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Companies Act 1956

COMPANIES ACT, 1956 [Act No. 1 OF 1956]

 
 
PART I : PRELIMINARY Sections
 
1. Short title, commencement and extent
2. Definitions
2A. Interpretation of certain words and expressions
3. Definitions of "company", "existing company", "private company" and "public company"
4. Meaning of "holding company" and "subsidiary"
4A. Public financial institutions
5. Meaning of "officer who is in default"
6. Meaning of "relative"
7. Interpretation of "person in accordance with whose directions or instructions directors are accustomed to act"
8. Power of Central Government to declare an establishment not to be a branch office
9. Act to override memorandum, articles, etc.
10. Jurisdiction of courts
10A. [Omitted] 10B. [Omitted] 10C. [Omitted] 10D. [Omitted]
PART IA : BOARD OF COMPANY LAW ADMINISTRATION
10E. Constitution of Board of Company Law Administration 10F. Appeals against the order of the Company Law Board 10FA. Dissolution of Company Law Board
PART IB : NATIONAL COMPANY LAW TRIBUNAL
10FB. Constitution of National Company Law Tribunal
10FC. Composition of Tribunal
10FD. Qualifications for appointment of President and Members
10FE. Term of office of President and Members
10FF. Financial and administrative powers of Member Administration
10FG. Salary, allowances and other terms and conditions of service of President and other Members
10FH. Vacancy in Tribunal
10FI. Resignation of President and Member
10FJ. Removal and suspension of President or Member
10FK. Officers and employees of Tribunal
10FL. Benches of Tribunal 10FM. Order of Tribunal 10FN. Power to review 10FO. Delegation of powers
10FP. Power to seek assistance of Chief Metropolitan Magistrate and District Magistrate
[PART IC : APPELLATE TRIBUNAL
10FQ. Appeal from order of Tribunal 10FR. Constitution of Appellate Tribunal 10FS. Vacancy in Appellate Tribunal, etc
10FT. Term of office of Chairperson and Members
10FU. Resignation of Chairperson and Members
10FV. Removal and suspension of Chairperson and Members of Appellate Tribunal
10FW. Salary, allowances and other terms and conditions of service of Chairperson and Members
10FX. Selection Committee
10FY. Chairperson, etc., to be public servants
10FZ. Protection of action taken in good faith
10FZA. Procedure and powers of Tribunal and Appellate Tribunal
10G. Power to punish for contempt 10GA. Staff of Appellate Tribunal 10GB. Civil court not to have jurisdiction
10GC. Vacancy in Tribunal or Appellate Tribunal not to invalidate acts or proceedings
10GD. Right to legal representation
10GE. Limitation
10GF. Appeal to Supreme Court
PART II : INCORPORATION OF COMPANY AND MATTERS INCIDENTAL THERETO
11. Prohibition of associations and partnerships exceeding certain number
12. Mode of forming incorporated company
13. Requirements with respect to memorandum
14. Form of memorandum
 
15. Printing and signature of memorandum
15A. Special provision as to alteration of memorandum consequent on alteration of name of State of Madras
15B. Special provision as to alteration of memorandum consequent on alteration of name of State of Mysore
16. Alteration of memorandum
17. Special resolution and confirmation by Company Laws Board required for alteration of memorandum
17A. Change of registered office within a State
18. Alteration to be registered within three months
19. Effect of failure to register
20. Companies not to be registered with undesirable names
21. Change of name by company
22. Rectification of name of company
23. Registration of change of name and effect thereof
24. Change of name of existing private limited companies
25. Power to dispense with "Limited" in name of charitable or other company
26. Articles prescribing regulations
27. Regulations required in case of unlimited company, company limited by guarantee or private company limited by shares
28. Adoption and application of Table A in the case of companies limited by shares
29. Form of articles in the case of other companies
30. Form and signature of articles
31. Alteration of articles by special resolution
32. Registration of unlimited company as limited, etc.
33. Registration of memorandum and articles
34. Effect of registration
35. Conclusiveness of certificate of incorporation
36. Effect of memorandum and articles
37. Provision as to companies limited by guarantee
38. Effect of alteration in memorandum or articles
39. Copies of memorandum and articles, etc., to be given to members
40. Alteration of memorandum or articles, etc., to be noted in every copy
41. Definition of "member"
42. Membership of holding company
43. Consequences of default in complying with conditions constituting a company a private company
43A Private company to become public company in certain cases
44. Prospectus or statement in lieu of prospectus to be filed by private company on ceasing to be private company
45. Members severally liable for debts where business carried on with fewer than seven, or in the case of a private company, two members
46. Form of contracts
47. Bills of exchange and promissory notes
48. Execution of deeds
49. Investments of company to be held in its own name
50. Power for company to have official seal for use outside India
51. Service of documents on company
52. Service of documents on Registrar
53. Service of documents on members by company
54. Authentication of documents and proceedings
PART III : PROSPECTUS AND ALLOTMENT, AND OTHER MATTERS RELATING TO ISSUE OF SHARES OR DEBENTURES
55. Dating of prospectus
55A. Powers of Securities and Exchange Board of India
56. Matters to be stated and reports to be set out in prospectus
57. Expert to be unconnected with formation or management of company
58. Expert's consent to issue of prospectus containing statement by him
58A. Deposits not to be invited without issuing an advertisement
58AA. Small deposits
58AAA. Default in acceptance or refund of deposits to be cognizable
58B. Provisions relating to prospectus to apply to advertisement
59. Penalty and interpretation
60. Registration of prospectus 60A. Filing of self prospectus 60B. Information memorandum
61. Terms of contract mentioned in prospectus or statement in lieu of prospectus, not to be varied
62. Civil liability for mis-statements in prospectus
63. Criminal liability for mis-statements in prospectus
64. Document containing offer of shares or debentures for sale to be deemed prospectus
65. Interpretation of provisions relating to prospectuses
 
66. Newspaper advertisements of prospectus
67. Construction of references to offering shares or debentures to the public, etc.
68. Penalty for fraudulently inducing persons to invest money
68A Personation for acquisition, etc., of shares
68B. Initial offer of securities to be in dematerialised form in certain cases
69. Prohibition of allotment unless minimum subscription received
70. Prohibition of allotment in certain cases unless statement in lieu of prospectus delivered to Registrar
71. Effect of irregular allotment
72. Applications for, and allotment of, shares and debentures
73. Allotment of shares and debentures to be dealt in on stock exchange
74. Manner reckoning fifth, eighth and tenth days in sections 72 and 73
75. Return as to allotments
76. Power to pay certain commissions and prohibition of payment of all other commissions, discounts, etc.
77. Restrictions on purchase by company, or loans by company for purchase, of its own or its holding company's shares
77A. Power of company to purchase its own securities.
77AA. Transfer of certain sums to capital redemption reserve account. 77B. Prohibition for buy-back in certain circumstances
78. Application of premiums received on issue of shares
79. Power to issue shares at a discount
79A. Issue of sweat equity shares
80. Power to issue redeemable preference shares
80A. Redemption of irredeemable preference shares etc.
81. Further issue of capital
PART IV: SHARE CAPITAL AND DEBENTURES
82. Nature of shares
83. Numbering of shares
84. Certificate of shares
85. Two kinds of share capital
86. New issues of share capital to be only of two kinds
87. Voting rights
88. [Omitted]
89. Termination of disproportionately excessive voting rights in existing companies
90. Savings
91. Calls on shares of same class to be made on uniform basis
92. Power of company to accept unpaid share capital, although not called up
93. Payment of dividend in proportion to amount paid-up
94. Power of limited company to alter its share capital
94A.Share capital to stand increased where an order is made under section 81(4)
95. Notice to Registrar of consolidation of share capital, conversion of shares into stock, etc.
96. Effect of conversion of shares into stock
97. Notice of increase of share capital or of members
98. Power of unlimited company to provide for reserve share capital on registration
99. Reserve liability of limited company
100. Special resolution for reduction of share capital
101. Application to court for confirming order, objections by creditors, and settlement of list of objecting creditors
102. Order confirming reduction and powers of court on making such order
103. Registration of order and minute of reduction
104. Liability of members in respect of reduced shares
105. Penalty for concealing name of creditor, etc.
106. Alteration of rights of holders of special classes of shares
107. Rights of dissentient shareholders
108. Transfer not to be registered except on production of instrument of transfer
108A. Restriction on acquisition of certain shares
108B. Restriction on transfer of shares
108C. Restriction on the transfer of shares of foreign companies
108D. Power of Central Government to direct companies not to give effect to the transfer
108E. Time within which refusal to be communicated
108F. Nothing in sections 108A to 108D to apply to Government Companies, etc. 108G. Applicability of the provisions of sections 108 to 108F
108H. Construction of certain expressions used in section 108A to 108G
108I. Penalty for acquisition or transfer of share in contravention of sections 108A to 108D
109. Transfer by legal representative
109A. Nomination of shares
109B. Transmission of shares
110. Application for transfer
 
111. Power to refuse registration and appeal against refusal
111A. Rectification of register on transfer
112. Certification of transfers
113. Limitation of time for issue of certificates
114. Issue and effect of share warrants to bearer
115. Share warrants and entries in register of members
116. Penalty for personation of shareholder
117. Debentures with voting rights not to be issued hereafter. 117A. Debenture trust deed
117B. Appointment of debenture trustees and duties of debenture trustees
117C. Liability of company to create security and debenture redemption reserve
118. Right to obtain copies of and inspect trust deed
119. Liability of trustees for debenture-holders
120. Perpetual debentures
121. Power to re-issue redeemed debentures in certain cases
122. Specific performance of contract to subscribe for debentures
123. Payments of certain debts out of assets subject to floating charge in priority to claims under the charge
PART V : REGISTRATION OF CHARGES
124. "Charge" to include mortgage in this Part
125. Certain charges to be void against liquidator or creditors unless registered
126. Date of notice of charge
127. Registration of charges on properties acquired subject to charge
128. Particulars in case of series of debentures entitling holders pan passu
129. Particulars in case of commission, etc., on debentures
130. Register of charges to be kept by Registrar
131. Index to register of charges
132. Certificate of registration
133. Endorsement of certificate of registration on debenture or certificate of debenture stock
134. Duty of company as regards registration and right of interested party
135. Provisions of Part to apply to modification of charges
136. Copy of instrument creating charge to be kept by company at registered office
137. Entry in register of charges of appointment of receiver or manager
138. Company to report satisfaction and procedure thereafter
139. Power of Registrar to make entries of satisfaction and release in absence of intimation from company
140. Copy of memorandum of satisfaction to be furnished to company
141. Rectification by Company Law Board of register of charges
142. Penalties
143. Company's register of charges
144. Right to inspect copies of instruments creating charges and company's register of charges
145. Application of Part to charges requiring registration under it but not under previous law
PART VI : MANAGEMENT AND ADMINISTRATION
CHAPTER 1 : GENERAL PROVISIONS REGISTERED OFFICE AND NAME
146. Registered office of company
147. Publication of name by company
148. Publication of authorised as well as subscribed and paid-up capital
149. Restrictions on commencement of business
150. Register of members
151. Index of members
152. Register and index of debenture-holders
152A. Register and index of beneficial owners to be of debenture-holders
153. Trusts not to be entered on register
153A. Appointment of public trustee
153B. Declaration as to shares and debentures held in trust
154. Power to close register of members or debenture-holders
155. [Omitted]
156. [Omitted]
157. Power for company to keep foreign register of members or debenture-holders
158. Provisions as to foreign registers
159. Annual return to be made by company having a share capital
160. Annual return to be made by company not having a share capital
161. Further provisions regarding annual return and certificate to be annexed thereto
162. Penalty and interpretation
163. Place of keeping and inspection of, registers and returns
164. Registers, etc., to be evidence
165. Statutory meeting and statutory report of company
166. Annual general meeting
 
167. Power of Company Law Board to call annual general meeting
168. Penalty for default in complying with section 166 or 167
169. Calling of extraordinary general meeting on requisition
170. Sections 171 to 186 to apply to meetings
171. Length of notice for calling meeting
172. Contents and manner of service of notice and persons on whom it is to be served
173. Explanatory statement to be annexed to notice
174. Quorum for meeting
175. Chairman of meeting
176. Proxies
177. Voting to be by show of hands in first instance
178. Chairman's declaration of result of voting by show of hands to be conclusive
179. Demand for poll
180. Time of taking poll
181. Restriction on exercise of voting right of members who have not paid calls, etc.
182. Restrictions on exercise of voting right in other cases to be void
183. Right of member to use his votes differently
184. Scrutineers at poll
185. Manner of taking poll and result thereof
186. Power of Company Law Board to order meeting to be called
187. Representation of corporations at meetings of companies and of "creditors
187A. Representation of the President and Governors in meetings of companies of which they are members
187B. Exercise of voting rights in respect of shares held in trust
187C. Declaration by persons not holding beneficial interest in any share
187D. Investigation of beneficial ownership of shares in certain cases
188. Circulation of members' resolutions
189. Ordinary and special resolutions
190. Resolutions requiring special notice
191. Resolutions passed at adjourned meetings
192. Registration of certain resolutions and agreements
192A. Passing of resolution by postal ballot
193. Minutes of proceedings of general meetings and of Board and other meetings
194. Minutes to be evidence
195. Presumptions to be drawn where minutes duly drawn and signed
196. Inspection of minute books of general meetings
197. Publication of reports of proceedings of general meetings
197A. Company not to appoint or employ certain different categories of managerial personnel at the same time
198. Overall maximum managerial remuneration and managerial remuneration in case of absence or inadequacy of profits
199. Calculation of commission, etc., in certain cases\
200. Prohibition of tax-free payments
201. Avoidance of provisions relieving liability of officers and auditors of company
202. Undischarged insolvent not to manage companies
203. Power to restrain fraudulent persons from managing companies
204. Restriction on appointment of firm or body corporate to office or place of profit under a company
204A. [Omitted]
205. Dividend to be paid only out of profits
205A. Unpaid dividend to be transferred to special dividend account
205B. Payment of unpaid or unclaimed dividend
205C. Establishment of Investor Education and Protection Fund
206. Dividend not to be paid except to registered share-holders or to their order or to their bankers
206A. Right to dividend rights, rights shares and bonus shares to be held in abeyance pending registration of transfer of shares
207. Penalty for failure to distribute dividends within thirty days
208. Power of company to pay interest out of capital in certain cases
209. Books of account to be kept by company
209 A. Inspection of books of accounts, etc. of companies
210. Annual accounts and balance-sheet
210A. Constitution of National Advisory Committee on Accounting Standards
211. Form and contents of balance-sheet and profit and loss account
212. Balance-sheet of holding company to include certain particulars as to its subsidiaries
213. Financial year of holding company and subsidiary
214. Rights of holding company's representatives and members
215. Authentication of balance-sheet and profit and loss account
216. Profit and loss account to be annexed and auditors' report to be attached to balance-sheet
217. Board's report
 
218. Penalty for improper issue, circulation or publication of balance-sheet or profit and loss account
219. Right of member to copies of balance-sheet and auditors' report
220. Three copies of balance-sheet, etc., to be filed with Registrar
221. Duty of officer to make disclosure of payments, etc.
222. Construction of references to documents annexed to accounts
223. Certain companies to publish statement in the Form in Table F in Schedule I
224. Appointment and remuneration of auditors
224A. Auditor not to be appointed except with the approval of the company by special resolution in certain cases
225. Provisions as to resolutions for appointing or removing auditors
226. Qualifications and disqualifications of auditors
227. Powers and duties of auditors
228. Audit of accounts of branch office of company
229. Signature of audit report, etc.
230. Reading and inspection of auditor's report
231. Right of auditor to attend general meeting
232. Penalty for non-compliance with sections 225 to 231.
233. Penalty for non-compliance by auditor with sections 227 and 229 233A. Power of Central Government to direct special audit in certain cases 233B. Audit of cost accounts in certain cases
234. Power of Registrar to call for information or explanation
234A. Seizure of documents by Registrar
235. Investigation of affairs of a company
236. Application by members to be supported by evidence and power of call for security
237. Investigation of company's affairs in other cases
238. Firm, body corporate or association not to be appointed as inspector
239. Power of inspectors to carry investigation into affairs of related companies, or of managing agent or associate etc.
240. Production of documents and evidence
240A. Seizure of documents by inspector
241. Inspectors' report
242. Prosecution
243. Application for winding up of company or an order under section 397 or 398
244. Proceedings for recovery of damages or property
245. Expenses of investigation
246. Inspectors' report to be evidence
247. Investigation of ownership of company
248. [Omitted]
249. [Omitted]
250. Imposition of restrictions upon shares and debentures and prohibition of transfer of shares or debentures in certain cases
250A. Voluntary winding up of company, etc., not to stop investigation proceedings
251. Saving for legal advisers and bankers
CHAPTER II : DIRECTORS
252. Minimum number of directors
253. Only individuals to be directors
254. Subscribers of memorandum deemed to be directors
255. Appointment of directors and proportion of those who are to retire by rotation
256. Ascertainment of directors retiring by rotation and filling of vacancies
257. Right of persons other than retiring directors to stand for directorship
258. Right of company to increase or reduce the number of directors
259. Increase in number of directors to require Government sanction
260. Additional directors
261. [Omitted]
262. Filling of casual vacancies among directors
263. Appointment of directors to be voted on individually
263A. Sections 177, 255, 256 and 263 not to apply in relation to companies not carrying business for profit, etc.
264. Consent of candidate for directorship to be filed with the company and consent to act as director to be filed with the Registrar
265. Option to company to adopt proportional representation for the appointment of directors
266. Restrictions on appointment or advertisement of director
267. Certain persons not to be appointed managing directors
268. Amendment of provision relating to managing, whole-time or non-rotational directors to require Government approval
269. Appointment of managing or whole-time director or manager to require Government approval only in certain cases
270. Time within which share qualification is to be obtained and maximum amount thereof
 
271. [Omitted]
272. Penalty
273. Saving
274. Disqualifications of directors
275. No person to be a director of more than fifteen companies
276. Choice to be made by director of more than fifteen companies at commencement of Act
277. Choice by person becoming director of more than fifteen companies after commencement of Act
278. Exclusion of certain directorships for the purposes of sections 275, 276 and 277
279. Penalty
280. [Omitted]
281. [Omitted]
282. [Omitted]
283. Vacation of office by directors
284. Removal of directors
285. Board to meet at least once in every three calendar months
286. Notice of meetings
287. Quorum for meetings
288. Procedure where meeting adjourned for want of quorum
289. Passing of resolutions by circulation
290. Validity of acts of directors
291. General powers of Board
292. Certain powers to be exercised by Board only at meeting
292A. Audit Committee
293. Restrictions on powers of Board
293A. Prohibitions and restrictions regarding
293B. Power of Board and other persons to make contributions to the National Defence Fund, etc.
294. Appointment of sole selling agents to require approval of company in general meeting
294A. Prohibition of payment of compensation to sole selling agents for loss of office in certain cases
294AA. Power of Central Government to prohibit the appointment of sole selling agents in certain cases
295. Loans to directors, etc.
296. Application of section 295 to book debts in certain cases
297. Board's sanction to be required for certain contracts in which particular directors are interested
298. [Omitted]
299. Disclosure of interests by director
300. Interested director not to participate or vote in Board's proceedings
301. Register of contracts, companies and firms in which directors are interested
302. Disclosure to members of director's interest in contract appointing manager, managing director
303. Register of directors, etc. 304.Inspection of the register
305.Duty of directors, etc., to make disclosure 306.Register to be kept by Registrar and inspection thereof 307.Register of directors' shareholdings, etc.
308. Duty of directors and persons deemed to be directors to make disclosure of shareholdings
309. Remuneration of directors
310. Provision for increase in remuneration to require Government sanction
311. Increase in remuneration of managing director on reappointment or appointment after Act to require Government sanction
312. Prohibition of assignment of office by directors
313. Appointment and term of office of alternate directors
314. Director, etc. not to hold office or place of profit
315. [Omitted]
316. Number of companies of which one person may be appointed managing director
317. Managing director not to be appointed for more than five years at a time
318. Compensation for loss of office not permissible except to managing or whole-time directors or to directors who are managers
319. Payment to director, etc., for loss of office, etc., in connection with transfer of undertaking of property
320. Payment to director for loss of office, etc., in connection with transfer of shares
321. Provisions supplementary to sections 318, 319 and 320
322. Directors, etc., with unlimited liability in limited company
323. Special resolution of limited company making liability of directors, etc., unlimited
CHAPTER III : MANAGING AGENTS
324 to 347. [Omitted]
348. [Omitted]
349. Determination of net profits
350. Ascertainment of depreciation
351. [Omitted]
 
352. [Omitted]
353. [Omitted]
354. [Omitted]
355. Saving
356 to 367. [Omitted]
368. [Omitted]
369. [Omitted]
370. Loans, etc., to companies under the same management
370A. Provisions as to certain loans which could not have been made if sections 369 and 370 were in force
371. Penalty for contravention of section 369, 370 or 370A
372. Purchase by company of shares, etc., of other companies
372A. Inter-corporate loans and investments
373. Investments made before commencement of Act
374. Penalty for contravention of section 372 or 373
375. [Omitted]
376. Conditions prohibiting reconstruction or amalgamation of company
377. [Omitted]
CHAPTER IV : A. SECRETARIES AND TREASURERS
378. [Omitted]
379. [Omitted]
380. [Omitted]
381. [Omitted]
382. [Omitted]
383. [Omitted]
383A. Certain companies to have secretaries
384. Firm or body corporate not to be appointed manager
385. Certain persons not to be appointed managers
386. Number of companies of which a person may be appointed manager
387. Remuneration of manager
388. Application of sections 269, 310, 311, 312 and 317 to managers
388A. Sections 386 to 388 not to apply to certain private companies
CHAPTER IV A : POWERS OF CENTRAL GOVERNMENT TO REMOVE MANAGERIAL PERSONNEL FROM OFFICE ON THE RECOMMENDATION OF THE COMPANY LAW BOARD
388B. Reference to Company Law Board of cases against managerial personnel
388C. Interim order by Company Law Board
388D. Decisions of the Company Law Board
388E. Power of Central Government to remove managerial personnel on the basis of Company Law Board's decision
CHAPTER V : ARBITRATIONS, COMPROMISES, ARRANGEMENTS AND RECONSTRUCTIONS
389. [Omitted]
390. Interpretation of sections 391 and 393
391. Power to compromise or make arrangements with creditors and members
392. Power of High Court to enforce compromises and arrangements
393. Information as to compromises or arrangements with creditors and members
394. Provisions for facilitating reconstruction and amalgamation of companies
394A. Notice to be given to Central Government for applications under sections 391 and 394
395. Power and duty to acquire shares of shareholders dissenting from scheme or contract approved by majority
396. Power of Central Government to provide for amalgamation of companies in public interest
396A. Preservation of books and papers of amalgamated company
CHAPTER VI : PREVENTION OF OPPRESSION AND MISMANAGEMENT
397. Application to Company Law Board for relief in cases of oppression
398. Application to Company Law Board for relief in cases of mismanagement
399. Right to apply under sections 397 and 398
400. Notice to be given to Central Government of applications under sections 397 and 398
401. Right of Central Government to apply under sections 397 and 398
402. Powers of Company Law Board on application under sections 397 or 398
403. Interim order by Company Law Board
404. Effect of alteration of memorandum or articles of company by order under section 397 or 398
405. Addition of respondents to application under section 397 or 398
406. Application of sections 539 to 544 to proceedings under sections 397 and 398
407. Consequences of termination or modification of certain agreements B Powers of central government
408. Powers of Government to prevent oppression or mismanagement
409. Power of Company Law Board to prevent change in Board of directors likely to affect company prejudicially
CHAPTER VII : CONSTITUTION AND POWERS OF ADVISORY COMMITTEE
410. Appointment of Advisory Committee
411. [Omitted]
412. [Omitted]
 
413. [Omitted]
414. [Omitted]
415. [Omitted]
CHAPTER VIII : MISCELLANEOUS PROVISIONS
416. Contracts by agents of company in which company is undisclosed principal
417. Employees' securities to be deposited in post office savings bank or Scheduled Bank
418. Provisions applicable to provident funds of employees
419. Right of employee to see bank's receipt for moneys or securities referred to in section 417 or 418
420. Penalty for contravention of sections 417, 418 and 419
421. Filing of accounts of receivers
422. Invoices, etc., to refer to receiver where there is one
423. Penalty for non-compliance with sections 421 and 422
424. Application of sections 421 to 423 to receivers and managers appointed by court and managers appointed in pursuance of an instrument
PART VIA : REVIVAL AND REHABILITATION OF SICK INDUSTRIAL COMPANIES
424A. Reference to Tribunal
424B. Inquiry into working of sick industrial companies
424C. Powers of Tribunal to make suitable order on completion of inquiry
424D. Preparation and sanction of schemes
424E. Rehabilitation by giving financial assistance
424F. Arrangement for continuing operations, etc., during inquiry
424G. Winding up of sick industrial company
424H. Operating agency to prepare complete inventory, etc
424-I. Direction not to dispose of assets
424J. Power of Tribunal to call for periodic information
424K. Misfeasance proceedings 424L. Penalty for certain offences PART VII : WINDING UP CHAPTER I : PRELIMINARY
425. Modes of winding up
426. Liability as contributories of present and past members
427. Obligations of directors and managers whose liability is unlimited
428. Definition of "contributory"
429. Nature of liability of contributory
430. Contributories in case of death of member
431. Contributories in case of insolvency of member
432. Contributories in case of winding up of a body corporate which is a member
CHAPTER II : WINDING UP BY THE COURT
433. Circumstances in which company may be wound up by court
434. Company when deemed unable to pay its debts
435. [Omitted]
436. [Omitted]
437. [Omitted]
438. [Omitted]
438. [Omitted]
439. Provisions as to applications for winding up
439A. Statement of affairs to the filed o winding up of a company
440. Right to present winding up petition where company is being wound up voluntarily or subject to court's supervision
441. Commencement of winding up by Court
441A. Levy and collection of cess on turnover or gross receipts of companies
441B. Crediting proceeds of cess to Consolidated Fund of India
441C. Rehabilitation Fund
441D. Application of Fund
441E. Power to call for information 441F. Penalty for non-payment of cess 441G. Refund of fund in certain cases
442. [Omitted]
443. Powers of Tribunal on hearing petition
444. Order for winding up to be communicated to Official Liquidator and Registrar
445. Copy of winding up order to be filed with Registrar
446. Suits stayed on winding up order
446A. Responsibility of directors and officers to submit to Tribunal audited books and accounts
447. Effect of winding up order
448. Appointment of Official Liquidator
449. Official Liquidator to be liquidator
 
450. Appointment and powers of provisional liquidator
451. General Provisions as to liquidators
452. Style, etc., of liquidator
453. Receiver not to be appointed of assets with liquidator
454. Statement of affairs to be made to Official Liquidator
455. Report by Official Liquidator
456. Custody of company's property
457. Powers of liquidator
458. Discretion of liquidator
458A. Exclusion of certain time in computing periods of limitation
459. Provision for legal assistance to liquidator
460. Exercise and control of liquidator's powers
461. Books to be kept by liquidator
462. Audit of liquidator's accounts
463. Control of Central Government over liquidators
464. Appointment and Composition of committee of inspection
465. Constitution and proceedings of committee of inspection
466. Power of court to stay winding up
467. Settlement of list of contributories and application of assets
468. Delivery of property to liquidator
469. Payment of debts due by contributory and extent of set-off
470. Power of court to make calls
471. Payment into bank of moneys due to company
472. Moneys and securities paid into Bank to be subject to order of court
473. Order on contributory to be conclusive evidence
474. Power to exclude creditors not proving in time
475. Adjustment of rights of contributories
476. Power to order costs
477. Power to summon persons suspected of having property of company, etc.
478. Power to order public examination of promoters, directors, etc.
479. Power to arrest absconding contributory
480. Saving of existing powers of court
481. Dissolution of company
482. Order made in any court to be enforced by other courts
483. Appeals from orders
CHAPTER III : VOLUNTARY WINDING UP
484. Circumstances in which company may be wound up voluntarily
485. Publication of resolution to wind up voluntarily
486. Commencement of voluntary winding up
487. Effect of voluntary winding up on status of company
488. Declaration of solvency in case of proposal to wind up voluntarily Provisions applicable to a members' voluntary winding up
489. Provisions applicable to a members' voluntary winding up
490. Power of company to appoint and fix remuneration of liquidators
491. Board's powers to cease on appointment of liquidator
492. Power to fill vacancy in office of liquidator
493. Notice of appointment of liquidator to be given to Registrar
494. Power of liquidator to accept shares, etc., as consideration for sale of property of company
495. Duty of liquidator to call creditors' meeting in case of insolvency
496. Duty of liquidator to call general meeting at end of each year
497. Final meeting and dissolution
498. Alternative provisions as to annual and final meetings in case of insolvency
499. Provisions applicable to a creditors' voluntary winding up
500. Meeting of creditors
501. Notice of resolutions passed by creditors' meeting to be given to Registrar
502. Appointment of liquidator
503. Appointment of committee of inspection
504. Fixing of liquidators' remuneration
505. Board's powers to cease on appointment of liquidator
506. Power to fill vacancy in office of liquidator
507. Application of section 494 to a creditors' voluntary winding up
508. Duty of liquidator to call meetings of company and of creditors at end of each year
509. Final meeting and dissolution
510. Provisions applicable to every voluntary winding up
511. Distribution of property of company
511A. Application of section 454 to voluntary winding up
 
512. Powers and duties of liquidator in voluntary winding up
513. Body corporate not to be appointed as liquidator
514. Corrupt inducement affecting appointment as liquidator
515. Power of court to appoint and remove liquidator in voluntary winding up
516. Notice by liquidator of his appointment
517. Arrangement when binding on company and creditors
518. Power to apply to court to have questions determined or powers exercised
519. Application of liquidator to court for public examination of promoters, directors, etc.
520. Costs of voluntary winding up
521. [Omitted]
CHAPTER IV : WINDING UP SUBJECT TO SUPERVISION OF COURT
522 to 527. [Omitted]
CHAPTER V: PROVISIONS APPLICABLE TO EVERY MODE OF WINDING UP
528. Debts of all descriptions to be admitted to proof
529. Application of insolvency rules in winding up of insolvent companies. 529A. Overriding preferential payment
530. Preferential payments
531. Fraudulent preference
531A. Avoidance of voluntary transfer
532. Transfers for benefit of all creditors to be void
533. Liabilities and rights of certain fraudulently preferred persons
534. Effect of floating charge
535. Disclaimer of onerous property in case of a company which is being wound up
536. Avoidance of transfers, etc., after commencement of winding up
537. Avoidance of certain attachments, executions, etc., in winding up by or subject to supervision of court
538. Offences by officers of companies in liquidation
539. Penalty for falsification of books
540. Penalty for frauds by officers
541. Liability where proper accounts not kept
542. Liability for fraudulent conduct of business
543. Power of court to assess damages against delinquent directors, etc
544. Liability under sections 542 and 543 to extend to partners or directors in firm or company
545. Prosecution of delinquent officers and members of company
546. Liquidator to exercise certain powers subject to sanction
547. Notification that a company is in liquidation
548. Books and papers of company to be evidence
549. Inspection of books and papers by creditors and contributories
550. Disposal of books and papers of company
551. Information as to pending liquidations
552. Official Liquidator to make payments into the public account of India
553. Voluntary liquidator to make payments into Scheduled Bank
554. Liquidator not to pay moneys into private banking account
555. Unpaid dividends and undistributed assets to be paid into the Companies Liquidation Account
556. Enforcement of duty of liquidator to make returns, etc. Supplementary powers of court
557. Meetings to ascertain wishes of creditors or contributories
558. Court or person before whom affidavit may be sworn
559. Power of court to declare dissolution of company void
560. Power of Registrar to strike defunct company off register
PART VIII : APPLICATION OF ACT TO COMPANIES FORMED OR REGISTERE UNDER PREVIOUS COMPANIES LAWS
561. Application of Act to companies formed and registered under previous companies laws
562. Application of Act to companies registered but not formed under previous companies laws
563. Application of Act to unlimited companies re-registered under previous companies laws
564. Mode of transferring shares in the case of companies registered under Acts 19 of 1857 and 7 of 1860. PART IX : COMPANIES AUTHORISED TO REGISTER UNDER THIS ACT
565. Companies capable of being registered
566. Definition of "joint-stock company"
567. Requirements for registration of joint-stock companies
568. Requirements for registration of companies not being "joint-stock companies"
569. Authentication of statements of existing companies
570. Power of Registrar to require evidence as to nature of company
571. Notice to customers on registration of banking company with limited liability
572. Change of name for purposes of registration
573. Addition of "Limited" or "Private Limited" to name
574. Certificate of registration of existing companies
575. Vesting of property on registration
 
576. Saving for existing liabilities
577. Continuation of pending legal proceedings
578. Effect of registration under Part
579. Power to substitute memorandum and articles for deed of settlement
580. Power of court to stay or restrain proceedings
581. Suits stayed on winding up order
PART IXA
CHAPTER I : PRODUCER COMPANIES
581A. Definitions
CHAPTER II : INCORPORATION OF PRODUCER COMPANIES AND OTHER MATTERS
581B. Objects of Producer Company
581C. Formation of Producer Company and its registration
581D. Membership and voting rights of Members of Producer Company
581E. Benefits to Members
581F. Memorandum of Producer Company
581G. Articles of association
581H. Amendment of memorandum
581-I. Amendment of articles
581J. Option to inter-State co-operative societies to become Producer Companies
581K. Effect of incorporation of Producer Company
581L. Vesting of undertaking in Producer Company
581M. Concession, etc., to be deemed to have been granted to Producer Company
581N. Provisions in respect of officers and other employees of inter-State co-operative society
CHAPTER III: MANAGEMENT OF PRODUCER COMPANY
581O. Number of directors
581P. Appointment of directors 581Q. Vacation of office by directors 581R. Powers and functions of Board
581S. Matters to be transacted at general meeting
581T. Liability of directors
581U. Committee of directors
581V. Meetings of Board and quorum 581W. Chief Executive and his function 581X. Secretary of Producer Company 581Y. Quorum
581Z. Voting rights
CHAPTER IV: GENERAL MEETINGS
581ZA. Annual general meetings
CHAPTER V: SHARE CAPITAL AND MEMBERS RIGHTS
581ZB. Share capital
581ZC. Special user rights
581ZD. Transferability of shares and attendant rights
CHAPTER VI: FINANCE, ACCOUNTS AND AUDIT
581ZE. Books of account
581ZF. Internal audit
581ZG. Duties of auditor under this Part
581ZH. Donations or subscription by Producer Company
581ZI. General and other reserves
581ZJ. Issue of bonus shares
CHAPTER VII: LOANS TO MEMBERS AND INVESTMENTS
581ZK. Loan, etc., to members
581ZL. Investment in other companies, formation of subsidiaries, etc
CHAPTER VIII: PENALTIES
581ZM. Penalty for contravention
CHAPTER IX: AMALGAMATION, MERGER OR DIVISION
581ZN. Amalgamation, merger or division, etc., to form new Producer Companies
CHAPTER X: RESOLUTION OF DISPUTES
581ZO. Disputes
CHAPTER XI: MISCELLANEOUS PROVISIONS
581ZP. Strike off name of Producer Company
581ZQ. Provisions of this Part to override other laws
581ZR. Application of provisions relating to private companies
CHAPTER XII: RECONVERSION OF PRODUCER COMPANY TO INTER-STATE CO-OPERATIVE SOCIETY
581ZS. Reconversion of Producer Company to inter-State co-operative society
581ZT. Power to modify Act in its application to Producer Companies
PART X : WINDING UP OF UNREGISTERED COMPANIES
 
582. Meaning of "unregistered company"
583. Winding up of unregistered companies
584. Power to wind up foreign companies, although dissolved
585. Contributories in winding up of unregistered company
586. Power to stay or restrain proceedings
587. Suits, etc., stayed on winding up order
588. Directions as to property in certain cases
589. Provisions of Part cumulative
590. Saving and construction of enactments conferring power to wind up partnership, association or company in certain cases
PART XI : COMPANIES INCORPORATED OUTSIDE INDIA
591. Application of sections 592 to 602 to foreign companies
592. Documents, etc., to be delivered to Registrar by foreign companies carrying on business in India
593. Return to be delivered to Registrar by foreign company where documents, etc., altered
594. Accounts of foreign company
595. Obligation to state name of foreign company, whether limited, and country where incorporated
596. Service on foreign company
597. Office where documents to be delivered
598. Penalties
599. Company's failure to comply with Part not to affect its liability under contracts, etc. 600. Registration of charges, appointment of receiver and books of account
601. Fees for registration of documents under Part
602. Interpretation of foregoing sections of Part Prospectuses 603. Dating of prospectus and particulars to be contained therein 604. Provisions as to expert's consent and allotment
605. Registration of prospectus
605A. Offer of Indian Depository Receipts
606. Penalty for contravention of sections 603, 604 and 605. 607. Civil liability for mis-statements in prospectus
608. Interpretation of provisions as to prospectuses
PART XII : REGISTRATION OFFICES AND OFFICERS AND FEES
609. Registration Offices
610. Inspection, production and evidence of documents kept by Registrar
610A. Admissibility of micro films, facsimile copies of documents,computer printouts and documents on computer media as documents and as evidence
611. Fees in Schedule X to be paid
612. Fees, etc., paid to Registrar and other officers to be accounted for to Central Government
613. Power of Central Government to reduce fees, charges, etc.
614. Enforcement of duty of company to make returns, etc., to Registrar
614A. Power of court trying offences under the Act to direct the filing of documents with Registrar
PART XIII : GENERAL
615. "Power of Central Government to direct companies to furnish information or statisties
616. Application of Act to insurance, banking, electricity supply and other companies governed by special Acts
617. Definition of "Government Company"
618. [Omitted]
619. Application of sections 224 to 233 to Government companies
619A. Annual reports on Government companies
619B. Provisions of section 619 to apply to certain companies 620. Power to modify Act in relation to Government companies 620A. Power to modify Act in its application to Nidhis, etc.
620B. Special provision as to companies in Goa, Daman and Diu
620C. Special provision as to companies in Jammu and Kashmir
621. Offences against Act to be cognizable only on complaint by Registrar, shareholder of Government
621A. Composition of certain offences
622. Jurisdiction to try offences
623. Certain offences, triable summarily in Presidency towns
624. Offences to be non-cognizable
624A. Power of Central Government to appoint company prosecutors
624B. Appeal against acquittal
625. Payment of compensation in cases of frivolous or vexatious prosecution
626. Application of fines
627. Production and inspection of books where offence suspected
628. Penalty for false statements
629. Penalty for false evidence
629A. Penalty where no specific penalty is provided elsewhere in the Act
630. Penalty for wrongful withholding of property
 
631. Penalty for improper use of words "Limited" and "Private Limited"
632. Power to require limited company to give security for costs
633. Power of court to grant relief in certain cases
634. Enforcement of orders of courts
634A. Enforcement of orders of Company Law Board 635. Enforcement of orders of one court by other courts 635A. Protection of acts done in good faith
635AA. Non-disclosure of information in certain cases
635B. Protection of employees during investigation by Inspector or pendency of proceeding before court in certain cases
636. Reduction of fees, charges, etc., payable to company
637. Delegation by Central Government of its powers and fs under Act
637A. Power of Central Government or Company Law Board to accord approval, etc., subject to conditions and to prescribe fees on applications
637AA. Power of Central Government to fix a limit with regard to remuneration
637B. Condonation of delays in certain cases 638. Annual report by Central Government 639. [Omitted]
640. Validation of registration of firms as members of charitable and other companies 640A. Exclusion of time required in obtaining copies of orders of Court or the Tribunal 640B. Forms of, and procedure in relation to, certain applications
641. Power to alter Schedules
642. Power of Central Government to make rules
643. Power of Supreme Court to make rules
644. Repeal of Acts specified in Schedule XII
645. Saving of orders, rules, etc., in force at commencement of Act
646. Saving of operation of section 138 of Act 7 of 1913 647. Saving of pending proceedings for winding up 647A. Transfer of winding up proceedings to Tribunal
648. Saving of prosecutions instituted by liquidator or court under section 237 of Act 7 of 1913. 649. Construction of references to former enactments in documents
650. Construction of "Registrar of joint stock companies" in Act 21 of 1860 [Omitted]
651. Construction of references to extraordinary resolution in articles, etc. 651A. Reference of winding up of companies in other laws
652. Appointment under previous companies laws to have effect as if made under Act
653. Former registration offices continued
654. Registers under previous companies laws to be deemed to be part of registers under Act
655. Funds and accounts under Act to be in continuation of funds and accounts under previous companies taw
656. Saving of incorporation under repealed Acts
657. Saving of certain Tables under previous companies laws
658. Section 6 of the General Clauses Act, 1897 (10 of 1897) to apply in addition to sections 645 to 657 of Act
SCHEDULES I SCHEDULES IA SCHEDULES II SCHEDULES III SCHEDULES IV SCHEDULES V SCHEDULES VI SCHEDULES VII SCHEDULES VIII SCHEDULES IX SCHEDULES X SCHEDULES XI SCHEDULES XII SCHEDULES XIII SCHEDULES XIV SCHEDULES XV
 
COMPANIES ACT, 1956
[act no. 1 of 1956]
 
An Act to consolidate and amend the law relating to companies and certain other associations
Be it enacted by Parliament in the Sixth Year of the Republic of India as follows :
 
PART I : PRELIMINARY
 
1. SHORT TITLE, COMMENCEMENT AND EXTENT
(1) This Act may be called the Companies Act, 1956.
(2) It shall come into force on such date as the Central Government may, by notification in the Official Gazette, appoint.
(3) It extends to the whole of India :
Provided 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.
 
2. DEFINITIONS
In this Act, unless the context otherwise requires, -
1[(1) "abridged prospectus" means a memorandum containing such salient features of a prospectus as may be prescribed ;]
2[(1A) "alter" and "alteration" shall include the making of additions and omissions ;
3[(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 ;
(3) [Omitted by the Companies (Amendment) Act, 2000 with effect from 13-12-2000 ;]
(4) [Omitted by the Companies (Amendment) Act, 2000 with effect from 13-12-2000 ;]
(5) "banking company" has the same meaning as in the Banking Companies Act, 1949 (10 of 1949) ;
(6) "Board of directors" or "Board", in relation to a company, means the Board of directors of the company;
(7) "body corporate" or "corporation" includes a company incorporated outside India but does not include -
(a) a corporation sole ;
(b) a co-operative society registered under any law relating to co-operative societies ; and
(c) any other body corporate (not being a company as defined in this Act), which the Central Government may, by notification in the Official Gazette, specify in this behalf ;
(8) "book and paper" and "book or paper" include accounts, deeds, vouchers, writings, and documents ;
(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 ;
(10A) "Company Law Board" means the Board of Company Law Administration constituted under section 10E ;
(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 ;
4[(12A) "depository" has the same meaning as in the Depositories Act, 1996 (22 of 1996) ;]
4[(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 ;
4[(14A) "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 ;
4[(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 ; (18A) [Omitted by the MRTP (Amendment) Act, 1984, with effect from 1-8-1984 ;]
(19) "holding company" means a holding company within the meaning of section 4 ;
4[(19A) "hybrid" means any security which has the character of more than one type of security, including their derivatives ;]
5[(19AA) "industrial company" means a company which owns one or more industrial undertakings ;
(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 ;] 4[(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;]
(20) [Omitted by the (J & K Extension of Laws) Act, 1956;]
(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;
4[(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 (not being the managing agent) who, subject to the superintendence, control and direction of the Board of directors, has the management of the whole, or substantially the whole, of the affairs of a company, and includes a director or any other person occupying the position of a manager, by whatever name called, and whether under a contract of service or not;
(25) [Omitted by the Companies (Amendment) Act, 2000 with effect from 13-12-2000;]
(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 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 :
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 ;
(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 ;
6[ (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 ;]
7[(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 ;
4[(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) ;]
6[(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) "prescribed" means, as respects the provisions of this Act relating to the winding up of companies except sub- section (5) of section 503, sub-section (3) of section 550, section 552 and sub-section (3) of section 555, prescribed by rules made by the Supreme Court in consultation with 8[the Tribunal], and as respects the other provisions of this
 
Act including sub-section (5) of section 503, 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 any document described or issued as a prospectus and includes any notice, circular, advertisement or other document 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) "relative" means, with reference to any person, any one who is related to such person in any of the ways specified in section 6, and no others ;
(42) "Schedule" means a Schedule annexed to this Act ;
(43) "Scheduled Bank" has the same meaning as in the Reserve Bank of India Act, 1934 (2 of 1934) ;
(44) [Omitted by the Companies (Amendment) Act, 2000 with effect from 13-12-2000 ;]
9[(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 ;]
10[(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 ;]
4[(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 ;]
11[ (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 ;
4[(46A)"share with differential rights" means a share that is issued with differential rights in accordance with the provisions of section 86;]
6[ (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 ;]
6[(46AB)"State level institution" means any of the following institutions, namely : -
(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 ;
6[(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.
 
1. Inserted by the Companies (Amendment) Act, 2000 w.e.f. 13-12-2000.
2. Clause (1) renumbered as (1A) by the Companies (Amendment) Act, 2000 w.e.f. 13-12-2000.
3. Inserted by the Companies (Second Amendment) Act, 2002 w.e.f. 1-4-2003
4. Inserted by the Companies (Amendment) Act, 2000 w.e.f. 13-12-2000.
5. Inserted by the Companies (Second Amendment) Act, 2002 w.e.f. 1-4-2003
6. Inserted by the Companies (Second Amendment) Act, 2002 w.e.f. 1-4-2003
7. Substituted by the Companies (Amendment) Act, 2000 w.e.f. 13-12-2000. Prior to its substitution, clause (30), read as under :
`(30) "officer" includes any director, managing agent, secretaries and treasurers, manager or secretary, or any person in accordance with whose directions or instructions the Board of directors or any one or more of the director is or are accustomed to act, and also includes -
 
(a) where the managing agent, or the secretaries and treasurers is or are a firm, any partner in the firm ;
(b) where the managing agent or the secretaries and treasurers is or are a body corporate, any director or manager of the body corporate ;
(c) [Omitted by the Companies (Amendment) Act, 1974 w.e.f. 1st August, 1975], but, save in sections 477, 478, 539, 543, 545, 621, 625 and 633, does not include an auditor ;'
8. Substituted for `High Courts' by the Companies (Second Amendment) Act, 2002 w.e.f. 1-4-2003
9. Substituted by the Companies (Amendment) Act, 1988 w.e.f. 1-12-1988.
10. Inserted by the Companies (Amendment) Act, 1988 w.e.f. 15-6-1988.
11. Inserted by the Depositories Act, 1996 w.r.e.f. 20-9-1995.
 
1[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.]
 
1. Inserted by the Depositories Act, 1996 w.r.e.f. 20-9-1995.
 
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
(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 States (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), insofar as banking, insurance and financial corporations are concerned, and before the commencement of the Central Laws (Extension to Jammu & Kashmir) Act, 1968 (25 of 1968), insofar as other corporations are concerned ; and
(g) the Portuguese Commercial Code, insofar as it relates to "sociedades anonimas" ;
(iii) "private company" 1[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 is articles, -]
(a) restricts the right to transfer its shares, if any ;
(b) limits the number of its members to fifty not including -
(i) persons who are in the employment of the company ; and
(ii) persons who, having been formerly in the employment of the company, were members of the company while in that employment and have continued to be members after the employment ceased ; and
(c) prohibits any invitation to the public to subscribe for any shares in, or debentures of, the company ;
2[(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 ;
3[(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) ;
(b) [Omitted by the J&K (Extension of Laws) Act, 1956].
4[(3) Every private company, existing on the commencement of the Companies (Amendment) Act, 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, 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 Companies (Amendment) Act, 2000 shall not be required to have minimum paid-up capital specified in this section.]
 
1. Substituted for "means a company which, by its articles,-" by the Companies (Amendment) Act, 2000 w.e.f. 13-12-2000.
2. Inserted by the Companies (Amendment) Act, 2000 w.e.f. 13-12-2000.
3. Substituted for the clause (iv) by the Companies (Amendment) Act, 2000 w.e.f. 13-12-2000. Prior to substitution clause (iv) read as under :
`(iv) "public company" means a company which is not a private company.'
4. Sub-sections (3), (4), (5) and (6) inserted b the Companies (Amendment) Act, 2000 w.e.f. 13-12-2000.
 
4. MEANING OF "HOLDING COMPANY" AND "SUBSIDIARY"
(1) For the purposes of this Act, a company shall, subject to the provisions of sub-section (3), be deemed to be a subsidiary of another if, but only if, -
(a) that other controls the composition of its Board of directors ; or
(b) that other -
(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 person, can appoint or remove the holders of all or a majority of the directorships ; but for the purposes of this provision that other company shall be deemed to have power to appoint to a directorship with respect to which any of the following conditions is satisfied, that is to say -
(a) that a person cannot be appointed thereto without the exercise in his favour by that other company of such a power as aforesaid ;
(b) that a person's appointment thereto follows necessarily from his appointment as director 1[***] or manager of, or to any other office or employment in, that other company ; or
(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
(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.
 
(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.
 
1. Words ", managing agent, secretaries and treasurers" omitted by the Companies (Amendment) Act, 2000 w.e.f. 13-12-2000.
 
4A. PUBLIC FINANCIAL INSTITUTIONS
(1) Each of the financial institutions specified in this sub-section shall be regarded, for the purposes of this Act, as a public financial institution, namely :
(i) the Industrial Credit and Investment Corporation of India Limited, a company formed and registered under the Indian Companies Act, 1913 (7 of 1913) ;
(ii) the Industrial Finance Corporation of India, established under section 3 of the Industrial Finance Corporation Act, 1948 (15 of 1948) ;
(iii) the Industrial Development Bank of India, established under section 3 of the Industrial Development Bank of India Act, 1964 (18 of 1964) ;
(iv) the Life Insurance Corporation of India, established under section 3 of the Life Insurance Corporation Act, 1956 (31 of 1956) ;
(v) the Unit Trust of India, established under section 3 of the Unit Trust of India Act, 1963 (52 of 1963) ;
1[(vi) the Infrastructure Development Finance Company Limited, a company formed and registered under this Act ;] 2[(vii) the securitisation company or the 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.]
(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.
 
1. Inserted by the Companies (Amendment) Act 1999, w.r.e.f. 31-10-1998.
2. Inserted by the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 w.e.f. 21-6-2002.
 
1[5. MEANING OF "OFFICER WHO IS IN DEFAULT"
For the purpose of any provision in this Act which enacts that an officer of the company who is in default shall be liable to any punishment or penalty, whether by way of imprisonment, fine or otherwise, the expression "officer who is in default" means all the following officers of the company, namely :
(a) the managing director or managing directors ;
(b) the whole-time director or whole-time directors ;
(c) the manager ;
(d) the secretary ;
(e) any person in accordance with whose directions or instructions the Board of directors of the company is accustomed to act ;
(f) any person charged by the Board with the responsibility of complying with that provision :
Provided that the person so charged has given his consent in this behalf to the Board ;
(g) where any company does not have any of the officers specified in clauses (a) to (c), any director or directors who may be specified by the Board in this behalf or where no director is so specified, all the directors :
Provided that where the Board exercises any power under clause (f) or clause (g), it shall, within thirty days of the exercise of such powers, file with the Registrar a return in the prescribed form.]
 
1. Substituted by the Companies (Amendment) Act, 1988 w.e.f. 15-7-1988.
 
6. MEANING OF "RELATIVE"
A person shall be deemed to be a relative of another, if, and only if,
(a) they are members of a Hindu undivided family ; or
(b) they are husband and wife ; or
(c) the one is related to the other in the manner indicated in Schedule IA.
 
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.
 
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, any establishment carrying on either the same or substantially the same activity as that carried on by the head office of the company, or any 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.
 
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.
 
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.
 
10A. CONSTITUTION OF TRIBUNAL
[Omitted by the Companies Tribunal (Abolition) Act, 1967, with effect from 1-7-1967.]
 
10B. PROCEDURE OF TRIBUNAL
[Omitted by the Companies Tribunal (Abolition) Act, 1967, with effect from 1-7-1967.]
 
10C. POWERS OF TRIBUNAL
[Omitted by the Companies Tribunal (Abolition) Act, 1967, with effect from 1-7-1967.]
 
10D. APPEALS AGAINST DECISIONS, ETC., OF THE TRIBUNAL
[Omitted by the Companies Tribunal (Abolition) Act, 1967, with effect from 1-7-1967.]
PART IA BOARD OF COMPANY LAW ADMINISTRATION 10E. CONSTITUTION OF BOARD OF COMPANY LAW ADMINISTRATION
1[(1) As soon as may be after the commencement of the Companies (Amendment) Act, 1988, the Central Government
shall, by notification in the Official Gazette, constitute a Board to be called the Board of Company Law Administration. (1A) The Company Law Board shall exercise and discharge such powers and functions as may be 2[conferred on it, before the commencement of the Companies (Second Amendment) Act, 2002] 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 2[conferred on it before the commencement of the Companies (Second Amendment) Act, 2002] by the Central Government, by notification in the Official Gazette under the provisions of this Act or that other law. (2) The Company Law Board shall consist of such number of members, not exceeding nine, as the Central Government deems fit, to be appointed by that Government by notification in the Official Gazette :
3[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.]
4[(2A) The members of the Company Law Board shall possess such qualifications and experience as may be prescribed.]
(3) One of the members shall be appointed by the Central Government to be the chairman of the Company Law Board.
 
(4) No act done by the Company Law Board shall be called in question on the ground only of any defect in the constitution of, or the existence of any vacancy in, the Company Law Board.
(4A) [Omitted by the Companies (Amendment) Act, 1988, with effect from 31-5-1991.]
(4B) 5[The Board] may, by order in writing, form one or more Benches from among its members and authorise each such Bench to exercise and discharge such of the Board's powers and functions as may be specified in the order ; and every order made or act done by a Bench in exercise of such powers or discharge of such functions shall be deemed to be the order or act, as the case may be, of the Board.
(4C) Every Bench referred to in sub-section (4B) shall have powers which are vested in a Court under the Code of Civil Procedure, 1908 (5 of 1908), while trying a suit, in respect of the following matters, namely : -
(a) discovery and inspection of documents or other material objects producible as evidence ;
(b) enforcing the attendance of witnesses and requiring the deposit of their expenses ;
(c) compelling the production of documents or other material objects producible as evidence and impounding the same ;
(d) examining witnesses on oath ;
(e) granting adjournments ;
(f) reception of evidence on affidavits.
(4D) Every Bench shall be deemed to be a civil court for the purposes of section 195 and Chapter XXVI of the Code of Criminal Procedure, 1973 (2 of 1974), and every proceeding before the Bench shall be deemed to be a judicial proceeding within the meaning of sections 193 and 228 of the Indian Penal Code (45 of 1860), and for the purpose of section 196 of that Code.
2[(5) Without prejudice to the provisions of sub-sections (4C) and (4D), the Company Law Board shall in the exercise
of its powers and the discharge of its functions under this Act or any other law be guided by the principles of natural justice and shall act in its discretion.
(6) Subject to the foregoing provisions of this section, the Company Law Board shall have power to regulate its own procedure.]
1. Substituted by the Companies (Amendment) Act, 1988 w.e.f. 31-5-1991.
2. Substituted for "conferred on it" by the Companies (Second Amendment) Act, 2002 (w.e.f. a date yet to be notified).
3. Inserted by the Companies (Amendment) Act, 1988 w.e.f. 31-5-1991.
4. Inserted by the Companies (Amendment) Act, 1988 w.e.f. 4-8-1989.
5. Substituted for "Without prejudice to the provisions of sub-section (4A), the Board, with the previous approval of the Central Government" by the Companies (Amendment) Act, 1988 w.e.f. 31-5-1991.
 
1[10F. APPEALS AGAINST THE ORDERS OF THE COMPANY LAW BOARD
Any person aggrieved by any decision or order of the Company Law Board 2[made before the commencement of the Companies (Second Amendment) Act, 2002] 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.]
 
1. Inserted by the Companies (Amendment) Act, 1988 w.e.f. 31-5-1991.
2. Inserted by the Companies (Second Amendment) Act, 2002 (w.e.f. a date yet to be notified).
 
1[10FA. DISSOLUTION OF COMPANY LAW BOARD
(1) On and from the commencement of the Companies (Second Amendment) Act, 2002, 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 the Company 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 National Company Law Tribunal and the said Tribunal shall dispose of such cases in accordance with the provisions of this Act.]
 
1. Inserted by the Companies (Second Amendment) Act, 2002 (w.e.f. a date yet to be notified).
 
1[PART IB NATIONAL COMPANY LAW TRIBUNAL
1. Part IB, consisting of sections 10FB to 10 FP, and Part IC, consisting of sections 10FQ to 10GF, inserted by the Companies (Second Amendment) Act, 2002 w.e.f. 1-4-2003
 
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.
 
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.
 
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 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 Companies 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, 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 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
(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.
 
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.
 
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.
 
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.
 
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.
 
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.
 
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 in formed 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).
 
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.
 
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:
Provided that no transfer of any proceedings shall be made under this sub-section except after recording the reasons for so doing in writing.
 
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.
 
10FN. POWER TO REVIEW
The Tribunal shall have power to review its own orders.
 
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.
 
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.
 
 
1[PART IC APPELLATE TRIBUNAL
 
1. Part 1C inserted by the Companies (Second Amendment) Act, 2002 w.e.f. 1-4-2003.
 
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.
 
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.
 
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 Members 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.
 
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.
 
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.
 
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).
 
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.
 
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 and Company Affairs -Member ;
(c) Secretary in the Ministry of Labour -Member ;
(d) Secretary in the Ministry of Law and Justice (Department of Legal Affairs or Legislative Department) -Member ;
(e) Secretary in the Ministry of Finance and Company -Member. 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 Chair- person 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.
 
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 (45 of 1860).
 
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.
 
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 sections 193 and 228, and for the purposes of section 196, of the Indian Penal Code (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).
 
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), 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 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.
 
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.
 
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.
 
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.
 
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 Companies 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 Cost 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.
 
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.
 
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.]
 
 
PART II : INCORPORATION OF COMPANY AND MATTERS INCIDENTAL THERETO
Certain companies, associations and partnerships to be registered as companies under Act
 
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.
Memorandum of association
 
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").
 
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 ;
(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.
 
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.
 
15. PRINTING AND SIGNATURE OF MEMORANDUM
The memorandum shall-
(a) be printed,
(b) be divided into paragraphs numbered consecutively, and
(c) be signed by each subscriber (who shall add his address, description and occupation, if any), in the presence of at least one witness who shall attest the signature and shall likewise add his address, description and occupation, if any.
 
15A. SPECIAL PROVISION AS TO 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 Naidu for the reference to the State of Madras, and the Registrar of the State of Tamil Naidu shall make necessary alterations in the memorandum of association and the certificate of incorporation of the said company.
 
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.
 
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 1[***] or manager, may be altered in the same manner as the articles of the company, but if there is any express provision in this Act permitting of the alteration of such provisions in any other manner, they may also be altered in such other manner.
(4) All references to the articles of a company in this Act shall be construed as, including references to the other provisions aforesaid contained in its memorandum.
 
  
1. Words ", managing agent secretaries and treasurers" omitted by the Companies (Amendment) Act, 2000 w.e.f. 13-12-2000.
 
1[17. 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 existing circumstances 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.
(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.]
 
1. Substituted by Companies (Second Amendment) Act, 2002 (w.e.f. a date yet to be notified). Prior to substitution section 17 read as under :
"17. Special resolution and confirmation by Company Law Board 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 ;
(c) to enlarge or change the local area of its operations ;
(d) to carry on some business which under existing circumstances may conveniently or advantageously be combined with the business of the company ;
(e) to restrict or abandon any of the objects specified in the memorandum ;
(f) to sell or dispose of the whole or any part of the undertaking, or of any of the undertakings, of the company ;
(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 Company Law Board on petition.
(3) Before confirming the alteration, the Company Law Board must be satisfied-
(a) that sufficient notice has been given to every holder of the debentures of the company, and to every other person or class of persons whose interests will, in the opinion of the Company Law Board, be affected by the alteration ; and
(b) that, with respect to every creditor who, in the opinion of the Company Law Board, is entitled to object to the alteration, and who signifies his objection in the manner directed by the Company Law Board, either his consent to the alteration has been obtained or his debt or claim
 
has been discharged or has determined, or has been secured to the satisfaction of the Company Law Board :
Provided that the Company Law Board may, in the case of any person or class of persons, for special reasons, dispense with the notice required by clause (a).
(4) The Company Law Board shall cause notice of the petition for confirmation of the alteration to be served on the Registrar who shall also be given a reasonable opportunity to appear before the Company Law Board and state his objections and suggestions, if any, with respect to the confirmation of the alteration.
(5) The Company Law Board 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 Company Law Board shall, in exercising its powers under this section, have regard to the rights and interests of the members of the company and of every class of them, as well as to the rights and interests of the creditors of the company and of every class of them.
(7) The Company Law Board may, if it thinks fit, adjourn the proceedings in order that an arrangement may be made to the satisfaction of the Company Law Board for the purchase of the interests of dissentient members ; and may give such directions and make such orders as it thinks fit for facilitating, or carrying into effect, any such arrangement :
Provided that no part of the capital of the company may be expended for any such purchase."
 
1[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.]
 
1. Inserted by the Companies (Amendment) Act, 2000 w.e.f. 1-3-2001.
 
18. ALTERATION TO BE REGISTERED WITHIN THREE MONTHS
1[(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 2[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 2[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.
 
1. Substituted by the Companies (Amendment) Act, 1996 w.e.f. 1-3-1997. Prior to substitution, sub-section (1) read as under :
"(1) A certified copy of the order of the Company Law Board made under sub-section (5) of section 17 confirming the alteration, together with a printed copy of the memorandum as altered, shall, within three months from the date of the order, be filed by the company with the Registrar who shall register the same and certify the registration under his hand within one month from the date of the filing of such documents."
 
2. Substituted for "Company Law Board" by the Companies (Second Amendment) Act, 2002 (w.e.f. a date yet to be notified).
 
19. EFFECT OF FAILURE TO REGISTER
(1) No such alteration as is referred to in section 17 shall have any effect until it has been duly registered in accordance with the provisions of section 18.
(2) If the documents required to be filed with the Registrar under section 18 are not filed within the time allowed under that section, such alteration and the order of the 1[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 1[Central Government] may, on sufficient cause shown, revive the order on application made within a further period of one month.
 
1. Substituted for "Company Law Board" by the Companies (Second Amendment) Act, 2002 (w.e.f. a date yet to be notified).
 
 
Provisions with respect to names of companies
 
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.
1[(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,
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.]
1. Sub-sections (2) and (3) substituted for sub-section (2) by the Trade Marks Act, 1999. Prior to its substitution, sub-section (2) read as under :
"(2) Without prejudice to the generality of the foregoing power, a name which is identical with, or too nearly resembles, the name by which a company in existence has been previously registered, may be deemed to be undesirable by the Central Government within the meaning of sub-section (1)."
 
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 :
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.
 
22. RECTIFICATION OF NAME OF COMPANY
(1) 1[If, through inadvertence or otherwise, a company on its first registration or on its registration by a new name, is registered by a name which-
(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, 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.
2[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 3[one thousand] rupees for every day during which the default continues.
 
 
1. Substituted for the portion beginning with "If, through" and ending with "the first-mentioned company-" by the Trade Marks Act, 1999. Prior to its substitution the substituted portion read as under :
"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-"
2. Inserted by the Trade Marks Act, 1999.
3. Substituted for "one hundred" by the Companies (Amendment) Act, 2000 w.e.f. 13-12-2000.
 
23. REGISTRATION OF CHANGE OF NAME AND EFFECT THEREOF
(1) Where a company changes its name in pursuance of section 21 or 22, the Registrar shall enter the new name on the register in the place of the former name, and shall issue a fresh certificate of incorporation with the necessary alterations embodied therein ; and the change of name shall be complete and effective only on the issue of such a certificate.
(2) The Registrar shall also make the necessary alteration in the memorandum of association of the company.
(3) The change of name shall not affect any rights or obligations of the company, or render defective any legal proceedings by or against it ; and any legal proceedings which might have been continued or commenced by or against the company by its former name may be continued by or against the company by its new name.
 
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.
 
25. POWER TO DISPENSE WITH "LIMITED" IN NAME OF CHARITABLE OR OTHER COMPANY
(1) Where it is proved to the satisfaction of the Central Government that an association-
(a) is about to be formed as a limited company for promoting commerce, art, science, religion, charity or any other useful object, and
(b) intends to apply its profits, if any, or other income in promoting its objects, and to prohibit the payment of any dividend to its members,
the Central Government may, by licence, direct that the association may be registered as a company with limited liability, without the addition to its name of the word "Limited" or the words "Private Limited".
(2) The association may thereupon be registered accordingly ; and on registration shall enjoy all the privileges, and (subject to the provisions of this section) be subject to all the obligations, of limited companies.
(3) Where it is proved to the satisfaction of the Central Government-
(a) that the objects of a company registered under this Act as a limited company are restricted to those specified in clause (a) of sub-section (1), and
(b) that by its constitution the company is required to apply its profits, if any, or other income in promoting its objects and is prohibited from paying any dividend to its members,
the Central Government may, by licence, authorise the company by a special resolution to change its name, including or consisting of the omission of the word "Limited" or the words "Private Limited" ; and section 23 shall apply to a change of name under this sub-section as it applies to a change of name under section 21.
(4) A firm may be a member of any association or company licensed under this section, but on the dissolution of the firm, its membership of the association or company shall cease.
(5) A licence may be granted by the Central Government under this section on such conditions and subject to such regulations as it thinks fit, and those conditions and regulations shall be binding on the body to which the licence is granted, and where the grant is under sub-section (1), shall, if the Central Government so directs, be inserted in the memorandum or in the articles, or partly in the one and partly in the other.
(6) It shall not be necessary for a body to which a licence is so granted to use the word "Limited" or the words "Private Limited" as any part of its name and, unless its articles otherwise provide, such body shall, if the Central Government by general or special order so directs and to the extent specified in the directions, be exempt from such of the provisions of this Act as may be specified therein.
(7) The licence may at any time be revoked by the Central Government, and upon revocation, the Registrar shall enter the word "Limited" or the words "Private Limited" at the end of the name upon the register of the body to which it was granted ; and the body shall cease to enjoy the exemption granted by this section :
Provided that, before a licence is so revoked, the Central Government shall give notice in writing of its intention to the body, and shall afford it an opportunity of being heard in opposition to the revocation.
(8) (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) of section 17, the provisions of this sub-section shall be in addition to, and not in derogation of, the provisions of that section.
(9) Upon the revocation of a licence granted under this section to a body the name of which contains the words "Chamber of Commerce", that body shall, within a period of three months from the date of revocation or such longer period as the Central Government may think fit to allow, change its name to a name which does not contain those words ; and-
(a) the notice to be given under the proviso to sub-section (7) to that body shall include a statement of the effect of the foregoing provisions of this sub-section ; and
(b) section 23 shall apply to a change of name under this sub-section as it applies to a change of name under section 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 1[five thousand] rupees for every day during which the default continues.
 
1. Substituted for "five hundred" by the Companies (Amendment) Act, 2000 w.e.f. 13-12-2000.
 
Articles of association
 
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.
 
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).
 
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, insofar 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.
 
29. FORM OF ARTICLES IN THE CASE OF OTHER COMPANIES
The articles of association of any company, not being a company limited by shares, shall be in such one of the forms in Tables C, D and E in Schedule I as may be applicable, or in a form as near thereto as circumstances admit : Provided that nothing in this section shall be deemed to prevent a company from including any additional matters in its articles insofar 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.
 
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.
 
31. ALTERATION OF ARTICLES BY SPECIAL RESOLUTION
(1) Subject to the provisions of this Act and to the conditions contained in its memorandum, a company may, by special resolution, alter its articles :
 
Provided that no alteration made in the articles under this sub-section which has the effect of converting a public company into a private company, shall have effect unless such alteration has been approved by the Central Government.
(2) Any alteration so made shall, subject to the provisions of this Act, be as valid as if originally contained in the articles and be subject in like manner to alteration by special resolution.
(2A) Where any alteration such as is referred to in the proviso to sub-section (1) has been approved by the Central Government, a printed copy of the articles as altered shall be filed by the company with the Registrar within one month of the date of receipt of the order of approval.
(3) The power of altering articles under this section shall, in the case of any company formed and registered under Act No. 19 of 1857 and Act No. 7 of 1860 or either of them, extend to altering any provisions in Table B annexed to Act No. 19 of 1857, and shall also, in the case of an unlimited company formed and registered under the said Acts or either of them, extend to altering any regulations relating to the amount of capital or its distribution into shares, notwithstanding that those regulations are contained in the memorandum.
 
Change of registration of companies
 
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.
 
General provisions with respect to memorandum and articles
 
33. REGISTRATION OF MEMORANDUM AND ARTICLES
(1) There shall be presented for registration, to the Registrar of the State in which the registered office of the company is stated by the memorandum to be situate-
(a) the memorandum of the company ;
(b) its articles, if any ; and
1[(c) the agreement, if any, which the company proposes to enter into with any individual for appointment as its managing or whole-time director or manager.]
(2) A declaration by an advocate of the Supreme Court or of a High Court, an attorney or a pleader entitled to appear before a High Court, or 2[a secretary, or a chartered accountant, in whole-time practice in India], who is engaged in the formation of a company, or by a person named in the articles as a director 3[***], 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.
4[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.
1. Substituted by the Companies (Amendment) Act, 1988 w.e.f. 15-6-1988.
2. Substituted for "a chartered accountant practising in India" by the Companies (Amendment) Act, 1988 w.e.f. 15-6-1988.
3. The words "managing agent, secretaries and treasurers" omitted by the Companies (Amendment) Act, 1988
w.e.f. 15-6-1988.
4. Inserted by the Companies (Amendment) Act, 1988 w.e.f. 15-6-1988.
 
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.
 
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.
 
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.
 
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 Apri1, 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.
 
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 :
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.
 
39. COPIES OF MEMORANDUM AND ARTICLES, ETC., TO BE GIVEN TO MEMBERS
(1) A company shall, on being so required by a member, send to him within seven days of the requirement and subject to the payment of a fee of one rupee, a copy each of the following documents as in force for the time being-
(a) the memorandum ;
(b) the articles, if any ; (c) 1[***] ; and
(d) every other agreement and every resolution referred to in section 192, if and insofar 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 2[five hundred] rupees.
 
1. Omitted by the Companies (Amendment) Act, 2000 w.e.f. 13-12-2000.
2. Substituted for `fifty' by the Companies (Amendment) Act, 2000 w.e.f. 13-12-2000.
 
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, 1[***], 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 2[one hundred] rupees for each copy so issued.
 
1. Words "in the agreement referred to in clause (c) of sub section (1) of section 39 or in any other agreement" omitted by Companies (Amendment) Act, 2000 w.e.f. 13-12-2000.
2. Substituted for `ten' by the Companies (Amendment) Act, 2000 w.e.f. 13-12-2000
 
Membership of company
 
41. DEFINITION OF "MEMBER"
(1) The subscribers of the memorandum of a company shall be deemed to have agreed to become members of the company, and on its registration, shall be entered as members in its register of members.
(2) Every other person who agrees 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.
1[(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.]
1. Inserted by the Depositories Act, 1996 w.r.e.f. 20-9-1995.
 
42. MEMBERSHIP OF HOLDING COMPANY
(1) Except in the cases mentioned in this section, a body corporate cannot be a member of a company which is its holding company and any allotment or transfer of shares in a company to its subsidiary shall be void.
(2) Nothing in this section shall apply-
(a) where the subsidiary is concerned as the legal representative of a deceased member of the holding company ; or
(b) where the subsidiary is concerned as trustee, unless the holding company or a subsidiary thereof is beneficially interested under the trust and is not so interested only by way of security for the purposes of a transaction entered into by it in the ordinary course of a business which includes the lending of money.
(3) This section shall not prevent a subsidiary from continuing to be a member of its holding company if it was a member thereof either at the commencement of this Act or before becoming a subsidiary of the holding company, but except in the cases referred to in sub-section (2), the subsidiary shall have no right to vote at meetings of the holding company or of any class of members thereof.
(4) Subject to sub-section (2), sub-sections (1) and (3) shall apply in relation to a nominee for a body corporate which is a subsidiary, as if references in the said sub-sections (1) and (3) to such a body corporate included references to a nominee for it.
(5) In relation to a holding company which is either a company limited by guarantee or an unlimited company, the reference in this section to shares shall, whether or not the company has a share capital, be construed as including a reference to the interest of its members as such, whatever the form of that interest.
 
Private companies
 
43. CONSEQUENCES OF DEFAULT IN COMPLYING WITH CONDITIONS CONSTITUTING A COMPANY A PRIVATE COMPANY
Where the articles of a company include the provisions which, under clause (iii) of sub-section (1) of section 3, are required to be included in the articles of a company in order to constitute it a private company, but default is made in complying with any of those provisions, the company shall cease to be entitled to the privileges and exemptions conferred on private companies by or under this Act, and this Act shall apply to the company as if it were not a private company :
Provided that the 1[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 1[Central Government] just and expedient, order that the company be relieved from such consequences as aforesaid.
 
1. Substituted for "Company Law Board" by the Companies (Second Amendment) Act, 2002 (w.e.f. a date yet to be notified).
 
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.
1 [Explanation.-For the purposes of this sub-section, "bodies corporate" means public companies, or private companies which had become public companies by virtue of this section.]
(1A) Without prejudice to the provisions of sub-section (1), where the average annual turnover of a private company, whether in existence at the commencement of the Companies (Amendment) Act, 1974, or incorporated thereafter, is not, during the relevant period, less than 2[such amount as may be prescribed], the private company shall, irrespective of its paid-up share capital, become, on and from the expiry of a period of three months from the last day of the relevant period during which the private company had the said average annual turnover, a public company by virtue of this sub-section :
Provided that even after the private company has so become a public company, its articles of association may include provisions relating to the matters specified in clause (iii) of sub-section (1) of section 3 and the number of its members may be, or may at any time be reduced, below seven.
(1B) Where not less than twenty-five per cent of the paid-up share capital of a public company, having share capital, is held by a private company, the private company shall,-
(a) on and from the date on which the aforesaid percentage is first held by it after the commencement of the Companies (Amendment) Act, 1974, or
(b) where the aforesaid percentage has been first so held before the commencement of the Companies (Amendment) Act, 1974 on and from the expiry of the period of three months from the date of such commencement, unless within that period the aforesaid percentage is reduced below twenty-five per cent of the paid-up share capital of the public company,
become, by virtue of this sub-section, a public company, and thereupon all other provisions of this section shall apply thereto :
Provided that even after the private company has so become a public company, its articles of association may include provisions relating to the matters specified in clause (iii) of sub-section (1) of section 3 and the number of its members may be, or may at any time be reduced, below seven.
3[(1C) Where, after the commencement of the Companies (Amendment) Act, 1988, a private company accepts, after
an invitation is made by an advertisement, or renews, deposits from the public other than its members, directors or their relatives, such private company shall, on and from the date on which such acceptance or renewal, as the case may be, is first made after such commencement, become a public company and thereupon all the provisions of this section shall apply thereto :
Provided that even after the private company has so become a public company, its articles of association may include provisions relating to the matters specified in clause (iii) of sub-section (1) of section 3 and the number of its members may be, or may at any time be, reduced below seven.]
(2) Within three months from the date on which a private company becomes a public company by virtue of this section, the company shall inform the Registrar that it has become a public company as aforesaid, and thereupon the Registrar shall delete the word "Private" before the word "Limited" in the name of the company upon the register and shall also make the necessary alterations in the certificate of incorporation issued to the company and in its memorandum of association.
3[(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, such company shall inform the Registrar that it has become a private company and thereupon the Registrar shall substitute the word `private company' for the word
`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.]
(3) Sub-section (3) of section 23 shall apply to a change of name under sub-section (2) as it applies to a change of name under section 21.
(4) A private company which has become a public company by virtue of this section shall continue to be a public company until it has, with the approval of the Central Government and in accordance with the provisions of this Act, again become a private company.
(5) If a company makes default in complying with sub-section (2), the company and every officer of the company who is in default, shall be punishable with fine which may extend to five hundred rupees for every day during which the default continues.
(6) & (7) [Omitted by the Companies (Amendment) Act, 1988, with effect from 15-6-1988.]
(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, 5[***]
(b) [Omitted by the Companies (Amendment) Act, 1988, with effect from 15-6-1988],
(c) that the private company, irrespective of its paid-up share capital, did not have, during the relevant period, an average annual turnover of 6[such amount as is referred to in sub-section (1A) or more],
4[(d) that the private company did not accept or renew deposits from the public.]
(9) Every private company, having share capital, shall file with the Registrar along with the annual return a certificate signed by both the signatories of the return, stating that since the date of the annual general meeting with reference to which the last return was submitted, or in the case of a first return, since the date of the incorporation of the private company, it did not hold twenty-five per cent or more of the paid-up share capital of one or more public companies. 7[(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.]
8[(11) Nothing contained in this section, except sub-section (2A), shall apply on and after the commencement of the Companies (Amendment) Act, 2000.]
Explanation.-For the purposes of this section,-
(a) "relevant period" means the period of three consecutive financial years,-
(i) immediately preceding the commencement of the Companies (Amendment) Act, 1974, or
(ii) a part of which immediately preceded such commencement and the other part of which immediately, followed such commencement, or
(iii) immediately following such commencement or at any time thereafter ;
(b) "turnover" of a company, means the aggregate value of the realisation made from the sale, supply or distribution of goods or on account of services rendered, or both, by the company during a financial year ;
7[(c) "deposit" has the same meaning as in section 58A.]
 
1. Inserted by the Companies (Amendment) Act, 1988 w.e.f. 15-6-1988.
2. Substituted for "rupees one crore" by the Companies (Amendment) Act, 1988 w.e.f. 15-6-1988.
3. Inserted by the Companies (Amendment) Act, 1988 w.e.f. 15-6-1988.
4. Inserted by the Companies (Amendment) Act, 2000 w.e.f. 13-12-2000.
5. The word "or" omitted by the Companies (Amendment) Act, 1988 w.e.f. 15-6-1988.
6. Substituted for "rupees one crore or more," by the Companies (Amendment) Act, 1988 w.e.f. 15-6-1988.
7. Inserted by the Companies (Amendment) Act, 1988 w.e.f. 15-6-1988.
8. Inserted by the Companies (Amendment) Act, 2000 w.e.f. 13-12-2000.
 
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 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 1[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 2[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.
(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.
 
1. Substituted for "five hundred" by the Companies (Amendment) Act, 2000 w.e.f. 13-12-2000.
2. Substituted for "five" by the Companies (Amendment) Act, 2000 w.e.f. 13-12-2000.
 
 
 
 
Reduction of number of members below legal minimum
 
45. MEMBERS SEVERALLY LIABLE FOR DEBTS WHERE BUSINESS CARRIED ON WITH FEWER THAN SEVEN, OR IN THE CASE OF A PRIVATE COMPANY, TWO MEMBERS
If at any time the number of members of a company is reduced, in the case of a public company, below seven, or in the case of a private company, below two, and the company carries on business for more than six months while the number is so reduced, every person who is a member of the company during the time that it so carries on business after those six months and is cognisant of the fact that it is carrying on business with fewer than seven members or two members, as the case may be, shall be severally liable for the payment of the whole debts of the company contracted during that time, and may be severally sued therefor.
 
Contracts and deeds, investments, seal, etc.
 
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.
 
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.
 
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.
 
49. INVESTMENTS OF COMPANY TO BE HELD IN ITS OWN NAME
(1) Save as otherwise provided in sub-sections (2) to (5) or any other law for 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.
(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 insofar as it is necessary so to do, to ensure that the number of members of the subsidiary is not reduced, where it is a public company, below seven, and where it is a private company, below two.
 
(4) Sub-section (1) shall not apply to investments made by a company whose principal business consists of the buying and selling of shares or securities.
(5) Nothing in this section shall be deemed to prevent a company-
(a) from depositing with a bank, being the bankers of the company, any shares or securities for the collection of any dividend or interest payable thereon ; or
(aa) from depositing with, or transferring to, or holding in the name of, the State Bank of India or a Scheduled Bank, being the bankers of the company, shares or securities, in order to facilitate the transfer thereof :
Provided that if within a period of six months from the date on which the shares or securities are transferred by the company to, or are first held by the company in the name of, the State Bank of India or a Scheduled Bank as aforesaid, no transfer of such shares or securities takes place, the company shall, as soon as practicable after the expiry of that period, have the shares or securities retransferred to it from the State Bank of India or the Scheduled Bank or, as the case may be, again hold the shares or securities in its own name ; or
(b) from depositing with, or transferring to, any person any shares or securities, by way of security for the repayment of any loan advanced to the company or the performance of any obligation undertaken by it ;
1[(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 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 2[fifty] thousand rupees.
(10) If any inspection required under sub-section (8) is refused, the 3[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" include stock and debentures.
 
1. Inserted by the Depositories Act, 1996 w.r.e.f. 20-9-1995.
2. Substituted for "five" by the Companies (Amendment) Act, 2000 w.e.f. 13-12-2000.
3. Substituted for "Company Law Board" by the Companies (Second Amendment) Act, 2002 (w.e.f. a date yet to be notified).
 
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.
 
Service of documents
 
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 :
1[Provided that where the securities are held in a depository, the records of the beneficial ownership may be served by such depository on the company by means of electronic mode or by delivery of floppies or discs.]
 
1. Inserted by the Depositories Act, 1996 w.r.e.f. 20-9-1995.
 
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.
 
53. SERVICE OF DOCUMENTS ON MEMBERS BY COMPANY
(1) A document may be served by a company on any member thereof either personally, or by sending it by post to him to his registered address or if he has no registered address in India, to the address, if any, within India supplied by him to the company for the giving of notices to him.
(2) Where a document is sent by post,-
(a) service thereof shall be deemed to be effected by properly addressing, prepaying and posting a letter containing the document, provided that where a member has intimated to the company in advance that documents should be sent to him under a certificate of posting or by registered post with or without acknowledgement due and has deposited with the company a sum sufficient to defray the expenses of doing so, service of the document shall not be deemed to be effected unless it is sent in the manner intimated by the member ; and
(b) such service shall be deemed to have been effected-
(i) in the case of a notice of a meeting, at the expiration of forty-eight hours after the letter containing the same is posted, and
(ii) in any other case, at the time at which the letter would be delivered in the ordinary course of post.
(3) A document advertised in a newspaper circulating in the neighbourhood of the registered office of the company shall be deemed to be duly served on the day on which the advertisement appears, on every member of the company who has no registered address in India and has not supplied to the company an address 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.
 
Authentication of documents and proceedings
 
54. AUTHENTICATION OF DOCUMENTS AND PROCEEDINGS
Save as otherwise expressly provided in this Act, a document or proceeding requiring authentication by a company may be signed by a director, 1[***] the manager, the secretary or other authorised officer of the company, and need not be under its common seal.
 
1. Words ", the managing agents, the secretaries and treasurers" omitted by the Companies (Amendment) Act, 2000 w.e.f. 13-12-2000.
 
PART III
PROSPECTUS AND ALLOTMENT, AND OTHER MATTERS RELATING TO ISSUE OF SHARES OR DEBENTURES
 
Prospectus
 
55. DATING OF PROSPECTUS
A prospectus issued by or on behalf of a company or in relation to an intended company shall be dated, and that date shall, unless the contrary is proved, be taken as the date of publication of the prospectus.
 
1[55A. POWERS OF SECURITIES AND EXCHANGE BOARD OF INDIA
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, so far as they relate to issue and transfer of securities and non-payment of dividend shall, -
(a) in case of listed public companies ;
(b) in case of those public companies which intend to get their securities listed on any recognised stock exchange in India, be administered by the Securities and Exchange Board of India ; and
(c) in any other case, be administered by the Central Government.
Explanation. - For the removal of doubts, it is hereby declared that all powers relating to all other matters 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 2[Tribunal] or the Registrar of Companies, as the case may be].
 
1. Inserted by the Companies (Amendment) Act, 2000 w.e.f. 13-12-2000.
2. Substituted for `Company Law Board' by the Companies (Second Amendment) Act, 2002 (w.e.f. a date yet to be notified).
 
56. MATTERS TO BE STATED AND REPORTS TO BE SET OUT IN PROSPECTUS
(1) Every prospectus issued -
(a) by or on behalf of a company, or
(b) by or on behalf of any person who is or has been engaged or interested in the formation of a company,
shall state the matters specified in Part I of Schedule II and set out the reports specified in Part II of that Schedule ; and the said Parts I and II shall have effect subject to the provisions contained in Part III of that Schedule.
(2) A condition requiring or binding an applicant for shares in or debentures of a company to waive compliance with any of the requirements of this section, or purporting to affect him with notice of any contract, document or matter not specifically referred to in the prospectus, shall be void.
(3) No one shall issue any form of application for shares in or debentures of a company, unless the form is accompanied 1[by a memorandum containing such salient features of a prospectus as may be prescribed] which complies with the requirements of this section :
2[Provided that a copy of the prospectus shall, on a request being made by any person before the closing of the subscription list, be furnished to him :]
Provided 2[further] that this sub-section shall not apply if it is shown that the form of application was issued either -
(a) in connection with a bona fide invitation to a person to enter into an underwriting agreement with respect to the shares or debentures ; or
(b) in relation to shares or debentures which were not offered to the public.
If any person acts in contravention of the provisions of this sub-section, he shall be punishable with fine which may extend to 1[fifty] thousand rupees.
(4) A director or other person responsible for the prospectus shall not incur any liability by reason of any non- compliance with, or contravention of, any of the requirements of this section, if -
(a) as regards any matter not disclosed, he proves that he had no knowledge thereof ; or
(b) he proves that the non-compliance or contravention arose from an honest mistake of fact on his part ; or
(c) the non-compliance or contravention was in respect of matters which, in the opinion of the Court dealing with the case, were immaterial, or was otherwise such as ought, in the opinion of that Court, having regard to all the circumstances of the case, reasonably to be excused :
Provided that no director or other person shall incur any liability in respect of the failure to include in a prospectus a statement with respect to the matters specified in clause 18 of Schedule II, unless it is proved that he had knowledge of the matters not disclosed.
(5) This section shall not apply -
(a) to the issue to existing members or debenture holders of a company of a prospectus or form of application relating to shares in or debentures of the company, whether an applicant for shares or debentures will or will not have the right to renounce in favour of other persons ; or
(b) to the issue of a prospectus or form of application relating to shares or debentures which are, or are to be, in all respects uniform with shares or debentures previously issued and for the time being dealt in or quoted on a recognised stock exchange ;
but, subject as aforesaid, this section shall apply to a prospectus or a form of application, whether issued on or with reference to the formation of a company or subsequently.
(6) Nothing in this section shall limit or diminish any liability which any person may incur under the general law or under this Act apart from this section.
 
1. Substituted for "by a prospectus" by the Companies (Amendment) Act, 1988 w.e.f. 31-5-1991.
2. Inserted by the Companies (Amendment) Act, 1988 w.e.f. 31-5-1991.
3. Substituted for "five" by the Companies (Amendment) Act, 2000 w.e.f. 13-12-2000.
 
57. EXPERT TO BE UNCONNECTED WITH FORMATION OR MANAGEMENT OF COMPANY
A prospectus inviting persons to subscribe for shares in or debentures of a company shall not include a statement purporting to be made by an expert, unless the expert is a person who is not, and has not been, engaged or interested in the formation or promotion, or in the management, of the company.
 
58. EXPERT'S CONSENT TO ISSUE OF PROSPECTUS CONTAINING STATEMENT BY HIM
A prospectus inviting persons to subscribe for shares in or debentures of a company and including a statement purporting to be made by an expert shall not be issued, unless -
(a) he has given his written consent to the issue thereof with the statement included in the form and context in which it is included, and has not withdrawn such consent before the delivery of a copy of the prospectus for registration ; and
(b) a statement that he has given and has not withdrawn his consent as aforesaid appears in the prospectus.
 
58A. DEPOSITS NOT TO BE INVITED WITHOUT ISSUING AN ADVERTISEMENT
(1) The Central Government may, in consultation with the Reserve Bank of India, prescribe the limits up to which, the manner in which and the conditions subject to which deposits may be invited or accepted by a company either from the public or from its members.
 
(2) No company shall invite, or allow any other person to invite or cause to be invited on its behalf, any deposit unless
-
(a) such deposit is invited or is caused to be invited in accordance with the rules made under sub-section (1), 1[***]
(b) an advertisement, including therein a statement showing the financial position of the company, has been issued by the company in such form and in such manner as may be prescribed 2[,and]
2[(c) the company is not in default in the repayment of any deposit or part thereof and any interest thereupon in accordance with the terms and conditions of such deposit.]
(3)(a) Every deposit accepted by a company at any time before the commencement of the Companies (Amendment) Act, 1974 (41 of 1974), in accordance with the directions made by the Reserve Bank of India under Chapter IIIB of the Reserve Bank of India Act, 1934 (2 of 1934), shall, unless renewed in accordance with clause (b), be repaid in accordance with the terms 1[and conditions] of such deposit.
(b) No deposit referred to in clause (a) shall be renewed by the company after the expiry of the term thereof unless the deposit is such that it could have been accepted if the rules made under sub-section (1) were in force at the time when the deposit was initially accepted by the company.
(c) Where, before the commencement of the Companies (Amendment) Act, 1974 (41 of 1974), any deposit was received by a company in contravention of any direction made under Chapter IIIB of the Reserve Bank of India Act, 1934 (2 of 1934), repayment of such deposit shall be made in full on or before the 1st day of April, l975, and such repayment shall be without prejudice to any action that may be taken under the Reserve Bank of India Act, 1934 (2 of 1934) for the acceptance of such deposit in contravention of such direction.
1[(3A) Every deposit accepted by a company after the commencement of the Companies (Amendment) Act, 1988,
shall, unless renewed in accordance with the rules made under sub-section (1), be repaid in accordance with the terms and conditions of such deposit.]
(4) Where any deposit is accepted by a company after the commencement of the Companies (Amendment) Act, 1974 (41 of 1974), in contravention of the rules made under sub-section (1) repayment of such deposit shall be made by the company within thirty days from the date of acceptance of such deposit or within such further time, not exceeding thirty days, as the Central Government may, on sufficient cause being shown by the company, allow.
(5) Where a company omits or fails to make repayment of a deposit in accordance with the provisions of clause (c) of sub-section (3), or in the case of deposit referred to in sub-section (4) within the time specified in that sub-section, -
(a) the company shall be punishable with fine which shall not be less than twice the amount in relation to which the repayment of the deposit has not been made, and out of the fine, if realised, an amount equal to the amount in relation to which the repayment of deposit has not been made, shall be paid by the Court, trying the offence, to the person to whom repayment of the deposit was to be made, and on such payment, the liability of the company to make repayment of the deposit shall, to the extent of the amount paid by the Court, stand discharged ;
(b) every officer of the company who is in default shall be punishable with imprisonment for a term which may extend to five years and shall also be liable to fine.
(6) Where a company accepts or invites, or allows or causes any other person to accept or invite on its behalf, any deposit in excess of the limits prescribed under sub-section (1) or in contravention of the manner or condition prescribed under that sub-section or in contravention of the provisions of sub-section (2), as the case may be, -
(a) the company shall be punishable, -
(i) where such contravention relates to the acceptance of any deposit, with fine which shall not be less than an amount equal to the amount of the deposit so accepted ;
(ii) where such contravention relates to the invitation of any deposit, with fine which may extend to 1[ten] lakh rupees but shall not be less than 2[fifty] thousand rupees ;
(b) every officer of the company who is in default shall be punishable with imprisonment for a term which may extend to five years and shall also be liable to fine.
(7) (a) Nothing contained in this section shall apply to, -
(i) a banking company, or
(ii) such other company as the Central Government may, after consultation with the Reserve Bank of India, specify in this behalf.
(b) Except the provisions relating to advertisement contained in clause (b) of sub-section (2), nothing in this section shall apply to such classes of financial companies as the Central Government may, after consultation with the Reserve Bank of India, specify in this behalf.
(8) The Central Government may, if it considers it necessary for avoiding any hardship or for any other just and sufficient reason, by order, issued either prospectively or retrospectively from a date not earlier than the commencement of the Companies (Amendment) Act, 1974 (41 of 1974), grant extension of time to a company or class of companies to comply with, or exempt any company or class of companies from, all or any of the provisions of this section either generally or for any specified period subject to such conditions as may be specified in the order : Provided that no order under this sub-section shall be issued in relation to a class of companies except after consultation with the Reserve Bank of India.
1[(9) Where a company has failed to repay any deposit or part thereof in accordance with the terms and conditions of
such deposit, the 2[Tribunal] may, if it is satisfied, either on its own motion or on the application of the depositor, that it is necessary so to do to safeguard the interests of the company, the depositors or in the public interest, direct, by order, the company to make repayment of such deposit or part thereof forthwith or within such time and subject to such conditions as may be specified in the order :
Provided that the 2[Tribunal] may, before making any order under this sub-section, give a reasonable opportunity of being heard to the company and the other persons interested in the matter.
 
(10) Whoever fails to comply with any order made by the 2[Tribunal] under sub-section (9) shall be punishable with imprisonment which may extend to three years and shall also be liable to a fine of not less than rupees 3[five hundred] for every day during which such non-compliance continues.]
4[(11) A depositor may, at any time, make a nomination and the provisions of sections 109A and 109B shall, as far as may be, apply to the nomination made under this sub-section.]
Explanation. - For the purposes of this section, "deposit" means any deposit of money with, and includes any amount borrowed by, a company but shall not include such categories of amount as may be prescribed in consultation with the Reserve Bank of India.
 
1. The word "and" omitted by the Companies (Amendment) Act, 1996 w.e.f. 1-3-1997.
2. Inserted by the Companies (Amendment) Act, 1996 w.e.f. 1-3-1997.
3. Inserted by the Companies (Amendment) Act, 1988 w.e.f. 1-9-1989.
4. Substituted for "one" by the Companies (Amendment) Act, 2000 w.e.f. 13-12-2000.
5. Substituted for "five", by the Companies (Amendment) Act, 2000 w.e.f. 13-12-2000.
6. Inserted by the Companies (Amendment) Act, 1988 w.e.f. 1-9-1989.
7. Substituted for `Company Law Board' by the Companies (Second Amendment) Act, 2002 (w.e.f. a date yet to be notified).
8. Substituted for "fifty" by the Companies (Amendment) Act, 2000 w.e.f. 13-12-2000.
9. Inserted by the Companies (Amendment) Act, 1999 w.r.e.f. 31-10-1998.
 
1[58AA. SMALL DEPOSITORS
(1) Every company, which accepts deposits from small depositors, shall intimate to the 2[Tribunal] any default made by it in repayment of any such deposits or part thereof or any interest thereupon.
(2) The intimation under sub-section (1) shall, -
(a) be given within sixty days from the date of default ;
(b) include particulars in respect of the names and addresses of each small depositor, the principal sum of deposits due to them and interest accrued thereupon.
Explanation. - For the removal of doubts, it is hereby declared that the intimation under this section shall be given on monthly basis.
(3) Where a company has made a default in repayment of any deposit or part thereof or any interest thereupon to a small depositor, the 2[Tribunal], on receipt of intimation under sub-section (1) shall, -
(a) exercise, on its own motion, powers conferred upon it by sub-section (9) of section 58A ;
(b) pass an appropriate order within a period of thirty days from the date of receipt of intimation under sub-section (1) : Provided that 3[the Tribunal] may pass order after expiry of the period of thirty days, after giving the small depositors an opportunity of being heard:
Provided further that it shall not be necessary for a small depositor to be present at the hearing of the proceeding under this sub-section.
(4) No company shall, at any time, accept further deposits from small depositors, unless each small depositor, whose deposit has matured, had been paid the amount of the deposit and the interest accrued thereupon:
Provided that nothing contained in this sub-section shall apply to -
(a) any deposit which has been renewed by the small depositor voluntarily ; or
(b) any deposit, whose repayment has become impracticable due to the death of the small depositor or whose repayment has been stayed by a competent court or authority.
(5) Every company, which has on any occasion made a default in the repayment of a deposit or part thereof or any interest thereupon to a small depositor, shall state, in every future advertisement and application form inviting deposits from the public, the total number of small depositors and amount due to them in respect of which such default has been made.
(6) Where any interest accrued on deposits of the small depositors has been waived, the fact of such waiver shall be mentioned by the company in every advertisement and application form inviting deposits issued after such waiver.
(7) Where a company had accepted deposits from small depositors and subsequent to such acceptance of deposits, obtains funds by taking a loan for the purposes of its working capital from any bank, it shall first utilise the funds so obtained for the repayment of any deposit or any part thereof or any interest thereupon to the small depositor before applying such funds for any other purpose.
(8) Every application form, issued by a company to a small depositor for accepting deposits from him, shall contain a statement to the effect that the applicant had been apprised of -
(a) every past default by the company in the repayment of deposit or interest thereon, if any, such default has occurred ; and
(b) the waiver of interest under sub-section (6), if any, and reasons therefor.
(9) Whoever knowingly fails to comply with the provisions of this section or comply with any order of the 1[Tribunal] shall be punishable with imprisonment which may extend to three years and shall also be liable to fine for not less than five hundred rupees for every day during which such non-compliance continues.
(10) If a company or any other person contravenes any provision of this section, every person, who at the time the contravention was committed, was a director of the company, as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly.
(11) The provisions of section 58A shall, as far as may be, apply to the deposits made by a small depositor under this section.
 
Explanation. - For the purposes of this section, "a small depositor" means a depositor who has deposited in a financial year a sum not exceeding twenty thousand rupees in a company and includes his successors, nominees and legal representatives.
 
1. Inserted by the Companies (Amendment) Act, 2000 w.e.f. 13-12-2000.
2. Substituted for `Company Law Board' by the Companies (Second Amendment) Act, 2002 (w.e.f. a date yet to be notified).
3. Substituted for `the Board' by the Companies (Second Amendment) Act, 2002 (w.e.f. a date yet to be notified).
4. Substituted for `Company Law Board' by the Companies (Second Amendment) Act, 2002 (w.e.f. a date yet to be notified).
 
1[58AAA. DEFAULT IN ACCEPTANCE OR REFUND OF DEPOSITS TO BE COGNIZABLE
(1) Notwithstanding anything contained in sections 621 and 624, every offence connected with or arising out of acceptance of deposits under section 58A or section 58AA shall be cognizable offence under the Code of Criminal Procedure, 1973 (2 of 1974).
(2) No court shall take cognizance of any offence under sub-section (1) except on a complaint made by the Central Government or any officer authorised by it in this behalf.]
 
1. Inserted by the Companies (Amendment) Act, 2000 w.e.f. 13-12-2000.
 
58B. PROVISIONS RELATING TO PROSPECTUS TO APPLY TO ADVERTISEMENT
The provisions of this Act relating to a prospectus shall, so far as may be, apply to an advertisement referred to in section 58A.
 
59. PENALTY AND INTERPRETATION
(1) If any prospectus is issued in contravention of section 57 or 58, the company, and every person, who is knowingly a party to the issue thereof, shall be punishable with fine which may extend to 1[fifty] thousand upees.
(2) In sections 57 and 58, the expression "expert" includes an engineer, a valuer, an accountant and any other person whose profession gives authority to a statement made by him.
 
1. Substituted for "five" by the Companies (Amendment) Act, 2000 w.e.f. 13-12-2000.
 
60. REGISTRATION OF PROSPECTUS
(1) No prospectus shall be issued by or on behalf of a company or in relation to an intended company unless, on or before the date of its publication, there has been delivered to the Registrar for registration a copy thereof signed by every person who is named therein as a director or proposed director of the company or by his agent authorised in writing, and having endorsed thereon or attached thereto -
(a) any consent to the issue of the prospectus required by section 58 from any person as an expert ; and
(b) in the case of a prospectus issued generally, also -
(i) a copy of every contract required by clause 16 of Schedule II to be specified in the prospectus, or, in the case of a contract not reduced into writing, a memorandum giving full particulars thereof ; and
(ii) where the persons making any report required by Part II of that Schedule have made therein, or have, without giving the reasons, indicated therein, any such adjustments as are mentioned in clause 32 of that Schedule, a written statement signed by those persons setting out the adjustments and giving the reasons therefor.
(2) Every prospectus to which sub-section (1) applies shall, on the face of it, -
(a) state that a copy has been delivered for registration as required by this section ; and
(b) specify any documents required by this section to be endorsed on or attached to the copy so delivered, or refer to statements included in the prospectus which specify those documents.
(3) The Registrar shall not register a prospectus unless the requirements of sections 55, 56, 57 and 58 and sub- sections (1) and (2) of this section have been complied with and the prospectus is accompanied by the consent in writing of the person, if any, named therein as the auditor, legal adviser, attorney, solicitor, banker or broker of the company or intended company, to act in that capacity.
(4) No prospectus shall be issued more than ninety days after the date on which a copy thereof is delivered for registration ; and if a prospectus is so issued, it shall be deemed to be a prospectus a copy of which has not been delivered under this section to the Registrar.
(5) If a prospectus is issued without a copy thereof being delivered under this section to the Registrar or without the copy so delivered having endorsed thereon or attached thereto the required consent or documents, the company, and every person who is knowingly a party to the issue of the prospectus, shall be punishable with fine which may extend to 1[fifty] thousand rupees. sign the prospectus depending on the circumstances of each case [Circular No. 5(59)-CL- VI/65, dated 1st December, 1965].
 
1. Substituted for "five" by the Companies (Amendment) Act, 2000 w.e.f. 13-12-2000.
 
1[60A. SHELF PROSPECTUS
 
(1) Any public financial institution, public sector bank or scheduled bank whose main object is financing shall file a shelf prospectus.
(2) A company filing a shelf prospectus with the Registrar shall not be required to file prospectus afresh at every stage of offer of securities by it within a period of validity of such shelf prospectus.
(3) A company filing a shelf prospectus shall be required to file an information memorandum on all material facts relating to new charges created, changes in the financial position as have occurred between the first offer of securities, previous offer of securities and the succeeding offer of securities within such time as may be prescribed by the Central Government, prior to making of a second or subsequent offer of securities under the shelf prospectus.
(4) An information memorandum shall be issued to the public along with shelf prospectus filed at the stage of the first offer of securities and such prospectus shall be valid for a period of one year from the date of opening of the first issue of securities under that prospectus :
Provided that where an update of information memorandum is filed every time an offer of securities is made, such memorandum together with the shelf prospectus shall constitute the prospectus.
Explanation. - For the purpose of this section, -
(a) "financing" means making loans to or subscribing in the capital of, a private industrial enterprise engaged in infrastructural financing or, such other company as the Central Government may notify in this behalf ;
(b) "shelf prospectus" means a prospectus issued by any financial institution or bank for one or more issues of the securities or class of securities specified in that prospectus.]
 
1. Inserted by the Companies (Amendment) Act, 2000 w.e.f. 13-12-2000.
 
1[60B. INFORMATION MEMORANDUM
(1) A public company making an issue of securities may circulate information memorandum to the public prior to filing of a prospectus.
(2) A company inviting subscription by an information memorandum shall be bound to file a prospectus prior to the opening of the subscription lists and the offer as a red-herring prospectus, at least three days before the opening of the offer.
(3) The information memorandum and red-herring prospectus shall carry same obligations as are applicable in the case of a prospectus.
(4) Any variation between the information memorandum and the red-herring prospectus shall be highlighted as variations by the issuing company.
Explanation. - For the purposes of sub-sections (2), (3) and (4), "red-herring prospectus" means a prospectus which does not have complete particulars on the price of the securities offered and the quantum of securities offered.
(5) Every variation as made and highlighted in accordance with sub-section (4) above shall be individually intimated to the persons invited to subscribe to the issue of securities.
(6) In the event of the issuing company or the underwriters to the issue have invited or received advance subscription by way of cash or post-dated cheques or stock-invest, the company or such underwriters or bankers to the issue shall not encash such subscription moneys or post-dated cheques or stock-invest before the date of opening of the issue, without having individually intimated the prospective subscribers of the variation and without having offered an opportunity to such prospective subscribers to withdraw their application and cancel their post-dated cheques or stock-invest or return of subscription paid.
(7) The applicant or proposed subscriber shall exercise his right to withdraw from the application on any intimation of variation within seven days from the date of such intimation and shall indicate such withdrawal in writing to the company and the underwriters.
(8) Any application for subscription which is acted upon by the company or underwriters or bankers to the issue without having given enough information of any variations, or the particulars of withdrawing the offer or opportunity for cancelling the post-dated cheques or stock-invest or stop payments for such payments shall be void and the applicants shall be entitled to receive a refund or return of its post-dated cheques or stock-invest or subscription moneys or cancellation of its application, as if the said application had never been made and the applicants are entitled to receive back their original application and interest at the rate of fifteen per cent from the date of encashment till payment of realisation.
(9) Upon the closing of the offer of securities, a final prospectus stating therein the total capital raised, whether by way of debt or share capital and the closing price of the securities and any other details as were not complete in the red- herring prospectus shall be filed in a case of a listed public company with the Securities and Exchange Board and Registrar, and in any other case with the Registrar only.]
 
1. Inserted by the Companies (Amendment) Act, 2000 w.e.f. 13-12-2000.
 
61. TERMS OF CONTRACT MENTIONED IN PROSPECTUS OR STATEMENT IN LIEU OF PROSPECTUS, NOT TO BE VARIED
A company shall not, at any time, vary the terms of a contract referred to in the prospectus or statement in lieu of prospectus, except subject to the approval of, or except on authority given by, the company in general meeting.
 
62. CIVIL LIABILITY FOR MIS-STATEMENTS IN PROSPECTUS
(1) Subject to the provisions of this section, where a prospectus invites persons to subscribe for shares in or debentures of a company, the following persons shall be liable to pay compensation to every person who subscribes
 
for any shares or debentures on the faith of the prospectus for any loss or damage he may have sustained by reason of any untrue statement included therein, that is to say,
(a) every person who is a director of the company at the time of the issue of the prospectus ;
(b) every person who has authorised himself to be named and is named in the prospectus either as a director, or as having agreed to become a director, either immediately or after an interval of time ;
(c) every person who is a promoter of the company ; and
(d) every person who has authorised the issue of the prospectus :
Provided that where, under section 58, the consent of a person is required to the issue of a prospectus and he has given that consent, or where, under sub-section (3) of section 60, the consent of a person named in a prospectus is required and he has given that consent, he shall not, by reason of having given such consent, be liable under this sub- section as a person who has authorised the issue of the prospectus except in respect of an untrue statement, if any, purporting to be made by him as an expert.
(2) No person shall be liable under sub-section (1), if he proves -
(a) that, having consented to become a director of the company, he withdrew his consent before the issue of the prospectus, and that it was issued without his authority or consent ;
(b) that the prospectus was issued without his knowledge or consent, and that on becoming aware of its issue, he forthwith gave reasonable public notice that it was issued without his knowledge or consent ;
(c) that, after the issue of the prospectus and before allotment there under, he, on becoming aware of any untrue statement therein, withdrew his consent to the prospectus and gave reasonable public notice of the withdrawal and of the reason therefor ; or
(d) that -
(i) as regards every untrue statement not purporting to be made on the authority of an expert or of a public official document or statement, he had reasonable ground to believe, and did up to the time of the allotment of the shares or debentures, as the case may be, believe, that the statement was true ; and
(ii) as regards every untrue statement purporting to be a statement by an expert or contained in what purports to be a copy of or an extract from a report or valuation of an expert, it was a correct and fair representation of the statement, or a correct copy of, or a correct and fair extract from, the report or valuation ; and he had reasonable ground to believe and did up to the time of the issue of the prospectus believe, that the person making the statement was competent to make it and that that person had given the consent required by section 58 to the issue of the prospectus and had not withdrawn that consent before delivery of a copy of the prospectus for registration or, to the defendant's knowledge, before allotment thereunder ; and
(iii) as regards every untrue statement purporting to be a statement made by an official person or contained in what purports to be a copy of or extract from a public official document, it was a correct and fair representation of the statement, or a correct copy of or a correct and fair extract from, the document :
Provided that this sub-section shall not apply in the case of a person liable, by reason of his having given a consent required of him by section 58, as a person who has authorised the issue of the prospectus in respect of an untrue statement, purporting to be made by him as an expert. (3) A person who, apart from this sub-section, would, under sub-section (1), be liable by reason of his having given a consent required of him by section 58 as a person who has authorised the issue of a prospectus in respect of an untrue statement purporting to be made by him as an expert, shall not be so liable, if he proves
(a) that, having given his consent under section 58 to the issue of the prospectus, he withdrew it in writing before delivery of a copy of the prospectus for registration ;
(b) that, after delivery of a copy of the prospectus for registration and before allotment thereunder, he, on becoming aware of the untrue statement, withdrew his consent in writing and gave reasonable public notice of the withdrawal and of the reason therefor ; or
(c) that he was competent to make the statement and that he has reasonable ground to believe, and did up to the time of the allotment of the shares or debentures, believe, that the statement was true.
(4) Where -
(a) the prospectus specifies the name of a person as a director of the company, or as having agreed to become a director thereof, and he has not consented to become a director, or has withdrawn his consent before the issue of the prospectus and has not authorised or consented to the issue thereof ; or
(b) the consent of a person is required under section 58 to the issue of the prospectus and he either has not given that consent or has withdrawn it before the issue of the prospectus ;
the directors of the company excluding those without whose knowledge or consent the prospectus was issued, and every other person who authorised the issue thereof, shall be liable to indemnify the person referred to in clause (a) or clause (b), as the case may be, against all damages, costs and expenses to which he may be made liable by reason of his name having been inserted in the prospectus or of the inclusion therein of a statement purporting to be made by him as an expert, as the case may be, or in defending himself against any suit or legal proceeding brought against him in respect thereof :
Provided that a person shall not be deemed for the purposes of this sub-section to have authorised the issue of a prospectus by reason only of his having given the consent required by section 58 to the inclusion therein of a statement purporting to be made by him as an expert.
(5) Every person who, becomes liable to make any payment by virtue of this section, may recover contribution, as in cases of contract, from any other person who, if sued separately, would have been liable to make the same payment, unless the former person was, and the latter person was not, guilty of fraudulent misrepresentation.
(6) For the purposes of this section -
 
(a) the expression "promoter" means a promoter who was a party to the preparation of the prospectus or of the portion thereof containing the untrue statement, but does not include any person by reason of his acting in a professional capacity for persons engaged in procuring the formation of the company ; and
(b) the expression "expert" has the same meaning as in section 58.
 
63. CRIMINAL LIABILITY FOR MIS-STATEMENTS IN PROSPECTUS
(1) Where a prospectus issued after the commencement of this Act
includes any untrue statement, every person who authorised the issue of the prospectus shall be punishable with imprisonment for a term which may extend to two years, or with fine which may extend to 1[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 issue of the prospectus believe, that the statement was true.
(2) A person shall not be deemed for the purposes of this section to have authorised the issue of a prospectus by reason only of his having given -
(a) the consent required by section 58 to the inclusion therein of a statement purporting to be made by him as an expert, or
(b) the consent required by sub-section (3) of section 60.
 
1. Substituted for "five" by the Companies (Amendment) Act, 2000 w.e.f. 13-12-2000.
 
64. DOCUMENT CONTAINING OFFER OF SHARES OR DEBENTURES FOR SALE TO BE DEEMED PROSPECTUS
(1) Where a company allots or agrees to allot any shares in or debentures of the company with a view to all or any of those shares or debentures being offered for sale to the public, any document by which the offer for sale to the public is made shall, for all purposes, be deemed to be a prospectus issued by the company ; and all enactments and rules of law as to the contents of prospectuses and as to liability in respect of statements in and omissions from prospectuses, or otherwise relating to prospectuses, shall apply with the modifications specified in sub-sections (3),
(4) and (5), and have effect accordingly, as if the shares or debentures had been offered to the public for subscription and as if persons accepting the offer in respect of any shares or debentures were subscribers for those shares or debentures, but without prejudice to the liability, if any, of the persons by whom the offer is made in respect of mis- statements contained in the document or otherwise in respect thereof.
(2) For the purposes of this Act, it shall, unless the contrary is proved, be evidence that an allotment of, or an agreement to allot, shares or debentures was made with a view to the shares or debentures being offered for sale to the public if it is shown -
(a) that an offer of the shares or debentures or of any of them for sale to the public was made within six months after the allotment or agreement to allot ; or
(b) that at the date when the offer was made, the whole considera tion to be received by the company in respect of the shares or debentures had not been received by it.
(3) Section 56 as applied by this section shall have effect as if it required a prospectus to state in addition to the matters required by that section to be stated in a prospectus -
(a) the net amount of the consideration received or to be received by the company in respect of the shares or debentures to which the offer relates ; and
(b) the place and time at which the contract under which the said shares or debentures have been or are to be allotted may be inspected.
(4) Section 60 as applied by this section shall have effect as if the persons making the offer were persons named in a prospectus as directors of a company.
(5) Where a person making an offer to which this section relates is a company or a firm, it shall be sufficient if the document referred to in sub-section (1) is signed on behalf of the company or firm by two directors of the company or by not less than one-half of the partners in the firm, as the case may be ; and any such director or partner may sign by his agent authorised in writing.
 
65. INTERPRETATION OF PROVISIONS RELATING TO PROSPECTUSES
(1) For the purposes of the foregoing provisions of this Part -
(a) a statement included in a prospectus shall be deemed to be untrue, if the statement is misleading in the form and context in which it is included ; and
(b) where the omission from a prospectus of any matter is calculated to mislead, the prospectus shall be deemed, in respect of such omission, to be a prospectus in which an untrue statement is included.
(2) For the purposes of sections 61, 62 and 63 and clause (a) of sub-section (1) of this section, the expression "included" when used with reference to a prospectus, means included in the prospectus itself or contained in any report or memorandum appearing on the face thereof or by reference incorporated therein or issued therewith.
 
66. NEWSPAPER ADVERTISEMENTS OF PROSPECTUS
Where any prospectus is published as a newspaper advertisement, it shall not be necessary in the advertisement to specify the contents of the memorandum or the signatories thereto, or the number of shares subscribed for by them.
 
67. CONSTRUCTION OF REFERENCES TO OFFERING SHARES OR DEBENTURES TO THE PUBLIC, ETC
 
(1) Any reference in this Act or in the articles of a company to offering shares or debentures to the public shall, subject to any provision to the contrary contained in this Act and subject also to the provisions of sub-sections (3) and (4), be construed as including a reference to offering them to any section of the public, whether selected as members or debenture holders of the company concerned or as clients of the person issuing the prospectus or in any other manner.
(2) Any reference in this Act or in the articles of a company to invitations to the public to subscribe for shares or debentures shall, subject as aforesaid, be construed as including a reference to invitations to subscribe for them extended to any section of the public, whether selected as members or debenture holders of the company concerned or as clients of the person issuing the prospectus or in any other manner.
(3) No offer or invitation shall be treated as made to the public by virtue of sub-section (1) or sub-section (2), as the case may be, if the offer or invitation can properly be regarded, in all the circumstances -
(a) as not being calculated to result, directly or indirectly, in the shares or debentures becoming available for 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 :
1[Provided that nothing contained in this sub-section shall apply in a case where the offer or invitation to subscribe for shares or debentures is made to fifty persons or more :
Provided further that nothing contained in the first proviso shall apply to the non-banking financial companies or public financial institutions specified in section 4A of the Companies Act, 1956 (1 of 1956).
(3A) Notwithstanding anything contained in sub-section (3), the Securities and Exchange Board of India shall, in consultation with the Reserve Bank of India, by notification in the Official Gazette, specify the guidelines in respect of offer or invitation made to the public by a public financial institution specified under section 4A or non-banking financial company referred to in clause (f) of section 45-I of the Reserve Bank of India Act, 1934 (2 of 1934).]
(4) Without prejudice to the generality of sub-section (3), a provision in a company's articles prohibiting invitations to the public to subscribe for shares or debentures shall not be taken as prohibiting the making to members or debenture holders of an invitation which can properly be regarded in the manner set forth in that sub-section.
(5) The provisions of this Act relating to private companies shall be construed in accordance with the provisions contained in sub- sections (1) to (4).
 
1. Inserted by the Companies (Amendment) Act, 2000 w.e.f. 13-12-2000.
 
68. PENALTY FOR FRAUDULENTLY INDUCING PERSONS TO INVEST MONEY
Any person who, either by knowingly or recklessly making any statement, promise or forecast which is false, deceptive or misleading, or by any dishonest concealment of material facts, induces or attempts to induce another person to enter into, or to offer to enter into -
(a) any agreement for, or with a view to, acquiring, disposing of, subscribing for, or underwriting shares or debentures
; or
(b) any agreement the purpose or pretended purpose of which is to secure a profit to any of the parties from the yield of shares or debentures, or by reference to fluctuations in the value of shares or debentures ;
shall be punishable with imprisonment for a term which may extend to five years, or with fine which may extend to
1[one lakh] rupees, or with both.
 
1. Substituted for "ten thousand" by the Companies (Amendment) Act, 2000 w.e.f.
 
68A. PERSONATION FOR ACQUISITION, ETC., OF SHARES
(1) Any person who -
(a) makes in a fictitious name an application to a company for acquiring, or subscribing for, any shares therein, or
(b) otherwise induces a company to allot, or register any transfer of, shares therein to him, or any other person in a fictitious name,
shall be punishable with imprisonment for a term which may extend to five years.
(2) The provisions of sub-section (1) shall be prominently reproduced in every prospectus issued by the company and in every form of application for shares which is issued by the company to any person.
 
1[68B. INITIAL OFFER OF SECURITIES TO BE IN DEMATERIALISED FORM IN CERTAIN CASES
Notwithstanding anything contained in any other provisions of this Act, every listed public company, making initial public offer of any security for a sum of rupees ten crores or more, shall issue the same only in dematerialised form by complying with the requisite provisions of the Depositories Act, 1996 (22 of 1996) and the regulations made there- under.]
 
1. Inserted by the Companies (Amendment) Act, 2000 w.e.f. 13-12-2000.
 
69. PROHIBITION OF ALLOTMENT UNLESS MINIMUM SUBSCRIPTION RECEIVED
(1) No allotment shall be made of any share capital of a company offered to the public for subscription, unless the amount stated in the prospectus as the minimum amount which, in the opinion of the Board of directors, must be raised by the issue of share capital in order to provide for the matters specified in clause 5 of Schedule II has been subscribed, and the sum payable on application for the amount so stated has been paid to and received by the company, whether in cash or by a cheque or other instrument which has been paid.
 
(2) The amount so stated in the prospectus shall be reckoned exclusively of any amount payable otherwise than in money, and is in this Act referred to as "the minimum subscription".
(3) The amount payable on application on each share shall not be less than five per cent of the nominal amount of the share.
(4) All moneys received from applicants for shares shall be deposited and kept deposited in a Scheduled Bank-
(a) until the certificate to commence business is obtained under section 149, or
(b) where such certificate has already been obtained, until the entire amount payable on applications for shares in respect of the minimum subscription has been received by the company,
and where such amount has not been received by the company within the time on the expiry of which the moneys received from the applicants for shares are required to be repaid without interest under sub-section (5), all moneys received from applicants for shares shall be returned in accordance with the provisions of that sub-section.
In the event of any contravention of the provisions of this sub-section, every promoter, director or other person who is knowingly responsible for such contravention shall be punishable with fine which may extend to 1[fifty] thousand rupees.
(5) If the conditions aforesaid have not been complied with on the expiry of one hundred and twenty days after the first issue of the prospectus, all moneys received from applicants for shares shall be forthwith repaid to them without interest ; and if any such money is not so repaid within one hundred and thirty days after the issue of the prospectus, the directors of the company shall be jointly and severally liable to repay that money with interest at the rate of six per cent per annum from the expiry of the one hundred and thirtieth day :
Provided that a director shall not be so liable if he proves that the default in the repayment of the money was not due to any misconduct or negligence on his part.
(6) Any condition purporting to require or bind any applicant for shares to waive compliance with any requirement of this section shall be void.
(7) This section, except sub-section (3) thereof, shall not apply in relation to any allotment of shares subsequent to the first allotment of shares offered to the public for subscription.
 
1. Substituted for "five" by the Companies (Amendment) Act, 2000 w.e.f. 13-12-2000.
 
70. PROHIBITION OF ALLOTMENT IN CERTAIN CASES UNLESS STATEMENT IN LIEU OF PROSPECTUS DELIVERED TO REGISTRAR
(1) A company having a share capital, which does not issue a prospectus on or with reference to its formation, or which has issued such a prospectus but has not proceeded to allot any of the shares offered to the public for subscription, shall not allot any of its shares or debentures unless at least three days before the first allotment of either shares or debentures, there has been delivered to the Registrar for registration a statement in lieu of prospectus signed by every person who is named therein as a director or proposed director of the company or by his agent authorised in writing, in the form and containing the particulars set out in Part I of Schedule III and, in the cases mentioned in Part II of that Schedule, setting out the reports specified therein, and the said Parts I and II shall have effect subject to the provisions contained in Part III of that Schedule.
(2) Every statement in lieu of prospectus delivered under sub-section (1), shall, where the persons making any such report as aforesaid have made therein, or have without giving the reasons indicated therein, any such adjustments as are mentioned in clause 5 of Schedule III, have endorsed thereon or attached thereto a written statement signed by those persons, setting out the adjustments and giving the reasons thereof.
(3) This section shall not apply to a private company.
(4) If a company acts in contravention of sub-section (1) or (2), the company, and every director of the company who wilfully authorises or permits the contravention, shall be punishable with fine which may extend to 1[ten] thousand rupees.
(5) Where a statement in lieu of prospectus delivered to the Registrar under sub-section (1) includes any untrue statement, any person who authorised the delivery of the statement in lieu of prospectus for registration shall be punishable with imprisonment for a term which may extend to two years or with fine which may extend to 2[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 delivery for registration of the statement in lieu of prospectus believe, that the statement was true. (6) For the purposes of this section -
(a) a statement included in a statement in lieu of prospectus shall be deemed to be untrue if it is misleading in the form and context in which it is included ; and
(b) where the omission from a statement in lieu of prospectus of any matter is calculated to mislead, the statement in lieu of prospectus shall be deemed, in respect of such omission, to be a statement in lieu of prospectus in which an untrue statement is included.
(7) For the purposes of sub-section (5) and clause (a) of sub-section (6), the expression "included", when used with reference to a statement in lieu of prospectus, means included in the statement in lieu of prospectus itself or contained in any report or memorandum appearing on the face thereof, or by reference incorporated therein, or issued therewith.
 
1. Substituted for "one" by the Companies (Amendment) Act, 2000 w.e.f. 13-12-2000.
2. Substituted for "five", by the Companies (Amendment) Act, 2000 w.e.f. 13-12-2000.
 
71. EFFECT OF IRREGULAR ALLOTMENT
 
(1) An allotment made by a company to an applicant in contravention of the provisions of section 69 or 70 shall be voidable at the instance of the applicant -
(a) within two months after the holding of the statutory meeting of the company, and not later, or
(b) in any case where the company is not required to hold a statutory meeting or where the allotment is made after the holding of the statutory meeting, within two months after the date of the allotment, and not later.
(2) The allotment shall be voidable as aforesaid, notwithstanding that the company is in course of being wound up.
(3) If any director of a company knowingly contravenes, or wilfully authorises or permits the contravention of, any of the provisions of section 69 or 70 with respect to allotment, he shall be liable to compensate the company and the allottee respectively for any loss, damages or costs which the company or the allottee may have sustained or incurred thereby :
Provided that proceedings to recover any such loss, damages or costs shall not be commenced after the expiration of two years from the date of the allotment.
 
72. APPLICATIONS FOR, AND ALLOTMENT OF, SHARES AND DEBENTURES
(1) (a) No allotment shall be made of any shares in or debentures of a company in pursuance of a prospectus issued generally, and no proceedings shall be taken on applications made in pursuance of a prospectus so issued, until the beginning of the fifth day after that on which the prospectus is first so issued or such later time, if any, as may be specified in the prospectus :
Provided that where, after a prospectus is first issued generally, a public notice is given by some person responsible under section 62 for the prospectus which has the effect of excluding, limiting or diminishing his responsibility, no allotment shall be made until the beginning of the fifth day after that on which such public notice is first given.
(b) Nothing in the foregoing proviso shall be deemed to exclude, limit or diminish any liability that might be incurred in the case referred to therein under the general law or this Act.
(c) The beginning of the fifth day or such later time as is mentioned in the first paragraph of clause (a), or the beginning of the fifth day mentioned in the second paragraph of that clause, as the case may be, is hereinafter in this Act referred to as "the time of the opening of the subscription lists".
(2) In sub-section (1), the reference to the day on which the prospectus is first issued generally shall be construed as referring to the day on which it is first so issued as a newspaper advertisement :
Provided that, if it is not so issued as a newspaper advertisement before the fifth day after that on which it is first so issued in any other manner, the said reference shall be construed as referring to the day on which it is first so issued in any manner.
(3) The validity of an allotment shall not be affected by any contravention of the foregoing provisions of this section ; but, in the event of any such contravention, the company, and every officer of the company who is in default, shall be punishable with fine which may extend to 1[fifty] thousand rupees.
(4) In the application of this section to a prospectus offering shares or debentures for sale, sub-sections (1) to (3) shall have effect with the substitution of references to sale for references to allotment, and with the substitution for the reference to the company and every officer of the company who is in default of a reference to any person by or through whom the offer is made and who is knowingly guilty of, or wilfully authorises or permits, the contravention.
(5) An application for shares in, or debentures of, a company, which is made in pursuance of a prospectus issued generally shall not be revocable until after the expiration of the fifth day after the time of the opening of the subscription lists, or the giving, before the expiry of the said fifth day by some person responsible under section 62 for the prospectus, of a public notice having the effect under that section of excluding, limiting or diminishing the responsibility of the person giving it.
 
1. Substituted for "five" by the Companies (Amendment) Act, 2000 w.e.f. 13-12-2000.
 
73. ALLOTMENT OF SHARES AND DEBENTURES TO BE DEALT IN ON STOCK EXCHANGE
1[(1) Every company intending to offer shares or debentures to the public for subscription by the issue of a prospectus shall, before such issue, make an application to one or more recognised stock exchanges for permission for the shares or debentures intending to be so offered to be dealt with in the stock exchange or each such stock exchange.] 2[(1A)] Where a prospectus, whether issued generally or not, states that an 3[application under sub-section (1) has been] made for permission for the shares or debentures offered thereby to be dealt in one or more recognised stock exchanges, such prospectus shall state the name of the stock exchange or, as the case may be, each such stock exchange, and any allotment made on an application in pursuance of such prospectus shall, whenever made, be void, 4[***] if the permission has not been granted by the stock exchange or each such stock exchange, as the case may be, before the expiry of ten weeks from the date of the closing of the subscription lists :
Provided that where an appeal against the decision of any recognised stock exchange refusing permission for the shares or debentures to be dealt in on that stock exchange has been preferred under section 22 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956), such allotment shall not be void until the dismissal of the appeal. (2) Where the permission has not been applied 5[under sub-section (1)], or, such permission having been applied for, has not been granted as aforesaid, the company shall forthwith repay without interest all moneys received from applicants in pursuance of the prospectus, and, if any such money is not repaid within eight days after the company becomes liable to repay it, 1[the company and every director of the company who is an officer in default shall, on and from the expiry of the eighth day, be jointly and severally liable to repay that money with interest at such rate, not less than four per cent and not more than fifteen per cent, as may be prescribed, having regard to the length of the period of delay in making the repayment of such money.]
 
[Proviso omitted by the Companies (Amendment) Act, 1988 with effect from 15-6-1988.]
(2A) Where permission has been granted by the recognised stock exchange or stock exchanges for dealing in any shares or debentures in such stock exchange or each such stock exchange and the moneys received from applicants for shares or debentures are in excess of the aggregate of the application moneys relating to the shares or debentures in respect of which allotments have been made, the company shall repay the moneys to the extent of such excess forthwith without interest and if such money is not repaid within eight days, from the day the company becomes liable to pay it, 1[the company and every director of the company who is an officer in default shall, on and from the expiry of the eighth day, be jointly and severally liable to repay that money with interest at such rate, not less than four per cent and not more than fifteen per cent, as may be prescribed, having regard to the length of the period of delay in making the repayment of such money.]
[Proviso omitted by the Companies (Amendment) Act, 1988 with effect from 15-6-1988.]
(2B) If default is made in complying with the provisions of sub-section (2A), the company and every officer of the company who is in default shall be punishable with fine which may extend to 2[fifty] thousand rupees, and where repayment is not made within six months from the expiry of the eighth day, also with imprisonment for a term which may extend to one year.
(3) All moneys received as aforesaid shall be kept in a separate bank account maintained with a Scheduled Bank until the permission has been granted, or where an appeal has been preferred against the refusal to grant such permission, until the disposal of the appeal, and the money standing in such separate account shall, where the permission has not been applied for as aforesaid or has not been granted, be repaid within the time and in the manner specified in sub- section (2) ; and if default is made in complying with this sub-section, the company, and every officer of the company who is in default, shall be punishable with fine which may extend to 1[fifty] thousand rupees.
(3A) Moneys standing to the credit of the separate bank account referred to in sub-section (3) shall not be utilised for any purpose other than the following purposes, namely :
(a) adjustment against allotment of shares, where the shares have been permitted to be dealt in on the stock exchange or each stock exchange specified in the prospectus ; or
(b) repayment of moneys received from applicants in pursuance of the prospectus, where shares have not been permitted to be dealt in on the stock exchange or each stock exchange specified in the prospectus, as the case may be, or, where the company is for any other reason unable to make the allotment of share.
(4) Any condition purporting to require or bind any applicant for shares or debentures to waive compliance with any of the requirements of this section shall be void.
(5) For the purposes of this section, it shall be deemed that permission has not been granted if the application for permission, where made, has not been disposed of within the time specified in sub-section (1).
(6) This section shall have effect -
(a) in relation to any shares or debentures agreed to be taken by a person underwriting an offer thereof by a prospectus, as if he had applied therefor in pursuance of the prospectus ; and
(b) in relation to a prospectus offering shares for sale, with the following modifications, namely, -
(i) references to sale shall be substituted for references to allotment ;
(ii) the persons by whom the offer is made, and not the company, shall be liable under sub-section (2) to repay money received from applicants, and references to the company's liability under that sub-section shall be construed accordingly; and
(iii) for the reference in sub-section (3) to the company and every officer of the company who is in default, there shall be substituted a reference to any person by or through whom the offer is made and who is knowingly guilty of, or wilfully authorises or permits, the default. (7) No prospectus shall state that application has been made for permission for the shares or debentures offered thereby to be dealt in on any stock exchange, unless it is a recognised stock exchange.
 
1. Inserted by the Companies (Amendment) Act, 1988 w.e.f. 15-6-1988.
2. Renumbered by the Companies (Amendment) Act, 1988 w.e.f. 15-6-1988.
3. Substituted for "application has been, or will be," by the Companies (Amendment) Act, 1988 w.e.f. 15-6- 1988.
4. The words "if the permission has not been applied for before the tenth day after the first issue of the prospectus, or, where such permission has been applied for before that day," omitted by the Companies (Amendment) Act, 1988 w.e.f. 15-6-1988.
5. Substituted for "for as aforesaid" by the Companies (Amendment) Act, 1988 w.e.f. 15-6-1988.
6. Substituted for "the directors of the company shall be jointly and severally liable to repay that money with interest at the rate of twelve per cent per annum from the expiry of the eighth day :" by the Companies (Amendment) Act, 1988 w.e.f. 15-6-1988.
7. Substituted for "five" by the Companies (Amendment) Act, 2000 w.e.f. 13-12-2000.
8. Substituted for "five" by the Companies (Amendment) Act, 2000 w.e.f. 13-12-2000.
 
74. MANNER OF RECKONING FIFTH, EIGHTH AND TENTH DAYS IN SECTIONS 72 AND 73
In reckoning for the purposes of sections 72 and 73, the fifth day, 1[or the eighth day] after another day, any intervening day which is a public holiday under the Negotiable Instruments Act, 1881 (26 of 1881), shall be disregarded, and if the fifth, 2[or eighth day] (as so reckoned) is itself such a public holiday, there shall for the said purposes be substituted the first day thereafter which is not such a holiday.
 
1. Substituted for "the eighth day, or the tenth day" by the Companies (Amendment) Act, 1988 w.e.f. 15-6-1988.
2. Substituted for "eighth, or tenth day" by the Companies (Amendment) Act, 1988 w.e.f. 15-6-1988.
 
75. RETURN AS TO ALLOTMENTS
(1) Whenever a company having a share capital makes any allotment of its shares, the company shall, within thirty days thereafter, -
(a) file with the Registrar a return of the allotments, stating the number and nominal amount of the shares comprised in the allotment, the names, addresses and occupations of the allottees, and the amount, if any, paid or due and payable on each share :
Provided that the company shall not show in such return any shares as having been allotted for cash if cash has not actually been received in respect of such allotment ;
(b) in the case of shares (not being bonus shares) allotted as fully or partly paid-up otherwise than in cash, produce for the inspection and examination of the Registrar a contract in writing consti- tuting the title of the allottee to the allotment together with any contract of sale, or a contract for services or other consideration in respect of which that allotment was made, such contracts being duly stamped, and file with the Registrar copies verified in the prescribed manner of all such contracts and a return stating the number and nominal amount of shares so allotted, the extent to which they are to be treated as paid-up, and the consideration for which they have been allotted ; and
(c) file, with the Registrar -
(i) in the case of bonus shares, a return stating the number and nominal amount of such shares comprised in the allotment and the names, addresses and occupations of the allottees and a copy of the resolution authorising the issue of such shares ;
(ii) in the case of issue of shares at a discount, a copy of the resolution passed by the company authorising such issue together with a copy of the order of the 1[Tribunal] sanctioning the issue and where the maximum rate of discount exceeds ten per cent, a copy of the order of the Central Government permitting the issue at the higher percentage.
(2) Where a contract such as is mentioned in clause (b) of sub-section (1) is not reduced to writing, the company shall, within thirty days after the allotment, file with the Registrar the prescribed particulars of the contract stamped with the same stamp duty as would have been payable if the contract had been reduced to writing ; and those particulars shall be deemed to be an instrument within the meaning of the Indian Stamp Act, 1899 (2 of 1899), and the Registrar may, as a condition of filing the particulars ; require that the duty payable thereon be adjudicated under section 31 of that Act.
(3) If the Registrar is satisfied that in the circumstances of any particular case the period of thirty days specified in sub- sections (1) and (2) for compliance with the requirements of this section is or was inadequate, he may, on application made in that behalf by the company, whether before or after the expiry of the said period, extend that period as he thinks fit ; and if he does so, the provisions of sub-sections (1) and (2) shall have effect in that particular case as if for the said period of thirty days the extended period allowed by the Registrar were substituted.
(4) If default is made in complying with this section, every officer of the company who is in default shall be punishable with fine which may extend to 2[five thousand] rupees for every day during which the default continues :
Provided that in case of contravention of the proviso to clause (a) of sub-section (1), every such officer, and every promoter of the company who is guilty of the contravention shall be punishable with fine which may extend to 1[fifty] thousand rupees.
(5) Nothing in this section shall apply to the issue and allotment by a company of shares which under the provisions of its articles were forfeited for non-payment of calls.
 
1. Substituted for `Court' by the Companies (Second Amendment) Act, 2002 (w.e.f. a date yet to be notified).
2. Substituted for "five hundred" by the Companies (Amendment) Act, 2000 w.e.f.
3. Substituted for "five", by the Companies (Amendment) Act, 2000 w.e.f. 13-12-2000.
 
Commissions and discounts
 
76. POWER TO PAY CERTAIN COMMISSIONS AND PROHIBITION OF PAYMENT OF ALL OTHER COMMISSIONS, DISCOUNTS, ETC.
(1) A company may pay a commission to any person in consideration of -
(a) his subscribing or agreeing to subscribe, whether absolutely or conditionally, for any shares in, or debentures of, the company, or
(b) his procuring or agreeing to procure subscriptions, whether absolute or conditional, for any shares in, or debentures of, the company,
if the following conditions are fulfilled, namely :
(i) the payment of the commission is authorised by the articles ;
(ii) the commission paid or agreed to be paid does not exceed in the case of shares, five per cent of the price at which the shares are issued or the amount or rate authorised by the articles, whichever is less, and in the case of debentures, two and a half per cent of the price at which the debentures are issued or the amount or rate authorised by the articles, whichever is less ;
(iii) the amount or rate per cent of the commission paid or agreed to be paid is -
in the case of shares or debentures offered to the public for subscription, disclosed in the prospectus ; and in the case of shares or debentures not offered to the public for subscription, disclosed in the statement in lieu of prospectus, or in a statement in the prescribed form signed in like manner as a statement in lieu of prospectus and filed before the
 
payment of the commission with the Registrar and, where a circular or notice, not being a prospectus inviting subscription for the shares or debentures, is issued, also disclosed in that circular or notice ;
(iv) the number of shares or debentures which persons have agreed for a commission to subscribe absolutely or conditionally is disclosed in the manner aforesaid ; and
(v) a copy of the contract for the payment of the commission is delivered to the Registrar at the time of delivery of the prospectus or the statement in lieu of prospectus for registration.
(2) Save as aforesaid and save as provided in section 79, no company shall allot any of its shares or debentures or apply any of its moneys, either directly or indirectly, in payment of any commission, discount or allowance, to any person in consideration of -
(a) his subscribing or agreeing to subscribe, whether absolutely or conditionally, for any shares in, or debentures of, the company, or
(b) his procuring or agreeing to procure subscriptions, whether absolute or conditional, for any shares in, or debentures of, the company,
whether the shares, debentures or money be so allotted or applied by being added to the purchase money of any property acquired by the company or to the contract price of any work to be executed for the company, or the money be paid out of the nominal purchase money or contract price, or otherwise.
(3) Nothing in this section shall affect the power of any company to pay such brokerage as it has heretofore been lawful for a company to pay.
(4) A vendor to, promoter of, or other person who receives payment in shares, debentures or money from, a company shall have and shall be deemed always to have had power to apply any part of the shares, debentures or money so received in payment of any commission the payment of which, if made directly by the company, would have been legal under this section.
(4A) For the removal of doubts it is hereby declared that no commission shall be paid under clause (a) of sub-section
(1) to any person on shares or debentures which are not offered to the public for subscription :
Provided that where a person has subscribed or agreed to subscribe under clause (a) of sub-section (1) for any shares in, or debentures of, the company and before the issue of the prospectus or statement in lieu thereof any other person or persons has or have subscribed for any or all of those shares or debentures and that fact together with the aggregate amount of commission payable under this section in respect of such subscription is disclosed in such prospectus or statement, then, the company may pay commission to the first-mentioned person in respect of such subscription.
(5) If default is made in complying with the provisions of this section, the company, and every officer of the company who is in default, shall be punishable with fine which may extend to 1[five thousand] rupees.
 
1. Substituted for "five hundred" by the Companies (Amendment) Act, 2000 w.e.f.
 
77. RESTRICTIONS ON PURCHASE BY COMPANY, OR LOANS BY COMPANY FOR PURCHASE, OF ITS OWN OR ITS HOLDING COMPANY'S SHARES
(1) No company limited by shares, and no company limited by guarantee and having a share capital, shall have power to buy its own shares, unless the consequent reduction of capital is effected and sanctioned in pursuance of sections 100 to 104 or of section 402.
(2) No public company, and no private company which is a subsidiary of a public company, shall give, whether directly or indirectly, and whether by means of a loan, guarantee, the provision of security or otherwise, any financial assistance for the purpose of or in connection with a purchase or subscription made or to be made by any person of or for any shares in the company or in its holding company : Provided that nothing in this sub-section shall be taken to prohibit -
(a) the lending of money by a banking company in the ordinary course of its business ; or
(b) the provision by a company, in accordance with any scheme for the time being in force, of money for the purchase of, or subscription for, fully paid shares in the company or its holding company, being a purchase or subscription by trustees of or for shares to be held by or for the benefit of employees of the company, including any director holding a salaried office or employment in the company ; or
(c) the making by a company of loans, within the limit laid down in sub-section (3), to persons (other than directors 1[***] or managers) bona fide in the employment of the company with a view to enabling those persons to purchase or subscribe for fully paid shares in the company or its holding company to be held by themselves by way of beneficial ownership.
(3) No loan made to any person in pursuance of clause (c) of the foregoing proviso shall exceed in amount his salary or wages at that time for a period of six months.
(4) If a company acts in contravention of sub-sections (1) to (3), the company, and every officer of the company who is in default, shall be punishable with fine which may extend to 2[ten] thousand rupees.
(5) Nothing in this section shall affect the right of a company to redeem any shares issued under section 80 or under any corresponding provision in any previous companies law.
 
1. Words ", managing agents, secretaries and treasurers" omitted by the Companies (Amendment) Act, 2000 w.e.f. 13-12-2000.
2. Substituted for "one", by the Companies (Amendment) Act, 2000 w.e.f. 13-12-2000.
 
1[77A. POWER OF COMPANY TO PURCHASE ITS OWN SECURITIES
 
(1) Notwithstanding anything contained in this Act, but subject to the provisions of sub-section (2) of this section and section 77B, a company may purchase its own shares or other specified securities (hereinafter referred to as "buy- back") out of -
(i) its free reserves ; or
(ii) the securities premium account ; or
(iii) the proceeds of any shares or other specified securities :
Provided that no buy-back of any kind of shares or other specified securities shall be made out of the proceeds of an earlier issue of the same kind of shares or same kind of other specified securities.
(2) No company shall purchase its own shares or other specified securities under sub-section (1), unless -
(a) the buy-back is authorised by its articles ;
(b) a special resolution has been passed in general meeting of the company authorising the buy-back :
2[Provided that nothing contained in this clause shall apply in any case where-
(a) the buy-back is or less than ten per cent of the total paid-up equity capital and free reserves of the company ; and
(b) such buy-back has been authorised by the Board by means of a resolution passed at its meeting :
Provided further that no offer of buy-back shall be made within a period of three hundred and sixty-five days reckoned from the date of the preceding offer of buy-back, if any.
Explanation. - For the purposes of this clause, the expression "offer of buy-back" means the offer of such buy-back made in pursuance of the resolution of the Board referred in the first proviso;]
(c) the buy-back is or less than twenty-five per cent of the total paid-up capital and free reserves of the company : Provided that the buy-back of equity shares in any financial year shall not exceed twenty-five per cent of its total paid- up equity capital in that financial year ;
(d) the ratio of the debt owed by the company is not more than twice the capital and its free reserves after such buy- back :
Provided that the Central Government may prescribe a higher ratio of the debt than that specified under this clause for a class or classes of companies.
Explanation. - For the purposes of this clause, the expression "debt" includes all amounts of unsecured and secured debts ;
(e) all the shares or other specified securities for buy-back are fully paid-up ; (f) The buy-back of the shares or other specified securities listed on any recognised stock exchange is in accordance with the regulations made by the Securities and Exchange Board of India in this behalf ; and
(g) the buy-back in respect of shares or other specified securities other than those specified in clause (f) is in accordance with the guidelines as may be prescribed.
(3) The notice of the meeting at which special resolution is proposed to be passed shall be accompanied by an explanatory statement stating -
(a) a full and complete disclosure of all material facts ;
(b) the necessity for the buy-back ;
(c) the class of security intended to be purchased under the buy-back ;
(d) the amount to be invested under the buy-back ; and
(e) the time limit for completion of buy-back.
(4) Every buy-back shall be completed within twelve months from the date of passing the special resolution 1[or a resolution passed by the Board] under clause (b) of sub-section (2).
(5) The buy-back under sub-section (1) may be -
(a) from the existing security holders on a proportionate basis ; or
(b) from the open market ; or
(c) from odd lots, that is to say, where the lot of securities of a public company, whose shares are listed on a recognised stock exchange, is smaller than such marketable lot, as may be specified by the stock exchange ; or
(d) by purchasing the securities issued to employees of the company pursuant to a scheme of stock option or sweat equity.
(6) Where a company has passed a special resolution under clause (b) of sub-section (2) 1[or the Board has passed a resolution under the first proviso to clause (b) of that sub-section] to buy-back its own shares or other securities under this section, it shall, before making such buy-back, file with the Registrar and the Securities and Exchange Board of India a declaration of solvency in the form as may be prescribed and verified by an affidavit to the effect that the Board has made a full inquiry into the affairs of the company as a result of which they have formed an opinion that it is capable of meeting its liabilities and will not be rendered insolvent within a period of one year of the date of declaration adopted by the Board, and signed by at least two directors of the company, one of whom shall be the managing director, if any :
Provided that no declaration of solvency shall be filed with the Securities and Exchange Board of India by a company whose shares are not listed on any recognised stock exchange.
(7) Where a company buy-back its own securities, it shall extinguish and physically destroy the securities so bought- back within seven days of the last date of completion of buy-back.
(8) Where a company completes a buy-back of its shares and other specified securities under this section, it shall not make further issue of the same kind of shares (including allotment of further shares under clause (a) of sub-section (1) of section 81) or other specified securities within a period of 2[six] months except by way of bonus issue or in the discharge of subsisting obligations such as conversion of warrants, stock option schemes, sweat equity or conversion of preference shares or debentures into equity shares.
 
(9) Where a company buy-back its securities under this section, it shall maintain a register of the securities so bought, the consideration paid for the securities bought-back, the date of cancellation of securities, the date of extinguishing and physically destroying of securities and such other particulars as may be prescribed.
(10) A company shall, after the completion of the buy-back under this section, file with the Registrar and the Securities and Exchange Board of India, a return containing such particulars relating to the buy-back within thirty days of such completion, as may be prescribed : Provided that no return shall be filed with the Securities and Exchange Board of India by a company whose shares are not listed on any recognised stock exchange.
(11) If a company makes default in complying with the provisions of this section or any rules made thereunder, or any regulations made under clause (f) of sub-section (2), the company or any officer of the company who is in default shall be punishable with imprisonment for a term which may extend to two years, or with fine which may extend to fifty thousand rupees, or with both.
Explanation. - For the purposes of this section, -
(a) "specified securities" includes employees' stock option or other securities as may be notified by the Central Government from time to time ;
(b) "free reserves" shall have the meaning assigned to it in clause (b) of Explanation to section 372A.]
 
1. Inserted by the Companies (Amendment) Act, 1999 w.r.e.f. 31-10-1998.
2. Inserted by the Companies (Amendment) Act, 2001 w.r.e.f. 23-10-2001.
3. Inserted by the Companies (Amendment) Act, 2001 w.r.e.f. 23-10-2001.
4. Inserted by the Companies (Amendment) Act, 2001 w.r.e.f. 23-10-2001.
5. Substituted for "twenty four" by the Companies (Amendment) Act, 2001 w.r.e.f.
 
1[77AA. TRANSFER OF CERTAIN SUMS TO CAPITAL REDEMPTION RESERVE ACCOUNT
Where a company purchases its own shares out of free reserves, then a sum equal to the nominal value of the share so purchased shall be
transferred to the capital redemption reserve account referred to in clause (d) of the proviso to sub-section (1) of section 80 and details of such transfer shall be disclosed in the balance sheet.]
 
1. Inserted by the Companies (Amendment) Act, 1999 w.r.e.f. 31-10-1998.
 
1[77B. PROHIBITION FOR BUY-BACK IN CERTAIN CIRCUMSTANCES
(1) No company shall directly or indirectly purchase its own shares or other specified securities -
(a) through any subsidiary company including its own subsidiary companies ; or
(b) through any investment company or group of investment companies ; or
(c) if a default, by the company, in repayment of deposit or interest payable thereon, redemption of debentures or preference shares or payment of dividend to any shareholder or repayment of any term loan or interest payable thereon to any financial institution or bank is, subsisting. (2) No company shall directly or indirectly purchase its own shares or other specified securities in case, such company has not complied with the provisions of sections 159, 207 and 211.]
 
1. Inserted by the Companies (Amendment) Act, 1999 w.r.e.f. 31-10-1998.
 
78. APPLICATION OF PREMIUMS RECEIVED ON ISSUE OF SHARES
(1) Where a company issues shares at a premium, whether for cash or otherwise, a sum equal to the aggregate amount or value of the premiums on those shares shall be transferred to an account, to be called "the 1[securities] premium account" ; and the provisions of this Act relating to the reduction of the share capital of a company shall, except as provided in this section, apply as if the 1[securities] premium account were paid-up share capital of the company.
(2) The 1[securities] premium account may, notwithstanding anything in sub-section (1), be applied by the company -
(a) in paying up unissued shares of the company to be issued to members of the company as fully paid bonus shares ;
(b) in writing off the preliminary expenses of the company ;
(c) in writing off the expenses of, or the commission paid or discount allowed on, any issue of shares or debentures of the company ; or
(d) in providing for the premium payable on the redemption of any redeemable preference shares or of any debentures of the company.
(3) Where a company has, before the commencement of this Act, issued any shares at a premium, this section shall apply as if the shares had been issued after the commencement of this Act : Provided that any part of the premiums which has been so applied that it does not at the commencement of this Act form an identifiable part of the company's reserves within the meaning of Schedule VI, shall be disregarded in determining the sum to be included in the 1[securities] premium account.
 
5. Substituted for "share" by the Companies (Amendment) Act, 1999 w.r.e.f. 31-10-1998.
 
79. POWER TO ISSUE SHARES AT A DISCOUNT
(1) A company shall not issue shares at a discount except as provided in this section.
 
(2) A company may issue at a discount shares in the company of a class already issued, if the following conditions are fulfilled, namely, -
(i) the issue of the shares at a discount is authorised by a resolution passed by the company in general meeting and sanctioned by the 1[Central Government] ;
(ii) the resolution specifies the maximum rate of discount at which the shares are to be issued :
Provided that no such resolution shall be sanctioned by the 1[Central Government] if the maximum rate of discount specified in the resolution exceeds ten per cent, unless 2[the Central Government] is of opinion that a higher percentage of discount may be allowed in the special circumstances of the case ;
(iii) not less than one year has at the date of the issue elapsed since the date on which the company was entitled to commence business ; and
(iv) the shares to be issued at a discount are issued within two months after the date on which the issue is sanctioned by the 1[Central Government] or within such extended time as the 1[Central Government] may allow.
(3) Where a company has passed a resolution authorising the issue of shares at a discount, it may apply to the 1[Central Government] for an order sanctioning the issue ; and on any such application, the 1[Central Government], if having regard to all the circumstances of the case, it thinks proper so to do, may make an order sanctioning the issue on such terms and conditions as it thinks fit.
3[Provided that in the case of revival and rehabilitation of Sick Industrial Companies under chapter VIA, the provisions of this section shall have effect as if for the words `Central Government, the words `Tribunal' had been substituted.]
(4) Every prospectus relating to the issue of the shares shall contain particulars of the discount allowed on the issue of the shares or of so much of that discount as has not been written off at the date of the issue of the prospectus.
If default is made in complying with this sub-section, the company, and every officer of the company who is in default, shall be punishable with fine which may extend to 4[five hundred] rupees.
 
1. Substituted for `Company Law Board' by the Companies (Second Amendment) Act, 2002
2. Substituted for `Company Law Board' by the Companies (Second Amendment) Act, 2002.
3. Substituted for `the Board' by the Companies (Second Amendment) Act, 2002.
4. Inserted by the Companies (Second Amendment) Act, 2002.
5. Substituted for "fifty" by the Companies (Amendment) Act, 2000 w.e.f. 13-12-2000.
 
1[79A. ISSUE OF SWEAT EQUITY SHARES
(1) Notwithstanding anything contained in section 79, a company may issue sweat equity shares of a class of shares already issued if the following conditions are fulfilled, namely :
(a) the issue of sweat equity shares is authorised by a special resolution passed by the company in the general meeting ;
(b) the resolution specifies the number of shares, current market price, consideration, if any, and the class or classes of directors or employees to whom such equity shares are to be issued ;
(c) not less than one year has, at the date of the issue, elapsed since the date on which company was entitled to commence business ;
(d) the sweat equity shares of a company, whose equity shares are listed on a recognised stock exchange, are issued in accordance with the regulations made by the Securities and Exchange Board of India in this behalf : Provided that in the case of a company whose equity shares are not listed on any recognised stock exchange, the sweat equity shares are issued in accordance with the guidelines as may be prescribed.
Explanation I. - For the purposes of this sub-section, the expression "a company" means company incorporated, formed and registered under this Act and includes its subsidiary company incorporated in a country outside India.
Explanation II. - For the purposes of this Act, the expression "sweat equity shares" means equity shares issued by the company to employees or directors at a discount or for consideration other than cash for providing know-how or making available rights in the nature of intellectual property rights or value additions, by whatever name called.
(2) All the limitations, restrictions and provisions relating to equity shares shall be applicable to such sweat equity shares issued under sub- section (1).]
 
1. Inserted by the Companies (Amendment) Act, 1999 w.r.e.f. 31-10-1998.
 
1[Issue and redemption of preference shares]
80. POWER TO ISSUE REDEEMABLE PREFERENCE SHARES
(1) Subject to the provisions of this section, a company limited by shares may, if so authorised by its articles, issue preference shares which are, or at the option of the company are to be liable, to be redeemed :
Provided that -
(a) no such shares shall be redeemed except out of profits of the company which would otherwise be available for dividend or out of the proceeds of a fresh issue of shares made for the purposes of the redemption ;
(b) no such shares shall be redeemed unless they are fully paid ;
(c) the premium, if any, payable on redemption shall have been provided for out of the profits of the company or out of the company's 2[security premium account], before the shares are redeemed ;
(d) where any such shares are redeemed otherwise than out of the proceeds of a fresh issue, there shall, out of profits which would otherwise have been available for dividend, be transferred to a reserve fund, to be called the capital redemption reserve account, a sum equal to the nominal amount of the shares redeemed ; and the provisions of this
 
Act relating to the reduction of the share capital of a company shall, except as provided in this section, apply as if the capital redemption reserve account were paid-up share capital of the company.
(2) Subject to the provisions of this section, the redemption of preference shares thereunder may be effected on such terms and in such manner as may be provided by the articles of the company.
(3) The redemption of preference shares under this section by a company shall not be taken as reducing the amount of its authorised share capital.
(4) Where in pursuance of this section, a company has redeemed or is about to redeem any preference shares, it shall have power to issue shares up to the nominal amount of the shares redeemed or to be redeemed as if those shares had never been issued ; and accordingly the share capital of the company shall not, for the purpose of calculating the fees payable under section 611, be deemed to be increased by the issue of shares in pursuance of this sub-section : Provided that, where new shares are issued before the redemption of the old shares, the new shares shall not, so far as relates to stamp duty, be deemed to have been issued in pursuance of this sub-section unless the old shares are redeemed within one month after the issue of the new shares.
(5) The capital redemption reserve account may, notwithstanding anything in this section, be applied by the company, in paying up unissued shares of the company to be issued to members of the company as fully paid bonus shares. 1[(5A) Notwithstanding anything contained in this Act, no company limited by shares shall, after the commencement of the Companies (Amendment) Act, 1996, issue any preference share which is irredeemable or is redeemable after the expiry of a period of twenty years from the date of its issue.]
(6) If a company fails to comply with the provisions of this section, the company, and every officer of the company who is in default, shall be punishable with fine which may extend to 2[ten] thousand rupees.
 
1. Substituted by the Companies (Amendment) Act, 1996 w.e.f. 1-3-1997. Prior to substitution sub-section (5A) read as under :
"(5A) Notwithstanding anything contained in this Act, no company limited by shares shall, after the commencement of the Companies (Amendment) Act, 1988, issue any preference share which is irredeemable or is redeemable after the expiry of a period of ten years from the date of its issue."
2. Substituted for "one" by the Companies (Amendment) Act, 2000 w.e.f. 13-12-2000.
3. Substituted for "Redeemable preference shares" by the Companies (Amendment) Act, 1988 w.e.f. 15-6- 1988.
4. Substituted for "share premium account" by the Companies (Amendment) Act, 1999 w.r.e.f. 31-10-1998.
 
1[80A. REDEMPTION OF IRREDEEMABLE PREFERENCE SHARES, ETC
(1) Notwithstanding anything contained in the terms of issue of any preference shares, every preference share issued before the commencement of the Companies (Amendment) Act, 1988, -
(a) which is irredeemable, shall be redeemed by the company within a period not exceeding five years from such commencement, or
(b) which is not redeemable before the expiry of ten years from the date of issue thereon in accordance with the terms of its issue and which had not been redeemed before such commencement, shall be redeemed by the company on the date on which such share is due for redemption or within a period not exceeding ten years from such commencement, whichever is earlier :
Provided that where a company is not in a position to redeem any such share within the period aforesaid and to pay the dividend, if any, due thereon (such shares being hereinafter referred to as unredeemed preference shares), it may, with the consent of the 2[Tribunal], on a petition made by it in this behalf and notwithstanding anything contained in this Act, issue further redeemable preference shares equal to the amounts due (including the dividend thereon), in respect of the unredeemed preference shares, and on the issue of such further redeemable preference shares, the unredeemed shares shall be deemed to have been redeemed.
(2) Nothing contained in section 106 or any scheme referred to in sections 391 to 395, or in any scheme made under section 396, shall be deemed to confer power on any class of shareholders by resolution or on 3[any court or the Tribunal] or the Central Government to vary or modify the provisions of this section.
(3) If any default is made in complying with the provisions of this section, -
(a) the company making such default shall be punishable with fine which may extend, to 4[ten] thousand rupees for every day during which such default continues ; and
(b) every officer of the company who is in default shall be punishable with imprisonment for a term which may extend to three years and shall also be liable to fine.]
 
1. Inserted by the Companies (Amendment) Act, 1988 w.e.f. 15-6-1988.
2. Substituted for "Company Law Board" by the Companies (Second Amendment) Act, 2002 (w.e.f. a date yet to be notified).
3. Substituted for "any court" by the Companies (Second Amendment) Act, 2002 (w.e.f. a date yet to be notified).
4. Substituted for "one" by the Companies (Amendment) Act, 2000 w.e.f. 13-12-2000.
 
Further issue of capital
 
81. FURTHER ISSUE OF CAPITAL
 
(1) Where at any time after the expiry of two years from the formation of a company or at any time after the expiry of one year from the allotment of shares in that company made for the first time after its formation, whichever is earlier, it is proposed to increase the subscribed capital of the company by allotment of further shares, then, -
(a) such further shares shall be offered to the persons who, at the date of the offer, are holders of the equity shares of the company, in proportion, as nearly as circumstances admit, to the capital paid-up on those shares at that date ;
(b) the offer aforesaid shall be made by notice specifying the number of shares offered and limiting a time not being less than fifteen days from the date of the offer within which the offer, if not accepted, will be deemed to have been declined ;
(c) unless the articles of the company otherwise provide, the offer aforesaid shall be deemed to include a right exercisable by the person concerned to renounce the shares offered to him or any of them in favour of any other person ; and the notice referred to in clause (b) shall contain a statement of this right ;
(d) after the expiry of the time specified in the notice aforesaid, or on receipt of earlier intimation from the person to whom such notice is given that he declines to accept the shares offered, the Board of directors may dispose of them in such manner as they think most beneficial to the company. Explanation. - In this sub-section, "equity share capital" and "equity shares" have the same meaning as in section 85.
(1A) Notwithstanding anything contained in sub-section (1), the further shares aforesaid may be offered to any persons [whether or not those persons include the persons referred to in clause (a) of sub-section (1)] in any manner whatsoever -
(a) if a special resolution to that effect is passed by the company in general meeting, or
(b) where no such special resolution is passed, if the votes cast (whether on a show of hands, or on a poll, as the case may be) in favour of the proposal contained in the resolution moved in that general meeting (including the casting vote, if any, of the chairman) by members who, being entitled so to do, vote in person, or where proxies are allowed, by proxy, exceed the votes, if any, cast against the proposal by members so entitled and voting and the Central Government is satisfied, on an application made by the Board of directors in this behalf, that the proposal is most beneficial to the company.
(2) Nothing in clause (c) of sub-section (1) shall be deemed -
(a) to extend the time within which the offer should be accepted, or
(b) to authorise any person to exercise the right of renunciation for a second time, on the ground that the person in whose favour the renunciation was first made has declined to take the shares comprised in the renunciation.
(3) Nothing in this section shall apply -
(a) to a private company ; or
(b) to the increase of the subscribed capital of a public company caused by the exercise of an option attached to debentures issued or loans raised by the company -
(i) to convert such debentures or loans into shares in the company, or
(ii) to subscribe for shares in the company :
Provided that the terms of issue of such debentures or the terms of such loans include a term providing for such option and such term -
(a) either has been approved by the Central Government before the issue of debentures or the raising of the loans, or is in conformity with the rules, if any, made by that Government in this behalf ; and
(b) in the case of debentures or loans other than debentures issued to, or loans obtained from, the Government or any institution specified by the Central Government in this behalf, has also been approved by a special resolution passed by the company in general meeting before the issue of the debentures or the raising of the loans.
(4) Notwithstanding anything contained in the foregoing provisions of this section, where any debentures have been issued to, or loans have been obtained from, the Government by a company, whether such debentures have been issued or loans have been obtained before or after the commencement of the Companies (Amendment) Act, 1963, the Central Government may, if in its opinion it is necessary in the public interest so to do, by order, direct that such debentures or loans or any part thereof shall be converted into shares in the company on such terms and conditions as appear to that Government to be reasonable in the circumstances of the case, even if the terms of issue of such debentures or the terms of such loans do not include a term providing for an option for such conversion.
(5) In determining the terms and conditions of such conversion, the Central Government shall have due regard to the following circumstances, that is to say, the financial position of the company, the terms of issue of the debentures or the terms of the loans, as the case may be, the rate of interest payable on the debentures or the loans, the capital of the company, its loan liabilities, its reserves, its profits during the preceding five years and the current market price of the shares in the company.
(6) A copy of every order proposed to be issued by the Central Government under sub-section (4) shall be laid in draft before each House of Parliament while it is in session for a total period of thirty days which may be comprised in one session or in two or more successive sessions.
(7) If the terms and conditions of such conversion are not acceptable to the company, the company may, within thirty days from the date of communication to it of such order or within such further time as may be granted by the Court, prefer an appeal to the Court in regard to such terms and conditions and the decision of the Court on such appeal and, subject only to such decision, the order of the Central Government under sub-section (4) shall be final and conclusive.
 
PART IV: SHARE CAPITAL AND DEBENTURES
 
Nature, numbering and certificate of shares
 
82. NATURE OF 1[SHARES OR DEBENTURES]
The 1[shares or debentures] or other interest of any member in a company shall be movable property, transferable in the manner provided by the articles of the company.
1. Substituted for "shares" by the Companies (Amendment) Act, 1999 w.r.e.f. 31-10-1998.
 
1[83. NUMBERING OF SHARES
Each share in a company having a share capital shall be distinguished by its appropriate number :
Provided that nothing in this section shall apply to the shares held with a depository.]
1. Inserted by the Depositories Related Laws (Amendment) Act, 1997 w.e.f. 15-1-1997. Earlier existing section 83 was omitted by the Depositories Act, 1996 w.r.e.f. 20-9-1995.
 
84. CERTIFICATE OF SHARES
(1) A certificate, under the common seal of the company, specifying any shares held by any member, shall be prima facie evidence of the title of the member to such shares.
(2) A certificate may be renewed or a duplicate of a certificate may be issued if such certificate -
(a) is proved to have been lost or destroyed, or
(b) having been defaced or mutilated or torn is surrendered to the company.
(3) If a company with intent to defraud, renews a certificate or issues a duplicate thereof, the company shall be punishable with fine which may extend to 1[one lakh] rupees and every officer of the company who is in default shall be punishable with imprisonment for a term which may extend to six months, or with fine which may extend to 1[one lakh] rupees, or with both.
(4) Notwithstanding anything contained in the articles of association of a company, the manner of issue or renewal of a certificate or issue of a duplicate thereof, the form of a certificate (original or renewed) or of a duplicate thereof, the particulars to be entered in the register of members or in the register of renewed or duplicate certificates, the form of such registers, the fee on payment of which, the terms and conditions, if any (including terms and conditions as to evidence and indemnity and the payment of out-of-pocket expenses incurred by a company in investigating evidence) on which a certificate may be renewed or a duplicate thereof may be issued, shall be such as may be prescribed.
1. Substituted for "ten thousand" by the Companies (Amendment) Act, 2000 w.e.f.
 
85. TWO KINDS OF SHARE CAPITAL
(1) "Preference share capital" means, with reference to any company limited by shares, whether formed before or after the commencement of this Act, that part of the share capital of the company which fulfils both the following requirements, namely : -
(a) that as respects dividends, it carries or will carry a preferential right to be paid a fixed amount or an amount calculated at a fixed rate, which may be either free of or subject to income-tax ; and
(b) that as respects capital, it carries or will carry, on a winding up or repayment of capital, a preferential right to be repaid the amount of the capital paid-up or deemed to have been paid-up, whether or not there is a preferential right to the payment of either or both of the following amounts, namely :
(i) any money remaining unpaid, in respect of the amounts specified in clause (a), up to the date of the winding up or repayment of capital ; and
(ii) any fixed premium or premium on any fixed scale, specified in the memorandum or articles of the company. Explanation. - Capital shall be deemed to be preference capital, notwithstanding that it is entitled to either or both of the following rights, namely :
(i) that, as respects dividends, in addition to the preferential right to the amount specified in clause (a), it has a right to participate, whether fully or to a limited extent, with capital not entitled to the preferential right aforesaid ;
(ii) that, as respects capital, in addition to the preferential right to the repayment, on a winding up, of the amounts specified in clause (b), it has a right to participate, whether fully or to a limited extent, with capital not entitled to that preferential right in any surplus which may remain after the entire capital has been repaid.
(2) "Equity share capital" means, with reference to any such company, all share capital which is not preference share capital.
(3) The expressions "preference share" and "equity share" shall be construed accordingly.
 
1[86. NEW ISSUES OF SHARE CAPITAL TO BE ONLY OF TWO KINDS
The share capital of a company limited by shares shall be of two kinds only, namely : -
(a) equity share capital -
(i) with voting rights ; or
(ii) with differential rights as to dividend, voting or otherwise in accordance with such rules and subject to such conditions as may be prescribed ;
(b) preference share capital].
1. Substituted by the Companies (Amendment) Act, 2000 w.e.f. 13-12-2000. Prior to its substitution, section 86 read as under :
`86. New issues of share capital to be only of two kinds. - The share capital of a company limited by shares formed after the commencement of this Act, or issued after such commencement, shall be of two kinds only, namely : -
(a) equity share capital ; and
 
(b) preference share capital.'
 
87. VOTING RIGHTS
(1) Subject to the provisions of section 89 and sub-section (2) of section 92 :
(a) every member of a company limited by shares and holding any equity share capital therein shall have a right to vote, in respect of such capital, on every resolution placed before the company ; and
(b) his voting right on a poll shall be in proportion to his share of the paid-up equity capital of the company.
(2)(a) Subject as aforesaid and save as provided in clause (b) of this sub-section, every member of a company limited by shares and holding any preference share capital therein shall, in respect of such capital, have a right to vote only on resolutions placed before the company which directly affect the rights attached to his preference shares.
Explanation. - Any resolution for winding up the company or for the repayment or reduction of its share capital shall be deemed directly to affect the rights attached to preference shares within the meaning of this clause.
(b) Subject as aforesaid, every member of a company limited by shares and holding any preference share capital therein shall, in respect of such capital, be entitled to vote on every resolution placed before the company at any meeting, if the dividend due on such capital or any part of such dividend has remained unpaid -
(i) in the case of cumulative preference shares, in respect of an aggregate period of not less than two years preceding the date of commencement of the meeting ; and
(ii) in the case of non-cumulative preference shares, either in respect of a period of not less than two years ending with the expiry of the financial year immediately preceding the commencement of the meeting or in respect of an aggregate period of not less than three years comprised in the six years ending with the expiry of the financial year aforesaid.
Explanation. - For the purposes of this clause, dividend shall be deemed to be due on preference shares in respect of any period, whether a dividend has been declared by the company on such shares for such period or not, -
(a) on the last day specified for the payment of such dividend for such period, in the articles or other instrument executed by the company in that behalf ; or
(b) in case no day is so specified, on the day immediately following such period ;
(c) Where the holder of any preference share has a right to vote on any resolution in accordance with the provisions of this sub- section, his voting right on a poll, as the holder of such share, shall, subject to the provisions of section 89 and sub-section (2) of section 92, be in the same proportion as the capital paid-up in respect of the preference share bears to the total paid-up equity capital of the company.
 
88. PROHIBITION OF ISSUE OF SHARES WITH DISPROPORTIONATE RIGHTS
1[Omitted by the Companies (Amendment) Act, 2000 w.e.f. 13-12-2000.]
1. Prior to its omission, section 88 read as under :
`88. Prohibition of issue of shares with disproportionate rights. - No company formed after the commencement of this Act, or issuing any share capital after such commencement, shall issue any shares (not being preference shares) which carry voting rights or rights in the company as to dividend, capital or otherwise which are disproportionate to the rights attaching to the holders of other shares (not being preference shares).'
 
89. TERMINATION OF DISPROPORTIONATELY EXCESSIVE VOTING RIGHTS IN EXISTING COMPANIES
(1) If at the commencement of this Act any shares, by whatever name called, of any existing company limited by shares carry voting rights in excess of the voting rights attaching under sub-section (1) of section 87 to equity shares in respect of which the same amount of capital has been paid-up, the company shall, within a period of one year from the commencement of this Act, reduce the voting rights in respect of the shares first-mentioned so as to bring them into conformity with the voting rights attached to such equity shares under sub-section (1) of section 87.
(2) Before the voting rights are brought into such conformity, the holders of the shares in question shall not exercise in respect thereof voting rights in excess of what would have been exercisable by them if the capital paid-up on their shares had been equity share capital, in respect of the following resolutions placed before the company, namely : - 1[(a) any resolution relating to the appointment or re-appointment of a director or to any variation in the terms of an agreement between the company and a managing or whole-time director thereof].
(b) any resolution relating to the appointment of buying or selling agents ; (c) 2[***].
(3) If, by reason of the failure of the requisite proportion of any class of members to agree, it is not found possible to comply with the provisions of sub-section (1), the company shall, within one month of the expiry of the period of one year mentioned in that sub-section, apply to the Court for an order specifying the manner in which the provisions of that sub-section shall be complied with ; and any order made by the Court in this behalf shall bind the company and all its shareholders.
If default is made in complying with this sub-section, the company, and every officer of the company who is in default, shall be punishable with fine which may extend to 3[ten] thousand rupees.
(4) The Central Government may, in respect of any shares issued by a company before the 1st day of December, 1949, exempt the company from the requirements of sub-sections (1), (2) and (3), wholly or in part, if in the opinion of the Central Government the exemption is required either in the public interest or in the interest of the company or of any class of shareholders therein or of the creditors or any class of creditors thereof.
Every order of exemption made by the Central Government under this sub-section shall be laid before both Houses of Parliament as soon as may be after it is made.
1. Substituted by the Companies (Amendment) Act, 2000 w.e.f. 13-12-2000.
 
2. Omitted by the Companies (Amendment) Act, 2000 w.e.f. 13-12-2000.
3. Substituted for "one" by the Companies (Amendment) Act, 2000 w.e.f. 13-12-2000.
 
90. SAVINGS
(1) Nothing in sections 85, 86, 88 and 89 shall, in the case of any shares issued by a public company before the commencement of this Act, affect any voting rights attached to the shares save as otherwise provided in section 89, or any rights attached to the shares as to dividend, capital or otherwise.
(2) Nothing in sections 85 to 89 shall apply to a private company, unless it is a subsidiary of a public company.
(3) For the removal of doubts, it is hereby declared that on and from the commencement of the Companies (Amendment) Act, 1974, the provisions of section 87 shall apply in relation to the voting rights attached to preference shares issued by a public company before the 1st day of April, 1956, as they apply to the preference shares issued by a public company after that date.
Explanation. - For the purposes of this section, references to a public company shall be construed as including references to a private company which is a subsidiary of a public company.
 
Miscellaneous provisions as to share capital
 
91. CALLS ON SHARES OF SAME CLASS TO BE MADE ON UNIFORM BASIS
Where after the commencement of this Act, any calls for further share capital are made on shares, such calls shall be made on a uniform basis on all shares falling under the same class.
Explanation. - For the purposes of this section, shares of the same nominal value on which different amounts have been paid-up shall not be deemed to fall under the same class.
 
92. POWER OF COMPANY TO ACCEPT UNPAID SHARE CAPITAL, ALTHOUGH NOT CALLED UP
(1) A company may, if so authorised by its articles accept from any member the whole or a part of the amount remaining unpaid on any shares held by him, although no part of that amount has been called up.
(2) The member shall not however be entitled, where the company is one limited by shares, to any voting rights in respect of the moneys so paid by him until the same would, but for such payment, become presently payable.
 
93. PAYMENT OF DIVIDEND IN PROPORTION TO AMOUNT PAID-UP
A company may, if so authorised by its articles, pay dividends in proportion to the amount paid-up on each share where a larger amount is paid-up on some shares than on others.
 
94. POWER OF LIMITED COMPANY TO ALTER ITS SHARE CAPITAL
(1) A limited company having a share capital, may, if so authorised by its articles, alter the conditions of its memorandum as follows, that is to say, it may -
(a) increase its share capital by such amount as it thinks expedient by issuing new shares ;
(b) consolidate and divide all or any of its share capital into shares of larger amount than its existing shares ;
(c) convert all or any of its fully paid-up shares into stock, and reconvert that stock into fully paid-up shares of any denomination ;
(d) sub-divide its shares, or any of them, into shares of smaller amount than is fixed by the memorandum, so, however, that in the sub-division the proportion between the amount paid and the amount, if any, unpaid on each reduced share shall be the same as it was in the case of the share from which the reduced share is derived ;
(e) cancel shares which, at the date of the passing of the resolution in that behalf, have not been taken or agreed to be taken by any person, and diminish the amount of its share capital by the amount of the shares so cancelled.
(2) The powers conferred by this section shall be exercised by the company in general meeting and shall not require to be confirmed by the Court.
(3) A cancellation of shares in pursuance of this section shall not be deemed to be a reduction of share capital within the meaning of this Act.
 
94A. SHARE CAPITAL TO STAND INCREASED WHERE AN ORDER IS MADE UNDER SECTION 81(4)
(1) Notwithstanding anything contained in this Act, where the Central Government has, by an order made under sub- section (4) of section 81, directed that any debenture or loan or any part thereof shall be converted into shares in a company, the conditions contained in the memorandum of such company shall, where such order has the effect of increasing the nominal share capital of the company, stand altered and the nominal share capital of such company shall stand increased by an amount equal to the amount of the value of the shares into which such debentures or loans or part thereof has been converted.
(2) Where, in pursuance of an option attached to debentures issued or loans raised by the company, any public financial institution proposes to convert such debentures or loans into shares in the company, the Central Government may, on the application of such public financial institution, direct that the conditions contained in the memorandum of such company shall stand altered and the nominal share capital of such company shall stand increased by an amount equal to the amount of the value of the shares into which such debentures or loans or part thereof has been converted.
(3) Where the memorandum of a company becomes altered, whether by reason of an order made by the Central Government under sub-section (4) of section 81 or sub-section (2) of this section, the Central Government shall send a copy of such order to the Registrar and also to the company and on receipt of such order, the company shall file in
 
the prescribed form, within thirty days from the date of such receipt, a return to the Registrar with regard to the increase of share capital and the Registrar shall, on
 
95. NOTICE TO REGISTRAR OF CONSOLIDATION OF SHARE CAPITAL, CONVERSION OF SHARES INTO STOCK, ETC
(1) If a company having a share capital has -
(a) consolidated and divided its share capital into shares of larger amount than its existing shares ;
(b) converted any shares into stock ;
(c) re-converted any stock into shares ;
(d) sub-divided its shares or any of them ;
(e) redeemed any redeemable preference shares ; or
(f) cancelled any shares, otherwise than in connection with a reduction of share capital under sections 100 to 104 ;
the company shall within thirty days after doing so, give notice thereof to the Registrar specifying, as the case may be, the shares consolidated, divided, converted, sub-divided, redeemed or cancelled, or the stock reconverted.
(2) The Registrar shall thereupon record the notice, and make any alterations which may be necessary in the company's memorandum or articles or both.
(3) If default is made in complying with sub-section (1), the company, and every officer of the company who is in default, shall be punishable with fine which may extend to 1[five hundred] rupees for every day during which the default continues.
1. Substituted for "fifty" by the Companies (Amendment) Act, 2000 w.e.f. 13-12-2000.
 
96. EFFECT OF CONVERSION OF SHARES INTO STOCK
Where a company having a share capital has converted any of its shares into stock, and given notice of the conversion to the Registrar, all the provisions of this Act which are applicable to shares only, shall cease to apply as to so much of the share capital as is converted into stock.
 
97. NOTICE OF INCREASE OF SHARE CAPITAL OR OF MEMBERS
(1) Where a company having a share capital, whether its shares have or have not been converted into stock, has increased its share capital beyond the authorised capital, and where a company, not being a company limited by shares, has increased the number of its members beyond the registered number, it shall file with the Registrar, notice of the increase of capital or of members within thirty days after the passing of the resolution authorising the increase ; and the Registrar shall record the increase and also make any alterations which may be necessary in the company's memorandum or articles or both.
(2) The notice to be given as aforesaid shall include particulars of the classes of shares affected and the conditions, if any, subject to which the new shares have been or are to be issued.
(3) If default is made in complying with this section, the company, and every officer of the company who is in default, shall be punishable with fine which may extend to 1[five hundred] rupees for every day during which the default continues.
1. Substituted for "fifty" by the Companies (Amendment) Act, 2000 w.e.f. 13-12-2000.
 
98. POWER OF UNLIMITED COMPANY TO PROVIDE FOR RESERVE SHARE CAPITAL ON RE-REGISTRATION An unlimited company having a share capital may, by its resolution for registration as a limited company in pursuance of this Act, do either or both of the following things, namely :
(a) increase the nominal amount of its share capital by increasing the nominal amount of each of its shares, but subject to the condition that no part of the increased capital shall be capable of being called up except in the event and for the purposes of the company being wound up ;
(b) provide that a specified portion of its uncalled share capital shall not be capable of being called up except in the event and for the purposes of the company being wound up.
 
99. RESERVE LIABILITY OF LIMITED COMPANY
A limited company may, by special resolution, determine that any portion of its share capital which has not been already called up shall not be capable of being called up, except in the event and for the purposes of the company being wound up, and thereupon that portion of its share capital shall not be capable of being called up except in that event and for those purposes.
 
Reduction of share capital
 
100. SPECIAL RESOLUTION FOR REDUCTION OF SHARE CAPITAL
(1) Subject to confirmation by the 1[Tribunal], a company limited by shares or a company limited by guarantee and having a share capital, may, if so authorised by its articles, by special resolution, reduce its share capital in any way, and in particular and without prejudice to the generality of the foregoing power, may -
(a) extinguish or reduce the liability on any of its shares in respect of share capital not paid-up ;
(b) either with or without extinguishing or reducing liability on any of its shares, cancel any paid-up share capital which is lost, or is unrepresented by available assets ; or
(c) either with or without extinguishing or reducing liability on any of its shares, pay off any paid-up share capital which is in excess of the wants of the company ;
 
and may, if and so far as is necessary, alter its memorandum by reducing the amount of its share capital and of its shares accordingly.
(2) A special resolution under this section is in this Act referred to as "a resolution for reducing share capital".
1. Substituted for `court' by the Companies (Second Amendment) Act, 2002 (w.e.f. a date yet to be notified).
 
101. APPLICATION TO 1[TRIBUNAL] FOR CONFIRMING ORDER, OBJECTIONS BY CREDITORS, AND SETTLEMENT OF LIST OF OBJECTING CREDITORS
(1) Where a company has passed a resolution for reducing share capital, it may apply, by petition, to the 1[Tribunal] for an order confirming the reduction.
(2) Where the proposed reduction of share capital involves either the diminution of liability in respect of unpaid share capital or the payment to any shareholder of any paid-up share capital, and in any other case if the 1[Tribunal] so directs, the following provisions shall have effect subject to the provisions of sub-section (3) :
(a) every creditor of the company who at the date fixed by the 1[Tribunal] is entitled to any debt or claim which, if that date were the commencement of the winding up of the company, would be admissible in proof against the company, shall be entitled to object to the reduction ;
(b) the 1[Tribunal] shall settle a list of creditors so entitled to object, and for that purpose shall ascertain, as far as possible without requiring an application from any creditor, the names of those creditors and the nature and amount of their debts or claims, and may publish notices fixing a day or days within which creditors not entered on the list are to claim to be so entered or are to be excluded from the right of objecting to the reduction ;
(c) where a creditor entered on the list whose debt or claim is not discharged or has not determined does not consent to the reduction, the 1[Tribunal] may, if it thinks fit, dispense with the consent of that creditor, on the company securing payment of his debt or claim by appropriating, as the 1[Tribunal] may direct, the following amount :
(i) if the company admits the full amount of the debt or claim, or, though not admitting it, is willing to provide for it, then, the full amount of the debt or claim ;
(ii) if the company does not admit and is not willing to provide for the full amount of the debt or claim, or if the amount is contingent or not ascertained, then, an amount fixed by the 1[Tribunal] after the like inquiry and adjudication as if the company were being wound up by the 1[Tribunal].
(3) Where a proposed reduction of share capital involves either the diminution of any liability in respect of unpaid share capital or the payment to any shareholder of any paid-up share capital, the 1[Tribunal] may, if, having regard to any special circumstances of the case, it thinks proper so to do, direct that the provisions of sub-section (2) shall not apply as regards any class or any classes of creditors.
1. Substituted for `court' by the Companies (Second Amendment) Act, 2002.
 
102. ORDER CONFIRMING REDUCTION AND POWERS OF 1[TRIBUNAL] ON MAKING SUCH ORDER
(1) The 1[Tribunal], if satisfied with respect to every creditor of the company who under section 101 is entitled to object to the reduction, that either his consent to the reduction has been obtained or his debt or claim has been discharged, or has determined, or has been secured, may make an order confirming the reduction on such terms and conditions as it thinks fit.
(2) Where the 1[Tribunal] makes any such order, it may -
(a) if for any special reason it thinks proper so to do, make an order directing that the company shall, during such period commencing on, or at any time after, the date of the order, as is specified in the order, add to its name as the last words thereof the words "and reduced" ; and
(b) make an order requiring the company to publish as the 1[Tribunal] directs the reasons for reduction or such other information in regard thereto as the 1[Tribunal] may think expedient with a view to giving proper information to the public, and, if the 1[Tribunal] thinks fit, the causes which led to the reduction.
(3) Where a company is ordered to add to its name the words "and reduced", those words shall, until the expiration of the period specified, in the order, be deemed to be part of the name of the company.
1. Substituted for `court' by the Companies (Second Amendment) Act, 2002 (w.e.f. a date yet to be notified).
 
103. REGISTRATION OF ORDER AND MINUTE OF REDUCTION
(1) The Registrar -
(a) on production to him of an order of the 1[Tribunal] confirming the reduction of the share capital of a company ; and
(b) on the delivery to him of a certified copy of the order and of a minute approved by the 1[Tribunal] showing, with respect to the share capital of the company as altered by the order, (i) the amount of the share capital, (ii) the number of shares into which it is to be divided, (iii) the amount of each share, and (iv) the amount, if any, at the date of the registration deemed to be paid-up on each share ; shall register the order and minute.
(2) On the registration of the order and minute, and not before, the resolution for reducing share capital as confirmed by the order shall take effect.
(3) Notice of the registration shall be published in such manner as the 1[Tribunal] may direct.
(4) The Registrar shall certify under his hand the registration of the order and minute, and his certificate shall be conclusive evidence that all the requirements of this Act with respect to reduction of share capital have been complied with, and that the share capital of the company is such as is stated in the minute.
(5) The minute when registered shall be deemed to be substituted for the corresponding part of the memorandum of the company, and shall be valid and alterable as if it had been originally contained therein.
(6) The substitution of any such minute as aforesaid for part of the memorandum of the company shall be deemed to be an alteration of the memorandum within the meaning and for the purposes of section 40.
 
1. Substituted for `court' by the Companies (Second Amendment) Act, 2002.
 
104. LIABILITY OF MEMBERS IN RESPECT OF REDUCED SHARES
(1) A member of the company, past or present, shall not be liable, in respect of any share, to any call or contribution exceeding in amount the difference, if any, between the amount paid on the share, or the reduced amount, if any, which is to be deemed to have been paid thereon, as the case may be, and the amount of the share as fixed by the minute of reduction :
Provided that, if any creditor entitled in respect of any debt or claim to object to the reduction of share capital is, by reason of his ignorance of the proceedings for reduction or of their nature and effect with respect to his debt or claim, not entered on the list of creditors, and after the reduction the company is unable, within the meaning of section 434, to pay the amount of his debt or claim, then -
(a) every person who was a member of the company at the date of the registration of the order for reduction and minute, shall be liable to contribute for the payment of that debt or claim an amount not exceeding the amount which he would have been liable to contribute if the company had commenced to be wound up on the day immediately before the said date ; and
(b) if the company is wound up, the 1[Tribunal], on the application of any such creditor and proof of his ignorance as aforesaid, may, if it thinks fit, settle accordingly a list of persons so liable to contribute, and make and enforce calls and orders on the contributories settled on the list, as if they were ordinary contributories in a winding up.
(2) Nothing in this section shall affect the rights of the contributories among themselves.
1. Substituted for `court' by the Companies (Second Amendment) Act, 2002.
 
105. PENALTY FOR CONCEALING NAME OF CREDITOR, ETC
If any officer of the company -
(a) knowingly conceals the name of any creditor entitled to object to the reduction ;
(b) knowingly misrepresents the nature or amount of the debt or claim of any creditor ; or
(c) abets or is privy to any such concealment or misrepresentation as aforesaid ;
he shall be punishable with imprisonment for a term which may extend to one year, or with fine, or with both.
 
Variation of shareholders' rights
 
106. ALTERATION OF RIGHTS OF HOLDERS OF SPECIAL CLASSES OF SHARES
Where the share capital of a company is divided into different classes of shares, the rights attached to the shares of any class may be varied with the consent in writing of the holders of not less than three-fourths of the issued shares of that class or with the sanction of a special resolution passed at a separate meeting of the holders of the issued shares of that class -
(a) if provision with respect to such variation is contained in the memorandum or articles of the company, or
(b) in the absence of any such provision in the memorandum or articles, if such variation is not prohibited by the terms of issue of the shares of that class.
 
107. RIGHTS OF DISSENTIENT SHAREHOLDERS
(1) If, in pursuance of any provision such as is referred to in section 106, the rights attached to any such class of shares are at any time varied, the holders of not less in the aggregate than ten per cent of the issued shares of that class, being persons who did not consent to or vote in favour of the resolution for the variation, may apply to the 1[Tribunal] to have the variation cancelled, and where any such application is made, the variation shall not have effect unless and until it is confirmed by the 1[Tribunal].
(2) An application under this section shall be made within twenty-one days after the date on which the consent was given or the resolution was passed, as the case may be, and may be made on behalf of the shareholders entitled to make the application by such one or more of their number as they may appoint in writing for the purpose.
(3) On any such application, the 1[Tribunal], after hearing the applicant and any other persons who apply to the 1[Tribunal] to be heard and appear to the 1[Tribunal] to be interested in the application, may, if it is satisfied, having regard to all the circumstances of the case, that the variation would unfairly prejudice the shareholders of the class represented by the applicant, disallow the variation ; and shall, if not so satisfied, confirm the variation.
(4) The decision of the 1[Tribunal] on any such application shall be final.
(5) The company shall, within thirty days after the service on the company of any order made on any such application, forward a copy of the order to the Registrar ; and if default is made in complying with this provision, the company, and every officer of the company who is in default, shall be punishable with fine which may extend to 2[five hundred] rupees.
1. Substituted for `court' by the Companies (Second Amendment) Act, 2002 (w.e.f. a date yet to be notified).
2. Substituted for "fifty" by the Companies (Amendment) Act, 2000 w.e.f. 13-12-2000.
 
Transfer of shares and debentures
 
108. TRANSFER NOT TO BE REGISTERED EXCEPT ON PRODUCTION OF INSTRU-MENT OF TRANSFER
(1) A company shall not register a transfer of shares in, or debentures of, the company, unless a proper instrument of transfer duly stamped and executed by or on behalf of the transferor and by or on behalf of the transferee and specifying the name, address and occupation, if any, of the transferee, has been delivered to the company along with
 
the certificate relating to the shares or debentures, or if no such certificate is in existence, along with the letter of allotment of the shares or debentures :
Provided that where, on an application in writing made to the company by the transferee and bearing the stamp required for an instrument of transfer, it is proved to the satisfaction of the Board of directors that the instrument of transfer signed by or on behalf of the transferor and by or on behalf of the transferee has been lost, the company may register the transfer on such terms as to indemnity as the Board may think fit :
Provided further that nothing in this section shall prejudice any power of the company to register as shareholder or debenture holder any person to whom the right to any shares in, or debentures of, the company has been transmitted by operation of law.
(1A) Every instrument of transfer of shares shall be in such form as may be prescribed, and -
(a) every such form shall, before it is signed by or on behalf of the transferor and before any entry is made therein, be presented to the prescribed authority, being a person already in the service of the Government, who shall stamp or otherwise endorse thereon the date on which it is so presented, and
(b) every instrument of transfer in the prescribed form with the date of such presentation stamped or otherwise endorsed thereon shall, after it is executed by or on behalf of the transferor and the transferee and completed in all other respects, be delivered to the company, -
(i) in the case of shares dealt in or quoted on a recognised stock exchange, at any time before the date on which the register of members is closed, in accordance with law, for the first time after the date of the presentation of the prescribed form to the prescribed authority under clause (a) or within 1[twelve] months from the date of such presentation, whichever is later ;
(ii) in any other case, presentation within two months from the date of such presentation.
(1B) Notwithstanding anything contained in sub-section (1A), an instrument of transfer of shares, executed before the commencement of section 13 of the Companies (Amendment) Act, 1965 (31 of 1965), or executed after such commencement in a form other than the prescribed form, shall be accepted by a company, -
(a) in the case of shares dealt in or quoted on a recognised stock exchange, at any time not later than the expiry of six months from such commencement or the date on which the register of members is closed, in accordance with law, for the first time after such commencement whichever is later ;
(b) in any other case, at any time not later than the expiry of six months from such commencement. (1C) Nothing contained in sub-sections (1A) and (1B) shall apply to -
(A) any share -
(i) which is held by a company in any other body corporate in the name of a director or nominee in pursuance of sub- section (2), or as the case may be, sub-section (3), of section 49, or
(ii) which is held by a corporation, owned or controlled by the Central Government or a State Government, in any other body corporate in the name of a director or nominee, or
(iii) in respect of which a declaration has been made to the Public Trustee under section 153B, if-
(1) the company or corporation, as the case may be, stamps or otherwise endorses, on the form of transfer in respect of such share, the date on which it decides that such share shall not be held in the name of the said director or nominee or, as the case may be, in the case of any share in respect of which any such declaration has been made to the Public Trustee, the Public Trustee stamps or otherwise endorses, on the form of transfer in respect of such share under his seal, the date on which the form is presented to him, and
(2) the instrument of transfer in such form duly completed in all respects, is delivered to the -
(a) body corporate in whose share such company or corporation has made investment in the name of its director or nominee, or
(b) company in which such share is held in trust, within two months of the date so stamped or otherwise endorsed ; or
(B) any share deposited by any person with -
(i) the State Bank of India, or
(ii) any scheduled bank, or
(iii) any banking company (other than a scheduled bank) or financial institution approved by the Central Government by notification in the Official Gazette (and any such approval may be accorded so as to be retrospective to any date not earlier than the 1st day of April, 1966), or
(iv) the Central Government or a State Government or any corporation owned or controlled by the Central Government or a State Government,
by way of security for the repayment of any loan or advance to, or for the performance of any obligation undertaken by, such person, if -
(1) the bank, institution, Government or corporation, as the case may be, stamps or otherwise endorses on the form of transfer of such share -
(a) the date on which such share is returned by it to the depositor, or
(b) in the case of failure on the part of the depositor to repay the loan or advance or to perform the obligation, the date on which such share is released for sale by such bank, institution, Government or corporation, as the case may be, or
(c) where the bank, institution, Government or corporation, as the case may be, intends to get such share registered in its own name, the date on which the instrument of transfer relating to such share is executed by it ; and
(2) the instrument of transfer in such form, duly completed in all respects, is delivered to the company within two months from the date so stamped or endorsed.
Explanation. - Where any investment by a company or a corporation in the name of its director or nominee referred to in clause (A)(i) or clause (A)(ii), or any declaration referred to in clause (A)(iii), or any deposit referred to in clause (B)
 
of this sub- section is made after the expiry of the period or date mentioned in clause (a) of sub-section (1B) or after the expiry of the period mentioned in clause (b) of that sub-section, as the case may be, the form of transfer, in respect of the share which is the subject of such investment, declaration or deposit, means the prescribed form ; or
(C) any share which is held in any company by the Central Government or a State Government in the name of its nominee, except that every instrument of transfer which is executed on or after the 1st day of October, 1966, in respect of any such share shall be in the prescribed form.
(1D) Notwithstanding anything in sub-section (1A) or sub-section (1B) or sub-section (1C), where in the opinion of the Central Government it is necessary so to do to avoid hardship in any case, that Government may on an application made to it in that behalf, extend the periods mentioned in those sub-sections by such further time as it may deem fit whether such application is made before or after the expiry of the periods aforesaid ; and the number of extensions granted hereunder and the period of each such extension shall be shown in the annual report laid before the Houses of Parliament under section 638.
(2) In the case of a company having no share capital, sub-section (1) shall apply as if the references therein to shares were references instead to the interest of the member in the company.
1[(3) Nothing contained in this section shall apply to transfer of a security effected by the transferor and the transferee both of whom are entered as beneficial owners in the records of a depository.]
1. Substituted for "two" by the Companies (Amendment) Act, 1988 w.e.f. 15-6-1988.
2. Inserted by the Depositories Act, 1996 w.r.e.f. 20-9-1995.
 
1[108A. RESTRICTION ON ACQUISITION OF CERTAIN SHARES
(1) Except with the previous approval of the Central Government, no individual, firm, group, constituent of a group, body corporate or bodies corporate under the same management, shall jointly or severally acquire or agree to acquire, whether in his or its own name or in the name of any other person, any equity shares in a public company, or a private company which is a subsidiary of a public company, if the total nominal value of the equity shares intended to be so acquired exceeds, or would, together with the total nominal value of any equity shares already held in the company by such individual, firm, group, constituent of a group, body corporate or bodies corporate under the same management, exceed twenty-five per cent of the paid-up equity share capital of such company.
(2) Where any individual, firm, group, constituent of a group, body corporate or bodies corporate under the same management (hereafter in this Act referred to as the acquirer), is prohibited by sub-section (1), from acquiring or agreeing to acquire except with the previous approval of the Central Government, any share of a public company or a private company which is a subsidiary of a public company, no -
(a) company in which not less than fifty-one per cent of the share capital is held by the Central Government ; or
(b) corporation (not being a company) established by or under any Central Act ; or
(c) financial institution,
shall transfer or agree to transfer any share to such acquirer unless such acquirer has obtained the previous approval of the Central Government for the acquisition, or agreement for the acquisition, of such share.]
1. Inserted by the MRTP (Amendment) Act, 1991 w.r.e.f. 27-9-1991.
 
1[108B. RESTRICTION ON TRANSFER OF SHARES
(1) Every body corporate or bodies corporate under the same management holding whether singly or in the aggregate, ten per cent or more of the nominal value of the subscribed equity share capital of any other company shall, before transferring one or more of such shares, give to the Central Government an intimation of its or their proposal to transfer such share, and every such intimation shall include a statement to the particulars of the share proposed to be transferred, the name and address of the person to whom the share is proposed to be transferred, and shareholding, if any, of the proposed transferee in the concerned company and such other particulars as may be prescribed.
(2) Where, on receipt of an intimation given under sub-section (1) or otherwise, the Central Government is satisfied that as a result of such transfer, a change in the composition of the Board of directors of the company is likely to take place and that such change would be prejudicial to the interests of the company or to the public interest, it may, by order, direct that -
(a) no such share shall be transferred to the proposed transferee :
Provided that no such order shall preclude the body corporate or bodies corporate from intimating, in accordance with the provisions of sub-section (1), to the Central Government its or their proposal to transfer the share to any other person, or
(b) where such share is held in a company engaged in any industry specified in Schedule XV, such share shall be transferred to the Central Government or to such corporation owned or controlled by that Government as may be specified in the direction.
(3) Where a direction is made by the Central Government under clause (b) of sub-section (2), the share referred to in such direction shall stand transferred to the Central Government or to the corporation specified therein, and the Central Government or the specified corporation, as the case may be, shall pay, in cash, to the body corporate or bodies corporate from which such share stands transferred, an amount equal to the market value of such share within the time specified in sub-section (4).
Explanation. - In this sub-section, "market value" means, in the case of a share which is quoted on any recognised stock exchange, the value quoted at such stock exchange on the date immediately preceding the date on which the direction is made, and, in any other case, such value as may be mutually agreed upon between the holder of the
 
share and the Central Government or the specified corporation, as the case may be, or in the absence of such agreement, as may be determined by the Court.
(4) The market value referred to in sub-section (3) shall be given forthwith, where there is no dispute as to such value or where such value has been mutually agreed upon, but where there is a dispute as to the market value, such value as is estimated by the Central Government or the corporation, as the case may be, shall be given forthwith and the balance, if any, shall be given within thirty days from the date when the market value is determined by the court.
(5) If the Central Government does not make any direction under sub-section (2) within sixty days from the date of receipt by it of the intimation given under sub-section (1), the provisions contained in sub-section (2) with regard to the transfer of such share shall not apply.]
1. Inserted by the MRTP (Amendment) Act, 1991 w.r.e.f. 27-9-1991.
 
1[108C. RESTRICTION ON THE TRANSFER OF SHARES OF FOREIGN COMPANIES
No body corporate or bodies corporate under the same management, which holds, or hold in the aggregate, ten per cent or more of the nominal value of the equity share capital of a foreign company, having an established place of business in India, shall transfer any share in such foreign company to any citizen of India or any body corporate incorporated in India except with the previous approval of the Central Government and such previous approval shall not be refused unless the Central Government is of opinion that such transfer would be prejudicial to the public interest].
1. Inserted by the MRTP (Amendment) Act, 1991 w.r.e.f. 27-9-1991.
 
1[108D. POWER OF CENTRAL GOVERNMENT TO DIRECT COMPANIES NOT TO GIVE EFFECT TO THE TRANSFER
(1) Where the Central Government is satisfied that as a result of the transfer of any share or block of shares of a company, a change in the controlling interest of the company is likely to take place and that such change would be prejudicial to the interests of the company or to the public interest, that Government may direct the company not to give effect to the transfer of any such share or block of shares, and -
(a) where the transfer of such share or block of shares has already been registered, not to permit the transferee or any nominee or proxy of the transferee, to exercise any voting or other rights attaching to such share or block of shares ; and
(b) where the transfer of such share or block of shares has not been registered, not to permit any nominee or proxy of the transferor to exercise any voting or other rights attaching to such share or block of shares.
(2) Where any direction is given by the Central Government under sub-section (1) the share or the block of shares referred to therein shall stand re-transferred to the person from whom it was acquired, and thereupon the amount paid by the transferee for the acquisition of such share or block of shares shall be refunded to him by the person to whom such share or block of shares stands or stand re-transferred.
(3) If the refund referred to in sub-section (2) is not made within the period of thirty days from the date of the direction referred to in sub-section (1), the Central Government shall, on the application of the person entitled to get the refund, direct, by order, the refund of such amount and such order may be enforced as if it were a decree made by a civil court.
(4) The person to whom any share or block of shares stands or stand retransferred under sub-section (2) shall, on making refund under sub-section (2) or sub-section (3), be eligible to exercise voting or rights attaching to such share or block of shares.]
1. Inserted by the MRTP (Amendment) Act, 1991 w.r.e.f. 27-9-1991.
 
1[108E. TIME WITHIN WHICH REFUSAL TO BE COMMUNICATED
Every request made to the Central Government for according its approval to the proposal for the acquisition of any share referred to in section 108A or the transfer of any share referred to in section 108C shall be presumed to have been granted unless, within a period of sixty days from the date of receipt of such request, the Central Government communicates to the person by whom the request was made, that the approval prayed for cannot be granted.]
1. Inserted by the MRTP (Amendment) Act, 1991 w.r.e.f. 27-9-1991.
 
1[108F. NOTHING IN SECTIONS 108A TO 108D TO APPLY TO GOVERNMENT COMPANIES, ETC
Nothing contained in section 108A [except sub-section (2) thereof] shall apply to the transfer of any share to, and nothing in section 108B or section 108C or section 108D shall apply to the transfer of any share by -
(a) any company in which not less than fifty-one per cent of the share capital is held by the Central Government ;
(b) any corporation (not being a company) established by or under any Central Act ;
(c) any financial institution.]
1. Inserted by the MRTP (Amendment) Act, 1991 w.r.e.f. 27-9-1991.
 
1[108G. APPLICABILITY OF THE PROVISIONS OF SECTIONS 108A TO 108F
The provisions of sections 108A to 108F (both inclusive) shall apply to the acquisition or transfer of shares or share capital by, or to, an individual, firm, group, constituent of a group, body corporate or bodies corporate under the same management, who or which -
(a) is, in case of acquisition of shares or share capital, the owner in relation to a dominant undertaking and there would be, as a result of such acquisition, any increase -
 
(i) in the production, supply, distribution or control of any goods that are produced, supplied, distributed or controlled in India or any substantial part thereof by that dominant undertaking, or
(ii) in the provision or control of any services that are rendered in India or any substantial part thereof by that dominant undertaking ; or
1. Inserted by the MRTP (Amendment) Act, 1991 w.r.e.f. 27-9-1991.
 
1[108H. CONSTRUCTION OF CERTAIN EXPRESSIONS USED IN SECTIONS 108A TO 108G
The expressions "group", "same management", "financial institution", "dominant undertaking" and "owner" used in sections 108A to 108G (both inclusive), shall have the meanings respectively assigned to them in the Monopolies and Restrictive Trade Practices Act, 1969 (54 of 1969)].
1. Inserted by the MRTP (Amendment) Act, 1991 w.r.e.f. 27-9-1991.
 
1[108I. PENALTY FOR ACQUISITION OR TRANSFER OF SHARE IN CONTRAVENTION OF SECTIONS 108A TO
108D
(1) Any person who acquires any share in contravention of the provisions of section 108A shall be punishable with imprisonment for a term which may extend to three years, or with fine which may extend to 2[fifty] thousand rupees, or with both.
(2) (a) Every body corporate which makes any transfer of shares without giving any intimation as required by section 108B, shall be punishable with fine which may extend to 2[fifty] thousand rupees.
(b) Where any contravention of the provisions of section 108B, has been made by a company, every officer of the company who is in default shall be punishable with imprisonment for a term which may extend to three years, or with fine which may extend to 2[fifty] thousand rupees, or with both.
(3)(a) Every body corporate which makes any transfer of shares in
contravention of the provisions of section 108C, shall be punishable with fine which may extend to 2[fifty] thousand rupees.
(b) Where any contravention of the provisions of section 108C has been made by a company, every officer of the company who is in default shall be punishable with imprisonment for a term which may extend to three years, or with fine which may extend to 2[fifty] thousand rupees, or with both.
(4)(a) Every person who transfers any share in contravention of any order made by the Central Government under section 108B, or gives effect to any transfer of shares made in contravention of any direction made by the Central Government under section 108D, or who exercises any voting right in respect of any share in contravention of any direction made by the Central Government under section 108D, shall be punishable with imprisonment for a term which may extend to five years, and shall also be liable to fine.
(b) If any company gives effect to any voting or other right exercised in relation to any share acquired in contravention of the provisions of section 108B, or which gives effect to any voting right in contravention of any direction made by the Central Government under section 108D, the company shall be punishable with fine which may extend to 2[fifty] thousand rupees, and every officer of the company who is in default shall be punishable with imprisonment for a term which may extend to three years, or with fine which may extend to 2[fifty] thousand rupees, or with both.]
1. Inserted by the MRTP (Amendment) Act, 1991 w.r.e.f. 27-9-1991.
2. Substituted for "five" by the Companies (Amendment) Act, 2000 w.e.f. 13-12-2000.
** Vide MCA Circular No. 30/2011 dated 23.05.2011 Secs. 108A to 108I have become redundant and will have no legal force.
 
109. TRANSFER BY LEGAL REPRESENTATIVE
A transfer of the share or other interest in a company of a deceased member thereof made by his legal representative shall, although the legal representative is not himself a member, be as valid as if he had been a member at the time of the execution of the instrument of transfer.
 
1[109A NOMINATION OF SHARES
(1) Every holder of shares in, or holder of debentures of, a company may, at any time, nominate, in the prescribed manner, a person to whom his shares in, or debentures of, the company shall vest in the event of his death.
(2) Where the shares in, or debentures of, a company are held by more than one person jointly, the joint holders may together nominate, in the prescribed manner, a person to whom all the rights in the shares or debentures of the company shall vest in the event of death of all the joint holders.
(3) Notwithstanding anything contained in any other law for the time being in force or in any disposition, whether testamentary or otherwise, in respect of such shares in, or debentures of, the company, where a nomination made in the prescribed manner purports to confer on any person the right to vest the shares in, or debentures of, the company, the nominee shall, on the death of the shareholder or holder of debentures of, the company or, as the case may be, on the death of the joint holders becomes entitled to all the rights in the shares or debentures of the company or, as the case may be, all the joint holders, in relation to such shares in, or debentures of, the company to the exclusion of all other persons, unless the nomination is varied or cancelled in the prescribed manner.
(4) Where the nominee is a minor, it shall be lawful for the holder of the shares, or holder of debentures, to make the nomination to appoint, in the prescribed manner, any person to become entitled to shares in, or debentures of, the company, in the event of his death, during the minority.]
1. Inserted by the Companies (Amendment) Act, 1999 w.r.e.f. 31-10-1998.
 
1[109B. TRANSMISSION OF SHARES
(1) Any person who becomes a nominee by virtue of the provisions of section 109A, upon the production of such evidence as may be required by the Board and subject as hereinafter provided, elect, either -
(a) to be registered himself as holder of the share or debenture, as the case may be ; or
(b) to make such transfer of the share or debenture, as the case may be, as the deceased shareholder or debenture holder, as the case may be, could have made.
(2) If the person being a nominee, so becoming entitled, elects to be registered as holder of the share or debenture, himself, as the case may be, he shall deliver or send to the company a notice in writing signed by him stating that he so elects and such notice shall be accompanied with the death certificate of the deceased shareholder or debenture holder, as the case may be.
(3) All the limitations, restrictions and provisions of this Act relating to the right to transfer and the registration of transfers of shares or debentures shall be applicable to any such notice or transfer as aforesaid as if the death of the member had not occurred and the notice or transfer were a transfer signed by that shareholder or debenture holder, as the case may be.
(4) A person, being a nominee, becoming entitled to a share or debenture by reason of the death of the holder shall be entitled to the same dividends and other advantages to which he would be entitled if he were the registered holder of the share or debenture except that he shall not, before being registered a member in respect of his share or debenture, be entitled in respect of it to exercise any right conferred by membership in relation to meetings of the company :
Provided that the Board may, at any time, give notice requiring any such person to elect either to be registered himself or to transfer the share or debenture, and if the notice is not complied with within ninety days, the Board may thereafter withhold payment of all dividends, bonuses or other moneys payable in respect of the share or debenture, until the requirements of the notice have been complied with.]
1. Inserted by the Companies (Amendment) Act, 1999 w.r.e.f. 31-10-1998.

 110. APPLICATION FOR TRANSFER

(1) An application for the registration of a transfer of the shares or other interest of a member in a company may be made either by the transferor or by the transferee.
(2) Where the application is made by the transferor and relates to partly paid shares, the transfer shall not be registered, unless the company gives notice of the application to the transferee and the transferee makes no objection to the transfer within two weeks from the receipt of the notice.
(3) For the purposes of sub-section (2), notice to the transferee shall be deemed to have been duly given if it is despatched by prepaid registered post to the transferee at the address given in the instrument of transfer, and shall be deemed to have been duly delivered at the time at which it would have been delivered in the ordinary course of post.
 
1[111. POWER TO REFUSE REGISTRATION AND APPEAL AGAINST REFUSAL
(1) If a company refuses, whether in pursuance of any power of the company under its articles or otherwise, to register the transfer of, or the transmission by operation of law of the right to, any shares or interest of a member in, or debentures of the company, it shall, within two months from the date on which the instrument of transfer, or the intimation of such transmission, as the case may be, was delivered to the company, send notice of the refusal to the transferee and the transferor or to the person giving intimation of such transmission, as the case may be, giving reasons for such refusal.
(2) The transferor or transferee, or the person who gave intimation of the transmission by operation of law, as the case may be, may appeal to the 2[Tribunal] against any refusal of the company to register the transfer or transmission, or against any failure on its part within the period referred to in sub-section (1), either to register the transfer or transmission or to send notice of its refusal to register the same.
(3) An appeal under sub-section (2) shall be made within two months of the receipt of the notice of such refusal or, where no notice has been sent by the company, within four months from the date on which the instrument of transfer, or the intimation of transmission, as the case may be, was delivered to the company.
(4) If -
(a) the name of any person -
(i) is, without sufficient cause, entered in the register of members of a company, or
(ii) after having been entered in the register, is without sufficient cause omitted therefrom ; or
(b) default is made, or unnecessary delay takes place, in entering in the register the fact of any person having become or ceased to be, a member [including a refusal under sub-section (1)],
the person aggrieved, or any member of the company, or the company, may apply to the 2[Tribunal] for rectification of the register.
(5) The 2[Tribunal], while dealing with an appeal preferred under sub- section (2) or an application made under sub- section (4) may, after hearing the parties, either dismiss the appeal or reject the application, or by order -
(a) direct that the transfer or transmission shall be registered by the company and the company shall comply with such order within ten days of the receipt of the order ; or
(b) direct rectification of the register and also direct the company to pay damages, if any, sustained by any party aggrieved.
(6) The 3[Tribunal], while acting under sub-section (5), may, at its discretion, make -
(a) such interim orders, including any orders as to injunction or stay, as it may deem fit and just ;
(b) such orders as to costs as it thinks fit ; and
 
(c) incidental or consequential orders regarding payment of dividend or the allotment of bonus or rights shares.
(7) On any application under this section, the 3[Tribunal] -
(a) may decide any question relating to the title of any person who is a party to the application to have his name entered in, or omitted from, the register ;
(b) generally, may decide any question which it is necessary or expedient to decide in connection with the application for rectification.
(8) The provisions of sub-sections (4) to (7) shall apply in relation to the rectification of the register of debenture holders as they apply in relation to the rectification of the register of members.
(9) If default is made in giving effect to the orders of the 3[Tribunal] under this section, the company and every officer of the company who is in default shall be punishable with fine which may extend to 4[ten] thousand rupees, and with a further fine which may extend to 5[one thousand] rupees for every day after the first day after which the default continues.
(10) Every appeal or application to the 3[Tribunal] under sub-section (2) or sub-section (4) shall be made by a petition in writing and shall be accompanied by such fee as may be prescribed.
(11) In the case of a private company which is not a subsidiary of a public company, where the right to any shares or interest of a member in, or debentures of, the company is transmitted by a sale thereof held by a Court or other public authority, the provisions of sub-sections (4) to (7) shall apply as if the company were a public company :
Provided that the 6[Tribunal] may, in lieu of an order under sub-section (5), pass an order directing the company to register the transmission of the right unless any member or members of the company specified in the order acquire the right aforesaid, within such time as may be allowed for the purpose by the order, on payment to the purchaser of the price paid by him therefor or such other sum as the 6[Tribunal] may determine to be a reasonable compensation for the right in all the circumstances of the case.
(12) If default is made in complying with any of the provisions of this section, the company, and every officer of the company who is in default, shall be punishable with fine which may extend to 7[five hundred] rupees for every day during which the default continues.
(13) Nothing in this section and section 108, 109 or 110 shall prejudice any power of a private company under its articles to enforce the restrictions contained therein against the right to transfer the shares of such company].
8[(14) In this section "company" means a private company and includes a private company which had become a public company by virtue of section 43A of this Act.]
1. Substituted by the Companies (Amendment) Act, 1988 w.e.f. 31-5-1991.
2. Substituted for "Company Law Board" by the Companies (Second Amendment) Act, 2002 (w.e.f. a date yet to be notified).
3. Substituted for "Company Law Board" by the Companies (Second Amendment) Act, 2002 (w.e.f. a date yet to be notified).
4. Substituted for "one" by the Companies (Amendment) Act, 2000 w.e.f. 13-12-2000.
5. Substituted for "one hundred" by the Companies (Amendment) Act, 2000 w.e.f. 13-12-2000.
6. Substituted for "Company Law Board" by the Companies (Second Amendment) Act, 2002 (w.e.f. a date yet to be notified).
7. Substituted for "fifty" by the Companies (Amendment) Act, 2000 w.e.f. 13-12-2000.
8. Inserted by the Depositories Act, 1996 w.r.e.f. 20-9-1995.
 
1[111A. RECTIFICATION OF REGISTER ON TRANSFER
(1) In this section, unless the context otherwise requires, "company" means a company other than a company referred to in sub-section (14) of section 111 of this Act.
(2) Subject to the provisions of this section, the shares or debentures and any interest therein of a company shall be freely transferable :
2[Provided that if a company without sufficient cause refuses to register transfer of shares within two months from the
date on which the instrument of transfer or the intimation of transfer, as the case may be, is delivered to the company, the transferee may appeal to the 3[Tribunal] and it shall direct such company to register the transfer of shares].
4[(3) The 3[Tribunal] may, on an application made by a depository, company, participant or investor or the Securities
and Exchange Board of India, if the transfer of shares or debentures is in contravention of any of the provisions of the Securities and Exchange Board of India Act, 1992 (15 of 1992), or regulations made thereunder or the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986), or any other law for the time being in force, within two months from the date of transfer of any shares or debentures held by a depository or from the date on which the instrument of transfer or the intimation of the transmission was delivered to the company, as the case may be, after such inquiry as it thinks fit, direct any depository or company to rectify its register or records].
(4) The 5[Tribunal] while acting under sub-section (3), may at its discretion make such interim order as to suspend the voting rights before making or completing such enquiry.
(5) The provisions of this section shall not restrict the right of a holder of shares or debentures, to transfer such shares or debentures and any person acquiring such shares or debentures shall be entitled to voting rights unless the voting rights have been suspended by an order of the 5[Tribunal].
(6) Notwithstanding anything contained in this section, any further transfer, during the pendency of the application with the 5[Tribunal], of shares or debentures shall entitle the transferee to voting rights unless the voting rights in respect of such transferee have also been suspended.
(7) The provisions of sub-sections (5), (7), (9), (10) and (12) of section 111 shall, so far as may be, apply to the proceedings before the 1[Tribunal] under this section as they apply to the proceedings under that section].
 
1. Inserted by the Depositories Act, 1996 w.r.e.f. 20-9-1995.
2. Inserted by the Depositories Related Laws (Amendment) Act, 1997 w.e.f. 15-1-1997.
3. Substituted for "Company Law Board" by the Companies (Second Amendment) Act, 2002 (w.e.f. a date yet to be notified).
4. Substituted by the Depositories Related Laws (Amendment) Act, 1997 w.e.f. 15-1-1997. Prior to substitution, sub-section (3) read as under :
"(3) The company Law Board may on an application made by a depository, company, participant or investor or the Securities and Exchange Board of India within two months from the date of transfer of any shares or debentures held by a depository or from the date on which the instrument of transfer or the intimation of transmission was delivered to the company, as the case may be, after such enquiry as it thinks fit, direct any company or depository to rectify register or records if the transfer of the shares or debentures is in contravention of any of the provisions of the Securities and Exchange Board of India Act, 1992 (15 of 1992), or regulations made thereunder or the sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986)."
5. Substituted for "Company Law Board" by the Companies (Second Amendment) Act, 2002 (w.e.f. a date yet to be notified).
 
112. CERTIFICATION OF TRANSFERS
(1) The certification by a company of any instrument of transfer of shares in, or debentures of, the company, shall be taken as a representation by the company to any person acting on the faith of the certification that there have been produced to the company such documents as on the face of them show a prima facie title to the shares or debentures in the transferor named in the instrument of transfer, but not as a representation that the transferor has any title to the shares or debentures.
(2) Where any person acts on the faith of an erroneous certification made by a company negligently, the company shall be under the same liability to him as if the certification had been made fraudulently.
(3) For the purposes of this section -
(a) an instrument of transfer shall be deemed to be certificated if it bears the words "certificate lodged" or words to the like effect ;
(b) the certification of an instrument of transfer shall be deemed to be made by a company, if -
(i) the person issuing the certificated instrument is a person authorised to issue such instruments of transfer on the company's behalf ; and
(ii) the certification signed by any officer or servant of the company or any other person, authorised to certificate transfers on the company's behalf, or if a body corporate has been so authorised, by any officer or servant of that body corporate ;
(c) a certification shall be deemed to be signed by any person, if it purports to be authenticated by his signature unless it is shown that the signature was placed there neither by himself nor by any person authorised to use the signature for the purpose of certificating transfers on the company's behalf.
 
113. LIMITATION OF TIME FOR ISSUE OF CERTIFICATES
(1) 1[Every company, unless prohibited by any provision of law or of any order of any court, tribunal or other authority, shall, within three months after the allotment of any of its shares, debentures or debenture stock, and within two months after the application for the registration of the transfer of any such shares, debentures or debenture stock, deliver, in accordance with the procedure laid down in section 53, the certificates of all shares, debentures and certificates of debenture stocks allotted or transferred :
Provided that the 2[Central Government] may, on an application being made to it in this behalf by the company, extend any of the periods within which the certificates of all debentures and debenture stocks allotted or transferred shall be delivered under this sub-section, to a further period not exceeding nine months, if it is satisfied that it is not possible for the company to deliver such certificates within the said periods].
The expression "transfer", for the purposes of this sub-section, means a transfer duly stamped and otherwise valid, and does not include any transfer which the company is for any reason entitled to refuse to register and does not register.
(2) If default is made in complying with sub-section (1), the company, and every officer of the company who is in default, shall be punishable with fine which may extend to 3[five thousand] rupees for every day during which the default continues.
(3) If any company on which a notice has been served requiring it to make good any default in complying with the provisions of sub-section (1), fails to make good the default within ten days after the service of the notice, the 2[Central Government] may, on the application of the person entitled to have the certificates or the debentures delivered to him, make an order directing the company and any officer of the company to make good the default within such time as may be specified in the order ; and any such order may provide that all costs of and incidental to the application shall be borne by the company or by any officer of the company responsible for the default.
4[(4) Notwithstanding anything contained in sub-section (1), where the securities are dealt with in a depository, the
company shall intimate the details of allotment of securities to depository immediately on allotment of such securities].
1. Substituted by the Companies (Amendment) Act, 1988 w.e.f. 15-6-1988.
2. Substituted for "Company Law Board" by the Companies (Second Amendment) Act, 2002 (w.e.f. a date yet to be notified).
3. Substituted for "five hundred" by the Companies (Amendment) Act, 2000 w.e.f. 13-12-2000.
4. Inserted by the Depositories Act, 1996 w.r.e.f. 20-9-1995.
 
Share warrants
 
114. ISSUE AND EFFECT OF SHARE WARRANTS TO BEARER
(1) A public company limited by shares, if so authorised by its articles, may, with the previous approval of the Central Government, with respect to any fully paid-up shares, issue under its common seal a warrant stating that the bearer of the warrant is entitled to the shares therein specified, and may provide, by coupons or otherwise, for the payment of the future dividends on the shares specified in the warrant.
(2) The warrant aforesaid is in this Act referred to as a "share warrant".
(3) A share warrant shall entitle the bearer thereof to the shares therein specified, and the shares may be transferred by delivery of the warrant.
 
115. SHARE WARRANTS AND ENTRIES IN REGISTER OF MEMBERS
(1) On the issue of a share warrant, the company shall strike out of its register of members the name of the member then entered therein as holding the shares specified in the warrant as if he had ceased to be a member, and shall enter in that register the following particulars, namely : -
(a) the fact of the issue of the warrant ;
(b) a statement of the shares specified in the warrant, distinguishing each share by its number ; and
(c) the date of the issue of the warrant.
(2) The bearer of a share warrant shall, subject to the articles of the company, be entitled, on surrendering the warrant for cancellation and paying such fee to the company as the Board of directors may from time to time determine, to have his name entered as a member in the register of members.
(3) The company shall be responsible for any loss incurred by any person by reason of the company entering in its register of members the name of a bearer of a share warrant in respect of the shares therein specified, without the warrant being surrendered and cancelled.
(4) Until the warrant is surrendered, the particulars specified in sub- section (1) shall be deemed to be the particulars required by this Act to be entered in the register of members ; and, on the surrender, the date of the surrender shall be entered in that register.
(5) Subject to the provisions of this Act, the bearer of a share warrant may, if the articles of the company so provide, be deemed to be a member of the company within the meaning of this Act, for any purposes defined in the articles.
(6) If default is made in complying with any of the requirements of this section, the company, and every officer of the company who is in default, shall be punishable with fine which may extend to 1[five hundred] rupees for every day during which the default continues.
every officer in default shall be punishable with fine upto Rs. 500 per day [sub-section (6)].
Offence compoundable : The above offence punishable under sub-section (6) is compoundable under section 621A.
1. Substituted for "fifty" by the Companies (Amendment) Act, 2000 w.e.f. 13-12-2000.
 
Penalty for personation of shareholder
 
116. PENALTY FOR PERSONATION OF SHAREHOLDER
If any person deceitfully personates an owner of any share or interest in a company, or of any share warrant or coupon issued in pursuance of this Act, and thereby obtains or attempts to obtain any such share or interest or any such share warrant or coupon, or receives or attempts to receive any money due to any such owner, he shall be punishable with imprisonment for a term which may extend to three years and shall also be liable to fine.
 
Special provisions as to debentures
 
117. DEBENTURES WITH VOTING RIGHTS NOT TO BE ISSUED HEREAFTER
No company shall, after the commencement of this Act, issue any debentures carrying voting rights at any meeting of the company, whether generally or in respect of particular classes of business.
 
1[117A. DEBENTURE TRUST DEED
(1) A trust deed for securing any issue of debentures shall be in such form and shall be executed within such period as may be prescribed.
(2) A copy of the trust deed shall be open to inspection to any member or debenture holder of the company and he shall also be entitled to obtain copies of such trust deed on payment of such sum as may be prescribed.
(3) If a copy of the trust deed is not made available for inspection or is not given to any member or debenture holder, the company and every officer of the company who is in a default, shall be punishable, for each offence, with fine which may extend to five hundred rupees for every day during which the offence continues.]
1. Inserted by the Companies (Amendment) Act, 2000 w.e.f. 13-12-2000.
 
1[117B. APPOINTMENT OF DEBENTURE TRUSTEES AND DUTIES OF DEBENTURE TRUSTEES
(1) No company shall issue a prospectus or a letter of offer to the public for subscription of its debentures, unless the company has, before such issue, appointed one or more debenture trustees for such debentures and the company has, on the face of the prospectus or the letter of offer, stated that the debenture trustee or trustees have given their consent to the company to be so appointed :
 
Provided that no person shall be appointed as a debenture trustee, if he -
(a) beneficially holds shares in the company ;
(b) is beneficially entitled to moneys which are to be paid by the company to the debenture trustee ;
(c) has entered into any guarantee in respect of principal debts secured by the debentures or interest thereon.
(2) Subject to the provisions of this Act, the functions of the debenture trustees shall generally be to protect the interest of holders of debentures (including the creation of securities within the stipulated time) and to redress the grievances of holders of debentures effectively.
(3) In particular, and without prejudice to the generality of the foregoing functions, a debenture trustee may take such other steps as he may deem fit -
(a) to ensure that the assets of the company issuing debentures and each of the guarantors are sufficient to discharge the principal amount at all times ;
(b) to satisfy himself that the prospectus or the letter of offer does not contain any matter which is inconsistent with the terms of the debentures or with the trust deed ;
(c) to ensure that the company does not commit any breach of covenants and provisions of the trust deed ;
(d) to take such reasonable steps to remedy any breach of the covenants of the trust deed or the terms of issue of debentures ;
(e) to take steps to call a meeting of holders of debentures as and when such meeting is required to be held.
(4) Where at any time the debenture trustee comes to a conclusion that the assets of the company are insufficient or are likely to become insufficient to discharge the principal amount as and when it becomes due, the debenture trustee may file a petition before the 2[Central Government] and the 2[Central Government] may, after hearing the company and any other person interested in the matter, by an order, impose such restrictions on the incurring of any further liabilities as the 2[Central Government] thinks necessary in the interests of holders of the debentures.
3[Provided that in the case of revival and rehabilitation of a sick industrial company under Part VIA, the provisions of this section shall have effect as if for the words "Central Government", the word "Tribunal" had been substituted;]
1. Inserted by the Companies (Amendment) Act, 2000 w.e.f. 13-12-2000.
2. Substituted for "Company Law Board" by the Companies (Second Amendment) Act, 2002 (w.e.f. a date yet to be notified).
3. Inserted by the Companies (Second Amendment) Act, 2002 (w.e.f. a date yet to be notified).
 
1[117C. LIABILITY OF COMPANY TO CREATE SECURITY AND DEBENTURE REDEMPTION RESERVE
(1) Where a company issues debentures after the commencement of this Act, it shall create a debenture redemption reserve for the redemption of such debentures, to which adequate amounts shall be credited, from out of its profits every year until such debentures are redeemed.
(2) The amounts credited to the debenture redemption reserve shall not be utilised by the company except for the purpose aforesaid.
(3) The company referred to in sub-section (1) shall pay interest and redeem the debentures in accordance with the terms and conditions of their issue.
(4) Where a company fails to redeem the debentures on the date of maturity, the 2[Tribunal] may, on the application of any or all the holders of debentures shall, after hearing the parties concerned, direct, by order, the company to redeem the debentures forthwith by the payment of principal and interest due thereon.
(5) If default is made in complying with the order of the 2[Tribunal] under sub-section (4), every officer of the company who is in default, shall be punishable with imprisonment which may extend to three years and shall also be liable to a fine of not less than five hundred rupees for every day during which such default continues.]
1. Inserted by the Companies (Amendment) Act, 2000 w.e.f. 13-12-2000.
2. Substituted for "Company Law Board" by the Companies (Second Amendment) Act, 2002 (w.e.f. a date yet to be notified).
 
118. RIGHT TO OBTAIN COPIES OF AND INSPECT TRUST DEED
(1) A copy of any trust deed for securing any issue of debentures shall be forwarded to the holder of any such debentures or any member of the company, at his request and within seven days of the making thereof, on payment -
(a) in the case of a printed trust deed, of 1[such sum as may be prescribed] ; and
(b) in the case of a trust deed which has not been printed, of 2[such sum as may be prescribed] for every one hundred words or fractional part thereof required to be copied.
(2) If a copy is refused, or is not forwarded within the time specified in sub-section (1), the company, and every officer of the company who is in default, shall be punishable, for each offence, with fine which may extend to 3[five hundred] rupees and with a further fine which may extend to 4[two hundred] rupees for every day during which the offence continues.
(3) The 5[Central Government] may also, by order, direct that the copy required shall forthwith be sent to the person requiring it.
(4) The trust deed referred to in sub-section (1) shall also be open to inspection by any member or debenture holder of the company in the same manner, to the same extent, and on payment of the same fees, as if it were the register of members of the company.
1. Substituted for "the sum of one rupee" by the Companies (Amendment) Act, 1988 w.e.f. 15-7-1988.
2. Substituted for "six annas" by the Companies (Amendment) Act, 1988 w.e.f. 15-7-1988.
3. Substituted for "fifty" by the Companies (Amendment) Act, 2000 w.e.f. 13-12-2000.
4. Substituted for "twenty" by the Companies (Amendment) Act, 2000 w.e.f. 13-12-2000.
 
5. Substituted for "Company Law Board" by the Companies (Second Amendment) Act, 2002 (w.e.f. a date yet to be notified).
 
119. LIABILITY OF TRUSTEES FOR DEBENTURE HOLDERS
(1) Subject to the provisions of this section, any provision contained in a trust deed for securing an issue of debentures, or in any contract with
the holders of debentures secured by a trust deed, shall be void insofar
as it would have the effect of exempting a trustee thereof from, or indemnifying him against, liability for breach of trust, where he fails to show the degree of care and diligence required of him as trustee, having regard to the provisions of the trust deed conferring on him any powers, authorities or discretions.
(2) Sub-section (1) shall not invalidate -
(a) any release otherwise validly given in respect of anything done or omitted to be done by a trustee before the giving of the release ; or
(b) any provision enabling such a release to be given -
(i) on the agreement thereto of a majority of not less than three-fourths in value of the debenture holders present and voting in person or, where proxies are permitted, by proxy, at a meeting summoned for the purpose ; and
(ii) either with respect to specific acts or omissions or on the trustee dying or ceasing to act.
(3) Sub-section (1) shall not operate -
(a) to invalidate any provision in force at the commencement of this Act so long as any person then entitled to the benefit of that provision or afterwards given the benefit thereof under sub- section (4) remains a trustee of the deed in question ; or
(b) to deprive any person of any exemption or right to be indemnified in respect of anything done or omitted to be done by him while any such provision was in force.
(4) While any trustee of a trust deed remains entitled to the benefit of a provision saved by sub-section (3), the benefit of that provision may be given either -
(a) to all trustees of the deed, present and future ; or
(b) to any named trustees or proposed trustees thereof ;
by a resolution passed by a majority of not less than three-fourths in value of the debenture holders present in person or, where proxies are permitted, by proxy, at a meeting called for the purpose in accordance with the provisions of the deed or, if the deed makes no provision for calling meetings, at a meeting called for the purpose in any manner approved by the Court.
 
120. PERPETUAL DEBENTURES
A condition contained in any debentures or in any deed for securing any debentures, whether issued or executed before or after the commencement of this Act, shall not be invalid by reason only that thereby, the debentures are made irredeemable or redeemable only on the happening of a contingency, however remote, or on the expiration of a period, however long.
 
121. POWER TO RE-ISSUE REDEEMED DEBENTURES IN CERTAIN CASES
(1) Where either before or after the commencement of this Act, a company has redeemed any debentures previously issued, then, -
(a) unless any provision to the contrary, whether express or implied, is contained in the articles, or in the conditions of issue, or in any contract entered into by the company ; or
(b) unless the company has, by passing a resolution to that effect or by some other act, manifested its intention that the debentures shall be cancelled ;
the company shall have, and shall be deemed always to have had, the right to keep the debentures alive for the purposes of re-issue ; and in exercising such a right, the company shall have, and shall be deemed always to have had, power to re-issue the debentures either by re-issuing the same debentures or by issuing other debentures in their place.
(2) Upon such re-issue, the person entitled to the debentures shall have, and shall be deemed always to have had, the same rights and priorities as if the debentures had never been redeemed.
(3) Where with the object of keeping debentures alive for the purpose of re-issue, they have, either before or after the commencement of this Act, been transferred to a nominee of the company, a transfer from that nominee shall be deemed to be a re-issue for the purposes of this section.
(4) Where a company has, either before or after the commencement of this Act, deposited any of its debentures to secure advances from time to time on current account or otherwise, the debentures shall not be deemed to have been redeemed by reason only of the account of the company having ceased to be in debit whilst the debentures remained so deposited.
(5) The re-issue of a debenture or the issue of another debenture in its place under the power by this section given to, or deemed to have been possessed by, a company, whether the re-issue or issue was made before or after the commencement of this Act, shall be treated as the issue of a new debenture for the purposes of stamp duty, but it shall not be so treated for the purposes of any provision limiting the amount or number of debentures to be issued : Provided that any person lending money on the security of a debenture re-issued under this section which appears to be duly stamped may give the debenture in evidence in any proceedings for enforcing his security without payment of the stamp duty or any penalty in respect thereof, unless he had notice or, but for his negligence, might have
 
discovered, that the debenture was not duly stamped ; but in any such case the company shall be liable to pay the proper stamp duty and penalty.
(6) Nothing in this section shall prejudice -
(a) the operation of any decree or order of a Court of competent jurisdiction pronounced or made before the twenty- fifth day of February, 1910, as between the parties to the proceedings in which the decree or order was made ;
(b) where an appeal has been preferred against any such decree or order, the operation of any decree or order passed on such appeal, as between the parties to such appeal ; or
(c) any power to issue debentures in the place of any debentures paid off or otherwise satisfied or extinguished, reserved to a company by its debentures or the securities for the same.
 
122. SPECIFIC PERFORMANCE OF CONTRACT TO SUBSCRIBE FOR DEBENTURES
A contract with a company to take up and pay for any debentures of the company may be enforced by a decree for specific performance.
 
123. PAYMENTS OF CERTAIN DEBTS OUT OF ASSETS SUBJECT TO FLOATING CHARGE IN PRIORITY TO CLAIMS UNDER THE CHARGE
(1) Where either -
(a) a receiver is appointed on behalf of the holders of any debentures of a company secured by a floating charge ; or
(b) possession is taken by or on behalf of those debenture holders of any property comprised in or subject to the charge ;
then, if the company is not at the time in course of being wound up, the debts which in every winding up are, under the provisions of Part VII relating to preferential payments, to be paid in priority to all other debts, shall be paid forthwith out of any assets coming to the hands of the receiver or other person taking possession as aforesaid in priority to any claim for principal or interest in respect of the debentures.
(2) In the application of the provisions aforesaid, section 530 shall be construed as if the provision for payment of accrued holiday remuneration becoming payable on the termination of employment before or by the effect of the winding up order or resolution were a provision for payment of such remuneration becoming payable on the termination of employment before or by the effect of the appointment of the receiver or possession being taken as aforesaid.
(3) The periods of time mentioned in the said provisions of Part VII shall be reckoned from the date of appointment of the receiver or of possession being taken as aforesaid, as the case may be.
(4) Where the date referred to in sub-section (3) occurred before the commencement of this Act, sub-sections (1) and
(3) shall have effect with the substitution, for references to the said provisions of Part VII, of references to the provisions which, by virtue of sub-section (9) of section 530, are deemed to remain in force in the case therein mentioned, and sub-section (2) shall not apply.
(5) Any payments made under this section shall be recouped, as far as may be, out of the assets of the company available for payment of general creditors.
 
PART V REGISTRATION OF CHARGES
 
124. "CHARGE" TO INCLUDE MORTGAGE IN THIS PART
In this Part, the expression "charge" includes a mortgage.
 
125. CERTAIN CHARGES TO BE VOID AGAINST LIQUIDATOR OR CREDITORS UNLESS REGISTERED
(1) Subject to the provisions of this Part, every charge created on or after the 1st day of April, 1914, by a company and being a charge to which this section applies shall, so far as any security on the company's property or undertaking is conferred thereby, be void against the liquidator and any creditor of the company, unless the prescribed particulars of the charge, together with the instrument, if any, by which the charge is created or evidenced, or a copy thereof verified in the prescribed manner, are filed with the Registrar for registration in the manner required by this Act within thirty days after the date of its creation :
1[Provided that the Registrar may allow the particulars and instrument or copy as aforesaid to be filed within thirty days next following the expiry of the said period of thirty days on payment of such additional fee not exceeding ten
times the amount of fee specified in Schedule X as the Registrar may determine, if the company satisfies the Registrar that it had sufficient cause for not filing the particulars and instrument or copy within that period.]
(2) Nothing in sub-section (1) shall prejudice any contract or obligation for the repayment of the money secured by the charge.
(3) When a charge becomes void under this section, the money secured thereby shall immediately become payable.
(4) This section applies to the following charges :
(a) a charge for the purpose of securing any issue of debentures ;
(b) a charge on uncalled share capital of the company ;
(c) a charge on any immovable property, wherever situate, or any interest therein ;
(d) a charge on any book debts of the company ;
(e) a charge, not being a pledge, on any movable property of the company ;
(f) a floating charge on the undertaking or any property of the company including stock-in-trade ;
(g) a charge on calls made but not paid ;
(h) a charge on a ship or any share in a ship ;
 
(i) a charge on goodwill, on a patent or a licence under a patent, on a trade mark, or on a copyright or a licence under a copyright.
(5) In the case of a charge created out of India and comprising solely property situate outside India, thirty days after the date on which the instrument creating or evidencing the charge or a copy thereof could, in due course of post and if despatched with due diligence, have been received in India, shall be substituted for thirty days after the date of the creation of the charge, as the time within which the particulars and instrument or copy are to be filed with the Registrar.
(6) Where a charge is created in India but comprises property outside India, the instrument creating or purporting to create the charge under this section or a copy thereof verified in the prescribed manner, may be filed for registration, notwithstanding that further proceedings may be necessary to make the charge valid or effectual according to the law of the country in which the property is situate.
(7) Where a negotiable instrument has been given to secure the payment of any book debts of a company, the deposit of the instrument for the purpose of securing an advance to the company shall not, for the purposes of this section, be treated as a charge on those book debts.
(8) The holding of debentures entitling the holder to a charge on immovable property shall not, for the purposes of this section, be deemed to be an interest in immovable property.
1. Substituted by the Companies (Amendment) Act, 1988 w.e.f. 15-6-1988.
 
126. DATE OF NOTICE OF CHARGE
Where any charge on any property of a company required to be registered under section 125 has been so registered, any person acquiring such property or any part thereof, or any share or interest therein, shall be deemed to have notice of the charge as from the date of such registration.
 
127. REGISTRATION OF CHARGES ON PROPERTIES ACQUIRED SUBJECT TO CHARGE
(1) Where a company acquires any property which is subject to a charge of any such kind as would, if it had been created by the company after the acquisition of the property, have been required to be registered under this Part, the company shall cause the prescribed particulars of the charge, together with a copy (certified in the prescribed manner to be a correct copy) of the instrument, if any, by which the charge was created or is evidenced, to be delivered to the Registrar for registration in the manner required by this Act within thirty days after the date on which the acquisition is completed :
Provided that, if the property is situate, and the charge was created, outside India, thirty days after the date on which a copy of the instrument could, in due course of post and if despatched with due diligence, have been received in India shall be substituted for thirty days after the completion of the acquisition as the time within which the particulars and the copy of the instrument are to be delivered to the Registrar.
(2) If default is made in complying with sub-section (1), the company, and every officer of the company who is in default, shall be punishable with fine which may extend to 1[five thousand] rupees.
 
1. Substituted for "five hundred" by the Companies (Amendment) Act, 2000 w.e.f 13-12-2000.
 
128. PARTICULARS IN CASE OF SERIES OF DEBENTURES ENTITLING HOLDERS PARI PASSU
Where a series of debentures containing, or giving by reference to any other instrument, any charge to the benefit of which the debenture holders of that series are entitled pari passu is created by a company, it shall, for the purposes of section 125, be sufficient, if there are filed with the Registrar, within thirty days after the execution of the deed containing the charge or, if there is no such deed, after the execution of any debentures of the series, the following particulars : -
(a) the total amount secured by the whole series ;
(b) the dates of the resolutions authorising the issue of the series and the date of the covering deed, if any, by which the security is created or defined ;
(c) a general description of the property charged ; and
(d) the names of the trustees, if any, for the debenture holders ;
together with the deed containing the charge, or a copy of the deed verified in the prescribed manner, or if there is no such deed, one of the debentures of the series :
Provided that, where more than one issue is made of debentures in the series, there shall be filed with the Registrar, for entry in the register, particulars of the date and amount of each issue ; but an omission to do this shall not affect the validity of the debentures issued.
 
129. PARTICULARS IN CASE OF COMMISSION, ETC., ON DEBENTURES
Where any commission, allowance or discount has been paid or made either directly or indirectly by a company to any person in consideration of his subscribing or agreeing to subscribe, whether absolutely or conditionally, for any debentures of the company, or procuring or agreeing to procure subscriptions, whether absolute or conditional, for any such debentures, the particulars required to be filed for registration under sections 125 and 128 shall include particulars as to the amount or rate per cent of the commission, discount or allowance so paid or made ; but an omission to do this shall not affect the validity of the debentures issued :
Provided that the deposit of any debentures as security for any debt of the company shall not, for the purposes of this section, be treated as the issue of the debentures at a discount.
 
130. REGISTER OF CHARGES TO BE KEPT BY REGISTRAR
1[(1) The Registrar shall, in respect of each company, cause to be kept a register containing the particulars of all the charges requiring registration under this Part.
(1A) Every company shall forward to the Registrar for being entered in the register kept under sub-section (1) the particulars of all the charges requiring registration under this Part in such form and manner, and after payment of, such fees as may be prescribed.
(1B) The particulars of the charges referred to in sub-section (1) shall relate to, -
(a) in the case of a charge to the benefit of which the holders of a series of debentures are entitled, such particulars as are specified in sections 128 and 129 ;
(b) in the case of any other charge, -
(i) if the charge is a charge created by the company, the date of its creation, and if the charge was a charge existing on property acquired by the company, the date of the acquisition of the property ;
(ii) the amount secured by the charge ;
(iii) short particulars of the property charged ; and
(iv) the persons entitled to the charge.
(1C) The pages of the register shall be consecutively numbered and the Registrar shall -
(a) cause to be kept in such register in the prescribed form, the documents of charges filed in such form and manner as may be prescribed ; and
(b) sign or initial every page of such register.
(2) After entering the particulars of all the charges required under sub-section (1), the Registrar shall return the instrument, if any, or the verified copy thereof, as the case may be, filed in accordance with the provisions of this Part to the person filing it.]
(3) The register kept in pursuance of this section shall be open to inspection by any person on payment of 2[such fee as may be prescribed] for each inspection.
 
1. Substituted for sub-sections (1) and (2) by the Companies (Amendment) Act, 1988 w.e.f. 17-4-1989.
2. Substituted for "a fee of one rupee" by the Companies (Amendment) Act, 1988 w.e.f. 17-4-1989.
 
131. INDEX TO REGISTER OF CHARGES
The Registrar shall keep a chronological index, in the prescribed form and with the prescribed particulars, of the charges registered with him in pursuance of this Part.
 
132. CERTIFICATE OF REGISTRATION
The Registrar shall give a certificate under his hand of the registration of any charge registered in pursuance of this Part, stating the amount thereby secured ; and the certificate shall be conclusive evidence that the requirements of this Part as to registration have been complied with.
 
133. ENDORSEMENT OF CERTIFICATE OF REGISTRATION ON DEBENTURE OR CERTIFICATE OF DEBENTURE STOCK
(1) The company shall cause a copy of every certificate of registration given under section 132, to be endorsed on every debenture or certificate of debenture stock which is issued by the company and the payment of which is secured by the charge so registered :
Provided that nothing in this sub-section shall be construed as requiring a company to cause a certificate of registration of any charge so given to be endorsed on any debenture or certificate of debenture stock issued by the company before the charge was created.
(2) If any person knowingly delivers, or wilfully authorises or permits the delivery of, any debenture or certificate of debenture stock which, under the provisions of sub-section (1), is required to have endorsed on it a copy of a certificate of registration without the copy being so endorsed upon it, he shall, without prejudice to any other liability, be punishable with fine which may extend to 1[ten] thousand rupees.
 
1. Substituted for "one" by the Companies (Amendment) Act, 2000 w.e.f. 13-12-2000.
 
134. DUTY OF COMPANY AS REGARDS REGISTRATION AND RIGHT OF INTERESTED PARTY
(1) It shall be the duty of a company to file with the Registrar for registration the particulars of every charge created by the company, and of every issue of debentures of a series, requiring registration under this Part ; but registration of any such charge may also be effected on the application of any person interested therein.
(2) Where registration is effected on the application of some person other than the company, that person shall be entitled to recover from the company the amount of any fees properly paid by him to the Registrar on the registration.
 
135. PROVISIONS OF PART TO APPLY TO MODIFICATION OF CHARGES
Whenever the terms or conditions, or the extent or operation, of any charge registered under this Part are or is modified, it shall be the duty of the company to send to the Registrar the particulars of such modification, and the provisions of this Part as to registration of a charge shall apply to such modification of the charge.
 
136. COPY OF INSTRUMENT CREATING CHARGE TO BE KEPT BY COMPANY AT REGISTERED OFFICE
 
Every company shall cause a copy of every instrument creating any charge requiring registration under this Part to be kept at the registered office of the company :
Provided that, in the case of a series of uniform debentures, a copy of one debenture of the series shall be sufficient.
 
137. ENTRY IN REGISTER OF CHARGES OF APPOINTMENT OF RECEIVER OR MANAGER
(1) If any person obtains an order for the appointment of a receiver of, or of a person to manage, the property of a company, or if any person appoints such receiver or person under any powers contained in any instrument, he shall, within thirty days from the date of the passing of the order or of the making of the appointment under the said powers, give notice of the fact to the Registrar ; and the Registrar shall, on payment of the prescribed fee, enter the fact in the register of charges.
(2) Where any person so appointed under the powers contained in any instrument cease to act as such, he shall, on so ceasing, give to the Registrar notice to that effect ; and the Registrar shall enter the notice in the register of charges.
(3) If any person makes default in complying with the requirements of sub-section (1) or (2), he shall be punishable with fine which may extend to 1[five hundred] rupees for every day during which the default continues.
1. Substituted for "fifty" by the Companies (Amendment) Act, 2000 w.e.f. 13-12-2000.
 
138. COMPANY TO REPORT SATISFACTION AND PROCEDURE THEREAFTER
(1) The company shall give intimation to the Registrar of the payment or satisfaction, in full, of any charge relating to the company and requiring registration under this Part, within thirty days from the date of such payment or satisfaction.
(2) The Registrar shall, on receipt of such intimation, cause a notice to be sent to the holder of the charge calling upon him to show cause within a time (not exceeding fourteen days) specified in such notice, why payment or satisfaction should not be recorded as intimated to the Registrar.
(3) If no cause is shown, the Registrar shall order that a memorandum of satisfaction shall be entered in the register of charges.
(4) If cause is shown, the Registrar shall record a note to that effect in the register, and shall inform the company that he has done so.
(5) Nothing in this section shall be deemed to affect the power of the Registrar to make an entry in the register of charges under section 139 otherwise than on receipt of an intimation from the company.
 
139. POWER OF REGISTRAR TO MAKE ENTRIES OF SATISFACTION AND RELEASE IN ABSENCE OF INTIMATION FROM COMPANY
The Registrar may, on evidence being given to his satisfaction with respect to any registered charge, -
(a) that the debt for which the charge was given has been paid or satisfied in whole or in part ; or
(b) that part of the property or undertaking charged has been released from the charge or has ceased to form part of the company's property or undertaking ;
enter in the register of charges a memorandum of satisfaction in whole or in part, or of the fact that part of the property or undertaking has been released from the charge or has ceased to form part of the company's property or undertaking, as the case may be, notwithstanding the fact that no intimation has been received by him from the company.
 
140. COPY OF MEMORANDUM OF SATISFACTION TO BE FURNISHED TO COMPANY
Where the Registrar enters a memorandum of satisfaction in whole or in part, in pursuance of section 138 or 139, he shall furnish the company with a copy of the memorandum.
 
1[141. RECTIFICATION BY CENTRAL GOVERNMENT OF REGISTER OF CHARGES
(1) The Central Government, on being satisfied -
(a) that the omission to file with the Registrar the particulars of any charge created by a company or of any charge subject to which any property has been acquired by the company or of any modification of any such charge or of any issue of debentures of a series, or that the omission to register any charge within the time required by this Part or that the omission to give intimation to the Registrar of the payment or satisfaction of a charge, within the time required by this Part, or that the omission or misstatement of any particular with respect to any such charge, modification or issue of debentures of a series or with respect to any memorandum of satisfaction or other entry made in pursuance of section 138 or section 139, was accidental or due to inadvertence or some other sufficient cause or is not of a nature to prejudice the position of creditors or shareholders of the company ; or
(b) that on other grounds, it is just and equitable to grant relief, may on the application of the company or any person interested and on such terms and conditions as it may seem to the Central Government just and expedient, direct that the time for the filing of the particulars or for the registration of the charge or for the giving of intimation of payment or satisfaction shall be extended or, as the case may require, that the omission or mis-statement shall be rectified.
(2) The Central Government may make such order as to the costs of an application under sub-section (1) as it thinks fit.
(3) Where the Central Government extends the time for the registration of a charge, the order shall not prejudice any rights acquired in respect of the property concerned before the charge is actually registered.]
 
1. Substituted by Companies (Second Amendment) Act, 2002 (w.e.f. a date yet to be notified). Prior to substitution section 141 read as under :
 
`141. Rectification by Company Law Board of register of charges. - (1) The Company Law Board, on being satisfied -
(a) that the omission to file with the Registrar the particulars of any charge created by a company or of any charge subject to which any property has been acquired by the company or of any modification of any such charge or of any issue of debentures of a series, or that the omission to register any charge within the time required by this Part, or that the omission to give intimation to the Registrar of the payment or satisfaction of a charge, within the time required by this Part, or that the omission or mis-statement of any particular with respect to any such charge, modification or issue of debentures of a series or with respect to any memorandum of satisfaction or other entry made in pursuance of section 138 or 139, was accidental or due to inadvertence or to some other sufficient cause or is not of a nature to prejudice the position of creditors or shareholders of the company; or
(b) that on other grounds it is just and equitable to grant relief ;
may, on the application of the company or any person interested and on such terms and conditions as seem to the Company Law Board just and expedient, direct that the time for the filing of the particulars or for the registration of the charge or for the giving of intimation of payment or satisfaction shall be extended or, as the case may require, that the omission or mis-statement shall be rectified.
(2) The Company Law Board may make such order as to the costs of an application under sub-section (1) as it thinks fit.
(3) Where the Company Law Board extends the time for the registration of a charge, the order shall not prejudice any rights acquired in respect of the property concerned before the charge is actually registered.'
 
142. PENALTIES
(1) If default is made in filing with the Registrar for registration the particulars -
(a) of any charge created by the company ;
(b) of the payment or satisfaction of a debt in respect of which a charge has been registered under this Part ; or
(c) of the issues of debentures of a series ;
requiring registration with the Registrar under the provisions of this Part, then unless the registration has been effected on the application of some other person, the company, and every officer of the company or other person who is in default, shall be punishable with fine which may extend to 1[five thousand] rupees for every day during which the default continues.
(2) Subject as aforesaid, if any company makes default in complying with any of the other requirements of this Act as to the registration with the Registrar of any charge created by the company or of any fact connected therewith, the company, and every officer of the company who is in default, shall, without prejudice to any other liability, be punishable with fine which may extend to 2[ten] thousand rupees.
 
1. Substituted for "five hundred" by the Companies (Amendment) Act, 2000 w.e.f. 13-12-2000.
2. Substituted for "one" by the Companies (Amendment) Act, 2000 w.e.f. 13-12-2000.
 
143. COMPANY'S REGISTER OF CHARGES
(1) Every company shall keep at its registered office a register of charges and enter therein all charges specifically affecting property of the company, and all floating charges on the undertaking or on any property of the company, giving in each case -
(i) a short description of the property charged ;
(ii) the amount of the charge ; and
(iii) except in the case of securities of bearer, the names of the persons entitled to the charge.
(2) If any officer of the company knowingly omits, or wilfully authorises or permits the omission of, any entry required to be made in pursuance of sub-section (1), he shall be punishable with fine which may extend to 1[five thousand] rupees.
 
1. Substituted for "five hundred" by the Companies (Amendment) Act, 2000 w.e.f. 13-12-2000.
 
144. RIGHT TO INSPECT COPIES OF INSTRUMENTS CREATING CHARGES AND COMPANY'S REGISTER OF CHARGES
(1) The copies of instruments creating charges kept in pursuance of section 136, and the register of charges kept in pursuance of section 143, shall be open during business hours (but subject to such reasonable restrictions as the company in general meeting may impose, so that not less than two hours in each day are allowed for inspection) to the inspection of any creditor or member of the company without fee, at the registered office of the company.
(2) The register of charges kept in pursuance of section 143 shall also be open, during business hours but subject to the reasonable restrictions aforesaid, to the inspection of any other person on payment of a fee of 1[such sum as may be prescribed] for each inspection, at the registered office of the company.
(3) If inspection of the said copies or register is refused, the company, and every officer of the company who is in default, shall be punishable with fine which may extend to 2[five hundred] rupees and with a further fine which may extend to 3[two hundred] rupees for every day during which the refusal continues.
(4) The 4[Central Government] may also by order compel an immediate inspection of the said copies or register.
 
1. Substituted for "one rupee" by the Companies (Amendment) Act, 1988 w.e.f. 15-7-1988.
 
2. Substituted for "fifty" by the Companies (Amendment) Act, 2000 w.e.f. 13-12-2000.
3. Substituted for "twenty" by the Companies (Amendment) Act, 2000 w.e.f. 13-12-2000.
4. Substituted for "Company Law Board" by the Companies (Second Amendment) Act, 2002 (w.e.f. a date yet to be notified).
 
145. APPLICATION OF PART TO CHARGES REQUIRING REGISTRATION UNDER IT BUT NOT UNDER PREVIOUS LAW
In respect of any charge created before, and remaining unsatisfied at, the commencement of this Act, which, if this Act had been in force at the relevant time, would have had to be registered by the company in pursuance of this Part but which did not require registration under the Indian Companies Act, 1913 (7 of 1913), and in respect of all matters relating to such charge, the provisions of this Part shall apply and have effect in all respects, as if the date of commencement of this Act had been substituted therein for the date of creation of the charge, or the date of completion of the acquisition of the property subject to the charge, as the case may be. Nothing contained in this section shall be deemed to affect the relative priorities as they existed immediately before the commencement of this Act, as between charges on the same property.
 
PART VI: MANAGEMENT AND ADMINISTRATION CHAPTER I: GENERAL PROVISIONS
Registered office and name
 
146. REGISTERED OFFICE OF COMPANY
(1) A company shall, as from the day on which it begins to carry on business, or as from the thirtieth day after the date of its incorporation, whichever is earlier, have a registered office to which all communications and notices may be addressed.
(2) Notice of the situation of the registered office, and of every change therein, shall be given within thirty days after the date of the incorporation of the company or after the date of the change, as the case may be, to the Registrar who shall record the same :
Provided that except on the authority of a special resolution passed by the company, the registered office of the company shall not be removed -
(a) in the case of an existing company, outside the local limits of any city, town or village where such office is situated at the commencement of this Act, or where it may be situated later by virtue of a special resolution passed by the company ; and
(b) in the case of any other company, outside the local limits of any city, town or village where such office is first situated, or where it may be situated later by virtue of a special resolution passed by the company.
(3) The inclusion in the annual return of a company of a statement as to the address of its registered office shall not be taken to satisfy the obligation imposed by sub-section (2).
(4) If default is made in complying with the requirements of this section, the company, and every officer of the company who is in default, shall be punishable with fine which may extend to 1[five hundred] rupees for every day during which the default continues.
 
1. Substituted for "fifty' by the Companies (Amendment) Act, 2000 w.e.f. 13-12-2000.
 
147. PUBLICATION OF NAME BY COMPANY
(1) Every company -
(a) shall paint or affix its name and the address of its registered office, and keep the same painted or affixed, on the outside of every office or place in which its business is carried on, in a conspicuous position, in letters easily legible ; and if the characters employed therefor are not those of the language, or of one of the languages in general use in that locality, also in the characters of that language or of one of those languages ;
(b) shall have its name engraven in legible characters on its seal ; and
(c) shall have its name and the address of its registered office mentioned in legible characters in all its business letters, in all its bill heads and letter paper, and in all its notices and other official publications ; and also have its name so mentioned in all bills of exchange, hundies, promissory notes, endorsements, cheques and orders for money or goods purporting to be signed by or on behalf of the company, and in all bills of parcels, invoices, receipts and letters of credits of the company.
(2) If a company does not paint or affix its name and the address of its registered office, or keep the same painted or affixed in the manner directed by clause (a) of sub-section (1), the company, and every officer of the company who is in default, shall be punishable with fine which may extend to 1[five hundred] rupees for not so painting or affixing its name and the address of its registered office, and for every day during which its name and the address of its registered office is not so kept painted or affixed.
(3) If a company fails to comply with clause (b) or clause (c) of sub- section (1), the company shall be punishable with fine which may extend to 2[five thousand] rupees.
(4) If an officer of a company or any person on its behalf -
(a) uses, or authorises the use of, any seal purporting to be a seal of the company whereon its name is not engraven in the manner aforesaid ;
 
(b) issues, or authorises the issue of, any business letter, bill head, letter paper, notice or other official publication of the company wherein its name and the address of its registered office are not mentioned in the manner aforesaid ;
(c) signs, or authorises to be signed, on behalf of the company, any bill of exchange, hundi, promissory note, endorsement, cheque or order for money or goods wherein its name is not mentioned in the manner aforesaid ; or
(d) issues, or authorises the issue of, any bill of parcels, invoice, receipt or letter of credit of the company, wherein its name is not mentioned in the manner aforesaid ;
such officer or person shall be punishable with fine which may extend to 3[five thousand] rupees, and shall further be personally liable to the holder of the bill of exchange, hundi, promissory note, cheque or order for money or goods, for the amount thereof, unless it is duly paid by the company.
 
1. Substituted for "fifty' by the Companies (Amendment) Act, 2000 w.e.f. 13-12-2000.
2. Substituted for "five hundred' by the Companies (Amendment) Act, 2000 w.e.f. 13-12-2000.
3. Substituted for "five hundred' by the Companies (Amendment) Act, 2000 w.e.f. 13-12-2000.
 
148. PUBLICATION OF AUTHORISED AS WELL AS SUBSCRIBED AND PAID-UP CAPITAL
(1) Where any notice, advertisement or other official publication, or any business letter, bill head or letter paper, of a company contains a statement of the amount of the authorised capital of the company, such notice, advertisement or other official publication, or such letter, bill head or letter paper, shall also contain a statement, in an equally prominent position and in equally conspicuous characters, of the amount of the capital which has been subscribed and the amount paid-up.
(2) If default is made in complying with the requirements of sub- section (1), the company, and every officer of the company who is in default, shall be punishable with fine which may extend to 1[ten] thousand rupees.
 
1. Substituted for "one' by the Companies (Amendment) Act, 2000 w.e.f. 13-12-2000.
 
149. RESTRICTIONS ON COMMENCEMENT OF BUSINESS
(1) Where a company having a share capital has issued a prospectus inviting the public to subscribe for its shares, the company shall not commence any business or exercise any borrowing powers, unless -
(a) shares held subject to the payment of the whole amount thereof in cash have been allotted to an amount not less in the whole than the minimum subscription ;
(b) every director of the company has paid to the company, on each of the shares taken or contracted to be taken by him and for which he is liable to pay in cash, a proportion equal to the proportion payable on application and allotment on the shares offered for public subscription ;
(c) no money is, or may become, liable to be repaid to applicants for any shares or debentures which have been offered for public subscription by reason of any failure to apply for, or to obtain, permission for the shares or debentures to be dealt in on any recognised stock exchange ; and
(d) there has been filed with the Registrar a duly verified declaration by one of the directors or the secretary 1[or, where the company has not appointed a secretary, a secretary in whole-time practice], in the prescribed form, that clauses (a), (b) and (c) of this sub-section, have been complied with.
(2) Where a company having a share capital has not issued a prospectus inviting the public to subscribe for its shares, the company shall not commence any business or exercise any borrowing powers, unless -
(a) there has been filed with the Registrar a statement in lieu of prospectus ;
(b) every director of the company has paid to the company, on each of the shares taken or contracted to be taken by him and for which he is liable to pay in cash, a proportion equal to the proportion payable on application and allotment on the shares payable in cash ; and
(c) there has been filed with the Registrar a duly verified declarations by one of the directors or the secretary 1[or, where the company has not appointed a secretary, a secretary in whole-time practice], in the prescribed form, that clause (b) of this sub-section has been complied with.
(2A) Without prejudice to the provisions of sub-section (1) and sub- section (2) a company having a share capital, whether or not it has issued a prospectus inviting the public to subscribe for its shares, shall not at any time commence any business -
(a) if such company is a company in existence immediately before the commencement of the Companies (Amendment) Act, 1965 (31 of 1965) in relation to any of the objects stated its memorandum in pursuance of clause
(c) of sub-section (1) of section 13 ;
(b) if such company is a company formed after such commencement, in relation to any of the objects stated in its memorandum in pursuance of sub-clause (ii) of clause (d) of sub-section (1) of the said section,
unless -
(i) the company has approved of the commencement of any such business by a special resolution passed in that behalf by it in general meeting ; and
(ii) there has been filed with the Registrar a duly verified declaration by one of the directors or the secretary 1[or, where the company has not appointed a secretary, a secretary in whole-time practice], in the prescribed form, that clause (i) or, as the case may be, sub-section (2B) has been complied with ;
and if the company commences any such business in contravention of this sub-section, every person who is responsible for the contravention shall, without prejudice to any other liability, be punishable with fine which may extend to 2[five thousand] rupees for every day during which the contravention continues.
 
Explanation. - A company shall be deemed to commence any business within the meaning of clause (a) if and only if it commences any new business which is not germane to the business which it is carrying on at the commencement of the Companies (Amendment) Act, 1965 (31 of 1965) in relation to any of the objects referred to in the said clause. (2B) Notwithstanding anything contained in sub-section (2A) where no such special resolution as is referred to in that sub-section is passed but the votes cast (whether on a show of hands, or, as the case may be, on a poll) in favour of the proposal to commence any business contained in the resolution moved in that general meeting (including the casting vote, if any, of the chairman) by members who, being entitled so to do, vote in person, or where proxies are allowed, by proxy, exceed the votes, if any, cast against the proposal by members so entitled and voting, the Central Government may on an application made to it by the Board of directors in this behalf allow the company to commence such business as if the proposal had been passed by a special resolution by the company in general meeting.
(3) The Registrar shall, on the filing of a duly verified declaration in accordance with the provisions of sub-section (1) or sub-section (2), as the case may be, and, in the case of a company which is required by sub-section (2) to file a statement in lieu of prospectus, also of such a statement, certify that the company is entitled to commence business, and that certificate shall be conclusive evidence that the company is so entitled.
(4) Any contract made by a company before the date at which it is entitled to commence business shall be provisional only, and shall not be binding on the company until that date, and on that date it shall become binding.
(5) Nothing in this section shall prevent the simultaneous offer for subscription or allotment of any shares and debentures or the receipt of any money payable on applications for debentures.
(6) If any company commences business or exercises borrowing powers in contravention of this section, every person who is responsible for the contravention shall, without prejudice to any other liability, be punishable with fine which may extend to 3[five thousand] rupees for every day during which the contravention continues.
(7) Nothing in this section shall apply to -
(a) a private company ; or
(b) a company registered before the first day of April, 1914 which has not issued a prospectus inviting the public to subscribe for its shares.
(8) [Omitted by the Companies (Amendment) Act, 1960.]
 
1. Inserted by the Companies (Amendment) Act, 1988 w.e.f. 15-6-1988.
2. Substituted for "five hundred' by the Companies (Amendment) Act, 2000 w.e.f. 13-12-2000.
3. Substituted for "five hundred' by the Companies (Amendment) Act, 2000 w.e.f. 13-12-2000.
 
150. REGISTER OF MEMBERS
(1) Every company shall keep in one or more books a register of its members, and enter therein the following particulars : -
(a) the name and address, and the occupation, if any, of each member ;
(b) in the case of a company having a share capital, the shares held by each member, 1[***] 2[distinguishing each share by its number except where such shares are held with a depository], and the amount paid or agreed to be considered as paid on those shares ;
(c) the date at which each person was entered in the register as a member ; and
(d) the date at which any person ceased to be a member :
Provided that where the company has converted any of its shares into stock and given notice of the conversion to the Registrar, the register shall show the amount of stock held by each of the members concerned instead of the shares so converted which were previously held by him.
(2) If default is made in complying with sub-section (1), the company, and every officer of the company who is in default, shall be punishable with fine which may extend to 3[five hundred] rupees for every day during which the default continues.
 
1. The words "distinguishing each share by its number" omitted by the Depositories Act, 1996 w.r.e.f. 20-9- 1995.
2. Inserted by the Depositories Related Laws (Amendment) Act, 1997 w.e.f. 15-1-1997.
3. Substituted for "fifty' by the Companies (Amendment) Act, 2000 w.e.f. 13-12-2000.

 

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