Section 146 - Registered office of company
(1) A company shall, as from the day on which it begins to carry on business, or as from the1[thirtieth] day after the date of its incorporation, whichever is earlier, have a registered office to which all communications are notices may be addressed.
(2) Notice of the situation of the registered office, and of every change therein, shall be given within2[thirty] days after the date of the incorporation of the company or after the date of the change, as the case may be, to the Registrar who shall record the same:
Provided that except on the authority of a special resolution passed by the company, the registered office of the company shall not be removed -
(a) in the case of an existing company, outside the local limits of any city, town or village where such office is situated at the commencement of, this Act, or where it may be situated later by virtue of a special resolution passed by the company; and
(b) in the case of any other company, outside the local limits of any city, town or village where such office is first situated, or where it may be situated later by virtue of a special resolution passed by the company.
(3) The inclusion in the annual return of a company of a statement as to the address of its registered office shall not be taken to satisfy the obligation imposed by subsection (2).
(4) If default is made in complying with the requirements of this section, the company, and, every officer of the company who is in default, shall be punishable with fine which may extend to3[five hundred rupees] for every day during which the default continues.
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1. Substituted by Act 31 of 1965, Section 62 and Schedule, for "twenty-eighth" (w.e.f. 15-10-1965).
2.Substituted by Act 31 of 1965, section 62 and Schedule, for "twenty-eight" (w.e.f. 15-10-1965).
3.Substituted by Act 53 of 2000, Section 56, for "fifty rupees" (w.e.f. 13-12-2000).
Section 147 - Publication of name by company
(1) Every company -
(a) shall paint or affix its name1[and the address of its registered office], and keep the same painted or affixed, on the outside of every office or place in which its business is carried on, in a conspicuous position, in letters easily legible; and if the characters employed therefor are not those of the language, or of one of the languages, in general use in that locality, also in the characters of that language or of one of those languages;
(b) shall have its name engraven in legible characters on its seal; and
(c) shall have its name1[and the address of its registered office] mentioned in legible characters in all its business letters, in all its bill heads and letter paper, and in all its notices2[***]and other official publications;3[and also have its name so mentioned in all bills of exchange], hundies, promissory notes, endorsements, cheques and orders for money or goods purporting to be signed by or on behalf of the company, and in all bills of parcels, invoices, receipts and letters of credit of company.
(2) If a company does not paint or affix its name1[and the address of its registered office], or keep the same painted or affixed in the manner directed by clause (a) of sub-section (1), the company, and every officer of the company who is in default, shall be punishable with fine which may extend to4[five hundred rupees] for not so painting or affixing its name1[and the address of its registered office], and for every day during which its name1[and the address of its registered office], is not so kept painted or affixed.
(3) If a company fails to comply with clause (b) or clause (c) of sub-section (i), the company shall be punishable with fine which may extend to5[five thousand rupees].
(4) If an officer of a company or any person on its behalf -
(a) uses, or authorises the use of any seal purporting to be a seal of the company whereon its name is not engraven in the manner aforesaid;
(b) issues, or authorises the issue of any business letter, bill head, letter paper, notice2[***] or other official publication of the company wherein6[its name and the address of its registered office are] not mentioned in the manner aforesaid;
(c) signs, or authorises to be signed, on behalf of the company, any bill of exchange, hundi, promissory note, endorsement, cheque or order for money or goods wherein its name is not mentioned in the manner aforesaid; or
(d) issues, or authorises the issue of, any bill of parcels, invoice, receipt or letter of credit of the company, wherein ifs name is not mentioned in the manner aforesaid;
such officer or person shall be punishable with fine which may extend to5[five thousand rupees], and shall further be personally liable to the holder of the bill of exchange, hundi, promissory note, cheque or order for money or goods, for the amount thereof, unless it is duly paid by the company.
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1. Inserted by Act 65 of 1960, Section 34 (w.e.f. 28-12-1960).
2. The word "advertisements" omitted by Act 65 of 1960, Section 34 (w.e.f. 28-12-1960).
3. Substituted by Act 65 of 1960, Section 34, for "and all bills of exchange" (w.e.f. 28-12-1960).
4. Substituted by Act 53 of 2000, Section 57, for "fifty rupees" (w.e.f. 13-12-2000).
5. Substituted by Act 53 of 2000, Section 57, for "five hundred rupees" (w.e.f. 13-12-2000).
6. Substituted by Act 65 of 1960, Section 34, for "its name is" (w.e.f. 28-12-1960).
Section 148 - Publication of authorised as well as subscribed and paid-up capital
(1) Where any notice, advertisement or other official publication, or any business letter, bill head or letter paper, of a company contains a statement of the amount of the authorised capital of the company, such notice, advertisement or other official publication, or such letter, bill head or letter paper, shall also contain a statement, in an equally prominent position and in equally conspicuous characters, of the amount of the capital which has been subscribed and the amount paid-up.
(2) If default is made in complying with the requirements of sub-section (1), the company, and every officer of the company who is in default, shall be punishable with fine which may extend to1[ten thousand rupees].
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1. Substituted by Act 53 of 2000, Section 58, for "one thousand rupees" (w.e.f. 13-12-2000).
Section 149 - Restrictions on commencement of business
(1) Where a company having a share capital has issued a prospectus inviting the public to subscribe for its shares, the company shall not commence any business or exercise any borrowing powers, unless-
(a) shares held subject to the payment of the whole amount thereof in cash have been allotted to an amount not less in the whole than the minimum subscription;
(b) every director of the company has paid to the company, on each of the shares taken or contracted to be taken by him and for which he is liable to pay in cash, a proportion equal to the proportion payable on application and allotment on the shares offered for public subscription;
(c) no money is, or may become, liable to be repaid to applicants for any shares or debentures which have been offered for public subscription by reason of any failure to apply for, or to obtain, permission for the shares or debentures to be dealt in on any recognized stock exchange; and
(d) there has been filed with the Registrar a duty verified declaration by1[one of the directors or the secretary or, where the company has not appointed a secretary, a secretary in whole-time practice] in the prescribed form, that clauses-(a), (b) and (c) of this sub-section, have been complied with.
(2) Where a company having a share capital has not issued a prospectus inviting the public to subscribe for its shares, the company shall not commence any business or exercise any borrowing powers, unless-
(a) there has been filed with the Registrar a statement in lieu of prospectus;
(b) every director of the company has paid to the company, on each of the shares taken or contracted to be taken by him and for which he is liable to pay in cash, a proportion equal to the proportion payable on application and allotment on the shares payable in cash; and
(c) there has been filed with the Registrar a duly verified declaration by1[one of the directors or the secretary or, where the company has not appointed a secretary, a secretary in whole-time practice] in the prescribed form, that clause (b) of this sub-section has been complied with.
2[(2A) Without prejudice to the provisions of sub-section (1) and sub-section (2) a company having a share capital, whether or not it has issued a prospectus inviting the public to subscribe for its shares, shall not at any time commence any business-
(a) if such company is a company in existence immediately before the commencement of the Companies (Amendment) Act, 1965 (31 of 1965), in relation to any of the objects staled in its memorandum in pursuance of clause (c) of sub-section (1) of section 13;
(b) if such company, is a company formed after such commencement in relation to any of the objects stated in its memorandum in pursuance of sub-clause (ii) of clause (d) of sub-section (1) of the said section,
unless-
(i) the company has approved of the commencement of any such business by a special resolution passed in that behalf by its general meeting; and
(ii) there has been filed with the Registrar a duty verified declaration by1[one of the directors or the secretary or where the company has not appointed a secretary, a secretary in whole time practice] in the prescribed form, that clause (i) or as the case may be, sub-section (2B) has been complied with;
and if the company commences any such business in contravention of this sub-section, every person who is responsible for the contravention shall, without prejudice to any other liability, be punishable with fine which may extend to3[five thousand rupees] for every day during which the contravention continues.
Explanation. -A company shall be deemed to commence any business within the meaning of clause (a) if and only if it commences any new business which is not germane to the business which it is carrying on at the commencement of the Companies (Amendment) Act, 1965 (31 of 1965) in relation to any of the objects referred to in the said clause.
(2B) Notwithstanding anything contained in sub-section (2A) where no such special resolution as is referred to in that sub-section is passed but the votes cast (whether on a show of hands or, as the case may be, on a poll) in favour of the proposal to commence any business contained in the resolution moved in that general meeting (including the casting vote, if any, of the chairman) by members who, being entitled so to do, vote in person, or where proxies are allowed, by proxy, exceed the votes, if any, cast against the proposal by members so entitled and voting, the Central Government may on an application made to it by the Board of directors in this behalf allow the company to commence such business as if the proposal had been passed by a special resolution by the company in general meeting.]
(3) The Registrar shall, on the filing of a duly verified declaration in accordance with the provisions of sub-section (1) or sub-section (2), as the case may be, and, in the case of a company which is required by sub-section (2) to file a statement in lieu of prospectus, also of such a statement, certify that the company is entitled to commence business, and that certificate shall be conclusive evidence that the company is so entitled.
(4) Any contract made by a company before the date at which it is entitled to commence business shall be provisional only, and shall not be binding on the company until that date, and on that date it shall become binding.
(5) Nothing in this section shall prevent the simultaneous offer for subscription or allotment of any shares and debentures or the receipt of any money payable on applications for debentures.
(6) If any company commences business or exercises borrowing powers in contravention of this section, every person who is responsible for the contravention shall, without prejudice to any other liability, be punishable with fine which may extend to4[five thousand rupees] for every day during which the contravention continues.
(7) Nothing in this section shall apply to-
(a) a private company; or
(b) a company registered before the first day of April, 1914, which has not issued a prospectus inviting the public to subscribe for its shares.
5[***]
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1. Substituted by Act 31 of 1988, Section 20; for "one of the directors or the secretary" w.e.f. 15-6-1988.
2. Inserted by Act 31 of 1965, Section 15 (w.e.f. 15-10-1965).
3. Substituted by Act 31 of 1988, Section 20, for "one of the directors or the secretary" (w.e.f. 15-6-1988).
4. Substituted by Act 53 of 2000, Section 59, "five hundred rupees" (w.e.f. 13-12-2000).
5. Sub-section (8) omitted by Act 65 of 1960, Section 35 (w.e.f. 28-12-1960).
Section 150 to 156 - Registers of members and debenture-holders
Section 150 - Register of members
(1) Every company shall keep in one or more books a register of its members, and enter therein the following particulars: -
(a) the name and address and the occupation, if any, of each member;
(b) in the case of a company having a share capital, the shares held by each member,1[***]2[distinguishing each share by its number except where such shares are held with a depository] and the amount paid or agreed to be considered as paid on those shares;
(c) the date at which each person was entered in the register as a member; and
(d) the date at which any person ceased to be a member:
Provided that where the company has converted any of its shares into stock and given notice of the conversion to the Registrar, the register shall show the amount of stock held by each of the members concerned instead of the shares so converted which were previously held by him.
(2) If default is made in complying with sub-section (1), the company and every officer of the company who is in default, shall be punishable with fine which may extend to3[five hundred rupees] for every day during which the default continues.
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1. The words "distinguishing each share by its number" omitted by Act 22 of 1996, Section 30 and Schedule (w.r.e.f. 20-9-1995).
2. Inserted by Act 8 of 1997, Section 11 (w.r.e.f. 15-1-1997).
3. Substituted by Act 53 of 2000, Section 60, for "fifty rupees" (w.e.f. 13-12-2000).
Section 151 - Index of members
(1) Every company having more than fifty members shall, unless the register of members is in such a form as in itself to constitute an index, keep an index (which may be in the form of a card index) of the names of the members of the company and shall, within fourteen days, after the date on which any alteration is made in the register of members, make the necessary alteration in the index.
(2) The index shall, in respect of each member, contain a sufficient indication to enable the entries relating to that member in the register to be readily found.
(3) The index shall, at all times, be kept at the same place as the register of members.
(4) If default is made in complying with sub-sections (1), (2) or (3), the company and every officer of the company who is in default, shall be punishable with fine which may extend to1[five hundred rupees].
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1. Substituted by Act 53 of 2000, Section 61, for "fifty rupees" (w.e.f. 13-12-2000).
Section 152 - Register and index of debenture-holders
(1) Every company shall keep in one or more books a register of the holders of its debentures and enter therein the following particulars, namely:-
(a) the name and address, and the occupation, if any, of each debenture-holder;
(b) the debentures held by each holder, 1 [***] 2 [distinguishing each debenture by its number except where such debentures are held with a depository] and the amount paid or agreed to be considered as paid on those debentures;
(c) the date at which each person was entered in the register as a debenture-holder; and
(d) the date at which any person ceased to be a debenture-holder.
(2) (a) Every company having more than fifty debenture-holders shall, unless the register of debenture-holders is in such a form as in itself to constitute an index, keep an index (which may be in the form of a card index) of the names of the debenture-holders of the company and shall, within fourteen days after the date on which any alteration is made in the register of debenture-holders, make the necessary alteration in the index.
(b) The index shall, in respect of each debenture-holder, contain a sufficient indication to enable the entries relating to that holder in the register to be readily found.
(3) If default is made in complying with sub-section (1) or (2), the company, and every officer of the company who is in default, shall be punishable with fine which may extend to 3 [five hundred rupees].
(4) Sub-sections (1) to (3) shall not apply with respect of debentures which, ex facie, are payable to the bearer thereof:
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1. The words "distinguishing each share by its number" omitted by Act 22 of 1996, sec. 30 and Schedule (w.r.e.f. 20-9-1995).
2. Inserted by Act 8 of 1997, Section 12 (w.r.e.f. 15-1-1997).
3. Substituted by Act 53 of 2000, Section 62, for "fifty rupees" (w.e.f. 13-12-2000).
Section 152A - Register and index of beneficial owners to be of debenture-holders
1[152A. Register and index of beneficial owners to be of debenture-holders
The register and index of beneficial owners maintained by a depository under section 11 of the Depositories Act, 1996, shall be deemed to be an index of members and register and index of debenture-holders, as the case may be, for the purposes of this Act.]
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1. Inserted by Act 22 of 1996, Section 30 and Schedule (w.r.e.f. 20-9-1995).
Section 153 - Trusts not to be entered on register
No notice of any trust, express, implied or constructive, shall be entered on the register of members or of debenture-holders1[***]
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1. The words "or be receivable by the Registrar" omitted by Act 53 of 1963, Section 6 (w.e.f. 1-1-1964).
Section 153A - Appointment of public trustee
1[153A. Appointment of public trustee
2[(1)] The Central Government may, by notification in the Official Gazette, appoint a person as public trustee to discharge the functions and to exercise the rights and powers conferred on him by or under this Act.]
3[(2) The provision of this section shall not apply on and after the commencement of the Companies (Amendment) Act, 2000.]
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1. Inserted by Act 53 of 1963, Section 7 (w.e.f. 1-1-1964).
2. Section 153A renumbered as sub-section (1) thereof by Act 53 of 2000, Section 63 (w.e.f. 13-12-2000).
3. Inserted by Act 53 of 2000, Section 63 (w.e.f. 13-12-2000).
Section 153B - Declaration as to shares and debentures held in trust
1[1 53B. Declaration as to shares and debentures held in trust
(1) Notwithstanding anything contained in section 153, where any shares in, or debenture, of, a company are held in trust by any person (hereinafter referred to as the trustee), the trustee shall, within such time and in such form as may be prescribed, make a declaration to the public trustee.
(2) A copy of the declaration made under sub-section (1) shall be sent by the trustee to the company concerned, within twenty-one days, after the declaration has been sent to the public trustee.
(3) (a) If a trustee fails to make a declaration as required by this section, he shall be punishable with fine which may extend to five thousand rupees and in the case of a continuing failure, with a further fine which may extend to one hundred rupees for every day during which the failure continues.
(b) If a trustee makes in a declaration aforesaid any statement which is false and which he knows or believes to be false or does not believe to be true, he shall be punishable with imprisonment for a term which may extend to two years and also with fine.
(4) The provisions of this section and section 187B shall not apply in relation to a trust-
(a) where the trust is not created by instrument in writing; or
(b) even if the trust is created by instrument in writing,2[where the value of the shares in, or debentures of, a company held in trust]-
(i) does not exceed one lakh of rupees, or
(ii) exceeds one lakh of rupees but does not exceed either five lakhs of rupees or twenty-five per cent of the paid-up share capital of the company,3[whichever is less, or]]
4[(c) where the trust is created to set up a Mutual Fund or Venture Capital Fund or such other fund as may be approved by the Securities and Exchange Board of India established under sub-section (1) of section 3 of the Securities and Exchange Board of India Act, 1992 (15 of 1992).]
5[Explanation.-The expression "the value of the shares in, or debentures of, a company" in clause (b) means,-
(i) in the case of shares or debentures acquired by way of allotment or transfer for consideration, the cost of acquisition thereof, and
(ii) in any other case, the paid-up value of the shares or debentures.]
6[(5) The provisions of this section shall not apply on and after the commencement of the Companies (Amendment) Act, 2000.]
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1. Inserted by Act 53 of 1963, Section 7 (w.e.f. 1-1-1964).
2. Substituted by Act 31 of 1965, Section 16, for certain words (w.e.f. 15-10-1965).
3. Substituted by Act 5 of 1997, Section 6, for "whichever is less" (w.e.f. 1-3-1997).
4. Inserted by Act 5 of 1997, Section 6 (w.e.f. 1-3-1997).
5. Inserted by Act 31 of 1965, Section 16 (w.e.f. 15-10-1965).
6. Inserted by Act 53 of 2000, Section 64 (w.e.f. 13-12-2000).
Section 154 - Power to close register of members or debenture-holders
(1) A company may, after giving not less than seven days' previous notice by advertisement in some newspapers circulating in the district in which the registered office of the company is situate, close the register of members or the register of debenture-holders for any period or periods not exceeding in the aggregate fifty-five days in each year, but not exceeding thirty days at any one time.
(2) If the register of members or of debenture-holders is closed without giving the notice provided in sub-section (1), or after giving shorter notice than that so provided, or for a continuous or an aggregate period in excess of the limits specified in that subsection, the company, and every officer of the company who is in default, shall be punishable with fine which may extend to1[five thousand rupees] for every day during which the register is so closed.
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1. Substituted by Act 53 of 2000, Section 65, for "five hundred rupees" (w.e.f. 13-12-2000).
Section 155 - Power of Court to rectify register to members [Repealed]
[Rep. by the Companies (Amendment) Act, 1988 (31 of 1988) section 21.]
Section 156 - Notice to Registrar of rectification of register [Repealed]
[Rep. by the Companies (Amendment) Act, 1988 (31 of 1988) section 21.]
Section 157 to 158 - Foreign registers of members or debenture-holders
Section 157 - Power for company to keep foreign register of members or debenture-holders
(1) A company which has a share capital or which has issued debentures may, if so authorised by its articles, keep in any State or country outside India a branch register of members or debenture-holders resident in that State or country (in this Act called a "foreign register").
(2) The company shall, within1[thirty days] from the date of the opening of any foreign register, file with the registrar notice of the situation of the office where such register is kept; and in the event of any change in the situation of such office or of its discontinuance, shall, within1[thirty days] from the date of such change or discontinuance, as the case may be, file notice with the Registrar of such change or discontinuance.
(3) If default is made in complying with the requirements of sub-section (2), the company, and every officer of the company who is in default, shall be punishable with fine which may extend to2[five hundred rupees] for every day during which the default continues.
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1. Substituted by Act 31 of 1965, Section 62 and Schedule, for "one month" (w.e.f. 15-10-1965).
2. Substituted by Act 53 of 2000, Section 66, for "fifty rupees" (w.e.f. 13-12-2000).
Section 158 - Provisions as to foreign registers
( 1 ) A foreign register shall be deemed to be part of the company's register (in this section called the "principal register") of members or of debenture-holders, as the case may be.
(2) A foreign register shall be kept, shall be open to inspection and may be closed, and extracts may be taken therefrom and copies thereof may be required, in the same manner, mutatis mutandis, as is applicable to the principal register under this Act, except that the advertisement before closing the register shall be inserted in some newspapers circulating in the district wherein the foreign register is ke p t.
(3) (a) The Central Government may, by notification in the Official Gazette, direct that the provisions of clause (b) shall apply, or cease to apply, to foreign registers kept in any State or country outside India.
(b) If a foreign register is kept by a company in any State or country to which a direction under clause (a) applies for the time being, the decision of any competent court in that State or country in regard to the rectification of the register shall have the same force and effect as if it were the decision of a competent court in India.
(4) The company shall -
(a) transmit to its registered office in India a copy of every entry in any foreign register as soon as may be after the entry is made; and
(b) keep at such office a duplicate of every foreign register duly entered up from time to time.
(5) Every such duplicate shall, for all the purposes of this Act, be deemed to be part of the principal register.
(6) Subject to the provisions of this section with respect to duplicate registers, the shares or debentures registered in any foreign register shall be distinguished from the shares or debentures registered in the principal register and in every other foreign register; and no transaction with respect to any shares or debentures registered in a foreign register shall, during the continuance of that registration, be registered in any other register.
(7) The company may discontinue the keeping of any foreign register; and thereupon all entries in that register shall be transferred to some other foreign register kept by the company in the same part of the world or to the principal register.
(8) Subject to the provisions of this Act, a company may, by its articles, make such regulations as it thinks fit in regard to its foreign registers.
(9) If default is made in complying with sub-section (4), the company, and every officer of the company who is in default, shall be punishable with fine which may extend to1[five hundred rupees].
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1. Substituted by Act 53 of 2000, Section 67, for "fifty rupees" (w.e.f. 13-12-2000).
Section 159 to 162 - Annual returns
Section 159 - Annual return to be made by company having a share capital
(1) Every company having a share capital shall within 1 [sixty] days from the day on which each of the annual general meetings referred to in section 166 is held, prepare and file with the Registrar a return containing the particulars specified in Part I of Schedule V, as they stood on that day, regarding-
(a) its registered office,
(b) the register of its members,
(c) the register of its debenture-holders,
(d) its shares and debentures,
(e) its indebtedness,
(f) its members and debenture-holders, past and present, and
(g) its directors, managing directors, 2 [***] 3 [managers and secretaries], past and present:
4 [Provided that 5 [any of the five] immediately preceding returns has given as at the date of the annual general meeting with reference to which it was submitted, the full particulars required as to past and present members and the shares held and transferred by them, the return in question may contain only such of the particulars as relate to persons ceasing to be or becoming members since that date and to shares transferred since that date or to changes as compared with that date in the number of shares held by a member.
Explanation.-Any reference in this section or in section 160 or 161 or in any other section or in Schedule V to the day on which an annual general meeting is held or to the date of the annual general meeting shall, where the annual general meeting for any year has not been held, be construed as a reference to the latest day on or before which that meeting should have been held in accordance with the provisions of this Act.]
(2) The said return shall be in the Form set out in Part II of Schedule V or as near thereto as circumstances admit 4 [and where the return is filed even though the annual general meeting has not been held on or before the latest day by which it should have been held in accordance with the provisions of this Act, the company shall file with the return a statement specifying the reasons for not holding the annual general meeting]:
Provided that where the company has converted any of its shares into stock and given notice of the conversion to the Registrar, the list referred to in paragraph 5 of Part I of Schedule V shall state the amount of stock held by each of the members concerned instead of the shares so converted previously held by him.
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1. Substituted by Act 31 of 1965, Section 62 and Schedule, for "forty-two" (w.e.f. 15-10-1965).
2. The words "managing agents, secretaries and treasurers" omitted by Act 53 of 2000, Section 68 (w.e.f. 13-12-2000).
3. Substituted by Act 65 of 1960, Section 38, for "and managers" (w.e.f. 28-12-1960).
4. Inserted by Act 65 of 1960, Section 38 (w.e.f. 28-12-1960).
5. Substituted by Act 31 of 1988, Section 22, for "any of the two" (w.e.f. 15-6-1988).
Section 160 - Annual return to be made by company not having a share capital
(1) Every company not having a share capital shall, within1[sixty] days from the day on which each of the annual general meetings referred to in section 166 is held, prepare and file with the Registrar a return stating the following particulars as they stood on that day: -
(a) the address of the registered office of the company;
2[(aa) the names of members and the respective dates on which they became members and the names of persons who ceased to be members since the date of the annual general meeting of the immediately preceding year, and the dates on which they so ceased;]
(b) all such particulars with respect to the persons who, at the date of the return, where the directors of the company3[***]4[its manager and its secretary] as are set out in section 303.
(2) There shall be annexed to the return a statement containing particulars of the total amount of the indebtedness of the company as on the day aforesaid in respect of all charges which are or were required to be registered with the Registrar under this Act or under any previous companies law, or which would have been required to be registered under this Act if they had been created after the commencement of this Act.
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1. Substituted by Act 31 of 1965, Section 62 and Schedule, for "forty-two" (w.e.f. 15-10-1965).
2. Inserted by Act 65 of 1960, Section 39 (w.e.f. 28-12-1960).
3. The words "its managing agent, it secretaries and treasurers" omitted by Act 53 of 2000, Section 69 (w.e.f. 13-12-2000).
4. Substituted by Act 65 of 1960, Section 39, for "and its manager" (w.e.f. 28-12-1960).
Section 161 - Further provisions regarding annual return and certificate to be annexed thereto
(1) The copy of the annual return filed with the Registrar under section 159 or 160, as the case may be, shall be signed both by a director and by the 1 [***]manager or secretary of the company, or where there is no 1 [***] manager or secretary, by two directors of the company, one of whom shall be the managing director where there is one:
2 [Provided that where the annual return is filed by a company whose shares are listed on a recognised stock exchange, the copy of such annual return shall also be signed by a secretary in whole-time practice.]
(2) There shall also be filed with the Registrar along with the return a certificate signed by 3 [the signatories] of the return, stating-
(a) that the return states the facts as they stood on the day of the annual general meeting aforesaid, correctly and completely; 4 [***]
5 [(aa) that since the date of the last annual return the transfer of all shares and debentures and the issue of all further certificates of shares and debentures have been appropriately recorded in the books maintained for the purpose; and]
(b) in the case of a private company also, (i) that the company has not, since the date of the annual general meeting with reference to which the last return was submitted, or in the case of a first return, since the date of the incorporation of the company, issued any invitation to the public to subscribe for any shares or debentures of the company, and (ii) that, where the annual return discloses the fact that the number of members of the company exceeds fifty, the excess consists wholly of persons who under sub-clause (b) of clause (iii) of sub-section (1) of section 3 are not to be included in reckoning the number of fifty.
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1. The words "managing agent, secretaries and treasurers," omitted by Act 31 of 1998, Section 23 (w.e.f. 15-6-1968).
2. Inserted by Act 31 of 1988, Section 23 (w.e.f. 15-6-1988).
3. Substituted by Act 31 of 1988, Section 23, for "both the signatories" (w.e.f. 15-6-1988.)
4. The word "and" omitted by Act 65 of 1960, Section 40 (w.e.f. 28-12-1960).
5. Inserted by Act 65 of 1960, Section 40 (w.e.f. 28-12-1960).
Section 162 - Penalty and interpretation
(1) if a company fails to comply with any of the provisions contained in sections 159, 160 or 161, the company, and every officer of the company who is in default, shall be punishable with fine which may, extend to1[five hundred rupees] for every day during which the default continues.
(2) For the purposes of this section and sections 159, 160, and 161, the expressions "officer" and "director" shall include any person in accordance with whose directions or instructions the Board of directors of the company is accustomed to act.
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1. Substituted by Act 53 of 2000, Section 70, for "fifty rupees" (w.e.f. 13-12-2000).
Section 163 to 164 - General provisions regarding registers and returns
Section 163 - Place of keeping and inspection of, registers and returns
(1) The register of members commencing from the date of the registration of the company, the index of members, the register and index of debenture-holders, and copies of all annual returns prepared under sections 159 and 160, together with the copies of certificates and documents required to be annexed thereto under sections 160 and 161, shall be kept at the registered office of the company:
1 [Provided that such registers, indexes, returns and copies of certificates and documents or any or more of them may, instead of being kept at the registered office of the company, be kept of any other place within the city, town or village in which the registered office is situate, if-
(i) such other place has been approved for this purpose by a special resolution passed by the company in general meeting, 2 [and]
3 [***]
(iii) the Registrar has been given in advance a copy of the proposed special resolution.]
1 [(1A) Notwithstanding anything contained in sub-section (1), the Central Government may make rules for the preservation and for the disposal, whether by destruction or otherwise, of the registers, indexes, returns, and copies of certificates and other documents referred to in sub-section (1).]
(2) The registers, indexes, returns, and copies of certificates and other documents referred to in sub-section (1) shall, except when the register of members or debenture-holders is closed under the provisions of this Act, be open during business hours (subject to such reasonable restrictions, as the company may impose, so that not less than two hours in each day are allowed for inspection) to the inspection-
(a) of any member or debenture-holder, without fee; and
(b) of any other person, on payment of 4 [such sum as may be prescribed] for each inspection.
(3) Any such member, debenture-holder or other person may-
(a) make extracts from any register, index or copy referred to in sub-section (1) without fee or additional fee, as the case may be; or
(b) require a copy of any such register, index or copy or of any part thereof, on payment of 5 [such sum as may be prescribed] for every one hundred words or fractional part thereof required to be copied.
(4) The company shall cause any copy required by any person under clause (b) of sub-section (3) to be sent to that person within a period of ten days, exclusive of non-working days, commencing on the day next after the day on which the requirement is received by the company.
(5) If any inspection, or the making of any extract required under this section, is refused, or if any copy required under this section is not sent within the period specified in sub-section (4), the company, and every officer of the company who is in default, shall be punishable, in respect of each offence, with fine which may extend to 6 [five hundred rupees] for every day during which the refusal or default continues.
(6) The 7 [Central Government] may also, by order, compel an immediate inspection of the document, or direct that the extract required shall forthwith be allowed to be taken by the person requiring it, or that the copy required shall forthwith be sent to the person requiring it, as the case may be.
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1. Inserted by Act 65 of 1960, Section 41 (w.e.f. 28-12-1960).
2. Inserted by Act 31 of 1965, Section 17 (w.e.f. 15-10-1965).
3. Clause (ii) omitted by Act 31 of 1965, Section 17 (w.e.f. 15-10-1965).
4. Substituted by Act 31 of 1988, Section 67, for "a fee of one rupee" (w.e.f. 15-7-1988).
5. Substituted by Act 31 of 1988, Section 67, for "six annas" (w.e.f. 15-7-1988).
6. Substituted by Act 53 of 2000, Section 71, for "fifty rupees" (w.e.f. 13-12-2000).
7. Substituted by Act 31 of 1988, Section 67, for "Court" (w.e.f. 31-5-1991) and again substituted by Act 11 of 2003, Section 21, for "Company law Board".
Section 164 - Registers, etc., to be evidence
The register of members, the register of debenture-holders, and the annual returns, certificates and statements referred to in sections 159, 160 and 161 shall be prima facie evidence of any matters directed or authorised to be inserted therein by this Act.
Section 165 to 197 - Meetings and proceedings
Section 165 - Statutory meeting and statutory report of company
(1) Every company limited by shares, and every company limited by guarantee and having a share capital, shall, within a period of not less than one month nor more than six months from the date at which the company is entitled to commence business, hold a general meeting of the members of the company, which shall be called "the statutory meeting".
(2) The Board of directors shall, at least twenty-one days before the day on which the meeting is held, forward a report (in this Act referred to as "the statutory report") to every member of the company:
Provided that if the statutory report is forwarded later than is required above, it shall, notwithstanding that fact, be deemed to have been duly forwarded if it is so agreed to by all the members entitled to attend and vote at the meeting.
(3) The statutory report shall set out -
(a) the total number of shares allotted, distinguishing shares allotted as fully or partly paid up otherwise than in cash, and stating in the case of shares partly paid up, the extent to which they are so paid up, and in either case, the consideration for which they have been allotted;
(b) the total amount of cash received by the company in respect of all the shares allotted, distinguished as aforesaid;
(c) an abstract of the receipts of the company and of the payments made thereout, up to a date within seven days of the date of the report, exhibiting under distinctive headings the receipts of the company from shares and debentures and other sources, the payments made thereout, and particulars concerning the balance remaining in hand, and an account or estimate of the preliminary expenses of the company, showing separately any commission or discount paid or to be paid on the issue or sale of shares or debentures;
(d) the names, addresses and occupations of the directors of the company and of its auditors; and also, if there be any, of its1[***] manager, and secretary; and the changes, if any which have occurred in such names, addresses and occupations since the date of the incorporation of the company;
(e) the particulars of any contract which, or the modification or the proposed modification of which, is to be submitted to the meeting for its approval, together in the latter case with the particulars of the modification or proposed modification;
(f) the extent, if any, to which each under-writing contract, if any, has not been carried out, and the reasons therefor;
2[(g) the arrears, if any, due on calls from every director and from the manager; and]
3[(h) the particulars of any commission or brokerage paid or to be paid in connection with the issue or sale of shares or debentures to any director or to the manager.]
(4) The statutory report shall be certified as correct by not less than two directors of the company one of whom shall be a managing director, where there is one.
After the statutory report has been certified as aforesaid, the auditors of the company shall, insofar as the report relates to the shares allotted by the company, the cash received in respect of such shares and the receipts and payments of the company4[***]certify it as correct.
(5) The Board shall cause a copy of the statutory report certified as is required by this section to be delivered to the Registrar for registration forthwith, after copies thereof have been sent to the members of the company.
(6) The Board shall cause a list showing the names, addresses and occupations of the members of the company, and the number of shares held by them respectively, to be produced at the commencement of the statutory meeting, and to remain open and accessible to any member of the company during the continuance of the meeting.
(7) The members of the company present at the meeting shall be at liberty to discuss any matter relating to the formation of the company or arising out of the statutory report, whether previous notice has been given or not; but no resolution may be passed of which notice has not been given in accordance with the provisions of this Act.
(8) The meeting may adjourn from time to time, and at any adjourned meeting any resolution of which notice has been given in accordance with the provisions of this Act, whether before or after the former meeting, may be passed; and the adjourned meeting shall have the same powers as an original meeting.
(9) If default is made in complying with the provisions of this section, every director or other officer of the company who is in default shall be punishable with fine which may extend to5[five thousand rupees].
(10) This section shall not apply to a private company.
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1 . The words "managing agent, secretaries and treasurers," omitted by Act 53 of 2000, Section 72 (w.e.f. 13-12-2000).
2. Substituted by Act 53 of 2000, Section 72, for clause (g) (w.e.f. 13-12-2000).
3. Substituted by Act 53 of 2000, Section 72, for clause (h) (w.e.f. 13-12-2000).
4. The words "on capital account" omitted by Act 65 of 1960, Section 42 (w.e.f. 28-12-1960).
5. Substituted by Act 53 of 2000, Section 72, for "five hundred rupees" (w.e.f. 13-12-2000).
Section 166 - Annual general meeting
1 [(1) Every company shall in each year hold in addition to any other meetings a general meeting as its annual general meeting and shall specify the meeting as such in the notices calling it; and not more than fifteen months shall elapse between the date of one annual general meeting of a company and that of the next:
Provided that a company may hold its first annual general meeting within a period of not more than eighteen months from the date of its incorporation; and if such general meeting is held within that period, it shall not be necessary for the company to hold any annual general meeting in the year on its incorporation or in the following year:
Provided further that the Registrar may, for any special reason, extend the time within which any annual general meeting (not being the first annual general meeting) shall be held, by a period not exceeding three months.]
(2) Every annual general meeting shall be called for a time during business hours, on a day that is not a public holiday, and shall be held either at the registered office of the company or at some other place within the city, town or village in which the registered office of the company is situate 2 [***]:
3 [Provided that the Central Government may exempt any class of companies from the provisions of this sub-section subject to such conditions as it may impose:
Provided further that-
(a) a public company or a private company which is a subsidiary of a public company, may by its articles fix the time for its annual general meetings and may also by a resolution passed in one annual general meeting fix the time for its subsequent annual general meetings; and
(b) a private company which is not a subsidiary of a public company, may in like manner and also by a resolution agreed to by all the members thereof, fix the times as well at the place for its annual general meeting.]
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1. Substituted by Act 65 of 1960, Section 43, for sub-section (1) (w.e.f. 28-12-1960).
2. Certain words omitted by Act 65 of 1960, Section 43 (w.e.f. 28-12-1960).
3. Inserted by Act 65 of 1960, Section 43 (w.e.f. 28-12-1960).
Section 167 - Power of Central Government to call annual general meeting
1[167 . Power of Central Government to call annual general meeting
( 1 ) If default is made in holding an annual general me eting in accordance with section 166 , the Central Government may, notwithstanding anything contained in this Act or in the articles of the company, on the application of any me mber of the company, call, or direct the calling of, a general me eting of the company and give such ancillary or consequential directions as the Central Government thinks expedient in relation to the calling, holding and conducting of the me eting.
Explanation . -The directions that may be given under this sub -section may include a direction that one me mber of the company present in person or by proxy sh all be deemed to constitute a me eting.
( 2 ) A general me eting held in pursuance of sub -section ( 7 ) sh all, sub ject to any directions of the Central Government, be deemed to be an annual general me eting of the company:
Provided that in the case of revival and rehabilitation of sick industrial companies under Chapter VIA, the provisions of this section sh all have effect as if for the words "Central Government", the word "Tribunal" had been sub stituted.]
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1. Substituted by Act 11 of 2003, Section 22, for section 167 (See Annexe).
Section 168 - Penalty for default in complying with section 166 or 167
If default is made in holding a meeting of the company in accordance with section 166, or in complying with any directions of the1[Tribunal or the Central Government as the case may be,] under sub-section (1) of section 167, the company, and every officer of the company who is in default, shall be punishable with fine which may extend to2[fifty thousand rupees]3[and in the case of a continuing default, with a further fine which may extend to4[two thousand five hundred rupees] for every day after the first during which such default continues].
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1. Substituted by Act 11 of 2003, Section 23, for "Central Government".
2. Substituted by Act 53 of 2000, Section 73, for "five thousand rupees" (w.e.f. 13-12-2000).
3. Inserted by Act 65 of 1960, Section 44 (w.e.f. 28-12-1960).
4.Substituted by Act 53 of 2000, Section 73, for "two hundred and fifty rupees" (w.e.f. 13-12-2000).
Section 169 - Calling of extraordinary general meeting on requisition
(1) The Board of directors of a company shall, on the requisition of such number of members of the company as is specified in sub-section (4), forthwith proceed duly to call an extraordinary general meeting of the company.
(2) The requisition shall set out the matters for the consideration of which the meeting is to be called, shall be signed by the requisitionists, and shall be deposited at the registered office of the company.
(3) The requisition may consist of several documents in like form, each signed by one or more requisitionists.
(4) The number of members entitled to requisition a meeting in regard to any matter shall be
(a) in the case of a company having a share capital, such number of them as hold at the date of the deposit of the requisition, not less than one-tenth of such of the paid-up capital of the company as at that date carried the right of voting in regard to that matter;
(b) in the case of company not having a share capital, such number of them as have at the date of deposit of the requisition not less than one-tenth of the total voting power of all the members having at the said date a right to vote in regard to that matter.
(5) Where two or more distinct matters are specified in the requisition, the provisions of sub-section (4) shall apply separately in regard to each such matter; and the requisition shall accordingly be valid only in respect of those matters in regard to which the condition specified in that sub-section is fulfilled.
(6) If the Board does not, within twenty-one days from the date of the deposit of a valid requisition in regard to any matters, proceed duly to call a meeting for the consideration of those matters on a day not later than forty-five days from the date of the deposit of the requisition, the meeting may be called
(a) by the requisitionists themselves;
(b) in the case of a company having a share capital, by such of the requisionists as represent either a majority in value of the paid-up share capital held by all of them or not less than one-tenth of such of the paid-up share capital of the company as is referred to in clause (a) of sub-section (4), whichever is less; or
(c) in the case of a company not having a share capital by such of the requisitionists as represent not less than one-tenth of the total voting power of all the members of the company referred to in clause (b) of sub-section (4).
Explanation.For the purposes of this sub-section, the Board shall, in the case of a meeting at which a resolution is to be proposed as a special resolution, be deemed not to have duly convened the meeting if they do not give such notice thereof as is required by sub-section (2) of section 189.
(7) A meeting called under sub-section (6) by the requisitionists or any of them
(a) shall be called in the same manner, as nearly as possible, as that in which meetings are to be called by the Board; but
(b) shall not be held after the expiration of three months from the date of the deposit of the requisition.
Explanation.Nothing in clause (b) shall be deemed to prevent a meeting duly commenced before the expiry of the period of three months, aforesaid, from adjourning to some day after the expiry of that period.
(8) Where two or more persons hold any shares or interest in a company jointly, a requisition, or a notice calling a meeting, signed by one or some only of them shall, for the purposes of this section, have the same force and effect as if it had been signed by all of them.
(9) Any reasonable expenses incurred by the requisitionists by reason of the failure of the Board duly to call a meeting shall be repaid to the requisitionists by the company; and any sum so repaid shall be retained by the company out of any sums due or to become due from the company by way of fees or other remuneration for their services to such of the directors as were in default.
Section 170 - Sections 171 to 186 to apply to meetings
(1) The provisions of sections 171 to 186
(i) shall, notwithstanding anything to the contrary in the articles of the company, apply with respect to general meetings of a public company, and of a private company which is a subsidiary of a public company; and
(ii) shall, unless otherwise specified therein or unless the articles of the company otherwise provide, apply with respect to general meetings of a private company which is not a subsidiary of a public company.
(2) (a) Section 176, with such adaptations and modifications, if any, as may be prescribed, shall apply with respect to meetings of any class of members or of debenture-holders or any class of debenture-holders of a company, in like manner as it applies with respect to general meetings of the company.
(b) Unless the articles of the company or a contract binding on the persons concerned otherwise provide, sections 171 to 175 and sections 177 to 186 with such adaptations and modifications, if any, as may be prescribed, shall apply with respect to meetings of any class of members, or of debenture-holders or any class of debenture-holders, of a company, in like manner as they apply with respect to general meetings of the company.
Section 171 - Length of notice for calling meeting
(1) A general meeting of a company may be called by giving not less than twenty-one days' notice in writing.
(2) A general meeting may be called after giving shorter notice than that specified in sub-section (1), if consent is accorded thereto
(i) in the case of an annual general meeting, by all the members entitled to vote thereat; and
(ii) in the case of any other meeting by members of the company (a) holding, if the company has a share capital, not less than 95 per cent of such part of the paid-up share capital of the company as gives a right to vote at the meeting, or (b) having, if the company has no share capital, not less than 95 per cent of the total voting power exercisable at that meeting:
Provided that where any members of a company are entitled to vote only on some resolution or resolutions to be moved at a meeting and not on the others, those members shall be taken into account for the purposes of this sub-section in respect of the former resolution or resolutions and not in respect of the latter.
Section 172 - Contents and manner of service of notice and persons on whom it is to be served
(1) Every notice of a meeting of a company shall specify the place, and the day, and hour of the meeting, and shall contain a statement of the business to be transacted thereat.
(2) Notice of every meeting of the company shall be given-
(i) to every member of the company, in any manner authorised by sub-sections (1) to (4) of section 53;
(ii) to the persons entitled to a share in consequence of the death or insolvency of a member, by sending it through the post in a prepaid letter address to them by name, or by the title of representatives of the deceased, or assignees of the insolvent, or by any like description, at the address, if any, in India supplied for the purpose by the persons claiming to be so entitled, or until such an address has been so supplied, by giving the notice in any manner in which it might have been given if the death or insolvency had not occurred; and
(iii) to the auditor or auditors for the time being of the company, in any manner authorised by section 53 in the case of any member or members of the company:
1 [Provided that where the notice of a meeting is given by advertising the same in a newspaper circulating in the neighbourhood of the registered office of the company under sub-section (3) of section 53, the statement of material facts referred to in section 173 need not be annexed to the notice as required by that section but it shall be mentioned in the advertisement that the statement has been forwarded to the members of the company.]
(3) The accidental omission to give notice to, or the non-receipt of notice by, any member or other person to whom it should be given shall not invalidate the proceedings at the meeting.
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1. Inserted by Act 65 of 1960, Section 45 (w.e.f. 28-12-1960).
Section 173 - Explanatory statement to be annexed to notice
(1) For the purposes of this section -
(a) in the case of an annual general meeting, all businesses to be transacted at the meeting shall be deemed special, with the exception of business relating to (i) the consideration of the accounts, balance-sheet and the reports of the Board of directors and auditors, (ii) the declaration of a dividend, (iii) the appointment of directors in the place of those retiring, and (iv) the appointment of, and the fixing of the remuneration of, the auditors; and
(b) in the case of any other meeting, all business shall be deemed special.
(2) Where any items of business to be transacted at the meeting are deemed to be special as aforesaid, there shall be annexed to the notice of the meeting a statement setting out all material facts concerning each such item of business, including in particular1[the nature of the concern or interest], if any, therein or every director2[***] and the manager, if any:
3[Provided that where any item of special business as aforesaid to be transacted at a meeting of the company relates to, or affects, any other company the extent of shareholding interest in that other company of every director2[***] and the manager, if any, of the first-mentioned company shall also be set out in the statement if the extent of such shareholding interest is not less than twenty per cent of the paid-up share capital of that other company.]
(3) Where any item of business consists of the according of approval to any document by the meeting, the time and place where the document can be inspected shall be specified in the statement aforesaid.
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1 . Substituted by Act 65 of 1960, Section 46, for "the nature and extent of the interest" (w.e.f. 28-12-1960).
2. The words ", the managing agent, if any, the secretaries and treasurers, if any," omitted by Act 53 of 2000, Section 74 (w.e.f. 13-12-2000).
3. Inserted by Act 65 of 1960, Section 46 (w.e.f. 28-12-1960).
Section 174 - Quorum for meeting
(1) Unless the articles of the company provide for a larger number, five members personally present in the case of1[public company (other than a public company which has become such by virtue of section 43A), and two members personally present in the case of any other company,] shall be the quorum for a meeting of the company.
(2) Unless the articles of the company otherwise provide, the provisions of subsections (3), (4) and (5) shall apply with respect to the meetings of a public or private company.
(3) If within half an hour from the time appointed for holding a meeting of the company, a quorum is not present, the meeting if called upon the requisition of members, shall stand dissolved.
(4) In any other case, the meeting shall stand adjourned to the same day in the next week, at the same time and place, or to such either day and at such other time and place as the Board may determine.
(5) If at the adjourned meeting also a quorum is not present within half an hour from the time appointed for holding the meeting the members present shall be a quorum.
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1. Substituted by Act 31 of 1965, Section 18, for certain words (w.e.f. 15-10-1965).
Section 175 - Chairman of meeting
(1) Unless the articles of the company otherwise provide, the members personally present at the meeting shall elect one of themselves to be the chairman thereof on a show of hands.
(2) If a poll is demanded on the election of the chairman, it shall be taken forthwith in accordance with the provisions of this Act, the chairman elected on a show of hands exercising all the powers of the chairman under the said provisions.
(3) If some other person is elected chairman as a result of the poll, he shall be chairman for the rest of the meeting.
Section 176 - Proxies
(1) Any member of a company entitled to attend and vote at a meeting of the company shall be entitled to appoint another person (whether a member or not) as his proxy to attend and vote instead of himself; but a proxy so appointed shall not have any right to speak at the meeting:
Provided that, unless the articles otherwise provide -
(a) this sub-section shall not apply in the case of a company not having a share capital;
(b) a member of a private company shall not be entitled to appoint more than one proxy to attend on the same occasion; and
(c) a proxy shall not be entitled to vote except on a poll.
(2) In every notice calling a meeting of a company which has a share capital, or the articles of which provide for voting by proxy at the meeting, there shall appear with reasonable prominence a statement that a member entitled to attend and vote is entitled to appoint a proxy, or, where that is allowed, one or more proxies, to attend and vote instead of himself, and that a proxy need not be a member.
If default is made in complying with this sub-section as respects any meeting, every officer of the company who is in default shall be punishable with fine which may extend to1[five thousand rupees].
2[(3) Any provision contained in the articles of a public company, or of a private company which is a subsidiary of a public company, which specifies or requires a longer period than forty-eight hours before a meeting of the company, for depositing with the company or any other person any instrument appointing a proxy or any other document necessary to show the validity or otherwise relating to the appointment of a proxy in order that the appointment may be effective at such meeting, shall have effect as if a period of forty-eight hours had been specified in or required by such provision for such deposit.]
(4) If for the purpose of any meeting of a company, invitations to appoint as proxy a person or one of a number of persons specified in the invitations are issued at the company's expense to any member entitled to have a notice of the meeting sent to him and to vote thereat by proxy, every officer of the company who knowingly issues the invitations as aforesaid or wilfully authorises or permits their issue shall be punishable with fine which may extend to3[ten thousand rupees]:
Provided that an officer shall not be punishable under this sub-section by reason only of the issue to a member at his request in writing of a form of appointment naming the proxy, or of a list of persons willing to act as proxies, if the form or list is available on request in writing to every member entitled to vote at the meeting by proxy.
(5) The instrument appointing a proxy shall -
(a) be in writing; and
(b) be signed by the appointer or his attorney duly authorised in writing or, if the appointer is a body corporate, be under its seal or be signed by an officer or an attorney duly authorised by it.
(6) An instrument appointing a proxy, if in any of the forms set out in Schedule IX, shall not be questioned on the ground that it fails to comply with any special requirements specified for such instrument by the articles.
(7) Every member entitled to vote at a meeting of the company, or on any resolution to be moved thereat, shall be entitled during the period beginning twenty-four hours before the time fixed for the commencement of the meeting and ending with the conclusion of the meeting, to inspect the proxies lodged, at any time during the business hours of the company, provided not less than three days' notice in writing of the intention so to inspect is given to the company.
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1. Substituted by Act 53 of 2000, Section 75, for "five hundred rupees" (w.e.f. 13-12-2000).
2. Substituted by Act 65 of 1960, Section 47, for sub-section (3) (w.e.f. 28-12-1960).
3. Substituted by Act 53 of 2000, Section 75, for "one thousand rupees" (w.e.f. 13-12-2000).
Section 177 - Voting to be by show of hands in first instance
At any general meeting, a resolution put to the vote of the meeting shall, unless a poll is demanded under section 179, be decided on a show of hands.
Section 178 - Chairman's declaration of result of voting by show of hands to be conclusive
A declaration by the chairman in pursuance of section 177 that on a show of hands, a resolution has or has not been carried, or has or has not been carried either unanimously or by a particular majority, and an entry to that effect in the books containing the minutes of the proceedings of the company, shall be conclusive evidence of the fact, without proof of the number or proportion of the votes cast in favour of or against such resolution.
Section 179 - Demand for poll
(1) Before or on the declaration of the result of the voting on any resolution on a show of hands, a poll may be ordered to be taken by the chairman of the meeting of his own motion, and shall be ordered to be taken by him on a demand made in that behalf by the persons or person specified below, that is to say, -
1[(a) in the case of a public company having a share capital, by any member or members present in person or by proxy and holding shares in the company -
(i) which confer a power to vote on the resolution not being less than one tenth of the total voting power in respect of the resolution, or
(ii) on which an aggregate sum of not less than fifty thousand rupees has been paid up,
(b) in the case of a private company having a share capital, by one member having the right to vote on the resolution and present in person or by proxy if not more than seven such members are personally present, and by two such members present in person or by proxy, if more than seven such members are personally present,
(c) in the case of any other company, by any member or members present in person or by proxy and having not less than one tenth of the total voting power in respect of the resolution.]
(2) The demand for a poll may be withdrawn at any time by the person or persons who made the demand.
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1. Substituted by Act 31 of 1988, Section 24, for clauses (a) to (d) (w.e.f. 15-6-1988).
Section 180 - Time of taking poll
(1) A poll demanded on a question of adjournment shall be taken forthwith.
(2) A poll demanded on any other question (not being a question relating to the election of a chairman which is provided for in section 175) shall be taken at such time not being later than forty-eight hours from the time when the demand was made, as the chairman may direct.
Section 181 - Restriction on exercise of voting right of members who have not paid calls etc.
Notwithstanding contained in this Act, the articles of a company may provide that no member shall exercise any voting right in respect of any shares registered in his name on which any calls or other sums presently payable by him have not been paid, or in regard to which the company has and has exercised any right of lien.
Section 182 - Restrictions on exercise of voting right in other cases to be void
A public company, or a private company which is a subsidiary of a public company shall not prohibit any member from exercising his voting right on the ground that he has not held his share or other interest in the company for any specified period preceding the date on which the vote is taken, or on any other ground not being a ground set out in section 181.
Section 183 - Right of member to use his votes differently
On a poll taken at a meeting of a company, a member entitled to more than one vote, or his proxy, or other person entitled to vote for him as the case may be, need not, if he votes, use all his voles or cast in the same way all the votes he uses.
Section 184 - Scrutineers at poll
(1) Where a poll is to be taken, the chairman of the meeting shall appoint two scrutineers to scrutinise the votes given on the poll and to report thereon to him.
(2) The chairman shall have power, at any time before the result of the poll is declared, to remove a scrutineer from office and to fill vacancies in the office of scrutineer arising from such removal or from any other cause.
(3) Of the two srcutineers appointed under this section, one shall always be a member (not being an officer or employee of the company) present at the meeting, provided such a member is available and willing to be appointed.
Section 185 - Manner of taking poll and result thereof
(1) Subject to the provisions of this Act, the chairman of the meeting shall have power to regulate the manner in which a poll shall be taken.
(2) The result of the poll shall be deemed to be the decision of the meeting on the resolution on which the poll was taken.
Section 186 - Power of Tribunal to order meeting to be called
1 [186. Power of Tribunal to order meeting to be called
(1) If for any reason it is impracticable to call a meeting of a company, other than an annual general meeting, in any manner in which meetings of the company may be called, or to hold or conduct the meeting of the company in the manner prescribed by this Act or the articles, the Tribunal may, either of its own motion or on the application of any director of the company, or of any member of the company who would be entitled to vote at the meeting,--
(a) order a meeting of the company to be called, held and conducted in such manner as the Tribunal thinks fit; and
(b) give such ancillary or consequential directions as the Tribunal thinks expedient, including directions modifying or supplementing in relation to the calling, holding and conducting of the meeting, the operation of the provisions of this Act and of the company's articles.
Explanation.--The directions that may be given under this sub-section may include a direction that one member of the company present in person or by proxy shall be deemed to constitute a meeting.
(2) Any meeting called, held and conducted in accordance with any such order shall, for all purposes, be deemed to be a meeting of the company duly called, held and conducted.]
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1. Substituted by Act 11 of 2003, Section 24, for section 186 (See Annexe).
Section 187 - Representation of corporations at meetings of companies and of creditors
(1) A body corporate (whether a company within the meaning of this Act or not) may -
(a) if it is a member of a company within the meaning of his Act, by resolution of its Board of directors or other governing body, authorise such person as it thinks fit to act as its representative at any meeting of the company, or at any meeting of any class of members of the company;
(b) if it is a creditor (including a holder of debentures) of a company within the meaning of this Act, by resolution of its directors or other governing body, authorise such person as it thinks fit to act as its representative at any meeting of any creditors of the company held in pursuance of this Act or of any rules made thereunder, or in pursuance of the provisions contained in any debenture or trust deed, as the case may be.
(2) A person authorised by resolution as aforesaid shall be entitled to exercise the same rights and powers (including the right to vote by proxy) on behalf of the body corporate which he represents as that body could exercise if it were1[an individual member], creditor or holder of debentures of the company.
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1. Substituted by Act 65 of 1960, Section 48, for "a member" (w.e.f. 28-12-1960).
Section 187A - Representation of the President and Governors in meetings of companies of which they are members
1[187A. Representation of the President and Governors in meetings of companies of which they are members.-
(1) The President of India or the Governor of a State if he is a member of a company, may appoint such person as he thinks fit to act as his representative at any meeeting of the company or at any meeting of any class of members of the company.
(2) A person appointed to act as aforesaid shall, for the purposes of this Act, be deemed to be a member of such a company and shall be entitled to exercise the same rights and powers (including the right to vote by proxy) as the President or, as the case may be, the Governor could exercise as a member of the company.]
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1. Inserted by Act 65 of 1960, section 49 (w.e.f. 28-12-1960).
Section 187B - Exercise of voting rights in respect of shares held in trust
1[187B. Exercise of voting rights in respect of shares held in trust
(1) Save as otherwise provided in section 153B but notwithstanding anything contained in any other provisions of this Act or any other law or any contract, memorandum or articles, where any shares in a company are held in trust by a person (hereinafter referred to as trustee), the rights and powers (including the right to vote by proxy) exercisable at any meeting of the company or at any meeting of any class of members of the company by the trustee as a member of the company shall -
(a) cease to be exercisable by the trustee as such member, and
(b) become exercisable by the public trustee.
(2) The public trustee may, instead of himself attending the meeting, and exercising the rights and powers, as aforesaid, appoint as his proxy an officer of Government or the trustee himself to attend such meeting and to exercise such rights and powers in accordance with the directions of the public trustee:
Provided that where the trustee is appointed by the public trustee as his proxy, the trustee shall be entitled, notwithstanding anything contained in any other provisions of this Act, to exercise such rights and powers in the same manner as he would have been but for the provisions of this section.
(3) The public trustee may abstain from exercising the rights and powers conferred on him by this section if in his opinion the objects of the trust or the interests of the beneficiaries of the trust are not likely to be adversely affected by such abstention.
(4) If for any reason the trustee considers that the public trustee should not abstain from exercising the rights and powers conferred on him by this section and the exercise of such rights and powers is necessary in order to safeguard the objects of the trust or the interests of the beneficiaries of the trust, he may by writing communicate his views in this behalf to the public trustee but the public trustee may in his discretion either accept such views or reject the same.
(5) No suit, prosecution or other legal proceeding shall lie against the public trustee at the instance of the trustee or any person on his behalf or any other person on the ground that the public trustee has abstained from exercising the rights and powers conferred on him by this section.
(6) In order to enable the public trustee to exercise the rights and powers aforesaid, the public trustee shall also be entitled to receive and inspect all books and papers under this Act, which a member is entitled to receive and inspect.]
2[(7) The provisions of this section shall not apply on and after the commencement of the Companies (Amendment) Act, 2000.]
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1. Inserted by Act 53 of 1963, Section 8 ( w.e.f. 1-12-1964).
2. Inserted by Act 53 of 2000, Section 76 ( w.e.f. 13-12-2000).
Section 187C - Declaration by persons not holding beneficial interest in any share
1[187C. Declaration by persons not holding beneficial interest in any share
(1) Notwithstanding anything contained in section 150, section 153B or section 187B, a person, whose name is entered, at the commencement of the Companies (Amendment) Act, 1974 (41 of 1974), or at any time thereafter, in the register of members of a company as the holder of a share in that company but who does not hold the beneficial interest in such share, shall, within such time and in such form as may be prescribed, make a declaration to the company specifying the name and other particulars of the person who holds the beneficial interest in such share.
(2) Notwithstanding anything contained elsewhere in this Act, a person who holds a beneficial interest in a share or a class of shares of a company shall, within thirty days from the commencement of the Companies (Amendment) Act, 1974 (41 of 1974) or within thirty days after his becoming such beneficial owner, whichever is later, make a declaration to the company specifying the nature of his interest, particulars of the person in whose name the shares stand registered in the books of the company and such other particulars as may be prescribed.
(3) Whenever there is a change in the beneficial interest in such shares the beneficial owner shall, within thirty days from the date of such change, make a declaration to the company in such form and containing such particulars as may be prescribed.
(4) Notwithstanding anything contained in section 153 where any declaration referred to in sub-section (1), sub-section (2) or sub-section (3) is made to a company, the company shall make a note of such declaration, in its register of members and shall file, within thirty days from the date of receipt of the declaration by it, a return in the prescribed form with the Registrar with regard to such declaration.
(5) (a) If any person, being required by the provisions of sub-section (1), sub-section (2) or sub-section (3), to make a declaration, fails, without any reasonable excuse, to do so, he shall be punishable with fine which may extend to one thousand rupees for every day during which the failure continues.
(b) If a company fails to comply with the provisions of this section, the company, and every officer of the company who is in default shall be punishable with fine which may extend to one hundred rupees for every day during which the default continues."
(6) Any charge, promissory note or any other collateral agreement, created, executed or entered into in relation to any share, by the ostensible owner thereof, or any hypothecation by the ostensible owner of any share, in respect of which a declaration is required to be made under the foregoing provisions of this section, but not so declared, shall not be enforceable by the beneficial owner or any person claiming through him.
(7) Nothing in this section shall be deemed to prejudice the obligation of a company to pay dividend in accordance with the provisions of section 206, and the obligation shall, on such payment, stand discharged.]
2[(8) The provisions of this section shall not apply to the trustee referred to in section 187B on and after the commencement of the Companies (Amendment) Act, 2000.]
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1 . Inserted by Act 41 of 1974, Section 15 ( w.e.f. 1-2-1975).
2. Inserted by Act 53 of 2000, Section 77 ( w.e.f. 13-12-2000).
Section 187D - Investigation of beneficial ownership of shares in certain cases
1[ 187D. Investigation of beneficial ownership of shares in certain cases
Where it appears to the Central Government that there are good reasons so to do, it may appoint one or more Inspectors to investigate and report as to whether the provisions of section 187C have been complied with regard to any share, and thereupon the provisions of section 247 shall, as far as may be, apply to such investigation as if it were an investigation ordered under that section.]
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1 . Inserted by Act 41 of 1974, section 15 (w.e.f. 1-2-1975).
Section 188 - Circulation of members' resolutions
(1) Subject to the provisions of this section, a company shall, on the requisition in writing of such number of members as is hereinafter specified and (unless the company otherwise resolves) at the expense of the requisitionists, -
(a) give to members of the company entitled to receive notice of the next annual general meeting notice of any resolution which may properly be moved and is intended to be moved at that meeting;
(b) circulate to members entitled to have notice of any general meeting sent to them, any statement of not more than one thousand words with respect to the matter referred to in any proposed resolution, or any business to be dealt with at that meeting.
(2) The number of members necessary for a requisition under sub-section (1) shall be-
(a) such number of members as represent not less than one-twentieth of the total voting power of all the members having at the date of the requisition a right to vote on the resolution or business to which the requisition relates; or
(b) not less than one hundred members having the right aforesaid and holding shares in the company on which there has been paid up an aggregate sum of not less than one lakh of rupees in all.
(3) Notice of any such resolution shall be given, and any such statement shall be circulated to members of the company entitled to have notice of the meeting sent to them, by serving a copy of the resolution or statement on each member in any manner permitted for service of notice of the meeting; and notice of any such resolution shall be given to any other member of the company by giving notice of the general effect of the resolution in any manner permitted for giving him notice of meetings of the company:
Provided that the copy shall be served, or notice of the effect of the resolution shall be given as the case may be, in the same manner and, so far as practicable, at the same time as notice of the meeting, and where it is not practicable for it to be served or given at that time, it shall be served or given as soon as practicable thereafter.
(4) A company shall not be bound under this section to give notice of any resolution or to circulate any statement unless -
(a) a copy of the requisition signed by the requisitionists (or two or more copies which between them contain the signatures of all the requisitionists) is deposited at the registered office of the company -
(i) in the case of a requisition requiring notice of a resolution, not less than six weeks before the meeting;
(ii) in the case of any other requisition, not less than two weeks before the meeting; and
(b) there is deposited or tendered with the requisition a sum reasonably sufficient to meet the company's expenses in giving effect thereto:
Provided that if, after a copy of a requisition requiring notice of a resolution has been deposited at the registered office of the company, an annual general meeting is called for a date six weeks or less after the copy has been deposited, the copy, although not deposited within the time required by this sub-section shall be deemed to have been properly deposited for the purposes thereof.
(5) The company shall also not be bound under this section to circulate any statement if, on the application either of the company or of any other person who claims to be aggrieved, the1[Central Government] is satisfied that the rights conferred by this section are being abused to secure needless publicity for defamatory matter; and the1[Central Government] may order the company's costs on an application under this section to be paid in whole or in part by the requisitionists, notwithstanding that they are not parties to the application.
(6) A banking company shall not be bound to circulate any statement under this section if, in the opinion of its Board of directors, the circulation will injure the interests of the company.
(7) Notwithstanding anything in the company's articles, the business which may be dealt with at an annual general meeting shall include any resolution of which notice is given in accordance with this section, and for the purposes of this sub-section, notice shall be deemed to have been so given, notwithstanding the accidental omission, in giving it, of one or more members.
(8) If default is made in complying with the provisions of this section, every officer of the company who is in default, shall be punishable with fine which may extend to2[fifty thousand rupees].
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1. Substituted by Act 31 of 1988, Section 67, for "Court" (w.e.f. 31-5-1991) and again substituted by Act 11 of 2003, section 25, for "Company Law Board".
2 . Substituted by Act 53 of 2000, Section 78, for "five thousand rupees". (w.e.f. 13-12-2000).
Section 189 - Ordinary and special resolutions
(1) A resolution shall be an ordinary resolution when at a general meeting of which the notice required under this Act has been duly given, the voles cast (whether on a show of hands, or on a poll, as the case may be,) in favour of the resolution including the casting vote, if any, of the chairman) by members who, being entitled so to do, vote in person, or where proxies are allowed, by proxy, exceed the votes, if any, cast against the resolution by members so entitled and voting.
(2) A resolution shall be a special resolution when
(a) the intention to propose the resolution as a special resolution has been duly specified in the notice calling the general meeting or other intimation given to the members of the resolution;
(b) the notice required under this Act has been duly given of the general meeting; and
(c) the votes cast in favour of the resolution (whether on a show of hands or on a poll, as the case may be,) by members who, being entitled so to do, vote in person, or where proxies are allowed, by proxy, are not less than three times the number of the votes, if any, cast against the resolution by members so entitled and voting.
Section 190 - Resolutions requiring special notice
(1) Where, by any provision contained in this Act or in the articles, special notice is required of any resolution, notice of the intention to move the resolution shall be given to the company not less than1[fourteen days] before the meeting at which it is to be moved, exclusive of the day on which the notice is served or deemed to be served and the day of the meeting.
2[(2) The company shall immediately after the notice of the intention to move any such resolution has been received by it, give its members notice of the resolution in the same manner as it gives notice of the meeting, or if that is not practicable, shall give them notice thereof, either by advertisement in a newspaper having an appropriate circulation or in any other mode allowed by the articles, not less than seven days before the meeting.]
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1 . Substituted by Act 65 of 1960, Section 50, for "twenty-eight day" (w.e.f. 28-12-1960).
2. Substituted by Act 65 of 1960, Section 50, for sub-section (2) and (3) (w.e.f. 28-12-1960).
Section 191 - Resolutions passed at adjourned meetings
Where a resolution is passed at an adjourned meeting of
(a) a company;
(b) the holders of any class of shares in a company; or
(c) the Board of directors of a company;
the resolution shall, for all purposes be treated as having been passed on the date on which it was in fact passed, and shall not be deemed to have been passed on any earlier date.
Section 192 - Registration of certain resolutions and agreements
(1) A copy of every resolution 1 [(together with a copy of the statement of material facts annexed under section 173 to the notice of the meeting in which such resolution has been passed)] or agreement to which this section applies shall, within 2 [thirty] days after the passing or making thereof, be printed or typewritten and duly certified under the signature of an officer of the company and filed with the Registrar who shall record the same.
(2) Where articles have been registered 3 [a copy of every resolution referred to in sub-section (1) which has the effect of altering the articles and a copy of every agreement referred to in that sub-section] for the time being in force shall be embodied in or annexed to every copy of the articles issued after the passing of the resolution or the making of the agreement.
(3) Where articles have not been registered, a printed copy of every 4 [resolution or agreement referred to in sub-section (1)] shall be forwarded to any member at his request, on payment of one rupee.
(4) This section shall apply to-
(a) special resolutions;
(b) resolutions which have been agreed to by all the members of a company, but which, if not so agreed to, would not have been effective for their purpose unless they had been passed as special resolutions;
(c) any resolution of the Board of directors of a company or agreement executed by a company, relating to the appointment, re-appointment or renewal of the appointment, or variation of the terms of appointment, of a managing director;
5 [***]
(e) resolutions or agreements which have been agreed to by all the members of any class of shareholders but which, if not so agreed to, would not have been effective for their purposes unless they had been passed by some particular majority or otherwise in some particular manner; and all resolutions or agreements which effectively bind all the members of any class of a shareholders though not agreed to by all those members; 6 [***]
1 [(ee) resolution passed by a company-
(i) according consent to the exercise by its Board of directors of any of the powers under clause (a), clause (d) and clause (e) of sub-section (1) of section 293;
(ii) approving the appointment of sole selling agents under 7 [section 294 or section 294AA];]
(f) resolutions requiring a company to be wound up voluntarily passed in pursuance of sub-section (1) of section 484; and
8 [(g) copies of the terms and conditions of appointment of a sole selling agent appointed under section 294 or of a sole selling agent or other person appointed under section 294AA.]
(5) If default is made in complying with sub-section (1), the company, and every officer of the company who is in default, shall be punishable with fine which may extend to 9 [two hundred rupees] for every day during which the default continues.
(6) If default is made in complying with sub-section (2) or (3), the company, and every officer of the company who is in default, shall be punishable with fine which may extend to 10 [one hundred rupees] for each copy in respect of which default is made.
(7) For the purposes of sub-sections (5) and (6), the liquidator of a company shall be deemed to be an officer of the company.
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1. Inserted by Act 65 of 1960, Section 51 (w.e.f. 28-12-1960).
2. Substituted by Act 31 of 1965, Section 62 and Schedule, for "fifteen" (w.e.f. 15-10-1965).
3. Substituted by Act 65 of 1960, Section 51, for "a copy of every such resolution or agreement" (w.e.f. 28-12-1960).
4. Substituted by Act 65 of 1960, Section 51, for "such resolution or agreement" (w.e.f. 28-12-1960).
5. Clause (d) omitted by Act 53 of 2000, Section 79 (w.e.f. 13-12-2000).
6. The word "and" omitted by Act 65 of 1960, Section 51 (w.e.f. 28-12-1960).
7. Substituted by Act 41 of 1974, Section 16, for "section 294" ( w.e.f. 1-2-1975).
8. Inserted by Act 41 of 1974, Section 16 ( w.e.f. 1-2-1975).
9. Substituted by Act 53 of 2000, Section 79, for "twenty rupees" (w.e.f. 13-12-2000).
10. Substituted by Act 53 of 2000, Section 79, for "ten rupees" (w.e.f. 13-12-2000).
Section 192A - Passing of resolutions by postal ballot
1[192A. Passing of resolutions by postal ballot
(1) Notwithstanding anything contained in the foregoing provisions of this Act, a listed public company may, and in the case of resolutions relating to such business as the Central Government may, by notification, declare to be conducted only by postal ballot, shall, get any resolution passed by means of a postal ballot, instead of transacting the business in general meting of the company.
(2) Where a company decides to pass any resolution by resorting to postal ballot, it shall send a notice to all the shareholders, along with a draft resolution explaining the reasons therefor, and requesting them to send their assent or dissent in writing on a postal ballot within a period of thirty days from the date of posting of the letter.
(3) The notice shall be sent by registered post acknowledgment due, or by any other method as may be prescribed by the Central Government in this behalf, and shall include with the notice, a postage pre-paid envelope for facilitating the communication of the assent or dissent of the shareholder to the resolution within the said period.
(4) If a resolution is assented to by a requisite majority of the shareholders by means of postal ballot, it shall be deemed to have been duly passed at a general meeting convened in that behalf.
(5) If a shareholder sends under sub-section (2) his assent or dissent in writing on a postal ballot and thereafter any person fraudulently defaces or destroys the ballot paper or declaration of identity of the shareholder, such person shall be punishable with imprisonment for a term which may extend to six months or with fine or with both.
(6) If a default is made in complying with sub-sections (1) to (4), the company and every officer of the company, who is in default shall be punishable with fine which may extend to fifty thousand rupees in respect of each such default.
Explanation. -For the purposes of this section, "postal ballot includes voting by electronic mode.]
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1. Inserted by Act 53 of 2000, Section 80 (w.e.f. 15-6-2000).
Section 193 - Minutes of proceedings of general meetings and of Board and other meetings
1[(1) Every company shall cause minutes of all proceedings of every general meeting and of all proceedings of every meeting of its Board of directors or of every committee of the Board, to be kept by making within2[thirty] days of the conclusion of every such meeting concerned, entries thereof in books kept for that purpose with their pages consecutively numbered.
(1A) Each page of every such book shall be initiated or signed and the last page of the record of proceedings of each meeting in such books shall be dated and signed -
(a) in the case of minutes of proceedings of a meeting of the Board or of a committee thereof, by the chairman of the said meeting or the chairman of the next succeeding meeting;
(b) in the case of minutes of proceedings of a general meeting, by the chairman of the same meeting within the aforesaid period of2[thirty] days or in the event of the death or inability of that chairman within that period, by a director duly authorised by the Board for the purpose.
(1B) In no case the minutes of proceedings of a meeting shall be attached to any such book as aforesaid by pasting or otherwise.]
(2) The minutes of each meeting shall contain a fair and correct summary of the proceedings thereat.
(3) All appointments of officers made at any of the meetings aforesaid shall be included in the minutes of the meeting.
(4) In the case of a meeting of the Board of directors or of a committee of the Board, the minutes shall also contain -
(a) the names of the directors present at the meeting; and
(b) in the case of each resolution passed at the meeting, the names of the directors, if any, dissenting from, or not concurring in the resolution.
(5) Nothing contained in sub-sections (1) to (4) shall be deemed to require the inclusion in any such minutes of any matter which, in the opinion of the chairman of the meeting -
(a) is, or could reasonable be regarded as, defamatory of any person;
(b) is irrelevant or immaterial to the proceedings; or
(c) is detrimental to the interests of the company.
Explanation. -The chairman shall exercise an absolute discretion in regard to the inclusion or non-inclusion of any matter in the minutes on the grounds specified in this sub-section.
(6) If default is made in complying with the foregoing provisions of this section in respect of any meeting, the company, and every officer of the company who is in default, shall be punishable with fine which may extend to3[five hundred rupees].
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1. Substituted by Act 65 of 1960, Section 52, for sub-section (1) (w.e.f. 28-12-1960).
2. Substituted by Act 31 of 1965, Section 62 and Schedule, for "fourteen" (w.e.f. 15-10-1965).
3. Substituted by Act 53 of 2000, Section 81, for "fifty rupees" (w.e.f. 13-12-2000).
Section 194 - Minutes to be evidence
1 [194. Minutes to he evidence
Minutes of meetings kept in accordance with the provisions of section 193 shall be evidence of the proceedings recorded therein.]
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1. Substituted by Act 65 of 1960, Section 53, for section 194 (w.e.f. 28-12-1960).
Section 195 - Presumptions to be drawn where minutes duly drawn and signed
Where minutes of the proceedings of any general meeting of the company or of any meeting of its Board of directors or of a committee of the Board1[have been kept in accordance with the provisions of section 193], then, until the contrary is proved, the meeting shall be deemed to have been duly called and held, and all proceedings thereat to have duly taken place, and in particular, all appointments of directors or liquidators made at the meeting shall be deemed to be valid.
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1. Substituted by Act 65 of 1960, Section 54, for certain words (w.e.f. 28-12-1960).
Section 196 - Inspection of minute books of general meetings
(1) The books containing the minutes of the proceedings of any general meeting of a company held on or after the 15th day of January, 1937, shall -
(a) be kept at the registered office of the company, and
(b) be open, during business hours, to the inspection of any member without charge, subject to such reasonable restrictions as the company may, by its articles or in general meeting impose, so however that not less than two hours in each day are allowed for inspection.
(2) Any member shall be entitled to be furnished, within seven days after he has made a request in that behalf to the company, with a copy of any minutes referred to in sub-section (1), on payment of1[such sum as may be prescribed] for every one hundred words or fractional part thereof required to be copied.
(3) If any inspection required under sub-section (1) is refused, or if any copy required under sub-section (2) is not furnished within the time specified therein, the company, and every officer of the company who is in default, shall be punishable with fine which may extend to2[five thousand rupees] in respect of each offence.
(4) In the case of any such refusal or default, the3[Central Government] may, by order, compel an immediate inspection of the minute books or direct that the copy required shall forthwith be sent to the person requiring it.
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1. Substituted by Act 31 of 1988, Section 67, for "six annas" ( w.e.f. 15-7-1988).
2. Substituted by Act 53 of 2000, Section 82, for "five hundred rupees" (w.e.f. 13-12-2000).
3. Substituted by Act 31 of 1988, Section 67, for "Court" ( w.e.f. 31-5-1991) and again substituted by Act 11 of 2003, section 25, for "Company Law Board".
Section 197 - Publication of reports of proceedings of general meetings
(1) No document purporting to be a report of the proceedings of any general meeting of a company shall be circulated or advertised at the expense of the company, unless it includes the matters required by section 193 to be contained in the minutes of the proceedings of such meeting.
(2) If any report is circulated or advertised in contravention of sub-section (1), the company, and every officer of the company who is in default, shall be punishable, in respect of each offence, with fine which may extend to1[five thousand rupees].
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1. Substituted by Act 53 of 2000, Section 83, for "five hundred rupees" (w.e.f. 13-12-2000).
Section 197A - Company not to appoint or employ certain different categories of managerial personnel at the same time
1 [Prohibition of simultaneous appointment of different categories of managerial personnel
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197A. Company not to appoint or employ certain different categories of managerial personnel at the same time
Notwithstanding anything contained in this Act or any other law or any agreement or instrument, no company shall, after the commencement of the Companies (Amendment) Act, 1960 (65 of 1960), appoint or employ at the same time, or after the expiry of six months from such commencement, continue the appointment or employment at the same time, of more than one of the following categories of managerial personnel, namely: -
(a) managing director.
2 [***]
(d) manager.]
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1. Inserted by Act 65 of 1960, Section 55 (w.e.f. 28-12-1960).
2. Clauses (b) and (c) omitted by Act 53 of 2000, Section 84 (w.e.f. 13-12-2000).
Section 198 to 201 - Management remuneration, etc.
Section 198 - Overall maximum managerial remuneration and managerial remuneration in case of absence or inadequacy of profits
1[Overall maximum managerial remuneration and managerial remuneration in case of absence or inadequacy of profits
(1) The total managerial remuneration payable by a public company or a private company which is a subsidiary of a public company, to its directors and its2[***] manager in respect of any financial year shall not exceed eleven per cent of the net profits of that company for that financial year computed in the manner laid down in sections 3493[and 350], except that the remuneration of the directors shall not be deducted from the gross profits.
4[***]
(2) The percentage aforesaid shall be exclusive of any fees payable to directors under sub-section (2) of section 309.
(3) Within the limits of the maximum remuneration specified in sub-section (1), a company may pay a monthly remuneration to its managing or whole-time director in accordance with the provisions of section 309 or to its manager in accordance with the provisions of section 387.
5[(4) Notwithstanding anything contained in sub-sections (1) to (3), but subject to the provisions of section 269, read with Schedule XIII, if, in any financial year, a company has no profits or its profits are inadequate, the company shall not pay to its directors, including any managing or whole-time director or manager, by way of remuneration any sum exclusive of any fees payable to directors under subsection (2) of section 309, except with the previous approval of the Central Government.]
Explanation.- For the purposes of this section and sections 309, 310, 311,6[***] 381 and 387, "remuneration" shall include, -
(a) any expenditure incurred by the company in providing any rent-free accommodation, or any other benefit or amenity in respect of accommodation free of charge, to any of the persons specified in sub-section (1);
(b) any expenditure incurred by the company in providing any other benefit or amenity free of charge or at a concessional rate to any of the persons aforesaid;
(c) any expenditure incurred by the company in respect of any obligation or service which, but for such expenditure by the company, would have been incurred by any of the persons aforesaid; and
(d) any expenditure incurred by the company to effect any insurance on the life of, or to provide any pension, annuity or gratuity for, any of the persons aforesaid or his spouse or child.]
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1. Substituted by Act 65 of 1960, Section 56, for section 198 (w.e.f. 28-12-1960).
2. The words "managing agent, secretaries and treasurers or" omitted by Act 53 of 2000, Section 85 (w.e.f. 13-12-2000).
3. Substituted by Act 53 of 2000, Section 85, for "350 and 351" (w.e.f. 13-12-2000).
4. Proviso omitted by Act 53 of 2000, Section 85 (w.e.f. 13-12-2000).
5. Substituted by Act 31 of 1988, Section 25, for sub-section (4) (w.e.f. 15-6-1988).
6. The figures "348, 352" omitted by Act 53 of 2000, Section 85 (w.e.f. 13-12-2000).
Section 199 - Calculation of commission, etc., in certain cases
(1) Where any commission or other remuneration payable to any officer or employee of a company (not being a director1[***]or a manager) is fixed at a percentage of, or is otherwise based on, the net profits of the company, such profits shall be calculated in the manner set out in sections 3492[and 350].
(2) Any provision in force at the commencement of this Act for the payment of any commission or other remuneration in any manner based on the net profits of a company, shall continue to be in force for a period of one year from such commencement; and thereafter shall become subject to the provisions of sub-section (1).
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1. The words ",the managing agent, secretaries and treasurers" omitted by Act 53 of 2000, Section 86 (w.e.f. 13-12-2000).
2. Substituted by Act 53 of 2000, Section 86, for ",350 and 351" (w.e.f. 13-12-2000).
Section 200 - Prohibition of tax-free payments
(1) No company shall pay to any officer or employee thereof, whether in his capacity as such or otherwise, remuneration free of any tax, or otherwise calculated by reference to, or varying with, any tax payable by him, or the rate of standard rate of any such tax, or the amount thereof.
Explanation.-(1) In this sub-section, the expression "tax" comprises any kind of income-tax including super-tax.
(2) Where by virtue of any provision in force immediately before the commencement of this Act, whether contained in the company's articles, or in any contract made with the company, or in any resolution passed by the company in general meeting or by the company's Board of directors, any officer or employee of the company holding any office at the commencement of this Act is entitled to remuneration in any of the modes prohibited by sub-section (1), such provision shall have effect during the residue of the term for which he is entitled to hold such office at such commencement, as if it provided instead for the payment of a gross sum subject to the tax in question, which, after deducting such tax, would yield the net sum actually specified in such provision.
(3) This section shall not apply to any remuneration-
(a) which fell due before the commencement of this Act, or
(b) which may fall due after the commencement of this Act, in respect of any period before such commencement.
Section 201 - Avoidance of provisions relieving liability of officers and auditors of company
(1) Save as provided in this section, any provision, whether contained in the articles of a company or in an agreement with a company or in any other instrument, for exempting any officer of the company or any person employed by the company as auditor from, or indemnifying him against, any liability which, by virtue of any rule of law, would otherwise attach to him in respect of any negligence, default, misfeasance, breach of duty or breach of trust of which he may be guilty in relation to the company, shall be void:
Provided that a company may, in pursuance of any such provision as aforesaid, indemnify any such officer or auditor against any liability incurred by him in defending any proceedings, whether civil or criminal, in which judgment is given in his favour or in which he is acquitted or discharged or in connection with any application under section 633 in which relief is granted to him by the court.
1[***]
__________________
__
1. Sub-section (2) omitted by Act 53 of 2000, Section 87 (w.e.f. 13-12-2000).
Section 202 to 203 - Prevention of management by undesirable persons
Section 202 - Undischarged insolvent not to manage companies
(1) If any person, being an undischarged insolvent, -
(a) discharges any of the functions of a director, or acts as or discharges any of me functions of the1[***] manager, of any company; or
(b) directly or indirectly takes part or is concerned in the promotion, formation or management of any company;
he shall be punishable with imprisonment for a term which may extend to two years, or with fine which may extend to2[fifty thousand rupees], or with both.
(2) In this section, "company" includes -
(a) an unregistered company; and
(b) a body corporate incorporated outside India, which has an established place of business within India.
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1. The words ", managing agent, secretaries and treasurers, or" omitted by Act 53 of 2000, Section 88 (w.e.f. 13-12-2000).
2. Substituted by Act 53 of 2000, Section 88, for "five thousand rupees" (w.e.f. 13-12-2000).
Section 203 - Power to restrain fraudulent persons from managing companies
(1) Where-
(a) a person is convicted of any offence in connection with the promotion, formation or management of a company; or
(b) in the course of winding up a company it appears that a person-
(i) has been guilty of any offence for which he is punishable (whether he has been convicted or not) under section 542; or
(ii) has otherwise been guilty, while an officer of the company, of any fraud or misfeasance in relation to the company or of any branch of his duty to the company;
the1[Court or the Tribunal, as the case may be] may make an order that that person shall not, without the leave of the1[Court or the Tribunal, as the case may be], be a director of, or in any way, whether directly or indirectly, be concerned or take part in the promotion, formation or management of a company, for such period not exceeding five years as may be specified in the order.
(2) In sub-section (1), the expression "the court",-
(a) in relation to the making of an order against any person by virtue of clause (a) thereof,2[ includes the Court or the Tribunal by which he is convicted, as well as any Court or Tribunal having jurisdiction to wind up ] the company as respects which the offence was committed; and
(b) in relation to the granting of leave, means any1[Court or Tribunal] having jurisdiction to wind up the company as respects which leave is sought.
(3) A person intending to apply for the making of an order under this section by the3[ Court or the Tribunal having jurisdiction to wind up a company ] shall give not less than ten days' notice of his intention to the person against whom the order is sought, and at the hearing of the application, the last-mentioned person may appear and himself give evidence or call witnesses.
(4) An application for the making of an order under this section by the3[ Court or the Tribunal having jurisdiction to wind up a company ] may be made by the Official Liquidator, or by the liquidator of the company, or by any person who is or has been a member or creditor of the company.
(5) On the hearing of any application for an order under this section by the Official Liquidator or the liquidator, or of any application for leave under this section by a person against whom an order has been made on the application of the Official Liquidator or liquidator, the Official Liquidator or liquidator shall appear and call the4[ attention of the Court or the Tribunal, as the case may be ,] to any matters which seem to him to be relevant, and may himself give evidence or call witnesses.
(6) An order may be made by virtue of sub-clause (ii) of clause (b) of sub-section (1), notwithstanding that the person concerned may be criminally liable in respect of the matters on the ground of which the order is to be made5[***].
(7) If any person acts in contravention of an order made under this section, he shall, in respect of each offence, be punishable with imprisonment for a term which may extend to two years, or with fine which may extend to6[fifty thousand rupees], or with both.
(8) The provisions of this section shall be in addition to, and without prejudice to the operation of, any other provision contained in this Act.
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1. Substituted by Act 11 of 2003, Section 26, for "Court".
2. Substituted by Act 11 of 2003, section 26, for "includes the Court by which he is convicted as well as any Court having jurisdiction to wind up".
3. Substituted by Act 11 of 2003, Section 26, for "Court having jurisdiction to wind up a company".
4. Substituted by Act 11 of 2003, Section 26, for "attention of the court".
5.Certain words omitted by Act 31 of 1965, section 19 (w.e.f. 15-10-1965).
6.Substituted by Act 53 of 2000, Section 89, for "five thousand rupees" (w.e.f. 13-12-2000).
Section 204 to 204A - Restriction on appointment of firms and bodies corporate to offices
Section 204 - Restriction on appointment of firm or body corporate to office or place of profit under a company
1[(1) Save as provided in sub-section (2), no company shall after the commencement of this Act, appoint or employ any firm or body corporate to or in any office or place of profit under the company, other than the office of2[***] trustee for the holders of debentures of the company, for a term exceeding five years at a time:
Provided that the initial appointment or employment of a firm or body corporate to or in any office or place of profit as aforesaid may, with the approval of the Central Government, be made for a term not conceding ten years.]
3[***]
(3) Any firm or body corporate holding at the commencement of this Act any office or place of profit under the company shall, unless its term of office expires earlier, be deemed to have vacated its office immediately on the expiry of five years from the commencement of this Act.
(4) Nothing contained in sub-section (1) shall be deemed to prohibit the re-appointment, re-employment, or extension of the term of office, of any firm or body corporate by further periods not exceeding five years on each occasion;
Provided that any such re-appointment, re-employment or extension shall not be sanctioned earlier than two years from the date on which it is to come into force.
(5) Any office or place in a company shall be deemed to be an office or place of profit under the company, within the meaning of this section, if the person holding it4[obtains from the company anything] by way of remuneration, whether as salary, fees, commission perquisites the right to occupy free of rent any premises as a place of evidence or otherwise.
(6) This section shall not apply to a private company, unless it is a subsidiary of a public company.
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1 . Substituted by Act 65 of 1960, Section 57, for sub-section (1) (w.e.f. 28-12-1960).
2 . The words ", managing agent, secretaries and treasurers or" omitted by Act 53 of 2000, Section 90 (w.e.f. 13-12-2000).
3. Sub-section (2) omitted by Act 53 of 2000, Section 90 (w.e.f. 13-12-2000).
4. Substituted by Act 65 of 1960, Section 57, for "obtains anything" (w.e.f. 28-12-1960).
Section 204A - Restrictions on the appointment of former managing agents or secretaries and treasurers to any office [Repealed]
1[204A . Restrictions on the appointment of former managing agents or secretaries and treasurers to any office.-
[Repealed by the Companies (Amendment) Act, 2000 (53 of 2000) Section 91 (w.e.f. 13-12-2000)].
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1. Inserted by Act 41 of 1974, Section 17 (w.e.f. 1-2-1975).
Section 205 to 207 - Dividends and manner and time of payment thereof
Section 205 - Dividend to be paid only out of profits
1 [205. Dividend to be paid only out of profits
(1) No dividend shall be declared or paid by a company for any financial year except out of the profits of the company for that year arrived at after providing for depreciation in accordance with the provisions of sub-section (2) or out of the profits of the company for any previous financial year or years arrived at after providing for depreciation in accordance with those provisions and remaining undistributed or out of both or out of moneys provided by the Central Government or a State Government for the payment of dividend in pursuance of a guarantee given by that Government:
Provided that-
(a) if the company has not provided for depreciation for any previous financial year or years which falls or fall after the commencement of the Companies (Amendment) Act,.1960 (65 of 1960), it shall, before declaring or paying dividend for any financial year provide for such depreciation out of the profits of that financial year or out of the profits of any other previous financial year or years;
(b) if the company has incurred any loss in any previous financial year or years, which falls or fall after the commencement of the Companies (Amendment) Act, 1960 (65 of 1960), is equal to the amount of the loss or an amount which is equal to the amount provided for depreciation for that year or those years whichever is less, shall be set off against the profits of the company for the year for which dividend is proposed to be declared or paid or against the profits of the company for any previous financial year or years, arrived at in both cases after providing for depreciation in accordance with the provisions of sub-section (2) or against both;
(c) the Central Government may, if it thinks necessary so to do in the public interest, allow any company to declare or pay dividend for any financial year out of the profits of the company for that year or any previous financial year or years without providing for depreciation:
Provided further that it shall not be necessary for a company to provide for depreciation as aforesaid where dividend for any financial year is declared or paid out of the profits of any previous financial year or years which falls or fall before the commencement of the Companies (Amendment) Act, 1960 (65 of 1960).
2 [(1A) The Board of directors may declare interim dividend and the amount of dividend including interim dividend shall be deposited in a separate bank account within five days from the date of declaration of such dividend.
(1B) The amount of dividend including interim dividend so deposited under sub-section (1 A) shall be used for payment of interim dividend.
(1C) The provisions contained in sections 205, 205A, 205C, 206, 206A and 207 shall, as far as may be, also apply to any interim dividend.]
(2) For the purpose of sub-section (1), depreciation shall be provided either-
(a) to the extent specified in section 350; or
(b) in respect of each item of depreciable asset, for such an amount as is arrived at by dividing ninety-five per cent of the original cost thereof to the company by the specified period in respect of such asset; or
(c) on any other basis approved by the Central Government which has the effect of writing off by way of depreciation ninety-five per cent of the original cost to the company of each such depreciable asset on the expiry of the specified period; or
(d) as regards any other depreciable asset for which no rate of depreciation has been laid down by 3 [this Act or any rules made thereunder], on such basis as may be approved by the Central Government by any general order published in the Official Gazette or by any special order in any particular case:
Provided that where depreciation is provided for in the manner laid down in clause (b) or clause (c), then, in the event of the depreciable asset being sold, discarded, demolished or destroyed the written down value thereof at the end of the financial year in which the asset is sold, discarded, demolished or destroyed, shall be written off in accordance with the proviso to section 350.
4 [(2A) Notwithstanding anything contained in sub-section (1), on and from the commencement of the Companies (Amendment) Act, 1974 no dividend shall be declared or paid by a company for any financial year out of the profits of the company for that year arrived at after providing for depreciation in accordance with the provisions of sub-section (2), except after the transfer to the reserves of the company of such percentage of its profits for that year, not exceeding ten per cent, as may be prescribed:
Provided that nothing in this sub-section shall be deemed to prohibit the voluntary transfer by a company of a higher percentage of its profits to the reserves in accordance with such rules as may be made by the Central Government in this behalf.]
5 [(2B) A company which fails to comply with the provisions of section 80A shall not, so long as such failure continues, declare any dividend on its equity shares.]
(3) No dividend shall be payable except in cash:
Provided that nothing in this sub-section shall be deemed to prohibit the capitalization of profits or reserves of a company for the purpose of issuing fully paid-up bonus shares or paying up any amount for the time being unpaid on any shares held by the members of the company.
(4) Nothing in this section shall be deemed to affect in any manner the operation of section 208.
(5) For the purposes of this section-
(a) "specified period" in respect of any depreciable asset shall mean the number of years at the end of which at least ninety-five per cent of the original cost of that asset to the company will have been provided for by way of depreciation if depreciation were to be calculated in accordance with the provisions of section 350;
(b) any dividend payable in cash may be paid by cheque or warrant sent through the post directed to the registered address of the shareholder entitled to the payment of the dividend or in the case of joint shareholders, to the registered address of that one of the joint shareholders which is first named on the register of members, or to such person and to such address as the shareholder or the joint shareholders may in writing direct.]
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1. Substituted by Act 65 of 1960, Section 58, for section 205 (w.e.f. 28-12-1960).
2. Inserted by Act 53 of 2000, Section 92 (w.e.f. 13-12-2000).
3. Substituted by Act 31 of 1988, Section 26, for "the Indian Income-tax Act, 1922 (11 of 1922) or the rules made thereunder " (w.e.f. 15-6-1988).
4. Inserted by Act 41 of 1974, Section 18 ( w.e.f. 1-2-1975).
5. Inserted by Act 31 of 1988, Section 26 ( w.e.f. 15-6-1988).
Section 205A - Unpaid dividend to be transferred to special dividend account
1 [205A. Unpaid dividend to be transferred to special dividend account.-
(1) Where, after the commencement of the Companies (Amendment) Act, 1974, a dividend has been declared by a company but has not been paid 2 [or claimed] within 3 [thirty days] from the date of the declaration, to any shareholder entitled to the payment of the dividend, the company shall, within seven days from the date of expiry of the said period of 3 [thirty days], transfer the total amount of dividend which remains unpaid 4 [or unclaimed] within the said period of 3 [thirty days, to a special account to be opened by the company in that behalf in any scheduled bank, to be called "Unpaid Dividend Account of ...... Company Limited/Company (Private) Limited.
5 [Explanation.-In this sub-section, the expression "dividend which remains unpaid" means any dividend the warrant in respect thereof has not been encashed or which has otherwise not been paid or claimed.]
(2) Where the whole or any part of any dividend, declared by a company before the commencement of the Companies (Amendment) Act, 1974, remains unpaid at such commencement, the company shall, within a period of six months from such commencement, transfer such unpaid amount to the account referred to in subsection (1).
(3) Where, owing to inadequacy or absence of profits; in any year, any company proposes to declare dividend out of the accumulated profits earned by the company in previous years and transferred by it to the reserves, such declaration of dividend shall not be made except in accordance with such rules as may be made by the Central Government in this behalf, and, where any such declaration is not in accordance with such rules, such declaration shall not be made except with the previous approval of the Central Government.
(4) If default is made in transferring the total amount referred to in sub-section (1) or any part thereof to the unpaid dividend account of the concerned company, the company shall pay, from the date of such default interest on so much of the amount as has not been transferred to the said account, at the rate of twelve per cent per annum and the interest accruing on such amount shall ensure to the benefit of the members of the company in proportion to the amount remaining unpaid to them.
6 [(5) Any money transferred to the unpaid dividend account of a company in pursuance of this section which remains unpaid or unclaimed for a period of seven years from the date of such Transfer shall be transferred by the company to the Fund established under sub-section (1) of section 205C.]
(6) The company shall, when making any transfer under sub-section (5) to the 7 [Fund established under section 205C] any unpaid or unclaimed dividend, furnish 8 [to such authority or committee as the Central Government may appoint] in this behalf a statement in the prescribed form setting forth in respect of all sum included in such transfer, the nature of the sums, the names and last known addresses of the person entitled to receive the sum, the amount to which each person is entitled and the nature of his claim thereto and such other particulars as may be prescribed.
9 [(7) The company shall be entitled to a receipt from the authority or committee under sub-section (4) of section 205C for any money transferred by it to the Fund and such a receipt shall be an effectual discharge of the company in respect thereof.]
(8) If a company fails to comply with any of the requirements of this section, the company and every officer of the company who is in default, shall be punishable with fine which may extend to 10 [five thousand rupees] for every day during which the failure continues.]
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1. Inserted by Act 41 of 1974, Section 19 ( w.e.f. 1-2-1975).
2. Substituted by Act 31 of 1988, Section 27, for "or the warrant in respect thereof has not been posted" ( w.e.f. 15-6-1988).
3. Substituted by Act 53 of 2000, Section 93, for "forty-two days" (w.e.f. 13-12-2000).
4. Substituted by Act 31 of 1988, Section 27, for "or in relation to which no dividend warrant has been posted" ( w.e.f. 15-6-1988).
5. Inserted by Act 31 of 1988, Section 27 ( w.e.f. 15-6-1988).
6. Substituted by Act 21 of 1999, Section 10, for sub-section (5) ( w.r.e.f. 31-10-1998).
7. Substituted by Act 21 of 1999, Section 10, for "general revenue account of the Central Government" ( w.r.e.f. 31-10-1998).
8. Substituted by Act 21 of 1999, Section 10, for "to such officer as the Central Government may appoint" ( w.r.e.f. 31-10-1998).
9. Substituted by Act 21 of 1999, Section 10 for sub-section (7) ( w.r.e.f. 31-10-1998).
10. Substituted by Act 53 of 2000, Section 93, for "five hundred rupees" (w.e.f. 13-12-2000).
Section 205B - Payment of unpaid or unclaimed dividend
1 [205B. Payment of unpaid or unclaimed dividend.-
Any person claiming to be entitled to any money transferred under sub-section (5) of section 205A to the general revenue account of the Central Government, may apply to the Central Government for an order for payment of the money claimed; and the Central Government may, if satisfied, whether on a certificate by the company or otherwise, that such person is entitled to the whole or any part of the money claimed, make an order for the payment to that person of the sum due to him after taking such security from his as it may think fit:]
2 [Provided that nothing contained in this section shall apply to any person claiming to be entitled to any money transferred to the Fund referred to in section 205C on and after the commencement of the Companies (Amendment) Act, 1999.]
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1. Inserted by Act 41 of 1974, Section 19 ( w.e.f. 1-2-1975).
2. Inserted by Act 21 of 1999, Section 11 ( w.r.e.f. 31-10-1998).
Section 205C - Establishment of Investor Education and Protection Fund
1[205C. Establishment of Investor Education and Protection Fund
(1) The Central Government shall establish a fund to be called the Investor Education and Protection Fund (hereafter in this section referred to as the "Fund").
(2) There shall be credited to the Fund the following amounts, namely: -
(a) amounts in the unpaid dividend accounts of companies;
(b) the application moneys received by companies for allotment of any securities and due for refund;
(c) matured deposits with companies;
(d) matured debentures with companies;
(e) the interest accrued on the amounts referred to in clauses (a) to (d);
(f) grants and donations given to the Fund by the Central Government, State Governments, companies or any other institutions for the purposes of the Fund; and
(g) the interest or other income received out of the investments made from the Fund:
Provided that no such amounts referred to in clauses (a) to (d) shall form part of the Fund unless such amounts have remained unclaimed and unpaid for a period of seven years from the date they became due for payment.
Explanation. -For the removal of doubts, it is hereby declared that no claims shall lie against the Fund or the company in respect of individual amounts which were unclaimed and unpaid for a period of seven years from the dates that they first became due for payment and no payment shall be made in respect of any such claims.
(3) The Fund shall be utilised for promotion of investors' awareness and protection of the interests of investors in accordance with such rules as may be prescribed.
(4) The Central Government shall, by notification in the Official Gazette, specify an authority or committee, with such members as the Central Government may appoint, to administer the Fund, and maintain separate accounts and other relevant records in relation to the Fund in such form as may be prescribed in consultation with the Comptroller and Auditor-General of India.
(5) It shall be competent for the authority or committee appointed under sub-section (4) to spend moneys out of the Fund for carrying out the objects for which the Fund has been established.]
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1. Inserted by Act 21 of 1999, Section 12 ( w.r.e.f. 31-10-1998).
Section 206 - Dividend not to be paid except to registered shareholders or to their order or to their bankers
(1) No dividend shall be paid by a company in respect of any share therein, except
(a) to the registered holder of such share or to his order or to his bankers; or
(b) in case a share warrant has been issued in respect of the share in pursuance of section 114, to the bearer of such warrant or to his bankers.
(2) Nothing contained in sub-section (1) shall be deemed to require the bankers of a registered shareholder to make a separate application to the company for the payment of the dividend.
Section 206A - Right to dividend, rights shares and bonus shares to he held in abeyance pending registration of transfer of shares
1[206A. Right to dividend, rights shares and bonus shares to he held in abeyance pending registration of transfer of shares
Where any instrument of transfer of shares has been delivered to any company for registration and the transfer of such shares has not been registered by the company, it shall notwithstanding anything contained in any other provision of this Act, -
(a) transfer the dividend in relation to such shares to the special account referred to in section 205A unless the company is authorised by the registered holder of such share in writing to pay such dividend to the transferee specified in such instrument of transfer; and
(b) keep in abeyance in relation to such shares any offer of rights shares under clause (a) of sub-section (1) of section 81 and any issue of fully paid-up bonus shares in pursuance of sub-section (3) of section 205.]
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1. Inserted by Act 31 of 1988, Section 28, ( w.e.f. 15-6-1988).
Section 207 - Penalty for failure to distribute dividends within thirty days
1[207. Penalty for failure to distribute dividends within thirty days
Where a dividend has been declared by a company but has not been paid, or the warrant in respect thereof has not been posted, within thirty days from the date of declaration, to any shareholder entitled to the payment of the dividend, every director of the company shall, if he is knowingly a party to the default, be punishable with simple imprisonment for a term which may extend to three years and shall also be liable to a fine of one thousand rupees for every day during which such default continues and the company shall be liable to pay simple interest at the rate of eighteen per cent, per annum during the period for which such default continues:
Provided that no offence shall be deemed to have been committed within the meaning of the foregoing provisions in the following cases, namely: -
(a) where the dividend could not be paid by reason of the operation of any law;
(b) where a shareholder has given directions to the company regarding the payment of the dividend and those directions cannot be complied with;
(c) where there is a dispute regarding the right to receive the dividend;
(d) where the dividend has been lawfully adjusted by the company against any sum due to it from the shareholder; or
(e) where, for any other reason, the failure to pay the dividend or to post the warrant within the period aforesaid was not due to any default on the part of the company.]
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1. Substituted by Act 53 of 2000, Section 94, for Section 207 (w.e.f. 13-12-2000).
Section 208 - Power of company to pay interest out of capital in certain cases
Payment of interest out of capital
(1) Where any shares in a company are issued for the purpose of raising money to defray the expenses of the construction of any work or building, or the provision of any plant, which cannot be made profitable for a lengthy period, the company may
(a) pay interest on so much of that share capital as is for the time being paid up, for the period and subject of the conditions and restrictions mentioned in sub-sections (2) to (7); and
(b) charge the sum so paid by way of interest, to capital as part of the cost of construction of the work or building or the provision of the plant.
(2) No such payment shall be made unless it is authorised by the articles or by a special resolution.
(3) No such payment, whether authorised by the articles or by special resolution, shall be made without the previous sanction of the Central Government.
The grant of such sanction shall be conclusive evidence, for the purposes of this section, that the shares of the company, in respect of which such sanction is given, have been issued for a purpose specified in this section.
(4) Before sanctioning any such payment, the Central Government may, at the expense of the company, appoint a person to inquire into, and report to the Central Government on, the circumstances of the case; and may, before making the appointment, require the company to give security for the payment of the costs of the inquiry.
(5) The payment of interest shall be made only for such period as may be determined by the Central Government; and that period shall in no case extend beyond the close of the half-year next after the half-year during which the work or building has been actually completed or the plant provided.
(6) The rate of interest shall in no case except four per cent per annum or such other rate as the Central Government may, by notification in the Official Gazette, direct.
(7) The payment of the interest shall not operate as a reduction of the amount paid up on the shares in respect of which it is paid.
(8) Nothing in this section shall affect any company to which the Indian Railway Companies Act, 1895 (10 of 1895), or the Indian Tramways Act, 1902 (4 of 1902) applies
.
Section 209 to 223 - Accounts
Section 209 - Books of account to be kept by company
1 [(1) Every company shall keep at its registered office proper books of account with respect to -
(a) all sums of money received and expended by the company and the matters in respect of which the receipt and expenditure take place;
(b) all sales and purchases of goods by the company; 2 [***]
(c) the assets and liabilities of the company; 3 [and]
3 [(d) in the case of a company pertaining to any class of companies engaged in production, processing, manufacturing or mining activities, such particulars relating to utilisation of material or labour or to other items of cost as may be prescribed if such class of companies is required by the Central Government to include such particulars in the books of account:]
Provided that all or any of the books of account aforesaid may be kept at such other place in India as the Board of directors may decide and when the Board of directors so decides, the company shall, within seven days of the decision, file with the Registrar a notice in writing giving the full address of that other place.]
(2) Where a company has a branch office, whether in or outside India, the company shall be deemed to have complied with the provisions of sub-section (1), if proper books of account relating to the transactions effected at the branch office are kept at that office and proper summarised returns, made up to dates at intervals of not more than three months, are sent by the branch office to the company at its registered office or the other place referred to in sub-section (1).
4 [(3) For the purposes of sub-sections (1) and (2), proper books of account shall not be deemed to be kept with respect to the matters specified therein, -
(a) if there are not kept such books as are necessary to give a true and fair view of the state of affairs of the company or branch office, as the case may be, and to explain its transactions; and
(b) if such books are not kept on accrual basis and according to the double entry system of accounting.]
5 [(4) 6 [***] The books of account and other books and papers shall be open to inspection by any director during business hours.]
7 [***]
8 [(4A) The books of account of every company relating to a period of not less than eight years immediately preceding the current year 3 [together with the vouchers relevant to any entry in such books of account] shall be preserved in good order:
Provided that in the case of a company incorporated less than eight years before the current year, the books of account for the entire period preceding the current year 3 [together with the vouchers relevant to any entry in such books of account] shall be so preserved.]
(5) If any of the persons referred to in sub-section (6) fails to take all reasonable steps to secure compliance by the company with the requirements of this section, or has by his own wilful act been the cause of any default by the company thereunder, he shall, in respect of each offence, be punishable with 9 [imprisonment for a term which may extend to six months, or with fine which may extend to 10 [ten thousand rupees], or with both]:
Provided that in any proceedings against a person in respect of an offence under this section consisting of a failure to take reasonable steps to secure compliance by the company with the requirements of this section, it shall be a defence to prove 11 [***]that a competent and reliable person was charged with the duty of seeking that those requirements were complied with and was in a position to discharge that duty:
8 [Provided further that no person shall be sentenced to imprisonment for any such offence unless it was committed wilfully.]
(6) The persons referred to in sub-section (5) are the following, namely: -
12 [(a) where the company has a managing director or manager, such managing director or manager and all officers and other employees of the company; and]
13 [***]
14 [(d) where the company has neither a managing director nor manager, every director of the company;]
15 [***]
(7) If any person, not being a person referred to in sub-section (6), having been charged by the 16 [***] 8 [managing director, manager] or Board of directors, as the case may be, with the duty of seeing that the requirements of this section are complied with makes default in doing so, he shall, in respect of each offence, be punishable with 9 [imprisonment for a term which my extend to six months, or with fine which may extend to 10 [ten thousand rupees], or with both].
____________________
1. Substituted by Act 65 of 1960, Section 60, for sub-section (1) (w.e.f. 28-12-1960).
2. The word "and" omitted by Act 31 of 1965, Section 20 (w.e.f. 15-10-1965).
3. Inserted by Act 31 of 1965, Section 20 (w.e.f. 15-10-1965).
4. Substituted by Act 31 of 1988, Section 29, for sub-section (3) ( w.e.f. 15-6-1988).
5. Substituted by Act 31 of 1965, Section 20, for sub-section (4) (w.e.f. 15-10-1965).
6. The brackets and letter "(a)" omitted by Act 41 of 1974, Section20 ( w.e.f. 1-2-1975).
7. Clauses (b), (c) and (d) omitted by Act 41 of 1974, Section 20 ( w.e.f. 1-2-1975).
8. Inserted by Act 65 of 1960, Section 60 (w.e.f. 28-12-1960).
9. Substituted by Act 65 of 1960, Section 60, for "fine which may extend to one thousand rupees" (w.e.f. 28-12-1960).
10. Substituted by Act 53 of 2000, Section 95, for "one thousand rupees" (w.e.f. 13-12-2000).
11. The words "that they had reasonable ground to believe, and did believe" omitted by Act 65 of 1960, Section 60 (w.e.f. 28-12-1960).
12. Substituted by Act 53 of 2000, Section 95, for clause (a) (w.e.f. 13-12-2000).
13. Clauses (b) and (c) omitted by Act 53 of 2000, Section 95 (w.e.f. 13-12-2000).
14. Substituted by Act 53 of 2000, Section 95, for clause (d) (w.e.f. 13-12-2000).
15. Clause (e) omitted by Act 53 of 2000, Section 95 (w.e.f. 13-12-2000).
16. The words "managing agent, secretaries and treasurers," omitted by Act 53 of 2000, Section 95 (w.e.f. 13-12-2000).
Section 209A - Inspection of books of accounts, etc. of companies
1[209A. Inspection of books of accounts, etc. of companies
(1) The books of account and other books and papers of every company shall be open to inspection during business hours-
(i) by the Registrar, or
2[(ii) by such officer of the Government as may be authorised by the Central Government in this behalf;
(iii) by such officers of the Securities of Exchange Board of India as may be authorised by it:
Provided that such inspection may be made without giving any previous notice to the company or any officer thereof:
Provided further that the inspection by the Securities and Exchange Board of India shall be made in respect of matters covered under sections referred to in section 55A.]
(2) It shall be the duty of every director, other officer or employee of the company to produce to the person making inspection under sub-section (1), all such books of account and other books and papers of the company in his custody or control and to furnish him with any statement, information or explanation relating to the affairs of the company as the said person may require of him within such time and at such place as he may specify.
(3) It shall also be the duty of every director, other officer or employee of the company to give to the person making inspection under this section all assistance in connection with the inspection which the company may be reasonably expected to give.
(4) The person making the inspection under this section may, during the course of inspection, -
(i) make or cause to be made copies of books of accounts and other books and papers; or
(ii) place or cause to be placed any marks of identification thereon in token of the inspection having been made.
(5) Notwithstanding anything contained in any other law for the time being in force or any contract to the contrary, any person making an inspection under this section shall have the same powers as are vested in a civil Cour t under the Code of Civil Procedure, 1908 (5 of 1908), while trying a suit, in respect of the following matters, namely: -
(i) the discovery and production of books of account and other documents, at such place and such time as may be specified by such person;
(ii) summoning and enforcing the attendance of persons and examining them on oath;
(iii) inspection of any books, registers and other documents of the company at any place.
(6) Where an inspection of the books of account and other books and papers of the company has been made under this section, the person making the inspection shall make a report to the Central Government3[or the Securities and Exchange Board of India in respect of inspection made by its officers].
(7) Any officer authorised to make an inspection under this section shall have all the powers that a Registrar has under this Act in relation to the making of inquiries.
(8) If default is made in complying with the provisions of this section, every officer of the company who is in default shall be punishable with fine which shall not be less than4[fifty thousand rupees], and also with imprisonment for a term not exceeding one year.
(9) Where a director or any other officer of a company has been convicted of an offence under this section he shall, on and from the date on which he is so convicted, be deemed to have vacated his office as such and on such vacation of office, shall be disqualified for holding such office in any company, for a period of five years from such date.]
____________________
1. Inserted by Act 41 of 1974, Section 21 ( w.e.f. 1-12-1975).
2. Substituted by Act 53 of 2000, Section 96, for clause (ii) and the proviso (w.e.f. 13-12-2000).
3 . Inserted by Act 53 of 2000, Section 96 (w.e.f. 13-12-2000).
4. Substituted by Act 53 of 2000, Section 96, for "five thousand rupees" (w.e.f. 13-12-2000).
Section 210 - Annual accounts and balance-sheet
(1) At every annual general meeting of a company held in pursuance of section 166, the Board of directors of the company shall lay before the company -
(a) a balance-sheet as at the end of the period specified in sub-section (3); and
(b) a profit and loss account for that period.
(2) In the case of a company not carrying on business for profit, an income and expenditure account shall be laid before the company at its annual general meeting instead of a profit and loss account, and all references to "profit and loss account", "profit" and "loss" in this section and elsewhere in this Act, shall be construed, in relation to such a company, as references respectively to the "income and expenditure account", "the excess of income over expenditure", and "the excess of expenditure over income".
(3) The profit and loss account shall relate -
(a) in the case of the first annual general meeting of the company, to the period beginning with the incorporation of the company and ending with a day which shall not precede the day of the meeting by more than nine months; and
1[(b) in the case of any subsequent annual general meeting of the company, to the period beginning with the day immediately after the period for which the account was last submitted and ending with a day which shall not precede the day of the meeting by more than six months, or in cases where an extension of time has been granted for holding the meeting under the second proviso to sub-section (1) of section 166, by more than six months and the extension so granted.]
(4) The period to which the account aforesaid relates is referred to in this Act as a "financial year"; and it may be less or more than a calendar year, but it shall not exceed fifteen months:
Provided that it may extend to eighteen months where special permission has been granted in that behalf by the Registrar.
(5) If any person, being a director of a company, fails to take all reasonable steps to comply with the provisions of this section, he shall, in respect of each offence, be punishable with imprisonment for a term which may extend to six months, or with fine which may extend to2[ten thousand rupees], or with both:
Provided that in any proceedings against a person in respect of an offence under this section, it shall be a defence to prove3[***] that a competent and reliable person was charged with the duty of seeing that the provisions of this section were complied with and was in a position to discharge that duty:
Provided further that no person shall be sentenced to imprisonment for any such offence unless it was committed wilfully.
(6) If any person, not being a director of the company, having been charged by the Board of directors with the duty of seeing that the provisions of this section are complied with, makes default in doing so, he shall, in respect of each offence, be punishable with imprisonment for a term which may extend to six months, or with fine which may extend to2[ten thousand rupees], or with both:
Provided that no person shall be sentenced to imprisonment for any such offence unless it was committed wilfully.
____________________
1. Substituted by Act 65 of 1960, Section 61, for clause (b) (w.e.f. 28-12-1960).
2 . Substituted by Act 53 of 2000, Section 97, for "one thousand rupees" (w.e.f. 13-12-2000).
3. The words "that he had reasonable ground to believe and did believe" omitted by Act 65 of 1960, Section 61 (w.e.f. 28-12-1960).
Section 210A - Constitution of National Advisory Committee on Accounting Standards
1[210A. Constitution of National Advisory Committee on Accounting Standards
(1) The Central Government may, by notification in the Official Gazette, constitute an Advisory Committee to be called the National Advisory Committee on Accounting Standards ( hereafter in this section referred to as the "Advisory Committee") to advise the Central Government on the formulation and laying down of accounting standards for adoption by companies or class of companies under this Act.
(2) The Advisory Committee shall consist of the following members, namely: -
(a) a Chairperson who shall be a person of eminence and well versed in accountancy, finance, business administration, business law, economics or similar discipline;
(b) one member each nominated by the Institute of Chartered Accountants of India constituted under the Chartered Accountants Act, 1949 (38 of 1949), the Institute of Cost and Works Accountants of India constituted under the Cost and Works Accountants Act, 1959 (23 of 1959), and the Institute of Company Secretaries of India constituted under the Company Secretaries Act, 1980 (56 of 1980);
(c) one representative of the Central Government to be nominated by it;
(d) one representative of the Reserve Bank of India to be nominated by it;
(e) one representative of the Comptroller and Auditor-General of India to be nominated by him;
(f) a person who holds or has held the office of professor in accountancy, finance or business management in any university or deemed university;
(g) the Chairman of the Central Board of Direct Taxes constituted under the Central Boards of Revenue Act, 1963 (54 of 1963) or his nominee;
(h) two members to represent the chambers of commerce and industry to be nominated by the Central Government; and
(i) one representative of the Securities and Exchange Board of India to be nominated by it.
(3) The Advisory Committee shall give its recommendations to the Central Government on such matters of accounting policies and standards and auditing as may be referred to it for advice from time to time.
(4) The members of the Advisory Committee shall hold office for such term as may be determined by the Central Government at the time of their appointment and any vacancy in the membership in the Committee shall be filled by the Central Government in the same manner as the member whose vacancy occurred was filled.
(5) The non-official member of the Advisory Committee shall be entitled to such fees, travelling, conveyance and other allowances as are admissible to the officers of the Central Government of the highest rank.]
____________________
1 . Inserted by Act 21 of 1999, Section 13 ( w.r.e.f. 31-10-1998).
Section 211 - Form and contents of balance-sheet and profit and loss account
1 [(1) Every balance-sheet of a company shall give a true and fair view of the state of affairs of the company as at the end of the financial year and shall, subject to the provisions of this section, be in the form set out in Part I of Schedule VI, or as near thereto as circumstances admit or in such order form as may be approved by the Central Government either generally or in any particular case; and in preparing the balance-sheet due regard shall be had, as far as may be, to the general instructions for preparation of balance-sheet under the heading "Notes" at the end of that Part:
Provided that nothing contained in this sub-section shall apply to any insurance or banking company or any company engaged in the generation or supply of electricity or to any other class of company for which a form of balance-sheet has been specified in or under the Act governing such class of company.]
(2) Every profit and loss account of a company shall give a true and fair view of the profit or loss of the company for the financial year and shall, subject as aforesaid, comply with the requirements of Part II of Schedule VI, so far as they are applicable thereto:
Provided that nothing contained in this sub-section shall apply to any insurance or banking company 2 [or any company engaged in the generation or supply of electricity], or to any other class of company for which a form of profit and loss account has been specified in or under the Act governing such class of company.
(3) The Central Government may, by notification in the Official Gazette, exempt any class of companies from compliance with any of the requirements in Schedule VI if, in its opinion, it is necessary to grant the exemption in the 3 [public interest].
Any such exemption may be granted either unconditionally or subject to such conditions as may be specified in the notification.
4 [(3A) Every profit and loss account and balance-sheet of the company shall comply with the accounting standards.
(3B) Where the profit and loss account and the balance-sheet of the company do not comply with the accounting standards, such companies shall disclose in its profit and loss account and balance-sheet, the following, namely:-
(a) the deviation from the accounting standards;
(b) the reasons for such deviation; and
(c) the financial effect, if any, arising due to such deviation.
(3C) For the purposes of this section, the expression "accounting standards" means the standards of accounting recommended by the Institute of Chartered Accountants of India constituted under the Chartered Accountants Act, 1949 (38 of 1949), as may be prescribed by the Central Government in consultation with the National Advisory Committee on Accounting Standards established under sub-section (1) of section 210A:
Provided that the standards of accounting specified by the Institute of Chartered Accountants of India shall be deemed to be the accounting standards until the accounting standards are prescribed by the Central Government under this sub-section.]
(4) The Central Government may, on the application or with the consent of the Board of directors of the company, by order, modify in relation to that company any of the requirements of this Act as to the matters to be stated in the company's balance sheet or profit and loss account for the purpose of adapting them to the circumstances of the company.
(5) The balance-sheet and the profit and loss account of a company shall not be treated as not disclosing a true and fair view of the state of affairs of the company, merely by reason of the fact that they do not disclose-
(i) in the case of an insurance company, any matters which are not required to be disclosed by the Insurance Act, 1938 (4 of 1938);
(ii) in the case of a banking company, any matters which are not required to be disclosed by the Banking Companies Act, 1949 (10 of 1949);
(iii) in the case of a company engaged in the generation or supply of electricity, any matters which are not required to be disclosed by 5 [both the Indian Electricity Act, 1910 (9 of 1910). and the Electricity (Supply) Act, 1948 (34 of 1948)];
(iv) in the case of a company governed by any other special Act for the time being in force, any matters which are not required to be disclosed by that special Act; or
(v) in the case of any company, any matters which are not required to be disclosed by virtue of the provisions contained in Schedule VI or by virtue of a notification issued under sub-section (3) or an order issued under sub-section (4).
(6) For the purposes of this section, except where the context otherwise requires, any reference to a balance-sheet or profit and loss account shall include any notes thereon or documents annexed thereto, giving information required by this Act, and allowed by this Act to be given in the form of such notes or documents.
(7) If any such person as is referred to in sub-section (6) of section 209 fails to take all reasonable steps to secure compliance by the company, as respects any accounts laid before the company in general meeting, with the provisions of this section and with the other requirements of this Act as to the matters to be stated in the accounts, he shall, in respect of each offence, be punishable with imprisonment for a term which may extend to six months, or with fine which may extend to 6 [ten thousand rupees], or with both:
Provided that in any proceedings against a person in respect of an offence under this section, it shall be a defence to prove 7 [***] that a competent and reliable person was charged with the duty of seeing that the provisions of this section and the other requirements aforesaid were complied with and was in a position to discharge that duty:
Provided further that no person shall be sentenced to imprisonment for any such offence unless it was committed wilfully.
(8) If any person, not being a person referred to in sub-section (6) of section 209, having been charged by the 8 [***] 2 [managing director or manager,] or Board of directors, as the case may be, with the duty of seeing that the provisions of this section and the other requirements aforesaid are complied with, makes default in doing so, he shall, in respect of each offence, be punishable with imprisonment for a term which may extend to six months or with fine which may extend to 6 [ten thousand rupees], or with both:
Provided that no person shall be sentenced to imprisonment for any such offence unless it was committed wilfully.
____________________
1. Substituted by Act 65 of 1960, Section 62, for sub-section (1) (w.e.f. 28-12-1960).
2. Inserted by Act 65 of 1960, Section 62 (w.e.f. 28-12-1960).
3. Substituted by Act 65 of 1960, Section 62, for "national interest" (w.e.f. 28-12-1960).
4. Inserted by Act 21 of 1999, Section 14 ( w.r.e.f. 31-10-1998).
5. Substituted by Act 65 of 1960, Section 62, for "the Electricity (Supply) Act, 1948 (54 of 1948)" (w.e.f. 28-12-1960).
6. Substituted by Act 53 of 2000, Section 98, for "one thousand rupees" (w.e.f. 13-12-2000).
7. The words "that he had reasonable ground to believe and did believe" omitted by Act 65 of 1960, Section 62 (w.e.f. 28-12-1960).
8. The words "managing agent, secretaries and treasurers," omitted by Act 53 of 2000, Section 98 (w.e.f. 13-12-2000).
Section 212 - Balance-sheet of holding company to include certain particulars as to its subsidiaries
(1) There shall be attached to the balance-sheet of a holding company having a subsidiary or subsidiaries at the end of the financial year as at which the holding company's balance-sheet is made out, the following documents in respect of such subsidiary or of each such subsidiary, as the case may be:-
(a) a copy of the balance-sheet of the subsidiary;
(b) a copy of its profit and loss account;
(c) a copy of the report of its Board of directors;
(d) a copy of the report of its auditors;
(e) a statement of the holding company's interest in the subsidiary as specified in sub-section (3);
(f) the statement referred to in sub-section (5), if any; and
(g) the report referred to in sub-section (6), if any.
(2)1[(a) The balance-sheet referred to in clause (a) of sub-section (1) shall be made out in accordance with the requirements of this Act,-
(i) as at the end of the financial year of the subsidiary, where such financial year coincides with the financial year of the holding company;
(ii) as at the end of the financial year of the subsidiary last before that of the holding company where the financial year of the subsidiary does not coincide with that of the holding company.]
(b) The profit and loss account and the reports of the Board of directors and of the auditors, referred to in clauses (b), (c) and (d) of sub-section (1), shall be made out, in accordance with the requirements of this Act, for the financial year of the subsidiary referred to in clause (a).
(c)2[Where the financial year of the subsidiary does not coincide with that of the holding company, the financial year aforesaid] of the subsidiary shall not end on a day which precedes the day on which the holding company's financial year ends by more than six months.
(d) Where the financial year of a subsidiary is shorter in duration than that of its holding company, references to the financial year of the subsidiary in clauses (a), (b) and (c) shall be construed as references to two or more financial years of the subsidiary the duration of which, in the aggregate, is not less than the duration of the holding company's financial year.
(3) The statement referred to in clause (e) of sub-section (1) shall specify-
(a) the extent of the holding company's interest in the subsidiary at the end of the financial year or of the last of the financial years of the subsidiary referred to in sub-section (2);
(b) the net aggregate amount, so far as it concerns members of the holding company and is not dealt with in the company's accounts, of the subsidiary's profits after deducting its losses or vice versa-
(i) for the financial year or years of the subsidiary aforesaid; and
(ii) for the previous financial years of the subsidiary since it became the holding company's subsidiary;
(c) the net aggregate amount of the profits of the subsidiary after deducting its losses or vice versa-
(i) for the financial year or years of the subsidiary aforesaid; and
(ii) for the previous financial years of the subsidiary since it became the holding company's subsidiary,
so far as those profits are dealt with, or provision is made for those losses, in the company's accounts.
(4) Clauses (b) and (c) of sub-section (3) shall apply only to profits and losses of the subsidiary which may properly be treated in the holding company's accounts as revenue profits or losses, and the profits or losses attributable to any shares in a subsidiary for the time being held by the holding company or any other of its subsidiaries shall not (for that or any other purpose) be treated as aforesaid so far as they are profits or losses for the period before the date on or as from which the shares were acquired by the company or any of its subsidiaries, except that they may in a proper case be so treated where-
(a) the company is itself the subsidiary of another body corporate; and
(b) the shares were acquired from that body corporate or a subsidiary of it;
and for the purpose of determining whether any profits or losses are to be treated as profits or losses for the said period, the profit or loss for any financial year of the subsidiary may, if it is not practicable to apportion it with reasonable accuracy by reference to the facts, be treated as accruing from day-to-day during that year and be apportioned accordingly.
(5) Where the financial year or years of a subsidiary referred to in sub-section (2) do not coincide with the financial year of the holding company, a statement containing information on the following matters shall also be attached to the balance-sheet of the holding company:-
(a) whether there has been any, and, if so, what change in the holding company's interest in the subsidiary between the end of the financial year or of the last of the financial years of the subsidiary and the end of the holding company's financial year;
(b) details of any material changes which have occurred between the end of the financial year or of the last of the financial years of the subsidiary and the end of the holding company's financial year in respect of-
(i) the subsidiary's fixed assets;
(ii) its investments;
(iii) the moneys lent by it;
(iv) the moneys borrowed by it for any purpose other than that of meeting current liabilities.
(6) If, for any reason, the Board of directors of the holding company is unable to obtain information on any of the matters required to be specified by sub-section (4), a report in writing to that effect shall be attached to the balance-sheet of the holding company.
(7) The documents referred to in clauses (e), (f) and (g) of sub-section (1) shall be signed by the persons by whom the balance-sheet of the holding company is required to be signed.
(8) The Central Government may, on the application or with the consent of the Board of directors of the company, direct that in relation to any subsidiary, the provisions of this section shall not apply, or shall apply only to such extent as may be specified in the direction.
(9) If any such person as is referred to in sub-section (6) of section 209 fails to take all reasonable steps to comply with the provisions of this section, he shall in respect of each offence, be punishable with imprisonment for a term which may extend to six months, or with fine which may extend to3[ten thousand rupees], or with both:
Provided that in any proceedings against a person in respect of an offence under this section, it shall be a defence to prove4[***]that a competent and reliable person was charged with the duty of seeing that the provisions of this section were complied with and was in a position to discharge that duty:
Provided further that no person shall be sentenced to imprisonment for any such offence unless it was committed wilfully.
(10) If any person not being a person referred to in sub-section (6) of section 209, having been, charged by the5[***]6[managing director, manager,] or Board of directors, as the case may be, with the duty of seeing that the provisions of this section are complied with, makes default in doing so, he shall, in respect of each offence, be punishable with imprisonment for a term which may extend to six months, or with fine which may extend to3[ten thousand rupees], or with both:
Provided that no person shall be sentenced to imprisonment for any such offence unless it was committed wilfully.
____________________
1. Substituted by Act 65 of 1960, Section 63, for clause (a) (w.e.f. 28-12-1960).
2. Substituted by Act 65 of 1960, Section 63, for "The financial year aforesaid" (w.e.f. 28-12-1960).
3. Substituted by Act 53 of 2000, Section 99, for "one thousand rupees" (w.e.f. 13-12-2000).
4. The words "that he had reasonable ground to believe, and did believe," omitted by Act 65 of 1960, Section 63 (w.e.f. 28-12-1960).
5. The words "managing agent, secretaries and treasurers," omitted by Act 53 of 2000, Section 99 (w.e.f. 13-12-2000).
6. Inserted by Act 65 of 1960, Section 63 (w.e.f. 28-12-1960).
Section 213 - Financial year of holding company and subsidiary
(1) Where it appears to the Central Government desirable for a holding company or a holding company's subsidiary, to extend its financial year so that the subsidiary's financial year may end with that of the holding company, and for that purpose to postpone the submission of the relevant accounts to a general meeting, the Central Government may, on the application or with the consent of the Board of directors of the company whose financial year is to be extended, direct that in the case of that company, the submission of accounts to a general meeting, the holding of an annual general meeting or the making of an annual return, shall not be required to be submitted, held or made, earlier than the-dates specified in the direction, notwithstanding anything to the contrary in this Act or in any other Act for the time being in force.
(2) The Central Government shall, on the application of the Board of directors of a holding company or a holding company's subsidiary, exercise the powers conferred on that Government by sub-section (1) if it is necessary so to do, in order to secure that the end of the financial year of the subsidiary does not precede the end of the holding company's financial year by more than six months, where that is not the case at the commencement of this Act, or at the date on which the relationship of holding company and subsidiary comes into existence where that date is later than the commencement of this Act.
Section 214 - Rights of holding company's representatives and members
(1) A holding company may, by resolution, authorise representatives named in the resolution to inspect the books of account kept by any of its subsidiaries; and the books of account of any such subsidiary shall be open to inspection by those representatives at any time during business hours.
(2) The rights conferred by section 235 upon members of a company may be exercised, in respect of any subsidiary, by members of the holding company as if they alone were members of the subsidiary.
Section 215 - Authentication of balance-sheet and profit and loss account
(1) Save as provided by sub-section (2), every balance-sheet and every profit and loss account of a company shall be signed on behalf of the Board of directors-
(i) in the case of banking company, by the persons specified in clause (a) or clause (b), as the case may be, of sub-section (2) of section 29 of the Banking Companies Act, 1949 (10 of 1949);
(ii) in the case of any other company, by its1[***]manager or secretary, if any, and by not less than two directors of the company one of whom shall be a managing director where there is one.
(2) In the case of a company not being a banking company, when only one of its directors is for the time being in India, the balance-sheet and the profit and loss account shall be signed by such director; but in such a case there shall be attached to the balance-sheet and the profit and loss account a statement signed by him explaining the reason for non-compliance with the provisions of sub-section (1).
(3) The balance-sheet and the profit and loss account shall be approved by the Board of directors before they are signed on behalf of the Board in accordance with the provisions of this section and before they are submitted to the auditors for their report thereon.
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1 . The words "managing agent, secretaries and treasurers," omitted by Act 53 of 2000, Section 100 (w.e.f. 13-12-2000).
Section 216 - Profit and loss account to be annexed and auditors' report to be attached to balance-sheet
The profit and loss account shall be annexed to the balance-sheet and the auditors' report 1 [(including the auditors' separate, special or supplementary report, if any)] shall be attached thereto.
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1. Inserted by Act 65 of 1960, Section 64 (w.e.f. 28-12-1960).
Section 217 - Board's report
(1) There shall be attached to every balance-sheet laid before a company in general meeting, a report by its Board of directors, with respect to-
(a) the state of the company's affairs;
(b) the amounts, if any, which it proposes to carry to any reserves 1 [***] in such balance-sheet 2 [***];
(c) the amount, if any, which it recommends should be paid by way of dividend;
3 [(d) material changes and commitments, if any; affecting the financial position of the company which have occurred between the end of the financial year of the company to which the balance-sheet relates and the date of report;]
4 [(e) the conservation of energy, technology absorption, foreign exchange earnings and outgo, in such manner as may be prescribed.]
(2) The Board's report shall, so far as is material for the appreciation of the state of the company's affairs by its members and will not in the Board's opinion be harmful to the business of the company or of any of its subsidiaries, deal with any changes which have occurred during the financial year-
(a) in the nature of the company's business;
(b) in the company's subsidiaries or in the nature of the business carried on by them; and
(c) generally in the classes of business in which the company has an interest.
5 [(2A) (a) The Board's report shall also include a statement showing the name of every employee of the company who-
(i) if employed throughout the financial year, was in receipt of remuneration for that year which, in the aggregate, was not less than 6 [such sum as may be prescribed]; or
(ii) if employed for a part of the financial year, was in receipt of remuneration for any part, of that year, at a rate which, in the aggregate was not less than 7 [such sum per month as may be prescribed;8 or]
9 [(iii) if employed throughout the financial year or part thereof, was in receipt of remuneration in that year which, on the aggregate, or as the case may be, at a rate which, in the aggregate, is in excess of that drawn by the managing director or whole-time director or manager and holds by himself or along with his spouse and dependent children, not less than two per cent, of the equity shares of the company.]
(b) The statement referred to in clause (a) shall also indicate,-
(i) whether any such employee is a relative of any director or manager of the company and if so, the name of such director, and
(ii) such other particulars as may be prescribed.
Explanation.-"Remuneration" has the meaning assigned to it in the explanation to section 198.]
10 [(2AA) The Board's report shall also include a Directors' Responsibility Statement, indicating therein,-
(i) that in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures;
(ii) that the directors had selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company at the end of the financial year and of the profit or loss of the company for that period;
(iii) that the directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities;
(iv) that the directors had prepared the annual accounts on a going concern basis.]
11 [(2B) The Board's report shall also specify the reasons for the failure, if any, to complete the buy-back within the time specified in sub-section (4) of section 77A.]
(3) The Board shall also be bound to give the fullest information and explanations in its report aforesaid, or in cases falling under the proviso to section 222, in an addendum to that report, on every reservation, qualification or adverse remark contained in the auditors' report.
(4) The Board's report and any addendum thereto shall be signed by its chairman if he is authorised in that behalf by the Board; and where he is not so authorised, shall be signed by such number of directors as are required to sign the balance-sheet and the profit and loss account of the company by virtue of sub-sections (1) and (2) of section 215.
(5) If any person, being a director of a company, fails to take all reasonable steps to comply with the provisions of sub-sections (1) to (3), or being the chairman, signs the Board's report otherwise than in conformity with the provisions of sub-section (4), he shall, in respect of each offence, be punishable with imprisonment for a term which may extend to six months, or with fine which may extend to 12 [twenty thousand rupees], or with both:
Provided that no person shall be sentenced to imprisonment for any such offence unless it was committed wilfully:
Provided further that in any proceedings against a person in respect of an offence under sub-section (1), it shall be a defence to prove 13 [***] that a competent and reliable person was charged with the duty of seeing that the provisions of that subsection were complied with and was in a position to discharge that duty.
(6) If any person, not being a director, having been charged by the Board of directors with the duty of seeing that the provisions of sub-sections (1) to (3) are complied with, makes default in doing so, he shall, in respect of each offence, be punishable with imprisonment for a term which may extend to six months, or with fine which may extend to 12 [twenty thousand rupees], or with both:
Provided that no person shall be sentenced to imprisonment for any such offence unless it was committed wilfully.
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1. The word "either" omitted by Act 65 of 1960, Section 65 (w.e.f. 28-12-1960).
2. The words "or in a subsequent balance-sheet; and" omitted by Act 65 of 1960, Section 65 (w.e.f. 28-12-1960).
3. Inserted by Act 65 of 1960, Section 65 (w.e.f. 28-12-1960).
4. Added by Act 31 of 1988, Section 30 (w.e.f. 1-4-1989).
5. Inserted by Act 41 of 1974, Section 22 (w.e.f. 1-2-1975).
6. Substituted by Act 31 of 1988, Section 30, for "thirty-six thousand rupees" (w.e.f. 15-6-1988).
7. Substituted by Act 31 of 1988, Section 30, for "three thousand rupees per month" (w.e.f. 15-6-1988).
8. Rs. 2,00,000 per month (w.e.f. 17-4-2002).
9. Inserted by Act 31 of 1988, Section 30 (w.e.f. 15-6-1988).
10. Inserted by Act 53 of 2000, Section 101 (w.e.f. 13-12-2000).
11. Inserted by Act 21 of 1999, Section 15 (w.r.e.f. 31-10-1998).
12. Substituted by Act 53 of 2000, Section 101, for "two thousand rupees" (w.e.f. 13-12-2000).
13. The words "that the had reasonable ground to believe, and did believe," omitted by Act 65 of 1960, Section 65 of 1960, Section 65 (w.e.f. 28-12-1960).
Section 218 - Penalty for improper issue, circulation or publication of balance-sheet or profit and loss account
(a) If any copy of a balance-sheet or profit and loss account which has not been signed as required by section 215 is issued, circulated or published; or
(b) If any copy of a balance-sheet is issued, circulated or published without there being annexed or attached thereto, as the case may be, a copy each of (i) the profit and loss account, (ii) any accounts, reports or statements which, by virtue of section 212, are required to be attached to the balance-sheet, (iii) the auditors' report, and (iv) the Board's report referred to in section 217;
the company, and every officer of the company who is in default, shall be punishable with fine which may extend to1[five thousand rupees].
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1 . Substituted by Act 53 of 2000, Section 102, for "five hundred rupees" (w.e.f. 13-12-2000).
Section 219 - Right of member to copies of balance-sheet and auditors' report
(1) A copy of every balance-sheet (including the profit and loss account, the auditors' report and every other document required by law to be annexed or attached, as the case may be, to the balance-sheet) which is to be laid before a company in general meeting shall, not less than twenty-one days before the date of the meeting, be sent to every member of the company, 1 [to every trustee for the holders of any debentures issued by the company, whether such member or trustee is or is not entitled to have notices of general meetings of the company sent to him, and to all persons other than such members or trustees, being persons so entitled]:
Provided that-
(a) in the case of a company not having a share capital, this sub-section shall not require the sending of a copy of the documents aforesaid to a member, or holder of debentures, of the company who is not entitled to have notices of general meetings of the company sent to him,
(b) this sub-section shall not require a copy of the documents aforesaid to be sent-
(i) to a member, or holder of debentures, of the company, who is not entitled to have notices of general meetings of the company sent to him and of whose address the company is unaware;
(ii) to more than one of the joint-holders of any shares or debentures none of whom is entitled to have such notices sent to him; 2 [***]
(iii) in the case of joint-holders of any shares or debentures some of whom are and some of whom are not entitled to have such notices sent to them, to those who are not so entitled; 3 [***].
4 [(iv) in the case of a company whose shares are listed on a recognised stock exchange, if the copies of the documents aforesaid are made available for inspection at its registered office during working hours for a period of twenty-one days before the date of the meeting and a statement containing the salient features of such documents in the prescribed form or copies of the documents aforesaid, as the company may deem fit, is sent to every member of the company and to every trustee for the holders of any debentures issued by the company not less than twenty-one days before the date of the meeting;]
(c) if the copies of the documents aforesaid are sent less than twenty-one days before the date of the meetings, they shall, notwithstanding that fact, be deemed to have been duly sent if it is so agreed by all the members entitled to vote at the meeting.
5 [(2) Any member for holder of debentures of a company and any person from whom the company has accepted a sum of money by way of deposit shall, on demand, be entitled to be furnished free of cost, with a copy of the last balance-sheet of the company and of every document required by law to be annexed or attached thereto, including the profit and loss account and the auditors' report.]
(3) If default is made in complying with sub-section (1), the company, and every officer of the company who is in default, shall be punishable with fine which may extend to 6 [five thousand rupees].
(4) If, when any person makes a demand for a copy of any document with which he is entitled to be furnished by virtue of sub-section (2), default is made in complying with the demand within seven days after the making thereof, the company, and every officer of the company who is in default, shall be punishable with fine which may extend to 6 [five thousand rupees], unless it is proved that person had already made a demand for and been furnished with a copy of the document.
The 7 [Central Government] may also by order, direct that the copy demanded shall forthwith be furnished to the person concerned.
(5) Sub-sections (1) to (4) shall not apply in relation to a balance-sheet of a private company laid before it before the commencement of this Act; and in such a case the right of any person to have sent to him or to be furnished with a copy of the balance-sheet, and the liability of the company in respect of a failure to satisfy that right, shall be the same as they would have been if this Act had not been passed.
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1. Substituted by Act 31 of 1988, Section 31, for certain words (w.e.f. 17-4-1989).
2. The word "or" omitted by Act 31 of 1988, Section 31 (w.e.f. 17-4-1989).
3. The word "and" omitted by Act 31 of 1988, Section 31 (w.e.f. 17-4-1989).
4. Inserted by Act 31 of 1988, Section 31 (w.e.f. 17-4-1989).
5. Substituted by Act 31 of 1988, Section 31, for sub-section (2) (w.e.f. 17-4-1989).
6. Substituted by Act 53 of 2000, Section 103, for "five hundred rupees" (w.e.f. 13-12-2000).
7. Substituted by Act 31 of 1988, Section 31, for "Court" (w.e.f. 31-5-1991) and again substituted by Act 11 of 2003, section 27, for "Company Law Board".
Section 220 - Three copies of balance-sheet, etc., to be filed with Registrar
(1) After the balance-sheet and the profit and loss account have been laid before a company at an annual general meeting as aforesaid, there shall be filed with the Registrar1[within thirty days from the date on which the balance-sheet and the profit and loss account were so laid]2[or where the annual general meeting of a company for any year has not been held, there shall be filed with the Registrar within thirty days from the latest day on or before which that meeting should have been held in accordance with the provisions of this Act].
(a)3[***] three copies of the balance-sheet and the profit and loss account signed by the managing director,4[***]manager or secretary of the company, or if there be none of these, by a director of the company, together with three copies of all documents which are required by this Act to be annexed or attended to such balance-sheet or profit and loss account:
5[Provided that in the case of a private company, copies of the balance-sheet and copies of the profit and loss account shall be filed with the Registrar separately:]
6[***]
5[Provided further that, -
(i) in the case of a private company which is not a subsidiary of a public company, or
(ii) in the case of a private company of which the entire paid-up share capital is held by one or more bodies corporate incorporated outside India, or
(iii) in the case of a company which becomes a public company by virtue of section 43A, if the Central Government directs that it is not in the public interest that any person other than a member of the company shall be entitled to inspect, or obtain copies of the profit and loss account of the company,
no person other than a member of the company concerned shall be entitled to inspect, or obtain copies of, the profit and loss account of that company under section 610.]
(2) If the annual general meeting of a7[***] company before which a balance-sheet is laid as aforesaid does not adopt the balance-sheet8[or is adjourned without adopting the balance-sheet]9[or, if the annual general meeting of a company for any year has not been held] a statement of that fact and of the reasons therefor shall be annexed to the balance-sheet and to the copies thereof required to be filed with the Registrar.
(3) If default is made in complying with the requirements of sub-sections (1) and (2), the company, and every officer of the company who is in default, shall be liable to the like punishment as is provided by section 162 for a default in complying with the provisions of sections 159, 160 or 161.
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1 .Substituted by Act 31 of 1965, Section 62 and Schedule, for certain words (w.e.f. 15-10-1965).
2 .Inserted by Act 46 of 1977, Section 5 (w.e.f. 24-12-1977).
3 .The words "in the case of a public company" omitted by Act 65 of 1960, Section 66 (w.e.f. 28-12-1960).
4 .The words "managing agent, secretaries and treasurers," omitted by Act 53 of 2000, Section 104 (w.e.f. 13-12-2000).
5 .Inserted by Act 65 of 1960, Section 66 (w.e.f. 28-12-1960).
6 .Clause (b) omitted by Act 65 of 1960, Section 66 (w.e.f. 28-12-1960).
7 .The words "public or private" omitted by Act 65 of 1960, Section 66 (w.e.f. 28-12-1960).
8 .Inserted by Act 31 of 1988, Section 32 (w.e.f. 15-6-1988).
9 .Inserted by Act 46 of 1977, Section 5 (w.e.f. 24-12-1977).
Section 221 - Duty of officer to make disclosure of payments, etc.
(1) Where any particulars or information is required to be given in the balance-sheet or profit and loss account of a company or in any document required to be annexed or attached thereto, it shall be the duty of the concerned officer of the company to furnish without delay to the company, and also to the company's auditor whenever he so requires, those particulars or that information in as full a manner as possible.
1 [***]
(3) The particulars or information referred to in sub-section (1) may, relate to payments made to any director, 2 [***]or other person by any other company, body corporate, firm or person.
(4) If any person knowingly makes default in performing the duty cast on him by the foregoing provisions of this section, he shall be punishable with imprisonment which may extend to six months, or with fine which may extend to 3 [fifty thousand rupees], or with both.
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1. Sub-section (2) omitted by Act 53 of 2000, Section 105 (w.e.f. 13-12-2000).
2. The words "managing agent, secretaries and treasurers," omitted by Act 53 of 2000, Section 105 (w.e.f. 13-12-2000).
3. Substituted by Act 53 of 2000, Section 105, for "five thousand rupees" (w.e.f. 13-12-2000).
Section 222 - Construction of references to documents annexed to accounts
References in this Act to documents annexed or required to be annexed to a company's accounts or any of them shall not include the Board's report, the auditors' report or any document attached or required to be attached to those accounts:
Provided that any information which is required by this Act to be given in the accounts, and is allowed by it to be given in a statement annexed to the accounts, may be given in the Board's report instead of in the accounts; and if any such information is so given, the report shall be annexed to the accounts and this Act shall apply in relation thereto accordingly, except that the auditors shall report thereon only insofar as it gives the said information.
Section 223 - Certain companies to publish statement in the Form in Table F in Schedule I
(1) Every company which is a limited banking company, an insurance company or a deposit, provident or benefit society, shall, before it commences business and also on the first Monday in February and the first Monday in August in every year during which it carries on business, make a statement in the Form in Table F in Schedule I, or in a Form as near thereto as circumstances admit.
(2) A copy of the statement, together with a copy of the last audited balance-sheet laid before the members of the compa n y, shall be displayed and until the display of the next following statement, shall be kept displayed, in a conspicuous place in the registered office of the company, and in every branch office or place where the business of the company is carried on.
(3) Every member and every creditor, of the company shall be entitled, on payment of a sum of eight annas, to be furnished with a copy of the statement, within seven days of such payment.
(4) If default is made in complying with any of the requirements of this section, the company, and every officer of the company who is in default, shall be punishable with fine which may extend to1[five hundred rupees] for every day during which the default continues.
(5) This section shall not apply to a life assurance company or provident insurance society to which the provisions of the Insurance Act, 1938 (4 of 1938), as to the annual statements to be made by such company or society, apply with or without modifications, if the company or society complies with those provisions.
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1.Substituted by Act 53 of 2000, Section 106, for "fifty rupees" (w.e.f. 13-12-2000).
Section 224 to 233B - Audit
Section 224 - Appointment and remuneration of auditors
1 [(1) Every company shall, at each annual general meeting, appoint an auditor or auditors to hold office from the conclusion of that meeting until the conclusion of the next annual general meeting and shall, within seven days of the appointment, give intimation thereof to every auditor so appointed 2 [***]:
3 [Provided that before any appointment or re-appointment of auditor or auditors is made by any company at any annual general meeting a written certificate shall be obtained by the company from the auditor or auditors proposed to be so appointed to the effect that the appointment or re-appointment, if made, will be in accordance with the limits specified in sub-section (1B).]
(1A) Every auditor appointed under sub-section (1), 2 [***] shall within thirty days of the receipt from the company of the intimation of his appointment, inform the Registrar in writing that he has accepted or refused to accept, the appointment.]
3 [(1B) On and from the financial year next following the commencement of the Companies (Amendment) Act, 1974, no company or its Board of directors shall appoint or re-appoint any person 4 [who is in full-time employment elsewhere] or firm as its auditor if such person or firm is, at the date of such appointment or re-appointment, holding appointment as auditor of the specified number of companies or more than the specified number of companies:
5 [Provided that in the case of a firm of auditors "specified number of companies" shall be construed as the number of companies specified for every partner of the firm who is not in full-time employment elsewhere:]
Provided further that where any partner of the firm is also a partner of any other firm or firms of auditors, the number of companies which may be taken into account, by all the firms together, in relation to such partner shall not exceed the specified number in the aggregate:
Provided also that where any partner of a firm of auditors is also holding office, in his individual capacity, as the auditor of one or more companies, the number of companies which may be taken into account in his case shall not exceed the specified number, in the aggregate.
6 [Provided also that the provisions of this sub-section shall not apply, on and after the commencement of Act, 2000, to a private company.]
(1C) For the purposes of enabling a company to comply with the provisions of subsection (1B), a person or firm holding, immediately before the commencement of the Companies (Amendment) Act, 1974, appointment as the auditor of a number of companies exceeding the specified number, shall, within sixty days from such commencement, intimate his or its unwillingness to be re-appointed as the auditor from the financial year next following such commencement, to the company or companies of which he or it is not willing to be re-appointed as the auditor; and shall simultaneously intimate to the Registrar the names of the companies of which he or it is willing to be reappointed as the auditor and forward a copy of the intimation to each of the companies referred to therein.
Explanation I. --For the purposes of sub-sections (1B) and (1C), "specified number" means, -
(a) in the case of a person or firm holding appointment as auditor of a number of companies each of which has a paid-up share capital of less than rupees twenty-five lakh, twenty such companies;
(b) in any other case twenty companies, out of which not more than ten shall be companies each of which has a paid-up share capital of rupees twenty-five lakh or more.
Explanation II. -In computing the specified number, the number of companies in respect of which or any part of which any person or firm has been appointed as an auditor, whether singly or in combination with any other person or firm, shall be taken into account.]
(2) 7 [Subject to the provisions of sub-section (1B) and section 224A at any annual general meeting,] a retiring auditor, by whatsoever authority appointed, shall be re-appointed, unless-
(a) he is, not qualified for re-appointment;
(b) he has given the company notice in writing of his unwillingness to be re-appointed;
(c) a resolution has been passed at that meeting appointing somebody instead of him or providing expressly that he shall not be re-appointed; or
(d) where notice has been given of an intended resolution to appoint some person or persons in the place of a retiring auditor, and by reason of the death, incapacity or disqualification of that person or of all those persons, as the case may be, the resolution cannot be proceeded with.
(3) Where at an annual general meeting no auditors are appointed or re-appointed, the Central Government may appoint a person to fill the vacancy.
(4) The company shall, within seven days of the Central Government's power under sub-section (3), becoming exercisable, give notice of that fact to that Government; and, if a company fails to give such notice, the company, and every officer of the company who is in default, shall be punishable with fine which my extend to 8 [five thousand rupees].
(5) The first auditor or auditors of a company shall be appointed by the Board of directors within one month of the date of registration of the company; and the auditor or auditors so appointed shall hold offices until the conclusion of the first annual general meeting:
Provided that -
(a) the company may, at a general meeting, remove any such auditor or all or any of such auditors and appoint in his or their places any other person or persons who have been nominated for appointment by any member of the company and of whose nomination notice has been given to the members of the company not less than fourteen days before the date of the meeting; and
(b) if the Board fails to exercise its powers under this sub-section, the company in general meeting may appoint the first auditor or auditors.
(6) (a) The Board may fill any casual vacancy in the office of an auditor; but while any such vacancy continues, the remaining auditor or auditors, if any, may act:
Provided where such vacancy is caused by the resignation of an auditor, the vacancy shall only be filled by the company in general meeting.
(b) Any auditor appointed in a casual vacancy shall hold office until the conclusion of the next annual general meeting.
(7) Except as provided in the proviso to sub-section (5), any auditor appointed under this section may be removed from office before the expiry of his term only by the company in general meeting, after obtaining the previous approval of the Central Government in that behalf.
(8) The remuneration of the auditors of a company -
(a) in the case of an auditor appointed by the Board or the Central Government, may be fixed by the Board or the Central Government, as the case may be; and
6 [(aa) in the case of an auditor appointed under section 619 by the Comptroller and Auditor-General of India, shall be fixed by the company in general meeting or in such manner as the company in general meeting may determine.]
(b) subject to clause (a), shall be fixed by the company in general meeting or in such manner as the company in general meeting may determine.
For the purposes of this sub-section, any sums paid by the company in respect of the auditors' expenses shall be deemed to be included in the expression "remuneration".
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1. Substituted by Act 65 of 1960, Section 67, for sub-section (1) (w.e.f. 28-12-1960).
2. The words "unless he is a retiring auditor" omitted by Act 41 of 1974, Section 23 (w.e.f. 1-2-1975).
3. Inserted by Act 41 of 1974, Section 23 (w.e.f. 1-2-1975).
4. Inserted by Act 31 of 1988, Section 33 (w.e.f. 15-6-1988).
5. Substituted by Act 31 of 1988, Section 33, for the first proviso (w.e.f. 15-6-1988).
6. Inserted by Act 53 of 2000, Section 107 (w.e.f. 13-12-2000).
7. Substituted by Act 41 of 1974, Section 23, for "At any general meeting" (w.e.f. 1-2-1975).
8. Substituted by Act 53 of 2000, Section 107, for "five hundred rupees" (w.e.f. 13-12-2000).
Section 224A - Auditor not to be appointed except with the approval of the company by special resolution in certain cases
1 [224A. Auditor not to be appointed except with the approval of the company by special resolution in certain cases
(1) In the case of a company in which not less than twenty-five per cent of the subscribed share capital is held, whether singly or in any combination, by -
(a) a public financial institution or a Government company or Central Government or any State Government, or
(b) any financial or other institution established by any Provincial or State Act in which a Stale Government holds not less than fifty-one per cent of the subscribed share capital, or
(c) a nationalised bank or an insurance company carrying on general insurance business,
the appointment or re-appointment at each annual general meeting of an auditor or auditors shall be made by a special resolution.
(2) Where any company referred to in sub-section (1) omits or fails to pass at its annual general meeting any special resolution appointing an auditor or auditors, ii shall be deemed that no auditor or auditors had been appointed by the company at its annual general meeting, and thereupon the provisions of sub-section (3) of section 224 shall become applicable in relation to such company.
Explanation. -For the purposes of this section, -
(a) "general insurance business" has the meaning assigned to it in the General Insurance (Emergency Provisions) Act, 1971 (17 of 1971);
(b) "nationalised bank" means a corresponding new bank as defined in the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (5 of 1970) 2 [or in the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980 (10 of 1980)].]
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1. Inserted by Act 41 of 1974, Section 24 (w.e.f. 1-2-1975).
2. Inserted by Act 31 of 1988, Section 34 (w.e.f. 15-6-1988).
Section 225 - Provisions as to resolutions for appointing or removing auditors
(1) Special notice shall be required for a resolution at an annual general meeting appointing as auditor a person other than a retiring auditor, or providing expressly that a retiring auditor shall not be re-appointed.
(2) On receipt of notice of such a resolution, the company shall forthwith send a copy thereof to the retiring auditor.
(3) Where notice is given of such a resolution and the retiring auditor makes with respect thereto representations in writing to the company (not exceeding a reasonable length) and requests their notification to members of the company, the company shall, unless the representations are received by it too late for it to do so, -
(a) in any notice of the resolution given to members of the company, state the fact of the representations having been made; and
(b) send a copy of the representations to every member of the company to whom notice of the meeting is sent, whether before or after the receipt of the representations by the company,
and if a copy of the representations is not sent as aforesaid because they were received too late or because of the company's default the auditor may (without prejudice to his right to be heard orally) require that the representations shall be read out at the meeting:
Provided that copies of the representations need not be sent out and the representations need not be read out at the meeting if, on the application either of the company or of any other person who claims to be aggrieved, the1[Central Government] is satisfied that the rights conferred by this sub-section are being abused to secure needless publicity for defamatory matter; and the1[Central Government] may order the company's costs on such an application to be paid it in whole or in art by the auditor, notwithstanding that he is not a party to the application.
(4) Sub-sections (2) and (3) shall apply to a resolution to remove the first auditors or any of them under sub-section (5) of section 224 or to the removal of any auditor or auditors under sub-section (7) of that section, as they apply in relation to a resolution that a retiring auditor shall not be re-appointed.
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1 . Substituted b y Act 31 of 1988, Section 67, for "Court" (w.e.f. 31-5-1991) and again substituted by Act 11 of 2003, section 27, for "Company Law Board".
Section 226 - Qualifications and disqualifications of auditors
(1) A person shall not be qualified for appointment as auditor of a company unless he is a chartered accountant within the meaning of the Chartered Accountants Act, 1949 (38 of 1949):
Provided that a firm whereof all the partners practising in India are qualified for appointment as aforesaid may be appointed by its firm name to be auditor of a company, in which case any partner so practising may act in the name of the firm.
(2) (a) Notwithstanding anything contained in sub-section (1) but subject to the provisions of any rules made under clause (b), the holder of a certificate granted under a law in force in the whole or any portion of a Part B State immediately before the commencement of the Part B States (Laws) Act, 1951 (3 of 1951)1[or of the Jammu and Kashmir (Extension of Laws) Act, 1956 (62 of 1956) as the case may be,] entitling him to act as an auditor of companies2[in the territories which, immediately before the 1st November, 1956, were comprised in that State] or any portion thereof, shall be entitled to be appointed to act as an auditor of companies registered anywhere in3[India].
(b) The Central Government may, by notification in the Official Gazette, make rules providing for the grant, renewal, suspension or cancellation of auditors' certificates to persons in4[the territories which, immediately before the 1st November, 1956, were comprised in Part B States] for the purposes of clause (a), and prescribing conditions and restrictions for such grant, renewal, suspension or cancellation.
(3) None of the following persons shall be qualified for appointment as auditor of a company -
(a) a body corporate;
(b) an officer or employee of the company;
(c) a person who is a partner, or who is in the employment, of an officer or employee of the company;
(d) a person who is indebted to the company for an amount exceeding one thousand rupees, or who has given any guarantee or provided any security in connection with the indebtedness of any third person to the company for an amount exceeding one thousand rupees.
5[(e) a person holding any security of that company after a period of one year from the date of commencement of Act 53 of 2000.
Explanation.-For the purpose of this section, "security" means an instrument which carries voting rights.]
Explanation.-References in this sub-section to an officer or employee shall be construed as not including references to an auditor.
(4) A person shall also not be qualified for appointment as auditor of a company if he is, by virtue of sub-section (3), disqualified for appointment as auditor of any other body corporate which is that company's subsidiary or holding company or a subsidiary of that company's holding company, or would be so disqualified if the body corporate were a company.
(5) If an auditor becomes subject, after his appointment, to any of the disqualifications specified in sub-sections (3) and (4), he shall be deemed to have vacated his office as such.
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1. Inserted by Act 62 of 1956, Section 2 and Schedule (w.e.f. 1-11-1956).
2. Substituted by A.O. (No. 3) 1956, for "in that State".
3. Substituted by Act 65 of 1960, Section 68, for "those territories" (w.e.f. 28-12-1960).
4. Substituted by the A.O. (No. 3) 1956, for "Part B States".
5. Substituted by Act 53 of 2000, Section 108, for clauses (e) and (f) (w.e.f. 13-12-2000).
Section 227 - Powers and duties of auditors
(1) Every auditor of a company shall have a right of access at all times to the books and accounts and vouchers of the company, whether kept at the head office of the company or elsewhere, and shall be entitled to require from the officers of the company such information and explanations as the auditor may think necessary for the performance of his duties as auditor.
1 [1A) Without prejudice to the provisions of sub-section (1), the auditor shall inquire -
(a) whether loans and advances made by the company on the basis of security have been properly secured and whether the terms on which they have been made are not prejudicial to the interest of the company or its members;
(b) whether transactions of the company which are represented merely by book entries are not prejudicial to the interests of the company;
(c) where the company is not an investment company within the meaning of section 372 or a banking company, whether so much of the assets of the company as consist of shares, debentures and other securities have been sold at a price less than that at which they were purchased by the company;
(d) whether loans and advances made by the company have been shown as deposits;
(e) whether personal expenses have been charged to revenue account;
(f) where it is stated in the books and papers of the company that any shares have been allotted for cash, whether cash has actually been received in respect of such allotment, and if no cash has actually been so received, whether the position as stated in the account books and the balance-sheet is correct, regular and not misleading.]
(2) The auditor shall make a report to the members of the company on the accounts examined by him, and on every balance-sheet and profit and loss account and on every other document declared by this Act to be pan of or annexed to the balance-sheet or profit and loss account which are laid before the company in general meeting during his tenure of office, and the report shall state whether, in his opinion and to the best of his information and according to the explanations given to him, the said accounts give the information required by this Act in the manner so required and give a true and fair view -
(i) in the case of the balance-sheet, of the state of the company's affairs as at the end of its financial years; and
(ii) in the case of the profit and loss account, of the profit or loss for its financial year.
(3) The auditor's report shall also state -
(a) whether he has obtained all the information and explanations which to the best of his knowledge and belief were necessary for the purposes of his audit;
(b) whether, in his opinion, proper books of account as required by law have been kept by the company so far as appears from his examination of those books, and proper returns adequate for the purposes of his audit have been received from branches not visited by him;
2 [(bb) whether the report on the accounts of any branch office audited under section 228 by a person other than the company's auditor has been awarded to him as enquired by clause (c) of sub-section (3) of that section and how he has dealt with the same in preparing the auditor's report;]
(c) whether the company's balance-sheet and profit and loss account dealt with by the report are in agreement with the books of account and returns;
3 [(d) whether, in his opinion, the profit and loss account and balance-sheet comply with the accounting standards referred to in sub-section (3C) of section 211;]
4 [(e) in thick type or in italics the observations or comments of the auditors which have any adverse effect on the functioning of the company;
(f) whether any director is disqualified from being appointed as director under clause (g) of sub-section (1) of section 274.]
5 [(g) Whether the cess payable under Section 441A has been paid and if not, the details of amount of cess not so paid]
(4) Where any of the matters referred to in clauses (i) and (ii) of sub-section (2) or in clauses (a), (b), 2 [(bb)] 6 [(c) and (d)] of sub-section (3) is answered in the negative or with a qualification, the auditor's report shall state the reason for the answer.
1 [(4A) The Central Government may, by general or special order, direct that, in the case of such class or description of companies as may be specified in the order, the auditor's report shall also include a statement on such matters as may be specified therein:
Provided that before making any such order the Central Government may consult the Institute of Chartered Accountants of India constituted under the Chartered Accountants Act, 1949 (38 of 1949), in regard to the class or description of companies and other ancillary matters proposed to be specified therein unless the Government decides that such consultation is not necessary or expedient in the circumstances of the case.]
7 [(5) The accounts of a company shall not be deemed as not having been, and the auditors report shall not state that those accounts have not been properly drawn up on the ground merely that the company had not disclosed certain matters if-
(a) those matters are such as the company is not required to disclose by virtue of any provisions contained in this or any other Act, and
(b) those provisions are specified in the balance-sheet and profit and loss account of the company.]
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1. Inserted by Act 31 of 1965, Section 1 (w.e.f. 15-10-1965).
2. Inserted by Act 65 of 1960, Section 69 (w.e.f. 28-12-1960).
3. Inserted by Act 21 of 1999, Section 16 (w.r.e.f. 31-10-1998).
4. Inserted by Act 53 of 2000, Section 109 (w.e.f. 13-12-2000).
5. Inserted by Act 11 of 2003, Section 28.
6. Substituted by Act 21 of 1999, Section 16, for "and (c)" (w.r.e.f. 31-10-1988).
7. Substituted by Act 65 of 1960, Section 69, for sub-section (5) (w.e.f. 28-12-1960).
Section 228 - Audit of accounts of branch office of company
(1) Where a company has a branch office, the accounts of that office shall, 1 [be audited by the company's auditor appointed under section 224 or] by a person qualified for appointment as auditor of the company under section 226, or where the branch office is situate in a country outside India, either 2 [by the company's auditor or a person qualified as aforesaid] or by an accountant duly qualified to act as an auditor of the accounts of the branch office in accordance with the laws of that country.
(2) Where the accounts of any branch office are 3 [audited by a person other than the company's auditor] the company's auditor-
(a) shall be entitled to visit the branch office, if he deems it necessary to do so for the performance of has duties as auditor, and
(b) shall have a right of access at all times to the books and accounts and vouchers of the company maintained at the branch office:
Provided that in the case of a banking company having a branch office outside India, it shall be sufficient if the auditor is allowed access to such copies of, and extracts from the books and accounts of the branch as have been transmitted to the principal office of the company in India.
4 [(3) (a) Where a company in general meeting decides to have the accounts of a branch office audited otherwise than by the company's auditor, the company in that meeting shall for the audit of those accounts appoint a person qualified for appointment as auditor of the company under section 226, or where the branch office is situate in a country outside India, a person who is either qualified as aforesaid or an accountant duly qualified to act as an auditor of the accounts of the branch office in accordance with the laws of that country, or authorise the Board of directors to appoint such a person in consultation with the company's auditor;
(b) the person so appointed (hereafter in this section referred to as the branch auditor) shall have the same powers and duties in respect of audit of the accounts of the branch office as the company's auditor has in respect of the same;
(c) the branch auditor shall prepare a report on the accounts of the branch office examined by him and forward the same to the company's auditor who shall in preparing the auditor's report, deal with the same in such manner as he considers necessary;
(d) the branch auditor shall receive such remuneration and shall hold his appointment subject to such terms and conditions as may be fixed either by the company in general meeting or by the Board of directors if so authorised by the company in general meeting.
(4) Notwithstanding anything contained in the foregoing provisions of this section, the Central Government 5 [may make rules providing for the exemption of] any branch office from the provisions of this section to the extent specified in the rules and in making such rules the Central Government shall have regard to all or any of the following matters, namely: -
(a) the arrangement made by the company for the audit of accounts of the branch office by a person otherwise qualified for appointment as branch auditor even though such person may be an officer or employee of the company;
(b) the nature and quantum of activity carried on at the branch office during a period of three years immediately preceding the date on which the branch office is exempted from the provisions of this section;
(c) the availability at a reasonable cost of a branch auditor for the audit of accounts of the branch office;
(d) any other matter which in the opinion of the Central Government justifies the grant of exemption to the branch office from the provisions of this section.]
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1. Substituted by Act 65 of 1960, Section 70, for "unless the company in general meeting decides otherwise, be audited" (w.e.f. 28-12-1960).
2. Substituted by Act 65 of 1960, Section 70, for "by a person qualified as aforesaid" (w.e.f. 28-12-1960).
3. Substituted by Act 65 of 1960, Section 70, for "not so audited" (w.e.f. 28-12-1960).
4. Inserted by Act 65 of 1960, Section 70 (w.e.f. 28-12-1960).
5. Substituted by Act 31 of 1965, Section 22, for "may, by rules made in this behalf, exempt" (w.e.f. 15-10-1965).
Section 229 - Signature of audit report, etc.
Only the person appointed as auditor of the company, or where a firm is so appointed in pursuance of the proviso to sub-section (1) of section 226, only a partner in the firm practising in India, may sign the auditor's report, or sign or authenticate any other document of the company required by law to be signed or authenticated by the auditor.
Section 230 - Reading and inspection of auditor's report
The auditor's report shall be read before the company in general meeting and shall be open to inspection by any member of the company.
Section 231 - Right of auditor to attend general meeting
All notices of any other communications relating to, any general meeting of a company which any member of the company is entitled to have sent to him shall also be forwarded to the auditor of the company; and the auditor shall be entitled to attend any general meeting and to be heard at any general meeting which he attends on any part of the business which concerns him as auditor.
Section 232 - Penalty for non-compliance with sections 225 to 231
If default is made by a company in complying with any of the provisions contained in sections 225 to 231, the company, and every officer of the company who is in default, shall be punishable with fine which may extend to1[five thousand rupees].
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1.Substituted by Act 53 of 2000, Section 110, for "five hundred rupees" (w.e.f. 13-12-2000 ).
Section 233 - Penalty for non-compliance by auditor with sections 227 and 229
If any auditor's report is made, or any document of the company is signed or authenticated, otherwise than in conformity with the requirements of sections 227 and 229, the auditor concerned, and the person, if any, other than the auditor who signs the report or signs or authenticates the document, shall, if the default is wilful, be punishable with fine which may extend to1[ten thousand rupees].
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1 . Substituted by Act 53 of 2000, Section 111, for "one thousand rupees" (w.e.f. 13-12-2000).
Section 233A - Power of Central Government to direct special audit in certain cases
1 [233A. Power of Central Government to direct special audit in certain cases
(1) Where the Central Government is of the opinion-
(a) that the affairs of any company are not being managed in accordance with sound business principles or prudent commercial practices; or
(b) that any company is being managed in a manner likely to cause serious injury or damage to the interests of the trade, industry or business to which it pertains; or
(c) that the financial position of any company is such as to endanger its solvency;
the Central Government may at any time by order direct that a special audit of the company's accounts for such period or periods as may be specified in the order, shall be conducted and may by the same or a different order appoint either a chartered accountant as defined in clause (b) of sub-section (1) of section 2 of the Chartered Accountants Act, 1949 (38 of 1949) (whether or not such chartered accountant is a chartered accountant in practice within the meaning of that Act), or the company's auditor himself to conduct such special audit.
(2) The chartered accountant or the company's auditor appointed under sub-section (1) to conduct a special audit as aforesaid is hereafter in this section referred to as the special auditor.
(3) The special auditor shall have the same powers and duties in relation to the special audit as an auditor of a company has under section 227:
Provided that the special auditor shall, instead of making his report to the members of the company, make the same to the Central Government.
(4) The report of the special auditor shall, as far as may be, include all the matters required to be included in an auditor's report under section 227 and, if the Central Government so directs, shall also include a statement on any other matter which may be referred to him by that Government.
(5) The Central Government may by order direct any person specified in the order to furnish to the special auditor within such time as may be specified therein such information or additional information as may be required by the special auditor in connection with the special audit; and on failure to comply with such order such person shall be punishable with fine which may extend to 2 [five thousand rupees].
(6) On receipt of the report of the special auditor, the Central Government may take such action on the report as it considers necessary in accordance with the provisions of this Act or any other law for the time being in force:
Provided that if the Central Government does not take any action on the report within four months from the date of its receipt, that Government shall send to the company either a copy of, or relevant extract from, the report with its comments thereon and require the company either to circulate that copy or those extracts to the members or to have such copy or extracts read before the company at its next general meeting.
(7) The expenses of, and incidental to, any special audit under this section (including the remuneration of the special auditor) shall be determined by the Central Government (which determination shall be final) and paid by the company and in default of such payment shall be recoverable from the company as an arrear of revenue.]
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1. Inserted by Act 65 of 1960, Section 71 (w.e.f. 28-12-1960).
2. Substituted by Act 53 of 2000, Section 112, for "five hundred rupees" (w.e.f. 13-12-2000).
Section 233B - Audit of cost accounts in certain cases
1 [233B. Audit of cost accounts in certain cases
(1) Where in the opinion of the Central Government it is necessary so to do in relation to any company required under clause (d) of sub-section (1) of section 209 to include in its books of account the particulars referred to therein, the Central Government may, by order, direct that an audit of cost accounts of the company shall be conducted in such manner as may be specified in the order by an auditor 2 [who shall be a cost accountant within the meaning of the Cost and Work Accountants Act, 1959 (23 of 1959):
Provided that if the Central Government is of opinion that sufficient number of cost accountants within the meaning of the Cost and Works Accountants Act, 1959 (23 of 1959), are not available for conducing the audit of the cost accounts of companies generally, that Government may, by notification in the Official Gazette, direct that, for such period as may be specified in the said notification, such chartered accountant within the meaning of the Chartered Accountants Act, 1949 (33 of 1949), as possesses the prescribed qualifications, may also conduct the audit of the cost accounts of companies, and thereupon a chartered accountant possessing the prescribed qualifications may be appointed to audit the cost accounts of the company.]
3 [(2) The auditor under this section shall be appointed by the Board of directors of the company in accordance with the provisions of sub-section (1B) of section 224 and with the previous approval of the Central Government:
Provided that before the appointment of an auditor is made by the Board, a written certificate shall be obtained by the Board from the auditor proposed to be so appointed to the effect that the appointment, if made, will be in accordance with the provisions of sub-section (1B) of section 224.]
(3) An audit conducted by an auditor under this section shall be in addition to an audit conducted by an auditor appointed under section 224.
(4) An auditor shall have the same powers and duties in relation to an audit conducted by him under this section as an auditor of a company has under sub-section (1) of section 227 and such auditor shall make his report to the 4 [Central Government] in such form and within such time as may be prescribed and shall also at the same time forward a copy of the report to the company.]
5 [(5) (a) A person referred to in sub-section (3) or sub-section (4) of section 226 shall not be appointed or re-appointed for conducting the audit of the cost accounts of a company.
(b) A person appointed, under section 224, as an auditor of a company, shall not be appointed or re-appointed for conducting the audit of the cost accounts of that company.
(c) If a person, appointed for conducting the audit of cost accounts of a company, becomes subject, after his appointment, to any of the disqualifications specified in clause (a) or clause (b) of this sub-section, he shall, on and from the date on which he becomes so subject, cease to conduct the audit of the cost accounts of the company.
(6) Upon receipt of an order under sub-section (1) it shall be the duty of the company to give all facilities and assistance to the person appointed for conducting the audit of the cost accounts of the company.
(7) The company shall, within thirty days from the date of receipt of a copy of the report referred to in sub-section (4) furnish the Central Government with full information and explanations on every reservation or qualification contained in such report.
(8) If, after considering the report referred to in sub-section (4) and the information and explanations furnished by the company under sub-section (7), the Central Government is of opinion that any further information or explanation is necessary, that Government may call for such further information and explanation and thereupon the company shall furnish the same within such time as may be specified by that Government.
(9) On receipt of the report referred to in sub-section (4) and the informations and explanations furnished by the company under sub-section (7) and sub-section (8), the Central Government may take such action on the report, in accordance with the provisions of this Act or any other law for the time being in force, as it may consider necessary.
(10) The Central Government may direct the company whose cost accounts have been audited under this section to circulate to its members, along with the notice of the annual general meeting to be held for the first time after the submission of such report the whole or such portion of the said report as it may specify in this behalf.
(11) If default is made in complying with the provisions of this section, the company shall be liable to be punished with fine which may extend to five thousand rupees, and every officer of the company who is in default shall be liable to be punished with imprisonment for a term which may extend to three years, or with fine which may extend to 6 [fifty thousand rupees], or with both.]
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1. Inserted by Act 31 of 1965, Section 23 (w.e.f. 15-10-1965).
2. Substituted by Act 41 of 1974, Section 25, for certain words (w.e.f. 1-2-1975).
3. Sub-section (2) Substituted by Act 41 of 1974, Section 25 (w.e.f. 1-2-1975) and again substituted by Act 31 of 1988, section 35 (w.e.f. 15-6-1988).
4. Substituted by Act 41 of 1974, Section 25, for "Company Law Board" (w.e.f. 1-2-1975).
5. Inserted by Act 41 of 1974, Section 25 (w.e.f. 1-2-1975).
6. Substituted by Act 53 of 2000, Section 113, for "five thousand rupees" (w.e.f. 13-12-2000).
Section 234 to 234A - Power of registrar to call for information, etc.
Section 234 - Power of Registrar to call for information or explanation
(1) Where, on perusing any document which a company is required to submit to him under this Act, the Registrar is of opinion that any information or explanation is necessary 1 [with respect to any matter to which such document] purports to relate, he may, by a written order call on the company submitting the document to furnish in writing such information or explanation, within such time as he may specify in the order.
(2) On receipt by the company of an order under sub-section (1), it shall be the duty of the company, and of all persons who are officers of the company, to furnish such information or explanation to the best of their power.
(3) On receipt of a copy of an order under sub-section (1), it shall also be the duty of every person who has been an officer of the company to furnish such information or explanation to the best of his power.
2 [(3A) If no information or explanation is furnished within the time specified or if the information or explanation furnish is, in the opinion of the Registrar, inadequate, the Registrar may by another written order call on the company to produce before him for his inspection such books and papers as he considers necessary within such time as he may specify in the order; and it shall be the duty of the company, and of all persons who are officers of the company, to produce such books and papers.]
(4) If the company, or any such person as is referred to in sub-section (2) or (3), refuses or neglects to furnish any such information or explanation 2 [or if the company or any such person as is referred to in sub-section (3A) refuses or neglects to produce any such books and papers], -
3 [(a) the company and each such person shall be punishable with fine which may extend to 4 [five thousand rupees] and in the case of a continuing offence, with an additional fine which may extend to 5 [five hundred rupees] for every day after the first during which the offence continues; and
(b) the court trying me offence may, on application of the Registrar and after notice to the company, make an order on the company for production before the Registrar of such books and papers as in the opinion of the court, may reasonably be required by the Registrar for the purpose referred to in subsection (1).]
6 [(5) On receipt of any writing containing the information or explanation referred to in sub-section (1), or of any book or paper produced whether in pursuance of an order of the Registrar under sub-section (3A) or of an order of the court under sub-section (4), the Registrar may annex that writing, book or paper, or where that book or paper is required by the company, any copy or extract thereof to the document referred to in sub-section (1); and any writing or any book or paper or copy or extract thereof so annexed shall be subject to the like provisions as to inspection, the taking of extracts and the furnishing of copies, as that document is subject.]
7 [(6) If such information or explanation is not furnished within the specified time or if after perusal of such information or explanation or of the books and papers produced whether in pursuance of an order of the Registrar under sub-section (3A) or of an order of the court under sub-section (4), the Registrar is of opinion that the document referred to in sub-section (1), together with such information or explanation or such books and papers discloses an unsatisfactory state of affairs or does not disclose a full and fair statement of any matter to which the document purports to relate, the Registrar shall report in writing the circumstances of the case to the Central Government.]
(7) If it is represented to the Registrar on materials placed before him by any contributory or creditor or any other person interested that the business of a company is being carried on in fraud of its creditors or of persons dealing with the company or otherwise for a fraudulent or unlawful purpose, he may, after giving the company an opportunity of being heard by a written order, call on the company to furnish in writing any information or explanation on matters specified in the order, within such time as he may specify therein; and the provisions of sub-sections (2), (3), 2 [(3A)], and (4) and (6) of this section shall apply to such order.
If upon inquiry the Registrar is satisfied that any representation on which he took action under this sub-section was frivolous or vexatious, he shall disclose the identity of his information to the company.
(8) The provisions of this section shall apply mutatis mutandis to documents which a liquidator, or a foreign company within the meaning of section 591, is required to file under this Act.
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1. Substituted by Act 65 of 1960, Section 72, for certain words (w.e.f. 28-12-1960).
2. Inserted by Act 65 of 1960, Section 72 (w.e.f. 28-12-1960).
3. Substituted by Act 65 of 1960, Section 72, for clause (a) and (b) (w.e.f. 28-12-1960).
4. Substituted by Act 53 of 2000, Section 114, for "five hundred rupees" (w.e.f. 13-12-2000).
5. Substituted by Act 53 of 2000, Section 114, for "fifty rupees" (w.e.f. 13-12-2000).
6. Substituted by Act 65 of 1960, Section 72, for sub-section (5) (w.e.f. 28-12-1960).
7. Substituted by Act 65 of 1960, Section 72, for sub-section (6) (w.e.f. 28-12-1960).
Section 234A - Seizure of documents by Registrar
1 [234A. Seizure of documents by Registrar
(1) Where, upon information in his possession or otherwise, the Registrar has reasonable ground to believe that books and papers of, or relating to, any company or other body corporate, 2 [***] or managing director or manager of such company or other body corporate, 3 [***] may be destroyed, mutilated, altered, falsified or secreted, the Registrar may make an application 4 [***] to the Magistrate of the First Class or, as the case may be, the Presidency Magistrate having jurisdiction for an order for the seizure of such books and papers.
(2) After considering the application and hearing the Registrar, if necessary, the 5 [Magistrate] may, by order, authorise the Registrar-
(a) to enter, with such assistance as may be required, the place or places where such books and papers are kept;
(b) to search that place in those places in the manner specified in the order; and
(c) to seize such books and papers as he considers necessary.
(3) The, Registrar shall return the books and papers seized under this section as soon as may be, and in any case not later than the thirtieth day, after such seizure, to the company or the other body corporate or, as the case may be, to 3 [***] the associate of such managing agent or secretaries and treasurers or the managing director or the manager or any other person, from whose custody or power they were seized an inform the 5 [Magistrate] of such return:
Provided that the Registrar may, before returning such books and papers as aforesaid, take copies of, or extracts from them 6 [or place identification marks on them or any part thereof] or deal with the same in such other manner as he considers necessary.
(4) Save as otherwise provided in this section, every search 6 [or seizure] made under this section shall be carried out in accordance with the provisions of the Code of Criminal Procedure, 1898 (5 of 1898)7 relating to searches 6 [or seizures] made under that Code.]
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1. Inserted by Act 65 of 1960, Section 73 (w.e.f. 28-12-1960).
2. The words "any managing agent or secretaries and treasurers or" omitted by Act 53 of 2000, Section 115 (w.e.f. 13-12-2000).
3. Certain words omitted by Act 53 of 2000, Section 115 (w.e.f. 13-12-2000).
4. The words "to the Tribunal or" Inserted by Act 31 of 1965, Section 24 (w.e.f. 15-10-1965) and omitted by Act 17 of 1967, Section 4 and Schedule (w.e.f. 1-7-1967).
5. Substituted by Act 17 of 1967, Section 4 and Schedule, for "Tribunal or Magistrate, as the case may be" (w.e.f. 1-7-1967).
6. Inserted by Act 31 of 1965, Section 24 (w.e.f. 15-10-1965).
7. See now the Code of Criminal Procedure, 1973 (2 of 1974).
Section 235 to 251 - Investigation
Section 235 - Investigation of affairs of a company
1 [235. Investigation of affairs of a company
(1) The Central Government may, where a report has been made by the Registrar under sub-section (6) of section 234, or under sub-section (7) of that section, read with sub-section (6) thereof, appoint one or more competent persons as inspectors to investigate the affairs of a company and to report thereon in such manner as the Central Government may direct.
(2) Where -
(a) in the case of a company having a share capital, an application has been received from not less then two hundred members or from members holding not less than one-tenth of the total voting power therein, and
(b) in the case of a company having no share capital, an application has been received from not less than one-fifth of the persons on the company's register of members,
the 2 [Tribunal] may, after giving the parties an opportunity of being heard, by order, declare mat the affairs of the company ought to be investigated by an inspector or inspectors, and on such a declaration being made, the Central Government shall appoint one or more competent persons as inspectors to investigate the affairs of the company and to report thereon in such manner as the Central Government may direct.]
___________________
1. Substituted by Act 31 of 1988, Section 36, for section 235 (w.e.f. 31-5-1991).
2. Substituted by Act 11 of 2003, Section 29, for "Company Law Board".
Section 236 - Application by members to be supported by evidence and power to call for security
An application by members of a company 1 [under sub-section (2) of section 235] shall be supported by such evidence as the 2 [3 [Tribunal] may require] for the purpose of showing that the applicants have good reason for requiring the investigation; and the Central Government may, before appointing an inspector, require the applicants to give security, for such amount not exceeding one thousand rupees as it may think fit, for payment of the costs of the investigation.
___________________
1. Substituted by Act 31 of 1988, Section 37, for "under clause (a) or (b) of section 235" (w.e.f. 31-5-1991).
2. Substituted by Act 31 of 1988, Section 37, for "Central Government may require" (w.e.f. 31-5-1991).
3. Substituted by Act 11 of 2003, Section 29, for "Company Law Board".
Section 237 - Investigation of company's affairs in other cases
Without prejudice to its powers under section 235, the Central Government -
(a) shall appoint one or more competent persons as inspectors to investigate the affairs of a company and to report thereon in such manner as the Central Government may direct, if -
(i) the company, by special resolution; or
(ii) the Court, by order,
declares that the affairs of the company ought to be investigated by an inspection appointed by the Central Government; and
(b) may do so1[ in its opinion or in the opinion of the Tribunal ] there are circumstances suggesting -
(i) that the business of the company is being conducted with intent to defraud its creditors, members or any other persons, or otherwise for a fraudulent or unlawful purpose, or in a manner oppressive of any of its members, or that the company was formed for any fraudulent or unlawful purpose;
(ii) that persons concerned in the formation of the company or the management of its affairs have in connection therewith been guilty of fraud, misfeasance or other misconduct towards the company or towards any of its members; or
(iii) that the members of the company have not been given all the information with respect to its affairs which they might reasonably expect, including information relating to the calculation of the commission payable to a managing or other director,2[***] or the manager, of the company.
___________________
1 . Substituted by Act 11 of 2003, Section 30, for "if in the opinion of the Company Law Board".
2 . The words "the managing agent the secretaries, and treasurers" omitted by Act 31 of 1988, Section 38 (w.e.f. 31-5-1991).
Section 238 - Firm, body corporate or association not to be appointed as inspector
No firm, body corporate or other association shall be appointed as an inspector under section 235 or 237.
Section 239 - Power of inspectors to carry investigation into affairs of related companies, or of managing agent or associate etc
1[239. Power or inspectors to carry investigation into affairs of related companies or of managing agent or associate etc.
(1) If an inspector appointed under section 235 or 237 to investigate the affairs of a company thinks it necessary for the purposes of his investigation to investigate also the affairs of -
(a) any other body corporate which is, or has at any relevant time been the company's subsidiary or holding company, or a subsidiary of its holding company, or a holding company of its subsidiary;
2[(b) any other body corporate which is, or has at any relevant time been managed by any person as managing director or as manager, who is, or was, at the relevant time, the managing director or the manager of the company; or]
(c) any other body corporate which is, or has at any relevant time been, managed by the company or whose Board of directors comprises of nominees of the company or is accustomed to act in accordance with the directors or instructions of-
(i) the company, or
(ii) any of the directors of the company, or
(iii) any company of whose directorships is held by the employees or nominees of those having the control and management of the first-mentioned company; or
3[(d) any person who is or has at any relevant time been the company's managing director or manager,]
4[the inspector shall, subject to the provisions of sub-section (2) have power so to do and shall report on the affairs of the other body corporate or of the managing director, or manager, so far as he thinks that the results of his investigation thereof are relevant to the investigation of the affairs of the first-mentioned company.]
(2) In the case of any body corporate or person referred to in clause (b) (ii), (b) (iii), (c) or (d) of sub-section (1), the inspector shall not exercise his power of investigating into, and reporting on, its or his affairs without first having obtained the prior approval of the Central Government thereto:
Provided that before according approval under this sub-section, the Central Government shall give the body corporate or person a reasonable opportunity to show cause why such approval should not be accorded.]
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1 . Substituted by Act 65 of 1960, Section 74, for section 239 (w.e.f. 28-12-1960).
2 . Substituted by Act 53 of 2000, Section 116, for clause (b) (w.e.f. 13-12-2000).
3 . Substituted by Act 53 of 2000, Section 116, for clause (d) (w.e.f. 13-12-2000).
4 . Substituted by Act 53 of 2000, Section 116, for certain words (w.e.f. 13-12-2000).
Section 240 - Production of documents and evidence
1 [(1) It shall be the duly of all officers and other employees and agents of the company, and where the affairs of any other body corporate are investigated by virtue of section 239, of all officers and other employees and agents of such body corporate-
(a) to preserve and to produce to an inspector or any person authorised by him in this behalf with the previous approval of the Central Government, all books and papers of, or relating to, the company or, as the case may be, or of relating to the other body corporate, which are in their custody or power; and
(b) otherwise to give to the inspector all assistance in connection with the investigation which they are reasonably able to give.]
2 [(1A) The inspector may, with the previous approval of the Central Government, require any body corporate [other than a body corporate referred to in sub-section (1)] to furnish such information to, or produce such books and papers before him or any person authorised by him in this behalf 3 [with the previous approval of that Government] as he may consider necessary if the furnishing of such information or the production of such books and papers is relevant or necessary for the purposes of his investigation.
(1B) The inspector may keep in his custody any books and papers produced under sub-section (1) or sub-section (1A) for six months and thereafter shall return the same to the company, body corporate, firm or individual by whom or on whose behalf the books and papers are produced:
Provided that the inspector may call for the books and papers if they are needed again:
Provided further that if certified copies of the books and papers produced under sub-section (1A) are furnished to the inspector, he shall return those books and papers to the body corporate concerned.]
4 [(2) An inspector may examine on oath -
(a) any of the persons referred to in sub-section (1); and
(b) with the previous approval of the Central Government, any other person,
in relation to the affairs of the company, 5 [other body corporate] and may administer an oath accordingly and for that purpose may require any of those persons to appear before him personally.
(3) If any person fails without reasonable cause or refuses -
(a) to produce to an inspector or any person authorised by him in this behalf with the previous approval of the Central Government any book or paper which is his duty under sub-section (1) or sub-section (1A) to produce; or
(b) to furnish any information which it is his duty under sub-section (1A) to furnish; or
(c) to appear before the inspector personally when required to do so under sub-section (2) or to answer any question which is put to him by the inspector in pursuance of that sub-section; or
(d) to sign the notes of any examination referred to in sub-section (5),
he shall be punishable with imprisonment for a term which may extend to six months, or with fine which may extend to 6 [twenty thousand rupees], or with both, and also with a further fine which may extend to 7 [two thousand rupees] for every day after the first during which the failure or refusal continues.]
8 [***]
(5) Notes of any examination under sub-section (2) 9 [***] shall be taken down in writing and shall be read over to or by, and signed by, the person examined, and may thereafter be used in evidence against him.
(6) In this section -
(a) the expression "officers", in relation to any company or body corporate, includes any trustee for the debenture-holders of such company or body corporate;
(b) the expression "agent", in relation to any company, body corporate or person, means any one acting or purporting to act for or on behalf of such company, body corporate or person, and includes the bankers and legal advisers of, and persons employed as auditors by, such company, body corporate or person; and
(c) any reference to 10 [officers and other employees], agents or partners shall be construed as a reference to past as welt as present 10 [officers and other employees], agents or partners, as the case may be.
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1. Substituted by Act 53 of 2000, Section 117, for sub-section (1) (w.e.f. 13-12-2000).
2. Inserted by Act 31 of 1965, Section 25 (w.e.f. 15-10-1965).
3. Inserted by Act 34 of 1966, Section 2 (w.e.f. 1-4-1967).
4. Substituted by Act 31 of 1965, Section 25, for sub-sections (2), (3), (3A) and (4) (w.e.f. 15-10-1965).
5. Substituted by Act 53 of 2000, Section 117, for "other body corporate, managing agent, secretaries and treasurers or associate," (w.e.f. 13-12-2000).
6. Substituted by Act 53 of 2000, Section 117, for "two thousand rupees" (w.e.f. 13-12-2000).
7. Substituted by Act 53 of 2000, Section 117, "two hundred rupees" (w.e.f. 13-12-2000).
8. Sub-section (4) omitted by Act 31 of 1965, section 25, as a result of substitution of sub-section (2), (3), (3A) and (4) (w.e.f. 15-10-1965).
9. The word, brackets and figure "or (4)" omitted by Act 31 of 1965, Section 25 (w.e.f. 15-10-1965).
10. Substituted by Act 65 of 1960, Section 75, for "officers" (w.e.f. 28-12-1960).
Section 240A - Seizure of documents by inspector
1 [240A. Seizure of documents by inspector
(1) Where in the course of investigation under section 235 or section 237 or section 239 or section 247, the inspector has reasonable ground to believe that the books and papers of, or relating to, any company or other body corporate 2 [***] or managing director or manager of such company or other body corporate, 3 [***] may be destroyed, mutilated, altered, falsified or secreted, the inspector may make an application 4 [***] to the Magistrate of the First Class or, as the case may be, the Presidency Magistrate, having jurisdiction for an order for the seizure of such books and papers.
(2) After considering the application and hearing the inspector, if necessary, the 5 [Magistrate] may by order authorise the inspector-
(a) to enter, with such assistance, as may be required, the place or places where such books and papers are kept;
(b) to search that place or those places in the manner specified in the order; and
(c) to seize books and papers he considers necessary for the purposes of his investigation.
(3) The inspector shall keep in his custody the books and papers seized under this section for such period not later than the conclusion of the investigation as he considers necessary and thereafter shall return the same to the company or the other body corporate, 6 [***] or the managing director or the manager or any other person, from whose custody or power they were seized and inform the 5 [Magistrate] of such return:
7 [Provided that the inspector may, before returning such books and papers as aforesaid, place identification marks on them or any part thereof.]
(4) Save as otherwise provided in this section, every search 7 [or seizure] made under this section shall be carried out in accordance with the provisions of the Code of Criminal Procedure, 1898 (5 of 1898)8 to searches 7 [or seizures] made under that Code.]
___________________
1. Inserted by Act 65 of 1960, Section 76 (w.e.f. 28-12-1960).
2. The word "any managing agent or secretaries and treasurers or" omitted by Act 53 of 2000, Section 118 (w.e.f. 13-12-2000).
3. The words "or any associate of such managing agent or secretaries and treasurers" omitted by Act 53 of 2000, Section 118 (w.e.f. 13-12-2000).
4. The words "to the Tribunal or" Inserted by Act 31 of 1965, Section 26 (w.e.f. 15-10-1965) and omitted by Act 17 of 1967, Section 4 and Schedule (w.e.f. 1-7-1967).
5. Substituted by Act 17 of 1967, Section 4 and Schedule, for "Tribunal or Magistrate, as the case may be," (w.e.f. 1-7-1967).
6. Certain words omitted by Act 53 of 2000, Section 118 (w.e.f. 13-12-2000).
7. Inserted by Act 31 of 1965, Section 26 (w.e.f. 15-10-1965).
8. See now the Code of Criminal Procedure, 1973 (2 of 1974).
Section 241 - Inspectors' report
(1) The inspectors may, and if so directed by the Central Government shall, make interim reports to that Government, and on the conclusion of the investigation shall make a final report to the Central Government.
Any such report shall be written or printed, as the Central Government may direct.
(2) The Central Government -
(a) shall forward a copy of any report 1 [(other than an interim report)] made by the inspectors to the company at its registered office, and also to any body corporate 2 [***] dealt with in the report by virtue of section 239;
(b) may, if it thinks fit, furnish a copy thereof, on request and on payment of the prescribed fee, to any person -
3 [(i) who is a member of the company or other body corporate deal with in the report by virtue of section 239; or]
4 [***]
(iii) whose interests as a creditor of the company, other body corporate, 2 [***]aforesaid appear to the Central government to be affected;
(c) shall, where the inspectors are appointed 5 [in pursuance of the provisions of sub-section (2)] of section 235, furnish, at the request of the applicants for the investigation, a copy of the report to them;
(d) shall, where the inspectors are appointed under section 237 in pursuance of an order of the court, furnish a copy of the report to the Court; 6 [***]
7 [(dd) shall, where the inspectors are appointed in pursuance of the provisions of sub-section (2) of section 235 furnish a copy of the report to the 8 [Tribunal]; and]
(e) may also cause report to be published.
___________________
1. Inserted by Act 31 of 1965, Section 27 (w.e.f. 15-10-1965).
2. The words ", managing agent, secretaries and treasurers or associate" omitted by Act 53 of 2000, Section 119 (w.e.f. 13-12-2000).
3. Substituted by Act 53 of 2000, Section 119, for sub-clause (i) (w.e.f. 13-12-2000).
4. Sub-clause (ii) omitted by Act 53 of 2000, Section 119 (w.e.f. 13-12-2000).
5. Substituted by Act 31 of 1988, Section 39, for "under clause (a) or (b)" (w.e.f. 31-5-1991).
6. The word "and" omitted by Act 31 o f1988, Section 39 (w.e.f. 31-5-1991).
7. Inserted by Act 31 of 1988, Section 39 (w.e.f. 31-5-1991).
8. Substituted by Act 11 of 2003, Section 31, for "Company Law Board".
Section 242 - Prosecution
(1) If, from any report made under section 241, it appears to the Central Government that any person has, in relation to the company or in relation to any other body corporate,1[***] whose affairs have been investigated by virtue of section 239, been guilty of any offence for which he is criminally liable, the Central Government may, after taking such legal advice as it thinks fit, prosecute such person for the offence and it shall be the duty of 92[all officers and other employees] and3[agents of the company, or body corporate,] (other than the accused in the proceedings), to give the Central Government all assistance in connection with the prosecution which they are reasonably able to give.
(2) Sub-section (6) of section 240 shall apply for the purposes of this section, as it applies for the purposes of that section.
___________________
1 . Certain words omitted by Act 53 of 2000, Section 120 (w.e.f. 13-12-2000).
2 . Substituted by Act 65 of 1960, Section 77, for "all officers" (w.e.f. 28-12-1960).
3 . Substituted by Act 53 of 2000, Section 120, for certain word (w.e.f. 13-12-2000).
Section 243 - Application for winding up of company or an order under section 397 or 398
If any such company or other body corporate,1[***] is liable to be wound up under this Act and it appears to the Central Government from any such report as aforesaid that it is expedient so to do by reason of any such circumstances as are referred to in sub-clause (i) or (ii) of clause (b) of section 237, the Central Government may, unless2[the company or body corporate,] is already being wound up by the3[Tribunal], cause to be presented to the3[Tribunal] by any person authorised by the Central Government in this behalf-
(a) a petition for the winding up of2[the company or body corporate,] on the ground that it is just and equitable that it should be wound up;
(b) an application for an order under section 397 or 398;
(c) both a petition and an application as aforesaid.
___________________
1 . Certain words omitted by Act 53 of 2000, Section 121 (w.e.f. 13-12-2000).
2 . Substituted by Act 53 of 2000, Section 121, for certain words (w.e.f. 13-12-2000).
3 . Substituted by Act 11 of 2003, Section 32, for "Court".
Section 244 - Proceedings for recovery of damages or property
(1) If from any such report as aforesaid, it appears to the Central Government that proceedings ought, in the public interest, to be brought by the company or any body corporate whose affairs have been investigated in pursuance of clauses (a), (b) or (c) of section 239,
(a) for the recovery of damages in respect of any fraud, misfeasance or other misconduct in connection with the promotion or formation, or the management of the affairs, of such company or body corporate; or
(b) for the recovery of any property of such company, or body corporate, which has been misapplied or wrongfully retained,
the Central Government may itself bring proceedings for that purpose in the name of such company or body corporate.
(2) The Central Government shall indemnify such company or body corporate against any costs or expenses incurred by it in, or in connection with, any proceedings brought by virtue of sub-section (1).
Section 245 - Expenses of investigation
(1) The expenses of and incidental to an investigation by an inspector appointed by the Central Government under section 235 or 237 shall be defrayed in the first instance by the Central Government; but the following persons shall, to the extent mentioned below, be liable to reimburse the Central Government in respect of such expenses: -
(a) any person who is convicted on a prosecution instituted in pursuance of section 242, or who is ordered to pay damages or restore any property in proceedings brought by virtue of section 244, may, in the same proceedings, be ordered to pay the said expenses to such extent as may be specified by the court convicting such person, or ordering him to pay such damages or restore such property as the case may be;
(b) any company or body corporate in whose name proceedings are brought as aforesaid shall be liable, to the extent of the amount or value of any sums or property recovered by it as a result of the proceedings; and
(c) unless as a result of the investigation, a prosecution is instituted in pursuance of section 242, -
1 [(i) any company, body corporate, 2 [***] managing director or manager dealt with by the report of the inspector shall be liable to reimburse the Central Government in respect of the whole of the expenses, unless and except insofar as, the Central Government otherwise directs; and]
(ii) the applicants for the investigation, where the inspector was appointed 3 [in pursuance of the provisions of sub-sections (2)] of section 235, shall be liable to such extent, if any, as the Central Government may direct.
(2) Any amount for which a company or body corporate is liable by virtue of clause (b) of sub-section (1) shall be a first charge on the sums or property mentioned in that clause.
4 [(3) The amount of expenses in respect of which any company, body corporate, 2 [***] managing director or manager is liable under sub-clause (i) of clause (c) of subsection (1) to reimburse the Central Government shall be recoverable from that company, body corporate, 2 [***] managing director or manager, as an arrear of land revenue.]
(4) For the purposes of this section, any costs or expenses incurred by the Central Government in or in connection with proceedings brought by virtue of section 244 (including expenses incurred by virtue of sub-section (2) thereof) shall be treated as expenses of the investigation giving rise to the proceedings.
(5) (a) Any liability to reimburse the Central Government imposed by clauses (a) and (b) of sub-section (1) shall, subject to satisfaction of the right of the Central Government to reimbursement, be a liability also to indemnify all persons against liability under clause (c) of that sub-section.
(b) Any such liability imposed by the said clause (a) shall subject as aforesaid, be a liability also to indemnify all persons against liability under the said clause (b).
(c) Any person liable under the said clause (a) or (b) or sub-clause (i) or (ii) of the said clause (c) shall be entitled to contribution from any other person liable under the same clause or sub-clause, as the case may be, according to the amount of their respective liabilities thereunder.
(6) Insofar as the expenses to be defrayed by the Central Government under this section are not recovered thereunder, they shall be paid out of moneys provided by Parliament.
___________________
1. Substituted by Act 65 of 1960, Section 78, for sub-clause (i) (w.e.f. 28-12-1960).
2. The words "managing agent, secretaries and treasurers, associate" omitted by Act 53 of 2000, Section 122 (w.e.f. 13-12-2000).
3. Substituted by Act 31 of 1988, Section 40, for "under clause (A) or clause (b)" (w.e.f. 31-5-1991).
4. Substituted by Act 65 of 1960, Section 78, for sub-section (3) (w.e.f. 28-12-1960).
Section 246 - Inspectors' report to be evidence
A copy of any report of any inspector or inspectors appointed under section 235 or 237 authenticated in such manner, of any, as may be prescribed, shall be admissible in any legal proceeding as evidence of the opinion of the inspector or inspectors in relation to any matter contained in the report.
Section 247 - Investigation of ownership of company
(1) Where it appears to the Central Government that there is good reason so to do it may appoint one or more inspectors to investigate and report on the membership of any company and other mailers relating to the company, for the purpose of determining the true persons -
(a) who are or have been financially interested in the success or failure, whether real or apparent, of the company; or
(b) who are or have been able to control or materially to influence the policy of the company.
1 [(1A) Without prejudice to its powers under this section, the Central Government shall appoint one or more inspectors under sub-section (1), if the 2 [Tribunal] in the course of any proceedings before it, declares by an order that the affairs of the company ought to be investigated as regards the membership of the company and other matters relating to the company, for the purposes of determining the true persons -
(a) who are or have been financially interested in the success or failure, whether real or apparent, of the company; or
(b) who are or have been able to control or materially to influence the policy of the company.]
(2) When appointing an inspector under sub-section (1), the Central Government may define the scope of his investigation, whether as respects the matters or the period to which it is to extend or otherwise, and in particular, may limit the investigation to matters connected with particular shares or debentures.
(3) Subject to the terms of an inspector's appointment, his powers shall extend to the investigation of any circumstances suggesting the existence of any arrangement or understanding which, though not legally binding, is or was observed or is likely to be observed in practice and which is relevant to the purposes of his investigation.
3 [***]
(5) For the purposes of any investigation under this section, sections 239, 240 and 241 shall apply with the necessary modifications of references to the affairs of the company or to those of any other body corporate 4 [***]
Provided that the said sections shall apply in relation to all persons (including persons concerned only on behalf of others) who are or have been, or whom the inspector has reasonable cause to believe to be or to have been, -
(i) financially interested in the success or failure, or the apparent success or failure, of the company, or of any other body corporate, 5 [***] whose membership or constitution is investigated with that of the company; or
(ii) able to control or materially to influence the policy of such company body corporate, 5 [***];
as they apply in relation to 6 [officers and other employees and agents] of the company, of the other body corporate, 4 [***]as the case may be: 4 [***]as the case may be:
Provided further that the Central Government shall not be bound to furnish the company or any oilier person with a copy of any report by an inspector appointed under this section or with a complete copy thereof, if it is of opinion that there is good reason for not divulging the contents of the report or of parts thereof; but in such a case, the Central Government shall cause to be kept by the Registrar a copy of any such report, or as the case may be, of the parts thereof, as respects which it is not of that opinion.
(6) The expenses of any investigation under this section shall be defrayed by the Central Government out of moneys provided by Parliament, unless the Central Government directs that the expenses or any part thereof should be paid by the persons on whose application the investigation was ordered.
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1. Inserted by Act 31 of 1988, Section 41 (w.e.f. 31-5-1991).
2. Substitution by Act 11 of 2003, Section 33, for "Company Law Board".
3. Sub-section (4) omitted by Act 53 of 2000, Section 123 (w.e.f. 13-12-2000).
4. The words "or of any managing agent, secretaries and treasurers, or associate" omitted by Act 53 of 2000, Section 123 (w.e.f. 13-12-2000).
5. The words "managing agent, secretaries and treasurers or associate," omitted by Act 53 of 2000, Section 123 (w.e.f. 13-12-2000).
6. Substituted by Act 65 of 1960, Section 79, for "officers and agents" (w.e.f. 28-12-1960).
Section 248 - Information regarding persons having an interest in company or in body corporate or firm acting as managing agent thereof [Repealed]
[Repealed by the Companies (Amendment) Act, 2000 (53 of 2000), Section 124 (w.e.f. 13-12-2000).
Section 249 - Investigation of associateship with managing agents, etc. [Repealed]
[Repealed by the Companies (Amendment) Act, 2000 (53 of 2000), Section 124 (w.e.f. 13-12-2000).
Section 250 - Imposition of restrictions upon shares and debentures and prohibition of transfer of shares or debentures in certain cases
1 [250. Imposition of restrictions upon shares and debentures and prohibition of transfer of shares or debentures in certain cases
(1) 2 [Where it appears to the 3 [Tribunal], whether on a reference made to it by the Central Government in connection with any investigation under sections 247, 4 [***] or on a complaint made by any person in this behalf] that there is good reason to find out the relevant facts about any shares (whether issued or to be issued) and the 5 [Tribunal] is of the opinion that such facts cannot be found out unless the restrictions specified in subsection (2) are imposed, the 5 [Tribunal] may, by order, direct that the shares shall be subject to the restrictions imposed by sub-section (2) for such period not exceeding three years as may be specified in the order.
(2) So long as any shares are directed to be subject to the restrictions imposed by this sub-section -
(a) any transfer of those shares shall be void;
(b) where those shares are to be issued, they shall not be issued; and any issue thereof or any transfer of the right to be issued therewith shall be void;
(c) no voting right shall be exercisable in respect of those shares;
(d) no further shares shall be issued in right of those shares or in pursuance of any offer made to the holder thereof; and any issue of such shares or any transfer of the right to be issued therewith, shall be void; and
(e) except in a liquidation, no payment shall be made of any sums due from the company on those shares, whether in respect of dividend, capital or otherwise.
6 [(3) Where a transfer of shares in a company has taken place and as a result thereof a change in the composition of the Board of directors of the company is likely to take place and the 3 [Tribunal] is of the opinion that any such change would be prejudicial to the public interest, it may, by order, direct that -
(a) the voting rights in respect of those shares shall not be exercisable for such period not exceeding three years as may be specified in the order;
(b) no resolution passed or action taken to effect a change in the composition of the Board of directors before the date of the order shall have effect unless confirmed by the 3 [Tribunal].
(4) Where the 3 [Tribunal] has reasonable ground to believe that a transfer of shares in a company is likely to take place whereby a change in the composition of the Board of directors of the company is likely to take place and the 3 [Tribunal] is of the opinion that any such change would be prejudicial to the public interest the 3 [Tribunal] may, by order, direct that any transfer of shares in the company during such period not exceeding three years as may be specified in the order, shall be void.]
(5) The 5 [Tribunal] may, by order at any time, vary or rescind any order made by it under sub-section (1) or sub-section (3) or sub-section (4).
7 [***]
(8) Any order made by the 3 [Tribunal]] under sub-section (5) shall be served on the company within fourteen days of the making of the order.
(9) Any person who -
(a) exercises or purports to exercise any right to dispose of any shares or of any right to be issued with any such shares when to his knowledge he is not entitled to do so by reason of any of the said restrictions applicable to the case under sub-section (2); or
(b) votes in respect of any shares whether as holder or proxy, or appoints a proxy to vote in respect thereof, when to his knowledge he is not entitled to do so by reason of any of the said restrictions applicable to the case under sub-section (2) or by reason of any order made under sub-section (3); or
(c) transfers any shares in contravention of any order made under sub-section (4); or
(d) being the holder of any shares in respect of which an order under sub-section (2) or sub-section (3) has been made, fails to give notice of the fact of their being subject to any such order to any person whom he does not know to be aware of that fact but whom he knows to be otherwise entitled to vote in respect of those shares, whether as holder or as proxy,
shall be punishable with imprisonment for a term which may extend to six months, or with fine which may extend to 8 [fifty thousand rupees], or with both.
(10) Where shares in any company are issued in contravention of such of the restrictions as may be applicable to the case under sub-section (2), the company, and every officer of the company who is in default, shall be punishable with fine which may extend to 8 [fifty thousand rupees].
(11) A prosecution shall not be instituted under this section except by, or with the consent of the Central Government.
(12) This section shall apply in relation to debentures as it applies in relation to shares.]
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1. Substituted by Act 65 of 1960, Section 80, for section 250 (w.e.f. 28-12-1960).
2. Substituted by Act 31 of 1988, Section 43, for certain words (w.e.f. 31-5-1991).
3. Substituted by Act 11 of 2003, Section 33 for "Company Law Board".
4. The figures and words "248 or 249" omitted by Act 53 of 2000, Section 125 (w.e.f. 13-12-2000).
5. Substituted by Act 31 of 1988, Section 43, for "Central Government" and again substituted by Act 11 of 2003, section 33, for "Company Law Board".
6. Substituted by Act 31 of 1988, Section 43, for sub-sections (3) and (4) (w.e.f. 31-5-1991).
7. Sub-sections (6) and (7) omitted by Act 31 of 1988, Section 43 (w.e.f. 31-5-1991).
8. Substituted by Act 53 of 2000, Section 125, for "five thousand rupees" (w.e.f. 13-12-2000).
Section 250A - Voluntary winding up of company, etc., not to stop investigation proceedings
1 [250A. Voluntary winding up of company, etc., not to stop investigation proceedings
An investigation may be initiated under sections 235, 237, 239 2 [or 247] notwithstanding that-
(a) an application has been made for an order under section 397 or section 398; or
(b) the company has passed a special resolution for voluntary winding up,
and no investigation so initialed shall be stopped or suspended by reason only of the fact that an application referred to in clause (a) has been made or a special resolution referred to in clause (b) has been passed.]
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1. Inserted by Act 31 of 1965, Section 28 (w.e.f. 15-10-1965).
2. Substituted by Act 53 of 2000, Section 126, for "247, 248 or 249" (w.e.f. 13-12-2000).
Section 251 - Saving for legal advisers and bankers
Nothing in sections1[ 234 to 247 and 250 ] shall require the disclosure to2[3[Tribunal] or to the Central Government or to the Registrar or to an inspector appointed by Central Government]-
(a) by a legal adviser, of any privileged communication made to hi m in that capacity, except as respects the name and address of hi s client; or
(b) by the bankers of any company, body corporate,4[***] or other person, referred to in the sections aforesaid, as such bankers of any information as to the affairs of any of their customers other than such company, body corporate,4[***]or person.
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1 . Substituted by Act 53 of 2000, Section 127, for "234 to 250" (w.e.f. 13-12-2000).
2 . Substituted by Act 31 of 1988, Section 44, for certain words (w.e.f. 31-5-1991).
3. Substituted by Act 11 of 2003, Section 33, for "Company Law Board" .
4. Substituted by Act 53 of 2000, Section 127, for "managing agent secretaries and treasurers" (w.e.f. 13-12-2000).