Directors responsibilities Companies Act, 2013

Duties and responsibilities of the Directors of a company, particularly the public limited companies, have been explicitly and lucidly stipulated in the new Indian Companies Act, 2013, which were rather obscure in the earlier Companies Act, 1956. These duties and liabilities of both the general Directors and the Independent Directors, are described in the Section 166, and the Schedule IV of the Companies Act, 2013. Discover these vital duties, for highly efficient and impeccable corporate management and governance.

Stipulation and elucidation of the duties and responsibilities of the directors of a company, especially the public limited companies, are welcome and great contribution of the new company law of India, the Companies Act, 2013, to better corporate governance and security, and the best possible growth and prosperity in the corporate world of India. The former company law of India, the Companies Act 1956, was disgustingly deficient in this respect. The new Companies Act, 2013 can be seen as offering a landmark piece of legislation in this regard, which duly and explicitly clarifies, redefines, and enlarges the ambit of duties and responsibilities of the directors. 

These newly introduced provisions by Companies Act, 2013 regarding the duties and responsibilities of the directors, including the independent directors, not only provide greater certainty to the directors regarding their conducts and responsibilities, and thus, ensuring better and impeccable corporate management and governance; but also enable and empower the beneficiaries, regulators, and the courts, to judge, regulate, and control the activities and obligations of the directors more objectively and effectively. Ours this well-drafted web-article offers very useful and fertile information exclusively about these new provisions of the Indian Companies Act 2013, connected with the roles, duties, and responsibilities of the directors and independent directors of public limited companies.

This prudent legislation of the Companies Act, 2013 over the duties and liabilities of the directors, is further supported and supplemented by the revised corporate governance norms (Revised and New Clause 49 of the Listing Agreement) of SEBI [the Securities and Exchange Board of India], in order to bring the SEBI’s corporate governance norms in connection with the listed companies, in close harmony and consistency with the provisions of the Companies Act, 2013. 

While the several provisions of the Companies Act, 2013 related with duties of directors have been made effective from April 01, 2014; the revised SEBI’s norms for corporate governance are likely to be in force from October 01, 2014. 

Here, it may also be briefly just mentioned that the Directors are regarded as being the Key Managerial Persons of a company, with special importance to the listed companies. They can hold multiple high and responsible positions in the companies, such as the Managing Director, Manager, Whole Time Director, or an Independent Director. Thus, efficient, flawless, and rather progressive management of a company, and the desired growth and profitability of its businesses, are certainly largely dependent on the competence and trustworthiness of its directors. By the way, a Director means a Director appointed to the Board of a company; and, the Board of a company represents the collective body of its directors. 

Duties of Directors Under the New Indian  Companies Act, 13

The duties and responsibilities of directors stipulated by the Indian Companies Act 2013, can broadly be classified into the following two categories: --- 

[i] The duties and liabilities which encourage and promote the sincerest investment of the best efforts of directors in the efficient and prudent corporate management, in providing elegant and swift resolutions of various business-related issues including those which are raised through “red flags”, and in taking fully mature and wise decisions to avert unnecessary risks to the company. 

[ii] Fiduciary duties which ensure and secure that the directors of companies always keep the interests of the company and its stakeholders, ahead and above their own personal interests. 

The following duties and liabilities have been imposed on the directors of companies, by the Indian Companies Act of 2013, under its Section 166: ---

• Section 166(1): A director of a company shall act in accordance with the Articles of Association (AOA) of the company.

• Section 166(2): A director of the company shall act in good faith, in order to promote the objects of the company, for the benefits of the company as a whole, and in the best interests of the stakeholders of the company.

• Section 166(3): A director of a company shall exercise his duties with due and reasonable care, skill and diligence and shall exercise independent judgment.

• Section 166(4): A director of a company shall not involve in a situation in which he may have a direct or indirect interest that conflicts, or possibly may conflict, with the interest of the company.

• Section 166(5): A director of a company shall not achieve or attempt to achieve any undue gain or advantage either to himself or to his relatives, partners, or associates and if such director is found guilty of making any undue gain, he shall be liable to pay an amount equal to that gain to the company.

• Section 166(6): A director of a company shall not assign his office and any assignment so made shall be void.

• Section 166(7): If a director of the company contravenes the provisions of this section such director shall be punishable with fine which shall not be less than one Lakh Rupees but which may extend to five Lakh Rupees.

Independent Directors

The liability regime of the CA-2013 not only imposes the above-mentioned duties and responsibilities on the directors of Indian companies, but also advocates for independence and equitableness of the board of a company, especially a public limited company. Consequently, the roles, duties, and responsibilities of the Independent Directors have also been stipulated by the new Indian Companies Act of 2013. An Independent Director is that member of the board of a company, who does not possess any financial relationship with the company (except the sitting fees), nor can own shares in the company. The earlier Indian Companies Act of 1956 had no explicit provisions for the independent directors, and only the Old Clause 49 of the Listing Agreement of SEBI contained prescriptions for induction of independent directors to the listed companies. 

The new Indian Companies Act of 2013 dictates that every listed company must contain at least one-third of the total magnitude of its directors, as the independent directors; and it also empowers the Government of India to include other categories of companies within the scope of this provision or requirement (Section 149 of the CA-2013). Public limited companies composited as per the former CA-1956, are granted a transition period of one year for making strict compliance with this mandatory provision. Again, the independent directors are not permitted to hold office for more than two consecutive terms of five-year periods. 

In the new regime, the roles and duties of the independent directors attained significant expansion, and many new other areas have been prudently covered. Broadly, they are intelligently assigned the highly responsible role of the arbiters among various constituencies within the corporation. Hence, the new provisions for the independent directors of the limited companies are certainly very constructive for transparent and sound corporate governance, and are hugely beneficial to the company and its all shareholders. Some of the most significant functions, duties, and liabilities of the independent directors, are the following (as per the Schedule IV of the CA-2013): ---

• To assist in forwarding equitable and independent judgment to the board

• To secure and promote the interests of all stakeholders of the concerned company, particularly of the minority shareholders

• To conciliate and balance the conflicting interests of the stakeholders

• To attend actively and constructively most of the board and committee meetings

• To pay proper and adequate attention to Related Party Transactions (RPTs)

• To report concerns honestly and impartially about any unethical behavior, violation of the code of conduct, or any suspected fraud in the company 

Conclusion

Thus, the new Indian Companies Act of 2013 is certainly a very innovative and landmark legislation in respect of the duties and responsibilities of the directors (of companies) also. Both broad categories of directors, namely, the directors having pecuniary relationship with the company, and the independent directors, have been properly considered under this mature legislation for directors. It is quite obvious from above illustrations that the CA-2013 sincerely seeks to make the corporate management and governance in India rather efficient, fully accountable, transparent, and maximally beneficial to all stakeholders and related professionals, through this intelligent legislation over duties and responsibilities of directors in Indian companies.

AUTHOR: Hemant Goyal & Sandhya Aggarwal

Source: http://www.hg.org/article.asp?id=33097

Dis-honour of Cheque cases can be filed only to the Court within whose local jurisdiction, the offence was Committed; ie, where the cheque is dishonoured by the bank on which it is drawn. Bhaskaran Vs Balan (1999) which allowed Five territorial Jurisdictions overruled

A three Judge Bench of the Supreme Court finally held that  a Complaint of Dis-honour of Cheque can be filed only  to  the  Court  within  whose  local jurisdiction the offence was committed, which  in  the  present  context  is where the cheque is dishonoured by the bank on which it is drawn. The Court clarified that the Complainant  is  statutorily  bound  to comply with Section 177 etc. of the CrPC and therefore the  place  or  situs where the Section 138 Complaint is to be filed is not of his choosing. The Supreme Court in Dashrath Rupsingh Rathod Vs. State of Maharashtra & Anr. Overruled the two Judge Bench Judgment in K. Bhaskaran v. Sankaran Vaidhyan  Balan  (1999)  7 SCC 510 wherein  it was held that “the offence under Section 138 of the Act can be completed only with the concatenation of a number of acts. Following are the acts which are components of the said offence : (1) Drawing of the cheque, (2) Presentation of the cheque to the bank, (3) Returning the cheque unpaid by the drawee bank, (4) Giving notice in writing to the drawer of the cheque demanding payment of the cheque amount, (5) failure of the drawer to make payment within 15 days of the receipt of the notice”.” if the five different acts were done in five different localities any one of the courts exercising jurisdiction in one of the five local areas can become the place of trial for the offence under Section 138 of the Act. In other words, the complainant can choose any one of those courts having jurisdiction over any one of the local areas within the territorial limits of which any one of those five acts was done.” The Court accepted the view of another two Judge Bench Judgment in Harman  Electronics  Pvt.Ltd. v. National Panasonic India Pvt. Ltd. (2009) 1  SCC  720. “It is one thing to say that sending of a notice is one of the ingredients for maintaining the complaint but it is another thing to say that dishonour of a cheque by itself constitutes an offence. For the purpose of proving its case that the accused had committed an offence under Section 138 of the Negotiable Instruments Act, the ingredients thereof are required to be  proved. What would constitute an offence is stated in the main provision. The proviso appended thereto, however, imposes certain further conditions which are required to be fulfilled before cognizance of the offence can be taken. If the ingredients for constitution of the offence laid down in the provisos (a), (b) and (c) appended to Section 138 of the Negotiable Instruments Act intended to be applied in favour of the accused, there cannot be any doubt that receipt of a notice would ultimately give rise to the cause of action for filing a complaint. As it is only on receipt of the notice the accused at his own peril may refuse to pay the amount. Clauses (b) and (c) of the proviso to Section 138 therefore must be read together. Issuance of notice would not by itself give rise to a cause of action but communication of the notice would.”.

Justice Vikramjit Sen who wrote the main Judgment held that “We  respectfully agree  with  this  statement  of  law  and  underscore  that   in   criminal jurisprudence there is  a  discernibly  demarcated  difference  between  the commission of an offence and its  cognizance  leading  to  prosecution.  The

Harman  approach  is  significant  and  sounds  a  discordant  note  to  the Bhaskaran ratio.  Harman also highlights the reality  that  Section  138  of the NI Act is being rampantly misused so  far  as  territorial  jurisdiction for trial of the Complaint is concerned.  With the passage of time  equities have therefore transferred from one end of the pendulum to  the  other.   It is now not uncommon for the Courts to encounter the issuance of a notice  in compliance with clause (b) of the proviso to Section 138 of the NI Act  from a situs which bears no connection with the Accused or with any facet of  the transaction between the parties, leave aside the place where  the  dishonour of the cheque has taken place.  This is also the  position  as  regards  the presentation of the cheque, dishonour  of  which  is  then  pleaded  as  the territorial platform of the Complaint under  Section  138  of  the  NI  Act.

Harman, in fact,  duly  heeds  the  absurd  and  stressful  situation,  fast becoming common-place where several cheques signed by the  same  drawer  are presented  for  encashment  and  requisite  notices  of  demand   are   also despatched from different places.  It appears to us that justifiably  so  at that time, the conclusion in Bhaskaran was influenced in  large  measure  by curial compassion towards the unpaid payee/holder, whereas with the  passage of two decades  the  manipulative  abuse  of  territorial  jurisdiction  has become a recurring and piquant factor.  The liberal  approach  preferred  in Bhaskaran now calls for a stricter interpretation of the statute,  precisely because of its  misemployment  so  far  as  choice  of  place  of  suing  is concerned.  These are the circumstances which have propelled us to  minutely consider the decisions rendered by two-Judge Benches of this Court.

The Court found that the two Judge Benches of the Supreme Court and various High Courts are following the above two Judgments at their discretion. It is held that “The territorial jurisdiction conundrum which, candidly is currently  in  the cauldron owing to varying if not  conflicting  ratios,  has  been  cogitated upon very recently by a two-Judge Bench in Criminal Appeal  No.808  of  2013 titled Nishant Aggarwal v. Kailash Kumar  Sharma  decided  on  1.7.2013  and again by the same Bench in Criminal Appeal No.1457 of  2013  titled  Escorts Limited v. Rama Mukherjee decided on  17.09.2013.   Bhaskaran  was  followed and Ishar Alloy and Harman were explained.

Justice T.S.Takur who wrote a separate but concurrent opinion held that “Three recent decisions need be mentioned  at  this  stage  which  have followed Bhaskaran and attempted to reconcile the ratio of  that  case  with the subsequent decisions in Ishar Alloy Steels and  Harman  Electronics.  In Nishant Aggarwal v. Kailash Kumar Sharma (2013) 10 SCC  72  this  Court  was once again dealing with a case where the complaint had been filed  in  Court at Bhiwani in Haryana within whose territorial jurisdiction the  complainant had presented the cheque for encashment, although the cheque was drawn on  a bank at Gauhati in Assam. Relying upon the  view  taken  in  Bhaskaran  this Court held that the Bhiwani Court had jurisdiction to deal with the  matter. While saying so, the  Court  tried  to  distinguish  the  three-Judge  Bench decision  in  Ishar  Alloy  Steels  (supra)  and  that  rendered  in  Harman Electronics case (supra) to hold that the ratio of those decisions  did  not dilute the principle stated in Bhaskaran case. That  exercise  was  repeated by this Court in FIL Industries Ltd. v. Imtiyaz Ahmad Bhat (2014) 2 SCC  266 and in Escorts Ltd. v. Rama Mukherjee (2014) 2 SCC 255  which  too  followed Bhaskaran and held that complaint under Section  138  Negotiable  Instrument Act could be instituted at any  one  of  the  five  places  referred  to  in Bhaskaran’s case.

We have, with utmost respect to the Judges comprising the  Bench  that heard the above cases, found it difficult to follow suit  and  subscribe  to the view stated in Bhasakaran.

Justice Thakur summarized the principles as follows

(i)   An offence under Section 138 of the Negotiable Instruments  Act,  1881is committed no sooner a cheque drawn by the accused  on  an  account  being maintained by him in a bank for  discharge  of  debt/liability  is  returned unpaid for insufficiency of funds or for the reason that the amount  exceeds the arrangement made with the bank.

(ii)  Cognizance of any such offence is however forbidden under Section  142 of the Act except upon a complaint in writing made by the  payee  or  holder of the cheque in due course within a period of one month from the  date  the cause of action accrues to such payee or holder under clause (c) of  proviso to Section 138.

(iii)  The  cause  of  action   to   file   a   complaint   accrues   to   a complainant/payee/holder of a cheque in due course if

(a)   the dishonoured cheque is  presented  to  the  drawee  bank  within  a period of six months from the date of its issue.

(b) If the complainant has demanded payment of cheque amount  within  thirty days of receipt of information by him from the bank regarding the  dishonour of the cheque and

(c)   If the drawer has failed to pay the cheque amount within fifteen  days of receipt of such notice.

(iv)   The  facts  constituting  cause  of  action  do  not  constitute  the ingredients of the offence under Section 138 of the Act.

(v)   The proviso to Section  138  simply  postpones/defers  institution  of criminal proceedings and taking of cognizance by the Court  till  such  time cause  of  action  in  terms  of  clause  (c)  of  proviso  accrues  to  the complainant.

(vi)  Once the cause of action accrues to the complainant, the  jurisdiction of the Court to try the case will be determined by reference  to  the  place where the cheque is dishonoured.

(vii)  The general rule stipulated under Section 177 of  Cr.P.C  applies  to cases under Section 138 of the Negotiable Instruments Act.   Prosecution  in such cases can, therefore, be launched against  the  drawer  of  the  cheque only before the Court within whose jurisdiction the  dishonour  takes  place except  in  situations  where  the  offence  of  dishonour  of  the   cheque punishable under Section 138 is committed along with  other  offences  in  a single transaction within the meaning of Section 220(1)  read  with  Section 184 of the Code of Criminal Procedure or is covered  by  the  provisions  of Section 182(1) read with Sections 184 and 220 thereof.

Arbitration Act

Meaning

Arbitration is the means by which parties to a dispute get the same settled through the intervention of a third person or more, but without recourse to a court of law. The settlement of dispute is arrived by the judgment of the third person or more  who are called Arbitrators. The parties repose confidence in the judgment of the arbitrator and show their willingness to abide by his decision. The essence of arbitration is thus based upon the principle of keeping away the dispute from the ordinary court enabling the parties to substitute by a domestic tribunal. It is therefore reference of the matter of disputes to the decision of one or more persons between the disputing parties.

With a view to consolidate and amend the law relating to domestic arbitration, International commercial arbitration a new law called Arbitration and Conciliation Act 1996 has been passed.

OBJECT: Major changes have been brought in the new law to attract foreign investors by creating such circumstances so that they may have confidence in the system of commercial disputes resolution and enforcement of foreign awards in India. Some of the main objectives of the Act. are as under :

a) To cover domestic and international Commercial arbitration and conciliation.

b) To make provision for an arbitral procedure which is fair, transparent, efficient and capable of meeting needs of the specific arbitration.

c) To ensure that arbitral tribunal gives solid reasons for its arbitral award

d) To ensure that the arbitral tribunal remains within the prescribed limits of its jurisdiction.

e) To minimize the supervisory and intervensionary  role of the court in the arbitral process.

f) To permit an arbitral tribunal to use the means of mediation, conciliation or other procedure during the arbitral proceedings to encourage settlement.

g) To provide that every final arbitral award is enforced in the same manner as if it were a decree of the Court.

Scope and Application of the Act.

The Act contains 86 section and three schedules and is divided into four parts – Part I deals with Arbitration. Part II deals with enforcement of certain foreign award. Part III deals with ‘Conciliation’ which is unique feature in the new Act. Part IV deals with supplementary provision.

Sec 2(2),(3),(4) and (5) specially deal with the scope and applicability of Part I of the Act which is pointed below:-

a) Part I is applicable where the place of arbitration is in India, irrespective of whether the parties are Indian or foreigner.

b)Part I does not affect any law by which certain disputes may not be referred to arbitration.

c) Part I applicable to all arbitration, falling under other enactments, except where inconsistent.

d)Part I does not override any agreement between India and other Country.

The Features of Arbitral Award:

As per sec 2(1)( c ) “arbitral award” includes interim award. The definition does not give much details of the ingredients of an arbitral award. The features of Arbitral Award is pointed below :

1. An arbitral award required to be made in writing on proper value stamp paper as prescribed.

2. The award must be signed by the member of tribunal or majority of signature is enough if the reason for any omitted signature is stated.

3. The award should be dated.

4. Place of arbitration is important for determination of rules applicable to substance of disputes, and recourse against  the award.

5. The arbitral tribunal may include in the sum for which award is made interest up to the date of award and also a direction regarding future interest.

6. The award may also include decision and direction of the arbitrator regarding the cost of the arbitration.

7. After the award is made, a signed copy should be delivered to each party for appropriate action like implementation or recourse against arbitral award.

Arbitration Agreement

There should be an agreement mentioning all terms and condition regarding arbitration procedure. Arbitration Agreement means an agreement referred  under sec 7 that an agreement by parties to submit the arbitration or certain disputes which have arisen between them in respect of legal relation ship whether contractual or not. Agreement shall be in writing with containing the following fact.

a) a document signed by the parties.

b) an exchange of letters, telex, telegram or others means of telecommunication which provide a record of the agreement.

c)An exchange of statement of claims and defence in which the existence of the agreement is alleged by one party and not denied by the other.

Appointment of Arbitrator

Sec 11 of the Act deals with the appointment of the Arbitrator and the following provision should be taken in to consideration.

a) The parties may agree to a procedure of appointment of arbitrator otherwise the following procedure shall apply:-

i. Arbitrator could be any nationality.

ii.In case of three arbitrator each party appoint its own arbitrator and two appointed arbitrator appoint the 3rd arbitrator.

iii.If within 30 days party fail to appoint arbitrator than Chief Justice shall appoint the arbitrator.

b) Decision of  Chief Justice on appointment of arbitrator  is final.

c) Chief Justice or Person designated would have due regard to qualification of arbitrators.

d) Chief Justice can make any scheme, he consider appropriate for appointment.

Number of Arbitrator

Sec 10 provides that parties are free to determine the number of arbitrators provided that such number shall not be an even number. If they fail to determine the arbitral tribunal shall consist of a sole arbitrator.

According to sec 12 of the Act when a person is approached in connection with his possible appointment as an arbitrator he shall disclose in writing any circumstances likely to give rise to justifiable doubts to his independence or impartiality. A party can challenged the appointment of arbitrator if the circumstances giving justifiable doubts as to his independence or he does not posses the qualification agreed by the parties.

http://www.lawyersclubindia.com/articles/Law-relating-the-applicability-of-Arbitration-procedure--4830.asp

Buying a property

Before buying any property or land in India, following legal documents or legalities should be checked.

1.Title deed / certificate of title of the land

When you are planning to buy any property, first and foremost thing is to check down the title deed of that property. The property title deed is the legal document which proves the ownership of property. The title deed presents certain rights and freedom to the person who holds it and such deeds are required where person wants to transfer his ownership.It includes description of property along with the person’s name that holds it and multiple persons can be listed as owner as well. An official seal is used to point out that the deed is recorded officially and normally it is signed by an owner(s) and a witness who may be a regional officer or a clerk.

So as a buyer you have to ask for original deed not a Xerox because sometimes the seller might have taken a loan and given in the original deed.

You should make sure through the title deed that the property is in the name of solely a seller and no one else is and he has all rights to sell it. The best practice is to get reviewed the property deed by an expert lawyer just to make sure that there are no loop holes.

As a good buyer you may also ask for a previous deed and get reviewed by a lawyer.

2. Encumbrance certificate

The encumbrance means any liabilities or charges created on any property in terms of any security of any debit by property owner which is not discharged as on date. It might be held as security against bank loan against property. Encumbrance certificate is necessary to check the title clearance of property when buying any property. This legal document is issued by registering authority. Government authorities and financial institutes like bank is requested encumbrance certificate for the period of 13 years but you can ask for up to 30 years as well to be checked. Then after if you still have any doubts, you can get possession certificate of ownership for a particular land from village office.

3. Torrence Plan

Torence plan is detailed plan of the property which is done by a licensed surveyor. All the measurements details in it are accurate in terms of length, width, borders etc. this plan is necessary for some specific areas only.

4. Pledged land

Many property owners take bank loan by pledging their property. So check they have paid the entire amount due when you are going to buy that property. If they have paid entire amount due then bank has issued them a “Release certificate”. Ask for the same as this release certificate is necessary whenever you want to take any loan in future.

5. Property Tax receipts

Property taxes are first charge on property that is paid to government or municipality. So you have to make enquiry in government and municipal offices to ensure whether all tax has been paid as on date. You can ask for latest tax receipt from owner. In this way you can check whether any notices or requisitions are issued on property or any tax due on the property. While you are checking property tax receipt, there are two columns in it. One is for owner’s name so verify it and other is for tax payer. In some cases, the tax receipt is not with owner. In such cases, you should contact village office with the survey number of land and confirm the original owner.

6. Measurement of Property 

It is prudential to measure the land before registering any property. In this way you can ensure the measurements and borders of land are perfect and accurate. You should get done it with authorized surveyor as you will avoid many problems coming in future. For the sake of your knowledge you should take surveys sketch from survey department and do ensure the accuracy.

7. Owner or Owners

In some cases, it’s possible that there will be more than one owner of property. In that case get No Objection Certificate or Release certificate from other owners.

8. NRI owner

An NRI can also sell his property in India. For this he gives Power of Attorney to third person whom he give rights for selling the property on behalf of him. The most important thing is to ensure the Power of Attorney is witnessed and is duly signed by an officer of the Indian Embassy. The Power of Attorney signed by a notary public has no legal support I such a case.

9. Deed/ Sale Agreement

After sorting out all the things whether financial or any other between buyer and seller, it’s now turn for advance payment and agreement between them. The agreement is done on 5o Rs stamp paper. It includes the final actual amount, advance payment, time limit to pay due amount and how to pay in installments, time indication when the actual sale should take place. It also includes what to do to cover loss if one of buyer or seller makes default. This ensures that the seller does not defer cost in any case after finalization and he doesn’t sell to another party meanwhile. This agreement can be done by an expert lawyer and signed by both the parties with two witnesses. After doing this agreement, if one from both parties makes any default then another one should take legal action against him.

10. Property Registration

All property sales will be held illegal unless the transaction is by means of a sale deed duly stamped and registered. After collecting and checking all the documents, you have to register land/ property at the Sub-Registrar or the SDM (Sub District Magistrates) of your area.

http://www.lawyersclubindia.com/articles/Documents-to-be-verified-before-buying-any-property-6065.asp#.U4lqMHKSzko

Appointing a Women as a Director in a company

The society in our county is male inclined from the very inception. Women were always seen as lower to men. But now, the time has drastically changed the thinking of society. Several laws are framed for providing security and special status to women. From many years the Central Government was providing even a special tax exemption to the women. Some schemes of Central Government are specially designed only for the betterment, protection and empowerment of the women. Here we can say that Companies Act, 2013 by second proviso to section 149(1) which is providing for the appointment of the women director is an effort for empowerment of the women in India.

Second Proviso to Section 149(1) runs as:

“Provided further that such class or classes of companies as may be prescribed, shall have at least one woman director.”

Earlier the draft rules in regard to the appointment of the Women Director were not very clear as it was providing “The listed company and all other companies which will fall under category of Rs. 100 crore Share capital or 300 crore sales shall appoint the women director within one year and three years respectively from the commencement of second proviso”. If we analyze the draft rules it clearly mentioned that government reserved arbitrary rights in its hands for the appointment of the women director when it was providing such class or classes of companies and on the other side from the commencement of second proviso.

But today as the rules got notified and enforced from 1st day of April, 2014, the position is clear, but only to a limited extent which is providing a choice for company in regard to appointment of the women director.

Section 149(1) clarifies that all the companies must have the Board of Directors, which shall consist of individuals

In case of Private Company: Minimum 2 directors;

In case of Public Company: Minimum 3 directors;

In case of One Person Company:  One director.

The Companies (Appointment & Qualification of Director) Rules, 2014 which come into force on 1st April 2014 provides the class of companies which shall appoint at least one woman director, these are-

(i) every listed company;

(ii) every other public company having -

(a) paid–up share capital of one hundred crore rupees or more; or

(b) turnover of three hundred crore rupees or more:

as on the last date of latest audited financial statements.

Proviso added to the rule is providing that a company, which has been incorporated under the Act and is covered under provisions of second proviso to sub-section (1) of section 149 shall comply with such provisions within a period of six months from the date of its incorporation

So, we can make the difference for the purpose of compliance of the provisions between companies:

Here, first category is of the companies which are incorporated under the current act, for which the proviso is providing that they are to appoint the women director with in the period of six months.

Second category is of those companies which were incorporated under the previous company laws, for those companies the period shall be one year from 1st April 2014 i.e. uptil 31st March 2015.

But the main concern here is to see whether the companies will seriously appoint deserving women director or the women director will also be coming out of the Promoter group. The provision is not clear about the independence of the women director. So, uptil when there is no restriction for the appointment of women director from the promoter group, there will be no difficulty for the promoters to appoint a women director. But, we can interpret only that this provision is a social measure so, the government will not take any step for independence of the women director.

Moreover, if the women director will be independent, it will be more beneficial for the companies because by appointing independent women director they will be complying two provisions of section 149 i.e. by appointing the women director and Independent Director.

The second proviso to the rule 3 is further providing that if there is intermittent vacancy of a woman director, it shall be filled-up by the Board at the earliest but not later than immediate next Board meeting or three months from the date of such vacancy whichever is later. This proviso can be analysed as essential for maintaining the post of women directors as if this provision would not have been made, the companies will be appointing a women director and after appointment will try her removal and would have overcome law. But this provision has ensured the enforcement of the appointment of Women Director in a Company.

http://www.mca.gov.in/MinistryV2/companiesact.html

Custody of Child - Supreme Court

Supreme Court has directed a mother to return to Singapore with her autistic child and subject herself to jurisdiction of the foreign court in  a recent case where NRIs involved in legal custody battle for children,

A bench of Justices Dipak Misra and V Gopala Gowda, however, directed the husband, who has initiated proceedings against the wife in Singapore, to fund her and the child's air ticket and also withdraw any contempt filed against her in the Singapore court.

The apex court's direction came after a petition filed by the father accusing his estranged wife of illegally spiriting away their child to India despite an order of the Singapore high court, directing she return with the child.

It was informed to the bench that the father of the child is a citizen of Singapore and settled there since 1978. After marriage, the wife also became a permanent resident of Singapore. The couple was blessed with a boy who was autistic by birth and also acquired citizenship of Singapore.

Due to marital discord, the mother took the child to India on the pretext of holidays. She promised she will return and had booked her return ticket as well but never came back.

The father then filed a petition before the Singapore high court which directed the return of the child to the jurisdiction of Singapore. Since the mother failed to comply with the high court's order, the father had to move the court in India.

SC directed the father to arrange a separate house for the mother and the child, and also deposit a sum of Rs 2 lakh for their expenses. SC also directed that all proceedings initiated by the wife in India will be put on hold till the decision by the High Court of Singapore comes while the father was restrained by SC from initiating any proceedings of contempt in Singapore.

http://timesofindia.indiatimes.com/city/delhi/Supreme-Court-tells-NRI-mom-to-go-back-to-Singapore-with-kid/articleshow/35271698.cms?intenttarget=no

Alimony to husband by wife

In recent divorce cases, courts, deviating from the norm, have been denying maintenance to the wife if she is capable of earning or was earning in the past. There are also cases of the wife being asked to pay maintenance to the husband.

The husband paying maintenance to the wife is the textbook model for divorce proceedings. However, in a recently developed trend, the courts have been denying maintenance to the wife if she is capable of earning or was earning in the past. There have also been cases where the court, instead of going the conventional way, has told the wife to pay maintenance to the husband. Even the wives, in a hurry to end the marriage as soon as possible, are opting for out-of-court settlements and paying the husbands a permanent alimony.

Maintenance Plea by the wife rejected

In a recent judgement, a trial court in Delhi denied the plea of a woman seeking maintenance from her husband. It was reported that the trial court dismissed the woman's plea seeking residential maintenance from her estranged husband, and observed that no financial assistance can be provided to a woman if she earns as much as her husband. Anuradha Shukla Bharadwaj, additional sessions judge, observed, "In the era of gender equality, bias cannot be shown to one gender and discretionary relief of financial assistance cannot be granted to wives despite their capability to earn as much as their husbands."

The court, reportedly, said that rental maintenance would have been awarded to the wife had she proved that she was incapable of arranging an accommodation for herself. However, in this case, she was living with her mother.

Although uncommon, it is not the first time that a court has denied maintenance to the wife. There have been several cases where the court has supported the husband and denied the wife's plea for maintenance. In a case, "The husband was an NRI from the UK and the wife was working with a multinational bank here in Delhi, and she was drawing a salary of `60,000-70,000. They had a troubled marriage so the wife filed for divorce. She asked for maintenance under Section 125 of the Code of Criminal Procedure, 1973, from her husband, stating that he was quite rich. However, her plea for maintenance was rejected and the court ruled that since she was earning well, she didn't need her husband's money to survive, despite the fact that he was quite well-off."

"A trend has developed recently wherein the court is denying maintenance to the wife if she has capability, capacity and past employment." Citing a case, he says, "There was a case in which the wife was a dentist by profession and used to be employed. However, at the time of divorce, she wasn't working and asked for maintenance from her husband. But the court denied her maintenance because, in this case, she had the capability and capacity, and was working in the past. So, she could work again to support herself."

Family resource cake

It is not necessary that either of the party has to pay maintenance to the other in divorce cases. "In 2004, Justice Vikramjeet Sen of the Delhi High Court (as he then was) worked out a formula involving a 'family resource cake' in order to provide maintenance to even working wives. Justice Sen, in the said judgment, combined the income of both the spouses, calling it the 'family resource cake.' Half of the 'cake' was allocated to the husband to meet his expenses, and the other half to the wife and children, for their maintenance. This method has been widely followed by other courts in Delhi when awarding maintenance to either spouse."

Maintenance in favour of the husband

Although in most cases, the wife is awarded maintenance to enjoy the same lifestyle as that of the husband, there are also instances where the reverse happens. Not only is the wife refused maintenance, in many cases, she is also asked to pay maintenance to the husband.  In a case where the court granted maintenance to the husband, the Court granted maintenance in favour of the husband, who was suffering from a mental disorder, while the wife had a government job. The wife earned about `20,000, and the husband was granted a maintenance of `2,000." 

There was another case in which a court passed a judgment supporting the plea of a husband who, under Section 24 of the HMA, wanted maintenance from his wife. The trial court directed the wife to pay the husband `20,000 per month as maintenance, `10,000 as litigation expenses and also to provide a car for him. This judgment was later challenged in the High Court by the wife, but the HC also supported the judgment of the trial court. The wife was running a paying guest facility while the husband was unemployed.

The law which allows the husband to seek maintenance from his wife

Husband can only seek maintenance under Section 24 of the Hindu Marriage Act. "Section 24 of the Hindu Marriage Act, 1955, provides that the court, in case of either the wife or the husband having no independent income sufficient for her or his support, may, on the application of either of the spouses, order to pay to the petitioner the expenses of the proceedings and monthly expenses during the proceedings such sum as, having regard to the petitioner's own income and the income of the respondent, it may seem to the court to be reasonable. So, under this section, even the husband can file an application claiming maintenance pendent elite in the pending divorce case. But the only pre-requisite is that he should not have sufficient income to maintain and support self in consonance with the lifestyle and income of the wife. Assuming the wife is earning much more than the husband, the husband only in that eventuality shall have the locus to file for maintenance."

http://timesofindia.indiatimes.com/life-style/relationships/man-woman/Rich-wives-pay-alimony-to-hubbies-to-end-marriage-asap/articleshow/35114784.cms

Does Airbnb.com Need A Trademark? Branding In The Collaborative Economy: Are Intellectual Property Rights At Risk?

There’s an event going on today at Union Station in Kansas City, Missouri called The Resilient Summit.  It is described as an examination of the “Collaborative Economy,” which is being called  “a key trend that’s redefining established business models, empowering consumers and driving the next phase of social.”   How can Collaborative Economy have anything to do withIntellectual Property?

As it turns out, plenty.

The Collaborative Economy is a term we’ve seen cropping up with more and more frequency in the commercial and social media.  The Collaborative Economy is described as an economic system where consumers prefer to share, rather than purchase, goods and services.

Stop right there.  In a consumer-oriented economy, where the idea is for people to consume, changing the paradigm to sharing would seem to imply a lot less consumption.  Economically, it may remain to be seen whether there is less consumption or just different consumption, and perhaps different revenue models under which the overall consumer economy still expands.

Intellectual Property law has focused on how to let inventors, artists, authors and businesses protect their rights while generally selling their goods and services.  What is the tension between protecting “sales” and the collaborative model of sharing?  How do brand owners maintain and protect their valuable intellectual property assets in the collaborative marketplace?

A lot of us know that instead of purchasing a car, someone who needs a car only occasionally can share a car through www.zipcar.com.   Or, a consumer from Detroit who wants to visit Paris for a week’s vacation can use www.airbnb.com instead of finding a hotel room.  Some brand owners have tried to figure out how to jump ahead of the curve and share, instead of sell, their products.  Patagonia’s and eBay’s Common Threads venture enables consumers to recycle “Patagonia” brand outdoor clothing from one user to another.  Toyota has started leasing cars for short-term periods.   So in these instances, it seems pretty clear that trademarks may become more important than ever in a sharing economy.   People rely on the trademarked name as an assurance of quality.  Trademarks will signify quality, authenticity and predictability.  They may function in different ways, but the value of a trademark – an indication of origin – is still front and center.

Advertising and marketing are traditional concepts for extending a brand’s reach. As the Collaborative Economy shifts more power out of the hands of marketers and into those of consumers, how will brands be able to advertise and market lawfully? What steps will brands have to take to reach consumers without exposing themselves to undue risk?  Social media strategies did not fit into traditional marketing until the past couple of years.  But testimonials like the experiences of friends and other consumers are key marketing components for the Collaborative Economy.  Advertising that includes references to these experiences is still subject to regulation by the FTC and the various state rules.  Disclosure rules regarding who is talking about your product and why, and if they are getting any money or other benefit, are also going to be front and center.

When we get to traditional concepts of patent and copyright protection, there is the potential for fundamental distribution by sharing.  Patents and copyrights have both been around in this country for well over two centuries.  Both types of property rights were established directly in the Constitution (you could look it up: it’s right there in Article I, Section 8, Clause 8, “…to promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.”)

The worthy bargain between encouraging invention and creation in exchange for giving inventors and authors various terms of exclusivity has always been favored by our laws.  An economy which relies in re-using rather than selling creates new challenges.  The digital economy has already exposed some of the weaknesses of the existing law in the music and publishing industries.  Will collaboration finally push a major overhaul of copyright law principles?  It may.  But for now, copyright owners will have to consider how entrenched legal principals such as a fair use right to copy the works of others will work into the equation.   For now, copyright owners might want to take more and innovative licensing approaches, including limiting the duration of rights which they grant, to find ways to explain this potential new collaborative marketplace.

Patents are property rights which already lend themselves to licensing.  Collaboratives might be a boon to sharing via patent licensing arrangements.  Might manufacturers rent rather than buy?  Can they join in a pool of patents to help expand their scope and streamline enforcement efforts?   There are legal boundaries that apply to some of these methods, and patents are already under wide-scale attack.  Does collaboration prove an opportunity to change the dialog? It might, especially when considering patent-laden technologies like 3-D printing, which are on the verge of bringing massive changes to whom consumer goods are valued and delivered.  And of course, if some entrepreneurs start patenting methods of sharing, we’ll be having a whole ‘nother discussion, still.

People protect their intellectual property rights as a threat which helps keep copiers at bay, and as a weapon with which to attack when that threat fails to keep an infringer from testing the boundaries of protection.  (Or, perhaps more realistically, when a buck is to be made by any means possible.)  Will consumers be unable to distinguish, in a sharing marketplace, between genuine goods and knock-offs?  If the sources of products are changing, where is the reassurance going to come from that the goods are genuine?  If a shopper buys a bag at Louis Vuitton, there are some good reasons to believe the product is the genuine article.  In a collaborative setting, what assurance is there, besides the buyer’s word?

The Collaborative Economy may well just be starting.  It may be the next big thing.  Companies can consider whether they can join the Collaborative Economy in a way that uses their intellectual property to build trust.  Companies will need to stay ahead of the consumer and legal curve to insure they know the impact on their intellectual property rights.

Source: http://www.forbes.com/sites/jesscollen/2014/02/06/branding-in-the-collaborative-economy-are-intellectual-property-rights-at-risk/

Winding up of a company

Winding up of a company is the stage, where by the company takes its last breath. It is a process by which business of the company is wound up, and the company ceases to exist anymore. All the assets of the company are sold, and the proceedings collected are used to discharge the liabilities on a priority basis.

MODES OF WINDING UP:

There are three ways, in which a company may be wound up. They are:

A.   Winding up by the court.

B.    Voluntary winding up:

Members Voluntary winding up.

Creditors Voluntary winding up.

C.   Winding up subject to supervision of the court

A.  WINDING UP BY THE COURT:

 A company may be wound up by the court in following situations. Here, the court means "High Court".

i.    If the company itself, has passed a special resolution in the general meeting to wound up its affairs. Special resolution means, resolution passed by three-fourth (3/4") of the members present.

ii.    If there is a default, in holding the statutory meeting or in delivering the statutory report to the Registrar.

A company which is limited by shares, and a company limited by guarantee having share capital, is required to hold a " Statutory meeting" of its members, within six months, and after one month, from the date of commencement of it's business. A statutory report of the meeting so held shall also be forwarded to the registrar. [Sec 165 (1) & (5)]

iii.     If the company fails to commence its business within one year from the date of it's incorporation, or suspends its business for a whole year.

A company limited by shares, has to obtain a "certificate of commencement" of business from the registrar. Unless it obtains such certificate, it cannot carry on its business operation.

iv.     If the number of members, in a public company is reduced to less than seven, and in case of private company less than two.

The statutory requirement of minimum number of members in a public company is seven, and in case of private company, it is two (sec 12)

v.      If the company is unable to pay its debits; where the financial position of the company is, such, that it has more liabilities than assets, and after disposing off the assets, it is still unable to extinguish it's liabilities, it means that company is unable to pay it's debts.

 vi.     If the court, itself is of the opinion that the company should be wound up.

The court may form such an opinion, if it comes to the knowledge of court that, the company is mismanaged, or financially unsound, or carrying an illegal operations etc.

RELEVANT POINTS:

A. WHO CAN APPLY TO COURT, FOR WINDING UP PETITION? (SEC 439)

Following persons can apply to the court, for petition for winding up:

o        The company itself

o        The creditor

o        Any Contributory

o        Registrar

O      Any person authorized by central government, in case of oppression or mismanagement (397)

B. WHAT ORDERS, THE COURT MAY PASS? (SEC 443)

The court may pass any one of the following orders on hearing the winding up petition.

 i.     Dismiss it, with or without costs

 ii.    Make any interim order, as it thinks fit, or

 iii.   Pass an order for winding up of the company with or without costs.

Consequences of court passing an order for winding up:

If the court is satisfied, that sufficient reasons exist in the petition for winding up, then it will pass a winding up order. Once the winding up order is passed, following consequences follow:

i.     Court will send notice to an official liquidator, to take change of the company. He shall carry out the process of winding up, ( sec. 444)

ii.    The winding up order, shall be applicable on all the creditors and contributories, whether they have filed the winding up petition or not.

iii.   The official liquidator is appointed by central Government ( sec. 448)

iv.   The company shall relevant particulars, relating to, assets, cash in hand, bank balance, liabilities, particulars of creditors etc, to the official liquidator. ( sec. 454)

v.    The official liquidator shall within six months, from the date of winding up order, submit a preliminary report to the court regarding :

o        Particulars of Capital

o        Cash and negotiable securities

o        Liabilities

o        Movable and immovable properties

o        Unpaid calls, and

o        An opinion, whether further inquiry is required or not ( 455)

The Central Govt. shall keep a cognizance over the functioning of official liquidator, and may require him to answer any inquiry. (463)

C. STAY ORDER:

Where, the court has passed a winding up order, it may stay the proceedings of winding up , on an application filed by official liquidator, or creditor or any contributory. (466)

D. DISSOLUTION OF COMPANY (481)

Finally the court will order for dissolution of the company, when:

o        the affairs of the company are completely wound up, or

o        the official liquidator is unable to carry on the winding up procedure for want of funds.

E. APPEAL: 483

An appeal from the decision of court will lie before that court, before whom, appeals lie from any order or decision of the former court in cases within its ordinary jurisdiction.

B.  VOLUNTARY WINDING UP

A company may, voluntary wind up its affairs, if it is unable to carry on its business, or if it was formed only for a limited purpose, or if it is unable to meet its financial obligation, and etc. A company may voluntary wind up itself, under any of the two modes:

i.     Members voluntarily winding up

ii.    Creditors voluntarily winding up

A company may voluntarily wind up itself, either by passing:

An ordinary resolution, where the purpose for which the company was formed has completed, or the time limit for which the company was formed, has expired.

Or

By way of special resolution

Both types of resolution shall e passed in the general meeting of the company. (484)

Once the resolution of voluntarily winding up is passed, and then the company may be wound up, either through:

O     Members voluntarily winding up, or

o     Creditors voluntarily winding up

The only difference between the abate two, is that in case of members voluntarily winding up, Board of Directors have to make a declaration to the effect, that company has no debts. (488)

 

                   i.            MEMBERS VOLUNTARILY WINDING UP

Directors of the company shall call for a Board of Directors Meeting, and make a declaration  of winding up, accompanied by an Affidavit, stating that;

o        The company has no debts to pay, or

o        The company will repay it's debts; if any, within 3 years from the commencement of winding up, as specified in declaration (488)

WHO SHALL CARRY OUT THE WINDING UP PROCEDURE? & WHAT SHALL BE THE PROCEDURE?

· The Company shall appoint one or more liquidators, in a general meeting, who shall look after the affair of winding up procedure, and distribution of assets. [490 (1)]

· The liquidator so appointed, shall be paid remuneration for his services, which shall also be fixed in general meeting [490 (2)]

 · The Company shall also give notice of appointment of liquidator to the registrar within ten days of appointment (493)

· Once the company has appointed liquidator, the powers of Board of Directors, Managing Director, and Manager, shall cease to exist. (491)

· The liquidator is generally given a free hand, to carry out the winding up procedure, in such a manner, as he thinks best in the interest of creditors, and company.

· In case, the winding up procedure, takes more than one year, then liquidator will have to call a general meeting, at the end of each year, and he shall present, a complete account of the procedure, and position of liquidator (496)

WHEN AFFAIRS OF THE COMPANY ARE FULLY WOUND UP

The liquidator shall take the following steps, when affairs of the company are fully wound up : (497)

i.    Call a general meeting of the members of the company, a lay before it, complete picture of accounts, winding up procedure and how the properties of company are disposed of.

ii.    The meeting shall be called by advertisement, specifying the time, place and object of the meeting.

iii.  The liquidator shall send to, the Registrar and official Liquidator copy of account, within one week of the meeting.

iv.  If from the report, official liquidator comes to the conclusion, that affairs of the company are not being carried in manner prejudicial to the interest of it's members, or public, then the company shall be deemed to be dissolved from the date of report to the court.

v.     However, if official liquidator comes to a finding, that affair have been carried in a manner prejudicial to interest of member or public, then court may direct the liquidator to investigate furthers.

ii. CREDITORS VOLUNTARILY WINDING UP

· Where the resolution for winding up has been passed, but the Board of Directors are not in a position to give a declaration on the liability of company, they may call a meeting of creditors, for the purpose of winding up. (500)

· It is the duty of Board of Directors, to present a full statement of company’s affairs, and list of creditors along with their dues, before the meeting of creditors. [500 (3)]

· Whatever resolution, the company passes in creditor's meeting, shall be given to the Registrar within ten days of its passing. (501)

WHO SHALL CARRY OUT THE WINDING UP PROCEDURE ? & WHAT SHALL BE THE PROCEDURE?

· Company in the general meeting [in which resolution for winding up is passed], and the creditors in their meeting, appoint liquidator. They may either agree on one liquidator, or if two names are suggested, then liquidator appointed by creditor shall act. (502)

· Any director, member or creditor may approach the court, for direction that:

o        Liquidator appointed in general meeting shall act, or

o        He shall act jointly with liquidator appointed by creditor, or

o        Appointing official liquidator, or

o        Some other person to be appointed as liquidator. [502 (2)]

· The remuneration of liquidator shall be fixed by the creditors, or by the court. (504)

· On appointment of liquidator, all the power of Board of Directors shall cease. (505)

· In case, the winding up procedure, takes more than one year, then he will have to call a general meeting, and meeting of creditors, at the end of each year, and he shall present, a complete account of the procedure, and the status / position of liquidation (505).

WHEN AFFAIRS OF THE COMPANY ARE FULLY WOUND UP ( 509)

The liquidator shall take the following steps, when affair of the company are fully wound up:

I.            Call a general meeting, and meeting of creditors, and lay before it, complete picture of accounts, winding up procedure and how the properties of company are disposed of.

II.            The meeting shall be called by advertisement, specifying the time, place and object of the meeting.

 III.            The liquidator shall send to the Registrar and official liquidator copy of account, within one week after the meeting.

 IV.            If from the report, official liquidator comes to the conclusion, that affairs of the company are not being carried in manner prejudicial to the interest of it’s members or public, then the company shall be deemed to be dissolved, from the date of report to the court.

    V.            However, if official liquidator comes to a finding, that affairs have been carried in a manner prejudicial to intent of members or public, and then court may direct the liquidator to investigate further.

DISTRIBUTION OF PROPERTY OF COMPANY ON VOLUNTARILY WINDING UP [BOTH MEMBERS AND CREDITORS VOLUNTARILY WINDING UP]

Once the company is fully wound up, and assets of the company sold or distributed, the proceedings collected are utilized to pay off the liabilities. The proceedings so collected shall be utilized to pay off the creditors in equal proportion. Thereafter any money or property left may be distributed among members according to their rights and interests in the company.

C.  WINDING UP SUBJECT TO SUPERVISION OF COURT.

Winding up subject to supervision of court, is different from "Winding up by court."

Here the court only supervises the winding up procedure. Resolution for winding up is passed by members in the general meeting. It is only for some specific reasons, that court may supervise the winding up proceedings. The court may put up some special terms and conditions also.

However, liberty is granted to creditors, contributories or other to apply to court for some relief. (522)

· The court may also appoint liquidators, in addition to already appointed, or remove any such liquidator. The court may also appoint the official liquidator, as a liquidator to fill up the vacancy.

· Liquidator is entitled to do all such things and acts, as he thinks best in the interest of company. He shall enjoy the same powers, as if the company is being wound-up voluntarily.

· The court also may exercise powers to enforce calls made by the liquidators, and such other powers, as if an order has been made for winding up the company altogether by court. ( 526)

PRIORITY IN DISPOSING LIABILITIES [529 A & 530]

When the company is wound up, by any mode, the liabilities shall be discharged in following priority.

1.     Workman's dues.

2.     Debts due to secured creditors, in case of insolvency.

3.     All ---------, taxes, cesses and rates due from the company to the central government or a state govt.

4.     All wages and salary of any employee due within four months.

5.     All -------- holiday remuneration becoming payable to any employee.

· All such debts shall be paid in full. If assets are insufficient to meet them, they shall abate in equal proportions.

MONEY RECEIVED BY LIQUIDATOR: (553)

Apart from an official liquidator, every liquidator appointed by company or court to carry on the winding up procedure, shall deposit the money is received by him in a scheduled bank, to the credit of a special banking account opened by him.

Apart from a normal company, registered under the companies Act, 1956 there are other companies as well winding up procedure for these companies are bit different from a company registered under companies Act.

These companies are:

1.     UNREGISTERED COMPANIES : (583)

In simple words, an unregistered company is a company which is not registered or covered under provisions of companies Act. 1956 (582)

· An unregistered company cannot be wound up voluntarily, or, subject to super vision of court.

· However, the circumstances, in which unregistered company may be wound up, are as follows:

o         If the company, is dissolved, or has ceased to carry on business, or is carrying on business only for the purposes of winding up, it's affairs,

o         If the company is unable to pay it's debt

o         If the court is of opinion, that it is just and equitable, that the company should be wound up.

· A creditor, contributory, or company itself by filing a petition, or any person authorized by central government may institute winding up proceedings.

· In respect to other aspects, the same provisions and procedure shall follow, as in winding up of registered company.

· A foreign company, carrying on business in India, which has been dissolved, may be wound up, as unregistered company.

1.     FOREIGN COMPANY ( 584)

A foreign company is a company which is incorporated outside India, and having a place of business in India.

Winding up of such companies is only limited to the extent of it's assets in India. In respect of assets and business carried outside India, Indian courts have no jurisdiction.

· Winding up of a foreign company can only be made through court.

· Even if the company had been dissolved or ceased to exist in the country of its incorporation, winding up order in this country can be made.

· Even if a foreign company has been wound up according to foreign law, the courts in India still protect the Indian Creditors. The surplus assets, after paying the creditors, should be distributed among the share holders equally in the same proportion, as the assets ---- to the total issued and paid up capital.

· Pendency of a foreign liquidation does not affect the jurisdiction to make winding up order. The Assets can be of any nature and do not take to be in the ownership of the company and can come from any Source.

· As, for persons claiming to be creditors, their presence, itself is sufficient. It is not required to be shown, that company carried on business operations from any place of business in India.

2.     GOVERNMENT COMPANY

 A Govt. company, means a company, in which 51% or more of, shares are held by a govt. company

Winding up procedure for a government company registered under the companies Act, 1956, is nearly similar to normal winding up procedure.

However, courts, take interest of public into consideration, and priority is given to them, as a govt. company is main function is to provide services to public.

 

 Source http://www.companyliquidator.gov.in/12/windingup_data.htm#b