METMUMBAI EDUCATIONAL TRUST

2011 - 12

BUSINESS LAW
PROJECT REPORT ON

INDIAN COMPANIES ACT 1956

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SUBMITTED PROF.DONGADE

TO

SUBMITTED BY :
SR.NO 1. 2. 3. 4. 5. NAME IVY DSOUZA DIMPLE JAVA SACHIN VERNEKAR POORVA ADARKAR SaAHIL LEDWANI ROLL NO. SIGNATURE 131 143 165 121 147

Acknowledgement

If words are considered to be sign of gratitude then let these words convey the very same. We are highly indebted to Prof. Devnani, who has provided us with the necessary information and also for the support and his valuable suggestions and comments on bringing out this report in the best way possible. We feel great pleasure to cordial thanks to all faculty members of management department who sincerely supported us with the valuable insights into the completion of this project and we are thankful to that power that always inspire

us to take right step in the journey of success in our life.

INDEX
SR. NO. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. PARTICULARS Introduction Classification of Company Formation of Company Memorandum of Association Articles of Association Doctrine of Ultravires, Constructive Notice & Indoor Management Prospectus Meetings Proxies, Quorum & Resolution Directors Case Study Forms Conclusion PAGE NOS. 5-7 8 14 15 16 18 19 20 21 23 24 25 26 29 30 32 33 34 35 45 46 - 51 52

INTRODUCTION
Origin of company's legislation in India:
Company's legislation in India owees it origin to English company's law. The first law regulating the companies took its birth in 1850 as Joint Stock Companies Act. This act was based on the English companies Act 1844. The important principle of limited liability was not incorporated in this act, though the concept of separate legal entity for a company was introduced. However, it was only in the year 1857 the Joint Stock Companies act for the first time in India introduced the principle of Limited liability to the Banking companies also. Following the English act I862 a comprehensive act was passed in India in the year 1866, which sought 10 consolidate and amend the law relating to the incorporation, and winding up of trading companies and other association, this was followed by the economic consolidation act of 1882 which repealed the companies act of 1882 which repeated the companies act 1866. Then came the Indian -company's act 1913, passed with the object of consolidating & amending the relating to trading companies and other association. However, even the act of 1913 proved to be inadequate and therefore the 1913 Act was amended several times.
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World War II witness many changes in the organization & management of the Joint Stock Company. In 1950 the government of India appointed a committee under the Chairmanship of Dr.H.J.Bhabha to make the suggestion the govemment of India in March ,1952 on for the company law reform. The committee comprised of reform. The committee submitted its report to the basis of recommendations the company's act of 1956 into force from April 1956. Inspite of the great care and caution in passing of companies Act 1956. The number of defects and loop holes remained in this act and therefore several amendments were made from time to time by the amendments act 1960. Ther were further amendments in 1962, 63, 65, 69, 70, 74, 77.

Object of the Companies Act:

The object of the companies act is to provide simple & cheap machinery for formation of the company & making the liability of its numbers limited, to the face value of the shares subscribed by them, whereby it eliminates any personal liability of its members in the case of partnership. It has also been enacted to consolidate & amend the law relating to the companies and certain other association. It seeks to achieve the following objects: 1) To encourage investment. 2) To ensure proper administration 3) To arrange for investigation. 4) To prevent malpractices.

DEFlNITIONS OF COMPANIES:
(1) According to Section 3/1 (i) of the companies act 1956: "'A company is a company which is formed & registered under the act or an existing company." Thus according to the above mentioned definition any company registered under the present act of 1956 or an existing company (registered under any previous company's act is deemed to be a company. This definition however is incomplete as in no way it helps us to know what the company is.

(2) Section 566 of the companies act 1956 defines Joint stock company as: A Joint stock company means a company having a permanent paid - up or nominal share capital of fixed amount divided into shares also of fixed amount, or held and transferable as stock a dividend and held partly in one way & partly in the other. (3) Some also defines company as: A voluntary incorporated association which is an artificial person created by law with limited liability having a common seal & perpetual succession.

ESSENTIAL FEATURES OF A COMPANY:

1) A company is compulsory registered under the companies act 1956. 2) It is a separate legal entity from the members who constitute it. 3) The shares in the share capital of the company are transferable. This makes the company independent from of its members & enjoys what is known as perpetual succession. 4) It is an artificial legal person & enjoys almost all the rights & is subject to all the obligations as in the case of natural person. 5) A company being an artificial legal person can act only through natural persons. 6) A company is not an agent or a trustee of the members, on the other hand in a particular case, a member may act as an agent or trustee or an employee for the company. 7) A company is not a citizen & has no fundamental rights under the constitution. 8) A company being an artificial legal person has nationality & a domicile. 9)A company can sue and can be sued, can enter into contracts & can exercise the entire powers incidental to the attainment of its objects given in its M.OA. 10) The liability or its members is limited, i.e. to say, in the event of winding up of the company, shareholders cannot be called upon to contribute more than what has been agreed by them to subscribe by way of participation in the share capital of the company. 11) The shareholders are not part owners or co owners of the company's property. Thus property of the company belongs to the company, & not to the shareholders.
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12) The company has the common seal which gives it an independent existence.

CLASSIFICATION OF COMPANIES
A) ON THE BASIS OF INCORPORATION: 1. Chartered Companies / Royal Charted Companies A company which came into being by grant of royal chartered issued by the king or queen are referred to as chartered companies or Royal Chartered Companies E.g. The East India Co. The Chartered Bank of Australia, Bank of England. These companies are regulated (i.e. their power & actions are governed) by that charter concern such type company do not exist in India. 2. Statutory Companies A Company which came into existence by special act passed by the legislator of a country or a state is referred to as statutory company E. RBI, SBI, LIC. The Industrial Finance Corporation of India, Air India etc. such companied enjoy the power of rights, privileges as laid down in the act. The act also states the objects, leavings & responsibilities of the companies so creative 3. Registered Companies Registered companies are those which are incorporated with the registrar of the companies under the provisions of prevailing companys act the company act 1956 provides for the registration of companies procedure the companies are
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governed by the provisions of companies Act 1956. Most of the companies in India are registered co, under the companys act 1956. B) On the Basis of Liability 1. i) ii) Company with an unlimited liability :S/12 The liability of members of a registered company may be limited or unlimited. (S/12(1)) A company not having any limit on the liability of its members is called an unlimited company with liability. iii) In the event of the winding up of the company the members are liable to contribute in the proportion of their share in the company a specified amount necessary to discharge n full the debts & liabilities of the company. iv) However the members are not liable to the companys creditors as the company being a separate legal entity from the persons who constitute it is liable to its creditor. v) In case, the creditors can not obtain payment from the company they may petition the court for the winding up of the company. vi) An unlimited company may or may not have a Share capital. vii) If it has a share capital the article must slate the amount of share capital with which the company is to be registered. viii) An unlimited company with the share capital may be either a public company or private companies. ix) The articles of an unlimited company should state the no. of members with which company is to be registered. 2. i) ii) iii) Company with limited liability: The liability of members of a registered company may be limited or unlimited. A company having a limit on the liability of its members is called a Limited Company or A company with limited liability. A limited company may he either a. b. c. A company limited by shares or, A company limited by guarantee or A company limited by shares as well as by guarantee.

a) A company limited by shares:

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i) ii)

It is a registered company having the liability of its members limited by its MOA to the amount, it any, unpaid on the shares respectively held by them. Such company also known as a share company. during the life time of company or at the time of winding up of the company

iii) The amount remaining unpaid on the shares can be called up at any time either

iv) However, a shareholder cannot be called upon to pay more than the amount remaining unpaid on his shares. v) His personal assets cannot be called upon for the payment of me liabilities of the company, if nothing remains to be paid on the shares purchased by him. vi) A company limited by shares may be a public company or a private company. b) (i) A company limited by guarantee: A company limited by guarantee is one having the liability of its members limited by the memorandum to such amounts as the members may respectively under a by the memorandum to contribute to the assets of the company in the event of its being wound up. (ii) Such a company is also known as Guarantee Company. (iii) The liability of members of Guarantee Company is limited by a stipulated amount mentioned in the memorandum (iv) The guaranteed amount can be called up by the company from the members only at the time of winding up, if the liability of the company exceeds to its assets. (b) A Co. limited by guarantee may or may not have a share capital. (v) The working funds of a company limited by guarantee not having a share capital are raised from like donations, grants, fees, subscriptions etc. & such companies are generally formed for the promotion of arts, science, culture, charity, sports etc. (vi) in case of a company limited by guarantee having a share capital, the liability of the members to limited to the face value of the shares subscribed by him. (vii) A company limited by guarantee having a share capital may be a public co. or a private company. C) A company limited by shares as well as by guarantee:

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(i)

It has both the elements of the guarantee company as well as the share company.

(ii) Such a company raises its initial capital from its members. while the normal working funds are provided from other sources such as fees, charges, subscriptions etc. (iii) Every member of such a company is subject t two-fold liability i.e. to guarantee which may become effective either during the lifetime of the company or at the time of winding up.

[C] (i)

ON THE BASIS OF GENERAL INTEREST OF THE PUBLIC: A private company is a company which by its articles. a) b) c) Prohibits any invitation to the public to subscribe to any of ha shares debentures. Prohibits the right to transfer its shares. Limits the no of its members to 50 excluding its employees member or part employee member.

1. Private companies: S/3(i) (iii)

2.

Public companies S/3 (iv) States that all companies other than private company are called public

company. 3. (i) Government Company S/617 S/617 of companies act defines the gvt company as a company in which a. less than 51% of the paid up share capital is held by the central gvt or by any state gvz / gvts or partly held by the central gvt & partly by one or more state gvt /gvts & & include co. which is a subsidiary of a gvt company. (ii) Jan as any other co., gvt co. are governed by the provisions other Co. act but by virtue of S/620, the central gvt may direct that any of the provisions of the act shall not apply to them or shall apply on with such excentions, modifications & adoptions & may be notified by the gvt. (iii) However, the central gvts cannot exempt the gvt a company from the provisions of which specifically deals with such Co.
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(iv)

S/619 according to this Section, the auditor of a gvt co shall be appointed or re-appointed by the central gvt on the advice of the controller and auditor general of India.

(v)

S/619(a) according to this section the central gvt must place before both the houses of parliament on annual report on the working & affairs of each gvt co & such a report to be prepared Within 3 months of its annual general meeting, to other with a copy of the audit report & any comments upon or Supplement to such a audit report made by the controller & auditor general of India.

4.

Foreign company:

(i) A co. incorporated outside India is a foreign company. (ii) Companies are placed into 2 categories namely: a) Co. incorporated outside India & which establish place of business in India after 1 April 1956 & b) Co. incorporated outside India & which established place of business in India before 1 April 1956 & continues to have it in India. (iii) According to companies amendment act 1971 if not less than 51% after paid up share capital of a company incorporated outside India& having established a place of business in India, is held by one or more citizens of India or by one or more Indian bodies corporate. then such co shall comply with such of the provisions of the act as may be prescribed with regard to the business carried on by it in India. (iv) The co. act of 1956 requires that every foreign company which established a place of business in India after 1st April 1956 must within 30 days of the establishment of such a place of business, filed with the registrar co. at New Delhi & also with the registrar of the company of the state in which such a place of business is established. a) A certified copy of memorandum & article of the Co. b) The full address of the registered office of the company. c) A list of the directors of the company & its secretary, with full particulars of their nationality, address & business or occupation.

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d) The names & address of someone or more persons residing in India, who are authorized to accept service of process or notices or other documents to be served on the company & e) The addresses of the principle place of business in India. f) Where a foreign company which has been carrying on business in India, ceases to carry on such business in India, it may be wound up as an unregistered company not withstanding the fact that the company has been dissolved or ceased to exist under the laws of the country in which it was incorporated.

D) OTHER COMPANIES 1. One man company : (i) (ii) (iii) (iv) When a single person held almost all the shares of the co., it is called one man company. This happens in both a pvt. Co. and a public company through usually they are a private company. The other members of the company may just hold one share each & bulk of the shares are held by one of the members only. Such a company has its legal personality, if it complies with the necessary requirements of the company. 2. Non profit making company : 3. Holding & subsidiary company : S/4 & 5. i) ii) iii) When one company holds another company is called holding company. The other company which it holds is a subsidiary company. One company may control the composition of board of directors of another company. a) Where it controls the composition of board of directors of another company. b) Where it controls more than half of the total quoting of the other co.

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c) Where it holds more than half in nominal value of equity share capital of the other company. d) Where it is a subsidiary of any other company. E.g. Company B is subsidiary of company A & company C is a subsidiary of company B. In such case co. C will be subsidiary of B & A & so on. IV) V) VI) Holding company & subsidiary company are separate companies & district legal entity. The subsidiary co. cannot hold shares to make investments in a holding co. nor can it hold the ___________ of holding company. The holding company shall attach the full documents of Balance sheet in repeat of each subsidiary company.

a) Copy of the B/s, F & L A/c with report of BOD & the auditors of its subsidiary company. b) A statement of the holding company in stress in the subsidiary company at the end of the financial year.

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FORMATION OF A COMPANY: Procedure regarding formation of incorporation of companies-------(Certificate of Incorporation) 1) 7 or more persons with no maximum limit for public company or 2 or more persons but no exceeding 50 for a private company sign on a document called MOA of the company & each of the signatures agreed & undertaken in take shares of the company mentioned in their name. 2) Signature of such persons who are promoters must be attested by the witnesses. 3) The memorandum is then printed, divided into paragraphs which are numbered accordingly. 4) The memorandum is field with the registrar of companies in the state in with the registered office of the company is established. 5) Along with the memorandum it has also to file the prospectus and AOA (Which deals with the internal management of the company & a little consent by every person who proposes to he a director of the company except incase of pvt co.) is to be filed with the registrar of the company. If the requirements of the company are complied with by the company the registrar issues a certificate known as the certificate of incorporation which is the conclusive evidence that all the requirements of the act have been compiled with by the company. From the date of the issue of the certificate of incorporation the company
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becomes a legal entity capable of exercising all the functions of a body corporate. Where the articles of association prescribe share qualification for a director, consent in writing by that person to take & pay for his qualification shares must be filed with the registrar. A declaration by a advocate of a supreme court or of a high court or by attorney or pleader entitled to appear before the high court or a chartered accountant practiced in India who is engaged in the function of a company or by a person named in the 1rticles as director, manager or secretary of the company that all the requirements of the act have been complied with in respect of registration, must be filed with the registrar the company. along with MOA

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Memorandum of Association MOAs/2(28)

Memorandum means the MOA of a company as originally framed or as altered, from time to time, in pursuance of, any previous companys law or of the existing act. The MOA of a company is a fundamental charter of the company as it contains the fundamental condition upon which alone the company can be incorporated as it defines the extent & powers of the company, a memorandum servers two-fold purpose, firstly, It enables the shareholders, creditors & all those who deal with the company to know that is a power are & what is the range of its activities. Secondly, it enables the outsiders to know whether the transaction he intends to make with the company is within the objects off the company & not ultra vires its objects. Contents of MOA: S/13 requires the MOA of the company (Ltd by shares) to contain: a) Name clause: A company Ltd by shares: i) Shall state the name of the Co. with the word Ltd or pvt Ltd as the last word of its name. ii) The name should not be undesirable or identical or resemble to a great extent to the name of the other company already in existence & registered with the registrar. iii) If this is done the company may be an ordinary resolution with the approval of the central govt & registrar in writing change its name within 12 months of its registration & within 3 months from the date of order or direction from the central government. In the event of default, the co. & every officer found guilty is punishable with a fine of Rs 500/- everyday, the default continuous. b) Domicile Clause/Registrar office of the Co.: A Co. Ltd by shares must state the state in which the registered office of the company is situated. The state law fixes the domicile of the company. All correspondents, notices & communication are to be served at the registered office of the company. The state in which the registered office of the company is situated- is important for the purpose of jurisdiction as the high court of the state (where the registered office of the Co. is situated) has jurisdiction to wind up the company. The central govt may by notification in theofficial gazette find any district court to exercise that jurisdiction. It should however
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be noted that the company shall give a notice (With respect to the registered office) within 30 days of the situation of the registered office. c) Object Clause! Objects of the company: A Co. Ltd by shares must state: i) The name of paramount object to be pursued by the Co. & the objects which are ancillary or incidental to the attainment of main objects. Incase of conflicts between the paramount (main) or ancillary objects, liberal construction must be constructed for the attainment of the paramount objects. ii) If the objects of the cc. are not confined to one state, then, the state to whose territories the objects extend must be stated in the memorandum. iii) The object clause must state the purpose for which the company is formed, as object clause gives protection to the subscribers for shares who must know the purpose for which money is utilized & risks he is taking in dealing with company. iv)It also gives protection to the person who enters into contracts with the co to know extent of powers of persons with whom they enter into contract & whether such contracts are within the corporate objects of the company. d) The liability clause/ Liability of the member: A Co. Ltd by share must state: (i) That the liability of the members or the shareholders of the co. is Ltd to the unpaid amount of the face value of the shares held by each member. (ii) The amount of capital with the company proposes to be registered & division there of into shares of fixed amount & different varieties II) More subscribers to the memorandum shall take less than one share. III) Each subscriber to the memorandum shall write against his name in the memorandum the no of share he takes & should also give that in writing, e) Capital Clause Details of share capital of a company: I. The capital clause in the MOA of a company Ltd by shares- must state the capital of the co. divided into different types of shares of different denominations each. II. In case of a co. Lid by guarantee the MOA must state that each member under takes to contribute to the assets of the co. & the amount of guarantee specified therein in the event of the co. being wound up when he is the member of the company or within one year afterwards for payment of debts & liabilities of the Co.
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III.

If the Co. in addition to the guarantee has a share capital, the memorandum shall also state the amount of share capital with which the Co. proposes to be registered & the division of share capital into shares of fixed amount & different varieties.

IV.

If the co. Ltd by guarantee does no have share capital, any provision in the MOA, AOA. or even in the resolution of the company permitting to give any person a right to participate in the division of profits of the company other than shareholders is void.

f) Subscription / Association Clause: i) At the end of the memorandum of every co. there is an association or subscription clause, where a declaration is made by the subscribers to the memorandum where by they agree to take the no. of share in the capital of the co set of opposite there respective names this decoration is then followed by the names, descriptions, occupations of the subscribers has taken & his signature attested by a witness. ii) After incorporation no subscribers can withdraw his name on any ground what so ever.

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Articles of Association : [S/2(2) to 39]

S/2(2) of the cos act defines articles Articles means Article of Association of a co. as originally framed or as altered from time to time in pursuance of any previous cos law or of this act, including so far as they apply to the co., the regulations contained as the c-a may be in table A to Schedule I of this act. 1. The MOA 0f a co. lays down the objects for which the co. is formed. 2. The articles arc subordinate to the memoranda prescribes to the internal management of the Co. 3. The rules & regulations of the Co. for the attainment of the objects of the co. have laid down in the memoranda. 4. Articles have no power for reductions of share capital of the co. such power can be assigned by the special resolution. 5. Incase of companies Ltd by shares Sf26 lays down there is no obligation on the en to file for registration, but this not so incase of en. Ltd by guarantee/an united en. where the AOA must be flied with the registrar of the cos for registration. 6. Rules & regulation contained in Table A of Schedule I of the cos act 1956 must be followed by the co. with respect to the contains of AOA. 7. The co. act provides that the rules & regulations contained in Table A of Schedule I shall be deemed to have in the AQA of every en. which is known as statutory articles. 8. 8) If the AOA does not contain the contents of Table A of Schedule I the law provides that if such articles are registered, the contents of Table A of Schedule I shall be deemed to in such articles; a) Filling of the articles for registration b) It must be printed. c) Numbered accordingly d) Divided into paragraph. e) Signed by every subscriber to the memoranda. f) One witness must at least the signature of the subscriber. g) Incase of an unltd co. in addition to the above the articles must also state; (I) The no. of members with which the co. is registered.
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(II)

If the co. has share capital the amount of share capital with which the is to be registered.

Contents of Articles of Association: a) Allotment of share. b) Time en calls on shares are made. c) Amount of calls. d) Persons to whom the call is to pay. e) Place where f) Forfeiture of share & conditions relating thereto. g) Mode of transport of shares. h) Power of co. to refuse to register the transfer. i) Increase of share capital of the co. & the rules & regulations thereto. j) Reorganization & reduction of share capital of the company. k) Issue of difference classes of shares with different rights attached to it. l) Lien of shares. m) Place where the meetings of co. is held n) Voting by proxy. o) Time & place for lodging of the proxy. p) Conversion of shares into stock with recon version q) Issue of share warrants r) Right of shareholder to demand a poll s) Powers of directors, managers, secretary & others. t) Place of meeting of the vote of BOD, their remuneration & disqualification. u) Dividends & creation of qualification reserve funds rule. v)Keeping of a/cs & rights of the shareholders to inspect the book of a/cs of the co. at the normal business house. w) Rules pertaining to the management of the co

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I. Doctrine of Ultravires:
1) Based on common sense, a co. can not be given a roaming communication to go where it likes or to do what it wills but the co. must circumscribe itself within the limits & powers mentioned in the MOA of the co. & cos act . 2) If it goes beyond it, it looses its object than such acts will be ultravires 3) The object of declaring such act as UV is to protect the interest of the shareholder & all those who deal with the company. 4) Suppose, all the shareholders of the co. give consent to purchase its own shares (which is illegal under the cos act) the co. comes under the doctrine of UV 5) The doctrine of UV must be reasonably understood according to the circumstances to each specified case. 6) Illustration: a) Suppose an association is formed for running term way but it runs luxury buses, it is UV b) Co. formed for erecting the building cannot use cos find for manufacturing machines c) A co. cannot take ever the business of another company unless is provision to that effect in the memoranda. d) A co. cannot pay money to a member of the parliament in consideration of his not opposing the bill in the parliament. e) It is UV for a company to enter into a partnership or amalgamation of another company in the absence of the power given to it in the MOA 7) Some of the pints are worth noting as regards to the doctrine of UV. a) The company exists only for the objects which are expressly stated in its object clause or which are incidental upon these specified objects. b) Any act done outside the expressed or implied objects in UV. c) The UV acts are null, void & void Abnitio; --- The company is not bound by this act & neither the co. nor the other contracting party can sue upon it.
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d) In case of a co. is about to undertake an UV act, the members of the co. (even a single member) can get an order of injunction restraining the co. to go ahead with UV acts. e) If the directors have exceeded their authority & done something then matter can be rectified by the general body of the shareholders, provided the co. has a capacity to do so by its MOA. f) If any property acquired by the co. under an UV transaction may be protected by the co. against the damages by the 3rd person.

//. Doctrine of Constructive Notice:

1) The MOA & AOA of the co. are registered as public documents under S/75 of the Indian Evidence act. 2) Inspection of the document can be taken by any members of the public from registrar of the co. on payment of a nominal fee of Re.1 only. 3) Being public document every member of the public dealing with the co. shall be deemed to have a notice & knowledge of its contents & shall be deemed to have read its contents & shall be deemed to have read its contents 4) Therefore, any person who contemplates entering into contract with the co. has the means of ascertaining & thus is presumed to know the powers of the co. & the extent to which they have been delegated to the directors 5) This is known as Document of constructive notice 6) If the provision in the articles provide a particular contract to enter into a particular manner a number entering into a contract with a co. must see that it is entered into a particular manner otherwise he will not be liable to file a suit against a co. when the dispute arises 7) This lead to an important case in the English co. law history knows as the rule in Royal British bank case. 8) In the above case the articles of the co. provide that in a particular contract there must be a signatures of 2 directors of the co. the person entering into contract with the co. must enter into contract with the co. in a particular manner. But he is not bound to know the regularity of the cos internal management.
9) Such a person is not bound to know whether these particular directors who

have entered into contract with him were validly appointed by the co. or whether there is any disqualification attached to their appointment. 10) Excent securing 2 signatures on the contract the person entering into contract with a co. is not concerned with the other irregularities with the co. provided that he has no actual or constructive notice of such irregularity otherwise he cannot secure protection of the above rules as matter of the internal management of the company are the assumed to the dually complied with the company.

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III. Doctrine of Indoor Management:

The Doctrine of Constructive Notice throw a burden on people entering into contract with the company that they are presumed to have read them. On the other hand the Doctrine of Indoor Mgmt allows although who deals with the company to assume that The provisions of the articles have been observed by the officers of the company. In other words they are not bound to enquire into the regular of the internal proceedings. An outsider is not accepted to see that the company carries out its internal regulation. For e.g; The directors of a co. were authorized by the articles to borrow on bond such sum of money from time to time, by resolution of the co in general meeting, be authorized to be borrowed. The directors gave a bond to Mr. T. Without the authorities of any such resolutions. The question arise whether the co. was liable on the bond? Held: The co. was liable on the bonds as Mr. T was entitled to assume that the resolution of the co. in general meeting ha been passed. The Doctrine of Indoor Mgmt is subject to follow exceptions: 1. The rules do not protect any person who has actual or construction notice of the want of authority of the person acting on behalf of the company. For e.g; The articles of the co. empowered the directors to borrow up Rs. 1000/- with the consent of the co. in general meeting without such consent they borrowed Rs. 2500/- from them & took debentures. The company refused to pay the amount. The rule cannot be invoked in favour of the person who did not consult the memoranda & articles & thus did not rely on them Thus rule do not apply to the transaction which are void, illegal or vold abnition For e.g; The secretary of a co. forged with the signature of 2 of the directors required under the articles of a shares certificate & issued the certificate without authority . The applicant calim to be entitled to be registered as the member of the co. Held: The certificate vold & the holder of the share certificate & would not take the advantages of Doctrine of Indoor Mgmt. If an officer of the company dopes something which would not be orderly with within his powers the person dealing with him must make proper enquires & satisfy himself as to the officers authority of he fails to make enquiry, he cannot rely on the rule. For e.g A person who has a sole director & principal shareholder of a company paid into his own account cheques drawn in favour of the co. the bank should have made the enquires as to the powers of there directors. The bank was put upon enquiry & was accordingly dis entitled to rely upon the ostensible authority of the director. 5. Negligence: Where the irregularity in the affairs iof the co. could be discovered with proper enquiries & with ordinary diligence.
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2. 3.

4.

PROSPECTUS:
Prospectus: S/2(36) " Prospectus means any document described or issued as a prospectus & 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 or debentures of a body corporate."

Thus, definition of prospectus includes any invitation to the public to subscribe for the shares & debentures of the company. Thus any document an offer for sale of shares or debentures shall be deemed to be a prospectus & all the provisions of the prospectus shall apply to it. Prospectus is a therefore a document through which company receives capital by issue of its shares & debentures to carry on its business.

A public Ltd co. must issue prospectus & it must contain all the matters specified in part I & II of schedule II & reports specified in part II of schedule II of the companies prospectus has been delivered to the register of the company for registration. It must be duly signed by every person who has been named there in as a director or a proposed director of the co. as well as the promoter of the company. All the relevant documents prescribed under the act must be attached to the copy of the prospectus.

Every person authorized to issue a prospectus has a primary responsibility to see that the prospectus contain true state of affairs of the company & does not give any fraudulent picture to the public. People are invited on the basis of in formation published in the prospectus & therefore their interest must be safeguarded against all false and wrong statements in the
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prospectus. Thus, prospectus must contain full &honest declaration of material facts without concealing or omitting ay relevant facts or information.

This rule is known as

"GOLDEN

RULE

FOR FRAMING THE

PREOSPECTUS". Every person who is authorized to issue the prospectus is liable for a false statement in the prospectus both in civil & criminal courts.

In a leading case; Derry v/s Peek- (1889) It has been held if the person making the statements honestly believe in the true is not guilty or fraud, even if the statement is not true. The facts of the case were. The tramway company had a power by a special act to make tram ways & to use steam power with the consent of Board of Trade. The plants of the company were approved. The directors of the co honestly believed that since the plans were approved permission to use steam power from the BOT was only formality & that it would have been granted. Thus directors of the co. issued the prospectus where the directors stated that the consent to use steam power were obtained by the company. Subsequently, the consent was refused by the BOT & the co. had to be wind up. Upon the action taken by one of the shareholders against the director for fraud, it was held that the directors was not liable for issued as they honestly believed that the consent of BOT would be obtained by the co.& that there was no intention to cheat the investors though the statement was untrue.

The

prospectus

which

contains

misleading

statements

is

called

"MISLEADING PROSPECTUS".

26

MEETINGS
The Provisions relating to meeting are covered by sections 165 to 197 or the Companies Act. It is important to remember, however, that apart from the Statutory provisions, the meetings of a company are governed by its articles of association. Thus, while the articles cannot contain provisions which would make an invalid meeting valid, they would contain provisions on matters that the law leaves a for passing resolutions on matters like borrowing investments, or the quorum necessary for constituting a meeting. It is possible that the Articles of Association may impose on the company conditions, stricter than these provided under the law, e.g. they may provide that a resolution should be passed by a special majority when the Act required it to be passed by an ordinary majority. Meeting of members may be classified into the following : 1. Statutory meetings. 2. Annual General meeting. 3. Extra ordinary General meeting. 4. Meetings of classes of shareholders.

Statutory Meetings Every public company limited by shares and every public company limited by guarantee is required to hold a meeting known as The Statutory Meetings, within a period of not less than one month, and not more than six months from the date on which it is entitled to commence business (section 165). As this requirements applied only to public companies and not to private companies, the articles of incorporating a company initially as a private company and converting it into a public company after six months is sometimes resorted to. The object of the statutory meetings is to put the shareholders is possession of all important facts relating to the new company at an early date. The notice calling the Statutory Meeting must refer to the meeting as a Statutory Meeting (section 165 (1)). A report known as the Statutory Report certified by atleast two of the Directors of the company is required to be sent to every member of the company, at least twenty 27

one days before the meeting unless all the members agree to have it forwarded later (Section 165 (2)). The matters that are required to be contained in this report are set out in sub-section (3) of this section. The report is required to be forwarded to the Registrar immediately after it has been forwarded to the members (section 165 (5)). It may be noted that if the Statutory Re[ort is not delivered to the Registrar, the court may order a winding of the company. The Statutory Report has to be made out in Form 22 of the Appendix I of the companies (Court) Rules 1959. At the meeting, a list of members including their addresses and occupation and the shares held by them is to be kept available for the inspection of members. It is interesting to note that at Statutory Meeting, members are at liberty to discuss any matters relating to the formation of the company or arising out of the Statutory Report whether previous notice has been given or not although no resolution may be passed of which notice has not been given in accordance with the Act, (section 165 (7)). The Statutory Meeting may be adjourned from time to time. Further, at such adjourned meeting any resolution may be passed even if such resolution was not intended to be passed at the first proposed Statutory Meeting provided requisite notice of such resolution had been given during the period between on adjourned meeting and the next (section 165 (8)). The notice required for such a meeting is also twenty one days as in the case of any other general meeting.

Annual General Meeting Section 166 of the companies Act provided that in addition to any other meeting that may be held, a company shall held each year a general meeting as its Annual General Meeting. These are two cumulative conditions to be satisfied in this connection. 1) One meeting at least must be held in a calendar year, and (section 166 (1)). 2) There must not be a gap of more than fifteen months between one meeting and another (section 166 (1)). Therefore, it would be a contravention of the section if the meeting is held in consecutive calendar years, but there is a gap of more than fifteen months between one meeting and another; equally there would be a contravention if the Meeting is not held in each calendar year e.g. if one meeting is held in October 1977, and the next is held in January, 1979. There are two exception of the above, viz. a) the first Annual General Meeting of Company may be held within a period of not more than eighteen months from the date of its incorporation. In that case it would not be necessary for the company to be held any Annual General Meeting in the year of its incorporation or in the following year e.g. a company incorporated in the month of August of any year need not held meeting in that year or in the subsequent year; (this provision enables a company to draw up its accounts for a period of more than one year and present them to the first Annual General Meeting and (b) the Registrar may extend the period of fifteen moths by a further period of three months.

28

This section must be read together with section 210 (3) in terms of which are the period for which the accounts are submitted to a meeting should not precede the day of the meeting by more than six months or six months plus the extension of time granted by the Registrar. It may, therefore, happen that an Annual Meeting may have to be held before the expiry of the period of fifteen months from the previous meeting in order to comply with the provisions of section 210. Equally it may be possible that the accounts may not be ready to be held to comply with the condition that one meeting must be held per year. In such a case the meeting should nevertheless be held within one statutory time limit, but adjourned to a date when the accounts will be ready. If default is made in calling the meeting in accordance with section 166, the Central Government may on the application of member call the meeting or direct that the meeting be called. Default under section 166 is punishable with a fine upto five thousand rupees which can be imposed separately on the company and the office in default. (section 167 & 168). The question is sometimes raised in this connection what is the consequence of holding a meeting after the expiry of the time limit prescribed by the law? Would the resolutions passed at such a meeting be valid and the appointment of directors be effective? The legal position would be that while penalty would undoubtedly be levied in view of the violation of the law, the resolution passed would be valid. The point that would arise for consideration, however when a meeting is held in the year following the year of default would be, whether the meeting is the meeting of the year of default, or that of the year in which it is actually held. Palmers view is that the proper course would be for the shareholders to resolve at the meeting that the meeting will be treated as the annual general meeting for both years and unless this is done the meeting will be treated as the annual meeting of the year of the default and a second meeting have to be held for the year in which it is actually held. Annual General Meeting must be called for a time during business hours, on a day that is not a public holiday, and must be held either at the registered office of the company or at some place within the city, town or village in which the registered office is situated. The Central Government, however has the power to exempt any class or companies from these provisions. Provisions (a) and (b) of the sub-section (2) of section 166 cast some doubt on the point on the point whether the articles of a company of the resolution passed by the shareholders at the Annual General Meeting can fix a time which falls outside business hours. The correct view would be that this cannot be done. The condition requiring the meeting to he held during business hours is intended to make it convenient for the majority of shareholders to attend a meeting which would not be possible if the meeting were held outside business hours and this condition must still be complied with. It must also be noted that while a private company which is not the subsidiary of a public company can fix both the time

29

and place of the meeting, a public company and a private company which is subsidiary of a public company can fix only the time. The definition of public holiday given in section 2 (38) should be noted. The company is not in default if a public holiday is declared after the issue of the notice. Extraordinary General Meeting An extra-ordinary General Meeting is any general meeting (i.e. of the general body of shareholders as opposed to a particular class of shareholders), other than the annual general meeting and the statutory meeting. Such meeting may be called for the management to transact any business of special character or may be called following requisition by shareholders under section 169 convened by the management on its own, and advance notice of twenty one days the Annual General Meeting is given. It should be noted that the conditions that attach to an annual general meeting viz. be held during business hours, etc. do not attach to an extraordinary meeting Section 173, states that all items transacted at an extraordinary general meeting shall be deemed to be special. The notice relating to an extraordinary meeting must, therefore, be accompanied by a statement setting out all the material facts relating to the business to be transacted including in particular the nature of the interest in that business of every director and manager. If the business to be transacted concerns another company the extent of shareholdings of every director and manager in the company must be stated provided the shareholding exceeds twenty per cent. An extraordinary general meeting may be called if a requisition is made from any of the following. i) In the case of a company having a share capital such number of members as hold not less than one-tenth of cash of the paid up capital of the company as at that date carries the right of voting in regard to the matter. ii) In the case of a company having a share capital such number of members as have not less than one-tenth of total voting power of the members entitled to vote on that matter (section 169). Section 169 contains an important right granted to minority shareholders viz. the right to compel directors to call meeting on the requisition of holders of only one-tenth of the paid up capital of a company. Meeting of classes of Shareholders The shares of a company are divided into various classes. Class meetings to be held when the Act or the Articles of Association or the terms of issue of the shares provide that they should be called.

30

PROXIES A member of a company who is entitled to attend and vote at a meeting is entitled to appoint another person whether a member or not to attend and vote instead of himself. The provision relating to proxies may be summarized below:a) Every member of a public company or private company which is a subsidiary of a public company and having a share capital has the right to appoint one or more persons to vote in respect to his shares. This right would be available to the member of a Company not having a share capital and a private company only if the articles of such a company specifically provided for this. (Section 176 (1) and proviso). b) A proxy is not entitled to speak at a meeting or normally to vote on a show of hands, he can however join in demanding a poll and vote by way of poll. The Articles of Association however may grant to the proxy the right to vote on a show of hands in addition to being entitled to vote on a poll (Section 176 (1)). Although the articles of association of most public companies provide that a proxy shall not be entitled to speak and will vote only on a poll, in actual practice this provision is not enforced for practical reasons. viz. that no separate sitting arrangement are made for proxy-holders and in all probability these persons take an active part in the proceeding as the members themselves. c) Every notice of a general meeting of a public company with share capital must state that the member has this right (Section 176 (3)). d) The instruments of proxy must be deposited with the company forty-eight hours (or less than forty-eight hours but not more) before the meeting and the articles of association cannot require a member to deposit it earlier than fortyeight hours. (Section 176 (3)). e) The company is forbidden from sending out invitations to member at its own expense requesting them to grant proxies in favour of a person nominated by the company. This offence is punishable with fine exceeding upto rupees one thousand. The Company is not however forbidden from supplying to

31

members at their request proxy forms or a list of persons willing to act as proxies. (Section176 (4)). It should be noted that under the English Law this is not an offence. On the contrary, the law provides that if directors send our proxy forms at the expenses of the company they should send them to all members. f) An instrument of proxy must be in writing and signed by the member or his duly authorized attorney. The proxy by a body corporate must be under its seal and signed by an authorized attorney, even if the articles provides for a form of proxy. A member is free to follow any of the forms set out is schedule IX (Section 276 (5) and (6)).

QUORUM AT GENERAL MEETING In order to constitute a valid meeting, the quorum provided under the Act must be present. Section 174 states that five members personally present in the case of public company (other that 43A company) and two members personally present in the case of any other company shall be the quorum for the meeting of the company. It may be noted that under English Law while the necessary quorum for a private company is the same as under the Indian Law, viz. the quorum for a public company is not five but three. It is important to remember that the persons who must be present must be the actual members and not persons who are representing the members by proxy. The obvious exceptions being a person who is representing a corporation under section 187 or a Governor or the President under section 187 (A), since it is not possible in these cases for the members to be personally present. It is important to note that while articles may provide for a large number than that stipulated in law for constituting a quorum they cannot provide for a smaller number. It is also submitted that the articles cannot provide that a quorum shall be five persons present in person or by proxy as the Act required the members to be personally present. The quorum required under the Act must be present at the beginning of the meeting and the business will be deemed validly transacted if thereafter the number falls below the statutory minimum. To make this position abundantly clear articles relating to quorum state that the necessary quorum present at the commencement of the business. The Act stipulates what should be the quorum in the first instance, it leaves the company free to provide in its articles what course should be followed if the quorum is not present at the meeting. If no provision is made in the articles the following will be the procedure:If the quorum is not present within half an hour of the time fixed for the meeting:

32

a) The meeting will stand dissolved if it has been called upon the requisition of members; b) At any other case, it will be adjourned to the same day in the next week at the same time and place or to such other day and at such other time and place as the Board determine; c) IF there is no quorum at the adjourned meeting also, the members present shall be the quorum. In this eventuality even one member can constitute a quorum whether present in person or by proxy.

RESOULTION The Proposal put before a company in general meetings are usually expressed in the form of resolutions. According to the normal practice the resolution is put to the meeting by the Chairman, where upon it is discussed. After the discussion is over, the Chairman puts resolution formally to vote viz. he states that it has been proposed by Mr. X and seconded by Mr. Y and then requests the meeting to indicate the sense of the house by a show of hands, unless a poll is demanded, those in favour of resolution are asked to put up their hands, and these are counted again. The Chairman then declares the results viz. whether the resolution is carried by the requisite majority or lost. While on this subject, it would be convenient to deal with the subject of ordinary and special resolutions. Section 189 defines the two kinds of resolutions. An ordinary resolution is one where the votes cast in favour of the resolution by the persons who are members or where proxies are allowed to vote, by proxy (either on a show of hands or on a poll) exceed the votes cast against the resolution. A special resolution is one where the votes cast in favour of special resolution i.e. the resolution requires a three-fourth majority. It should be noted that in addition to such majority, the notice must specifically mention that the resolution will be proposed as a special resolution and the notice must be validly given.

33

DIRECTORS
A company being an artificial person carries on its activities & business through individuals called directors. S/232 of the companys Act provides that every public company must have at least 3 directors & a Pvt. Co. must have at least 2 directors. Definition S/2(13): A director as including, any person occupying the position of Director by whatever name called. Legal Position of Directors: The exact position of director is hard to define, as no formal definition; either statutory or judicial of the term has been given. However, judicial pronouncement have described them as: 1. Agents, 2. Trustees or 3. Managing Partners

1. Directors as Agents:
The director acts as an agent of the company and the ordinary rule of agency apply. They exercise the powers and are subject to duties within the framework of the companys article and the companys avt. For instance they may make contracts on behalf of the company and they will not be personally liable as long as they act within the scope of their authority. But if they
34

contract in their own name or fail to exclude personal liability they also will be liable. If the directors exceed their authority, the same act may be rectified by the company. But if they do something beyond the object clause of the company, then the act is UV and the company cannot rectify the same. But the Directors are not agents for individual shareholders they are agents of the company in artificial persons.

2. Directors as Trustees:
The directors have also been described as trustees. But they are not trustee in full sense of the term. As much as no proprietary rights of the companys property are transferred to them and therefore, they enter in to contract on behalf of the company and in the name of the company. On the other hand, incase of a trust, the legal ownership of the trust property is transfereed to the trustee and therefore, he can enter into contracts in his own name, but whatever he does, he does for the benefit of the beneficiaries. Although the directors are not trustees in real sense of the term, they occupy an office of the trust and are in certain respect position of the trustee for the company such case is: a) They are trustees of the money which comes to their hands or which is actually under their control. If they misplay companys money, they have to make good the same as if they were trustees.

b) They are trustees for exercising powers conferred upon them for
the benefit of the company, for instance , power to allot shares, to make calls, forfeit shares should be exercised bonafiedly in the interest of the company. c) They stand in a fiduciary relationship to company and therefore whenever there is a clash of his personal interest with that of the company, he should keep in mind the company interest. 3. Directors as Managing Partners: The directors are also sometimes described as managing partners. They manage the affairs of the company on their own behalf and on
35

companys behalf of the shareholders who elect them. Directors are appointed by the company as paid employees to control its affairs. They do mange its affairs and day-to-day transaction, but they are not partner since they are employees of the company and no director can bid by his acts the other directors. There is no agency relationship between directors. The directors has no authority to act for and on behalf of other directors of a company. The directors are agents of the company and not of their co-directors. It is therefore not correct to state that the directors are managing partners.

CASE STUDY
2000-(099)-COMPCAS-0153-BOM MADALSA INTERNATIONAL LTD. AND OTHERS v. CENTRAL BANK OF INDIA. Appeal No. 426 of 1997 in Chamber Summons No. 428 of 1997 in Suit No. 278 of 1995, decided on December 11/12, 1997. IN THE BOMBAY HIGH COURT

S. H. Doctor and Ms. J. M. Sidhwa instructed by Mehta and Girdharilal for the appellants. Pravin Diwan instructed by Kanga and Co. for the respondents.

JUDGMENT The judgment of the court was delivered by

V. P. TIPNIS J. - The Central Bank of India filed a suit being Suit No. 278 of 1995 against the (1) Madalsa International Ltd., a company incorporated under the Companies Act, 1956, (2) Deepak Bhandari, and (3) Hotel Emerald Pvt. Ltd., a company incorporated under the Companies Act, 1956, for recovery of a large amount of more than Rs. 5 crores. Ultimately the parties reached a settlement and a decree on admission was passed on April 16, 1996, for a reduced amount of Rs. 1,34,94,692. The decree also provided that the decree shall not be executed and shall be marked as satisfied on the defendants jointly and severally paying the decretal amount as mentioned under clause (2) of the said decree on admission. It provided for payment. of a sum of Rs. 75 lakhs within two months from the date of execution of the terms and the balance was to be paid in nine monthly instalments each for a minimum amount of Rs. 50 lakhs, the first of which shall be paid on or
36

before June 30, 1996, and each subsequent instalment on or before the last day of each succeeding month so that the entire balance decretal amount shall be paid on or before March 31, 1997. Under the very consent decree Hotel Emerald Private Limited, defendant No. 3, created a mortgage in favour of the plaintiffs to secure the dues under the decree. It was contemplated that before the mortgage is created the plaintiff's advocates will have to be satisfied as to defendant No. 3's marketable title to the said property and the property being free from encumbrances. Defendant No. 3, Hotel Emerald Private Limited, gave an undertaking to this court to create the mortgage as agreed. The decree also mentions regarding several undertakings by defendants Nos. 1 to 3 for creating the mortgages in respect of the property mentioned therein and also make out a marketable title to the properties so agreed to be mortgaged. In the event of default it was provided that the plaintiff shall be at liberty to forthwith execute the decree and claim the entire decretal amount. The terms, inter alia, also contemplated sale of properties described in exhibits A and B by sale in execution in the event of defendants Nos. 1 to 3 committing any default in payment of any instalment as provided in clause (2) of the decree or in case of breach of any other terms and conditions of the decree. Clause 8 which is relevant is as under : "In the event of the defendants committing any default in the payment of the instalments as specified in clause 2 above and/or breach of any other terms hereof, the Court Receiver, High Court Bombay shall forthwith stand appointed as receiver in respect of the stocks of goods and book debts described in exhibits A-4, A-5, A-7, D7 and D-8 to the plaint and the properties described in annexures A and B hereto without any further orders from this Hon'ble Court with full power to take possession of the said securities, forcibly if necessary and to sell the same in execution by public auction or private treaty and to hand over the net sale proceeds and/or realisation thereof to the plaintiffs after deducting his cost, charges and expenses." After the decree was passed, absolutely no payment was made and as such the terms of the decree were breached by the defendants and the plaintiff moved the receiver to take steps as were contemplated under clause (8) of the decree, i.e., to take forcible possession of the properties of which he was appointed receiver. Thereafter, the defendants took out Chamber Summons No. 428 of 1997 praying that the execution of the aforesaid decree be stayed against all the defendants and in particular against defendants Nos. 2 and 3. Before the learned judge it was contended that defendant No. 1 has filed a reference to the Board for Industrial and Financial Reconstruction (for short "the BIFR") on March 19, 1997, and since defendants Nos. 2 and 3 are guarantors, they are also entitled to protection under section 22 (2) of the Sick Industrial Companies (Special Provisions) Act, 1985 (for short "the SICA 1985"), and the decree cannot be executed against their estate without obtaining permission of the Board for Industrial and Financial Reconstruction. The plaintiffs have contended that under the provisions of section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985, the guarantors cannot plead that the proceedings against them have to be suspended. Submissions were made before the learned judge and authorities were cited on the interpretation of section 22 and as to whether the guarantors are also protected under the provisions of the said section. The second submission on behalf
37

of the plaintiffs was that mere filing of the reference under the Sick Industrial Companies (Special Provisions) Act, 1985, does not amount to an inquiry and as such no impediment is created by the provisions of section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985, as contended by the defendants. The learned judge elaborately considered the scheme of the Sick Industrial Companies (Special Provisions) Act, 1985, referring in detail to the various sections of the said Act as also decisions of the Andhra Pradesh High Court in Sponge Iron India Ltd. v. Neelima Steels Ltd. [1990] 68 Comp Cas 201; [1991] Bank J 204 (AP), the Calcutta High Court in Bengal Lamps Ltd. v. Furmanite Nicco Ltd. [1991] 72 Comp Cas 146 and the Allahabad High Court in Industrial Finance Corporation of India v. Maharashtra Steels Ltd., AIR 1988 All 170; [1990] 67 Comp Cas 412 and observed that the learned judge was in agreement with the view of the Calcutta High Court and was unable to subscribe to the view of the Andhra Pradesh High Court. The learned judge also referred to the observations of another learned single judge of this court and ultimately came to the conclusion that no inquiry could be said to be pending under section 16 of the Sick Industrial Companies (Special Provisions) Act, 1985, and, therefore, section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985, cannot be said to be attracted in the facts and circumstances of the case. In view of the said finding the learned judge felt it unnecessary to go into the question whether the expression "suit" occurring in section 22 which has been added by amendment in the year 1993, includes execution proceedings or not. It is on this ground the learned judge by his judgment and order dated April 11, 1997, dismissed the chamber summons. Aggrieved by this order the original defendants have preferred this appeal. We have heard, Mr. Doctor, learned counsel for the appellants and Mr. Diwan, learned counsel for the respondents, the original plaintiffs. It was an agreed position before us that in view of the Division Bench decision of this court dated August 8, 1997, in Real Value Appliances Ltd. v.Vardhaman Spinning and General Mills Ltd. [1997] VILJ 10; [1998] 93 Comp Cas 6; [1998] 1 Bom CR 232; [1998] 1 BC 456, in the facts and circumstances as obtainable on the date of the order of the learned judge the order impugned herein cannot be faulted. However, Mr. Doctor, learned counsel appearing for the appellants contended that although the reference filed by appellant No. 1 was rejected by the Board for Industrial and Financial Reconstruction the appeal has been filed on September 15, 1997, before the appellate forum under section 25 of the Sick Industrial Companies (Special Provisions) Act, 1985 have become operative. Therefore in this appeal on the basis of the aforesaid developments, the question which is required to be considered is as to whether under the provisions of section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985, the chamber summons for stay of execution is required to be allowed. Mr. Doctor, learned counsel for the appellants, read out the provisions of section 22 and contended that the word "suit" mentioned in the amended portion of the section must include execution proceedings as well. He further submitted that the suit or proceedings are suspended not only as against the industrial company but also such proceedings cannot be continued without the consent of the Board even as against the guarantors. In this behalf he emphasised the following words in the amended portion of the section, i.e., "or of any guarantee in respect of any loans or advance
38

granted

to

the

industrial

company".

In support of his submission that the word "suit" in the section must include execution, Mr. Doctor relied upon the following extracts on pages 2336 and 2358 from Venkataramaiya's Law Lexicon, 1982, second edition. "Suit. The word 'suit' has no doubt not been defined anywhere and is a word of very wide import. The dictionary meanings of the word are as comprehensive as to take any request of any person, in particular, to a court of law or Tribunal for redress. In law, it means, vide Mukherjee, Law Lexicon at page 529. 'Suit' in its common parlance is a term of wide amplitude. Broadly' a 'suit' is a proceeding in a court of justice for the enforcement of a right denoting a legal proceeding of a civil kind. It is a proceeding in a court according to the forms of law to enforce the remedy to which a party deems itself entitled. Lord Coke defines a suit to be 'actio nihil aliud est quam jus prosequend in judico qunod licui debetur' meaning an action is nothing else that the right of pursuing in a court of justice, that which is due to one. 'Blackstone simply says that a 'suit' is a legal demand of one's rights. In its generic sense, a 'suit' is the pursuit or prosecution of some claim. The term 'suit' in its comprehensive sense may be treated as applying to any original proceedings in a court of justice by which a party pursues the remedy which the law grants him. The modes of proceedings may be various depending upon the different stages in the litigation, that is, proceedings in the original court, court of appeal, proceedings in the nature of review or revision and execution proceedings. The legal significance of the word 'suit' is very broad, and the term has also a much narrower meaning when it is examined in the procedural sense". "No definition is given of the term 'suit' either in the Act or the Civil Procedure Code. The term 'suit' has sometimes been interpreted as not including an appeal but at the same time it has also been at places interpreted to include an appeal which is regarded as a continuation of the suit. The meaning to be given to the term 'suit' should depend on the context in which the term is used in the Civil Procedure Code. Special procedure has been provided for appeals, and the term 'suit' appearing in the procedure prescribed for original courts is, therefore, taken as not including an appeal. But this does not however, mean that the Legislature has always used the term 'suit' in the same context. At places it has been used in its wider sense as including an appeal also." Mr. Doctor next relied upon Wharton's Law Lexicon 14th edition and especially the following extract appearing at page 387 thereof: "Execution. - The last stage of a suit whereby possession is obtained or anything recovered by a judgment. It is styled final process, and is regulated by R.C.C. 1883, Order XLII, r 17, which allows immediate execution in ordinary cases." Mr. Doctor next relied upon the decision of the apex court reported in Dokku Bhushayya v. Katragadda Ramakrishnayya, AIR 1962 SC 1886, and paragraphs 4, 8, 9, 20 and 22 which are as under :

39

"4. Order 32, rule 7 of the present Code corresponds to section 462 of the Code of 1882. It has been settled since the Code of 1882 was in force that the provision under consideration applies to proceedings in execution though it only mentions agreement or compromise with reference to the suit. As long ago as 1901, jenkins C.J. said in Virupakshappa v. Shidappa, 26 ILR Born 109, 114, 'I will first deal with the question whether section 462 applies to a compromise of execution proceedings. On the words of the section I think it does; applications in execution are proceedings in the suit so that a compromise of such a proceeding would be a compromise with reference to the suit. This view has been followed ever since. 8. Beyond this, I find no justification for limiting the operation of the rule. I observe that jenkins C.J. in what I have earlier read from his judgment, said that the rule 'applies to a compromise of execution proceedings'. Therefore, it seems to me that according to the learned Chief justice it applies to all compromises of execution proceedings, excepting of course compromises concerning the conduct of them and this whether the compromise directly affects the rights or liabilities under the decree or not. I think the principle of the rule was correctly stated by Heaton J. when dealing with section 462 of the Code of 1882 he observed in Gurmallapa v. Mallapa, AIR 1920 Bom 37; ILR 44 Bom 574. "That section, I think necessarily implies that during the continuance of proceedings in court the dispute between the minor and another party which the court has to decide could not be compromised except by the guardian ad litem of the minor and by him only with the leave of the court'. I think that any compromise of a proceeding which concerns the dispute involved in it would require the sanction of the court. I should also point out that sub-rule (5) of rule 3 of Order 32 provides that a person appointed guardian in the suit for minor shall unless his appointment is terminated continue as such throughout all the proceedings arising out of the suit including the proceedings in execution of a decree. 9. Quite obviously the word 'suit' in this observation would include a proceeding in execution. 20. The next limitation is that the protection is only during the pendency of the suit. When does a suit come to an end ? It has been held that for the purpose of the said rule an execution proceeding is a continuation of a suit. 22. We agree with these observations. The result is that Order 32, rule 7 of the Code will apply only to an agreement or compromise entered into by a guardian of a party to the suit, who is a minor, with another party thereof during the pendency of a suit and the execution proceedings." Mr. Doctor next relied upon the decision of the apex court reported in Batisidhar Sankarlal v. Mohd. Ibrahim [1970] 3 SCC 900; [1971] 41 Comp Cas 21; AIR 1971 SC 1292; [1971] 2 SCR 476, and to the following observations in paragraph 7 thereof : "The contention raised on behalf of Bansidhar loses all significance for an execution, application is only a continuation of the suit and the control of the High Court enures during the execution proceedings also ..." Reliance was next placed by Mr. Doctor on the decision of the Madras High Court in Muthulahhammal v. Narappa Reddiar, AIR 1933 Mad 456, wherein it was held that
40

Order 32, rule 7, Schedule I to the Civil Procedure Code applies to execution proceedings, on the basis that the proceedings in execution are proceedings in a suit and that compromise in such proceedings is compromise with reference to the suit. The next decision cited by Mr. Doctor was the decision of the Delhi High Court in Parhash Playing Cards Manufacturing Co. v. Delhi Financial Corporation, AIR 1980 Delhi 48, 52, wherein in paragraph 5 a reference was made to Mukherjee's Law Lexicon page 529 on "suit" and thereafter it was observed as under : "However, it is seen that the expression derives colour from its setting and has been interpreted in different ways in different legislative contexts. In Bhai Kirpa Singh v. Rasalldar Ajaipal Singh, AIR 1928 Lahore 627, a Pull Bench of the Lahore High Court pointed out that the words 'suit, proceedings' and words of a similar connotation have different meanings in different statutes and it is not possible to lay down a general rule of interpretation which would be applicable to all cases. In each particular case the question has to be examined in reference to the context and that meaning is to be preferred which will best fit in with it." Reliance was next placed on the decision of the Allahabad High Court in Achaibar Singh v. Ram Murat, AIR 1973 All 261, wherein the question was what is the ambit of the term "suit" in section 6 of the Specific Relief Act and whether it would include an objection under section 47 of the Code of Civil Procedure filed against the execution of the decree passed in a suit and it was held that the term "suit" under section 6 of the Specific Relief Act would include an objection under section 47 of the Code of Civil Procedure filed against the execution of decree passed in such a suit and in view of the bar created by the provisions of sub-section (3) of section 6 of the said Act, no appeal would lie from an order passed on such an objection filed under section 47 of the Code of Civil Procedure. Mr. Doctor also relied upon the decision of the Lahore High Court in Bhai Kirpa Singh v. Rasalldar Ajaipal Singh, AIR 1928 Lahore 627 [FBI. In the said case the Full Bench of the Lahore High Court was concerned with the provisions of the Sikh Gurudwaras Act (Punjab Act 8 of 1925). In the aforesaid judgment an occasion arose as to what is the meaning of the word "suit" and "proceeding". The learned judges observed that it is possible to cite an equally large number of cases in which a narrower meaning has been attached to the word "suit" as denoting the stage of the litigation before the court of the first instance, beginning with the filing of the plaint and ending with the decree or final order passed by such court. Finally after considering several authorities on the issue, the learned judges observed as under (page 632) : "An examination of these and other cases leads to the conclusion that suit', 'proceeding' and words of similar connotation have different meanings in different statutes and that it is not possible to lay down a general rule of interpretation which would be applicable to all cases. In each particular case the question has to be examined in reference to the context and that meaning is to be preferred which will best fit in with it . Mr. Doctor submitted that taking into consideration the object of the Act and the fact that section 22 was amended in the year 1993, and it was provided that no suit for
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recovery of money or for the enforcement of any security against the industrial company or of any guarantee in respect of any loans, or advance granted to the industrial company shall lie or be proceeded with further except with the consent of the Board or as the case may be, the Appellate Authority, the word "suit" must be given wider meaning so as to include also execution as such interpretation would advance the remedy and the object to be achieved by the provisions of the Sick Industrial Companies (Special Provisions) Act, 1985. In this behalf Mr. Doctor relied upon the decision of the apex court in Kanai Lal Sur v. Paramnidhi Sadhukhan, AIR 1957 SC 907, 910, and especially to the following observations : "However, in applying these observations to the provisions of any statute, it must always be borne in mind that the first and primary rule of construction is that the intention of the Legislature must be found in the words used by the Legislature itself. If the words used are capable of one construction only then it would not be open to the courts to adopt any other hypothetical construction on the ground that such hypothetical construction is more consistent with the alleged object and policy of the Act. The words used in the material provisions of the statute must be interpreted in their plain grammatical meaning and it is only when such words are capable of two constructions that the question of giving effect to the policy or object of the Act can legitimately arise. When the material words are capable of two constructions, one of which is likely to defeat or impair the policy of the Act whilst the other construction is likely to assist the achievement of the said policy then the courts would prefer to adopt the latter construction." Mr. Doctor also relied upon the decision of the apex court reported in Union of India v. Filip Tiago De Gama of Vedem Vasco De Gama, AIR 1990 SC 981; [1990] Mah. LJ 724 and especially the observations in paragraph 16 thereof which are as under : "16. The paramount object in statutory interpretation is to discover what the Legislature intended. This intention is primarily to be ascertained from the text of the enactment in question. That does not mean the text is to be construed merely as a piece of prose, without reference to its nature or purpose. A statute is neither a literary text nor a divine revelation. 'Words are certainly not crystals, transparent and unchanged' as Mr.justice Holmes has wisely and properly warned. Towne v. Fisher [1918] 245 US 418, 425. Learned Hand J. was equally emphatic when he said : 'Statutes should be construed not like theorems of Euclid, but with some imagination of the purposes which lie behind them' (Lenigh Valley Coal Co. v. Yensavage, 218 FR 547, 553)." Mr. Doctor submitted that the object of the amendment of section 22 in the year 1993, was to protect not only the industrial company but also the directors thereof and guarantors in respect of any guarantee given as against any loans or advances granted to the industrial company. Mr.Doctor submitted that in most of the cases guarantors are normally directors or their close relations who are shareholders and if such directors or guarantors could be proceeded against then obviously the revival of the company would be in jeopardy. Mr. Doctor also relied upon the decision of the apex court reported in Maharashtra Tubes Ltd. v. State Industrial and Investment Corporation of Maharashtra Ltd. [1993] 78 Comp Cas 803 [1993] 2 SCC 144 in
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support

of

his

submission.

Mr. Diwan, learned counsel appearing for the respondent plaintiff-bank contended that in view of the Division Bench decision of this court referred to above, learned counsel for the appellant has to concede that the impugned order on the basis of the facts obtainable on the date thereof cannot be faulted. Mr. Diwan also pointed out that by the decree itself the receiver stood appointed in July, 1996, and, if that be so, Mr. Diwan contended, so far as the receiver's actions contemplated under the decree are concerned, they cannot be affected by the pendency of the appeal under section 25 of the Sick Industrial Companies (Special Provisions) Act, 1985. In this behalf he relied upon the decision of the learned judge of this court in Industrial Development Bank of India v. Nira Pulp and Paper Mills Ltd. [1992] BJ 274 (Bom); [1994] 79 Comp Cas 811. Mr.Diwan also brought to our notice the older dated August 18, 1997, passed by the Board for Industrial and Financial Reconstruction on the reference made by Madalsa International Ltd., an industrial company under section 15 (1) of the Sick Industrial Companies (Special Provisions) Act, 1985. The said order shows that the learned members of the Board for Industrial and Financial Reconstruction took into consideration various orders passed by this court. They also took into consideration consent terms of the order of the court especially regarding the receiver being empowered to take forcible possession as also copy of the plaint in the suit, relevant and material portion of the operative part of the order passed by the court on March 21, 1997, especially directing the court receiver to take forcible possession was reproduced and ultimately it was observed that after careful consideration of the facts and material on record and in the circumstances of the case in particular the proceedings taken before the High Court and the orders passed by the High Court, the Board considers that it would not legally be in order for them to entertain and proceed with the present reference which was directed to be closed and filed. However, it is an admitted position that the aforesaid order of the Board is being challenged in a pending appeal before the appellate forum under section 25 of the Sick Industrial Companies (Special Provisions) Act, 1985. Mr. Diwan also submitted that the word "suit" will have to be interpreted in the context in which it is used in a particular statute. He further submitted that the same word appearing in the same statute must be interpreted in the same manner and obviously different words appearing in the same section or same statute will have to be interpreted differently. In this behalf Mr. Diwan relied upon the decision reported in Doc v. Dyeball [1828] 8 B 969, wherein learned Chief justice Lord Tenterden observed as under : "The safest course in this case is to give effect to the particular words of the enacting clause. Where the Legislature in the same sentence uses different words, we must presume that they were used in order to express different ideas. The words are 'that the house or building shall be held and the land occupied'. Here the house was held for one whole year, and the pauper's mother gained a settlement in Little Bolton. The order of sessions must therefore be quashed." Next Mr. Diwan relied upon the decision reported in Gibson v. Skibs A/s Marina and Orkla Groube, A/B and Smith Coggins Ltd. [1966] 2 All ER 476, and particularly the observations at page 478 which are as under : "It will be observed that para (c) of the regulation uses the word 'inspected'; para (a)
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of the regulation uses the word 'examined'; and regulation 18 uses the phrase 'thorough examination' and defines that particular phrase. There is clearly a difference between a 'thorough examination' as contemplated by the regulations and an 'examination' as contemplated by the regulations. Is there also a difference between examination' and 'inspection' as contemplated by the regulations. Prima facie one would expect that when two different words, although practically synonymous in ordinary use, or employed in different parts of the same regulation dealing with the same kind of topic, they are intended to have some different meaning." Mr. Diwan also brought to our notice the decision of the apex court reported in CIT v. East West Import and Export (P.) Ltd. (now known as Asian Distributors Ltd.) [1989] 176 ITR 155; AIR 1989 SC 836, 838, and the observations in paragraph 7 thereof which are as under (page 159 of ITR) : "7. The Explanation has reference to the point of time at two places the first one has been stated as 'at the end of the previous year' and the second, which is in issue, is 'in the course of such previous year'. Counsel for the Revenue has emphasised upon the feature that in the same Explanation reference to time has been expressed differently and if the legislative intention was not to distinguish and while stating 'in the course of such previous year' it was intended to convey the idea of the last day of the previous year, there would have been no necessity of expressing the position differently. There is abundant authority to support the stand of counsel for the Revenue that when the situation has been differently expressed the Legislature must be taken to have intended to express a different intention." Thus the first question which arises in this case is whether the word "suit" used in section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985, includes in its ambit execution or execution proceedings. In this behalf it is relevant to notice that prior to the amendment of section 22 it was provided that where in respect of an industrial company an inquiry under section 16 is pending or any scheme referred to under section 17 is under preparation or consideration or a sanctioned scheme is under implementation or where an appeal under section 25 relating to an industrial company is pending, then, notwithstanding anything contained in the Companies Act, 1956, or any other law or the memorandum and articles of association of the industrial company, or any other instrument having effect under the said Act or other law, no proceedings for the winding up of the industrial company or for execution, distress or the like against any of the properties of the industrial company or for the appointment of a receiver in respect thereof shall lie or be proceeded with further, except with the consent of the Board or, as the case may be, the Appellate Authority. Thus it is clear that the proceedings for winding up of the industrial company or for execution, distress or the like against any of the properties of the industrial company or for the appointment of a receiver in respect thereof could not lie and if already taken up could not be proceeded with further except with the consent of the Board or the Appellate Authority. It is clear that this was with a view to giving a free hand to the Board for Industrial and Financial Reconstruction for considering whether a company can be made viable and with that purpose it was thought necessary that the properties of the industrial company should not be exposed to coercive action of the nature mentioned in the section. The unamended section did not prohibit or suspend any suit for recovery of money or enforcement of any security against the
44

industrial company and/or guarantee in respect of any loans or advances granted to the industrial company. It is extremely relevant that the word "execution" is used in the unamended section while in the added portion by amendment the word "suit" is used. It is also further relevant that various authorities quoted above, clearly show that the interpretation of the word "suit" in any particular statute will have to be made in the context in which the same is used. In our opinion the intention and object of the amendment is not only that coercive action against the industrial company or proper-ties belonging to it should be suspended but also that the suit for any recovery of money or enforcement of any security against the industrial company should be suspended. The earlier part takes care of the coercive measures in execution, etc., while the later part obviously suspends the very initiation or if already initiated, prosecution of any suit of the description mentioned therein. Considered in this light we are of the clear opinion that the word "suit" in the amended portion of section 22 cannot include in its ambit execution or execution proceedings. On this interpretation in fact even if the appeal is pending so far as the execution proceedings are concerned, excepting the properties of the industrial company, there can-not be any bar or impediment in proceeding further with the same. The second submission is that by amendment not only the proceedings by way of suit for recovery of money or for enforcement of any security against the industrial company are suspended but proceedings against the guarantors are also suspended. We are not at all impressed by this submission. As is clear from the judgment of the apex court reported in Maharashtra Tubes Ltd. v. State Industrial and Investment Corporation of Maharashtra Ltd. [1993] 78 Comp Cas 803; [1993] 2 SCC 144, the purpose and object of suspension of proceedings, etc., under section 22 (1) of the Sick Industrial Companies (Special Provisions) Act, 1985, is to await the outcome of the reference made under the Board for Industrial and Financial Reconstruction for revival and rehabilitation of the sick industrial company. The Supreme Court in the aforesaid case referring to the words "or the like" which follow the words "execution" and "distress" held that it clearly intended to convey that the properties of the sick industrial company shall not be made the subject-matter of coercive action of similar quality and characteristic till the Board for Industrial and Financial Reconstruction finally disposes of the reference made under section 15 of the Sick Industrial Companies (Special Provisions) Act, 1985. It is observed that the Legislature has advisedly used an omnibus expression "the like" as it could not have conceived of all possible coercive measures that may be taken against a sick undertaking. The apex court in the aforesaid case has considered the coercive action under section 29 of the State Financial Corporations Act, 1951, against the sick industrial company. Considering the object and purpose of the Sick Industrial Companies (Special Provisions) Act, 1985, and the scheme of the Act which is clearly for protecting the properties of the industrial company and for enabling the Board for Industrial and Financial Reconstruction to have a complete free hand for the revival if possible of the sick industrial company, the provisions of section 22 are enacted. Section 22 in a sense imposes serious restrictions on the rights of the third party against filing of suits of the nature mentioned thereunder or for taking coercive action of the nature mentioned therein against the industrial company. Apart from the fact that such restrictions will have to be read on strict interpretation they affect the valuable rights, even the rights finalised by the judgment and decrees of the competent courts we
45

find absolutely no ground to read in these provisions that the proceedings against the guarantors or sureties of the company should also stand suspended. The guarantors could be absolute third parties or directors of an industrial company. However, in both cases it would be the guarantors, whether third parties or directors, who would be affected personally; and we see no reason to interpret the section in such a manner that apart from the properties of the industrial company, the Legislature intended to protect the personal interest of the guarantors as proceedings against guarantors and their personal properties would not affect the revival of the industrial company in any manner whatsoever. In the circumstances the words "of any guarantee in respect of any loans, or advance granted to the industrial company" in the context will have to be read as the guarantee given by the industrial company itself and none else. On the basis of the aforesaid we do not find any force in the second submission of Mr. Doctor as well. Defendant No. 3 has nothing to do with defendant No. 1-company. Mortgaged property at exhibit B belongs to defendant No. 3. In the result, we do not find any merit in this appeal and the appeal is dismissed-with costs. At this stage the learned counsel for the appellants prays for stay of this as well as the impugned order to enable the appellants to approach the apex court. However, in the facts and circumstances of the case we are not inclined to grant absolute stay as prayed for. We only direct that the receiver shall take formal possession of the properties mentioned in exhibit B to the decree and on or after January 23, 1998, shall also be at liberty to take actual physical possession even forcibly, if required, and shall take further steps as per the decree in respect thereof.

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FORM NO. 1 Registration No. of Company .......... Rs. ................ THE COMPANIES ACT, 1956 Declaration of compliance with the requirements of the Companies Act, 1956 on application for registration of a company [Pursuant to section 33(2)] Name of Company Limited/Private Limited Nominal Capital :

Presented by ..

I, sincerely Declare that I am [1] company, or a person

., of

do solemnly and who is engaged in the formation of the

Named in the articles as a director/manager/secretary of the Limited/Private Limited. And that all the requirements of the Companies Act, 1956, and the rules thereunder in respect of matters precedent to the registration of the said company and incidental thereto have been complied with. And make this solemn declaration conscientiously believing the same to be true.
47

Date Place Witness Designation 1. An advocate of the Supreme Court of the ...................... High Court, an attorney or a pleader entitled to appear before the ........................... High Court or a chartered accountant practising in India. 2. State whether director, manager / secretary /advocate/ chartered account. Signature

FORM NO. 2A COMPANIES ACT, 1956 Memorandum containing salient features of prospectus [See section 56(3)]

GENERAL INFORMATION (a) Name and address of registered office of the company (b) Issue listed at: [name(s) of the stock exchanges] (c) Opening, closing and earliest closing dates of the issue (d) Name and address of lead managers (e) Name and address of trustees under debenture trust deeds (in case of debenture issue) (f) Rating for the debenture/preference shares, if any, obtained from CRISIL or any recognised rating agency.

II CAPITAL STRUCTURE OF THE COMPANY (a) Issued, subscribed and paid-up capital (b) Size of present issue giving separately reservation for preferential allotment to promoters and others (c) Paid-up capital (i) after the present issue, (ii) after conversion of debentures (if applicable). III TERMS OF THE PRESENT ISSUE (a) Authority for the issue, terms of payments and procedure and time schedule for allotment and issue of certificates
48

(b) How to apply ------ availability of forms, prospectus and mode of payment (c) Special tax benefits to company and shareholders under the Income-tax Act, if any. IV PARTICULARS OF THE ISSUE. (a) Object of the issue (b) Project cost Means of financing (including contribution of promoters) V COMPANY, MANAGEMENT AND PROJECT (a) History, main objects and present business of the company. (b) Background of promoters, managing director/whole-time director and names of nominees of institution, if any, on the board of directors. (c) Location of the project. (d) Plant and machinery, technology, process, etc. (e) Collaboration, performance guarantee, if any, or assistance in marketing by the collaborators. (f) Infrastructure facilities for raw materials and utilities like water, electricity, etc. (g) Schedule of implementation of the project and progress made so far, giving details of land acquisition. Execution of civil works, installation of plant and machinery, trial production, date of commercial production, if any. (h) The products_____ (i) Nature of product(s)__ consumer/industrial and end-users. (ii) Exiting, licensed and installed capacity of the product, demand of the product existing, and estimated in the coming years estimated by a Government authority or by any other reliable institution, giving source of the information. (iii) Approach to marketing and proposed marketing and proposed marketing set up. In case of company providing services, relevant information in regard to nature/extent of services , etc. , to be furnished (i) Further prospectus___ the expected year when the company would be able to earn net profit, declare dividend. VI FINANCIAL PERFORMANCE OF THE COMPANY FOR THE LAST FIVE YEARS: (figures to be taken from the audited annual accountants in tabular from)\

49

(a) Balance sheet data; equity capital, reserves (state revaluation reserve, the year of revaluation and its monetary effect on assets ) and borrowings. (b) Profit and loss data: sales, gross profit, net profit, dividend paid , if any. (c) Any change in accounting policies during the last three years and their effect on the profits and reserves of the company. (d) Stock market quotation of shares/debentures of the company, if any (high/low price in each of the last three years and monthly high/low price during the last six months). VII WHETHER ALL PAYMENTS/ REFUNDS, DEBENTURES, FIXED DEPOSITS, INTEREST ON FIXED DEPOSITS, DEBENTURE INTEREST, INSTITUTIONAL DUES HAVE BEEN PAID UP TO DATE. IF NOT, DETAILS OF THE ARREARS, IF ANY, TO BE STATED. VIII FOLLOWING PARTICULARS IN REGARD TO THE LISTED COMPANIES UNDER THE SAME MANAGEMENT WITHIN THE MEANING OF SECTION 370(1B) WHICH MADE ANY CAPITAL ISSUE IN THE LAST THREE YEARS: (a) Name of the company. (b) Year of issue. (c) Type of issue (public/rights/composite). (d) Amount of issue. (e) Date of closure of issue. (f) Date of despatch of share/debenture certificate completed. (g) Date of completion of the project. (h) Rate of dividend paid. IX MANAGEMENT PERCEPTIONS OF RISK FACTORS (E.G. SENSITIVITY TO FOREIGN EXCHANGE RATE FLUCTUATIONS, DIFFICULTY IN AVAILABILITY OF RAW MATERIALS OR IN MARKETING OF PRODUCTS, COST/TIME OVERRUN.) Note: Term year wherever used, hereinbefore, means financial year. If the company does not receive application money for at least 90% of the issued amount, the entire subscription will be refunded to the applicants within ninety days from the date of closure of the issue. If there is delay in the refund of application money by more than 8 days after the company becomes liable to pay the excess amount, the company will pay interest for the delayed period, at prescribed rates in sub-sections (2) and (2A) of section 73. No statement made in this form shall contravene any of the provisions of the companies Act, 1956, and the rules made thereunder.

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Place: Date: Signatures of directors

FORM NO. 32 Registration No. of Company .......................... Rs. ................................... THE COMPANIES ACT, 1956 Particulars of appointment of directors and manager and changes among them [Pursuant to section 303(2)] Name of Company ......................................... by ............................................... Presented Nominal Capital

Note : --- If a company has no particulars to be included in one or two of the headings A B and C the parts containing those headings (in respect of which the company has no particulars to be included) need not be filed. A. Appointment of and Usual residential address 3 changes Nationality among directors.

Name or Fathers/ names and husbands surname in name full 1 2

Date of Brief appointmen particulars t or change of changes 5 6

Notes: (1) A note of changes should be made in column 6 e.g. by inserting against the name of new director, etc. the words in place of ........................ and by indicating against the name of the
51

former director, the cause for the change, e.g. by death, resignation, retirement by rotation, disqualification etc. (2) In case of managing director, his designation should be stated with his name in columan1.

C.

Appointment of and changes in managership and secretaryship. Usual residential address 3 Nationality Date of Brief appointmen particulars t or change of changes 5 6

Name or Fathers/ names and husbands surname in name full 1 2

Dated the .......................................... day of ..............19 Signature ............................................ Designation............................................ Notes: (1) For the purposes of this form, particulars of a person appointed as manager within the meaning of section 2(24) of the Companies Act, 1956 need be given. (2) A note of change as also the cause of change e,g, by death, resignation, removal, disqualification, etc. should be stated in column 6.

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CONCLUSION: -The Company Act 1956 is the most elaborative piece of legislation that governs the formation and conduct of company affairs. The Act confers a variety of powers on the Central Government and the Company Law board to monitor, regulate and control the affairs of the companies. -The Companies Act empowers the Central Government to inspect the books of accounts of a company, to direct special audit, to order investigation into affairs of a company and to launch prosecution for violation of the Act. -The Companies Act not only encourages for investment but also ensures better management of companies. The interest of the consumers are also sought to be taken care under the provisions of the Companies Act..

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-The MOA, AOA forms and the other returns can now be filed on line. -The Case study tries to provide the working of acts and interpretation of SICA rulings.

BIBLIOGRAPHY: - Prof Devnani for his compiled notes and valuable guidance. -Elements of Mercantile Law by N.D.Kapoor -www.vakilno1.com -www.google.co.in

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