Padhuka's Publications For CA Final - Shree Guru Kripa :: CA Institute

Gurukripa’s Guideline Answers for Nov 2016 CA Final Corporate and Allied Law Exam

Gurukripa’s Guideline Answers to Nov 2016 Exam Questions CA Final – Corporate and Allied Law Question No.1 is compulsory (4 X 5 = 20 Marks). Answer any five questions from the remaining six questions (16 X 5 = 80 Marks). [Answer any 4 out of 5 in Q.7] Note: Page References are from “Padhuka’s Students’ Handbook on Corporate and Allied Law”

Reference/Hint Answer

Issue (i): Refer Page 2.3, Para 2.1.6 – Excuse as to No Offence – Dividends can be lawfully adjusted against Call Money Due from Shareholder. Issue (ii): Refer Page 2.1, Para 2.1.2 – Payment of Dividend – Dividends should be paid only to Registered Holder of the Shares, i.e. Mr.Raj in this case.

M

4

ip a

1 (a)

Questions The Directors of Som Limited proposed Dividend at 12% on Equity Shares for the Financial Year 2015–2016. The same was approved in the Annual General Meeting of the Company held on 20th September 2016. The Directors declared the approved Dividends. They seek your opinion on the following matters: (i) Mr. Ashok, holding Equity Shares of Face Value of ` 10 Lakhs has not paid an amount of ` 1 Lakh towards call money on Shares. Can the same be adjusted against the Dividend Amount payable to him? (ii) Ms. Nini was the holder of 1,000 Equity Shares on 31st March 2016, but she has transferred the Shares to Mr.Raj, whose name has been registered on 20th May 2016. Who will be entitled to the above Dividend? Seafood Limited, a Public Limited Company, was incorporated on 1st April 2015. The Company has conducted four Board Meetings during the Financial year 2015–2016, i.e. on 6th April 2015, 28th August 2015, 30th September 2015 and 30th March 2016. (i) Has the Company contravened the provisions of the Companies Act, 2013 in respect of the conduct of the Meetings? (ii) Will your answer differ if the Company was incorporated under Section 8 of the Companies Act, 2013? RSE Stock Exchange Limited, a Recognized Stock Exchange is involved in trading of shares of Son Limited. The SEBI, on receiving a complaint from a group of Investors, enquired and found that trading of shares of Son Limited is being conducted in a manner detrimental to the interest of the general investors. In order to curb the same, the SEBI wants to issue some directions to RSE Stock Exchange Limited. Referring to the provisions of the Securities Contract (Regulation) Act, 1956, discuss whether the SEBI has power to issue such directions. Can such directions be given to an individual who made some profit in any transaction in contravention of any provision of the Securities Contracts (Regulation) Act, 1956, or Regulations made thereunder? Referring to the provisions of the Companies Act, 2013, examine the following: (i) XYZ Limited, a Listed Company, has constituted an Audit Committee consisting of 5 Members out of whom 2 are Independent Directors. Subsequently, the Company increased the composition of Audit Committee to 6 Members with 3 Independent Directors. (ii) Mr. Intelligent, was appointed as a Small Shareholder’s Director of XYZ Limited, which is in the business of Oil Refining. Subsequently, A Limited and B Limited have also appointed him as Small Shareholder’s Director. Is the appointment valid?

.c om

Q

uk r

hr ig ur

.s

Issue (i): In this case, there is more than 120 days gap between 1st and 2nd Meeting. Hence, there is contravention of Sec.173.

4

Issue (ii): There is one Meeting for every 6 calendar months. Hence, there is no contravention of Sec.173.

Refer Page 20.10, Para 20.3.10. SEBI has powers to issue directions u/s 12A to the RSE, including to person who has made profit in any transaction in contravention of SCRA.

4

w

1 (c)

w w

1 (b)

Refer Page 6.1, Para 6.1.1 for Principles.

1 (d)

Issue (i): Refer Page 6.7, Para 6.2.1, Point 2 – Composition – Audit Committee shall have majority Independent Directors. Hence, 3 out of 5 (or) 4 out of 6 is required. Issue (ii): Refer Page 5.16, Para 5.4.7 – 5th Point – Ceiling Limit – A Person shall not be appointed as SSD in more than 2 Companies at the same time. Hence, he can accept appointment in either A Ltd or B Ltd, provided both are not in competing business with XYZ Ltd.

4

________________________________________________________________________________________________________________________ Nov 2016.1 www.shrigurukripa.com


1 (e)

2 (a)

Questions Lifesys Limited, a billion dollar, Indian Company wishes to create a Chair in a Reputed University in the U.S. This Chair is for the Department of Computer Science. The Company wishes to obtain your advise in regard to the following with reference to FEMA, 1999. (i) Is such “Chair” creation permissible? (ii) What is the maximum amount that can be donated for such Chair? (iii) Any formalities to be complied with? Super Real Estate Limited, a Listed Company, has made the following profits, the profits reflect Eligible Profits under the relevant section of the Companies Act, 2013. Financial Year Amount (` Crores) 2011–2012 20 2012–2013 40 2013–2014 30 2014–2015 70 2015–2016 50 Calculate the amount that the Company has to spend towards CSR. (ii) Give the composition of the CSR Committee of a Listed and Unlisted Company. (iii) Will the Company suffer penalties if they fail to provide for or incur expenditure for CSR? (iv) List only two activities that are expressly prohibited from being considered as CSR activities. The Balance Sheet of Loyal Limited as at 31.03.2016 disclosed the following details: (i) Authorized Share Capital – ` 400 Crores (ii) Paid up Share Capital – ` 150 Crores (iii) Reserves and Surplus – ` 750 Crores The Company has issued, in the year 2011, Fully Convertible Debentures of ` 100 Crores which are due for conversion in the year 2016. The Company proposes after the conversion of Debentures to issue Bonus Shares in the ratio of 1:1. Referring to the provisions of the SEBI (ICDR) Regulations, 2009, explain the provisions with regard to: 1. Authorisation to issue the Bonus Shares. 2. Revision of Paid Up Share Capital. 3. Sources of Funds. 4. Any other restriction. Mr. Smart, a Technocrat aged 71 years and reputed to be a Specialist in reviewing Sick Companies, is being considered to be appointed as Managing Director of Downhill Industries Limited. The Company has been incurring losses for the past several years and its “Effective Capital” is ` 500 Crores. Referring to the provisions of the Companies Act, 2013, discuss: (i) Can Mr. Smart be appointed as Managing Director of the Company despite being over 70 years of age? If so, what is the process to be followed to enable this? (ii) What is “Effective Capital” as per Schedule V of the Act? (iii) What is the maximum permissible remuneration under the Companies Act, 2013?

M

Refer Latest Updates in FEMA below. Issue (i): Creation of “Chair” is permissible. Issue (ii): Donations can be made upto 1% of Foreign Exchange Earnings during the previous 3 Financial Years or USD 50,00,000, whichever is less.

4

Issue (iii): Prior Approval of RBI is required for Donations exceeding above limit.

Refer Page 3.9, Para 3.2.2 Issue (i): 2% of Average Net Profits of immediately preceding 3 Financial Years. So, Amount to be spent in FY 2016–2017 = 50 + 70 + 30 × 2% = ` 1 Crore. 3 Issue (ii): Page 3.9, Para 3.2.2, 2nd Point.

8

ip a

(i)


.c om

Q

Issue (iii): No Penalty as such u/s 135. General Penalty u/s 450 is applicable. See Page 16.4, Para 16.2.4.

.s

Refer Page 22.59, Q.No.18 [M 14] Answer for all Issues / Matters: See Page 22.61, Answer to 18th Question.

8

Refer Principles in Page 22.45, Para 22.9

w

w w

2 (b)

hr ig ur

uk r

Issue (iv): Page 3.10, Para 3.2.2, 5th Point.

3 (a)

Refer Page 9.11, Para 9.2.4, along with Latest Updates – Amendment of Schedule V – Part II – given below. Issue (i): See Page 9.2, Para 9.1.5 – Disqualifications – Appointment is valid if Special Resolution is passed by the Co.

8

Issue (ii): See Page 9.13, Para 9.2.7 Issue (iii): ` 120 Lakhs + 0.01% of the Effective Capital in excess of ` 250 Crores. [Double of the above, if Special Resolution is passed.] [Latest Limits].



Dull Limited was not running its business since last 2 years. It had no significant accounting transactions during that period. Hence, the Company had applied and was granted the status of a ‘Dormant Company’ by the Registrar of Companies. Now the Company has got some opportunity and recently started its operations. Therefore, the Company is intending to get back the status of an active Company and approached you for your advice on the basis of the applicable provisions of the Companies Act, 2013 and appropriate Rule of the Companies (Registration Offices and Fees) Rules, 2014. Also state the power of the Registrar to remove the name of a Company from the Register of ‘Dormant Company’ and treat it as an active Company. State with reference to the provisions of the Companies Act, 2013, whether the following persons can be appointed as a Director of a Company. (i) Mr. L, who has not paid any calls in respect of any Shares of the Company held by him and 5 months have passed from the last day fixed for the payment of calls. (ii) Mr. G is Director of LDT Limited, who has not filed the Company’s Annual Return pertaining to the Annual General Meeting held in the calendar years 2014, 2015 and 2016. The Board of Directors of Shakti Bank Limited, a Banking Company incorporated in India, for the accounting year ended on 31.03.2016, transferred 15% of its Net Profit to its Reserve Fund. Certain Shareholders of the Company objected to the above act of Board of Directors on the ground that it is violative of the provisions of the Banking Regulation Act, 1949. Examine the relevant provision of the Banking Regulation Act, 1949 to decide whether the contention of Shareholders is tenable.

w

4 (c)

w w

.s

4 (b)

4 (d)

5 (a)

Refer Page 10.8, Q.No.3 [RTP, N 01, M 05, M 07] Refer Principles in Page 10.3,

4

Para 10.2.1. Special Resolution + Intimation thereof to Central Govt, is required in this case. Insurance Act: Refer Page 26.10, Para 26A.3.2. Loans upto Surrender Value of his own Life Policies can be given to a Director. [Sec.29 of Insurance Act]

4

Companies Act: Sec.185 does not apply to Loans as specified above.

.c om

4 (a)

Bengaluru Ltd is a Listed Company with a Net Worth of ` 95 Lakhs and Turnover of ` 11.6 Crores as on 31st March 2016. The Company wants to circulate the Financial Statements in electronic mode. Referring to the provisions of Companies Act, 2013, advise the Company whether it can do so.

M

Refer Page 3.5, Para 3.1.5, 7th Point Since Bengaluru Ltd is a Listed Company, the conditions as to Net Worth or Turnover are not relevant. It can circulate the Financial Statements in electronic mode, and comply with Website Hosting, and other conditions.

4

ip a

3 (c)


uk r

3 (b)

Questions Greater DINA Investors Association made a complaint by an informal letter to the Central Government that the Management of Secret Limited has been indulging in fraudulent activities causing loss to the Shareholders and that an investigation should be carried out to find out the whole truth. On receipt of the letter, the Central Government directed the Association to approach them formally after complying with the provisions of the Companies Act, 2013. Advise the Association. Mr. Arnab, one the Directors of AIM Insurance Company Limited has taken some Life Insurance Policies from the Company. He, now, wants to avail a Temporary Loan from the Company. The Company refused to grant such loan on the ground that there is a prohibition in this regard. Mr. Arnab, approached you, now, about the matter. Advise him with reference to the Insurance Laws Amendment Act, 2015 as well as Sec.185 of the Companies Act, 2013, whether such Loan can be obtained by him.

Refer Page 16.13, Para 16.4.5 – Reclassification as Active Company.

hr ig ur

Q

The Central Government in the public interest ordered for the amalgamation of ABC Limited and DEF Limited into a single Company named KPN Limited through a notification in the Official Gazette. In this connection, the Prescribed Authority

4

Refer Page 5.5, Para 5.1.8 for Principles. Issue (i): Refer Sec.164(1)(f). Since 6 months have not elapsed, L is not disqualified in this case.

4

Issue (ii): Refer Sec.164(2). Assuming that the default pertains to 3 Financial Years, G cannot be appointed as Director of LDT Ltd. Refer Page 23.16, Q.No.3 [RTP, N 10, M 14] Answer: See Page 23.6, Para 23.2.3 Atleast 20% has to be transferred to Reserve Fund, unless written approval of Central Government is obtained for transferring a lower % to Reserve Fund.

4

Refer Page 11.9, Para 11.10 •

There is a right of appeal to the Tribunal against the assessment of compensation by Prescribed Authority.

6



6 (c)

6 (d)

.c om

Refer Sec.2(76) in Page 1.8, Page 8.5, Para 8.2.1, and Page 8.7, Para 8.2.6 Director of Holding Company is a “Related Party” and hence Sec.188 provisions are applicable. Punishment for Contravention is given in Para 8.2.6.

Refer Page 15.14, Q.No.9 [RTP, N 08] Answer: See Page 15.3, Para 15.1.5

6

4

Refer Page 8.6, 8.7 Para 8.4.2, 8.4.3. Issue (i): Unanimous Consent of all Directors present at the Meeting is required. Hence, this condition u/s 186 is not satisfied in this case.

4

Issue (ii): Prior Approval of PFI for Inter– Corporate Loan is required only where the Lending Company has obtained Term Loans from PFI. Such Borrowing by Easy Going Ltd is not relevant is this case. Refer Page 8.5, Para 8.2.1

4

Refer Page 24.3, Para 24.1.5, Point 1 [RTP, M 11, N 14]

4

Refer Page 19.6, Para 19.3.11, Point 2

4

w

6 (b)

w w

.s

6 (a)

•

M

Appeal to be filed to the Tribunal within 30 days from date of Publication of Prescribed Authority’s order in the Official Gazette. Appeal is only for assessment of compensation. Amalgamation Order itself cannot be challenged.

ip a

5 (c)

The Liability of Members of Style Limited, a Company incorporated in Singapore, is limited. The Company plans to start a place of business in Mumbai from 1st Dec 2016. It has taken an Office Space in Andheri (West), Mumbai for that purpose. The person who is to take charge of Mumbai Office seeks your advice regarding the provisions of the Companies Act, 2013, in respect of displaying of the Company’s name, etc. at its Mumbai Office as well as in its business letters and other documents. Advise him with reference to the provisions of the Companies Act, 2013 governing Foreign Companies. Soft and Secure Lenders Limited, has convened a Board Meetings on 25th October 2016. One of the items of the agenda is to approve the grant of Loan of ` 20 Crores to Easy Going Industries Limited, for expansion of its business activities. At the Board Meeting, out of the total of 6 Directors of the Lending Company, 5 Directors were present and except 1 Director, the remaining 4 directors approved the grant of Loan of ` 20 Crores to Easy Going Industries Limited. The Borrowing Company has taken Loans from a Public Financial Institution and also Deposits from Public. Examine the Loan Proposal with reference to the provisions of the Companies Act, 2013. Discuss “Related Party Transactions” under the Companies Act, 2013, with specific reference to the nature of transactions which fall under the purview of the Companies Act, 2013. GST Limited is a Securitization and Reconstruction Company under SARFAESI Act, 2002. The Certificate of Registration granted to it was cancelled. State the circumstances when the Certificate can be cancelled. Further, state the Authority which can cancel the Certificate of Registration. Upon an enquiry made by the Competition Commission of India, it was found that Huge Limited is enjoying dominant position in the market and there is every possibility that the Company may abuse its dominant position. In order to overcome such a possible situation, the Competition Commission of India wants to order for division of Huge Limited. Referring to the provisions of the Competition Act, 2002, describe the matters which may be provided in the said order.

Reference/Hint Answer •

uk r

5 (b)

Questions ordered that the Equity Shareholders of ABC Limited were to be provided with a Cash Compensation of ` 2,000 and 2 Equity Shares in KPN Limited for every single Equity Share held in ABC Limited. Mr. Ganesh, an Equity Shareholder of ABC Limited was dissatisfied not only with the amalgamation but also with the compensation offered by the Prescribed Authority. Advise him whether he can challenge the above amalgamation order of the Central Government. Also advise him within how many days and before which Authority he can prefer an appeal against the order of the Prescribed Authority. Advise him referring to the provisions of the Companies Act, 1956 in this regard. Mr. K, is making an arrangement to acquire some Stock–in–Trade from BL Limited for consideration of some furniture lying with him. He is a Director of JS Limited, which is the Holding Company of BL Limited. Advise him on the basis of provisions of Companies Act, 2013. What will be the position of the arrangement if there is a contravention of the applicable provisions of the Companies Act, 2013?

hr ig ur

Q



7 (d)

Explain very briefly the significance of conjunctive and disjunctive words “or” “and” in the matter of interpretation of Statutes. Discuss the provisions relating to Annual Reports of Government Companies – (i) Where in addition to the Central Government, any State Government is a Member of the Company. (ii) Where the Central Government is not a Member of the Government Company.

M

4

Refer Page 5.15, Para 5.4.6. Vacancy to be filled within the later of – (a) 3 months from 15th June (Date of Vacancy) so 15th Sep.

4

(b) Date of next immediate BOD Meeting, So, Ans: 15 Sep. i.e. 14th Aug. Refer Page 8.8, Para 8.3.1 [RTP, N 99, N 02, N 05]

(a) Holding Co. can give loan to 100% Subsidiary, if Subsidiary uses it only for principal business activities. (b) For Penalties, see Point 4 of Para 8.3.1

4


4


4

w

w w

.s

7 (e)

Points 3 to 8 [M 01]

.c om

7 (c)

Can a Holding Company advance any Loan to its wholly– owned Subsidiary Company? What are the relevant provisions of the Companies Act, 2013 with regard to granting of Loans by Holding Company to its wholly–owned Subsidiary Company? Mentions the penalties for the contravention of the provisions of the Companies Act, 2013.

Refer Page 13.46, Para 13.7.11,

ip a

7 (b)

SKY Limited, a Listed Company, has been incorporated under the Companies Act, 2013. An intermittent vacancy of a Woman Director has arisen on 15th June 2016. Advise the Company to fill the vacancy as per the provisions of the Companies Act, 2013. The Board Meeting was held on 14th August, 2016.


uk r

7 (a)

Questions Answer any four: Winding–up proceeding has been commenced by the Court against Lucky Limited, a Non–Government Company. Even after completion of 1 year from the date of commencement of winding up proceedings, it has been possible to conclude the same. Discuss the duties of the Liquidator with respect to auditing and filing of the required Statements with the Appropriate Authority as per the provisions of the Companies Act, 1956. Also discuss the penalty which can be imposed on the Liquidator for contravention of the above provisions.

hr ig ur

Q 7


Padhuka’s Latest Updates on Corporate and Allied Law – CA Final Summary / Index 1. 2. 3. 4. 5.

Law Companies Act, 2013 Foreign Exchange Management Act, 1999 SEBI (ICDR) Regulations, 2009 Banking Regulation Act, 1949 Prevention of Money Laundering Act, 2002

Description 19 Items as per List, along with Updates / Material in LA.1 to LA.8 7 Items as per List Provisions relating to Wilful Defaulter, as per details below. 8 Items as per List Appellate Tribunal related amendments, as per details below.

1. Companies Act, 2013

.c om

3.

GSR 540(E) dated 23.05.2016

ip a

SO 1975(E) dated 18.05.2016

Page Ref. Ch.16 Page 16.3 See LA.1 below

Page 3.10, Para 3.2.2

.s

hr ig ur

2.

Description Form GNL–1 for filing an application with ROC and Form GNL–4 for filing Addendum for Rectification of Defects and Incompleteness under Companies (Registration Offices and Fees) Rules, have been amended. Sec.2(29(iv), Sec.435 to 438 and Sec.440 is notified w.e.f. 18.05.2016 Establishment of Special Courts under COA 2013 Eligible Sec.8 Co / Trust / Society: CSR Activities may be undertaken through a Sec. 8 Company or a Registered Trust or a Registered Society. To be eligible CSR, such Sec.8 Company / Trust / Society must be – EITHER established by– (a) the Company, either singly or alongwith any other Company, or (b) (i) the Central Government, or (ii) State Government, or (iii) any Entity established under an Act of Parliament or a State Legislature. OR with established track record of 3 years in undertaking similar programs and projects, and the Company (required to comply with CSR) has specified – (a) the projects or programs to be undertaken, (b) the modalities of utilization of funds of such projects and programs, and (c) the monitoring and reporting mechanism. Amendments in Companies (Authorized to Register) Rules: 1. Para 15.2.3, Point A.5 will be as under – In case of a Firm, Deeds of Partnership, Bye–Laws or other Instrument constituting or regulating the Company and duly verified, and if the Deed of Partnership was revised at any time in the past, copies of the Principal and all Subsequent Deeds including the Latest Deed, along with the Certificate of the Registration issued by Registrar of firms, in case the Firm is registered.

uk r

1.

Notfn/Circular F.No.01/16/2013 CL–V (PT–II) dt 06.05.2016

w w

2. After Para A.8, the following Para A.9, A.10, A.11 shall be added – A.9 an Undertaking that the Proposed Directors shall comply with the requirements of Indian Stamp Act, 1899, A.10 a Statement of Assets & Liabilities of the LLP /Firm, certified by a CA in practice, made as on a date not earlier than 30 days of filing of Form URC.1 A.11 a copy of latest Income Tax Return of the LLP /Firm.

w

4.

F.No.01/35/2013 CL–V dated 31.05.2016

3.

Existing Para A.9 and A.10 of Page 15.9 to be renumbered as A.12, A.13.

4.

New Para A.13 relating to Affidavit will be modified as under – Undertaking from all Members / Partners, providing that in the event of registration under this Part, necessary documents or papers shall be submitted to the Registering or Other Authority with which the Company was earlier registered, for its dissolution as a Firm.

5.

Para 15.2.3B contents will be as under – Documents to be submitted in addition to Items A.2 to A.4, A.7 to A.13 – (a) List showing Names, Addresses and Occupations of all Persons, who were Members within 6 clear days of seeking registration, along with Proof of Membership.

Page 15.8, 15.9, Para 15.2.3

Nov 2016.6 ________________________________________________________________________________________________________________________ www.shrigurukripa.com

Padhuka’s Latest Updates on Corporate and Allied Law – CA Final Notfn/Circular

Description (b) Copy of the Instrument constituting or regulating the Company duly verified. [Note: If Partnership Deed was revised earlier, the requirements as in Point A.5 will also apply.] (c) In case of a Company intended to be registered as a Company limited by Guarantee, a copy of the Resolution declaring the Amount of Guarantee. Note below Para 15.2.3C will be modified as references to a Firm (instead of LLP), and Registrar of Firms (instead of LLP Registrar). Sec.140(4) 2nd Proviso Notified: NCLT’s Powers [Already given in Page 4.9, Para 4.3.2 in Italics, now notified.] Sec.140(5) 2nd Proviso Notified: NCLT’s Powers [Already given in Page 4.10, Para 4.3.3 in Italics, now notified.] Sec.169(4) Notified – Removal of Director – Representations: On receiving the written representation from the Director concerned, the Company shall, if the time permits it to do so – (a) state the fact of representation having been made in every Notice of the Resolution given to the Members, (b) send a copy of the representation to every Member to whom Notice has been sent (whether before or after receipt of the representation by the Company). Note: Other provisions notified are already covered in Page 5.24, Para 5.6.4, Pt 4. Sec.130,131 Notified: Re–Opening of Accounts on Court's or Tribunal's Orders, and Voluntary Revision of Financial Statements or Board's Report Sec.213 Notified – NCLT’s Powers to investigate into Company’s Affairs Note: Other Provisions relating to Investigation which are now notified are – • Sec.216(2):[Already in Pg 10.4, Para 10.2.1, Point B.2 in Italics, now notified.] • Sec.218: Protection of Employees during Investigation – See LA.3 below. • Sec.221: Freezing of Assets of Company upon Inquiry, etc. – See LA.3 below. • Sec.222: Imposition of Restrictions upon Securities – See LA.3 below. • Sec.224(5):[Already in Pg 10.6, Para 10.2.6, Point 4 in Italics, now notified.] Consequently, Sec.237, 635B, 250 of COA 1956 (in Page 10.10) not applicable.

Page Ref.

6.

SO 1934(E) dated 01.06.2016

6.

SO 1934(E) dated 01.06.2016

7.

SO 1934(E) dated 01.06.2016

8.

SO 1934(E) dated 01.06.2016

1.

9.

SO 1932(E), SO 1933(E), SO 1934(E), SO 1936(E) dated 01.06.2016

10.

SO 1934(E) dated 01.06.2016 & SO 2912(E) dated 05.09.2016

11.

SO 1934(E) dated 01.06.2016

12.

SO 2922(E) dated 12.09.2016

13.

SO 2866(E) dated 05.09.2016

14.

SO 2912(E) dated 05.09.2016

15.

F.No.01/5/2013 CL–V dated 30.06.2016

Prevention of Oppression and Mismanagement – 1. Sec.241–246 have been notified. 2. Sec.337–341 is also notified to the extent applicable for Sec.246. [Consequently, Para 12.2, Page 12.3 to 12.9 will stand modified as per LA.5] Sec.441 Compounding of Offences under COA 2013 is now notified. Consequently, Sec.621A of COA 1956 (in Page 16.18) not applicable. Amendments in Schedule V – Managerial Remuneration 1. Page 9.3 – Point 9.1.7 – Item 1(f) now read as COA 2013 or any previous Company Law [Note: Italics Portion inserted now.] 2. Page 9.11, Para 9.2.4 – Section II of Schedule V amended – Refer LA.7 1. Sec.124 (1) to (4) and (6) and Sec.125 (8) to (11) are notified. 2. Investor Education and Protection Fund Authority Rules, 2016 are notified vide GSR 854(E) and GSR 853(E) dated 05.09.2016. 3. However, Manner of Administration of Fund not notified yet. Sec.227 Notified: Legal Advisers & Bankers not to disclose certain information. [Provisions are the same as Sec.251 of COA 1956, already in Page 10.11] Amendments in Appointment and Remuneration of Managerial Personnel Rules 1. Return of Appointment: Form MR.1 Return of Appointment to be filed with ROC within 60 days of appointment of MD/WTD/ Manager. [Note: Earlier, CEO, CS and CFO were also covered, now only MD/WTD/Manager.]

NCLT and NCLAT have been constituted w.e.f. 01.06.2016, and cases pending before CLB shall be transferred to NCLT w.e.f. 01.06.2016. Provisions relating to NCLT/NCLAT have been notified. As a result, CLB stands dissolved, and consequential provisions u/s 466 have been notified.

w

w w

.s

2. 3.

hr ig ur

uk r

ip a

.c om

5.

Page 4.9, Page 4.10

Page 5.24

See LA.2 below

See LA.3 below

See LA.4 below

See LA.5 below See LA.6 below Page 9.11, Para 9.2.4 See LA.7 below See LA.8 below Page 10.11 Page 9.14


Padhuka’s Latest Updates on Corporate and Allied Law – CA Final Notfn/Circular 2. 3.

Description Page 9.14, Para 9.2.9 Point (a) – Details as to Managerial Remuneration by Listed Company – Items 5, 6, 7, 9, 10, 11 – shall be omitted. Page 9.14, Para 9.2.9 Point (b): • The Board’s Report shall include a Statement showing the names of the top

Page Ref.

10 Employees in terms of Remuneration drawn, and the name of every

.c om

ip a

F.No.01/40/2013 CL–V dated 14.07.2016

Page 4.15 Para 4.3.8

hr ig ur

uk r

16.

Employee who fulfils the conditions specified in (a) (b) (c) given therein. [Note: Italics portion added now] • Limit of ` 60 Lakhs p.a. and ` 5 Lakhs p.m. in conditions (a) and (b) have been increased to ` 120 Lakhs p.a. and ` 8.50 Lakhs p.m. now. Amendments in Companies (Cost Records and Audit) Rules 2016 1. Sectors to which Cost Audit applicable amended and notified. 2. Before appointment, the Cost Auditor shall submit a Certificate that – (a) the Individual / Firm is eligible for appointment, and is not disqualified under COA 2013, CWA Act, 1959, Rules / Regulations thereunder, (b) the Individual / Firm satisfies Sec.141 Criteria to the extent applicable, (c) the proposed appointment is within the limits laid down under COA 2013, (d) the list of proceedings against the Cost Auditor / Firm / Other Partner pending, on professional matters of conduct, is true and correct. 3. Before appointment is made by the Company, the written consent of Cost Auditor / Firm, and Certificate as above shall be obtained. 4. Removal: Cost Auditor may be removed before the expiry of his term, through a BOD Resolution, after – (a) giving a hearing opportunity, and (b) recording the reasons for removal in writing. [Note: Resolution to be enclosed when new Cost Auditor appointment is filed with ROC.] 5. Resignation: Cost Auditor may resign from such office of the Company. 6. BOD Approval: Before submission to the Cost Auditor for his audit / report, the BOD shall approve the Cost Statements, and all Annexures. They shall be signed by a Director authorized by the BOD. 7. Reporting: Cost Auditor shall submit his Report to the BOD within 180 days from the close of the relevant financial year. BOD shall consider and examine the Report, particularly any reservation or qualification therein. 8. Form CRA.4: Company’s Explanations on the Reservations / Qualifications in the Cost Audit Report to be furnished in XBRL Format.

w w

.s

Sec.381 compliance for Foreign Airlines Company having a Share Capital: 1. It is deemed sufficient compliance of Sec.381(1)(a), for periods ending on or after 31st Mar 2016, such Company submits to the appropriate ROC in India – (a) documents relating to copies of latest Consolidated Financial Statements of the Parent Foreign Company, as submitted by it to the Prescribed Authority in the country of its incorporation, [with English Translation, if applicable.] (b) in respect of its Indian Business Operations, a Statement of Receipts and Payments for the Financial Year, duly authenticated by a practicing CA in India or a Firm or a LLP of practicing CAs in India. (c) documents to be filed with ROC u/r 4(2) of the Companies (Registration of Foreign Companies) Rules, 2014. 2. The Company shall also furnish to the Central Government, information with regard to its accounts as the Central Government may require, if so required by notice in writing. Amendments in Companies (Accounts) Rules, 2013: 1. Page 3.7 – Para 3.2.1 – Point 1(b) – modified as under: BOD shall report on the highlights of performance of Subsidiaries, Associates and Joint Venture Companies and their contribution to the overall performance of the Company during the period under report. 2. Page 3.12 – Para 3.2.3 – 3rd Item – Internal Auditor: (a) Point 1: Internal Auditor maybe an Individual, Partnership Firm or Body Corporate. (b) Point 3: Chartered/ Cost A/ctant, may or may not be engaged in practice.

F.No.01/23/2013 CL–V dated 19.07.2016

18.

F.No.01/19/2013 CL–V dated 27.07.2016

w

17.

Page 15.3, Para 15.1.4

Chapter 3


Padhuka’s Latest Updates on Corporate and Allied Law – CA Final Notfn/Circular 3.

F.No.01/36/2013 CL–V dated 09.09.2016

Companies (Mediation & Conciliation) Rules, 2016 have been notified u/s 442.

LA.1 Special Courts [Sec.435–438, 440]

.c om

19.

Description Page 3.3 – Para 3.1.2 – Last Item – Consolidated Financial Statement: 5th Point – Manner of Consolidation is modified as under – (a) Consolidation of Fin.Stmts shall be as per Schedule III and applicable AS. (b) The above shall not apply to a Company which – • is a wholly/partly–Owned Subsidiary of another Company and all its other Members, including those not otherwise entitled to vote, having been intimated in writing and for which the proof of delivery is available with the Company, do not object to the Company not presenting CFS, • is a Company whose Securities are not listed or are not in the process of listing on any Stock Exchange, whether in India or outside India, and • its ultimate or any intermediate Holding Company files CFS with the ROC, which are in compliance with the applicable AS.

Page Ref.

Page 16.11 / 16.4.1

Note: Sec.2(29) portion relating to Special Courts is now notified. [Already given in Italics in Page 1.4, Sec.2(29), Point (d).]

All other Offences

uk r

Offences punishable under COA 2013 with imprisonment ≥ 2 yrs

ip a

Jurisdiction of Courts

.s

w

Provisions superseding Code of Criminal Procedure (CrPC) [Sec.436]

Description A Special Court shall consist of a single judge who shall be appointed by the Central Govt with the concurrence of the Chief Justice of the High Court within whose jurisdiction the Judge to be appointed is working. A person shall be qualified for appointment as a Judge of a Special Court only if he is, immediately before such appointment, holding office of a Sessions Judge or an Additional Sessions Judge. Except as otherwise provided in COA 2013, the provisions of CrPC, 1973 shall apply to the proceedings before a Special Court. The Special Court shall be deemed to be a Court of Session and the person conducting a prosecution before a Special Court shall be deemed to be a Public Prosecutor. 1. Jurisdiction: All offences specified u/s 435(1) shall be triable only by the Special Court established or designated for the area in which the Registered Office of the Company in relation to which the offence is committed, and if there are more Special Courts than one for such area, by such Special Court as specified by the High Court concerned. 2. Detention: Where a person accused of, or suspected of the commission of, an offence under COA 2013 is forwarded to a Magistrate u/s 167(2)/(2A) of CrPC, such Magistrate may authorise the detention of such person in such custody as he thinks fit for a period not exceeding 15 days in the whole (15 days in case of Judicial Magistrate, and 7 days in case of an Executive Magistrate). 3. Forwarding to Spl Court: Where such Magistrate considers that the detention of such person upon or before the expiry of the period of detention is unnecessary, he shall order such person to be forwarded to the Special Court having jurisdiction. 4. Powers of Spl Court: The Special Court may exercise, in relation to the person forwarded to it under (3) above, the same power which a Magistrate having jurisdiction to try a case may exercise u/s 167 of CrPC in relation to an accused person who has been forwarded to him under that section. 5. Cognizance: A Special Court may, upon perusal of the Police Report of the facts constituting an offence under COA 2013 or upon a complaint in that behalf, take cognizance of that offence without the accused being committed to it for trial. 1. All Offences in one Trial: When trying an offence under COA 2013, a Special Court may also try an offence other than an offence under COA 2013 with which the accused may, under the CrPC be charged at the same trial.

w w

Aspect Constitution [Sec.435(2)] Qualification [Sec.435(3)] Application of CrPC [Sec.438]

Metropolitan Magistrate or a Judicial Magistrate of the First Class having jurisdiction to try any offence under COA 2013 or under any previous Company Law.

hr ig ur

Special Courts established / designated by Central Government, u/s 435

Summary Trial [Sec.436]


Padhuka’s Latest Updates on Corporate and Allied Law – CA Final Aspect

Description Summary Trial: The Special Court may, if it thinks fit, try in a summary way any offence under COA 2013, which is punishable with imprisonment for a term not exceeding 3 years. However – (a) in case of any conviction in a summary trial, no sentence of imprisonment for a term exceeding 1 year shall be passed. (b) when at the commencement of, or in the course of, a summary trial, it appears to the Special Court that the nature of the case is such that the sentence of imprisonment for a term exceeding 1 year may have to be passed or that it is, for any other reason, undesirable to try the case summarily, the Special Court shall, after hearing the parties, record an order to that effect and thereafter recall any witnesses who may have been examined and proceed to hear or rehear the case in accordance with the procedure for the regular trial. The High Court may exercise, so far as may be applicable, all the powers conferred by Chapters XXIX and XXX of the CrPC on a High Court, as if a Special Court within the local limits of the jurisdiction of the High Court were a Court of Session trying cases within the local limits of the jurisdiction of the High Court. 1. Any offence committed under COA 2013, which is triable by a Special Court shall, until a Special Court is established, be tried by a Court of Session exercising jurisdiction over the area, notwithstanding anything contained in the CrPC. 2. The above shall not affect the powers of the High Court u/s 407 of CrPC to transfer any case or class of cases taken cognizance by a Court of Session under this section. 2.

Appeal and Revision [Sec.437]

.c om

Transitional Provisions [Sec.440]

ip a

LA.2 Re–Opening of A/cs, Voluntary Revision of Board’s Report [S.130, 131] LA.2.1 Re–opening of Accounts on Courts’ or Tribunals’ order [Sec.130]

1. 2.

Person Eligible to apply for Reopening

1. 2. 3. 1.

Order by Court / Tribunal

2.

uk r

Grounds for re– opening / re– Casting

Description Rule: A Company shall not re–open its books of account or not recast its Financial Statements. Exception: Re–opening of Books/ Re–casting of Financial Statements can be done only if an order is made by a Court or Tribunal. The relevant earlier accounts were prepared in a fraudulent manner, or The affairs of the Company were mis–managed during the relevant period, thereby casting a doubt on the reliability of Financial Statements. Central Government, 4. Any other Statutory Regulatory Body or Authority, or Income–Tax Authorities, 5. Any person concerned. Securities and Exchange Board of India (SEBI),

hr ig ur

1. 2.

Court or Tribunal shall give notice to above Persons [1 to 4 (not 5) above] and shall take into consideration the representations made, if any before passing an order. The accounts so revised or re–cast pursuant to the order shall be final.

.s

Particulars No Re–opening of Financial Statements

w w

LA.2.2 Voluntary Revision of Financial Statement or Boards’ Report [S.131] Particulars

w

Grounds for Revision [Sec. 131(1)]

Description appears to the Directors of the Company that – do not comply with the provisions of The Financial Statement of the Company, or Sec. 129 or Sec. 134 Board’s Report Revision can be in any of the 3 preceding financial years. Revised Fin.Stmt or Report shall not be prepared or filed more than once in a Financial Year. Reasons for revision of such Financial Statement or Report shall also be disclosed in the Board's report in the relevant financial year in which such revision is being made. 4. Revision must be restricted / confined as below: If the copies of the previous Fin. The revision must be confined to – Stmt or Report have already been – (a) sent out to Members, or (a) The correction in respect of which the previous Financial Statement or Report do not comply with the provisions (b) delivered to the Registrar, or of Sec. 129 or Sec. 134, and (c) laid before the Company in (b) The making of any necessary consequential alternation. General Meeting

If it (a) (b) 1. 2. 3.

Restrictions / Conditions for Revision [Sec. 131(2)]

The Company shall apply to the Tribunal for its approval. Tribunal shall give notice to (a) the Central Government, and (b) Income Tax Authorities, and shall take into consideration the representations, if any, made. Nov 2016.10 ________________________________________________________________________________________________________________________ Procedure

www.shrigurukripa.com

1. 2.

Padhuka’s Latest Updates on Corporate and Allied Law – CA Final Particulars

Power of CG to make Rules [Sec. 131(3)]

Description 3. Tribunal shall pass an order thereon. 4. A copy of the Tribunal’s order shall be filed with the ROC. 5. Board shall effect the revision in Financial Statement / Report as per above order. Central Government may make Rules as to the application of the Act in relation to Revised Financial Statement or a Revised Director's Report, covering the following– 1. make different provisions according to which the previous Financial Statement or Report are replaced or are supplemented by a document indicating the corrections to be made, 2. make provisions with respect to the functions of the Company's Auditor in relation to the Revised Financial Statement or Report, 3. require the Directors to take such steps as may be prescribed.

.c om

LA.3 NCLT’s Powers of Investigation, & other Provns [S.213, 218, 221, 222] LA 3.1 Investigation into Company’s Affairs in Other Cases [Sec.213] Aspect

Description For Company having Share Capital: Not Less than 100 Members or Members holding not less than 1/10th of the Total Voting Power, 2. For Company not having Share Capital: Not less than 1/5th of the Persons on the Company's Register of Members. Note: Applicants should provide necessary evidence for the purpose of showing that the Applicants have good reasons for seeking an order for conducting an investigation into the affairs of the Company. 1. The Business of the Company is being conducted – (a) with intent to defraud its Creditors, Members or any other person or (b) otherwise for a fraudulent or unlawful purpose, or (c) in a manner oppressive to any of its Members, 2. The Company was formed for any fraudulent or unlawful purpose, 3. Persons concerned in the formation of the Company or the management of its affairs have in connection therewith been guilty of fraud, misfeasance or other misconduct towards the Company or towards any of its Members, or 4. The Members of the Company have not been given all the information with respect to its affairs which they might reasonably expect, including information relating to the calculation of the Commission payable to a Managing or Other Director, or the Manager, of the Company. 1. On an application made by Applicants given above, or by other person, or otherwise, if the NCLT is satisfied that there are circumstances suggesting the above Grounds / Reasons, it may order that the affairs of the Company ought to be investigated by Inspector(s) appointed by the Central Government. 2. Before such order, the NCLT shall give a reasonable hearing opportunity to the Parties concerned. Where the above order is passed by NCLT, the Central Government shall appoint one or more competent persons as Inspectors to investigate into the affairs of the Company in respect of such matters and to report thereupon to it in such manner as the Central Government may direct. If after investigation it is proved that – 1. the business of the Company is being conducted with intent to defraud its Creditors, Members or any other Persons or otherwise for a fraudulent or unlawful purpose, or that the Company was formed for any fraudulent or unlawful purpose, or 2. any person concerned in the formation of the Company or the management of its affairs have in connection therewith been guilty of fraud, then, every Officer of the Company who is in default and the person(s) concerned in the formation of the Company or the management of its affairs shall be punishable for Fraud in the manner provided u/s 447.

w

Effect of NCLT Order

w w

.s

NCLT’s Powers

uk r

Grounds /Reasons

hr ig ur

Applicants

ip a

1.

Punishment

LA.3.2 Protection of Employees during Investigation [Sec.218] Aspect Situation

1. 2.

Description During the course of any investigation relating to a Co., Body Corporate, etc. u/s 210/212/213/216/219 During the pendency of any proceeding against any person concerned in the conduct and management of the affairs of a Company under Chapter XVI.



Procedure

Appeal to NCLAT Other Law

.c om

Proposal by Employer

Description Such Employer (Company, other Body Corporate or Person) proposes – 1. to discharge or suspend any Employee, or 2. to punish him, whether by dismissal, removal, reduction in rank or otherwise, or 3. to change the terms of employment to his disadvantage. 1. Employer shall obtain NCLT’s approval, of the action proposed against the Employee. 2. If the NCLT has any objection to the action proposed, it shall send by post, notice thereof in writing to the Employer concerned. 3. If the Employer does not receive the approval from NCLT within 30 days of making of application, only then, the Employer may proceed to take against the Employee, the action proposed. 1. If the Employer is dissatisfied with the objection raised by NCLT, it may prefer an appeal to the NCLAT, within 30 days of the receipt of the notice of the objection. 2. The decision of the NCLAT on such appeal shall be final and binding on the NCLT and on the Employer. Sec.218 shall have effect without prejudice to the provisions of any other law for the time being in force.

LA.3.3 Freezing of Assets of Company on Inquiry and Investigation [S.221]

NCLT’s Powers Effect of contra– vention

ip a

Grounds

uk r

Situation

Description Where it appears to the NCLT – 1. on a reference made to it by the Central Government, or 2. in connection with any inquiry or investigation into the affairs of a Company under Chapter XIV, or 3. on a complaint made by – (a) the number of Members specified u/s 244(1), or (b) a Creditor having ` 1 Lakh outstanding against the Company, or (c) any other person having a reasonable ground to believe so. That the removal, transfer or disposal of Funds, Assets, Properties of the Company is likely to take place in a manner that is prejudicial to the interests of the Company or its Shareholders or Creditors or in public interest. NCLT may by order direct that such transfer, removal or disposal – 1. shall not take place during the period specified in the order (maximum period = 3 years), or 2. may take place subject to such conditions and restrictions as the NCLT may deem fit. 1. Company shall be punishable with Fine (Minimum ` 1 Lakh, Maximum ` 25 Lakhs). 2. Every Officer in default shall be punishable with – (a) Imprisonment (maximum 3 years), or (b) Fine of Minimum ` 50,000, Maximum ` 5 Lakhs, or (c) both.

hr ig ur

Aspect

LA.3.4 Imposition of Restrictions upon Securities [Sec.222]

NCLT’s Powers

w

Effect of contra– vention

.s

Situation

Description In connection with any investigation u/s 216 or on a complaint made by any person in this behalf – 1. Where it appears to the NCLT, that there is good reason to find out the relevant facts about any Securities issued or to be issued by a Company, and 2. The NCLT is of the opinion that such facts cannot be found out unless certain restrictions are imposed. NCLT may, by order, direct that the Securities shall be subject to such restrictions as it may deem fit for such period not exceeding 3 years as may be specified in the order. Where Securities in any Company are issued or transferred or acted upon in contravention of NCLT’s Order – 1. Company shall be punishable with Fine (Minimum ` 1 Lakh, Maximum ` 25 Lakhs). 2. Every Officer in default shall be punishable with – (a) Imprisonment (maximum 6 months), or (b) Fine of Minimum ` 25,000, Maximum ` 5 Lakhs, or (c) both.

w w

Aspect


Padhuka’s Latest Updates on Corporate and Allied Law – CA Final

LA.4 NCLT and NCLAT LA.4.1 Definitions [Sec.407] Term Chairperson

Meaning

Judicial Member Member President Technical Member

means the Chairperson of the NCLAT. means a Member of NCLT or NCLAT appointed as such, and includes the President of NCLT or the Chairperson of NCLAT. means a Member, whether Judicial or Technical of the NCLT or NCLAT, and includes the President of NCLT or the Chairperson of NCLAT. means the President of the NCLT. means a Member of the NCLT or NCLAT appointed as such.

Qualifi– cations [S.409/411]

President: Person who is or has been a Judge of a High Court for 5 years.

(a) is, or has been, a Judge of a High Court, or (b) is, or has been, a District Judge for atleast 5 years, or (c) has, for atleast 10 years been an Advocate of a Court. [Note 1] (a) has, for atleast 15 years been a Member of the Indian Corporate Law Service or Indian Legal Service out of which atleast 3 years shall be in the pay scale of Joint Secretary to the Govt of India or equivalent or above in that service, or (b) is, or has been, in practice as a Chartered Accountant / Cost Accountant / Company Secretary for atleast 15 years, (c) is a person of proven ability, integrity and standing having special knowledge and experience, of not less than 15 years, in Law, Industrial Finance, Industrial Management or Administration, Industrial Reconstruction, Investment, Accountancy, Labour Matters, or such other disciplines related to Management, Conduct of Affairs, Revival, Rehabilitation and Winding Up of Companies, or (d) is, or has been, for atleast 5 years, a Presiding Officer of a Labour Court, Tribunal or National Tribunal constituted under Industrial Disputes Act, 1947. Can hold office for a term of 5 years from the date on which he enters upon his office. Eligible for re– appointment for another term of 5 years. A Member of NCLT shall hold office until he attains,– (a) President: 67 years, (b) Any other Member: 65 years.

w

Technical Member = Person who [S.409/411]

w w

.s

Judicial Member = Person who [S.409/411]

Term of Office [S.413] Age Limit [S.413] [Note 3]

For hearing appeals against the orders of NCLT.

ip a

Rules w.e.f. 21.07.2016

NCLAT Chairperson, and Judicial & Technical Members, not exceeding 11, as Central Govt may deem fit.

National Company Law Appellate Tribunal Rules, 2016 [Notfn No.F.No.1/30/NCLAT/CL–V/2013] Chairperson: Person who is or has been – (a) a Judge of the Supreme Court, or (b) the Chief Justice of a High Court.

uk r

Purpose [S.408/410]

NCLT President, and Judicial and Technical Members, as the Central Govt may deem necessary. To exercise and discharge the powers and functions as are, or may be, conferred on NCLT by or under COA 2013, or any other law for the time being in force. National Company Law Tribunal Rules, 2016 [Notification No.F.No.1/30/2013/CL–V]

hr ig ur

Point Constitution [S.408/410]

.c om

LA.4.2 NCLT & NCLAT – Comparative Analysis of Provisions

(a) is or has been a Judge of a High Court, or (b) is a Judicial Member of the NCLT for 5 years.

Person of proven ability, integrity and standing having special knowledge and experience, of not less than 25 years, in Law, Industrial Finance, Industrial Management or Administration, Industrial Reconstruction, Investment, Accountancy, Labour Matters, or such other disciplines related to Management, Conduct of Affairs, Revival, Rehabilitation and Winding Up of Companies.

Can hold office for a term of 5 years from the date on which he enters upon his office. Eligible for re–appointment for another term of 5 years. NCLAT Member shall hold office until he attains – (a) Chairperson: 70 years, (b) Any other Member: 67 years.


Padhuka’s Latest Updates on Corporate and Allied Law – CA Final Note 1: In computing the period during which a person has been an Advocate of a Court, any period during which the person has held Judicial Office or the Office of a Member of a Tribunal or any post, under the Union or a State, requiring special knowledge of law after he become an Advocate, shall be included. Note 2: Selection of Members of NCLT/NCLAT [Sec.412] The President of NCLT and the Chairperson and Judicial Members of NCLAT, shall be appointed after consultation with the Chief Justice of India.

2.

The Members of NCLT and the Technical Members of NCLAT shall be appointed on the recommendation of a Selection Committee consisting of– (a) Chief Justice of India or his Nominee–Chairperson, (b) a Senior Judge of the Supreme Court or a Chief Justice of High Court– Member, (c) Secretary in the Ministry of Corporate Affairs–Member, (d) Secretary in the Ministry of Law and Justice–Member, and (e) Secretary in the Department of Financial Services in the Ministry of Finance–Member.

3.

The Secretary, Ministry of Corporate Affairs shall be the Convener of the Selection Committee.

4.

The Selection Committee shall determine its procedure for recommending persons for Sec.412(2).

5.

No appointment of the Members of NCLT/NCLAT shall be invalid merely by reason of any vacancy or any defect in the constitution of the Selection Committee.

.c om

1.

uk r

ip a

Note 3: For both NCLT/NCLAT – 1. A person who has not completed 50 years of age shall not be eligible for appointment as Member. 2. The Member may retain his lien with his Parent Cadre or Ministry or Department, while holding office as such for a period not exceeding 1 year. 3. The Salary, Allowances and other Terms and Conditions of Service of the Members shall be prescribed. Such matters cannot be varied to their disadvantage after their appointment. [Sec.414]

LA.4.3 NCLT & NCLAT – Common Provisions

Acting President / Chairperson [Sec.415]

2.

1. 2.

w w

Resignation [Sec.416]

Description In case of vacancy in the office of the President/ Chairperson by reason of his death, resignation or otherwise, the Senior–most Member shall act as the President/ Chairperson, until the date on which a new President/Chairperson appointed as per the Act to fill such vacancy enters upon his office. When the President /Chairperson is unable to discharge his functions owing to absence, illness or any other cause, the Senior–most Member shall discharge the functions of the President/Chairperson, until the date on which the President/Chairperson resumes his duties. The President, the Chairperson or any Member may, by notice in writing under his hand addressed to the Central Government, resign from his office. Such Person shall continue to hold office for the earliest of the following – (a) until the expiry of 3 months from the date of receipt of notice by the Central Govt, or (b) until a person duly appointed as his successor enters upon his office, or (c) until the expiry of his term of office. General Grounds: The Central Government may, after consultation with the Chief Justice of India, remove from office the President, Chairperson or any Member, who – (a) has been adjudged an insolvent, or (b) has been convicted of an offence which, in the CG’s opinion, involves moral turpitude, or (c) has become physically or mentally incapable of acting as President / Chairperson / Member, or (d) has acquired such financial or other interest as is likely to affect prejudicially his functions as President / Chairperson / Member, or (e) has so abused his position as to render his continuance in office prejudicial to the public interest. Note: Hearing Opportunity has to be given in (b) to (e) above.

hr ig ur

1.

.s

Aspect

w

1.

Removal [Sec.417] 2.

Misbehaviour or Incapacity: (a) Powers of CG: President / Chairperson / Member can be removed from his office by an order made by the Central Govt on the ground of proved misbehaviour or incapacity after an inquiry made by a Judge of the Supreme Court nominated by the Chief Justice of India on a reference made to him by the Central Govt. Such President / Chairperson / Member should be informed of the charges against him and given a reasonable opportunity of being heard.



Expeditious Disposal [Sec.422]

.c om

Public Servants [Sec.427] Protection of action in good faith [Sec.428]

ip a

Staff of NCLT / NCLAT [Sec.418]

Description (b) Suspension: Until orders are passed by Central Govt, the President / Chairperson / Member can be suspended from office by the Central Govt, with the concurrence of the Chief Justice of India. (c) Rules for Inquiry: The Central Government shall, after consultation with the Supreme Court, make Rules to regulate the procedure for the inquiry as above. 1. The Central Govt shall, in consultation with NCLT/NCLAT, provide them with such Officers and other Employees as necessary for the exercise of the powers and discharge of the functions of NCLT/NCLAT. 2. The Officers and other Employees of NCLT/NCLAT shall discharge their functions under the general superintendence and control of the President / Chairperson, or any other Member to whom powers for exercising such superintendence and control are delegated by him. 3. The Salaries and Allowances and other conditions of service of the Officers and other Employees of NCLT/NCLAT shall be prescribed. The President, Members, Officers and Other Employees of NCLT and the Chairperson, Members, Officers and Other Employees of NCLAT shall be deemed to be Public Servants within the meaning of Sec.218 of the Indian Penal Code. No suit, prosecution or other legal proceeding shall lie against the NCLT/NCLAT, President/Chairperson, Member, Officer or Other Employee thereof or Liquidator or any other person authorised by NCLT/NCLAT for the discharge of any function under COA 2013, in respect of any loss or damage caused or likely to be caused by any act which is in good faith done or intended to be done in pursuance of this Act. 1. Application / Petition to NCLT and Appeal to NCLAT shall be dealt with and disposed of by it as expeditiously as possible. 2. NCLT/NCLAT shall endeavour for the disposal of Application / Petition / Appeal within 3 months from the date of its presentation / appeal. 3. If not disposed of within 3 months, the NCLT/NCLAT shall record the reasons for not disposing it off, and the President / Chairperson, may, after taking into account the reasons so recorded, extend the above period by another maximum 90 days, as he may consider necessary.

LA.4.4 NCLT – Benches, Orders, etc. 1. 2. 3.

w w 5.

w

Benches of NCLT [Sec.419]

.s

4.

Description The number of Benches of NCLT shall be notified by the Central Government. The Principal Bench shall be at New Delhi which shall be presided over by the President of NCLT. The powers of NCLT shall be exercisable by Benches consisting of 2 Members out of whom one shall be a Judicial Member and the other shall be a Technical Member. Single Member Bench: (a) If the President, by general or special order, specifies/authorizes so, a Single Judicial Member can also function as a Bench, and exercise the powers in respect of specified class of cases. (b) If at any stage of the hearing of any such case or matter, it appears to the Member that the case or matter is of such a nature that it ought to be heard by a Bench consisting of 2 Members, the case or matter may be transferred by the President, or, referred to him for transfer, to such Bench as the President may deem fit. Special Benches: The President shall, for the disposal of any case relating to rehabilitation, restructuring, reviving, of Companies, constitute one or more Special Benches consisting of 3 or more Members, majority necessarily being of Judicial Members. [See Note 1 below.] Majority Opinion: (a) If the Members of a Bench differ in opinion on any point(s), it shall be decided according to the majority, if there is a majority. (b) If the Members are equally divided, they shall state the point(s) on which they differ. The case shall be referred by the President for hearing on such point(s) by one or more of the other Members of NCLT. Decision shall be based on opinion of the majority of Members who have heard the case, including those who first heard it. Order: NCLT may, after giving the parties to any proceeding before it, a reasonable opportunity of being heard, pass such orders thereon as it thinks fit. Amendment: At any time within 2 years from the date of the order, for rectifying any mistake apparent from the record, NCLT may amend any order passed by it, and shall make such amendment, if the mistake is brought to its notice by the parties. However, amendment is not possible on an order which has been appealed against. Copy: NCLT shall send a copy of every order passed u/s 420, to all the parties concerned.

hr ig ur

Aspect

uk r

Aspect

6.

1. Orders of NCLT [Sec.420]

2.

3.


Padhuka’s Latest Updates on Corporate and Allied Law – CA Final Note 1: The provision relating to Special Benches to be modified as below by the Insolvency and Bankruptcy Code, 2016, with effect from a date yet to be notified. “The Central Government shall establish such number of Benches of NCLT,

as it may consider necessary, to exercise the jurisdiction, powers and authority of the Adjudicating Authority conferred on NCLT by or under Part II of the Insolvency and Bankruptcy Code, 2016.”

Note 2: Transfer of Pending Proceedings to NCLT [Sec.434]: 1.

w.e.f. 01.06.2016 all matters / proceedings pending before CLB shall stand transferred to the NCLT. NCLT shall dispose of such matters/ proceedings, in accordance with provisions of COA 2013 / COA 1956.

2.

Appeal against CLB Order made before 01.06.2016, can be made to the High Court, within 60 days from the date of communication of the CLB decision / order, on any question of law arising out of such order. The High Court may, if it is satisfied that the Appellant was prevented by sufficient cause from filing an appeal within that period, allow it to be filed within a further period not exceeding 60 days.

Time Extension Matter appealed

Any Question of Law arising out of NCLAT Order. As per Court Procedure.

hr ig ur

Form/Fee

Appeal to Supreme Court [Sec.423] NCLAT Any person aggrieved by an order of NCLAT. Within 60 days from the date of receipt of the order of NCLAT. Supreme Court may, if it is satisfied that the Appellant was prevented by sufficient cause from filing the appeal within the 60 day period, allow it to be filed within a further period not exceeding 60 days.

ip a

Time Limit

Appeal to NCLAT [Sec.421] NCLT Any person aggrieved by an order of NCLT. Within 45 days from the date on which a copy of the order of NCLT is made available. NCLAT may entertain an appeal after the above 45 days, but within a further 45 days, if it is satisfied that the Appellant was prevented by sufficient cause from filing the appeal within that period. Both Question of Fact and Question of Law. [Note 1] As per NCLAT Rules.

uk r

Point Order by Appellant

.c om

LA.4.5 Appeal to NCLAT / Supreme Court

.s

Note 1: Order made by NCLT with the consent of parties, cannot be appealed against. Note 2: NCLAT shall – (a) give the parties to the appeal a reasonable opportunity of being heard, (b) pass such orders thereon as it thinks fit, confirming, modifying or setting aside the order appealed against, and (c) send a copy of every order made by it to the NCLT and the parties to appeal.

Aspect

Description 1. While disposing of any proceeding/appeal before it, NCLT/NCLAT shall not be bound by the procedure laid down in the Code of Civil Procedure, 1908. 2. NCLT/NCLAT shall be guided by the principles of natural justice. 3. Subject to the other provisions of COA 2013 / Insolvency and Bankruptcy Code, 2016 / Rules thereunder, the NCLT/NCLAT shall have power to regulate their own procedure. NCLT/NCLAT shall have the same powers as are vested in a Civil Court under the Code of Civil Procedure, 1908 while trying a suit in respect of the following matters, namely– 1. summoning and enforcing the attendance of any person and examining him on oath, 2. requiring the discovery and production of documents, 3. receiving evidence on affidavits, 4. subject to Sec.123 and 124 of the Indian Evidence Act, 1872 , requisitioning any public record or document or a copy of such record or document from any office, 5. issuing commissions for the examination of witnesses or documents, 6. dismissing a representation for default or deciding it ex parte, 7. setting aside any order of dismissal of any representation for default or any order passed by it ex parte, and 8. any other prescribed matter.

w

Guiding Principles [Sec.424]

w w

LA.4.6 Powers of NCLT & NCLAT

Powers equivalent to Civil Court [Sec.424]



Punishing for Contempt [Sec.425] Delegation of Powers [Sec.426] Acts not invalidated [Sec.431] Limitation [Sec.433] Legal Represen– tation [Sec.432]

.c om

Civil Court not to have jurisdiction [Sec.430]

ip a

Deemed Civil Court [Sec.424]

No act or proceeding of the NCLT/NCLAT shall be questioned or shall be invalid merely on the ground of the existence of any vacancy or defect in the constitution of the NCLT/NCLAT.

uk r

Enforce– ment of Orders [Sec.424]

Description Any order made by NCLT/NCLAT may be enforced in the same manner as if it were a decree made by a Court in a suit pending therein, and it shall be lawful for NCLT/NCLAT to send for execution of its orders to the Court within the local limits of whose jurisdiction – 1. in the case of an order against a Company, the Registered Office of the Company is situate, or 2. in the case of an order against any other person, the person concerned voluntarily resides or carries on business or personally works for gain. All proceedings before NCLT/NCLAT shall be deemed to be judicial proceedings within the meaning of Sec.193 and 228, and for the purposes of Sec.196 of the Indian Penal Code. NCLT/NCLAT shall be deemed to be Civil Court for the purposes of Sec.195 and Chapter XXVI of the Code of Criminal Procedure, 1973. 1. No Civil Court shall have jurisdiction to entertain any suit or proceeding in respect of any matter which NCLT/NCLAT is empowered to determine by or under COA 2013 or any other applicable law. 2. No injunction shall be granted by any Court or other authority in respect of any action taken or to be taken in pursuance of any power conferred by or under COA 2013 or other law, by the NCLT/NCLAT. NCLT/NCLAT shall have the same jurisdiction, powers and authority in respect of contempt of themselves as the High Court has and may exercise, for this purpose, the powers under the provisions of the Contempt of Courts Act, 1971, which shall have the effect, with the following modifications – 1. Reference therein to a High Court shall be construed as including a reference to NCLT/NCLAT, and 2. Reference to Advocate–General in Sec.15 of that Act shall be construed as a reference to Law Officers specified by the Central Government. NCLT/NCLAT may, by general or special order, direct, subject to conditions specified in the order, any of its Officers or Employees or any other person authorised by it to inquire into any matter connected with any proceeding/appeal, and to report to it in a specified manner.

The provisions of the Limitation Act, 1963 shall, as far as may be, apply to proceedings or appeals before NCLT/NCLAT. A Party to any proceeding or appeal before the NCLT/NCLAT, may either appear in person or authorise one or more Chartered Accountants or Company Secretaries or Cost Accountants or Legal Practitioners or any other person to present his case before the NCLT/NCLAT.

hr ig ur

Aspect

Special Point: NCLT’s Power to seek assistance of Chief Metropolitan Magistrate, etc. [Sec.429] Situation In any proceeding relating to a Sick Company or winding up of any other Company. [See Note 1] To take into custody or under its control all property, books of account or other documents.

NCLT’s Powers

The NCLT may request, in writing, the Chief Metropolitan Magistrate, Chief Judicial Magistrate or District Collector (CMM/CJM/DC) within whose jurisdiction any such property, books of account or other documents of such Sick or other Company [See Note 2], are situate or found, to take possession thereof.

Duties of CMM, etc.

The CMM/CJM/DC shall, on such request being made to him – (a) take possession of such property, books of account or other documents, and (b) cause the same to be entrusted to the NCLT or other person authorised by it.

w w

w

Other Steps

.s

Purpose

For the purpose of securing compliance as above, the CMM/CJM/DC 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.

No act of the CMM/CJM/DC done in pursuance of Sec.429 shall be called in question in any Court or before any authority on any ground whatsoever. Note: Modifications made by the Insolvency and Bankruptcy Code, 2016, with effect from a date yet to be notified – 1. Situation: “In any proceedings for winding up of a Company under COA 2013 or in any proceedings under the Protection

Insolvency and Bankruptcy Code, 2016”

2.

Powers extend to property, books, etc. of “a Company under COA 2013 or of Corporate Persons under the Insolvency

and Bankruptcy Code, 2016”.



LA.5 Prevention of Oppression and Mismanagement LA.5.1 Eligible Applicants [Sec.244] Eligibility: The following Members shall have the right to apply to NCLT u/s 241 – Company Eligible Members 1. Least of the following – (a) Not less than 100 Members of the Company, or (b) Not less than 1/10th of the total number of its Members, or (a) Having Share Capital 2. Any Member(s) holding not less than 1/10th of the Issued Share Capital. Note: Members are eligible to apply only if all moneys / calls due on their Shares have been paid. (b) Not having Share Capital Not less than 1/5th of the total number of its Members. Note: NCLT may waive all or any of the above requirements, to enable Members to apply u/s 241. 2.

.c om

1.

Meaning of “Members”:

(a) ‘Member’ refers to a person whose name has been entered in the Register of Members. Only Members (not Directors) can make an application u/s 241. (b) The term “Members” includes both Equity and Preference Shareholders.

ip a

(c) Joint Holders of Shares shall be counted only as one Member, for Sec.241 purposes.

Consent: Any one or more eligible Member(s) can obtain the consent of the other Members in writing, and may make the application on behalf and for the benefit of all of them.

4.

Powers of Central Government: The Central Government may itself make an application to the Tribunal u/s 241(2).

LA.5.2 Grounds of Application [Sec.241]

uk r

3.

hr ig ur

Application to NCLT by

Members

Central Government

w

w w

.s

Ground 1 Ground 2 That the affairs of the Company have been That a material change has taken place in the If it is of the or are being conducted in a manner – Management or Control of the Company, and that opinion that the by reason of such change, it is likely that the affairs of the Co. (a) prejudicial to public interest, or affairs of the Company will be conducted in a are being (b) prejudicial or oppressive to any manner prejudicial to the interests of – (a) the conducted in a Member(s), including any Company, (b) its Members, (c) any class of manner prejudicial Applicant(s), or Members [See Note below] to public interest. (c) prejudicial to Company’s Interest. Note: • “Material Change” may be brought about by way of alteration in – (i) BOD or Manager, or (ii) ownership of the Company's Shares, or (iii) Membership, if the Company has no Share Capital, or (iv) in any other manner whatsoever. • Material Change does not include a change brought about by, or in the interests of, – (i) any Creditors including Debentureholders, or (ii) any class of Shareholders, of the Company.

LA.5.3 NCLT’s Powers Aspect

Description NCLT may make an order u/s 242, if it is of the opinion – (a) That the affairs of the Company are being conducted in a manner – (i) prejudicial or oppressive to 1. Basic any Member(s), (ii) prejudicial to public interest, or (iii) prejudicial to Co.’s interests, AND Powers of (b) That to wind up the Company would unfairly prejudice such Member(s) but that otherwise the NCLT facts would justify the making of a winding–up order on the ground that it was just and equitable [S.242(1)] that the Company should be wound up. [Item (b) notified w.e.f. 09.09.2016] 2. NCLT may pass Orders as it thinks fit, with a view to bringing to an end the matters complained of. Nov 2016.18 ________________________________________________________________________________________________________________________ 1.

www.shrigurukripa.com

Padhuka’s Latest Updates on Corporate and Allied Law – CA Final Description NCLT 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. The order of the Tribunal u/s 242 may provide for – 1. Regulation of the conduct of the Company’s affairs in future. 2. Purchase of the Shares or interests of any Members of the Company – (a) by other Members, or (b)by the Company. 3. In case of purchase of its Shares by the Company, the consequent reduction of its Share Capital [w.e.f. 9.9.2016] 4. Restrictions on the transfer or allotment of Shares of the Company. 5. Termination, setting aside or modification of any agreement between – [See Note 3 & 4 below] (a) the Company on one hand, and (b) (i) Managing Director(MD), or (ii) Any other Director, or (iii) Manager, on the other, upon such terms and conditions as may be considered just and equitable in the NCLT’s opinion. 6. Termination, setting aside or modification of any agreement between the Company, and any person not mentioned in (5)(b) above. [See Notes 1,2 below] 7. Setting aside any transaction involving transfer, delivery of goods, payment, execution or other act relating to property, made or done by or against the Company within 3 months before the date of application u/s 241, if such transaction is deemed to be a “fraudulent preference” in an insolvency proceedings against an individual. [w.e.f. 9.9.2016] 8. Removal of the MD, Manager or any of the Directors of the Company. 9. Recovery of Undue Gains made by any MD, Manager or Director during the period of his appointment as such, and the manner of utilisation of the recovery including transfer to Investor Education and Protection Fund or repayment to identifiable victims. 10. Manner in which the MD or Manager of the Company may be appointed subsequent to an Order removing the existing MD or Manager of the Company made under Point 8 above, 11. Appointment of such number of persons as Directors, who may be required by the Tribunal to report to the Tribunal on such matters as the Tribunal may direct, 12. Imposition of Costs as may be deemed fit by the Tribunal, 13. Any other matter for which it is just & equitable that provision should be made, as per NCLT’s opinion.

uk r

hr ig ur

3. Contents of Order [S.242(2)]

ip a

.c om

Aspect 2. Interim Order [S.242(4)]

w

w w

.s

Notes: [Sec 243] 1. In case of termination /setting aside /modification, due notice shall be given to the concerned party, and prior consent of the concerned party shall be obtained. 2. Tribunal Order shall not give rise to any claims whatever against the Company by any person – (a) for damages, or (b) for compensation for loss of office, or (c) in any other respect, either in pursuance of the agreement or otherwise. 3. No Director / MD / Manager whose agreement is terminated / set aside shall, for a period of 5 years from the date of such order, without the leave of the Tribunal, be appointed, or act, as the Director / MD / Manager of the Company. Also, Tribunal shall not grant leave, 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. 4. Contravention of Point 3 above, is punishable with – (i) Imprisonment upto 6 Months, or (ii) Fine upto ` 5,00,000, or (iii) Both, for the following persons – (a) Any person who knowingly acts as Director / MD / Manager in contravention of Point 3 above, (b) Every Director of the Company, who is knowingly a party to such contravention. NCLT is empowered to make such order as it thinks fit, u/s 242. Hence, its order can also lead to alteration of a Company’s MOA / AOA. The consequences of such alteration are – 1. Alteration as made by Company: Such alteration shall have the same effect as if they had been duly made by the Company in accordance with the provisions of the Act, and the provisions shall apply accordingly to the MOA or AOA as so altered.

4. Alteration of MOA / AOA by Tribunal’s Order [S.242(5) to (8)]

2.

Company’s own alteration prohibited: The Company cannot further alter the MOA & AOA, in any manner which is inconsistent with the Tribunal order, except with the previous permission of Tribunal. Contravention of this is punishable as under – (a) Company: Fine Minimum `1 Lakh, Maximum ` 25 Lakhs. (b) Every Officer in Default: (i) Imprisonment upto 6 Months, (ii) Fine of Minimum ` 25,000, Maximum ` 1 Lakh, or (iii) Both.


Padhuka’s Latest Updates on Corporate and Allied Law – CA Final Aspect 3.

Description Filing with ROC: A Certified Copy of every order altering or giving permission to alter a Company’s MOA / AOA shall be filed by the Company with the ROC within 30 days from the date of the order. The ROC shall register the same.

LA.5.4 Class Action [Sec.245]

ip a

.c om

Class Action refers to the complaint made by Member(s) / Depositor(s) / or any class thereof. The provisions are as under – Aspect Description A.Members B.Depositors 1. Least of the following – 1. Least of the following – (a) Not less than 100 Members, or (a) Not less than 100 Depositors, or (b) Not less than prescribed % of the total Company number of its Members, or (b) Not less than 1. Eligible having Share prescribed % of the 2. Any Member(s) holding not less than Applicants Capital total number of prescribed % of the Issued Share Capital. [S.245(3)] Depositors, or Note: Members are eligible to apply only if all 2. Any Depositor(s) to whom moneys / calls due on their Shares have been paid. the Company owes Company not Not less than 1/5th of the Total Number of its prescribed % of the Total having Share Members Deposits of the Company. Capital

(a) to restrain the Company from committing an act which is ultra vires its MOA/AOA, (b) to restrain the Company from committing breach of any provision of its MOA/AOA, (c) to declare a Resolution altering the MOA/AOA of the Company as void, if the Resolution was passed by suppression of material facts or obtained by misstatement to the Members or Depositors, (d) to restrain the Company and its Directors from acting on such resolution, (e) to restrain the Company from doing an act which is contrary to COA 2013 or prevalent law, , (f) to restrain the Company from taking action contrary to any Resolution passed by the Members, (g) to claim Damages or Compensation or demand any other suitable action from or against – (i) the Company or its Directors for any fraudulent, unlawful or wrongful act or omission or conduct or any likely act or omission or conduct on its or their part, (ii) the Auditor including Audit Firm of the Company for any improper or misleading statement of particulars made in his Audit Report or for any fraudulent, unlawful or wrongful act or conduct, or (iii) any Expert / Advisor / Consultant / any other person, for any incorrect or misleading statement made to the Company or for any fraudulent, unlawful or wrongful act or conduct or any likely act or conduct on his part, (h) to seek any other remedy as the NCLT may deem fit. Note: The Audit Firm as well as each concerned Partner, shall be liable in relation to (g)(ii) above.

hr ig ur

3. Application to NCLT

If the Member(s) or Depositor(s) or any class of them, are of the opinion that the management or conduct of the affairs of the Company are being conducted in a manner prejudicial to the interests of – (i) the Company, or (ii) its Members or Depositors. Eligible Applicants can file an application before the NCLT, on behalf of the Members or Depositors, seeking all or any of the orders specified in Point 4 below.

uk r

2. Situation [S.245(2)]

w

w w

.s

4. Remedy sought [S.245(1)]

5. Factors considered by NCLT [S.245(4)]

(a) Whether the Member/Depositor is acting in good faith in making the application for seeking an order, (b) Any evidence before it as to the involvement of any person other than Directors or Officers of the Company on any of the matters provided in Sec.245(1)(a) to (f) given above, (c) Whether the cause of action is one which the Member Or depositor could pursue in his own right rather than through an order u/s 245, (d) Any evidence before it as to the views of the Members/ Depositors of the Company who have no personal interest, direct or indirect, in the matter being proceeded u/s 245, (e) Where the cause of action is an act or omission that is yet to occur, whether the act or omission could be, and in the circumstances would be likely to be– (i) authorised by the Company before it occurs, or (ii) ratified by the Company after it occurs, (f) Where the cause of action is an act or omission that has already occurred, whether the act or omission could be, and in the circumstances would be likely to be, ratified by the Company.



6. Admission of Application by NCLT [S.245(5)]

7. Effect of NCLT Order [S.245(6), (7)]

If any application filed before NCLT is found to be frivolous or vexatious, NCLT shall, for reasons to be recorded in writing – (a) reject the application, and (b) make an order that the applicant shall pay to the opposite party a specified cost, Maximum ` 1 Lakh.

ip a

8. Frivolous Application [S.245(8)]

Description If the application u/s 245 is admitted by the NCLT, then – (a) Public Notice shall be served on admission of the application to all the Members / Depositors of the Class in the prescribed manner. (b) All similar applications prevalent in any jurisdiction should be consolidated into a single application and the class Members / Depositors should be allowed to choose the Lead Applicant. If the Members / Depositors of the class are unable to come to a consensus, NCLT shall have the power to appoint a Lead Applicant, who shall be in charge of the proceedings from the Applicant's side. (c) Two Class Action applications for the same cause of action shall not be allowed. (d) The Cost or Expenses connected with the application for class action shall be defrayed by the Company or any other person responsible for any oppressive act. (a) NCLT Order shall be binding on the Company and all its Members, Depositors and Auditor including Audit Firm or Expert or Consultant or Advisor or any other person associated with the Company. (b) Non–Compliance with NCLT Order is punishable as under – • Company: Fine Minimum ` 5 Lakhs, Maximum ` 25 Lakhs. • Every Officer in Default: (i) Imprisonment upto 3 Years, and (ii) Fine of Minimum ` 25,000, Maximum ` 1 Lakh.

.c om

Aspect

uk r

9. Exclusion Nothing contained in this section shall apply to a Banking Company. [S.245(9)] Note: Representation [S.245(10)]: Subject to the compliance of Sec.245, an application may be filed or any other action may be taken u/s 245 by any person, group of persons or any association of persons representing the persons affected by any act or omission, specified in Sec.245(1).

hr ig ur

LA.5.5 Application of certain provisions to Proceedings u/s 241 / 245 [S.246]

w

w w

.s

The provisions of Sec.337 to 341 (both inclusive) shall apply mutatis mutandis, in relation to an application made to NCLT u/s 241 or 245. These provisions are summarised below – Aspect Description (a) Situation: 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 NCLT 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, 1. Frauds by (b) with intent to defraud Creditors of the Company or any other person, has made or caused to be Officers made any gift or transfer of, or charge on, or has caused or connived at the levying of any [Sec.337] execution 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 2 months before that date. (b) Punishment: (a) Imprisonment of Min.1 Yr, Max.3 Yrs, and (b) Fine Min. ` 1 Lakh, Max. ` 3 Lakh. 1. Situation: Where a Company is being wound up, if it is shown that proper books of account were not kept by the Company, throughout, for the shorter of the following periods – (a) 2 years immediately preceding the commencement of the winding up, or (b) the period between the Incorporation of the Company and the commencement of winding up.

2. Proper A/cs not kept [Sec.338]

2.

Punishment: (a) Imprisonment of Min.1 Yr, Max.3 Yrs, and (b) Fine Min. ` 1 Lakh, Max. ` 3 Lakh.

3.

Excuse: Officer of the Company can avoid punishment if 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.

4.

Explanation: It shall be deemed that proper books of account have not been kept – (a) if such books of account 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, have not been kept, and Nov 2016.21 ________________________________________________________________________________________________________________________ www.shrigurukripa.com


1.

Description (b) where the business of the Company has involved dealings in goods, statements of the annual stock takings 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 the Sellers thereof in sufficient detail to enable those goods and those Buyers and Sellers to be identified, have not been kept. Situation: If in the course of the winding up of a Company, it appears that any business of the Company has been carried on – (a) with intent to defraud Creditors of the Company or any other persons, or (b) for any fraudulent purpose. Application: The Official Liquidator/ Company Liquidator/ Any Creditor or Contributory of the Company, can apply to NCLT.

3.

Evidence: On the hearing of such application by NCLT, the Official Liquidator or the Company Liquidator, may himself give evidence or call witnesses.

4.

NCLT’s Powers: NCLT may, if it thinks it proper so to do, declare that any person, who is or has been a Director, Manager, or Officer of the Company or 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.

5.

Related Powers: NCLT may give further directions as it thinks proper, for the purpose of giving effect to that declaration and, in particular,– (a) 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, (b) make further order necessary for enforcing any charge imposed u/s 339.

6.

Other Punishments / Liabilities: (a) Where any business of a Company is carried on as per Point (1) above, every person who was knowingly a party to the carrying on of the business aforesaid, shall be liable for action u/s 447. (b) Sec.339 shall apply, notwithstanding that the person concerned may be punishable under any other law in respect of the matters on the ground of which the declaration is to be made.

7.

Meaning of Terms: (a) “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. (b) “Officer” includes any person in accordance with whose directions or instructions the Directors of the Company have been accustomed to act. Situation: If in the course of winding up of a Company, it appears that any person who has taken part in the promotion or formation of the Company, or any person, who is or has been a Director, Manager, Company 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.

w w

.s

hr ig ur

uk r

ip a

3. Fraudulent Conduct of Business [Sec.339]

.c om

2.

w

1.

4. Damages against delinquent Directors [Sec.340]

2.

Application: The Official Liquidator/ Company Liquidator/ Any Creditor or Contributory of the Company, can apply to NCLT.

3.

Time Period: Application shall be made within 5 years from the date of the winding up order, or of the first appointment of the Company Liquidator in the winding up, or of the misapplication, retainer, misfeasance or breach of trust, as the case may be, whichever is longer.

4.

NCLT’s Powers: NCLT may inquire into the conduct of the person, Director, Manager, Company Liquidator or Officer aforesaid, and order him – (a) to repay or restore the money or property or any part thereof respectively, with interest at a rate as NCLT considers just and proper, or (b) 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 NCLT considers just and proper.



Description Other Punishments: This section shall apply, notwithstanding that the matter is one for which the person concerned may be criminally liable. Where a Declaration u/s 339 or an Order u/s 340 is made in respect of a Firm or Body Corporate, NCLT shall also have power to make a Declaration u/s 339 / Order u/s 340, in respect of any person who was at the relevant time a Partner in that Firm or a Director of that Body Corporate. 5.

5. Firms/Body Corporate [Sec.341]

LA.6 Compounding of Offences [Sec.441] Compounding of Offences involves payment of a fine / penalty in lieu of prosecution. The provisions are –

6.

Compounding Order

7.

Order to file documents with ROC

8.

Intimation to ROC

9.

Effect of Compounding Order

.c om

Application

ip a

5.

(a) Tribunal (NCLT), or (b) Regional Director (RD) or any Officer authorized by Central Govt (AO), where the maximum amount of fine which may be imposed for such offence does not exceed ` 5,00,000. Application for compounding of offence shall be made to the ROC, who shall forward the same, together with his comments thereon, to the NCLT/RD/AO. (a) The Offence may be compounded on payment or credit to the Central Government, by the Company / Officer, of the sum specified by NCLT/RD/AO. (b) The sum so specified shall not exceed the maximum amount of the fine which may be imposed for the offence so compounded. (c) In specifying the sum required to be paid or credited for the compounding of an offence, the sum, if any, paid by way of Additional Fee u/s 403(2) shall be taken into account. (a) NCLT/RD/AO may also direct any Officer or other Employee of the Company to file or register with, or on payment of Fees and Additional Fee u/s 403, the Return, Account or other document (which was omitted to be filed), within a time specified in the order. (b) Non–compliance thereof is punishable with – (i) Imprisonment upto 6 months, or (ii) Fine upto ` 1,00,000, or (iii) Both. Where any offence is compounded u/s 441, an intimation thereof shall be given by the Company to the ROC within 7 days from the date of which the offence is so compounded. • Compounding before instituting prosecution: No prosecution shall be instituted in relation to such offence, by ROC or by any Shareholder or by any person authorised by the Central Government, against the Offender in relation to such offence. • Compounding after instituting prosecution: Such composition shall be brought to the notice of the Court, by the ROC, in writing. On such notice being given, the Company or its Officer shall be discharged, in relation to such offence. • Compounding is not permissible in respect of offence committed by a Company or its Officer within 3 years from the date on which a similar offence committed by it or him was compounded u/s 441. • Any second or subsequent offence committed after the expiry of 3 years from the date on which the offence was previously compounded, shall be deemed to be a first offence. (a) Second or Subsequent Offences within 3 years, as above. (b) If the investigation against the Company has been initiated or is pending under the Act, then compounding u/s 441 is not permissible. (c) An Offence punishable – (a) with Imprisonment only, or (b) with imprisonment and also with Fine, is not compoundable. (d) An Offence punishable – (a) with Imprisonment or Fine, or (b) with Imprisonment or Fine or Both, is compoundable, only with permission of the Special Court. [as per CrPC Procedure]

uk r

Authority

w

w w

4.

Either before or after the institution of any prosecution.

hr ig ur

2. 3.

Description Any Offence punishable under this Act, punishable with fine only can be compounded without permission of the Special Court. Company or any Officer thereof.

.s

1.

Aspect Nature of Offence Committed by Time period for compounding

10. Second or Subsequent Offences

11. Offences not compoundable



LA.7 Schedule V – Section II SECTION II: Remuneration Payable by Companies having no profit or Inadequate Profit without Central Government approval: Where in any financial year during the currency of tenure of a Managerial Person, a Company has no profits or its profits are inadequate, it may, without Central Government approval, pay remuneration to the Managerial Person not exceeding the limits under (A) and (B) given below – (A) BASED ON EFFECTIVE CAPITAL: Where the Effective Capital is

Remuneration Payable p.a. shall not exceed

.c om

Negative or less than ` 5 Crores ` 60 Lakhs ` 5 Crores and above but less than ` 100 Crores ` 84 Lakhs ` 100 Crores and above but less than ` 250 Crores ` 120 Lakhs ` 250 Crores and above ` 120 Lakhs + 0.01% of the Effective Capital in excess of ` 250 Crores Note: (a) Above limits shall be doubled if the resolution passed by the Shareholders is a Special Resolution. (b) For a period less than 1 year, the limits shall be pro–rated. (B) BASED ON KNOWLEDGE/ NO INTEREST IN CAPITAL, etc.: In case of a Managerial Person who is functioning in a Professional Capacity, no approval of Central Government is required, if such Managerial Person –

ip a

(a) is not having any interest in the Capital of – (i) the Company, or (ii) its Holding Company, or (iii) any of its Subsidiaries directly or indirectly or through any other Statutory Structures, and not having any, direct or indirect interest or related to the Directors or Promoters of the Company or its Holding Company or any of its Subsidiaries at any time during the last 2 years before or on or after the date of appointment, and

uk r

(b) possesses Graduate Level Qualification, with expertise and specialised knowledge in the field in which the Company operates.

hr ig ur

Note: Any Employee of a Company holding Shares of the Company not exceeding 0.5% of its Paid Up Share Capital under any scheme formulated for allotment of Shares to such Employees including ESOP or by way of qualification shall be deemed to be a person not having any interest in the Capital of the Company. The limits specified under (A) and (B) shall apply, if –

Approval by Board / Committee: Payment of Remuneration is approved by a resolution passed by the Board and, in the case of a Company covered u/s 178(1) also by the Nomination and Remuneration Committee.

2.

No default in Debts: The Company has not made any default in repayment of any of its Debts (including Public Deposits) or Debentures or interest payable thereon for a continuous period of 30 days in the preceding financial year before the date of appointment of such Managerial Person. [Note: In case of a default, the Company obtains prior approval from Secured Creditors for the proposed Remuneration and the fact of such prior approval having been obtained is mentioned in the Explanatory Statement to the Notice convening the General Meeting.]

3.

Special Resolution: A Special Resolution has been passed at the General Meeting of the Company for payment of remuneration for a period not exceeding 3 years.

4.

Notice: A Statement along with a Notice calling the General Meeting referred in Point 3 above, is given to the Shareholders containing – I. General Information, II. Information about the Appointee, III. Other Information, IV. Disclosures.

w

w w

.s

1.

LA.8 Unpaid Dividend, Investor Education & Protection Fund [S.124,125] LA.8.1 Unpaid Dividend Account [Sec.124] Dividends should be paid within 30 days of declaration. The procedure in relation to Unpaid / Unclaimed Dividend is laid down in Sec.124. Aspect Description (a) Where a Dividend has been declared by a Company but has not been paid / claimed within 30 days from the date of the declaration, to any Shareholder entitled to the payment of the Dividend, 1. Transfer the Company shall transfer the Total Amount of Dividend which remains unpaid /unclaimed to a to Special Account. Special (b) Transfer to the Special A/c shall be made within 7 days from the date of expiry of the said 30 days. Account (c) The Special Account shall be opened by the Company in any Scheduled Bank, and shall be called the Unpaid Dividend Account. Nov 2016.24 ________________________________________________________________________________________________________________________ www.shrigurukripa.com


2. Interest

3. Notice in Website 4. Claim

7. Contra– vention

hr ig ur

6. State– ment to IEPFA

uk r

ip a

5. Transfer to IEPF

Description (a) In case of default in transferring the Total Amount or any part thereof to the Unpaid Dividend Account, the Company shall pay interest at 12% p,a. on the amount not so transferred. (b) Interest shall be computed from the date of such default. (c) This Interest shall enure to the benefit of the Members of the Company in proportion to the amount remaining unpaid to them. Within 90 days of making the transfer to the Unpaid Dividend Account, the Company shall – (a) prepare a Statement containing – (i) the Names, (ii) their last known Addresses, and (iii) the Unpaid Dividend to be paid to each person, and (b) place it on – (i) the Company’s Website, if any, and (ii) on any other website approved by Central Govt. The form, manner and other particulars of that Statement is as prescribed under Rules. Any person claiming to be entitled to any money transferred as above to the Unpaid Dividend Account of the Company may apply to the Company for payment of the money claimed. (a) Situation: Money transferred to the Unpaid Dividend Account of a Company u/s 124 which remains unpaid / unclaimed for a period of 7 years from the date of such transfer. (b) Transfer of Money: Such money, along with interest accrued ,if any, shall be transferred by the Company, to the Investor Education and Protection Fund (IEPF) established u/s 125(1). (c) Transfer of Shares: • All Shares in respect of which Dividend has not been paid / claimed for 7 consecutive years or more shall be transferred by the Company in the name of IEPF, along with a Statement containing the prescribed details. [See Note below] • Any Claimant of Shares transferred above shall be entitled to claim the transfer of shares from IEPF, in accordance with prescribed procedure and on submission of prescribed documents. • Note: In case any Dividend is paid or claimed for any year during the said period of 7 consecutive years, the Share shall not be transferred to IEPF. (a) The Company shall send a Statement of the details of such transfer, in Form DIV.5, to the Authority which administers the IEPF. (b) IEPF Authority shall issue a receipt to the Company as evidence of such transfer. Non–compliance with any of the above requirements is punishable with Fine as under – (a) Company: Fine – Minimum ` 5 Lakh, Maximum ` 25 Lakhs. (b) Every Officer in default: Fine – Minimum ` 1 Lakh, Maximum ` 5 Lakhs).

.c om

Aspect

LA.8.2 Investor Education and Protection Fund [Sec.125]

.s

Description The Central Government shall establish a Fund to be called the Investor Education and Protection Fund (referred as IEPF). (a) Amount given by Central Government as Grants after due appropriation made by Parliament by law in this behalf for being utilised for the purposes of IEPF, (b) Donations given to the Fund by the Central Government, State Governments, Companies or any other Institution for the purposes of IEPF, (c) Amount in the Unpaid Dividend Account of Companies transferred to the Fund u/s 124(5), (d) Amount in the General Revenue Account of the Central Government which had been transferred to that account u/s 205A(5) of COA 1956, (e) Amount lying in the Investor Education and Protection Fund u/s 205C of COA 1956, (f) Interest or Other Income received out of Investments made from the Fund, (g) Amount received u/s 38(4) – towards Punishment for Personation for acquisition of Securities, (h) Application Money received by Companies for allotment of any Securities and due for Refund, (i) Matured Deposits with Companies other than Banking Companies, (j) Matured Debentures with Companies, (k) Interest Accrued on the amounts referred to in Clauses (h) to (j), (l) Sale Proceeds of Fractional Shares arising out of issuance of Bonus Shares, Merger and Amalgamation for 7 or more years, (m) Redemption Amount of Preference Shares remaining unpaid or unclaimed for 7 or more years, and (n) Other Prescribed Amounts. Note: Amounts in (h) to (j) above shall form part of the Fund only if it has remained unclaimed and unpaid for 7 years from the date it became due for payment.

w

w w

Aspect 1. Consti– tution

2. Credits to IEPF



3. Usage: The Fund shall be utilized as per Rules, for –

4. Claim

Description (a) Refund in respect of Unclaimed Dividends, Matured Deposits, Matured Debentures, the Application Money due for Refund and Interest thereon, (b) Promotion of Investors' Education, Awareness and Protection, (c) Distribution of any disgorged amount among eligible and identifiable applicants for Shares or Debentures, Shareholders, Debenture–holders or Depositors who have suffered losses due to wrong actions by any person, as per the orders made by the Court which had ordered disgorgement, (d) Reimbursement of Legal Expenses incurred in pursuing Class Action Suits u/s 37 and 245 by Members, Debenture–holders or Depositors as may be sanctioned by NCLT, and (e) Any other purpose incidental thereto. Note: Disgorged Amount refers to the amount received through disgorgement or disposal of Securities. Any person claiming to be entitled to the amount referred above [i.e. Credits to the Fund] may apply to the IEPF Authority for the payment of the money claimed.

.c om

Aspect

LA.8.3 Investor Education and Protection Fund Authority [Sec.125] Aspect

3. Power to spend 4. Accounts 5. Audit

.s

6. Report

hr ig ur

2. Rules

uk r

ip a

1. Consti– tution

Description (a) The Central Government shall constitute an Authority [IEPFA] for administration of IEPF. (b) IEPFA shall consist of a Chairperson and other Members, not exceeding 7, and a Chief Executive Officer, as the Central Government may appoint. (a) The manner of – (i) administration of IEPF, (ii) appointment of Chairperson, Members and Chief Executive Officer, (iii) holding of Meetings of IEPFA, shall be in accordance with Rules. (b) The Central Government may provide to IEPFA, such Offices, Officers, Employees and other resources in accordance with Rules. (c) IEPFA Rules, 2016 have been notified vide GSR 854(E) and 853(E) both dated 05.09.2016. IEPFA is empowered to spend money out of the Fund for carrying out the objects specified in Sec.125(3). [Note: Refer “Usage” given above.] IEPFA shall administer the Fund (IEPF) and maintain separate accounts and other relevant records in relation to the Fund, in the form prescribed after consultation with the C&AG. The accounts of IEPF shall be audited by the C&AG at specified intervals. Such audited accounts together with the Audit Report thereon shall be forwarded annually by IEPFA to the Central Government. (a) For each financial year, IEPFA shall prepare its Annual Report giving a full account of its activities during the financial year and forward a copy thereof to the Central Government. (b) The Central Government shall cause the Annual Report and the Audit Report given by the C&AG to be laid before each House of Parliament.

w w

2. Foreign Exchange Management Act, 1999

Notification

w

Notfn No.FEMA.14(R)/2016– 1. RB/GSR No.480(E), dated 2–5–2016

NotfnNo.GSR 869(E) 2. [F.No. 1/31/ EM– 2015], dated 8–9–2016

3.

Circular No.68 [(1)/23 (R)], dated 12–5–2016

Description Manner of Receipt and Payment –Page 18.26, Para 18.4.5: 1. The words “all eligible Current Account transactions” in Point 1 Table is substituted as “export / import of all eligible goods and services”. 2. Note below Point 3 to be read as “In addition to Point (a) and (c) above”, instead of “In addition to (a) and (b) above”. Notfn No. GSR 389(E) [F.No.FEMA 5(R)/2016–RB], dtd 01.04.2016 provides the FEM (Deposit) Regulations, 2016. Now amended for NRE A/c: –

Loans outside India – AD’s may allow their Branches/Correspondents outside India to grant Loans to or in favour of Non–Resident Depositor or to Third Parties at the request of Depositor for bonafide purpose, against the security of funds held in the NRE a/cs in India and also agree for remittance of the funds from India, if necessary, for liquidation of the outstanding. This Circular clarifies procedural aspects under FEM (Export of Goods and Services) Regulations, 2015 as amended by Notfn No. GSR 19(E) [F.No.FEMA. 23(R)/2015–RB] dated 12.05.2016.

Page

18.26

18.30

18.24



18.28

18.30

18.50

18.7

Schedule III – Transactions requiring RBI Approval: Individuals: Individuals can avail of Forex facility for the following purposes within the limit of USD 2,50,000 only. Any additional remittance in excess of USD 2,50,000for the following purposes shall require prior approval of RBI: (a) Private Visits to any country (except Nepal and Bhutan), (b) Gift or Donation, (c) Going abroad for employment, (d) Emigration, (e) Maintenance of close relatives abroad, (f) Travel for business, or attending a conference or specialised training or for meeting expenses for meeting medical expenses, or check–up abroad, or for accompanying as Attendant to a patient going abroad for medical treatment / check–up. (g) Expenses in connection with medical treatment abroad, (h) Studies abroad, (i) Any other current account transaction:

w

w w

.s

1.

Schedule III of Current A/c Transactions Rules, 2000

Page

hr ig ur

7.

.c om

NotfnNo.FEMA 365/2016– 6. RB/GSR 571(E), dated 1– 6–2016

ip a

NotfnNo.FEMA 5. 10(R)/(1)/2016–RB/GSR 570(E), dated 1–6–2016

Description This Circular clarifies procedural aspects for Establishment of Branch Office (BO)/Liaison Office (LO)/Project Office (PO) In Indian By Foreign Entities. Amendments in FEM (Foreign Currency Accounts by a Person Resident in India) Regulations, 2016: Additional Points are – 1. IRDA registered Insurance/Reinsurance Cos. may open/hold/maintain a Foreign Currency A/c with a Bank outside India for the purpose of meeting the expenditure incidental to the Insurance / Reinsurance Business carried on by them and for that purpose, credit to such account the Insurance/Reinsurance Premia received by them outside India.. 2. An Indian Startup or any other Entity notified by RBI in consultation with the Central Government, having an Overseas Subsidiary, may open a Foreign Currency A/s with a Bank outside India for the purpose of crediting to it Forex Earnings out of Exports/Sales made by the said Entity and/or the Receivables, arising out of exports/sales, of its Overseas Subsidiary. The Balances in the account shall be repatriated to India as per FEM (Export of Goods & Services) Regulations, 2015. FEM (Foreign Exchange Derivative Contracts) Regulations, 2016 – Additional Points / Amendments: A Person resident in India may enter into – 1. aForex Derivative Contract in accordance with Schedule I, to hedge an exposure to risk or otherwise, in respect of a transaction permissible under the Act/ Rules / Regulations / Directions / Orders. 2. Cross–Currency Option Contract (not involving Rupee as one of the currencies) and/or Foreign Currency–Rupee Option Contract Authorised Dealer against an underlying Forex Exposure in respect of a transaction for which sale and/or purchase of Foreign Currency is permitted under the Act/ Rules/Regulations / Directions / Orders, subject to RBI’s terms & conditions. FEM (Current Account Transactions) Rules, 2000 – Transactions requiring RBI approval – Page 18.6 – Para 18.2.4 – Point C – amended as given below.

uk r

Notification Circular No.69 [(1)/22 4. (R)], dated 12–5–2016

Notes: • For (d), (g) and (h), the Individual may avail of exchange facility for an amount in excess of the limit prescribed under the Liberalised Remittance Scheme, if it is so required by a country of Emigration, Medical Institute offering treatment or the University, respectively. •

If an Individual remits any amount under the Liberalised Remittance Scheme in a financial year, then the applicable limit for such individual would be reduced from USD 250,000 by the amount so remitted.

•

For a person who is resident but not permanently resident in India and— (a) is a citizen of a foreign State other than Pakistan, or (b) is a citizen of India, who is on deputation to the Office or Branch of a Foreign Company or Subsidiary or Joint Venture in India of such Foreign Company, may make remittance upto his Net Salary (after deduction of Taxes, Contribution to Provident Fund and other deductions). Explanation: For this purpose, a Person resident in India on account of his employment or


Padhuka’s Latest Updates on Corporate and Allied Law – CA Final deputation of a specified duration (irrespective of length thereof) or for a specific job or assignments, the duration of which does not exceed 3 years, is a resident but not permanently resident. •

A Person other than an individual may also avail of foreign exchange facility, mutatis mutandis, within the limit prescribed under the Liberalised Remittance Scheme for the purposes mentioned hereinabove.

Persons other than Individual: The following remittances by Persons other than Individuals shall require prior approval of RBI – (a) Donations exceeding 1% of their Foreign Exchange Earnings during the previous 3 financial years or USD 50,00,000, whichever is less, for – • Creation of Chairs in reputed Educational Institutes, • Contribution to Funds (not being an Investment Fund) promoted by Educational Institutes, and • Contribution to a Technical Institution or Body or Association in the field of activity of the Donor Company. (b) Commission, per transaction, to Agents abroad for sale of Residential Flats or Commercial Plots in India exceeding USD 25,000 or 5% of the inward remittance whichever is more. (c) Remittances exceeding USD 10,000,000 per Project for any Consultancy Services in respect of Infrastructure projects and USD 1,000,000 per Project, for other Consultancy Services procured from outside India. (d) Remittances exceeding 5% of investment brought into India or USD 100,000 whichever is higher, by an Entity in India by way of reimbursement of Pre–Incorporation Expenses.

3.

Procedure: Procedure for drawal or remit of any Foreign Exchange under Schedule III shall be the same as applicable for remitting any amount under the Liberalised Remittance Scheme.

ip a

.c om

2.

3. SEBI (ICDR) Regulations, 2009 [SEBI/LAD–NRO / GN/ 2016–17/003 dated 25.05.2016]: w.r.t. WILFUL DEFAULTER – New Points are – Meaning: Wilful Defaulter means an Issuer who is categorized as a Wilful Defaulter by any Bank or Financial Institution or Consortium thereof, as per RBI Guidelines. It also includes an Issuer whose Director or Promoter is categorized as such.

2.

Page 22.2 – Para 22.2.2 – Point 2 in Table shall be omitted.

3.

Wilful Defaulter not eligible for making Issue: (a) Public Issue of Equity Securities cannot be made, if the Issuer or any of its Promoters or Directors is a Wilful Defaulter. (b) Public Issue of Convertible Debt Instruments cannot be made if – (i) the Issuer or any of its Promoters or Directors is a Wilful Defaulter,or (ii) it is in default of payment of interest or repayment of principal amount of Debt Instruments issued by it to the public, if any, for a period of more than 6 months.

4.

Rights Issue: (a) An Issuer making a Rights Issue of Specified Securities, shall make disclosures as per Schedule VIII Part G, in the Offer Document and Abridged Letter of Offer, if the Issuer or any of its Promoters or Directors is a Wilful Defaulter. (b) In the above case, the Promoters/ Promoter Group of the Issuer, shall not renounce their rights except to the extent of renunciation within the Promoter Group.

5.

Other Situations: Disclosures as per Schedule VIII Part G are also required in the following cases – (a) Preferential Issues [Page 22.40 – Para 22.7.5 – Regulation 73] (b) Qualified Institutions Placement [QIP] [Page 22.42 – Para 22.8 – Regulation 84]

6.

Specified Disclosures: If the Issuer or any of its Promoters or Directors is a Wilful Defaulter, the Disclosures required as per Schedule VIII Part G are– (a) Name of the Bank declaring the Entity as a Wilful Defaulter, (b) Year in which the Entity is declared as a Wilful Defaulter, (c) Outstanding Amount when the Entity is declared as a Wilful Defaulter, (d) Name of the Party declared as a Wilful Defaulter, (e) Steps taken, if any, for the removal from the List of Wilful Defaulters, (f) Other Disclosures, as deemed fit by the Issuer in order to enable Investors to take informed decisions, (g) Any other disclosure specified by SEBI.

w

w w

.s

hr ig ur

uk r

1.


Padhuka’s Latest Updates on Corporate and Allied Law – CA Final Note: • All above Disclosures shall be made in a separate Chapter or Section distinctly identifiable in the Index / Table of Contents. • The fact that the Issuer or any of its Promoters or Directors is a Wilful Defaulter shall be disclosed prominently on the Cover Page with suitable cross–referencing to the pages.

4. Banking Regulation Act, 1949

w

w w

.s

hr ig ur

uk r

ip a

.c om

Certain Amendments in Banking Regulation Act [vide Banking Laws (Amendment) Act, 2013] are summarized below – Sec. Description 1. Share Capital of Banking Cos. shall consist of – (a) Equity Shares only, or (b) Equity Shares & Preference Shares. 2. Issue of Preference Shares shall be as per RBI Guidelines only. 12 3. Holder of Preference Shares is not eligible to exercise Voting Rights as per Sec.87(2)(b) of COA 1956. 1. Prior Approval of RBI is required for acquisition of Shares or Voting Rights of 5% or more in a Banking Co. 2. Such Shares or Voting Rights may be acquired / agreed to be acquired, directly or indirectly, by the Person, or his Relative, or Associate Enterprise, or person acting in concert with the Person. 12B 3. RBI may grant approval if – (a) in public interest, or (b) interest of Banking Policy, or (c) preventing the affairs being conducted in a detrimental or prejudicial manner to Banking Co’s interests, or (d) in line with emerging trends in Banking and International Best Practices, or (e) in the interest of Banking & Financial System in India. See Page 23.5 – Para 23.2.2 – 2nd Item – Sec.13 – Limit on Commission / Brokerage: 13 The words “Paid Up Value of the Said Shares” is replaced by “Price at which the said Shares are issued”. Price at which Shares are issued shall include the amount or value of Premium on such Shares. See Page 23.6 – Para 23.2.4 –Sec.18 – Cash Reserve Ratio: 1. Non–Scheduled Bank to maintain CRR in India “on a daily basis”.[Note: Words in Italics introduced now.] 2. CRR shall be as notified by RBI, having regard to the needs of securing the monetary stability in the Country. 18 3. Penal Interest at 3% above Bank Rate is payable by the Defaulting Bank, to the RBI, for the day on which CRR falls below the stipulated minimum. If the shortfall continues, the Penal Interest shall be increased to 5% above Bank Rate. [Note: RBI can waive / exempt the provisions as to Penal Interest, in certain cases.] See Page 23.7 – Para 23.2.7 – Sec.24 – SLR: Every Scheduled Commercial Bank, Local Area Bank, Primary Co– Operative Bank, State Co–Operative Bank and Central Co–Operative Bank shall maintain in India SLR Assets, the value 24 of which shall not, at the close of business on any day, be less than – [vide RBI Circular dated 13.10.2016] 20.75% from October 1, 2016, and 20.50% from January 7, 2017. New Section 26A introduced on Depositor Education and Awareness Fund (referred as Fund) 1. Credit Amounts in accounts which are inoperative for 10 years, or Deposits unclaimed for more than 10 years, shall be transferred to the Fund within 3 months after the period of 10 years above. 26A 2. If a Depositor/ Claimant claims the money from the Banking Company, such Company shall pay the same, along with interest as per RBI Guidelines. The Banking Company can claim refund from the Fund in such case. 3. Fund shall be utilized for Promotion of Depositors’ Interests, and other related specified purposes. New Section 26A introduced: In respect of Associate Enterprises, RBI can – 1. direct a Banking Company to furnish Statements / Information relating to the business or affairs of any Associate 29A Enterprise of the Banking Company. 2. inspect an Associate Enterprise and its Books of Account, by RBI and other Regulatory Authority Officials. New Section 36ACA introduced: RBI can supersede the BOD of a Banking Company as under – 1. Situations: (a) in public interest, or (b) preventing the affairs of Banking Co being conducted in a detrimental 36 or prejudicial manner to Banking Co’s or Depositors’ interests, or (c) for securing the proper management of the Banking Co. ACA 2. Period: Generally upto 6 months, but extendable such that Total Period not to exceed 12 months. 3. Administrator: RBI shall appoint an Administrator for such Banking Co. in consultation with Central Govt.

5. Prevention of Money Laundering Act, 2002 Amendments in PMLA [vide Finance Act, 2016, w.e.f. 01.06.2016]: 1. The Appellate Tribunal under Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976 shall be the Appellate Tribunal under PMLA, for hearing appeals against orders of Adjudicating /Others Authorities. 2. Sec.25 of PMLA is substituted to give effect to the above. Consequently, Sec.27, 28, 30, 31, 32, 33, 34, 73(2)(s) and 73(2)(t) of PMLA shall be omitted. So, Page 25.10 – Para 25.4.1 and Para 25.4.2 shall be omitted. Nov 2016.29 ________________________________________________________________________________________________________________________ www.shrigurukripa.com


Padhuka’s Publications For CA Inter

uk r

ip a

.c om

Ready Referencer on Accounting – Group I Law, Ethics and Communication – A Referencer Students' Handbook on Cost Accounting and Financial Management Cost Accounting and Financial Management – A Practical Guide Handbook on Taxation Question Bank for Taxation Students' Handbook on Advanced Accounting – Group II A Students' Handbook on Auditing and Assurance Auditing and Assurance – A Ready Referencer Students' Handbook on Information Technology and Strategic Management Question Bank – Information Technology and Strategic Management Students' Referencer on Standards on Auditing

hr ig ur

• • • • • • • • • • • •

For CA CPT

w w

.s

Basics of Accounting Mercantile Law Guide Basics of General Economics Practical Guide on Quantitative Aptitude MCQ Bank for CA CPT Complete Guide for CA CPT

w

• • • • • •

For Attractive Discounts with “Special Combo Offers” *, visit

www.shrigurukripa.com * Subject to availability of Offer at the time of order. Terms and Conditions apply.



Padhuka’s Publications For CA Final

uk r

ip a

.c om

Students' Guide on Financial Reporting Students' Referencer on Strategic Financial Management Students' Handbook on Advanced Auditing Easy Guide to Advanced Auditing Students' Handbook on Corporate and Allied Law A Ready Referencer on Advanced Management Accounting Students' Handbook on Information Systems Control and Audit Question Bank ISCA Direct Taxes – A Ready Referencer Practical Guide on Direct Taxes Question Bank Direct Taxes Students' Referencer on Indirect Taxes Students' Referencer on Accounting Standards Students' Referencer on Standards on Auditing

For Professionals

w w

.s

Handbook on Direct Taxes – Compendium for Users Practical Guide on TDS & TCS Personal Income Tax – A Simplified Approach A Professional Guide to Income Computation & Disclosure Standards Professional Guide to Tax Audit Professional Manual on Accounting Standards Professional Guide to CARO 2016 Audit Referencer

w

• • • • • • • •

hr ig ur

• • • • • • • • • • • • • •

For Attractive Discounts with “Special Combo Offers” *, visit

www.shrigurukripa.com * Subject to availability of Offer at the time of order. Terms and Conditions apply.



w

w w

.s

hr ig ur

uk r

ip a

.c om

STUDENTS’ NOTES
