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335. Suspension from office where receiver appointed. (1) The managing agent of a company shall be deemed to have been suspended from his office as such, if a receiver is appointed for his property- (a) by a Court, or (b) by or on behalf of the creditors of the managing agent, including the holders of debentures issued by the managing agent, in pursuance of any power conferred by an instrument executed by the managing agent: Provided that the Court which appointed the receiver, or which will have jurisdiction to wind up the managed company, as the case may be, may, by order, direct that the managing agent shall continue to act as such for such period and subject to such restrictions and conditions, if any, as may be specified in the order.

(2) The Court may, at any time, cancel or vary any order passed

by it under the proviso to sub-section (1).

Vacation of office on conviction in certain cases. 336. Vacation of office on conviction in certain cases. Subject to the provisions of sections 340 and 341, the managing agent of a company shall also be deemed to have vacated his office as such, if- (a) the managing agent; (b) in case the managing agent is a firm, any partner in the firm ; or (c) in case the managing agent is a body corporate, any director of, or any officer holding a general power of attorney from, such body corporate; is convicted by a Court in India, after the commencement of this Act, of any offence, and sentenced therefor to imprisonment for a period of not less than six months.

Removal for fraud or breach of trust. 337. Removal for fraud or breach of trust. A company in general meeting may, by ordinary resolution, remove its managing agent from office- (i) for fraud or breach of trust in relation to the affairs of the company or of any subsidiary or holding company thereof, whether committed before or after the commencement of this Act; (ii) for fraud or breach of trust, whether committed before or after such commencement, in relation to the affairs of any other body corporate, if a Court of Law, whether in or outside India, finds such fraud or breach of trust to have been duly established ; or 305 (iii) subject to the provisions of sections 340 and, 341, where the managing agent is a firm or body corporate, if any partner in the firm, or any director of, or any officer holding a general power of attorney from, the body corporate is guilty of any such fraud or breach of trust as is referred to in clause (i).

Removal for gross negligence or mismanagement. 338. Removal for gross negligence or mismanagement. A company in general meeting may, by special resolution,, remove its managing agent from office for gross negligence in, or for gross mismanagement of, the affairs of the company or of any subsidiary thereof.

Power to call meetings for the purposes of sections 337 and 338 andprocedure. 339. Power to call meetings for the purposes of sections 337 and

338 and procedure. (1) Without prejudice to any other provision contained in this Act or in the articles of the company for the calling of meetings, any two directors of the company may call a general meeting of the company for the purpose of considering any resolution of the nature referred to in section 337 or 338.

(2) On receipt of notice of any such resolution, a copy of the resolution shall be sent forthwith to the managing agent by the company.

(3) The managing agent shall have, in relation to any such resolution, all the rights which a director of the company has under section 284 in relation to any resolution for removing him from office, including, in particular, the right to make representations to the company in writing, to have such representations sent to members of the company and to have them read out at the meeting and also the right to be heard on the resolution at the meeting.

Time when certain in disqualifications will take effect.

340. Time when certain in disqualifications will take effect. (1) The disqualifications imposed by clause (a) of section 334, by sub-

section (1) of section 335, by section 336, and by any resolution passed in pursuance of clause (ii) of section 337, shall not take effect- (a) for thirty days from the date of the order of adjudication, appointment of the receiver, sentence, or finding of the Court as the case may be, or (b) where any appeal or petition is preferred within the thirty days aforesaid against the order, appointment, sentence or conviction resulting in the sentence, or finding, until the expiry of seven days from the date on which such appeal or petition is disposed of, or (c) where within the seven days aforesaid, any further appeal or petition is preferred in respect of the order, appoint-

ment, sentence, conviction or finding, as the case may be, and the appeal or petition, if allowed, would result in the removal of the disqualification, or in making the resolution inapplicable, as the case may be, until such further appeal or petition is disposed of.

(2) In the cases referred to in sub-section (1), the Board may suspend the managing agent from office immediately on, or at any time after, the adjudication, appointment, sentence or finding referred to in clause (a) of that sub-section and until the disposal of the appeals and petitions, if any, referred to in clauses (b) and (c) thereof, or until the convicted partner, director or officer is expelled or dismissed in pursuance of section 341, as the case may be.

Conviction not to operate as disqualification if convicted partner, 341. Conviction not to operate as disqualification if convicted

partner, director, etc., is expelled. (1) In the cases referred to in clauses (b) and (c) of section 336, it shall be open to the managing agent, notwithstanding anything to the contrary in any other law or agreement, for the time being in force, to expel or dismiss the convicted partner, director or officer, within thirty days from the date of his sentence and in that event, the disqualifications imposed by the clauses aforesaid shall cease to apply.

(2) Sub-section (1) shall not affect the operation of section 346 in any case to which that section would otherwise apply.

Resignation of office by managing agent.

342. Resignation of office by managing agent. (1) Unless the managing agency agreement otherwise provides, a managing agent may, by notice to the Board, 1[resign his office as from such date as may be specified in the notice but such resignation shall not be effective

until it is accepted by the company under sub-section (7)].

(2) The managing agent shall cease to act as such with effect from the date so specified or from such later date, if any, as may be mutually agreed on between him and the Board; 2[but the managing agent shall not be absolved from liability to the company for his acts whether of commission or omission, during the period of his managing agency].

3[(3) When notice of resignation is given as aforesaid, the Board shall require the managing agent within such time as may be fixed by it or such further time as may be allowed by it, to prepare, and ———————————————————————- 1 Subs. by Act 65 of 1960, s. 123, for “resign his office with effect from such date as may be specified in the notice”. 2 Subs. by s. 123, ibid., or “but his resignation shall not be

effective until it is considered as provided in sub-section (3)”.

3 Subs. by s. 123, ibid.,for sub-sections (3), (4) and (5). ———————————————————————- 307 the managing agent shall prepare, a report on the state of affairs of the company as on the date specified in the notice of resignation or such subsequent date as the Board may think suitable, not being later than that on which the. managing agent ceases to act as such under

sub-section (2), together with a balance-sheet made out as on that date and a profit and loss account for the period commencing from the date up to which the last such account was prepared and ending with the date on which the managing agent ceases to act as such.

(4)In case of default by the managing agent in complying with the

requisition of the Board under sub-section (3), the Board shall itself cause a report on the state of affairs of the company as on the date specified in the notice of resignation or such subsequent date as the Board may think suitable, not being later than that on which the

managing agent ceases to act as such under sub-section (2), together with a balance-sheet made out as on that date and a profit and loss

account for the period specified in sub-section (3), to be prepared.

(5)The Board shall also obtain a report from the auditors of the company on such balance-sheet and profit and loss account in accor- dance with sections 227,228 and 229 and place the managing agents resignation together with the report on the state of the company’s affairs, balance-sheet, profit and loss account and auditors’ report mentioned above, before the company in general meeting.

(6)In relation to any report made by the auditors as aforesaid, sections 230 to 233 shall apply in like manner as they apply in rela- tion to auditors’ report referred to therein.

(7)The company in general meeting may, by a resolution, accept the resignation or take such other action with reference thereto as it may deem fit.] Transfers of, and Succession to, Office

Transfer of office by managing agent.

1[343. Transfer of office by managing agent. (1) The managing agent of a company shall not transfer his office to another person or enter into any agreement or arrangement with another person by or under which the managing agent parts with, or which has the effect of transferring, his right to manage the whole or substantially the whole of the affairs of the company in favour of or to that other person unless approval of the company in general meeting and also of the Central Government has been accorded to such transfer, agreement or arrangement. ———————————————————————- 1 Subs. by Act 65 of 1960, s. 124, for s.343. ———————————————————————- 308

(2)If the other person and the managing agent referred to in sub-

section (1) contravene the provisions of that sub-section, that other person and the managing agent, and where the managing agent is a firm, every partner in the firm and where the managing agent is a body corporate, every director of the body corporate, shall be punishable with imprisonment for a term which may extend to six months, or with fine which may extend to five thousand rupees, or with both.]

Managing agency not to be heritable after commencement of Act. 344. Managing agency not to be heritable after commencement of Act. Any agreement made by a company other than a private company which is not a subsidiary of a public company, with its managing agent after the commencement of this Act shall be void in so far as it provides for succession to the office by inheritance or devise.

Succession to managing agency by inheritance or devise under agreementbefore commencement of Act to be subject to Central Government’sapproval. 345. Succession to managing agency by inheritance or devise under agreement before commencement of Act to be subject to Central

Government’s approval. (1) Where the office of the managing agent of a company is held by an individual at the commencement of this Act and the managing agency agreement provides for succession to the office by inheritance or devise, no person shall succeed to the office on the death of the holder thereof, unless the succession of such person thereto is a proved by the Central Government ; and that Government shall not accord such approval unless, in its opinion, such person is a fit and proper person to hold the office of managing agent of the company.

(2)The provisions of sub-section (1) shall not apply to a private company which is not a subsidiary of a public company. Changes in Constitution of Firms and Corporations

Change in constitution of managing agency firm or corporation to beapproved by Central Government. 346. Change in constitution of managing agency firm or

corporation to be approved by Central Government. (1) Notwithstanding anything to the contrary contained in any other provision of this Act, where the managing agent of a public company, or of a private company which is a subsidiary of a public company, is a firm or body corporate and any change takes place in the constitution of the firm or body corporate, the managing agent shall cease to act as such on the expiry of six months from the date on which the charge takes place or such further time as the Central Government may (whether before or after the expiry of the six months) allow in that behalf, unless the approval of the Central Government has been accorded 1[before the expiry of six months aforesaid or where further time has been allowed by the Central Government, before the expiry of that time] to the changed constitution of the firm or body corporate. ———————————————————————- 1 Subs. by Act 65, of 1960, s. 125, for “before such expiry”. ———————————————————————- 309 Explanation.-For the purposes aforesaid, a change in the consti- tution of a body corporate means- (a) its conversion from a private to a public company, or from a public to a private company; (b) any change among the directors or managers of the corporation, whether caused by the death or retirement of a director or manager, the appointment of a new director or manager, or otherwise; (c) any change in the ownership of shares in the body corporate or in the case of a body corporate not having a share capital, any change in its membership; 1[and where the managing agent, being a body corporate is a subsidiary of another body corporate, includes a change in the cons- titution of that other body corporate within the meaning of clause (a), clause (b) or clause (c)].

2[(2) Where the managing agent is a body corporate (whether or not it is a subsidiary of another body corporate) and its shares are for the time being dealt in, or quoted on, a recognised stock ex- change, a change in the ownership of its shares, or where a managing agent being a body corporate is a subsidiary of another body corporate and the shares of the other body corporate are for the time being dealt in, or quoted on, a recognised stock exchange, a change in the ownership of the shares of the other body corporate, shall not be deemed to be a change in the constitution of the managing agent within the meaning and for the purposes of sub-section

(1), unless the Central Government, by notification in the Official Gazette, otherwise directs: Provided that no such notification shall be issued in respect of any such, or such other, body corporate as aforesaid, unless the Central Government is of the opinion that any change in the owner-. ship of its shares has taken place or is likely to take place, which has affected or is likely to affect prejudicially the affairs of any company which is being managed by the managing agent.]

Application of Schedule VIII to certain managing agents.

347.Application of Schedule VIII to certain managing agents. (1) The provisions of Schedule VIII shall apply- (a) to every firm or private company which acts . as the managing agent of any company, whether public or private; and ———————————————————————- 1 Ins. by Act 65 of 1960, s. 125.

2 Subs. by s. 125, ibid., for sub-section (2). ———————————————————————- 310

(b) save as provided in sub-section (2), to every other body corporate (not being a private company) which acts as the managing agent of any company, whether public or private.

(2) A body corporate (not being a private company) acting as managing agent shall, if and so long as its shares are dealt in, or quoted on, any recognised stock exchange, be exempt from the operation

of sub-section (1), unless the Central Government, by notification in the Official Gazette, otherwise directs: Provided that the Central Government may, by order, modify or limit the operation of this sub-section in relation to any body cor- porate in such manner as that Government thinks fit.

(3) If default is made by a managing agent to which Schedule VIII applies in complying with the provisions thereof,- (a) if the managing agent is a firm, every partner therein who is in default, and (b) if the managing agent is a body corporate, the body corporate, and every director or other officer thereof who is in default, shall be punishable with fine which may extend to fifty rupees for every day during which the default continues. Remuneration of managing agents

Remuneration of managing agent ordinarily not to exceed 10 per cent. ofnet profits. 348.Remuneration of managing agent ordinarily not to exceed 10

per cent. of net profits. 1[(1)] 2* * * A company shall not pay to its managing agent, in respect of any financial year beginning at or after the commencement of this Act, by way of remuneration, whether in respect of his services as managing agent or any other capacity, any sum in excess of ten per cent. of the net profits of the company for that financial year.

3[(2) For the purposes of this section, any payment made by way of remuneration to any of the following persons shall be deemed to be included in the remuneration of the managing agent:- (a) where the managing agent of the company is a firm, every partner in the firm ; (b) where the managing agent of the company is a public company, every director of that public company; ———————————————————————-

1 S. 348 renumbered as sub-section (1) of that section by Act 65 of 1960, s. 126. 2 The words “Save as otherwise expressly provided in this Act,” omitted by s. 126, ibid. 3 Ins. by s. 126, ibid. ———————————————————————- 311 (c) where the managing agent of the company is a private company, every director and member of that private company.

(3) Nothing contained in sub-section (1) or sub-section (2) shall be deemed to affect the operation of sections 352, 354 and 356 to 360.]

Determination of net profits.

349.Determination of net profits. (1) In computing for the purpose of section 348, the net profits of a company in any financial year- (a) credit shall be given for the sums specified in sub-

section (2), and credit shall not be given for those

specified in sub-section (3) ; and

(b) the sums specified in sub-section (4) shall be

deducted, and those specified in sub-section (5) shall not be deducted.

(2) In making the computation aforesaid, credit shall be given for the following sums:- bounties and subsidies received from any Government, or any public authority constituted or authorized in this behalf, by any Government unless and except in so far as the Central Government otherwise directs.

(3) In making the computation aforesaid, credit shall not be given for the following sums: – (a) profits, by way of premium, on shares or debentures of the company, which are issued or sold by the company; (b) profits on sales by the company of forfeited shares; (c) 1[profits of a capital nature including profits from the sale] of the undertaking or any of the undertakings of the company or of any part thereof; (d) profits from the sale of any immovable property or fixed assets of a capital nature comprised in the undertaking or any of the undertakings of the company, unless the business of the company consists, whether wholly or partly, of buying and selling any such property or assets: 2 [Provided that where the amount for which any fixed asset is sold exceeds the written-down value thereof referred to in section 350, credit shall be given for so much of the excess as is not higher ———————————————————————- 1 Subs. by Act 65 of 1960, s. 127, for “profits from the sale”. 2 Ins. by s. 127, ibid. ———————————————————————- 312 than the difference between the original cost of that fixed asset and its written-down value.]

(4) In making the computation aforesaid, the following sums shall be deducted:- (a) all the usual working charges; (b) directors’ remuneration; (c) bonus or commission paid or payable to any member of the company’s staff, or to any engineer, technician or person employed or engaged by the company, whether on a whole-time or on a part-time basis; (d) any tax notified by the Central Government as being in the nature of a tax on excess or abnormal profits; (e) any tax on business profits imposed for special reasons or in special circumstances and notified by the Central Government in this behalf ; (f) interest on debentures issued by the company; (g)interest on mortgages executed by the company and on loans and advances secured by a charge on its fixed or floating assets ; (h) interest on unsecured loans and advances; (i) expenses on repairs, whether to immovable or to movable property, provided the repairs are not of a capital nature; 1[(j)outgoings inclusive of contributions made under clause

(e) of sub-section (1) of section 293 ;] (k) depreciation to the extent specified in section 350; 2[(l) the excess of expenditure over income, which had arisen in computing the net profits in accordance with this section in any year which begins at or after the commencement of this Act, in so far as such excess has not been deducted in any subsequent year preceding the year in respect of which the net profits have to be ascertained;] (m) any compensation or damages to be paid in virtue of any legal liability, including a liability arising from a breach of contract; ———————————————————————- 1 Subs. by Act 65 of 1960, S. 127, for cl. (j). 2 Subs. by s. 127, ibid., for cl. (l). ———————————————————————- 313 (n) any sum paid by way of insurance against the risk of meeting any liability such as is referred to in clause (m) ; 1[(o) debts considered bad and written off or adjusted during the year of account.]

(5) In making the computation aforesaid, the following sums shall not be deducted:- (a) the remuneration payable to the managing agent; (b) income-tax and super-tax payable by the company under the Indian Income-tax Act, 1922, (11 of 1922) or any other tax on the income of the company not falling under clauses

(d) and (e)of sub-section (4) (c) any compensation, damages or payments made voluntarily, that is to say, otherwise than in virtue of a liability such

as is referred to in clause (m) of sub-section (4) ; 1[(d) loss of a capital nature including loss on sale of the undertaking or any of the undertakings of the company or of any part thereof not including any excess referred to in the proviso to section 350 of the written-down value of any asset which is sold, discarded, demolished or destroyed over its sale proceeds or its scrap value.]

Ascertainment of depreciation. 2[350.Ascertainment of depreciation. The amount of depreciation

to be deducted in pursuance of clause (k) of sub-section (4) of section 349 shall be the amount calculated with reference to the written-down value of the assets as shown by the books of the company at the end of the financial year expiring at the commencement of this Act or immediately thereafter and at the end of each subsequent financial year, 3[at the rate specified in Schedule XIV]: Provided that if any asset is sold, discarded, demolished or destroyed for any reason before depreciation of such asset has been provided for in full, the excess, if any, of the written-down value of such asset over its sale proceeds or, as the case may be, its scrap ———————————————————————- 1 Ins. by Act 65 of 1960, s. 127. 2 Subs. by s. 128, for s. 350. 3 Subs. by Act 31 of 1988, s.50 (w.e.f.15.6.1988) ———————————————————————– 314 value, shall be written off in the financial year in which the asset is sold, discarded, demolished or destroyed.]

Special provision where there is a profit sharing arrangement betweentwo or more companies. 351.Special provision where there is a profit sharing arrangement between two or more companies. Where there is an arrangement between two or more companies to share their profits, and not less than two of those companies have the same managing agent, any profits paid in pursuance of the arrangement by any of the companies having that managing agent to any other or others of them shall- (a) be excluded from the net profits of the company making such payment; and (b) be included in the net profits of the company receiving such payment, or where more than one company receives such payment, be included in the net profits of each of the receiving companies, to the extent of the payment received by it.

Payment of additional remuneration. 352.Payment of additional remuneration. Additional remuneration in excess of the limits specified in sections 198 and 348 may be paid to the managing agent if and only if, such remuneration is sanctioned by a special resolution of the company and is approved by the Central Government as being in the public interest.

Time of payment of remuneration. 353.Time of payment of remuneration. The remuneration payable to the managing agent for any financial year or part thereof shall not be paid to him, until the accounts of the company for such financial year have been audited and laid before the company in general meeting: Provided that the minimum remuneration, if any, payable in pursuance of section 198 may be paid to the managing agent in such suitable instalments as may be specified either in the articles of the company or in a resolution passed by the company at an annual general meeting or in the managing agency agreement executed by the company.

Managing agent not entitled to office allowance but entitled to bereimbursed in respect of expenses. 354.Managing agent not entitled to office allowance but entitled to be reimbursed in respect of expenses. The managing agent shall not be paid any office allowance, but he may be reimbursed in respect of any expenses incurred by him on behalf of the company and sanctioned by the Board or by the company in general meeting; and nothing contained in sections 348 to 353 shall be deemed to prohibit his being so reimbursed.

Saving. 355.Saving. Sections 348 to 354 shall not apply to a private company unless it is a subsidiary of a public company. 315 Appointments as Selling and Buying Agents

Appointment of managing agent or associate as selling agent of goodsproduced by the company. 356.Appointment of managing agent or associate as selling agent

of goods produced by the company. (1) No managing agent and no associate of a managing agent, shall receive any commission or other remuneration from the company, in respect of sales of goods produced by the managed company, if the sales are made from the premises at which they are produced or from the head office of the managing agent or from any place in India.

(2) For sales of any goods produced by the company which are effected from any place outside India not being a place specified in

sub-section (1), the managing agent, or an associate of the managing agent, may be appointed as a selling agent subject to the following conditions, namely:- (a) that the managing agent or associate maintains an office at such place for his own business, that is to say, for a business not connected with that of the company 1[or any other company managed by the managing agent]; (b) that the remuneration payable in respect of the work done as selling agent by the managing agent or associate is in accordance with the terms of a special resolution passed by the company in that behalf ; and (c) that no other sums are payable by the company to managing agent or associate whether by way of expenses or otherwise.

(3) Any appointment made in pursuance of sub-section (2) shall not be made for a term exceeding five years but may be renewed from time to time for a term not exceeding five years on each occasion: Provided that such renewal shall not be effected earlier than one year from the date on which it is to come into force.

(4) The special resolution referred to in clause (b) of sub-

section (2) shall set out the material terms subject to which the appointment of selling agent is made,

(5) Every appointment made under sub-section (2) and all particulars relating thereto shall be entered in a register maintained by the company for the purpose.

Application of section 356 to case where business of company consistsof the supply or rendering of any services. 357.Application of section 356 to case where business of company consists of the supply or rendering of any services. Where and in so far as the business of a company consists in the supply or rendering of any services, the provisions of section ———————————————————————- 1 Ins. by Act 65 of 1960, s. 129. ———————————————————————- 316 356 shall apply in respect of any such business procured for the com- pany by its managing agent or any associate of its managing agent from any place outside India, in like manner as those provisions apply in respect of sales of any goods produced by a company which are effected from that place.

Appointment of managing agent or associate as buying agent forcompany. 358.Appointment of managing agent or associate as buying agent

for company (1) No managing agent, and no associate of a managing agent, shall receive any payment whatever, from the company except expenses, if any, sanctioned under section 354 in respect of purchases of goods made on its behalf either in India, or in cases to which sub-

section (2) does not apply, outside India.

(2) Where purchases of goods are made on behalf of a company by its managing agent or any associate of its managing agent, at any place outside India, then, if the managing agent or associate main- tains an office at such place not only for such purchase but also for his own business, that is to say, for a business not connected with that of the company 1[or any other company managed by the managing agent], he may receive, at the option of the company, either- (a) such part of the expenses of such office as may reasonably be attributed to the purchases made on behalf of the company as aforesaid ; or (b) remuneration, by way of commission or otherwise, in respect of the work done by the managing agent or associate in making such purchases.

(3) In cases to which clause (a) of sub-section (2) applies, the maximum amount which may be paid to the managing agent shall be specified in a special resolution passed by the company; and in cases to which clause (b) of that sub-section applies, the remuneration payable to the managing agent or associate shall be in accordance with the terms of a special resolution, passed by the company in that behalf.

(4) The special resolution referred to in sub-section (3) shall set out in sufficient detail nature of the office maintained by the managing agent or associate outside India, the purposes for which it is maintained, the scale of its operations, the expenses incurred in maintaining the office, and the proportion of those expenses which may be reasonably attributed to the work done on behalf of the company.

(5) The special resolution shall not remain in force for a term exceeding three years but may be renewed from time to time for a term not exceeding three years on each occasion: ———————————————————————- 1 Ins. by Act 65 of 1960, s. 130. ———————————————————————- 317 Provided that no renewal shall take place earlier than one year from the date on which it is to come into force.

(6) Every resolution passed in pursuance of this section shall be entered in a register maintained by the company for the purpose.

Commission, etc., of managing agent as buying or selling agent ofother concerns. 359.Commission, etc., of managing agent as buying or selling

agent of other concerns. (1) A company in general meeting may, by resolution, authorise its managing agent or any associate of its managing agent to retain any commission or other remuneration earned or to be earned by such agent or associate as the 1* * * agent, secretary or selling or buying agent of any firm, body corporate or other concern in respect of any goods, power, freight, repairs or other services, for the sale, purchase, supply or rendering of which a contract has been, or is to be, entered into by such firm, body or concern with the company, provided the prices or amounts charged to or received by the company are at rates which are not less favourable to the company than the market rates or which are otherwise reasonable.

(2) Every contract so entered into and all particulars relating thereto shall be entered in a separate register maintained by the company for the purpose.

Contracts between managing agent or associate and company for the saleor purchase of goods or the supply of services, etc. 360.Contracts between managing agent or associate and company for

the sale or purchase of goods or the supply of services, etc. 2[(1) A contract between a company and its managing agent or an associate of the managing agent,- (a) for the sale, purchase or supply of any property, movable or immovable, or for the supply or rendering of any service other than that of managing agent-, or (b) for the underwriting of any shares or debentures, to be issued or sold by the company; shall not be valid against the company- (i) unless the contract has been approved by the company by a special resolution passed by it, and (ii) where the contract is for the supply or rendering of any service other than that of managing agent, unless further the contract has been approved by the Central Government. either before the date of the contract or at any time within three months next after that date.] ———————————————————————- 1 The words “managing agent, secretaries and treasurers, manager” omitted by Act 65 of 1960, s. 131.

2 Subs. by s. 132, ibid., for sub-section (1). ———————————————————————- 318

(2) The special resolution aforesaid shall- (a) set out the material terms of the contract proposed to be entered into 1[or entered into] ; and (b) provide specifically that for any property supplied or sold, or any services supplied or rendered, by the company, the managing agent or associate shall make payment to the company within one month from the date of the supply or sale of the 2[property], or the supply or rendering of the service, as the case may be.

(3) Every such contract and all particulars relating thereto shall be entered in a separate register maintained by the company for the purpose.

3[(4) Nothing in clause (a) of sub-section (1) shall affect any contract or contracts for the sale, purchase or supply of any property or the supply or rendering of any services, in which either the com- pany or the managing agent or associate, as the case may be, regularly trades or does business, provided that the value of such property or the cost of such services does not exceed five thousand rupees in the aggregate in any year comprised in the period of the contract or contracts.]

Existing contracts relating to matters dealt with in sections 365 to360 to terminate on 1st March, 1958. 361.Existing contracts relating to matters dealt with in sections 365 to 360 to terminate on 1st March, 1958. All contracts in force at the commencement of this Act, to which a company or the managing agent or an associate of the managing agent of a company is a party, shall, in so far as the contracts relate to any of the matters referred to in sections 356 to 360, be deemed to terminate on the first day of March, 1958, unless they terminate on an earlier date.

Registers to be open to inspection. 362.Registers to be open to inspection. The registers referred to in sections 356 to 360 shall be open to inspection, and extracts may be taken therefrom and copies thereof may be required, by any member of the company, in the same manner, to the same extent and on payment of the same fees as in the case of the register of members of the company.

Remuneration received in contravention of foregoing sections to beheld in trust for company. 363. Remuneration received in contravention of foregoing sections

to be held in trust for company. 4 [(1)] Where the managing agent of a company, or an associate of the managing agent, receives any sum from the company, ———————————————————————- 1 Ins. by Act 65 of 1960, S. 132. 2 Subs. by s. 132, ibid., for “goods”.

3 Subs. by s. 132, ibid., for sub-section (4).

4 S. 363 renumbered as sub-section (1) of that section by s. 133, ibid. ———————————————————————- 319 whether directly or indirectly, by way of remuneration, rebate, commission, expenses or otherwise,- (a) in the case of a public company or a private company which is a subsidiary of a public company, in contravention of sections 348 to 354 and sections 356 to 361; or (b) in the case of a private company which is not a subsidiary of a public company, in contravention of sections 356 to 361; the managing agent or associate 1[shall refund such sum to the company and until such sum is so refunded, hold it in trust for the company].

2[(2) The company shall not waive the recovery of any sum

refundable to it under sub-section (1) unless permitted by the Central Government.] Assignment of, or charge on, remuneration

Company not to be bound by assignment of, or charge on, managingagent’s remuneration. 364.Company not to be bound by assignment of, or charge on, managing agent’s remuneration. Any assignment of, or charge on, his remuneration, or any part thereof, effected by a managing agent shall be void as against the company. This section shall not affect the rights inter se of the managing agent and any person other than the company. Compensation for termination of office

Prohibition of payment of compensation for loss of office in certaincases. 365.Prohibition of payment of compensation for loss of office in certain cases. A company shall not pay or be liable to pay to its managing agent any compensation for the loss of his office in the following cases:- (a) where the managing agent resigns his office in view of the re-construction of the company or of its amalgamation with any other body corporate or bodies corporate and is ap- pointed as the managing agent, secretaries and treasurers, manager or other officer of the reconstructed company or of the body corporate resulting from the amalgamation; (b) where the managing agent resigns his office, otherwise than on the reconstruction of the company or its amalgamation as aforesaid; ———————————————————————- 1 Subs. by Act 65 of 1960, s. 133, for certain words. 2 Ins. by s. 133, ibid. ———————————————————————- 320 (c) where the managing agent vacates his office in pursuance of section 324, 1[324A,] 330 or 332; (d) where the managing agent is deemed to have vacated his office in pursuance of clause (a), (b), (c) or (d) of section 334 or of section 336; (e) where the managing agent is deemed to have vacated his office in pursuance of clause (e) of section 334, provided the winding up of the company was due to the negligence or default of the managing agent; (f) where the managing agent is deemed to have been suspended,or is suspended, from his office in pursuance of

section 335 or sub-section (2) of section 340; (g) where the managing agent is removed from office by a resolution in pursuance of section 337 or 338; and (h) where the managing agent has instigated, or has taken part in bringing about, the termination of his office.

Limit of compensation for loss of office. 366.Limit of compensation for loss of office. The compensation which may be paid by a company to its managing agent for loss of office shall not exceed the remuneration which he would have earned if he had been in office for the unexpired residue of his term, or for three years, whichever is shorter, calculated on the basis of the average remuneration actually earned by him during a period of three years immediately preceding the date on which his office ceased or was terminated, or where he held the office for a lesser period than three years, during such period: Provided that in the event of the winding up of the company commencing, whether before, or at any time within twelve months after, the date of the cessation or termination of the office of managing agent, no compensation shall be payable to him if the assets of the company on the winding up, after deduction of the expenses thereof, are not sufficient to repay the share capital (including the premiums, if any,) contributed by the members of the company. Other rights and liabilities, not affected on terminations of office

Managing agent’s rights and liabilities after termination of office. 367.Managing agent’s rights and liabilities after termination of office. Where the office of a managing agent ceases or is terminated- (a) the managing agent and the company shall be entitled to enforce any claim or demand which each may have against the other, in respect of anything done or omitted ———————————————————————- 1 Ins. by Act 17 of 1969, s. 5. ———————————————————————- 321 to be done by either of them before the cessation or termination of the managing agency; and (b) the rights and liabilities, in relation to the company, of the managing agent in any other capacity, shall not be affected. Restrictions on powers

Managing agent to be subject to control of Board and to restrictionsin Schedule VII. 368.Managing agent to be subject to control of Board and to restrictions in Schedule VII. The managing agent of a company, whether appointed before or after the commencement of this Act, shall exercise his powers subject to the superintendence, control and direction of its Board of directors and subject also to the provisions of the memo- randum and articles of the company and to the restrictions contained in Schedule VII.

Loans to managing agent.

369.Loans to managing agent. (1) No public company, and no private company which is a subsidiary of a public company, 1[shall directly or indirectly make] any loan to, or give any guarantee or provide any security in connection with a loan made by any other person to, or to any other person by,- (a) its managing agent or any associate of its managing agent; or (b) any body corporate in respect of which the Central Government, by order, declares that it is satisfied that the Board of directors, managing director, managing agent, secretaries and treasurers or manager thereof is accustomed to act in accordance with the directions or instructions of the managing agent or associate of the managing agent, notwithstanding that the body corporate may not itself be an associate of the managing agent.

2[(2) Nothing contained in sub-section (1) or section 295 shall apply to- (a) any credit given by the company to its managing agent for the purpose of facilitating the company’s business and held by such agent in his own name in one or more current accounts, subject to limits previously approved by the directors of company and on no account exceeding twenty thousand rupees in the aggregate; or ———————————————————————- 1 Subs. by Act 65 of 1960, s. 134, for ” shall make”.

2 Subs. by s. 134, ibid., for sub-section (2). ———————————————————————- 322 (b) any loan made by a holding company to its subsidiary.

Explanation.-Credit referred to in clause (a) of sub-section (2) is confined to any cash advance given by way of a permanent advance or imprest for facilitating the carrying on of the company’s business, transactions on such advance or imprest account being settled as far as possible on a monthly basis.]

Loans, etc., to companies under the same management.

370.Loans, etc., to companies under the same management. (1) No company (hereinafter in this section referred to as “the lending company”) shall- (a) make any loan to, or (b) give any guarantee, or provide any security, in connection with a loan made by any other person to, or to any other person by, any body corporate 1* * *, unless the making of such loan, the giving of such guarantee or the provision of such security has been previously authorised by a special resolution of the lending company. 2[Provided that no special resolution shall be necessary in the case of loans made to other bodies corporate not under the same management as the lending company where the aggregate of such loans does not exceed 3[such percentage of the aggregate of the subscribed capital of the lending company and its free reserves as may be prescribed:] Provided further that the aggregate of the loans made to all bodies corporate shall not exceed without the prior approval of the Central Government- (a) 3[such percentage of the aggregate of the subscribed capital of the lending company and its free reserves as may be prescribed] where all such other bodies corporate are not under the same management as the lending company; (b) 3[such percentage of the aggregate of the subscribed capital of the lending company and its free reserves as may be prescribed] where all such other bodies corporate are under the same management as the lending company. Explanation 4[1].-If a special resolution has been passed by the lending company authorising the making of loans up to the limit of 3[ the percentage of the aggregate specified in clause (a) or, as the case may be, the percentage of the aggregate specified in clause (b) of the second proviso] ———————————————————————- 1 The words ” which is under the same management as the lending company” omitted by Act 31 of 1965, s. 46 (w.e.f. 1-4-1967). 2 Added by s. 46, ibid. (w.e.f. 1-4-1967). 3 Subs. by Act 31 of 1988, s.51 (w.e.f. 17.4.1989). 4 Renumbered as Explanation 1 by Act 34 of 1966, s. 3 (w.e.f. 1-4-1967) ——————————————————————— 323 then, no further special resolution or resolutions shall be deemed to be necessary for the making of any loan or loans within such limit.] 1[Explanation 2.-If a special resolution has been passed by the lending company authorising the Board of Directors to give any guarantee or provide any security up to a limit specified in the reso- lution, then, no further special resolution or resolutions shall be deemed to be necessary for giving any guarantee or providing any security within such limit.] 2[(1A) Where the lending company- (a) makes any loan to, or (b) gives any guarantee, or provides any security, in connection with a loan made by any other person to, or to any other person by, a firm in which a partner is a body corporate under the same manage- ment as the lending company- (i) the loan shall be deemed to have been made to, or (ii) the guarantee or the security shall be deemed to have been given or provided in connection with the loan made by such other person to, or to such other person by, a body corporate under the same management.]

3[(1B)] 4[For the purposes of sub-sections (1) and (1A)] two bodies corporate shall be deemed to be under the same management- (i) if the managing agent, secretaries and treasurers, managing director or manager of the one body, or where such managing agent or secretaries and treasurers are a firm, any partner in the firm, or where such managing agent or secretaries and treasurers are a private company, any director of such company, is- (a)the managing agent, secretaries and treasurers, managing director or manager of the other body; or (b)a partner in the firm acting as managing agent or secretaries and treasurers of the other body ; or ——————————————————————— 1 Ins. by Act 34 of 1966, s. 3 (w.e.f. 1-4-1967). 2 Ins. by Act 65 of 1960, S. 135. 3 Explanation numbered and lettered as sub-section (1B) by s. 135, ibid. 4 Subs. by s. 135, ibid., for ” For the purposes of this sub- section “. ———————————————————————- 324 (c)a director of the private company acting as managing agent or secretaries and treasurers of the other body ; or (ii) if a majority of the directors of the one body constitute, or at any time within the six months immediately preceding constituted, a majority of the directors of the other body ; 1[or] 1[(iii) if not less than one-third of the total voting power with respect to any matter relating to each of the two bodies corporate is exercised or controlled by the same individual or body corporate ; or (iv) if the holding company of the one body corporate is under the same management as the other body corporate within the meaning of clause (i), clause (ii) or clause (iii), or (v) if one or more directors of the one body corporate while holding, whether by themselves or together with their relatives, the majority of shares in that body corporate also hold, whether by themselves or together with their relatives, the majority of shares in the other body corporate.] 1[(1C) Every lending company shall keep a register showing- (a) the names of all bodies corporate under the same management as the lending company and the name of every firm in which a partner is a body corporate under the same management as the lending company, and (b) the following particulars in respect of every loan made, guarantee given or security provided by the lending company 2[in relation to any such body corporate] under this section:- (i)the name of the body corporate to which the loan has been made whether such loan has been made before or after that body corporate came under the same management as the lending company, (ii) the amount of the loan, (iii)the date on which the loan has been made, (iv)the date on which the guarantee has been given or security has been provided in connection with a ———————————————————————- 1 Ins. by Act 65 of 1960, s. 135. 2 Ins. by Act 31 of 1965, s. 46 (w.e.f. 1-4-1967). ———————————————————————- 325 loan made by any other person to, or to any other person by,

any body corporate or firm referred to in sub-section (1) or (1A) together with the name of the person, body corporate or firm. (1D) Particulars of 1[every loan, guarantee or security referred to in sub-section (1C)] shall be entered in the register aforesaid within three days of the making of such loan, or the giving of such guarantee or the provision of such security or in the case of any loan made, guarantee given or security provided before the commencement of the Companies (Amendment) Act, 1960, (65 of 1960.) within three months from such commencement or such further time not exceeding six months as the company may by special resolution allow. (1E) If default is made in complying with the provisions of sub- section (1C) or (1D), the company and every officer of the company who is in default, shall be punishable with fine which may extend to five hundred rupees and also with a further fine which may extend to fifty rupees for every day after the first during which the default continues. (1F) The register aforesaid shall be kept at the registered office of the lending company and- (a) shall be open to inspection at such office, and (b) extracts may be taken therefrom or copies thereof may be required, by any member of the company to the same extent and in the same manner and on the payment of the same fees as in the case of the register of members of the company; and the provisions of section 163 shall apply accordingly.]

2 [(2) Nothing contained in the foregoing provisions of this section shall apply to- (a) any loan made- (i) by a holding company to its subsidiary, or (ii)by the managing agent or secretaries and treasurers to any company under his or their management, or 3[(iii) by a banking company, or an insurance company, in the ordinary course of its business ; 4[or] ———————————————————————- 1 Subs. by Act 31 of 1965, s. 46, for ” every such loan, guarantee or security (w.e.f. 1-4-1967).

2 Subs. by Act 65 of 1960, S. 135, for sub-section (2). 3 Subs. by Act 31 of 1965, S. 46, for sub-clause (iii) (w.e.f. 1- 4-1967). 4 Ins. by Act 34 of 1966, s. 3 (w.e.f. 1-4-1967). ——————————————————————— 326 (iv) by a private company, unless it is a subsidiary of a public company; 1[or] (v) by a company established with the object of financing industrial enterprises;] (b) any guarantee given or any security provided- (i)by a holding company in respect of any loan made to its subsidiary; or (ii)by the managing agent or secretaries and treasurers in respect of any loan made to any company under his or their management; or 2[(iii) by a banking company, or an insurance company, in the ordinary course of its business ; or (iv)by a private company, unless it is a subsidiary of a public company; or (v)by a company established with the object of financing industrial enterprises.]

(3) Nothing in this section shall apply to a book debt unless the transaction represented by the book debt was from its inception in the nature of a loan or an advance.

(4) For the purposes of this section, any person in accordance with whose directions or instructions the Board of directors of a company is accustomed to act shall be deemed to be a director of the company.]

3[ (5) Where before the commencement of the Companies (Amendment) Act, 1965, any loan, guarantee or security has been made, given or provided by a company which could not have been made, given or provided under this section as amended by that Act, and such loan, guarantee or security is outstanding at such commencement, the company shall,’within six months from such commencement enforce the repayment of the loan made or, as the case may be, revoke the guarantee given or the security provided, notwithstanding any agreement to the contrary: Provided that the aforesaid period of six months may be extended by the Central Government on an application made to it in that behalf by the company.] 4[Explanation.–For the purposes of this section, “loan” includes any deposit of money made by one company with another company, not being a banking company.] ———————————————————————- 1 Ins. by Act 34 of 1966, s. 3 (w.e.f. 1-4-1967). 2 Subs. by s. 3, ibid., for sub-clause (iii) (w.e.f. 1-4-1967). 3 Ins. by Act 31 of 1965, s. 46 (w.e.f. 1-4-1967). 4 Added by Act 31 of 1988, s. 51 (w.e.f. 17-4-1989) ——————————————————————— 326A 370A Provisions as to certain loans which could not have been made ifsections 369 and 370 were in force. 1[370A.Provisions as to certain loans which could not have been made if sections 369 and 370 were in force. Where any loan made, guarantee given or security provided by a company and outstanding at the commencement of the Companies (Amendment) Act, 1960 (65 of 1960.) would not have been made, given or provided if section 369 or section 370 had’ been in force at the time when such loan was made, guarantee given or security provided, the company shall, within six months from the commencement of that Act, enforce the repayment of the loan made or, as the case may be, revoke the guarantee given or the security provided, notwithstanding any agreement to the contrary: Provided that the period of six months within which the company is required by this section to enforce the repayment of the loan or to revoke the guarantee or security, may be extended- (a) in the case of a loan guarantee or security under section 369, by the Central Government on an application made to it by the company for that purpose ; (b) in the case of a loan, guarantee or security under section 370, by a special resolution of the company.]

Penalty for contravention of section 369, 370 or 370A.

371.Penalty for contravention of section 369, 370 or 370A. (1) Every person who is a party to any contravention of 2[section 369 or section 370 [excluding sub-section (1C) or (1D)], or section 370A] including in particular any person to whom the loan is made, or in whose interest the guarantee is given or the security is provided, shall be punishable with fine which may extend to five thousand rupees or with simple imprisonment for a term which may extend to six months: Provided that where any such loan, or any loan in connection with which any such guarantee or security has been given or provided by the lending company, has been repaid in full, no punishment by way of imprisonment shall be imposed under this sub-section; and where the loan has been repaid in part, the maximum punishment which may be imposed under this sub-section by way of imprisonment shall be proportionately reduced.

(2) All persons who are knowingly parties to any such contra- vention shall be liable, jointly and severally, to the lending company for the repayment of the loan, or for making good the sum which the lending company may have been called upon to pay in virtue of the guarantee given or the security provided by such company. ———————————————————————- 1 Ins. by Act 65 of 1960, s. 136. 2 Subs. by s. 137, ibid., for “section 369 or 370 ———————————————————————- 326B

Purchase by company of shares, etc., of other companies. 1[372.Purchase by company of shares, etc., of other companies.

(1) A company, whether by itself or together with its subsidiaries (hereafter in this section and section 373 referred as the investing company), shall not be entitled to acquire, by way of subscription, purchase or otherwise (whether by itself, or by any individual or association of individuals in trust for it or for its benefit or on its account) the shares of any other body corporate except to the extent, and except in accordance with the restrictions and conditions, specified in this section.] 1[ The Board of directors of the investing company shall be entitled to invest in any shares of any other body corporate up to such percentage of the subscribed equity share capital, or the aggregate of the paid-up equity and preference share capital, of such other body corporate, whichever is less, as may be prescribed:] Provided that the aggregate of the investments so made by the Board in all other bodies corporate shall not exceed 1[such percentage of the aggregate of the subscribed capital and free reserves of the investing company, as may be prescribed:] Provided further that the aggregate of the investments made in all other bodies corporate in the same group shall not exceed 1[such percentage of the aggregate of the subscribed capital and free reserves of the investing company as may be prescribed.]

(3) In computing at any time the percentages specified in sub-

section (2) and the provisos thereto, the aggregate of the investments made by the investing company in other body or bodies corporate [whether before or after the commencement of the Companies (Amendment) Act, 1960 (65 of 1960),] up to that time shall be taken into account. ——————————————————————— 1 Subs. by Act 31 of 1988, s.52 (w.e.f. 17.4.1989) ——————————————————————— 327

(4) The investing company shall not make any investment in the shares of any other body corporate in excess of the percentages speci-

fied in sub-section (2) and the provisos thereto, unless the investment is sanctioned by a resolution of the investing company in general meeting and 1[unless previously approved] by the Central Government: Provided that the investing company may at any time invest up to

any amount in shares offered to it under clause (a) of sub-section (1) of section 81 (hereafter in this section referred to as rights shares) irrespective of the aforesaid percentages: Provided further that when at any time the investing company intends to make any investments in shares other than rights shares, then, in computing at that time any of the aforesaid percentages, all existing investments, if any, made in rights shares up to that time shall be included in the aggregate of the investments of the company.

(5) No investment shall be made by the Board of directors of an

investing company in pursuance of sub-section (2), unless it is sanc- tioned by a resolution passed at a meeting of the Board with the consent of all the directors present at the meeting, except those not entitled to vote thereon, and unless further notice of the resolution to be moved at the meeting has been given to every director in the manner specified in section 286.

(6) Every investing company shall keep a register of all invest- ments made by it in shares of any other body or bodies corporate (whether in the same group or not and whether in the case of a body corporate in the same group, such investments were made before or after that body came within the same group as the investing company), showing in respect of each investment the following particulars: – (a) the name of the body corporate in which the investment has been made ; (b) the date on which the investment has been made; (c) where the body corporate is in the same group as the investing company, the date on which the body corporate came in the same group; (d) the names of all bodies corporate in the same group as the investing company.

(7) Particulars of every investment to which sub-section (6) applies shall be entered in the register aforesaid within seven days of the making thereof or in the case of investments made before the commencement of the Companies (Amendment) Act, 1960, (65 of 1960.) within six ———————————————————————- 1 Subs. by Act 31 of 1988, s.52 (w.e.f. 17.4.1989) ———————————————————————- 328 months from such. commencement, or such further time as the Central Government may grant on an application by the company in that behalf.

(8) If default is made in complying with the provisions of sub-

section (6) or (7), the company, and every officer of the company who is in default, shall be punishable with fine which may extend to five hundred rupees and also with a further fine which may extend to fifty rupees for every day after the first during which the default continues.

(9) The register aforesaid shall be kept at the registered office of the investing company and- (a) shall be open to inspection at such office, and (b) extracts may be taken therefrom and copies thereof may be required, by any member of the investing company to the same extent, in the same manner, and on the payment of the same fees as in the case of the register of members of the investing company; and the provisions of section 163 shall apply accordingly.

(10) Every investing company shall annex in each balance-sheet prepared by it after the commencement of the Companies (Amendment) Act, 1960, (65 of 1960), a statement showing the bodies corporate (indicating separately the bodies corporate in the same group) in the shares of which investments have been made by it (including all investments, whether existing or not, made subsequent to the date as at which the previous balance-sheet was made out) and the nature and extent of the investments so made in each body corporate: Provided that in the case of a company whose principal business is the acquisition of shares, stock, debentures or other securities (hereafter in this section referred to as an investment company), it shall be sufficient if the statement shows only the investments existing on the date as at which the balance-sheet to which the statement is annexed has been made out.

(11) For the purposes of this section, a body corporate shall be deemed to be in the same group as the investing company- (a) if the body corporate is the managing agent of the investing company ; or (b) if the body corporate and the investing company should, in virtue of sub-section (1B) of section 370, be deemed to be under the same management. 329

(12) References in the foregoing provisions of this section to shares shall in the case of investments made by the investing company in other bodies corporate in the same group, be deemed to include references to debentures also.

(13) The provisions of this section except the first proviso to

subsection (2) 1[and sub-section (5)] shall also apply to an investment company.

(14) This section shall not apply- (a) to any banking or insurance company (b) to a private company, unless it is a subsidiary of a public company; (c) to any company established with the object of financing, whether by way of making loans or advances to, or subscribing to the capital of, private industrial enterprises in India, in any case where the Central Government has made or agreed to make to the company a special advance for the purpose or has guaranteed or agreed to guarantee the payment of moneys borrowed by the company from any institution outside India; 2[(d) to investments by a holding company in its subsidiary other than a subsidiary within the meaning of clause (a) of

sub-section (1) of section 4; (e) to investments by a managing agent or secretaries and treasurers in a company managed by him or them.]

Investments made before commencement of Act. 373.Investments made before commencement of Act. Where any investments have been made by a company 3[in any other body corporate in the same group] at any time after the first day of April, 1952, which, if section 372 had been then in force, could not have been made except on the authority of a resolution passed by the investing company and the approval of the Central Government, the authority of the company by means of a resolution and the approval of the Central Government shall be obtained to such investments, within six months from the commencement of this Act ; and if such authority and approval are not so obtained, the Board of directors of the company shall dispose of the investments, in so far as they may be in excess of the

limits specified in sub-section (2) of section 372 and 4[the second proviso to that sub-section], within two years from the commencement of this Act.

Penalty for contravention of section 372 or 373. 374.Penalty for contravention of section 372 or 373. If default is made in complying with the provisions of 5[section 372 [excluding

sub-sections (6) and (7)] or section 373), ——————————————————————— 1 Ins. by Act 31 of 1965, s. 47 (w.e.f. 15-10-1965). 2 Subs. by Act 31 of 1988, s.52 (w.e.f. 17.4.1989). 3 Ins. by Act 65 of 1960, s. 139. 4 Subs. by s. 139, ibid., for “the proviso to that sub-section. 5 Subs. by s. 140, ibid., for ” section 372 or 373.” ———————————————————————- 330 every officer of the company who is in default shall be punishable with fine which may extend to five thousand rupees.

Managing agent not engage in business competing with business ofmanaged company.

375. (1)Managing agent not engage in business competing with business of managed company. A managing agent shall not engage on his own account in any business which is of the same nature as, and directly competes with, the business carried on by a company of which he is the managing agent or by a subsidiary of such company, unless such company by special resolution permits him to do so.

(2) For the purposes of sub-section (1), a managing agent shall be deemed to be engaged in business on his own account, if such busi- ness is carried on by- (a) a firm in which he is a partner; or (b) a private company at any general meeting of which not less than twenty per cent. of the total voting power may be exercised or controlled by any of the following persons, or by any two or more of them acting together, namely, (i) the managing agent aforesaid; (ii) where such managing agent is a firm, any partner in the firm; and (iii) where such managing agent is a body corporate, any officer of the body corporate; (c) a body corporate (not being a private company) at any general meeting of which not less than seventy per cent. of the total voting power may be exercised or controlled by any of the following persons, or by any two or more of them acting together, namely, (i) the managing agent aforesaid; (ii) where such managing agent is a firm, any partner in the firm; and (iii) where such managing agent is a body corporate, any officer of such body corporate.

(3) If a managing agent engages in any business in contravention of this section, he shall be deemed to have received all profits and benefits accruing to him from such business, in trust for the company under his management or the subsidiary of such company, as the case may be; and where such profits and benefits are deemed to have been so received by the managing agent in trust for two or more such companies or subsidiaries, such profits and benefits shall be held by the managing agent in trust for each of them in such proportions as may be agreed upon between them or, failing such agreement, as may be decided by the Court.

Condition prohibiting reconstruction or amalgamation of companyexcept on continuance of managing agent, etc., to be void. 376.Condition prohibiting reconstruction or amalgamation of company except on continuance of managing agent, etc., to be void. Where any provision in the memorandum or articles of a company, or in any resolution passed in general meeting by, or by the 331 Board of directors of, the company, or in an agreement between the company and its managing agent or any other person, whether made before or after the commencement of this Act, prohibits the recons- truction of the company or its amalgamation with any other body corporate or bodies corporate, either absolutely or except on the condition that the managing director, managing agent, secretaries and treasurers, or manager of the company is appointed or reappointed as secretaries and treasurers, managing director, managing agent, or manager of the reconstructed company or of the body resulting from amalgamation, as the case may be, shall become void with effect from the commencement of this Act, or be void, as the case may be.

Restrictions on right of managing agent to appoint directors. 377.Restrictions on right of managing agent to appoint directors.

(1) The managing agent of a company may, if so authorised by its articles, appoint not more than two directors where the total number of the directors exceeds five, and one director where the total number does not exceed five.

1[(1A) Nothing contained in sub-section (1), or In any other provision of this Act, or in the memorandum or articles of a company, or in any agreement executed by it, or in any resolution passed by the company in general meeting, or by its Board of directors shall be deemed to authorise the managing agent to appoint the chairman of the Board of directors.]

(2) The managing agent may, at any time, remove any director so appointed, and appoint another director in his place or in the place of a director so appointed who resigns or otherwise vacates his office.

(3) Any provision contained in the articles of, or in any agreement with, the company, authorising the managing agent to appoint

more than the number of directors authorised under sub-section (1), which is in force immediately before the commencement of this Act, shall, in regard to the excess, be void, with effect from the expiry of one month from such commencement.

(4) Where at the commencement of this Act, the number of direc- tors appointed by the managing agent exceeds the number authorised

under sub-section (1), the managing agent shall determine which of them shall continue to hold office, and intimate the choice made by him to the company before the expiry of one month from such com- mencement ; and only the director or directors so chosen shall conti- nue to hold office as directors after such expiry. ———————————————————————- 1 Ins. by Act 65 of 1960, s. 141. ———————————————————————- 332

(5) If no choice is made by the managing agent as aforesaid, all the directors appointed by him shall, with effect from the expiry of one month from the commencement of this Act, be deemed to have vacated their offices.

1[(6) Where from any cause the total number of directors is so reduced as not to exceed five, but the number of directors appointed by the managing agent exceeds, after such reduction, the number

authorised under sub-section (1), the managing agent shall determine which of them shall continue to hold office and intimate the choice made by him to the company before the expiry of one month from the happening of the cause and only the director so chosen shall continue to hold office as director with effect from such expiry: Provided that if no choice is made by the managing agent as aforesaid, all the directors appointed by him shall with effect from such expiry, be deemed to have vacated their offices.] CHAP A SECRETARIES AND TREASURERS CHAPTER IV.-A. SECRETARIES AND TREASURERS

Appointment of secretaries and treasurers. 378.Appointment of secretaries and treasurers. Subject to the provisions of this Chapter, a company may appoint a firm or body corporate as its secretaries and treasurers. 2* * * * * *

Provisions applicable to managing agents to apply to secretaries andtreasurers with the exceptions and modifications specified in sections380 to

379. Provisions applicable to managing agents to apply to secretaries and treasurers with the exceptions and modifications specified in sections 380 to 383. Subject to the exceptions and modifications specified in sections 380 to 383,- (a) all the provisions of this Act applicable to, or in relation to, a managing agent which is a firm or body corporate shall apply to secretaries and treasurers; and (b) all the provisions of this Act applicable to, or in relation to, any person or persons connected or associated in any manner with such a managing agent shall apply to, or in relation to, any person or persons connected or associated with secretaries and treasurers in the like manner; and subject as aforesaid 3[and unless the context otherwise requires], all references in this Act to a managing agent or any person or persons connected or associated in any manner with a managing agent shall be construed accordingly, as including a reference to secretaries and treasurers or to the person or persons connected or associated with them in the like manner. ———————————————————————- 1 Ins. by Act 65 of 1960, s. 141. 2 Proviso omitted by s. 142, ibid. 3 Ins. by s. 143, ibid. ———————————————————————- 333

Sections 324, 330 and 332 not to apply. 380. Sections 324, 330 and 332 shall not apply to secretaries and treasurers.

Section 348 to apply subject to a modification. 381.Section 348 to apply subject to a modification. Section 348 shall apply to secretaries and treasurers subject to the modification that for the words “ten per cent. of the net 1* * * profits” occurring in the section, the words “seven and a half per cent. of the net 1* * * profits” shall be substituted.

Secretaries and treasurers not to appoint directors. 382.Secretaries and treasurers not to appoint directors. Secretaries and treasurers shall have no right to appoint any director of the company; and sections 377 and 261 shall not apply to, or in relation to, secretaries and treasurers, or persons connected or associated with them in the manner in which the persons specified in section 261 are connected or associated with managing agents.

Secretaries and treasurers not to sell goods or articles produced bycompany, etc., unless authorised by Board. 383.Secretaries and treasurers not to sell goods or articles produced by Secretaries and treasurers shall have no right, unless, and except to the extent to which, they are authorised by the Board of directors, to sell any goods or articles manufactured or produced by the company, or to purchase, obtain, or acquire machinery, stores, goods or materials for the purposes of the company, or to sell the same when no longer required for those purposes. 383A Certain companies to have secretaries.

2[383A.Certain companies to have secretaries. (1) Every company 3[having such paid-up share capital as may be prescribed] shall have a whole-time secretary, and where the Board of directors of any such company comprises only two directors, neither of them shall be the secretary of the company. 1[(1A) If a company fails to comply with the provisions of sub-

section (1), the company and every officer of the company who is in default, shall be punishable with fine which may extend to fifty rupees for every day during which the default continues: Provided that in any proceedings against a person in respect of an offence under this sub-section, it shall be a defence to prove that all reasonable efforts to comply with the provisions of sub-

section (1) were taken or that the financial position of the company was such that it was beyond its capacity to engage a whole- time secretary.]

(2) Where, at the commencement of the Companies (Amendment) Act, 1974 (31 of 1974),– (a) any firm or body corporate is holding office, as the secretary of a company, such firm or body corporate shall, within six months from such commencement, vacate office as secretary of such company; (b) any individual is holding office as the secretary of more than one company having a paid-up share capital of ———————————————————————- 1 The word “annual” omitted by Act 65 of 1960, s. 144. 2 Ins by Act 41 of 1974, s. 30.(w.e.f. 1-2-1975). 3 Subs. by Act 31 of 1988, s.53 (w.e.f. 1-12-1988). 4 Ins. by s.53, ibid. ——————————————————————— 334 rupees twenty-five lakhs or more, he shall, within a period of six months from such commencement, exercise his option as to the company of which he intends to continue as the secretary and shall, on and from such date, vacate office as secretary in relation to all other companies.] B. MANAGERS

Firm or body corporate not to be appointed manager. 384.Firm or body corporate not to be appointed manager. 1[No company] shall, after the commencement of this Act, appoint or employ, or after the expiry of six months from such commencement, continue the appointment or employment of, any firm, body corporate or association as its manager.

Certain persons not to be appointed managers.

385.Certain persons not to be appointed managers. (1) No company shall, after the commencement of this Act, appoint or employ, or continue the appointment or employment of, any person as its manager who- (a) is an undischarged insolvent, or has at any time within the preceding five years been adjudged an insolvent; or (b) suspends, or has at any time within the preceding five years suspended, payment to his creditors; or makes, or has at any time within the preceding five years made, a composition with them; or (c) is, or has at any time within the preceding five years been, convicted by a Court in India of an offence involving moral turpitude.

(2) The Central Government may, by notification in the Official Gazette, remove the disqualification incurred by any person in virtue

of clause (a), (b), or (c) of sub-section (1), either generally or in relation to any company or companies specified in the notification.

Number of companies of which a person may be appointed manager. 386.Number of companies of which a person may be appointed

manager. (1) No company shall, after the commencement of this Act, appoint or employ any person as manager, if he is either the manager or the managing director of any other company, except as provided in

sub-section (2).

(2) A company may appoint or employ a person as its manager, if he is the manager or managing director of one, and not more than one, other company : ——————————————————————— 1 Subs. by Act 65 of 1960, s. 145, for certain words. ——————————————————————— 334A Provided that such appointment or employment is made or approved by a resolution passed at a meeting of the Board with the consent of all the directors present at the meeting, and of which meeting and of the resolution to be moved thereat, specific notice has been given to all the directors then in India.

(3)Where, at the commencement of this Act, any person is holding the office either of manager or of managing director in more than two companies, he shall, within one year from the commencement of this Act, choose not more than two of those companies as companies in which he wishes to continue to hold the office of manager or managing director, as the case may be; and the provisions of clauses (b) and

(c) of sub-section (1) and of sub-sections (2) and (3) of section 276 shall apply mutatis mutandis in relation. to this case, as those provisions apply in relation to the case of a director.

(4)Notwithstanding anything contained in sub-sections (1) to (3), the Central Government may, by order, permit any person to be appointed as a manager of more than two companies, if the Central Government is satisfied that it is necessary that the companies should, for their proper working, function as a single unit and have a common manager. 1* * * * * *

Remuneration of manager. 387.Remuneration of manager. The manager of a company may, subject to the provisions of section 198, receive remuneration either by way of a monthly payment, or by way of a specific percentage,2* * *, of the “net profits” of the company calculated in the manner laid down in sections 349, 350 and 351, or partly by the one way and partly by the other : 3[Provided that except with the approval of the Central Govern- ment such remuneration shall not exceed in the aggregate five per cent. of the net profits.] ———————————————————————-

1 Sub-section (5) omitted by Act 65 of 1960, s. 146. 2 The words “not exceeding five” omitted by s. 147, ibid. 3 Ins. by s. 147, ibid. ———————————————————————- 335

Application of sections 269, 310, 311, 312 and 317 to managers. 388.Application of sections 269, 310, 311, 312 and 317 to managers. The provisions of sections 1[269, 310], 311 and 317 shall apply in relation to the manager of a company as they apply in relation to a managing director thereof, and those of section 312 shall apply in relation to the manager of a company, as they apply to a director thereof. 388A Sections 386 to 388 not to apply to certain private companies. 2[388A. Sections 386 to 388 not to apply to certain private companies. Sections 386, 387 and 388 shall not apply to a private company unless it is a subsidiary of a public company.] 3[CHAPTER IVA.-POWERS OF CENTRAL GOVERNMENT TO REMOVE MANAGERIAL PERSONNEL FROM OFFICE ON THE RECOMMENDATION OF THE 4[Company Law Board] 388B Reference to Company Law Board of cases against managerial personnel. 388B. Reference to Company Law Board of cases against managerial

personnel. (1) Where in the opinion of the Central Government there are circumstances suggesting- (a) that any person concerned in the conduct and management of the affairs of a company is or has been in connection therewith guilty of fraud, misfeasance, persistent negligence or default in carrying out his obligations and functions under the law, or breach of trust ; or (b) that the business of a company is not or has not been conducted and managed by such person in accordance with sound business principles or prudent commercial practices ; or (c) that a company is or has been conducted and managed by such person in a manner which is likely to cause, or has caused, serious injury or damage to the interest of the trade, industry or business to which such company pertains ; or (d) that the business of a company is or has been conducted and managed by such person with intent to defraud its creditors, members or any other persons or otherwise for a fraudulent or unlawful purpose or in a manner prejudicial to public interest, the Central Government may state a case against the person aforesaid and refer the same to the 4[Company Law Board.] with a request that the ———————————————————————– 1 Subs. by Act 65 of 1960, s. 148, for ” 310″ 2 Ins. by s. 149, ibid. 3 Ins. by Act 53 of 1963, s. 9 (w.e.f. 1-1-1964). 4 Subs. by Act 31 of 1988, s. 67 (w.e.f. 31.5.1991) ———————————————————————– 336 1[Company Law Board] may inquire into the case and 2[record a decision] as to whether or not such person is a fit and proper person to hold the office of director or any other office connected with the conduct and management of any company.

(2) Every case under sub-section (1) shall be stated in the form of an application which shall be presented to the 1[Company Law Board] or such officer thereof as it may appoint in this behalf.

(3) The person against whom a case is referred to the 1[Company Law Board] under this section shall be joined as a respondent to the application.

(4) Every such application- (a) shall contain a concise statement of such circumstances and materials as the Central Government may consider neces- sary for the purpose of the inquiry, and (b) shall be signed and verified in the manner laid down in the Code of Civil Procedure, 1908, (5 of 1908.) for the signature and verification of a plaint in a suit by the Central Government.

(5) The 1[Company Law Board] may at any stage of the proceedings allow the Central Government to alter or amend the application in such manner and no such terms as may be just, and all such alterations or amendments shall be made as may be necessary for the purpose of determining the real questions in the inquiry. 388C Interim order by Company Law Board.

388C. Interim order by Company Law Board. (1) Where during the pendency of a case before the 1[Company Law Board] it appears necessary to the 1[Company Law Board] so to do in the interest of the members or creditors of the company or in the public interest, the 1[Company Law Board] may on the application of the Central Government or on its own motion by an order- (a) direct that the respondent shall not discharge any of the duties of his office until further orders of the 1[Company Law Board], and (b)appoint a suitable person in place of the respondent to discharge the duties of the office held by the respondent subject to such terms and conditions as the 1[Company Law Board] may specify in the order.

(2) Every person appointed under clause (b) of sub-section (1) shall be deemed to be a public servant within the meaning of section 21 of the Indian Penal Code (45 of 1860). ———————————————————————- 1 Subs. by Act 31 of 1988, s.67 (w.e.f.31.5.1991). 2 Subs. by Act 17 of 1967), s. 4 and Sch., for record a finding (w.e.f. 1-7-1967). ———————————————————————– 336A 388D Decision of the Company Law Board. 388D. Decision of the Company Law Board. At the conclusion of the hearing of the case, the 7[Company Law Board] shall record its decision] stating therein specifically as to whether or not the respondent is a fit and proper person to hold the office of director or any other office connected with the conduct and management of any company. 388E Power of Central Government to remove managerial personnel on thebasis of Company Law Board’s decisions. 388E. Power of Central Government to remove managerial personnel

on the basis of Company Law Board’s decisions. (1) Notwithstanding any other provision contained in this Act, the 2[Central Government shall], by order, remove from office any director, or any other person concerned in the conduct and management of the affairs, of a company, against whom there is a 3[decision of the 1[ Company Law Board under this Chapter]: Provided that where a firm or a body corporate is concerned in the conduct and management of the affairs of a company as its managing agent orsecretaries and treasurers, and the 4[decision of the 1[Company Law Board] is against any partner in such firm, or any director of, or any person holding a general power of attorney from, such body corporate, the Central Government may also remove from the office of managing agent or secretaries and treasurers, such firm or body corporate.

5[(2) No order removing a firm or body corporate from the office of managing agents or secretaries and treasurers shall be made in

pursuance of the proviso to sub-section (1) unless such firm or body corporate has been given a reasonable opportunity of showing cause against the same: Provided that no matter shall be raised by such firm or body cor- porate before the Central Government if such matter has been decided by the 1[Company Law Board].

(3)The person against whom an order of removal from office is made under this section shall not hold the office of a director or any other office connected with the conduct and management of the affairs of any company during a period of five years from the date of the order of removal: Provided that the Central Government may, with the previous concurrence of the 1[Company Law Board] permit such person to hold any ———————————————————————- 1 Subs. by Act 31 of 1988, s.67 (w.e.f. 31-5-1991). 2 Subs. by Act 17 of 1967, s. 4 and Sch., for “Central Gover- nment may “(w.e.f. 1-71967). 3 Subs. by s. 4 and Sch., ibid., for ” finding of the Tribunal under this Chapter or a decision of a High Court thereon ” (w.e.f 1-7- 1967). 4 Subs. S. 4 and Sch., ibid., for “finding of the Tribunal or the decision of a High Court” (w.e.f. 1-7-1967).

5 Subs. by s. 4 and Sch., ibid., for sub-section (2) (w.e.f. 1-7- 1967). ———————————————————————– 336B such office before the expiry of the said period of five years.

(4) Notwithstanding anything contained in any other provision of this Act or any other law or any contract, memorandum or articles, on the removal of a person from the office of a director or, as the case may be, any other office connected with the conduct and management of the affairs of the company, that person shall not be entitled to, or be paid, any compensation for the loss or termination of office.

(5) On the removal of a person from the office of a director or, as the case may be, any other office connected with the conduct and management of the affairs of the company, the company may, with the previous approval of the Central Government, appoint another person to that office in accordance with the provision of this Act. CHAP ARBITRATION, COMPROMISES, ARRANGEMENTS AND RECONSTRUCTIONS CHAPTER V.-ARBITRATION, COMPROMISES, ARRANGEMENTS AND RECONSTRUCTIONS

[Power for companies to refer matters to arbitration.] 389. [Power for companies to refer matters to arbitration.] Rep. by the Companies (Amendment) Act, 1960 (65 of 1960), s. 150.

Interpretation of sections 391 and 393. 390.Interpretation of sections 391 and 393. In sections 391 and 393,- (a) the expression ” company ” means any company liable to be wound up under this Act; (b) the expression ” arrangement includes a reorganization of the share capital of the company by the consolidation of shares of different classes, or by the division of shares into shares of different classes or, by both those methods; and (c) unsecured creditors who may have filed suits, or obtained decrees shall he deemed to be of the same class as other unsecured creditors.

Power to compromise or make arrangements with creditors and members. 391.Power to compromise or make arrangements with creditors and

members. (1) Where a compromise or arrangement is proposed- (a) between a company and its creditors or any class of them ;or (b)between a company and its members or any class of them; the Court may, on the application of the company or of any creditor or member of the company, or, in the case of a company, which is being wound up, of the liquidator, order a meeting of the creditors or class of creditors, or of the members or class of members, as the 336c case may be, to be called, held and conducted in such manner as the Court directs.

(2) If a majority in number representing three-fourths in value of the creditors, or class of creditors, or members, or class of members as the case may be, present and voting either in person or, where proxies are allowed 1[under the rules made under section 643], by proxy, at the meeting, agree to any compromise or arrangement, the compromise or arrangement shall, if sanctioned by the Court, be bind- ing on all the creditors, all the creditors of the class, all the members, or all the members of the class, as the case may be, and also on the company, or, in the case of a company which is being wound up, on the liquidator and contributories of the company: 2[Provided that no order sanctioning any compromise or arrange- ment shall be made by the Court unless the Court is satisfied that the company or any other person by whom an application has been made under

sub-section (1) has disclosed to the Court, by affidavit or otherwise, all material facts relating to the company, such as the latest financial position of the company, the latest auditor’s report on the accounts of the company, the pendency of any investigation proceedings in relation to the company under sections 235 to 251, and the like.]

(3) An order made by the Court under sub-section (2) shall have no effect until a certified copy of the order has been filed with the Registrar.

(4) A copy of every such order shall be annexed to every copy of the memorandum of the company issued after the certified copy of the order has been filed as aforesaid, or in the case of a company not having a memorandum, to every copy so issued of the instrument constituting or defining the constitution of the company.

(5) 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 to ten rupees for each copy in respect of which default is made.

(6) The Court may, at any time after an application has been made to it under this section, stay the commencement or continuation of any suit or proceeding against the company on such terms as the Court thinks fit, until the application is finally disposed of.

(7) An appeal shall lie from any order made by a Court exercising original jurisdiction under this section to the Court empowered to ———————————————————————- 1 Ins. by Act 65 of 1960, s. 151. 2 Added by Act 31 of 1965, s. 48 (w.e.f. 15-10-1965). ———————————————————————- 336D hear appeals from the decisions of that Court, or if more than one Court is so empowered, to the Court of inferior jurisdiction.

The provisions of sub-sections (3) to (6) shall apply in relation to the appellate order and the appeal as they apply in relation to the original order and the application.

Power of High Court to enforce compromises and arrangements. 392. Power of High Court to enforce compromises and

arrangements. (1) Where a High Court makes an order under section 391 sanctioning a compromise or an arrangement in respect of a company, it– (a) shall have power to supervise the carrying out of the compromise or arrangement ; and (b) may, at the time of making such order or at any time thereafter, give such directions in regard to any matter 337 or make such modifications in the compromise or arrangement as it may consider necessary for the proper working of the compromise or arrangement.

(2) If the Court aforesaid is satisfied that a compromise or arrangement sanctioned under section 391 cannot be worked satisfactorily with or without modifications, it may, either on its own motion or on the application of any person interested in the affairs of the company, make an order winding up the company, and such an order shall be deemed to be an order made under section 433 of this Act.

(3) The provisions of this section shall, so far as may be, also apply to a company in respect of which an order has been made before the commencement of this Act under section 153 of the Indian Companies Act, 1913, (7 of 1913) sanctioning a compromise or an arrangement.

Information as to compromises or arrangements with creditors andmembers. 393.Information as to compromises or arrangements with creditors

and members. (1) Where a meeting of creditors or any class of creditors, or of members or any class of members, is called under section 391,- (a) with every notice calling the meeting which is sent to a creditor or member, there shall be sent also a statement setting forth the terms of the compromise or arrangement and explaining its effect; and in particular, stating any material interests of the directors, managing director, managing agent, secretaries and treasurers or manager of the company, whether in their capacity as such or as members or creditors of the company or otherwise, and the effect on those interests, of the compromise or arrangement, if, and in so far as, it is different from the effect on the like interests of other persons ; and (b) in every notice calling the meeting which is given by advertisement, there shall be included either such a statement as aforesaid or a notification of the place at which and the manner in which creditors or members entitled to attend the meeting may obtain copies of such a statement as aforesaid.

(2) Where the compromise or arrangement affects the rights of debenture holders of the company, the said statement shall give the like information and explanation as respects the trustees of any deed for securing the issue of the debentures as it is required to give as respects the company’s directors.

(3) Where a notice given by advertisement includes a notification that copies of a statement setting forth the terms of the compromise or arrangement proposed and explaining its effect can be obtained 338 by creditors or members entitled to attend the meeting, every creditor or member so entitled shall, on making an application in the manner indicated by the notice, be furnished by the company, free of charge, with a copy of the statement.

(4) Where default is made in complying with any of the requirements of this section, the company, and every officer of the company who is in default, shall be punishable with fine which may extend to five thousand rupees ; and for the purpose of this sub- section any liquidator of the company and any trustee of a deed for securing the issue of debentures of the company shall be deemed to be an officer of the company: Provided that a person shall not be punishable under this sub- section if he shows that the default was due to the refusal of any other person, being a director, managing director, managing agent, secretaries and treasurers, manager or trustee for debenture holders, to supply the necessary particulars as to his material interests.

(5) Every director, managing director, managing agent, secre- taries and treasurers or manager of the company, and every trustee for debenture holders of the company, shall give notice to the company of such matters relating to himself as may be necessary for the purposes of this section ; and if he falls to do so, he shall be punishable with fine which may extend to five hundred rupees.

Provisions for facilitating reconstruction and amalgamation ofcompanies. 394.Provisions for facilitating reconstruction and amalgamation

of companies. (1) Where an application is made to the Court under section 391 for the sanctioning of a compromise or arrangement proposed between a company and any such persons as are mentioned in that section, and it is shown to the Court- (a) that the compromise or arrangement has been proposed for the purposes of, or in connection with, a scheme for the reconstruction of any company or companies, or the amalgamation of any two or more companies; and (b) that under the scheme the whole or any part of the undertaking, property or liabilities of any company concerned in the scheme (in this section referred to as a “transferor company”) is to be transferred to another company (in this section referred to as “.the transferee company”); the Court may, either by the order sanctioning the compromise or arrangement or by a subsequent order, make provision for all or any of the following matters:- (i) the transfer to the transferee company of the whole or any part of the undertaking, property or liabilities of any transferor company; 339 (ii) the allotment or appropriation by the transferee company of any shares, debentures, policies, or other like interests in that company which, under the compromise or arrangement, are to be allotted or appropriated by that company to or for any person ; (iii) the continuation by or against the transferee company of any legal proceedings pending by or against any transferor company ; (iv) the dissolution, without winding up, of any transferor company; (v) the provision to be made for any persons who, within such time and in such manner as the Court directs, dissent from the compromise or arrangement ; and (vi) such incidental, consequential and supplemental matters as are necessary to secure that the reconstruction or amalgamation shall be fully and effectively carried out: 1[Provided that no compromise or arrangement proposed for the purposes of, or in connection with, a scheme for the amalgamation of a company, which is being wound up, with any other company or companies, shall be sanctioned by the Court unless the Court has received a report from the Company Law Board, or the Registrar that the affairs of the company have not been conducted in a manner prejudicial to the interests of its members or to public interest: Provided further that no order for the dissolution of any trans- feror company under clause (iv). shall be made by the Court unless the Official Liquidator has, on scrutiny of the books and papers of the company, made a report to the Court that the affairs of the company have not been conducted in a manner prejudicial to the interests of its members or to public interest.]

(2) Where an order under this section provides for the transfer of any property or liabilities, then, by virtue of the order, that property shall be transferred to and vest in, and those liabilities shall be transferred to and become the liabilities of, the transferee company ; and in the case of any property, if the order so directs, freed from any charge which is, by virtue of the compromise or arrangement, to cease to have effect.

(3) Within 2 [thirty] days after the making of an order under this section every company in relation to which the order is made shall ———————————————————————- 1 Added by Act 31 of 1965, s. 49 (w.e.f. 15-10-1965). 2 Subs. by s. 62 and Sch., ibid. for “fourteen” (w.e.f. 15-10- 1965). ———————————————————————- 340 cause a certified copy thereof to be filed with the Registrar for registration. If default is made in complying with this sub-section, the com- pany, and every officer of the company who is in default, shall be punishable with fine which may extend to fifty rupees.

(4) In this section- (a) ” property ” includes property, rights and powers of every description and ” liabilities ” includes duties of every description; and (b) ” transferee company ” does not include any company other than a company within the meaning of this Act ; but “transferor company ” includes any body corporate, whether a company within the meaning of this Act or not. 394A Notice to be given to Central Government for applications under sec-tions 391 and 394. 1[394A. Notice to be given to Central Government for applications under sections 391 and 394. The Court shall give notice of every application made to it under section 391 or 394 to the Central Government, and shall take into consideration the representations, if any, made to it by that Government before passing any order under any of these sections.]

Power and duty to acquire shares of shareholders dissenting fromscheme or contract approved by majority. 395. Power and duty to acquire shares of shareholders

dissenting from scheme or contract approved by majority.(1) Where a scheme or contract involving the transfer of shares or any class of shares in a company (in this section referred to as ” the transferor company “) to another company (in this section referred to as ” the transferee company “), has, within four months after the making of the offer in that behalf by the transferee company, been approved by the holders of not less than nine-tenths in value of the shares whose transfer is involved (other than shares already held at the date of the offer by, or by a nominee for, the transferee company or its subsidiary), the transferee company may, at any time within two months after the expiry of the said four months, give notice in the prescribed manner to any dissenting shareholder, that it desires to acquire his shares ; and when such a notice is given, the transferee company shall, unless, on an application made by the dissenting shareholder within one month from the date on which the notice was given, the Court thinks fit to order otherwise, be entitled and bound to acquire those shares on the terms on which, under the scheme or contract, the shares of the approving shareholders are to be trans- ferred to the transferee company: Provided that where shares in the transferor company of the same class as the shares whose transfer is involved are already held as aforesaid to a value greater than one-tenth of the aggregate of the ———————————————————————- 1 Ins. by Act 31 of 1965, s. 50 (w.e.f. 15-10-1965). ———————————————————————- 341 values of all the shares in the company of such class, the foregoing provisions of this sub-section shall not apply, unless- (a) the transferee company offers the same terms to all holders of the shares of that class (other than those already held as aforesaid) whose transfer is involved; and (b) the holders who approve the scheme or contract, besides holding not less than nine-tenths in value of the shares (other than those already held as aforesaid) whose transfer is involved, are not less than three-fourths in number of the holders of those shares;

(2) Where, in pursuance of any such scheme or contract as afore- said, shares, or shares of any class, in a company are transferred to another company or its nominee, and those shares together with any other shares or any other shares of the same class, as the case may be, in the first-mentioned company held at the date of the transfer by, or by a nominee for, the transferee company or its subsidiary com- prise nine-tenths in value of the shares. or the shares of that class, as the case may be, in the first-mentioned company, then,- (a) the transferee company shall, within one month from the date of the transfer (unless on a previous transfer in pur- suance of the scheme or contract it has already complied with this requirement), give notice of that fact in the prescribed manner to the holders of the remaining shares or of the remaining shares of that class, as the case may be, who have not assented to the scheme or contract; and (b) any such holder may, within three months from the giving of the notice to him, require the transferee company to acquire the shares in question and where a shareholder gives notice under clause (b) with respect to any shares, the transferee company shall be entitled and bound to acquire those shares on the terms on which, under the scheme or contract, the shares of the approving shareholders were transferred to it, or on such other terms as may be agreed, or as the Court on the application of either the transferee company or the shareholder thinks fit to order.

(3) Where a notice has been given by the transferee company

under sub-section (1) and the Court has not, on an application made by the dissenting shareholder, made an order to the contrary, the transferee company shall, on the expiry of one month from the date on which the notice has been given, or, if an application to the Court by the dissenting shareholder is then pending, after that application 342 has been disposed of, transmit a copy of the notice to the transferor company together with an instrument of transfer executed on behalf of the shareholder by any person appointed by the transferee company and on its own behalf by the transferee company, and pay or transfer to the transferor company the amount or other consideration representing the price payable by the transferee company for the shares which, by virtue of this section, that company is entitled to acquire ; and 1[the transferor company shall– (a) thereupon register the transferee company as the holder of those shares. and (b) within one month of the date of such registration, inform the dissenting shareholders of the fact of such registration and of the receipt of the amount or other consideration representing the price payable to them by the transferee company:] Provided that an instrument of transfer shall not be required for any share for which a share warrant is for the time being outstanding.

(4) Any sums received by the transferor company under this section shall be paid into a separate bank account, and any such sums and any other consideration so received shall be held by that company in trust for the several persons entitled to the shares in respect of which the said sums or other consideration were respectively received. 2[ (4A) (a) The following provisions shall apply in relation to every offer of a scheme or contract involving the transfer of shares or any class of shares in the transferor company to the transferee company, namely: – (i)every such offer or every circular containing such offer or every recommendation to the members of the transferor company by its directors to accept such offer shall be accompanied by such information as may be prescribed ; (ii) every such offer shall contain a statement by or on behalf of the transferee company, disclosing the steps it has taken to ensure that necessary cash will be available ; (iii) every circular containing, or recommending acceptance of, such offer shall be presented to the Registrar for registration and no such circular shall be issued until it is so registered ; ——————————————————————— 1 Subs. by Act 31 of 1965, s.58, for certain words (w.e.f. 15-10-1965). 2 Ins. by s. 51, ibid. (w.e.f. 15-10-1965). ——————————————————————— 342 343 (iv) the Registrar may refuse to register any such circular which does not contain the information required to be given under sub-clause (i) or which sets out such information in a manner likely to give a false impression; and (v) an appeal shall lie to the Court against an order of the Registrar refusing to register any such circular. (b) Whoever issues a circular referred to in sub-clause (iii) of clause (a), which has not been registered, shall be punishable with fine which may extend to five hundred rupees.]

(5) In this section- (a) “dissenting shareholder” includes a shareholder who has not assented to the scheme or contract and any shareholder who has failed or refused to transfer his shares to the transferee company in accordance with the scheme or contract; (b) transferor company ” and ” transferee company ” shall have the same meaning as in section 394.

(6) In relation to an offer made by the transferee company to shareholders of the transferor company before the commencement of this Act, this section shall have effect-

(a) with the substitution, in sub-section (1), for the words ” the shares whose transfer is involved (other than shares already held at the date of the offer by, or by a nominee for, the transferee company or its subsidiary),” of the words ” the shares affected ” and with the omission of the proviso to that sub-section;

(b) with the omission of sub-section (2);

(c) with the omission in sub-section (3) of the words “together with an instrument of transfer executed on behalf of the shareholder by any person appointed by the transferee company and on its own behalf by the transferee company and of the proviso to that sub-section ; and

(d) with the omission of clause (b) of sub-section (5).

Power of Central Government to provide for amalgamation of companiesin public interest. 396.Power of Central Government to provide for amalgamation of

companies in public interest. (1) Where the Central Government is satisfied that it is essential in the 1[public interest] that two or more companies should amalgamate, then, notwithstanding anything contained in sections ———————————————————————- 1 Subs. by Act 65 of 1960, s. 152, for “national interest”. ———————————————————————- 344 394 and 395 but subject to the provisions of this section, the Central Government may, by order notified in the Official Gazette, provide for the amalgamation of those companies into a single company with such constitution ; with such property, powers, rights, interests, authorities and privileges ; and with such liabilities, duties, and obligations; as may be specified in the order.

(2) 1[The order aforesaid may provide for the continuation by or against the transferee company of any legal proceedings pending by or against any transferor company and may also] contain such consequential, incidental and supplemental provisions as may, in the opinion of the Central Government, be necessary to give effect to the amalgamation.

(3) Every member or creditor (including a debenture holder) of each of the companies before the amalgamation shall have, as nearly as may be, the same interest in or rights against the company resulting from the amalgamation as he had in the company of which he was originally a member or creditor; and to the extent to Which the interest or rights of such member or creditor in or against the com- pany resulting from the amalgamation are less than his interest in or rights against the original company, he shall be entitled to com- pensation which shall be assessed by such authority 1[as may be prescribed and every such assessment shall be published in the Official Gazette] The compensation so assessed shall be paid to the member or creditor concerned by the company resulting from the amalgamation. 2[(3A) Any person aggrieved by any assessment of compensation

made by the prescribed authority under sub-section (3) may, within thirty days from the date of publication of such assessment in the Official Gazette, prefer an appeal to the Company Law Board and thereupon the assessment of the compensation shall be made by the Company Law Board]

(4) No order shall be made under this section, unless- (a) a copy of the proposed order has been sent in draft to each of the companies concerned; 3* * * 2[(aa) the time for preferring an appeal under sub-section (3A) has expired, or where any such appeal has been preferred, the appeal has been finally disposed of; and] (b) the Central Government has considered, and made such- modifications, if any, in the draft order as may seem to it desirable in the light of any suggestions and objections_ which may be received by it from any such company within such period as the Central Government may fix in that behalf. not being less than two months from the date on which the copy aforesaid is received by that company, or from any class of shareholders therein, or from any creditors or any class of creditors thereof.

(5) Copies of every order made under this section shall, as soon as may be after it has been made, be laid before both Houses of Parliament. 396A Preservation of books and papers of amalgamated company. 4[396A.Preservation of books and papers of amalgamated company. The books and papers of a company which has been amalgamated with, or whose shares have been acquired by, another ———————————————————————- 1 Subs., by Act 35 of 1985, s.3. 2 Ins. by s.3, ibid. 3 Omitted by s.3, ibid. 4 Ins. by Act 31 of 1965, s.52 (w.e.f. 15-10-1965). ———————————————————————– 344A company under this Chapter shall not be disposed of without the prior permission of the Central Government and before granting such permission, that Government may appoint a person to examine the books and papers or any of them for the purpose of ascertaining whether they contain any evidence of the commission of an offence in connection with the promotion or formation, or the management of the affairs, of the first-mentioned company or its amalgamation or the acquisition of its shares.] CHAP PREVENTION OF OPPRESSION AND MISMANAGEMENT CHAPTER VI.-PREVENTION OF OPPRESSION AND MISMANAGEMENT A. Powers of 1[Company Law Board]

Application to Company Law Board for relief in cases of oppression. 397.Application to Company Law Board for relief in cases of

oppression. (1) Any members of a company who complain that the affairs of the company 2[are being conducted in a manner prejudicial to public interest or] in a manner oppressive to any member or members (including any one or more of themselves) may apply to the 1[Company Law board] for an order under this section, provided such members have a right so to apply in virtue of section 399.

(2)If, on any application under sub-section (1), the 1[Company Law Board] is of opinion- (a) that the company’s affairs 2[are being conducted in a manner prejudicial to public interest or] in a manner oppressive to any member or members; and (b) that to wind up the company would unfairly prejudice such member or members, but that otherwise the facts would justify the making of a winding-up order on the ground that it was just and equitable that the company should be wound up; the 1[Company Law Board] may with a view to bringing to an end the matters complained of, make such order as it thinks fit.

Application to Company Law Board for relief in cases of mismanagement. 398.Application to Company Law Board for relief in cases of

mismanagement. (1) Any members of a company who complain- (a) that the affairs of the company 3[are being conducted in a manner prejudicial to public interest or] in a manner prejudicial to the interests of the company ; or (b) that a material change (not being a change brought about by, or in the interests of, any creditors including deben- ———————————————————————- 1 Subs. by Act 31 of 1988, s.67 (w.e.f.31-5-1991). 2 Subs. by Act 53 of 1963, s.10, for “are being conducted” (w.e.f. 1-1-1964). 3 Subs. by s.11, ibid., for “are being conducted” (w.e.f. 1-1-1964). ——————————————————————— 344B ture holders, or any class of shareholders, of the company) has taken place in the management or control of the company, whether by an alteration in its Board of directors, or of its managing agent or secretaries and treasurers 1[or manager], or in the constitution or control of the firm or body corporate acting as its managing agent or secretaries and treasurers, or in the ownership of the company’s shares, or if it has no share capital, in its membership, or in any other manner whatsoever, and that by reason of such change, it is likely that the affairs of the company 2[will be conducted in a manner prejudicial to public interest or] in a manner prejudicial to the interests of the company; may apply to the 3[Company Law Board] for an order under this section, provided such members have a right so to apply in virtue of section

(2) If, on any application under sub-section (1), the 3[Company Law Board] is of opinion that the affairs of the company are being conducted as aforesaid or that by reason of any material change as aforesaid in the management or control of the company, it is likely that the affairs of the company will be conducted as aforesaid, the 3[Company Law Board] may, with view to bringing to an end or preventing the matters complained or apprehended, make such order as it thinks fit.

Right to apply under section 397 and 398.

399.Right to apply under section 397 and 398. (1) The following members of a company shall have the right to apply under section 397 or 398: – (a) in the case of a company having a share capital, not less than one hundred members of the company or not less than one-tenth of the total number of its members, whichever is less, or any member or members holding not less than one- tenth of the issued share capital of the company, provided that the applicant or applicants have paid all calls and other sums due on their shares; (b) in the case of a company not having a share capital, not less than one-fifth of the total number of its members.

(2) For the purposes of sub-section (1), where any share or shares are held by two or more persons jointly, they shall be counted only as one member. ———————————————————————- 1 Ins. by Act 65 of 1960, s. 153. 2 Subs. by Act 53 of 1963, s. 11, for “will be conducted” (w.e.f. 1-1-1964). 3 Subs. by Act 31 of 1988, s.67(w.e.f.31.5.1991). ———————————————————————- 345

(3) Where any members of a company are entitled to make an

application in virtue of sub-section (1), any one or more of them having obtained the consent in writing of the rest, may make the application on behalf and for the benefit of all of them.

(4) The Central Government may, if in its opinion circumstances exist which make it just and equitable so to do, authorise any member or members of the company to apply to, the 1[Company Law Board] under section 397 or 398, notwithstanding that the requirements of clause

(a) or (b), as the case may be, of sub-section (1) are not fulfilled.

(5) The Central Government may before authorising any member or members as aforesaid, require such member or members to give security for such amount as the Central Government may deem reasonable, for the payment of any costs which the 1[Company Law Board] dealing with the application, may order such member or members to pay to any other person or persons who are parties to the application.

Notice to be given to Central Government of applications undersections 397 and 398. 400.Notice to be given to Central Government of applications under sections 397 and 398. The 1[Company Law Board] shall give notice of every application made to it under section 397 or 398 to. the Central Government, and shall take into consideration the representations, if any, made to it by that Government before passing a final order under that section.

Right of Central Government to apply under sections 397 and 398. 401.Right of Central Government to apply under sections 397 and 398. The Central Government may itself apply to the 1[Company Law Board] for an order under section 397 or 398, or cause an application to be made to the 1[Company Law Board] for such an order by any person authorised by it in this behalf.

Powers of Company Law Board on application under section 397 or 398. 402. Powers of Company Law Board on application under section 397 or 398. Without prejudice to the generality of the powers of the 1[Company Law Board] under section 397 or 398, any order under either section may provide for- (a) the regulation of the conduct of the company’s affairs in future; (b) the purchase of the shares or interests of any members of the company by other members thereof or by the company; (c) in the case of a purchase of its shares by the company as aforesaid, the consequent reduction of its share capital; (d) the termination, setting aside or modification of any agreement, howsoever arrived at, between the company on ———————————————————————- 1 Subs. by Act 31 of 1988, s.67 (w.e.f.31.5.1991). ———————————————————————- 346 the one hand, and any of the following persons, on the other, namely: – (i) the managing director, (ii) any other director, (iii)the managing agent, (iv) the secretaries and treasurers, and (v) the manager, upon such terms and conditions as may, in the opinion of the 1[Company Law Board] be just and equitable in all the circumstances of the case; (e) the termination, setting aside or modification of any agreement between the company and any person not referred to in clause (d), provided that no such agreement shall be terminated, set aside or modified except after due notice to the party concerned and provided further that no such agreement shall be modified except after obtaining the consent of the party concerned; (f) the setting aside of any transfer, delivery of goods, payment, execution or other act relating to property made or done by or against the company within three months before the date of the application under section 397 or 398, which would, if made or done by or against an individual, be deemed in his insolvency to be a fraudulent preference ; (g) any other matter for which in the opinion of the 1[Company Law Board] it is just and equitable that provision should be made.

Interim order by Company Law Board. 403.Interim order by Company Law Board. Pending the making by it of a final order under section 397 or 398, as the case may be, 1[Company Law Board] may, on the application of any party to the proceeding, make any interim order which it thinks fit for regulating the conduct of the company’s affairs, upon such terms and conditions as appear to it to be just and equitable.

Effect of alteration of memorandum or articles of company by orderunder section 397 or 398. 404.Effect of alteration of memorandum or articles of company by

order under section 397 or 398. (1) Where an order under section 397 or 398 makes any alteration in the memorandum or articles of a company, then, notwithstanding any other provision of this Act, the company shall not have power, except to the extent, if any, permitted in the order, to make without the leave of the 1[Company Law Board] any alteration whatsoever which is inconsistent with the order, either in the memorandum or in the articles. ———————————————————————- 1 Subs. by Act 31 of 1988, s.67 (w.e.f. 31.5.1991) ———————————————————————- 347

(2) Subject to the provisions of sub-section (1), the alterations made by the order shall, in all respects, have the same effect as if they had been duly made by the company in accordance with the provisions or this Act; and the said provisions shall apply accordingly to the memorandum or articles as so altered.

(3) A certified copy of every order altering, or giving leave to alter, a company’s memorandum or articles, shall within 1[thirty] days after the making thereof, be filed by the company with the Registrar who shall register the same.

(4) If default is made in complying with the provisions of sub-

section (3), the company, and every officer of the company who is in default, shall be punishable with fine which may extend to five thousand rupees.

Addition of respondents to application under section 397 or 398. 405.Addition of respondents to application under section 397 or 398. If the managing director or any other director, the managing agent, secretaries and treasurers or the manager, of a company, or any other person, who has not been impleaded as a respondent to any application under section 397 or 398 applies to be added as a respondent thereto, the 2[Company Law Board] shall, if it is satisfied that there is sufficient cause for doing so, direct that he may be added as a respondent accordingly.

Application of sections 539 to 544 to proceedings under sections 397or 398. 406.Application of sections 539 to 544 to proceedings under sections 397 or 398. In relation to an application under section 397 or 398, sections 539 to 544, both inclusive, shall apply in the form set forth in Schedule XI.

Consequences of termination or modification of certain agreements. 407.Consequences of termination or modification of certain

agreements. (1) Where an order 3* * * made under section 397 or 398 terminates, sets aside, or modifies an agreement such as is referred to in clause (d) or (e) of section 402,- (a) the order shall not give rise to any claims whatever against the company by any person for damages or for compen- sation for loss of office or in any other respect, either in pursuance of the agreement or otherwise; (b) no managing or other director, managing agent, secretaries and treasurers, or manager whose agreement is so termi- ——————————————————————— 1 Subs. by Act 31 of 1965, s.62 and Sch. for “fifteen” (w.e.f.15- 10-1965). 2 Subs. by Act 31 of 1988, s.67 (w.e.f. 31-5-1991). 3 Omitted by s.67, ibid (w.e.f.S31-5-1991). ———————————————————————- 348 nated or set aside and no person who, at the date of the order terminating or setting aside the agreement was or subsequently becomes, an associate of such managing agent or secretaries and treasurers shall, for a period of five years from the date of 1[the order terminating or setting aside the agreement], without the leave of the 2[Company Law Board], be appointed, or act, as the managing or other director, managing agent, secretaries and treasurers, or manager of the company.

(2)(a) Any person who knowingly acts as a managing or other director, managing agent, secretaries and treasurers, or manager of, a

company in contravention of clause (b) of sub-section (1); (b)where the person so acting as managing agent or as secre- taries and treasurers is a firm or body corporate, every partner in the firm, or every director of the body corporate who is knowingly a party to such contravention; and (c)every other director or every director, as the case may be, of the company, who is knowingly a party to such contravention; shall be punishable with imprisonment for a term which may extend to one year, or with fine which may extend to five thousand rupees, or with both.

(3) 2[Company Law Board] under clause (b) of sub-section (1) unless notice of the intention to apply for leave has been served on the Central Government and that Government has been given an opportunity of being heard in the matter. B. Powers of Central Government

Powers of Government to prevent oppression or mismanagement. 408.Powers of Government to prevent oppression or mismanagement.

3[(1) Notwithstanding anything contained in this Act, the Central Government, may appoint such number of persons as the Company Law Board may, by order in writing, specify as being necessary to effectively safeguard the interests of the company, or its shareholders or the public interests to hold office as directors thereof for such period, not exceeding three years on any one occasion, as it may think fit, if the Company Law Board, on a reference made to it by the Central Government or on an application of not less than one hundred members of the company or of the members of the company holding not less than one-tenth of the total voting power therein, is satisfied, after such inquiry as it deems fit to make, that it is necessary to make the appointment or appointments in order to prevent the affairs of the company being conducted either in a manner which is oppressive to any members of the company or in a manner which is prejudicial to the interests of the company or to public interest: Provided that in lieu of passing an order as aforesaid, the Company Law Board may, if the company has not availed itself of the option given to it under section 265, direct the company to amend its articles in the manner provided in that section and make fresh appointments of directors in pursuance of the articles as so amended, within such time as may be specified in that behalf by the Company Law Board.

(2) In case the Company Law Board passes an order under the

proviso to sub-section (1), it may, if it thinks fit, direct that until new directors are appointed in pursuance of the order aforesaid, such number of persons as the Company Law Board may, by order, specify as being necessary to effectively safeguard the interests of the company, or its shareholders or the public interest, shall hold office as additional directors of the company and on such directions, the Central Government shall appoint such additional directors.] ———————————————————————– 1 Subs. by Act 65 of 1960, s. 154, for “the order terminating the agreement”. 2 Subs. by Act 31 of 1988,s.67 (w.e.f.31-5-1991). 3 Subs. by s.67, ibid., (w.e.f. 31.5.1991). ———————————————————————– 349

(3) For the purpose of reckoning two-thirds or any other proportion of the total number of directors of the company, any director or directors appointed by the Central Government under sub-

section (1) or (2) shall not be taken into account.

1[(4) A person appointed under sub-section (1) to hold office as

a director or a person directed under sub-section (2) to hold office as an additional director, shall not be required to hold any qualification shares nor his period of office shall be liable to determination by retirement of directors by rotation; but any such director or additional director may be removed by the Central Government from his office at any time and another person may be appointed by that Government in his place to hold office as a director or, as the case may be, an additional director. ———————————————————————- 1 Ins. by Act 65 of 1960, s. 155. ———————————————————————– 350

(5) No change in the Board of directors made after a person is appointed or directed to hold office as a director or additional director under this section shall, so long as such director or additional director holds office, have effect unless confirmed by the 1[Company Law Board.]

2[(6) Notwithstanding anything contained in this Act or in any other law for the time being in force, where any person is appointed by the Central Government to hold office as director or additional

director of a company in pursuance of sub-section (1) or sub-section

(2), the Central Government may issue such directions to the company as it may consider necessary or appropriate in regard to its affairs 3[and such directions may include directions to remove an auditor already appointed and to appoint another auditor in his place or to alter the articles of the company, and upon such directions being given, the appointment, removal or alteration, as the case may be, shall be deemed to have come into effect as if the provisions of this Act in this behalf have been complied with without requiring any further act or thing to be done.]

(7) The Central Government may require the persons appointed as

directors or additional directors in pursuance of sub-section (1) or

sub-section (2) to report to the Central Government from time to time with regard to the affairs of the company.]

Power of company Law Board to prevent change in Board of directorslikely to affect company prejudicially. 409.Power of company Law Board to prevent change in Board of

directors likely to affect company prejudicially. (1) Where a complaint is made to the 4[Company Law Board], by the managing director or any other director, the managing agent, 5[the secretaries and treasurers or the manager]. of a company that as a result of a change which has taken place or is likely to take place in the ownership of any shares held in the company, a change in the Board of directors is likely to take place which (if allowed) would affect prejudicially the affairs of the company, the 4[Company Law Board] may, if satisfied, after such inquiry as it thinks fit to make that it is just and proper so to do, by order, direct that 6[no resolution passed or that may be passed or no action taken or that may be taken] to effect a change in the Board of directors after the date of the complaint shall have effect unless confirmed by the 4[Company Law Board] and any such order shall have effect notwithstanding anything to the contrary contained in any other provision of this Act or in the memorandum or articles of the company, or in any agreement with, or any resolution passed in general meeting by, or by the Board of directors of, the company.

(2) The 4[Company Law Board] shall have power when any such complaint is received by it, to make an interim order to the effect

set out in sub-section (1), before making or completing the inquiry aforesaid. ———————————————————————- 1 Subs. by Act 31 of 1988, s.54 (w.e.f. 15.6.1988). 2 Ins. by Act 41 of 1974, s. 31 (w.e.f. 1-2-1975). 3 Added by Act 31 of 1988, s.54 (w.e.f. 15-6-1988). 4 Subs. by s.67, ibid, (w.e.f. 31.5.1991). 5 Subs. by Act 65 of 1960, s. 156, for “or the secretaries and treasurers”. 6 Subs. by s.156, ibid., for “no resolution passed or action taken”. ———————————————————————- 351-352

(3) Nothing contained in sub-sections (1) and (2) shall apply to a private company, unless it is a subsidiary of a public company. CHAP CONSTITUTION AND POWERS OF 1[ADVISORY COMMITTEE] CHAPTER VII.-CONSTITUTION AND POWERS OF 1[ADVISORY COMMITTEE]

Appointment of Advisory Committee. 2[410. Appointment of Advisory Committee. For the purpose of advising the Central Government and the Company Law Board on such matters arising out of the administration of this Act as may be referred to it by that Government or Board, the Central Government, may constitute an Advisory Committee consisting of not more than five persons with suitable qualifications.] CHAP MISCELLANEOUS PROVISIONS CHAPTER VIII.-MISCELLANEOUS PROVISIONS Contracts where company is undisclosed principal

Contracts by agents of company in which company is undisclosedprincipal. 416.Contracts by agents of company in which company is

undisclosed principal. (1) Every person, being the managing agent, secretaries and treasurers, manager or other agent of a public company or of a private company which is a subsidiary of a public company, who enters into a contract for or on behalf of the company in which contract the company is an undisclosed principal shall, at the time of entering into the contract, make a memorandum in writing of the terms of the contract, and specify therein the person with whom it is entered into.

(2) Every such person who enters into a contract as aforesaid shall forthwith deliver the memorandum to the company and send copies thereof to each of the directors; and such memorandum shall ———————————————————————- 1 Subs. by Act 31 of 1965, s.53, for “ADVISORY COMMISSION” (w.e.f. 15-10-1965). 2 Subs. by s.53, ibid, for sections 410-415 (w.e.f.15-10-1965). ——————————————————————— 353 be filed in the office of the company and laid before the Board of directors at its next meeting.

(3) If default is made in complying with the requirements of this section,- (a) the contract shall, at the option of the company, be voidable as against the company; and (b) the person who enters into the contract, or every officer of the company who is in default, as the case may be, shall be punishable with fine which may extend to two hundred rupees. Employees’ securities and provident funds

Employees’ securities to be deposited in post office savings bank orScheduled Bank. 417.Employees’ securities to be deposited in post office savings

bank or Scheduled Bank. 1[(1) Any money or security deposited with a company by any of its employee in pursuance of his contract of service with the company shall be kept or deposited by the company within fifteen days from the date of deposit- (a) in a post office savings bank account, or (b) in a special account to be opened by the company for the purpose in the State Bank of India or in a Scheduled Bank, or (c) where the company itself is a Scheduled Bank, in a special account to be opened by the company for the purpose either in itself or in the State Bank of India or in any other Scheduled Bank.]

(2) No portion of such moneys or securities shall be utilised by the company except for the purposes agreed to in the contracts of service.

(3) A receipt for moneys deposited with a company by its em- ployee shall not be deemed to be a security within the meaning of this section; and the moneys themselves shall accordingly be depo-

sited 2* * *as provided in sub-section (1).

Provisions applicable to provident funds of employees.

418.Provisions applicable to provident funds of employees. 3[(1) Where a provident fund has been constituted by a company for its employees or any class of its employees, all moneys contributed to such fund (whether by the company or by the employees) or received or accruing by way of interest or otherwise ———————————————————————-

1 Subs. by Act 65 of 1960, s. 158, for sub-section (1). 2 The words “with a Scheduled Bank” omitted by s. 158, ibid.

3 Subs. by s. 159, ibid., for sub-section (1). ———————————————————————- 354 to such fund shall, within fifteen days from the date of contribution, receipt or accrual, as the case may be, either- (a) be deposited- (i) in a post office savings bank account, or (ii)in a special account to be opened by the company for the purpose in the State Bank of India or in a Scheduled Bank, or (iii)where the company itself is a Scheduled Bank, in a special account to be opened by the company for the purpose either in itself or in the State Bank of India or in any other Scheduled Bank; or (b) be invested in the securities mentioned or referred to in clauses (a) to (e) of section 20 of the Indian Trusts Act, 1882 (2 of 1882).]

(2) Notwithstanding anything to the contrary in the rules of any

provident fund to which sub-section (1) applies or in any contract between a company and its employees, no employee shall be entitled to receive, in respect of such portion of the amount to his credit in such fund as is invested in accordance with the provisions of sub-

section (1), interest at a rate exceeding the rate of interest yielded by such investment.

(3) Nothing in sub-section (1) shall affect any rights of an em- ployee under the rules of a provident fund to obtain advances from or to withdraw money standing to his credit in the fund, where the fund is a recognised provident fund within the meaning of clause (a) of section 58A of the Indian Income-tax Act, 1922 (11 of 1922)3, or where the rules of the fund contain provisions corresponding to rules 4, 5, 6, 7, 8, and 9 of the Indian Income-tax (Provident Funds Relief) Rules.

(4) Where a 1* * * trust has been created by a company with

respect to any provident fund referred to in sub-section (1), the company shall be bound to collect the contributions of the employees concerned and pay such contributions as well as its own contributions, if any, to the trustees 2[within fifteen days from the date of collection] ; but in other respects, the obligations laid on the company by this section shall devolve on the trustees and shall be discharged by them instead of by the company. ———————————————————————- 1 The word “separate” omitted by Act 65 of 1960, s. 159. 2 Ins. by s. 159, ibid. 3 See now the income-tax Act, 1961 (43 of 1961). ———————————————————————- 355

Right of employee to see bank’s receipt for moneys or securitiesreferred to in section 417 or 418. 419. Right of employee to see bank’s receipt for moneys or securities referred to in section 417 or 418. An employee shall be entitled, on request made in this behalf to the company, or to the

trustees referred to in sub-section (4) of section 418, as the case may be, to see the bank’s receipt for any money or security such as is referred to in sections 417 and 418.

Penalty for contravention of sections 417, 418 and 419. 420.Penalty for contravention of sections 417, 418 and 419. Any officer of a company, or any such trustee of a provident fund as is

referred to in sub-section (4) of section 418 who, knowingly, contravenes, or authorises or permits the contravention of, the provi- sions of section 417, 418 or 419, shall be punishable with 1[imprison- ment for a term which may extend to six months, or with fine which may extend to one thousand rupees]. Receivers and Managers

Filing of accounts of receivers. 421.Filing of accounts of receivers. Every receiver of the property of a company who has been appointed under a power conferred by any instrument and who has taken possession, shall once in every half year while he remains in possession, and also on ceasing to act as receiver, file with the Registrar an abstract in the prescribed form of his receipts and payments during the period to which the abstract relates.

Invoices,etc., to refer to receiver where there is one. 422.Invoices,etc., to refer to receiver where there is one. Where a receiver, of the property of a company has been appointed, every invoice, order for goods, or business letter issued by or on behalf of the company, or the receiver of the company, being a document on or in which the name of the company appears, shall contain a statement that a receiver has been appointed.

Penalty for non-compliance with sections 421 and 422. 423.Penalty for non-compliance with sections 421 and 422. If default is made in complying with the requirements of section 421 or 422, the company, and every officer of the company who is in default, shall be punishable with fine which may extend to two hundred rupees. For the purposes of this section, the receiver shall be deemed to be an officer of the company.

Application of sections 421 to 423 to receivers and managers appointedby Court and managers appointed in pursuance of an instrument. 424. Application of sections 421 to 423 to receivers and managers appointed by Court and managers appointed in pursuance of an instrument. The provisions of sections 421, 422 and 423 shall apply to the receiver of, or any person appointed to manage, the property of a company, appointed by a Court or to any person appointed to manage the property of a company under any powers contained in an instrument, in like manner as they apply to a receiver appointed under any powers contained in an instrument. ———————————————————————- 1 Subs. by Act 65 of 1960, s. 160, for “fine which may extend to five hundred rupees”. ———————————————————————- 356 PART VII WINDING UP CHAP PRELIMINARY CHAPTER I.-PRELIMINARY Modes of Winding Up

Modes of winding up.

425. Modes of winding up. (1) The winding up of a company may be either- (a) by the Court ; or (b) voluntary ; or (c) subject to the supervision of the Court.

(2) The provisions of this Act with respect to winding up apply, unless the contrary appears, to the winding up of a company in any of those modes. Contributories

Liability as contributories of present and past members. 426. Liability as contributories of present and past members.

(1) In the event of a company being wound up, every present and past member shall be liable to contribute to the assets of the company to an amount sufficient for payment of its debts and liabilities and the costs, charges and expenses of the winding up, and for the adjustment of the rights of the contributories among themselves, subject to the provisions of section 427 and subject also to the following qualifications, namely:- (a) a past member shall not be liable to contribute if he has ceased to be a member for one year or upwards before the commencement of the winding up; (b) a past member shall not be liable to contribute in respect of any debt or liability of the company contracted after he ceased to be a member; (c) no past member shall be liable to contribute unless it appears to the Court that the present members are unable to satisfy the contributions required to be made by them in pursuance of this Act; (d) in the case of a company limited by shares, no contribution shall be required from any past or present member exceeding the amount, if any, unpaid on the shares in respect of which he is liable as such member; (e) in the case of a company limited by guarantee, no contribution shall, subject to the provisions of sub-section

(2), be required from any past or present member exceeding 357 the amount undertaken to be contributed by him to the assets of the company in the event of its being wound up; (f) nothing in this Act shall invalidate any provision contained in any policy of insurance or other contract whereby the liability of individual members on the policy or contract is restricted, or whereby the funds of the company are alone made liable in respect of the policy or contract; (g) a sum due to any past or present member of the company in his character as such, by way of dividends, profits or otherwise, shall not be deemed to be a debt of the company payable to that member, in a case of competition between himself and 1[any creditor claiming otherwise than in the character of a past or present member of the company]; but any such sum shall be taken into account for the purpose of the final adjustment of the rights of the contributories among themselves.

(2) In the winding up of a company limited by guarantee which has a share capital, every member of the company shall be liable, in addition to the amount undertaken to be contributed by him to the assets of the company in the event of its being wound up, to contri- bute to the extent of any sums unpaid on any shares held by him as if the company were a company limited by shares.

Obligations of directors, managing agents and managers whose liabilityis unlimited. 427. Obligations of directors, managing agents and managers whose liability is unlimited. In the winding up of a limited company, any director, managing agent, secretaries and treasurers or manager, whether past or present, whose liability is, under the provisions of this Act, unlimited, shall, in addition to his liability, if any, to contribute as an ordinary member, be liable to make a further contribution as if he were, at the commencement of the winding up, a member of an unlimited company: Provided that- (a) a past director, managing agent, secretaries and treasurers or manager shall not be liable to make such further contribution, if he has ceased to hold office for a year or upwards before the commencement of the winding up; (b) a past director, managing agent, secretaries and treasurers or manager shall not be liable to make such further contribution in respect of any debt or liability of the company contracted after he ceased to hold office; ———————————————————————- 1 Subs. by Act 65 of 1960, s. 161, for certain words. ———————————————————————- 358 (c) subject to the articles of the company, a director, managing agent, secretaries and treasurers or manager shall not be liable to make such further contribution, unless the Court deems it necessary to require the contribution in order to satisfy the debts and liabilities of the company, and the costs, charges and expenses of the winding up.

Definition of “contributory”. 428. Definition of “contributory”. The term “contributory” means every person liable to contribute to the assets of a company in the event of its being wound up, and includes the holder of any shares which are fully paid up ; and for the purposes of all proceedings for determining, and all proceedings prior to the final determination of, the persons who are to be deemed contributories, includes any person alleged to be a contributory.

Nature of liability of contributory.

429. Nature of liability of contributory. (1) The liability of a contributory shall create a debt accruing due from him at the time when his liability commenced, but payable at the times specified in calls made on him for enforcing the liability.

(2) No claim founded on the liability of a contributory shall be cognizable by any Court of Small Causes sitting outside the presi- dency-towns.

Contributories in case of death of member.

430. Contributories in case of death of member. (1) If a contributory dies either before or after he has been placed on the list of contributories, his legal representatives shall be liable in a due course of administration, to contribute to the assets of the company in discharge of his liability, and shall be contributories accordingly.

(2) If the legal representatives make default in paying any money ordered to be paid by them, proceedings may be taken for administering the estate of the deceased contributory and compelling payment thereout of the money due.

(3) For the purposes of this section, where the deceased contributory was a member of a Hindu joint family governed by the Mitakshara School of Hindu Law, his legal representatives shall be deemed to include the surviving coparceners.

Contributories in case of insolvency of member. 431. Contributories in case of insolvency of member. If a contributory is adjudged insolvent, either before or after he has been placed on the list of contributories,- (a) his assignees in insolvency shall represent him for all the purposes of the winding up, and shall be contributories accordingly, and may be called on to admit to proof against the estate of the insolvent, or otherwise to allow 359 to be paid out of his assets in due course of law, any money due from the insolvent in respect of his liability to contribute to the assets of the company ; and (b) there may be proved against the estate of the insolvent the estimated value of his liability to future calls as well as calls already made.

Contibutories in case of winding up of a body corporate which is amember. 432. Contibutories in case of winding up of a body corporate which is a member. If a body corporate which is a contributory is ordered to be wound up, either before or after it has been placed on the list of contributor,– (a) the liquidator of the body corporate shall represent it for all the purposes of the winding up of the company and shall be a contributory accordingly, and may be called on to admit to proof against the assets of the body corporate, or otherwise to allow to be paid out of its assets in due course of law, any money due from the body corporate in respect of its liability to contribute to the assets of the company ; and (b) there may be proved against the assets of the body corporate the estimated value of its liability to future calls as well as calls already made. CHAP WINDING UP BY THE COURT CHAPTER II-WINDING UP BY THE COURT Cases in which company may be wound up by the Court

Circumstances in which company may be wound up by Court. 433. Circumstances in which company may be wound up by Court. A company may be wound up by the Court,- (a) if the company has, by special resolution, resolved that the company be wound up by the Court; (b) if default is made in delivering the statutory report to the Registrar or in holding the statutory meeting ; (c) if the company does not commence its business within a year from its incorporation, or suspends its business for a whole year; (d) if the number of members is reduced, in the case of a public company, below seven, and in the case of a private company, below two; (e) if the company is unable to pay its debts; (f) if the Court is of opinion that it is just and equitable that the company should be wound up. 360

Company when deemed unable to pay its debts.

434. Company when deemed unable to pay its debts. (1) A company shall be deemed to be unable to pay its debts- (a) if a creditor, by assignment or otherwise, to whom the company is indebted in a sum exceeding five hundred rupees then due, has served on the company, by causing it to be delivered at its registered office, by registered post or otherwise, a demand under his hand requiring the company to pay the sum so due and the company has for three weeks thereafter neglected to pay the sum, or to secure or compound for it to the reasonable satisfaction of the creditor; (b) if execution or other process issued on a decree or order of any Court in favour of a creditor of the company is returned unsatisfied in whole or in part; or (c) if it is proved to the satisfaction of the Court that the company is unable to pay its debts, and, in determining whether a company is unable to pay its debts, the Court shall take into account the contingent and prospective liabilities of the company.

(2) The demand referred to in clause (a) of sub-section (1) shall be deemed to have been duly given under the hand of the creditor if it is signed by any agent or legal adviser duly authorised on his behalf, or in the case of a firm, if it is signed by any such agent or legal adviser or by any member of the firm. Transfer of Proceedings

Transfer of winding up proceedings to District Court. 435. Transfer of winding up proceedings to District Court. Where a High Court Makes an order for winding up a company under this Act, the High Court may, if it thinks fit, direct all subsequent proceedings to be had in a District Court subordinate thereto or, with the consent of any other High Court, in such High Court or in a District Court subordinate thereto ; and thereupon for the purposes of winding up the company, the Court in respect of which such direction is given shall be deemed to be “the Court” within the meaning of this Act, and shall have all the jurisdiction and powers of a High Court under this Act.

Withdrawal and transfer of winding up from one District Court toanother. 436. Withdrawal and transfer of winding up from one District Court to another. If during the progress of a winding up in a District Court, it appears to the High Court that the same could be more conveniently proceeded with in the High Court or in any other District Court, the High Court may, as the case may require,- (a) withdraw the case and proceed with the winding up itself; or 361 (b) transfer the case to such other District Court, whereupon the winding up shall proceed in that District Court.

Power of High Court to retain winding up proceedings in DistrictCourt. 437. Power of High Court to retain winding up proceedings in District Court. The High Court may direct that a District Court in which proceedings for winding up a company have been commenced, shall retain and continue the proceedings, although it may not be the Court in which they ought to have been commenced.

Jurisdiction of High Court under sections 435, 436 and 437 to beexercised at any time and at any stage. 438. Jurisdiction of High Court under sections 435, 436 and 437 to be exercised at any time and at any stage. The High Court shall have jurisdiction to pass orders under section 435, 436 or 437 at any time and at any stage and either on the application of, or without application from, any of the parties to the proceedings. Petition for Winding Up

Provisions as to applications for winding up.

439. Provisions as to applications for winding up. (1) An application to the Court for the winding up of a company shall be by petition presented, subject to the provisions of this section,- (a) by the company; or (b) by any creditor or creditors, including any contingent or prospective creditor or creditors ; or (c) by any contributory or contributories ; or (d) by all or any of the parties specified in clauses (a), (b) and (c), whether together or separately ; or (e) by the Registrar ; or (f) in a case falling under section 243, by any person authoised by the Central Government in that behalf.

(2) A secured creditor, the holder of any debentures (including debenture stock), whether or not any trustee or trustees have been appointed in respect of such and other like debentures, and the trustee for the holders of debentures, shall be deemed to be creditors

within the meaning of clause (b) of sub-section (1).

(3) A contributory shall be entitled to present a petition for winding up a company, notwithstanding that he may be the holder of fully paid-up shares, or that the company may have no assets at all, or may have, no surplus assets left for distribution among the share- holders after the satisfaction of its liabilities. 362

(4) A contributory shall not be entitled to present a petition for winding up a company unless- (a) either the number of members is reduced, in the case of a public company, below seven, and, in the case of a private company, below two; or (b) the shares in respect of which he is a contributory, or some of them, either were originally allotted to him or have been held by him, and registered in his name, for at least six months during the eighteen months immediately before the commencement of the winding up, or have devolved on him through the death of a former holder.

(5) Except in the case where he is authorised in pursuance of

clause (f) of sub-section (1), the Registrar shall be entitled to pre- sent a petition for winding up a company only on the grounds specified in 1[clauses (b), (c), (d), (e) and (f)] of section 433: Provided that the Registrar shall not present a petition on the ground specified in clause (e) aforesaid, unless it appears to him either from the financial condition of the company as disclosed in its balance-sheet or from the report of 2[a special auditor appointed under section 233A or an inspector] appointed under section 235 or 237, that the company is unable to pay its debts : Provided further that the Registrar shall obtain the previous sanction of the Central Government to the presentation of the petition on any of the grounds aforesaid.

(6) The Central Government shall not accord its sanction in pur- suance of the foregoing proviso, unless the company has first been afforded an opportunity of making its representations, if any.

(7) A petition for winding up a company on the ground specified in clause (b) of section 433 shall not be presented- (a) except by the Registrar or by a contributory ; or (b) before the expiration of fourteen days after the last day on which the statutory meeting referred to in clause (b) aforesaid ought to have been held.

(8) Before a petition for winding up a company presented by a contingent or prospective creditor is admitted, the leave of the Court ———————————————————————– 1 Subs. by Act 65 of 1960, s. 162, for ” clauses (b), (c) and (e)”. 2 Subs. by s. 162, ibid., for “an inspector “. ———————————————————————– 363 shall be obtained for the admission of the petition and such leave shall not be granted- (a) unless, in the opinion of the Court there is a prima facie case for winding up the company ; and (b) until such security for costs has been given as the Court thinks reasonable.

Right to present winding up petition where company is being wound upvoluntarily or subject to Court’s supervision. 440. Right to present winding up petition where company is being

wound up voluntarily or subject to Court’s supervision. (1) Where a company being wound up voluntarily or subject to the supervision of the Court, a petition for its winding up by the Court may be presented by- (a) any person authorised to do so under section 439, and subject to the provisions of that section ; or (b) the Official Liquidator.

(2) The Court shall not make a winding up order on a petition

presented to it under sub-section (1), unless it is satisfied that the voluntary winding up or winding up subject to the supervision of the Court cannot be continued with due regard to the interests of the creditors or contributories or both. Commencement of Winding Up

Commencement of winding up by Court.

441. Commencement of winding up by Court. (1) Where, before the presentation of a petition for the winding up of a company by the Court, a resolution has been passed by the company for voluntary winding up, the winding up of the company shall be deemed to have commenced at the time of the passing of the resolution, and unless the Court, on proof of fraud or mistake, thinks fit to direct otherwise, all proceedings taken in the voluntary winding up shall be deemed to have been validly taken.

(2) In any other case, the winding up of a company by the Court shall be deemed to commence at the time of the presentation of the petition for the winding up. Powers of Court

Power of Court to stay or restrain proceedings against Company. 442. Power of Court to stay or restrain proceedings against Company. At any time after the presentation of a winding up petition and before a winding up order has been made, the company, or any creditor or contributory, may- (a) where any suit or proceeding against the company is pending in the Supreme Court or in any High Court, apply to the Court in which the suit or proceeding is pending for a stay of proceedings therein ; and 364 (b) where any suit or proceeding is pending against the company in any other Court, apply to the Court having jurisdiction to wind up the company , to restrain further proceedings in the suit or proceeding; and the Court to which application is so made may stay or restrain the proceedings accordingly, on such terms as it thinks fit.

Powers of Court on hearing petition.

443. Powers of Court on hearing petition. (1) On hearing a winding up petition, the Court may- (a) dismiss it, with or without costs; or (b) adjourn the hearing conditionally or unconditionally; or (c) make any interim order that it thinks fit ; or (d) make an order for winding up the company with or without costs, or any other order that it thinks fit: Provided that the Court shall not refuse to make a winding up order on the ground only that the assets of the company have been mortgaged to an amount equal to or in excess of those assets, or that the company has no assets.

(2) Where the petition is presented on the ground that it is just and equitable that the company should be wound up, the Court may refuse to make an order of winding up, if it is of opinion that some other remedy is available to the petitioners and that they are acting unreasonably in seeking to have the company wound up instead of pursuing that other remedy.

(3) Where the petition is presented on the ground of default in delivering the statutory report to the Registrar, or in holding the statutory meeting, the Court may- (a) instead of making a winding up order, direct that the statutory report shall be delivered or that a meeting shall be held; and (b) order the costs to be paid by any persons who, in the opinion of the Court, are responsible for the default. Consequences of Winding up Order

Order for winding up to be communicated to Official Liquidator andRegistrar. 444. Order for winding up to be communicated to Official Liquidator and Registrar. Where the Court makes an order for the winding up of a company, the Court shall forthwith cause intimation thereof to be sent to the 1[Official Liquidator and the Registrar]. ———————————————————————- 1 Subs. by Act 65 of 1960, s. 163, for “Official Liquidator”. ———————————————————————- 365

Copy of winding up order to be filed with Registrar.

445. Copy of winding up order to be filed with Registrar. (1) On the making of a winding up order, it shall be the duty of the petitioner in the winding up proceedings and of the company to file with the Registrar a certified copy of the order, within 1[thirty days] from the date of the making of the order. If default is made in complying with the foregoing provision, the petitioner, or as the case may require, 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 each day during which the default continues. 2[(1A) In computing the period of 1[thirty days] from the date of

the making of a winding up order under sub-section (1), the time requisite for obtaining a certified copy of the order shall be excluded.]

(2) On the filing of a certified copy of the winding up order, the Registrar shall make a minute thereof in his books relating to the company, and shall notify in the Official Gazette that such an order has been made.

(3) Such order shall be deemed to be notice of discharge to the officers and employees of the company, except when the business of the company is continued.

Suits stayed on winding up order.

446. Suits stayed on winding up order. (1) When a winding up order has been made or the Official Liquidator has been appointed as provisional liquidator, no suit or other legal proceeding shall be commenced. or if pending at the date of the winding up order, shall be proceeded with, against the company, except by leave of the Court and subject to such terms as the Court may impose.

3[(2) The Court which is winding up the company shall, notwith- standing anything contained in any other law for the time being, in force, have jurisdiction to entertain, or dispose of- (a) any suit or proceeding by or against the company; (b) any claim made by or against the company (including claims by or against any of its branches in India) ; (c) any application made under section 391 by or in respect of the company; (d) any question of priorities or any other question whatsoever, whether of law or fact, which may relate to or arise in course of the winding up of the company; ———————————————————————- 1 Subs. by Act 31 of 1965, s. 62 and Sch., for “one month” (w.e.f. 15-10-1965). 2 Ins. by Act 65 of 1960, s. 164.

3 Subs. by s. 165, ibid., for sub-section (2). ———————————————————————– 366 whether such suit or proceeding has been instituted or is instituted, or such claim or question has arisen or arises or such application has been made or is made before or after the order for the winding up of the company, or before or after the commencement of the Companies (Amendment) Act, 1960.] (65 of 1960.)

(3)Any suit or proceeding by or against the company which is pending in any Court other than that in which the winding up of the company is proceeding may, notwithstanding anything contained in any other law for the time being in force, be transferred to and disposed of by that Court.

1[(4) Nothing in sub-section (1) or sub-section (3) shall apply to any proceeding pending in appeal before the Supreme Court or a High Court.]

Effect of winding up order. 447. Effect of winding up order. An order for winding up a company shall operate in favour of all the creditors and of all the contributories of the company as if it had been made on the joint petition of a creditor and of a contributory. Official Liquidators

Appointment of Official Liquidator.

448. Appointment of Official Liquidator. (1) For the purposes of this Act, so far as it relates to the winding up of companies by the Court,- (a) there shall be attached to each High Court, an Official Liquidator appointed by the Central Government, who shall be a whole-time officer, unless the Central Government considers that there will not be sufficient work for a whole-time officer in which case a part-time officer may be appointed; and (b) the Official Receiver attached to a District Court for insolvency purposes, or if there is no such Official Receiver, then, such person as the Central Government may, by notification in the Official Gazette appoint for the pur- pose, shall be the Official Liquidator attached to the District Court. 2 [(1A) The Central Government may appoint one or more Deputy or Assistant Official Liquidators to assist the Official Liquidator in the discharge of his functions.]

(2) All references to the ” Official Liquidator ” in this Act shall be construed as references to the Official Liquidator referred to in ———————————————————————- 1 Ins. by Act 65 of 1960, s. 165. 2 Ins. by s. 166, ibid. ———————————————————————- 367

clause (a) or clause (b), as the case may be, of sub-section (1) 1[and as including references to Deputy or Assistant Official Liquidators appointed under sub-section (1A)].

Official Liquidator to be liquidator. 449. Official Liquidator to be liquidator. On a winding up order being made in respect of a company, the Official Liquidator shall, by virtue of his office, become the liquidator of the company.

Appointment and powers of provisional liquidator.

450. Appointment and powers of provisional liquidator. (1) At any time after the presentation of a winding up petition and before the making of a winding up order, the Court may appoint the Official Liquidator to be liquidator provisionally.

(2) Before appointing a provisional liquidator, the Court shall give notice to the company and give a reasonable opportunity to it to make its representations, if any, unless, for special reasons to be recorded in writing, the Court thinks fit to dispense with such notice.

(3) Where a provisional liquidator is appointed by the Court, the Court may limit and restrict his powers by the order appointing him or by a subsequent order; but otherwise he shall have the same powers as a liquidator.

(4) The Official Liquidator shall cease to hold office as provisional liquidator, and shall become the liquidator, of the company, on a winding up order being made.

General provisions as to liquidators.

451. General provisions as to liquidators. (1) The liquidator shall conduct the proceedings in winding up the company and perform such duties in reference thereto as the Court may impose.

(2) Where the Official liquidator becomes or acts as liquidator, there shall be paid to the Central Government out of the assets of the company such fees as may be prescribed.

(3) The acts of a liquidator shall be valid, notwithstanding any defect that may afterwards be discovered in his appointment or qualification; Provided that nothing in his sub-section shall be deemed to give validity to acts done by a liquidator after his appointment has been shown to be invalid.

Style, etc., of liquidator. 452. Style, etc., of liquidator. A liquidator shall be described by the style of “The Official Liquidator ” of the particular company in respect of which he acts, and not by his individual name. ———————————————————————- 1 Ins. by Act 65 of 1960, s. 166. ———————————————————————- 368

Receiver not to be appointed of assets with liquidator. 453. Receiver not to be appointed of assets with liquidator. A receiver shall not be appointed of assets in the hands of a liquidator except by, or with the leave of, the Court.

Statement of affairs to be made to Official Liquidator.

454. Statement of affairs to be made to Official Liquidator. (1) Where the Court has made a winding up order or appointed the Official Liquidator as provisional liquidator, unless the Court in its discretion otherwise orders, there shall be made out and submitted to the Official Liquidator a statement as to the affairs of the company in the prescribed form, verified by an affidavit, and containing the following particulars, namely:- (a) the assets of the company, stating separately the cash balance in hand and at the bank, if any, and the negotiable securities, if any, held by the company; (b) its debts and liabilities; (c) the names, residences and occupations of its creditors, stating separately the amount of secured and unsecured debts; and in the case of secured debts, particulars of the securities given, whether by the company or an officer thereof, their value and the dates on which they were given ; (d) the debts due to the company and the names, residences and occupations of the persons from whom they are due and the amount likely to be realised on account thereof ; (e) such further or other information as may be prescribed, or as the Official Liquidator may require.

(2) The statement shall be submitted and verified by one or more of the persons who are at the relevant date the directors and by the person who is at that date the manager, secretary or other chief officer of the company, or by such of the persons hereinafter in this sub-section mentioned, as the Official Liquidator, subject to the direction of the Court, may require to submit and verify the statement, that is to say, persons- (a) who are or have been officers of the company; (b) who have taken part in the formation of the company at any time within one year before the relevant date; (c) who are in the employment of the company, or have been in the employment of the company within the said year, and are, in the opinion of the Official Liquidator, capable of giving the information required; 369 (d) who are or have been within the said year officers of, or in the employment of, a company which is, or within the said year was, an officer of the company to which the statement relates.

(3) The statement shall be submitted within twenty-one days from the relevant date, or within such extended time not exceeding three months from that date as the Official Liquidator or the Court may, for special reasons, appoint.

(4) Any person making, or concurring in making, the statement and affidavit required by this section shall be allowed, and shall be paid by the Official liquidator or provisional liquidator, as the case may be, out of the assets of the company, such costs and expenses incurred in and about the preparation and making of the statement and affidavit as the Official Liquidator may consider reasonable, subject to an appeal to the Court.

1[(5) If any person, without reasonable excuse, makes default in complying with any of the requirements of this section, he shall be punishable with imprisonment for a term which may extend to two years, or with fine which may extend to one hundred rupees for every day during which the default continues, or with both. (5A) The Court by which the winding up order is made or the provisional liquidator is appointed, may take cognizance of an offence

under sub-section (5) upon receiving a complaint of facts constituting such an offence and trying the offence itself in accordance with the procedure laid down in the Code of Criminal Procedure, 1898, (5 of 1898.) 2[for the trial of summons cases by magistrates.]]

(6) Any person stating, himself in writing to be a creditor or contributory of the company shall be entitled, by himself or by his agent, at all reasonable times, on payment of the prescribed fee, to inspect the statement submitted in pursuance of this section, and to a copy thereof or extract therefrom.

(7) Any person untruthfully so stating himself to be a creditor or contributory shall be guilty of an offence under section 182 of the Indian Penal Code; (45 of 1860.) and shall, on the application of the Official Liquidator, be punishable accordingly.

(8) In this section, the expression “the relevant date” means, in a case where a provisional liquidator is appointed, the date of his appointment, and in a case where no such appointment is made, the date of the winding up order. ———————————————————————-

1 Subs. by Act 65 of 1960, s. 167, for sub-section (5). 2 See now the Code of Criminal Procedure, 1973 (2 of 1974). ———————————————————————- 370

Report by Official Liquidator.

455. Report by Official Liquidator. (1) In a case where a winding up order is made, the Official Liquidator shall, as soon as practicable after receipt of the statement to be submitted under section 454 and not later than six months from the date of the order, 1[or such extended period as may be allowed by the Court] or in a case where the Court orders that no statement need be submitted, as soon as practicable after the date of the order, submit a preliminary report to the Court— (a) as to the amount of capital issued, subscribed, and paid up, and the estimated amount of assets and liabilities, giving separately, under the heading of assets, particulars of (i) cash and negotiable securities; (ii) debts due from contributories ; (iii) debts due to the company and securities, if any, available in respect thereof ; (iv) movable and immovable properties belonging to the company; and (v) unpaid calls; (b) if the company has failed, as to the causes of the failure; and (c) whether, in his opinion, further inquiry is desirable as to any matter relating to the promotion, formation, or failure of the company, or the conduct of the business thereof.

(2) The Official Liquidator may also, if he thinks fit, make a further report, or further reports, stating the manner in which the company was promoted or formed and whether in his opinion any fraud has been committed by any person in its promotion or formation, or by any officer of the company in relation to the company since the formation thereof, and any other matters which, in his opinion, it is desirable to bring to the notice of the Court.

(3) If the Official Liquidator states in any such further report that in his opinion a fraud has been committed as aforesaid, the Court shall have the further powers provided in section 478.

Custody of company’s property.

456. Custody of company’s property. (1) Where a winding up order has been made or where a provisional liquidator has been appointed, the liquidator 2[or the provisional liquidator, as the case may be,] shall take into his custody or under his control, all the property, effects and actionable claims to which the company is or appears to be entitled. 2 [(1A) For the purpose of enabling the liquidator or the provisional liquidator, as the case may be, to take into his custody or ———————————————————————- 1 Ins. by Act 65 of 1960, s. 168. 2 Ins. by s. 169, ibid. ———————————————————————- 371 under his control, any property, effects or actionable claims to which the company is or appears to be entitled, the liquidator or the provisional liquidator, as the case may be, may by writing request the Chief Presidency Magistrate or the District Magistrate within whose jurisdiction such property, effects or actionable claims or any books of account or other documents of the company may be found, to take possession thereof, and the Chief Presidency Magistrate or the District Magistrate may thereupon, after such notice as he may think fit to give to any party, take possession of such property, effects, actionable claims, books of account or other documents and deliver possession thereof to the liquidator or the provisional liquidator. (1B) For the purpose of securing compliance with the provisions of sub-section (1A), the Chief Presidency Magistrate or the District Magistrate may take or cause to be taken such steps and use or cause to be used such force as may in his opinion be necessary.]

(2)All the property and effects of the company shall be deemed to be in the custody of the court as from the date of the order for the winding up of the company.

Powers of liquidator.

457. Powers of liquidator. (1) The liquidator in a winding up by the Court shall have power, with the sanction of the Court,- (a) to institute or defend any suit, prosecution, or other legal proceeding, civil or criminal, in the name and on behalf of the company; (b) to carry on the business of the company so far as may be necessary for the beneficial winding up of the company; (c) to sell the immovable and movable property and actionable claims of the company by public auction or private contract, with power to transfer the whole thereof to any person or body corporate, or to sell the same in parcels; (d) to raise on the security of the assets of the company any money requisite; (e) to do all such other things as may be necessary for winding up the affairs of the company and distributing its assets.

(2) The liquidator in a winding up by the Court shall have power- (i) to do all acts and to execute, in the name and on behalf of the company, all deeds, receipts, and other documents, 372 and for that purpose to use, when necessary, the company’s seal ; 1[(ia) to inspect the records and returns of the company on the files of the Registrar without payment of any fee;] (ii) to prove, rank and claim in the insolvency of any contributory, for any balance against his estate, and to receive dividends in the Insolvency, in respect of that balance, as a separate debt due from the insolvent, and rateably with the other separate creditors ; (iii) to draw, accept, make and endorse any bill of exchange, hundi or promissory note in the name and on behalf of the company, with the same effect with respect to the liability of the company as if the bill, hundi, or note had been drawn, accepted, made or indorsed by or on behalf of the company in the course of its business ; (iv) to take out, in his official name, letters of administration to any deceased contributory, and to do in his official name any other act necessary for obtaining payment of any money due from a contributory or his estate which cannot be conveniently done in the name of the company, and in all such cases, the money due shall, for the purpose of enabling the liquidator to take out the letters of ad- ministration or recover the money, be deemed to be due to the liquidator himself: Provided that nothing herein empowered shall be deemed to affect the rights, duties and privileges of any Administrator-General; (v) to appoint an agent to do any business which the liquidator is unable to do himself.

(3) The exercise by the liquidator in a winding up by the Court of the powers conferred by this section shall be subject to the control of the Court; and any creditor or contributory may apply to the Court with respect to the exercise or proposed exercise of any of the powers conferred by this section.

Discretion of liquidator. 458. Discretion of liquidator. The Court may, by order, provide that the liquidator may exercise any of the powers referred to in sub-

section (1) of section 457 without the sanction or intervention of the Court : Provided always that the exercise by the liquidator of such powers shall be subject to the control of the Court. ———————————————————————- 1 Ins. by Act 65 of 1960, s. 170. ———————————————————————– 373 458A Exclusion of certain time in computing periods of limitation. 1[458A. Exclusion of certain time in computing periods of limitation. Notwithstanding anything in the Indian Limitation Act, 1908 (9 of 1908.) or in any other law for the time being in force, in computing the period of limitation prescribed for any suit or application in the name and on behalf of a company which is being wound up by the Court, the period from the date of commencement of the winding up of the company to the date on which the winding up order is made (both inclusive) and a period of one year immediately following the date of the winding up order shall be excluded.]

Provision for legal assistance to liquidator. 459. Provision for legal assistance to liquidator. The liquidator may, with the sanction of the Court, appoint an advocate, attorney or pleader entitled to appear before the Court to assist him in the performance of his duties.

Exercise and control of liquidator’s powers.

460. Exercise and control of liquidator’s powers. (1) Subject to the provisions of this Act, the liquidator shall, in the administration of the assets of the company and the distribution thereof among its creditors, have regard to any directions which may be given by resolution of the creditors or contributories at any general meeting or by the committee of inspection.

(2)Any directions given by the creditors or contributories at any general meeting shall, in case of conflict, be deemed to override any directions given by the committee of inspection.

(3) The liquidator- (a) may summon general meetings of the creditors or contributories, whenever he thinks fit, for the purpose of ascertaining their wishes; (b) shall summon such meetings at such times, as the creditors or contributories, as the case may be, may, by resolution, direct, or whenever requested in writing to do so by not less than one-tenth in value of the creditors or contributories, as the case may be.

(4) The liquidator may apply to the Court in the manner pres- cribed, if any, for directions in relation to any particular matter arising in the winding up.

(5) Subject to the provisions of this Act, the liquidator shall use his own discretion in the administration of the assets of the company and in the distribution thereof among the creditors.

(6) Any person aggrieved by any act or decision of the liquidator may apply to the Court ; and the Court may confirm, reverse or modify the act or decision complained of, and make such further order as it thinks just in the circumstances. ———————————————————————- 1 Ins. by Act 65 of 1960, s. 171. ———————————————————————- 374

Books to be kept by liquidator.

461. Books to be kept by liquidator. (1) The liquidator shall keep, in the manner prescribed, proper books in which he shall cause entries or minutes to be made of proceedings at meetings and of such other matters as may be prescribed.

(2) Any creditor or contributory may, subject to the control of the Court, inspect any such books, personally or by his agent.

Audit of liquidator’s accounts.

462. Audit of liquidator’s accounts. (1) The liquidator shall, at such times as may be prescribed but not less than twice in each year during his tenure of office, present to the Court an account of his receipts and payments as liquidator.

(2) The account shall be in the prescribed form, shall be made in duplicate, and shall be verified by a declaration in the prescribed form.

(3) The Court shall cause the account to be audited in such manner as it thinks fit ; and for the purpose of the audit, the liquidator shall furnish the Court with such vouchers and information as the Court may require, and the Court may, at any time, require the production of, and inspect, any books or accounts kept by the liquidator.

(4) When the account has been audited, one copy thereof shall be filed and kept by the Court, and the other copy shall be delivered to the Registrar for filing; and each copy shall be open to the inspection of any creditor, contributory or person interested.

2[(4A) Where an account referred to in sub-section (4) relates to a Government company in liquidation, the liquidator shall forward a copy thereof,- (a) to the Central Government, if that Government is a member of the Government company; or (b) to any State Government, if that Government is a member of the Government company; or (c) to the Central Government and any State Government, if both the Governments are members of the Government company.

(5) The liquidator shall cause the account when audited or a summary thereof to be printed, and shall send a printed copy of the account or summary by post to every creditor and to every contributory: Provided that the Court may in any case dispense with compliance with this sub-section.

Control of Central Government over liquidators.

463. Control of Central Government over liquidators. (1) The Central Government shall take cognisance of the conduct of liquidators of companies which are being wound up by the Court, and, if a liquidator does not faithfully perform his duties and duly observe all the requirements imposed on him by this Act 1[or by the Indian Companies Act, 1913],(7 of 1913.) the rules thereunder, or otherwise, with respect to the performance of his duties, or if any complaint is made to the Central Government by any creditor or contributory in regard thereto, the Central Government shall inquire into the matter, and take such action thereon as it may think expedient: ———————————————————————- 1 Ins. by Act 65 of 1960, s.172. 2 Ins. by Act 31 of 1988, s.55 (w.e.f. 15-6-1988). ——————————————————————— 375 1[Provided that where the winding up of a company has commenced before the commencement of this Act, the Court may, on the application of the Central Government, appoint in place of such liquidator the Official Liquidator as the liquidator in such winding up.]

(2)The Central Government may at any time require any liquidator of a company which is being wound up by the Court to answer any inquiry in relation to any winding up in which he is engaged, and may, if the Central Government thinks fit, apply to the Court to examine him or any other person on oath concerning the winding up.

(3)The Central Government may also direct a local investigation to be made of the books and vouchers of the liquidators. Committee of inspection

Appointment and Composition of committee of inspection. 464. Appointment and Composition of committee of inspection.

2[(1)(a) The Court may, at the time of making an order for the winding up of a company or at any time thereafter, direct that there shall be appointed a committee of inspection to act with the liquidator. (b)Where a direction is given by the Court as aforesaid, the liquidator shall, within two months from the date of such direction, convene a meeting of the creditors of the company (as ascertained from its books and documents) for the purpose of determining who are to be members of the committee.]

3 [(2) The liquidator shall, within fourteen days from the date of the creditors’ meeting or such further time as the Court in its discretion may grant for the purpose, convene a meeting of the contributories to consider the decision of the creditors’ meeting with respect to the membership of the committee ; and it shall be open to the meeting of the contributories to accept the decision of the creditors’ meeting with or without modifications or to reject it.]

(3)Except in the case where the meeting of the contributories’ accepts the decision of the creditors’ meeting in its entirety, it shall be the duty of the liquidator to apply to the Court for directions as to 4* * * what the composition of the committee shall be, and who shall be members thereof. ———————————————————————- 1 Ins. by Act 65 of 1960, s. 172.

2 Subs. by s. 173, ibid., for sub-section (1).

3 Subs. by s. 173, ibid., for sub-section (2). 4 The words ” whether there shall be a committee of inspection ; and, if so,” omitted by s. 173, ibid. ———————————————————————- 376

Constitution and proceedings of committee of inspection.

465. Constitution and proceedings of committee of inspection. (1) A committee of inspection appointed in pursuance of section 464 shall consist of not more than twelve members, being creditors and contributories of the company or persons holding general or special powers of attorney from creditors or contributories, in such proportions as may be agreed on by the meetings of creditors and con- tributories, or in case of difference of opinion between the meetings, as may be determined by the Court.

(2) The committee of inspection shall have the right to inspect the accounts of the liquidator at all reasonable times.

(3) The committee shall meet at such times as it may from time to time appoint, 1* * * and the liquidator or any member of the committee may also call a meeting of the committee as and when he thinks necessary.

(4) The quorum for a meeting of the committee shall be one-third of the total number of the members, or two, whichever is higher.

(5) The committee may act by a majority of its members present at a meeting, but shall not act unless a quorum is present.

(6) A member of the committee may resign by notice in writing signed by him and delivered to the liquidator.

(7) If a member of the committee is adjudged an insolvent, or compounds or arranges with his creditors, or is absent from five consecutive meetings of the committee without the leave of those members who, together with himself, represent the creditors or con- tributories, as the case may be, his office shall become vacant.

(8) A member of the committee may be removed at a meeting of creditors if he represents creditors, or at a meeting of contributories if he represents contributories, by an ordinary resolution of which seven days’ notice has been given, stating the object of the meeting.

(9) On a vacancy occurring in the committee, the liquidator shall forthwith summon a meeting of creditors or of contributories, as the case may require, to fill the vacancy; and the meeting may, by resolution, reappoint the same, or appoint another, creditor or contributory to fill the vacancy: Provided that if the liquidator, having regard to the position in the winding up, is of the opinion that it is unnecessary for the vacancy to be filled, he may apply to the Court and the Court may make an order that the vacancy shall not be filled, or shall not be filled except in such circumstances as may be specified in the order. ———————————————————————- 1 The words “and, failing such appointment, at least once a month,” omitted by Act 65 of 1960, s. 174. ———————————————————————- 377

(10)The continuing members of the committee, if not less than two, may act notwithstanding any vacancy in the committee. General powers of Court in case of winding up by Court

Power of Court to stay winding up.

466. Power of Court to stay winding up. (1) The Court may at any time after making a winding up order, on the application either of the Official Liquidator or of any creditor or contributory, and on proof to the satisfaction of the Court that all proceedings in relation to the winding up ought to be stayed, make an order staying the proceedings, either altogether or for a limited time, on such terms and conditions as the Court thinks fit.

(2) On any application under this section, the Court may, before making an order, require the Official Liquidator to furnish to the Court a report with respect to any facts or matters which are in his opinion relevant to the application.

(3) A copy of every order made under this section shall forthwith be forwarded by the company, or otherwise as may be prescribed, to the Registrar, who shall make a minute of the order in his books relating to the company.

Settlement of list of contributories and application of assets. 467. Settlement of list of contributories and application of

assets. (1) As soon as may be after making a winding up order, the Court shall settle a list of contributories, with power to rectify the register of members in’ all cases where rectification is required in pursuance of this Act, and shall cause the assets of the company to be collected and applied in discharge of its liabilities: Provided that, where it appears to the Court that it will not be necessary to make calls on, or adjust the rights of, contributories, the Court may dispense with the settlement of a list of contributories.

(2) In settling the list of contributories, the Court shall distinguish between those who are contributories in their own right and those who are contributories as being representatives of, or liable for the debts of, others.

Delivery of property to liquidator. 468. Delivery of property to liquidator. The Court may, at any time after making a winding up order, require any contributory for the time being on the list of contributories, and any trustee, receiver, banker, agent, 1[officer or other employee] of the company, to pay, deliver, surrender or transfer forthwith, or within such time as the Court directs, to the liquidator, any money, property or books and papers 2[in his custody or under his control] to which the company is prima facie entitled. ———————————————————————- 1 Subs. by Act 65 of 1960, s. 175, for “or officer”. 2 Subs. by s. 175, ibid., for “in his hands”. ———————————————————————- 378

Payment of debts due by contributory and extent of set-off. 469. Payment of debts due by contributory and extent of set-off.

(1) The Court may, at any time after making a winding up order, make an order on any contributory for the time being on the list of contributories to pay, in the manner directed by the order, any money due to the company, from him or from the estate of the person whom he represents, exclusive of any money payable by him or the estate by virtue of any call in pursuance of this Act.

(2) The Court, in making such an order, may- (a) in the case of an unlimited company, allow to the contributory, by way of set-off, any money due to him or to the estate which he represents, from the company, on any independent dealing or contract with the company, but not any money due to him as a member of the company in respect of any dividend or profit ; and (b) in the case of a limited company, make to any director, managing agent, secretaries and treasurers or manager whose liability is unlimited, or to his estate, the like allowance.

(3) In the case of any company, whether limited or unlimited, when all the creditors have been paid in full, any money due on any account whatever to a contributory from the company may be allowed to him by way of set-off against any subsequent call.

Power of Court to make calls.

470. Power of Court to make calls. (1) The Court may,at any time after making a winding up order and either before or after it has ascertained the sufficiency of the assets of the company,- (a) make calls on all or any of the contributories for the time being on the list of the contributories, to the extent of their liability, for payment of any money which the Court considers necessary to satisfy the debts and liabilities of the company, and the costs, charges and expenses of winding up, and for the adjustment of the rights of the contributories among themselves; and (b) make an order for payment of any calls so made.

(2) In making a call, the Court may take into consideration the probability that some of the contributories may, partly or wholly, fail to pay the call.

Payment into bank of moneys due to company.

471. Payment into bank of moneys due to company. (1) The Court may order any contributory, purchaser or other person from whom any money is due to the company to pay the money into the public account of India in the Reserve Bank of India instead of to the liquidator. 379

(2) Any such order may be enforced in the same manner as if the Court had directed payment to the liquidator.

Moneys and securities paid into Bank to be subject to order of Court. 472. Moneys and securities paid into Bank to be subject to order of Court. All moneys, bills, hundis, notes and other securities paid or delivered into the Reserve Bank of India in the course of the wind- ing up of a company by the Court, shall be subject in all respects to the orders of the Court.

Order on contributory to be conclusive evidence.

473. Order on contributory to be conclusive evidence. (1) An order made by the Court on a contributory shall, subject to any right of appeal, be conclusive evidence that the money, if any, thereby appearing to be due or ordered to be paid is due.

(2) All other pertinent matters stated in the order shall be taken to be truly stated as against all persons and in all proceedings whatsoever.

Power to exclude creditors not proving in time. 474. Power to exclude creditors not proving in time. The Court may fix a time or times within which creditors are to prove their debts or claims, or to be excluded from the benefit of any distribution made before those debts or claims are proved.

Adjustment or rights of contributories. 475. Adjustment or rights of contributories. The Court shall adjust the rights of the contributories among themselves, and distribute any surplus among the persons entitled thereto.

Power to order costs. 476. Power to order costs. The Court may, in the event of the assets being insufficient to satisfy the liabilities, make an order for the payment out of the assets, of the costs, charges and expenses incurred in the winding up, in such order of priority inter se as the Court thinks just.

Power to summon persons suspected of having property of company, etc. 477. Power to summon persons suspected of having property of

company, etc. (1) The Court may, at any time after the appointment of a provisional liquidator or the making of a winding up order summon before it any officer of the company or person known or suspected to have in his possession any property or books or papers, of the company, or known or suspected to be indebted to the company, or any person whom the Court deems capable of giving information concerning the promotion, formation, trade, dealings, property, books or papers, or affairs of the company.

(2) The Court may examine any officer or person so summoned on oath concerning the matters aforesaid, either by word of mouth or on written interrogatories; and may, in the former case, reduce his answers to writing and require him to sign them.

(3) The Court may require any officer or person so summoned to produce any books and papers in his custody or power relating to 380 the company; but, where he claims any lien on books or papers produced by him, the production shall be without prejudice to that lien, and the Court shall have jurisdiction in the winding up to determine all questions relating to that lien.

(4) If any officer or person so summoned, after being paid or tendered a reasonable sum for his expenses, fails to appear before the Court at the time appointed, not having a lawful impediment (made known to the Court at the time of its sitting and allowed by it), the Court may cause him to be apprehended and brought before the Court for examination.

1[(5) If, on his examination, any officer or person so summoned admits that he is indebted to the company, the Court may order him to pay to the provisional liquidator or, as the case may be, the liquidator at such time and in such manner as to the Court may seem just, the amount in which he is indebted, or any part thereof, either in full discharge of the whole amount or not, as the Court thinks fit, with or without costs of the examination.

(6) If, on his examination, any such officer or person admits that he has in his possession any property belonging to the company, the Court may order him to deliver to the provisional liquidator or, as the case may be, the liquidator, that property or any part thereof, at such time, in such manner and on such terms as to the Court may seem just.

(7) Orders made under sub-sections (5) and (6) shall be executed in the same manner as decrees for the payment of money or for the delivery of property under the Code of Civil Procedure, 1908, (5 of 1908.) respectively.

(8) Any person making any payment or delivery in pursuance of an

order made under sub-section (5) or sub-section (6) shall by such payment or delivery be, unless otherwise directed by such order, discharged from all liability whatsoever in respect of such debt or property.]

Power to order public examination of promoters, directors, etc. 478 Power to order public examination of promoters, directors,

etc. (1) When an order has been made for winding up a company by the Court, and the Official Liquidator has made a report to the Court under this Act, stating that in his opinion a fraud has been committed by any person in the promotion or formation of the company, or by any officer of the company in relation to the company since its formation, the Court may, after considering the report, direct that that person or officer shall attend before the Court on a day ———————————————————————- 1 Ins. by Act 65 of 1960, s. 176. ———————————————————————- 381 appointed by it for that purpose, and be publicly examined as to the promotion or formation or the conduct of the business of the company, or as to his conduct and dealings as an officer thereof.

(2) The Official Liquidator shall take part in the examination, and for that purpose may, if specially authorized by the Court in that behalf, employ such legal assistance as may be sanctioned by the Court.

(3) Any creditor or contributory may also take part in the examination either personally or by any advocate, attorney or pleader entitled to appear before the Court.

(4) The Court may put such questions to the person examined as it thinks fit.

(5) The person examined shall be examined on oath, and shall answer all such questions as the Court may put, or allow to be put, to him.

(6) A person ordered to be examined under this section- (a) shall, before his examination, be furnished at his own cost with a copy of the Official Liquidator’s report ; and (b) may at his own cost employ an advocate, attorney or pleader entitled to appear before the Court, who shall be at liberty to put to him such questions as the Court may deem just for the purpose of enabling him to explain or qualify any answers given by him.

(7) (a) If any such person applies to the Court to be exculpated from any charges made or suggested against him, it shall be the duty of the Official Liquidator to appear on the hearing of the application and call the attention of the Court to any matters which appear to the Official Liquidator to be relevant. (b) If the Court, after hearing any evidence given or witnesses called by the Official Liquidator, grants the application, the Court may allow the applicant such costs as it may think fit.

(8) Notes of the examination 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, and shall be open to the inspection of any creditor or contributory at all reasonable times.

(9) The Court may, if it thinks fit, adjourn the examination from time to time.

(10) An examination under this section may, if the Court so directs and subject to any rules made in this behalf, be held before any District Judge, or before any officer of the High Court, being an official Referee, Master, Registrar or Deputy Registrar. 382

(11) The powers of the Court under this section as to the conduct of the examination, but not as to costs, may be exercised by the Judge or officer before whom the examination is held in pursuance

of sub-section (10).

Power to arrest absconding contributory. 479.Power to arrest absconding contributory. At any time either before or after making a winding up order, the Court may, on proof of probable cause for believing that a contributory is about to quit India or otherwise to abscond, or is about to remove or conceal any of his property, for the purpose of evading payment of calls or of avoiding examination respecting the affairs of the company, cause– (a) the contributory to be arrested and safely kept until such time as the Court may order ; and (b) his books and papers and movable property to be seized and safely kept until such time as the Court may order.

Saving of existing powers of Court. 480.Saving of existing powers of Court. Any powers conferred on the Court by this Act shall be in addition to, and not in derogation of, any existing powers of instituting proceedings against any contributory or debtor of the company, or the estate of any contributory or debtor, for the recovery of any call or other sums.

Dissolution of company.

481.Dissolution of company. (1) When the affairs of a company have been completely wound up 1[or when the Court is of the opinion that the liquidator cannot proceed with the winding up of a company for want of funds and assets or for any other reason whatsoever and it is just and reasonable in the circumstances of the case that an order of dissolution of the company should be made], the Court shall make an order that the company be dissolved from the date of the order, and the company shall be dissolved accordingly.

(2) A copy of the order shall, within 2[thirty] days from the date thereof, be forwarded by the liquidator the Registrar who shall make in his books a minute of the dissolution of the company.

(3) If the liquidator makes default in forwarding a copy as aforesaid. he shall be punishable with fine which may extend to fifty rupees for every day during which the default continues. Enforcement of and appeal from orders

Order made to any Court to be enforced by other Courts. 482.Order made to any Court to be enforced by other Courts. Any order made by a Court for, or in the course of, winding up a company shall be enforceable at any place in India, other than ——————————————————————— 1 Ins. by Act 65 of 1960, s. 177. 2 Subs. by Act 31 of 1965, s. 62 and Sch., for “fourteen” (w.e.f. 15-10-1985). ——————————————————————— 383 that over which such Court has jurisdiction, by the Court which would have had jurisdiction in respect of the company if its registered office had been situate at such other place, and in the same manner in all respects as if the order had been made by that Court.

Appeals from orders. 483. Appeals from orders. Appeals from any order made, or decision given, in the matter of the winding up of a company by the Court shall lie to the same Court to which, in the same manner in which, and subject to the same conditions under which, appeals lie from any order or decision of the Court in cases within its ordinary jurisdiction. CHAP VOLUNTARY WINDING UP CHAPTER III.-VOLUNTARY WINDING UP Resolutions for, and commencement of, voluntary winding up

Circumstances in which company may be wound up voluntarily. 484. Circumstances in which company may be wound up voluntarily.

(1) A company may be wound up voluntarily– (a) when the period, if any, fixed for the duration of the company by the articles has expired, or the event, if any, has occurred, on the occurrence of which the articles provide that the company is to be dissolved, and the company in general meeting passes a resolution requiring the company to be wound up voluntarily; (b) if the company passes a special resolution that the company be wound up voluntarily.

(2) In this Act, the expression “a resolution for voluntary winding up” means a resolution passed under clause (a) or (b) of sub-

section (1).

Publication of resolution to wind up voluntraily.

485. Publication of resolution to wind up voluntraily. (1) When a company has passed a resolution for voluntary winding up, it shall, within fourteen days of the passing of the resolution, give notice of the resolution by advertisement in the Official Gazette, and also in some newspaper circulating in the district where the registered office of the company is situate.

(2) If default is made in complying with sub-section (1), the company, and every officer of the company who is in default, shall be punishable with fine which may extend to fifty rupees for every day during which the default continues. For the purposes of this sub-section, a liquidator of the company shall be deemed to be an officer of the company.

Commencement of voluntary winding up. 486. Commencement of voluntary winding up. A voluntary winding up shall be deemed to commence at the time when the resolution for voluntary winding up is passed. 384 Consequences of voluntary winding up

Effect of voluntary winding up on status of company. 487. Effect of voluntary winding up on status of company. In the case of a voluntary winding up, the company shall from the commencement of the winding up, cease to carry on its business, except so far as may be required for the beneficial winding up of such business: Provided that the corporate state and corporate powers of the company shall continue until it is dissolved. Declaration of Solvency

Declaration of solvency in case of proposal to wind up voluntarily. 488. Declaration of solvency in case of proposal to wind up

voluntarily. (1) Where it is proposed to wind up a company voluntarily, its directors, or in case the company has more than two directors, the majority of the directors, may, at a meeting of the Board, make a declaration verified by an affidavit, to the effect that they have made a full inquiry into the affairs of the company, and that, having done so, they have formed the opinion that the company has no debts, or that it will be able to pay its debts in full within such period not exceeding three years from the commencement of the winding up as may be specified in the declaration.

(2) A declaration made as aforesaid shall have no effect for the purposes of this Act, unless- (a) it is made within the five weeks immediately preceding the date of the passing of the resolution for winding up the company and is delivered to the Registrar for registration before that date ; and 1[(b) it is accompanied by a copy of the report of the auditors of the company (prepared, as far as circumstances admit, in accordance with the provisions of this Act) on the profit and loss account of the company for the period commencing from the date up to which the last such account was prepared and ending with the latest practicable date immediately before the making of the declaration and the balance sheet of the company made out as on the last- mentioned date and also embodies a statement of the company’s assets and liabilities as at that date.]

(3) Any director of a company making a declaration under this section without having reasonable grounds for the opinion that the company will be able to pay its debts in full within the period specified in the declaration, shall be punishable with imprisonment ———————————————————————– 1 Subs. by Act 65 of 1960, s. 178, for cl. (b), ———————————————————————– 385 for a term which may extend to six months, or with fine which may extend to five thousand rupees, or with both.

(4)If the company is wound up in pursuance of a resolution passed within the period of five weeks after the making of the declaration, but its debts are not paid or provided for in full within the period specified in the declaration, it shall be presumed, until the contrary is shown, that the director did not have reasonable grounds for his opinion.

(5)A winding up in the case of which a declaration has been made and delivered in accordance with this section is in this Act referred to as “a members’ voluntary winding up” ; and a winding up in the case of which a declaration has not been so made and delivered is in this Act referred to as a creditors’ voluntary winding up”. Provisions applicable to a Members Voluntary Winding Up

Provisions applicable to a members’ voluntary winding up. 489. Provisions applicable to a members’ voluntary winding up. The provisions contained in sections 490 to 498, both inclusive, shall subject to the provisions of section 498, apply in relation to a members’ voluntary winding up.

Power of company to appoint and fix remuneration of liquidators. 490. Power of company to appoint and fix remuneration of

liquidators. (1) The company in general meeting shall- (a) appoint one or more liquidators for the purpose of winding up the affairs and distributing the assets of the company ; and (b) fix the remuneration, if any, to be paid to the liquidator or liquidators.

(2) Any remuneration so fixed shall not be increased in any cir- cumstances whatever, whether with or without the sanction of the Court.

(3) Before the remuneration of the liquidator or liquidators is fixed as aforesaid, the liquidator, or any of the liquidators, as the case may be, shall not take charge of his office.

Board’s powers to cease on appointment of a liquidator. 491. Board’s powers to cease on appointment of a liquidator. On the appointment of a liquidator, all the powers of the Board of directors and of the managing or whole-time directors, managing agent, secretaries and treasurers, and manager, if there be any of these, shall cease, except for the purpose of giving notice of such appointment to the Registrar in pursuance of section 493 or in so far as the company in general meeting or the liquidator may sanction the continuance thereof. 386

Power to fill vacancy in office of liquidator.

492. Power to fill vacancy in office of liquidator. (1) If a vacancy occurs by death, resignation or otherwise in the office of any liquidator appointed by the company, the company in general meeting may, subject to any arrangement with its creditors, fill the vacancy.

(2) For that purpose, a general meeting may be convened by any contributory, or by the continuing liquidator or liquidators, if any.

(3) The meeting shall be held in the manner provided by this Act or by the articles, or in such other manner as the Court may, on application by any contributory or by the continuing liquidator or liquidators, determine.

Notice of appointment of liquidator to be given to Registrar. 493. Notice of appointment of liquidator to be given to

Registrar. (1) The company shall give notice to the Registrar of the appointment of a liquidator or liquidators made by it under section 490, of every vacancy occurring in the office of liquidator, and of the name of the liquidator or liquidators appointed to fill every such vacancy under section 492.

(2) The notice aforesaid shall be given by the company within ten days of the event to which it relates.

(3) If default is made in complying with sub-section (1) or (2), the company, and every officer of the company (including every liquidator or continuing liquidator) who is in default, shall be punishable with fine which may extend to one hundred rupees for every day during which the default continues.

Power of liquidator to accept shares, etc., as consideration for saleof property of company. 494. Power of liquidator to accept shares, etc., as consideration

for sale of property of company. (1) Where- (a) a company (in this section called “the transferor company”) is proposed to be, or is in course of being, wound up altogether voluntarily ; and (b) the whole or any part of its business or property is proposed to be transferred or sold to another company,, whether a company within the meaning of this Act or not (in this section called ” the transferee company “) ; the liquidator of the transferor company may, with the sanction of a special resolution of that company conferring on the liquidator either a general authority or an authority in respect of any particular arrangement,- (i) receive, by way of compensation or part compensation for the transfer or sale, shares, policies, or other like interests in the transferee company, for distribution among the, members of the transferor company; or 387 (ii) enter into any other arrangement whereby the members of the transferor company may, in lieu of receiving cash. shares, policies, or other like interests or in addition thereto, participate in the profits of, or receive any other benefit from, the transferee company.

(2) Any sale or arrangement in pursuance of this section shall be binding on the members of the transferor company.

(3) If any member of the transferor company who did not vote in favour of the special resolution expresses his dissent therefrom in writing addressed to the liquidator, and left at the registered office of the company within seven days after the passing of the resolution, he may require the liquidator either- (a) to abstain from carrying the resolution into effect ; or (b) to purchase his interest at a price to be determined by agreement, or by arbitration in the manner provided by this section.

(4) If the liquidator elects to purchase the member’s interest, the purchase money shall be paid before the company is dissolved, and be raised by the liquidator in such manner as may be determined by special resolution.

(5) A special resolution shall not be invalid for the purposes of this section by reason only that it is passed before or concurrently with, a resolution for voluntary winding up or for appointing liquidators ; but if an order is made within a year for winding up the company by or subject to the supervision of the Court, the special resolution shall not be valid unless it is sanctioned by the Court.

(6) The provisions of the Arbitration Act, 1940 (10 of 1940)1 other than those restricting the application of that Act in respect of the subject matter of the arbitration, shall apply to all arbitrations in pursuance of this section.

Duty of liquidator to call creditors’ meeting in case of insolvency. 495. Duty of liquidator to call creditors’ meeting in case of

insolvency. (1) If, in the case of a winding up commenced after the commencement of this Act, the liquidator is at any time of opinion that the company will not be able to pay its debts in full within the period stated in the declaration under section 488, or that period has expired without the debts having been paid in full, he shall forthwith summon a meeting of the creditors, and shall lay before the meeting a statement of the assets and liabilities of the company.

(2) If the liquidator fails to comply with sub-section (1), he shall be punishable with fine which may extend to five hundred rupees. ———————————————————————- 1 See now the Arbitration and Conciliation Act, 1996 (26 of 1996). ———————————————————————- 388

Duty of liquidator to call general meeting at end of each year. 496. Duty of liquidator to call general meeting at end of each

year. (1) Subject to the provisions of section 498, in the event of the winding up continuing for more than one year, the liquidator shall- (a) call a general meeting of the company at the end of the first year from the commencement of the winding up, and at the end of each succeeding year, or as soon thereafter as may be convenient within three months from the end of the year or such longer period as the Central Government may allow; and (b) lay before the meeting an account of his acts and dealings and of the conduct of the winding up during the preceding year, together with a statement in the prescribed form and containing the prescribed particulars with respect to the proceedings in, and position of, the liquidation.

(2) If the liquidator fails to comply with sub-section (1), he shall be punishable, in respect of each failure, with fine which may extend to one hundred rupees.

Final meeting and dissolution.

497. Final meeting and dissolution. (1) Subject to the provisions of section 498, as soon as the and affairs of the company are fully wound up, the liquidator shall- (a) make up an account of the winding up, showing how the winding up has been conducted and the property of the company has been disposed of; and (b) call a general meeting of the company for the purpose of laying the account before it, and giving any explanation thereof.

(2) The meeting shall be called by advertisement- (a) specifying the time, place and object of the meeting ; and (b) published not less than one month before the meeting in the Official Gazette, and also in some newspaper circulating in the district where the registered office of the company is situate,

(3) Within one week after the meeting, the liquidator shall send to the 1[Registrar and the Official liquidator a copy each of the account and shall make a return to each of them] of the holding of the meeting and of the date thereof. If the copy is not so sent or the return is not so made, the liquidator shall be punishable with fine which may extend to fifty rupees for every day during which the default continues. .LM0 ———————————————————————- 1 Subs. by Act 31 of 1965, s. 54, for certain words (w.e.f. 15-10-1965). ———————————————————————- 389

(4) If a quorum is not present at the meeting aforesaid, the

liquidator shall, in lieu of the return referred to in sub-section (3) make a return that the meeting was duly called and that no quorum was present thereat. Upon such a return being made within one week after the date

fixed for the meeting, the provisions of sub-section (3) as to the making of the return shall be deemed to have been complied with,

1[(5) The Registrar, on receiving the account and either the

return mentioned in sub-section (3) or the return mentioned in sub-

section (4), shall forthwith register them.

(6)The Official Liquidator, on receiving the account and either

the return mentioned in sub-section (3) or the return mentioned in

sub-section (4), shall, as soon as may be, make, and the liquidator and all officers, past or present, of the company shall give the Official Liquidator all reasonable facilities to make, a scrutiny of the books and papers of the company and if on such scrutiny the Official Liquidator makes a report to the Court that the affairs of the company have not been conducted in a manner prejudicial to the interests of its members or to public interest, then, from the date of the submission of the report to the Court the company shall be deemed to be dissolved. (6A) If on such scrutiny the Official Liquidator makes a report to the Court that the affairs of the company have been conducted in a manner prejudicial as aforesaid, the Court shall by order direct the Official Liquidator to make a further investigation of the affairs of the company and for that purpose shall invest him with all such powers as the Court may deem fit. (6B) On the receipt of the report of the Official Liquidator on such further investigation the Court may either make an order that the company shall stand dissolved with effect from the date to be specified by the Court therein or make such other order as the circum- stances of the case brought out in the report permit.]

(7)If the liquidator fails to call a general meeting of the com- pany as required by this section, he shall be punishable with fine which may extend to five hundred rupees. ———————————————————————-

1 Subs. by Act 31 of 1965, s. 54, for sub-sections (5) and (6) (w.e.f. 15-10-1965). ———————————————————————- 390

Alternative provisions as to annual and final meetings in case ofinsolvency. 498. Alternative provisions as to annual and final meetings in case of insolvency. Where section 495 has effect, sections 508 and 509 shall apply to the winding up, to the exclusion of sections 496 and 497, as if the winding up were a creditors’ voluntary winding up and not a members’ voluntary-winding up: Provided that the liquidator shall not be required to call a meeting of creditors under section 508 at the end of the first year from the commencement of the winding up, unless the meeting held under section 495 has been held more than three months before the end of that year. Provisions applicable to a Creditors’ Voluntary Winding Up

Provisions applicable to a creditor’s voluntary winding up. 499. Provisions applicable to a creditor’s voluntary winding up. The provisions contained in sections 500 to 509, both inclusive, shall apply in relation to a creditors’ voluntary winding up.

Meeting of creditors.

500. Meeting of creditors. (1) The company shall cause a meeting of the creditors of the company to be called for the day, or the day next following the day, on which there is to be held the general meeting of the company at which the resolution for voluntary winding up is to be proposed, and shall cause notices of the meeting of creditors to be sent by post to the creditors simultaneously with the sending of the notices of the meeting of the company.

(2)The company shall cause notice of the meeting of the creditors to be advertised once at least in the Official Gazette and once at least in two newspapers circulating in the district where the re- gistered office or principal place of business of the company is situate.

(3) The Board of directors of the company shall- (a) cause a full statement of the position of the company affairs together with a list of the creditors of the company and the estimated amount of their claims to be laid before the meeting of the creditors to be held as aforesaid ; and (b) appoint one of their number to preside at the said meeting.

(4) It shall be the duty of the director appointed to preside at the meeting of creditors to attend the meeting and preside thereat.

(5) If the meeting of the company at which the resolution for voluntary winding up is to be proposed is adjourned and the resolution is passed at an adjourned meeting, any resolution passed at 390A

the meeting of the creditors held in pursuance of sub-section (1) shall have effect as if it had been passed immediately after the pass- ing of the resolution for winding up the company.

(6) If default is made-

(a) by the company, in complying with sub-sections (1) and

(2) ; (b) by its Board of directors, in complying with sub-section

(3); (c) by any director of the company, in complying with sub-

section (4) ; the company, each of the directors, or the director, as the case may be, shall be punishable with fine which may extend to one thousand rupees and, in the case of default by the company, every officer of 391 the company who is in default, shall be liable to the like punishment.

Notice of resolutions passed by creditors’ meeting to be given toRegistrar. 501. Notice of resolutions passed by creditors’ meeting to be

given to Registrar. (1) Notice of any resolution passed at a creditors’ meeting in pursuance of section 500 shall be given by the company to the Registrar within ten days of the passing thereof.

(2) If default is made in complying with sub-section (1), the company, and every officer of the company who is in default, shall be punishable with fine which may extend to fifty rupees for every day during which the default continues. For the purposes of this section, a liquidator of the company shall be deemed to be an officer of the company.

Appointment of liquidator.

502. Appointment of liquidator. (1) The creditors and the company at their respective meetings mentioned in section 500 may nominate a person to be liquidator for the purpose of winding up the affairs and distributing the assets of the company.

(2) If the creditors and the company nominate, different persons the person nominated by the creditors shall be liquidator: Provided that any director, member or creditor of the company may, within seven days after the date on which the nomination was made by the creditors, apply to the Court for an order either directing that the person nominated as liquidator by the company shall be liquidator instead of or jointly with the person nominated by the creditors, or appointing the Official Liquidator or some other person to be liquidator instead of the person appointed by the creditors.

(3) If no person is nominated by the creditors, the person, if any, nominated by the company shall be liquidator.

(4) If no person is nominated by the company, the person, if any, nominated by the creditors shall be liquidator.

Appointment of committee of inspection.

503. Appointment of committee of inspection. (1) The creditors at the meeting to be held in pursuance of section 500 or at any subsequent meeting may, if they think fit, appoint a committee of inspection consisting of not more than five persons.

(2) If such a committee is appointed, the company may, either at the meeting at which the resolution for voluntary winding up is passed or at any subsequent general meeting, appoint such number of persons (not exceeding five) as they think fit to act as members of the committee: 392 Provided that the creditors may, if they think fit, resolve that all or any of the persons so appointed by the company ought not to be members of the committee of inspection.

(3) If the creditors so resolve, the persons mentioned in the resolution shall not, unless the Court otherwise directs, be qualified to act as members of the committee.

(4) On any application to the Court for a direction under sub-

section (3), the Court may, if it thinks fit, appoint other persons to act as members of the committee of inspection in the place of the persons mentioned in the creditors’ resolution.

(5) Subject to the provisions of sub-sections (1) to (4) and to such rules as may be made by the Central Government, the provisions of

section 465 [except sub-section (1) thereof] shall apply with respect to a committee of inspection appointed under this section as they apply with respect to a committee of inspection appointed in a winding up by the Court.

Fixing of liquidators’ remuneration.

504. Fixing of liquidators’ remuneration. (1) The committee of inspection, or if there is no such committee, the creditors, may fix the remuneration to be paid to the liquidator or liquidators.

(2) Where the remuneration is not so fixed, it shall be determined by the Court.

(3) Any remuneration fixed under sub-section (1) or (2) shall not be increased in any circumstances whatever, whether with or without the sanction of the Court.

Board’s powers to cease on appointment of liquidator. 505. Board’s powers to cease on appointment of liquidator. On the appointment of a liquidator, all the powers of the Board of directors shall cease, except in so far as the committee of inspection, or if there is no such committee, the creditors in general meeting, may sanction the continuance thereof.

Power to fill vacancy in office of liquidator. 506. Power to fill vacancy in office of liquidator. If a vacancy occurs by death, resignation or otherwise, in the office of a liquidator (other than a liquidator appointed by, or by the direction of, the Court), the creditors in general meeting may fill the vacancy.

Application of section 494 to a creditors’ voluntary winding up. 507. Application of section 494 to a creditors’ voluntary winding up. The provisions of section 494 shall apply in the case of a creditors’ voluntary winding up as in the case of a members’ voluntary winding up, with the modification that the powers of the liquidator under that section shall not be exercised except with the sanction either of the Court or of the committee of inspection. 393

Duty of liquidator to call meetings of company and of creditors at endof each year. 508. Duty of liquidator to call meetings of company and of

creditors at end of each year. (1) In the event of the winding up continuing for more than one year, the liquidator shall- (a) call a general meeting of the company and a meeting of the creditors at the end of the first year from the com- mencement of the winding up and at the end of each succeeding year, or as soon thereafter as may be convenient within three months from the end of the year or such longer period as the Central Government may allow ; and (b) lay before the meetings an account of his acts and dealings and of the conduct of the winding up during the preceding year, together with a statement in the prescribed form and containing the prescribed particulars with respect to the proceedings in, and position of, the winding up.

(2) If the liquidator fails to comply with sub-section (1), he shall be punishable, in respect of each failure, with fine which may extend. to one hundred rupees.

Final meeting and dissolution.

509. Final meeting and dissolution. (1) As soon as the affairs of the company are fully wound up, the liquidator shall- (a) make up an account of the winding up, showing how the winding up has been conducted and the property of the company has been disposed of ; and (b) call a general meeting of the company and a meeting of the creditors for the purpose of laying the account before the meetings and giving any explanation thereof,

(2) Each such meeting shall be called by advertisement- (a) specifying the time, place and object thereof ; and (b) published not less than one month before the meeting in the Official Gazette and also in some newspaper circulating in the district where the registered office of the company is situate.

(3) Within one week after the date of the meetings, or if the meetings are not held on the same date, after the date of the later meeting, the liquidator shall send to the 1[Registrar and the Official Liquidator a copy each of the account and shall make a return to ———————————————————————– 1 Subs. by Act 31 of 1965, s. 55, for certain words (w.e.f. 15-10-1965). ———————————————————————– 394 each of them] of the holding of the meetings and of the date or dates on which they were held. If the copy is not so sent or the return is not so made, the liquidator shall be punishable with fine which may extend to fifty rupees for every day during which the default continues.

(4) If a quorum (which for the purposes of this section shall be two persons) is not present at either of such meetings, the liquidator

shall, in lieu of the return referred to in sub-section (3), make a return that the meeting was duly called and that no quorum was present thereat. Upon such a return being made within one week after the date

fixed for the meeting, the provisions of sub-section (3) as to the making of the return shall, in respect of that meeting, be deemed to have been complied with.

1[(5) The Registrar, on receiving the account and also, in respect of each such meeting, either the return mentioned in

sub-section (3) or the return mentioned in sub-section (4), shall forthwith register them.

(6) The Official Liquidator, on receiving the account and

either the return mentioned in sub-section (3) or the return mentioned

in sub-section (4), shall, as soon as may be, make, and the liquidator and all officers, past or present, of the company shall give the Official Liquidator all reasonable facilities to make, a scrutiny of the books and papers of the company and if on such scrutiny the Official Liquidator makes a report to the Court that the affairs of the company have not been conducted in a manner prejudicial to the interests of its members or to public interest, then, from the date of the submission of the report to the Court the company shall be deemed to be dissolved. (6A) If on such scrutiny the Official Liquidator makes a report to the Court that the affairs of the company have been conducted in a manner prejudicial as aforesaid, the Court shall by order direct the Official Liquidator to make a further investigation of the affairs of the company and for that purpose shall invest him with all such powers as the Court may deem fit. (6B) On the receipt of the report of the Official Liquidator on such further investigation the Court may either make an order that the company shall stand dissolved with effect from the date to be specified by the Court therein or make such other order as the circumstances of the case brought out in the report permit.] ———————————————————————

1 Subs. by Act 31 of 1965, s. 55, for sub-sections (5) and (6) (w.e.f. 15.10.1965). ———————————————————————- 395

(7) If the liquidator fails to call a general meeting of the company or a meeting of the creditors as required by this section, he shall be punishable, in respect of each such failure, with fine which may extend to five hundred rupees. Provisions applicable to every voluntary winding up

Provisions applicable to every voluntary winding up. 510. Provisions applicable to every voluntary winding up. The provisions contained in sections 511 to 521, both inclusive, shall apply to every voluntary winding up, whether a members’ or a creditors’ winding up.

Distribution of property of company. 511. Distribution of property of company. Subject to the provisions of this Act as to preferential payments, the assets of a company shall, on its winding up, be applied in satisfaction of its liabilities pari passu and, subject to such application, shall, unless the articles otherwise provide, be distributed among the members according to their rights and interests in the company. 511A Application of section 454 to voluntary winding up. 1[511A. Application of section 454 to voluntary winding up. The provisions of section 454 shall, so far as may be, apply to every voluntary winding up as they apply to the winding up by the Court except that references to- (a) the Court shall be omitted ; (b) the Official Liquidator or the provisional liquidator shall be construed as references to the liquidator ; and (c) the ” relevant date ” shall be construed as references to the date of commencement of the winding up.]

Powers and duties of liquidator in voluntary winding up. 512. Powers and duties of liquidator in voluntary winding up.

(1) The liquidator may,- (a) in the case of a members’ voluntary winding up, with the sanction of a special resolution of the company, and in the case of a creditors’ voluntary winding up, with the sanction of the Court or, the committee of inspection or, if there is no such committee, of a meeting of the creditors, exercise any of the powers given by 2 [clauses (a)to (d) of

sub-section (1)] of section 457 to a liquidator in a winding up by the Court; (b) without the sanction referred to in clause (a), exercise any of the other powers given by this Act to the liquidator in a winding up by the Court; ———————————————————————- 1 Ins. by Act 31 of 1965, s. 56 (w.e.f. 15-10-1965). 2 Subs. by Act 65 of 1960, s. 179, for “clauses (i) to (iv) of

sub-section (2)”. ———————————————————————- 396 (c) exercise the power of the Court under this Act of settling a list of contributories (which shall be prima facie evidence of the liability of the persons named therein to be contributories); (d) exercise the power of the Court of making calls; (e) call general meetings of the company for the purpose of obtaining the sanction of the company by ordinary or special resolution, as the case may require, or for any other purpose he may think fit.

(2) The exercise by the liquidator of the powers given by clause

(a) of sub-section (1) shall be subject to the control of the Court ; and any creditor or contributory may apply to the Court with respect to any exercise or proposed exercise of any of the powers conferred by this section.

(3)The liquidator shall pay the debts of the company and shall adjust the rights of the contributories among themselves.

(4) When several liquidators are appointed, any power given by this Act may be exercised by such one or more of them as may be determined at the time of their appointment, or, in default of such determination, by any number of them not being less than two.

Body corporate not to be appointed as liquidator.

513.Body corporate not to be appointed as liquidator. (1) A body corporate shall not be qualified for appointment as liquidator of a company in a voluntary winding up.

(2) Any appointment made in contravention of sub-section (1) shall be void.

(3) Any body corporate which acts as liquidator of a company and every director, the managing agent or secretaries and treasurers, or a manager thereof) shall be punishable with fine which may extend to one thousand rupees.

Corrupt inducement affecting appointment as liquaidator. 514.Corrupt inducement affecting appointment as liquaidator. Any person who gives, or agrees or offers to give, to any member or creditor of a company any gratification whatever with a view to- (a) securing his own appointment or nomination as the company’s liquidator; or (b) securing or preventing the appointment or nomination of some person other than himself, as the company’s liquidator ; shall be punishable with fine which may extend to one thousand rupees. 396A

Power of Court to appoint and remove liquidator in voluntary windingup. 515. Power of Court to appoint and remove liquidator in voluntary

winding up. (1) If from any cause whatever, there is no liquidator acting, 1[the Court may appoint the Official Liquidator or any other person as a liquidator].

2[(2) The Court may, on cause shown remove a liquidator and appoint the Official Liquidator or any other person as a liquidator in place of the removed liquidator.

(3) The Court may also appoint or remove a liquidator on the application made by the Registrar in this behalf.

(4) If the Official Liquidator is appointed as liquidator under

the proviso to sub-section (2) of section 502 or under this section, the remuneration to be paid to him shall be fixed by the Court and shall be credited to the Central Government.]

Notice by liquidator of his appointment.

516. Notice by liquidator of his appointment. (1) The liquidator shall, within 3[thirty] days after his appointment, publish in the Official Gazette, and deliver to the Registrar for registration, a notice of his appointment in the form prescribed.

(2) If the liquidator fails to comply with sub-section (1), he shall be punishable with fine which may extend to fifty rupees for every day during which the default continues. ———————————————————————- 1 Subs. by Act 65 of 1960, s.180, for “the Court may appoint a liquidator”.

2 Subs. by s.180, ibid., for sub-section (2). 3 Subs. by Act 31 of 1965, s.62 and Sch. for “twenty-one” (w.e.f.15-10-1965). ———————————————————————- 397

Arrangement when binding on company and creditors.

517. Arrangement when binding on company and creditors. (1) Any arrangement entered into between a company about to be, or in the course of being, wound up and its creditors shall, subject to the right of appeal under this section, be binding on the company and on the creditors if it is sanctioned by a special resolution of the company and acceded to by three-fourths in number and value of the creditors.

(2) Any creditor or contributory may, within three weeks from the completion of the arrangement, appeal to the Court against it and the Court may thereupon, as it thinks just, amend, vary, confirm or set aside the arrangement.

Power to apply to Court to have questions determined or powersexercised. 518. Power to apply to Court to have questions determined or

powers exercised. (1) The liquidator or any contributory or creditor may apply to the Court- (a) to determine any question arising in the winding up of a company ; or (b) to exercise, as respects the enforcing of calls, the staying of proceedings or any other matter, all or any of the powers which the Court might exercise if the company were being wound up by the Court.

(2) The liquidator or any creditor or contributory may apply to

the Court specified in sub-section (3) for an order setting aside any attachment, distress or execution put into force against the estate or effects of the company after the commencement of the winding up,

(3) An application under sub-section (2) shall be made- (a) if the attachment, distress or execution is levied or put into force by a High Court, to such High Court ; and (b) if the attachment, distress or execution is levied or put into force by any other Court, to the Court having juris- diction to wind up the company.

(4) The Court, if satisfied on an application under sub-section

(1) or (2) that the determination of the question or the required exercise of power or the order applied for will be just and beneficial, may accede wholly or partially to the application on such terms and conditions as it thinks fit, or may make such other order on the application as it thinks just.

(5) A copy of an order staying the proceedings in the winding up, made by virtue of this section, shall forthwith be forwarded by the company, or otherwise as may be prescribed, to the Registrar, who shall make a minute of the order in his books relating to the company. 398

Application of liquidator to Court for public examination ofpromoters, directors, etc. 519. Application of liquidator to Court for public examination of

promoters, directors, etc. (1) The liquidator may make a report to the Court stating that in his opinion a fraud has been committed by any person in the promotion or formation of the company or by any officer of the company in relation to the company since its formation; and the Court may, after considering the report, direct that that person or officer shall attend before the Court on a day appointed by it for that purpose, and be publicly examined as to the promotion or formation or the conduct of the business of the company, or as to his conduct and dealings as officer thereof.

(2) The provisions of sub-sections (2) to (11) of section 478 shall apply in relation to any examination directed under sub-section

(1) as they apply in relation to an examination directed under sub-

section (1) of section 478 with references to the liquidator being substituted for references to the Official Liquidator in those provi- sions.

Costs of voluntary winding up. 520. Costs of voluntary winding up. All costs, charges and expenses properly incurred in the winding up, including the remuneration of the liquidator, shall subject to the rights of secured creditors, if any, be payable out of the assets of the company in priority to all other claims.

Saving of right of creditors and contributories to apply for windingup. 521. [Saving of right of creditors and contributories to apply for winding up.] Rep. by the Companies (Amendment) Act, 1960 (65 of 1960), s. 181. CHAP WINDING UP SUBJECT TO SUPERVISION OF COURT CHAPTER IV.-WINDING UP SUBJECT TO SUPERVISION OF COURT

Power to order winding up subject to supervision. 522. Power to order winding up subject to supervision. At any time after a company has passed a resolution for voluntary winding up, the Court may make an order that the voluntary winding up shall continue, but subject to such supervision of the Court, and with such liberty for creditors, contributories or others to apply to the Court, and generally on such terms and conditions, as the Court thinks just.

Effect of petition for winding up subject to supervision. 523. Effect of petition for winding up subject to supervision. A petition for the continuance of a voluntary winding up subject to the supervision of the Court shall, for the purpose of giving jurisdiction to the Court over suits and legal proceedings, be deemed to be a petition for winding up by the Court.

Power of Court to appoint or remove liquidators.

524. Power of Court to appoint or remove liquidators. (1) Where an order is made for a winding up subject to supervision, the Court may, by that or any subsequent order, appoint an additional liquidator or liquidators. 399

(2) The Court may remove any liquidator so appointed or any liquidator continued under the supervision order, and fill any vacancy occasioned by the removal, or by death or resignation.

1[(3) The Court may appoint the Official Liquidator as a liqui-

dator under sub-section (1) or to fill any vacancy occasioned under

sub-section (2).

(4) The Court may also appoint or remove a liquidator on an application made by the Registrar in this behalf.]

Powers and obligations of liquidator appointed by Court. 525. Powers and obligations of liquidator appointed by Court. A liquidator appointed by the Court under section 524 shall have the same powers, be subject to the same obligations, and in all respects stand in the same position, as if he had been duly appointed a in accordance with the provisions of this Act with respect to the appointment of liquidators in a voluntary winding up.

Effect of supervision order.

526. Effect of supervision order. (1) Where an order is made for a winding up subject to supervision, the liquidator may, subject to any restrictions imposed by the Court, exercise all his powers, without the sanction or intervention of the Court, in the same manner as if the company were being wound up altogether voluntarily.

(2) Except as provided in sub-section (1), any order made by the Court for a winding up subject to the supervision of the Court, shall for all purposes, including the staying of suits and other pro- ceedings, be deemed to be an order of the Court for winding up the company by the Court, and shall confer full authority on the Court to make calls or to enforce calls made by the liquidators, and to exercise all other powers which it might have exercised if an order had been made for winding up the company altogether by the Court.

(3) In the construction of the provisions whereby the Court is empowered to direct any act or thing to be done to or in favour of the liquidator, the expression “liquidator” shall be deemed to mean the liquidator conducting the winding up, subject to the supervision of the Court.

Appointment in certain cases of voluntary liquidators to office ofliquidators. 527. Appointment in certain cases of voluntary liquidators to office of liquidators. Where an order has been made for winding up a company subject to supervision, and an order is afterwards made for winding up by the Court, the Court may, by the last-mentioned or any subsequent order, appoint any person or persons who are then liquidators, either provisionally or permanently, to be liquidator or liquidators ——————————————————————– 1 Ins. by Act 65 of 1960, s. 182. ——————————————————————— 400 in the winding up by the Court in addition to, and subject to the control of, the Official Liquidator. CHAP PROVISIONS APPLICABLE TO EVERY MODE OF WINDING UP CHAPTER V.-PROVISIONS APPLICABLE TO EVERY MODE OF WINDING UP Proof and ranking of claims

Debts of all descriptions to be admitted to proof. 528. Debts of all descriptions to be admitted to proof. In every winding up (subject, in the case of insolvent companies, to the application in accordance with the provisions of this Act of the law of insolvency), all debts payable on a contingency, and all claims against the company, present or future, certain or contingent, ascertained or sounding only in damages, shall be admissible to proof against the company, a just estimate being made, so far as possible, of the value of such debts or claims as may be subject to any contingency, or may sound only in damages, or for some other reason may not bear a certain value.

Application of insolvency rules in winding up of insolvent companies. 529. Application of insolvency rules in winding up of insolvent

companies. (1) In the winding up of an insolvent company, the same rules shall prevail and be observed with regard to- (a) debts provable ; (b) the valuation of annuities and future and contingent liabilities ; and (c) the respective rights of secured and unsecured creditors; as are in force for the time being under the law of insolvency with respect to the estates of persons adjudged insolvent: 1[Provided that the security of every secured creditor shall be deemed to be subject to a pari passu charge in favour of the workmen to the extent of the workmen’s portion therein, and, where a secured creditor, instead of relinquishing his security and proving his debt, opts to realise his security,- (a) the liquidator shall be entitled to represent the workmen and enforce such charge; (b) any amount realised by the liquidator by way of enforcement of such charge shall be applied ratably for the discharge of workmen’s dues; and (c) so much of the debt due to such secured creditor as could not be realised by him by virtue of the foregoing provisions of this proviso or the amount of the workmen’s portion in his security, whichever is less, shall rank pari passu with the workmen’s dues for the purposes of section 529A.]

(2) All persons who in any such case would be entitled to prove for and receive dividends out of the assets of the company,may come in under the winding up, and make such claims against the company as they respectively are entitled to make by virtue of this section, 2[Provided that if a secured creditor instead of relinquishing his security and proving for his debt proceeds to realise his security, he shall be liable to 3[pay his portion of the expenses] incurred by the liquidator(including a provisional liquidator, if any) for the preservation of the security before its realization by the secured creditor.] 1[Explanation.-For the purposes of this proviso, the portion of expenses incurred by the liquidator for the preservation of a security which the secured creditor shall be liable to pay shall be the whole of the expenses less amount which bears to such expenses the same proportion as the workmen’s portion in relation to the security bears to the value of the security.]

1[(3) For the purposes of this section, section 529A and section 530,- (a) “workmen”, in relation to a company, means the employees of the company, being workmen within the meaning of the Industrial Disputes Act, 1947(14 of 1947); (b) “workmen’s dues”, in relation to a company, means the aggregate of the following sums due from the company to its workmen, namely:- (i) all wages or salary including wages payable for time or piece work and salary earned wholly or in part by way of commission of any workman, in respect of services rendered to the company and any compensation payable to any workman under any of the provisions of the Industrial Disputes Act, 1947 (14 of 1947); (ii)all accrued holiday remuneration becoming payable to any workman, or in the case of his death to any other person in his right, on the termination of his employment before, or by the effect of, the winding up order or resolution; (iii) unless the company is being wound up voluntarily merely for the purposes of reconstruction or of amalgamation with another company, or unless the company has,at the commencement of the winding up, under such contract with insurers as is mentioned in section 14 the Workmen’s Compensation Act, 1923 (8 of 1923), rights capable of being transferred to and vested in the workman, all amounts due in respect of any compensation or liability for compensation under the said Act in res- pect of the death or disablement of any workman of the company; (iv)all sums due to any workman from a provident fund, a pension fund, a gratuity fund or any other fund for the welfare of the workmen, maintained by the company; (c) “workmen’s portion”, in relation to the security of any secured creditor of a company, means the amount which bears to the value of the security the same proportion as the amount of the workmen’s dues bears to the aggregate of- (i) the amount of workmen’s dues; and (ii) the amounts of the debts due to the secured creditors. Illustration The value of the security of a secured creditor of a company is Rs. 1,00,000. The total amount of the workmen’s dues is Rs. 1,00,000.The amount of the debts due from the company to its secured creditors is Rs. 3,00,000. The aggregate of the amount of workmen’s dues and of the amounts of debts due to secured creditors is Rs. 4,00,000. The workmen’s portion of the security is, therefore, one-fourth of the value of the security, that is Rs. 25,000.] 529A Overriding preferential payment. 4[529A. Overriding preferential payment. Notwithstanding anything contained in any other provision of this Act or any other law for the time being in force in the winding up of a company- (a) workmen’s dues; and (b) debts due to secured creditors to the extent such debts

rank under clause (c) of the proviso to sub-section (1) of section 529 pari passu with such dues, shall be paid in priority to all other debts.

(2) The debts payable under clause (a) and clause (b) of sub-section

(1) shall be paid in full, unless the assets are insufficient to meet them, in which case they shall abate in equal proportions.]

Preferential payments.

530. Preferential payments. (1) In a winding up, 5[subject to the provisions of section 529A, there shall be paid] in priority to all other debts- (a) all revenues, taxes, cesses and rates due from the company to the Central or a State Government or to a local autho- ———————————————————————- 1 Ins. by Act 35 of 1985, s.4. 2 Ins. by Act 65 of 1960, s. 183. 3 Subs. by s.4, ibid. 4 Ins. by s.5, ibid. 5 Subs. by s.6, ibid. ———————————————————————– 401 rity at the relevant date as defined in clause (c) of sub-

section (8), and having become due and payable within the twelve months next before that date ; (b) all wages or salary (including wages payable for time or piece work and salary earned wholly or in part by way of commission) of any employee, in respect of services rendered to the company and due for a period not exceeding four months within the twelve months next before the relevant date 1* **

subject to the limit specified in sub-section (2); (c) all accrued holiday remuneration becoming payable to any employee, or in the case of his death to any other person in his right, on the termination of his employment before, or by the effect of, the winding up order or resolution ; (d) unless the company is being wound up voluntarily merely for the purposes of reconstruction or of amalgamation with another company, all amounts due, in respect of contributions payable during the twelve months next before the relevant date, by the company as the employer of any persons, under the Employees’ State Insurance Act, 1948 ( 34 of 1948.) or any other law for the time being in force; (e) unless the company is being wound up voluntarily merely for the purposes of reconstruction or of amalgamation with another company, or unless the company has, at the commencement of the winding up, under such a contract with insurers as is mentioned in section 14 of the Workmen’s Compensation Act, 1923, (8 of 1923.) rights capable of being transferred to and vested in the workman, all amounts due in respect of any compensation or liability for compensation under the said Act in respect of the death or disablement of any employee of the company; (f)all sums due to any employee from a provident fund, a pension fund a gratuity fund-or any other fund for the welfare of the employees, maintained by the company; and (g) the expenses of any investigation held in pursuance of section 235 or 237, in so far as they are payable by the company. ———————————————————————- 1 Omitted by Act 35 of 1985, s.6. ———————————————————————- 402

(2) The sum to which priority is to be given under clause (b) of

sub-section (1), shall not, in the case of any one claimant, exceed one thousand rupees. 1* * * * *

(3) Where any compensation under the Workmen’s Compensation Act, 1923(8 of 1923) is a weekly payment, the amount due in respect

thereof shall, for the purposes of clause (e) of sub-section (1), be taken to be the amount of the lump sum for which the weekly payment could, if redeemable, be redeemed if the employer made an application for that purpose under the said Act.

(4) Where any payment has been made to any employee of a company,- (i) on account of wages or salary ; or (ii) to him, or in the case of his death, to any other person in his right, on account of accrued holiday remuneration, out of money advanced by some person for that purpose, the person by whom the money was advanced shall, in a winding up, have a right of priority in respect of the money so advanced and paid, up to the amount by which the sum in respect of which the employee or other person in his right, would have been entitled to priority in the winding up has been diminished by reason of the payment having been made.

(5) The foregoing debts shall- (a) rank equally among themselves and be paid in full, unless the assets are insufficient to meet them, in which case they shall abate in equal proportions; and (b) so far as the assets of the company available for payment of general creditors are insufficient to meet them, have priority over the claims of holders of debentures under any floating charge created by the company, and be paid accordingly out of any property comprised in or subject to that charge.

(6) Subject to the retention of such sums as may be necessary for the costs and expenses of the winding up, the foregoing debts shall be discharged forthwith so far as the assets are sufficient to ——————————————————————— 1. Omitted by Act 35 of 1985, s.6 ——————————————————————— 403 meet them, and in the case of the debts to which priority is given by

clause (d) of sub-section (1), formal proof thereof shall not be required except in so far as may be otherwise prescribed.

(7)In the event of a landlord or other person distraining or having distrained on any goods or effects of the company within three months next before the date of a winding up order, the debts to which priority is given by this section shall be a first charge on the goods or effects so distrained on, or the proceeds of the sale thereof: Provided that, in respect of any money paid under any such charge, the landlord or other person shall have the same rights of priority as the person to whom the payment is made.

(8) For the purposes of this section- (a) any remuneration in respect of a period of holiday or of absence from work through sickness or other good cause shall be deemed to be wages in respect of services rendered to the company during that period; (b) the expression “accrued holiday remuneration” includes, in relation to any person, all sums which, by virtue either of his contract of employment or of any enactment (including any order made or direction given under any enactment), are payable on account of the remuneration which would, in the ordinary course, have become payable to him in respect of a period of holiday, had his employment with the company continued until he became entitled to be allowed the holiday 1* * *. 2[(bb) the expression “employee” does not include a workman;] and (c) the expression “the relevant date” means- (i) in the case of a company ordered to be wound up compulsorily, the date of the appointment (or first ap- pointment) of a provisional liquidator, or if no such appointment was made, the date of the winding up order, unless in either case the company had commenced to be wound up voluntarily before that date; and (ii) in any case where sub-clause (i) does not apply, the date of the passing of the resolution for the volun- tary winding up of the company.

(9) This section shall not apply in the case of a winding up where the

date referred to in sub-section (5) of section 230 of the Indian Companies Act, 1913,(7 of 1913.) occurred before the commencement of this Act, and in such a case, the provisions relating to preferential payments which would have applied if this Act had not been passed, shall be deemed to remain in full force. ———————————————————————- 1 Omitted by Act 35 of 1985, s.6. 2 Ins. by s.6, ibid. ———————————————————————- 404 Effect of winding up on antecedent and other transactions

Frudulent preference.

531. Frudulent preference. (1) Any transfer of property, movable or immovable, delivery of goods, payment, execution or other act relating to property made, taken or done by or against a company within six months before the commencement of its winding up which, had it been made, taken or done by or against an individual within three months before the presentation of an insolvency petition on which he is adjudged insolvent, would be deemed in his insolvency a fraudulent preference, shall in the event of the company being wound up, be deemed a fraudulent preference of its creditors and be invalid accordingly: Provided that, in relation to things made, taken or done before the commencement of this Act, this sub-section shall have effect with the substitution, for the reference to six months, of a reference to three months.

(2) For the purposes of sub-section (1), the presentation of a petition for winding up in the case of a winding up by or subject to the supervision of the Court, and the passing of a resolution for winding up in the case of a voluntary winding up, shall be deemed to correspond to the act of insolvency in the case of an individual. 531A Avoidance of voluntary transfer. 1[531A. Avoidance of voluntary transfer. Any transfer of property, movable or immovable, or any delivery of goods, made by a company, not being a transfer or delivery made in the ordinary course of its business or in favour of a purchaser or encumbrancer in good faith and for valuable consideration, if made within a period of one year before the presentation of a petition for winding up by or subject to the supervision of the Court or the passing of a resolution for voluntary winding up of the company, shall be void against the liquidator.]

Transfer for benefit of all creditors to be void. 532. Transfer for benefit of all creditors to be void. Any transfer or assignment by a company of all its property to trustees for the benefit of all its creditors shall be void.

Liabilities and rights of certain fraudulently preferred persons. 533. Liabilities and rights of certain fraudulently preferred

persons. (1) Where. in the case of a company which is being wound up, anything made, taken or done after the commencement of this Act is invalid under section 531 as a fraudulent preference of a person interested in property mortgaged or charged to secure the company’s debt, then (without prejudice to any rights or liabilities arising apart from this provision), the person preferred shall be subject to the same liabilities, and shall have the same rights, as if he had undertaken to be personally liable as surety for the debt, to the extent of the mort- ———————————————————————- 1 Ins. by Act 65 of 1960, s. 185. ———————————————————————- 405 gage or charge on the property or the value of his interest, whichever is less.

(2) The value of the said person’s interest shall be determined as at the date of the transaction constituting the fraudulent preference, and shall be determined as if the interest were free of all encumbrances other than those to which the mortgage or charge for the company’s debt was then subject.

(3) On any application made to the Court with respect to any payment on the ground that the payment was a fraudulent preference of a surety or guarantor, the Court shall have jurisdiction to determine any questions with respect to the payment arising between the person to whom the payment was made and the surety or guarantor and to grant relief in respect thereof, notwithstanding that it is not necessary so to do for the purposes of the winding up, and for that purpose may give leave to bring in the surety or guarantor as a third party as in the case of a suit for the recovery of the sum paid. This sub-section shall apply, with the necessary modifications, in relation to transactions other than the payment of money as it applies in relation to payments of money.

Effect of floating charge. 534. Effect of floating charge. Where a company is being wound up, a floating charge on the undertaking or property of the company created within the twelve months immediately preceding the commencement of the winding up, shall, unless it is proved that the company immediately after the creation of the charge was solvent, be invalid, except to the amount of any cash paid to the company at the time of, or subsequently to the creation of, and in consideration for, the charge, together with interest on that amount at the rate of five per cent. per annum or such other rate as may for the time being be notified by the Central Government in this behalf in the Official Gazette: Provided that in relation to a charge created more than three months before the commencement of this Act, this section shall have effect with the substitution, for references to twelve months of references to three months.

Disclaimer of onerous property in case of a company which is beingwound up. 535. Disclaimer of onerous property in case of a company which is

being wound up. (1) Where any part of the property of a company which is being wound up consists of- (a) land of any tenure, burdened with onerous covenants; (b) shares or stock in companies; (c) any other property which is unsaleable or is not readily saleable, by reason of its binding the possessor thereof 406 either to the performance of any onerous act or to the payment of any sum of money ; or (d) unprofitable contracts ; the liquidator of the company, notwithstanding that he has endeavoured to sell or has taken possession of the property, or exercised any act of ownership in relation thereto, or done anything in pursuance of the contract, may, with the leave of the Court and subject to the provisions of this section, by writing signed by him, at any time within twelve months after the commencement of the winding up or such extended period as may be allowed by the Court, disclaim the property: Provided that, where any such property has not come to the knowledge of the liquidator within one month after the commencement of the winding up, the power of disclaiming the property may be exercised at any time within twelve months after he has become aware thereof or such extended period as may be allowed by the Court.

(2) The disclaimer shall operate to determine, as from the date of disclaimer, the rights, interest, and liabilities of the company, and the property of the company, in or in respect of the property disclaimed, but shall not, except so far as is necessary for the pur- pose of releasing the company and the property of the company from liability, affect the rights or liabilities of any other person.

(3) The Court, before or on granting leave to disclaim, may re- quire such notices to be given to persons interested, and impose such terms as a condition of granting leave, and make such other order in the matter as the Court thinks just.

(4) The liquidator shall not be entitled to disclaim any property in any case where an application in writing has been made to him by any person interested in the property requiring him to decide whether he will or will not disclaim, and the liquidator has not, within a period of twenty-eight days after the receipt of the application or such extended period as may be allowed by the Court, given notice to the applicant that he intends to apply to the Court for leave to disclaim ; and in case the property is a contract, if the liquidator, after such an application as aforesaid, does not within the said period or extended period disclaim the contract, 1[he shall be deemed to have adopted it]. ———————————————————————- 1 Subs. by Act 65 of 1960, s. 186, for “the company shall be deemed to have adopted it”. ———————————————————————- 407

(5) The Court may, on the application of any person who is, as against the liquidator, entitled to the benefit or subject to the burden of a contract made with the company, make an order rescinding the contract on such terms as to payment by or to either party of damages for the non-performance of the contract, or otherwise as the Court thinks just ; and any damages payable under the order to any such person may be proved by him as a debt in the winding up.

(6) The Court may, on an application by any person who either claims any interest in any disclaimed property or is under any liabi- lity not discharged by this Act in respect of any disclaimed property, and after hearing any such persons as it thinks fit, make an order for the vesting of the property in, or the delivery of the property to, any person entitled thereto or to whom it may seem just that the property should be delivered by way of compensation for such liability as aforesaid, or a trustee for him, and on such terms as the Court thinks just ; and on any such vesting order being made, the property comprised therein shall vest accordingly in the person therein named in that behalf without any conveyance or assignment for the purpose: Provided that, where the property disclaimed is of a lease-hold nature, the Court shall not make a vesting order in favour of any person claiming under the company, whether as under-lessee or as mortgagee or holder of a charge by way of demise, except upon the terms of making that person- (a) subject to the same liabilities and obligations as those to which the company was subject under the lease in respect of the property at the commencement of the winding up; or (b) if the Court thinks fit, subject only to the same liabilities and obligations as if the lease had been assigned to that person at that date ; and in either event (if the case so requires) as if the lease had com- prised only the property comprised in the vesting order ; and any mortgagee or under-lessee declining to accept a vesting order upon such terms shall be excluded from all interest in and security upon the property, and, if there is no person claiming under the company who is willing to accept an order upon such terms, the Court shall have power to vest the estate and interest of the company in the property in any person liable, either personally or in a represen- tative character, and either alone or jointly with the company, to 408 perform the lessee’s covenants in the lease, freed and discharged from all estates, encumbrances and interests created therein by the company.

(7) Any person injured by the operation of a disclaimer under this section shall be deemed to be a creditor of the company to the amount of the compensation or damages payable in respect of the injury, and may accordingly prove the amount as a debt in the winding up.

Avoidance of transfers, etc., after commencement of winding up. 536. Avoidance of transfers, etc., after commencement of winding

up. (1) In the case of a voluntary winding up, any transfer of shares in the company, not being a transfer made to or with the sanction of the liquidator, and any alteration in the status of the members of the company, made after the commencement of the winding up, shall be void.

(2) In the case of a winding up by or subject to the supervision of the Court, any disposition of the property (including actionable claims) of the company, and any transfer of shares in the company or alteration in the status of its members, made after the commencement of the winding up, shall, unless the Court otherwise orders, be void.

Avoidance of certain attachments, executions, etc., in winding up byor subject to supervision of Court. 537. Avoidance of certain attachments, executions, etc., in

winding up by or subject to supervision of Court. (1) Where any company is being wound up by or subject to the supervision of the Court- (a) any attachment, distress or execution put in force, without leave of the Court, against the estate or effects of the company, after the commencement of the winding up ; or (b) any sale held, without leave of the Court, of any of the properties or effects of the company after such com- mencement; shall be void.

1[(2) Nothing in this section applies to any proceedings for the recovery of any tax or impost or any dues payable to the Government.] Offences antecedent to or in course of winding up

Offences by officers of companies in liquidation.

538. Offences by officers of companies in liquidation. (1) If any person, being a past or present officer of a company, which, at the time of the commission of the alleged offence, is being wound up, whether by or subject to the supervision of the Court or voluntarily, or which is subsequently ordered to be wound ———————————————————————-

1 Subs. by Act 65 of 1960, s. 187, for sub-section (2). ———————————————————————- 408/1 up by the Court or which subsequently passes a resolution for volun- tary winding up,- (a) does not, to the best of his knowledge and belief, fully and truly discover to the liquidator all the property, movable and immovable, of the company, and how and to whom and for what consideration and when the company disposed of any part thereof, except such part as has been disposed of in the ordinary course of the business of the company; (b) does not deliver up to the liquidator, or as he directs, all such part of the movable and immovable property of the company as is in his custody or under his control, and which he is required by law to deliver up ; (c) does not deliver up to the liquidator, or as he directs, all such books and papers of the company as are in his custody or under his control and which he is required by law to deliver up ; (d) within the twelve months next before the commencement of the winding up or at any time thereafter, conceals any part of the property of the company to the value of one hundred rupees or upwards, or conceals any debt due to or from the company ; (e) within the twelve months next before the commencement of the winding up or at any time thereafter, fraudulently removes any part of the property of the company to the value of one hundred rupees or upwards; (f) makes any material omission in any statement relating to the affairs of the company ; (g) knowing or believing that a false debt has been proved by any person under the winding up, fails for a period of one month to inform the liquidator thereof ; (h) after the commencement of the winding up, prevents the production of any book or paper affecting or relating to the property or affairs of the company; (i) within the twelve months next before the commencement of the winding up or at any time thereafter, conceals, destroys, mutilates or falsifies, or is privy to the con- cealment, destruction, mutilation or falsification of, any book or paper affecting or relating to, the property or affairs of the company; 408/2 (j) within the twelve months next before the commencement of the winding up or at any time thereafter makes, or is privy to the making of, any false entry in any book or paper affecting or relating to, the property or affairs of the company ; (k) within the twelve months next before the commencement of the winding up or at any time thereafter, fraudulently parts with, alters or makes any omission in, or is privy to the fraudulent parting with, altering or making of any omission in, any book or paper affecting or relating to the property or affairs of the company ; (l) after the commencement of the winding up or at any meeting of the creditors of the company within the twelve months next before the commencement of the winding up, attempts to account for any part of the property of the company by fictitious losses or expenses ; (m) within the twelve months next before the commencement of the winding up or at any time thereafter, by any false representation or other fraud, obtains on credit, for or on behalf of the company, any property which the company does not subsequently pay for ; (n) within the twelve months next before the commencement of the winding up or at any time thereafter, under the false pretence that the company is carrying on its business, obtains on credit, for or on behalf of the company, any property which the company does not subsequently pay for; (o) within the twelve months next before the commencement of the winding up or at any time thereafter, pawns, pledges or disposes of any property of the company which has been obtained on credit and has not been paid for, unless such pawning, pledging or disposing is in the ordinary course of the business of the company; or (p) is guilty of any false representation or other fraud for the purpose of obtaining the consent of the creditors of the company or any of them, to an agreement with reference to the affairs of the company or to the winding up; he shall be punishable, in the case of any of the offences mentioned in clauses (m), (n) and (o), with imprisonment for a term which may extend to five years, or with fine, or with both, and, in the case of 408/3 any other offence, with imprisonment for a term which may extend to two years, or with fine, or with both: Provided that it shall be a good defence- (i) to a charge under any of the clauses, (b), (c), (d), (f), (n) and (o), if the accused proves that he had no intent to defraud ; and (ii) to a charge under any of the clauses, (a), (h), (i) and if he proves that he had no intent to conceal the true state of affairs of the company or to defeat the law.

(2) Where any person pawns, pledges or disposes of any property in circumstances which amount to an offence under clause (o) of sub-

section (1), every person who takes in pawn or pledge or otherwise receives the property, knowing it to be pawned, pledged, or disposed of in such circumstances as aforesaid, shall be punishable with imprisonment for a term which may extend to three years, or with fine, or with both.

(3) For the purposes of this section, the expression “officer” shall include any person in accordance with whose directions or instructions the directors of the company have been accustomed to act.

Penalty for falsification of books. 539. Penalty for falsification of books. If with intent to defraud or deceive any person, any officer or contributory of a company which is being wound up- (a) destroys, mutilates, alters, falsifies or secretes, or is privy to the destruction, mutilation, alteration, falsification or secreting of, any books, papers or securities ; or (b) makes, or is privy to the making of, any false or fraudulent entry in any register, book of account or document belonging to the company; he shall be punishable with imprisonment for a term which may extend to seven years, and shall also be liable to fine.

Penalty for frauds by officers. 540. Penalty for frauds by officers. If any person, being at the time of the commission of the alleged offence an officer of a company which is subsequently ordered to be wound up by the Court or which subsequently passes a resolution for voluntary winding up,- (a) has, by false pretences or by means of any other fraud, induced any person to give credit to the company; or (b) with intent to defraud creditors of the company, has made or caused to be made any gift or transfer of or charge 408/4 on, or has caused or connived at the levying of any exe- cution against, the property of the company ; or (c) with intent to defraud creditors of the company, has concealed or removed any part of the property of the company since the date of any unsatisfied judgment or order for payment of money obtained against the company, or within two months before that date; he shall be punishable with imprisonment for a term which may extend to two years and shall also be liable to fine.

Liability where proper accounts not kept.

541. Liability where proper accounts not kept. (1) Where a company is being wound up, if it is shown that proper books of account were not kept by the company throughout the period of two years immediately preceding the commencement of the winding up, or the period between the incorporation of the company and the commencement of the winding up, whichever is shorter, every officer of the company who is in default shall, unless he shows that he acted honestly and that in the circumstances in which the business of the company was carried on, the default was excusable, be punishable with imprisonment for a term which may extend to one year.

(2) For the purposes of sub-section (1), it shall be deemed that proper books of account have not been kept in the case of any company, if there have not been kept– (a) such books or accounts as are necessary to exhibit and explain the transactions and financial position of the business of the company, including books containing entries made from day to day in sufficient detail of all cash received and all cash paid ; and (b) where the business of the company has involved dealings in goods, statements of the annual stocktakings and (except in the case of goods sold by way of ordinary retail trade) of all goods sold and purchased, showing the goods and the buyers and sellers thereof in sufficient detail to enable those goods and those buyers and sellers to be identified.

Liability for fraudulent conduct of business.

542. Liability for fraudulent conduct of business. (1) If in the course of the winding up of a company, it appears that any business of the company has been carried on, with intent to defraud creditors of the company or any other persons or for any fraudulent purpose, the Court, on the application of the Official Liquidator, or the liquidator or any creditor or contributory of. 408/5 the company, may, if it thinks it proper so to do, declare that any persons who were knowingly parties to the carrying on of the business in the manner aforesaid shall be personally responsible, without any limitation of liability, for all or any of the debts or other liabilities of the company as the Court may direct. On the hearing of an application under this sub-section, the Official Liquidator or the liquidator, as the case may be, may himself give evidence or call witnesses.

(2) (a) Where the Court makes any such declaration, it may give such further directions as it thinks proper for the purpose of giving effect to that declaration. (b) In particular, the Court may make provision for making the liability of any such person under the declaration a charge on any debt or obligation due from the company to him, or on any mortgage or charge or any interest in any mortgage or charge on any assets of the company held by or vested in him, or any person on his behalf, or any person claiming as assignee from or through the person liable or any person acting on his behalf. (c) The Court may, from time to time, make such further order as may be necessary for the purpose of enforcing any charge imposed under this sub-section. (d) For the purpose of this sub-section, the expression “assignee” includes any person to whom or in whose favour, by the directions of the person liable, the debt, obligation, mortgage or charge was created, issued or transferred or the interest was created, but does not include an assignee for valuable consideration (not including consideration by way of marriage) given in good faith and without notice of any of the matters on the ground of which the declaration is made.

(3) Where any business of a company is carried on with such

intent or for such purpose as is mentioned in sub-section (1), every person who was knowingly a party to the carrying on of the business in the manner aforesaid, shall be punishable with imprisonment for a term which may extend to two years, or with fine which may extend to five thousand rupees, or with both.

(4) This section shall apply, notwithstanding that the person concerned may be criminally liable in respect of the matters on the ground of which the declaration is to be made.

Power of Court to assess damages against delinquent directors, etc. 543. Power of Court to assess damages against delinquent

directors, etc. (1) If in the course of winding up a company, it appears that any person who has taken part in the promotion or formation 408/6 of the company, or any past or present director, managing agent, sec- retaries and treasurers, manager, liquidator or officer of the company- (a) has misapplied, or retained, or become liable or accountable for, any money or property of the company ; or (b) has been guilty of any misfeasance or breach of trust in relation to the company ; the Court may, on the application of the Official Liquidator, of the liquidator, or of any creditor or contributory, made within the time

specified in that behalf in sub-section (2), examine into the conduct of the person, director, managing agent, secretaries and treasurers, manager, liquidator or officer aforesaid, and compel him to repay or restore the money or property or any part thereof respectively, with interest at such rate as the Court thinks just, or to contribute such sum to the assets of the company by way of compensation in respect of the misapplication, retainer, misfeasance or breach of trust, as the Court thinks just.

(2) An application under sub-section (1) shall be made within five years from the date of the order for winding up, or of the first appointment of the liquidator in the winding up, or of the misapplica- tion, retainer,. misfeasance or breach of trust, as the case may be, whichever is longer.

(3) This section shall apply notwithstanding that the matter is one for which the person concerned may be criminally liable.

Liability under sections 542 and 543 to extend to partners ordirectors in firm or company. 544. Liability under sections 542 and 543 to extend to partners or directors in firm or company. Where a declaration under section 542 or an order under section 543 is or may be made in respect of a firm or body corporate, the Court shall also have power to make a declaration under section 542, or pass an order under section 543, as the case may be, in respect of any person who was at the relevant time a partner in that firm or a director of that body corporate.

Prosecution of delinquent officers and members of company. 545. Prosecution of delinquent officers and members of company.

(1) If it appears to the Court in the course of a winding up by, or subject to the supervision of, the Court, that any past or present officer, or any member, of the company has been guilty of any offence in relation to the company, the Court may, either on the application of any person interested in the winding up or of its own motion, direct the liquidator either himself to prosecute the offender or to refer the matter to the Registrar.

(2) If it appears to the liquidator in the course of a voluntary winding up that any past or present officer, or any member, of the company has been guilty of any offence in relation to the company, 408/7 he shall forthwith report the matter to the Registrar and shall furnish to him such information and give to him such access to and facilities for inspecting and taking copies of any books and papers, being information or books and papers in the possession or under the control of the liquidator and relating to the matter in question, as the Registrar may require.

(3) Where any report is made under sub-section (2) to the Regis- trar, he may, if he thinks fit, refer the matter to the Central Government for further inquiry. The Central Government shall thereupon investigate the matter and may, if it thinks it expedient, apply to the Court for an order conferring on any person designated by the Central Government for the purpose, with respect to the company concerned, all such powers of investigating the affairs of the company as are provided by this Act in the case of a winding up by the Court.

(4) If on any report to the Registrar under sub-section (2), it appears to him that the case is not one in which proceedings ought to be taken by him, he shall inform the liquidator accordingly, and thereupon, subject to the previous sanction of the Court, the liquida- tor may himself take proceedings against the offender.

(5) If it appears to the Court in the course of a voluntary winding up that any past or present officer, or any member, of the company has been guilty as aforesaid, and that no report with respect to the matter has been made by the liquidator to the Registrar under

sub-section (2), the Court may, on the application of any person interested in the winding up or of its own motion, direct the liquidator to make such a report, and on a report being made accordingly, the provisions of this section shall have effect as though the report had been made in pursuance of the provisions of sub-

section (2).

(6) If, where any matter is reported or referred to the Registrar under this section, he considers that the case is one in which a prosecution ought to be instituted, he shall report the matter to the Central Government; and that Government may, after taking such legal advice as it thinks fit, direct the Registrar to institute proceedings: Provided that no report shall be made by the Registrar under this sub-section without first giving the accused person an opportunity of making a statement in writing to the Registrar and of being heard thereon.

(7) When any proceedings are instituted under this section, it shall be the duty of the liquidator and of every officer and agent of the 408/8 company past and present (other than the defendant in the proceedings) to give all assistance in connection with the prosecution which he is reasonably able to give. For the purposes of this sub-section, the expression “agent”, in relation to a company, shall be deemed to include any banker or legal adviser of the company and any person employed by the company as auditor.

(8) If any person fails or neglects to give assistance in the

manner required by sub-section (7), the Court may, on the application of the Registrar, direct that person to comply with the requirements of that sub-section.

(9) Where any such application is made with respect to a liquidator, the Court may, unless it appears that the failure or neglect was due to the liquidator not having in his hands sufficient assets of the company to enable him so to do, direct that the costs of the application shall be borne by the liquidator personally. Miscellaneous Provisions

Liquidator to exercise certain powers subject to sanction. 546. Liquidator to exercise certain powers subject to sanction.

(1) The liquidator may- (a) with the sanction of the Court, when the company is being wound up by or subject to the supervision of the Court; and (b) with the sanction of a special resolution of the company, in the case of a voluntary winding up,- (i) pay any classes of creditors in full ; (ii) make any compromise or arrangement with creditors or persons claiming to be creditors, or having or alleging themselves to have any claim, present or future, certain or contingent, ascertained or sounding only in damages, against the company, or whereby the company may be rendered liable ; or (iii) compromise any call or liability to call, debt, and liability capable of resulting in a debt, and any claim, present or future, certain or contingent, ascertained or sounding only in damages, subsisting or alleged to subsist between the company and a contributory or alleged contributory or other debtor or person apprehending liability to the company, and all questions in any way relating to or affecting the assets or liabilities or the winding up of the company, on such terms as may be agreed, and take 408/9 any security for the discharge of any such call, debt, liability or claim, and give a complete discharge in respect thereof.

1[(1A) Notwithstanding anything contained in sub-section (1), in the case of a winding up by the Court, the Supreme Court may make rules under section 643 providing that the liquidator may, under such circumstances, if any, and subject to such conditions, restrictions and limitations, if any, as may be specified in the rules, exercise any of the powers referred to in sub-clause (ii) or sub-clause (iii)

of sub-section (1) without the sanction of the Court.]

(2) In the case of a voluntary winding up, the exercise by the

liquidator of the powers conferred by sub-section (1) shall be subject to the control of the Court.

(3) Any creditor or contributory may apply to the Court with respect to any exercise or proposed exercise of any such power.

Notification that a company is in liquidation.

547. Notification that a company is in liquidation. (1) Where a company is being wound up, whether by or under the supervision of the court or voluntarily, every invoice, order for goods or business letter issued by or on behalf of the company or a liquidator of the company, or a receiver or manager of the property of the company, being a document on or in which the name of the company appears, shall contain a statement that the company is being wound up.

(2) If default is made in complying with this section, the com- pany, and every one of the following persons who wilfully authorises or permits the default, namely, any officer of the company, any liqui- dator of the company and any receiver or manager, shall be punishable with fine which may extend to five hundred rupees.

Books and papers of company to be evidence. 548. Books and papers of company to be evidence. Where a company is being wound up, all books and papers of the company and of the liquidators shall, as between the contributories of the company, be prima facie evidence of the truth of all matters purporting to be therein recorded.

Inspection of books and papers by creditors and contributories. 549. Inspection of books and papers by creditors and

contributories. (1) At any time after the making of an order for the winding up of a company by or subject to the supervision of the Court, any creditor or contributory of the company may, if 2[the Supreme Court], by rules prescribed so permit and in accordance with and subject to such rules but not further or otherwise, inspect the books and papers of the company. ———————————————————————- 1 Ins. by Act 65 of 1960, s. 188. 2 Subs. by s. 189, ibid., for “the Central Government”. ———————————————————————- 408/10

(2) Nothing in sub-section (1) shall be taken as excluding or restricting any rights conferred by any law for the time being in force- (a) on the Central or a State Government; or (b) on any authority or officer thereof ; or (c) on any person acting under the authority of any such Government or of any such authority or officer.

Disposal of books and papers of company.

550. Disposal of books and papers of company. (1) When the affairs of a company have been completely wound up and it is about to be dissolved, its books and papers and those of the liquidator may be disposed of as follows, that is to say:- (a) in the case of a winding up by or subject to the supervision of the Court, in such manner as the Court directs; (b) in the case of a members’ voluntary winding up, in such manner as the company by special resolution directs; and (c) in the case of a creditors’ voluntary winding up, in such manner as the committee of inspection or, if there is no such committee. as the creditors of the company may direct.

(2) After the expiry of five years from the dissolution of the company, no responsibility shall rest on the company, the liquidator, or any person to whom the custody of the books and papers has been committed, by reason of any book or paper not being forthcoming to any person claiming to be interested therein.

(3) The Central Government may, by rules,- (a) prevent for such period (not exceeding five years from the dissolution of the company) as the Central Government thinks proper, the destruction of the books and papers of a company which has been wound up and of its liquidator ; and (b) enable any creditor or contributory of the company to make representations to the Central Government in respect of the matters specified in clause (a) and to appeal to the Court from any direction which may be given by the Central Government in the matter.

(4) If any person acts in contravention of any such rules or of any direction of the Central Government thereunder, he shall be punishable with imprisonment for a term which may extend to six months, or with fine which may extend to five thousand rupees, or with both. 408/11

Information as to pending liquidations.

551. Information as to pending liquidations. 1[(1) If the winding up of a company is not concluded within one year after its commencement, the liquidator shall, unless he is exempted from so doing either wholly or in part by the Central Government, within two months of the expiry of such year and thereafter until the winding up is concluded, at intervals of not more than one year or at such shorter intervals, if any, as may be prescribed, file a statement in the prescribed form and containing the prescribed particulars duly audited, by a person qualified to act as auditor of the company, with respect to the proceedings in, and position of, the liquidation,- (a) in the case of a winding up by or subject to the supervision of the Court, in Court ; and (b) in the case of a voluntary winding up, with the Registrar: Provided that no such audit as is referred to in this sub-section shall be necessary where the provisions of section 462 apply.]

(2) When the statement is filed in Court under clause (a) of

sub-section (1), a copy shall simultaneously be filed with the Registrar and shall be kept by him along with the other records of the company.

2[(2A) Where a statement referred to in sub-section (2) relates to a Government company in liquidation, the liquidator shall forward a copy thereof,- (a) to the Central Government, if that Government is a member of the Government company; or (b) to any State Government, if that Government is a member of the Government company; or (c) to the Central Government and any State Government, if both the Governments are members of the Government com- pany.]

(3) Any person stating himself in writing to be a creditor or contributory of the company shall be entitled, by himself or by his agent, at all reasonable times, on payment of the prescribed fee, to inspect the statement, and to receive a copy thereof or an extract therefrom.

(4) Any person untruthfully stating himself to be a creditor or contributory for the above purpose shall be deemed to be guilty of an offence under section 182 of the Indian Penal Code, (45 of 1860.) and shall, on the application of the liquidator, be punishable accordingly.

(5) If a liquidator fails to comply with any of requirements of this section, he shall be punishable with fine which may extend to five hundred rupees for every day during which the failure continues: 3[Provided that if the liquidator makes wilful default in causing

the statement referred to in sub-section (1) to be audited by a person qualified to act as auditor of the company, the liquidator shall be punishable with imprisonment for a term which may extend to six ———————————————————————-

1 Subs. by Act 65 of 1960, s. 190, for sub-section (1). 2 Ins. by Act 31 of 1988, s.56 (w.e.f. 15.6.1988). 3 Added by s.190, ibid. ———————————————————————– 408/12 months, or with fine which may extend to one thousand rupees, or with both.]

Official Liquidator to make payments into the public account of India. 552. Official Liquidator to make payments into the public account of India. Every Official Liquidator shall, in such manner and at such times as may be pescribed, pay the moneys received by him as liqui- dator of any company, into the public account of India in the Reserve Bank of India.

Voluntary liquidator to make payments into Scheduled Bank. 553. Voluntary liquidator to make payments into Scheduled Bank.

(1) Every liquidator of a company, not being an Official Liquidator, shall, in such manner and at such times as may be prescribed, pay the moneys received by him in his capacity as such into a Scheduled Bank to the credit of a special banking account opened by him in that behalf, and called “the Liquidation Account of Company Limited” ————————- —————————- Company Private Limited”: ————————- Company” Provided that if the Court is satisfied that for the purpose of carrying on the business of the company or of obtaining advances or for any other reason, it is to the advantage of the creditors or contributories that the liquidator should have an account with any other bank, the Court may authorise the liquidator to make his payments into or out of such other bank as the Court may select ; and thereupon those payments shall be made in the prescribed manner and at the prescribed times into or out of such other bank.

(2) If any such liquidator at any time retains for more than ten days a sum exceeding five hundred rupees or such other amount as the Court may, on the application of the liquidator, authorise him to retain, then, unless he explains the retention to the satisfaction of the Court, he shall- (a) pay interest on the amount so retained in excess, at the rate of twelve per cent. per annum and also pay such penalty as may be determined by the Registrar ; (b) be liable to pay any expenses occasioned by reason of his default; and (c) also be liable to have all or such part of his remuneration as the Court may think just disallowed, and to be removed from his office by the Court. 408/13

Liquidator not to pay moneys into private banking account. 554. Liquidator not to pay moneys into private banking account. Neither the Official Liquidator nor any other liquidator of a company shall pay any moneys received by him in his capacity as such into any private banking account.

Unpaid dividends and undistributed assets to be paid into theCompanies Liquidation Account. 555. Unpaid dividends and undistributed assets to be paid into

the Companies Liquidation Account. 1[(1) Where any company is being wound up, if the liquidator has in his hands or under his control any money representing- (a) dividends payable to any creditor which had remained unpaid for six months after the date on which they were declared, or (b) assets refundable to any contributory which have remained undistributed for six months after the date on which they became refundable, the liquidator shall forthwith pay the said money into the public account of India in the Reserve Bank of India in a separate account to be known as the Company’s Liquidation Account.]

(2) The liquidator shall, on the dissolution of the company, similarly pay into the said account any money representing 2[unpaid] dividends or undistributed assets in his hands at the date of dis- solution.

(3) The liquidator shall, when making any payment referred to in

sub-sections (1) and (2), furnish to such officer as the Central Government may appoint in this behalf, a statement in the prescribed form, setting forth, in respect of all sums included in such payment, the nature of the sums, the names and last known addresses of the per- sons entitled to participate therein, the amount to which each is entitled and the nature of his claim thereto, and such other particulars as may be prescribed.

(4) The liquidator shall be entitled to a receipt from the

Reserve Bank of India for any money paid to it under sub-sections (1)

and (2) ; and such receipt shall be an effectual discharge of the liquidator in respect thereof.

(5) Where the company is being wound up by the Court, the

liquidator shall make the payments referred to in sub-sections (1) and

(2) by transfer from the account referred to in section 552.

(6) Where the company is being wound up voluntarily or subject to the supervision of the Court, the liquidator shall, when filing

a statement in pursuance of sub-section (1) of section 551, indicate the sum of money which is payable to the Reserve Bank of India ———————————————————————-

1 Subs. by Act 65 of 1960, s. 191, for sub-section (1). 2 Subs. by s. 191, ibid., for “unclaimed”. ———————————————————————- 408/14

under sub-sections (1) and (2) of this section which he has had in his hands or under his control during the six months preceding the date to which the said statement is brought down, and shall, within fourteen days of the date of filing the said statement, pay that sum into the Companies Liquidation Account.

(7) (a) Any person claiming to be entitled to any money paid into the Companies Liquidation Account (whether paid in pursuance of this section or under the provisions of any previous companies law) may apply to the Court for an order for payment thereof, and the Court, if satisfied that the person claiming is entitled, may make an order for the payment to that person of the sum due: Provided that before making such an order, the Court shall cause a notice to be served on such officer as the Central Government may appoint in this behalf, calling on the officer to show cause within one month from the date of the service of the notice why the order should not be made. (b) Any person claiming as aforesaid may, instead of applying to the Court, 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 liquidator or the Official Liquidator or otherwise, that such person is entitled to the whole or any part of the money claimed and that no application made in pursuance of clause (a) is pending in the Court, make an order for the payment to that person of the sum due to him, after taking such security from him as it may think fit.

(8) Any money paid into the Companies Liquidation Account in pursuance of this section, which remains unclaimed thereafter for a period of fifteen years, shall be transferred to the general revenue account of the Central Government; but a claim to any money so

transferred may be preferred under sub-section (7) and shall be dealt with as if such transfer had not been made, the order, if any, for payment on the claim being treated as an order for refund of revenue.

(9) Any liquidator retaining any money which should have been paid by him into the Companies Liquidation Account under this section shall- (a) pay interest on the amount retained at the rate of twelve per cent. per annum, and also pay such penalty as may be determined by the Registrar: 1[Provided that the Central Government may in any proper case remit either in part or in whole the amount of ———————————————————————- 1 Ins. by Act 65 of 1960, s. 191. ———————————————————————- 408/15 interest which the liquidator is required to pay under this clause ;] (b) be liable to pay any expenses occasioned by reason of his default; and (c) where the winding up is by or under the supervision of the Court, also be liable to have all or such part of his remuneration as the Court may think just to be disallowed, and to be removed from his office by the Court.

Enforcement of duty of liquidator to make returns, etc.

556. Enforcement of duty of liquidator to make returns, etc. (1) If any liquidator who has made any default in filing. delivering or making any return, account or other document, or in giving any notice which he is by law required to file, deliver, make or give, fails to make good the default within fourteen days after the service on him of a notice requiring him to do so, the Court may, on an application made to the Court by any contributory or creditor of the company or by the Registrar, make an order directing the liquidator to make good the default within such time as may be specified in the order.

(2) Any such order may provide that all costs of and incidental to the application shall be borne by the liquidator.

(3) Nothing in this section shall be taken to prejudice the operation of any enactment imposing penalties on a liquidator in respect of any such default as aforesaid. Supplementary Powers of Court

Meetings to ascertain wishes of creditors or contributories. 557. Meetings to ascertain wishes of creditors or contributories.

(1) In all matters relating to the winding up of a company, the Court may- (a) have regard to the wishes of creditors or contributories of the company, as proved to it by any sufficient evidence ; (b) if it thinks fit for the purpose of ascertaining those wishes, direct meetings of the creditors or contributories to be called, held and conducted in such manner as the Court directs ; and (c) appoint a person to act as chairman of any such meeting and to report the result thereof to the Court.

(2) When ascertaining the wishes of creditors, regard shall be had to the value of each creditor’s debt.

(3) When ascertaining the wishes of contributories, regard shall be had to the number of votes which may be cast by each contributory. 408/16

Court or person before whom affidavit may be sworn.

558. Court or person before whom affidavit may be sworn. (1) Any affidavit required to be sworn under the provisions, or for the purposes, of this Part may be sworn- (a) in India, before any Court, Judge or person lawfully authorised to take and receive affidavits ; and (b) in any other country, either before any Court, Judge or person lawfully authorised to take and receive affidavits in that country or before an Indian Consul or Vice Consul. 1* * * * *

(2) All Courts, Judges, Justices, Commissioners and persons act- ing judicially in India shall take judicial notice of the seal, stamp or signature, as the case may be, of any such Court, Judge, person, Consul or Vice-Consul, attached, appended or subscribed to any such affidavit or to any other document to be used for the purposes of this Part. Provisions as to Dissolution

Power of Court to declare dissolution of company void.

559. Power of Court to declare dissolution of company void. (1) Where a company has been dissolved, whether in pursuance of this Part or of section 394 or otherwise, the Court may at any time within two years of the date of the dissolution, on application by the liquidator of the company or by any other person who appears to the Court to be interested, make an order, upon such terms as the Court thinks fit, declaring the dissolution to have been void; and thereupon such proceedings may be taken as might have been taken if the company had not been dissolved.

(2) It shall be the duty of the person on whose application the order was made, within 2[thirty] days after the making of the order or such further time as the Court may allow, to file a certified copy of the order with the Registrar who shall register the same; and if such person fails so to do, he shall be punishable with fine which may extend to fifty rupees for every day during which the default continues.

Power of Registrar to strike defunct company off register. 560. Power of Registrar to strike defunct company off register.

(1) Where the Registrar has reasonable cause to believe that a company is not carrying on-business or in operation, he shall send to the company by post a letter inquiring whether the company is carrying on business or in operation.

(2) If the Registrar does not within one month of sending the letter receive any answer thereto, he shall, within fourteen days after the expiry of the month, send to the company by post a registered ———————————————————————- 1 Explanation omitted by Act 62 of 1956, s. 2 and Sch. (w.e.f. 1-11-1956). 2 Subs. by Act 31 of 1965, s. 62 and Sch., for “twenty-one” (w.e.f. 15-10-1965). ———————————————————————- 408/17 letter referring to the first letter, and stating that no answer thereto has been received and that, if an answer is not received to the second letter within one month from the date thereof, a notice will be published in the Official Gazette with a view to striking the name of the company off the register.

(3) If the Registrar either receives an answer from the company to the effect that it is not carrying on business or in operation, or does not within one month after sending the second letter receive any answer, he may publish in the Official Gazette, and send to the company by registered post, a notice that, at the expiration of three months from the date of that notice, the name of the company mentioned therein will, unless cause is shown to the contrary, be struck off the resister and the company will be dissolved.

(4) If, in any case where a company is being wound up, the Registrar has reasonable cause to believe either that no liquidator is acting, or that the affairs of the company have been completely wound up, and any returns required to be made by the liquidator have not been made for a period of six consecutive months, the Registrar shall publish in the Official Gazette and send to the company or the

liquidator, if any, a like notice as is provided in subsection (3).

(5) At the expiry of the time mentioned in the notice referred

to in sub-section (3) or (4), the Registrar may, unless cause to the contrary is previously shown by the company, strike its name off the register, and shall publish notice thereof in the Official Gazette ; and on the publication in the Official Gazette of this notice, the company shall stand dissolved: Provided that- (a) the liability, if any, of every director, the managing agent, secretaries and treasurers, manager or other officer who was exercising any power of management, and of every member of the company, shall continue and may be enforced as if the company had not been dissolved ; and (b) nothing in this sub-section shall affect the power of the Court to wind up a company the name of which has been struck off the register.

(6) If a company, or any member or creditor thereof, feels aggrieved by the company having been struck off the register, the Court, on an application made by the company, member or creditor before the expiry of twenty years from the publication in the Official Gazette of the notice aforesaid, may, if satisfied that the company was, at the 408/18 time of the striking off, carrying on business or in operation or otherwise that it is just that the company be restored to the register, order the name of the company to be restored to the register; and the Court may, by the order, give such directions and make such provisions as seem just for placing the company and all other persons in the same position as nearly as may be as if the name of the company had not been struck off.

(7) Upon a certified copy of the order under sub-section(6) being delivered to the Registrar for registration, the company shall be deemed to have continued in existence as if its name had not been struck off.

(8) A letter or notice to be sent under this section to a company may be addressed to the company at its registered office,or if no office has been registered, to the care of some director, the managing agent, secretaries and treasurers, manager or other officer of the company, or if there is no director, managing agent, secretaries and treasurers, manager or officer of the company whose name and address are known to the Registrar, may be sent to each of the persons who subscribed the memorandum, addressed to him at the address mentioned in the memorandum.

(9) A notice to be sent under this section to a liquidator may be addressed to the liquidator at his last known place of business. PART VIII APPLICATION OF ACT TO COMPANIES FORMED OR REGISTERED UNDER PREVIOUS COMPANIES LAWS

Application of Act to companies formed and registered under previouscompanies laws. 561. Application of Act to companies formed and registered under previous companies laws. This Act shall apply to existing companies as follows:- (a) in the case of a limited company other than a company limited by guarantee, this Act shall apply in the same manner as if the company had been formed and registered under this Act as a company limited by shares; (b) in the case of a company limited by guarantee, this Act shall apply in the same manner as if the company had been formed and registered under this Act as a company limited by guarantee; and (c) in the case of a company other than a limited company, this Act shall apply in the same manner as if the company 408/19 had been formed and registered under this Act as an unlimited company: Provided that- (i) nothing in Table A in Schedule I shall apply to a company formed and registered under Act 19 of 1857 and Act 7 of 1860 or either of them, or under the Indian Companies Act, 1866, (10 of 1866.) or the Indian Companies Act, 1882 ;(6 of 1882.) (ii) reference, express or implied, to the date of registration shall be construed as a reference to the date at which the company was registered under the previous companies law concerned.

Application of Act to companies registered but not formed underprevious companies laws. 562. Application of Act to companies registered but not formed under previous companies laws. This Act shall apply to every company registered but not formed under any previous companies law in the same manner as it is in Part IX of this Act declared to apply to companies registered but not formed under this Act: Provided that reference, express or implied, to the date of registration shall be construed as a reference to the date at which the company was registered under the previous companies law concerned.

Application of Act to unlimited companies re-registered under previouscompanies laws. 563. Application of Act to unlimited companies re-registered under previous companies laws. This Act shall apply to every unlimited company registered as a limited company in pursuance of any previous companies law, in the same manner as it applies to an unlimited company registered in pursuance of this Act as a limited company: Provided that reference, express or implied, to the date of registration shall be construed as a reference to the date at which the company was registered as a limited company under the previous companies law concerned.

Mode of transferring shares in the case of companies registered underActs 19 of 1857 and 7 of 1860. 564. Mode of transferring shares in the case of companies registered under Acts 19 of 1857 and 7 of 1860. A company registered under Act 19 of 1857 and Act 7 of 1860 or either of them may cause its shares to be transferred in the manner hitherto in use, or in such other manner as the company may direct. PART IX COMPANIES AUTHORISED TO REGISTER UNDER THIS ACT

Companies capable of being registered.

565. Companies capable of being registered. (1) With the exceptions and subject to the provisions contained in this section- (a) any company consisting of seven or more members, which was in existence on the first day of May, 1882, including 408/20 any company registered under Act No. 19 of 1857 and Act No. 7 of 1860 or either of them or under any laws or law in force in a Part B State, corresponding to those Acts or either of them ; and (b) any company formed after the date aforesaid, whether before or after the commencement of this Act, in pursuance of any Act of Parliament other than this Act or of any other Indian law (including a law in force in a Part B State), or of any Act of Parliament of the United Kingdom or Letters Patent in force in India, or being otherwise duly constituted according to law, and consisting of seven or more members; may at any time register under this Act as an unlimited company, or as a company limited by shares, or as a company limited by guarantee ; and the registration shall not be invalid by reason only that it has taken place with a view to the company’s being wound up: Provided that- (i) a company registered under the Indian Companies Act, 1882,(6 of 1882.) or under the Indian Companies Act, 1913,(7 of 1913.) shall not register in pursuance of this section ; (ii) a company having the liability of its members limited by any Act of Parliament other than this Act or by any other Indian law (including a law in force in a Part B State), or by any Act of Parliament of the United Kingdom or Letters Patent in force in India, and not being a joint stock company as defined in section 566, shall not register in pursuance of this section ; (iii) a company having the liability of its members limited by any Act of Parliament other than this Act or by any other Indian law (including a law in force in a Part B State), or any Act of Parliament of the United Kingdom or Letters Patent in force in India, shall not register in pur- suance of this section as an unlimited company or as a company limited by guarantee; (iv) a company that is not a joint stock company as defined in section 566 shall not register in pursuance of this section as a company limited by shares ; (v) a company shall not register in pursuance of this section without the assent of a majority of such of its members 408/21 as are present in person, or where proxies are allowed, by proxy, at a general meeting summoned for the purpose; (vi) where a company not having the liability of its members limited by any Act of Parliament or any other Indian law (including a law in force in a Part B State) or by any Act of Parliament of the United Kingdom or Letters Patent in force in India, is about to register as a limited company, the majority required to assent as aforesaid shall consist of not less than three-fourths of the members present in person, or where proxies are allowed, by proxy, at the meeting ; (vii) where a company is about to register as a company limited by guarantee, the assent to its being so registered shall be accompanied by a resolution declaring that each member undertakes to contribute to the assets of the company, in the event of its being wound up while he is a member, or within one year after he ceases to be a member, for payment of the debts and liabilities of the company or of such debts and liabilities as may have been contracted before he ceases to be a member, and of the costs, charges and expenses of winding up, and for the adjustment of the rights of the contributories among themselves, such amount as may be required, not exceeding a specified amount.

(2) In computing any majority required for the purposes of sub-

section (1) when a poll is demanded, regard shall be had to the number of votes to which each member is entitled according to the regulations of the company.

(3) Nothing in this section shall be deemed to apply to any com- pany the registered office whereof at the commencement of this Act is in Burma, Aden or Pakistan, 1* * *.

Definition of “joint-stock company”.

566. Definition of “joint-stock company”. (1) For the purposes of this Part, so far as it relates to the registration of companies as companies limited by shares, a joint stock company means a company having a permanent paid up or nominal share capital of fixed amount divided into shares, also of fixed amount, or held and transferable as stock, or divided and held partly in the one way and partly in the other, and formed on the ———————————————————————- 1 The words “or in the State of Jammu and Kashmir” omitted by Act 62 of 1956, s. 2 and Sch. (w.e.f. 1-11-1956). ———————————————————————- 408/22 principle of having for its members the holders of those shares or that stock, and no other persons.

(2) Such a company, when registered with limited liability under this Act, shall be deemed to be a company limited by shares.

Requirements for registration of joint-stock companies. 567. Requirements for registration of joint-stock companies. Before the registration in pursuance of this Part of a joint stock company, there shall be delivered to the Registrar the following documents: – (a) a list showing the names, addresses and occupations of all persons who on a day named in the list, not being more than six clear days before the day of registration, were members of the company, with the addition of the shares or stock held by them respectively, distinguishing, in cases where the shares are numbered, each share by its number; (b) a copy of any Act of Parliament or other Indian law, Act of Parliament of the United Kingdom, Royal Charter, Letters Patent, deed of settlement, deed of partnership or other instrument constituting or regulating the company; and (c) if the company is intended to be registered as a limited company, a statement specifying the following parti- culars: – (i) the nominal share capital of the company and the number of shares into which it is divided or the amount of stock of which it consists ; (ii) the number of shares taken and the amount paid on each share; (iii) the name of the company, with the addition of the word “Limited” or “Private Limited” as the case may require, as the last word or words thereof ; and (iv) in the case of a company intended to be registered as a company limited by guarantee, a copy of the resolution declaring the amount of the guarantee.

Requirements for registration of companies not being joint-stockcompanies. 568. Requirements for registration of companies not being joint- stock companies. Before the registration in pursuance of this Part of any company not being a joint-stock company, there shall be delivered to the Registrar the following documents:- (a) a list showing the names, addresses and occupations of the directors, the managing agent, if any, the secretaries and 408/23 treasurers, if any, and the manager, if any, of the company; (b) a copy of any Act of Parliament or other Indian law, Act of Parliament of the United Kingdom, Letters Patent, deed of settlement, deed of partnership or other instrument constituting or regulating the company; and (c) in the case of a company intended to be registered as a company limited by guarantee, a copy of the resolution declaring the amount of the guarantee.

Authentication of statements of existing companies. 569. Authentication of statements of existing companies. The lists of members and directors and any other particulars relating to the company required to be delivered to the Registrar shall be duly verified by the declaration of any two or more directors or other principal officers of the company.

Power of Registrar to require evidence as to nature of company. 570.Power of Registrar to require evidence as to nature of company. The Registrar may require such evidence as he thinks necessary for the purpose of satisfying himself whether any company proposing to be registered is or is not a joint-stock company as de- fined in section 566.

Notice to customers on registration of banking company with limitedliability. 571. Notice to customers on registration of banking company with

limited liability. (1) Where a banking company which was in existence on the first day of May, 1882, proposes to register as a limited company under this Part, it shall, at least thirty days before so registering, give notice of its intention so to register, to every person who has a banking account with the company, either by delivery of the notice to him, or by posting it to him at, or delivering it at, his last known address.

(2) If the banking company omits to give the notice required by

sub-section (1), then, as between the company and the person for the time being interested in the account in respect of which the notice ought to have been given, and so far as respects the account down to the time at which notice is given, but not further or otherwise, the certificate of registration with limited liability shall have no operation.

Change of name for purposes of registration. 572. Change of name for purposes of registration. Where the name of a company seeking registration under this Part is one which in the opinion of the Central Government is undesirable, the company may, with the approval of the Central Government signified in writing, change its name with effect from the date of its registration under this Part: Provided that the like assent of the members of the company shall be required to the change of name as is required by section 565 to the registration of the company under this Part. 408/24

Addition “Limited ” or “Private Limited” to name. 573. Addition “Limited ” or “Private Limited” to name. When a company registers in pursuance of this Part with limited liability, the word “Limited” or the words “Private Limited” as the case may be, shall form, and be registered as, the last word or words of its name: Provided that this section shall not be deemed to exclude the operation of section 25.

Certificate of registration of existing companies. 574. Certificate of registration of existing companies. On compliance with the requirements of this Part with respect to registration, and on payment of such fees, if any, as are payable under Schedule X, the Registrar shall certify under his hand that the company applying for registration is incorporated as a company under this Act, and in the case of a limited company that it is limited and thereupon the company shall be so incorporated.

Vesting of property on registration. 575. Vesting of property on registration. All property, movable and immovable (including actionable claims), belonging to or vested in a company at the date of its registration in pursuance of this Part, shall, on such registration, pass to and vest in the company as incorporated under this Act, for all the estate and interest of the company therein.

Saving for existing liabilities. 576. Saving for existing liabilities. The registration of a company in pursuance of this Part shall not affect its rights or liabilities in respect of any debt or obligation incurred, or any contract entered into, by, to, with, or on behalf of, the company before registration.

Continuation of pending legal proceedings. 577. Continuation of pending legal proceedings. All suits and other legal proceedings taken by or against the company, or any public officer or member thereof, which are pending at the time of the registration of a company in pursuance of this Part, may be continued in the same manner as if the registration had not taken place: Provided that execution shall not issue against the property or person of any individual member of the company on any decree or order obtained in any such suit or proceeding ; but, in the event of the property of the company being insufficient to satisfy the decree or order, an order may be obtained for winding up the company.

Effect of registration under Part.

578. Effect of registration under Part. (1) When a company is

registered in pursuance of this Part, sub-sections (2) to (7) shall apply.

(2) All provisions contained in any Act of Parliament or other Indian law, or other instrument constituting or regulating the 408/25 company, including, in the case of a company registered as a company limited by guarantee, the resolution declaring the amount of the guarantee, shall be deemed to be conditions and regulations of the company, in the same manner and with the same incidents as if so much thereof as would, if the company had been formed under this Act, have been required to be inserted in the memorandum, were contained in a registered memorandum, and the residue thereof were contained in registered articles.

(3) All the provisions of this Act shall apply to the company and the members, contributories and creditors thereof, in the same manner in all respects as if it had been formed under this Act, subject as follows:- (a) Table A in Schedule I shall not apply unless and except in so far as it is adopted by special resolution ; (b) the provisions of this Act relating to the numbering of shares shall not apply to any joint-stock company whose shares are not numbered; (c) subject to the provisions of this section, the company shall not have power to alter any provision contained in any Act of Parliament or other Indian law relating to the company; (d) subject to the provisions of this section, the company shall not have power, without the sanction of the Central Government, to alter any provision contained in any Act of Parliament of the United Kingdom, Royal Charter or Letters Patent, relating to the company ; (e) the company shall not have power to alter any provision contained in any Act of Parliament or other Indian law or in any Act of Parliament of the United Kingdom, Royal Charter or Letters Patent, with respect to the objects of the company ; (f) in the event of the company being wound up, every person shall be a contributory, in respect of the debts and liabilities of the company contracted before registration, who is liable to pay or contribute to the payment of any debt or liability of the company contracted before registration, or to pay or contribute to the payment of any sum for the adjustment of the rights of the members among themselves in respect of any such debt or liability, or to pay or contribute to the payment of the costs, 408/26 charges and expenses of winding up the company, so far as relates to such debts or liabilities as aforesaid ; (g) in the event of the company being wound up, every contributory shall be liable to contribute to the assets of the company, in the course of the winding up, all sums due from him in respect of any such liability as aforesaid; and in the event of the death or insolvency of any contributory, the provisions of this Act with respect to the legal representatives of deceased contributories, or with respect to the assignees of insolvent contributories, as the case may be, shall apply.

(4) The provisions of this Act with respect to- (a) the registration of an unlimited as a limited company; (b) the powers of an unlimited company on registration as a limited company, to increase the nominal amount of its share capital and to provide that a portion of its share capital shall not be capable of being called up except in the event of winding up ; (c) the power of a limited company to determine that a portion of its share capital shall not be capable of being called up except in the event of winding up ; shall apply, notwithstanding any provisions contained in any Act of Parliament or other Indian law, or other instrument constituting or regulating the company.

(5) Nothing in this section shall authorise the company to alter any such provisions contained in any instrument constituting or regulating the company as would, if the company had originally been formed under this Act, have been required to be contained in the memorandum and are not authorised to be altered by this Act.

(6) None of the provisions of this Act (apart from those of section 404) shall derogate from any power of altering its constitution or regulations which may be vested in the company, by virtue of any Act of Parliament or other Indian law, or other instrument constituting or regulating the company.

(7) In this section, the expression “instrument” includes deed of settlement, deed of partnership, Act of Parliament of the United Kingdom, Royal Charter and Letters Patent.

Power to substitute memorandum and articles for deed of settlement. 579. Power to substitute memorandum and articles for deed of

settlement. (1) Subject to the provisions of this section, a company registered in pursuance of this Part may, by special resolution, alter 408/27 the form of its constitution by substituting a memorandum and articles for a deed of settlement.

(2) The provisions of sections 17 and 19 with respect to an alteration of the objects of a company shall, so far as applicable, apply to any alteration under this section with the following modifications: – (a) there shall be substituted for the printed copy of the altered memorandum required to be filed with the Registrar a printed copy of the substituted memorandum and articles ; and (b) on the registration of the alteration being certified by the Registrar, the substituted memorandum and articles shall apply to the company in the same manner as if it were a company registered under this Act with that memorandum and those articles, and the company’s deed of settlement shall cease to apply to the company.

(3) An alteration under this section may be made either with or without any alteration of the objects of the company under this Act.

(4) In this section, the expression “deed of settlement” includes any deed of partnership, Act of Parliament of the United Kingdom, Royal Charter or Letters Patent, or other instrument constituting or regulating the company, not being an Act of Parliament or other Indian law.

Power of Court to stay or restrain proceedings. 580. Power of Court to stay or restrain proceedings. The provisions of this Act with respect to staying and restraining suits and other legal proceedings against a company at any time after the presentation of a petition for winding up and before the making of a winding up order, shall, in the case of a company registered in pursuance of this Part, where the application to stay or restrain is by a creditor, extend to suits and other legal proceedings against any contributory of the company.

Suits stayed on winding up order. 581. Suits stayed on winding up order. Where an order has been made for winding up, or a provisional liquidator has been appointed for, a company registered in pursuance of this Part, no suit or other legal proceeding shall be proceeded with or commenced against the Company or any contributory of the company in respect of any debt of the company, except by leave of the Court and except on such terms as the Court may impose. 408/28 PART X WINDING UP OF UNREGISTERED COMPANIES

Managing of “unregistered company”. 582. Managing of “unregistered company”. For the purposes of this Part, the expression “unregistered company”- (a) shall not include- (i) a railway company incorporated by any Act of Parliament or other Indian law or any Act of Parliament of the United Kingdom; (ii) a company registered under this Act; or (iii) a company registered under any previous com- panies law and not being a company the registered office whereof was in Burma, Aden or Pakistan immediately before the separation of that country from India 1* * * ; and (b) save as aforesaid, shall include any partnership, association or company consisting of more than seven members 2[at the time when the petition for winding up the partnership, association or company, as the case may be, is presented before the Court].

Winding up of unregistred companies.

583. Winding up of unregistred companies. (1) Subject to the provisions of this Part, any unregistered company may be wound up under this Act, and all the provisions of this Act with respect to winding up shall apply to an unregistered company, with the exceptions

and additions mentioned in sub-sections (2) to (5).

(2) For the purpose of determining the Court having Jurisdiction in the matter of the winding up, an unregistered company shall be deemed to be registered in the State where its principal place of business is situate or, if it has a principal place of business situate in more than one State, then, in each State where it has a principal place of business ; and the principal place of business situate in that State in which proceedings are being instituted shall, for all the purposes of the winding up, be deemed to be the registered office of the company.

(3) No unregistered company shall be wound up under this Act voluntarily or subject to the supervision of the Court. ———————————————————————- 1 Certain words omitted by Act 62 of 1956, s. 2 and Sch. (w.e.f. 1-11-1956). 2 Ins. by Act 65 of 1960, s. 192. ———————————————————————- 408/29

(4) The circumstances in which an unregistered company may be wound up are as follows: – (a) if the company is dissolved, or has ceased to carry on business, or is carrying on business only for the purpose of winding up its affairs ; (b) it the company is unable to pay its debts; (c) if the Court is of opinion that it is just and equitable that the company should be wound up.

(5) An unregistered company shall, for the purposes of this Act, be deemed to be unable to pay its debts- (a) if a creditor, by assignment or otherwise, to whom the company is indebted in a sum exceeding five hundred rupees then due, has served on the company, by leaving at its principal place of business, or by delivering to the secretary, or some director, managing agent, secretaries and treasurers, manager or principal officer of the company, or by otherwise serving in such manner as the Court may approve or direct, a demand under his hand requiring the company to pay the sum so due, and the company has, for three weeks after the service of the demand, neglected to pay the sum or to secure or compound for it to the satisfaction of the creditor ; (b) if any suit or other legal proceeding has been instituted against any member for any debt or demand due, or claimed to be due, from the company, or from him in his character of member, and notice in writing of the institution of the suit or other legal proceeding having been served on the company by leaving the same at its principal place of business or by delivering it to the secretary, or some director, managing agent, secretaries and treasurers, manager or principal officer of the company or by otherwise serving the same in such manner as the Court may approve or direct, the company has not, within ten days after service of the notice,- (i) paid, secured or compounded for the debt or demand; or (ii) procured the suit or other legal proceeding to be stayed ; or (iii) indemnified the defendant to his satisfaction against the suit or other legal proceeding, and against 408/30 all costs, damages and expenses to be incurred by him by reason of the same ; (c) if execution or other process issued on a decree or order of any Court in favour of a creditor against the company, or any member thereof as such, or any person authorised to be sued as nominal defendant on behalf of the company, is returned unsatisfied in whole or in part ; (d) if it is otherwise proved to the satisfaction of the Court that the company is unable to pay its debts.

Power to wind up foreign companies, although dissolved. 584. Power to wind up foreign companies, although dissolved. Where a body corporate incorporated outside India which has been carrying on business in India, ceases to carry on business in India, it may be wound up as an unregistered company under this Part, notwithstanding that the body corporate has been dissolved or otherwise ceased to exist as such under or by virtue of the laws of the country under which it was incorporated.

Contributories in winding up of unregistred company.

585. Contributories in winding up of unregistred company. (1) In the event of an unregistered company being wound up, every person shall be deemed to be a contributory, who is liable to pay, or contribute to the payment of,- (a) any debt or liability of the company; or (b) any sum for the adjustment of the rights of the members among themselves; or (c) the costs, charges and expenses of winding up the company.

(2) Every contributory shall be liable to contribute to the assets of the company all sums due from him in respect of any liability to pay or contribute as aforesaid.

(3) In the event of the death or insolvency of any contributory, the provisions of this Act with respect to the legal representatives of deceased contributories, or with respect to the assignees of insolvent contributories, as the case may be, shall apply.

Power to stay or restrain proceedings. 586. Power to stay or restrain proceedings. The provisions of this Act with respect to staying and restraining suits and legal proceedings against a company at any time after the presentation of a petition for winding up and before the making of a winding up order, shall, in the case of an unregistered company, where the application to stay or restrain is by a creditor, extend to suits and legal proceedings against any contributory of the company. 408/31

Suits, etc., stayed or winding up order. 587. Suits, etc., stayed or winding up order. Where an order has been made for winding up an unregistered company, no suit or other legal proceeding shall be proceeded with or commenced against any contributory of the company in respect of any debt of the company, except by leave of the Court and except on such terms as the Court may impose.

Directions as to property in certain cases.

588. Directions as to property in certain cases. (1) If an unregistered company has no power to sue and be sued in a common name, or if for any reason it appears expedient, the Court may, by the winding up order or by any subsequent order, direct that all or any part of the property, movable or immovable (including actionable claims), belonging to the company or held by trustees on its behalf, shall vest in the Official Liquidator by his official name; and thereupon the property or the part thereof specified in the order shall vest accordingly.

(2) The Official Liquidator may, after giving such indemnity, if any, as the Court may direct, bring or defend in his official name any suit or legal proceeding relating to that property, or which it is necessary to bring or defend for the purpose of effectually winding up the company and recovering its property.

Provisions of Part cumulative.

589. Provisions of Part cumulative. (1) The provisions of this Part with respect to unregistered companies shall be in addition to and not in derogation of, any provisions hereinbefore in this Act contained with respect to the winding up of companies by the Court.

(2) The Court or Official Liquidator may exercise any powers or do any act in the case of unregistered companies which might be exercised or done by the Court or Official Liquidator in winding up companies formed and registered under this Act : Provided that an unregistered company shall not, except in the event of its being wound up, be deemed to be a company under this Act, and then only to the extent provided by this Part.

Saving and construction of enactments conferring power to wind uppartnership, association or company in certain cases. 590. Saving and construction of enactments conferring power to wind up partnership, association or company in certain cases. Nothing in this Part shall affect the operation of any enactment which provides for any partnership, association or company being wound up, or being wound up as a company or as an unregistered company, under the Indian Companies Act, 1913 (7 of 1913.) or any Act repealed by that Act : Provided that references in any such enactment to any provision contained in the Indian Companies Act, 1913 (7 of 1913.) or in any Act repealed by that Act shall be read as references to the corresponding provision, if any, contained in this Act. 408/32 PART XI COMPANIES INCORPORATED OUTSIDE INDIA Provisions as to Establishment of Places of Business in India

Application of sections 592 to 602 to foreign companies. 591. Application of sections 592 to 602 to foreign companies.

1[(1)] Sections 592 to 602, both inclusive, shall apply to all foreign companies, that is to say, companies falling under the following two classes, namely :- (a) companies incorporated outside India which, after the commencement of this Act, establish a place of business within India; and (b) companies incorporated outside India which have, before the commencement of this Act, established a place of business within India and continue to have an established place of business within India at the commencement of this Act.

2[(2) Notwithstanding anything contained in sub-section (1), where not less than fifty per cent. of the paid up share capital (whether equity or preference or partly equity and partly preference) of a company incorporated outside India and having an established place of business in India, is held by one or more citizens of India or by one or more bodies corporate incorporated in India, or by one or more citizens of India and one or more bodies corporate incorporated in India, whether singly or in the aggregate, such company shall comply with such of the provisions of this Act as may be prescribed with regard to the business carried on by it in India, as if it were a company incorporated in India.]

Documents, etc., to be delivered to Registrar by foreign companiescarrying on business in India. 592. Documents, etc., to be delivered to Registrar by foreign

companies carrying on business in India. (1) Foreign companies which, after the commencement of this Act, establish a place of business within India shall, within 3[thirty days] of the establishment of the place of business, deliver to the Registrar for registration- (a) a certified copy of the charter, statutes, or memorandum and articles, of the company or other instrument constituting or defining the constitution of the company; and, ———————————————————————-

1 S. 591 renumbered as sub-section (1) by Act 41 of 1974, s. 32 (w.e.f. 1-2-1975). 2 Ins. by s. 32, ibid. (w.e.f. 1-2-1975). 3 Subs. by Act 31 of 1965, s. 62 and Sch., for “one month” (w.e.f. 15-10-1965). ———————————————————————- 408/32A if the instrument is not in the English language, a certi- fied translation thereof; (b) the full address of the registered or principal office of the company; (c) a list of the directors and secretary of the company,

containing the particulars mentioned in sub-section (2); (d) the name and address or the names and addresses of some one or more persons resident in India, authorised to accept on behalf of the company service of process and any notices or other documents required to be served on the company; and (e) the full address of the office of the company in India which is to be deemed its principal place of business in India.

(2) The list referred to in clause (c) of sub-section (1) shall contain the following particulars, that is to say:- (a) with respect to each director,- (i) in the case of an individual, his present name and surname in full, any former name or names and sur- 408/33 name or surnames in full, his usual residential address, his nationality, and if that nationality is not the nationality of origin, his nationality of origin, and his business occupation, if any, or if he has no business occupation but holds any other directorship or directorships, particulars of that directorship or of some one of those directorships ; and (ii) in the case of a body corporate, its corporate name and registered or principal office ; and the full name, address, nationality, and nationality of origin. if different from that nationality, of each of its directors ; (b) with respect to the secretary, or where there are joint secretaries with respect to each of them- (i) in the case of an individual., his present name and surname. any former name or names and surname or surnames, and his usual residential address; and (ii) in the case of a body corporate, its corporate name and registered or principal office: Provided that, where all the partners in a firm are joint secretaries of the company, the name and principal office of the firm may be stated instead of the particulars mentioned in clause (b) of this subsection.

(3) Clauses (2) and (3) of the Explanation to sub-section (1) of section 303 shall apply for the purpose of the construction of refer-

ences in sub-section (2) to present and former names and surnames as they apply for the purposes of the construction of such references in

sub-section (1) of section 303.

(4) Foreign companies, other than those mentioned in sub-section

(1), shall, if they have not delivered to the Registrar before the commencement of this Act the documents and particulars specified in

sub-section (1) of section 277 of the Indian Companies Act, 1913,(7 of 1913.) continue to be subject to the obligation to deliver those documents and particulars in accordance with that Act.

Return to be delivered to Registrar by foreign company wheredocuments, etc., altered. 593. Return to be delivered to Registrar by foreign company where documents, etc., altered. If any alteration is made or occurs in- (a) the charter, statutes, or memorandum and articles of a foreign company or other instrument constituting or defining the constitution of a foreign company ; or (b) the registered or principal office of a foreign company; or 408/34 (c) the directors or secretary of a foreign company 1* * * ; or (d) the name or address of any of the persons authorised to accept service on behalf of a foreign company ; or (e) the principal place of business of the company in India; the company shall, within the prescribed time, deliver to the Registrar for registration a return containing the prescribed particulars of the alteration.

Accounts of foreign company.

594. Accounts of foreign company. (1) Every foreign company shall, in every calendar year,- (a) make out a balance sheet and profit and loss account in such form, containing such particulars and including or having annexed or attached thereto such documents (including, in particular documents relating to every subsidiary of the foreign company) as under the provisions of this Act it would, if it had been a company within the meaning of this Act, have been required to make out and lay before the company in general meeting; and (b) deliver three copies of those documents to the Registrar: Provided that the Central Government may, by notification in the Official Gazette, direct that, in the case of any foreign company or class of foreign company the requirements of clause (a) shall not apply, or shall apply subject to such exceptions and modifications as may be specified in the notification.

(2) If any such document as is mentioned in sub-section (1) is not in the English language, there shall be annexed to it a certified translation thereof.

(3) Every foreign company shall send to the Registrar with the

documents required to be delivered to him under sub-section (1), three copies of a list in the prescribed form of all places of business established by the company in India as at the date with reference to

which the balance sheet referred to in sub-section (1) is made out.

Obligation to state name of foreign company whether limited, andcountry where incorporated. 595. Obligation to state name of foreign company whether limited, and country where incorporated. Every foreign company shall- (a) in every prospectus inviting subscriptions in India for its shares or debentures, state the country in which the company is incorporated; (b) conspicuously exhibit on the outside of every office or place where it carries on business in India, the name of the ———————————————————————- 1 Certain words omitted by Act 31 of 1965, s. 57 (w.e.f. 15-10-1965). ———————————————————————– 408/35 company and the country in which it is incorporated, in letters easily legible in English characters, and also in the characters of the language or one of the languages in general use in the locality in which the office or place is situate; (c) cause the name of the company and of the country in which the company is incorporated, to be stated in legible English characters in all business letters, bill-heads and letter paper, and in all notices, 1* * * and other official publications of the company; and (d) if the liability of the members of the company is limited cause notice of that fact- (i) to be stated in every such prospectus as aforesaid and in all business letters, bill-heads, letter paper, notices, advertisements and other official publications of the company, in legible English characters; and (ii) to be conspicuously exhibited on the outside of every office or place where it carries on business in India, in legible English characters and also in legible characters of the language or one of the languages in general use in the locality in which the office or place is situate.

Service on foreign company. 596. Service on foreign company. Any process, notice, or other document required to be served on a foreign company shall be deemed to be sufficiently served, if addressed to any person whose name has been delivered to the Registrar under the foregoing provisions of this Part and left at, or sent by post to, the address which has been so delivered: Provided that- (a) where any such company makes default in delivering to the Registrar the name and address of a person resident in India who is authorised to accept on behalf of the company service of process, notices or other documents; or (b) if at any time all the persons whose names and addresses have been so delivered are dead or have ceased so to reside, or refuse to accept service on behalf of the com- pany, or for any reason, cannot be served; ———————————————————————- 1 The word “advertisements” omitted by Act 65 of 1960, s. 193. ———————————————————————- 408/36 a document may be served on the company by leaving it at, or sending it by post to, any place of business established by the company in India.

Office where documents to be delivered.

597. Office where documents to be delivered. (1) Any document which any foreign company is required to deliver to the Registrar shall be delivered to the Registrar having jurisdiction over New Delhi, and references to the Registrar in this Part [except in sub-

section (2)] shall be construed accordingly.

(2) Any such document as is referred to in sub-section (1) shall also be delivered to the Registrar of the State in which the principal place of business of the company is situate.

(3) If any foreign company ceases to have a place of business in India, it shall forthwith give notice of the fact to the Registrar, and as from the date on which notice is so given, the obligation of the company to deliver any document to the Registrar shall cease, pro- vided it has no other place of business in India.

Penalties. 598. Penalties. If any foreign company fails to comply with any of the foregoing provisions of this Part, the company, and every officer or agent of the company who is in default, shall be punishable with fine which may extend to one thousand rupees, and in the case of a continuing offence, with an additional fine which may extend to one hundred rupees for every day during which the default continues.

Company’s failure to comply with Part not to affect its liabilityunder contracts, etc. 599. Company’s failure to comply with Part not to affect its liability under contracts, etc. Any failure by a foreign company to comply with any of the foregoing provisions of this Part shall not affect the validity of any contract, dealing or transaction entered into by the company or its liability to be sued in respect thereof ; but the company shall not be entitled to bring any suit, claim any set-off, make any counter-claim or institute any legal proceeding in respect of any such contract, dealing or transaction, until it has complied with the provisions of this Part.

Registration of charges, appointment of receiver and books of account. 600. Registration of charges, appointment of receiver and books

of account. (1) The provisions of Part V (sections 124 to 145) ; shall apply mutatis mutandis to- (a) charges on properties in India which are created by a foreign company after the 15th day of January, 1937; and (b) charges on property in India which is acquired by any foreign company after the day aforesaid: Provided that where a charge is created, or the completion of the acquisition of the property takes place, outside India, sub-section

(5) of section 125 and the proviso to sub-section (1) of section 127 shall 408/37 have effect as if the property, wherever situated, were situated out- side India.

(2) The provisions of section 118 shall apply mutatis mutandis to a foreign company.

(3) 1[(a)] The provisions of section 209 shall apply to a foreign company to the extent of requiring it to keep at its principal place of business in India the books of account referred to in that section, with respect to moneys received and expended, sales and purchases made, and assets and liabilities, in the course of or in relation to its business in India. 2[(b) On and from the commencement of the Companies (Amendment) Act, 1974,(41 of 1974.) – (i) the provisions of section 159 shall, subject to such modifications or adaptations as may be made therein by the rules made under this Act, apply to a foreign company having an established place of business in India, as they apply to a company incorporated in India; (ii) the proviso of sections 209, 209A, 233A and 233B and sections 234 to 246 (both inclusive) shall, so far as may be, apply only to the Indian business of a foreign company having an established place of business in India, as they apply to a company incorporated in India.]

(4) In applying the sections referred to in sub-sections (1),

(2) and (3) to a foreign company as aforesaid, references in those sections to the Registrar shall be deemed to be references to the Registrar having jurisdiction over New Delhi, and references to the registered office of the foreign company shall be deemed to be references to its principal place of business in India.

Fees for registration of documents under Part. 601. Fees for registration of documents under Part. There shall be paid to the Registrar for registering any document required by the foregoing provisions of this Part to be registered by him, such fees as may be prescribed. ———————————————————————-

1 Sub-section (3) re-lettered as cl. (a) of that sub-section by Act 41 of 1974, s. 33 (w.e.f. 1-2-1975). 2 Ins. by s. 33, ibid. (w.e.f. 1-2-1975). ——————————————————————— 408/38

Interpretation of foregoing sections of Part. 602. Interpretation of foregoing sections of Part. For the purposes of the foregoing provisions of this Part- (a) the expression “certified” means certified in the prescribed manner to be a true copy or a correct translation; (b) the expression “direct-or”, in relation to a company, includes any person in accordance with whose directions or instructions the Board of directors of the company is accus- tomed to act; (c) the expression “place of business” includes a share transfer or share registration office; (d) the expression “prospectus” has the same meaning as when used in relation to a company incorporated under this Act; and (e) the expression “secretary” includes any person occupying the position of secretary, by whatever name called. Prospectuses

Dating of prospectus and particulars to be contained therein. 603. Dating of prospectus and particulars to be contained

therein. (1) No person shall issue, circulate or distribute in India any prospectus offering for subscription shares in or debentures of a company incorporated or to be incorporated outside India, whether the company has or has not established, or when formed will or will not establish, a place of business in India, unless the prospectus is dated: and (a) contains particulars with respect to the following matters : – (i) the instrument constituting or defining the con- stitution of the company; (ii) the enactments or provisions having the force of enactments, by or under which the incorporation of the company was effected; (iii) an address in India where the said instrument, enactments, or provision, or copies thereof, and if the same are not in English, a translation thereof certified in the prescribed manner, can be inspected; (iv) the date on which and the country in which the company was incorporated: 408/38A (v)whether the company has established a place of business in India, and, if so, the address of its principal office in India; and (b) subject to the provisions of this section, states the matters specified in Part I of Schedule 11 and sets out the reports specified in Part II of that Schedule, subject always to the provisions contained in Part III of that Schedule : Provided that sub-clauses (i), (ii) and (iii) of clause (a) shall not apply in the case of a prospectus issued more than two years after the date at which the company is entitled to commence business; and in the application of Part I of Schedule II for the purposes of this sub- section, clause 2 thereof shall have effect with the substitution, for references to the articles of references to the constitution of a company.

(2) Any condition requiring or binding an applicant for shares or debentures to waive compliance with any requirement imposed by

virtue of clause (a) or (b) of sub-section (1), or purporting to affect him with notice of any contract, document or matter not specifically referred to in the prospectus, shall be void.

(3) No person shall issue to any person in India a form of application for shares in or debentures of such a company or intended

company as is mentioned in sub-section (1), unless the form is issued with a prospectus which complies with the provisions of this Part and the issue whereof in India does not contravene the provisions of section 604 : Provided that this sub-section shall not apply if it is shown that the form of application was issued in connection with a bona fide 408/39 invitation to a person to enter into an underwriting agreement with respect to the shares or debentures.

(4) In the event of non-compliance with or contravention of any of the requirements imposed by clauses (a) and (b) of sub-section

(1), a director or other person responsible for the prospectus shall not incur any liability by reason of the non-compliance or contravention, if- (a) as regards any matter not disclosed, he proves that he had no knowledge thereof ; or (b) he proves that the non-compliance or contravention arose from an honest mistake of fact on his part ; or (c) the non-compliance or contravention was in respect of matters which, in the opinion of the Court dealing with the case, were immaterial, or was otherwise such as ought in the opinion of that Court, having regard to all the circumstances of the case, reasonably to be excused: Provided that, in the event of failure to include in a prospectus a statement with respect to the matters contained in clause 18 of Schedule II, no director or other person shall incur any liability in respect to the failure, unless it be proved that he had knowledge of the matters not disclosed.

(5) This section- (a) shall not apply to the issue to existing members or debenture holders of a company of a prospectus or form of application relating to shares in or debentures of the company, whether an applicant for shares or debentures will or will not have the right to renounce in favour of other persons ; and (b) except in so far as it requires a prospectus to be dated, shall not apply to the issue of a prospectus relating to shares or debentures which are or are to be in all respects uniform with shares or debentures previously issued and for the time being dealt in or quoted on a recognised stock exchange, but, subject as aforesaid, this section shall apply to a prospectus or form of application whether issued on or with reference to the for- mation of a company or subsequently.

(6) Nothing in this section shall limit or diminish any liability which any person may incur under the general law or under this Act apart from this section, 408/40

Provisions as to expert’s consent and allotment.

604. Provisions as to expert’s consent and allotment. (1) No person shall issue, circulate or distribute in India any prospectus offering for subscription shares in or debentures of a company incorporated or to be incorporated outside India, whether the company has or has not established, or when formed will or will not establish, a place of business in India- (a) if, where the prospectus includes a statement purporting to be made by an expert, he has not given, or has before delivery of the prospectus for registration withdrawn, his written consent to the issue of the prospectus with the statement included in the form and context in which it is included, or there does not appear in the prospectus a statement that he has given and has not withdrawn his consent as aforesaid ; or (b) if the prospectus does not have the effect, where an application is made in pursuance thereof, of rendering all persons concerned bound by all the provisions (other than penal provisions) of sections 72, 73 and 74, so far as applicable.

(2) In this section, the expression “expert” includes an engineer, a valuer, an accountant and any other person whose profession gives authority to a statement made by him ; and for the purposes of this section a statement shall be deemed to be included in a prospectus if it is contained in any report or memorandum appearing on the face thereof or by reference incorporated therein or issued therewith.

Registration of prospectus.

605. Registration of prospectus. 1[(1)] No person shall issue, circulate or distribute in India any prospectus offering for subscription shares in or debentures of a company incorporated or to be incorporated outside India, whether the company has or has not established, or when formed will or will not establish, a place of business in India, unless before the issue, circulation or distribution of the prospectus in India, a copy thereof certified by the chairman and two other directors of the company as having been approved by resolution of the managing body has been delivered for registration to the Registrar and the prospectus states on the face of it that a copy has been so delivered, and there is endorsed on or attached to the copy- (a) any consent to the issue of the prospectus required by section 604 ; (b) a copy of any contract required by clause 16 of Schedule II to be stated in the prospectus or, in the case of a ———————————————————————- 1 Ins. by Act 36 of 1957, s. 3 and Sch. II, ———————————————————————– 408/41 contract not reduced into writing, a memorandum giving full particulars thereof ; and (c) where the persons making any report required by Part II of Schedule II have made therein, or have, without giving the reasons, indicated therein, any such adjustments as are mentioned in clause 32 of that Schedule, a written statement signed by those persons setting out the adjustments and giving the reasons therefore.

(2) The references in clause (b) of sub-section (1) to the copy of a 1[contract] required thereby to be endorsed on or attached to a copy of the prospectus shall, in the case of a contract wholly or partly in a language other than English, be taken as references to a copy of a translation of the contract in English or a copy embodying a translation in English of the parts which are not in English, as the case may be, being a translation certified in the prescribed manner to be a correct translation.

Penalty for contravention of sections 603 , 604 and 605. 606. Penalty for contravention of sections 603 , 604 and 605. Any person who is knowingly responsible- (a) for the issue, circulation or distribution of a prospectus ; or (b) for the issue of a form of application for shares or debentures ; in contravention of any of the provisions of sections 603, 604 and 605, shall be punishable with imprisonment for a term which may extend to six months, or with fine which may extend to five thousand rupees, or with both.

Civil liability for mis-statements in prospectus. 607. Civil liability for mis-statements in prospectus. Section 62 shall extend to every prospectus offering for subscription shares in or debentures of a company incorporated or to be incorporated outside India, whether the company has or has not established, or when formed will or will not establish, a place of business in India, with the substitution for references in section 62 to section 60 of this Act, of references to section 604 thereof.

Interpretation of provisions as to prospectuses.

608. Interpretation of provisions as to prospectuses. (1) Where any document by which any shares in, or debentures of, a company incorporated outside India are offered for sale to the public, would, if the company concerned had been a company within the meaning of this Act, have been deemed by virtue of section 64, to be a prospectus issued by the company, that document shall be deemed, for the purposes of this Part, to be a prospectus issued by the company offering such shares or debentures for subscription. ———————————————————————- 1 Subs. by Act 36 of 1957, s. 3 and Sch. II, for “contractor”. ———————————————————————- 408/42

(2) An offer of shares or debentures for subscription or sale to any person whose ordinary business it is to buy or sell shares or debentures, whether as principal or as agent, shall not be deemed to be an offer to the public for the purposes of this Part.

(3) In this Part, the expressions “prospectus”, “shares” and “debentures” have the same meanings as when used in relation to a company incorporated under this Act. PART XII REGISTRATION OFFICES AND OFFICERS AND FEES

Registration Offices.

609. Registration Offices. (1) For the purposes of the registration of companies under this Act, there shall be offices at such places as the Central Government thinks fit.

(2) The Central Government may appoint such Registrars, and such Additional, Joint, Deputy and Assistant Registrars as it thinks necessary for the registration of companies under this Act, and may make regulations with respect to their duties.

(3) The salaries of the persons appointed under this section shall be fixed by the Central Government.

(4) The Central Government may direct a seal or seals to be pre- pared for the authentication of documents required for, or connected with, the registration of companies.

(5) Whenever any act is by this Act directed to be done to or by the Registrar, it shall, until the Central Government otherwise directs, be done to or by the existing Registrar of companies or jointstock companies, or in his absence, to or by such person as the Central Government may for the time being authorise: Provided that in the event of the Central Government altering the constitution of the existing registry offices or any of them, any such act shall be done to or by such officer and at such place, with reference to the local situation of the registered offices of the com- panies concerned, as the Central Government may appoint.

Inspection, production and evidence of documents kept by Registrar. 610. Inspection, production and evidence of documents kept by

Registrar. (1) 1[Save as otherwise provided elsewhere in this Act, any person may]- (a) inspect any documents kept by the Registrar 2[in accordance with the rules made under the Destruction of ———————————————————————- 1 Subs. by Act 65 of 1960, s. 194, for “Any person may”. 2 Ins. by s. 194, ibid. ———————————————————————- 408/43 Records Act, 1917] (5 of 1917.) being documents filed or registered by him in pursuance of this Act, or making a record of any fact required or authorised to be recorded or registered in pursuance of this Act, on payment for each inspection, of a 1[such fee as may be prescribed]; (b) require a certificate of the incorporation of any company, or a copy or extract of any other document or any part of any other document to be certified by the Registrar, 2[on payment in advance of 1[such fees as may be prescribed]: Provided that the rights conferred by this sub-section shall be exercisable- (i) in relation to documents delivered to the Registrar with a prospectus in pursuance of sub-clause (i) of clause

(b) of sub-section (1) of section 60, only during the fourteen days beginning with the date of publication of the prospectus ; and at other times, only with the permission of the Central Government; and (ii) in relation to documents so delivered in pursuance of

clause (b) of sub-section (1) of section 605, only during the fourteen days beginning with the date of the prospectus ; and at other times, only with the permission of the Central Government.

(2) No process for compelling the production of any document kept by the Registrar shall issue from any Court 3[or the Company Law Board] except with the leave of that Court 3[or the Company Law Board]; and any such process, if issued, shall bear thereon a statement that it is issued with the leave of the Court 3[or the Company Law Board].

(3) A copy of, or extract from, any document kept and registered at any of the offices for the registration of companies under this Act, certified to be a true copy under the hand of the Registrar (whose official position it shall not be necessary to prove), shall, in all legal proceedings, be admissible in evidence as of equal validity with the original document. 4* * * * * * ———————————————————————- 1 Subs. by Act 31 of 1988, s.57 (w.e.f.15.7.1988). 2 Subs. by Act 65 of 1960, s. 194, for certain words. 3 Ins. by Act 31 of 1988, S.57 (w.e.f. 31-5-1991).

4 Sub-section (4) omitted Act 65 of 1960, S.194. ———————————————————————– 408/44

Fees in Schedule X to be paid.

611. Fees in Schedule X to be paid. 1[(1)] In respect of the several matters mentioned in Schedule X, there shall, subject to the limitations imposed by that Schedule, be paid to the Registrar the several fees therein specified: Provided that no fees shall be charged in respect of the registration in pursuance of Part IX of a company, if it is not registered as a limited company, or if, before its registration as a limited company, the liability of the shareholders was limited by some other Act of Parliament or any other Indian law or by an Act of Parliament of the United Kingdom, Royal Charter or Letters Patent in force in India: 2[Provided further that in the case of resolutions to which sec- tion 192 applies, not more than one fee shall be required for the filing of more resolutions than one passed in the same meeting if such resolutions are filed with the Registrar at the same time.]

2[(2) Any document required or authorised by this Act to be filed or registered, or any fact required or authorised by this Act to be registered, with the Registrar on payment of the fee specified therefor in Schedule X, may, without prejudice to any other liability, be filed or registered after the time, if any, specified in this Act for its filing or registration on payment of such additional fee not exceeding ten times the amount of the fee so specified as the Registrar may determine.]

Fees, etc., paid to Registrar and other officers to be accounted forto Central Government. 612. Fees, etc., paid to Registrar and other officers to be accounted for to Central Government. All fees, charges, and other sums paid to any Registrar, any Additional, Joint, Deputy, or Assistant Registrar, or any other officer of the Central Government in pursuance of this Act shall be paid into the public account of India in the Reserve Bank of India.

Power of Central Government to reduce fees, charges, etc. 613. Power of Central Government to reduce fees, charges, etc.

(1) The Central Government may, by order notified in the Official Gazette, reduce the amount of any fee, charge or other sum specified in any provision contained in this Act, as payable in respect of any matter, either to the Central Government or to any Registrar, any Additional, Joint, Deputy, or Assistant Registrar or any other officer of the Central Government ; and thereupon such provision shall, during the period for which the order is in force, have effect as if the reduced fee had been substituted for the fee specified in such provision. ———————————————————————-

1 S. 611 re-numbered as sub-section (1) of that section by Act 65 of 1960, s. 195. 2 Ins. by s. 195, ibid. ———————————————————————- 408/45

(2)Any order notified under sub-section (1) may, by a like order, be cancelled or varied at any time by the Central Government.

(3)Nothing in this section shall be deemed to affect the power of the Central Government under section 641 to alter any of the fees specified in Schedule X.

Enforcement of duty of company to make returns etc., to Registrar. 614. Enforcement of duty of company to make returns etc., to

Registrar. (1) If a company, having made default in complying with any provision of this Act which requires it to file or register with, or deliver or send to, the Registrar any return, account or other document, or to give notice to him of any matter, fails to make good the default within fourteen days after the service of a notice on the company requiring it to do so, the 1[Company Law Board] may, on an application made to it by any member or creditor of the company or by the Registrar, make an order directing the company and any officer thereof to make good the default within such time as may be specified in the order.

(2)Any such order may provide that all costs of and incidental to the application shall be borne by the company or by any officers of the company responsible for the default.

(3)Nothing in this section shall be taken to prejudice the opera- tion of any provisions in this or any other Act imposing penalties on a company or its officers in respect of any such default as aforesaid. 614A Power of Court trying offences under the Act to direct the filing ofdocuments with Registrar. 2[614A. Power of Court trying offences under the Act to direct

the filing of documents with Registrar. (1) Any Court trying an offence for a default in compliance with any provision of this Act which requires a company or its officers to file or register with, or deliver or send to, the Registrar, any return, account or other document, may at the time of sentencing, acquitting or discharging the accused, direct by order, if it thinks fit to do so, any officer or other employee of the company to file or register with, deliver or send to, the Registrar on payment of the fee including the additional fee required to be paid under section 611, such return, account or other document within such time as may be specified in the order.

(2)Any officer or other employee of the company who fails to

comply with an order of the Court under sub-section (1) shall be punishable with imprisonment for a term which may extend to six months, or with fine, or with both.] ——————————————————————— 1 Subs. by Act 31 of 1988, s.67 (w.e.f.31.5.1991). 2 Ins. by Act 65 of 1960, s. 196. ———————————————————————- 408/46 PART XIII GENERAL Collection of information and statistics from companies

Power of Government to direct companies to furnish information orstatistics. 615. Power of Government to direct companies to furnish

information or statistics. (1) The Central Government may, by order, require companies generally, or any class of companies, or any company, to furnish such information or statistics with regard to their or its constitution or working, and within such time, as may be specified in the order.

(2)(a) Every order under sub-section (1) addressed to companies generally or to any class of companies, shall be published in the Official Gazette and in such other manner, if any, as the Central Government may think fit. (b)The date of publication of the order in the Official Gazette shall be deemed to be the date on which the demand for information or statistics is made on such companies or class of companies, as the case may be.

(3)Every order under sub-section (1) addressed to an individual company shall be served on it in the manner laid down in section 51.

(4)For the purpose of satisfying itself that any information or statistics furnished by a company in pursuance of any order under sub-

section (1) is correct and complete, the Central Government may require such company- (a) to produce such records or documents in its possession or under its control for inspection, before such officer and at such time as may be specified by the Central Government ; or (b) to furnish such further information as may be specified by the Central Government and within such time as may be fixed by it.

(5) The Central Government may also, by order, direct an inquiry to be made by any person or persons named in the order- (a) for the purpose of obtaining any information or statistics which a company has failed to furnish as required

of it by an order under sub-section (1) ; or (b) for the purpose of satisfying itself that any information or statistics furnished by a company in pursuance of an 408/47

order made under sub-section (1) is correct and complete; and in so far as such information or statistics may be found to be incorrect or incomplete for the purpose of obtaining such information or statistics as may be necessary to make the information or statistics furnished correct and complete; and a person or persons so appointed shall, for the purposes of such inquiry, have such powers as may be prescribed.

(6) If any company fails to comply with an order made under sub-

section (1) or (4), or knowingly furnishes any information or statistics which is incorrect or incomplete in any material respect, the company, and every officer thereof who is in default, shall be punishable with imprisonment which may extend to three months, or with fine which may extend to one thousand rupees, or with both.

(7) An order requiring any information or statistics to be fur- nished by a company may also be addressed to any person who is, or has at any time been, an officer or employee of the company, and all the provisions of this section, so far as may be, shall apply in relation to such person as they apply in relation to the company : Provided that no such person shall be punishable under sub-section

(6), unless the Court is satisfied that he was in a position to comply with the order and made wilful default in doing so.

(8) Where a body corporate incorporated outside India and having established an office within India, carries on business in India, all references to a company in this section shall be deemed to include references to the body corporate in relation, and only in relation, to such business. Application of Act to Companies governed by Special Acts

Application of Act to insurance, banking, electricity supply and othercompanies governed by special Acts. 616. Application of Act to insurance, banking, electricity supply and other companies governed by special Acts. The provisions of this Act shall apply– (a) to insurance companies, except in so far as the said provisions are inconsistent with the provisions of the Insurance Act, 1938; (4 of 1938.) (b) to banking companies, except in so far as the said provisions are inconsistent with the provisions of the Bank- ing Companies Act, 1949; (10 of 1949.) 408/48 (c) to companies engaged in the generation or supply of electricity, except in so far as the said provisions are inconsistent with the provisions of 1[The Indian Electricity Act, 1910, (9 of 1910.) or] the Electricity Supply Act, 1948; (54 of 1948.) (d) to any other company governed by any special Act for the time being in force, except in so far as the said provisions are inconsistent with the provisions of such special Act; 2[(e) to such body corporate, incorporated by any Act for the time being in force, as the Central Government may, by notification in the Official Gazette, specify in this behalf, subject to such exceptions, modifications or adaptations, as may be specified in the notification.] Application of Act to Government Companies

Definition of “Government company”. 617. Definition of “Government company”. For the purposes of 3[this Act] Government company means any company in which not less than fifty-one per cent. of the 4[paid up share capital] is held by the Central Government, or by any State Government or Governments, or partly by the Central Government and partly by one or more State Governments 5[and includes a company which is a subsidiary of a Government company as thus defined].

Government companies not to have managing agents. 6[618. Government companies not to have managing agents. No Government company, whether formed before or after the 1st day of April, 1956, (65 of 1960.) shall, after the commencement of the Companies (Amendment) Act, 1960,(65 of 1960.) appoint or employ, or after the 6 expiry of six months from such commencement, continue the appointment or employment of, any managing agent : Provided that where a company has become a Government company after the 1st day of April, 1956, nothing in this section shall prevent that company from continuing after the commencement of the Companies (Amendment) Act, 1960(65 of 1960), the appointment or employ- ment of a managing agent appointed or employed before such commence- ment.] ———————————————————————- 1 Ins. by Act 65 of 1960, s. 197. 2 Ins. by Act 41 of 1974, s. 34 (w.e.f. 1-2-1975). 3 Subs. by Act 65 of 1960, s. 198, for “sections 618, 619 and 620”. 4 Subs. by s. 198, ibid., for “share capital”. 5 Added by s. 198, ibid. 6 Subs. by s. 199, ibid., for s. 618. ———————————————————————- 408/49

Application of sections 224 to 233 to Government companies. 619. Application of sections 224 to 233 to Government companies.

(1) In the case of a Government company, the following provisions shall apply, notwithstanding anything contained in sections 224 to

(2)The auditor of a government company shall be appointed or re- appointed by the Central Government on the advice of the Comptroller Auditor-General of India : 1[Provided that the limits specified in sub-sections (1B) and (1C) of section 224 shall apply in relation to the appointment or re- appointment of an auditor under this sub-section.]

(3)The Comptroller and Auditor-General of India shall have power– (a) to direct the manner in which the company’s accounts shall be audited by the auditor appointed in pursuance of

sub-section (2) and to give such auditor instructions in regard to any matter relating to the performance of his functions as such; (b) to conduct a supplementary or test audit of the company’s accounts by such person or persons as he may authorise in this behalf; and for the purposes of such audit, to require information or additional information to be furnished to any person or persons so authorised, on such matters, by such person or persons, and in such form, as the comptroller and Auditor-general may, by general or special order, direct.

(4) The auditor aforesaid shall submit a copy of his audit report to the Comptroller and Auditor-General of India who shall have the right to comment upon, or supplement, the audit report in such manner as he may think fit.

(5) Any such comments upon, or supplement to, the audit report shall be placed before the annual general meeting of the company at the same time and in the same manner as the audit report. ——————————————————————— 1 Ins. by Act 41 of 1974, s. 35 (w.e.f. 1-2-1975). ——————————————————————— 408/50 619A Annual reports on Government companies.

1[619A. Annual reports on Government companies. (1) Where the Central Government is a member of a Government company, the Central Government shall cause an annual report on the working and affairs of that company to be- (a) prepared within three months of its annual general meeting before which the audit report is placed under sub-

section (5) of section 619; and (b) as soon as may be after such preparation, laid before both Houses of Parliament together with a copy of the audit report and any comments upon, or supplement to, the audit report, made by the Comptroller and Auditor General of India.

(2) Where in addition to the Central Government, any State Government is also a member of a Government company, that State Government shall cause a copy of the annual report prepared under sub-

section (1) to be laid before the House or both Houses of the State Legislature together with a copy of the audit report and the comments

or supplement referred to in sub-section (1).

(3) Where the Central Government is not a member of a Government company, every State Government which is a member of that company, or where only one State Government is a member of the company, that State Government shall cause an annual report on the working and affairs of the company to be-

(a) prepared within the time specified in sub-section (1); and (b) as soon as may be after such preparation, laid before the House or both Houses of the State Legislature with a copy of the audit report and comments or supplement referred to in

sub-section (1).] 619B Provisions of section 619 to apply to certain companies. 2[619B. Provisions of section 619 to apply to certain companies. The provisions of section 619 shall apply to a company in which not less than fifty-one per cent. of the paid-up share capital is held by one or more of the following or any combination thereof, as if it were a Government company, namely :- (a) the Central Government and one or more Government companies; (b) any State Government or Governments and one or more Government companies; ———————————————————————- 1 Ins. by Act 65 of 1960, s. 200. 2 Ins. by Act 41 of 1974, s.36 (w.e.f. 1.2.1975). 3 Ins. by Act 31 of 1988, s.58 (w.e.f. 15.6.1988). ———————————————————————- 408/50A (c) the Central Government, one or more State Governments and one or more Government companies; (d) the Central Government and one or more corporations owned or controlled by the Central Government; (e) the Central Government, one or more State Governments and one or more corporations owned or controlled by the Central Government; (f)one or more corporations owned or controlled by the Central Government or the State Government; (g) more than one Government company.]

Power to modify Act in relation to Government companies. 620. Power to modify Act in relation to Government companies.

(1) The Central Government may, by notification in the Official Gazette, direct that any of the provisions of this Act (other than sections 618, 619 and 1[619A]) specified in the notification :- (a) shall not apply to any Government company; or (b) shall apply to any Government company, only with such exceptions, modifications and adaptations, as may be specified in the notification.

2 [ (2) A copy of every notification proposed to be issued under sub-section (I), shall be laid in draft before each House of Parlia- ment, while it is in session, for a total period of thirty days which may be comprised in one session or in two or more successive sessions, and if, before the expiry of the session immediately following the session or the successive sessions aforesaid, both Houses agree in disapproving the issue of the notification or both Houses agree in making any modification in the notification, the notification shall not be issued or, as the case may be, shall be issued only in such modified form as may be agreed upon by both the Houses.] 3[Modification of Act in its application to Nidhis and Mutual Benefit Societies 620A Power to modify Act in its application to Nidhis, etc.

620A. Power to modify Act in its application to Nidhis, etc. (1) In this section, “Nidhi” or “Mutual Benefit Society” means a company which the Central Government may, by notification in the Official Gazette, declare to be a Nidhi or Mutual Benefit Society, as the case may be. ———————————————————————- 1 Subs. by Act 52 of 1964, s. 3 and Sch II, for “639”.

2 Subs. by Act 46 of 1977, s. 7, for sub-section (2) (w.e.f. 1-2- 1975).. 3 Ins. by Act 65 of 1960, s. 201. ——————————————————————— 408/50B

(2) The Central Government may, by notification in the Official Gazette, direct that any of the provisions of this Act specified in the notification- (a) shall not apply to any Nidhi or Mutual Benefit Society, or (b) shall apply to any Nidhi or Mutual Benefit Society with such exceptions, modifications and adaptations as may be specified in the notification. 408/51

(3) A copy of every notification issued under sub-section (1) shall be laid as soon as may be after it is issued, before each House of Parliament.] 2[Special provision as to companies in Jammu and Kashmir 620C Special provision as to companies in Jammu and Kashmir. 620C. Special provision as to companies in Jammu and Kashmir.The Central Government may by notification in the Official Gazette, direct that with effect from the commencement of the Central Laws (Extension to Jammu and Kashmir) Act, 1968 or any subsequent date, any of the provisions of this Act specified in the notification shall not apply, or shall apply only with such exceptions and modifications or adaptations as may be specified in the notification, to- (a) any existing company in the State of Jammu and Kashmir; (b) any company registered in that State under this Act after the commencement of the Central Laws (Extension to Jammu and Kashmir) Act, 1968.] Offences

Offences against Act to be cognizable only on complaint by Registrar,shareholder or Government. 621. Offences against Act to be cognizable only on complaint by

Registrar, shareholder or Government. (1) No court shall take congnizance of any offence against this Act (other than an offence with respect to which proceedings are instituted under section 545), which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or of a shareholder of the company, or of a person authorised by the Central Government in that behalf: Provided that nothing in this sub-section shall apply to a prosecution by a company of any of its officers. 3[(1A) Notwithstanding anything contained in the Code of Criminal Procedure, 1898, (5 of 1898)4 where the complainant under sub-section

(1) is the Registrar or a person authorised by the Central Government, the personal attendance of the complainant before the Court trying the offence shall not be necessary unless the Court for reasons to be recorded in writing requires his personal attendance at the trial.]

(2) Sub-section (1) shall not apply to any action taken by the liquidator of a company in respect of any offence alleged to have been committed in respect of any of the matters included in Part VII (sections ———————————————————————- 1 For the text of section 620B as applicable to the Union territory of Goa, Daman and Diu, see Regulation 11 of 1963, s. 9. 2 Ins. by Act 25 of 1968, s. 2 and Sch. (w.e.f. 15-8-1968). 3 Ins. by Act 65 of 1960, s. 202. 4 See now the Code of Criminal Procedure, 1973 (2 of 1974). ———————————————————————– 408/52 425 to 560) or in any other provision of this Act relating to the winding up of companies.

(3) A liquidator of a company shall not be deemed to be an

officer of the company, within the meaning of sub-section (1). 621A Composition of certain offences.

1[621A. Composition of certain offences. (1) Notwithstanding anything contained in the Code of Criminal Procedure,1973 (2 of 1974), any offence punishable under this Act(whether committed by a company or any officer thereof), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by- (a) the Company Law Board; or (b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Director, as the case may be, may specify: Provided that the sum so specified shall not, in any case, exceed the maximum amount of the fine which may be imposed for the offence so compounded: Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under this sub-section,

the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.

(2) Nothing in sub-section (1) shall apply to an offence com- mitted by a company or its officer within a period of three years from the date on which a similar offence committed by it or him was compounded under this section. Explanation.-For the purposes of this section,- (a) any second or subsequent offence committed after the expiry of a period of three years from the date on which the offence was previously compounded, shall be deemed to be a first offence; (b) “Regional Director” means a person appointed by the Central Government as a Regional Director for the purposes of this Act.

(3) Every Regional Director shall exercise the powers to com- pound an offence, subject to the direction, control and supervision of the Company Law Board.

(4) (a) Every application for the compounding of an offence shall be made to the Registrar who shall forward the same, together with his comments thereon, to the Company Law Board or the Regional Director, as the case may be. (b) Where any offence is compounded under this section, whether before or after the institution of any prosecution, an intimation thereof shall be given by the company to the Registrar within seven days from the date on which the offence is so compounded. (c) Where any offence is compounded before the institution of any prosecution, no prosecution shall be instituted in relation to such offence, either by the Registrar or by any shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded. (d) Where the composition of any offence is made after the institution of any prosecution, such composition shall be brought by the Registrar in writing, to the notice of the Court in which the prosecution is pending and on such notice of the composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.

(5) The Company Law Board or the Regional Director, as the case may be, while dealing with a proposal for the compounding of an offence for a default in compliance with any provision of this Act which requires a company or its officer to file or register with, or deliver or send to, the Registrar any return, account or other document, may, direct, by order, if it or he thinks fit to do so, any officer or other employee of the company to file or register with, or on payment of the fee, and the additional fee, required to be paid under section 611, such return, account or other document within such time as may be specified in the order.

(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional

Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.

(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974),- (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in that Act for compounding of offences; (b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.

(8) No offence specified in this section shall be compounded ex- cept under and in accordance with the provisions of this section.]

Jurisdiction to try offences. 622. Jurisdiction to try offences. No Court inferior to that of a Presidency Magistrate or Magistrate of the first class shall try any offence against this Act.

Certain offences triable summarily in Presidency towns. 623. Certain offences triable summarily in Presidency towns. If any offence against this Act which is punishable with fine only is committed by any person within a Presidency town, such person may be tried summarily and punished by any Presidency Magistrate of that Presidency town.

Offences to be noncognizable. 624. Offences to be noncognizable. Notwithstanding anything in the Code of Criminal Procedure, 1898 (5 of 1898)2, every offence against this Act shall be deemed to be noncognizable within the meaning of the said Code. 624A Power of Central Government to appoint company prosecutors. 3[624A. Power of Central Government to appoint company prosecutors. Notwithstanding anything contained in the Code of Criminal Procedure, 1898 (5 of 1898)2, the Central Government may appoint generally or in any case, or for any specified class of cases in any local area, one or more persons, as company prosecutors for the conduct of prosecutions arising out of this Act; and the persons so appointed as company prosecutors shall have all the powers and privileges conferred by that Code on public prosecutors appointed by a State Government under section 492 4 of that Code. 624B Appeal against acquittal. 624B. Appeal against acquittal. Notwithstanding anything contained in the Code of Criminal Procedure, 1898 (5 of 1898)2, the Central Government may, in any case arising out of this Act, direct any company prosecutor or authorise any other person either by name or by virtue of his office. to present an appeal from an order of acquittal passed by any Court other than a High Court and an appeal presented by such prosecutor or other person shall be deemed to have been validly presented to the appellate Court.]

Payment of compensation in cases of frivolous or vexatiousprosecution. 625. Payment of compensation in cases of frivolous or vexatious

prosecution. (1) In respect of any case instituted upon the complaint of a shareholder against the company or any officer thereof in pursuance of section 621, the provisions of section 250 of the Code of Criminal Procedure, 1898 (5 of 1898)5, shall not apply; and the following provisions shall apply instead.

(2) If the Magistrate by whom any such case is heard discharges or acquits all or any of the accused, and is of opinion that the accusa- ———————————————————————- 1 Ins. by Act 31 of 1988, s.59 (w.e.f. 31.5.1991). 2 See now the Code of Criminal Procedure, 1973 (Act 2 of 1974). 3 Ins. by Act 65 of 1960, s. 203. 4 See now the Code of Criminal Procedure, 1973 (Act 2 of 1974), s. 24. 5 See now s. 250, ibid. ———————————————————————– 408/52A tion against them or any of them was false and either frivolous or vexatious, the Magistrate may, by his order of discharge or acquittal, if the shareholder upon whose complaint the accusation was made is present, call upon him forthwith to show cause why he should not pay compensation to such accused, or to each or any of such accused when there is more than one, or if such shareholder is not present, direct the issue of a summons to him to appear and show cause as aforesaid.

(3) The Magistrate shall record and consider any cause which such shareholder may show; and if the Magistrate is satisfied that the accusation was false and either frivolous or vexatious, he may, for reasons to be recorded, direct that compensation to such amount as he may determine be paid by such shareholder to the accused or to each or any of them, not exceeding one thousand rupees in all. 408/53

(4) The Magistrate may, by the order directing payment of the

compensation under sub-section (3), further order that, in default of payment, the shareholder ordered to pay such compensation shall suffer simple imprisonment for a term not exceeding two months.

(5) When any person is imprisoned under sub-section (4), the provisions of sections 68 and 69 of the Indian Penal Code (45 of 1860.) shall, so far as may be, apply.

(6) No person who has been directed to pay compensation under this section shall, by reason of such order, be exempted from any civil or criminal liability in respect of the complaint made by him: Provided that any amount paid to an accused person under this section shall be taken into account in awarding compensation to such person in any subsequent civil suit relating to the same matter.

(7) A complainant who has been ordered to pay compensation under

sub-section (3) by a Magistrate may appeal from the order, in so far as it relates to the payment of compensation,as if such complainant had been convicted on a trial held by such Magistrate.

(8) Where an order for payment of compensation to an accused person is made, the compensation shall not be paid to him before the period allowed for the presentation of the appeal under sub-section

(7) has elapsed ; or, if an appeal is presented,before the appeal has been decided.

Application of fines. 626. Application of fines. The Court imposing any fine under this Act may direct that the whole or any part thereof shall be applied in or towards payment of the costs of the proceedings, or in or towards the rewarding of the person on whose information or at whose instance the fine is recovered.

Production and inspection of books where offence suspected. 627. Production and inspection of books where offence suspected.

OFFICE TIMINGS
Monday to Saturday 10:00 am to 06:00 pm.
Sundays and Holidays Reserved for urgent & prior appointments.

Related Bare Acts