The
Companies Act, 1956. Once a company is born, the only method to get it extinguished is not by assailing its
incorporation, since the certificate of incorporation is conclusive, but by resorting to the provisions of the Companies
Act which provide for winding up of companies.49
Suit for injunction.—However, this will not prevent a person filing a suit for injunction if the use of the name by the
company infringes the person’s copyright. The certificate does not prevent a person from challenging the legality of
the objects in the memorandum and taking proceedings for cancellation of the certificate.50
Illegal object.—In certain cases, the registration of a company could be cancelled if it was registered for an illegal
object.51
Minor in minimum subscribers.—In English law an infant subscriber may be counted to make up the essential
minimum of subscribers. But, under the Indian law if the Registrar is aware of such fact, he should refuse to register
the company as a minor cannot enter into such a contract. But, where one of the subscribers is a minor and the
certificate of incorporation is issued the company would be duly constituted, the certificate of incorporation being
conclusive that the provisions of the Act had been complied with. Even though without authority a person presenting
the Memorandum and Articles makes alteration therein at the instance of the Registrar and the certificate is issued,
the company is validly incorporated.52
New Certificate on change of Name [ Section 23].—A change in name under sections 21 or 22 shall be recorded
by the Registrar of Companies. The Registrar shall issue a fresh certificate of incorporation in the new name. The
old certificate will be deemed to have been cancelled. The change of name shall be complete and effective only on
the issue of such a certificate. [ Section 23 (1)].
The certificate of incorporation issued by the Registrar changing the name of the company shall be conclusive.53
Filing certified copy in Suit by Company.—Where in a suit by the company photostat copy of certificate of
incorporation was filed instead of certified copy, the inadvertent omission was allowed to be rectified. Laws of
procedure are meant to be hand-maidens to justice and not stumbling blocks.54
Corporate Identity Number (CIN).—The Department of Company Affairs has issued Circulars, viz., E-Corporate
Business Working Group to synergise the provisions of The Companies Act, 1956, with The Information Technology
Act, 2000 stating that all the Registrars of Companies will allocate a Corporate Identity Number (CIN) to each
company registered on or after 1st November, 2000 as follows.
Department’s view.— E-Corporate Business Working Group to synergise the provisions of The Companies
Act, 1956, with the Information Technology Act, 2000.—“I am directed to say that it has been decided that all
Registrars of Companies will allocate a Corporate Identity Number (CIN) to each company registered on or after 1st
November, 2000.
2. The CIN has been designed to help easily identify companies belonging to a State, industry, ownership or
age. It will be a 21-digit number.
3. The first letter denotes the listed or unlisted company. The first five digits represent the economic activity of
the company, the second two places represent the State in which the company’s registered office is
located, the next four places indicate the year in which the company was incorporated, the next three
places indicate ownership code and the last six places in the CIN are the unique number assigned to every
company in any particular economic activity, in a particular State, of a particular year of incorporation and
of a particular ownership category. For example, the new CIN for a few well known companies is presented
below:
Steel Authority of L 27104 DL 1973 UGC XXXXXX
India Ltd.
Page 3 of 10
Tata Engineering L 3410 MH 1943 PLC XXXXXX

and Locomotive
The complete listing of State Code and the Ownership Code is enclosed.
4. Training schedule for the officers and staff of Registrars of Companies in this regard is being chalked out
by the NIC and will be sent to you shortly.
5. All Registrars of Companies are directed to act accordingly. A copy of this circular is also available on
website http://www.nic.in/dca[www.dca.nic.in] of the Department and can be accessed in case of need.
Implementation of Corporate Identity Number (CIN)
Contents
Chapter/Page
1. Corporate Identity Number (CIN)/1
2. Steps for Implementation of CIN/3
Annexures
I. Industry Codes (Sample List)
II. State Codes
III. Ownership Codes
1. Corporate Identity Number (CIN)
A new investor friendly Corporate Identity Number (CIN) is being introduced to uniquely identify every company
registered with the Registrar of Companies. Currently, the present registration number assigned to a company does
not reflect the activity or the State or ownership of the company.
The CIN assigned to a company indicates the following:

• Listing status
• Economic activity (industry)
• State
• Year of incorporation
• Ownership
• Sequential number assigned by Roc’s
The CIN is explained schematically below:
Listing Status
5 digit NIC industry
State Code
Year of incorporation
Ownership Code
Page 4 of 10
Sequential Number
The first digit of the CIN represents the listing status of a company. If the company is unlisted the alphabet entered
is “U” and in case the company is listed the alphabet entered is “L”. In general, freshly incorporated companies are
unlisted.
The second five digits represent the economic activity of the company. The standard national industrial
classification (NIC) 98, at the 5-digit level, would be used to assign activity/industry code. The NIC’98 has been
devised by the Central Statistical Organisation (CSO), Ministry of Statistics and Program Implementation, Govt. of
India. The document giving details on the codes can be procured from the CSO. Annexure I presents a sample
classification for a few economic activities.
The next two places represent the State in which the company’s registered office is located. All States are
represented by a two-alphabet code. The complete list of State Code is presented in Annexure II to this note.
The next four places indicate the year in which the company was incorporated.
Next, the ownership code is indicated through a three-alphabet code. The list of codes with their description is
presented in Annexure III to this note.
The last six places in the CIN are the sequential number assigned to every company by the concerned Roc office of
the State.
Note that there is no space, hyphen, oblique sign, etc., between the various code components.
2. Steps for implementation of CIN
Step 1 : First place in CIN represents the listing status of a company. The listing status code is
represented by an alphabet. If company is listed then assign “L” otherwise assign “U” for unlisted company.
Step 2 : The next five places represent the economic activity of the company according to the standard
National Industrial Classification (NIC) 98. Select the economic activity code of the company from NIC 98
manual and assign the code. In case a company is operating in diverse fields, then assign “00000” as a
“diversified”† company. The manual/document on NIC’98 can be obtained from CSO. Annexure I presents
a sample classification for a few economic activities.
Step 3 : The next two places represent the State in which the company’s registered office is located. All
States are represented by a two-alphabet code. The complete list of State Code is presented in Annexure
II to this note. Assign the State Code from the list given in Annexure II.
Step 4 : The next four places represent the year of incorporation of the company.
Assign the year of incorporation of a company in “YYYY” format.
Example, if a company is incorporated on April 2, 1982. Then assign 1982 as year of incorporation.
Step 5 : The next three places represent the ownership of a company. Whether the company is Union
Government company or State Government company, private limited or public limited company. Ownership
code is represented by three alphabet code. The list of codes with their description is presented in
Annexure III to this note. Assign the Ownership Code from the list presented in Annexure III.
Step 6 : The last six places represent the unique sequential number assigned to every company by the
concerned Registrar of Companies (RoCs) office of the State. This unique six digit sequential number is
assigned by the respective Rocs.
Note that there is no space, hyphen, oblique sign, etc., between the various code components.
Consider an example of an existing company ABC India Ltd.

Page 5 of 10
ABC India Ltd. 1393 (Registration number)
ABC India Ltd. L60230AS1972PLC1393 (CIN)
The registration number does not give any information about the company whereas the CIN provides information
about the listing status, activity (industry), ownership, registered office, and year of incorporation of the company.
An investor friendly CIN of ABC India Ltd. indicates the following characteristics of the company:
L—Listed company
60230—Freight transport by road
AS—Registered office in Assam
1972—28 year old company
PLC—Public Limited Indian non-Government company
1393—Sequential number assigned by respective Rocs
ANNEXURE I
15 : Manufacture of food products and beverages
151 Production, processing and

preservation of meat, fish,
fruit, vegetables, oils and fats;
1511 Production, processing and

preserving of meat and meat
products;
15111 Mutton-slaughtering,
preparation;
15112 Beef-slaughtering,
preparation;
15113 Pork-slaughtering,
preparation;
15114 Poultry and other

slaughtering, preparation;
15115 Preservation of meat except

by canning;
15116 Processing and canning of

meat;
15117 Rendering and refining of lard

and other edible animal fats;
15118 Production of flours and

meals of meat and meat
offals;
1512 Processing and preserving of

fish products fishing and
Page 6 of 10
processing of the catch;
15121 Sun-drying of fish;
15122 Artificial dehydration of fish

and sea food;
15123 Radiation preservation of fish

and similar food;

fish;
15125 Manufacturing of fish meal;

froglegs;
15127 Processing and preserving of

fish crustacean and similar
foods.
152 ..........................
16 : ...............................................................................
ANNEXURE II
State Codes :
AN — Andaman and Nicobar Islands
AP — Andhra Pradesh
AR — Arunachal Pradesh
AS — Assam
BR — Bihar
CH — Chandigarh
CT — Chattisgarh*
DN — Dadar Nagar Haveli
DD — Daman and Diu
DL — Delhi
GA — Goa
GJ — Gujarat
HR — Haryana
HP — Himachal Pradesh
JK — Jammu and Kashmir
JH — Jharkhand*
Page 7 of 10
KA — Karnataka
KL — Kerala
LD — Lakshadweep
MP — Madhya Pradesh
MH — Maharashtra
MN — Manipur
ML — Meghalaya
MZ — Mizoram
NL — Nagaland
OR — Orissa
PY — Pondicherry
PB — Punjab
RJ — Rajasthan
SK — Sikkim
TN — Tamil Nadu
TR — Tripura
UR — Uttaranchal*
UP — Uttar Pradesh
WB — West Bengal
ANNEXURE III
Ownership Codes :
GOI — Union Government company
SGC — State Government company
Public limited Indian non—Government

PLC — company
Private limited Indian non—Government

PTC — company
Public limited foreign company

FLC — incorporated in India
Private limited foreign company

FTC — incorporated in India
ULL — Unlimited Liabilities Public

Page 8 of 10
ULT — Unlimited Liabilities Private
GAP — Guarantee and Association Public
GAT — Guarantee and Association Private
Section 25 company.” [ General Circular

No. 12 of 2000 (F. No. 1/6/2000-CL-V),
dated 25-10-2000: (2000) 102 Comp.
NPL — Cas. (St.) 545].
Corporate Identity Number(CIN)to companies registered prior to 1-11-2000.—“In continuation to this

Department’s General Circular No. 12 of 2000 (F. No. 1/6/2000-CL-V), dated 25-10-2000 [ printed above] intimating
the instructions to allocate a Corporate Identity Number (CIN) to each company registered on or after 1st
November, 2000, I am directed to say that it has been decided that allotment of a Corporate Identity Number (CIN)
to companies registered prior to 1-11-2000, shall be completed within a year in a phased manner as indicated
below:—
Phase Companies registered during the CIN to be allotted

period
1st 1-1-1995 to 31-10-2000 Within 3 months from 1-5-2001 to 31-7-
2001
2nd 1-1-1985 to 31-12-1994 Within 3 months from 1-8-2001 to 31-10-

2001
3rd 1-1-1971 to 31-12-1984 Within 3 months from 1-11-2001 to 31-1-

2002
4th 1-1-1956 to 31-12-1970 Within 2 months from 1-2-2002 to 31-3-

2002
5th Companies registered prior to 1-1-1956 Within 1 month from 1-4-2002 to 30-4-
2002
2. All Registrars of Companies are directed to act accordingly and the concerned companies may be
informed about the allotment of CIN. The small Roc offices shall finish the work as early as possible. Rocs
shall send their compliance report to their respective Regional Director within seven days after completion
of every phase.
3. All Regional Directors are also requested to ensure that the work is finished within the target dates and
consolidated compliance reports may be sent to the Department within ten days after completion of every
phase.
4. A copy b site http://www.nic.in/dca of the Department.”[ General Circular No. 8 of 2001 (F. No. 1/6/2000-
CL-V), dated 30-3-2001 : (2001) 105 Comp. Cas. (St.) 29].
Allocation of specific economic activity based upon the main object clause of a company while allocating
Corporate Identity Number (CIN) instead of entering the code “00000”.—“In continuation of this Department's
General Circular No. 12 of 2000 (issued vide Letter F. No. 1/6/2000-CL-V), dated 25-10-2000 [ printed above], I am
directed to say that step 2 for implementation of Corporate Identity Number (CIN) provides that in a case if a
company is operating in diverse fields, the economic activity as “00000” has to be assigned.
2. Some difficulties may be faced while implementing Corporate Identity Number (CIN) while doing
industrywise analysis in the case of a company operating in diverse fields is shown as having economic
activity “00000”. You are, therefore, requested that instead of entering the code “00000” as economic
activity of a company, a specific economic activity of the company based upon the main object clause in
the company's memorandum of association [item 1 of the Object Clause (IIIA)] be entered in the second
Page 9 of 10
five digits representing the economic activity of the company.” [ General Circular No. 9 of 2001 (F. No.
1/6/2000-CL-V), dated 15-5-2001 : (2001) 105 Comp. Cas. (St.) 64].
E-Filing and Search facilities on MCA website [www.mca.gov.in].— See the following e-Governance, e-Filing,
Charter.
DSC now.
(6) Find CIN/GLN.
Jurisdiction of Registrars of Companies (ROCs).— See detailed Comments on the Jurisdiction and Functions of
Registrars of Companies (ROCs), Regional Directors (RDs), the Ministry of Corporate Affairs (MCA), e-
Governance, MCA-21, e-Filing and e-Forms under Sections 609 and 610B.
See detailed Comments under Section 609 and 610A to 610E.
Producer Company—Certificate of Incorporation [ Section 581C(2)].—Any Ten or more Producers or Two or

and register a Producer Company. [ Section 581C(1)].
On being satisfied that the Producer Company has complied with all the requirements, the Registrar of Companies
(ROC) shall issue the Certificate of Incorporation [ Section 581C(2)] of the Companies Act, 1956.
See detailed Comments under Sections 581C and 581A to 581ZT.
49. Salim Akbarali Nanji v. Union of India, (2003) 113 Comp. Cas. 141 (Bom.) (DB); Moosa Goolam Arif v. Abrahim
Goolam Ariff,(1912) ILR 40 Cal. 1; Ramasundari Ray v. Shyamendra Lal Ray,(1947) ILR 2 Cal. 1.
50. Bowman v. Secular Society Ltd.,(1917) AC 406: 86 LJ Ch. 568 : 117 LT 161 (HL); Performing Right Society Ltd. v.
London Theatre of Varieties Ltd.,(1922) 2 KB 433 (CA); affirmed in (1924) AC 1 : 93 LJ KB 33 : 130 LT 450 (HL). See
also Comments under Ss. 12, 22, 31 and 33.
51. R v. Registrar of Companies,(1991) BCLC 476 (QBD). See detailed Comments under Sections 12 and 33.
52. Laxon & Co. (No. 2), Re, (1892) 3 Ch. 555 : 61 LJ Ch. 667 : 67 LT 85: 40 WR 621; Nassau Phosphate Co., Re, (1876)
2 Ch.D. 610 : 45 LJ Ch. 584 : 24 WR 692; Barned’s Banking Co., Re, Peel’s Case, (1867) 2 Ch. App. 674: 36 LJ Ch.
757. See also Comments u/s. 33 and 41.
53. Sulphur Dyes Ltd. v. Hickson and Dadajee Ltd., (1995) 83 Comp. Cas. 533 (Bom.). See detailed Comments under
54. Faridabad Spg. and Woollen Mills P. Ltd. v. Janta Builders, (1988) 63 Comp. Cas. 595 (Delhi). See detailed Comments
on Principles of Interpretation under Section 1.
† See also General Circular No. 9 of 2001, dated 15-5-2001 printed hereinafter.
Page 10 of 10
End of Document
Datta: Company Law
C R Datta
S. 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.
56. Shyam Chand v. Calcutta Stock Exchange Association Ltd.,AIR 1949 Cal. 337.
v. Perfect Castings Pvt. Ltd., (1968) 38 Comp. Cas. 187 (Mad.) : (1968) 1 Comp. LJ 41 (Mad.); Jarnail Singh v. Bakshi
Singh, (1960) 30 Comp. Cas. 192 (Punj.) : AIR 1960 Punj. 455. See also Comments under Sections 2(2), 3 and 28.
58. Raja Ram Corn Products (Punjab) Ltd. v. Company Law Board, (2003) 113 Comp. Cas. 33 (P&H) (DB). See also
59. Duke's Case , (1876) 1 Ch.D. 620. See also Comments under Section 13.
60. Eley v. Positive Govt. Security Life Assce. Co., (1876)1 Ex.D. 88 : 45 LJ Exch. 451 (CA); Borland's Trustee v. Steel
Bros. & Co. Ltd., (1901) 1 Ch. 279 : 70 LJ Ch. 51; Hanuman Prasad Gupta v. Hiralal, (1970) 40 Comp. Cas. 1058 (SC)
: AIR 1971 SC 206 [LNIND 1970 SC 71]: (1970) 2 Comp. LJ 195 (SC); Unity Co. Pvt. Ltd. v. Diamond Sugar Mills
Ltd.,AIR 1971 Cal. 18 [LNIND 1968 CAL 184]: (1970) 2 Comp. LJ 64 (Cal.). See also Comments under Sections 2(46),
26, 28 and Schedule I, Table A.
61. Welton v. Saffery,(1897) AC 299 : 66 LJ Ch. 362 : 76 LT 505 : 45 WR 508 (HL).
62. Hickman v. Kent Sheep-Breeders' Assn., (1915) 1 Ch. 881 : 84 LJ Ch. 688 : 113 LT 159; Beattie v. E & F Beattie Ltd.,
(1938) Ch. 708 : (1938) 3 All ER 214 : 107 LJ Ch. 333 (CA); Shiv Onkar Maheswari v. Bansidhar Jagannath, (1957) 27
Comp. Cas. 255 (Bom.) : AIR 1956 Bom. 459 [LNIND 1955 BOM 113]: (1956) ILR Bom. 100 : 1956 Bom. LR 3. See
Comp. LJ 195 (SC). See detailed Comments under Sections 26.
422 [LNIND 1970 SC 391]; V.B. Rangaraj v. V.B. Gopalakrishnan, (1992) 73 Comp. Cas. 201 (SC) : AIR 1992 SC 453
[LNIND 1991 SC 637]. See detailed Comments under Section 26.
65. Smt. Claude-Lila Parulekar v. Sakal Papers Pvt. Ltd., (2005) 124 Comp. Cas. 685 (SC) relying on Hunter v.
Hunter,(1936) AC 222 : 105 LJ Ch. 97 : 154 LT 513 : (1937) 7 Comp. Cas. 36 (HL); Lyle and Scott Ltd. v. Scott's
Trustees,(1959) AC 763 : (1959) 2 All ER 661 : (1959) 3 WLR 133 : (1959) 103 SJ 507 : (1960) 30 Comp. Cas. 30 (HL);
Page 2 of 7
422 [LNIND 1970 SC 391]: (1971) 1 SCC 50 [LNIND 1970 SC 391]; Hanuman Prasad Gupta v. Hiralal, (1970) 40
Comp. Cas. 1058 (SC) : AIR 1971 SC 206 [LNIND 1970 SC 71]: (1970) 1 SCC 437 [LNIND 1970 SC 71] : (1970) 2
Comp. LJ 195 (SC).
66. Kinetic Honda Motor Ltd. v. Pawan Gupta, (1996) 86 Comp. Cas. 596 (CLB). See also Comments under Sections 82
and 108.
67. London Sack & Bag Co. Ltd. v. Dixon & Lugton Ltd.,(1943) 2 All ER 763 : 170 LT 70 (CA); Welton v. Saffery,(1897) AC
299 : 66 LJ Ch. 362 : 76 LT 505 : 45 WR 508 (HL); Shiv Onkar Maheswari v. Bansidhar Jagannath, (1957) 27 Comp.
Cas. 255 (Bom.) : AIR 1956 Bom. 459 [LNIND 1955 BOM 113]: (1956) ILR Bom. 100 : 1956 Bom. LR 3. See also
68. Doraiswami Iyengar v. United India Life Assurance Co. Ltd.,AIR 1956 Mad. 316 [LNIND 1955 MAD 258]; Major
General Shanta Shamsher Jung Bahadur Rana v. Kamani Bros. P. Ltd., (1959) 29 Comp. Cas. 501 (Bom.) : AIR 1959
Bom. 201 [LNIND 1958 BOM 1].
69. Hickman v. Kent Sheep-Breeders' Association, (1915) 1 Ch. 881 : 84 LJ Ch. 688 : 113 LT 159; Rameswar v. Calcutta
Wheat and Seed Association,(1938) 42 CWN 161 (Cal.).
70. MacDougall v. Gardiner (No. 2), (1875) 1 Ch.D. 13 : 45 LJ Ch. 27 : 33 LT 521 (CA); Burland v. Earle,(1902) AC 83 :
(1900-03) All ER Rep. Ext. 1452 : 71 LJ PC 1. See also Comments under Sections 41 and 205.
71. Gulab Singh v. Punjab Zamindara Bank,AIR 1942 Lah. 47; Anglo-Austrian Printing and Publishing Union, Re, Isaac's
Case, (1892) 2 Ch. 158 : 66 LT 593 : 61 LJ Ch. 481 : 40 WR 518 : 36 SJ 427 (CA); New British Iron Co., Re, ex parte
Beckwith, (1898) 1 Ch. 324 : 67 LJ Ch. 164; Beattie v. E & F Beattie Ltd., (1938) Ch. 708 : (1938) 3 All ER 214 : 107 LJ
Ch. 333 (CA). See also Comments under Sections 255 and 432.
72. Indian Copper Corporation Ltd. v. CIT, (1960) 30 Comp. Cas. 200 (Patna) (DB).
73. Fertilizer Corporation of India Ltd. v. Workmen,AIR 1970 SC 867 [LNIND 1968 SC 340]; G. Karunakaran v. State of
Kerala, (1987) 61 Comp. Cas. 334 (Ker.). See Comments under Sections 26, 29 and 617.
75. Ram Chand and Sons Sugar Mills P. Ltd. v. Kanhayalal Bhargava, (1967) 37 Comp. Cas. 42 (SC) : AIR 1966 SC 1899
[LNIND 1966 SC 79]: (1966) 2 Comp. LJ 224 (SC). See also Comments under Sections 13, 34, 253, 255 and 291-293.
Sections 25 and 26.
77. Jon Beauforte (London) Ltd., Re, (1953) Ch. 131 : (1953) 1 All ER 634 : 2 WLR 465. The Doctrine of constructive notice
has been abolished under English Law. See detailed Comments under Section 13 and 290-293.
663 (Ex Ch.). See detailed Comments under Section 132-93.
79. Pabna Dhana-Bhandar Co. Ltd. v. Foyezuddin Mia, (1933) 3 Comp. Cas. 41 (Cal.) : (1932) 36 CWN 589 : AIR 1932
Cal. 716; Viswanath v. Holyland Cinetone Ltd.,AIR 1939 All. 739. See also Comments under Schedule I, Table A,
Regulation 13.
80. Skypark Builders and Distributors v. Kerala Police Housing and Construction Corporation Ltd., (2003) 114 Comp. Cas.
425 (Ker.) (DB).
81. Beattie v. E & F Beattie Ltd., (1938) Ch. 708 : (1938) 3 All ER 214 : 107 LJ Ch. 333 (CA); Hickman v. Kent Sheep-
Breeders' Assn., (1915) 1 Ch. 881 : 84 LJ Ch. 688 : 113 LT 159.
COMMENTS
follows: “The section corresponds to section 21 of the existing Act and section 20 of the English Act. The language
has been generalised so as to make a reference not only to the members of the company but also to the company.”
Page 3 of 7
Memorandum and Articles binding [ Section 36(1)].—Subject to the provisions of this Act, the Memorandum and
Articles bind the company and members as if signed by the company and each member, and contain covenants to
observe all the provisions of the Memorandum and Articles.
Construction of Memorandum and Articles.—Memorandum of Association has to be read together with the
Articles of Association, where the terms are ambiguous or silent. Articles may explain the Memorandum, but cannot
extend its scope.55
Primarily the Memorandum alone must be looked at for the purpose of ascertaining the objects of the company. It is
only in case of ambiguity that the Articles may be referred to for the very limited purpose of explaining the
ambiguity.56 Articles should be construed as a business document so as to give business efficacy in preference to a
construction which will prove it unworkable.57
Act to override Memorandum and Articles [ Section 9].—Save as otherwise expressly provided in the Act (a)
the provisions of the Companies Act, 1956 shall override the memorandum, articles, agreements or resolutions, and
(b) any provision contained in the memorandum, articles, agreement or resolution shall, to the extent to which it is
Subject to provisions of the Act.—The Memorandum and Articles of company are binding subject to provisions of
the Act. In view of non obstante clause in proviso to section 80A(1) of the Act, the CLB [ now the Tribunal] has
power to lay down conditions while granting permission to issue further redeemable preference shares in lieu of
existing shares. Such condition overrides the Articles.58
Contract, its binding nature.—As per this section the Memorandum and Articles bind the company and members
as if signed by the company and each member. The decisions enunciating the binding nature of this contract are as
follows.
Memorandum irrevocably binds Subscriber.—Memorandum of Association of the company irrevocably binds a

subscriber thereof to contribute the proportion of the capital for which he subscribes, but it does not bind him
irrevocably as regards matters not required by the Act to be stated therein. A person who subscribes for preference
shares may take an equivalent of ordinary shares instead.59
Articles a contract between Company and its Members.—There are decisions or dicta to the effect that the
Articles of Association of a company constitute a contract between the members inter se60 and also to the effect
that the Articles do not constitute a contract between the members inter se.61
The result of apparently conflicting decisions is that though the Articles can neither constitute a contract between
the company and an outsider nor give any individual member of the company special contractual rights beyond
those of the members generally, they in fact constitute a contract between the company and its members in respect
of their ordinary rights as members.62
It is well established that the Articles of Association constitute a contract between a company and its members in
respect of their ordinary rights as members.63
Articles regulate the Internal Management.—Subject to the provisions of the Companies Act, 1956, the company
and its members are bound by the provisions contained in the Articles of Association. The Articles regulate the
internal management of the company and define the powers of its officers. They also establish a contract between
the company and the members and between the members inter se.64
Articles binding on Membersinter se.— Section 36 of the Companies Act, 1956 makes the Memorandum of
Association and Articles of Association of a Company, when registered, binding not only on the company but also
Page 4 of 7
the Members inter se to the same extent as if they had been signed by the company and by each member and
covenanted to by the company and each shareholder to observe all the provisions of the Memorandum and of the
Articles. The Articles of Association constitute a contract not merely between the shareholders and the company but
between the individual shareholders also. The Articles of Association of a Company are a source of powers of the
Directors who can as a result exercise only those powers conferred by the Articles in accordance therewith. Any
action referable to the Articles and contrary thereto would be ultra vires the Articles.65
See also Comments under Sections 9, 13, 26 and 291 to 293.
Articles as to splitting of shares binding.—The Companies Act, 1956, does not lay down any rule as to the
number of share certificates that a company should issue to a member who holds more than one share. However,
the issue of a great number of split shares to the same shareholder may considerably inconvenience the company
and for that reason Articles of Association of companies sometimes provide that issue of several certificates relating
to the same holding shall be in the discretion of the directors. The Articles of Association are not only a contract
between the company and its members but they also constitute a relationship between the company and its
members, their rights inter se. Therefore, where the transferor is a member of the company and who has sought for
splitting of share certificates he is bound by the provisions of the Articles that the Board of directors shall not
approve splitting of shares below a certain number in each certificate.66
See also Comments under Sections 82, 108, 111 and 111A.
Contractual force of Articles.—The contractual force of the Articles of Association of the company is limited to
such provisions of the Articles as are applied to the relationship of the members as such.67
Third party.—The Articles do not constitute a contract between the company and any third party.68 An outsider to
whom rights are purported to be given by the Articles in his capacity as such outsider whether he is or subsequently
becomes a member cannot sue on those Articles treating them as contracts between himself and the company to
enforce those rights. No rights merely purporting to be given by an Article to a person whether a member or not in a
capacity other than that of a member, such as a solicitor or promoter, can be enforced against the company.69 The
rights arising out of such contracts can be enforced only through the company.70
Implied contract.—Though Memorandum and Articles may not constitute a contract between the company and an
outsider, such as a promoter and the company, an implied contract may be inferred from the acts of the parties on
the terms set out in the Articles. The Articles have been held to constitute an implied contract between the company
and its directors in certain cases given below.
Contract between company and its Directors.—Where in terms of certain Articles a shareholder was appointed
managing director of the company who acted for several years and was remunerated as provided in the Articles, it
was held that this constituted an implied contract between the company and the shareholder so as to entitle him to
a declaration that he was the managing director of the company.71
It is a well established that the Articles of Association of a company form part of the contract between the
shareholders inter se; and if on the basis of these Articles the directors were employed by the company, the terms
of the Articles are embodied in and form part of the contract between the company and its directors.72
Articles of Government Company.—The Articles of Association of a Corporation or a Government Company

providing that the Board of Directors will act subject to direction of the President of India or hold office at the
pleasure of the Governor shall be binding on the directors.73
Acts beyond scope of Memorandumultra vires.—Where an act is beyond the scope of the Memorandum of
Association of the company, it is ultra vires, and no legal effect ensues, it is void, cannot be ratified by the
shareholders and if any money has been disbursed then the officers of the company responsible for such unlawful
disbursement and not the company will be responsible.74
Doctrine ofultra vires.— See detailed Comments under Section 13.
Acts outside powers of Directors.—An act outside the powers of Directors will not bind the company. A company
and the directors of the company are different legal personalities. The company derives its powers from the
Page 5 of 7
Memorandum. Some of the powers are delegated to the directors. For certain purposes they are said to be trustees
and for some others to be the agents or managers of the company. The acts of the Directors within the powers
conferred on them may be binding on the company. But their acts outside the said powers will not bind the
company.75
See detailed Comments under Sections 13 and 291-293.
Conduct of the parties.—In interpreting Memorandum and Articles of a company the conduct of the parties
accepting a standard practice for past several years as to the internal management of the company would have to
be given due weight.76
Doctrine of constructive notice and Directors’ acts.—As per the doctrine of constructive notice any one dealing
with a company is deemed to have notice of the contents of its ‘public documents’, e.g., Memorandum and Articles
of Association of the company. A third party is thus deemed to have knowledge of the contents of its objects clause.
Where the insolvent company's stated objects were to manufacture dresses but it was making veneered panels.
The claims of the creditors were held to be ultra vires on a combination of actual knowledge of the present nature of
the business and constructive knowledge of objects clause.77
constructive notice rule was mitigated by refinement of normal agency principles in Royal British Bank v. Turquand
.78
English law.—The constructive notice rule has been abolished by the English Companies Act, 1989 and a third
party acting in good faith is protected by new sections in dealing with the Board of directors or officers or agents
authorised by the Board. But, where third party's dealings are with some officer or agent other than the Board of
directors or authorised by the Board normal agency principles as refined in Turquand's case and later decisions are
still relevant even under English law.
Money payable by member a debt due [Sub-section (2)].—All money payable by any member to the company
under the Memorandum or Articles of Association of the company is a debt due from him to the company.
Suit and notice.
—A suit may be filed to recover the debt. But precondition to enforcement to such a debt, though due and payable,
is that proper notice is to be given in accordance with the Articles to the person concerned. Without such a notice
the debt is not enforceable.79
Arbitration.—Where provisions in the Memorandum of a Government Company provided that the Board of
Directors was competent to refer disputes to the arbitration. It is only an enabling provision. There is no necessary
inference of an arbitration agreement. It could not be said that there was a written agreement to arbitration between
the parties. There was no compulsion on the Board of directors to make reference to arbitration under the
Arbitration and Conciliation Act, 1996.80
Article referring to Arbitration.—An Article referring to Arbitration of any dispute between the company and any
member does not constitute a submission to arbitration of a dispute between the company and one of its directors
as such, notwithstanding that the director was a member of the company.81
Producer Company—Memorandum and Articles [ S. 581G(1)].—Producer Company shall present for

registration to the Registrar of Companies (ROC) of the State in which the Registered Office of the Producer
Company shall be situated as per its Memorandum of Association:
(a) Memorandum of the Producer Company, and (b) Articles of the Producer Company duly signed by the
Subscribers to the Memorandum.
Memorandum of Association [ Section 581F(c)].—The Memorandum of Association of a Producer Company

Page 6 of 7
shall contain the Main Objects of the Producer Company as specified in Section 581B and the particulars specified
in Section 581F(a) to (i) of the Companies Act, 1956 in addition to other matters.
Articles to contain Mutual assistance principles [ Section 581G(2)].—The Articles of Association of the
Producer Company shall contain the mutual assistance principles enumerated in Section 581G(2)(a) to (g).
See Mutual assistance principles in Section 581G(2)(a) to (g) above.
Mutual assistance principles [ Section 581A(f)].—Mutual assistance principles means the principles set out in
Section 581G(2) of the Companies Act, 1956.
See Definitions and Comments under Sections 581A(f).
Articles to contain Regulations [ Section 581G(3)].
—Without prejudice to the generality of the foregoing provisions of Section 581G(1) and (2), the Articles of Producer
Company shall, inter alia, contain the Regulations enumerated in Section 581G(3)(a) to (p) of the Companies Act,
1956.
See detailed Comments under Sections 581A to 581G.
56. Shyam Chand v. Calcutta Stock Exchange Association Ltd.,AIR 1949 Cal. 337.
v. Perfect Castings Pvt. Ltd., (1968) 38 Comp. Cas. 187 (Mad.) : (1968) 1 Comp. LJ 41 (Mad.); Jarnail Singh v. Bakshi
Singh, (1960) 30 Comp. Cas. 192 (Punj.) : AIR 1960 Punj. 455. See also Comments under Sections 2(2), 3 and 28.
58. Raja Ram Corn Products (Punjab) Ltd. v. Company Law Board, (2003) 113 Comp. Cas. 33 (P&H) (DB). See also
59. Duke's Case , (1876) 1 Ch.D. 620. See also Comments under Section 13.
60. Eley v. Positive Govt. Security Life Assce. Co., (1876)1 Ex.D. 88 : 45 LJ Exch. 451 (CA); Borland's Trustee v. Steel
Bros. & Co. Ltd., (1901) 1 Ch. 279 : 70 LJ Ch. 51; Hanuman Prasad Gupta v. Hiralal, (1970) 40 Comp. Cas. 1058 (SC)
: AIR 1971 SC 206 [LNIND 1970 SC 71]: (1970) 2 Comp. LJ 195 (SC); Unity Co. Pvt. Ltd. v. Diamond Sugar Mills
Ltd.,AIR 1971 Cal. 18 [LNIND 1968 CAL 184]: (1970) 2 Comp. LJ 64 (Cal.). See also Comments under Sections 2(46),
26, 28 and Schedule I, Table A.
61. Welton v. Saffery,(1897) AC 299 : 66 LJ Ch. 362 : 76 LT 505 : 45 WR 508 (HL).
62. Hickman v. Kent Sheep-Breeders' Assn., (1915) 1 Ch. 881 : 84 LJ Ch. 688 : 113 LT 159; Beattie v. E & F Beattie Ltd.,
(1938) Ch. 708 : (1938) 3 All ER 214 : 107 LJ Ch. 333 (CA); Shiv Onkar Maheswari v. Bansidhar Jagannath, (1957) 27
Comp. Cas. 255 (Bom.) : AIR 1956 Bom. 459 [LNIND 1955 BOM 113]: (1956) ILR Bom. 100 : 1956 Bom. LR 3. See
Comp. LJ 195 (SC). See detailed Comments under Sections 26.
422 [LNIND 1970 SC 391]; V.B. Rangaraj v. V.B. Gopalakrishnan, (1992) 73 Comp. Cas. 201 (SC) : AIR 1992 SC 453
[LNIND 1991 SC 637]. See detailed Comments under Section 26.
65. Smt. Claude-Lila Parulekar v. Sakal Papers Pvt. Ltd., (2005) 124 Comp. Cas. 685 (SC) relying on Hunter v.
Hunter,(1936) AC 222 : 105 LJ Ch. 97 : 154 LT 513 : (1937) 7 Comp. Cas. 36 (HL); Lyle and Scott Ltd. v. Scott's
Trustees,(1959) AC 763 : (1959) 2 All ER 661 : (1959) 3 WLR 133 : (1959) 103 SJ 507 : (1960) 30 Comp. Cas. 30 (HL);
422 [LNIND 1970 SC 391]: (1971) 1 SCC 50 [LNIND 1970 SC 391]; Hanuman Prasad Gupta v. Hiralal, (1970) 40
Comp. Cas. 1058 (SC) : AIR 1971 SC 206 [LNIND 1970 SC 71]: (1970) 1 SCC 437 [LNIND 1970 SC 71] : (1970) 2
Comp. LJ 195 (SC).
66. Kinetic Honda Motor Ltd. v. Pawan Gupta, (1996) 86 Comp. Cas. 596 (CLB). See also Comments under Sections 82
and 108.
Page 7 of 7
67. London Sack & Bag Co. Ltd. v. Dixon & Lugton Ltd.,(1943) 2 All ER 763 : 170 LT 70 (CA); Welton v. Saffery,(1897) AC
299 : 66 LJ Ch. 362 : 76 LT 505 : 45 WR 508 (HL); Shiv Onkar Maheswari v. Bansidhar Jagannath, (1957) 27 Comp.
Cas. 255 (Bom.) : AIR 1956 Bom. 459 [LNIND 1955 BOM 113]: (1956) ILR Bom. 100 : 1956 Bom. LR 3. See also
68. Doraiswami Iyengar v. United India Life Assurance Co. Ltd.,AIR 1956 Mad. 316 [LNIND 1955 MAD 258]; Major
General Shanta Shamsher Jung Bahadur Rana v. Kamani Bros. P. Ltd., (1959) 29 Comp. Cas. 501 (Bom.) : AIR 1959
Bom. 201 [LNIND 1958 BOM 1].
69. Hickman v. Kent Sheep-Breeders' Association, (1915) 1 Ch. 881 : 84 LJ Ch. 688 : 113 LT 159; Rameswar v. Calcutta
Wheat and Seed Association,(1938) 42 CWN 161 (Cal.).
70. MacDougall v. Gardiner (No. 2), (1875) 1 Ch.D. 13 : 45 LJ Ch. 27 : 33 LT 521 (CA); Burland v. Earle,(1902) AC 83 :
(1900-03) All ER Rep. Ext. 1452 : 71 LJ PC 1. See also Comments under Sections 41 and 205.
71. Gulab Singh v. Punjab Zamindara Bank,AIR 1942 Lah. 47; Anglo-Austrian Printing and Publishing Union, Re, Isaac's
Case, (1892) 2 Ch. 158 : 66 LT 593 : 61 LJ Ch. 481 : 40 WR 518 : 36 SJ 427 (CA); New British Iron Co., Re, ex parte
Beckwith, (1898) 1 Ch. 324 : 67 LJ Ch. 164; Beattie v. E & F Beattie Ltd., (1938) Ch. 708 : (1938) 3 All ER 214 : 107 LJ
Ch. 333 (CA). See also Comments under Sections 255 and 432.
72. Indian Copper Corporation Ltd. v. CIT, (1960) 30 Comp. Cas. 200 (Patna) (DB).
73. Fertilizer Corporation of India Ltd. v. Workmen,AIR 1970 SC 867 [LNIND 1968 SC 340]; G. Karunakaran v. State of
Kerala, (1987) 61 Comp. Cas. 334 (Ker.). See Comments under Sections 26, 29 and 617.
75. Ram Chand and Sons Sugar Mills P. Ltd. v. Kanhayalal Bhargava, (1967) 37 Comp. Cas. 42 (SC) : AIR 1966 SC 1899
[LNIND 1966 SC 79]: (1966) 2 Comp. LJ 224 (SC). See also Comments under Sections 13, 34, 253, 255 and 291-293.
Sections 25 and 26.
77. Jon Beauforte (London) Ltd., Re, (1953) Ch. 131 : (1953) 1 All ER 634 : 2 WLR 465. The Doctrine of constructive notice
has been abolished under English Law. See detailed Comments under Section 13 and 290-293.
663 (Ex Ch.). See detailed Comments under Section 132-93.
79. Pabna Dhana-Bhandar Co. Ltd. v. Foyezuddin Mia, (1933) 3 Comp. Cas. 41 (Cal.) : (1932) 36 CWN 589 : AIR 1932
Cal. 716; Viswanath v. Holyland Cinetone Ltd.,AIR 1939 All. 739. See also Comments under Schedule I, Table A,
Regulation 13.
80. Skypark Builders and Distributors v. Kerala Police Housing and Construction Corporation Ltd., (2003) 114 Comp. Cas.
425 (Ker.) (DB).
81. Beattie v. E & F Beattie Ltd., (1938) Ch. 708 : (1938) 3 All ER 214 : 107 LJ Ch. 333 (CA); Hickman v. Kent Sheep-
Breeders' Assn., (1915) 1 Ch. 881 : 84 LJ Ch. 688 : 113 LT 159.
End of Document
Datta: Company Law
C R Datta
S. 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.
82. Malleson v. General Mineral Patents Syndicate Ltd., (1894) 3 Ch. 538 : 63 LJ Ch. 868.
83. Mackenzie & Co. Ltd., Re, (1916) 2 Ch. 450 : 85 LJ Ch. 804 : 115 LT 440.
84. Companies Code, 1963, Section 40.
25, 27, 28, 29, 108, 111A and Schedule I.
Association(1980) 121 ITR 1 [LNIND 1979 SC 459] (SC) : AIR 1980 SC 387 [LNIND 1979 SC 459]; CIT v. Andhra
Chamber of Commerce,(1981) 130 ITR 184 (SC); Thiagarajar Charities v. Addl. CIT(1997) 225 ITR 1010 (SC). See
COMMENTS
—The Notes on clauses explained this section as follows: “The section corresponds to section 27 of the existing Act
and section 21 of the English Act. For the words ‘commencement of this Act’ which refer to the commencement of
Page 2 of 3
the Act of 1913, the date on which that Act came into force, viz., the 1st day of April, 1914, has been substituted.” [
Clause 32 of the Companies Bill, 1953 (46 of 1953)].
Object of section.
—An English company limited by guarantee issued shares of no-par-value. Section 37 is aimed at preventing the
formation of such a company.82
Thus sub-section (1) provides that a company limited by guarantee having no share capital cannot allow any
outsider to participate in the divisible profits of the company registered after 1st April, 1914. This is no longer
possible also because a provision in the Memorandum or Articles of a company limited by guarantee dividing its
undertaking into shares or interest is deemed to be a provision for creation of share capital. The effect is that the
shares must be given a nominal value.
Shares of no nominal or no-par-value.—Issue of shares of no-par-value means the undertaking is divided into a
certain number of shares. Each share represents a fraction of the whole share capital. The value of each share will
fluctuate with the value of the whole undertaking. This is so because the shares will have no nominal par value. The
advantage of shares with no-par-value is that it will save the company from certain adverse effects. Sometimes
companies find that a fixed nominal capital leads to unjustified criticism of the extent of their profits which appear to
be excessive in relation to the nominal capital, but actually it is not so in comparison with the actual capital
employed. Companies find that at times they are subjected to penal taxes when they wanted to adjust the nominal
capital to a more realistic figure by making bonus issues. Further, the companies have to bear with adverse
criticism. The no-par-share has this advantage that the shareholders will get the real benefit from the prosperity of
the company. The introduction of no-par-shares will not lead to any weakening of the safeguards provided by the
Acts and the Rules about the raising of and maintaining capital. There will be a term called “stated capital” instead
of “paid up capital and share premium account”.
This will be the capital yardstick. This “stated capital” will not be reduced on redemption of redeemable preference
shares. There will be no “capital redemption reserve fund”. However, if shares of no-par-value and shares of par
value (as all present-day shares in India are) are permitted to be issued by different companies then the public and
sometimes even the judges may be misled.83
Unscrupulous company promoters may continue to mislead the public by issue of shares of par value. It is quite
likely that a company may issue irredeemable 10% Rs. 1,000 Preference Shares at a price of Rs. 1,500 repayable
on winding up a sum of Rs. 1,000 only. A layman will be tempted to buy such a preference share in preference to a
share of no-par-value without realising the implications.
In Ghana the issue of no-par-value shares has been made compulsory,84 and in the U.S.A. it is almost of general
practice.
Debentures.—This section does not prevent a company limited by guarantee from issuing debentures with the rate
of interest rising and falling with the profits of the company.
Memorandum of Association.—The Memorandum of a company limited by Guarantee shall state that the liability
of its members is limited. [ Section 13(2)]. A company limited by Guarantee should indicate the amount that a
member may be called upon to pay in case the company is wound up. [ Section 13(3)].
Articles of a company limited by Guarantee.—The Articles of a company limited by guarantee must state the
number of members with which the company is to be registered, i.e., members at the inception of the company. [
Section 27(2)].
Transfer of interest by Member.—The principles of the transfer of shares by a shareholder member may not be
applicable to a member of a company limited by Guarantee. Section 29 provides that the Articles of a guarantee
company shall be in one of such forms in Tables C or D in Schedule I as may be applicable. Section 28 provides
that the Articles of a company limited by shares may adopt all or any of the Regulations in Table A. If Tables A and
Table C are compared it becomes apparent that there are material differences between the two. Where, the High
Court disposed of the matter by merely observing that no distinction can be made in the matter of transfer of shares
or other interest between a company limited by shares and a company limited by guarantee. The Supreme Court
set aside the judgment and order passed by the High Court and remitted the matter back for deciding the appeal
afresh.85
Page 3 of 3
Income-tax.—An association only by virtue of being registered under section 25 of the Companies Act, 1956 (1 of
1956) is not exempted from income-tax. Although, in view of its objects it shall generally qualify for exemption under
section 11 read with section 2(15) of the Income-tax Act, 1961 (43 of 1961).86
82. Malleson v. General Mineral Patents Syndicate Ltd., (1894) 3 Ch. 538 : 63 LJ Ch. 868.
83. Mackenzie & Co. Ltd., Re, (1916) 2 Ch. 450 : 85 LJ Ch. 804 : 115 LT 440.
84. Companies Code, 1963, Section 40.
25, 27, 28, 29, 108, 111A and Schedule I.
Association(1980) 121 ITR 1 [LNIND 1979 SC 459] (SC) : AIR 1980 SC 387 [LNIND 1979 SC 459]; CIT v. Andhra
Chamber of Commerce,(1981) 130 ITR 184 (SC); Thiagarajar Charities v. Addl. CIT(1997) 225 ITR 1010 (SC). See
End of Document
Datta: Company Law
C R Datta
S. 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:
87[ 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.]
87. Substituted by the Companies (Amendment) Act, 1960 (65 of 1960), s. 12. For the proviso as it stood prior to its
88. Bratton Seymour Services Company Ltd. v. Oxborough,(1992) BCLC 693 (CA).
COMMENTS
English Act, 1948 : Section 22 Previous Act, 1913 : Section 20A
English Act, 1985 : Section 16 English Act, 1985 : Section 16
follows: “This clause corresponds to section 20A of the existing Act and section 22 of the English Act. In the
proviso, the words ‘a particular alteration’ have been substituted for the words ‘the alteration’ so as to bring out the
meaning clearly.” [ Clause 33 of the Companies Bill, 1953 (46 of 1953)].
follows: “It is a necessary clarification as the words ‘or otherwise to pay money to the company’ have been
construed as prohibiting any change in respect of levy of fees, subscriptions, etc., by clubs, associations, etc., by
amending the articles of association or regulations, in the same manner as the statutory restriction applies to a
contributory of share capital (para 36 of the Report).” [ Clause 12 of the Companies (Amendment) Bill, 1959 (37 of
1959)].
Page 2 of 3
The relevant paragraph of the Report of the Companies Act Amendment Committee, 1957 is reproduced below:
“This section corresponds to section 22 of the English Act and though its object is plain enough, its interpretation
has given rise to difficulties. In the case of a company limited by shares, the memorandum states the amount of the
share capital and its division into shares of a fixed amount and the liability of a member to the company is limited to
the amount payable on the share held by him. In the case of a company limited by guarantee, each member
undertakes to contribute to the assets of the company in the event of its being wound up a sum not exceeding the
amount specified in the memorandum for the purpose of meeting the debts and liabilities of the company. Upon his
guarantee, a member is liable to be placed on the list of contributories only in respect of the amount which, by the
memorandum, he has undertaken to contribute in the event of its being wound up. Under section 38, the
memorandum or articles cannot be altered in such a way as to require any member to take or subscribe for more
shares than the number held by him or to increase his liability to the company beyond the amount due on the
shares held by him. The section also provides that a memorandum or articles should not be altered so as to compel
members of a guarantee company to pay anything more than the amount which they have undertaken to pay
according to the terms of the memorandum as they stood at the time they became members. This is the object and
the purpose of the words ‘or otherwise to pay money to the company’ found at the end of the main part of the
section. It is this liability of the members of a guarantee company under the basic documents, to contribute a sum
not exceeding the amount specified in the memorandum in the event of the company being wound up, that is
referred to in the section. It would appear that the section applies to original stipulations of the kind above
mentioned and has no application to collateral obligations such as the liability for monthly or annual subscriptions
payable by the members of a club or other association at such rates as may be fixed by the articles from time to
time for the privilege of enjoying the amenities provided by the club or association. In view of the increase in the
general level of prices such recurring subscriptions have to be raised by an amendment of the articles pursuant to a
resolution of the company so as to be binding on all the members. Section 38 would have no application to such
cases of recurring subscriptions. The Bombay High Court in a recent judgement [Suit No. 135 of 1957], however,
has taken a contrary view and construing the words ‘otherwise to pay money to the company’ in their widest sense
held that a resolution of the company (a Turf-Club) amending its articles so as to raise the rates of recurring
subscriptions payable by members would not be binding on the dissentient members and that they would be
entitled to enjoy all the privileges of membership on payment of the rates of subscription current at the time when
they became members of the club. Of course, persons who became members of the company subsequent to the
amendment of the articles would be bound to pay the increased rates of subscription. It is by reason of the decision
of the Bombay High Court, an amendment of section 38 is considered desirable.” [ Report : para 36].
Member's liability cannot be increased [ Section 38].—Without a written consent the company cannot increase
the liability of a member or compel him to pay any money to the company other than that he agreed to pay. Any
alteration in the Memorandum or Articles will be void and a resolution will not be operative if the effect is the
enhancement of liability of a member without his written consent.
The written consent or writing need not be in any form. A signature on the minutes containing the resolution will be
sufficient consent.
Liability restricted to shares or guarantee.—A member of a company cannot be asked to contribute any extra
sum by implication or on the basis of extrinsic evidence or the surrounding circumstances, which means his liability
is restricted to the shares taken or the guarantee given by him.88
Exceptions [Proviso].—As per proviso to section 38 the section shall not apply in the following cases.
Member agrees in writing [Proviso (a)].—Where the member agrees in writing either before or after a particular
alteration is made to be bound by the alteration the provisions of section 38 shall not apply.
Club or Association [Proviso (b)].—A company which is a Club or Association can alter its Memorandum or
Articles of Association increasing the recurring liability or periodical subscriptions or charges of a member even
though a Member does not agree in writing or objects to such enhancement.
Reduction of Members below legal minimum [ Section 45].— Section 45 provides another exception. If at any
time the number of members of a company is reduced below legal minimum, i.e., (a) below 7 in the case of a public
company, or (b) below 2 in the case of a private company, and the company carries on business for more than 6
Page 3 of 3
months, every member of the company after those six months shall be severally liable for the debts contracted
during that time.
87. Substituted by the Companies (Amendment) Act, 1960 (65 of 1960), s. 12. For the proviso as it stood prior to its
88. Bratton Seymour Services Company Ltd. v. Oxborough,(1992) BCLC 693 (CA).
End of Document
Datta: Company Law
C R Datta
S. 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;
89[(c) * * * ]; 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 90[ five hundred rupees].
89. Omitted by the Companies (Amendment) Act, 2000 (53 of 2000), s. 10 (w.e.f. 13-12-2000). For clause (c) as it
stood prior to its omission see Annexure at the end of this Volume. The system of managing agency had already been
abolished videsection 324A of the Companies Act, 1956, as inserted by the Companies (Amendment) Act, 1969 (17 of
1969), s. 4 (w.e.f. 3-4-1970).
90. Substituted by Act 53 of 2000, s. 10, for “fifty rupees” (w.e.f. 13-12-2000).
91. H.V. Jayaram v. ICICI Ltd., (2000) 99 Comp. Cas. 341 (SC); Hanuman Prasad Gupta v. Hiralal, (1970) 40 Comp. Cas.
1058 (SC) : AIR 1971 SC 206 [LNIND 1970 SC 71]: (1970) 2 Comp. LJ 195 (SC); Karnataka Bank Ltd. v. B. Suresh,
(2001) 105 Comp. Cas. 110 (Kar.). See also Comments under Sections 53, 113, 207 and 219.
COMMENTS
follows: “This clause corresponds to section 25 of the existing Act and section 24 of the English Act. Power has
been conferred in general terms on any company to reduce any fee or charge etc. payable to it (clause 591) [
Section 636]. Hence the omission of the words ‘or such less sum as the company may prescribe’ which occur in the
Page 2 of 3
existing Act. In sub-clause (2) reference has been made to the officer of the company who is in default—compare
section 24(2) of the English Act.” [ Clause 34 of the Companies Bill, 1953 (46 of 1953)].
section as follows: “This clause seeks to omit clause (c) in sub-section (1) of section 39 of the Act relating to
managing agent, secretaries and treasurers and also seeks to enhance the fine specified in sub-section (2) of that
section from fifty rupees to five hundred rupees.” [ Clause 10 of the Companies (Second Amendment) Bill, 1999
(139 of 1999)].
Member's right to have copies of Memorandum, Articles, etc. [Sub-section (1).—On payment of Re. 1, a
member is entitled to have within 7 days from the company a copy each of the following documents:
(1) the Memorandum of Association, (2) the Articles of Association and (3) every other Agreement and Resolution
referred to in section 192, if and in so far as they have not been embodied in the memorandum or articles.
For Agreements and Resolutions see detailed Comments under Section 192.
The Memorandum and Articles should be kept up-to-date with all amendments and resolutions or orders required to
be annexed to them. [ Section 40].
Penalty [Sub-section (2)].—For failure to send to a member, on being required by him, within 7 days of request,
the copies of memorandum, articles, agreements and resolutions, specified in sub-section (1), the company and
every officer who is in default shall be punishable with a fine upto Rs. 500 for each offence.
Member's right to copies of certain other documents.—A member is also entitled to copies of certain other
documents under following sections.
Minute Book [ Section 196].—Under section 196 a member may inspect and take copies of the Minute Book of
General Meetings but not the Minute Book of Board Meetings. See detailed Comments under Section 196.
Balance Sheet [ Section 219].—A member is entitled to copies of the company's balance sheet with all its
enclosures under section 219.
Failure or defaults under sections 39(2), 219(4) and certain other sections, e.g., failure to send a Share Certificate [
Section 113(2)] and failure to pay or post a Dividend Warrant [ Section 207], etc., are punishable under respective
Sections.
Cause of action for failure to deliver documents.—The cause of action for the offences punishable under
sections 39(2), 113(2), 207 and 219(4) of the Companies Act, 1956, i.e., for failure to deliver the documents or
share certificates, etc., within the prescribed time, read with section 53 of the Act, would arise where the registered
office of the company is situated. Section 53 prescribes the mode of delivery, inter alia, by sending the document by
post and section 53(2) is the deeming provision for delivery of such letter. So, if the documents are posted within
the stipulated time, there would be compliance with the section and there would not be any offence.91
Account Books.— Section 209 provides that the books of accounts and other books and papers may be inspected
by any director and section 209A provides that these can be inspected by the Registrar and the Central
Government's representative, a member has not been given the right of inspection of these books.
Order of compromise or arrangements [ Section 391].—As per section 391(4) a copy of every order shall be
annexed to every copy of the memorandum of the company issued after the certified copy of the order has been
filed.
Secretarial Practice and Check List.— Section 39. Ensure that members were supplied with copies of
memorandum, articles, etc., within seven days of receipt of request from the members on payment of requisite fee.
Check whether any complaints had been received? If so, whether corrective action taken?
To be ensured from correspondence with the members.

Page 3 of 3
89. Omitted by the Companies (Amendment) Act, 2000 (53 of 2000), s. 10 (w.e.f. 13-12-2000). For clause (c) as it
stood prior to its omission see Annexure at the end of this Volume. The system of managing agency had already been
abolished videsection 324A of the Companies Act, 1956, as inserted by the Companies (Amendment) Act, 1969 (17 of
1969), s. 4 (w.e.f. 3-4-1970).
90. Substituted by Act 53 of 2000, s. 10, for “fifty rupees” (w.e.f. 13-12-2000).
1058 (SC) : AIR 1971 SC 206 [LNIND 1970 SC 71]: (1970) 2 Comp. LJ 195 (SC); Karnataka Bank Ltd. v. B. Suresh,
(2001) 105 Comp. Cas. 110 (Kar.). See also Comments under Sections 53, 113, 207 and 219.
End of Document
Datta: Company Law
C R Datta
S. 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, 92[***] or any resolution,
referred to in section 192, every copy of the memorandum, articles, agreement or resolution issued
after the date of the alteration shall be in accordance with the alteration.
(2) If, at any time, the company issues any copies of the memorandum, articles, resolution or agreement,
which are not in accordance with the alteration or alterations made therein before that time, the
company, and every officer of the company who is in default, shall be punishable with fine which may
extend to 93[ one hundred rupees] for each copy so issued.
92. The words, brackets, letter and figures “in the agreement referred to in clause (c) of sub-section (1) of section
39 or in any other agreement” omitted by the Companies (Amendment) Act, 2000 (53 of 2000), s. 11 (w.e.f. 13-
12-2000).
93. Substituted Act 53 of 2000, s. 11, for “ten rupees” (w.e.f. 13-12-2000).
COMMENTS
English Act, 1948 : Section 25 Previous Act, 1913 : Section 25A
Legislative History.—The Companies Act, 1956 (1 of 1956).—The Notes on clauses explained as follows: “In sub-
clause (1), reference has been made to certain resolutions and agreements which have also to be treated in the
same way as articles of the company.” [ Clause 35 of the Companies Bill, 1953 (46 of 1953)].
The Companies (Amendment) Act, 2000 (53 of 2000).—The Notes on clauses explained as follows: “This clause,
inter alia, seeks to enhance the fine specified in sub-section (2) of section 40 of the Act from ten rupees to one
hundred rupees.” [ Clause 11 of the Companies (Second Amendment) Bill, 1999 (139 of 1999)].
Corrected or altered copy to be issued [ Section 40(1)].—Corrected copy of the Memorandum, Articles,
Agreements and Resolutions as on the date of issue should be supplied to the members.
Section 39 imposes a duty on the company and its officers to supply within 7 days of demand copies of
Memorandum, Articles, Resolutions and Agreements.
Page 2 of 2
Section 40 imposes a further duty that Memorandum, Articles, Resolutions and Agreements supplied should be
corrected up to the date of despatch.
Penalty [Sub-section (2)].—For issuing at any time copies of memorandum, articles, resolutions or agreements
which are not in accordance with the alterations made therein before that time, the company and every officer who
is in default shall be punishable with fine upto Rs. 100 for each copy so issued.
See also Comments under Sections 5, 39, 621 and 621A.
Secretarial Practice and Check List.— Section 40. Ensure that the alterations were noted in all copies of
memorandum and articles issued after the date of alteration.
To be ensured from Memorandum and Articles.
92. The words, brackets, letter and figures “in the agreement referred to in clause (c) of sub-section (1) of section
39 or in any other agreement” omitted by the Companies (Amendment) Act, 2000 (53 of 2000), s. 11 (w.e.f. 13-
12-2000).
93. Substituted Act 53 of 2000, s. 11, for “ten rupees” (w.e.f. 13-12-2000).
End of Document
Datta: Company Law
C R Datta
COMPANY AND MATTERS INCIDENTAL THERETO > Membership of company
S. 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 94[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.
95[ (3) Every person holding equity share capital of company and whose name is entered as beneficial
owner in the records of the depository shall be deemed to be a member of the concerned company.]
94. Substituted by the Companies (Amendment) Act, 1960 (65 of 1960), s. 13, for “agrees”.
1. Balkrishan Gupta v. Swadeshi Polytex Ltd., (1985) 58 Comp. Cas. 563 (SC) : AIR 1985 SC 520 [LNIND 1985 SC 51].
2. Collector of Moradabad v. Equity Insurance Co. Ltd.,AIR 1948 Oudh 197; J.H. Chandler & Co. v. H.I. Philips,AIR 1926
All. 550; Babulal v. Narain Sugar and General Mills Ltd., (1958) 28 Comp. Cas. 155 (Punj.). See also Comments under
Section 432.
3. U.P. Oil Mills Co. Ltd. v. Jamna Prasad, (1933) 3 Comp. Cas. 256 (All.) : AIR 1933 All. 334; Official Liquidator v.
Suleman Bhai Kachhi,AIR 1955 MB 166 (DB). See also Comments under Schedule I, Table A, Regulation 31.
4. Lurgan's (Lord) Case Re, , (1902) 1 Ch. 707 : 71 LJ Ch. 323 : 86 LT 291. See also Comments under Sections 12 and
15.
5. Sonardih Coal Co. v. Paramanand,(1928) 26 ALJ 347 : 108 IC 451.
6. Alexander v. Automatic Telephone Co., (1900) 2 Ch. 56 : (1900-03) All ER Rep. Ext. 1755 : 69 LJ Ch. 428 : 82 LT 400
(CA). See also Comments under Sections 12 and 543.
ITR 215 [LNIND 1959 SC 34] (SC) : (1959) Supp. 2 SCR 448; R. Mathalone v. Bombay Life Assurance Co. Ltd., (1954)
24 Comp. Cas. 1 (SC) : AIR 1953 SC 385 [LNIND 1953 SC 64]: 1954 SCR 117 [LNIND 1953 SC 64]; Clariant
International Ltd. v. SEBI, (2004) 122 Comp. Cas. 112 (SC). See also Comments under Sections 2(27), 110 and
8. Vijay Kumar Narang v. Prakash Coach Builders P. Ltd., (2005) 128 Comp. Cas. 976 (CLB).
9. Balkrishan Gupta v. Swadeshi Polytex Ltd., (1985) 58 Comp. Cas. 563 (SC) : AIR 1985 SC 520 [LNIND 1985 SC 51];
Lalithamba Bai v. Harrisons Malayalam Ltd., (1988) 63 Comp. Cas. 662 (Ker.) on appeal (1997) 13 SCL 175 (Ker.)
(DB). See detailed Comments under Rights of a Member or Shareholder hereinafter. See also Comments under
Sections 87, 108, 150 and 169.
10. Kumaran Potty v. Venad Pharmaceuticals & Chemicals Ltd., (1989) 65 Comp. Cas. 246 (Ker.). See also Comments
under Sections 72, 110, 111 and 111A.
Page 2 of 39
11. Ram Kishan v. Kanwar Papers Pvt. Ltd., (1990) 69 Comp. Cas. 209 (HP). See also Comments under Sections 111 and
433.
12. Indglonal Investment and Finance Ltd. v. Rajasthan Breweries Ltd., (2001) 107 Comp. Cas. 525 (CLB). See detailed
Sections 2(27), 150, 164 and 397-399.
Comments under Minors can be Member through Guardian hereinafter.
16. H.H. Manabendra Shah v. Official Liquidator, (1977) 47 Comp. Cas. 356 (Delhi). See also Comments under Sections
69, 72, 150, 164 and 467.
17. Chloro Controls (India) P. Ltd. v. Severn Trent Water Purification Inc., (2006) 131 Comp. Cas. 501 (Bom.) (DB). See
also Comments under Sections 108, 428 and 439(4)(b).
24 Comp. Cas. 1 (SC) : AIR 1953 SC 385 [LNIND 1953 SC 64]: 1954 SCR 117 [LNIND 1953 SC 64]; Balkrishan Gupta
v. Swadeshi Polytex Ltd., (1985) 58 Comp. Cas. 563 (SC) : AIR 1985 SC 520 [LNIND 1985 SC 51]. See also
Comments under Persons agreeing in writing to become Members earlier and Blank Transfers later. See also
Comments under Sections 2(27), 87, 110, 150, 169 and Schedule I, Table A, Regulation 19.
19. L.I.C. v. Escorts Ltd., (1986) 59 Comp. Cas. 548 (SC) : AIR 1986 SC 1370 [LNIND 1985 SC 362]. See also Comments
under Rights of a Member or Shareholder in earlier paragraphs. See also Comments under Sections 2(46), 34, 108,
111, 111A, 169, 206, 397, 433 and 617.
20. Bajaj Auto Ltd. v. N.K. Firodia, (1971) 41 Comp. Cas. 1 (SC) : AIR 1971 SC 321 [LNIND 1970 SC 345]. See also
21. Killick Nixon Ltd. v. Bank of India, (1985) 57 Comp. Cas. 831 (Bom.) (DB).
22. Prafulla Kumar Rout v. Orient Engg. Works P. Ltd., (1986) 60 Comp. Cas. 65 (Orissa).
ITR 215 [LNIND 1959 SC 34] (SC) : (1959) Supp. 2 SCR 448. See also Comments under Membership by Transfer of
Shares hereinbefore. See detailed Comments under Sections 108 and 206.
See also Comments under Sections 108 and Schedule I, Table A, Regulation 19.
25. Rahul Subodh Windoors Ltd. v. A.K. Menon, (1999) 96 Comp. Cas. 597(SC). For jurisdiction of Special Court under the
Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992 (27 of 1992)see Comments under
Section 10.
26. Clariant International Ltd. v. Securities and Exchange Board of India (SEBI), (2004) 122 Comp. Cas. 112 (SC) : AIR
2004 SC 4236 [LNIND 2004 SC 852]: (2004) 8 SCC 524 [LNIND 2004 SC 852] : (2005) 4 Comp. LJ 52 (SC).
27. Nutech Agro Ltd. v. Ch. Mohan Rao, (2002) 111 Comp. Cas. 75 (AP).
28. Dinesh Kumar Jhunjhunwala v. Karur Vysya Bank Ltd., (2007) 140 Comp. Cas. 229 (Mad.).
29. James v. Buena Ventura Nitrate Grounds Syndicate Ltd., (1896) 1 Ch. 456 : (1895-99) All ER Rep. Ext. 1968 : 65 LJ
Ch. 284 : 74 LT 1 (CA). See also Comments under Section 109.
30. Smt. Kamalabai v. Vithal Prasad Co. P. Ltd., (1993) 77 Comp. Cas. 231 (Kar.); Narinder Kumar Sehgal v. Leader
Valves Ltd., (1993) 77 Comp. Cas. 393 (CLB); Kailashnarayan Bhangadia v. VST Industries Ltd., (1998) 93 Comp.
Cas. 470 (CLB). See detailed Comments under Sections 108, 109, 110 and 111.
31. Indian Chemical Products Ltd. v. State of Orissa, (1966) 36 Comp. Cas. 592 (SC) : AIR 1967 SC 253 [LNIND 1966 SC
134]: (1966) Supp. SCR 436 : (1966) 2 Comp. LJ 63 (SC); Nazamunnessa Begum v. Vidya Sagar Cotton Mills Ltd.,
(1963) 33 Comp. Cas. 36 (Cal.) : AIR 1962 Cal. 380. See also Comments under Sections 108, 109, 111 and Schedule
I, Table A, Regulations 25-28.
32. World Wide Agencies P. Ltd. v. Mrs. Margaret T. Desor, (1990) 67 Comp. Cas. 607 (SC) : AIR 1990 SC 737 [LNIND
1989 SC 628]. See also Comments under Sections 2(27), 41(2), 109, 397 and 398.
33. Narandas Manmohandas v. Indian Mfg. Co. Ltd.,AIR 1953 Bom. 433 [LNIND 1953 BOM 18]. See also Comments
under Section 270.
34. Jarnail Singh v. Bakshi Singh, (1960) 30 Comp. Cas. 192 (Punj.) : AIR 1960 Punj. 455.
Page 3 of 39
35. Exchange Travels (Holdings) Ltd. Re, , (1991) BCLC 728.

* See the Foreign Exchange Management Act, 1999 (42 of 1999) in Appendix 325.
36. L.I.C. v. Escorts Ltd., (1986) 59 Comp. Cas. 548 (SC) : AIR 1986 SC 1370 [LNIND 1985 SC 362]; Dale and Carrington
Invt. P. Ltd. v. P.K. Prathapan, (2004) 122 Comp. Cas. 161 (SC). See also Comments under Membership by Transfer
of Shares hereinbefore and Comments under Sections 2(46), 34, 111, 111A, 169 and 617.
37. Kumar Malavalli v. CRCW Search Technologies P. Ltd., (2004) 118 Comp. Cas. 618 (CLB). See also Comments under
Sections 111 and 111A.
Sections 12 and 13.
39. Barned's Banking Co. Re, Peel's Case, (1867) 2 Ch. App. 674 : 36 LJ Ch. 757; Nassau Phosphate Co. Re, , (1876) 2
Ch.D. 610 : 45 LJ Ch. 584 : 24 WR 692; Laxon & Co. (No. 2) Re, , (1892) 3 Ch. 555 : 61 LJ Ch. 667 : 67 LT 85 : 40 WR
621.
40. Dewan Singh v. Minerva Films Ltd., (1958) 28 Comp. Cas. 191 (Punj.); Dewan Singh v. Minerva Films Ltd., (1959) 29
Comp. Cas. 263 : AIR 1959 Punj. 106; R. Balaraman v. Buckingham and Carnatic Co. Ltd., (1969)1 Comp. LJ 82
(CLB). But see Palaniappa v. Pasupati Bank,AIR 1942 Mad. 470 [LNIND 1942 MAD 1]: (1942) 1 MLJ 425 [LNIND
1942 MAD 1]. See also Comments under Section 69.
42. Mohori Bibi v. Dharamadas Ghosh,(1903) ILR 30 Cal. 539 (PC) : (1903) 30 IA 114 (PC); Steinberg v. Scala (Leeds)
Ltd., (1923) 2 Ch. 452 (CA) : 92 LJ KB 944 : 129 LT 624 (CA). See also Comments under Sections 12 and 69.
43. R. Balaraman v. Buckingham and Carnatic Co. Ltd., (1969) 1 Comp. LJ 82 (CLB).
hereinbefore and under Sections 9, 111A and 153.
* See also Letter No. 8/18(41)/63-PR, dated 31-3-1964 printed after this Circular.
† In view of section 8(1) of the Hindu Minority and Guardianship Act, 1956 (32 of 1956), a guardian can agree in writing
on behalf of a minor to become a member of a company;Master Gautam R. Padival (Minor) v. Karnataka Theatres Ltd.,
(2000) 100 Comp. Cas. 124 (CLB).
45. Cork and Bandon Railway Co. v. Cazenove,(1847) 10 QB 935 : 11 Jur. 802 : 116 ER 355; Lumsden's Case , (1868)
LR 4 Ch. App. 31; Yeoland Consols Ltd. (No. 2) Re, , (1888) 58 LT 922. See detailed Comments under Section 69.
46. Capper's Case , (1868) LR 3 Ch. 458 : 16 WR 1002.; Hercules Insurance Co. Re, , (1872) LR 13 Eq. 566 : 41 LJ Ch.
580.
47. Gooch's Case , (1872) 8 Ch. App. 266. See also Comments under Section 69.
48. Symon's Case Re, (1870) 5 Ch. App. 298 : 39 LJ Ch. 461. See also Comments u/s. 536.
49. Anil Gupta v. Delhi Cloth and General Mills Co. Ltd., (1983) 54 Comp. Cas. 301 (Delhi). See also Comments under
Section 111A.
51. Amrit Banaspati Co. Ltd. In re, , (1995) 83 Comp. Cas. 789 (CLB). See also Comments under Sections 11, 12 and 150.
52. Vagliano Anthracite Collieries Ltd. Re,(1910) WN 187 : 79 LJ Ch. 769 : 103 LT 211; Sadler v. Whiteman,(1910) 1 KB
868; Glory Paper Mills Co. Re, Dunster's Case, (1894) 3 Ch. 473 : 63 LJ Ch. 885 : 71 LT 528 : 43 WR 164 : 10 TLR
669 : 38 SJ 694 (CA). See also Comments under Sections 11, 12 and 150.
53. Amrit Banaspati Co. Ltd. In re, , (1995) 83 Comp. Cas. 789 (CLB).
54. Vickers Systems International Ltd. v. Mahesh P. Keswani, (1992) 73 Comp. Cas. 317 (CLB). See also Comments
56. R. Mathalone v. Bombay Life Assurance Co. Ltd., (1954) 24 Comp. Cas. 1 (SC) : AIR 1953 SC 385 [LNIND 1953 SC
64]: 1954 SCR 117 [LNIND 1953 SC 64]. See also Comments under Sections 81, 82, 108 and 150.
57. Vasant Investment Corporation Ltd. In re, , (1982) 52 Comp. Cas. 139 (Bom.); National Steel & General Mills v. Official
Liquidator, (1990) 69 Comp. Cas. 416 (Delhi) (DB). See also Comments under Sections 100, 391 and 536.
Page 4 of 39
58. Rajdhani Grains and Jaggery Exchange Ltd. In Re , (1983) 54 Comp. Cas. 166 (Delhi). See also Comments under
Sections 391, 428, 430, 442, 467, 469 and 511.
59. J.P. Srivastava and Sons Pvt. Ltd. v. Gwalior Sugar Co. Ltd., (2004) 122 Comp. Cas. 696 (SC)See detailed Comments
60. J.P. Srivastava and Sons Pvt. Ltd. v. Gwalior Sugar Co. Ltd., (2004) 122 Comp. Cas. 696 (SC) : (2004) 7 Supreme 794
: (2004) 9 JT 507 (SC) (Mrs. Ruma Pal and Arun Kumar, JJ.).
* See the Societies Registration Act, 1860 (21 of 1860) in Appendix 333.
See detailed Comments under Membership by Transfer, Receiver, etc., in earlier paragraphs.
See fuller discussion in earlier paragraphs and Comments under Section 169.
63. All India Bank Officers' Confederation v. Dhanalakshmi Bank Ltd., (1997) 90 Comp. Cas. 225 (CLB).
64. Morgan v. Gray, (1953) Ch. 83 : (1953) 1 All ER 213 : (1953) 2 WLR 140. See also Comments under Sections 45, 69,
177 and 397.
65. Birch v. Sullivan,(1958) 1 All ER 56 : (1957) 1 WLR 1247 : (1957) 101 SJ 974. See also Comments under Sections 10
and 69.
66. South London Fish Market Co. Re, , (1888) 39 Ch.D. 324 : 60 LT 68 : 37 WR 3 (CA).
[LNIND 1954 SC 145] (SC) : (1955) 1 SCR 876 [LNIND 1954 SC 145]; Borland's Trustee v. Steel Bros. & Co. Ltd.,
(1901) 1 Ch. 279 : 70 LJ Ch. 51; Charanjit Lal Chowdhury v. UOI, (1951) 21 Comp. Cas. 33 (SC) : AIR 1951 SC 41
[LNIND 1950 SC 55]: 1950 SCR 869 [LNIND 1950 SC 55]; Shyamlal Purohit v. Jagannath Ray, (1970) 40 Comp. Cas.
138 (Cal.) (DB) : AIR 1969 Cal. 424 [LNIND 1968 CAL 198]; Purna Investment Ltd. v. Bank of India Ltd., (1984) 55
Comp. Cas. 737 (Cal.) (DB); Lalithamba Bai v. Harrisons Malayalam Ltd., (1988) 63 Comp. Cas. 662 (Ker.). See also
Comments under Sections 2(46), 11, 34 and 82.
69. L.I.C. v. Escorts Ltd., (1986) 59 Comp. Cas. 548 (SC) : AIR 1986 SC 1370 [LNIND 1985 SC 362]; Tata Engineering
and Locomotive Co. Ltd. v. State of Bihar, (1964) 34 Comp. Cas. 458 (SC) : AIR 1965 SC 40 : (1964) 6 SCR 885; New
Horizons Ltd. v. UOI, (1997) 89 Comp. Cas. 849 (SC). See detailed Comments under Section 34.
70. POW Services Ltd. v. Clare,(1995) 2 BCLC 435.
71. N. Satyaprasad Rao v. V.L.N. Sastry, (1988) 64 Comp. Cas. 492 (AP). See also Comments under Sections 2(27),
111A, 150, 397 and 398.
under Membership by Transfer of Shares and other relevant discussions in this Section and Comments under Sections
2(46), 34, 108, 111, 169, 397, 433 and 617.
See also Comments under other relevant discussions in this Section and Comments under Sections 2(27), 87, 110,
169, 408 and Schedule I, Table A, Regulation 19.
24 Comp. Cas. 1 (SC) : AIR 1953 SC 385 [LNIND 1953 SC 64]: 1954 SCR 117 [LNIND 1953 SC 64]. See detailed
Comments under Membership by Transfer and Blank Transfer in earlier paragraphs.
75. National Steel & General Mills v. Official Liquidator, (1990) 69 Comp. Cas. 416 (Delhi) (DB). See also Comments under
Sections 150, 391, 428, 446(2) and 457. See also Comments under Official Liquidator in earlier paragraphs.
76. Santosh Mani v. New Delhi Young Mens Christian Association,(1995) Corp. LA 178 (Delhi).
detailed Comments under Membership by Transmission of Shares hereinbefore. See also Comments under Sections
2(27), 10, 108 and 398.
SCR 885. See detailed Comments under Section 34.
79. Prakash Timbers P. Ltd. v. Smt. Sushma Shingla, (1997) 89 Comp. Cas. 770 (All.) (DB).
Page 5 of 39
Sections 10, 34, 153, 153B, 187C and 399.
81. Order 29, Rule 1 and Order 6, Rule 14 of the Code of Civil Procedure, 1908 (5 of 1908);Foss v. Harbottle, (1843) 2
Hare 461 : (1843) 67 ER 189; Mozley v. Alston, (1847) 1 Ph. 790 : 16 LJ Ch. 217; MacDougall v. Gardiner (No. 2),
(1875) 1 Ch.D. 13 : 45 LJ Ch. 27 : 33 LT 521 (CA). See detailed Comments hereinafter. See also Comments under
Sections 10, 10FB and 34.
82. Hindustan Petroleum Corporation Ltd. v. Sardar Chand, (1991) 71 Comp. Cas. 257 (P&H). See detailed Comments
83. John Shaw & Sons (Salford) Ltd. v. Shaw,(1935) 2 KB 113 : (1935) All ER Rep. 456 (CA); Marshall's Valve Gear Co.
Ltd. v. Manning, Wardle & Co. Ltd., (1909) 1 Ch. 267 : 78 LJ Ch. 46 : 100 LT 65; Scott v. Scott,(1943) WN 16 : (1943) 1
All ER 582.
84. Regal (Hastings) Ltd. v. Gulliver,(1942) 1 All ER 378 (HL) : (1967) 2 AC 134 n. See also Comments under Section
383A.
85. Marshall's Valve Gear Co. Ltd. v. Manning, Wardle & Co. Ltd., (1909) 1 Ch. 267 : 78 LJ Ch. 46 : 100 LT 65; Alexander
Ward & Co. Ltd. v. Samyang Navigation Co. Ltd.,(1975) 2 All ER 424 : (1975) 1 WLR 673 (HL). See also Comments
86. Mosely v. Koffyfontein Mines Ltd., (1911) 1 Ch. 73 : 80 LJ Ch. 111 : 103 LT 516 (CA); Pender v. Lushington, (1877) 6
Ch.D. 70 : 46 LJ Ch. 317 : 25 WR Dig. 64; Foster v. Foster, (1916) 1 Ch. 532 : (1916-17) All ER Rep. 856 : 85 LJ Ch.
305. See detailed Comments hereinafter and Comments under Section 10.
Services Ltd., (1992) 75 Comp. Cas. 583 (Bom.). See detailed Comments under Sections 10, 34, 291, 293, 397 and
398.
88. Danish Mercantile Co. Ltd. v. Beaumont, (1951) Ch. 680 : (1951) 1 All ER 925 (CA); Alexander Ward & Co. Ltd. v.
89. Foss v. Harbottle, (1843) 2 Hare 461 : (1843) 67 ER 189. See also Comments under Section 10—Jurisdiction of
Courts.
90. Mozley v. Alston, (1847) 1 Ph. 790 : 16 LJ Ch. 217; MacDougall v. Gardiner (No. 2), (1875) 1 Ch.D. 13 : 45 LJ Ch. 27 :
33 LT 521 (CA).
91. Edwards v. Halliwell , (1950) WN 537 : (1950) 2 All ER 1064 : 94 SJ 803 (CA).
92. Watts v. Midland Bank plc.,(1986) BCLC 15.
93. Fargo Ltd. v. Godfroy,(1986) 3 All ER 279 : (1986) 1 WLR 1134 : (1986) BCLC 370. See detailed Comments under
Hospital (Pvt.) Ltd., (1999) 97 Comp. Cas. 216 (Ker.) (DB);, (1950) WN 537 : (1950) 2 All ER 1064 : 94 SJ 803 (CA);
Cook v. Deeks,(1916) 1 AC 554 : 85 LJ PC 161 : 114 LT 636 (PC); Heyting v. Dupont,(1964) 2 All ER 273 : (1964) 1
WLR 843 : 108 SJ 277 (CA); Hodgson v. National and Local Government Officers Association,(1972) 1 All ER 15 :
(1972) 1 WLR 130. See also Comments under Sections 10, 13 and 283.
WLR 31 (CA). See detailed Comments hereinafter and Comments under Sections 10, 399 and 408.
96. Wallersteiner v. Moir (No. 2),(1975) QB 373 : (1975) 1 All ER 849 : (1975) 2 WLR 389 (CA); Nurcombe v.
Nurcombe,(1985) 1 All ER 65 : (1985) 1 WLR 370 : (1984) BCLC 557 (CA); Giles v. Rhind,(2002) 4 All ER 977. See
97. Prudential Assurance Co. Ltd. v. Newman Industries Ltd. (No. 2), (1982) Ch. 204 (CA) : (1982) 1 All ER 354 : (1982) 2
WLR 31 (CA). See also Comments under Sections 399 and 408.
1. Wallersteiner v. Moir (No. 2),(1975) QB 373 : (1975) 1 All ER 849 : (1975) 2 WLR 389 : (1975) 119 SJ 97 (CA). See
2. Smith v. Croft (No. 2),(1987) 3 All ER 909 : (1987) 3 WLR 405 : (1987) BCLC 206; Jaybird Group Ltd. v.
Greenwood,(1986) BCLC 319. See also Comments under Section 398.
4. Towers v. African Tug Co., (1904) 1 Ch. 558 : (1904) 73 LJ Ch. 395 : 90 LT 298 (CA); Nurcombe v. Nurcombe,(1985) 1
All ER 65 : (1985) 1 WLR 370 : (1984) BCLC 557 (CA). See detailed Comments under Section 399.
Page 6 of 39
5. Forrest v. Manchester, Sheffield and Lincoln Railway Co., (1861) 5 De G.F.&J 126; Robson v. Dodds,(1869) LR 8 Eq.
301; Whitwam v. Watkin,(1898) 78 LT 188.
6. Seaton v. Grant,(1867) LR 2 Ch. App. 459; Bloxam v. Metropolitan Rly. Co., (1868) 3 Ch. App. 337 : 18 LT 41 : 16 WR
490.
7. Birch v. Sullivan,(1958) 1 All ER 56 : (1957) 1 WLR 1247 : (1957) 101 SJ 974; BSN (UK) Ltd. v. Janardan Mohandas
Rajan Pillai, (1996) 86 Comp. Cas. 371 (Bom.). See detailed Comments hereinbefore and Comments under Section
8. Mosely v. Koffyfontein Mines Ltd., (1911) 1 Ch. 73 : 80 LJ Ch. 111 : 103 LT 516 (CA)affirmed in Koffyfontein Mines Ltd.
v. Mosely,(1911) AC 409 : 80 LJ Ch. 668 : 105 LT 115 (HL).
9. Section 36; Hanuman Prasad Gupta v. Hiralal, (1970) 40 Comp. Cas. 1058 (SC) : AIR 1971 SC 206 [LNIND 1970 SC
71]: (1970) 2 Comp. LJ 195 (SC); Naresh Chandra Sanyal v. Calcutta Stock Exchange Association Ltd., (1971) 41
Comp. Cas. 51 (SC) : AIR 1971 SC 422 [LNIND 1970 SC 391]; V.B. Rangaraj v. V.B. Gopalakrishnan, (1992) 73
Comp. Cas. 201 (SC) : AIR 1992 SC 453 [LNIND 1991 SC 637]; Beattie v. E & F Beattie Ltd., (1938) Ch. 708 : 3 All
ER 214 : 107 LJ Ch. 333 (CA). See detailed Comments under Section 36.
11. Dr. Satya Charan Law v. Rameshwar Prosad Bajoria, (1950) 20 Comp. Cas. 39 (FC) : AIR 1950 FC 133.
12. Mozley v. Alston, (1847) 1 Ph. 790 : 16 LJ Ch. 217.
13. Burland v. Earle,(1902) AC 83 : (1900-03) All ER Rep. Ext. 1452 : 71 LJ PC 1.
14. Edwards v. Halliwell,(1950) WN 537 : (1950) 2 All ER 1064 : 94 SJ 803 (CA).
15. Avanthi Explosives P. Ltd. v. Principal Subordinate Judge, (1987) 62 Comp. Cas. 301 (AP). See detailed Comments in
earlier paragraphs and Comments under Section 10.
WLR 31 (CA); Baillie v. Oriental Telephone and Electric Co. Ltd., (1915) 1 Ch. 503 : 84 LJ Ch. 409 : 112 LT 569 (CA).
See also Comments in earlier paragraphs and Comments under Sections 10 and 399.
17. Daniels v. Daniels, (1978) Ch. 406 : (1978) 2 All ER 89 : (1978) 2 WLR 73; Burland v. Earle,(1902) AC 83 : (1900-03)
All ER Rep. Ext. 1452 : 71 LJ PC 1. See also Comments u/s. 10.
18. Holmes v. Newcastle-upon-Tyne Freehold Abattoir Co., (1875) 1 Ch.D. 682 : 45 LJ Ch. 38 : 24 WR 505. See also
19. Hope v. International Financial Society, (1876) 4 Ch.D. 327 : 46 LJ Ch. 200 (CA).
20. MacDougall v. Jersey Imperial Hotel Co., (1864) 2 H.&M. 528; Towers v. African Tug Co., (1904) 1 Ch. 558 (CA) :
(1904-07) All ER Rep. Ext. 1583 (CA) : 73 LJ Ch. 395 : 90 LT 298 (CA). See also Comments under Sections 205 and
399.
21. Biswanath Prasad Khaitan v. New Central Jute Mills Co. Ltd., (1961) 31 Comp. Cas. 125 (Cal.) : 64 CWN 970;
Raghunandan Neotia v. Swadeshi Cloth Dealers Ltd., (1964) 34 Comp. Cas. 570 (Cal.) : AIR 1964 Cal. 347 [LNIND
1963 CAL 187]: 68 CWN 302. See also Comments under Section 10.
22. Vadilal v. Manecklal,(1925) ILR 49 Bom. 291; Menier v. Hooper's Telegraph Works, (1874) 9 Ch. App. 350 : 43 LJ Ch.
330 : 30 LT 209; Alexander v. Automatic Telephone Co., (1900) 2 Ch. 56 : (1900-03) All ER Rep. Ext. 1755 : 69 LJ Ch.
428 : 82 LT 400 (CA); Cook v. Deeks,(1916) 1 AC 554 : 85 LJ PC 161 : 114 LT 636 (PC); Spokes v. Grosvenor Hotel
Co.,(1897) 2 QB 124 : 66 LJ QB 572 : 76 LT 679 (CA).
23. Mason v. Harris, (1879) 11 Ch.D. 97 : 48 LJ Ch. 589 : 40 LT 644 : 27 WR 699 (CA).
24. Cockburn v. Newbridge, Sanitary Steam Laundry Co. & Llewellyn,(1915) 1 IR 237 (CA).
25. Atwool v. Merryweather,(1867) LR 5 Eq. 464n : 37 LJ Ch. 35.
26. Brown v. British Abrasive Wheel Co. Ltd., (1919) 1 Ch. 290 : (1918-19) All ER Rep. 308 : 88 LJ Ch. 143 : 120 LT 529.
27. Dhakeshwari Cotton Mills v. Neelkamal Chakravarti,AIR 1937 Cal. 645 : 41 CWN 1137.
28. Star Tile Works Ltd. v. N. Govindan & Co.,AIR 1959 Ker. 254.
29. Ramakishendas Dhanuka v. Satya Charan Law, (1950) 20 Comp. Cas. 133 (PC) : 77 IA 128 : AIR 1950 PC 81 [LNIND
1938 PC 61].
30. Estmanco (Kilner House) Ltd. v. Greater London Council,(1982) 1 All ER 437 : (1982) 1 WLR 2 : (1981) 125 SJ 790.
See fuller discussion in Comments under Section 399.
31. Murarka Paint and Varnish Works (P.) Ltd. v. Mohanlal Murarka, (1961) 31 Comp. Cas. 301 (Cal.) : AIR 1961 Cal. 251
[LNIND 1960 CAL 154]: 65 CWN 32; Russian Commercial and Industrial Bank v. Comptoir d'Escompte de
Page 7 of 39
Mulhouse,(1925) AC 112 : (1924) All ER Rep. 381 : 93 LJ KB 1098 (HL); Danish Mercantile Co. Ltd. v. Beaumont,
(1951) Ch. 680 : (1951) 1 All ER 925 (CA); Marshall's Valve Gear Co. Ltd. v. Manning, Wardle & Co. Ltd., (1909) 1 Ch.
267 : 78 LJ Ch. 46 : 100 LT 65; Airways Ltd. v. Bowen and Reid,(1985) BCLC 355 (CA). See also Comments
hereinbefore and under Sections 10, 13 and 293.
32. Newbiggin-by-the-Sea Gas Co. v. Armstrong, (1879) 13 Ch.D. 310 : 49 LJ Ch. 231 (CA); John Shaw & Sons (Salford)
Ltd. v. Shaw,(1935) 2 KB 113 : (1935) All ER Rep. 456 : 104 LJ KB 549 : 153 LT 245 (CA).
33. Order 1, Rule s 9 and 10 of the Code of Civil Procedure, 1908 (5 of 1908). See also Comments under Sections 10 and
34.
34. Murlidhar Chatterjee v. International Film Co. Ltd.,AIR 1943 PC 34 : 70 IA 1 (PC).
35. British Sugar Refining Co. Re, , (1857) 3 K&J 408 : 26 LJ Ch. 369 : 5 WR 379.
36. Pender v. Lushington, (1877) 6 Ch.D. 70 : 46 LJ Ch. 317 : 25 WR Dig. 64; Edwards v. Halliwell,(1950) WN 537 : (1950)
2 All ER 1064 : 94 SJ 803 (CA). See detailed Comments hereinbefore and Comments under Section 10.
37. Wood v. Odessa Waterworks Co., (1889) 42 Ch.D. 636 : 58 LJ Ch. 628 : 37 WR 733.
38. Rayfield v. Hands, (1960) Ch. 1 : (1958) 2 All ER 194 : (1958) 2 WLR 851.
39. Griffith v. Paget, (1877) 5 Ch.D. 894 : 46 LJ Ch. 493 : 25 WR 523.
40. Simpson v. Westminster Palace Hotel Co., (1860) 8 HL Cas. 712 : 2 LT 707 (HL); Hoole v. Great Western Rly. Co.,
(1867) 3 Ch. App. 262 : 17 LT 453 : 16 WR 260; Hutton v. West Cork Rly. Co., (1883) 23 Ch.D. 654 : 52 LJ Ch. 689 :
49 LT 420 (CA). See also Comments under Section 13.
41. Wall v. London and Northern Assets Corpn., (1898) 2 Ch. 469 : 67 LJ Ch. 596 (CA).
42. Henderson v. Bank of Australasia, (1890) 45 Ch.D. 330 : 59 LJ Ch. 794 (CA).
43. Sections 108-112; Smith, Knight & Co. Re, Weston's Case, (1868) 4 Ch. App. 20 : 38 LJ Ch. 49 : 19 LT 337. See
detailed Comments under Membership by Transfer in earlier paragraphs.
44. Section 38; Hole v. Garnsey,(1930) AC 472 : (1930) All ER Rep. 568 : 99 LJ Ch. 243 (HL).
45. Sections 39, 196, 219, etc. See detailed Comments under Section 39.
46. Section 113.
47. Section 176.
48. L.I.C. v. Escorts Ltd., (1986) 59 Comp. Cas. 548 (SC) : AIR 1986 SC 1370 [LNIND 1985 SC 362]; Balkrishan Gupta v.
Swadeshi Polytex Ltd., (1985) 58 Comp. Cas. 563 (SC) : AIR 1985 SC 520 [LNIND 1985 SC 51]. See detailed
Comments under Rights of a Member or Shareholder in earlier paragraphs.
51. Edwards v. Halliwell,(1950) WN 537 : (1950) 2 All ER 1064 : 94 SJ 803 (CA); Salmon v. Quin and Axtens Ltd.,(1909)
AC 442 : 78 LJ Ch. 506 : 100 LT 820 (HL).
52. Pender v. Lushington, (1877) 6 Ch.D. 70 : 46 LJ Ch. 317 : 25 WR Dig. 64.
53. Scottish Insurance Corpn. v. Wilsons and Clyde Coal Co.,(1949) AC 462 : (1949) 1 All ER 1068 : (1949) LJR 1190 : 65
TLR 354 (HL). See also Comments under Section 100.
54. Mozley v. Alston, (1847) 1 Ph. 790 : 16 LJ Ch. 217; Jhajharia Bros. v. Sholapur Spg. & Wvg. Co. Ltd.,AIR 1941 Cal.
174 : (1941) ILR 1 Cal. 30 followed in ILR (1970) 2 Cal. 147; Ferguson v. Wilson,(1866) LR 2 Ch. 77 : 36 LJ Ch. 67 : 15
LT 230. See also Comments u/s. 10.
56. ICICI Ltd. v. Parasrampuria Synthetics Ltd., (1998) 92 Comp. Cas. 238 (Delhi).
Sections 9, 10E, 10FB, 397 and 398.
58. Morel v. Hege, 130 Ga. 825 : 61 SE 487 : 14 Ann. Cas. 935.
59. Guernsey v. Cock, 120 Mass. 510.
60. Marcht v. Merchants Mortgage and Credit Co., 22 Del. Ch. 74.
Page 8 of 39
61. Manson v. Curtis, 223 NY 313 : 119 NE 559;, 115 Cali. 584.
62. Williams Fredericks Re, 187 LA 987.
63. West v. Comden, 135 US 507.
Comments under Sections 82, 108, 111 and 111A.
26, 31 and 108.
Sections 25.
69. Purushottamdass v. Registrar of Companies, (1986) 60 Comp. Cas. 154 (Bom.). See detailed Comments under
Section 560(6).
COMMENTS
follows: “This section corresponds to section 26 of the English Act, 1948 and section 30 of the existing Act.” [
section as follows: “The proposed amendment is intended to avoid the improper fastening of liability as
contributories on persons, who never applied for shares (para 38 of the Report.).” [ Clause 14 of the Companies
“It has been suggested that a specific provision should be made that minors cannot be members of a company.
Under the Contract Act a minor is incapable of contracting and membership involves a contractual relationship
between the company and the members as well as the members inter se. No further provision is necessary.
Under section 117 of the English Companies Act no notice of any trust, expressed, implied or constructive, can be
entered in the register of members or debenture holders or be receivable by the Registrar. Section 153 of our Act is
to the same effect. In a few cases, the Act has recognised the holding of shares in the names of a nominee or
nominees of the real owner [see sections 4(3), 42, 49, 226(3) and 307]. It would be risky for a company to register
transfers of shares and pay dividends to the transferees if it was obliged to take notice of equitable interests in its
share capital and it was eventually proved that the transfers were in breach of trust. A trustee of shares who is on
the register of members is personally liable to the company for any calls or other obligations attaching to the shares.
This has been the settled law for a long time. We are, therefore, unable to accept the suggestion that the name of a
minor who has inherited shares as heir or legatee should be entered in the register as the holder of the shares.
There would, however, be no objection to having the name of the certificated guardian of a minor who has inherited
the shares or the executor of a probated will, under which a legacy of shares is given to a minor, being entered in
the register and dividends being paid to him.
We are also unable to accept the suggestion that the name of a trust owning shares should be entered in the
register in order to avoid the necessity for a transfer of the shares by one trustee to a succeeding trustee. To do so
would be a contravention of section 153.
Page 9 of 39
It has been brought to our notice that in some cases, on the verge of liquidation, entries are made in the register of
members of the names of persons who never applied for shares, in order to fasten liability on these persons as
contributories. To avoid this contingency, we suggest the addition of the words ‘in writing’ after the word ‘agrees’ in
section 41(2).” [ Report : para 38].
The Depositories Act, 1996 (22 of 1996).
—The Notes on clauses explained the amendments in this section as follows: “Clause 30 provides for amendment
to certain provisions of the Companies Act, 1956 provided in the Schedule to the Bill.” [Clause 30 of the
Depositories Bill, 1996 (29 of 1996)].
For Statement of Objects and Reasons appended to the Bills see Legislative History in Comments under Section 1.
Definition of “member”.— Section 41 defines the expression “member” of a company. The following persons shall
be or shall deemed to be a member of the company (1) subscribers of the memorandum of a company on its
registration, shall be entered as members in its register of members, (2) every other person who agrees in writing to
become a member of the company and whose name is entered in its register of members, and (3) every person
holding equity share capital of company and whose name is entered as beneficial owner in the records of the
depository.
Subscribers to Memorandum as Members [ Section 41(1)].—The subscribers of the Memorandum of

Association 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. A subscriber to the memorandum is liable as
the holder of shares which he has undertaken to subscribe for.1
The test of membership is whether the name of a person appears on the register of members of the company. A
subscriber to the memorandum is not a member until his name appears on the register of members; he shall be
deemed to have agreed to become member. But it has been held that he becomes ipso facto member on the
incorporation of the company and is liable for the shares he has subscribed.2 The words “shall be deemed to have
agreed to become members of the company” mean that the subscribers of the memorandum are to be treated as
having become members by the fact of the subscription.3 A subscriber to memorandum cannot repudiate his
subscription on the ground that he was induced to sign by misrepresentation.4
A subscriber cannot plead that he subscribed to the Memorandum of Association subject to certain reservations.5
The subscribers are only bound to pay when calls are made unless otherwise agreed.6
Persons agreeing in writing to become Members [ Section 41(2)].—Every other person who 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.
A person who has agreed in writing to become a member will not be a member until his name appears on the
register of members. A person who has purchased shares in a company under a blank transfer and in whose name
the shares have not been registered in the books of the company is not a shareholder in respect of such shares. A
transferee of shares is not a member until his name is entered in the register. No right arises till such registration
takes place but on completion of the transaction and his name being entered in the register it relates back to the
time when the transfer was first made. In most cases a shareholder is a member and a member is a shareholder
and the two terms are interchangeable. But a shareholder by transfer is not a member until his name is entered in
the register of the company.7
Subscribersipso factoMember—Subsequent Allotment.—By virtue of Section 41(1) of the Companies Act,

1956, a Subscriber to the Memorandum of a Company, becomes ipso facto a Member on incorporation. In the case
of a Subscriber, no application or allotment is necessary to become a Member. For any other person to become a
Member, Section 41(2) of the Companies Act, 1956 stipulates two conditions, viz., that there is an agreement to
become a Member and that his name is entered in the Register of Members of the company. The words “agrees in
writing” have been substituted for “agrees” in Section 41(2) by the Companies (Amendment) Act, 1960 (65 of 1960)
to protect innocent persons from the demands of companies on the verge of going into liquidation, as borne out the
suggestion of the Companies Act Amendment Committee. Thus, under Section 41(2) a person must give his
consent in unequivocal terms by applying in writing for allotment of shares. This requirement, is as regards the first
allotment made after the formation of the company. In the case of subsequent allotments to persons who are
Page 10 of 39
already shareholders, the procedure prescribed in Section 41(2) does not apply. Procedure prescribed under
Section 41(2) does not apply to existing shareholders. Refusal to allot shares on this ground amounts to
oppression. Even otherwise, the requirement of Section 41(2) was satisfied in view of joint application made by the
applicants that the petitioners wanted to maintain the parity of shareholding. The company was directed to transfer
the allotted shares.8
See detailed Comments under Sections 41(1), (2), 397, 398, 402 and 403.
Two conditions to become Member cumulative.—For a person other than a subscriber to the Memorandum of
Association of a company, there are two conditions to become a Member of a company, namely, (1) that there is an
agreement in writing to become a member and (2) that his name is entered in the Register of Members of the
company. Both the conditions are cumulative and have to be satisfied to enable him to exercise the rights of a
Member. But when once a person becomes a member, he is entitled to exercise all the rights of a member until he
ceases to be a member in accordance with the provisions of the Act.9
Application for allotment in writing.—In order to become a shareholder or member, there must be an agreement
by him in writing under section 41(2) of the Act. The words “in writing” indicate, by necessary implication, that an
application for allotment of shares should be made in writing.10
Condition cannot be waived by investors.—The name of a person cannot be entered in the Register of Members
without a written agreement. The object with which the words “in writing” were introduced in section 41(2) after the
word “agrees” is more than clear from paragraph 38 of the Report of the Companies Act Amendment Committee [
see Legislative History above]. The requirement of agreement “in writing” in section 41(2) is founded upon
principles of public policy and cannot be waived by the investors. The names of persons included in the register of
members without agreement in writing would be liable to be removed.11
Rectification of Register.— Section 41 stipulates that a person, to become a member, should agree in writing.
Where there was no written application or written request or written agreement for allotment of shares to the
petitioner and other two companies. Non-compliance with provisions of law was a sufficient cause to order
rectification of register of members. Since the provisions of section 41 had not been complied with, the register was
ordered to be rectified under section 111A.12
See detailed Comments on Rectification of Register in case of Private Companies under Section 111 and Public
Companies under Section 111A.
Section 25-Company—Denial by Association to admit a Member.— Section 111 or 111A of the Companies Act,
1956 apply only to matters of transfer or transmission of shares or membership rights. Section 111(4)(a) deals with
situations wherein the name of a person is entered in the Register of Members without sufficient cause and when
the name of a person which is already on the Register of Members is omitted therefrom without sufficient cause. In
the instant case, the complaint of the petitioner was that the Association had rejected his application for
Membership and thereby refused to put his name in the Register of Members. The two conditions prescribed in
Section 41 of the Act are cumulative in nature in the sense that there should not only be an agreement in writing but
the name also should be entered in the Register of Members to be a member of a company. Merely agreeing to
become a Member of a company and on that basis to claim that the refusal of the company to enter his name in the
Register would entitle a petitioner to file a petition under Section 111 was not sustainable. Whether the refusal by
the Association was mala fide or whether the Articles giving the power to the Association to reject an application for
membership were valid, etc., are beyond the scope of Section 111. The denial of the Association to admit the
petitioner as a Member was not a ground to invoke the provisions of Section 111.13
Register of Members.—The Form of Register of Members shall be as prescribed in Appendix to the Companies
(Issue of Share Certificates) Rules, 1960.
See detailed Comments, Form and Procedure under Sections 84 and 150. See also Comments under Register of
Members not conclusive hereinafter.
Definition of Member in Section 41(2) and Section 2(27).—For the purposes of sections 397-399, i.e., petition for
relief in case of oppression and mismanagement, the definition of a member as contained in section 2(27) is
applicable and not the definition given in section 41(2). Requirement of application in writing under section 41(2) is
Page 11 of 39
directory and not mandatory. The limited purpose of amending section 41(2) by the incorporation of the words
“agrees in writing” was to protect innocent persons from the demands of companies on the verge of going into
liquidation. The underlying purpose of section 41(2) is that a person must give his consent in unequivocal terms by
applying in writing for allotment of shares. But it does not mean that the company cannot allot the shares even
when a person has not complied with the requirement of section 41(2). The allotment of shares is a matter of
contract between the parties and that contract could either be express or implied. If a person is treated as a
shareholder of the company either by entering his name in the register of members or treating him as a member by
any subsequent conduct, his right of membership cannot be questioned by the company on the ground that he has
not complied with section 41(2). If a shareholder who claims relief under sections 397 and 398 of the Act satisfies
the Company Court [the CLB (now the Tribunal)] that he is a shareholder of a company by virtue of allotment of
shares in his favour which is evidenced not only by the register of members maintained by the company but also by
the statutory returns and documents maintained and filed by the company, it is not open to the company to contend
that for the purpose of sections 397 and 398, a shareholder must comply with the condition precedent stipulated in
section 41(2) of the Act.14
Guardian representing Minor.—In a different context it has been held that the provisions of section 41(2) are
directory and not mandatory. It is not always necessary that there should be agreement in writing to become a
member. Shares can be registered in the name of a minor indicating therein the name of the Guardian representing
the minor. Articles may provide restriction as to the voting rights but that will not affect transfer of shares in the
name of the applicant.15
See detailed Comments on Position of Minor as Member hereinafter.
List of contributories in winding up.—A written application for allotment of shares is necessary before a person
can be entered as a member in the register and consequently to be placed on the list of contributories in case of
winding up.16
“Contributory”, “Holder of shares”, “Shareholder” and “Member”.—The transferee company in Amalgamation

whose name is not borne on the Register of Members cannot be treated as contributory by operation of law. A
“contributory” is defined in Section 428 of the Companies Act, 1956. The term “contributory” under Section 428
includes the holder of any shares which are fully paid-up. The Courts have held that the words, “holder of shares”,
“shareholder” and “member” are synonyms in so far as the Companies Act are concerned and the said expressions
have been interchangeably used. Merely being contributory shall not clothe the petitioner to maintain the petition for
winding up order unless the conditions in Section 439(4)(b) are met. Clause (b) of sub-section (4) of Section 439
provides that a contributory shall not be entitled to present the petition for winding up a company unless, the shares
of which he is a contributory or some of them (i) were originally allotted to him or (ii) have been held by him and
registered in his name for at least 6 months during the 18 months immediately before the commencement of the
winding up or (iii) have devolved on him through the death of a former holder. The category, “or have devolved on
him through the death of former holder” in Section 439(4)(b) is applicable only to personal representative of a
person holding shares in the company in his individual capacity. The said expression applies to devolution of rights
on the death of a natural person and has no application to a corporate entity or a juristic person. If the words “or
have devolved on him through the death of former holder” could also be applied to a company which has ceased to
exist on Amalgamation, it would be tampering with the plain language used in Section 439(4)(b) of the Act which is
not permissible.17
See detailed Comments under Sections 41, 108, 428 and 439(4)(b).
Membership by Transfer of Shares.—A person who has agreed in writing to become a member will not be a
member until his name appears on the register of members. A transferee of shares is not a member until his name
is entered in the register. No right arises till such registration takes place but on completion of the transaction and
his name being entered in the register it relates back to the time when the transfer was first made. In most cases a
shareholder is a member and a member is a shareholder and the two terms are interchangeable. But a shareholder
by transfer is not a member until his name is entered in the register of the company.18
A share is transferable but while a transfer may be effective between transferor and transferee from the date of
transfer, the transfer is truly complete and the transferee becomes a shareholder in the true and full sense of the
term, with all the rights of a shareholder, only when the transfer is registered in the company's register. A transfer
effective between the transferor and the transferee is not effective as against the company and persons without
notice of the transfer until the transfer is registered in the company's register. Until the transfer is registered in the
books of the company, the person whose name is found in the register alone is entitled to receive the dividends,
Page 12 of 39
notwithstanding that he has already parted with his interest in the shares. However, on the transfer of shares, the
transferee becomes the owner of the beneficial interest though the legal title continues with the transferor. The
relationship of trustee and “cestui que trust” is established and the transferor is bound to comply with all the
reasonable directions that the transferee may give. He also becomes a trustee of the dividends as also of the right
to vote. The right of the transferee “to get on the register” must be exercised with due diligence and the principle of
equity which makes the transferor a constructive trustee does not extend to a case where a transferee takes no
active interest “to get on the register”.19
In exercise of their absolute discretion under articles to refuse to register transfer of shares, the directors will act for
the paramount interest of the company and for the general interest of the shareholders. The directors are required
to act bona fide and not arbitrarily and not for any collateral motive.20 The transferors as constructive trustees of the
transferees may file petitions under sections 397 and 398. The transferees who hold power of attorney from the
transferors shall be competent to file a petition under sections 397 and 398.21 Where the transfer has been effected
by the company and the name of the transferee entered in the register, the transferor shall not be competent to file
a petition under sections 397 and 398 of the Act.22
Section 111Anow makes the shares of a Public Company freely transferable. Section 111 has been restricted to
Private Companies only.
Form and Procedure.—For transfer of shares an instrument in the prescribed form, duly stamped, executed by the
transferor and transferee together with share certificate or if no certificate has been issued, the letter of allotment,
should be submitted to the company. If these conditions are not fulfilled, the Board of Directors will not be
competent to register the transfer.
Blank Transfers.—Transfers of shares take place either by a fully executed document contemplated by Regulation
19 of Table A of Schedule I to the Companies Act, 1956, or by what are known as “blank transfers”. In such blank
transfers, the name of the transferor is entered, and the transfer deed signed by the transferor is handed over with
the share scrip to the transferee, who, if he so chooses, completes the transfer by entering his name and then
applying to the company to register his name in place of the previous holder of the share. The company recognises
no person except one whose name is on the register of members, upon whom alone calls for unpaid capital can be
made and to whom only the dividend declared by the company is legally payable. Of course, between the transferor
and the transferee, certain equities arise even on the execution and handing over of “a blank transfer”, and among
these equities is the right of the transferee to claim the dividend declared and paid to the transferor who is treated
as a trustee on behalf of the transferee. These equities, however, do not touch the company, and no claim by the
transferee whose name is not in the register of members can be made against the company, if the transferor retains
the money in his own hands and fails to pay it to him.23
Even where the holder of a share whose name is entered in the register of members hands over his shares with
blank transfer forms duly signed, the transferee would not be able to claim the rights of a member as against the
company concerned until his name is entered in the register of members.24
Allotment in blank form.—The shares cannot be allotted in blank form. There must be the name of a person to
whom it has been allotted. Allotment can be made to a person applying in writing. Where allotment was made in
blank to unknown persons. The order of the Special Court holding that there was no allotment of shares and
directing the company to return the money to the Custodian was justified.25
Depository deemed to be a Member [ Section 41(3)].—Sub-section (3) inserted by the Depositories Act, 1996
(22 of 1996) provides that every person holding equity share capital of company and whose name is entered as
beneficial owner in the records of the depository shall be deemed to be a member of the concerned company.
Depository [ Section 2(12A)].—Depository has the same meaning as in the Depositories Act, 1996 (22 of 1996)*. [
S. 2(12A) of the Companies Act, 1956].
Page 13 of 39
Sub-clause 9A.
Member, meaning of—Depository.—Member's holding equity share capital of the company and whose names
are entered as the beneficial owner in the Records of Depository are to be deemed to be members of the
concerned company.26
Register of Members.—Under sections 150 and 151 read with section 41(3) the company has to keep a register of
members and index if its members exceed 50. For refusing inspection, taking extracts or sending copies of register
of members under sections 163(1), (3) and (4) the company and officers in default shall be punishable under
section 163(5) of the Act.27
Member includes Beneficial Owners in the records of Depository.—The definition of “Member” under Section
41(3) of the Companies Act, 1956, includes a beneficial owner, whose name is entered in the records of the
Depository, and he shall be deemed to be a Member of the concerned company. Once the Members of the
Depository are deemed to be Members of the company, the Register of Members of the company, maintained
under Sections 151 and 152 of the Companies Act, 1956, must contain the names of the Beneficial Owners
maintained by the Depository. Section 163 of the Companies Act, 1956, mandates the company to keep the
Register and Returns for inspection. Section 152A of the Companies Act, 1956, also states that the Register and
Index of the Beneficial Owners maintained 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 the Companies Act, 1956. The appellant was a member of the respondent-Bank holding 100 equity
shares, and sought extracts of the Register of Members of the Bank which was refused by the Bank. On a petition
by the appellant before theCompany Law Boardfor a direction to issue extracts of the Register of Members, the
Bank contended that the claim of the appellant was contrary to Section 163(2) of the Companies Act, 1956,
inasmuch as the persons claiming a copy of the Register of Members should have inspected the register which was
a pre-condition for demanding extracts of the register of members. Though theCompany Law Board held that the
right to seek a copy of the register of members was available only to those members who inspected the register, it
granted the prayer of the petitioner considering his age. On appeal the appellant challenged the direction of the
Company Law Board in not including the list of Beneficial Owners of the shares of the bank in the Membership list.
Reversing the decision of the Company Law Board, the Court held that if the interpretation given by the Company
Law Boardwas to be accepted, the insertion of Section 41(3) of the Companies Act, 1956 would be rendered
meaningless. A member of the company was defined without any ambiguity in the Companies Act, 1956 and the
intention of the Legislature should not be given a narrow interpretation. It was not open for the Bank to contend that
it would maintain a List of Members, excluding the Beneficial Owners whose names were found in the records of
the Depository. The order passed by theCompany Law Boardwas contrary to Section 41(3) of the Companies Act,
1956, and in violation of Section 152A of the Companies Act, 1956.28
Deceased Member.—The word “member” includes a deceased member so long as his name is on the register of
members.29
Membership by Transmission of Shares.—In the case of transmission of shares by operation of law, e.g., death
of the member, the company must register the name of a heir or other legal representative as a member only on
application in writing as in view of section 41(2) there must be an agreement in writing to become a member.
The legal representative of a deceased member may transfer the shares by executing of transfer. The legal
representative is not a member of the company, but he can transfer the shares of the deceased. The company may,
however, ask the legal representative to show his authority to act on behalf of the deceased, such as the
Succession Certificate, Probate or Letters of Administration.30
Page 14 of 39
The decision of the directors to refuse to register transmission of shares is liable to be set aside if they acted
oppressively, capriciously, corruptly or mala fide.31
See detailed Comments under Sections 108, 109, 109A-B, 111 and 111A.
Legal Representatives.—The legal representatives of a deceased member acquire certain rights including the
right to present a petition for mismanagement and oppression. The legal representatives are entitled to file a
petition under sections 397 and 398 for relief against mismanagement or oppression even though the names of
legal representatives have not been registered in the register of members.32
Nomination of Shares.— Sections 109A and 109B, inserted by Companies (Amendment) Act, 1999 (21 of 1999)
(w.e.f. 31-10-1998), provide for nomination facility to shareholders. Every holder of shares may, at any time,
nominate, in the prescribed manner, a person to whom his shares shall vest in the event of his death. The joint-
holders may together nominate a person to whom all the rights in the shares shall vest in the event of death of all
the joint holders. Where the nominee is a minor, it shall be lawful for the holder of the shares to make the
nomination to appoint a person to become entitled to shares in the event of his death, during the minority.
Transmission of shares by Nominee.—As per Section 109B by virtue of the provisions of section 109A, nominee
upon the production of such evidence as may be required by the Board of directors and subject to the provisions of
this section, elect, either—(a) to be registered himself as holder of the share; or (b) to make such transfer of the
share as the deceased shareholder could have made.
See detailed Comments under Sections 109A and 109B.
Joint shareholders.—Joint shareholders in a public company are not a single member, each of the joint holders is
a separate member.33
Position of joint shareholders.—The position of joint shareholders in a company under various provisions of the
Act is explained below.
Joint-holders in Private Company [ S. 3(1)(iii), proviso].—For the purposes of counting maximum limit of 50
members in a private company joint-holders will be treated as a single member. See detailed Comments under
Section 3.
Where Articles of a private company contain pre-emption clause the transfer of shares to one of several joint
holders shall be permissible. Joint-holders of shares are also shareholders of the company. They are treated as one
member only for the purpose of proviso to section 3(1)(iii). The joint holders are entitled to register themselves
separately. But the directors may refuse to do so, if it contravenes the provisions of the Act and is likely to endanger
its remaining private company, i.e., it would result in increasing its total number of members beyond the maximum
limit of fifty.34
Service of Documents on joint-holders [ Section 53(4)].—A document may be served by the company on the
joint-holders of a share by serving it on the joint holder named first in the Register in respect of the share.
Share Certificate [Sch. I, Table A, Regulation 7(3)].—In respect of any 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 such holders.
See Comments under Section 113 and Schedule I, Table A, Regulation 7.
Requisitioning EGM [ Section 169(8)].—Where two or more persons hold shares or interest in a company jointly,
a requisition, or a notice calling a meeting, signed by one or some only of them shall be sufficient and have the
same force and effect as if it had been signed by all of them.
Payment of Dividend [ Section 205(5)(b)].—Dividend may be paid in case of joint shareholders to the joint
shareholder first named on the register of members, or to such person and to such address as the joint
shareholders may in writing direct.
Page 15 of 39
Nominee Joint-Member with a Company.—Where the shares are registered in the joint names of a Company and
one of its Directors, the director is a nominee of the company, he has no rights in respect of the shares and is not
entitled to attend the proceedings of the company as a shareholder. He must act with the company as a joint holder
of shares.35
Non-Resident (NRI) Shareholder.—A non-resident or a foreigner can subscribe to the memorandum and become
a member with necessary permission of the Reserve Bank of Indiaunder the Foreign Exchange Management Act,
1999 (42 of 1999).*
Where the transfer of shares is regulated by a Statute, as in the case of a transfer of shares to a Non-Resident
which is regulated by the Foreign Exchange Regulation Act, 1973 (46 of 1973) [now the FEMA, 1999*], the
permission, if any, prescribed by the statute must be obtained. The permission of the RBI could be ex post facto
and conditional. In the absence of the permission, the transfer will not clothe the transferee with the right “to get on
the register” unless and until the requisite permission is obtained. A transferee who has the right to get on the
register, where no permission is required or where permission has been obtained, may ask the company to register
the transfer and the company may not refuse to register the transfer except for a bona fide reason, neither arbitrarily
nor for any collateral purpose. The paramount consideration is the interest of the company and the general interest
of the shareholders. On the other hand, where the requisite permission under the FERA [ now the FEMA*] is not
obtained, it is open to the Indian company and, indeed, it is bound to refuse to register the transfer of shares of an
Indian company in favour of a Non-Resident. But once permission is obtained, whether before or after the purchase
of the shares, the company cannot, thereafter, refuse to register the transfer of shares. Nor is it open to the
company or any other authority or individual to take upon itself or himself, thereafter, the task of deciding whether
the permission was rightly granted by the Reserve Bank. Where under the portfolio investment scheme, any foreign
company whose shares were owned to the extent of more than 60% by persons of Indian nationality or origin could
avail of the facility irrespective of the fact whether the same group of shareholders figured in the different
companies. The Reserve Bank was not guilty of any mala fides or non-application of mind in granting permission to
the Caparo Group of companies. No mala fides could be attributed to the Union of India either.36
Register of the Members—Rectification of register.— Section 41(2) of the Companies Act, 1956, provides that
for any person to become a member of a company, two conditions must be fulfilled (a) that there is an agreement in
writing to become a member, and (b) that the name is entered in the Register of Members. There were
correspondence between the parties showing that the Non-Resident agreed in writing to invest in company and
would be issued shares of the company at mutually agreeable premium. The conditions for membership were
satisfied. But there were no record or evidence to substantiate mutual agreements between the parties or due
compliance with the guidelines issued by the Controller of Capital Issues (CCI) [now the Securities and Exchange
Board of India (SEBI)] and the Foreign Exchange Regulation Act, 1973 (46 of 1973) (the FERA) [now the Foreign
Exchange Management Act, 1999 (42 of 1999) (the FEMA)]. Therefore the allotment of shares in favour of the
petitioner was irregular and not in consonance with the relevant provisions of the Foreign Exchange Regulation Act,
1973 (the FERA) [now the Foreign Exchange Management Act, 1999 (42 of 1999) (the FEMA)] and this would be
sufficient to order rectification of the Register of Members of the Company. Rectification of name in the Register of
Members was ordered as the allotment of shares in question in favour of the petitioner was irregular and not in
consonance with the relevant statutory provisions.37
Membership of a Company.—As per section 41 of the Companies Act, 1956 only a person who agrees in writing
to become a member and whose name is entered in the Register of Members of the company shall be a member.
Who can be a Member.—The position of Minors, Company, Firm, HUF, etc., as Members of a company is as
follows.
Minor as Member.—The position of minors as subscribers and members of a company is explained below.
Minor cannot be a subscriber.—A minor cannot enter into a contract. A contract by a minor is ab initio void. The
subscriber to the Memorandum of Association of a company enters into an implied agreement to become a member
of the company by acceptance of the number of shares of the company written against his name. Since a minor
cannot enter into a contract, he cannot subscribe his name to the memorandum of association of a company. So
Page 16 of 39
where there are seven subscribers to the memorandum of which one is a minor, the Registrar of Companies may
refuse to register the company. A minor cannot be a subscriber even through his guardian.38
See alsoDepartment of Company Affairs'Circular No. 312(43)-CL-III/63, dated 30-9-1963 reproduced under
Department's view hereinafter. This circular further clarifies that a minor may hold shares in a company through his
guardian.
In English law an infant subscriber may be counted to make up essential minimum of subscribers. But, under the
Indian law if the Registrar is aware of such fact, he should refuse to register the company as a minor cannot enter
into such a contract. But, where one of the subscribers is a minor and the certificate of incorporation is issued the
company would be duly constituted, the certificate of incorporation being conclusive that the provisions of the Act
had been complied with.39
Minors can be Member through Guardian.—There is nothing in law to prevent minors from acquiring or holding
shares in a company if they are properly represented and act by lawful guardians.40 The expression “agrees in
writing” was inserted in section 41(2) to protect innocent persons from being made contributories in the event of
liquidation of a company. The provisions of section 41(2) are not mandatory but only directory. To become a
member, it is not always necessary that one should agree in writing. Assuming that in terms of section 41(2) a
minor cannot agree in writing to become a member, the settled law is that the natural guardian of a minor can enter
into contracts on behalf of the minor for the latter's benefit and in such cases, such contracts are binding on the
minor. A guardian can agree in writing on behalf of a minor to become a member of a company. It would not be a
case of a trust under section 153 of the Act because the shares would be registered in the names of the minors
themselves as represented by the guardian and the members will be the minors themselves.41See also
Department's views hereinafter.
Minor can purchase fully paid shares.—There is a difference between an agreement to become a member and
to purchase shares and an agreement of purchase and thereby becoming a member. The test is: will the minor
have any future commitment under the agreement? Where the minor will have any future commitment, the
agreement will be void. Where the minor will not have any future commitment, the agreement will be valid.
Therefore if fully paid shares are purchased by a minor or by the guardian in the name of the minor, the minor
becomes a member by such purchase and such purchase is a valid one.42
See also Department's views and Comments hereinafter.
Transfer of shares to Minor.
—Transfer of shares to a minor is good provided the company registers the transfer. A company has a right to
refuse transfer in the name of a minor where the shares are not fully paid up. In case of fully paid shares, transfer to
a minor is valid provided his guardian acts on the minor's behalf.43
The Board of directors cannot refuse to register the shares in the name of a minor acting through a guardian.
Articles may provide restriction as to the voting rights but that will not affect transfer of shares in the name of the
minor.44
Department's view.— Holding of shares by a Minor in a company.—“This Department has been advised that
the Judicial Committee of the Privy Council in the leading case Mohori Bibi v. Dharamadas Ghosh, (1903) 30 Cal.
539 held that in India a contract by a minor is ab initio void. Apart from the subscribers to the memorandum of
association of a company a person can become a member of that company only when he agrees in writing to be a
member and when, pursuant to such agreement the name of the person is entered in the register of members.
Since a minor cannot enter into a contract or agreement except through a guardian, and since in view of section
153 of the Companies Act, 1956, no notice can be taken of the fact that the guardian holds a share in trust for a
minor, it follows that his name cannot be entered in the register of members and therefore, he cannot become a
member of a company. A subscriber to the memorandum of association of a company also enters into an implied
agreement to become a member of the company by acceptance of the number of shares of the company written
against his name. Since a minor cannot enter into contract, it follows that he cannot subscribe his name to the
memorandum of association of a company. There is, however, no objection in law to the guardian of a minor
entering into a contract on behalf of a minor or a minor entering into a contract by or through his guardian. In such
an event, however, owing to the operation of section 153 of the Companies Act, the name of the minor cannot be
Page 17 of 39
entered in the register of members along with that of his guardian nor can the name of the guardian be entered in
the register of members in a manner which will show that the person concerned (the guardian) is holding the shares
in question on behalf of another person, viz., the minor.* In view of the fiduciary relationship between the guardian
and the minor as laid down in the Guardians and Wards Act, 1890 (8 of 1890)†, a guardian is responsible for his
acts and dealings to the minor in respect of the “ward” property. There is a distinction between an agreement for
sale and the sale itself. Whereas, due to the provisions of section 10 of the Indian Contract Act, 1872 (9 of 1872) a
minor is not competent to enter into any contract for the purchase of shares, there is no bar to a minor purchasing
fully paid-up shares since in the event of such purchase there will be no covenant subsequent on the part of the
minor. In view of the legal position explained above, the Government feels it desirable that in the case of shares
owned by a minor the name of the guardian and not of the minor is shown in the register of members.” [ Circular
No. 312(43)-CL-III/63, dated 30-9-1963 : Govt. of India publication, Clarifications and Circulars on Company Law,
1977 Edition, page 21].
Minor can purchase fully paid-up shares.—“In a reference from the Federation of Indian Chambers of
Commerce and Industry, New Delhi, the question relating to the holding of shares in a company by a minor was
examined in the Department and it has been decided that whereas due to the provisions of section 10 of the Indian
Contract Act, 1872 a minor is not competent to enter into any contract for the purchase of shares, there is no bar to
a minor purchasing fully paid-up shares, provided the name of the guardian and not that of the minor is entered in
the register of members.” [ Circular No. 8/18(41)/63-PR, dated 2-11-1963 : Govt. of India publication, Clarifications
and Circulars on Company Law, 1977 Edition, page 23].
Membership of a company—Whether a minor can be a member.—“Registrars should not raise any objection to
the allotment or registration of transfer/transmission of shares to a minor and the entry of the name of a minor in the
register of members or in the return of allotment or in any other return.” [ Letter No. 8/18(41)/63-PR, dated 31-3-
1964 : Government of India publication, Clarifications and Circulars on Company Law, 1977 Edition, page 23].
Repudiation of contract with Minor.—Where a transfer in the name of a minor has been registered in ignorance
of the minority the company may repudiate the registration and retain the name of the transferor in the register of
members. The company may refuse to recognise a minor. But if it has once accepted a minor as a member, it
cannot repudiate the contract except on grounds of misrepresentation or fraud. Similarly, a minor may repudiate
any transfer of shares in his name. He may repudiate a contract to take shares at any time during his minority and
within a reasonable time on attaining majority. But not later than winding up.45 A minor who is a member of the
company can exercise full powers of membership.46
A transferor to a minor remains liable for all future calls on the shares so long they are held by the minor. But a
transfer by the minor to another adult person will relieve the first transferor from liability to pay the call money.47
Where the minor's name was placed on the register in ignorance of his minority, the official liquidator could refuse
to accept him as a shareholder although after coming of age he was willing to confirm the transfer.48
Transfer of Minor's shares.—Where transfer of shares of a minor was registered under the guardianship of the
father. Shares were transferred by the father during the minority. The minor after attaining majority challenged the
transfer and asked for rectification of the share register. No relief could be granted unless fraud against the
company was alleged and proved and the application was within the time. The limitation will start from the date of
the transfer and not the date of knowledge.49
Minor as Nominee [ Section 109A(4)].—A minor can be nominated by a holder of shares or debentures and in
that event the name and address of the guardian shall be given by the holder. Where nominee is a minor,
shareholders or debenture holders may nominate any person to become entitled to shares or debentures of the
company, in the event of his death, during the minority.
See detailed Comments, Form and Procedure under Section 109A.
Company as Member.—A company may be a member of another company it being a juristic person. See also
Subject to section 42 of the Companies Act, 1956, a company or a body corporate may become a member. A
company which holds shares in another company does not lose its right to exercise its voting rights in respect of the
Page 18 of 39
shares merely because the management of the industrial units belonging to it is taken over by an order of the
Central Government under section 18AA(l)(a) of the Industries (Development and Regulation) Act, 1951 (65 of
1951).50
See also Comments under Section 42—Membership of holding company.
Firm cannot be a Member.—A partnership firm being only the collective name of the partners cannot be registered
as a member of a company. The partners individually or jointly may become members of a company.
A Partnership Firm is not a legal entity or a “person” as contemplated under section 41 of the Companies Act, 1956
and it cannot become a member of a company.51 A partnership in its firm name cannot be a member of a company.
The partners may, however, be registered as joint-holders of shares.52
Department's view.— A partnership firm cannot be a member of a company.—“A firm, not being a person
cannot be registered as a member of a company except where the company is licenced under section 25 of the
Companies Act, 1956. Companies which have firms registered as shareholders should be advised to take steps to
rectify the position within a specified time. In case the irregularity persists, despite a warning, necessary action can
be taken under section 150(2) of the Companies Act, 1956.” [ Circular No. 4/72, dated 9-3-1972 : Govt. of India
Where, a company formed in 1940 allotted shares to firms as per then prevailing practice. In pursuance of above
Circular 4/72, the company took steps to rectify the position and have the shares transferred in the names of
partners of firms. But, it was unable to trace the individuals behind several firms. The Registrar filed complaint
under section 150 on the basis of Circular. The company filed a petition under section 111(4), praying for
rectification of the register of members by deleting the names of firms and transferring the shares in trust. The CLB
ordered to transfer all the impugned shares to a trust and directed the Department to withdraw the complaint.53
HUF can be a Member throughKarta.—There is no legal bar on a Hindu undivided family investing its monies in
shares and securities and the Companies Act does not prohibit membership of Hindu undivided family. A
Hindu undivided family means persons constituting the family and all such persons are owners of HUF property
. The karta is one of the coparceners. Under section 153 of the Companies Act, 1956, a company cannot take
notice of any trust on its register of members. In the case of a Hindu undivided family, if the shares are held in the
name of the karta of the HUF it cannot be equated with trust property held by a trustee. In respect of shares held by
a minor, it has been held in a number of cases that there is nothing objectionable if the shares are registered in the
name of the minor represented by his guardian. Similar is the position in the case of a Hindu undivided family and
the shares can be registered in the name of the karta of the Hindu undivided family.54
Receiver cannot be a Member.—Receiver normally cannot be a member because the shares do not vest in him. A
receiver appointed under Order XL of the Code of Civil Procedure, 1908 (5 of 1908), only holds the property
committed to his control under the order of the court but the property does not vest in him. The privileges of a
member can be exercised by only that person whose name is entered in the register of members. A receiver whose
name is not entered in the register of members cannot exercise any of those rights unless in a proceeding to which
the company concerned is a party and an order is made therein. Whatever may be the other powers of a receiver
dealing with the property which is in custodia legis while in his custody, he is not to be construed as either an
assignee or beneficial owner of such property. Even assuming that an entry has been made in the register of
charges maintained in accordance with section 137 of the Companies Act, 1956 of the appointment of receiver, in
respect of the shares of the shareholder, it would not have the effect of taking away the right of the shareholder to
exercise the right to vote in respect of those shares. Mere appointment of a receiver in respect of certain shares of
a company without more cannot, therefore, deprive the holder of the shares whose name is entered in the register
of members of the company the right to vote at the meetings of the company or to issue a notice under section 169
of the Companies Act, 1956.55
A receiver appointed by a court in respect of certain shares which had not been duly entered in the register of
members as belonging to him could not acquire certain newly issued shares which could be obtained by the
members of the company.56
Page 19 of 39
Official Liquidator.—Official Liquidator normally cannot be a member because the shares do not vest in him.
Under section 41(2) every other person who 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. Hence, every person who has agreed to
be a member and whose name appears in the register of members is a member. Handing over of the share
certificate to the official liquidator does not amount to a surrender of shares to the company. A company which is
being wound up can be taken out of the winding up. Section 391 in terms applies to a company which is being
wound up, and the section provides that in the case of a company which is being wound up, an application under
section 391 can be made by a liquidator also, in addition to a creditor or a member of the company. Therefore,
section 391 would apply to a company which is being wound up. An arrangement under section 391 would cover an
arrangement to take such a company out of the winding up.57
“Member” and “Contributory”.—The terms “contributory” and “member” are not interchangeable. By virtue of
section 428 of the Act every member would become a contributory. The converse, however, is not true. Though a
member even of fully paid up shares would become a contributory. On his death his legal representatives, by virtue
of section 430, would be regarded as contributories. The legal representatives, however, would not be regarded as
members unless and until their names are put in the register of members. After the passing of the winding up order
the register of members would come into the custody of the official liquidator. The names entered in the register of
members are not erased therefrom. In fact under section 467 of the Act the Court [ now the Tribunal] has been
given the power, while settling the list of contributories, to rectify the register of members. This obviously means that
even after the winding up order has been passed the register of members continues to exist. If this be so, any
person whose name is entered in the register of members shall by virtue of section 41, be regarded as a member
and would still be a member of the company, notwithstanding the winding up order having been passed. Under
different provisions of the Act a reference is made to members even though a winding up order has been passed
such as sections 469(2) and 511. Such a member has a right to file an application under section 391 for the revival
of wound up company.58
President or Governor as Member.—As regards subscription of the Memorandum of Association or membership

by the Central Government or the State Government, this will be done or registered only in the name of the
President of India or the Governor of the State concerned.
Department's view.— Government Company.—“The shares in a Government company can be held in the name
of the President of India or the Governor of the State concerned.” [Extracts from File No. 15/32/65-IGC, dated 30-9-
1966].
“Under Article 299 of the Constitution of India, all contracts are required to be in the name of the President or the
Governor as the case may be and under Article 300 of the Constitution all suits by or against the Union/State
Governments are required to be filed in the name of the President or the Governor as the case may be.” [Extracts
from File No. 25851/67 : Government of India publication, Clarifications and Circulars on Company Law, 1977
Edition, page 23].
Administrator-General.—The Administrator-General constituted under the Administrators-General Act, 1963 (45 of

1963) is a corporation sole and can be a member of the company. See Department's view hereinafter.
Corporation sole.—A
‘corporation sole’ is a corporation constituted in a single person who in the right of some office or function has
corporate status. It has the same characteristics of perpetual succession and separation of rights and duties of the
corporate body from those of the corporator as all corporations possess.
See Department's view under Public office below.
Public office.—A public office cannot be a member of a company unless it is a Corporation sole such as
Administrator-General.
Department's view.— Public office—Collector not a Corporation sole cannot become member.—“There is no
provision in the Companies Act, 1956 that the shares in a company may be held in the name of a public office.
Page 20 of 39
Section 41(2) provides how a “person” (other than a subscriber of the memorandum) becomes a member. The
Collector of Central Excise or the Secretary, to the Government of India, as such, is not a legal entity. Shares
cannot, therefore, be held in the name of such office. Similar observations apply to the holder of any other public
office which is not a corporation sole constituted by statute [e.g., the Administrator-General constituted a
corporation sole by the Administrators-General Act, 1963 (45 of 1963)]. Hence shares in a company cannot be
registered in the name of a public office which is not a corporation sole as understood in law.
The question raised is whether the Collector of a District is entitled to hold shares of a Company incorporated under
the Companies Act. A ‘member’ has been defined in section 41 of the Companies Act. According to that section, the
subscribers to the Memorandum of Association of a company and other persons who agree in writing to become a
member shall be deemed to be members of the Company. The answer to the question raised will, therefore,
depend on whether the Collector of a District is ‘a person’ within the meaning of the Companies Act. The term
‘person’ has been held to include among others a ‘corporation sole’. The Collector of a District can only be entitled
to be a shareholder as a corporation sole in case it is held that his office constitutes a corporation sole. A
‘corporation sole’ is a corporation constituted in a single person who in the right of some office or function has
corporate status. The object of a corporation sole is to make it possible to distinguish the holder of an office or
function in his official and in his private capacity. By this fiction of law, it is possible to attach rights and duties to the
holder, for the time being, of the office or functions to convey real or personal property to him in his official capacity,
and to sue him and for him to bring an action in his official name and style. In short, a ‘corporation sole’ has the
same characteristics of perpetual succession and separation of rights and duties of the corporate body from those
of the corporator as all corporations possess.
Illustrations of corporation sole in existence in the modern law are the sovereign, an archbishop, a minister or officer
of the Crown who is given the status usually by statutes (see Palmer's Company Law—21st Edition).
The Collector of a District is a civil servant of the Union/State. Under Article 299 of the Constitution of India, all
contracts are required to be in the name of the President or the Governor as the case may be and under Article 300
all suits by or against the Union/State Governments are required to be filed in the name of the President or the
Governor as the case may be. A Collector has no power under the Constitution either to enter into contracts or to
sue or to be sued in his capacity as a collector. Therefore, the Collector cannot be said to be a Corporation sole.
In the circumstances, he is not competent to hold shares in a limited company incorporated under the Companies
Act, as the Collector.” [Extracts from File No. 25851/67 : Government of India publication, Clarifications and
Trust as Member.—Trustee can be registered as member in respect of the shares held by him as trustee. The
shares should thus be held in the name of the Trustees.
See detailed Comments under Section 153. See also Department's views under Societies as Member hereinafter.
Duties of Trustees.—Although as a rule, trustees must execute their duties of their office jointly, this general
principle is subject to the following exceptions when one trustee may act for all (1) where the trust deed allows the
trust to be executed by one or more or by majority of trustees; (2) where there is express sanction or approval of the
act by the co-trustees; (3) where the delegation of power is necessary; (4) where the beneficiaries competent to
contract consent to the delegation; (5) where the delegation to a co-trustee is in the regular course of the business;
(6) where the co-trustee merely gives effect to a decision taken by the trustees jointly. Where the co-trustees
authorised a trustee to file a petition for oppression and mismanagement under sections 397 and 398. The
resolution of the trust and affidavit of co-trustee authorising the petitioner to file petition was substantial compliance
and the petition was maintainable. The owner of beneficial interest is not a member of a company. The devolution
on beneficiary does not affect locus standi to file the petition. The consent of supporting members must be obtained
prior to filing the petition. The filing of documents, i.e., consent letters with the petition is directory. Substantial
compliance with the regulation would be sufficient.59
Oppression and Mismanagement— Locus standi— Shares held by Trust.—A petition was made alleging
oppression and mismanagement. An equitable or beneficial interest in the shares does not make the owner of
interest a Member of company. Even while assuming that in terms of the Trust Deed, the shares had devolved on
the Beneficiary of the Trust this fact does not mean that the beneficiaries were the actual owners of the shares
already registered with the Company. Unless the beneficiaries are entered in the Register of Members of the
Company, they would not be competent to file a petition under Sections 397 and 398 of the Act. Where shares were
Page 21 of 39
held by Trust, an Affidavit of Co-Trustees authorising the Trustee to file petition was substantial compliance. Petition
was held to be maintainable.60
Societies can be a Member.—Societies registered under the Societies Registration Act, 1860 (21 of 1860) can be
a member.*
Department's view.— Society registered under the Societies Registration Act, 1860 not a “body corporate”
but it can be a Member.—“The question whether a society registered under the Societies Registration Act, 1860
(21 of 1860), should be considered a ‘body corporate’ within the meaning of section 2(7) of the Companies Act has
been carefully examined further in consultation with the Ministry of Law as well as in the light of recent judgment of
the Supreme Court in the Board of Trustees v. State of DelhiAIR 1962 SC 458 [LNIND 1961 SC 337]. It has been
decided that such a society should not be deemed to be a ‘body corporate’ within the meaning of the aforesaid
provisions of the Companies Act, although such a society can be treated as a ‘person’ having separate legal entity
apart from the members constituting it and thereby capable of becoming a member of a company under section
41(2) of the Companies Act, 1956. The view expressed in para 1 of the Department's Letter No. 8/2(7)/56-PR,
dated 30-11-1957 to Registrar of Companies, New Delhi, copy endorsed to all other field officers, may accordingly
be deemed to have been modified to the extent stated above.
Consistent with the revised interpretation of the expression ‘body corporate’ as stated above, the said expression
occurring in various provisions of the Companies Act, 1956, viz., sections 43A, 293, 303, 372, etc., should be so
interpreted as to exclude a society registered under the Societies Registration Act, 1860 (21 of 1860) from the
scope of the expression ‘body corporate’.” [ Circular Letter No. 8/48/2(7)/63-PR, dated 24-11-1962 : Government of
India publication, Clarifications and Circulars on Company Law, 1977 Edition, pages 1 and 23].
Charitable Trust or Society as member.—“In 1957 the Department of Company Affairs was advised that the
shares in a company, being the property of a charitable trust, can be held in the names of the trustees simpliciter
without describing them as trustees and that if the trustees constitute a society registered under the Societies
Registration Act, 1860, the shares can be held in the name of such a society. [ vide U.O. No. 21031/57-Adv.(F),
dated 27-5-1957]. This view was reiterated in the subsequent opinion bearing U.O. No. 21767/62-Adv.(F), dated 16-
7-1962, wherein it was pointed out that though a society registered under the Societies Registration Act, 1860 is not
a body corporate, it is a “person” capable of being a member of company under section 41(2) of the Companies
Act, 1956. Such a society is also a ‘person’ as contemplated by section 153B of the Companies Act, 1956.”
[Extracts from File No. 1(43)-PT/67 : Govt. of India publication, Clarifications and Circulars on Company Law, 1977
Edition, page 23].
Trust/Society.—“Goenka Charitable Trust although the name indicates so, is not a Trust created under the Indian
Trusts Act, 1882 (2 of 1882). It is a Society registered under the Societies Registration Act, 1860 (21 of 1860) and
as such the provisions of the Societies Registration Act shall apply. Under section 5 of the said Act [the Societies
Registration Act, 1860], moveable and immoveable properties of a Society so registered, if not vested in Trustees,
shall be deemed to be vested for the time being in the governing body of such Society. Under the rules and
regulations of the Goenka Charities Trust, the management of the Society is vested in a Board of Trustees. The
Board of Trustees, therefore, is the governing body of the Society for the purposes of section 5 of the said Act
irrespective of whether the trust properties have been transferred to the Trustees as required by section 6 of the
Indian Trusts Act. The shares should therefore be held in the name of the Trustees.
Section 108 of the Companies Act, 1956inter alia requires that a company shall not register transfer of shares
unless a proper instrument of transfer duly stamped and executed by and on behalf of the transferor and transferee
has been delivered to the company. As the section under which the application has been made requires that the
transfer should be on a proper instrument duly stamped and executed, the CLB [ now the Tribunal] is, competent to
advise the applicant that the share should be held in the name of the Trustees and not the Trust and that the
application should be amended accordingly.” [Extracts from File No. 32/108/68-CL-V : Govt. of India publication,
Attachment of Shares.—An order of attachment of shares cannot have the effect of depriving the holder of the
shares of his title to the shares. The attachment of the shares does not deprive the holder of his rights in respect of
those shares, e.g., right to vote at the meeting or to issue a requisition under section 169 of the Act.61
Pledgee of shares not a Member.—The pledgee or pawnee of shares cannot be treated as the holder of the
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shares pledged in his favour. The holder of shares continues to be the member of shares pledged and can exercise
his rights in respect of the shares pledged, e.g., under section 169 of the Act.62
Trade Union can be a Member.—A Trade Union registered under the Trade Unions Act, 1926 (16 of 1926) is a
body corporate with attendant requirements like perpetuity, succession, etc. A registered Trade Union is thus a
“person”. It can be registered as a Member of a company and can hold shares in its own name. Section 14 of the
Trade Unions Act, 1926 providing that the provisions of the Companies Act are not applicable to a Trade Union
relates to the registration and functioning of the trade union and not its rights to invoke the provisions of the
Companies Act, 1956 to enforce its rights arising therefrom.63
Co-operative Societies as Member.—A co-operative society which is a registered society/company having

separate legal entity can be a member of a company.
As explained in sections 2(7) and 2(10) a co-operative society is not a corporation, it is not a company under the
Companies Act.
Producer Companies [ Sections 581A-581ZT].—A new Part IXA consisting of Chapters I to XII [ Sections 581A to
581ZT] has been inserted in the Companies Act, 1956 by the Companies (Amendment) Act, 2002 (1 of 2003)
(w.e.f. 6-2-2003) facilitating formation of co-operative business as companies and to convert existing business into
companies on a voluntary basis. The aim is to provide statutory and regulatory framework that creates the potential
for producer-owned enterprises to compete with other enterprises on a competitive footing with more liberal
regulatory framework and certain privileges of a private company.
Insolvent's position.—An insolvent does not cease to be a member and so long his name appears on the register
of members, he is entitled to vote64 and can make use of provisions like sections 397, 398 in exercise of his right as
a minority shareholder.65 He cannot, however, become a member so long he remains an undischarged insolvent.
Member and Shareholder.—The member and shareholder are interchangeable terms in a company limited by
shares. Members may be ordinary shareholders or preference shareholders. The word “member” may be used in
relation to all kinds of companies. The word “shareholder” is used only in relation to companies having a share
capital. A member of an unlimited company and of a company limited by guarantee without any share capital is not
a shareholder.66
See also Comments hereinafter and under Sections 25, 81 and 85.
Shareholders not owners of company's property.—The position of members is not analogous to that of partners
inter se and the shareholders cannot claim that the properties of the company are their property. A company is a
separate entity from its shareholders. It is the company which is the owner of its assets, including immovable
properties, and not the shareholders. The shareholder in such a company has a right to share in the profits, by way
of receipt of dividends. He has a right, in an appropriate case, to apply for the winding up of the company and to
take part in the distribution of the surplus assets after payment of the debts and liabilities, which must of course be
done in accordance with the articles of association and the provisions of the Act. As long as the company continues
to exist, that is to say, before its dissolution, no shareholder can be said to have any interest in the properties and
assets of the company, either legal or equitable. When the company is being wound up, their only right is to
participate in the surplus assets after the payment of debts and liabilities.67
While it is firmly established ever since Salomon v. Salomon & Co. Ltd. 68 was decided that a company has an
independent and legal personality distinct from the individuals who are its members, it has since been held that the
corporate veil may be lifted, the corporate personality may be ignored and the individual members recognised for
who they are in certain exceptional circumstances.69
Admission to Membership as per Articles.—Admission to membership must be in accordance with the Articles of
Association of the Company. Persons admitted to membership without following procedure contained in the Articles
are not legally members of the company and cannot constitute a valid General Meeting.70
Register of members not conclusive.— Section 150(1) casts a duty upon every company to maintain a register of
its members and enter the relevant particulars more fully set out in clauses (a) to (d) thereof. Failure to comply with
the mandatory duty enacted under section 150(1) is made punishable under section 150(2). Once a person's name
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is entered as a member of the company in its register of members, it is not open to question his membership.
However, the converse does not necessarily flow. Even if the prescribed register of the company does not
incorporate the names of all its shareholders as members of the company, the particulars so entered in the register
are not conclusive. The shareholders of the company, in whose favour share certificates are issued, can exercise
rights as members of the company notwithstanding the omission of their membership as found in the prescribed
register.71
Rights of a Member or Shareholder.—A shareholder has an undoubted interest in a company, an interest which
is represented by his shareholding. Share is movable property, with all the attributes of such property. The rights of
a shareholder are (i) to elect directors and thus to participate in the management through them; (ii) to vote on
resolutions at meetings of the company; (iii) to enjoy the profits of the company in the shape of dividends; (iv) to
apply to the Court [the CLB (now the Tribunal)] for relief in the case of oppression; (v) to apply to the Court [the CLB
(now the Tribunal)] for relief in the case of mismanagement; (vi) to apply to the Court [ now the Tribunal] for winding
up of the company; and (vii) to share in the surplus on winding up. A share is transferable but while a transfer may
be effective between transferor and transferee from the date of transfer, the transfer is truly complete and the
transferee becomes a shareholder in the true and full sense of the term, with all the rights of a shareholder, only
when the transfer is registered in the company's register.72
The expressions “a member”, “a shareholder” or “holder of a share” used in the Companies Act, 1956 are
synonymous to indicate the person who is recognised by a company as the owner for its purposes. When once a
person becomes a member, he is entitled to exercise all the rights of a member until he ceases to be a member in
accordance with the provisions of the Act. A person ceases to be a member by transferring his share to another
person, by transmission of his share by operation of law, by forfeiture of share, by death, or by any other reason
known to law. A person who is a shareholder of a company has many rights under the Act. Some of them are: (i)
the right to vote at all meetings [ Section 87], (ii) the right to requisition an extraordinary general meeting of the
company or to be a joint requisitionist [ Section 169], (iii) the right to receive notice of a general meeting [ Section
172], (iv) the right to appoint proxy and inspect proxy registers [ Section 176], (v) in the case of a body corporate
which is a member, the right to appoint a representative to attend a general meeting on its behalf [ Section 187],
and (vi) the right to require the company to circulate his resolutions [ Section 188]. The privileges of a member can
be exercised by only that person whose name is entered in the register of members. The required number of
members to requisition a meeting under section 169 is needed at the time of deposit of the requisition with the
company. After such requisition any of the requisitionists may cease to be a member by transfer of shares or
otherwise or may withdraw but that will not invalidate the requisition. The right to requisition or vote at a meeting by
a shareholder is not affected by pledge or attachment of his shares or by appointment of a Receiver over the
shares. Such rights are not affected by taking over of management under the IDR Act of the shareholder
company.73
In most cases a shareholder is a member and a member is a shareholder and the two terms are interchangeable.
But a shareholder by transfer is not a member until his name is entered in the register of the company.74
So long as the name of the member continues to be on the register of members and until he ceases to be a
member in accordance with the provisions of the Act, he continues to be a member. Even a bankrupt is held to be a
member of the company so long as his name is on the register. Even after the company is wound up, the name of
the member does not stand erased from the register of members and he does not cease to be a member. A
member can therefore make the application under section 391 of the Act even if the company is being wound up.75
A person who has applied for shares but has not been allotted any shares and his name has not been entered in
the Register of Members is not a member and cannot exercise any right or make any application to the Court [the
CLB (now the Tribunal)] in relation to the management of the affairs of the company.76
Legal representatives.—The legal representatives of a deceased shareholder or member acquire certain rights
including the right to present and continue a suit or petition for oppression and mismanagement.77
Suit by Company—The company is a separate legal entity having perpetual succession. It can sue and be sued
exclusively for its own purpose.78
See detailed Comments under Sections 10, 10E, 10FB and 34.
National Company Law Tribunal [ Sections 10FB-10FP].—On constitution of the Tribunal (NCLT) under Section
10FB of the Companies Act, 1956 inserted by the Companies (Second Amendment) Act, 2002 (11 of 2003) (w.e.f.
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date to be notified), the jurisdiction, powers and functions hitherto exercised by various bodies, viz., the Company
Law Board (CLB), or High Courts as Company Court, or the BIFR or the AAIFR have been consolidated and
entrusted to the Tribunal (NCLT).
Appeal from the orders of the Tribunal, except consent orders, lies to the Appellate Tribunal (NCLAT) [ Section
10FQ]. Civil Court will not to have Jurisdiction in matters conferred on Tribunal (NCLT) [ Section 10GB]. Any person
aggrieved by any decision or order of the Appellate Tribunal may file an appeal to the Supreme Court on any
question of law arising out of such decision or order. [ Section 10GF].
Appropriate Forum.—The matters which are not within the jurisdiction of the CLB [ now the Tribunal (NCLT)], are
decided by the High Court or the District Court as provided under section 10 and other provisions of the Companies
Act, 1956. The residue may go to ordinary Civil Court or some other competent authority.79
See detailed Comments under Sections 10, 10E, 10F, 10FA and 10FB-10GF.
Actions by Members against company.—A member as defined under Section 41 of the Companies Act, 1956
can maintain an action against the company,—(i) to enforce a personal right, e.g., the right to vote at or to attend a
meeting; (ii) a representative action under Order 1, Rule 8 of the Civil Procedure Code, 1908 (5 of 1908) on behalf
of himself and other shareholders. Such action can be maintained if the same is a derivative action. In such a
derivative action a shareholder can seek reliefs in favour of the company. Such action, therefore, is not to enforce a
personal right of the shareholder. Under the Indian company law, only a person who is on the register of members
of the company is a member/shareholder of the company. The Court would not lift the veil of incorporation at the
instance of a person having no right of relief against the company or whose name does not appear in the register of
members of the company to enable him to show his beneficial interest in the company through a chain of
intercorporate investments. Where the shares in the Indian company were held by subsidiary of a foreign company,
the suit by foreign company and its nominee on the Board of the Indian company was not maintainable. Neither of
them was a person on the register of members of the company. Therefore, derivative action by them was not
maintainable. The doctrine of the lifting of a corporate veil cannot be applied to a plaintiff who is not a shareholder
of a company but claims that if the veil of the corporate personality of the plaintiff is lifted, the real holder will
emerge. The corporate veil is lifted when in defence proceedings, such as for the evasion of tax, an entity relies on
its corporate personality as a shield to cover its wrong doings. The plaintiff therefore could not attain locus standi to
maintain the suit by asking the Court to lift not only its own corporate veil but also the corporate veil of the
subsidiaries. Further, the claim as to beneficial holding would also be contrary to the Benami Transactions
(Prohibition) Act, 1988 (45 of 1988).80
Jurisdiction.—The jurisdiction conferred on the High Court as a Company Court [ Section 10] or the CLB [ Section
10E] now the Tribunal (NCLT) [ Section 10FB] read with various sections conferring powers is in respect of
Corporate Rights and not Individual Rights of a Member. The Company Court or the CLB [ now the Tribunal] has no
jurisdiction in such cases and the same can be tried in a Civil Court.
See detailed Comments under Sections 10, 10E, 10FA, 10FB and 10GB.
Actions by Minority Shareholders.—Actions by minority shareholders, viz., Derivative or Representative action,

constitutes exception to the Rule of internal management in Foss v. Harbottle . Actions by the Company, Rule of
Internal Management in Foss v. Harbottle , Exceptions to the rule, Shareholders' Corporate Membership Rights and
Personal rights, viz., Derivative or Representative actions and Suits by a Member are explained below.
Actions by the Company.—For wrongs or injuries done to the company, the action should be brought by the
company. The company should be the plaintiff and the wrong-doers should be made the defendants. The plaint in
such a suit by the company may be signed by the secretary, director or other principal officer able to depose to the
facts. Such plaint may also be signed by a person authorised by the company to sign on its behalf.81
legal proceedings.82 Shareholders in general meeting cannot forbid the exercise by the Board of this power by
ordinary resolution.83 A Board of directors containing majority of errant directors is not likely to initiate litigation
against themselves but such litigation may be initiated by a new Board.84 The shareholders may by ordinary
resolution in general meeting bring litigation in the name of the company where the directors are alleged to be
wrong-doers.85
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A minority shareholder may bring an action against miscreant directors where his personal or individual right is
infringed. Such action may be a derivative or representative action where the plaintiff and other shareholders, or a
class of them, have common interest.86See detailed Comments hereinafter.
Authority to file suit.
—Where the plaintiff in a suit is a corporation, there has to be (1) proper authority by Resolution of the Board of
Directors, or (2) a Power of Attorney authorising institution of the suit on behalf of the corporation, or (3) power
conferred by the Articles of Association of a corporation. The authority to institute a suit is distinct from and in
addition to what is contemplated by Order 29 of the Code of Civil Procedure, 1908 (5 of 1908), which deals only
with signing of plaints and verification of pleadings by certain persons mentioned in that provision. Where the
Articles of the company conferred authority on the Managing Director and the joint managing director alone to
institute suits on behalf of the company. A suit filed by a whole-time director was not maintainable.87
An action brought without proper authority may be ratified. Where the company had no directors, two individuals
brought an action on the company's behalf to recover debts without any authority, it was held that the liquidator
could ratify the action.88
Rule of Internal Management inFoss v. Harbottle .—In Foss v. Harbottle it has been laid down that prima facie
every action must be brought in the name of the company to remedy a wrong done to it.89
In Mozley v. Alston it has been laid down that to redress a wrong done to the company or to recover property of the
company or to enforce the rights of the company the suit should be filed by the company in its own name as the
plaintiff. The name of the company as plaintiff can be used if the majority directors so decide or if the company at a
general meeting so resolves. The court will not ordinarily intervene in the case of an internal irregularity if the matter
is one which the company can ratify or condone by its own internal procedure, e.g., rectify it by ordinary
resolution.90
The rule in Foss v. Harbottle is: First, the proper plaintiff in an action in respect of a wrong alleged to be done to a
company or association is prima facie the company or the association itself. Secondly, where the alleged wrong is a
transaction which might be made binding on the company or association and on all its members by a simple
majority of the members, no individual member of the company is allowed to maintain an action in respect of that
matter.91
Locus standi.—The issue of locus standi is governed by the rule in Foss v. Harbottle . Thus, prima facie, where a
wrong is done to the company, the derivative action should not be available and the individual shareholder should
ask either the Board of directors or the general meeting to commence litigation in the company's name. Derivative
action was not allowed against alleged wrongdoing receiver since such action could be brought by the Board of
directors or general meeting.92
Action by Liquidator.—Derivative action was not allowed against alleged director/shareholder of a deadlocked
company in liquidation since the Liquidator could commence action in the company's name.93
Exceptions to the rule inFoss v. Harbottle .—Every suit for redress of individual wrongs cannot be considered as
merely concerned with matters of internal management. The rule of internal management as stated in Foss v.
Harbottle does not apply to : (1) an act which is ultra vires the company or illegal; or (2) an act which constitutes a
fraud against the minority and the wrongdoers are themselves in control of the company; or (3) a resolution which
requires a qualified majority but has been passed by a simple majority. The rule does not apply because the
majority cannot sanction those acts. A resolution which is ultra vires or illegal or is a fraud on the minority or is not
bona fide or for the benefit of the company as a whole or is intended to discriminate between the majority
shareholders and the minority shareholders is illegal and can be questioned by a separate action in a Civil Court.
The reason for this is that if the minority were denied that right, their grievance could never reach the Court because
the wrongdoers themselves being in control would not allow the company to take any action. (4) The rule is not rigid
and exception will be made where the justice of the case demands it. (5) The rule against interference by Court with
internal management of company is not applicable to cases of infringement of individual membership rights as
distinct from corporate membership rights. Unless there is an exclusion of the jurisdiction of the Civil Court by words
express or implied, a suit would be maintainable, and there is no such exclusion in respect of individual rights. A
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Director of a company can maintain a suit in a Civil Court challenging the validity of resolutions passed by its Board
of directors to the effect that he had been disqualified from being a Director.94
See also Comments under Section 10—Jurisdiction of Courts, e.g., Civil Courts when may exercise Jurisdiction: (1)
Where no special remedy is provided in the Companies Act, 1956, (2) Where act complained of is a fraud on the
minority, (3) Where act complained of is illegal or ultra vires the company, (4) Ordinary Resolution passed instead
of Special Resolution, (5) Where justice demands, e.g., misfeasance, and (6) Violation of individual membership
rights.
Derivative action.—This term describes an action brought by a shareholder on behalf of a company to redress a
wrong done to the company. It is the company which has the right to the action and the shareholder derives his
right of action from the company and hence his right is a derivative right.95
A procedure devised to enabling a Court to do justice to a company controlled by miscreant directors or

shareholders is called a derivative action, which is normally permissible with the leave of the Court.96
Representative actions.—Such action is the minority shareholder's sword to the majority shareholders' two
shields, legal entity and majority rule. The minority shareholder can only get a wrong done to the company, and
unremedied by the management, redressed by persuading the majority shareholders to his point of view or enlisting
their express or implied support in removing the directors. He brings the action for self and all other members
aggrieved by the wrongful act of the company and obtains leave under Order 1, Rule 8 of the Civil Procedure Code,
1908 if necessary. This process is difficult, if not impossible, to achieve the purpose. An action before the court
involves enormous expense which is not worthwhile in most of the cases where a minority shareholder intends to
have his grievances redressed. For example, it is reported that four senior counsels with seven juniors appeared in
the courts for about eighty days involving an expenditure of not less than Rs. 80,00,000 in the Prudential (No. 1)
and (No. 2) cases.97 In view of this a simpler and cheaper procedure is to be evolved to redress the grievances of
minority shareholders in addition to Section 408 of the Companies Act, 1956.
Indemnity of costs from company to Member.—Since the decision of the Court of Appeal that an indemnity of
costs and expenses for derivative action from the company will be made to the member if the derivative action is in
the company's interest, the expenses facing a member or shareholder who contemplates bringing a derivative
action have been reduced. Though, the rules which govern the circumstances in which a derivative action will be
available to a member remain strict.1 An order in a minority shareholders action directing the company to indemnify
the plaintiffs as to costs should not normally be made ex parte and that the company should be joined as a party to
such an application. The company would be at liberty to place all the evidence at its disposal in determining as to
whether an order as regards costs should be made. The Court would consider whether an independent Board of
directors would, in the circumstances, have authorised an action on behalf of the company2 and the action is for the
benefit of the members or shareholders.3
Doctrine of clean hands.—The derivative action is subject to the doctrine of clean hands. Since the derivative
action is discretionary, the court will not permit a member to bring it unless he comes with clean hands. The court is
entitled to look at the conduct of the plaintiff to satisfy itself that the plaintiff is a proper person to bring the action. A
member who has acquiesced, participated or knowingly benefited from the wrong done to the company, the court
would not permit it.4
Where the plaintiff was regarded as the puppet of outsiders whose interests were opposed to those of the company,
the court did not permit derivative action.5 The action of a member who purchased the shares for the very purpose
of remedying the wrong being perpetrated on the company is not tainted with disability. The plaintiff need not have
been the member at the time when the wrong was done to the company.6 But he must be a registered member at
the time when he brings the action.7 The requirement of clean hands does not apply to the personal action by the
member.8
Shareholders' Rights in two capacities.—A person by becoming a Member of a company has certain rights
which can be divided into (1) “Membership Rights” or “Corporate Membership Rights” and (2) Personal Rights.
(1) Corporate Membership Rights.—A person by becoming a member of a company enters into a contract with
the company as also with all other shareholders of the company. Under this binding contract a shareholder or
member agrees to accept inter alia the decisions of majority members provided such decisions are bona fide and
according to the Articles of Association of the company and the Law. The rights which can be altered by such
majority decisions are called “Membership Rights” or “Corporate Membership Rights”.9
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(2) Personal or Individual Rights.—A shareholder or member by virtue of the contract as also of law acquires
certain other rights as well. These are his personal rights or individual rights and cannot be modified or altered
without his consent.
The decisions explaining and enunciating these rights are given below.
(1) Action for breach of Corporate Membership Rights—Class rights or Membership rights.—When a
membership right is infringed, an action can be brought by a member as a representative of the class of
shareholders who are aggrieved. In such an action the plaintiff represents himself and other shareholders excepting
the wrong-doers. If charges are against the directors and particular members in such a suit they should be made
defendants. In such actions the company may be made a defendant. In Foss v. Harbottle 10 it is implied that where
the matter complained of is one that cannot be rectified, because the persons against whom relief is sought control
the company, the shareholders complaining are permitted to bring an action in their own names on behalf of
shareholders other than the offending majority. This principle has been practically followed in Satya Charan v.
Rameshwar .11
In Mozley v. Alston it has been laid down that such an action can be brought to restrain the company or its directors
from doing an act or acting upon a resolution which is illegal or ultra vires the company. Such action against the
wrong-doers and the company would lie if the act complained of is unfair or oppressive. In some exceptional cases
where justice cannot be done without allowing such an action to be brought, the Court would allow such a
representative suit being filed.12
In Burland v. Earle 13 and Edwards v. Halliwell 14 the same principle has been laid down that where the persons
against whom relief is sought themselves hold and control the majority of the shares and will not permit an action to
be brought in the name of the company, a member may bring an action for himself and on behalf of other members
against wrong-doers of the company.15
Where the persons against whom relief is sought hold and control the majority of the shares or are able to
manipulate their position to ensure that the majority will not permit a claim to be brought, the shareholders
complaining may bring an action in their own names and on behalf of others.16 Such action will be maintainable
when the acts complained of are of a fraudulent character or amount to breach of duty by directors and majority
shareholders to the detriment of the company and benefit of the directors even though no fraud is alleged.17
Suit by a Member.—A suit by a member for himself and on behalf of other members against the wrong-doers of
the company was held to be maintainable where there were illegal return of capital,18 or purchase of shares,19 or in
a case where dividend was paid out of capital,20 or for a year other than for which the annual general meeting was
held,21 majority members wanted to benefit themselves at the cost of the minority,22 vendors holding majority shares
in the company made a fraudulent sale to the company,23 company refused to ask a director to refund illegal gains
made by him,24 majority members obtained control by wrongful acts,25 articles altered to expropriate the rights of
minority,26 resolution claimed to have been passed but in fact not passed,27 proxy fraudulently shut out,28 where
proper resolution not passed,29 and where fraud was committed on the minority or the majority power was abused.30
Civil Suit.—Civil Courts may exercise Jurisdiction: (1) Where no special remedy is provided in the Companies Act,
1956, (2) Where act complained of is a fraud on the minority, (3) Where act complained of is illegal or ultra vires the
company, (4) Ordinary Resolution passed instead of Special Resolution, (5) Where justice demands, e.g.,
misfeasance and (6) Violation of individual membership rights.
Wrongful use of company's name as plaintiff.—Where a shareholder brings an action using the name of the
company as the plaintiff or one of the plaintiffs but neither the directors nor the majority shareholders come forward
to support such an action, the action will not fail but the court will strike name of company as a plaintiff. Where a
company has been joined as a plaintiff without proper authority an application may be made to strike out the name
of the company. An objection as to the user of the name of the company by the plaintiff cannot be raised as a
defence but should be on a motion to stay the action. The judge should deal with the application as a preliminary
matter and not allow the action to proceed without determining the application. The normal practice upon a motion
to strike out the company's name is for the court to adjourn, whilst ordering that a meeting of the shareholders be
held to see if the company supports the litigation. If it does not, the motion will succeed and the solicitor who
commenced the proceedings without authority of the company will be personally liable for the defendants' costs.
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When there was no conclusive evidence showing that the plaintiff was not authorised to institute the suit. The
Articles conferred sufficient powers on the plaintiff to maintain the suit. Accordingly, no general meeting could be
held to deprive the directors of their powers under the Articles.31
In such a case where the company is improperly impleaded as a plaintiff, the court at its discretion may direct the
solicitor on record to pay costs of the company or order that the costs may come out of the company's assets.32
The mere wrongful addition of the company as plaintiff is merely an irregularity for which the suit will not fail and the
court may order that the name of the company improperly joined as plaintiff be struck out and the company may be
added as a defendant.33 The court should not insist upon a rigid pleading.34
Inherent Powers.—The Court [the CLBnow the Tribunal] has inherent powers to give such directions or pass such
orders as may be necessary for the ends of justice or to prevent abuse of the process of the court.
See detailed Comments under Sections 10, 10E and 10FB.
(2) Enforcement of Personal rights of a Member.—A shareholder or member is entitled to take action in his
individual name for infringement of his individual or personal rights. The decisions illustrating this are given below.
(a) Contractual rights.—A member by virtue of the contract with the company and other members is entitled :
to have his name on the register of members,35 to vote at the meeting of members,36 to receive dividends
when declared,37 to exercise the rights conferred by the articles, such as pre-emption rights,38 and return of
capital on winding up or on reduction of share capital of the company.39
(b) Contractual or otherwise.—As a member he has certain other rights which may or may not arise out of
contract. In exercise of such rights he is entitled : to bring an action to restrain the company from doing an
ultra vires act,40 to attend and take part in the proceedings of meetings of the company,41 and to move
amendments.42
(c) Statutory rights.—Under the provisions of the Companies Act a member is entitled: to transfer his
shares,43 not to have his financial obligations increased,44 to inspect documents and registers of the
company and have copy of certain documents,45 to have share certificates,46 to appoint proxies,47 and
many other rights.48
Apart from these Memorandum and Articles of company may confer some further rights on a member. A Member is
entitled to see that the company does not take away his individual rights by wrongfully passing a resolution or
altering the memorandum or articles or doing an act contrary to the provisions of the Companies Act.
A member is entitled to see that the company complies with the provisions of the relevant Acts, does not commit
offence or illegal acts and conducts its business in accordance with the provisions of the Act, the Memorandum and
Articles of Association. A member is entitled to restrain a person who is improperly acting as a director; he may
restrain a company from holding a meeting of which no proper notice has been given; and if meeting has been held
to ask for a declaration that the resolutions passed at the meeting are nullity because of some irregularity or fraud
such as the wrongful refusal by the chairman to put the resolution to a poll. However, a member is not entitled to
take action in his individual name if the infringement of the right is a corporate membership right.
Civil Courts when may exercise Jurisdiction.—Civil Courts may exercise Jurisdiction: (1) Where no special
remedy is provided in the Companies Act, 1956, (2) Where act complained of is a fraud on the minority, (3) Where
act complained of is illegal or ultra vires the company, (4) Ordinary Resolution passed instead of Special
Resolution, (5) Where justice demands, e.g., misfeasance, and (6) Violation of individual membership rights.
Civil court not to have jurisdiction [ Section 10GB].—As per section 10GB, after the constitution of the National
Company Law Tribunal (NCLT) and the Appellate Tribunal under Sections 10FB and 10FR of the Companies Act,
1956, as inserted by the Companies (Second Amendment) Act, 2002 (11 of 2003) (w.e.f. date to be notified), no
civil court shall have jurisdiction to entertain any suit or proceeding in respect of any matter which the Tribunal
(NCLT) or the Appellate Tribunal is empowered to determine by or under this Act or any other law and no injunction
shall be granted by any court or other authority in respect of any action taken or to be taken in pursuance of any
power conferred by or under this Act or any other law.
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Individual and Corporate Rights not mutually exclusive.—Where the same transaction infringes both individual
and corporate membership rights, one composite action can be brought.50 The individual membership rights include
the maintenance of his rights and privileges appertaining to that status. He can insist on the strict observance of the
provisions of the memorandum and articles which cannot be waived by a majority of shareholders. A shareholder
has, however, no individual membership right to have the annual accounts of the company amended.51 His
individual membership rights enable him that his vote should be recorded.52
Where an act of the company such as reduction of capital requires confirmation or sanction of the Court [ now the
Tribunal (NCLT)], in the exercise of his individual membership right a shareholder is entitled to be heard in the
proceeding in order to oppose the reduction.53
Practice and Procedure.—A shareholder or member may sue in his own name if his individual or personal rights
are infringed. In such an action the wrong-doer and the company should be made defendants.54
The dividing line between personal and corporate rights is very thin and the court will probably be inclined to treat a
right as a “personal right” only if he has a “special interest” distinct from the general interest which other members
have in the company complying with the terms and conditions of the Act, the Memorandum and the Articles of
Association. As the dividing line between a member's corporate right and individual right is very hard to draw, a
member may sue as plaintiff “for self and all other members of the named company except those who are
defendants” and making the company and known wrong-doers by name defendants to the suit.
See detailed Comments under Actions by Company, Derivative or Representative actions and Wrongful use of
company's name as plaintiff hereinbefore.
Rule inFoss v. Harbottle not to be applied mechanically.—Fraud, manipulation, stratagem, device, breach of
fiduciary duties and negligence are well-established exceptions to the principle of Foss v. Harbottle However, a
mechanical and automatic application of Foss v. Harbottle 55 rule to Indian situations, Indian conditions and Indian
corporate realities would be improper and misleading. The principle, in the countries of its origin, owes its genesis to
the established factual foundation of shareholder power and majority shareholder power centring around private
individual enterprises and involving a large number of small shareholders, is vastly different from the ground
realities in our country. Here the modern Indian corporate entity is not the multiple contribution of small individual
investors but a predominantly and indeed overwhelmingly State-supported funding structure at all stages by
receiving substantial funding up to 80 per cent. or more from financial institutions which are entirely State controlled
or represent substantial State interest and, thus, their shareholding may be small but it is these financial institutions
which provide entire funds for the continuous existence and corporate activities. If we apply mechanically the Foss
v. Harbottle rule, it would amount to giving weightage to that majority of the shareholding having notionally holding
more percentage of shares and the financial institutions which may own a small percentage of shares though
having contributed 80 per cent. or more in terms of the finances to such companies. It is these financial institutions
which have really provided the finance for the company's existence and, therefore, to exclude them or to render
them voiceless on an application of the principles of Foss v. Harbottle , would be unjust and impracticable.
Therefore, the principle of Foss v. Harbottle , cannot be applied mechanically without taking into consideration the
ground realities of the corporate sector in India.56
See detailed Comments under Section 10—Jurisdiction of Court.
Arbitration.—The right to file a petition for relief in cases of oppression and mismanagement under sections 397
and 398 of the Companies Act, 1956, arising out of commercial relationship between a shareholder and the
company, is “action” which can be relegated to the arbitration under sections 8 and 45 of the Arbitration and
Conciliation Act, 1996 (26 of 1996).57
Page 30 of 39
Restrictions on voting rights of Members.—The powers that shareholders or members enjoy cannot be
exercised against the interest of the company, against the public interest or public policy or fraudulently or to take
undue advantage of the position of being the majority or controlling shareholders. In some American cases
agreements among shareholders have been annulled on some or other of the grounds mentioned. Shareholders
cannot by agreements change the voting powers in respect of their shares except following the procedure as laid
down by law. An agreement between two groups of shareholders prior to incorporation that one group holding one-
half of the shares would nominate 3 out of 5 Directors was held void as being against public policy.58 Agreements
which seek to induce the voter to concur in a decision affecting the rights of others, to obtain advantages for himself
or for some other person such as securing employment as an officer for a salary are void.59 Purchase of proxy is
against public policy and use of votes purchased may be restrained.60
Agreement among the shareholders to vote as a unit for the election of directors to gain control of the management
may be valid depending upon the purpose, effect and tendency.61 However, contracts by non-shareholders to
influence directors of a company to elect a person to an executive position of the company is valid but not a
contract by shareholders to elect dummy directors who will maintain a certain person in the employment of the
company.62 Similarly an agreement to restrict the exercise of discretionary powers of the directors is contrary to
public policy and as such void.63
Expulsion of Member.—It cannot be denied that there are some members who by creating various kinds of trouble
for the management of the company try to wrest undue advantage for themselves. The company should evolve
suitable methods to deal with this black-mailing type of members but not by way of expulsion. Even if Articles
authorise the directors to expel a member under certain circumstances such powers must be exercised bona fide
and in the general interest of the company. So far as the property right is concerned the company should arrange
that the expelled member gets appropriate price for his shares. The principle involved may be found by analogy
from the Supreme Court decision.64
A power to expel a member upon terms to get rid of a member as shareholder is a power that might be resorted in
the Articles of Association. The amendment of the Articles to provide for compulsory transfer of the shares against
the wishes of some of the existing members of the company was held permissible. The Articles of Association of
company are in the nature of a contract. The rights and liabilities of the members of a company are regulated by the
Articles of Association. A person on becoming the member of the company agrees to be bound by such a contract.
Alteration of the Articles of Association is permitted under section 31. Section 31(2) declares that the alteration so
made shall be as valid as if originally contained in the Articles of Association subject, of course, to the provisions of
the Companies Act.65
Department's view.— Expulsion of Member.—“A case has come to the notice of the Central Government where
a public limited company amended its Articles of Association by including a clause by a special resolution passed at
the Extraordinary General Meeting of the company empowering the Board of directors of the company to expel a
member in a case where the Board is prima facie of the view that activities or conduct of the member is detrimental
to the interests of the company or that by reason of his continuance as a member, it would be prejudicial to the
future of the company. The question whether such an amendment of the Articles of Association of a company is
valid has been under consideration of the Department. After considering the scheme of the Companies Act, the
Department is of the view that amendment of Articles of Association of a company providing for expulsion of a
member by the management is opposed to the fundamental principles of the companies' jurisprudence and is ultra
vires of the company. Such a provision is repugnant to the various provisions in the Companies Act pertaining to
the rights of a member in a public limited company and cuts across the scheme of the Act as it has the effect of
rendering nugatory the very powers of the Central Government under Section 111 [the CLBnow the Tribunal
(NCLT) under Section 111 and new Section 111A which now makes the shares of a Public Company freely
transferable] of the Companies Act, 1956 and the powers of the Court [now the Tribunal (NCLT)] under Sections
107 and 395 of the Act and is, therefore, void by the operation of the provisions of Section 9 of the Companies Act,
1956. The Articles of Association is a contract between the company and its members setting out the rights of
members inter se under the contract and expulsion of a member is not only a violation of this contract but it is also
opposed to the principles of natural justice. Moreover, under Section 23 of the Indian Contract Act, 1872 (9 of
1872), any agreement which is contrary to any law or opposed to public policy would be deemed to be unlawful and
void. The Supreme Court in the case of Bajaj Auto Ltd. v. N.K. Firodia, (1971) 41 Comp. Cas. 1 (SC) : AIR 1971 SC
321 [LNIND 1970 SC 345] has laid down the law as to the conditions on the basis of which directors could refuse a
person to be admitted as a member of the company. The principles laid down by the Supreme Court in this case,
even though pertain to the refusal of a company to the admission of a person as a member of the company, are
applicable even with greater force to a case of expulsion of an existing member. As under Article 141 of the
Page 31 of 39
Constitution of India the law declared by the Supreme Court is binding on all courts within the territory of India, any
provision pertaining to the expulsion of member by the management of a company which is against the law as laid
down by the Supreme Court will be illegal and ultra vires. In the light of the aforesaid position, it is clarified that
assumption by the Board of directors of a company of any power to expel a member by amending its Articles of
Association is illegal and void.” [ Circular No. 32/75, dated 1-11-1975 : Govt. of India publication, Clarifications and
Comments on Circular.—The Department's view does not give due weight to the contractual aspect of the Articles
of Association. If the right of expulsion of a member has been obtained in accordance with the procedure laid down
by law and agreement, it can only be set aside by the court on proof of mala fide exercise of power by the majority
shareholders or the Board of directors. The Department has not taken into account the factual aspect of the matter,
namely, there are people owning very small number of shares in large number of companies, who attend general
meetings only to wrest undue advantage for themselves. The Department's circular will encourage such dishonest
shareholders and hamper the proper and smooth management of the affairs of many companies unless they
accede to the unreasonable demands of such members. Undoubtedly the company has power to expel a member
in appropriate situation for the paramount interest of the company, of course, on arranging payment of adequate
price for the shares held by such a member. If any allegation of collusion or mala fide is made, let the Court, the
Central Government or the Company Law Board [ now the Tribunal] decide about this and give appropriate relief. In
Bajaj Auto Ltd.'s case the Supreme Court by implication has approved that the directors could refuse registration of
transfer of shares on just and proper consideration, acting bona fide, in the paramount interest of the company and
general interest of the shareholders as fair and sensible men. A member is liable to be expelled if these tests are
satisfied. If there is no corrupt motive for such expulsion, it cannot be assailed. A member has his individual and
corporate rights but these rights are to be exercised bona fide, as a sensible person and not for oblique or collateral
purposes or for obtaining extra benefits from the resources of the company which no other shareholder gets. A
shareholder is not entitled to any benefits except those which are equally available to other shareholders similarly
situated.
Members Rights—Articles of Guarantee Company—Expulsion.— Section 29 of the Companies Act, 1956 does
not prevent a company from including any additional matters in its Articles in so far as they are not inconsistent with
the provisions contained in the Form in any of the Tables including Table ‘C’, ‘D’ or ‘E’ to the Companies Act, 1956
adopted by the company. A company limited by Guarantee maintained that the Articles also provided for matters
other than those indicated in Table ‘C’ not inconsistent with the Act. The Articles relating to a Stock Exchange
confer powers for disciplining Members including expulsion of Members incurring disqualification. Such a provision
is not contrary to the provisions of the Companies Act, 1956 and can be enforced. In case of a company limited by
Guarantee a provision in the Articles for expulsion of a Member was not inconsistent with the requirements or
provisions of the Companies Act 1956. None of the Articles in Table ‘C’ or Section 29, proviso of the Companies
Act, 1956 prohibits the suspension or expulsion of any Member and a Stock Exchange company can be formed as
a normal company and registered as such under the Companies Act, 1956 and when so registered the Stock
Exchange is subject not only to the provisions of Companies Act, 1956 but also to the Regulatory framework of the
Securities Contracts (Regulations) Act, 1956. The Government of India in a letter to all Stock Exchanges has
expressed its opinion that it is not permissible for a Member of Stock Exchange to become a Managing Director of a
company or Partner in a Firm carrying on any other business.66
Articles of Club—Voting rights only to Club Members—Stand Members not given voting rights cannot
challenge Articles or seek winding up.—Where the Race Club was having different categories of Members.
Articles of the Club gave voting rights only to the Club Members. Stand Members were not given voting rights.
Single judge admitted the winding up petition on just and equitable ground under Section 433(f) of the Companies
Act, 1956. On appeal, the Division Bench held that Stand Members were not entitled to challenge the Articles or
seek to have company wound up. Judicial discretion must be exercised in admitting winding up petition. No prima
facie ground for winding up was made out. The winding up petition was dismissed. An order of admission of winding
up petition has serious Civil consequences and would have to be followed by an Advertisement and therefore an
appeal under Section 483 of the Companies Act, 1956 [now Sections 10FB to 10GF] would lie. Winding up under
just and equitable clause is the remedy of last resort.67
See also Comments under Sections 433(f), 10FB-10GF and 483.
Shares of Public Companies freely transferable [ Section 111A].— Section 111Anow makes the shares of
Public Companies freely transferable and registration can be refused only for “sufficient cause”, on grounds
specified and subject to restrictions in Section 111A. Rectification of register on transfer can be allowed only on the
Page 32 of 39
grounds specified in Section 111A. Section 111, which earlier applied to both Private as well as Public Companies,
now applies only to Private Companies.
See detailed Comments under Sections 82, 111 and 111A.
Section 25-Company.—The Supreme Court decision in Bajaj Auto Ltd. v. N.K. Firodia, (1971) 41 Comp. Cas. 1
(SC) : AIR 1971 SC 321 [LNIND 1970 SC 345] regarding expulsion of a shareholder of a public limited company
and Circular No. 32 of 1975 dealing with expulsion of a shareholder of a public limited company is not applicable to
Clubs, Associations, etc., incorporated under section 25 of the Act. Where the Articles of Association of the Madras
Cricket Club conferred power on the club to suspend a member for a limited period. The Article was approved by
the Regional Director. Held, the wisdom or otherwise of the bye-law of a private club is not a matter for
consideration in a writ petition under Article 226 of the Constitution of India.68
Rights of members of defunct company.—Any member of the company may apply within 20 years for restoration
of the name of a company which has been struck out by the Registrar of Companies. In the interest of the members
and creditors of the company, the Court may direct restoration of the name of the company in the Register of
Companies. The rights and liabilities of the company are not affected by the striking out of its name from the
Register of Companies. After the name is restored it shall be deemed as if the company was on the register all the
time.69
94. Substituted by the Companies (Amendment) Act, 1960 (65 of 1960), s. 13, for “agrees”.
2. Collector of Moradabad v. Equity Insurance Co. Ltd.,AIR 1948 Oudh 197; J.H. Chandler & Co. v. H.I. Philips,AIR 1926
All. 550; Babulal v. Narain Sugar and General Mills Ltd., (1958) 28 Comp. Cas. 155 (Punj.). See also Comments under
Section 432.
3. U.P. Oil Mills Co. Ltd. v. Jamna Prasad, (1933) 3 Comp. Cas. 256 (All.) : AIR 1933 All. 334; Official Liquidator v.
Suleman Bhai Kachhi,AIR 1955 MB 166 (DB). See also Comments under Schedule I, Table A, Regulation 31.
4. Lurgan's (Lord) Case Re, , (1902) 1 Ch. 707 : 71 LJ Ch. 323 : 86 LT 291. See also Comments under Sections 12 and
15.
5. Sonardih Coal Co. v. Paramanand,(1928) 26 ALJ 347 : 108 IC 451.
6. Alexander v. Automatic Telephone Co., (1900) 2 Ch. 56 : (1900-03) All ER Rep. Ext. 1755 : 69 LJ Ch. 428 : 82 LT 400
(CA). See also Comments under Sections 12 and 543.
24 Comp. Cas. 1 (SC) : AIR 1953 SC 385 [LNIND 1953 SC 64]: 1954 SCR 117 [LNIND 1953 SC 64]; Clariant
International Ltd. v. SEBI, (2004) 122 Comp. Cas. 112 (SC). See also Comments under Sections 2(27), 110 and
8. Vijay Kumar Narang v. Prakash Coach Builders P. Ltd., (2005) 128 Comp. Cas. 976 (CLB).
9. Balkrishan Gupta v. Swadeshi Polytex Ltd., (1985) 58 Comp. Cas. 563 (SC) : AIR 1985 SC 520 [LNIND 1985 SC 51];
Lalithamba Bai v. Harrisons Malayalam Ltd., (1988) 63 Comp. Cas. 662 (Ker.) on appeal (1997) 13 SCL 175 (Ker.)
(DB). See detailed Comments under Rights of a Member or Shareholder hereinafter. See also Comments under
Sections 87, 108, 150 and 169.
10. Kumaran Potty v. Venad Pharmaceuticals & Chemicals Ltd., (1989) 65 Comp. Cas. 246 (Ker.). See also Comments
under Sections 72, 110, 111 and 111A.
11. Ram Kishan v. Kanwar Papers Pvt. Ltd., (1990) 69 Comp. Cas. 209 (HP). See also Comments under Sections 111 and
433.
12. Indglonal Investment and Finance Ltd. v. Rajasthan Breweries Ltd., (2001) 107 Comp. Cas. 525 (CLB). See detailed
Sections 2(27), 150, 164 and 397-399.
Page 33 of 39
Comments under Minors can be Member through Guardian hereinafter.
16. H.H. Manabendra Shah v. Official Liquidator, (1977) 47 Comp. Cas. 356 (Delhi). See also Comments under Sections
69, 72, 150, 164 and 467.
17. Chloro Controls (India) P. Ltd. v. Severn Trent Water Purification Inc., (2006) 131 Comp. Cas. 501 (Bom.) (DB). See
also Comments under Sections 108, 428 and 439(4)(b).
24 Comp. Cas. 1 (SC) : AIR 1953 SC 385 [LNIND 1953 SC 64]: 1954 SCR 117 [LNIND 1953 SC 64]; Balkrishan Gupta
v. Swadeshi Polytex Ltd., (1985) 58 Comp. Cas. 563 (SC) : AIR 1985 SC 520 [LNIND 1985 SC 51]. See also
Comments under Persons agreeing in writing to become Members earlier and Blank Transfers later. See also
Comments under Sections 2(27), 87, 110, 150, 169 and Schedule I, Table A, Regulation 19.
under Rights of a Member or Shareholder in earlier paragraphs. See also Comments under Sections 2(46), 34, 108,
111, 111A, 169, 206, 397, 433 and 617.
21. Killick Nixon Ltd. v. Bank of India, (1985) 57 Comp. Cas. 831 (Bom.) (DB).
22. Prafulla Kumar Rout v. Orient Engg. Works P. Ltd., (1986) 60 Comp. Cas. 65 (Orissa).
ITR 215 [LNIND 1959 SC 34] (SC) : (1959) Supp. 2 SCR 448. See also Comments under Membership by Transfer of
Shares hereinbefore. See detailed Comments under Sections 108 and 206.
See also Comments under Sections 108 and Schedule I, Table A, Regulation 19.
25. Rahul Subodh Windoors Ltd. v. A.K. Menon, (1999) 96 Comp. Cas. 597(SC). For jurisdiction of Special Court under the
Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992 (27 of 1992)see Comments under
Section 10.
26. Clariant International Ltd. v. Securities and Exchange Board of India (SEBI), (2004) 122 Comp. Cas. 112 (SC) : AIR
2004 SC 4236 [LNIND 2004 SC 852]: (2004) 8 SCC 524 [LNIND 2004 SC 852] : (2005) 4 Comp. LJ 52 (SC).
27. Nutech Agro Ltd. v. Ch. Mohan Rao, (2002) 111 Comp. Cas. 75 (AP).
28. Dinesh Kumar Jhunjhunwala v. Karur Vysya Bank Ltd., (2007) 140 Comp. Cas. 229 (Mad.).
29. James v. Buena Ventura Nitrate Grounds Syndicate Ltd., (1896) 1 Ch. 456 : (1895-99) All ER Rep. Ext. 1968 : 65 LJ
Ch. 284 : 74 LT 1 (CA). See also Comments under Section 109.
30. Smt. Kamalabai v. Vithal Prasad Co. P. Ltd., (1993) 77 Comp. Cas. 231 (Kar.); Narinder Kumar Sehgal v. Leader
Valves Ltd., (1993) 77 Comp. Cas. 393 (CLB); Kailashnarayan Bhangadia v. VST Industries Ltd., (1998) 93 Comp.
Cas. 470 (CLB). See detailed Comments under Sections 108, 109, 110 and 111.
31. Indian Chemical Products Ltd. v. State of Orissa, (1966) 36 Comp. Cas. 592 (SC) : AIR 1967 SC 253 [LNIND 1966 SC
134]: (1966) Supp. SCR 436 : (1966) 2 Comp. LJ 63 (SC); Nazamunnessa Begum v. Vidya Sagar Cotton Mills Ltd.,
(1963) 33 Comp. Cas. 36 (Cal.) : AIR 1962 Cal. 380. See also Comments under Sections 108, 109, 111 and Schedule
I, Table A, Regulations 25-28.
32. World Wide Agencies P. Ltd. v. Mrs. Margaret T. Desor, (1990) 67 Comp. Cas. 607 (SC) : AIR 1990 SC 737 [LNIND
1989 SC 628]. See also Comments under Sections 2(27), 41(2), 109, 397 and 398.
33. Narandas Manmohandas v. Indian Mfg. Co. Ltd.,AIR 1953 Bom. 433 [LNIND 1953 BOM 18]. See also Comments
under Section 270.
34. Jarnail Singh v. Bakshi Singh, (1960) 30 Comp. Cas. 192 (Punj.) : AIR 1960 Punj. 455.
35. Exchange Travels (Holdings) Ltd. Re, , (1991) BCLC 728.
* See the Foreign Exchange Management Act, 1999 (42 of 1999) in Appendix 325.
36. L.I.C. v. Escorts Ltd., (1986) 59 Comp. Cas. 548 (SC) : AIR 1986 SC 1370 [LNIND 1985 SC 362]; Dale and Carrington
Invt. P. Ltd. v. P.K. Prathapan, (2004) 122 Comp. Cas. 161 (SC). See also Comments under Membership by Transfer
of Shares hereinbefore and Comments under Sections 2(46), 34, 111, 111A, 169 and 617.
37. Kumar Malavalli v. CRCW Search Technologies P. Ltd., (2004) 118 Comp. Cas. 618 (CLB). See also Comments under
Sections 111 and 111A.
Page 34 of 39
Sections 12 and 13.
39. Barned's Banking Co. Re, Peel's Case, (1867) 2 Ch. App. 674 : 36 LJ Ch. 757; Nassau Phosphate Co. Re, , (1876) 2
Ch.D. 610 : 45 LJ Ch. 584 : 24 WR 692; Laxon & Co. (No. 2) Re, , (1892) 3 Ch. 555 : 61 LJ Ch. 667 : 67 LT 85 : 40 WR
621.
40. Dewan Singh v. Minerva Films Ltd., (1958) 28 Comp. Cas. 191 (Punj.); Dewan Singh v. Minerva Films Ltd., (1959) 29
Comp. Cas. 263 : AIR 1959 Punj. 106; R. Balaraman v. Buckingham and Carnatic Co. Ltd., (1969)1 Comp. LJ 82
(CLB). But see Palaniappa v. Pasupati Bank,AIR 1942 Mad. 470 [LNIND 1942 MAD 1]: (1942) 1 MLJ 425 [LNIND
42. Mohori Bibi v. Dharamadas Ghosh,(1903) ILR 30 Cal. 539 (PC) : (1903) 30 IA 114 (PC); Steinberg v. Scala (Leeds)
Ltd., (1923) 2 Ch. 452 (CA) : 92 LJ KB 944 : 129 LT 624 (CA). See also Comments under Sections 12 and 69.
43. R. Balaraman v. Buckingham and Carnatic Co. Ltd., (1969) 1 Comp. LJ 82 (CLB).
hereinbefore and under Sections 9, 111A and 153.
* See also Letter No. 8/18(41)/63-PR, dated 31-3-1964 printed after this Circular.
† In view of section 8(1) of the Hindu Minority and Guardianship Act, 1956 (32 of 1956), a guardian can agree in writing
on behalf of a minor to become a member of a company;Master Gautam R. Padival (Minor) v. Karnataka Theatres Ltd.,
(2000) 100 Comp. Cas. 124 (CLB).
45. Cork and Bandon Railway Co. v. Cazenove,(1847) 10 QB 935 : 11 Jur. 802 : 116 ER 355; Lumsden's Case , (1868)
LR 4 Ch. App. 31; Yeoland Consols Ltd. (No. 2) Re, , (1888) 58 LT 922. See detailed Comments under Section 69.
46. Capper's Case , (1868) LR 3 Ch. 458 : 16 WR 1002.; Hercules Insurance Co. Re, , (1872) LR 13 Eq. 566 : 41 LJ Ch.
580.
47. Gooch's Case , (1872) 8 Ch. App. 266. See also Comments under Section 69.
48. Symon's Case Re, (1870) 5 Ch. App. 298 : 39 LJ Ch. 461. See also Comments u/s. 536.
49. Anil Gupta v. Delhi Cloth and General Mills Co. Ltd., (1983) 54 Comp. Cas. 301 (Delhi). See also Comments under
Section 111A.
51. Amrit Banaspati Co. Ltd. In re, , (1995) 83 Comp. Cas. 789 (CLB). See also Comments under Sections 11, 12 and 150.
52. Vagliano Anthracite Collieries Ltd. Re,(1910) WN 187 : 79 LJ Ch. 769 : 103 LT 211; Sadler v. Whiteman,(1910) 1 KB
868; Glory Paper Mills Co. Re, Dunster's Case, (1894) 3 Ch. 473 : 63 LJ Ch. 885 : 71 LT 528 : 43 WR 164 : 10 TLR
669 : 38 SJ 694 (CA). See also Comments under Sections 11, 12 and 150.
53. Amrit Banaspati Co. Ltd. In re, , (1995) 83 Comp. Cas. 789 (CLB).
54. Vickers Systems International Ltd. v. Mahesh P. Keswani, (1992) 73 Comp. Cas. 317 (CLB). See also Comments
56. R. Mathalone v. Bombay Life Assurance Co. Ltd., (1954) 24 Comp. Cas. 1 (SC) : AIR 1953 SC 385 [LNIND 1953 SC
64]: 1954 SCR 117 [LNIND 1953 SC 64]. See also Comments under Sections 81, 82, 108 and 150.
57. Vasant Investment Corporation Ltd. In re, , (1982) 52 Comp. Cas. 139 (Bom.); National Steel & General Mills v. Official
Liquidator, (1990) 69 Comp. Cas. 416 (Delhi) (DB). See also Comments under Sections 100, 391 and 536.
58. Rajdhani Grains and Jaggery Exchange Ltd. In Re , (1983) 54 Comp. Cas. 166 (Delhi). See also Comments under
Sections 391, 428, 430, 442, 467, 469 and 511.
59. J.P. Srivastava and Sons Pvt. Ltd. v. Gwalior Sugar Co. Ltd., (2004) 122 Comp. Cas. 696 (SC)See detailed Comments
60. J.P. Srivastava and Sons Pvt. Ltd. v. Gwalior Sugar Co. Ltd., (2004) 122 Comp. Cas. 696 (SC) : (2004) 7 Supreme 794
: (2004) 9 JT 507 (SC) (Mrs. Ruma Pal and Arun Kumar, JJ.).
* See the Societies Registration Act, 1860 (21 of 1860) in Appendix 333.
Page 35 of 39
See detailed Comments under Membership by Transfer, Receiver, etc., in earlier paragraphs.
See fuller discussion in earlier paragraphs and Comments under Section 169.
63. All India Bank Officers' Confederation v. Dhanalakshmi Bank Ltd., (1997) 90 Comp. Cas. 225 (CLB).
64. Morgan v. Gray, (1953) Ch. 83 : (1953) 1 All ER 213 : (1953) 2 WLR 140. See also Comments under Sections 45, 69,
177 and 397.
65. Birch v. Sullivan,(1958) 1 All ER 56 : (1957) 1 WLR 1247 : (1957) 101 SJ 974. See also Comments under Sections 10
and 69.
66. South London Fish Market Co. Re, , (1888) 39 Ch.D. 324 : 60 LT 68 : 37 WR 3 (CA).
[LNIND 1954 SC 145] (SC) : (1955) 1 SCR 876 [LNIND 1954 SC 145]; Borland's Trustee v. Steel Bros. & Co. Ltd.,
(1901) 1 Ch. 279 : 70 LJ Ch. 51; Charanjit Lal Chowdhury v. UOI, (1951) 21 Comp. Cas. 33 (SC) : AIR 1951 SC 41
[LNIND 1950 SC 55]: 1950 SCR 869 [LNIND 1950 SC 55]; Shyamlal Purohit v. Jagannath Ray, (1970) 40 Comp. Cas.
138 (Cal.) (DB) : AIR 1969 Cal. 424 [LNIND 1968 CAL 198]; Purna Investment Ltd. v. Bank of India Ltd., (1984) 55
Comp. Cas. 737 (Cal.) (DB); Lalithamba Bai v. Harrisons Malayalam Ltd., (1988) 63 Comp. Cas. 662 (Ker.). See also
Comments under Sections 2(46), 11, 34 and 82.
69. L.I.C. v. Escorts Ltd., (1986) 59 Comp. Cas. 548 (SC) : AIR 1986 SC 1370 [LNIND 1985 SC 362]; Tata Engineering
and Locomotive Co. Ltd. v. State of Bihar, (1964) 34 Comp. Cas. 458 (SC) : AIR 1965 SC 40 : (1964) 6 SCR 885; New
Horizons Ltd. v. UOI, (1997) 89 Comp. Cas. 849 (SC). See detailed Comments under Section 34.
70. POW Services Ltd. v. Clare,(1995) 2 BCLC 435.
71. N. Satyaprasad Rao v. V.L.N. Sastry, (1988) 64 Comp. Cas. 492 (AP). See also Comments under Sections 2(27),
111A, 150, 397 and 398.
under Membership by Transfer of Shares and other relevant discussions in this Section and Comments under Sections
2(46), 34, 108, 111, 169, 397, 433 and 617.
See also Comments under other relevant discussions in this Section and Comments under Sections 2(27), 87, 110,
169, 408 and Schedule I, Table A, Regulation 19.
24 Comp. Cas. 1 (SC) : AIR 1953 SC 385 [LNIND 1953 SC 64]: 1954 SCR 117 [LNIND 1953 SC 64]. See detailed
Comments under Membership by Transfer and Blank Transfer in earlier paragraphs.
75. National Steel & General Mills v. Official Liquidator, (1990) 69 Comp. Cas. 416 (Delhi) (DB). See also Comments under
Sections 150, 391, 428, 446(2) and 457. See also Comments under Official Liquidator in earlier paragraphs.
76. Santosh Mani v. New Delhi Young Mens Christian Association,(1995) Corp. LA 178 (Delhi).
detailed Comments under Membership by Transmission of Shares hereinbefore. See also Comments under Sections
2(27), 10, 108 and 398.
SCR 885. See detailed Comments under Section 34.
79. Prakash Timbers P. Ltd. v. Smt. Sushma Shingla, (1997) 89 Comp. Cas. 770 (All.) (DB).
Sections 10, 34, 153, 153B, 187C and 399.
81. Order 29, Rule 1 and Order 6, Rule 14 of the Code of Civil Procedure, 1908 (5 of 1908);Foss v. Harbottle, (1843) 2
Hare 461 : (1843) 67 ER 189; Mozley v. Alston, (1847) 1 Ph. 790 : 16 LJ Ch. 217; MacDougall v. Gardiner (No. 2),
(1875) 1 Ch.D. 13 : 45 LJ Ch. 27 : 33 LT 521 (CA). See detailed Comments hereinafter. See also Comments under
Sections 10, 10FB and 34.
82. Hindustan Petroleum Corporation Ltd. v. Sardar Chand, (1991) 71 Comp. Cas. 257 (P&H). See detailed Comments
Page 36 of 39
83. John Shaw & Sons (Salford) Ltd. v. Shaw,(1935) 2 KB 113 : (1935) All ER Rep. 456 (CA); Marshall's Valve Gear Co.
Ltd. v. Manning, Wardle & Co. Ltd., (1909) 1 Ch. 267 : 78 LJ Ch. 46 : 100 LT 65; Scott v. Scott,(1943) WN 16 : (1943) 1
All ER 582.
84. Regal (Hastings) Ltd. v. Gulliver,(1942) 1 All ER 378 (HL) : (1967) 2 AC 134 n. See also Comments under Section
383A.
85. Marshall's Valve Gear Co. Ltd. v. Manning, Wardle & Co. Ltd., (1909) 1 Ch. 267 : 78 LJ Ch. 46 : 100 LT 65; Alexander
Ward & Co. Ltd. v. Samyang Navigation Co. Ltd.,(1975) 2 All ER 424 : (1975) 1 WLR 673 (HL). See also Comments
86. Mosely v. Koffyfontein Mines Ltd., (1911) 1 Ch. 73 : 80 LJ Ch. 111 : 103 LT 516 (CA); Pender v. Lushington, (1877) 6
Ch.D. 70 : 46 LJ Ch. 317 : 25 WR Dig. 64; Foster v. Foster, (1916) 1 Ch. 532 : (1916-17) All ER Rep. 856 : 85 LJ Ch.
305. See detailed Comments hereinafter and Comments under Section 10.
Services Ltd., (1992) 75 Comp. Cas. 583 (Bom.). See detailed Comments under Sections 10, 34, 291, 293, 397 and
398.
88. Danish Mercantile Co. Ltd. v. Beaumont, (1951) Ch. 680 : (1951) 1 All ER 925 (CA); Alexander Ward & Co. Ltd. v.
89. Foss v. Harbottle, (1843) 2 Hare 461 : (1843) 67 ER 189. See also Comments under Section 10—Jurisdiction of
Courts.
90. Mozley v. Alston, (1847) 1 Ph. 790 : 16 LJ Ch. 217; MacDougall v. Gardiner (No. 2), (1875) 1 Ch.D. 13 : 45 LJ Ch. 27 :
33 LT 521 (CA).
91. Edwards v. Halliwell , (1950) WN 537 : (1950) 2 All ER 1064 : 94 SJ 803 (CA).
93. Fargo Ltd. v. Godfroy,(1986) 3 All ER 279 : (1986) 1 WLR 1134 : (1986) BCLC 370. See detailed Comments under
Hospital (Pvt.) Ltd., (1999) 97 Comp. Cas. 216 (Ker.) (DB);, (1950) WN 537 : (1950) 2 All ER 1064 : 94 SJ 803 (CA);
Cook v. Deeks,(1916) 1 AC 554 : 85 LJ PC 161 : 114 LT 636 (PC); Heyting v. Dupont,(1964) 2 All ER 273 : (1964) 1
WLR 843 : 108 SJ 277 (CA); Hodgson v. National and Local Government Officers Association,(1972) 1 All ER 15 :
(1972) 1 WLR 130. See also Comments under Sections 10, 13 and 283.
WLR 31 (CA). See detailed Comments hereinafter and Comments under Sections 10, 399 and 408.
96. Wallersteiner v. Moir (No. 2),(1975) QB 373 : (1975) 1 All ER 849 : (1975) 2 WLR 389 (CA); Nurcombe v.
Nurcombe,(1985) 1 All ER 65 : (1985) 1 WLR 370 : (1984) BCLC 557 (CA); Giles v. Rhind,(2002) 4 All ER 977. See
1. Wallersteiner v. Moir (No. 2),(1975) QB 373 : (1975) 1 All ER 849 : (1975) 2 WLR 389 : (1975) 119 SJ 97 (CA). See
2. Smith v. Croft (No. 2),(1987) 3 All ER 909 : (1987) 3 WLR 405 : (1987) BCLC 206; Jaybird Group Ltd. v.
Greenwood,(1986) BCLC 319. See also Comments under Section 398.
4. Towers v. African Tug Co., (1904) 1 Ch. 558 : (1904) 73 LJ Ch. 395 : 90 LT 298 (CA); Nurcombe v. Nurcombe,(1985) 1
All ER 65 : (1985) 1 WLR 370 : (1984) BCLC 557 (CA). See detailed Comments under Section 399.
5. Forrest v. Manchester, Sheffield and Lincoln Railway Co., (1861) 5 De G.F.&J 126; Robson v. Dodds,(1869) LR 8 Eq.
301; Whitwam v. Watkin,(1898) 78 LT 188.
6. Seaton v. Grant,(1867) LR 2 Ch. App. 459; Bloxam v. Metropolitan Rly. Co., (1868) 3 Ch. App. 337 : 18 LT 41 : 16 WR
490.
7. Birch v. Sullivan,(1958) 1 All ER 56 : (1957) 1 WLR 1247 : (1957) 101 SJ 974; BSN (UK) Ltd. v. Janardan Mohandas
Rajan Pillai, (1996) 86 Comp. Cas. 371 (Bom.). See detailed Comments hereinbefore and Comments under Section
Page 37 of 39
8. Mosely v. Koffyfontein Mines Ltd., (1911) 1 Ch. 73 : 80 LJ Ch. 111 : 103 LT 516 (CA)affirmed in Koffyfontein Mines Ltd.
v. Mosely,(1911) AC 409 : 80 LJ Ch. 668 : 105 LT 115 (HL).
9. Section 36; Hanuman Prasad Gupta v. Hiralal, (1970) 40 Comp. Cas. 1058 (SC) : AIR 1971 SC 206 [LNIND 1970 SC
71]: (1970) 2 Comp. LJ 195 (SC); Naresh Chandra Sanyal v. Calcutta Stock Exchange Association Ltd., (1971) 41
Comp. Cas. 51 (SC) : AIR 1971 SC 422 [LNIND 1970 SC 391]; V.B. Rangaraj v. V.B. Gopalakrishnan, (1992) 73
Comp. Cas. 201 (SC) : AIR 1992 SC 453 [LNIND 1991 SC 637]; Beattie v. E & F Beattie Ltd., (1938) Ch. 708 : 3 All
ER 214 : 107 LJ Ch. 333 (CA). See detailed Comments under Section 36.
11. Dr. Satya Charan Law v. Rameshwar Prosad Bajoria, (1950) 20 Comp. Cas. 39 (FC) : AIR 1950 FC 133.
12. Mozley v. Alston, (1847) 1 Ph. 790 : 16 LJ Ch. 217.
13. Burland v. Earle,(1902) AC 83 : (1900-03) All ER Rep. Ext. 1452 : 71 LJ PC 1.
14. Edwards v. Halliwell,(1950) WN 537 : (1950) 2 All ER 1064 : 94 SJ 803 (CA).
15. Avanthi Explosives P. Ltd. v. Principal Subordinate Judge, (1987) 62 Comp. Cas. 301 (AP). See detailed Comments in
earlier paragraphs and Comments under Section 10.
WLR 31 (CA); Baillie v. Oriental Telephone and Electric Co. Ltd., (1915) 1 Ch. 503 : 84 LJ Ch. 409 : 112 LT 569 (CA).
See also Comments in earlier paragraphs and Comments under Sections 10 and 399.
17. Daniels v. Daniels, (1978) Ch. 406 : (1978) 2 All ER 89 : (1978) 2 WLR 73; Burland v. Earle,(1902) AC 83 : (1900-03)
All ER Rep. Ext. 1452 : 71 LJ PC 1. See also Comments u/s. 10.
18. Holmes v. Newcastle-upon-Tyne Freehold Abattoir Co., (1875) 1 Ch.D. 682 : 45 LJ Ch. 38 : 24 WR 505. See also
19. Hope v. International Financial Society, (1876) 4 Ch.D. 327 : 46 LJ Ch. 200 (CA).
20. MacDougall v. Jersey Imperial Hotel Co., (1864) 2 H.&M. 528; Towers v. African Tug Co., (1904) 1 Ch. 558 (CA) :
(1904-07) All ER Rep. Ext. 1583 (CA) : 73 LJ Ch. 395 : 90 LT 298 (CA). See also Comments under Sections 205 and
399.
21. Biswanath Prasad Khaitan v. New Central Jute Mills Co. Ltd., (1961) 31 Comp. Cas. 125 (Cal.) : 64 CWN 970;
Raghunandan Neotia v. Swadeshi Cloth Dealers Ltd., (1964) 34 Comp. Cas. 570 (Cal.) : AIR 1964 Cal. 347 [LNIND
1963 CAL 187]: 68 CWN 302. See also Comments under Section 10.
22. Vadilal v. Manecklal,(1925) ILR 49 Bom. 291; Menier v. Hooper's Telegraph Works, (1874) 9 Ch. App. 350 : 43 LJ Ch.
330 : 30 LT 209; Alexander v. Automatic Telephone Co., (1900) 2 Ch. 56 : (1900-03) All ER Rep. Ext. 1755 : 69 LJ Ch.
428 : 82 LT 400 (CA); Cook v. Deeks,(1916) 1 AC 554 : 85 LJ PC 161 : 114 LT 636 (PC); Spokes v. Grosvenor Hotel
Co.,(1897) 2 QB 124 : 66 LJ QB 572 : 76 LT 679 (CA).
23. Mason v. Harris, (1879) 11 Ch.D. 97 : 48 LJ Ch. 589 : 40 LT 644 : 27 WR 699 (CA).
24. Cockburn v. Newbridge, Sanitary Steam Laundry Co. & Llewellyn,(1915) 1 IR 237 (CA).
25. Atwool v. Merryweather,(1867) LR 5 Eq. 464n : 37 LJ Ch. 35.
26. Brown v. British Abrasive Wheel Co. Ltd., (1919) 1 Ch. 290 : (1918-19) All ER Rep. 308 : 88 LJ Ch. 143 : 120 LT 529.
27. Dhakeshwari Cotton Mills v. Neelkamal Chakravarti,AIR 1937 Cal. 645 : 41 CWN 1137.
28. Star Tile Works Ltd. v. N. Govindan & Co.,AIR 1959 Ker. 254.
29. Ramakishendas Dhanuka v. Satya Charan Law, (1950) 20 Comp. Cas. 133 (PC) : 77 IA 128 : AIR 1950 PC 81 [LNIND
1938 PC 61].
30. Estmanco (Kilner House) Ltd. v. Greater London Council,(1982) 1 All ER 437 : (1982) 1 WLR 2 : (1981) 125 SJ 790.
See fuller discussion in Comments under Section 399.
31. Murarka Paint and Varnish Works (P.) Ltd. v. Mohanlal Murarka, (1961) 31 Comp. Cas. 301 (Cal.) : AIR 1961 Cal. 251
[LNIND 1960 CAL 154]: 65 CWN 32; Russian Commercial and Industrial Bank v. Comptoir d'Escompte de
Mulhouse,(1925) AC 112 : (1924) All ER Rep. 381 : 93 LJ KB 1098 (HL); Danish Mercantile Co. Ltd. v. Beaumont,
(1951) Ch. 680 : (1951) 1 All ER 925 (CA); Marshall's Valve Gear Co. Ltd. v. Manning, Wardle & Co. Ltd., (1909) 1 Ch.
267 : 78 LJ Ch. 46 : 100 LT 65; Airways Ltd. v. Bowen and Reid,(1985) BCLC 355 (CA). See also Comments
hereinbefore and under Sections 10, 13 and 293.
32. Newbiggin-by-the-Sea Gas Co. v. Armstrong, (1879) 13 Ch.D. 310 : 49 LJ Ch. 231 (CA); John Shaw & Sons (Salford)
Ltd. v. Shaw,(1935) 2 KB 113 : (1935) All ER Rep. 456 : 104 LJ KB 549 : 153 LT 245 (CA).
33. Order 1, Rule s 9 and 10 of the Code of Civil Procedure, 1908 (5 of 1908). See also Comments under Sections 10 and
34.
Page 38 of 39
34. Murlidhar Chatterjee v. International Film Co. Ltd.,AIR 1943 PC 34 : 70 IA 1 (PC).

35. British Sugar Refining Co. Re, , (1857) 3 K&J 408 : 26 LJ Ch. 369 : 5 WR 379.
36. Pender v. Lushington, (1877) 6 Ch.D. 70 : 46 LJ Ch. 317 : 25 WR Dig. 64; Edwards v. Halliwell,(1950) WN 537 : (1950)
2 All ER 1064 : 94 SJ 803 (CA). See detailed Comments hereinbefore and Comments under Section 10.
37. Wood v. Odessa Waterworks Co., (1889) 42 Ch.D. 636 : 58 LJ Ch. 628 : 37 WR 733.
38. Rayfield v. Hands, (1960) Ch. 1 : (1958) 2 All ER 194 : (1958) 2 WLR 851.
39. Griffith v. Paget, (1877) 5 Ch.D. 894 : 46 LJ Ch. 493 : 25 WR 523.
40. Simpson v. Westminster Palace Hotel Co., (1860) 8 HL Cas. 712 : 2 LT 707 (HL); Hoole v. Great Western Rly. Co.,
(1867) 3 Ch. App. 262 : 17 LT 453 : 16 WR 260; Hutton v. West Cork Rly. Co., (1883) 23 Ch.D. 654 : 52 LJ Ch. 689 :
49 LT 420 (CA). See also Comments under Section 13.
41. Wall v. London and Northern Assets Corpn., (1898) 2 Ch. 469 : 67 LJ Ch. 596 (CA).
42. Henderson v. Bank of Australasia, (1890) 45 Ch.D. 330 : 59 LJ Ch. 794 (CA).
43. Sections 108-112; Smith, Knight & Co. Re, Weston's Case, (1868) 4 Ch. App. 20 : 38 LJ Ch. 49 : 19 LT 337. See
detailed Comments under Membership by Transfer in earlier paragraphs.
44. Section 38; Hole v. Garnsey,(1930) AC 472 : (1930) All ER Rep. 568 : 99 LJ Ch. 243 (HL).
45. Sections 39, 196, 219, etc. See detailed Comments under Section 39.
46. Section 113.
47. Section 176.
48. L.I.C. v. Escorts Ltd., (1986) 59 Comp. Cas. 548 (SC) : AIR 1986 SC 1370 [LNIND 1985 SC 362]; Balkrishan Gupta v.
Swadeshi Polytex Ltd., (1985) 58 Comp. Cas. 563 (SC) : AIR 1985 SC 520 [LNIND 1985 SC 51]. See detailed
Comments under Rights of a Member or Shareholder in earlier paragraphs.
51. Edwards v. Halliwell,(1950) WN 537 : (1950) 2 All ER 1064 : 94 SJ 803 (CA); Salmon v. Quin and Axtens Ltd.,(1909)
AC 442 : 78 LJ Ch. 506 : 100 LT 820 (HL).
52. Pender v. Lushington, (1877) 6 Ch.D. 70 : 46 LJ Ch. 317 : 25 WR Dig. 64.
53. Scottish Insurance Corpn. v. Wilsons and Clyde Coal Co.,(1949) AC 462 : (1949) 1 All ER 1068 : (1949) LJR 1190 : 65
TLR 354 (HL). See also Comments under Section 100.
54. Mozley v. Alston, (1847) 1 Ph. 790 : 16 LJ Ch. 217; Jhajharia Bros. v. Sholapur Spg. & Wvg. Co. Ltd.,AIR 1941 Cal.
174 : (1941) ILR 1 Cal. 30 followed in ILR (1970) 2 Cal. 147; Ferguson v. Wilson,(1866) LR 2 Ch. 77 : 36 LJ Ch. 67 : 15
LT 230. See also Comments u/s. 10.
56. ICICI Ltd. v. Parasrampuria Synthetics Ltd., (1998) 92 Comp. Cas. 238 (Delhi).
Sections 9, 10E, 10FB, 397 and 398.
58. Morel v. Hege, 130 Ga. 825 : 61 SE 487 : 14 Ann. Cas. 935.
59. Guernsey v. Cock, 120 Mass. 510.
60. Marcht v. Merchants Mortgage and Credit Co., 22 Del. Ch. 74.
61. Manson v. Curtis, 223 NY 313 : 119 NE 559;, 115 Cali. 584.
62. Williams Fredericks Re, 187 LA 987.
63. West v. Comden, 135 US 507.
Comments under Sections 82, 108, 111 and 111A.
Page 39 of 39
26, 31 and 108.
Sections 25.
69. Purushottamdass v. Registrar of Companies, (1986) 60 Comp. Cas. 154 (Bom.). See detailed Comments under
Section 560(6).
End of Document
Datta: Company Law
C R Datta
COMPANY AND MATTERS INCIDENTAL THERETO > Membership of company
S. 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 subisidiary 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 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.
70. Asian Investments Ltd., In re, (1992) 73 Comp. Cas. 517 (Mad.). See also Comments under Sections 100 to 102.
71. Himachal Telematics Ltd. and Himachal Futuristic Communications Ltd., In re, (1996) 86 Comp. Cas. 325 (Delhi). See
72. New Vision Laser Centers (Rajkot) Pvt. Ltd., In re (2002) 111 Comp. Cas. 756 (Guj.); Consolidated Coffee Ltd., In re,
(1999) 97 Comp. Cas. 1 (Kar.). See detailed Comments under Sections 77 and 391 to 394.
73. Dina Moni v. Elahadut Khan, 8 CWN 848; Amarchandra v. Sebak, 11 CWN 593.
COMMENTS

Page 2 of 5
follows: “This section corresponds to section 27 of the English Act. Section 27 of the English Act has been
incorporated in accordance with the Company Law Committee's recommendation in paragraph 40 of the Report.” [
“Section 30 of the present Act defines the members of a company. The original subscribers to a memorandum
together with those who subsequently become members constitute a company from the date of its registration, but
it is desirable to define more clearly the membership of a holding company than the Act at present does. We
recommend that the provisions of section 27 of the English Companies Act, 1948, be adopted. Under this section of
the English Act, no subsidiary or its nominee can in future become a member of its holding company, except as a
personal representative or a trustee. In the latter case, neither the holding company nor the subsidiary may have
any beneficial interest under the trust except by way of security for the purpose of a transaction entered into in the
ordinary course of a business, which includes the lending of money. In regard to subsidiaries, which are already
members of their holding companies, they are permitted to retain their membership but can exercise no voting
rights in future, except where they are personal representatives or trustees. Further, any allotment or transfer of
shares in a company to its subsidiary is declared to be void. These salutary provisions constitute an attempt to
maintain the separate operational identity of a holding company and its subsidiary and thereby to preserve the
respective shareholders' control over them. In the absence of any such provision, the affairs of a holding company
and its subsidiary may, in the hands of unscrupulous company managers, become inextricably involved and
confused to the serious detriment of shareholders.” [ Report : para 40].
Object of the section.—The object of this section is to maintain the separate operational identity of a holding
company and its subsidiaries and thereby preserve the respective shareholders' control over them.70
A holding company and a subsidiary are two separate legal entities. It is true that occasionally the corporate veil of
a holding and subsidiary company is pierced through in order to find out the substance but that is only where it is
permitted by a statute or in exceptional cases of fraud. See detailed Comments under Sections 4 and 34.
Subsidiary not to be Member of its Holding Company [Sub-section (1)].—A subsidiary company cannot hold
shares or be a member in its holding company. 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.
Section 42 not hit by Scheme of Amalgamation, Merger.—A subsidiary company can buy the shares in the
holding company where it is a part of a Scheme of Amalgamation sanctioned by the Court [ now the Tribunal
(NCLT)]. Section 42 falls in that Part of the Companies Act, 1956 which deals with incorporation of company and
matters incidental thereto. This Part deals with the Memorandum of Association, Names of the companies, Articles
of Association, Change of the registration of companies and sections 41 and 42 deal with Membership of the
company. From a plain reading of section 42 it cannot be said that this section is intended to be read with section
391, 392 or 394 at the time when the scheme of the amalgamation is pending before the Court [now the Tribunal
(NCLT)] for approval and when the shareholders and the creditors have approved the same and the Registrar of
Companies has also filed an affidavit that the affairs of the company are not conducted in a manner prejudicial to
the shareholders or prejudicial to the public interest.71
The provisions of sections 391 to 394 are not controlled by the provisions of sections 42 and 77. Therefore, the
objection of the Official Liquidator or the Regional Director that by merger, sections 42 and 77 which prohibit the
holding of shares by a subsidiary company in its holding company would be contravened was overruled.72
Exceptions to section 42 [Sub-section (2)].—This section will not apply (a) where a subsidiary acts as the legal
representative of a deceased member of the holding company and (b) if the subsidiary is a trustee for some other
shareholder, the holding company or its subsidiary not being beneficiary except as lender of money in the usual
course of business.
Subsisting holdings, no voting right [Sub-section (3)].—A company, which was a member before becoming a
subsidiary, may retain its membership but the subsidiary company shall not exercise any right of vote at any
Page 3 of 5
meeting of the holding company. A subsidiary may retain its membership of the holding company if such
membership was acquired before 1st April, 1956, but without any voting right.
Subsidiary includes nominee [Sub-section (4)].—Sub-sections (1) and (3) shall apply in relation to a nominee for
a body corporate which is a subsidiary. References to a body corporate in these sub-sections include references to
a nominee for it. This is subject to the provisions of sub-section (2).
The term “subsidiary” includes a nominee of the subsidiary. Legal representative includes heirs and persons who in
law represent the estate of the deceased person.73
Guarantee company or unlimited company [Sub-section (5)].—Where the holding company is a company
limited by guarantee or unlimited company the subsidiary cannot have any interest in such company.
Holding Company and Subsidiary Company.— Section 4 of the Companies Act, 1956 explains the Meaning of
Holding Company and Subsidiary Company.
Section 42 of the Companies Act, 1956 (1 of 1956) prohibits allotment of Shares of the Holding Company to a
Subsidiary Company.
The importance of relationship of Holding Company and Subsidiary Companies lies in preserving operational
identity, shareholders' control over each of the companies and in the obligation to attach Subsidiary's Balance
Sheet, Profit and Loss Account, Directors' and Auditors' Reports and a Statement showing Holding Company's
interest in the Subsidiary Company, to the Balance Sheet of the Holding Company.
Balance sheet of Holding Company.— Section 212 of the Companies Act, 1956 deals with Balance sheet of
Holding Company to include certain particulars as to its Subsidiaries. Section 213 confers powers on the Central
Government to extend financial year of the Subsidiary so that it ends with that of its Holding Company.
Section 214 of the Companies Act, 1956 provides for Inspection of Subsidiary Company's Books of Accounts.
See detailed Comments under Sections 4, 42, 211-214, 227 and Schedule VI.
Companies (Accounting Standards) Rules, 2006, the Indian GAAP, International GAAP, English GAAP and US
GAAP, ICAI Accounting Standards (AS), Accounting Standards Interpretations (ASI), Guidance Notes on
Accounting, Authority Attached to Documents Issued by the Institute of Chartered Accountants of India (ICAI) under
Section 211(3C) and Schedule VI.
Compliance Certificate—Holding Company and Subsidiary Company.—Relevant paras of the Form appended
to the Companies (Compliance Certificate) Rules, 2001 and ICSI Guidance Note on Compliance Certificate are
dealt with below.
(AGM).
Page 4 of 5
Check-List for issue of Compliance Certificate.—Check-List for issue of Compliance Certificate as contained in
ICSI Guidance Note on Compliance Certificate, on, inter alia, requires a PCS to check as follows.
Check-List for other Compliances.—Besides 33 paras of Form of Compliance, the ICSI Guidance Note on
Compliance Certificate requires a Practising Company Secretary (PCS) to check certain Sundry Items (General).
Relevant paragraphs on Holding Company and Subsidiary Company are reproduced below.
“(c) Holding Company and Subsidiary Company. Check whether:

(i) if during the year the company has become a ‘Holding Company’ or ‘Subsidiary Company’ under Section 4
and where the financial year of the subsidiary does not coincide with that of the holding company there
should not have been a gap in excess of six months between the financial year of the holding and
subsidiary company;
(ii) in such cases the Balance sheet of Holding Company include certain particulars as to its Subsidiaries as
required under Section 212;
(iii) where the Holding Company was unable to obtain the required information from its Subsidiaries check
whether a report in writing to that effect was attached to the Balance sheet of the Holding Company;
(iv) any exemption was obtained from the Central Government and if so whether the directions given by the
Central Government were complied with.”
“(j) Membership of Holding Company.—Check whether :

(i) the company is a Member of a company which is its Holding Company;
(ii) the company which is a Member of its Holding Company has been allotted any shares or acquired further
shares after it became a Subsidiary as such allotment or transfer is void.”
“(b) In case of a Private Company which is a Subsidiary of a Public Company.—Check whether the company
commencement of the Companies (Amendment) Act, 2000 i.e. 13-12-2000.”
See detailed Comments on Status of Company under Section 3.
under Section 383A.
70. Asian Investments Ltd., In re, (1992) 73 Comp. Cas. 517 (Mad.). See also Comments under Sections 100 to 102.
71. Himachal Telematics Ltd. and Himachal Futuristic Communications Ltd., In re, (1996) 86 Comp. Cas. 325 (Delhi). See
72. New Vision Laser Centers (Rajkot) Pvt. Ltd., In re (2002) 111 Comp. Cas. 756 (Guj.); Consolidated Coffee Ltd., In re,
(1999) 97 Comp. Cas. 1 (Kar.). See detailed Comments under Sections 77 and 391 to 394.
73. Dina Moni v. Elahadut Khan, 8 CWN 848; Amarchandra v. Sebak, 11 CWN 593.
Page 5 of 5
End of Document
Datta: Company Law
C R Datta
COMPANY AND MATTERS INCIDENTAL THERETO > Private companies
S. 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 74[ Central Government], 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 74[ Central Government] just and expedient, order that the company be
relieved from such consequences as aforesaid.
[(w.e.f.) date to be notified]. Earlier the words “Company Law Board” were substituted by the Companies
(Amendment) Act, 1988 (31 of 1988), s. 67, for “Court” (w.e.f. 31-5-1991).
75. Winfield Agro Services Pvt. Ltd., In re, (1996) 86 Comp. Cas. 587 (AP). See also Comments under Sections 3 and 391.
COMMENTS
English Act, 1948 : Section 29 Previous Act, 1913 : Sections 154(3)
Legislative History.— The Companies Act, 1956 (1 of 1956).—The Notes on clauses explained the provisions of
this section as follows: “This section corresponds to section 154 of the Indian Act and section 29 of the English Act.”
The Companies (Amendment) Act, 1988 (31 of 1988).—The powers which were exercised by the Court under this
section were vested in the CLB [ now the Central Government]. See Legislative History below and under Section
10E.
The Companies (Second Amendment) Act, 2002 (11 of 2003).—The Notes on clauses explained as follows: “This
clause seeks to amend section 43 of the Companies Act, 1956 relating to consequences of default in complying
with conditions constituting a company as private company. It is proposed to confer the powers of theCompany Law
Page 2 of 3
Board in the aforesaid section upon the Tribunal [ conferred upon the Central Government in the Act]. These
amendments are of consequential nature.” [ Clause 8 of the Companies (Amendment) Bill, 2001 (80 of 2001)].
See also Legislative History under Sections 10E and 10FB.
Jurisdiction.—By the Companies (Second Amendment) Act, 2002 (11 of 2003) (w.e.f. date to be notified), the
powers and jurisdiction hitherto exercised by the Company Law Board (CLB) has now been transferred to “the
Central Government”. Earlier, the Companies (Amendment) Act, 1988 had transferred the jurisdiction from the
Court to the CLB to give a cheaper and quicker relief to the applicant.
See also Comments under Sections 10E, 10FB and 637.
Effect of non-compliance with four restrictions by Private Company.—The consequence of default in

complying with the four restrictions enumerated in section 3(1)(iii) (a) to (d) [as amended by the Companies
(Amendment) Act, 2000] is that the company will be deemed to be a public company and the provisions relating to
public companies will apply to such a private company. It shall cease to be entitled to the privileges and exemptions
conferred on private companies by or under this Act and this Act shall apply as if it were not a private company.
For Restrictions, Privileges and Exemptions see Comments under Section 3.
Central Government may grant relief [Proviso].—The Central Government has been given power to grant relief
from such consequences on an application made by the company or any other person interested on such terms and
conditions as the Central Government thinks just and expedient, 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.
Application under section 43 praying for relief from consequences of failure to comply with conditions constituting it
a private company shall be made to the Central Government.
See detailed Comments, Form and Procedure under Sections 10FB and 637.
For Form and Procedure for Application (till commencement of amendment) hitherto made to the CLBsee
Comments under Section 10E.
Amalgamation.—Where the Central Government objected to a sanction being granted to a scheme of

amalgamation on the ground that due to amalgamation the number of membership of the private transferee-
company would exceed 50 and the transferee company would become a public company. The objection was raised
that this cannot be done. Rejecting the objection the Court [ now the Tribunal] held that it was for the amalgamated
company to take steps in accordance with the provisions of the Act after such amalgamation.75
Secretarial Practice and Check List.— Section 43. Check whether the private company had committed default
and came under this section? If so, the details thereof.
The documents involved are : (1) Minutes of Board Meeting, (2) Register of Members, (3) Correspondence with
Registrar, (4) Memorandum and Articles, (5) Certificate of Incorporation.
75. Winfield Agro Services Pvt. Ltd., In re, (1996) 86 Comp. Cas. 587 (AP). See also Comments under Sections 3 and 391.
Page 3 of 3
End of Document
Datta: Company Law
C R Datta
76[S. 43A. Private company to become public company in certain cases.

—
(1) Save as otherwise provided in this section, where not less than twenty-five per cent. of the paid-up
share capital of a private company having a share capital, is held by one or more bodies corporate, the
private company shall,—
(a) on and from the date on which the aforesaid percentage is first held by such body or bodies
corporate, or
(b) where the aforesaid percentage has been first so held before the commencement of the
Companies (Amendment) Act, 1960 (65 of 1960), on and from the expiry of the period of three
months from the date of such commencement unless within that period the aforesaid percentage is
reduced below twenty-five per cent. of the paid-up share capital of the private company,
become by virtue of this section a public company:
Provided that even after the private company has so become a public company, its articles of
association may include provisions relating to the 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.
77[ Explanation.—For the purposes of this sub-section,

Page 2 of 21
“” means public companies, or private companies which had become public companies by virtue of
this section.
]
78[(1A) Without prejudice to the provisions of sub-section (1), where the average annual turnover
of a private company, whether in existence at the commencement of the Companies (Amendment)
Act, 1974 (41 of 1974), or incorporated thereafter, is not, during the relevant period, 79[less than
such amount as may be prescribed], the private company shall, irrespective of its paid-up share
capital, become, on and from the expiry of a period of three months from the last day of the
relevant period during which the private company had the said average annual turnover, a public
company by virtue of this sub-section:
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:
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.]
80[(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 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:
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.
81[ (2A) Where a public company referred to in sub-section (2) becomes a private company on or
after the commencement of the Companies (Amendment) Act, 2000 (53 of 2000), such company
shall inform the Registrar that it has become a private company and thereupon the Registrar shall
substitute the words “private company” for the words “public company” in the name of the company
Page 3 of 21
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 within four weeks from the date of
application made by the company.]
(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.
82[(6) * * *]
83[(7) * * *]
(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, 83[***]
84[(b) * * *]
85[(c) that the private company, irrespective of its paid-up share capital, did not have, during the
relevant period, an average annual turnover of 86[such amount as is referred to in sub-section (1A)
or more],]
87[(d) that the private company did not accept or renew deposits from the public.]
88[(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.]
89[(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.]
90[ Explanation.—For the purposes of this section,—

(a)
“” 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)
Page 4 of 21
“”, 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.
]
91[(c) “deposit” has the same meaning as in section 58A.]
92[ (11)Nothing contained in this section, except sub-section (2A), shall apply on and after the
commencement of the Companies (Amendment) Act, 2000 (53 of 2000).]
78. Inserted by the Companies (Amendment) Act, 1974, 1974 (41 of 1974) s. 6 (w.e.f. 1-2-1975).
79. Substituted by Act 31 of 1988, s. 7, for “less than rupees one crore” (w.e.f. 15-6-1988).
81. Inserted by the Companies (Amendment) Act, 2000 (53 of 2000), s. 12 (w.e.f. 13-12-2000).;
82. Omitted by Act 31 of 1988, s. 7 (w.e.f. 15-6-1988). For sub-sections (6) and (7) as they stood prior to their omission see
83. The word “or” omitted by Act 31 of 1988, s. 7 (w.e.f. 15-6-1988).
84. Omitted by the Companies (Amendment) Act, 1988 (31 of 1988), s. 7 (w.e.f. 15-6-1988). For clause (b) as it stood prior
to its omission see Annexure at the end of this Volume.
86. Substituted by Act 31 of 1988, s. 7 (w.e.f. 15-6-1988), for “rupees one crore or more”.
under Sections 3, 21, 23, 31 and 44.
94. Magna Graphics (India) Ltd. v. Prakash Sabde, (2006) 129 Comp. Cas. 629 (Bom.).
95. Needle Industries (India) Ltd. v. Needle Industries Newey (India) Holding Ltd., (1981) 51 Comp. Cas. 743 (SC) : AIR
1981 SC 1298 [LNIND 1981 SC 278]: (1981) 3 SCR 698 [LNIND 1981 SC 278]; Jayanthi Detergents Pvt. Ltd. v.
Secretary, CLB, (2001) 103 Comp. Cas. 184 (AP). See also Comments under Section 81.
1. Sishu Ranjan Dutta v. Bhola Nath Paper House Ltd., (1983) 53 Comp. Cas. 883 (Cal.). See also Comments under
Section 398.
2. Bhubaneshwar Singh v. Kanthal India Ltd., (1986) 59 Comp. Cas. 46 (Cal.). See also Comments under Section 398.
3. Sri Ramdas Motor Transport Ltd. v. Tadi Adhinarayana Reddy, (1997) 90 Comp. Cas. 383 (SC). See also Comments
4. Zenith Electro-Systems Pvt. Ltd., In re, (1990) 69 Comp. Cas. 138 (Bom). See also Comments under Sections 372,
372A, 374 and 391.
5. Parasrampuria Trading and Finance Ltd., In re, (2006) 131 Comp. Cas. 834 (All.); Parasrampuria Trading and Finance
Ltd., In re, (2007) 135 Comp. Cas. 65 (All.).
6. M. Rajamoni Amma v. Dy. CIT, (1992) 74 Comp. Cas. 356 (SC) : (1992) 195 ITR 873 (SC). See also Comments under
Sections 3 and 34.
Page 5 of 21
COMMENTS
Legislative History.—The Companies (Amendment) Act, 2000 (53 of 2000).—The Notes on Clauses explained the
amendments as follows: “This clause seeks to insert new sub-section (11) so as to provide that the provisions of
section 43A of the Act will not be applicable after enactment of the Bill.” [ Clause 12 of the Companies (Second
For Statement of Objects and Reasons appended to the original and Amending Bills see Legislative History in
As section 43A is not applicable (w.e.f. 13-12-2000), Legislative History and Comments on section 43A as it stood
prior to 13-12-2000 have been given in smaller type after Comments on the Companies (Amendment) Act, 2000 (53
of 2000) given below as the object of this deeming provision or deemed public company may be of some use under
new definition of “public company” under Section 3(1)(iv).
Section 43A not applicable (w.e.f. 13-12-2000) [ Section 43(11)].—Nothing contained in this section, except sub-
section (2A), shall apply on and after the commencement of the Companies (Amendment) Act, 2000.
Section 43A(11) provides that the provisions of section 43A of the Companies Act, 1956 except sub-section (2A)
will not be applicable after the commencement of the Companies (Amendment) Act, 2000, i.e., with effect from 13-
12-2000.
Department's view.— Companies (Central Government's) General Rules and Forms (Amendment) Rules,
2001.—“The Department of Company Affairs (DCA) has issued a Notification amending the Companies (Central
Government's) General Rules and Forms, 1956.
By Notification issued earlier, in Rule 4C* [ Section 43A] of the Companies (Central Government's) General Rules
and Forms, the following proviso has been inserted, “Provided that nothing contained in this rule shall apply on and,
after the commencement of the Companies (Central Government's) General Rules and Forms (Amendment) Rules,
2001.
The principal rules were published in the Gazette of India on February 18, 1956, and subsequently amended 77
times to date.” [Extracts from PIB Press Release, New Delhi, dated 12-2-2001 : (2001) 104 Comp. Cas. (St.) 307].
Inform the Registrar [Sub-section (2A).—Where a public company referred to in sub-section (2), that is, a private
company deemed to be public company under section 43(2), becomes a private company in view of the Companies
(Amendment) Act, 2000 (w.e.f. 13-12-2000), such company shall inform the Registrar of Companies that it has
become a private company and thereupon the Registrar shall substitute the words “private company” for the words
“public company” 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 within four weeks from
the date of application made by the company.
Department's view.— New provisions of Section 43A(2A) of the Companies Act, 1956.—“I am directed to refer
to your letter No. TC/43A(2A)/3854, dated 23rd January, 2002, addressed to the Regional Director, Kanpur, and
copy endorsed to this Department and to say that fixing of time-limit for getting conversion by deemed public
company to private limited company under section 43A(2A)of the Companies Act, 1956, may not be feasible. If a
public company, which had become a deemed public company under section 43A of the Companies Act, 1956
when it was in force, does not approach for reconversion, it is deemed to have chosen to remain as a public
company.” [ Departmental Circular No. 3 of 2002 (F. No. 17/4/2002-CL-V), dated 24-7-2002, addressed to the
Registrar of Companies, NCT of Delhi and Haryana, New Delhi :(2002) 112 Comp. Cas. (St.) 117].
Section 4(7) ‘private’ status to Indian private companies where foreign body corporates hold 100 per cent.
shares automatic. Exemption not required after amendment of section 43A.—“The Registrar of NCT of Delhi
and Haryana has sought a clarification on the applicability of section 43A(2A)on the erstwhile deemed public
companies [when section 43A was in operation prior to the Companies (Amendment) Act, 2000, which came into
Page 6 of 21
force with effect from 13th December, 2000], to those public companies which are subsidiaries of foreign body
corporates. The matter has been examined in the Department.
2. After amendment of the erstwhile section 43A, since the provisions of section 4 of the Companies Act are
independent, a private company, being a subsidiary of a foreign body corporate, which, if incorporated in India,
would not be a public company. As such, these deemed public companies are entitled to revert back to their initial
status of private limited companies as the effect of section 43A has been nullified by the amendment referred to.
3. Section 4(7) of the Act was an exemption available to Indian private companies when foreign body corporates
were holding 100 per cent. share in them to retain their ‘private’ status. After amendment of section 43A, such
exemption is not required. Therefore, applications under section 43A(2A) shall be dealt with independent of section
4(7) of the Act. The legal position in the above circumstances would be that a private company would be the
subsidiary of another private limited company even if the holding company happens to be a foreign body corporate
and these companies do not need the exemption provided in section 4(7) of the Act. Therefore, the private
company status of such companies is a statutory one, and takes effect automatically. All that the company is
required to do is to make an application to the Registrar that the company has become a private company and
thereupon the Registrar shall substitute the words ‘private limited’ in lieu of the words ‘public limited’.
4. Since no time limit has been prescribed in the statute for the companies to revert back, the Department has
already issued a Departmental Circular No. 3 of 2002, dated 24th July 2002 (F. No. 17/4/2002-CL-V) [ printed
above], wherein it has been clarified that those companies which do not approach the Registrar of Companies
seeking reversion back to private company status, are deemed to have chosen to remain as public companies.
5. In the circumstances, it is hereby clarified, that in cases falling in the above paragraphs, the Registrar is required
to make the necessary corrections in the certificate of incorporation within four weeks as from the date of receipt of
application from the company as provided in section 43A(2A) of the Act.” [ General Circular No. 23 of 2002 (F. No.
17/26/2002-CL-V), dated 30-9-2002 : (2002) 112 Comp. Cas. (St.) 118].
Filing Fees.— See clause 6 of Schedule X of the Companies Act, 1956 for fees payable for making a record of or
registering any fact by this Act required or authorised to be recorded or registered. This includes making of an
alteration in the Memorandum of Association. Appropriate fees should be paid by companies on the information
furnished to the Registrar of Companies under section 43A(2A)of the Companies Act 1956 as amended (w.e.f. 13-
12-2000). See Circular No. 28/72, dated 2-8-1972 in Comments on old Section 43A(2) hereinafter.
As before making the application the company may have to amend its Articles of Association, if necessary, so as to
incorporate the four requirements of section 3(1)(iii) of the Act as amended (w.e.f. 13-12-2000). The said obligation
may be fulfilled with the passing of a special resolution in pursuance of Section 31 of the Companies Act. Because
the special resolution would precede and be a step-in-aid of the application under section 43A(2A) of the Act. An
application by the company under Section 43A(2A) is only required and the question of two applications
accompanied by two application fees may not arise. The requirement of Central Government's approval under the
proviso to Section 31 of the Act is solely applicable to the category of public companies which by the terms of their
incorporation or by direct conversion (i.e. without intervention of old Section 43A), e.g., under Section 44, from
private to public have assumed the status of public companies and which seek to attain or recover the status of
private companies. See Circular No. 11/72, dated 19-5-1972 in Comments on old Section 43A(4) hereinafter.
Conversion of Private into Public Company.—For Conversion of Private Company into a Public Company and
vice versa, that is, Conversion of Public Company into a Private Company see Comments under Sections 31 and
44.
Deemed Public Company [ S. 43A inapplicable (w.e.f. 13-12-2000)].—As already explained, Section 43A, viz.,
Private companies to become public companies in certain cases is not applicable (w.e.f. 13-12-2000) [ Section
43A(11)].
Section 43A provided that a Private Company became a Deemed Public Company if it held certain shares in public
companies or vice versa or its turnover exceeded certain limits. A deemed public company after the
commencement of the Companies (Amendment) Act, 2000 (53 of 2000) (w.e.f. 13-12-2000) might apply to the
Registrar of Companies for becoming a Private Company [ Section 43A(2A)]. On Application under section 43(2A)
the Registrar had to issue a fresh Certificate adding the word “Private” in the name of the Company.
Page 7 of 21
New Definitions of Private and Public Company [ Section 3].—As a consequence, new definitions of Private
company [ Section 3(1)(iii)] and Public Company [ Section 3(1)(iv)] have been substituted (w.e.f. 13-12-2000).
Private Company [ Section 3(1)(iii)].— Section 3(1)(iii) as amended by the Companies (Amendment) Act, 2000
(w.e.f. 13-12-2000) defines the private company to mean a company which has a minimum paid-up capital of Rs. 1
lakh or higher sum prescribed, and by its Articles (a) restricts the right to transfer its shares, (b) limits the number of
its members to 50, (c) prohibits invitation to the public to subscribe for shares in, or debentures of, the company,
and (d) prohibits invitation or acceptance of deposits from persons other than its members, directors or their
relatives.
Minimum subscribers [ Section 12(1)].—Seven or more persons may form a public company. A private company
may be formed by two or more persons.
Default by Private Company in complying S. 3(1)(iii) [ Section 43].—If a private company makes default in
complying with any of the provisions of section 3(1)(iii), it shall cease to be entitled to privileges and exemptions
conferred on private companies by or under this Act, and the provisions of the Act shall apply to the company as if it
were not a private company.
Private company ceasing to be private [ Section 44].—If a private company, alters its Articles in a manner that
they no longer include the four restrictions under section 3(1)(iii), it shall cease to be a private company.
Public Company [ Section 3(1)(iv)].— Section 3(1)(iv) as substituted by the Companies (Amendment) Act, 2000
(53 of 2000) with effect from 13-12-2000 defines that the public company means a company which—(a) is not a
private company, (b) has a minimum paid-up capital of Rs. 5 lakhs or higher sum prescribed, and (c) is a private
company which is a subsidiary of a company which is not a private company.
Privileges and Exemptions to Private Companies.—Private Companies enjoy several Exemptions and Privileges
under the Companies Act, 1956 principally on the ground that they are family concerns in which the public is not
directly interested.
The object of Section 43A [ inapplicable (w.e.f. 13-12-2000)] now new definition of Public Company [ Section
3(1)(iv)] (w.e.f. 13-12-2000) read with Sections 43 and 44 is that if a private company takes advantage of public
money or does not contain the four restrictions in its Articles of Association it will become a public company and all
the provisions of the Act will apply to it excepting certain privileges explained in Comments under Sections 3 and
43.
See List of Privileges and Exemptions to a Private Company (not being a subsidiary of a public company) in
Comments on old Section 43A.— Section 43A is since not applicable. But object behind this provision, Legislative
History, Department's views and certain Comments on old section 43A as it stood prior to 13-12-2000 have been
given in smaller type below which may be of some use under new definition of “public company” under Section
3(1)(iv)of the Companies Act, 1956 (w.e.f. 13-12-2000) and similar questions may also arise in connection with a
private company that becomes a public company in the ordinary course by conversion.
Legislative History.— The Companies (Amendment) Act, 1960 (65 of 1960).—The Notes on clauses explained the
reasons for insertion of this section as follows: “The amendment proposed implements the recommendation in para
23 of the Report that private companies, which employ public money to an appreciable extent, should be subject to
the same restrictions and limitations as to disclosure and otherwise, as apply to public companies. It is proposed to
exempt a private company which is wholly-owned either by another private company registered in India or by one or
more foreign companies from the operation of the new requirement.” [ Clause 15 of the Companies (Amendment)
Bill, 1959 (37 of 1959)].
The recommendations of the Companies Act Amendment Committee, 1957 were:
“Private companies are exempted from the operation of several sections of the Act and enjoy certain privileges,
principally on the ground that they are family concerns in which the public is not directly interested. It is, however,
Page 8 of 21
well known that there are many private companies with large capital doing extensive business and controlling a
number of public companies. This is made possible because funds of other companies, public and private, are
invested in such private companies. As public money is invested in such companies, there is no reason for treating
such companies as private companies. The problem of private companies has always been somewhat difficult. On
the one hand, there are genuine private companies which are nothing but glorified partnerships and, on the other,
there are private companies whose operations, financial and industrial, are far wider than those of many public
companies. To meet this problem, the Cohen Committee created the category of exempted private companies but
the relevant provisions in the English Act are very complicated. It was strongly urged upon us that the several
exemptions granted to and the privileges enjoyed by private companies should be withdrawn, as they are abused.
But to withdraw them from all private companies may cause hardship to genuine small private companies. At the
same time, there is no doubt that private companies, which employ public money directly or indirectly to a
considerable extent, should be subject to the same restrictions and limitations as to disclosure and otherwise as
apply to public companies.” [ Report : para 23].
The Joint Committee proposed further changes as follows:
“In respect of this clause it was contended that there was no justification for deeming a private company as a public
one when twenty-five per cent. or more of its shares were held by one or more private companies, because such a
company might not employ any public money directly or indirectly, particularly when the aggregate individual
membership of the concerned company including the individual members of the shareholding private companies did
not exceed 50. The Committee think that this contention is not without substance. They, therefore, feel that the
restriction imposed under this clause should not apply to any private company if (i) the body corporate or each of
the bodies corporate holding shares in the private company is itself a private company, (ii) no body corporate holds
any share in any of the shareholding companies and (iii) the total number of individual shareholders of the
shareholding company or companies together with the individual shareholders of the private company does not
exceed 50, which number should be computed in the same manner as is done in the case of a private company
under section 3(1)(iii)(b) of the Act. The Committee further feel that in computing the relevant percentage, no
account should be taken of any shares in the private company held by a banking company either as a trustee for
any individual or as an executor or as an administrator of a deceased person. The Committee also consider it
unnecessary to require a private company which has become a public company to pass a resolution for the change
of its name. The purpose will be served if the company informs the Registrar about the conversion within a period of
three months. The clause has been recast accordingly.” [ Report : para 22].
The Companies (Amendment) Act, 1974 (41 of 1974).—Clause 5 of the Companies (Amendment) Bill, 1972 (72 of
1972) originally contained the amendments on the basis of recommendations of the Shastri Committee. This clause
was however re-drafted by the Joint Committee. The Notes on clauses are reproduced below:
“Sub-section (1).—The Shastri Committee recommended that the exemptions available to private companies under
the Act should not apply to those private companies in which public money, directly or indirectly, is employed to a
considerable extent. Accordingly, section 43A was introduced by the Amending Act of 1960 under which, where not
less than twenty-five per cent. of the paid-up capital of a private company is held by one or more bodies corporate,
such a private company shall become a public company and all the provisions of the Act relating to a public
company shall apply to it. At that time the figure of twenty-five per cent. of share ownership by bodies corporate was
considered sufficient as a gauge of the public interest involved in a company incorporated as a private company.
But it is found from experience that it is possible for bodies corporate in which public interest is considerable to
control private companies with very much lower percentage of the paid-up capital of such companies. In order to
widen the scope of regulation of companies in which though, incorporated as private, the public interest involved is
of a considerable extent, it is considered reasonable to reduce the percentage aforesaid from twenty-five to ten per
cent. The Shastri Committee had further recommended that indirect employment of public money in a private
company should also be a criterion for making a private company subject to the same restrictions and limitations as
a public company. This aspect is not reflected in section 43A as it stands, inasmuch as the loan capital and scale of
operations are not made a basis for deeming private companies as public companies. In order to make good this
omission, it is further proposed that if a private company with a paid-up capital of Rs. 25 lakhs or more has an
average turnover of Rs. 50 lakhs or more during the three financial years immediately preceding the first date on
which the company has the said paid-up share capital and turnover it would also be deemed to be a public
company.
Sub-section (1A).—It has been felt that where not less than ten per cent. of the paid-up capital of a public company
is held by a private company, the latter becomes affected with public interest and may well be brought, therefore,
into the ambit of section 43A.
Page 9 of 21
Sub-sections (6) and (7).—The exemptions conferred by the existing sub-section (6) of section 43A of the Act are
withdrawn and hence the said sub-section as well as sub-section (7) which is consequential to it, is being deleted.
Sub-section (8).—This is a consequential amendment to the changes proposed in section 43A as outlined above.” [
Clause 5 of the Companies (Amendment) Bill, 1972 (72 of 1972)].
The changes recommended by the Joint Committee and the reasons therefor were:
“Sub-section (1A).—According to existing section 43A(1), where one or more bodies corporate hold not less than
twenty-five per cent. of the paid-up share capital of a private company, such private company becomes a public
company. The sub-clause, as introduced, proposes to reduce the said percentage from twenty-five to ten. The
Committee feel that the reduction of the percentage of shareholding to ten is likely to hamper the formation and
growth of private limited companies in the small scale sector, especially in the rural areas, and, therefore, the
provisions of section 43A(1) should not be disturbed. The Committee further feel that private companies which are
less capital intensive but have a considerable consumer and employee interest because of its high turnover, should
be brought within the ambit of deemed public companies irrespective of its paid-up share capital. The Committee,
therefore, recommend that a private company, irrespective of its paid up share capital, shall become a public
company if it has an average annual turnover of one crore rupees or more. The Committee have, therefore, inserted
new sub-section (1A) after sub-section (1) of section 43A, to achieve these objectives.
Sub-section (1B).—The Bill, as originally introduced, sought to provide that a private company holding ten per cent.
or more of the paid-up share capital of a public company will be deemed to be a public company. The Committee
feel that the fixation of the percentage at ten is likely to hamper the growth and formation of capital of public
companies. The Committee, therefore, recommend that the percentage be increased to twenty-five. The sub-clause
has been amended accordingly. A consequential change in the number of the sub-section has been made.
Sub-sections (6) and (7).—The Committee feel that a private company in which the entire share capital is held by
another private company need not become a public company. The sub-clause has, therefore, been omitted in order
that the exemptions under section 43A as it stands may continue to be in force.
Sub-section (8).—The amendments are of a consequential nature. The Committee feel that private companies
which do not have an average annual turnover of rupees one crore or more should file with the Registrar a
certificate to that effect.
Sub-section (9) and Explanation.—The Committee feel that every private company having share capital should file
with the Registrar, along with the annual return, a certificate signed by both the signatories of the annual return,
stating that since the date of the annual general meeting with reference to which the last annual 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. A new sub-section (9)
has been added to section 43A accordingly.
The Committee have inserted an ‘Explanation’ including therein definitions of the expressions ‘relevant period’ and
‘turnover’ so that there may not be any difficulty with regard to the interpretation of those expressions.” [ Report :
para 21].
The Companies (Amendment) Act, 1988 (31 of 1988).—The Explanation to sub-section (1) was added by the
official amendments made in the original Bill in Rajya Sabha. The term ‘bodies corporate’ was defined for the
purpose of sub-section (1) of section 43A.
The Notes on clauses explained the other amendments as follows:
“Sub-section (1A).—The value of average annual turn-over of rupees one crore as the ceiling for deeming a private
company as public company in section 43A is being substituted to provide for a ceiling that may be prescribed.
Further, the provision for laying down absolute monetary ceilings are being substituted by ceilings to be prescribed
by rules.
Sub-section (1C).—This provides that a private company which accepts deposits from the public should be deemed
to be a public company.
Page 10 of 21
Sub-sections (6) and (7) of section 43A are sought to be deleted as the exemption contained therein have been
found to render the other provisions of the section nugatory.
The amendments proposed in other sub-sections are of consequential nature.” [ Clause 7 of the Companies
Sub-section (1C) was inserted on the basis of the recommendations of the Sachar Committee in its Report para 4.5
which read as follows: “Private companies will be prohibited from accepting deposits or borrowing money from
members of the public, except from their own directors, shareholders and their relatives.”
Object.—This section provided that if a private company took advantage of public money or operated on a large
scale, it would become a public company and all the provisions of the Act would apply to such company except that
the three restrictions contained in its Articles might be retained and that the number of members need not be seven
or more.
Circumstances in which private company became public company.—There were four circumstances on the
fulfilment of any one of them a private company was deemed to have become a public company. These
circumstances had been provided for in sub-sections (1), (1A), (1B) and (1C) of section 43A. The sub-sections are
discussed below:
Sub-section (1).—If one or more public companies including a deemed public company held 25 per cent. or more
of the paid up share capital of the private company, then the private company became a deemed public company.
Department's view.— Computation of the percentage of shareholding for the purpose of Section 43A(1).—[
Not reproduced as redundant (w.e.f. 13-12-2000)].
See Circulars, viz., Extract from queries raised by the Indian Merchants Chamber in a memorandum submitted to
the Department of Company Affairs, (Company Law Administration) on 31-7-1962 and the Department's views
thereon. Company News and Notes, dated July 1, 1963 : Govt. of India publication, Clarifications and Circulars on
Company Law, 1977 Edition, page 30 and Datta on the Company Law, Fifth Edition, 1991, page 183.
Sub-section (1A).—If the average annual turnover of the private company for the last three financial years was Rs.
25 crores or more [ vide Rule 4C of the Companies (Central Govt.'s) General Rules and Forms, 1956 substituted for
Rs. 10 crores (w.e.f. 23-2-1999) since inapplicable (w.e.f. 13-12-2000)] then the private company became a
deemed public company. Sub-section (1A) earlier provided for the limit of Rs. one crore or more. See Circular. 7 of
1999 (F. No. 1/8/99-CL-V), dated 25-5-1999 : (1999) 97 Comp. Cas. (St.) 95.
As per proviso to Rule 4C of the Companies (Central Government's) General Rules and Forms, 1956 nothing
contained in this Rule shall apply (w.e.f. 15-1-2001).
Department's view.— Prescribed turnover and turnover criterion.—[ Not reproduced as redundant (w.e.f. 13-
12-2000)].
See Circulars, viz., Circular No. 16/90 (F. No. 1/6/88-CL-V), dated 22-10-1990 : Chartered Secretary, November
1990, page 969 : (1991) 70 Comp. Cas. (St.) 30, Circular No. 3/89 (F. No. 3/19/88-CL-V), dated 13-4-1989:
Chartered Secretary, May 1989, page 374 : (1989) 65 Comp. Cas. (St.) 561, Circular F. No. 3/20/88-CL-V, dated
18-8-1988 : Chartered Secretary, November 1988, page 1006, Circular No. 4/1/80-CL-V, dated 2-9-1980 :
Chartered Secretary, September 1980, page 852 : (1980) 50 Comp. Cas. (St.) 105, Circular No. 16/75, dated 23-6-
1975 : Govt. of India publication, Clarifications and Circulars on Company Law, 1977 Edition, page 35 and Letter
No. 32/17/75-CL-III, dated 9-9-1975 : Govt. of India publication, Clarifications and Circulars on Company Law, 1977
Edition, page 34 and Datta on the Company Law, Fifth Edition, 1991, pages 183-186.
Sub-section (1B).—If the private company held 25% or more of the paid up share capital of a public company, the
private company was deemed to have become a public company.
Sub-section (1C).—If a private company after an invitation by means of an advertisement accepted or renewed
deposits from the public, other than from its members or directors and their relatives, then it became a deemed
public company.
Page 11 of 21
Acceptance of deposits from persons approached individually or by private letters was not hit by this section.
Acceptance of deposits or renewals of deposits on the basis of personal negotiations was not within the purview of
this section. There ought to be an invitation by advertisement just like public issue of shares and debentures inviting
deposits or renewal thereof to attract the provisions of this section.
As a consequence of inapplicability of section 43A, sub-clause (d) has been inserted in Section 3(1)(iii) w.e.f. 13-12-
2000. Thus, if a Private Company invites or accepts deposits from public it shall become Public Company under
substituted definition of Public Company in section 3(1)(iv) (w.e.f. 13-12-2000). See detailed Comments under
Section 3(1)(iii)(d).
Department's view.— Section 43A(1C).—“A private company which accepts deposits from public by way of
invitation by advertisement, or renews deposits so accepted, will become a public company, and not otherwise. It is
clarified that a private company which had accepted, after an invitation made by advertisement, deposits from the
public prior to the 15th June, 1988, shall be deemed to have become a public company when any deposit so
accepted is renewed, on and from the date of such renewal.” [ Circular No. 3/89, dated 13-4-1989 : Chartered
Secretary, May 1989, page 374 : (1989) 65 Comp. Cas. (St.) 561].
Private company structure could be retained.—A private company after becoming a deemed public company
might continue to retain the restrictive and prohibitive conditions in its Articles [specified in section 3(1)(iii)] which
distinguish it from a public company and to this extent the other provisions applicable to public company were not
applicable. [Proviso to Sub-sections (1), (1A), (1B) and (1C)].
Formalities [Sub-section (2)].—This sub-section provided for formalities to complied after becoming a deemed
public company.
Department's view.— Formalities to be complied with on deemed conversion.—In reply to a query: “There are
no procedural details given in the new section 43A which made private companies/public companies in certain
cases. Is it sufficient that the Registrar is intimated? What are the other formalities to be complied with?”
The Department expressed following views: “When a private company becomes a public company due to the
provisions of section 43A(1), then by virtue of section 43A(2) the said company is required to:—
(i) file a declaration with the Registrar;
(ii) change its name;
(iii) bring its articles in consonance with the requirements applicable to a public company; and
(iv) take such other steps as would be necessary in regard to the number of its directors, members, etc.” [
Letter No. 8/16(1)/61-PR, dated 9-5-1961 : Govt. of India publication, Clarifications and Circulars on
Intimation given to the Registrar of Companies under section 43A(2)Whether may be treated as a document
on which filing fee is to be levied.—“It has come to the notice of this Department that some of the Registrars of
Companies charge fees for recording the information referred to above while others do not charge any such fees.
This Department has examined this point in consultation with the Ministry of Law and Justice and holds that the
provisions contained in clause 6 of Schedule X of the Companies Act, 1956 apply to the making of an alteration in
the Memorandum of Association under sub-section (2) of Section 43A which has to be done when the Registrar is
informed by a Private company that it has become a public company under sub-section (1) of the said section.
Clause 6 of Schedule X speaks of making a record of any fact and therefore making alteration by means of a formal
writing in the Memorandum of Association registered with the Registrar showing that the private company has
become a public company would be within the ambit of the said clause.
Appropriate fees are therefore to be paid by companies on the information furnished to the Registrar of Companies
under sub-section (2) of section 43A of the Companies Act 1956. ” [ Circular No. 28/72, dated 2-8-1972 : Govt. of
India publication, Clarifications and Circulars on Company Law, 1977 Edition, page 33].
Change of name [Sub-section (3)].— Sub-section (3) of section 23 shall apply to a change of name under section
43A(2) as it applies to a change of name under section 21.
A combined reading of the provisions of sections 43A, 21 and 23 leaves no manner of doubt that when a company
Page 12 of 21
is converted into a public company, apart from the change in its name, the constitution and the entity of the
company is not affected in any other manner and the legal proceedings instituted by its former name can be
continued by its new name.93
Deemed Public Company—Change of name from “Private” to “Limited”.—In a writ petition filed by the
petitioner against the demand by the Collector of unearned profit under a lease deed, the Single Judge declared
that the change in name of the petitioner-company by deletion of the word “Private” was not by any voluntary act on
behalf of the petitioner but was by virtue of operation of law under the provisions of Section 43A of the Companies
Act, 1956 and that the petitioner had not committed any breach of conditions of the lease deed. The Commissioner
on the ground that the petitioner did not take prior permission from the Collector before changing its name as per
the conditions mentioned in the original lease deed which was still binding upon the petitioner-company, demanded
50 per cent. of the unearned profit. On a contempt petition challenging the decision of the Commissioner. It was
held, that the order of the Single Judge in clear terms declared that the change in the name of the petitioner-
company from “private limited” to “limited company” had not been on account of any voluntary act on behalf of the
petitioner-company but was purely by virtue of operation of law in terms of Section 43A(1A)of the Companies Act,
1956. It was a declaratory order and such declaration was never challenged by the Respondents-Collector and it
attained finality and was binding upon parties. The Collector while acting in quasi-judicial manner, refused to act in
compliance with the order of the Court having been brought to his notice. Such non-compliance would be treated as
wilful disobedience of the order of the Court. The Respondent-Collector was guilty of Contempt of Court.94
Reconversion [Sub-section (4)].—A deemed public company might again become a private company with the
approval of the Central Government and on complying with the requirements of the Companies Act.
Department's view.— Approval under Section 43A(4) and Section 31(1) of the Companies Act—
Reconversion of a public company into a private company.—“In terms of provisions in Section 43A(4)of the
Companies Act, 1956 (hereinafter referred to as the Act) a private company which becomes a public company by
virtue of provisions in Section 43A(1) shall continue to be a public company until it has with the approval of the
Central Government and in accordance with the provisions of the Act again become a private company.
Question has been raised whether in the case of a company which having become a public company by virtue of
the provisions of Section 43A(1) of the Act approaches the Company Law Board for obtaining approval under
Section 43A(4) for a reversion to the status of a private company, two applications to the Central Government—one
under Section 43A(4) and the other under Section 31(1) of the Act, with two separate application fees are required
under the aforesaid provisions of the Companies Act or a single application fee is sufficient for the purpose.
The issue has been examined by the Company Law Board in consultation with the Ministry of Law and the Board
has been advised that any company which becomes a public company by virtue of the provisions of Section 43A(1)
of the Act can convert itself into a private company after obtaining the approval of the Central Government under
Section 43A(4)of the Act. Once the Central Government has granted its approval to convert a public company into a
private one under Section 43A(4) of the Act there is nothing left for further approval under section 31(1) of the Act.
Therefore in such cases an application by the company under Section 43A(4) is only required and the question of
two applications accompanied by two application fees does not arise. Before making the said application the
company should amend its Articles of Association, if necessary, so as to incorporate the requirements of section
3(1)(iii) of the Act. This amendment will be necessary in those cases of companies which during their existence as a
public company under Section 43A(1) chose to get those clauses of the Articles of Association deleted, which had
conformed to the requirements of Section 3(1)(iii) of the Act, instead of retaining them under the proviso to Section
43A(1). As for the obligation of companies in such cases to re-insert the said clauses in the Articles of Association
in order that they might be regarded as private companies after their application under Section 43A(4)of the Act is
allowed, the said obligation may be fulfilled with the passing of a special resolution in pursuance of Section 31 of
the Companies Act, but no approval of the Central Government is required in that regard, because the special
resolution would precede and be a step-in-aid of the application under section 43A(4)of the Act. This means that the
requirement of Central Government's approval under the proviso to Section 31 of the Act is solely applicable to the
category of public companies which by the terms of their incorporation or by direct conversion (i.e. without
intervention of Section 43A) from private to public have assumed the status of public companies and which seek to
attain or recover the status of private companies.” [ Circular No. 11/72, dated 19-5-1972 : Government of India
Clarification regarding provisions of section 43A.—“The provisions of section 43A (1A) and (1B) are mandatory
and the private company shall become a public company according to the said provisions and the company should
comply with the provisions of sub-section (2) of section 43A of the Act within the stipulated period of 3 months. On
Page 13 of 21
the private company's disposing of the shares of the public company so as to reduce the percentage of its hold less
than 25% of the paid up share capital of the public company or its average annual turnover falling below rupees one
crore [Rs. 25 crores (w.e.f. 23-2-1999) earlier Rs. 10 crores since inapplicable(w.e.f. 13-12-2000)] the company can
convert itself into a private company by complying with the provisions of Section 43A(4) of the Companies Act,
1956.” [ Letter No. 32/21/75-CL-III, dated 20-10-1975 : Govt. of India publication, Clarifications and Circulars on
These Circulars are redundant. Now see new definitions of Private company [ Section 3(1)(iii)] and Public Company
[ Section 3(1)(iv)] substituted (w.e.f. 13-12-2000).
under sub-section (4) of section 43A were delegated to the Registrars of Companies. [ Notification No. G.S.R.
507(E), dated 24-6-1985 : For text of the Notification see Comments under Section 637].
Official Liquidators shall be processed within the time frame indicated in Schedules (I), (II), (III) & (IV) annexed to
the Citizen's Charter.
Section 43A(4)] in 15 working days. [ Press Note No. 9 (1999 Series) (F. No. 5/25/99-CL-V), dated 9-8-1999 :
www.dca.nic.in : (1999) 98 Comp. Cas. (St.) 1 : See Fuller Text under Sections 12, 33, 609 and 637].
Penalty [Sub-section (5)].—This sub-section provided for penalty in case of default in complying with sub-section
(2).
Sub-sections (6) and (7).—Sub-sections (6) and (7) contained certain conditions exempting the private companies
from the provisions of section 43A. These sub-sections were omitted by the Companies (Amendment) Act, 1988 as
the exemptions contained therein had been found to render the other provisions of the section nugatory.
Department's view.—In view of the omission of sub-sections (6) and (7), Circulars, e.g., Letter No. 8/16(1)/61-PR,
dated 9-5-1961, Circular letter No. 48(32)-CL-IV/62, dated 16-11-1962, Circular No. 31/76, dated 1-9-1976 which
was issued in supersession of Circular No. 1/76, dated 27-1-1976, etc., became ineffective and have not been
reproduced.
Two Certificates [Sub-sections (8) and (9)].—Every private company having a share capital in addition to the
certificate referred to in sub-section (2) of section 161, was required to file with the Registrar of Companies along
with the Annual Return further certificates as per sub-sections (8) and (9).
Penalty.—For failure to comply with sub-sections (8) and (9), the company and every officer who is in default, was
punishable under section 629A.
Effect.—A private company deemed to be public company under Section 43A lost all the advantages of being a
private company [ See Privileges and Exemptions of Private Company in Comments under Section 3] except that it
might have the restrictions in its Articles, the Membership might be less than seven and that its profits and loss
accounts filed with the Registrar might not be open to inspection by the public [ Section 220]. Such a company need
not file a Statement in lieu of Prospectus under section 44. But if it wanted to raise money from the public, the
provisions of section 70 were to be complied with.
Sections 43A and 81—Effect of.—Though the definition of “private company” and that of a “public company”
saying that it “means a company which is not a private company” bear out the argument that these two categories
of companies are mutually exclusive it is not true to say that, between them, they exhaust the universe of
companies. There are three distinct types of companies in the scheme of the Companies Act, 1956: (1) private
companies, (2) public companies and (3) private companies which have become public companies by virtue of
Section 43A [Inapplicable w.e.f. 13-12-2000 now see amended Sections 3(1)(iii) and (iv)], but which continue to
include or retain the three characteristics [ now four] of a private company. Neither section 81(1)(c) nor section
Page 14 of 21
81(1A) would apply to a private company which has become a public company by virtue of section 43A but has
retained in its articles the three restrictions referred to in section 3(1)(iii). It is enough in order to comply with the
opening words of clause (c) of section 81(1), that the Articles of the company contain by necessary implication a
provision which is otherwise than what is provided in clause (c). The right to renounce shares in favour of any other
person which is conferred by section 81(1)(c) has no application to a section 43A proviso company and therefore its
members cannot claim the right to renounce shares offered to them in favour of any other member or members.95
Department's view.— Section 43A—Effect of—on Managing Directors' appointments, remuneration etc.—
“Where private companies convert into public companies, or come to be deemed to be public companies, and have
pre-existing managing directors whose remuneration is in accord with sections 309 and 198, as amended, no
permission of the Central Government would be necessary for the continuance of the existing appointment. But
sections 268, and 317 will become applicable as from the date of conversion or change of character and Central
Government's approval will be necessary for any amendment in the terms of appointment or at the time of re-
appointment under section 269(2), as it will also be necessary for purposes of payment of minimum remuneration
under section 198(4).” [File No. 8/16(1)/61-PR : Govt. of India publication, Clarifications and Circulars on Company
Application of Section 204(3) to deemed Public Limited Companies.—“The question is whether section 204(3)
will apply to a private company on becoming a public company under section 43A from the date it became public
company or from 28-12-1960? This question will also arise in connection with a private company that becomes a
public company in the ordinary course by conversion.
It seems that the contract for appointment entered into, before the company became a public company under
section 43A, will not be terminated immediately after it has become a public company under section 43A.” [F. No.
2/25/61-PR : Govt. of India publication, Clarifications and Circulars on Company Law, 1977 Edition, page 28].
Effects of Section 49 on deemed public companies.—“A question was raised as to whether, in view of the fact
that section 49 of the Act did not apply to a foreign company, it was open to such a company holding the entire
paid-up share capital of an Indian Private company, to hold these shares through nominee shareholders to the
extent the company desired without thereby disturbing the private character of the Indian private company. Since, in
view of the fact a private company must have at least two members under the Act, it would, in effect, not be
possible for the entire share capital of a private company to be held only by one company, the view has been taken
that section 43A should be read with section 49 of the Act which allows nominees of a shareholding companies to
hold the minimum number of qualification shares for the purpose of being appointed as directors or to hold shares
solely for the purpose of complying with the requirement as to the minimum membership of two.
Section 49 of the Act not being applicable to foreign companies, they are not entitled even to the concession
envisaged in that section. It has, however, been decided administratively that equal treatment should be given to
foreign companies and they should have the benefit of section 49 of the Act.” [F. No. 8/16(1)/61-PR, dated 4-3-1961
: Govt. of India publication, Clarifications and Circulars on Company Law, 1977 Edition, page 29].
Managerial Remuneration in deemed public companies.—“The general policy to be followed in regard to section
43A companies will be governed by the following considerations:—
(i) Section 43A companies should be treated at par with other public companies so far as managerial
remuneration was concerned and except in the case of such companies which were primarily managing
agency companies, no special treatment would be justified.
(ii) In the case of such companies where the existing remuneration itself could be considered reasonable
having regard to the criteria adopted for fixation of remuneration of managerial personnel of public
companies generally, such remuneration should be protected in full by issuing suitable orders under
sections 198(4) and 309(3).
(iii) In cases where the existing remuneration consists of both salary and commission element and where the
total remuneration exceeds 11 per cent. of the current net profits of the company but the remuneration
itself is not unduly high, the full amount of the salary and perquisites should be protected but the
commission element should be protected (by being converted into salary) only to such extent that the total
remuneration should not exceed 25 per cent. of the average net profits of the company for the last three
years.
(iv) In regard to cases where the remuneration is disproportionately high, no protection should be given to the
commission element, if any but the monthly salary payable in terms of existing contracts may be protected
Page 15 of 21
for a period not exceeding two or three years or for the remainder of the term of office, whichever is less. In
such cases, it should be made clear to the company that Government would not be able to exercise its
special powers to protect the salary for a longer period and that the company should reorganise their
business and managerial set up so that the managerial remuneration should not exceed the ceilings
prescribed under the Act.” [F. No. 1(125)-CL-I/61 : Govt. of India publication, Clarifications and Circulars on
Clarification regarding provisions of Section 43A—Addressed to all recognised Chambers of Commerce

and Trade Associations.—“(i) By virtue of the new section 43A, a number of private companies became public
companies with effect from the 28th March, 1961. A company which was a private company before the enactment
of section 43A will, however, continue to remain so, if it fulfils immediately before the 28th March, 1961 either of the
conditions laid down under sub-section (6) thereof.
(ii) All the provisions of the Act which are applicable to a public company will, after the 28th March, 1961, generally
apply to a company which has become a public company by virtue of section 43A. However, the provisions of
section 12(1) and 45 of the Act which require a public company to have at least seven members will not apply to a
section 43A company. The articles of association of such company may continue to contain a provision similar to
that in section 3(1)(iii) which is applicable to private companies. Section 44 also is not applicable to a private
company, when it becomes a public company by virtue of section 43A and consequently such a company will not
be required to file with the Registrar a statement in lieu of prospectus under section 44(1)(b) of the Act. When it
intends to raise subscriptions from the public, the company must comply with the requirements of section 70.
(iii) The provisions of sections 198, 269, 309, 310, 311, 387 and 388 etc. which govern inter alia the appointment
and re-appointment and the payment of remuneration to managing and whole-time directors or managers apply to
section 43A Companies. The provisions of section 269(1) of the Act will not, however, apply to a person holding the
office of managing or whole-time director or manager of such a company for a period not exceeding 5 years from
the 28th March, 1961 provided he was holding the office immediately before it became a public company; but the
restrictions contained in sections 198, 309, 310, 311, etc., would automatically be applicable to such companies
from the date they became public companies. Some companies are under the impression that the amended
provisions contained in sections 198 and 309 would not apply in cases where the terms of appointment were settled
or approved before the Amendment Act was passed. This is not correct. It further appears that on the basis of the
provisions contained in sub-section (8) of section 309 of the Act, some companies have taken the view that these
sections are applicable to them only from the next financial year. Apparently, the words ‘this Act’ occurring in the
sub-section have been taken to refer to the Companies (Amendment) Act, 1960 which came into force on the 28th
December, 1960. This is not correct and it is pointed out for the information of all concerned that section 309 with all
its existing sub-sections has been in force since the 1st April, 1956, when the Companies Act was promulgated.
The Companies (Amendment) Act, 1960 has, brought about certain changes in the existing sub-sections. The
words ‘this Act’ occurring in sub-section (8) of section 309, therefore, refer to the Companies Act which came into
force on the 1st April, 1956, and not to the Companies (Amendment) Act, 1960. The provisions of section 309 and
198 of the Act would therefore be applicable to public companies of the type referred to above with effect from the
28th March, 1961. Since the restrictive provisions of the Act relating to payment of remuneration to managerial
personnel did not apply to private companies the remuneration had, in most cases, been fixed by the companies
without reference to the modes of payment authorised under the Act or the ceilings prescribed thereunder. It would,
therefore, be necessary for many of these companies to change the mode of payment of managerial remuneration
and also seek the Central Government's approval, wherever necessary under section 309, 310, and 198 of the Act
as the case may be. Some companies have already sought the Central Government's approval in this behalf. Other
companies which for some reason or other have not sought Government's approval so far should do so
immediately in their own interest as otherwise they will be violating the law with its attendant consequences.
(iv) For the purposes of calculating the total number of shareholders in terms of section 43A(6)(b)(iii), common
shareholders of the private company and of the shareholding company should be counted separately.
(v) The word ‘held’ used in sub-section (1) and elsewhere in section 43A does not mean ‘beneficially held’ since
companies are not permitted under section 153 of the Companies Act, 1956 to recognise trust or nominee holdings.
Nominee holdings however are permissible to the extent they are provided for in sub-sections (2) and (3) of section
49 and companies which seek exemption from the provisions of section 43A under sub-section (6)(a) thereof would
not be entitled to such exemption unless holdings by nominees of the parent company are restricted to what is
permitted to under section 49(2) and 49(3). For this limited purpose, the Department has construed the word
‘company’ appearing in these two sub-sections to include a ‘Body Corporate’.
Page 16 of 21
(vi) In respect of the various representations made to the Central Government to the effect that a large number of
private companies which had technically become public companies on 28-3-1961 under the provisions of section
43A(1) could not, for one reason or the other, reorganise their shareholdings before 28-3-1961 so as to enable
them to continue as private companies, Government has taken an administrative decision that no proceedings
would be launched against such of those companies as were able to reorganise their shareholdings before 31-12-
1961 at the latest. All those companies which were able to avail of this administrative concession would be deemed
to have continued as private companies and no insistence will be placed on them by the Department to comply with
the requirements of sub-section (2) and (4) of section 43A. Where however, for its own protection any such
company applies for the approval of Central Government under section 43A(4), it should first fulfil the obligations
imposed on it under section 43A(2) and then only seek Central Government's approval under section 43A(4).
(vii) Companies which have failed to reorganise their shareholdings by 31-12-1961 would be deemed to have
become and continued as public limited companies on and from 28-3-1961 and would become liable to penal
proceedings as prescribed in law for failure to comply with the provisions of sub-section (2) of section 43A as well
as other provisions of the Act applicable to public limited companies.” [Enclosure to Circular Letter No. 48(50)-CL-
IV/61, dated 12-2-1962 : Government of India publication, Clarifications and Circulars on Company Law, 1977
Edition, page 31].
Certain Clarifications regarding Section 43A.—In reply to the queries: “(i)(a) Consequent upon becoming a
deemed public limited company under the amended Section 43A will it be necessary for the company to get an
approval from the Central Government for the continuation of the appointment of its Managing Director, Whole-time
Directors already in position, or on the analogy of the provisions contained in sub-section (2) of Section 269
applicable to an ‘existing company’, the present tenure of the continuing directors may remain undisturbed and the
approval of the Central Government will be necessary for any new appointment or reappointment only on expiry of
the existing tenure of the continuing directors.
(b) What will be the position if the orders appointing them only say that their appointment is until further orders and
no fixed tenure is indicated thereagainst. In such a case, would it be correct to assume that in terms of Section 317
they can continue for a period of five years from the date of company becoming a deemed public company.
(ii) Have the companies, having losses or inadequate profits, on becoming deemed public limited companies under
section 43A to apply for approval for minimum remuneration to be paid to their Managing/Whole-time Directors. If
so, what is the time limit within which such applications should be submitted by such companies after their coming
within the purview of Section 43A of the Act.
(iii) What would be the position of loans and advances already given in excess of the limits laid down in Section
370(1)of the Companies Act, 1956 in case of companies on becoming deemed public limited companies under
Section 43A of this Act. Would it be correct to assume that the past loans and advances would not be affected
though for future loans and advances they will have to seek necessary approval from the Central Government apart
from complying with other formalities as laid down.”
The Department expressed the following views: “(1) The existing appointment of Managing Director or the Whole-
time Director would not require the approval of the Central Government now, but it will be necessary at the time of
the next appointment. In case the existing appointment is for an indefinite period, i.e., until further orders, then,
unless the appointment is terminated earlier, the period of appointment will be taken as five years from the date of
the company becoming a public company.
(2) In the event of inadequacy of profit, the company can pay the minimum remuneration after obtaining the
approval of the Central Government under Section 198(3) of the Act and the application for the purpose has to be
made within a reasonable time from the date of the company becoming a Public Company under Section 43A.
(3) On the principle underlying the provisions of Section 370(5), the company will have to recover the loans taken or
withdraw the guarantee within a period of six months from the date of becoming a public company.” [F. No.
32/13/75-CL-III, dated 25-6-1975 : Govt. of India publication, Clarifications and Circulars on Company Law, 1977
Edition, page 34].
Private Company.—For the privileges and exemptions available to a private company which is not covered by this
section see Comments under Section 3.
Page 17 of 21
Oppression and Mismanagement.—A private limited family company became deemed public company under
section 43A. Managing Director and Directors were continuing in office wrongfully and there was deadlock in the
management of the affairs of the company. The court may direct winding up of the company, appoint special
officers for realisation and distribution of the assets with liberty to the disputing parties or factions to carry on their
business under different names.1
Transfer of foreign holdings.—Where two groups each held 49% shares and an individual acceptable to both
groups held 2%. The Reserve Bank of India directed that shares by foreign group be reduced to 40%, attempt to
transfer 9% and 2% shares to the nominee of the foreign group without consent of the Indian group and contrary to
Articles of Association amounted to oppression and the Court granted relief.2
Writ.—Writ petition seeking direction for an investigation by the Central Bureau of Investigation by one shareholder
against a deemed public company was held to be not maintainable. The court held that the mismanagement and
oppression was not a matter of public interest. Remedy was available under the Companies Act.3
Amalgamation.—Restriction as to purchase by private company of shares of other companies is not applicable to

a private company. Where a private company was deemed public company by allotting its shares to a public
company. But later holding of public company was reduced by increase of capital and it was reconverted into
private company. The violation of section 372 was held to be technical. The scheme was sanctioned.4
Prosecution of erstwhile Directors—Inspection Report/Accounts.—Where the business of the company with

Turnover in crores of rupees was run and managed as a private company, the amounts advanced to the Directors
were without interest and/or retained by them for long periods, the investments made and shares sold were without
seeking approval of the Board of Directors which led to the company being wound up. The findings in the Inspection
Report supported by the Accounts of the company annexed to the application prima facie amounted to violation of
Sections 43A, 542 and 543 of the Companies Act, 1956. The erstwhile directors were to be charged with the
offences under Section 542(3) of the Act.5
See also Comments under Sections 209A, 299, 372, 542 and 543
Recovery of Income-tax.—Where a private company became deemed public company by virtue of section 43A of
the Companies Act, 1956. Directors of the company could not be proceeded against for recovery of tax due from
company, for periods after the company became public company, under section 179 of the Income-tax Act, 1961.6
Government Company.— Section 43A did not apply to a Government Company in which the entire paid up share
capital was held by the Central Government or by any State Government or Governments, or by the Central
Government and one or more State Governments. [ Notification No. G.S.R. 577(E), dated 16-7-1985, published in
the Gazette of India, Extraordinary, No. 306, Part II, section 3(i), page 1, dated 16-7-1985 : Chartered Secretary,
September 1985, page 726 : (1985) 58 Comp. Cas. (St.) 169].
Department's view.— Applicability of section 43A to Government Companies.— “Several Government

Companies which were private companies until 1st February, 1975 have already become Public companies by
virtue of the turnover criterion brought in by new sub-section (1A) of section 43A of the Companies Act, 1956
[Inapplicable w.e.f. 13-12-2000]. Representations have been received from some of the Government Companies
etc. for exempting Government Companies incorporated as Private Limited Companies from the operation of sub-
section (1A) of Section 43A under section 620 so that they can preserve the status quo ante of a Government
private company as on 1st February, 1975. While there is no bar to exempting Government Companies from the
operation of sub-section (1A) of section 43A, there is no scope for exempting Government Companies which have
become Public Companies by the operation of section 43A, with retrospective effect, so as to enable them to be re-
converted into private company status. Hence, even if a notification under section 620 is issued granting such an
exemption the same would not be available to all existing Government private companies, but may be available
only to those companies which may become public companies by the turnover criteria adopted under sub-section
(1A) of section 43A in future or Government companies that may be incorporated as private in future.” [ Circular
letter No. 36/75, dated 3-12-1975 : Govt. of India publication, Clarifications and Circulars on Company Law, 1977
Edition, page 36].
Page 18 of 21
Notification exempting Government Companies from the provisions of section 43A has since been issued as given
in the preceding paragraph. In view of this Circular the exemption shall not be with retrospective effect.
Chartered Accountants of India (ICAI) enumerated Salient provisions of the Companies Act, 1956 concerning
Chartered Accountants and stated as follows.
Compliance with the Companies Act.— The Companies Act lays down detailed provisions regarding various
Statement.
The List of important Sections provided in the Statement, inter alia, enumerated Section 43A of the Companies Act,
1956 as follows:
Section 43A [Deemed Public Company].—This Section describes the circumstances under which a Private
Company would become a public company under the Act. It should be seen that prima facie the company has not
transgressed the provisions of Section 43A by continuing to claim the privileges of a Private Company when it has
ceased to be a Private Company. Attention is invited to the provisions of the new sub-sections (1A) and (1B).
Section 43A not applicable after 30-12-2000.— Section 43A which described the circumstances under which a
Private Company would become a Public Company under the Act shall not apply after 30-12-2000.
Now see detailed Comments under substituted Section 3(1)(iii) and new definition of “Public Company” under
Section 3(1)(iv) (w.e.f. 13-12-2000).
Compliance Certificate—Conversion of Deemed Public Company into Private or Public Company.—Relevant

paras of Form appended to the Companies (Compliance Certificate) Rules, 2001 and ICSI Guidance Note on
Compliance Certificate are as follows.
Page 19 of 21
(AGM).
a Guidance Note on Compliance Certificate to be issued in terms of the newly inserted proviso to Section 383A(1)of
the Companies Act, 1956 as prescribed in the Companies (Compliance Certificate) Rules, 2001 by a Practising
Company Secretary (PCS).
Relevant paragraphs on Conversion of a Public Company (Section 43A Company) (Deemed Public Company) into
a Private Company or Continuation of a Section 43A Public Company as a Public Company (after 13-12-2000) are
reproduced below.
“(e) Conversion of a Public Company (Section 43A Company) (Deemed Public Company) into a Private
Company.—Check whether:
(i) a public company (Section 43A company) has become a private company after the commencement of the
Companies (Amendment) Act, 2000 (53 of 2000) and if so, has it informed/applied ROC that it has become
a private company;
(ii) the ROC has made necessary alterations in the Certificate of Incorporation by substituting the word ‘private
limited’ for the word ‘public limited’;
(iii) the company has filed Form No. 23 [ now e-Form 23] with the ROC and obtained fresh/modified certificate
of incorporation;
(iv) the private company's Articles contain provisions:
(a) restricting the right to transfer its shares;
(b) limiting the number of members to fifty;
(c) prohibiting any invitation to public to subscribe its shares/debentures; and
(d) prohibiting an invitation or acceptance of deposits from persons other than its members, directors or
their relatives.
(f) Continuation of a Section 43A Public Company as a Public Company.—“If a public company (Section 43A
company) intends to continue as a public company then check whether:
(i) it has altered its Articles by deleting provisions relating to matters specified in clause (iii) of sub-section
(1)of Section 3;
(ii) it has altered its Articles for increasing the number of its members to minimum seven;
(iii) it has altered its Articles for increasing the number of directors to at least three directors;
(iv) it has a minimum paid up capital of five lakh rupees or more on or before 12th December, 2002 or such
higher paid-up capital as may be prescribed;
(v) it has filed Form No. 23 [ now e-Form 23] with the ROC and obtained a fresh/modified Certificate of
Incorporation.”
Second Edition, August 2003, pages 87-88].
See detailed Comments on Meaning and Status of Company under Section 3.
Page 20 of 21
under Section 383A.
Secretarial Practice and Check List.— Section 43A. Check whether the company had become a deemed public
company under s. 43Aprior to 13-12-2000 on any of the following criteria: (1) 25 per cent. paid-up share capital of
private company was held by one or more bodies corporate; (2) average annual turnover was Rs. 25 crores or more
[w.e.f. 23-2-1999] during the relevant period; (3) the private company held 25 per cent. paid-up share capital of a
public company; (4) it invited and accepted or renewed deposits from the public. If so, check whether: (1) it has
informed the Registrar of Companies after 13-12-2000 on becoming a private company on the commencement of
the Companies (Amendment) Act, 2000 [ Section 43(2A)] as section 43A is inapplicable (w.e.f. 13-12-2000) [ vide
Section 43(11)], (2) the Registrar has substituted the words “private company” for the words “public company” in the
name of the company upon the register, issued fresh certificate of incorporation and altered memorandum of
association within four weeks from the date of application.
As per Departmental Circular No. 3 of 2002, dated 24-7-2002 [ printed above in Comments under Section 43(2A)]
no time-limit has been fixed for getting conversion by deemed public company to private limited company under
section 43A(2A). if a public company, which had become a deemed public company under section 43A of the
Companies Act, 1956 when it was in force, does not approach for reconversion, it is deemed to have chosen to
remain as a public company.
The documents involved are: (1) Correspondence with the Registrar of Companies, (2) Fresh Certificate of
Incorporation, if any, (3) Altered copies of Memorandum and Articles, (4) Common Seal.
78. Inserted by the Companies (Amendment) Act, 1974, 1974 (41 of 1974) s. 6 (w.e.f. 1-2-1975).
79. Substituted by Act 31 of 1988, s. 7, for “less than rupees one crore” (w.e.f. 15-6-1988).
81. Inserted by the Companies (Amendment) Act, 2000 (53 of 2000), s. 12 (w.e.f. 13-12-2000).;
82. Omitted by Act 31 of 1988, s. 7 (w.e.f. 15-6-1988). For sub-sections (6) and (7) as they stood prior to their omission see
83. The word “or” omitted by Act 31 of 1988, s. 7 (w.e.f. 15-6-1988).
84. Omitted by the Companies (Amendment) Act, 1988 (31 of 1988), s. 7 (w.e.f. 15-6-1988). For clause (b) as it stood prior
to its omission see Annexure at the end of this Volume.
86. Substituted by Act 31 of 1988, s. 7 (w.e.f. 15-6-1988), for “rupees one crore or more”.
94. Magna Graphics (India) Ltd. v. Prakash Sabde, (2006) 129 Comp. Cas. 629 (Bom.).
95. Needle Industries (India) Ltd. v. Needle Industries Newey (India) Holding Ltd., (1981) 51 Comp. Cas. 743 (SC) : AIR
1981 SC 1298 [LNIND 1981 SC 278]: (1981) 3 SCR 698 [LNIND 1981 SC 278]; Jayanthi Detergents Pvt. Ltd. v.
Secretary, CLB, (2001) 103 Comp. Cas. 184 (AP). See also Comments under Section 81.
Page 21 of 21
1. Sishu Ranjan Dutta v. Bhola Nath Paper House Ltd., (1983) 53 Comp. Cas. 883 (Cal.). See also Comments under
Section 398.
2. Bhubaneshwar Singh v. Kanthal India Ltd., (1986) 59 Comp. Cas. 46 (Cal.). See also Comments under Section 398.
3. Sri Ramdas Motor Transport Ltd. v. Tadi Adhinarayana Reddy, (1997) 90 Comp. Cas. 383 (SC). See also Comments
4. Zenith Electro-Systems Pvt. Ltd., In re, (1990) 69 Comp. Cas. 138 (Bom). See also Comments under Sections 372,
372A, 374 and 391.
5. Parasrampuria Trading and Finance Ltd., In re, (2006) 131 Comp. Cas. 834 (All.); Parasrampuria Trading and Finance
Ltd., In re, (2007) 135 Comp. Cas. 65 (All.).
6. M. Rajamoni Amma v. Dy. CIT, (1992) 74 Comp. Cas. 356 (SC) : (1992) 195 ITR 873 (SC). See also Comments under
Sections 3 and 34.
End of Document
Datta: Company Law
C R Datta
S. 44. Prospectus or statement in lieu of prospectus to be filed by private

company on ceasing to be private company.
—
(1) If a company, being a private company, alters its articles in such 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 7[thirty] days after the said date, file with the Registrar either a prospectus
or a statement in lieu of prospectus, as specified in sub-section (2).
(2)
(a) Every prospectus filed under sub-section (1) shall state the matters specified in Part I of Schedule
II and set out the reports specified in Part II of that Schedule, and the said Parts I and II shall have
effect subject to the provisions contained in Part III of that Schedule.
(b) Every statement in lieu of prospectus filed under sub-section (1) shall be in the form and contain
the particulars set out in Part I of Schedule IV, and in the cases mentioned in Part II of that
Schedule, shall set out the 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 IV, as the case may be, the prospectus or
statement in lieu of prospectus filed as aforesaid, shall have endorsed thereon or attached thereto,
a written statement signed by those persons, setting out 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 8[ five thousand 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 9[ fifty
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.
Page 2 of 10
(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.
7. Substituted by the Companies (Amendment) Act, 1965 (31 of 1965), s. 62 and Sch., for “fourteen” (w.e.f. 15-10-1965).
8. Subs. by the Companies (Amendment) Act, 2000 (53 of 2000), s. 13 (w.e.f. 13-12-2000), for “five hundred
rupees”.
9. Substituted by Act 53 of 2000, s. 13, for “five thousand rupees” (w.e.f. 13-12-2000).
610E (w.e.f. 16-9-2006) in Appendix 2.
10-2006) in Comments under Section 610B as inserted by The Companies (Amendment) Act, 2006 (23 of 2006) (w.e.f.
16-9-2006).
† Companies (Director Identification Number) Rules, 2006 in Appendix 49. See detailed Comments on Director
2006) (w.e.f. 1-11-2006).
10. All India Reporter Ltd. v. Ramchandra Datar,AIR 1961 Bom. 292 [LNIND 1959 BOM 109]. See also Comments under
Sections 20 and 23.
11. Radiant Chemical Co. Ltd., In Re,AIR 1943 Pat. 278.
12. Bai Rambha v. Master Silk Mills,AIR 1955 (NOC) 997.
2006) in Comments under Section 610B inserted by The Companies (Amendment) Act, 2006 (23 of 2006) (w.e.f. 16-9-
COMMENTS
English Act, 1948 : Section 30 Previous Act, 1913 : Section 154(1) and (2)
follows: “This section corresponds to section 154 of the Indian Act and section 30 of the English Act.” [ Clause 39 of
—The amendments of minor detail or of a clarificatory or consequential nature, e.g., number of days for filing,
compliance etc. have been made in sections specified in the Schedule. [ Clause 62 of the Companies (Second
—The Notes on clauses explained the amendments as follows: “This clause seeks to enhance the fine specified in
sub-section (3) from five hundred rupees to five thousand rupees and in sub-section (4) from five thousand rupees
Page 3 of 10
to fifty thousand rupees of section 44 of the Act.” [ Clause 13 of the Companies (Second Amendment) Bill, 1999
(139 of 1999)].
Private company ceasing to be private to file prospectus [Sub-s. (1)].—This section deals with the effect of
alteration of Articles removing any of the four restrictions enumerated in section 3(1)(iii)(a) to (d) [as amended by
The Companies (Amendment) Act, 2000] from the Articles of a Private Company.
If 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 (b) shall, within 30 days file with the Registrar either a Prospectus or a Statement in lieu of
prospectus, as specified in sub-section (2).
The four restrictions in Articles of a private company enumerated in section 3(1)(iii) (a) to (d) are as follows. See
Private company becomes public company.—Where the Articles are altered in a manner which has the effect of
removing any of the four restrictions of a private company under Section 3(1)(iii), viz., (a) restricting free
transferability of its shares, (b) limiting its membership to 50, (c) prohibition from inviting the public to subscribe to
its capital, and (d) prohibition from inviting deposits from the public, the private company will be treated as a public
company and it will have to comply with all the provisions of the Companies Act, 1956 applicable to a public
company.
Within 30 days of its becoming a public company, it shall file with the Registrar of Companies a prospectus or a
statement in lieu of prospectus.
However, a deemed public company by virtue of section 43A [ since inapplicable (w.e.f. 13-12-2000)] was not
required to comply with section 44.
Form of Prospectus [Sub-section (2)(a).—Prospectus filed under section 44(1) shall state the matters specified in
Part I of Schedule II and set out the reports specified in Part II of Schedule II. Parts I and II shall have effect subject
to the provisions contained in Part III of Schedule II of the Act.
Form of Statement in lieu of Prospectus [Sub-section (2)(b)].
—Statement in lieu of prospectus filed under section 44(1) shall be in form and contain particulars set out in Part I
of Schedule IV, and in cases mentioned in Part II of that Schedule, shall set out the reports specified therein. Parts I
and II shall have effect subject to the provisions contained in Part III of Schedule IV of the Act.
Statement setting out Adjustments [Sub-section (2)(c)].—Where the persons making any reports under section
44(a) or (b) have made or without giving reasons indicated therein, any adjustments mentioned in clause 32 of
Schedule II or clause 5 of Schedule IV, the aforesaid prospectus or statement in lieu of prospectus, shall have
endorsed thereon or attached thereto, a written statement signed by those persons, setting out the adjustments and
giving the reasons therefor.
Filing with Registrar(ROC).
—As per Rule 20C* of The Companies (Central Govt.'s) General Rules and Forms, 1956 the company shall file
documents with the Registrar of Companies (ROC)under Section 44 of the Companies Act, 1956 together with e-
Form 62* of the Companies (Central Govt.'s) General Rules and Forms, 1956.
Rules and Forms, 1956 substituted (w.e.f. 16-9-2006) by The Companies (Central Govt.'s) General Rules and
Forms (Second Amendment) Rules, 2006 vide Notification No. G.S.R. 555(E), dated 14-9-2006, published in the
Gazette of India, Extraordinary, No. 435, Part II, section 3(i), page 31 : MCA website http://www.mca.gov.in : (2006)
Earlier e-Form 62 was inserted by the Companies (Central Government's) General Rules and Forms (Amendment)
Rules, 2006 vide Notification No. G.S.R. 56(E), dated 10-2-2006, published in the Gazette of India, Extraordinary,
No. 50, Part II, section 3(i), page 156 : (2006) 130 Comp. Cas. (St.) 13.
Page 4 of 10
website http://www.mca.gov.in under the category Compliance Related Filing, Date of Last Release (21-1-2007).
Section 44 of the Companies Act, 1956] for Form for submission of documents with theRegistrar of Companies
(ROC).
Instructions for filling of e-Form 62—Form for submission of documents with Registrar of Companies.—
Specific Instruction Kit for filling e-Form 1AD of the Companies (Central Government's) General Rules and Forms,
1956 containing the e-Form Sl. No. and Detailed Instructions is reproduced below:
If it is required to file e-Form 23 in relation to the Document being filed through this e-Form; ensure that filing of e-
Form 23 precedes filing of this e-Form.
Refer the relevant provisions of The Companies Act, 1956 and Rules made thereunder with respect to the matter
dealt in this e-Form.
1 (a) Enter the Corporate Identity Number (CIN) of the company.
• You can find the CIN by entering the existing registration number of the company in the ‘Find
CIN/GLN’ service at the portal (www.mca.gov.in).
2 The system will automatically display the name and registered office address of the company.
3 Select any one option for the document being filed through this e-Form.
4 If ‘others’ has been selected then specify the details of the document being filed.
5 Enter details of e-Form 23 filed with Registrar of Companies with respect to the filing of the following
documents:
• Statement in lieu of prospectus as per Schedule IV.
• Prospectus as per Schedule II.
• eForm 149 for declaration of solvency.
Note: In case the existing company does not have the service request number (SRN) of e-Form 23, enter
“Z99999999” as SRN of e-Form 23 and attach the Resolution passed as an optional attachment
6 Enter the Section(s) of the Companies Act under which the document is being filed by selecting the Others
option in field 3.
7 Enter details of document being filed. The details should contain the nature of document and purpose of
filing of the document.
8 In case e-Form 23 details have been filled, the date of passing of Resolution will automatically be displayed
as date of event.
In case of Return of Deposits, the date of event will automatically be displayed. This will be the end
date of the financial year as to be filled in field 9.
For Form 4A [of the Companies (Central Government's) General Rules and Forms, 1956], enter the
date of Board/General Meeting Resolution where Buy Back has been approved.
Page 5 of 10
For Form 149 [of the Companies (Court) Rules, 1959], enter date of Special Resolution for winding up
of the company. [ See Comments in Section 488 of the Companies Act, 1956].
For Form 152 [of the Companies (Court) Rules, 1959], enter date of appointment of Liquidator. [ See
Comments in Section 516].
For Form 153 [of the Companies (Court) Rules, 1959], enter date of commencement of winding up. [
See Comments in Section 551].
For Form 154 [of the Companies (Court) Rules, 1959], enter date of commencement of winding up.
For Form 156 [of the Companies (Court) Rules, 1959], enter date of closure of winding up. [ See
Comments in Section 497/509].
For Form 157 [of the Companies (Court) Rules, 1959], enter date of final winding up meeting. [ See
For Form 158 [of the Companies (Court) Rules, 1959], enter date of final winding up meeting. [ See
For Form 159 [of the Companies (Court) Rules, 1959], enter date of the completion of winding up. [
See Comments in Sections 551 and 555].
9 Enter the financial year start date and end date for which the document relates ‘Return of Deposits
pursuant to Rule 10 of the Companies (Acceptance of Deposits) Rules, 1975’.
Attachments
• Form selected in field 3 in the format as prescribed by the General Rules and Forms or Court Rules as
applicable.
• Prospectus, prepared and authenticated as per Sections 56 and 60, read with Schedule II of the
• Statement in lieu of prospectus, prepared and authenticated as per Section 44, read with Schedule II of the
• Any other information can be provided as an optional attachment to e-Form.
Verification.
—Enter the date of Board Resolution authorizing signatory to sign and submit the e-Form.
Digital Signature.
—To be digitally signed by the Managing Director, Director, Manager or Secretary of the company authorised by the
Board of Directors.
In case of filing of documents under Companies (Court) Rules, 1959 except for Form 149, the e-Form, should be
digitally signed by Liquidator(s) of the company.
Note : The original duly filled in and signed Forms 4A, 149, 154 on stamp paper are required to be sent together to
the concerned Roc Office failing which the filing will not be considered and legal action will be taken.
Page 6 of 10
[ Instructions for Filling e-Company Forms : (2006) 131 Comp. Cas. (St.) 228 (original e-Form 62) : Downloaded (on
1-8-2007) from e-Forms with Instruction Kit on the Ministry of Corporate Affairs (MCA) website
http://www.mca.gov.in (substituted e-Form 62 w.e.f. 16-9-2006)].
Filing Fees.
—Filing Fees as prescribed in Schedule X to the Companies Act, 1956, based on Authorised Capital, shall be
payable along with e-Form 62.
Each event mentioned in e-Form 62 shall be treated as separate document and separate Filing Fee as per Existing
Practice shall be paid.
Details of New e-Forms and Fees.
— See Details of New e-Forms and Fees and Statement showing the old Forms, the corresponding Revised new e-
Forms and the method of Fee Calculation or Fee Structure as adapted from Instructions for Filling e-Company
Forms : (2006) 131 Comp. Cas. (St.) 254-264 and the Ministry of Corporate Affairs (MCA) website
http://www.mca.gov.in along with Relevant Sections of The Companies Act, 1956 or Relevant Rules in Comments
under Section 610B.
16-9-2006).
Filing Fees on e-Forms.
— See Rule 22 of the Companies (Central Govt.'s) General Rules and Forms, 1956 as amended by The
Companies (Central Government's) General Rules and Forms (Amendment) Rules, 2006 (w.e.f. 10-2-2006) for
Mode of Payment of Fees on filing of e-Forms to the Registrars of Companies (ROCs)under Schedule X to the
Companies Act, 1956 or the Central Government under The Companies (Fees on Applications) Rules, 1999.
MCA-21 e-Governance Project.
—The Ministry of Company Affairs (MCA) launched MCA-21 e-Governance Project on 18-2-2006 which has been
implemented at all Registrars of Companies (ROCs) locations.
Act, 1956 as inserted by The Companies (Amendment) Act, 2006 (23 of 2006) (w.e.f. 16-9-2006).
E-Governance and e-Filing.
—The MCA-21 e-Governance Project shall facilitate e-Filing for all transactions with the Registrars of Companies
Page 7 of 10
(ROCs). Therefore, all Companies, Directors and Professionals must obtain Director Identification Number (DIN)
and Digital Signature Certificates (DSCs) on-line immediately.
Ministry of Corporate Affairs website [www.mca.gov.in].
separate Ministry, viz., ‘Ministry of Company Affairs’ (MCA)vide Cabinet Secretariat Notification Notification
No.DOC.CD-160/2004, dated 27-5-2004.
—The Ministry of Company Affairs (MCA) has been renamed as ‘Ministry of Corporate Affairs’ (MCA)vide
Presidential Notification, dated 9-5-2007 amending The Government of India (Allocation of Business) Rules, 1961
(w.e.f. 9-5-2007):
inserted by The Companies (Amendment) Act, 2006 (23 of 2006) (w.e.f. 1-11-2006).
See the Companies (Director Identification Number) Rules, 2006† framed under Sections 266A to 266G (w.e.f. 1-
(ESC) in various Chapters/Sections/Sub-sections/Clauses of The Information Technology Act, 2000 (21 of 2000) as
Sabha on 15-12-2006.
266G inserted (w.e.f. 1-11-2006).
Penalty [Sub-sections (3) and (4)].—For omitting to file with the Registrar a statement in lieu of prospectus by a
private company on ceasing to be private company, the company and every officer who is in default shall be
punishable with fine upto Rs. 5,000 for every day of default. [Sub-section (3)].
Page 8 of 10
For filing with the Registrar prospectus or statement in lieu of prospectus containing any untrue statement, the
person authorising the filing of such prospectus or statement shall be punishable with imprisonment upto two years
or fine upto Rs. 50,000 or both. [Sub-section (4)].
Conversion of Private Company into a Public Company.—Where a private company voluntarily wants to
convert itself into a public company, it may pass a Special Resolution altering its Articles. See Comments under
Section 31.
For alteration of the name of the company the Central Government's [power delegated to the Registrars of
Companies] sanction is necessary. The conversion of a private company into a public company and the consequent
change of name does not affect the identity of the company.10
Conversion of Public Company into a Private Company.—By altering the name and the Articles incorporating
the four restrictions mentioned in section 3(1)(iii) a public company may become a private company.
The change of name will have to be approved by the Central Government [power delegated to the Registrars of
Companies]. The conversion, therefore, is subject to the sanction of the Central Government.
For such conversion the sanction of the Court is not necessary and the absence of such a provision for conversion
in the Act or in the Articles does not debar the company from converting itself into a private company.11
See detailed Comments, Form and Procedure Sections 3, 21 and 31.
Special Resolution and approval.—The public company has to pass a Special Resolution altering its Articles and
also take approval of the Central Government [power delegated to the Registrars of Companies].
A resolution to convert a public company into a private company, if bona fide and in the interest of the company as
a whole and consistent with the objects in the memorandum, will bind the dissenting shareholders.12
Compliance Certificate by Secretary—Conversion of a Private Company into a Public Company under

Section 44.—Relevant paras of Form appended to The Companies (Compliance Certificate) Rules, 2001 and ICSI
Guidance Note on Compliance Certificate are as follows.
(AGM).
a Guidance Note on Compliance Certificate to be issued in terms of the newly inserted proviso to Section 383A(1)
of the Companies Act, 1956 as prescribed in The Companies (Compliance Certificate) Rules, 2001 by a Practising
Page 9 of 10
Relevant paragraph on Conversion of a Private Company into a Public Company under Section 44 is reproduced
below.
“(g) Conversion of a Private Company into a Public Company under Section 44.
—Check whether :
(i) the company has increased the number of its directors to minimum three;
(ii) the company has increased the number of its members to minimum seven:
(iii) the company has secured shareholders' approval by Special Resolution for deletion of the Article
containing restrictive provisions applicable to a Private Company [ vide Section 3(1)(iii)];
(iv) the company has altered other Regulations in the Articles which are not applicable to a Public Company;
(v) the company has filed Form No. 23 [ now e-Form 23] with the ROC along with the Special Resolution and
Explanatory Statement;
(vi) the company has filed Prospectus/Statement in lieu of prospectus with the ROC;
(vii) the company has received a fresh/modified Certificate of Incorporation after deleting the word “private” in
its name.”
See detailed Comments on Meaning and Status of Company under Section 3.
See Form of Compliance Certificate appended to The Companies (Compliance Certificate) Rules, 2001, ICSI
under Section 383A.
Secretarial Practice and Check List.— Section 44. Check that the prospectus or a statement in lieu thereof had
been filed with the Registrar within 30 days of ceasing to be a private company together with e-Form 62*.
The documents involved are: (1) Minutes of Board/General Meeting, (2) Prospectus, etc., (3) e-Form 62.
7. Substituted by the Companies (Amendment) Act, 1965 (31 of 1965), s. 62 and Sch., for “fourteen” (w.e.f. 15-10-1965).
8. Subs. by the Companies (Amendment) Act, 2000 (53 of 2000), s. 13 (w.e.f. 13-12-2000), for “five hundred
rupees”.
9. Substituted by Act 53 of 2000, s. 13, for “five thousand rupees” (w.e.f. 13-12-2000).
610E (w.e.f. 16-9-2006) in Appendix 2.
10-2006) in Comments under Section 610B as inserted by The Companies (Amendment) Act, 2006 (23 of 2006) (w.e.f.
16-9-2006).
† Companies (Director Identification Number) Rules, 2006 in Appendix 49. See detailed Comments on Director
2006) (w.e.f. 1-11-2006).
10. All India Reporter Ltd. v. Ramchandra Datar,AIR 1961 Bom. 292 [LNIND 1959 BOM 109]. See also Comments under
Sections 20 and 23.
11. Radiant Chemical Co. Ltd., In Re,AIR 1943 Pat. 278.
12. Bai Rambha v. Master Silk Mills,AIR 1955 (NOC) 997.
Page 10 of 10
2006) in Comments under Section 610B inserted by The Companies (Amendment) Act, 2006 (23 of 2006) (w.e.f. 16-9-
End of Document
Datta: Company Law
C R Datta
COMPANY AND MATTERS INCIDENTAL THERETO > Reduction of Number of Members below
Legal Minimum
S. 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.
13. Madan Lal v. Himatlal and Co., (2000) 99 Comp. Cas. 266 (MP).
15. Bowling & Welby's Contract, Re, (1895) 1 Ch. 663 : (1895-99) All ER Rep. 920 (CA). See also Comments under
Section 109.
16. Morgan v. Gray, (1953) Ch. 83 : (1953) 1 All ER 213 : (1953) 2 WLR 140.
COMMENTS
Legislative History.— The Companies Act, 1956(1 of 1956).—The Notes on clauses explained this section as
follows: “This section corresponds to section 147 of the Indian Act and section 31 of the English Act.” [ Clause 40 of
Reduction of Members below legal minimum [ Section 45].
—The liability of the members is limited to the unpaid amount of face value of shares taken by him or the amount he
has guaranteed. In an unlimited company a member's liability is like that of a partner in a firm, it is for the entire
debt of the company.
Page 2 of 3
This section provides that if at any time the number of members of a company is reduced below legal minimum, i.e.,
(a) below 7 in the case of a public company, or (b) below 2 in the case of a private company, and the company
carries on business for more than 6 months, every member of the company after those six months shall be
severally liable for the debts contracted during that time.
Company cannot increase liability of a Member [ Section 38].—Without a written consent the company cannot
increase the liability of a member except in case of Club or Association. See detailed Comments under Section 38.
Section 45, however, provides an exception to this general rule and makes the liability of members unlimited for the
debts contracted during the time.
Unlimited Liability of Members.—As per section 45, when (1) a public company with less than 7 members, or (2)
a private company with less than 2 members, carries on business for more than 6 months, every member who
knows of this fact will become liable to an unlimited extent for all the debts contracted by the company in so carrying
on business from the 7th month onwards. He will enjoy the limited liability privilege under the Act for the first 6
months only.
Personal or several liability of Members/Directors.— Section 45 of the Companies Act, 1956 speaks of the
personal liability of the directors (members) of the company in a given situation. The section is not exhaustive. It
does not say that in no other case the directors (members) of the company can be made severally liable. It is for the
plaintiff being dominus litus, to choose persons of his choice to be sued. If he ultimately fails in establishing his
claim against defendants not only his suit may be dismissed, he may be saddled with costs.13
Statutory provision contemplating lifting the veil.—As already explained under section 34, it is well settled that,
in law, a company is a legal entity distinct from its members. It was so laid down by the House of Lords in 1897 in
the leading case of Salomon v. Salomon & Co. Ltd. Ever since this decision has been followed by the courts in
England as well as in India. But there have been inroads in the doctrine of corporate personality propounded in
Salomon's case by statutory provisions as well as by judicial pronouncements. By “lifting the corporate veil”, the law
goes behind the corporate personality to the individual members. The Supreme Court has, inter alia, observed that
the corporate veil may be lifted where the statute itself contemplates lifting the veil. Section 45 of the Companies
Act, 1956 provides for such a circumstance in which the corporate veil may be lifted and the members of the
company shall be severally liable for the debts contracted during that time.14
See also Comments under Section 12, 13, 34 and 41.
Liable to be wound up.—The reduction of number of members below the minimum will make the public company
liable to be wound up under section 433. The provisions of this section did not apply to a private company deemed
to be public company by virtue of section 43A[ since inapplicable (w.e.f. 13-12-2000)].
See detailed Comments under Section 43A and 433.
Counting of Membership.—In counting the number of members for purposes of this section the representatives of
a deceased or bankrupt or past embers should not be counted.15 But if the representative of the deceased or
bankrupt member applies for registration of his name and the company enters his name in the register of members
then the representative will be counted as a member.16
Secretarial Practice and Check List.— Section 45. Ensure that the company did not carry on business for more
than six months if membership was below the prescribed number.
The documents involved are : (1) Register of Members, (2) Minutes of Board/General Meeting.
13. Madan Lal v. Himatlal and Co., (2000) 99 Comp. Cas. 266 (MP).
Page 3 of 3
15. Bowling & Welby's Contract, Re, (1895) 1 Ch. 663 : (1895-99) All ER Rep. 920 (CA). See also Comments under
Section 109.
16. Morgan v. Gray, (1953) Ch. 83 : (1953) 1 All ER 213 : (1953) 2 WLR 140.
End of Document
Datta: Company Law
C R Datta
COMPANY AND MATTERS INCIDENTAL THERETO > Contracts and deeds, investments, seal,
etc.
S. 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.
532]: (1963) 1 Comp. LJ 248 (SC); Ashbury Railway Carriage and Iron Co. Ltd. v. Riche,(1875) LR 7 HL 653 : (1874-
80) All ER Rep. Ext. 2219 (HL); Attorney-General v. Great Eastern Railway Co., (1880) 5 App. Cas. 473 : (1874-80) All
ER Rep. Ext. 1459 : 49 LJ Ch. 545 : 42 LT 810 (HL); Lee, Behrens & Co. Ltd. Re, (1932) 2 Ch. 46 : (1932) All ER Rep.
889 : 101 LJ Ch. 183. The Doctrine of ultra vires has virtually been abolished by the English Companies Act, 1985 as
amended by the English Companies Act, 1989. See detailed Comments under Section 13.
18. Societe de Traction et D'Electricite Societe Anonyme v. Kamani Engg. Co. Ltd., (1963) 33 Comp. Cas. 869 (SC) : AIR
1964 SC 558 [LNIND 1963 SC 116]: (1963) 2 Comp. LJ 203 (SC).
19. Badger Re, Mansell, (1905) 1 Ch. 568 : 74 LJ Ch. 327 : 92 LT 230.
20. Rolloswin Investments Ltd. v. Chromolit,(1970) 2 All ER 673 : 1 WLR 912 : 114 SJ 147.
21. F. Goldsmith (Sicklesmere) Ltd. v. Baxter, (1970) 1 Ch. 85 : (1969) 3 All ER 733 : (1969) 3 WLR 522 : (1970) 40 Comp.
Cas. 809 (Ch.).
22. Sections 48, 50, 84, 114 and 176.
23. Biggerstaff v. Rowatt's Wharf Ltd., (1896) 2 Ch. 93 : (1895-99) All ER Rep. Ext. 1933 (CA) : 65 LJ Ch. 536 : 74 LT 473 :
44 WR 536 (CA).
24. Barned's Banking Co. Re, ex parte Contract Corpn., (1867) 3 Ch. App. 105 : (1861-73) All ER Rep. Ext. 2068 : 37 LJ
Ch. 81 : 17 LT 267.
25. Deffell v. White , (1866) LR 2 CP 144 : 36 LJ CP 25 : 15 LT 211 : 15 WR 68.
26. Panchanan Dhara v. Monmatha Nath Maity (Deceased) through Legal Representatives (L.R.s), , (2006) 131 Comp.
Cas. 577 (SC) relying on Probodh Chandra Mitra v. Road Oils (India) Ltd.,AIR 1930 Cal. 782; OTV Birwel Co. Ltd. v.
Technical and General Guarantee Co. Ltd.,(2002) 4 All ER 668 : (2002) 2 BCLC 723 (QB).
27. OTV Birwel Co. Ltd. v. Technical and General Guarantee Co. Ltd., (2002) 4 All ER 668 : (2002) 2 BCLC 723 (QB).
Page 2 of 6
28. McCollin v. Gilpin,(1881) 6 QBD 516 : 44 LT 914 (CA).

29. Badgerhill Properties Ltd. v. Cottrill,(1991) BCLC 805.
30. Mohta Alloy and Steel Works v. Mohta Finance and Leasing Co. Ltd., (1997) 89 Comp. Cas. 227 (Delhi) : (1997) 3
Comp. LJ 183 (Delhi); Smt. Deepa Anant Bandekar v. Rajaram Bandekar (Sirigao) Mines Pvt. Ltd., (1992) 74 Comp.
Cas. 42 (Bom.).
Comments under Sections 4, 13, 26, 34 and 290-293.
32. Smt. Deepa Anant Bandekar v. Rajaram Bandekar (Sirigao) Mines Pvt. Ltd., (1992) 74 Comp. Cas. 42 (Bom.). See also
Comments under Sections 13, 210, 215, 290-293 and 433.
33. Lindgren v. L. and P. Estates Ltd., (1968) Ch. 572 (CA) : (1968) 2 WLR 562 (CA) : (1969) 39 Comp. Cas. 62 (CA).
34. Ray Cylinders and Containers v. Hindustan General Industries Ltd., (2001) 103 Comp. Cas. 161 (Delhi). See also
35. Madras Refineries Ltd. v. Southern Petrochemical Industries Corporation Ltd., (1999) 95 Comp. Cas. 213 (Mad.) (DB).
36. Panchanan Dhara v. Monmatha Nath Maity (Deceased) through Legal Representatives (L.R.s), (2006) 131 Comp. Cas.
577 (SC).
37. Newborne v. Sensolid (Great Britain) Ltd.,(1954) 1 QB 45 : (1953) 1 All ER 708 (CA) : (1953) 2 WLR 596 : (1953) 97 SJ
209 : (1954) 24 Comp. Cas. 159 (CA); Kelner v. Baxter,(1866) LR 2 CP 174 : 36 LJ CP 94 : 15 LT 213 : 15 WR 278;
Natal Land and Colonisation Co. Ltd. v. Pauline Colliery and Development Syndicate Ltd.,(1904) AC 120 : 73 LJ PC 22
: 89 LT 678 (PC); Braymist Ltd. v. The Wise Finance Co Ltd.,(2002) 3 WLR 322 (CA) : (2002) 112 Comp. Cas. 402
(CA). See also Comments under Sections 62 and 149(4). See alsoSections 15(h) and 19(e) of the Specific Relief Act,
1963 (47 of 1963).
38. CIT v. City Mills Distributors (P.) Ltd., (1996) 86 Comp. Cas. 546 (SC) : (1996) 219 ITR 1 [LNIND 1996 SC 276] (SC).
39. Braymist Ltd. v. Wise Finance Co. Ltd.,(2002) 1 BCLC 415 : (2002) 112 Comp. Cas. 402 (CA).
COMMENTS
English Act, 1985 : Sections 36, 36A, 36B, 36C
this section as follows: “This section corresponds to section 88 of the Indian Act and section 32 of the English Act.” [
Pre and post Incorporation Contracts.—Contracts entered into by companies may be divided into (1) Post-
commencement Contracts, (2) Pre-incorporation Contracts, and (3) Post-incorporation but pre-commencement
Contracts.
This section deals with Post-commencement Contracts. Therefore the decisions enunciating these are given in that
order below.
(1) Post-commencement Contracts.—All contracts entered into orally or in writing by a person properly
authorised in that behalf are valid and binding on the company provided the contracts are such as would come
within the objects clause of the memorandum of the company. A contract which is ultra vires the company cannot
be enforced against the company or by the company even though all the members agree or purport to ratify it. A
contract or an act beyond the objects clause will be ultra vires the company and would be void. Such an act cannot
be ratified even by a unanimous resolution of all the shareholders.17
A company under the Companies Act, 1956 is entitled to enter into contracts for all such purposes as are by its
constitution within its competence. It is invested with a legal personality, and a commercial company may subject to
restrictions specifically imposed upon it by its Memorandum or Articles, always enter into contracts for the purpose
of its business subject, in the matter of form, to section 46 of the Companies Act, 1956. The power of a company to
enter into a contracts, would include power to submit a dispute to Arbitration out of court.18
Page 3 of 6
A trading or commercial company but not a literary or scientific society has an implied power to borrow and to
mortgage or charge any part of its property.19
See detailed Comments on Doctrine of ultra vires, Implied powers and Doctrine of ultra vires virtually abolished in
English Law under Sections 13 and 290-293.
No special form or requirement for Contracts.—This section puts a company in the same status as that of an
individual. Any person properly authorised by the company may enter into a contract. And contracts may be entered
into between two companies on a Sunday.20 If the companies can be identified the accuracy in naming the
companies in the contract is not essential to the validity of the contract.21
A contract may be oral or in writing but must be entered into by a person authorised in that behalf either expressly
or impliedly. The provisions of the Contract Act, the Registration Act and other applicable Acts, should be complied
with. In some cases a contract has to be under seal of the company. The seal must be put on certificates of shares,
on stocks, share warrants, on power of attorney for execution of deeds or authorising a person to use its seal
outside India or on instrument of proxy.22
Common Seal.—A person having power to manage the affairs of a trading company has implied power to affix the
seal.23 The right to use the seal is vested in the directors.24 But if the Articles make special provision that provision
should be complied with. Generally two directors and the secretary sign on the affixation of the common seal of the
company. Where a document is to be attested by two witnesses, as in mortgage deeds the two witnesses must be
outsiders, the signatures of two directors and the secretary would not be enough.25
Contract with Company—Common Seal of Company.— Sections 46 and 48 of the Companies Act, 1956 merely
lay down the mode of signing contract or execution of deeds on behalf of the company. Once a contract or deed is
executed on behalf of the company, it is the company and not the persons signing which can sue or be sued on the
contract if the evidence is clear that the signature was only that of the company. An oral agreement for sale is
permissible in law. Where the contract was executed in the name of the company. It was not disputed that all the
five directors executed the agreement. The company was a private limited company. The subsequent letters written
on behalf of the company clearly demonstrated that all the directors were aware of the said agreement. The
company before the Trial Court never chose to file any written statement or dispute the contentions raised in the
plaint. In fact in the deeds executed in favour of the agreement, it had been clearly stated that the suit for specific
performance of contract filed by the respondent was pending. The company never denied or disputed the
correctness or otherwise of the contents of the agreement. The company never denied or disputed the terms of the
agreement nor raised any plea that the agreement was not binding on the company or the same was illegal. Thus,
even in the absence of a Resolution the contract could not have been held to be invalid or illegal. So far as the
question of putting up of the seal of the company is concerned, it is a relic of the days when mediaeval barons, who
could not read or write, used their rings to make a characteristic impress. Even in the absence of a seal, the
company may still be held to be liable having regard to the nature of transaction and the authority of those who had
executed it. If the act of the directors is not ultra vires or no public policy is involved, the parties acting thereupon
cannot be left at large.26
Contract, Deed or Bond—Company's Seal, necessity of—Trade Name.—A company may use its Trade Name
and not its Registered Name in the Body of a Deed or Bond. In the present transaction there was also a surety. On
the action of the Contractor it was held that the company was bound under the Contract even though in the
contract, its Trading Name was used and the surety was also liable for breach of the agreement. The underlying
Contract was not a nullity, the contractor was entitled to enforce the contract. It was not against the Public Policy to
allow the enforcement of such a contract. The Contract, Deed or Bond was found valid and enforceable.27
Common Seal dispensed with under English Law.— Section 36A(3) of the English Companies Act, 1985
inserted by the English Companies Act, 1989 removes the need for a company to have a Common Seal. Section
36A provides that in favour of a purchaser in good faith for valuable consideration including a lessee, mortgagee or
other person who for valuable consideration acquires an interest in property, a document shall be deemed to be
duly executed by a company if it purports to be signed by a Director and the Secretary or by two Directors and that,
where it makes it clear on its face that it is intended to be a deed, to have been “delivered”.
Contract on behalf of the Company.—Directors signing a contract must indicate that they are signing on behalf of
Page 4 of 6
the company otherwise they may be personally liable on the contract.28 A contract on behalf of a company is
entered into by its Director or Officer of the company whose status is that of an agent and he is not personally liable
under the contract.29
Authority to enter into Contracts.—A contract on behalf a company may be entered into by the Directors
authorised by a Board Resolution or if the Articles so provide the Chairman may authorise the Directors to execute
the contract. A director of two companies may sign an agreement on behalf of both the companies. The authority
given may be express or implied.30
Doctrine of Indoor Management.—In most of the cases express authority is found in Articles of Association of
companies authorising the Board of Directors to enter into contracts. In practice the Articles contain the widest
powers of delegation, both to individual directors and to other agents chosen by the Board of Directors, e.g.,
Committees, Managers, Managing Director, or other persons and such delegation may be made either express or
by implication. Where powers could be delegated to the managing director or directors and the director also had the
authority to enter into contracts the respondent could validly rely on the doctrine of indoor management. Where
under the Articles of Association of two companies under the same group the director was authorised to enter into
and execute all contracts. The agreement between two group companies could be signed by the single director.31
See detailed Comments on Rule in Royal British Bank v. Turquand , Doctrine of constructive notice, Directors' and
Officers' acts when binding, Third party acting in good faith and Constructive notice rule abolished under English
Law by the English Companies Act, 1989, etc., under Sections 13, 36 and 290-293.
Contractultra viresthe Directors.—A contract which is ultra vires the Directors but intra vires the company is valid
and if the company accepts benefit under the contract, it should pay for the same.
Ratification.—The company will not be bound by any agreement if an agent of the company has entered into an
agreement without actual authority, whether express or implied, to enter into a contract. For any such agreement to
be binding on the company, the company should either accept the said agreement or ratify the same. Where the
facts and circumstances clearly indicated that the company had accepted the liability under the agreement, the
agreement was binding on the company.32
However, as already explained, a contract ultra vires the company cannot be ratified even by a unanimous
resolution of all the shareholders.
See detailed Comments hereinbefore and under Sections 13 and 290-293.
Duty of Directors.—It is the duty of the Directors of the company to consider the commercial merits of the
contract.33
Contracts in which Directors interested [ Section 297].—The sanction of the Board of Directors of the company
is required for certain contracts in which particular directors are interested. See detailed Comments under Sections
297 to 302.
Company not privy to contract by Directors.—A company is a corporate body with a separate existence. Where
Directors entered into agreement for sale of their own shares. The company would not be privy to contract and not
bound by the obligation under the contract.34
Joint Venture.—Two companies entered into agreement for formation of joint venture company. Government
clearances and land were obtained. But, one of the promoter companies implemented the project on its own by
forming its own companies. Suit for declaration by other promoter for breach of negative covenant in the
memorandum of understanding was held to be competent. Promoter had locus standi through shareholders of the
joint venture company. Injunctions against implementation of the project by the promoter company on its own were
granted.35
Specific performance of Contract—Plea of limitation.—A plea of limitation is a mixed question of law and fact.
The question as to whether a suit for specific performance of contract will be barred by limitation or not would not
only depend upon the nature of the Agreement but also the conduct of the parties and also as to how they
understood the terms and conditions of the agreement. It is not in dispute that the suit for specific performance of
contract would be governed by Article 54 of the Limitation Act, 1963 (36 of 1963). While determining the
applicability of the first or the second part of Article 54 of Schedule I to the Limitation Act, 1963, the Court will firstly
Page 5 of 6
see as to whether any time was fixed for performance of the agreement of sale and if it was so fixed, whether the
suit was filed beyond the prescribed period unless any case of extension of time for performance was pleaded and
established. When, however, no time is fixed for performance of Contract, the Court may determine the date on
which the plaintiff had notice of refusal on the part of the defendant to perform the Contract and in that event the
suit is required to be filed within a period of 3 years therefrom. Plea of limitation not raised before the Courts below
but raised for the first time before the Supreme Court will not be allowed. The plea that the limitation would begin
from the date of perfection of title of the seller and plea that the agreement was vague and uncertain was not taken
before the Courts below and could not be allowed to be raised for the first time before the Supreme Court.36
(2) Pre-incorporation Contracts.—A contract entered into by the promoters on behalf of a proposed company is
void so far as the company is concerned. The promoters cannot be agents for a principal which has not yet come
into existence. The contract is a nullity so far as the company is concerned. On such a contract the promoters
themselves will be personally liable, even though the company has taken benefit thereunder. But in all cases the
company after incorporation may enter into a fresh agreement though on identical terms and conditions.37
A company becomes a legal entity in the eye of law only when it is incorporated. Prior to its incorporation, it simply
does not exist. Pre-incorporation profits are therefore not taxable in its hands. A company can enter into an
agreement only after its incorporation. It is only after incorporation that a company may decide to accept that its
promoters have carried on business on its behalf and appropriate the income thereof to itself. The question as to
who is liable to pay tax on such income cannot depend upon, whether or not the company after incorporation so
decides. It is he who carried on the business and received the income when it accrued, who is liable to bear the
burden of tax thereon.38See also Comments under Schedule VI.
Model Articles [ Schedule I, Table A].—As per Regulation 67 of Table ‘A’ of Schedule I to the Companies Act,
1956, the Board of Directors may pay all expenses incurred in getting up and registering the company.
The Regulations of Table ‘A’ will apply to a public company limited by shares, if they are not inconsistent with the
company's own Articles, if any. A similar Article should be contained in Articles of private and other companies.
See detailed Comments under Schedule I, Table A and Sections 26-31.
Contract by Solicitor of Proposed or Unformed Company.—The Solicitors of a Proposed (Unformed) Company

signed an agreement for the sale of plant as its agent. The question arose as to whether the agreement was signed
by and on behalf of a party to agreement and whether the agent (Solicitors) for the Proposed or Unformed
Company is entitled to sue on contract of sale of the land. The contract entered into by the Solicitor-Agent on behalf
of the Proposed or Unformed Company was enforceable by him against the other party and the other party can also
enforce the contract against the Solicitor-Agent of the Unformed Company under the Contract as the Proposed
Unformed Company did not come into existence.39
(3) Post-incorporation but pre-commencement Contracts.—All contracts entered into by a public company after
incorporation but before obtaining Certificate of Commencement are provisional. They are valid contracts but not
enforceable until the company obtains the Certificate of Commencement.
Private Company.—A contract by a private company after its incorporation is valid and binding as a private
company does not need any Certificate of Commencement. See detailed Comments under Sections 3, 12, 33 and
149.
Secretarial Practice and Check List.— Section 46. Check whether : (1) the contracts entered into for and on
behalf of the company, (2) contracts are intra vires the Memorandum and Articles of Association of the company,
(3) the Board's sanction is obtained for contracts in which particular directors are interested [ Section 297].
The documents involved are : (1) Contracts/Agreements, (2) Memorandum and Articles, (3) Register of Contracts,
(4) Minutes of Board/General Meetings.
Page 6 of 6
532]: (1963) 1 Comp. LJ 248 (SC); Ashbury Railway Carriage and Iron Co. Ltd. v. Riche,(1875) LR 7 HL 653 : (1874-
80) All ER Rep. Ext. 2219 (HL); Attorney-General v. Great Eastern Railway Co., (1880) 5 App. Cas. 473 : (1874-80) All
ER Rep. Ext. 1459 : 49 LJ Ch. 545 : 42 LT 810 (HL); Lee, Behrens & Co. Ltd. Re, (1932) 2 Ch. 46 : (1932) All ER Rep.
889 : 101 LJ Ch. 183. The Doctrine of ultra vires has virtually been abolished by the English Companies Act, 1985 as
amended by the English Companies Act, 1989. See detailed Comments under Section 13.
18. Societe de Traction et D'Electricite Societe Anonyme v. Kamani Engg. Co. Ltd., (1963) 33 Comp. Cas. 869 (SC) : AIR
1964 SC 558 [LNIND 1963 SC 116]: (1963) 2 Comp. LJ 203 (SC).
19. Badger Re, Mansell, (1905) 1 Ch. 568 : 74 LJ Ch. 327 : 92 LT 230.
20. Rolloswin Investments Ltd. v. Chromolit,(1970) 2 All ER 673 : 1 WLR 912 : 114 SJ 147.
21. F. Goldsmith (Sicklesmere) Ltd. v. Baxter, (1970) 1 Ch. 85 : (1969) 3 All ER 733 : (1969) 3 WLR 522 : (1970) 40 Comp.
Cas. 809 (Ch.).
22. Sections 48, 50, 84, 114 and 176.
23. Biggerstaff v. Rowatt's Wharf Ltd., (1896) 2 Ch. 93 : (1895-99) All ER Rep. Ext. 1933 (CA) : 65 LJ Ch. 536 : 74 LT 473 :
44 WR 536 (CA).
24. Barned's Banking Co. Re, ex parte Contract Corpn., (1867) 3 Ch. App. 105 : (1861-73) All ER Rep. Ext. 2068 : 37 LJ
Ch. 81 : 17 LT 267.
25. Deffell v. White , (1866) LR 2 CP 144 : 36 LJ CP 25 : 15 LT 211 : 15 WR 68.
26. Panchanan Dhara v. Monmatha Nath Maity (Deceased) through Legal Representatives (L.R.s), , (2006) 131 Comp.
Cas. 577 (SC) relying on Probodh Chandra Mitra v. Road Oils (India) Ltd.,AIR 1930 Cal. 782; OTV Birwel Co. Ltd. v.
28. McCollin v. Gilpin,(1881) 6 QBD 516 : 44 LT 914 (CA).
29. Badgerhill Properties Ltd. v. Cottrill,(1991) BCLC 805.
30. Mohta Alloy and Steel Works v. Mohta Finance and Leasing Co. Ltd., (1997) 89 Comp. Cas. 227 (Delhi) : (1997) 3
Comp. LJ 183 (Delhi); Smt. Deepa Anant Bandekar v. Rajaram Bandekar (Sirigao) Mines Pvt. Ltd., (1992) 74 Comp.
Cas. 42 (Bom.).
Comments under Sections 4, 13, 26, 34 and 290-293.
32. Smt. Deepa Anant Bandekar v. Rajaram Bandekar (Sirigao) Mines Pvt. Ltd., (1992) 74 Comp. Cas. 42 (Bom.). See also
Comments under Sections 13, 210, 215, 290-293 and 433.
33. Lindgren v. L. and P. Estates Ltd., (1968) Ch. 572 (CA) : (1968) 2 WLR 562 (CA) : (1969) 39 Comp. Cas. 62 (CA).
34. Ray Cylinders and Containers v. Hindustan General Industries Ltd., (2001) 103 Comp. Cas. 161 (Delhi). See also
35. Madras Refineries Ltd. v. Southern Petrochemical Industries Corporation Ltd., (1999) 95 Comp. Cas. 213 (Mad.) (DB).
577 (SC).
37. Newborne v. Sensolid (Great Britain) Ltd.,(1954) 1 QB 45 : (1953) 1 All ER 708 (CA) : (1953) 2 WLR 596 : (1953) 97 SJ
209 : (1954) 24 Comp. Cas. 159 (CA); Kelner v. Baxter,(1866) LR 2 CP 174 : 36 LJ CP 94 : 15 LT 213 : 15 WR 278;
Natal Land and Colonisation Co. Ltd. v. Pauline Colliery and Development Syndicate Ltd.,(1904) AC 120 : 73 LJ PC 22
: 89 LT 678 (PC); Braymist Ltd. v. The Wise Finance Co Ltd.,(2002) 3 WLR 322 (CA) : (2002) 112 Comp. Cas. 402
(CA). See also Comments under Sections 62 and 149(4). See alsoSections 15(h) and 19(e) of the Specific Relief Act,
1963 (47 of 1963).
38. CIT v. City Mills Distributors (P.) Ltd., (1996) 86 Comp. Cas. 546 (SC) : (1996) 219 ITR 1 [LNIND 1996 SC 276] (SC).
39. Braymist Ltd. v. Wise Finance Co. Ltd.,(2002) 1 BCLC 415 : (2002) 112 Comp. Cas. 402 (CA).
End of Document
Datta: Company Law
C R Datta
etc.
S. 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.
40. Oriol Industries Ltd. v. Bombay Mercantile Bank Ltd., (1961) 31 Comp. Cas. 185 (SC) : AIR 1961 SC 993 [LNIND 1961
SC 37].
SC 37]; Mahony v. East Holyford Mining Co.,(1875) LR 7 HL 869 : (1874-80) All ER Rep. 427 : 33 LT 383 (HL). See
42. Sreelal v. Lister Antiseptic Dressing Co.,AIR 1925 Cal. 1062 : 29 CWN 828; Jajodia Cotton Mills, In re, 31 CWN 683
(Cal.). The system of managing agency, secretaries and treasurers has since been abolished vide section 324A. See
43. Elliott v. Bax-Ironside,(1925) 2 KB 301 : (1925) All ER Rep. 209 : 94 LJ KB 807 (CA).
44. Mercantile Bank of India Ltd. v. Chartered Bank of India, Australia and China and Strauss & Co. Ltd.,(1937) 1 All ER
231. See also Comments under Sections 13 and 293.
45. Bryant, Powis and Bryant v. La Banque de Peuple,(1893) AC 170 : 62 LJ PC 68; Montaignac v. Shitta, (1890) 15 App.
Cas. 357 : 39 WR Dig. 178.
46. Section 50.
47. Royal British Bank v. Turquand, , (1856) 6 E.&B. 327 : (1843-60) All ER Rep. 435 (Ex Ch.) : 25 LJ QB 317 : 2 Jur. NS
48. Shri Kishan Rathi v. Mondal Bros. & Co. (P.) Ltd., (1967) 37 Comp. Cas. 256 (Cal.) : AIR 1967 Cal. 75 [LNIND 1965
CAL 134]: 70 CWN 164; Surve Kedarappa v. Bhimappa, (1960) 30 Comp. Cas. 131 (Mys.); Dey v. Pullinger
Engineering Co.,(1921) 1 KB 77. See also Comments under Section 292.
49. P. Rangaswami Reddiar v. R. Krishnaswami Reddiar, (1973) 43 Comp. Cas. 232 (Mad.) : AIR 1973 Mad. 251 [LNIND
50. C. Sundararaja Pillai v. Sakthi Talkies (Dindigul) Ltd., (1967) 37 Comp. Cas. 463 (Mad.) (DB). See also Comments
under Section 300.
51. Kirlampudi Sugar Mills Ltd. v. G. Venkata Rao, (2003) 114 Comp. Cas. 563 (AP). See also Comments under Section
147(1)(c).
52. M. Mahadevan Pillai v. Vedavalli Ammal, (1994) 79 Comp. Cas. 851 (Mad.).
53. Chattanatha Karayalar v. Central Bank of India, (1965) 35 Comp. Cas. 610 (SC) : AIR 1965 SC 1856 [LNIND 1965 SC
74]: (1965) 3 SCR 318 [LNIND 1965 SC 74]; Margaret Lalita Samuel v. Indo-Commercial Bank Ltd., (1979) 49 Comp.
Cas. 86 (SC) : AIR 1979 SC 102 [LNIND 1978 SC 263]: (1979) 1 SCR 914 [LNIND 1978 SC 263]; Bank of Bihar Ltd. v.
Dr. Damodar Prasad, (1969) 39 Comp. Cas. 133 (SC) : (1969) 1 SCR 620 [LNIND 1968 SC 200]; Union Bank of India
Page 2 of 5
v. Manku Narayana, (1987) 62 Comp. Cas. 1 (SC); Punjab National Bank v. Mehra Brothers (P.) Ltd., (1983) 54 Comp.
Cas. 541 (Cal.); United Commercial Bank v. Rathi Fibres and Fabrics Ltd., (1983) 54 Comp. Cas. 625 (Delhi); Central
Bank of India v. P. R. Garments Industries P. Ltd., (1987) 62 Comp. Cas. 669 (Guj.).
COMMENTS
Legislative History.—The Companies Act, 1956 (1 of 1956).—The Notes on clauses explained the provisions of
Mode of execution of Negotiable Instruments.—A bill of exchange, hundi or promissory note must be drawn,
accepted, made or endorsed in the name of the company, or the words “on behalf of” or “on account of”, e.g., “for
and on behalf of” should be used. The document may be singed by any person acting under the authority of the
company, whether express or implied.
Essential conditions or requirements of Section 47.—It is clear that in order that a company may be bound by a
negotiable instrument purporting to have been issued on its behalf two conditions must be satisfied: the instrument
must be drawn, made, accepted or endorsed in the name of or by or on behalf of or on account of the company,
and the person who makes, draws, endorses or accepts the instrument must have the authority given to him by the
company on that behalf. This authority may be either express or implied. There is thus no doubt that before a
company can be bound by a negotiable instrument one of the essential conditions is that the instrument on its face
must show that it has been drawn, made, accepted or endorsed by the company. This may be done either by
showing the name of the company itself on the instrument, or by the statement of the person making the instrument
that he is doing so on behalf of the company. In other words, unless the plain tenor of the negotiable instrument on
its face satisfies the relevant requirement the instrument cannot be validly treated as an instrument drawn by the
company. The failure to complying with the essential requirements of section 47 of the Companies Act, 1956 must
necessarily mean that the negotiable instrument is defectively issued, would not bind the company and cannot be
enforced against it.40
Bank's position—Honouring of cheque.—In order to make the company liable on a bill or note it must appear on
the face of such bill or note that it was intended to be drawn, accepted or made on behalf of the company. It is only
in the matter of enforcement of negotiable instrument against a company that the principle underlying in section 47
of the Companies Act, 1956 comes into play. This principle cannot be extended to a claim made by a company
against its bank on the ground that the cheque which the bank had accepted and honoured was defective in that it
did not comply with the requirements of section 47 and could not have been enforced against it. The law in regard
to the company's power to issue negotiable instruments has to be found in the relevant provisions of the
Companies Act, 1956 itself and not in the Negotiable Instruments Act, 1881 (26 of 1881). Where the resolution of
the appellant company did not require the drawers of the cheques to specify on each cheque that they were made
or drawn on behalf of the company and the cheques accepted by the bank were not inconsistent with the
requirements of the resolution. The bank was justified in thinking that the cheques must have been issued by the
two drawers on behalf of the only account on which they could operate and that they drew the cheques in
pursuance of the authority conferred on them by the company by its resolution.41 Where the endorsement was “M &
Sons, Managing Agents of L.A. Co. Ltd.”, it was held that the company was not liable but M & Sons was.42 But in
such cases the court is entitled to look at the surrounding circumstances under which the bill was signed.43
Duty of third party.—A third party dealing with an agent of a company cannot rely upon apparent authority but is
bound to acquaint himself with the Memorandum and Articles of Association of the company.44
Power of Attorney.—Any person dealing with an agent on the basis of a power of attorney is put on inquiry though
not as to the existence of special circumstances.45
Page 3 of 5
Seal outside India.—But this principle will not apply to a contract under seal entered into by an agent outside
India.46
Rule inRoyal British Bank v. Turquand. —In the case of acts ultra vires the Directors or Officers of the company
beyond their authority, the effect of the constructive notice rule was mitigated by refinement of normal agency
principles in Royal British Bank v. Turquand. 47
Protection against irregularity in Indoor Management.—A person taking in due course a bill of exchange or
hundi signed by a director who, consistently with the company's Articles, might have been, but who was not in fact
authorised to sign bills or hundis is, upon the principle of the Royal British Bank v. Turquand. , entitled to assume
that the director was “acting under its authority” when he signed the bill, and to recover on the bill or hundi against
the company accordingly. The lender who lent money to the company in those circumstances on a promissory note
or a bill of exchange executed by the manager and the director after having found on inquiry from the Memorandum
and the Articles the existence of such power to borrow, need not and cannot, and is not obliged, to look further into
the internal management of the company and embark on an investigation whether a particular manager or director
who is given such powers under the memorandum and articles has nevertheless lost it or qualified or limited it by an
internal resolution contained in the internal minutes book or resolution of the company's directors.48
See detailed Comments on the Doctrine of Constructive Notice and Rule in Turquand's case under Sections 13, 36,
46 and 293.
Recent Trend—English Law.—As the doctrine of constructive notice has now been abolished under the English
law, the rule in Turquand's case is no longer of relevance to the third party dealing with the company through the
Board of directors. Hence, a third party, who has dealt with the company through its Board of directors (de jure or
de facto) or with someone authorised by the Board of directors, will be protected so long as he has acted in good
faith.
See detailed Comments on the Doctrine of Constructive Notice and Rule in Turquand's case under Sections 13 and
290-293.
Borrowing powers and promissory notes.—Where the Articles of Association of a company allow borrowing by
the Directors, borrowing moneys on promissory notes is a transaction coming within the powers of the Directors.
When a person is appointed as the managing director by a resolution of the Board of Directors vesting in him full
powers for the management of the company's affairs and authorising him to sign all papers of the company, he has
full powers to borrow moneys on promissory notes even without a resolution of the Board of Directors as envisaged
under section 292(c) of the Companies Act, 1956.49
Promissory on behalf of company.—Where the promissory note was executed on behalf of the company for sale
of property to the company. The seal of the company was not necessary on the promissory note. Promissory note is
covered by section 47 and not section 48 of the Companies Act, 1956. Even if the plaintiff as a director had voted in
the passing of the resolution the only legal consequence would be that his vote would have to be excluded from
consideration. But, the validity of the transaction would not be thereby affected.50
Where money was borrowed and promissory note executed by the Chief Executive of the company in that capacity.
The company and new management could not deny the execution of the promissory note. That accounts of the
company did not reflect the borrowing was the internal matter with which the creditor was not concerned. The
company was liable for borrowing by the chief executive for the company.51
Promissory Note by Managing Director.—Where a promissory note was executed by the Managing Director.
There was no indication that the sum was borrowed by the company or the Managing Director on behalf of the
company. The Managing Director was held personally liable. Even if the company had treated it as its own liability it
would not bind the creditor.52
Publication of name by company [ Section 147].
—Every company shall have its name mentioned in legible characters, inter alia, in all bills of exchange, hundies,
Page 4 of 5
promissory notes, endorsements, cheques and letters of credit, etc., of the company. [ Section 147(1)(c)]. See
Dishonour of Cheques.—Under section 141 of the Negotiable Instruments Act, 1881 [Offences by companies]: If
the person committing an offence under section 138 of the Negotiable Instruments Act [Dishonour of cheque for
insufficiency, etc., of funds in the account] is a company, the persons who are in charge of the conduct of the
business of the company as well as the company will be liable.
See detailed Comments in this Commentary under Section 5 of the Companies Act, 1956—Meaning of “Officer who
is in default”.
Bank Guarantee.—The duty to satisfy about the authority of the executant is on the beneficiary. If a transaction is
contained in more than one documents between the same parties, they must be read and interpreted together to
see the position of the Directors of the company as surety or guarantor.53
Secretarial Practice and Check List.— Section 47. Check that : (1) the articles of association of the company
provide that the instrument must be drawn, made, accepted or endorsed in the name of or by or on behalf of or on
account of the company, (2) the person who makes, draws, endorses or accepts the instrument must have the
authority given to him by the company on that behalf, and (3) the instrument must be drawn or endorsed “for and on
behalf of the company”.
The documents involved are : (1) Articles, (2) Minutes of Board Meeting.
SC 37].
SC 37]; Mahony v. East Holyford Mining Co.,(1875) LR 7 HL 869 : (1874-80) All ER Rep. 427 : 33 LT 383 (HL). See
42. Sreelal v. Lister Antiseptic Dressing Co.,AIR 1925 Cal. 1062 : 29 CWN 828; Jajodia Cotton Mills, In re, 31 CWN 683
(Cal.). The system of managing agency, secretaries and treasurers has since been abolished vide section 324A. See
43. Elliott v. Bax-Ironside,(1925) 2 KB 301 : (1925) All ER Rep. 209 : 94 LJ KB 807 (CA).
44. Mercantile Bank of India Ltd. v. Chartered Bank of India, Australia and China and Strauss & Co. Ltd.,(1937) 1 All ER
231. See also Comments under Sections 13 and 293.
45. Bryant, Powis and Bryant v. La Banque de Peuple,(1893) AC 170 : 62 LJ PC 68; Montaignac v. Shitta, (1890) 15 App.
Cas. 357 : 39 WR Dig. 178.
46. Section 50.
47. Royal British Bank v. Turquand, , (1856) 6 E.&B. 327 : (1843-60) All ER Rep. 435 (Ex Ch.) : 25 LJ QB 317 : 2 Jur. NS
48. Shri Kishan Rathi v. Mondal Bros. & Co. (P.) Ltd., (1967) 37 Comp. Cas. 256 (Cal.) : AIR 1967 Cal. 75 [LNIND 1965
CAL 134]: 70 CWN 164; Surve Kedarappa v. Bhimappa, (1960) 30 Comp. Cas. 131 (Mys.); Dey v. Pullinger
Engineering Co.,(1921) 1 KB 77. See also Comments under Section 292.
49. P. Rangaswami Reddiar v. R. Krishnaswami Reddiar, (1973) 43 Comp. Cas. 232 (Mad.) : AIR 1973 Mad. 251 [LNIND
50. C. Sundararaja Pillai v. Sakthi Talkies (Dindigul) Ltd., (1967) 37 Comp. Cas. 463 (Mad.) (DB). See also Comments
under Section 300.
51. Kirlampudi Sugar Mills Ltd. v. G. Venkata Rao, (2003) 114 Comp. Cas. 563 (AP). See also Comments under Section
147(1)(c).
52. M. Mahadevan Pillai v. Vedavalli Ammal, (1994) 79 Comp. Cas. 851 (Mad.).
53. Chattanatha Karayalar v. Central Bank of India, (1965) 35 Comp. Cas. 610 (SC) : AIR 1965 SC 1856 [LNIND 1965 SC
74]: (1965) 3 SCR 318 [LNIND 1965 SC 74]; Margaret Lalita Samuel v. Indo-Commercial Bank Ltd., (1979) 49 Comp.
Cas. 86 (SC) : AIR 1979 SC 102 [LNIND 1978 SC 263]: (1979) 1 SCR 914 [LNIND 1978 SC 263]; Bank of Bihar Ltd. v.
Page 5 of 5
Dr. Damodar Prasad, (1969) 39 Comp. Cas. 133 (SC) : (1969) 1 SCR 620 [LNIND 1968 SC 200]; Union Bank of India
v. Manku Narayana, (1987) 62 Comp. Cas. 1 (SC); Punjab National Bank v. Mehra Brothers (P.) Ltd., (1983) 54 Comp.
Cas. 541 (Cal.); United Commercial Bank v. Rathi Fibres and Fabrics Ltd., (1983) 54 Comp. Cas. 625 (Delhi); Central
Bank of India v. P. R. Garments Industries P. Ltd., (1987) 62 Comp. Cas. 669 (Guj.).
End of Document
Datta: Company Law
C R Datta
etc.
S. 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.
54. Danby v. Coutts & Co., (1885) 29 Ch.D. 500 : 54 LJ Ch. 577 : 52 LT 401 : 33 WR 559; Jacobs v. Morris, (1902) 1 Ch.
816 : 71 LJ Ch. 363 : 86 LT 275 : 50 WR 371 (CA); Hambro v. Burnard,(1904) 2 KB 10 : 73 LJ KB 669 : 90 LT 803
(CA).
55. Societe de Foments Industrial Ltd. v. Ravindranath Subraya Kamat,AIR 1999 Bom. 158 [LNIND 1998 GOA 9].
56. Mercantile Bank of India Ltd. v. Chartered Bank of India, Australia and China and Strauss & Co. Ltd., , (1937) 1 All ER
231. See also Comments under Sections 13, 47 and 293.
57. Montaignac v. Shitta, (1890) 15 App. Cas. 357 : 39 WR Dig. 178; Bryant, Powis and Bryant v. La Banque de Peuple ,
(1893) AC 170 : 62 LJ PC 68.
58. Rajendra Nath Dutta v. Shibendra Nath Mukherjee, (1982) 52 Comp. Cas. 293 (Cal.).
577 (SC) relying on Probodh Chandra Mitra v. Road Oils (India) Ltd.,AIR 1930 Cal. 782; OTV Birwel Co. Ltd. v.
COMMENTS
Page 2 of 3
Appointment of Attorney under Seal to execute Deeds.—The company may appoint and empower any person
as its Attorney for a particular purpose or generally. The appointment must be in writing and under common seal.
Such appointment is to be made by the Board of Directors. The Attorney shall execute Deeds which should be
under his own seal, where seal is required, and such a contract or deed will be binding on the company. The power
of attorney executed by the company and its scope and operations are strictly construed.54
Power of Attorney.—The company may in writing under a Common Seal empower any person to execute a Deed
on its behalf.55
Duty of outsiders.—A third party dealing with the attorney cannot rely upon apparent authority but should acquaint
himself with the Memorandum and Articles of the company.56 Such outsiders, however, need not have knowledge
of the existence of the special circumstances.57
Model Articles [Schedule I, Table A].
— See Regulation 84 of Table ‘A’ of Schedule I to the Companies Act, 1956 for the Seal. See detailed Comments
under Schedule I, Table A and Sections 26-31.
See also Comments under Section 50 and Regulation 84.
Agreement without common seal.—Where the Articles of Association of a company provided that certain types of
agreement would be executed under the common seal of the company, a lease agreement executed by the
Managing Director without the common seal is not binding on the company.58
See also Schedule I, Table A, Regulation 84.
Powers of Managing Director.—From the definition of “managing director” under section 2(26) of the Companies
Act, 1956, it is clear that the managing director as an agent of the company does not have all the powers to act for
and on behalf of the company. Where, the managing director did not have the actual authority or power to fix the
common seal of the company to any document by arriving at any kind of settlement for and on behalf of the
company. He had no “actual” authority or power to act for and on behalf of the company. The Memorandum of
understanding (MoU) entered into between the managing director and N was not for and on behalf of the
respondent-company, nor was it a valid deed in terms of section 48 of the Act, so as to bind the company. The Mou
or settlement did not create a binding debt. Winding up could not, therefore, be ordered under sections 433 and 434
of the Act.59
Publication of name by company [ Section 147].—Every company shall have its name engraven in legible
characters on its seal. [ Section 147(1)(b)].
Contract with Company—Common Seal of Company.— Sections 46 and 48 of the Companies Act, 1956 merely
lay down the mode of signing contract or execution of deeds on behalf of the company. Once a contract or deed is
executed on behalf of the company, it is the company and not the persons signing which can sue or be sued on the
contract if the evidence is clear that the signature was only that of the company. An oral agreement for sale is
permissible in law. Where the contract was executed in the name of the company. It was not disputed that all the
five directors executed the agreement. The company was a private limited company. The subsequent letters written
on behalf of the company clearly demonstrated that all the directors were aware of the said agreement. The
company before the Trial Court never chose to file any written statement or dispute the contentions raised in the
plaint. In fact in the deeds executed in favour of the agreement, it had been clearly stated that the suit for specific
performance of contract filed by the respondent was pending. The company never denied or disputed the
correctness or otherwise of the contents of the agreement. The company never denied or disputed the terms of the
agreement nor raised any plea that the agreement was not binding on the company or the same was illegal. Thus,
even in the absence of a Resolution the contract could not have been held to be invalid or illegal. So far as the
question of putting up of the seal of the company is concerned, it is a relic of the days when mediaeval barons, who
could not read or write, used their rings to make a characteristic impress. Even in the absence of a seal, the
company may still be held to be liable having regard to the nature of transaction and the authority of those who had
executed it. If the act of the directors is not ultra vires or no public policy is involved, the parties acting thereupon
cannot be left at large.60
Page 3 of 3
Contract, Deed or Bond—Company's Seal, necessity of—Trade Name.—A company may use its Trade Name
and not its Registered Name in the Body of a Deed or Bond. In the present transaction there was also a surety. On
the action of the Contractor it was held that the company was bound under the Contract even though in the
contract, its Trading Name was used and the surety was also liable for breach of the agreement. The underlying
Contract was not a nullity, the contractor was entitled to enforce the contract. It was not against the Public Policy to
allow the enforcement of such a contract. The Contract, Deed or Bond was found valid and enforceable.61
Common Seal dispensed with under English Law.— Section 36A(3) of the English Companies Act, 1985
inserted by the English Companies Act, 1989 removes the need for a company to have a common seal. Section
36A provides that in favour of a purchaser in good faith for valuable consideration including a lessee, mortgagee or
other person who for valuable consideration acquires an interest in property, a document shall be deemed to be
duly executed by a company if it purports to be signed by a director and the secretary or by two directors and that,
where it makes it clear on its face that it is intended to be a deed, to have been “delivered”.
Secretarial Practice and Check List.— Section 48. Check whether : (1) Attorney to execute deeds on behalf of
the company empowered under common seal? (2) Deed signed by such an attorney on behalf of the company as
required by the power of attorney and the articles?
The documents involved are : (1) Articles, (2) Minutes of Board Meeting, (3) Official Seal, (4) Power of Attorney
bearing Official Seal (5) Register of Deeds and Documents executed, if any.
54. Danby v. Coutts & Co., (1885) 29 Ch.D. 500 : 54 LJ Ch. 577 : 52 LT 401 : 33 WR 559; Jacobs v. Morris, (1902) 1 Ch.
816 : 71 LJ Ch. 363 : 86 LT 275 : 50 WR 371 (CA); Hambro v. Burnard,(1904) 2 KB 10 : 73 LJ KB 669 : 90 LT 803
(CA).
55. Societe de Foments Industrial Ltd. v. Ravindranath Subraya Kamat,AIR 1999 Bom. 158 [LNIND 1998 GOA 9].
56. Mercantile Bank of India Ltd. v. Chartered Bank of India, Australia and China and Strauss & Co. Ltd., , (1937) 1 All ER
231. See also Comments under Sections 13, 47 and 293.
57. Montaignac v. Shitta, (1890) 15 App. Cas. 357 : 39 WR Dig. 178; Bryant, Powis and Bryant v. La Banque de Peuple ,
(1893) AC 170 : 62 LJ PC 68.
58. Rajendra Nath Dutta v. Shibendra Nath Mukherjee, (1982) 52 Comp. Cas. 293 (Cal.).
577 (SC) relying on Probodh Chandra Mitra v. Road Oils (India) Ltd.,AIR 1930 Cal. 782; OTV Birwel Co. Ltd. v.
End of Document
Datta: Company Law
C R Datta
etc.
S. 49. Investments of company to be held in its own name.

—
(1) Save as otherwise provided in sub-sections (2) to (5) 62[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
(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 63[***].
(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
64[(aa) from depositing with, or transferring to, or holding in the name of, the State Bank of India or
a Scheduled Bank, being the bankers of the company, shares or securities, in order to facilitate the
transfer thereof:
Provided that if within a period of six months from the date on which the shares or securities are
transferred by the company to, or are first held by the company in the name of, the State Bank of
India or a Scheduled Bank as aforesaid, no transfer of such shares or securities takes place, the
company shall, as soon as practicable after the expiry of that period, have the shares or securities
retransferred to it from the State Bank of India or the Scheduled Bank or, as the case may be,
again hold the shares or securities in its own name; or]
(b) from depositing with, or transferring to, any person any shares or securities, by way of security for
the repayment of any loan advanced to the company or the performance of any obligation
undertaken by it;
Page 2 of 11
65[ (c) from holding investments in the name of a depository when such investments are in the
form of securities held by the company as a beneficial owner.]
(6) The certificate or letter of allotment relating to the shares or securities in which investments have been
made by a company shall, except in the cases referred to in sub-sections (4) and (5), be in the custody
of such company or 66[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 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
67[ fifty thousand rupees].
(10) If any inspection required under sub-section (8) is refused, the 68[ Central Government] 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.
63. The words “expressly described as a nominee of the company” omitted by the Companies (Amendment) Act,1960 (65
of 1960), s. 15.
65. Inserted by the Depositories Act, 1996 (22 of 1996), s. 30 and Sch. (w.r.e.f. 20-9-1995);.
66. Substituted by Act 65 of 1960, s. 15, for “with a Scheduled Bank”.
67. Subs. by the Companies (Amendment) Act, 2000 (53 of 2000), s. 14 (w.e.f. 13-12-2000), for “five thousand
rupees”.
† See Section 2(43). For List of Scheduled Banks see Second Schedule to the Reserve Bank of India Act, 1934 in
Appendix 305.
** See the Companies (Declaration of Beneficial Interest in Shares) Rules, 1975 in Appendix 24.
69. Hemangini Finance and Leasing P. Ltd. v. Tamilnad Mercantile Bank Ltd., (1996) 86 Comp. Cas. 875 (CLB). See also
Comments under Section 108, 111, 187C, 370, 372 and 372A.
70. Mishra Dhathu Nigam Ltd. v. State, (1998) 92 Comp. Cas. 730 (AP); R.K. Mahapatra v. Secy. to Govt., (1998) 92
Comp. Cas. 809 (AP). See also Comments under Section 209A and 292.
† See the Companies (Declaration of Beneficial Interest in Shares) Rules, 1975 in Appendix 24.
Page 3 of 11
COMMENTS
follows: “This section is based on the Company Law Committee's recommendation at page 291 of its Report.” [
“A new section should be inserted to provide that all investments held by a company should be registered in the
name of the company, the only exception being the qualification shares required to qualify a nominated director of a
company, but such shares should be in the possession of company or its bankers. The Committee considers this
specific provision in the Act necessary as it would reduce the temptation to misuse the investment of the company.”
[ Report : page 291].
The Joint Committee recommended further changes as follows: “The Committee consider that this clause which
requires a company to hold all investments in its own name should not apply to an investment company whose
business consists of the buying and selling of shares, stock, debentures or other securities. Deposits of securities in
a bank for the collection of dividend or interest and deposits or transfers by way of security are permitted. In the
case of investments held by a company at the commencement of this Bill, the period of six months allowed by the
Bill as introduced for compliance with the provisions of this clause has been increased to one year. The Committee
have also provided for the keeping of a register of all securities belonging to, but not held by, a company in its own
name.” [ Report : para 24].
The Companies (Amendment) Act, 1960 (65 of 1960).—The Notes on clauses explained as follows: “The changes
proposed in section 49 seek to implement the recommendations made in para 39 of the Report that some latitude
may be given to companies in those cases where, on account of the provisions of some other law for the time being
in force, it is not possible for the companies to keep investments exclusively in its own name, ensure that indirectly
through nominees trusts ought not to be entered on the register of members of a company, and facilitate operation
through banks.” [ Clause 16 of the Companies (Amendment) Bill, 1959 (37 of 1959)].
“Consistently with the view we have taken that trusts ought not to be entered on the register we recommend the
deletion of the word ‘expressly described as a nominee of the company’ occurring at the end of section 49(2). It has
been suggested that in cases where investments cannot be held in the name of the company on account of the
provisions of some other law or rule or regulation having the force of law, the company should be allowed to hold
them in the name of other persons. This would be indirectly defeating a provision of law and could not be allowed.
Section 49(1) might, however, be amended by inserting the words ‘or by any other law for the time being in force’
after the words ‘sub-sections (2) to (5)’ occurring at the beginning of the sub-section. It is said that section 49(5)(a)
does not make it clear whether while depositing the securities with a company's bankers, such securities should
stand in the company's own name or whether they could stand in the name of its bankers. Apparently, the intention
was that the securities should be held in the name of the company. It has been pointed out that in the case of
investments of the funds of a company in Government securities or debentures and shares it should be open to the
company to have them bought in the name of a scheduled bank the advantage being the easy collection of
dividends and the speedy disposal of such shares and securities at a slightly higher price. Till the shares or
securities are disposed of, the bankers of the company would be collecting interest and dividends and crediting
them to the company's account. Section 49(5)(a) may be amended by stating that ‘nothing in the section should be
deemed to prevent a company, from depositing with or transferring to or holding shares or securities in the name of
the State Bank of India or a Scheduled Bank, being the bankers of the company, so as to facilitate the collection of
dividends or interest or transfer of the shares and securities.’ As a consequential amendment, the words ‘or the
State Bank of India’ shall be added before the words ‘or with a Scheduled Bank’ in section 49(6).
We have been informed that difficulties have been experienced over the interpretation of the words ‘whose principal
business’ occurring in section 49(4). The suggestion has been made that the term should be defined or,
alternatively, that it should be replaced by words such as ‘one of the business of which’ or ‘a substantial part of the
business of which’. We consider that any amendment might seriously impair the effectiveness of the section to
achieve its object and that, in this context, the Parliament intended to exclude from the operation of the provisions
of sub-section (1)(a) only those companies which were mainly engaged in the buying and selling of shares and
securities. The question of what is or is not a company's principal business is a question of fact which has to be
Page 4 of 11
decided having regard to the circumstances in each particular case and we do not feel that any amendment to
section 49(4) is required.” [ Report : para 39].
The Joint Committee recommended further changes as follows:
“The Committee consider that where a company transfers any shares to a Bank to facilitate the disposal of these
shares, then, if the shares are not disposed of within six months, the Bank should re-transfer them to the company.
The clause has been amended accordingly.” [ Report : para 23].
—The Notes on clauses explained that the powers which were exercised by the Court were vested in the Company
Law Board [ now the Central Government]. [ Clause 67 of the Companies (Amendment) Bill, 1987 (32 of 1987)].
See also Legislative History below and Comments under Section 10E.
The Depositories Act, 1996 (22 of 1996).—The Notes on clauses explained the amendments in this section as
follows: “Clause 30 provides for amendment to certain provisions of the Companies Act, 1956 provided in the
Schedule to the Bill.” [Clause 30 of the Depositories Bill, 1996 (29 of 1996)].
The Companies (Amendment) Act, 2000 (53 of 2000).—The Notes on clauses explained as follows: “This clause
seeks to enhance the fine specified in sub-section (9) of section 49 of the Act from five thousand rupees to fifty
thousand rupees.” [ Clause 14 of the Companies (Second Amendment) Bill, 1999 (139 of 1999)].
The Companies (Second Amendment) Act, 2002 (11 of 2003).—The Notes on clauses explained the amendments
as follows: “This clause, inter alia, seeks to amend section 49 of the Companies Act, 1956 relating to investments of
company to be held in its own name. It is proposed to confer the powers of theCompany Law Board in the aforesaid
section upon the Tribunal [ conferred upon the Central Government in the Act]. These amendments are of
See also Legislative History under Section 10E, 10FB and 637.
Investments to be in company's name [Sub-section (1)].—This section provides that all investments, e.g., in
shares, stocks, debentures and other securities, made by a company on its own behalf shall be made and held by it
in its own name.
If any other Law permits.—If any other Law permits, the company may invest and hold its investments in any
other name.
Some latitude has been given to companies where, on account of the provisions of some other Law for the time
being in force, it is not possible for the companies to keep investments exclusively in its own name.
See Legislative History of Amending Acts given above.
Exceptions [Sub-sections (2) to (5)].—Sub-sections (2) to (5) provide the following exceptions to the above
general provision:
(a) Qualification Shares of Directors [Sub-section (2)].—Where a company has a right to appoint directors
in another company, the qualification shares of the directors may be held jointly in the name of nominee
directors and itself or in the name of the nominee directors.
See detailed Comments on Qualification Shares under Section 270.
(b) Shares in Subsidiary [Sub-section (3)].—A holding company may acquire and hold shares in its
subsidiary in the name of its nominee(s) to comply with the requirement relating to the statutory minimum
number of members in the subsidiary company.
See also Comments hereinafter and under Section 4.

Page 5 of 11
(c) Investment Company [Sub-section (4)].—An investment company need not hold the securities in its own
name.
(d) Shares deposited with a Bank [Sub-section (5)(a)].—A company may keep the shares or securities
deposited with a bank, being the bankers of the company, for collection of Dividends or Interest.
(e) Securities with Scheduled Bank for transfer [Sub-section (5)(aa)].—Shares or securities can be held in
the name of or transferred to the State Bank of India or a Scheduled Bank† for the purposes of transfer; if
the transfer does not take place within six months the investments must as soon as practicable thereafter
be held by the company in its own name.
(f) Security for repayment of loan [Sub-section (5)(b)].—A company may transfer shares to any person by
way of security for repayment of loan or the performance of any obligation.
(g) Depository [Sub-section (5)(c)].—A company may hold investments in the name of a depository when
such investments are in the form of securities held by the company as a beneficial owner.
Depository [ Section 2(12A) ].—Depository has the same meaning as in the Depositories Act, 1996 (22 of 1996)*.
[ S. 2(12A) of the Companies Act, 1956].
The Depositories Act, 1996 (22 of 1996) and further related amendments to certain enactments have made
consequential amendments in the Companies Act, 1956 (1 of 1956).
See Comments under relevant Sections of the Companies Act, 1956, viz., Section 2(12A), 2A, 41(3), 49(5)(c), 51
proviso 68A, 68B, 83, 108(3), 111(14), 111A, 113(4), 150(1)(b), 152(1)(b), 152A and Schedule II, Part II, Clause C,
Sub-clause 9A.
Shares in name of Company's Nominee.—Where shares are held in the name of company's nominee, the
provisions of sections 187C are to be complied with.
Declaration of Beneficial Interest in Shares [ Section 187C ].— See detailed Comments, Form and Procedure
and Filing, etc., for Declaration of interest and change, etc., by legal owner and beneficiary under Section 187C.
See the Companies (Declaration of Beneficial Interest in Shares) Rules, 1975** in Appendices.
Section 187C inapplicable to Public Trustee.—The provisions of section 187C shall not apply to trustee referred
to in section 187B on and after the commencement of the Companies (Amendment) Act, 2000. [ Section 187C(8)].
Section 153A, 153B and 187B inapplicable (w.e.f. 13-12-2000).—As per sections 153A(2), 153B(5), 187B(7),
187C(8)of the Companies Act, 1956, as inserted by the Companies (Amendment) Act, 2000 (53 of 2000), the
provisions of section 153A, 153B, 187B, 187C of the Act will not be applicable to the Trustees referred to in these
sections (w.e.f. 13-12-2000).
These sections provided for: Appointment of public trustee [ Section 153A], Declaration as to shares and
debentures held in trust [ Section 153B] and Exercise of voting rights in respect of shares held in trust [ Section
187B].
See detailed Comments and Legislative History under respective Sections
Depositories.— Section 9(2) of the Depositories Act, 1996 makes section 153, 153A, 153B, 187B, 187C and 372
[now Section 372A] of the Companies Act, 1956 relating to shares held in trust or by nominee inapplicable to a
depository in respect of securities held by it on behalf of the beneficial owners.
BenamiTransactions (Prohibition) Act, 1988 .—Under Section 68A of the Companies Act, 1956, application or
acquisition of shares in fictitious name is punishable. Further, the Benami Transactions (Prohibition) Act, 1988 (45
of 1988) has also been enacted to prohibit benami transactions and the right to recover property held benami and
for matters connected therewith or incidental thereto.
The Benami Transactions (Prohibition) Act, 1988 has been amended by the Depositories Act, 1996 and shall not
apply in certain cases, e.g., (a) property purchased in the name of wife or unmarried daughter or (b) securities held
Page 6 of 11
by Depository and Depository Participants. [ Section 3(2) of the Benami Transactions (Prohibition) Act, 1988 as
substituted by the Depositories Act, 1996].
However, every depository shall maintain a register and an index of beneficial owners as provided in sections 150,
151 and 152 of the Companies Act, 1956 [ Section 11 of the Depositories Act, 1996 (22 of 1996)].
See detailed Comments under Section 68A and 68B.
Custody of Certificate or Letter of Allotment [Sub-section (6)].—The certificate or letter of allotment in respect
of securities in which investments have been made by a company shall be kept with the company or its banker
being the State Bank of India or a Scheduled Bank except in the cases referred to in sub-section (4) and (5).
Register of investments not in company's name [Sub-section (7)].—Where investments are not held in
company's own name in pursuance of sub-sections (2) to (5), the company must maintain a register of such
investments with prescribed particulars.
Inspection [Sub-section (8)].—Such register will be open for inspection for two hours every day by members or
debenture holders without any charge.
Penalty [Sub-section (9)].—For failure to comply with the requirements of sub-sections (1) to (8) of section 49, that
investments made by a company should be held in its own name, etc., the company and every officer who is in
default shall be punishable with fine upto Rs. 50,000.
See also Comments under Section 5, 621 and 621A.
Jurisdiction [Sub-section (10)].—If any inspection required under sub-section (8) is refused, the Company Law
Board [ now the Central Government] may by order direct an immediate Inspection of the Register.
By the Companies (Second Amendment) Act, 2002 (11 of 2003) (w.e.f. date to be notified), the powers and
jurisdiction presently being exercised by the Company Law Board (CLB) have been transferred to “the Central
Government”.
Earlier, the Companies (Amendment) Act, 1988 had transferred the jurisdiction from the Court to the CLB.
See also Comments under Section 10E, 10FB and 637.
Petition under section 49(10) to direct the company to allow an immediate inspection of Register of Investments, if
the inspection is refused, shall be made to the Central Government.
See detailed Comments, Form and Procedure under Section 10FB and 637.
For Form and Procedure for Petition (till commencement of above amendment) hitherto made to the Company Law
Boardsee Comments under Section 10E.
Securities includes stock and debentures [Sub-section (11)].—In this section, “securities” includes stock and
debentures.
Inter-corporate Loans and Investments [ Section 372A].—A company may purchase shares in the name of
another company, e.g., in a transaction in the nature of lender and borrower, in which event the money paid shall be
treated as a loan to that another company. It will not be violative of Section 49 of the Act.69
Complaint for Investments of funds in contravention of Board Resolution—Limitation.—For filing complaint

for investments of funds in contravention of the resolution of Board of directors under section 292(1)(d) of the Act,
mere filing of balance sheet was held to be not sufficient to impute knowledge to the Registrar. Date of company's
reply to the Department in response to the notice of inspection under section 209A had to be taken as the date of
knowledge of offence. The complaint filed beyond six months from the date of such knowledge was barred by
limitation under section 468 of the Code of Criminal Procedure, 1973 (2 of 1974).70
Page 7 of 11
Statement.
1956 as follows:
Section 49 [Investments in Company's name].—This Section requires that the investments of a company are
held in its own name, except as otherwise permitted by it and the Auditor should see that its provisions have been
complied with.
Compliance Certificate by Secretary—Registers and Records.—Relevant paras of the Form appended to the
below.
(AGM).
follows:
“1. The company has kept and maintained all Registers as stated in Annexure ‘A’ to this Certificate, as per the
provisions and the Rules made thereunder and all entries therein have been duly recorded.”
Page 8 of 11
Check-List for issue of Compliance Certificate.— See Check-List for issue of Compliance Certificate on Para 1
of the Form of Compliance Certificate as contained in ICSI Guidance Note on Compliance Certificate relating to
Registers and Records in Comments under Section 150 and 163.
“Registers and Records.—Following is the List of Registers and Records to be maintained by a company, if
applicable. If the Registers or Records are maintained in Electronic Form, then at the end of the financial year a
print out of Registers or Records should be taken out and the same should be signed by any Director authorised by
the Board. The Practising Company Secretary (PCS) should initial all Registers or Documents checked by him with
some distinctive mark for identification.
Check whether the company has, inter alia, maintained the following Registers/Records, applicable to it:—
Statutory Registers.— (a) Register of Investments under Section 49.—Check whether:

(i) all investments of the company are held in the name of the company;
(ii) if any investments are not held by the company in its own name as allowed by sub-sections (2), (3), (4) or
(5) of Section 49; whether Register of investments not held in company's name has been maintained and
the particulars such as the nature, value and such other particulars as may be necessary fully to identify
the shares or securities in question and the bank or person in whose name or custody the shares or
securities are held have been entered therein;
(iii) the Register is kept open for inspection by any member or debenture-holder without charge, during
business hours, subject to reasonable restrictions as may be imposed by the Articles or in General
Meeting.
Registers as maintained by the Company are required to be enumerated in Annexure ‘A’ to Compliance Certificate.
This is applicable to Private Companies as well as Public Companies.
See Comments on Register of Investments under Section 49(1) to (5) and Register was kept open for Inspection as
required by Section 49(8) of the Act. See Comments on Inter-Corporate Loans and Investments under Section
372A.
under Section 383A.
Secretarial Standard-4 (SS-4) on Registers and Records.—The Council of the Institute of Company Secretaries
of India (ICSI) has issued “Secretarial Standard-4 (SS-4) on Registers and Records” in October, 2005.
Secretarial Standards
Relevant paras of ICSI “Secretarial Standard-4 (SS-4) on Registers and Records” containing Standard in bold type
and other important matters are reproduced below.
“1. Register of Investments in Securities not held in the name of the Company
1.1 Maintenance.— 1.1.1 Every company should, from the date of its registration, maintain a Register of
Page 9 of 11
Investments in Securities and enter therein the particulars of Investments in Securities made by the Company on its
own behalf but which are not held in its own name.
If a company nominates any person to act as a director of any other company or body corporate, the company can
for the purpose of meeting share qualification requirements of such company or body corporate, hold shares in
such company or body corporate either jointly in its name and in the name of each such person or nominee, or
exclusively in the name of such person or nominee. In such cases, the nominal value of such shareholding should
not exceed the nominal value of the qualification shares that may be required to be held by the person nominated to
act as a director of that company or body corporate.
A company can also make investment in its subsidiaries and hold such shares in the name(s) of its nominee(s) only
to ensure minimum number of members in the subsidiaries.
If the company is a trustee, the investment should be deemed to have been made on behalf of the beneficiaries of
the trust and not on its own behalf. Consequently, no entries are required to be made in respect of such
investments.
1.1.2 The register should contain the following information in relation to each investment made: name of the
company or body corporate in which investment is made; date of Board Resolution; date of investment; kind and
number of securities; purpose for making the investment; certificate number; distinctive number of securities; folio
number/client ID number; cost of acquisition of securities; face value of securities; name of the person in whose
name the investment is made; date of disposal; number of securities disposed of and sale consideration.
‘Date of investment’ for the purpose of this Register means the date on which investments already held by the
company are transferred in the name of its nominee/directors/other persons.
‘Date of disposal’ for the purpose of this Register means the date on which the investments are either disposed off
or transferred in the name of the company.
1.1.3 Entries in the register should be made forthwith, in chronological order and separate folios should be assigned
to every person in whose name the investments are held.
The details of benefits arising out of corporate actions such as rights shares, bonus shares, etc. should be
recorded.
1.1.4 The register should be maintained at the registered office of the company.
1.2 Inspection.— 1.2.1 The register should be open for inspection of any member or debenture holder of the
company during the business hours of the company without payment of any fee, subject to such reasonable
restrictions as the company may impose by its Articles or in General Meeting so that not less than 2 hours in each
working day of the company are allowed for inspection.
A member or debenture holder inspecting the Register can make extracts from the register during the course of
inspection.
A representative of a body corporate, seeking to inspect the register should be duly authorized to do so by the
Board of such body corporate. Where a representative of a body corporate inspects the register and if the
inspection were to be continued by some other person, such other person should also be authorized by the Board
of the inspecting body corporate.
The words ‘reasonable restrictions’ relate to the time of inspection and the company may permit inspection of the
register during certain identified hours only. The company should, through its notices, annual report or other
communication, duly intimate members about the time of inspection of the register.
Only one person at a time should be allowed to inspect the register.
1.2.2 No person is entitled to copies of the register or any portion thereof.
1.3 Authentication.— 1.3.1 Entries in the register should be authenticated by the Secretary of the company or by
any other person authorized by the Board for the purpose, by appending his signature to each entry.
Page 10 of 11
1.4 Preservation.— 1.4.1 The register should be preserved permanently and should be kept in the custody of the
Secretary of the company or any other person authorized by the Board for the purpose.”
[ Secretarial Standard-4 (SS-4) on Registers and Records, Issued by the Institute of Company Secretaries of India
(ICSI), October, 2005, para 1, pages 3 to 6].
“19. Register of Investments (Other than Securities not held in the Name of the Company)
Investments and enter therein particulars of investments, Other than Securities, title whereof has not passed in the
Name of the Company.
19.1.2 The register should contain the following particulars: date of acquisition; description of properties or
documents by which the property was acquired; reasons for which title not yet passed in the name of the company;
quantum of investment; date and description of title in the name of the company.
19.1.3 Entries in the register should be made forthwith, in chronological order and separate folios should be
assigned to every person in whose name the investments are held.
19.2 Inspection.— 19.2.1 The register should be open for inspection of any member or debenture holder of the
company during the business hours of the company, subject to such reasonable restrictions as the company may
impose by its Articles or in General Meeting so that not less than 2 hours in each working day of the company are
allowed for inspection.
A member or debenture holder inspecting the register can make extracts from the register during the course of
inspection.
A representative of a body corporate seeking to inspect the register should be duly authorized to do so by the Board
of such body corporate. Where a representative of a body corporate inspects the register and if the inspection were
to be continued by some other person, such other person should also be authorized by the Board of the inspecting
body corporate.
19.2.2 No person is entitled to copies of the register or any portion thereof.
19.3 Authentication.— 19.3.1 Entries in the register should be authenticated by the Secretary of the company or
by any other person authorized by the Board for the purpose, by appending his signature to each entry.
19.4 Preservation.— 19.4.1 The register should be preserved permanently and should be kept in the custody of
the Secretary of the company or any other person authorized by the Board for the purpose.”
(ICSI), October, 2005, para 19, pages 47-48 : the ICSI website http://www.icsi.edu : See Fuller Text in Comments
under Section 163].
See detailed Comments under Section 49, 163, 372A and 383A.
Secretarial Practice and Check List.— Section 49. Check that all investments of the company were held in the
name of the company. Check whether any investments were held in the name of nominees? If so, check whether :
(1) the particulars such as nature, value, etc., which may be necessary to identify the shares or securities had been
entered in a register kept for the purpose? (2) provisions of section 187C have been complied with both by the
company as beneficiary or by the persons holding the shares as ostensible owners? (3) the register was kept open
for inspection? (4) such investments had been re-transferred in the name of the company within six months if held
in the name of the banker?
The documents involved are : (1) Minutes of Board Meeting, (2) Register of Investments, (3) Share/Debenture
Certificates, (4) Investments held by banks [check documents with banks], (5) Copies of Forms I, II and III under the
Companies (Declaration of Beneficial Interest in Shares) Rules, 1975.†
Page 11 of 11
63. The words “expressly described as a nominee of the company” omitted by the Companies (Amendment) Act,1960 (65
of 1960), s. 15.
65. Inserted by the Depositories Act, 1996 (22 of 1996), s. 30 and Sch. (w.r.e.f. 20-9-1995);.
66. Substituted by Act 65 of 1960, s. 15, for “with a Scheduled Bank”.
67. Subs. by the Companies (Amendment) Act, 2000 (53 of 2000), s. 14 (w.e.f. 13-12-2000), for “five thousand
rupees”.
† See Section 2(43). For List of Scheduled Banks see Second Schedule to the Reserve Bank of India Act, 1934 in
Appendix 305.
** See the Companies (Declaration of Beneficial Interest in Shares) Rules, 1975 in Appendix 24.
69. Hemangini Finance and Leasing P. Ltd. v. Tamilnad Mercantile Bank Ltd., (1996) 86 Comp. Cas. 875 (CLB). See also
Comments under Section 108, 111, 187C, 370, 372 and 372A.
70. Mishra Dhathu Nigam Ltd. v. State, (1998) 92 Comp. Cas. 730 (AP); R.K. Mahapatra v. Secy. to Govt., (1998) 92
Comp. Cas. 809 (AP). See also Comments under Section 209A and 292.
† See the Companies (Declaration of Beneficial Interest in Shares) Rules, 1975 in Appendix 24.
End of Document
Datta: Company Law
C R Datta
etc.
S. 50. Power for company to have official seal for use outside India
—
(1) A company whose objects require or comprise the transaction of business outside India may, if
authorised by its articles, have for use in any territory, district or place not situate in India an official
seal which shall be a facsimile of the common seal of the company, with the addition on its face of the
name of the territory, district or place where it is to be used.
(2) A company having an official seal for use in any such territory, district or place may, by writing under its
common seal, authorise any person appointed for the purpose in that territory, district or place to affix
the official seal to any deed or other document to which the company is a party in that territory, district
or place.
(3) The authority of any agent authorised under sub-section (2) shall, as between the company and any
person dealing with the agent, continue during the period, if any, mentioned in the instrument
conferring the authority, or if no period is there mentioned, until notice of the revocation or
determination of the agent's authority has been given to the person dealing with him.
(4) The person affixing any such official seal shall, by writing under his hand, certify on the deed or other
document to which the seal is affixed, the date on which and the place at which, it is affixed.
(5) A deed or other document to which an official seal is duly affixed shall bind the company as if it had
been sealed with the common seal of the company.
COMMENTS
—The Notes on clauses explained that “This section is based on section 91 of the existing Act and section 35 of the
English Act.” [ Clause 45 of the Companies Bill, 1953 (46 of 1953)].
Official seal for use outside India.—Where a company has any business or transaction in a place outside India, a
facsimile (exact reproduction) of the common seal may be kept there. The seal should also contain the name of the
place where the seal would be used. For such use there must be power in the Articles. A person must be properly
authorised to use the seal, who shall sign his name, put the name of the place and the date on any document on
which the seal is affixed and the fact that he has been authorised to do so by the specified resolution.
Power in the Articles.—The power under this section can be exercised only if the Articles of Association of the
company authorise.
Page 2 of 3
Seal of company, when to be used.—The Articles of Association of the company should provide for putting the
seal of the company on documents. Apart from this, the company's seal is to be put on Power of Attorney, Deed of
Lease, Deed of Sale, Share Certificates, Debentures, Debenture Trust Deeds, Deed of Mortgage, Promissory
Notes, Negotiable Instruments (except cheques), Agreement of Hypothecation, Loan Agreements with Banks and
Financial Institutions, Contract of Employment, Guarantees issued by the company and all formal documents and
documents executed on stamped papers. The documents should be executed only by persons specifically
authorised by the Articles of Association of the company or by resolutions of the general meeting or the Board of
directors. The authority to execute the formal documents will imply the putting the seal of the company but specific
authority may also be given to specified officers of the company. However, if the company executes documents on
putting its rubber stamp, it cannot avoid the liability under the documents on the plea that it did not bear the seal of
the company.
Publication of name by company [ Section 147].—Every company shall have its name engraven in legible
characters on its seal. [ Section 147(1)(b)].
Model Articles [Schedule I, Table A].— See Regulation 84 of Table ‘A’ of Schedule I to the Companies Act, 1956
for the Seal. See detailed Comments under Schedule I, Table A and Sections 26-31.
See also Comments under Section 48 and Regulation 84.
Secretarial Standard-4 (SS-4) on Registers and Records.—The Council of the Institute of Company Secretaries
of India (ICSI) has issued “Secretarial Standard-4 (SS-4) on Registers and Records” in October, 2005.
Secretarial Standards
Relevant paras of ICSI “Secretarial Standard-4 (SS-4) on Registers and Records” containing Standard in bold type
and other important matters are reproduced below.
“20. Register of Documents executed under Common Seal
Documents on which the Common Seal of the company has been affixed.
20.1.2 The register should contain the following particulars: description of the document; date of the resolution
authorizing the use of common seal; date of affixing seal on the document; name(s) of person(s) who attested the
affixation; and the place at which the document was so sealed.
20.1.3 Entries in the register should be made forthwith.
20.2 Inspection.— 20.2.1 The register is not open for inspection.
20.3 Authentication.— 20.3.1 Entries in the register should be authenticated by the Secretary of the company or
by any other person authorized by the Board for the purpose, by appending his signature to each entry.
20.4 Preservation.— 20.4.1 The register should be preserved permanently and should be kept in the custody of
the Secretary of the company or any other person authorized by the Board for the purpose.”
(ICSI), October, 2005, para 20, page 49 : the ICSI website http://www.icsi.edu : See Fuller Text in Comments under
Section 163].
See detailed Comments under Sections 46 to 50, 163 and 383A.
Secretarial Practice and Check List.— Section 50. Whether the company had used its official Seal outside India?
If so, check whether : (1) the articles authorised such use? (2) the seal was a facsimile of the common seal of the
Page 3 of 3
company with the addition on its face, name of the place where it was to be used? (3) the person using the Official
Seal was authorised in writing under the common seal of the company? (4) the person affixing such seal had
certified in writing on the deed/document to which the seal was affixed the date on which and the place at which it
was affixed?
The documents involved are : (1) Articles, (2) Minutes of Board/General Meeting, (3) Official Seal, (4) Document of
authorisation to use the Seal, (5) Deeds/documents bearing Official Seal, (6) Register of Documents Sealed, if any.
End of Document
Datta: Company Law
C R Datta
COMPANY AND MATTERS INCIDENTAL THERETO > Service of Documents
S. 51. Service of documents on company.

—A document may be served on a company or an officer thereof by sending it to the company or officer at the
registered office of the company by post under a certificate of posting or by registered post, or by leaving it at its
registered office:
71[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.]
72. Shalimar Rope Works Ltd. v. Abdul Hussain, , AIR 1980 SC 1163 [LNIND 1980 SC 232]: (1980) 3 SCR 1028 [LNIND
1980 SC 232];Nicco Corporation Ltd. v. Cethar Vessels Ltd., , (1998) 92 Comp. Cas. 748 (Mad.).
73. Cathrineholm A/S v. Norequipment Trading Ltd., , (1972) 2 QB 314 : (1972) 2 All ER 538 : (1972) 2 WLR 1242 : (1972)
116 SJ 159 (CA).
74. Harendra Nath Ghosal v. Superfoam Pvt. Ltd., , (1992) 74 Comp. Cas. 740 (Cal.) (DB). See also All India General
Transport Corporation Ltd. v. Raghunath Sahay, , (1970) 40 Comp. Cas. 203 (Pat.) in Comments under Sections 10
and 34.
75. Parasrampuria Synthetics Ltd. v. Shankar Prasad, , (2005) 123 Comp. Cas. 419 (Delhi) (DB).
76. Madan and Co. v. Wazir Jaivir Chand, , AIR 1989 SC 630 [LNIND 1988 SC 564].
77. Maharashtra State Financial Corporation v. Masvi and Co. P. Ltd., , (1993) 76 Comp. Cas. 168 (Bom.). See also
78. Jute & Gunny Brokers Ltd. v. UOI, , (1962) 32 Comp. Cas. 845 (SC) : AIR 1961 SC 1214 [LNIND 1961 SC 64].
79. Springate v. Questier, , (1952) 2 All ER 21 : 116 JP 367 (DC); Sarkar Estates P. Ltd. v. Kusumika Iron Works P. Ltd., ,
(1962) 32 Comp. Cas. 575 (Cal.) : AIR 1961 Cal. 439 [LNIND 1960 CAL 207]; Liverpool Marine Insurance Co. v.
Haughton, , (1874) 23 WR 93.
80. Benabo v. William Jay & Partners Ltd., , (1941) Ch. 52 : (1940) 4 All ER 196 : 110 LJ Ch. 17.
81. Sadashiv Shankar Dandige v. Gandhi Seva Samaj Ltd., , (1958) 28 Comp. Cas. 137 (Bom.) : AIR 1958 Bom. 247 : 60
Bom. LR 90. See also Comments under Section 9.
82. SIL Import v. Exim Aides Silk Exporters, , (1999) 97 Comp. Cas. 575 (SC); Hastie & Jenkerson v. Mcmohan, , (1991) 1
All ER 255.
83. Om Prakash Jaiswal v. Shekhraj Hotel Pvt. Ltd., , (2004) 122 Comp. Cas. 255 (All.) : (2003) 2 Comp. LJ 34 (All.);
Motilal Agarwal v. Diabari Tea Co. Ltd., , (2005) 128 Comp. Cas. 672 (Cal.); Sika Qualcrete Ltd. v. Orissa Bridge
Construction Corporation Ltd., , (2006) 129 Comp. Cas. 660 (Orissa). See detailed Comments under Sections 433(e)
and 434(1)(a).
Page 2 of 5
COMMENTS
English Act, 1948 : Section 437 Previous Act, 1913 : Sections 17(2), 148, 149
Legislative History.— The Companies Act, 1956 (1 of 1956).—The Notes on clauses explained the provisions
contained in sections 51, 52 and 53 as follows: “These are based on sections 148 and 149 of the existing Act and
regulations 112 to 115 of Table A in the First Schedule to that Act, which are all compulsory regulations. See
section 17(2) of the existing Act. They have therefore been incorporated in the body of the Bill as suggested by the
Company Law Committee.” [ Clauses 46 to 48 of the Companies Bill, 1953 (46 of 1953)].
See Recommendations of the Company Law Committee under Section 28.
The Depositories Act, 1996 (22 of 1996).—The Notes on clauses explained the amendments as follows: “Clause 30
provides for amendment to certain provisions of the Companies Act, 1956 provided in the Schedule to the Bill.”
[Notes on Clause 30 of the Depositories Bill, 1996 (29 of 1996)].
Mode of Service of Documents on Company.—A document may be served on a company by sending it

addressed to the registered office of the Company by post under certificate of posting or by registered post. A
document may also be served by leaving it at the Registered Office of the company.
Service by certificate of posting is not safe, as in many cases the Court or Tribunal would be reluctant to accept it
as good service. Personal delivery or service will also not be acceptable to Court or Tribunal unless a competent
person on behalf of the company has given a receipt for the letter or document.
It would be better to serve a company by registered post or through peon who shall obtain a proper signature and
rubber stamp from the company's employee. If an officer of the company is to be served, the same procedure is to
be adopted.
See detailed Comments on Service of documents on Registrar under Section 52 and Service of documents on
Members by company, Modes of service, Presumption as to service and Presumption rebuttable, etc., under
Section 53.
Service of summons on Company.—A summons has to be served by registered post or personally on the
Secretary, Director or Principal Officer of the company and in spite of due diligence if this cannot be done, then only
it can be left at the registered office. Service on an Office Assistant of a registered company is no service at all.72
Technically, if the provisions of this section are complied with, it will be no defence to a decree obtained in default of
appearance of the company that the Writ of Summons never reached the company.73
Summons to be served at Registered Office.— Section 51 of the Companies Act, 1956 which deals with service
of documents on companies enjoins that a document may be served on a company or an officer thereof by sending
it to the company or officer at the registered office of the company by post under a certificate of posting or by
registered post or by leaving it at its registered office. The “document”, in view of Section 2(15) of the Companies
Act, 1956 includes summons, notices, requisition, order, other legal processes and registers whether issued, sent
or kept in pursuance of this or any other Act or otherwise. Rule 2 of Order 29 of the Code of Civil Procedure, 1908
(5 of 1908) provides for service of process in a suit against a corporation subject, however, to any statutory
provision regulating such service. Therefore, in the matter of service of summons on a limited company, the
provisions of Rule 2 of Order 29 shall be subject to Section 51 of the Companies Act, 1956. The result is that the
provision of Section 51 of the Companies Act, 1956 would prevail over Rule 2 of Order 29 of the Civil Procedure
Code. Therefore, a summons on a limited company has to be served at its registered office in terms of Section 51
of the Companies Act. Where this is not done, there is no valid service of summons upon the company. Where the
appellate court, on appreciating the evidence adduced by the parties, accepted the company's contention that its
premises had remained closed during the time summons were served. There could be no inference that the
Page 3 of 5
summons were tendered by the postal authorities and refused by the company. There could therefore be no
presumption as to valid service.74
Service of Summons on the Company—Corporate Office.— Order 29, Rule 2 of the Code of Civil Procedure,
1908 (5 of 1908), does not limit the service of Summons at the Registered Office of the company alone. It provides
for different modes of service which also include service of Summons on the Secretary or Managing Director or
Principal Officer of the Corporation or service through the Registered Post at the Corporation's Registered Office, or
at the place where the Corporation carried on business in case it had no Registered Office. Summons were served
on the Corporate Office of the company and were also admittedly received by its employee who had executed the
receipt affixing the Seal of company. Such service could not be held as bad or invalid or against the provisions of
Order 29, Rule 2 of the Code of Civil Procedure, 1908 (5 of 1908). The respondent having effected such service on
the appellants Corporate Office at Delhi, which was admitted had done its duty, was not expected to do anything
more under the circumstances. Even if the service is disputed the Court was satisfied that appellants had
knowledge of notice of hearing and had sufficient time to appear on the next day.75
Presumption of service.—When a summons was sent to the proper address of the addressee by registered post
and tendered with the postal authority for service, then the presumption of service arises under section 27 of the
General Clauses Act, 1897 (10 of 1897). Such presumption, even though rebuttable, has to be rebutted by the other
side by leading sufficient evidence.76
Service of Notice of Meetings.—For Service of Notice of Meetings see detailed Comments under Section 172.
Service of Notice on company.—The Managing Director of the company is entitled to accept the notice on behalf
of the company. The notice accepted by the Managing Director of the company is a proper service on the
company.77
Any other mode of service provided by any other Act.—Any other mode of service provided by any other Act
may also be valid.78
Defective Address.—The letter should be addressed with substantial accuracy. The omission of the word “Private”
in the address will not invalidate a service of document. Similarly the omission of the word “Limited” will not affect
the validity of service of a notice or document on a company provided there was no company at the other address
in a similar name.79 A notice addressed to the company and served on the directors is good service.80
Articles cannot limit mode of service.—The Articles of Association of a company cannot contain any provision
contrary to this section nor can it limit the mode of service to one only of the modes provided by the statute.81
Service by Depository in Electronic Mode [ Section 51, proviso].—Where the shares or 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.
Depository [ Section 2(12A)].—Depository has the same meaning as in the Depositories Act, 1996 (22 of 1996). [
S. 2(12A) of the Companies Act, 1956].
Sub-clause 9A.
Service of notice by Fax.—Service of notice by Fax is valid.82

Page 4 of 5
Foreign Company.—The procedure for service of documents on a foreign company is laid down in section 596.
See Comments under Section 596.
Winding up—Inability to pay debts—Statutory Notice.—Statutory Notice of demand under Section 434(1)(a) of
the Companies Act, 1956 must be served at the Registered Office of the company. Time of 21 days for Statutory
Notice is mandatory. Presumption of inability to pay debt under Section 433(e) is available only where the Statutory
Notice of demand is served at the Registered Office. Where the petitioner served notice at former Registered
Office, the presumption was not available. The petitioner was not entitled to take the plea of deemed insolvency
under Section 434 of the Act. On facts, the petitioner failed to show that disappearance of the substratum had
imperilled the chance of recovery. The winding up petition was dismissed.83
See detailed Comments under Sections 51, 146, 433(e) and 434(1)(a).
Service of documents by company.— See detailed Comments under Service of documents on Registrar [
Section 52], Service of documents on members by company [ Section 53] and Service of Notice of Meetings of
Company [ Section 172].
Secretarial Practice and Check List.— Section 51. Check whether documents required to be served on a
company were served on the company or officer : (a) at the registered office of the company? (b) by sending it to
the company or officer at the registered office by post under a certificate of posting or by registered post, or by
leaving it at its registered office?
The documents involved are : (1) Despatch Register, (2) Correspondence, (3) Register of Members.
72. Shalimar Rope Works Ltd. v. Abdul Hussain, , AIR 1980 SC 1163 [LNIND 1980 SC 232]: (1980) 3 SCR 1028 [LNIND
1980 SC 232];Nicco Corporation Ltd. v. Cethar Vessels Ltd., , (1998) 92 Comp. Cas. 748 (Mad.).
73. Cathrineholm A/S v. Norequipment Trading Ltd., , (1972) 2 QB 314 : (1972) 2 All ER 538 : (1972) 2 WLR 1242 : (1972)
116 SJ 159 (CA).
74. Harendra Nath Ghosal v. Superfoam Pvt. Ltd., , (1992) 74 Comp. Cas. 740 (Cal.) (DB). See also All India General
Transport Corporation Ltd. v. Raghunath Sahay, , (1970) 40 Comp. Cas. 203 (Pat.) in Comments under Sections 10
and 34.
75. Parasrampuria Synthetics Ltd. v. Shankar Prasad, , (2005) 123 Comp. Cas. 419 (Delhi) (DB).
76. Madan and Co. v. Wazir Jaivir Chand, , AIR 1989 SC 630 [LNIND 1988 SC 564].
77. Maharashtra State Financial Corporation v. Masvi and Co. P. Ltd., , (1993) 76 Comp. Cas. 168 (Bom.). See also
78. Jute & Gunny Brokers Ltd. v. UOI, , (1962) 32 Comp. Cas. 845 (SC) : AIR 1961 SC 1214 [LNIND 1961 SC 64].
79. Springate v. Questier, , (1952) 2 All ER 21 : 116 JP 367 (DC); Sarkar Estates P. Ltd. v. Kusumika Iron Works P. Ltd., ,
(1962) 32 Comp. Cas. 575 (Cal.) : AIR 1961 Cal. 439 [LNIND 1960 CAL 207]; Liverpool Marine Insurance Co. v.
Haughton, , (1874) 23 WR 93.
80. Benabo v. William Jay & Partners Ltd., , (1941) Ch. 52 : (1940) 4 All ER 196 : 110 LJ Ch. 17.
81. Sadashiv Shankar Dandige v. Gandhi Seva Samaj Ltd., , (1958) 28 Comp. Cas. 137 (Bom.) : AIR 1958 Bom. 247 : 60
Bom. LR 90. See also Comments under Section 9.
82. SIL Import v. Exim Aides Silk Exporters, , (1999) 97 Comp. Cas. 575 (SC); Hastie & Jenkerson v. Mcmohan, , (1991) 1
All ER 255.
83. Om Prakash Jaiswal v. Shekhraj Hotel Pvt. Ltd., , (2004) 122 Comp. Cas. 255 (All.) : (2003) 2 Comp. LJ 34 (All.);
Motilal Agarwal v. Diabari Tea Co. Ltd., , (2005) 128 Comp. Cas. 672 (Cal.); Sika Qualcrete Ltd. v. Orissa Bridge
Construction Corporation Ltd., , (2006) 129 Comp. Cas. 660 (Orissa). See detailed Comments under Sections 433(e)
and 434(1)(a).
Page 5 of 5
End of Document
Datta: Company Law
C R Datta
S. 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.

* See the Companies (Central Government's) General Rules and Forms, 1956 in Appendix 1.c
‡ See the Companies (Electronic Filing and Authentication of Documents) Rules, 2006 framed under Sections 610A to
610E (w.e.f. 16-9-2006) in Appendix 2.
† See the Scheme for Filing of Statutory Documents and Other Transactions by Companies in Electronic Mode (w.e.f. 27-
16-9-2006).
COMMENTS
51.
Mode of Service of Documents on the Registrar.—Service of document on the Registrar of Companies (ROC)
may be by post under a certificate of posting, or by registered post, or by delivery to him or by leaving the document
for him at his office. The document should be sent to his office address.
It is advisable to send the document by Registered Post with Acknowledgement Due or by a peon who shall obtain
signature of an employee of the Registrar's office and rubber stamp in acknowledgement of receipt of the
document.
Form and Procedure.— See Regulation 17* of the Companies Regulations, 1956 for registration and rectification
of defects in documents filed with the Registrar and Regulation 18* of the Companies Regulations, 1956 for Filing
Fee under Schedule X and Additional Fee imposed by Registrar under Section 611(2).
Rule 19† of the Companies (Central Govt.'s) General Rules and Forms, 1956 provides for translation of documents
other than those under Part XI of the Act. As per this rule if any document, or any portion of any document, required
to be filed is not in English or in Hindi, a translation of that document or portion either in English or in Hindi certified
by a responsible officer of the company to be correct, shall be attached to each copy of the document which is
furnished to the Registrar. The Central Government may relax this requirement. See Rule 21† of the Companies
(Central Govt.'s) General Rules and Forms, 1956.
Page 2 of 10
Filing Fees.—Filing fee as prescribed in Schedule X of the Companies Act, 1956, based on Nominal or Authorised
Capital, shall be payable along with Forms and Documents to be filed with the Registrar of Companies. See
detailed Comments on Filing Fees and Additional Fees under Section 611 and Schedule X.
See detailed Comments, Form and Procedure under Sections 609 to 614A.
all applications submitted to the Department of Company Affairs, Regional Directors, Registrars of Companies
(ROCs) and Official Liquidators shall be processed within the time frame indicated in Schedules (I), (II), (III) & (IV).
Companies(ROCs) have been given in Schedule (V) annexed to the Citizen's Charter.
As per Schedule (II) the ROCS shall process Applications in specified working days. [ Press Note No. 9 (1999
Series) (F. No. 5/25/99-CL-V), dated 9-8-1999 : Department's web site (www.dca.nic.in) : (1999) 98 Comp. Cas.
(St.) 1 : See Fuller Text under Sections 33, 609 and 637 and Extracts under respective Sections].
Registration of Documents under amended Regulation 17 of the Companies Regulations, 1956.—“I am

directed to enclose herewith a copy each of Notification No. G.S.R. 924(E), dated 14-12-1992, and Press Note,
dated 21-12-1992 [ printed below], on the above subject and to say that the amended Regulation 17 of the
Companies Regulations, 1956 shall come into force with effect from 1-1-1993. You are requested to issue notice
under certificate of posting immediately on filing the defective document, clearly identifying the defect for
corrections, giving 15 days' time from the date of notice. It may be ensured that such documents are kept ready for
corrections when the signatory to the documents visit your office and efforts be made to take the documents on
record, duly corrected. In case the defects are not removed within 15 days, the concerned document be taken on
record immediately thereafter along with office copy of the notice issued. Subsequently in case any writing or paper
is filed in relation to such document, the same be annexed in terms of section 234(5) of the Act. Similar procedure
be adopted in respect of pending documents.
2. It may be noted that in case the filing/additional fee is not paid, the concerned document cannot be taken on
record in terms of Regulation 18.” [ Circular No. 11 of 1992 (F. No. 14/3/87-CL-V), dated 21-12-1992 : Chartered
Secretary, January 1993, page 61 : (1993) 76 Comp. Cas. (St.) 10].
Press Note, dated 21-12-1992.—“It has come to the notice of the Government that a large number of defective
documents are pending in the offices of the Registrars of Companies, with the result that the same are not made
available for inspection to the members of the public under section 610 of the Companies Act, 1956.
2. Regulation 17 of the Companies Regulations, 1956, empowers the Registrar of Companies to examine the
document and to direct the company to rectify the defect and no document can be taken on record unless the
defect is rectified. Experience shows that the companies generally do not come forward to rectify the defective
documents and the same remain pending for a very long time.
3. To streamline the procedure, Regulation 17 of the Companies Regulations, 1956, has been amended, vide
Notification No. G.S.R. 924(E), dated 14-12-1992, with effect from 1st January, 1993. It has been provided that if
any such document is found to be defective or incomplete in any respect, the Registrar shall give notice in writing to
the company to rectify the defect or complete the document or to file a revised document complete in all respects
within 15 days from the date of such notice and on failure on the part of the company to rectify the defect, the
document shall be registered, recorded or filed, as the case may be, by the Registrar and the company shall be
informed accordingly.
4. The companies are advised to ensure that the corrected documents are filed within the prescribed period along
with filing fee and in case of defective documents, the defects be removed within 15 days on receipt of notice from
the Registrar of Companies. It may be pointed out that the defective document will be taken on record by the
Registrar without prejudice to his powers to take such action, as warranted under the law.” [ Press Note 12/92,
dated 21-12-1992, Issued by the Ministry of Law, Justice and Company Affairs, Department of Company Affairs,
New Delhi : Chartered Secretary, January 1993, page 62 : (1993) 76 Comp. Cas. (St.) 10].

vide Circular No. 1 of 1995, dated 16-2-1995 directed the Registrars of Companies(ROCs) to implement certain
Page 3 of 10
the companies. [ Circular No. 1 of 1995 (F. No. 14/6/94-CL-V), dated 16-2-1995 : (1995) 82 Comp. Cas. (St.) 261 :
See Full Text of the Circular in Comments under Section 609].
See also Relevant Extracts of the foregoing Circular under Department's views in Comments under Sections 12,
13, 15, 20, 30, 31, 33, 56, 60, 61, 108, 125, 159, 192, 210, 220, 303, 555 and 572.
Filing of documents by companies with Registrar of Companies requires certificate by Chartered

Accountant/Cost Accountant/Company Secretary for expeditious registration.—“The Government have taken
a decision that all documents filed by companies with the concerned Registrar of Companies under the Companies
Act, 1956 (1 of 1956), be taken on record, if the same are duly certified as correct by a Chartered Accountant/Cost
Accountant/Company Secretary in Practice for the sake of expeditious registration of public documents filed under
the said Act.” [ Press Note (F. No. 3/10/91-CL-V), dated 12-3-1991 :(1991) 70 Comp. Cas. (St.) 93].
Authorisation for making corrections in defective documents filed by companies with the Registrars of
Companies.—“I am directed to say that it has come to the notice of this Department that the companies, which file
defective documents with the Registrars of Companies, do not take appropriate steps to remove those defects. You
are requested to prevail upon your constituents to ensure that the defective documents, pending with the Registrars
of Companies, are corrected expeditiously, so that the same are taken on record. While it is necessary that the
documents are corrected by the signatory of the document concerned, as a matter of administrative convenience, it
has been decided that a duly authorised person, preferably a professional Chartered Accountant/Company
Secretary/Cost Accountant or an Advocate, be allowed to make such corrections. The said authorisation should be
by way of a Power of Attorney, duly executed on a requisite stamp paper and accompanied by a Resolution of the
Board of Directors, in this behalf.
2. You are also requested to advise your constituents that proper care is taken at the time of filing documents, so
that the concerned Registrar of Companies has no difficulty in taking the documents on record.” [ Circular No. 8/90
(F. No. 14/2/88-CL-V), dated 17-5-1990 : Chartered Secretary, June 1990, page 487].
See also Comments under Sections 12, 33, 234, 609-611 and Schedule X.
Offices of Registrars of Companies (ROC) [ Section 609].—Registrars of Companies (ROC)appointed under

Section 609 of the Companies Act, 1956 covering the various States and Union Territories are vested with the
primary duty of registering companies floated in the respective States and the Union Territories and ensuring that
such companies comply with statutory requirements under the Act.
These ROC offices function as registry of records, relating to the companies registered with them, which are
available for inspection by members of public on payment of the prescribed fee. The Central Government exercises
administrative control over these offices through the respective Regional Directors.
See Comments on the Companies Regulations, 1956, e-Filing with the Registrars of Companies (ROCs),
Registration Fees, Filing Fees, Additional Fees, Department's views on Registration of Documents, Filing of
documents, Streamlining the Working of Registrars of Companies (ROCs), etc., briefly dealt with below.
See detailed Comments under Sections 609, 610, 610A, 610B-610E and 611.
The Companies Regulations, 1956.—In exercise of the powers conferred by Sections 25 and 609(2) of the
Companies Act, 1956, the Central Government has made the Companies Regulations, 1956 which, inter alia,
provide for :
Charitable Companies or Associations [Regulations 3 to 14].—Charitable Companies or Associations may be

registered under the Companies Act, 1956 without the words “Limited” or “Private Limited” at the end of its name.
See Regulations 3 to 14 and Annexures I to V of the Companies Regulations, 1956 dealt with in Comments under
Section 25.
Duties of the Registrars (ROCs) [Regulations 15 to 26].—The Regulations with respect to the Duties of the
Registrars of Companies (ROCs) under Section 609 are contained in Part E, Regulations 15 to 26 of these
Regulations.
Page 4 of 10
Office Hours of the ROCS [Regulation 15].—The office of the Registrar shall observe such normal working hours
as may be approved by the Central Government and shall be open for the transaction of business with the public on
all days except Saturday, Sunday and other public holidays between 10.30 a.m. and 3.30 p.m.
Certificate of Incorporation [Regulation 16(1)].—On the registration of the Memorandum of Association of the
company, the Registrar of Companies shall certify under his hand that the company is incorporated.
As per Regulation 16(1) of the Companies Regulations, 1956 the Certificate of Incorporation granted to a company
in pursuance of Section 34(1) of the Companies Act, 1956 shall be in Form I of the Companies Regulations, 1956.
The Registrar of Companies shall cause a copy of such certificate to be entered on the Memorandum of
Association of the company. [Regulation 16(2)].
See detailed Comments, Form and Procedure on Registration of Memorandum and Articles [ Section 33],
Certificate of incorporation [ Section 34], Conclusiveness of certificate of incorporation [ Section 35] and Effect of
Memorandum and Articles [ Section 36] of the Companies Act, 1956 earlier in this Book.
Register of Companies [Regulation 21].—As per Regulation 21(1) the Register of Companies to be maintained in
the office of each Registrar of Companies (ROC) shall be in Form III of the Companies Regulations, 1956.
E-Governance, e-Filing, e-Registration, Authentication through Digital Signature, e-Records and e-

Inspection.—In exercise of the powers conferred by Section 25(5) and (8) and Section 609(2) read with Section
610A(2) of the Companies Act, 1956 (1 of 1956), the Central Government has further amended the Companies
Regulations, 1956 by the Companies (Amendment) Regulations, 2006, the Companies (Second Amendment)
Regulations, 2006 and the Companies (Third Amendment) Regulations, 2006 which, inter alia, provide as follows:
Regulation 19 [substituted (w.e.f. 22-8-2006)].— Regulation 19 of the Companies Regulations, 1956 substituted
by the Companies (Second Amendment) Regulations, 2006 vide Notification No. G.S.R. 497(E), dated 21-8-2006,
published in the Gazette of India, Extraordinary, No. 385, Part II, Section 3(i), page 3, dated 22-8-2006 : (2006) 133
Comp. Cas. (St.) 54 (w.e.f. 22-8-2006) provides as follows:
“19. (1) The following particulars shall be endorsed and maintained electronically or otherwise on every document
registered, recorded or filed with the Registrar:
(i) the number assigned to the company in the Register of Companies maintained by Registrar in pursuance
of sub-regulation (1) of Regulation 21;
(ii) a unique number assigned to the document; and
(iii) the date on which it is registered, recorded or filed.
(2) Every endorsement referred to in sub-regulation (1) shall either—

(i) be signed by the Registrar, and in such case, shall bear his official seal; or
(ii) be authenticated through a valid digital signature generated by computer system, in case of electronic
documents.
(3) If the endorsement aforesaid cannot be conveniently entered into on the document itself,—
(a) in the case of a physical document, it shall be made on a separate sheet which shall be attached to the
document with a note regarding such attachment being made on the document in question and signed by
Registrar;
(b) in the case of an electronic document, such endorsement be authenticated through a valid digital signature
generated by computer system.”
by the Companies (Third Amendment) Regulations, 2006 vide Notification No. G.S.R. 556(E), dated 14-9-2006,
published in the Gazette of India, Extraordinary, No. 436, Part II, Section 3(i) : (2006) 133 Comp. Cas. (St.) 80
(w.e.f. 14-9-2006) provides as follows:
Page 5 of 10
“25 (1). Any person who wishes to inspect a document registered, recorded or filed by or with the Registrar in
pursuance of the Act, shall apply to him for the purpose along with fee prescribed in that behalf under of clause (a)
of sub-section (1)Section 610 of the Act.
(2) The applicant shall be allowed to inspect the document, which do not form part of the electronic registry, only in
presence of the Registrar or of a person authorized by him in this behalf, and only during office hours.”
Application, Documents, Licence, etc., in the Electronic manner [Regulations 27 to 31].—Part F containing
Regulations 27 to 31 of the Companies Regulations, 1956 added by the Companies (Amendment) Regulations,
2006 vide Notification No. G.S.R. 157(E), dated 16-3-2006, published in the Gazette of India, Extraordinary, No. 99,
Part II, Section 3(i), page 3, dated 16-3-2006 : (2006) 130 Comp. Cas. (St.) 294 (w.e.f. 16-3-2006) provides as
follows:
“27. Any application or document or notice or declaration or statement required to be made or filed or furnished or
sent or given, as the case may be, by any person under these Regulations may also be made or filed or furnished
or sent or given, as the case may be, in the electronic manner:
Provided that the provisions of this regulation shall not be applicable to the provisions of Regulations 10 and 11 of
Part D of these Regulations.
28. Any certificate, licence, receipt or endorsement required to be given or granted or made or signed or
acknowledged, as the case may be, by Regional Director or Registrar of Companies, may also be given or granted
or made or signed or acknowledged, as the case may be, in the electronic manner.
29. Any document required or authorised to be registered, recorded or filed by or with the Registrar of Companies
under these Regulations may be registered, recorded or filed by him in the electronic manner, subject to the
compliance with the requirement of Regulation 18 of Part E of these Regulations.
30. The Register or Index required to be maintained by the Registrar of Companies pursuant to these Regulations
may also be maintained in electronic manner.”
E-Governance and e-Filing by Companies.— See Comments on e-Governance and e-Filing by Companies later
in this Section.
See detailed Comments, Form and Procedure on e-Governance and e-Filing by Companies under Sections 610A
to 610E.
by the Companies (Third Amendment) Regulations, 2006 vide Notification No. G.S.R. 556(E), dated 14-9-2006,
published in the Gazette of India, Extraordinary, No. 436, Part II, Section 3(i) : (2006) 133 Comp. Cas. (St.) 80
(w.e.f. 14-9-2006) provides as follows:
“31. The documents registered, recorded or filed with the Registrar electronically or documents which have been
scanned and digitized and form a part of the electronic registry shall be available for inspection only in electronic
manner on payment of fee as prescribed under clause (a) of sub-section (1) of Section 610 of the Act.
See also Comments under Sections 610, 610A to 610E and 611.
Citizen's Charter of the DCA [ now the MCA].—As per the Citizen's Charter of the erstwhile Department of
Company Affairs (DCA) now the Ministry of Company Affairs (MCA), all applications submitted to the Department of
Company Affairs (DCA) [ now the Ministry of Company Affairs (MCA)], Regional Directors (RDs), Registrars of
Companies (ROCs) and Official Liquidators (OLs) shall be processed within the time frame indicated in Schedules
(I), (II), (III) & (IV) annexed to the Citizen's Charter. Organisational chart of the Department of Company Affairs
(DCA) and Addresses of Regional Directors (RDs) and Registrars of Companies (ROCs) have been given in
Schedule (V) annexed to the Citizen's Charter.
As per Schedules (I) to (IV) annexed to the Citizen's Charter, the Department of Company Affairs (DCA), the
Regional Directors (RDs), the Registrars of Companies (ROCs) and the Official Liquidators (OLs) shall process
Applications under respective Sections within the time frame specified in the Schedules:
Page 6 of 10
(I) Functions falling within the jurisdiction of the Central Government and dealt with at the Headquarters of the
Department of Company Affairs (DCA), at New Delhi [ now the Ministry of Company Affairs (MCA)].
(II) Functions falling within the jurisdiction of Regional Directors (RDs).
(III) Functions falling within the jurisdiction of Registrars of Companies (ROCs).
(IV) Functions falling within the jurisdiction of Official Liquidators (OLs).
As per Schedule (III), the Registrars of Companies (ROCs) shall process Applications under various Sections in the
stipulated working days or time frame.
See the Citizen's Charter of the Department of Company Affairs (DCA) [ now the Ministry of Company Affairs
(MCA)] : Press Note No. 9 (1999 Series) (F. No. 5/25/99-CL-V), dated 9-8-1999 : (1999) 98 Comp. Cas. (St.) 1 :
Issued by the Government of India, Ministry of Law, Justice and Company Affairs, Department of Company Affairs
(DCA) : www.dca.nic.in as updated from the Ministry of Corporate Affairs (MCA) website http://www.mca.gov.in in
Jurisdiction of Registrars of Companies.— See List of Functions falling within the jurisdiction of Registrars of
Companies (ROCs) and Addresses of Registrars of Companies (ROCs) as given in the Citizen's Charter of the
Department of Company Affairs (DCA) [ nowMinistry of Company Affairs (MCA)] issued vide Press Note No. 9
(1999 Series), dated 9-8-1999 as updated from the Ministry of Corporate Affairs (MCA) website
http://www.mca.gov.in in Comments under Section 609.
under various Sections have also been delegated to the Registrars of Companies. [ Notification No. G.S.R. 507(E),
dated 24-6-1985 as amended by Notification No. G.S.R. 281(E), dated 21-3-1995].
For Text of the Notification see Comments under Section 637.
Filing of e-Forms by Companies with ROCS.— See Forms of the Companies (Central Government's) General
Rules and Forms, 1956 as substituted by e-Forms* by the Companies (Central Government's) General Rules and
Forms (Amendment) Rules, 2006 (w.e.f. 10-2-2006) vide Notification No. G.S.R. 56(E), dated 10-2-2006, published
in the Gazette of India, Extraordinary, No. 50, Part II, Section 3(i), page 156 : (2006) 130 Comp. Cas. (St.) 13 in
Appendices.
See List of Old and New e-Forms 1 to 6† of the Companies (Central Govt.'s) General Rules and Forms, 1956 and
Fee Structure as also e-Forms prescribed under some other Rules and Fee Structure in Comments under Section
610B.
16-9-2006).
See the Companies (Electronic Filing and Authentication of Documents) Rules, 2006‡ framed under Sections 610A
27-10-2006)†vide Notification No. S.O. 1844(E), dated 26-10-2006, published in the Gazette of India, Extraordinary,
No. 1287, Part II, section 3(ii), page 15, dated 27-10-2006 : the Ministry of Corporate Affairs (MCA) website
http://www.mca.gov.in: (2006) 134 Comp. Cas. (St.) 91 in Comments under Section 610B.
Revised e-Forms.— See Revised e-Forms on the Ministry of Corporate Affairs (MCA) website
http://www.mca.gov.in under the various Categories of Services along with Date of Last Release as substituted or
Revised from time to time.
Page 7 of 10
10-2-2006) for Mode of Payment of Fees on filing of e-Forms to the Registrars of Companies (ROCs)under
Rules, 1999.
See detailed Comments under Sections 610B, 611, 637A and Schedule X.
Fees on Registration.—As per Section 611 and Schedule X, the Registration Fees (I) in respect of a company
having a share capital based on Authorised or Nominal Capital, and (II) in respect of a company not having a share
capital based on number of Members, shall be paid to the Registrar of Companies.
See detailed Comments under Sections 33, 611 and Schedule X.
Fees and Additional Fees.— See Comments on Filing Fees and Additional Fees on delayed filing to the
Registrars of Companies (ROCs) under Section 611.
See the Companies (Director Identification Number) Rules, 2006 framed under Sections 266A to 266G (w.e.f. 1-11-
2006) vide Notification No. G.S.R. 649(E), dated 19-10-2006, published in the Gazette of India, Extraordinary, No.
502, Part II, section 3(i), page 21 : Ministry of Corporate Affairs (MCA) website http://www.mca.gov.in : (2006) 134
Comp. Cas. (St.) 112 in Appendices.
Directors must apply for the Director Identification Number (DIN) on-line. See “DIN Issuance Process” or Director
Identification Number (DIN) issue Process, DIN Process Document, Frequently Asked Question (FAQs) on DIN,
Apply for DIN, Enquire DIN Approval Status, Get DIN Application, etc., on the Ministry of Corporate Affairs (MCA)
Authorised Signatories and Professionals have to procure Digital Signature Certificate (DSC). Digital Signature
Certificate (DSC) and e-Filing made mandatory from 16-9-2006.
See Digital Signature Certificate (DSC), e-Filing made mandatory from 16th September 2006, Apply for your DSC
now. Applying for DSCS on the Ministry of Corporate Affairs (MCA) website http://www.mca.gov.in.

(MCA)vide Cabinet Secretariat Notification No.DOC.CD-160/2004, dated 27-5-2004.
The erstwhile Department's website www.dca.nic.in was moved to the Ministry of Company Affairs (MCA) website
http://www.mca.gov.in.
Page 8 of 10
‘Ministry of Corporate Affairs‘ (MCA) (w.e.f. 9-5-2007).—The Ministry of Company Affairs (MCA) has been
renamed as ‘Ministry of Corporate Affairs‘ (MCA) vide Presidential Notification, dated 9-5-2007 amending the
‘Ministry of Corporate Affairs‘, Government of India, ‘A’ Wing, 5th Floor, Shastri Bhavan, Dr. Rajendra Prasad
Road,New Delhi-110 001.
See‘Ministry of Corporate Affairs‘ (MCA) website http://www.mca.gov.in.
E-Filing and Search facilities on MCA website [http://www.mca.gov.in].— See the following e-Governance, e-
Filing, e-Forms, Search and other Facilities on the Ministry of Corporate Affairs (MCA) website
http://www.mca.gov.in :
Charter.
(2) MCA-21 Program.
DSC now.
(6) Company Master Data and Charge Documents, Verify Company Master Data and Index of Charges.
(7) Annual Filing Corner [As a part of Annual Filing, companies incorporated under the Companies Act, 1956
are required to file following documents along with the e-Forms with the Registrar of Companies (RoC)]:
1. Balance-Sheet [e-Form 23AC to be filed by all Companies].
2. Profit & Loss Account [e-Form 23ACA by all Companies].
3. Annual Return [e-Form 20B by Companies having share capital].
4. Annual Return [e-Form 21A by Companies without share capital].
5. Compliance Certificate [e-Form 66 to be filed by Companies with paid up capital between Rs. 10 lakh
to Rs. 2 crore].
(8) Forms for e-Filing of Annual Returns, Balance Sheet & Profit and Loss, Annual filing e-Forms and e-Forms
with Instruction kit.
(9) e-Filing [the Ministry of Company Affairs (MCA) has introduced the MCA-21 e-Governance programme
with a view to providing all services relating to Registrar of Companies (ROC) Offices on-line in e-
Governance mode. All filings from September 16, 2006 can be done only under the Digital Signatures of
the authorised person (MD/Director/Company Secretary as the case may be].
There are various channels available to stakeholders to enable them to do the statutory filing with ROC
offices across the Country:
• The Virtual Front Office through http://www.mca.gov.in portal;
• Registrar's Front Offices set-up under the Project and Managed & operated by the Operator (53 all
over India); and
• Certified Filing Centers (CFCs) managed and operated by the Professionals on user charge basis (550
plus Centers approved all over India at 85 cities).
Virtual Front Office [MCA-21 replaces the erstwhile practices broadly consisting of physically filing of
documents, incorporation of companies and inspection of documents with the Registrar of Companies. This
project is the first of its kind and is intended to create a health business eco system conducive to foreign
investment thereby boosting the Indian economy.]
for a CFC, etc.
Page 9 of 10
(12) Annual Report, Corporate Growth, Other Reports.
(13) Approval Services (Headquarters), Approval Services (Regional Director), Approval Services (Registrar of
Companies).
(14) Change Services, Charge Management, Company Registration, Compliance Related Filing, Investor
Services, Provisions related to Managerial Personnel.
(15) View Public Documents, Get Certified Copies.
(16) Lodge Complaint, Track Complaint Status.
(17) Find CIN/GLN.
(18) Fee Calculator.
(20) View Transaction Status PFO.
See detailed Comments on the Companies (Electronic Filing and Authentication of Documents) Rules, 2006 earlier
under Section 610B(1).
See the Scheme for Filing of Statutory Documents and Other Transactions by Companies in Electronic Mode, 2006
(w.e.f. 27-10-2006) reproduced earlier in Comments under Section 610B(2).
Department's view.— Instructions for filling e-Company Forms.— See Press Releases/Instructions for filling e-
Company Forms:
(1) e-Form Specific Instruction Kit for filling e-Forms 1 to 66* of the Companies (Central Government's)
General Rules and Forms, 1956.
(2) e-Form Specific Instruction Kit for filling Investor Complaint e-Form.
(3) Common Instructions Kit, e.g., Pre Fill, Attach, Remove attachment, Check Form, Modify, Pre scrutiny,
Submit and Country code (List of ISO Country Code).
(4) Guidelines to be followed during e-Filing (Some of these guidelines will be applicable only at the Customer
Facilitation Centres).
(5) Details of New Forms and Fees.
[See Press Releases/Instructions for Filling e-Company Forms : (2006) 131 Comp. Cas. (St.) pages 1 to 264 : e-
Forms Instruction Kit, e-Forms, e-Forms with Instruction Kit, e-Filing updates, Revised e-Forms as issued and
revised from time to time on the Ministry of Corporate Affairs (MCA) website http://www.mca.gov.in].
See List of Old and New e-Forms with Relevant Sections in Comments under Section 610B. See Form and
Procedure under respective Sections.
List and Details of Old Form and New e-Forms and Fees.— See List of Old Forms and New e-Forms 1 to 66 of
the Companies (Central Government's) General Rules and Forms, 1956 [ which are mandatory (w.e.f. 16-9-2006)],
Fee Structure, Corresponding Old Forms and New e-Forms under some other Rules with Fee Structure as adapted
from Press Releases/Instructions for Filling e-Company Forms : (2006) 131 Comp. Cas. (St.) 255 and the Ministry
of Corporate Affairs (MCA) website http://www.mca.gov.in as further Revised or Substituted along with Relevant
Sections of the Act in Comments under Section 610B.
See detailed Comments on E-Filing, Electronic Registry, e-Inspection, etc., which have been made mandatory
(w.e.f. 16-9-2006), E-Filing Rules, Amended Regulations, E-Filing Scheme, 2006, etc., under Sections 609, 610,
610A and 610B to 610E.
Page 10 of 10
Registrars of Companies (ROCs) to overlook technical defaults.—A debate has been raised as to the
effectiveness of the Registration Office.
Admittedly, as in England so also in India, only a fraction of the companies and officers in default are prosecuted
and only a few investigations are started. The question is whether strict enforcement of the law could make the
workings of the company more efficient and worth the monetary and other costs involved.
Secretarial Practice and Check List.— Section 52. Check documents served on a Registrar by post are sent
under a certificate of posting or registered post or alternatively, delivered by hand.

* See the Companies (Central Government's) General Rules and Forms, 1956 in Appendix 1.c
‡ See the Companies (Electronic Filing and Authentication of Documents) Rules, 2006 framed under Sections 610A to
610E (w.e.f. 16-9-2006) in Appendix 2.
† See the Scheme for Filing of Statutory Documents and Other Transactions by Companies in Electronic Mode (w.e.f. 27-
16-9-2006).
End of Document
Datta: Company Law
C R Datta
S. 53. Service of documents on members by company.

—
(1) A document may be served by a company on any member thereof either personally, or by sending it by
post to him to his registered address, or if he has no registered address in India, to the address, if any,
within India supplied by him to the company for the giving of notices to him.
(2) Where a document is sent by post,—
(a) service thereof shall be deemed to be effected by properly addressing, prepaying and posting a
letter containing the document, provided that where a member has intimated to the company in
advance that documents should be sent to him under a certificate of posting or by registered post
with or without acknowledgement due and has deposited with the company a sum sufficient to
defray the expenses of doing so, service of the document shall not be deemed to be effected
unless it is sent in the manner intimated by the member; and
(b) 84[***] 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 joint-holders of a share by serving it on the joint-
holder named first in the register in respect of the share.
(5) A document may be served by the company on the persons entitled to a share in consequence of the
death or insolvency of a member by sending it through the post in a prepaid letter addressed to them
by name, or by the title of representatives of the deceased, or assignees of the insolvent, or by any like
description, at the address, if any, in India supplied for the purpose by the persons claiming to be so
entitled, or until such an address has been so supplied, by serving the document in any manner in
which it might have been served if the death or insolvency had not occurred.
84. The words “unless the contrary is proved,” omitted by the Companies (Amendment) Act, 1960 (65 of 1960), s. 16.
85. Abdul Karim Babu Khan v. Sirpur Paper Mills Ltd., (1969) 39 Comp. Cas. 33 (AP) (DB). See also Comments on Notice
of Forfeiture under Section 100.
86. Parmanand Choudhary v. Smt. Shukla Devi Mishra, (1990) 67 Comp. Cas. 45 (MP) (DB).
87. Shobhi G. Mahtani v. Lilaram Shewaram (India) P. Ltd., (2007) 139 Comp. Cas. 817 (CLB).
Page 2 of 12
88. Col. Kuldip Singh Dhillon v. Paragaon Utility Financiers Pvt. Ltd., (1986) 60 Comp. Cas. 1075 (P&H). See also
Comments on Notice of Meetings under Sections 171 and 172.
89. Bharat Kumar Dilwali v. Bharat Carbon and Ribbon Mfg. Co. Ltd., (1973) 43 Comp. Cas. 197 (Delhi); Maharaja Exports
v. Apparel Export Promotion Council, (1986) 60 Comp. Cas. 353 (Delhi). See also Comments under Sections 25, 171
and 172.
90. Balwant Singh Sethi v. Sardar Zorawarsingh Hushnak Singh Anand, (1988) 63 Comp. Cas. 310 (Bom.). See detailed
91. Challa Rajendra Prasad v. Asian Coffee Ltd., (2000) 100 Comp. Cas. 689 (AP).
92. Ramdas v. Cotton Ginning Co.,(1887) ILR 9 All. 366; Jadabpore Tea Co. Ltd. v. Bengal Dooars National Tea Co. Ltd.,
(1984) 55 Comp. Cas. 160 (Cal.) (DB).
93. Somalingappa Shiva Putrappa Mugabasav v. Shree Renuka Sugars Ltd., (2002) 110 Comp. Cas. 371 (Kar.). See also
94. Ansar Khan v. Finecore Cables P. Ltd., (2007) 140 Comp. Cas. 76 (CLB).
Sections 3, 170, 172, 286, 397 and 398.
2. Bharat Bhushan v. H.B. Portfolio Leasing Ltd., (1992) 74 Comp. Cas. 20 (Delhi); Shekar Mehra v. Kilpest Pvt. Ltd.,
(1986) 3 Comp. LJ 234 (MP). See also Comments under Sections 283 and 284. See Comments on Notice of Board
Meetings under Section 286.
3. Bhankerpur Simbhaoli Beverages Pvt. Ltd. v. Sarabhjit Singh, (1996) 86 Comp. Cas. 842 (P&H); Malleswara Finance
and Investments Co. P. Ltd. v. CLB, (1995) 82 Comp. Cas. 836 (Mad.) (DB); Shiv Kumar v. State of Haryana,(1994) 87
FJR 66 (SC) : (1994) 4 JT 162 (SC); Mst. L.M.S. Ummu Saleema v. B.B. Gujral, (1983) 53 Comp. Cas. 312 (SC);
Herdilia Unimers Ltd. v. Smt. Renu Jain, (1998) 92 Comp. Cas. 841 (Raj.); Inter Sales v. Reliance Industries Ltd.,
(2002) 108 Comp. Cas. 680 (Cal.) (DB). See also Comments under Sections 113, 169 and 284.
4. Akbarali A. Kalvert v. Konkan Chemicals Pvt. Ltd., (1997) 88 Comp. Cas. 245 (CLB). See also Comments under
5. Micromeritics Engineers Pvt. Ltd. v. S. Munusamy, (2003) 116 Comp. Cas. 465 (Mad.) affirmed in Micromeritics
Engineers Pvt. Ltd. v. S. Munusamy, (2004) 122 Comp. Cas. 150 (Mad.) (DB). See also Comments under Sections
10F, 193, 195, 397, 398 and 402.
6. Tarlok Chand Khanna v. Raj Kumar Kapoor, (1983) 54 Comp. Cas. 12 (Delhi); Ms. Hardeep Kaur v. Thinlac Enterprises
Pvt. Ltd., (2004) 122 Comp. Cas. 944 (CLB). See also Comments under Sections 9, 111A, 172, 284, 397, 398 and 408.
2(11), 10 and 84.
8. R. Khemka v. Deccan Enterprises P. Ltd., (2000) 100 Comp. Cas. 211 (AP) (DB). See also Comments under Sections
397 and 398.
9. M.S. Madhusoodhanan v. Kerala Kaumudi Pvt. Ltd., (2003) 117 Comp. Cas. 19 (SC). See detailed Comments on
Service on Company under Section 51.
10. M.S. Madhusoodhanan v. Kerala Kaumudi Pvt. Ltd., (2003) 117 Comp. Cas. 19 (SC) : AIR 2004 SC 909 [LNIND 2003
SC 626]: (2003) 6 Supreme 49 (SC).
11. Goldmark Enterprise Ltd. v. Pondy Metal and Rolling Mills P. Ltd., (2007) 136 Comp. Cas. 598 (CLB). See also
Comments under Sections 169, 172, 193, 195, 397 and 398.
12. Ms. Hardeep Kaur v. Thinlac Enterprises Pvt. Ltd., (2004) 122 Comp. Cas. 944 (CLB).
13. Pearson Education Inc. (formerly Prentice Hall Inc.) v. Prentice Hall India P. Ltd., (2007) 136 Comp. Cas. 294 (Delhi) :
(2006) CLC 218 (Delhi); Kasturi and Sons Ltd. v. Sporting Pastime India Ltd., (2007) 139 Comp. Cas. 623 (CLB).
14. T. Ramesh U. Pai v. Canara Land Investments Ltd., (2005) 123 Comp. Cas. 869 (CLB).
15. Cardiff Chemicals Ltd. v. Fortune Bio-Tech Ltd., (2005) 126 Comp. Cas. 275 (CLB); Herdilia Unimers Ltd. v. Smt. Renu
Jain, (1998) 92 Comp. Cas. 841 (Raj.); H.V. Jayaram v. ICICI Ltd., (2000) 99 Comp. Cas. 341 (SC). See detailed
16. Smt. Sujata Khetawat v. Ushashree Tea P. Ltd., (2006) 133 Comp. Cas. 943 (CLB).
17. Ritesh Exports Ltd. v. Registrar of Companies, (2005) 127 Comp. Cas. 583 (AP).
18. K.B. Madhavan v. Federal Bank Ltd., (2007) 135 Comp. Cas. 234 (CLB).
19. United Bank of India Ltd. v. United India Credit and Development Co. Ltd., (1977) 47 Comp. Cas. 689 (Cal.). See also
Page 3 of 12
20. Allen v. Gold Reefs of West Africa Ltd., (1900) 1 Ch. 656 : (1900-03) All ER Rep. 746 : 69 LJ Ch. 266 (CA); Tricumdas
Mills Co. v. Hajee Saboo, (1902) 4 Bom. LR 215; Ward v. Dublin North City Milling Co. Ltd., (1919) 1 IR [Irish] 5. See
21. Canara Bank Ltd. v. T.P.R. Thampi, (1972) 42 Comp. Cas. 473 (Ker.).
1058 (SC) : AIR 1971 SC 206 [LNIND 1970 SC 71]: (1970) 2 Comp. LJ 195 (SC); Indian Petro Chemicals Corpn. Ltd.
v. State of Rajasthan, (2001) 104 Comp. Cas. 285 (Raj.); Karnataka Bank Ltd. v. B. Suresh, (2001) 105 Comp. Cas.
110 (Kar.). See also Comments under Sections 39, 113, 207, 219 and 621.
COMMENTS
51.
section as follows: “The expression ‘unless the contrary is proved’ in clause (b) of sub-section (2) of section 53, may
be construed to mean that the presumption regarding the receipt of notice of a general meeting is rebuttable, and is
likely to cause difficulty in practice in those cases where members receive the notice of a general meeting late due
to delays in post but may nevertheless urge that the notice given to them is a notice of a period less than 21 days
and goes against the provisions of section 171(1) of the Act. It is, therefore, proposed to delete the expression from
clause (b) of section 53(2).” [ Clause 17 of the Companies (Amendment) Bill, 1959 (37 of 1959)].
Service of Documents on Members by company [ Section 53(1)].—A document may be served by a company
on any member either: (a) personally, or (b) by sending it by post to his registered address in India, as recorded in
the Company's Register, or (c) 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.
A letter sent by post should be properly addressed and stamped. The address should be the registered address or
the address supplied by the member for such purpose. If a member wanted the letter to be sent by registered post
or otherwise and paid the required expenses in advance, the letter should be sent according to such instructions,
even though such address is outside India.85 Service of notice under certificate of posting is proper service. A
member wishing to be served notice by Registered Post must deposit sufficient amount therefor with the
company.86
Notice of EGM not properly addressed.—Where the Notice of Extraordinary General Meeting (EGM) sent to the
second and third petitioners at the address of the first petitioner failed to fulfil the requirements of Section 53 of the
Act. The Board Meeting was also invalid due to lack of quorum. As there were discrepancies in the three versions of
the minutes of the same Board Meeting, no credence could be attached to any of the versions of the minutes of the
Board Meeting. The proceedings of the EGM and the Board Meeting were in violation of the provisions of the Act
and Articles of Association of the company and were invalid. It was held that the transfer of shares and change in
management of the company was oppressive to the minority shareholders. The transfer of shares was set aside.
The Company Law Board (CLB) directed the shares be restored in the name of the transferors and the company to
rectify the Register of Members. The petitioners along with the second respondent and her daughter, being the
shareholders and the first petitioner with the second respondent as directors were at liberty to manage the day-to-
day affairs of the company in accordance with the Articles of Association of the company.87
Document served personally.—A document or letter served personally is deemed to have been effected on the
same day.
See detailed Comments on Service by Registered Post and Certificate of Posting after Presumption as to service of
documents by post dealt with below.
NidhiCompanies and Mutual Benefit Societies.—In exercise of the powers conferred by Section 620A of the
Companies Act, 1956 (1 of 1956), the Central Government has (i) declared the companies specified in Schedules I
and II as Nidhis and Mutual Benefit Societies respectively; and (ii) directed that the provisions of Section 53(1) of
Page 4 of 12
the Act shall not apply or apply with the exceptions, modifications and adaptations specified in Schedule III to the
Notification as follows:
Section 53(1).—Shall apply subject to the modification that in the case of a Nidhi or Mutual Benefit Society a
document may be served only on members who hold more than one thousand rupees in face value or more than
one per cent. of the total paid up capital of the Nidhi company whichever is less.
For other shareholders document may be served by a public notice in newspaper circulated in the district where the
Registered Office of a Nidhi company is situated; and publication on the notice board of the Nidhi or Mutual Benefit
Society.
[ Notification No. G.S.R. 978, dated 28-5-1963, Schedule III as substituted by Notification No. G.S.R. 517(E), dated
31-8-2006, published in the Gazette of India, Extraordinary, No. 402, Part II, Section 3(i) : (2006) 133 Comp. Cas.
(St.) 24].
See Full Text of Notification in Comments under Section 620A.
Presumption as to service of documents by post [ Section 53(2)].
—Where a document is sent by post—(a) service is deemed to be effected by properly addressing, prepaying and
posting it. But, 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, service shall not be deemed to be effected unless it is sent in the
manner intimated by the member; and (b) such service shall be deemed to have been effected—(i) in case of a
notice of meeting, at the expiration of 48 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.
Service deemed to be effected.
—If a letter or notice is posted to a shareholder at his registered address by affixing the requisite postal stamps, the
service is deemed to have been effected on him in view of section 53(2)(a), if he has not issued any instructions to
the company and provided sufficient funds to have it sent to him under certificate of posting or by registered post
with or without acknowledgement.88
Notice of Meeting deemed served after 48 Hours [ Section 53(2)(b)(i)].
—A notice of meeting sent by post will be deemed to have been effected after 48 hours of its posting. The
provisions of sub-section (2)(b)(i) of section 53 are to make the service certain and to fix the day of service as the
day on which the said 48 hours expire.89
Under section 53(2)(b)(i) of the Companies Act, 1956, notice of a meeting is deemed to be served at the expiration
of 48 hours after the letter containing it is posted. Section 171 requires 21 days' clear notice to the members for
calling a general meeting. Where notices for a meeting to be held on September 21, 1987, were posted on August
31, 1987 and September 1, 1987, they could be deemed to have been received on September 2, 1987 and
September 3, 1987 respectively. The members, therefore, could not be held to have had 21 days' clear notice of the
meeting.90
Where for consideration of a Scheme of Amalgamation notices for meeting of the shareholders accompanied by
statement under section 393 were sent by Certificate of Posting. A shareholder complained that the notice was
invalid and the meeting should be postponed. The Court [ now the Tribunal] held that under Section 53 the notice
sent by post shall be deemed to have been effected after 48 hours of posting of the notice and that the notice in
question was duly served giving more than 21 days' clear notice to the petitioner.91 When a notice of a meeting is
sent duly addressed and stamped by Certificate of Posting it will be deemed to have been duly served even though
the letter does not in fact reach the addressee.92
Notices through Courier.
—Where the notices were posted through courier giving 26 clear days between the date of the meeting and the
date of the notice, Sections 171 and 172 were held to have been substantially complied with.93
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Notice of Meeting by Courier not conclusive proof.
—The mere production of the Courier Consignment Notes could not amount to conclusive proof of service of copies
of the requisitions and notice of the meeting on the petitioners, satisfying the requirements of Section 172 of the
Companies Act, 1956. Section 172 provides that Notice of every Meeting shall be given, among others, to every
Member of the company whose name appears on its Register of Members. The provisions of Section 172 are
mandatory and must strictly be complied with, non-compliance with which invalidates the resolutions passed at the
general meeting. Any meeting held without proper notice would not be validly held and proceedings of such a
meeting would be illegal. There was no material to show that the petitioners had supplied any different address for
service of any document on them. Moreover, the courier consignment notes, in the event of serious disputes
between the parties, could not amount to conclusive proof of service of notice on the concerned addressee,
especially when despatch of notice by courier service was not in consonance with Section 53(1)(a) of the
Companies Act, 1956. The respondents failed to prove service of notice of the Extraordinary General Meeting on
the petitioners. The Resolution passed at the Board Meeting was also invalid as it failed to comply with Section 286
of the Act.94
See also Comments under Sections 172, 284, 286, 397, 398, 402 and 403.
Notice of Meetings mandatory.
—Service of notice upon the directors before a Board meeting is held and service of notice and taking all steps
required under law before holding of Annual General Meeting are mandatory in case of a public company
notwithstanding anything to the contrary in the Articles. It is no good contending that as the meeting has been
attended by the majority members, the same would be valid. It is a general rule of common law that a corporate
body is not properly constituted unless the notice of meeting is given to every member. Section 172 mandates
service of such notice specifying the place, date and hour of the meeting and containing the statement of the
business to be transacted thereat. Section 172(2) provides for service of notice on every member of the company in
the manner authorised by sub-sections (1) to (4) of section 53. In case of a Private Company, the same provisions
are applicable unless the Articles of the company provide otherwise. The Meetings of a Private Company can be
held in terms of its Articles of Association, even though it is not in accordance with the provisions of the Companies
Act, 1956.1
Presumption in any other case [ Section 53(2)(b)(ii)].
—Sub-section (2)(b)(ii) provides that in any other case the service is deemed to have been effected at the time at
which the letter would be delivered in the ordinary course of post. Thus, if it is a notice other than of a meeting, it will
be deemed to have been effected at the time at which the letter would be delivered in the ordinary course of post.2
Presumption of service is rebuttable.
—It is true that under section 53 of the Companies Act, 1956, the certificate of posting or registered post are one of
the modes for the service of documents or notices, but the presumption to be drawn under section 53 of the
Companies Act is not absolute, but rebuttable. The court, on the facts and circumstances of a case, may refuse to
draw a presumption.3
Certificate of Posting weak presumption.
—Certificate of Posting raises a weak presumption which is rebuttable.4 Certificate of posting would not be
sufficient. The company must prove despatch of notices. The appellants did not produce the despatch register nor
the books of account showing that the expenses were incurred by the company for posting the notices. If the
primary evidence was not proved the presumption on the basis of section 53(2) of the Companies Act, 1956 could
not be drawn. The meetings held without proper notice were not properly held and proceedings of such meetings
were illegal.5
Registered Post Acknowledgment Due.
—Notice shall not be deemed to be effective unless it is sent in the manner intimated by the member/shareholder
who has deposited the sum sufficient to defray the expenses to send it by Registered Post or Registered A.D. In
case of majority or minority groups the notice of the Board or Annual General Meeting must advisedly be sent by
Page 6 of 12
Registered A.D. In some cases, notice sent to majority group under Certificate of Posting was held to be not proper
notice. The companies were directed to hold the Board meeting/AGM after issuing notice through registered post
with acknowledgment due.6
Registered Post not delivered.—Documents sent by Registered Post, if not delivered to the addressee, the
company will have to send the documents again.7
Person attending Meeting.—A person who attended the General Meetings as also the Board Meetings cannot
question the validity of the meetings on the ground that he did not receive any notice of any meeting.8
Notice handed over to assistant of Director.—Where notice of Board Meeting was claimed to have been handed
over to the assistant of the Director. Despatch register did not show the details of despatch. There was no service.
Therefore, meetings were not validly held and resolutions passed thereat would be of no effect.9
Alternation of Articles—Special Resolution—Service of Notice.—For an alteration of the Articles of Association,

three conditions have to be fulfilled, namely, (i) Notice specifying the intention to propose the Resolution as an
Extraordinary (Special) Resolution must be given; (ii) the Special Resolution must be passed by 75% of the
Members present; and (iii) not less than 21 days Notice of the Meeting must be duly given. All these pre-conditions
are cumulative and mandatory. The intention in the Notice under Section 189(2)(a) proposing an Extraordinary or
Special Resolution must be sufficiently specific, frank, open and clear. Notice of the meeting was not served on all
the members and further, there was deletion of an Article not forming part of the notice. The Resolution could not be
given effect to. The words “shall presume” in Section 53(2) of the Companies Act, 1956 mean a rebuttable
presumption which the Court must raise provided the posting of the documents is proved, the onus being on the
addressee alone to show that the documents referred to in the Certificate of Posting were not received by him. If the
basic facts such as due posting of notice is proved, the Court must raise presumption that the notice under
Certificate of Posting has been effected. The word “Presumption” is only an inference of affirmative or disaffirmative
of the truth or falsehood of a doubtful fact drawn by process of probable reasons for something proved or taken for
granted. “Shall presume” do not indicate the same as “Presumption”. The respondents decided to increase the
share capital and to allot additional shares to its shareholders. Notice was not given to appellant and his group who
were all shareholders. The Certificate of Posting of Notice was suspected and it did not amount to conclusive proof
of such posting of Notice. Further nobody on behalf of respondent gave any evidence that the notice of proceedings
was sent through post to the appellant. As Certificate of Posting of Notice could not be proved, the allotment of
additional shares was invalid. It was further held that subsequent allotment of shares to other shareholders and
affirmation of such allotment of shares were also invalid. The appellant was not served with Notice according to
provisions of Section 53 of the Companies Act, 1956 or the Articles of Association of the Company. It was not
proved that the sealed envelope contained such notice or that the envelope was ultimately received by the
appellant. The affidavit on behalf of the respondent indicated entry in the local Delivery Book. As the service of
Notice to the appellant was not proved it was held that the allotment of shares was invalid. Service of notice must
be personal service. Sufficient proof has to be shown that notice was duly served personally. There was an entry in
the local delivery book acknowledged to have been received by personal assistant of the addressee concerned. It
was further stated that the said notice was sent by a peon. No evidence was produced that the letter was served to
the addressee. The Court held that there was no service done. It was contended that proper documents were not
executed for transfer of the shares. The company, however, produced documents that the transfer was approved by
the Board of Directors and Annual Returns were filed showing such transfer, and such transfer of the shares was
admitted in counter-affidavit filed on behalf of transferor and transferor received the consideration. The transfer was
valid. The shares are transferable. An agreement between the shareholders for transfer of shares is maintainable
and the company need not be a party to such agreement. A Resolution passed by the Board of Directors of the
company indicated that the Transfer Deeds were duly approved. In this case presumption is that the transfer of
shares were properly executed and such transfer is valid even though the price should be determined at a later
date. For alteration of the Articles of the company Notice period is 21 days. Notice specifying the intention to pass
Special Resolution by requisite majority is required. Deletion of any particular Article providing that certain
shareholder shall be a permanent Managing Director of the company was held not valid as the said Notice did not
specify the intention of altering the said Article. Despatch of such notice of convening the meeting of Board of
Directors of the company was not proved, despatch register did not contain details of such despatch. As such, the
said meeting was not validly held and the Resolutions passed were of no effect. The Minute Book must be properly
maintained and would be sufficient evidence of proceedings of such meeting. Annual Return has to contain full
particulars mandatorily required.10
See also Comments under Sections 108, 164, 189(2)(a) and 195.
Page 7 of 12
Notice of EGM to every Member—Certificate of Posting not conclusive.—The notice of every General Meeting,
e.g., Extraordinary General Meeting (EGM), of the company should be given to every member of the company
whose name appears on its Register of Members, in any manner authorised by Section 53(1) to (4). The
requirements of Section 172 are mandatory and must strictly be complied with, non-compliance with which
invalidates the resolutions passed at such meeting. The respondents had produced a Certificate of Posting to
establish service of notice on the petitioner. The certificate of posting in the event of serious disputes between the
parties, could not amount to conclusive proof of service of notice on the addressee, meeting the mandatory
requirements of Section 172. It was unsafe to place any reliance on mere certificate of posting, without any
corroborative evidence such as despatch register, books of account, etc., showing the expenses incurred in
connection with sending of notices to the shareholders, including the petitioner. The certificate of posting would
show that certain postal envelopes had been put into the post office and would not itself necessarily mean that
there had been conclusive proof of service of the notice on the addressee. In a petition filed under Sections 397
and 398 of the Companies Act, 1956 it was held that the Directors who are empowered by the Articles to allot
shares at their discretion must (i) exercise their power with utmost good faith for the benefit and interest of the
company, (ii) ensure fair play in action in corporate management and (iii) act bona fide in exercise of their
responsibilities in further issue of shares. Therefore, increase in share capital was illegal and void.11
See also Comments under Sections 169, 172, 193, 195, 397 and 398.
Meetings—Service of Notice—Registered Post.—Notice of Annual General Meeting was sent by Certificate of

Posting. Petitioner complained non-receipt of the notice for the said Annual General Meeting. The Court, however,
held that the Annual General Meeting should be held after issuing notice through Registered Post with
Acknowledgment Due [Regd. A.D.]. The Company could issue further shares for carrying on its business and
meeting payment commitments. The objection of the petitioner has to further issue of shares was overruled and the
Company was directed to hold the Annual General Meeting again after issuing appropriate notice through
Registered Post with Acknowledgment Due.12
Issue of Rights Shares—No proper Notice—Oppression.—Under Section 53 of the Companies Act, 1956
notices are required to be sent to the addresses registered with the company. Where the second respondent had
the knowledge of the correct address of the appellant. The appellant immediately sent letter pointing out that the
respondent's offer was sent at the wrong address and that the appellant was deprived from exercising its right as a
shareholder to subscribe for further shares on the basis of rights. Therefore by sending the letter at another address
the motive of the company was to ensure that it was not received by the appellant in time and it lost its chance to
apply for the rights shares. The only justification given for sending the notice of issue of rights shares at the given
address was that the particular address was the one printed by the petitioner on the books published by it. That was
a far fetched explanation. Moreover, the respondents did not at all give any justification for issuing further share
capital. The move of the respondents lacked bona fides, especially when 75% of the money collected by issue of
the share capital was paid back as dividend within a short period. In view of the profitability and cash flow of the
company the issue of further shares was not a business necessity. However, as the respondent-company was the
brain child of Prentice Hall Inc., the predecessor of the appellant which gave its name to it as well and also ensured
that it did the business of printing and publishing the appellant's titles for which it was incorporated. In view of this,
option was given to the petitioner that in case the petitioner accepted the alternative of transferring all its shares in
favour of the second-respondent without any consideration, the second respondent in that eventuality would take
steps for change of the name of the Indian Company by dropping the words “Prentice Hall”.13
No proper Notice—Closely-held company—Exclusion of a Group.—The company gave lease of its immovable

properties on nominal rent without periodical increase. There was no representation in the Board of Directors of a
particular group. Preference shares were allotted to the members excluding that particular group. Both the groups
were related family members. Allotment of shares to the exclusion of one set of shareholders, allotment of shares at
the Meetings for which notices were not sent in spite of money being deposited for sending the Notices by
Registered Post were wrongful acts. Non-issue of notices by Registered Post was an act of oppression. Exclusion
of a group in a closely-held company having 44% shareholding was an act of oppression. The Company Law Board
(CLB)[ now the Tribunal (NCLT) (w.e.f. date to be notified)] directed valuation and division of assets and properties
of the company in shareholding proportion. Valuation would be done by an independent Valuer.14
Page 8 of 12
See detailed Comments under Sections 53(2)(a), 397, 398 and 402.
Delivery of Share Certificates—Presumption—Burden of proof.— Section 113(1) of the Companies Act, 1956
contemplates the delivery of share certificates, etc., within stipulated time. In case of allotment of
shares/debentures, the certificates are to be delivered in accordance with procedure laid down in Section 53 within
3 months of allotment. Section 53 provides that a document may be served by a company on any member either
personally or by sending it by post to him to his registered address. A presumption has been drawn that where a
document is sent by post, service thereof shall be deemed to be effected by properly addressing, pre-paying and
posting the letter containing the document. The presumption under Section 53 of the Act is rebuttable and a
shareholder may allege that he has not been delivered the share certificate or it was not properly addressed. The
bulk registered receipt with the name of the addressee and post office of destination is not complete in itself and on
the basis of such a document the proceedings could not be quashed. Burden of proof of delivery of share certificate
to shareholder is upon the company. Where no conclusive proof was produced, it was held that the company
defaulted in delivering the share certificate and was directed to deliver the share certificate.15
In terms of Section 113 read with Section 53 of the Companies Act, 1956, the company is obliged to deliver the
share certificates to the shareholder within 3 months after the allotment of its shares. The petitioner was the wife of
one of the directors of the respondent-company and held 7,500 shares in the respondent-company. In a petition
filed under Section 113, contending that she did not receive share certificates pertaining to the shares held by her,
the company produced the acknowledgment signed by the husband of the petitioner for having received the
certificates. It was held that the delivery of the certificates had not been made to the shareholder but to her husband
with whom matrimonial differences had arisen and certain proceedings were pending. Since the share certificates
had not been delivered to the petitioner the company was to issue duplicate share certificates in respect of 7,500
shares allotted to her.16
Share Certificates sent under Certificate of Posting.—Where rectified Share Certificates were sent under
Certificate of Posting. It was held that the Registrar of Companies (ROC) is an aggrieved person under the Act
competent to file a complaint for failure to deliver the share certificates within time stipulated under Section 113 of
the Act. Section 53(2) of the Companies Act, 1956 specifies the service of documents on members of companies
but the actual mode of service is not specified as to the delivery of share certificates. Therefore, as there was no
specific mode prescribed, the company sent the rectified share certificates under certificate of posting. Further, it
was not the case of the concerned allottee that the share certificates were not at all despatched. In the light of the
language employed in Section 53 of the Act, it could not be said that the prosecution proved its case beyond all
reasonable doubt. Though the Registrar of Companies could maintain the complaint as an aggrieved person, the
actual person who was knowledgeable about what transpired was not examined. Maintaining a complaint was
different from proof of an offence. As the benefit of doubt would be in favour of the appellants, the Managing
Director, the fine imposed and the conviction were to be set aside with a direction to refund the fine already paid.17
Forfeiture of Shares—Forfeiture Notice sent by Registered Post.—By virtue of Section 53(1) of the Companies
Act, 1956 a document may be served by a company on any member either personally or by sending it by post to his
registered address, or if he had no registered address in India to the address, if any, within India supplied by him to
the company for the giving of notice to him. Where the final notice of forfeiture was sent to the residential address of
the petitioner as entered in the Register of Members of the company. Though the petitioner claimed that he had
been residing in Dubai for several years, there was no material to show that the petitioner had notified any change
in his address for communication by the company. The plea that if the notice proposing the forfeiture of shares sent
by post was not served, the company was to take steps to ascertain the correct address of the shareholders before
deciding to forfeit shares would not hold good in the light of due service of the notice of forfeiture on the petitioner.
The letter of offer stipulated, inter alia, that any change in the address was to be indicated to the company. While
the petitioner had not chosen to notify the change in his address and was prepared to receive other
communications including dividend warrants at the place of his registered address, it was not open to him at this
stage to take a stand that the notice ought to have been sent to his address at Dubai. The forfeiture notice was sent
to the petitioner's registered address and thus the notice was in consonance with the provisions of Section 53(1).
Since the petitioner had failed to make any payment in terms of the demand made by the company, leading to
forfeiture of shares in accordance with law, the petitioner was not entitled to any bonus shares on the forfeited
Page 9 of 12
shares. The fact that the shares had been forfeited after eight years did not invalidate the forfeiture which had been
made lawfully. Therefore, the claim for rectification of the Register of Members was not to be allowed.18
Newspaper advertisement for Members abroad [Sub-s. (3)].—Documents 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 who (a) has no registered address in India and (b) has not
supplied to company an address within India for giving of notices to him.
In normal circumstances notice cannot be given to members by advertisement if their registered addresses are in
India. Where the notice is advertised in the newspaper circulating in the neighbourhood of the registered office of
the company it will be deemed to have been effected on members who have no registered address in India on the
same day on which the advertisement appears.19
Service on joint shareholders [Sub-section (4)].—A document may be served by company on the joint-holders of
a share by serving it on the joint-holder named first in the register in respect of the share. In case of joint-holders of
a share, the notice is to be served on the first named joint-holder in the Register of Members.
Death or insolvency of a Member [Sub-section (5)].—The document may be served by the company on persons
entitled to shares in consequence of the death or insolvency of a member (a) by post in a prepaid letter addressed
to them by name, or title of representatives of the deceased, or assignees of the insolvent at the address, if any, in
India supplied for the purpose by persons claiming to be so entitled, or (b) until such an address has been supplied,
by serving the document in any manner in which it might have been served if the death or insolvency had not
occurred.
In case of death or insolvency of a member, the notice is to be sent to his registered address. But if his legal
representative or assignee of the insolvent has informed the company of any other address, the notice has to be
sent at that other address. But, a company is not bound to send notice to a deceased member, or to his legal
representatives whose names do not appear on the register.20
Duty of Legal Representatives.—It is the duty of the legal representatives of a deceased shareholder to intimate
and furnish to the company their address for notices to be served on them by the company. If they fail to send such
intimation, the company would serve the documents or notice in any manner in which it might have been served as
if the death did not take place.21
Cause of action for failure to deliver certificates or documents.—The cause of action for the offences
punishable under sections 39(2), 113(2), 207 and 219(4) of the Act, i.e., for failure to deliver the documents, share
certificates, dividend warrants and balance sheet, etc., within the prescribed time, read with section 53 of the Act,
would arise where the registered office of the company is situated. Under section 53 of the Companies Act, 1956, a
document is to be served either personally or by sending it by post at the registered address within India. Sub-
section (2) specifically mentions that where a document is sent by post, such service thereof shall be deemed to be
effected by properly addressing, prepaying and posting the letter containing the document. Since there is a
statutory mode of delivering the document by post and deeming provision of such delivery, the place where such
posting is done is the place of performance of statutory duty and the same stands discharged as soon as the
document is posted. Reading sections 113 and 53 of the Act together, share certificates are to be delivered in
accordance with the procedure laid down in section 53. Hence, the cause of action for the default under section 113
of not sending the share certificates within the stipulated time would arise at the place where the registered office of
the company is situated as from that place the share certificates can be posted and are usually posted. For such
default, as contemplated under section 113(1), there is no question of any cause of action arising at the place
where the complainant was to receive postal delivery. The cause of action for failure to deliver the share certificates
or documents within the prescribed time would arise where the registered office of the company is situated. The
complaint for an offence under section 113(2) has to be filed where the registered office of the company is situated.
What is punishable under sub-section (2) of section 113 is non-delivery, in accordance with the provision laid down
under section 53, of the certificates of shares within the prescribed time. So, if the documents are posted within the
stipulated time, there would be compliance with section 113 and that there would not be any offence.22
Department's view.— Issue of refund orders, allotment letters, share certificates and letters of offer by
registered post.—“I am directed to say that the Government has been receiving complaints from the investing
public regarding non-receipt of refund orders, allotment letters, share certificates, rights of offer and dividend
Page 10 of 12
warrants. In this connection, it may be stated that the Ministry of Finance, Department of Economic Affairs, vide
their circular letter No. 8/15/SE/86-B, dated 3rd June, 1986 [ now see alsoSEBI Guidelines refer Comments under
Section 55A], addressed to all stock exchanges, informed that the Government has decided that henceforth all
companies listed or seeking enlistment on stock exchanges, shall issue refund orders, allotment letters/certificates
only by registered post. It has now been considered necessary that with a view to protect the interests of investors,
the letters of offer for rights issue be also issued to the shareholders by registered post, in future.
2. You are, therefore, requested to ensure strict compliance with these guidelines by your constituent member
companies.” [ Circular No. 6 of 1992 (F. No. 17/8/89-CL-V), dated 3-9-1992 : Chartered Secretary, October 1992,
page 933 : (1992) 75 Comp. Cas. (St.) 217].
Issue of refund orders under section 73(2)/(2A) of the Companies Act, 1956.—“I am directed to invite your
attention to this Department's Circular No. 6 of 1992 (F. No. 17/8/89-CL-V), dated 3rd September, 1992 [ printed
above], on the above subject, and to say that your constituent member-companies were advised to ensure issue of
refund orders only by registered post. The matter has been considered further, keeping in view the constraints
faced by the companies in issuing the refund orders by registered post, as the Postal Department is not able to
cope up with the work involved. It has, accordingly, been decided that it will be in order for the companies to issue
refund orders for amounts exceeding Rs. 1,500 per refund order only by registered post and the refund orders
below that amount be issued under certificate of posting. In case of delay in refund, interest for the delayed period
be calculated at 15 per cent. per annum and paid along with the refund order or while issuing the duplicate refund
order, as the case may be, up to the date of actual despatch. In this regard, attention is also invited to the penal
provisions contained in section 73(2B) of the Companies Act, 1956.” [ Circular No. 1 of 1993 (F. No. 17/8/89-CL-V),
dated 16-3-1993 : Chartered Secretary, April 1993, page 370 :(1993) 76 Comp. Cas. (St.) 88].
Compulsory registration of share certificates, debenture certificates, dividend warrants and refund orders
under Post Office Rules.—See PIB Press Releases, dated 23-6-1993 and 22-7-1993 reproduced in Comments
under Section 69.
See also Comments under Sections 55A, 69, 72, 73, 84, 113 and 205.
Compliance Certificate—Service of documents by Company on a Member.—Relevant paras of Form

appended to the Companies (Compliance Certificate) Rules, 2001 and ICSI Guidance Note on Compliance
Certificate are as follows.
(AGM).
a Guidance Note on Compliance Certificate to be issued in terms of the newly inserted proviso to Section 383A(1)
of the Companies Act, 1956 as prescribed in the Companies (Compliance Certificate) Rules, 2001 by a Practising
Relevant paragraph on Service of Documents by Company on a Member in conformity with the provisions of
Section 53 is reproduced below.
“(o) General.—Check whether:

(i) a Company has served documents on a Member in conformity with the provisions of Section 53.”
Page 11 of 12
under Section 383A.
Secretarial Practice and Check List.— Section 53. Whether documents were served on every member : (a)
personally or by post, properly addressed and pre-paid? and (b) mode of posting was in accordance with request, if
any, of a member? Check sufficient sum to defray expenses had been received from such members. In case of a
member with no registered address or any address in India whether documents were advertised in a newspaper
circulating in the neighbourhood of the registered office? In case of joint holders, whether served on first named
holder in the Register of Members? In case of death or insolvency of a member, whether sent to representative, if
any, or to the original address of the deceased/insolvent?
The documents involved to check compliance are : (1) Despatch Register, (2) Members' correspondence, (3)
Newspaper cutting, (4) Register of Members.
84. The words “unless the contrary is proved,” omitted by the Companies (Amendment) Act, 1960 (65 of 1960), s. 16.
85. Abdul Karim Babu Khan v. Sirpur Paper Mills Ltd., (1969) 39 Comp. Cas. 33 (AP) (DB). See also Comments on Notice
of Forfeiture under Section 100.
86. Parmanand Choudhary v. Smt. Shukla Devi Mishra, (1990) 67 Comp. Cas. 45 (MP) (DB).
87. Shobhi G. Mahtani v. Lilaram Shewaram (India) P. Ltd., (2007) 139 Comp. Cas. 817 (CLB).
88. Col. Kuldip Singh Dhillon v. Paragaon Utility Financiers Pvt. Ltd., (1986) 60 Comp. Cas. 1075 (P&H). See also
Comments on Notice of Meetings under Sections 171 and 172.
89. Bharat Kumar Dilwali v. Bharat Carbon and Ribbon Mfg. Co. Ltd., (1973) 43 Comp. Cas. 197 (Delhi); Maharaja Exports
v. Apparel Export Promotion Council, (1986) 60 Comp. Cas. 353 (Delhi). See also Comments under Sections 25, 171
and 172.
90. Balwant Singh Sethi v. Sardar Zorawarsingh Hushnak Singh Anand, (1988) 63 Comp. Cas. 310 (Bom.). See detailed
91. Challa Rajendra Prasad v. Asian Coffee Ltd., (2000) 100 Comp. Cas. 689 (AP).
92. Ramdas v. Cotton Ginning Co.,(1887) ILR 9 All. 366; Jadabpore Tea Co. Ltd. v. Bengal Dooars National Tea Co. Ltd.,
(1984) 55 Comp. Cas. 160 (Cal.) (DB).
93. Somalingappa Shiva Putrappa Mugabasav v. Shree Renuka Sugars Ltd., (2002) 110 Comp. Cas. 371 (Kar.). See also
94. Ansar Khan v. Finecore Cables P. Ltd., (2007) 140 Comp. Cas. 76 (CLB).
Sections 3, 170, 172, 286, 397 and 398.
2. Bharat Bhushan v. H.B. Portfolio Leasing Ltd., (1992) 74 Comp. Cas. 20 (Delhi); Shekar Mehra v. Kilpest Pvt. Ltd.,
(1986) 3 Comp. LJ 234 (MP). See also Comments under Sections 283 and 284. See Comments on Notice of Board
Meetings under Section 286.
3. Bhankerpur Simbhaoli Beverages Pvt. Ltd. v. Sarabhjit Singh, (1996) 86 Comp. Cas. 842 (P&H); Malleswara Finance
and Investments Co. P. Ltd. v. CLB, (1995) 82 Comp. Cas. 836 (Mad.) (DB); Shiv Kumar v. State of Haryana,(1994) 87
FJR 66 (SC) : (1994) 4 JT 162 (SC); Mst. L.M.S. Ummu Saleema v. B.B. Gujral, (1983) 53 Comp. Cas. 312 (SC);
Herdilia Unimers Ltd. v. Smt. Renu Jain, (1998) 92 Comp. Cas. 841 (Raj.); Inter Sales v. Reliance Industries Ltd.,
(2002) 108 Comp. Cas. 680 (Cal.) (DB). See also Comments under Sections 113, 169 and 284.
4. Akbarali A. Kalvert v. Konkan Chemicals Pvt. Ltd., (1997) 88 Comp. Cas. 245 (CLB). See also Comments under
5. Micromeritics Engineers Pvt. Ltd. v. S. Munusamy, (2003) 116 Comp. Cas. 465 (Mad.) affirmed in Micromeritics
Engineers Pvt. Ltd. v. S. Munusamy, (2004) 122 Comp. Cas. 150 (Mad.) (DB). See also Comments under Sections
10F, 193, 195, 397, 398 and 402.
Page 12 of 12
6. Tarlok Chand Khanna v. Raj Kumar Kapoor, (1983) 54 Comp. Cas. 12 (Delhi); Ms. Hardeep Kaur v. Thinlac Enterprises
Pvt. Ltd., (2004) 122 Comp. Cas. 944 (CLB). See also Comments under Sections 9, 111A, 172, 284, 397, 398 and 408.
2(11), 10 and 84.
8. R. Khemka v. Deccan Enterprises P. Ltd., (2000) 100 Comp. Cas. 211 (AP) (DB). See also Comments under Sections
397 and 398.
9. M.S. Madhusoodhanan v. Kerala Kaumudi Pvt. Ltd., (2003) 117 Comp. Cas. 19 (SC). See detailed Comments on
Service on Company under Section 51.
10. M.S. Madhusoodhanan v. Kerala Kaumudi Pvt. Ltd., (2003) 117 Comp. Cas. 19 (SC) : AIR 2004 SC 909 [LNIND 2003
SC 626]: (2003) 6 Supreme 49 (SC).
11. Goldmark Enterprise Ltd. v. Pondy Metal and Rolling Mills P. Ltd., (2007) 136 Comp. Cas. 598 (CLB). See also
Comments under Sections 169, 172, 193, 195, 397 and 398.
12. Ms. Hardeep Kaur v. Thinlac Enterprises Pvt. Ltd., (2004) 122 Comp. Cas. 944 (CLB).
13. Pearson Education Inc. (formerly Prentice Hall Inc.) v. Prentice Hall India P. Ltd., (2007) 136 Comp. Cas. 294 (Delhi) :
(2006) CLC 218 (Delhi); Kasturi and Sons Ltd. v. Sporting Pastime India Ltd., (2007) 139 Comp. Cas. 623 (CLB).
14. T. Ramesh U. Pai v. Canara Land Investments Ltd., (2005) 123 Comp. Cas. 869 (CLB).
15. Cardiff Chemicals Ltd. v. Fortune Bio-Tech Ltd., (2005) 126 Comp. Cas. 275 (CLB); Herdilia Unimers Ltd. v. Smt. Renu
Jain, (1998) 92 Comp. Cas. 841 (Raj.); H.V. Jayaram v. ICICI Ltd., (2000) 99 Comp. Cas. 341 (SC). See detailed
16. Smt. Sujata Khetawat v. Ushashree Tea P. Ltd., (2006) 133 Comp. Cas. 943 (CLB).
17. Ritesh Exports Ltd. v. Registrar of Companies, (2005) 127 Comp. Cas. 583 (AP).
18. K.B. Madhavan v. Federal Bank Ltd., (2007) 135 Comp. Cas. 234 (CLB).
19. United Bank of India Ltd. v. United India Credit and Development Co. Ltd., (1977) 47 Comp. Cas. 689 (Cal.). See also
20. Allen v. Gold Reefs of West Africa Ltd., (1900) 1 Ch. 656 : (1900-03) All ER Rep. 746 : 69 LJ Ch. 266 (CA); Tricumdas
Mills Co. v. Hajee Saboo, (1902) 4 Bom. LR 215; Ward v. Dublin North City Milling Co. Ltd., (1919) 1 IR [Irish] 5. See
21. Canara Bank Ltd. v. T.P.R. Thampi, (1972) 42 Comp. Cas. 473 (Ker.).
1058 (SC) : AIR 1971 SC 206 [LNIND 1970 SC 71]: (1970) 2 Comp. LJ 195 (SC); Indian Petro Chemicals Corpn. Ltd.
v. State of Rajasthan, (2001) 104 Comp. Cas. 285 (Raj.); Karnataka Bank Ltd. v. B. Suresh, (2001) 105 Comp. Cas.
110 (Kar.). See also Comments under Sections 39, 113, 207, 219 and 621.
End of Document
Datta: Company Law
C R Datta
COMPANY AND MATTERS INCIDENTAL THERETO > Authentication of Documents and
Proceedings
S. 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, 23[***] the manager, the secretary or other authorised officer of the
company, and need not be under its common seal.
23. The words “the managing agent, the secretaries and treasurers,” omitted by the Companies (Amendment) Act,
2000 (53 of 2000), s. 15 (w.e.f. 13-12-2000). The system of managing agency had already been abolished videsection
324A of the Companies Act, 1956 (1 of 1956), as inserted by the Companies (Amendment) Act, 1969 (17 of 1969), s. 4
(w.e.f. 3-4-1970).
COMMENTS
Legislative History.— The Companies Act, 1956 (1 of 1956).—The Notes on clauses explained as follows:
“Compare section 150 of the existing Act and section 36 of the English Act.” [ Clause 49 of the Companies Bill,
1953 (46 of 1953)].
The Companies (Amendment) Act, 2000 (53 of 2000).—The Notes on clauses explained as follows: “This clause
seeks to omit the expression ‘managing agent, secretaries and treasurers’ in section 54 of the Act which is of
consequential nature.” [ Clause 15 of the Companies (Second Amendment) Bill, 1999 (139 of 1999)].
Authentication of document or proceeding.—A document or proceeding may be authenticated by the signature

of a Director, Manager, Secretary or any other Authorised Officer of the company.
See also Comments under Director [ Section 2(13)], Manager [ Section 2(24)], Managing Director [ Section 2(26)],
Secretary [ Section 2(45) and 383A], Officer who is in default [ Section 2(31) and 5], Authority to file suits [ Section
10], Authority to execute Contracts [ Section 46], Bills of Exchange and Promissory Notes [ S. 47] and Execution of
Deeds [ Section 48], etc.
Seal.—No seal need be affixed unless expressly required by any law. See detailed Comments under Sections 46 to
50.
Page 2 of 2
Authentication by other mode in Act.—But if any provision of this Act requires a document to be executed in any
other manner that should be followed. Authentication by any other mode is not excluded. See for instance the
following provisions.
Annual Return [ Section 161].— See detailed Comments on Authentication or Signature on Annual Return to be
filed with the Registrar of Companies under Section 159 or 160 and Certificates to be annexed thereto under
Section 161.
Balance Sheet [ Section 215].— See detailed Comments on Authentication of balance sheet and profit and loss
account under Section 215.
Board's Report [ Section 217].— See detailed Comments on Authentication or signature on Board's Report and
any addendum thereto under Section 217(4).
Auditor's Report [ Section 229].— See detailed Comments on Signature of Audit Report, etc., under Section 229.
Notary Public.—A Notary Public may authenticate under the Notaries Act, 1952 (53 of 1952).
23. The words “the managing agent, the secretaries and treasurers,” omitted by the Companies (Amendment) Act,
2000 (53 of 2000), s. 15 (w.e.f. 13-12-2000). The system of managing agency had already been abolished videsection
324A of the Companies Act, 1956 (1 of 1956), as inserted by the Companies (Amendment) Act, 1969 (17 of 1969), s. 4
(w.e.f. 3-4-1970).
End of Document

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Date and Time: 03 April 2020 11:13:00 IST

Job Number: 113853887

1. S. 1. Short title, commencement and extent

S. 1. Short title, commencement and extent.

10. ITO v. D. Manoharlal Kothari, (1999) 96 Comp. Cas. 275 (Mad.).

English Act, 1948: Section 462 Previous Act, 1913: Section 1

(c) company meetings and procedure (clauses 158 to 189);

3. The Bill seeks to achieve the above objects.”

(6) Non-availability of liquid funds for payment of dividends declared.

Other amendments included in the Bill are of a consequential or formal nature.”

4. The Bill seeks to achieve the above objects.”

2. The salient features of the amendments are:

2. The depositories legislation, inter alia, provides for:

4. The Bill seeks to replace the said Ordinance.”

3. The Bill seeks to achieve the above objectives.”

See detailed Comments under Sections 20 and 22.

5. The Bill seeks to achieve the above objectives.

6. The notes on clauses explain, in detail, the provisions of the Bill.”

See detailed Comments on Tribunal (NCLT) under Section 10FB.

See detailed Comments under relevant Sections 4A and 424A.

2. The Ministry of Company Affairson the recommendations of Department of Information Technology is

In addition the 1989 Act has:

See also Comments under Section 3.

See Comments and List of Privileges and Exemptions under Section 3.

See detailed Comments under Section 3.

See detailed Comments under Section 43A.

Charitable Companies [Section 25].

See detailed Comments under Sections 424A to 424L and 10FB.

See detailed Comments under Sections 581A to 581ZT.

See detailed Comments under Sections 591 to 608.

See detailed Comments under Sections 617-620.

Rational Construction.—It is a well-recognised rule of construction that a statutory provision must be so

See detailed Comments under Sections 391 to 394A and 466.

See detailed Comments under Sections 10FB and 424A to 424L.

See detailed Comments under Sections 529 and 529A.

Principles of legislation by incorporation or by reference.—The principles of legislation by incorporation or by

See detailed Comments under Sections 5 and 621 to 631.

The legal maxim

ejusdem generis means ‘of the same kind’.

See also Comments under Long title or Preamble in earlier paragraphs.

See detailed Comments under Section 10—Jurisdiction of Courts.

See detailed Comments on Binding force of Circulars under Section 637.

Doctrine ofcontemporanea expositio.—The rule of construction by reference to contemporanea expositio is a

Circulars—Service Tax—Firm to include Company—Valid.—Two Circular Nos. 43/5/97-TRU, dated July 2,

See detailed Comments under Section 10—Jurisdiction of Courts.

See detailed Comments under Section 10—Jurisdiction of Courts.

See Accounting and Auditing Practices under Sections 205 to 233-B.

“abridged prospectus” means a memorandum containing such salient features of a prospectus as

“branch office” in relation to a company means—

“the Court” means,—

“dividend” includes any interim dividend

Provided that, in relation to an insurance company,

“financial year” shall mean the calendar year

“information memorandum” means a process undertaken prior to the filing of a prospectus by

“limited company” means a company limited by shares or by guarantee

“memorandum” means the memorandum of association of a company as originally framed or as

Explanation.—For the purposes of this clause, ]

“paid-up capital” or “capital paid up” includes capital credited as paid up

“private company” means a private company as defined in section 3

“public company” means a public company as defined in section 3

“Registrar” means a Registrar, or an Additional, a Joint, a Deputy or an Assistant Registrar, having

“Schedule” means a Schedule annexed to this Act

“secretary in whole-time practice” means a secretary who shall be deemed to be in practice

“sick industrial company” means an industrial company which has—