SUMMARY CONTENT

Oppression & Mismanagement

Section 241:- Application to tribunal for oppression

1. Application by member eligible u/s 244 to tribunal CG may apply to tribunal

if of the opinion that affairs

a) Affairs of co. conducted (in manner) Material change in conducted in manner prejudicial

prejudicial to public/co /member Management/control of co. to public interest

oppressive to member likely that affairs will be conducted

prejudicial to member/company

1. Case law of [Re Ballador Silk Ltd.]

If majority director over-ride minority, no resort u/s 241

2. Case law of [Gnana Sambhandem vs Tamilnad Transporters (Coimbatore) Pvt. Ltd]:-

Oppression only if affairs are being conducted in manner oppressive to shareholders or someone in a
position that can oppress someone.

3. Case law of [Dale & Carrington Investment Pvt. Ltd vs P.K. PrathPan]

If object is to attain majority /control without intimating others, an act of oppression .

4. Case law of [V.Sebastean vs City Hospital]

If majority prevented from protecting itself, majority become artificial minority & can claim
protection u/s 241.

Section 244:- Right of application u/s 241

Company having share capital Company not having share capital

Atleast 100; or whichever is lower Atleast 1/5th of

Atleast 1/10th of members ; or of total no. of

Atleast 1/10th of share capital members.

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Case law of [Rajahmundry Electric Corporation Ltd vs A. Nageshgwara Rao]

Criteria u/s 244 required to be satisfied on date of filing complaint and not subsequently.

Section :-242 Powers of tribunal

(1) Tribunal may pass an order u/s 242(2) lf of opinion

&
Affairs of co. conducted in a Winding -up of co. would
manner& prejudicial to and unfairly prejudice members.
member/ public interest

(2) Orders u/s 242 (2)

a) Regulation of affairs

b) Purchase of shares of 1 member by other member/company

c) Upon purchase in (b), consequent reduction in share capital

d) Restriction on transfer/allotment of shares

e) Co. MD/ Manager/ Director

Termination/ setting aside of agreement

f) Co. Other person prior consent of such other person

Termination/ setting aside of agreement

g) Setting aside transfer/delivery of goods/payment, execution

by/ against co within 3 months from application

h) Removal of MD/ Manager/ Director

i) Recovery of undue gain from MD/ Manager/ Director

j) Manner of appointment of MD/ Manager after (h)

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[3] Certified copy of Tribunal To ROC by co. 30 days

[4] Upon any alteration to MOA/AOA

No further alteration by co same effects as if made by co. Certified copy

without leave from tribunal
Filed to ROC within 30 days

[5] Contravention

Company Officer In default Or Fine or both

1,00,000 to 25,00,000 Upto 6 months 25000 1 lakh

Section: -243 Consequences of termination/ modification of agreements

Where order u/s 242 Terminate/ set aside / modify

Any agreement

No rise to claim against No MD/ Manager/ Director

co. for loss of office. Be appointed as in such co.

MD/ Manager/ Director

:- contravention upto 6 months or fine max 5 lakh or both

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Section 245:- Class action suit

1. Application for class action by

Member Depositors
s

Atleast

Company having share capital Company not having share capital 100 depositors

10% of depositors

To whom co. owned

100 members 10% of members 10% of issued capital 1/5th of total members
10% of deposits

2. Why such application restraining from

Committing an act Committing breach Committing an act Action contrary to Action on any
ultra vires of of MOA/AOA contrary to Act resolution of resolution if
MOA/AOA members passed by mis-
statement to
members/
depositors.

3 In addition application also for action against

Company/director for Auditor for improper/ Expert/ advisor any incorrect

fraudulent / unlawful act misleading statement made misleading statement

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4. Tribunal to consider

Whether member in Evidence for involvement of Possibility of ratification by

good faith. any person. co.

5. To have regard to & ensure

2 application on same All similar application Public notice on application

cause not allowed consolidated into single
application. To Member or depositor

Member /depositor to
choose lead application .

:- any application if found frivolous/vexatious Applicant to pay upto Rs. 100000

DIVIDEND
Section 123:- Declaration of dividend
Out of

Current year Previous year both Money by CG/SG

profit. profit. for payment of
dividend for
guarantee given.
( only after depreciation)

:- Co. may transfer % of profit towards reserve .

:- No dividend from reserve other than free reserve. ExceptionCo. where 100% by CG/SG/CG+SG

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:- No dividend unless carried over losses and depreciation(unabsorbed) set- off against profit of C.Y.

Section 123(2) :- Depreciation according to schedule ll

Section 123(3) :- Interim dividend out of

P&L A/C Or Profit of F.Y. in which interim Or both

dividend sought. (Upto Date)

:- If loss upto last quarter of current F.Y.

:- No dividend exceeding rate of average dividend for preceding 3 F.Y.

Section 123(4) :-Dividend (including interim dividend) deposit in a schedule bank within 5
days of declaration.- NA to Co. where 100% by CG/SG/CG+SG

Section 123(6) :-Any failure u/s 73&74 ,no dividend as long as such failure continues

RULE 3:- Declaration of dividend out of reserves

1. Max. Dividend shall not exceed average rate in 3 immediate preceding years.
➢ N.A. if no dividend in each of 3 year.

2. Amount to be drawn from reserve not to exceed 1/10th of [P.U.C + F.Res]

➢ To be utilized to set off losses of current year

3. Balance of reserve, after withdrawal shall not fall below 15% of its paid up capital as
per latest audited.

Unpaid dividend account [Section 124]

1. Dividend Declared
30day 7days
Not Paid
Un-Paid dividend to be
transfer to unpaid Div. A/c

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2. Within 90 days of such transfer

Statement to be placed → Website

Name Last known addresses Amount of unpaid dividend

3. In case of default → Interest @ 12% P.a.

4. Claimant may apply within 7 years → then amount to be transferred to “Investor
Education & protection Fund” (Shares shall also be transferred)

5. Claimant can still claim from ”IEPF” with procedure/document as prescribed

5lakh 1,00,000
6. Non- compliance ( &) officer
(Co) 25lakh 5,00,000

Procedure for claiming from fund

➢ Claimant to be submit an application in form IEPF-5 to authority along with

document specified in form
➢ Upon submission to authority, also to send to concerned company at its registered
office for verification
➢ Company → within 15days → verification report → to authority
➢ After verification → authority (+) drawing & disbursement officer → bill to
account officer
➢ Authority to issue refund sanction order
➢ Application of refund to be disposed off within 60 days from verification report of
co.

Investor Education & Protection Fund [Section 125]

1. C.G → Establish fund → “ I.E & P. Fund”

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2. Amount to be credited
Application money

I E P F as per C Act 1956 4D Pref. sh. P AG Grant by CG

Dividend Debentures Deposits Donation by

Unpaid Matured Matured CG/ SG/ CO.

3. Purpose → I.E& P + Refund of 3D + Disgorgement from any wrong work to Eligible

Shareholder/Debenture holder/Deposit holder

Investor Education & Protection Fund Authority

1. Composition

Chairman Chief Executive officer

Secretary MCA 6 members [Convenor]
[Ex-Officio] By C.G (appoint)

1 nominated 1 nominated by 4 having

by RBI Ex- SEBI Ex-Officio experience
officio 15 yrs

Finance Management A/C Law

(1 from each such field)

2. Terms of office
➢ 1term=3year , 3terms, cooling=3years, removal by CG=3 months
notice/Resignation= 3month notice

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➢ Removal→ Insolvent/Unsound Mind/ Convicted for / Abused position

[Moral Turpitude]
3. Function of Authority

Management Administration Formation of permanent

of affairs of fund committees

Committees → Each= CEO (+) concerned functional head May invite expert

4. Meetings of Authority & Committee→ To decide own procedure for holding meetings
➢ Meeting at New Delhi, else approval of chairperson
➢ Meeting at least 1 in qtr (+) at least 4 in F.Y.(Gap Not exceeding 120 days)
➢ Chairperson → Unable →Member present to decide 1 member
➢ Difference in opinion → View of majority
➢ Quorum= >50% of appointed members → Authority
➢ 2 members → Committees

5. Account & Audit

➢ Account in forms prescribed by CG → Consultation → C & AG
➢ Audited annually by C & AG (+) chief controller of accounts
➢ C & AG/ Person appointed → all right as for Govt. Co.
➢ Audit Report → CG→ laid before parliament

Right of dividend/ right share/bonus share to be held in abeyance [Section126]

❖ Where instrument of transfer delivered →for registration →however pending

→company shall

Transfer dividend to unpaid Keep in abeyance for such

dividend A/c share
Except → Register holder Any bonus/ right for such
authorised to pay such
shares
dividend to transferee

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Section-127:- Punishment for failure to distribute dividend

1. Dividend declared → not paid/ warrant not posted
➢ Within 30days →Every director → punishable with imprisonment up to 2yrs
(+) Rs.1000 per day →till default continue
➢ Co. also liable for interest @ 18%p.a during such default
Exceptions:- If no dividend due to

Operation Dispute over Where instruction Dividend Any reason not due
of law right to have of share holder adjusted by Co. to any fault of Co.
dividend cannot be against any
Complied dues
complied

Foreign Company
Section 2(42):- Company incorporated O/S India
having in India → Place of business (+) business activity

Physically Electronic Mode

Business Online services Offer to accept ❖ Web Marketing

to Deposit/ ❖ Data base
➢ Telemarketing subscription from services
Business Consumer ➢ Telemedicine India/ citizen of ❖ Financial
➢ Education India settlement

Also all communication service through social media, email etc.

Foreign companies to be treated as company incorporated in India [Section 379]

➢ If at last 50% of paid-up capital is held by 1 or more → citizen/ Body-corporate/

together

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➢ All provisions for Indian business to apply as if company incorporated in India

Document to be delivered to ROC by foreign Co. [Sec 380]

Certified copy of MOA/ AOA/ Charter/ statute/ Full address of Regd. office
document defining constitution of Co.
Opening/ closing of place of buss

In English Converted in English

OR
Declaration that no director/ representative ever convicted in India/ abroad

Person → Name/address → authorized to accept service of document from ROC

Detail of Directors along with their name , address, age, nationality, e Mails etc
➢ All above document → to ROC in FC-1 → 30 days of establishment of place of
business in India
➢ Along with approval from RBI Under FEMA
➢ Any submission of document to ROC- Delhi
➢ Any alteration → Return containing alteration in FC-2 → within 30 days to ROC

Account of Foreign Company [Section 381]

Make out balance sheet/ P&L in prescribed form

Every foreign company &

Deliver the same to ROC

➢ Every financial statement for Indian business in Sched-III

➢ All document shall be as per chapter IX of this Act
➢ Document of CFS → as submitted by holding in country of incorporation
Statement of RPT
➢ Also to file Statement of Repatriation of profit
Statement of Transfer of fund

➢ Submission → within 6month from end of F.Y.

➢ If not in English → translation in English to be annexed

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Audit [Companies (Registration of foreign Co.) Rules, 2014]

Accounts for Indian business

Audited by PCA/Firm of PCA Provisions of chapter X to

apply mutatis mutandis

Display of name [Section 382]

Conspicuously exhibit Cause → Name of Company If liability of member is limited

(+) country of incorporation
Outside of Indian office/place of Cause this fact
business In English on

Buss. Letters/ Notices etc. To be Cons.

Name of Country of stated on Exhibit
company incorporation all notices/
Outside
buss.
office/
Letters
place of
Letters in English & busines
language used in locality s

Service on foreign company [section 383]

➢ Any notice/document required to be served on foreign company to be addressed

to person→ whose name/address give to ROC u/s 380

Dating of prospectus & particular to be contained there [Sec 387]

No prospectus offering security of Foreign company

Incorporated or to be Incorporated Whether it has or has not established a

outside India place of business in India
Unless prospectus is dated & signed → and

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1. Contain particulars with regard to

Instrument Enactment Date & country Any place

containing where Co. was where Co. was of buss in
constitution of Co. incorporated incorporated India

All matters U/s 26 of this Act

Address where they can be inspected

2. No form of application to be issued to person in India for any securities of foreign

Co. unless accompanied with prospectus
Exception

Issue of prospectus for Issue to person invited Issue to existing

securities uniform in bonafide to enter into members/debenture
all respect with underwriting agr’t holders
securities previously
issued & dealt in RSE
Registration of prospectus [Section389]

No person to issue any prospectus for foreign company

Unless copy submitted to ROC Incorporated

Chairperson or
(+) to be signed by (+) to be incorporated
2 directors Has/ has not established
(+) Mentioned on face that copy delivered
to ROC Place of business in India

Document along with prospectus

Consent of Copy of Material contract Contract of appointment of

expert underwriting (last 2yers) MD/Manager

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Not in ordinary course

Punishment for contravention [Section392]

1, 00,000

➢ Any contravention foreign Co. punishable with fine

3, 00, 000
(+) Continuing offence → fine up to 50, 000per day
25,000
(+) Every officer → up to 6-month or or Both
5, 00,000

"Government company" means any company in which atleast 51% of the paid-up share
capital is held by the CG/SG/CG+SG ,and includes a company which is a subsidiary
company of such a Government company;

Any failure to comply → not to invalidate [Section 393]

➢ Non- compliance → not to affect validity of contract

➢ Co. shall not be entitled to bring any suit until it has complied with provisions of
this Ac

Annual Report on Govt Co. [Sec 394]

1. If CG→ member of any Co. → it Shall ensure

Annual report on working → be To be laid before parliament

prepared → in 3months of AGM (+) Copy of audit report
(+) comment on audit by C& AG

2. If (CG+ SG) → member →SG to ensure

Annual report before house/s along with copy of audit (+) comment

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Security Contract Regulations Act

1. Application to SEBI [Section -3] :- STX →application to SEBI in form “A” of [SECR]
rules ,1957 (+) 4 copies of bye law &rules

Constitution of Power & duties Admission Entry of firm as

governing body. Its of office bearer or member
power of suspension
management or
expulsion of members

2. Approval [section 4] →SEBI satisfied

Grant of recognition in Rules/ bye laws are

favour of trade & sufficient for fair
investors” transaction in securities

➢ Any such recognition to be effective from publication in Gazette of India

3. Withdrawal of recognition [section -5]:- SEBI may withdraw if satisfied –interest of

“Trade & investors “→ ROOBH→ notification in official Gazette
➢ withdrawal not to invalidate already entered contract
➢ STX not been corporatized /demutualised /failed to submit scheme /scheme
Rejected by SEBI →Recognition stand withdraw

Records to be retained & submission of return [Section 6]

❖ STX (+) its members → maintain records for at least 5years

❖ To be open for inspection SEBI
❖ STX to summit annual return to SEBI
❖ SEBI may → if deems fit

Call STX/ member to furnish Appoint 1 or more person for investigation into Submission of Report to
information as required affairs of governing body SEBI (time framed)

❖ In interest of trade & public → direction to STX/ member to furnish →

information / explanation for affairs of STX/ members

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Rules by stock exchange [Section 7A & 8]

STX is authorized to make rules on

1. Restriction of voting right to member

2. Regulation of voting right in manner that 1member= 1vote (irrespective of share in share
capital)
3. Restrictive on appointment of another person as proxy to attend/ vote
4. Such incidental/ supplement matters as necessary
Order by SEBI [Section 8]:- to make/ amend rules as specified U/S 3 & 7A
❖ Order to specify reason
❖ Duty of STX to comply order within 2- months’, else SEBI may frame rules & notify them in OG

Process of Corporatization [Section 4A]

❖ SEBI may require STX to submit its scheme for Conversion into body-Corporate & submit to
SEBI for approval
❖ Scheme to provide→ transfer of capital, reserves, assets, liability from STX to body corporate

Actions by SEBI

Scheme approved Scheme dis-approved

Without modification With modification by

by SEBI SEBI

Acceptable to STX Not acceptable to STX

STX may file an appeal

Notification in O.G. against decision of SEBI to
Published & STX becomes “SAT”
body-Corporate from date
specified

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Process of Demutualization [Section 4B]

❖ Immediately upon conversion of STX into body-corporate, entire capital will be

held by members with right to act as broker
❖ Within next 12-months, So much of fresh capital to be issued→ So that Capital
held by [Broker/ Member]→ 49 % (Max.)

Members

Having a right to act as Not having a right to act as

broker broker

Do not have any voting Have any voting power in

power in G.M G.M

Max. Holding =49% of Capital Min. Holding =51% of Capital

Their representation on BoD representation on=75%

BoD=25% (Max.) (Minimum)

Clearing corporation [Section 8A]

STX → with SEBI approval→ transfer duties/function of clearing house to clearing

Corporation →to be a Co. Only → for

Periodic Settlement Delivery & payment Any other incidental

of contract of securities or connected matter

❖ Clearing corporation→ Frame bye laws → Obtain SEBI approval

❖ SEBI satisfied in public interest→ order → transfer of duties & function from
clearing house to clearing corporation

Power of R.S.E to make bye laws [section 9]

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1) STX → with SEBI approval, make bye laws for regulation/control of contracts
2) Content of bye-laws
O M C Promote Selling
Opening Market Closing Periodic settlement Submission to SEBI,
particulars as
Of contract prescribe through
clearing corporation
OF

DR LAL Path

Declaration of Regulation Listing of Regulation or prohibition

market rate or securities of blank transfer
prohibition
of budlas

3) Bye law may also specify

Bye-law → where contravention Any contravention → member

will make contract void U/s 14 liable to or more of following

Fine Expulsion Suspension from Any other

from membership penalty
membership

Power of SEBI to make/amend bye-laws of STX [Section 10]

1) Request by governing body of STX With consultation with

or →SEBI → governing body
own motion

Make bye-laws for all/any of matter specified U/s 9 or amend any such bye-laws if

It is necessary to do so & by recording its reasons

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2) Any bye law → made/amended → publication in O.G → have same effect as if

made by STX
3) In case of objection to governing body → application to SEBI for revision.
4) SEBI may subject to ROOBH revise such bye laws

Management take-over [section 11]

SEBI opinion → Governing body to be superseded (unethical practice) subject to

ROOBH, SEBI may order by notification in O.G

Consequences

SEBI to appoint Member of governing All power of All property of

new person to body ceases to be its governing body STX shall vest
take charge members ended & become in with person
exercisable by so appointed

Tenure will depend upon notification of SEBI

Before completion of tenure, he may constitute new governing body

Suspension of business [Section 12]

❖ Opinion of SEBI → emergency has arised → for handling it→ necessary to

suspend business activities of STX →it may notification in O.G → suspend
business of STX for maximum 7days at 1 time
❖ Extention of suspension → if SEBI so consider Subject to ROOBH

Contract in notified areas illegal in certain circumstance [13]

❖ If CG satisfied → it may be notification in OG→ declare this section apply to

state/area→ then any contract entered into without member shall be illegal,
provided any contract between member of 2 or more STX be

Subject to terms specified by STX with approval of CG Require prior permission from STX if so required

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Additional trading floor [Section13A]

➢ STX with SEBI approval→ form additional trading floor

Trading ring Trading facility

Outside area of operation of STX →enable investors to buy/sell security

Contract in notified area to be void in certain case [14]

Any contract in areas U/s 13 in contravention of section 9 to be void

Power to delist security [Section 21 A]

STX may delist listed securities

(+)
After recording its reasons Subject to ROOBH

Listed entity may appeal before SAT → within 15days

SAT may provide extension upto 1month on sufficient reasons

Remedies in case of rejection by STX: - if STX reject listing →aggrieved may appeal to
SAT within 15days →applicant for listing → STX provide no communication considered
rejected → appeal to SAT within 15days .Consideration of appeal even after 15days on
sufficient reasons

❖ SAT shall have powers as vest in code of civil procedure [some as in

Section__________ ]
❖ Disposal of appeal within 6month & copy of order to all concerned
❖ No civil court to entertain any suit where SAT is empowered
❖ No injunction by any court for action by SAT
❖ Aggrieved may prefer appeal to supreme court(law/fact) within 60 days from
order of SAT. Extension by 60 days

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Title to dividend [Section27]

1) Holder of security is entitled to receive & retain any dividend even after transfer
of shares for consideration

Exception if transferee who claim dividend has lodged security & all document
transfer with company within 15days of dividend become due. Extension allowed

In case death Loss of transfer Delay in lodging

of transferee deed beyond control security due to post
of transferee

2) Nothing to affect → right of company to pay dividend to person whose name

entered as holder in books of company
➢ Transferee right to enforce security where company refused to register
transfer in his name

Banking Regulation Act

[Section 5A]:- Act to have over-riding effect

❖ Act to apply notwithstanding anything contrary in MOA/AOA of banking

company or any agreement/ resolution of board/member → registered or
not
❖ Any provision in MOA/AOA Agreement/resolutionin Contravention is void

[Section 7]:- Restriction on use of word “Bank” etc

❖ No Individual/firm/group of individual/company other than banking →to

use in its name “Bank/Banker/Banking”.
❖ No company to carry banking unless any of such words used

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