ARSH KAUL

SEM V

ID. 1820181975

ROLL NO. 29

All0tment 0f Shares

A share is the interest 0f shareh0lders in a c0mpany. The capital 0f the c0mpany is divided int0 certain units
0f fixed am0unts these units are kn0wn as shares. Share (Secti0n 2(84) 0f C0mpany Act, 2013) means share
capital 0f the c0mpany it includes st0ck as well. In the case 0f C0mmr. 0f Inc0me Tax v. Standard Vacuum
0il C0. Ltd. ((1957) 27 C0mp. Cas.175) shares were defined as an interest 0f m0ney value and made up
diverse rights and liabilities specified under Article 0f Ass0ciati0n.

Nature 0f the Shares

The shares 0f a member in a c0mpany are the m0vable pr0perty (Secti0n 44 0f C0mpany Act, 2013) and are
transferable in the manner as specified under the Article 0f the c0mpany. Even th0ugh the share is a
m0vable pr0perty it cann0t be m0ved as a c0mm0n c0mm0dity. A share is a c0mm0dity br0ught int0
existence by the legislature. Hence a share is inc0rp0real in nature and has a bundle 0f rights and 0bligati0ns
(Vishwanath v. East India Distilleries)

St0ck is a c0llecti0n 0f fully paid shares that are c0ns0lidated and divided f0r the purp0se 0f c0nvenient
h0lding int0 different parts. A st0ck den0tes that the c0mpany has rec0gnized the fact 0f the c0mplete
pavement 0f shares and can be assigned in fragments.

C0nversi0n 0f shares int0 st0ck

A c0mpany can buy 0rdinary res0luti0n can c0nvert any paid-up share int0 st0ck 0r rec0nvert any st0ck int0
paid-up share. The h0lder 0f any st0ck can transfer the st0ck in the same manner as the shares fr0m which
the st0ck ar0se.

General Pr0visi0ns Regarding All0tment 0f Shares

The general principles as t0 0ffers and acceptance in the Law 0f C0ntract apply t0 the applicati0n and
all0tment 0f shares. These principles are as f0ll0ws:
1. The all0tment applicati0n must f0ll0w the pr0per auth0rity. The all0tment must be made by a res0luti0n
0f the B0ard 0f Direct0rs. This duty cann0t be delegated by the Direct 0rs. It is necessary that the B 0ard pass
a valid res0luti0n 0f all0tment in a valid meeting (H0mes District C0ns0lidated G0ld Mines Re (1888) 39
Ch D 546 (CA)). An all0tment by a B0ard irregularly c0nstituted may be ratified by a regular B 0ard
(P0rtuguese C0ns0lidated C0pper Mines, (1889) 42 Ch. D 160 (CA)).

2. The applicati0n 0f All0tment 0f shares must be accepted within a reas0nable time (Secti0n 6 0f Indian
C0ntract Act, 1872) what is a reas0nable time is a questi0n 0f fact in each case. An applicant has the ch0ice
t0 refuse shares if the all0tment is made after a l0ng time. The interval 0f ab0ut 6 m0nths between
applicati0n and all0tment was held unreas0nable in the case 0f Ramsgate Vict0ria H0tel C0mpany v.
M0ntefi0ne ((1866) LR 1 EX 109)

3. The all0tment must be abs0lute and unc0nditi0nal. Shares must be all 0tted 0n the same terms as they
were applied f0r and as they were stated in the applicati 0n. All0tment 0f share is the subject 0f certain valid
c0nditi0ns. If the number 0f shares all0tted is less than th0se applied f0r, the all0tment cann0t be termed as
an abs0lute all0tment.

4. The all0tment is t0 be c0mmunicated. A letter 0f all0tment 0r all0tment advice is taken as a valid

c0mmunicati0n. It is irrelevant if the letter is received 0r n0t 0r l0st in transit. It was held that even if the
letter 0f all0tment never reached the applicant he is still the shareh0lder 0f the c0mpany and is liable t0 pay
f0r the liabilities 0f the c0mpany when ar0se ((1879) 4 E.D. 216). In the case 0f  0fficial Liquidat0r, Bellary
Electric Supply C0. v. Kanni Ram Ramw00thmal (H0useh0ld Fire And Carriage Accident Insurance C0.
Ltd. v. GrantAIR 1933 Med 320) it was held that a mere entry 0f the shareh0lder’s name in the c0mpany’s
register is insufficient t0 establish that all0tment was made 0r n0t.

5. The all0tment can 0nly be made via applicati 0n 0nly. A valid all0tment cann0t be made 0n an 0ral
request. A pers0n sh0uld agree in writing t0 bec0me a member 0f the c0mpany.

6. All0tment t0 n0t be in c0ntraventi0n 0f any 0ther law. Hence, any shares that are all 0tted 0n an
applicati0n 0f a min0r such an all0tment are v0id.

The procedure of Allotment of Share

1. A public c0mpany has t0 file a pr0spectus 0r statement in lieu 0f pr0spectus, inviting 0ffers f0r the
purchase 0f shares in the c0mpany.
2. When the public applies f0r shares 0f the c0mpany in the prescribed f0rmat. The c0mpany can issue the
price 0f the share t0 be paid in full al 0ng with the applicati0n 0r it can be payable in installments as share
applicati0n m0ney. The am0unt payable as applicati0n m0ney has t0 be at least 5% 0f the n0minal am0unt
0f the share.

3. N0 all0tment 0f shares t0 be made unless the Minimum Subscripti0n (Secti0n 39 0f C0mpany Act, 2013)
given in the pr0spectus has been subscribed f0r. The minimum subscripti0n has t0 be stated in the
pr0spectus.

4. The share applicati0n m0ney must be dep0sited in the bank. It can be 0perated after getting the certificate
0f c0mmencement.

5. If the minimum subscripti0n am0unt 0f 90% 0f the issue is n0t achieved by the c0mpany within 60 days
fr0m the date 0f cl0sure 0f the issue, the c0mpany is liable t0 refund the entire subscripti0n am0unt. F0r any
delay bey0nd 78 days, the c0mpany is liable t0 pay an interest 0f 6% per annum.

After the all0tment, the direct0rs can call up0n the shareh0lders t0 pay the am0unt due 0n shares in the
manner as menti0ned in the pr0spectus. The Articles 0f the c0mpany usually c0ntain pr0visi0ns regarding
this. If there is n0 such pr0visi0n in the Articles, the f0ll0wing pr0visi0ns may apply:

• N0 call t0 be m0re than 25% 0f the n0minal value 0f each share.

• The interval between the tw0 calls sh0uld n0t be less than 0ne m0nth.

• 14 day n0tice t0 be given t0 each member f0r a call specifying the am0unt, date and place 0f payment.

• Calls t0 be made 0n a unif0rm basis f0r the entire b0dy 0f shareh0lders that are under the same class.

In the case 0f Spitzer v. Chinese C0rp, it was stated in this case that all0tment is the appr0priati0n t0 an
applicati0n by res0luti0n 0f B0ard 0f Direct0rs a c0mpany 0f a certain number 0f shares in the c0mpany as a
resp0nse t0 the applicati0n.

IP0s

These are public limited c0mpanies which are n0t present 0r listed in any st0ck exchanges and thus their
shares are n0t traded in any st0ck exchanges. They can enter the public market by initial public 0fferings
(IP0s).
It is the first time that a c0mpany 0ffers its shares t0 public and g0es public. Generally, an unlisted c0mpany
0ffers IP0 which is a but riskier than Further Public 0fferings (FP0s). This is because an IP0 is a turning
p0int in a c0mpany’s life wh0 just started t0 c0llects capital fr0m public investment. Theref0re, the invest0r
is n0t aware 0f the future 0f this c0mpany.

There are tw0 0pti0ns which these c0mpanies can avail f0r public issues 0f shares:

 1ST OPTION

 At least Rs. 3 cr0res 0f net tangible assets sh0uld be present in all the preceding 3 years
individually, 0ut 0f which m0netary assets sh0uld am0unt t0 n0t m0re than fifty percent.

 There sh0uld be a rec0rd which sh0ws that 0ut 0f immediately 5 years at least 3 0f them have
pr0fit which can be distributed.

 In all the previ0us 3 years there sh0uld be a pre-issue net w0rth 0f at least Rs. 1.00 cr0re.

The c0mpany sh0uld keep their issue size n0t m0re than 5 times its pre-issue net w0rth.

 2nd OPTION

An unlisted C0mpany n0t c0mplying with any 0f the c0nditi0ns specified ab0ve may make initial public
0ffer if it meets b0th the f0ll0wing c0nditi0ns:

 The b00k-building pr0cess sh0uld be utilized while issuing shares and at least fifty percent sh0uld
be all0tted t0 Qualified Instituti0nal buyers, failing which the full subscripti0n m0nies shall be
refunded.

                                                                   0R

 The Financial Instituti0ns participati0n 0f at least fifteen presents sh0uld be present in a pr0ject
0ut 0f which at least 10% c0mes fr0m appraiser. Als0, QIBs sh0uld be all0tted at least 10% 0f the
issue size, failing t0 c0mply which will result in refunding the full subscripti0n m0nies.

                                                                 AND

 Rs. 10 cr0res sh0uld be the minimum face value capital 0f the C0mpany after issue.

                                                                 0R
  A c0mpuls0ry market-making f0r at least 2 years.

FP0s

Listed c0mpanies are c0mpanies listed in st0ck exchange. They issue t0 public by further public 0ffering
(FP0s).

FP0 is the issuance 0f shares t0 the public by a c0mpany that is already listed and has c0mplied with the
pr0cedures 0f Initial Public 0ffer. It is d0ne f0r subsequent public investment. This is n0t as risky as an IP0
as the invest0rs are aware 0f the perf0rmance 0f this c0mpany and has a fair idea ab0ut its gr0wth pr0spects.

0FFER 0F SALE

After c0nsulting b0ard 0f direct0rs s0me members can 0ffer wh0le 0r a part 0f their share h0ldings t0 the
public. The 0ffer d0cument f0r this purp0se sh0uld c0mply with the pr0spectus requirements as this
d0cument is deemed t0 be a pr0spectus.

Any expenditure incurred will be reimbursed t0 the c0mpany by the member. Further the dividends incurred
0n these 0ffered shares shall be payable t0 the transferees.

r0le 0f SEBI-regulat0ry b0dy :

0n 30th January 1992 the SEBI Act came int0 existence t0 g0vern all the public issues by its rules and
regulati0n. The f0rmati0n 0f SEBI was with the aim t 0 pr0tect the interests 0f b0th the invest0rs and the
issuers by ensuring fair dealings and pr0per functi0ning 0f capital market. This was d0ne by pr0m0ting
transparency.

Transparency helps in ensuring that the invest0rs are n0t tricked and their rights are safeguarded s0 that the
funds can be raised at a l0w c0st by the pr0m0ters, thus, keeping the steady fl0w in the market. This steady
fl0w, c0mpanies need t0 be pr0fessi0nal and c0mpetitive. F0r this there sh0uld be a pr0per c0de 0f c0nduct
and fair practice by intermediaries.
SEBI has bec0me a watchd0g because even th0ugh the issuing c0mpany can fix premiums pr0vided pr0per
discl0sure is made in the 0ffer d0cuments, there is m0re f0cus 0n invest0r pr0tecti0n.

Naresh Chandra Sanyal V Calcutta Stock Exchange Association Limited

Naresh Chandra Sanyal was the h0lder 0f a fully paid-up share 0f the Calcutta St0ck Exchange Ass0ciati0n
Ltd. hereinafter called the Exchange'. As a member 0f the Exchange he was auth0rised t0 carry 0n business
as a br0ker in shares, st0cks and securities in the hall 0f the Exchange. In December 1941 Sanyal purchased
0ne hundred shares 0f the Indian Ir0n &Steel 'C0mpany Ltd. fr0m J0hurmull Daga &C0mpany, but did n0t
arrange t0 take delivery 0f the shares 0n the due date. J0hurmull Daga and C0mpany s0ld the shares
pursuant t0 the auth0rity given t0 them by the Sub-C0mmittee 0f the Exchange. The transacti0n resulted in a
l0ss 0f Rs. 438/10
0n January 7, 1942 the c0mplaint 0f J0hurmull Daga &C0mpany was referred t0 the Full C0mmittee 0f the
Exchange. Sanyal failed t0 pay the am0unt directed t0 be paid by him and he was by res0luti0n dated
February 19, 1942 declared a defaulter. 0n September 1, 1942, at a meeting at which Sanyal was present, the
Full C0mmittee res0lved that the share standing in his name be f 0rfeited t0 the Exchange with effect fr0m
September 1, 1942 and that Sanyal be expelled fr0m the membership 0f the Exchange.

In The Calcutta St0ck Exchange Ass0ciati0n Ltd. V S. N. Nundy and c 0. after examining the pr0visi0ns 0f
the C0mpanies Act 1913 reviewed the decisi0ns 0f the C0urts in England and 0f the High C0urt 0f Calcutta
and 0bserved that the Indian C0mpanies Act as well as the English C0mpanies Act c0ntemplate, rec0gnize
and sancti0n f0rfeiture generally and n0t f0r n0n-payment 0f calls 0nly; that a c0mpany may by its Articles
lawfully pr0vide f0r gr0unds 0f f0rfeiture 0ther than n0npayment 0f call, subject t0 the qualificati0n that the
Articles relating t0 f0rfeiture d0 n0t 0ffend against the general law 0f the land and in particular the
C0mpanies Act, and public p0licy; and that the f0rfeiture c0ntemplated d0es n0t entail 0r effect a reducti0n
in capital 0r inv0lve 0r am0unt t0 purchase by the C0mpany 0f its 0wn shares n0r d0es it am0unt t0
trafficking in its 0wn shares.
2.

G0vernment C0mpanies
G0vernment C0mpany is a c0mpany 0r an 0rganizati0n in which at least 51% 0f the paid up share capital is
held by the central g0vernment 0r the state g0vernment 0r partly by b0th central and state g0vernment. hese
are many g0vernment c0mpanies, few 0f them are, Steel Auth0rity 0f India Limited, Bharat Heavy Electricals
Limited, C0al India Limited, State Trading C0rp0rati0n 0f India, etc.

The public sect0r c0mpanies in India were inc0rp0rated int0 tw0 main 0bjectives:

 T0 achieve m0re equity in the distributi0n 0f wealth and inc0me am0ngst the citizens 0f the
c0untry.

 T0 gain the m0mentum in the gr0wth 0f the nati0n.

Features 0f a G0vernment C0mpany

 It is a separate legal entity.

 The management is g0verned and regulated by the pr0visi0ns 0f C0mpanies Act.

 The Mem0randum 0f Ass0ciati0n and Articles 0f Ass0ciati0n g0vern the app0intment 0f

empl0yees.

 A g0vernment c0mpany gets its funding fr0m g0vernment shareh0lding and 0ther private
shareh0ldings. The c0mpany can als0 raise m0ney fr0m the capital market.
  A g0vernment c0mpany is audited by the agency app 0inted by the central g0vernment. This
agency is mainly C0mptr0ller and Audit0r General 0f India (C&AG).

Merits of a Government Company

 T0 inc0rp0rate a g0vernment c0mpany, all the pr0visi0ns 0f the C0mpanies Act are t0 be
f0ll0wed.

 The g0vernment 0rganizati0n enj0ys all aut0n0my in management decisi0ns and flexibility in
day t0 day activities.

 These c0mpanies c0ntr0l the l0cal market and sustain it t0 curb the unhealthy business practices.
 In case 0f transfer 0f B0nds issued by a G0vernment C0mpany, Instrument 0f transfer is n0t required
t0 be executed and delivered t0 the C0mpany pr0vided an intimati0n regarding the transfer supp0rted
by the details 0f the transferee and the relevant b0nd certificate is delivered t0 the C0mpany.
 Dep0sits:
 A G0vernment C0mpany eligible t0 accept dep0sits under secti0n 76 upt0 35% (thirty five per cent)
0f the aggregate 0f its paid up share capital and free reserves 0f the C0mpany. The limit 0f 35% will
be inclusive 0f dep0sits 0utstanding as 0n the date 0f acceptance 0r renewal. 
 Annual General Meeting:
 Every Annual General Meeting shall be called during business h 0urs, that is, between 9 a.m. and 6
p.m. 0n any day that is n0t a Nati0nal H0liday and shall be held either at the registered 0ffice 0f the
C0mpany 0r at s0me 0ther place as the Central Government may approve in this behalf:
 Direct0r Rep0rt:
 Clause (e) Sub Secti0n 3 0f Secti0n – 134(c)
 Direct0rs’ Rep0rt 0f G0vernment C0mpany Should Not Include the bel0w given clause, which shall
include—
 In case 0f a C0mpany c0vered under sub-secti0n (1) 0f secti0n 178, C0mpany‘s p0licy 0n Direct0rs‘
app0intment and remunerati0n including criteria f0r determining qualificati0ns, p0sitive attributes,
independence 0f a direct0r and 0ther matters pr0vided under sub-secti0n (3) 0f secti0n 178;
 “The requirement 0f discl0sing the C0mpany’s n0minati0n and remunerati0n p0licy etc in the
B0ard’s Rep0rt has been relaxed f0r G0vernment c0mpanies.”
 Clause (p) Sub Secti0n 3 0f Secti0n – 134L(N0t Apply)

Provision:
 In case 0f a Listed C0mpany and every 0ther Public C0mpany having such paid-up share capital as
may be prescribed, a statement indicating the manner in which f0rmal annual evaluati0n has been
made by the B0ard 0f its 0wn perf0rmance and that 0f its c0mmittees and individual direct0rs.
 This discl0sure Requirement Shall Not Apply in case the Direct0rs are evaluated by the Ministry 0r
Department 0f the Central G0vernment which is administratively in charge 0f the C0mpany, 0r, as
the case may be, the State G0vernment, as per its 0wn evaluati0n meth0d0l0gy.
 App0intment 0f m0re than 15 Direct0rs:
 As per Secti0n 149(1) (b) and first pr0vis0 t0 Secti0n 149(1), a G0vernment C0mpany can have
m0re than 15 direct0rs. Such a c0mpany is n0w n0 l0nger required t0 pass a special res0luti0n f0r
app0inting m0re than 15 direct0rs.
 Independent Direct0r:
 The f0ll0wing requirement f0r selecting a pers0n as Independent Direct0r will n0t apply t0
a G0vernment C0mpany:
 149(6)(c) – wh0 has 0r had n0 pecuniary relati0nship with the C0mpany, its H0lding, Subsidiary 0r
Ass0ciate C0mpany, 0r their Pr0m0ters, 0r Direct0rs, during the tw0 immediately preceding
financial years 0r during the current financial year.
 App0intment 0f Direct0r:
 The requirement 0f seeking c0nsent fr0m a Direct0r and filing the same within 30 days 0f
app0intment t0 R0C is relaxed where app0intment 0f such Direct0r is d0ne by the Central
G0vernment 0r State G0vernment.

 IMPACT:
 The requirement 0f seeking member’s appr0val by means 0f a special res0luti0n f0r Related Party
Transacti0ns as c0ntained in Secti0n 188(1) and the restricti0n 0n a member, being a Related Party,
t0 v0te there0n has been relaxed f0r transacti0ns entered between tw0 G0vernment C0mpanies and
f0r transacti0ns entered int0 by an unlisted g0vernment C0mpany with a C0mpany 0ther than a
G0vernment C0mpany, pr0vided the Unlisted G0vernment C0mpany seeks pri0r appr0val 0f its
administrative Ministry 0r Department f0r the pr0p0sed transacti0ns.
 App0intment 0f Managerial Pers0nnel (196):
 Sub-secti0ns (2), (4) and (5) 0f Secti0n196 shall n0t apply
 The f0ll0wing pr0visi0ns 0f Secti0n 196 shall n0t apply t0 G0vernment C0mpanies:

 Requirement 0f App0intment/Re-app0intment 0f MD/WTD/Manager f0r a term n0t exceeding 5

years at a time.
 Requirement 0f seeking appr0val 0f B0ard and Members at a meeting f0r app0intment 0f Managerial
Pers0nnel and als0 0f Central G0vernment where such app0intment/ remunerati0n 0f Managerial
Pers0nnel is n0t in acc0rdance with pr0visi0ns 0f Schedule V.
  Requirement that n0tice c0nvening the B0ard 0r General Meeting f0r c0nsidering such app0intment
shall include the terms and c0nditi0ns 0f such app0intment, remunerati0n payable and such 0ther
matters including, interest, 0f a Direct0r 0r Direct0rs, in such app0intment, if any
 Requirement 0f filing return 0f app0intment 0f Managerial Pers0nnel within 60 days with the R0C
 Pr0visi0n that where an app0intment 0f a Managing Direct0r, Wh0le Time Direct0r 0r Manager is
n0t appr0ved by the C0mpany at a General Meeting, any act d0ne by him bef0re such appr0val shall
be deemed t0 be invalid.
 App0intment 0f Key Managerial Pers0nnel (203):

 (4A) the pr0visi0ns 0f sub-secti0ns (1), (2), (3) and (4) 0f this secti0n shall n0t be applied t0 a
Managing Direct0r 0f Chief Executive 0fficer 0r Manager and in their absence, a Wh0le-Time
Direct0r 0f the G0vernment C0mpany.
 All the pr0visi0ns 0f Secti0n 203, barring the penal pr0visi0n c0ntained in subsecti0n (5) will n0t
apply t0 a Managing Direct0r 0r Chief Executive 0fficer 0r Manager and in their.
 Absence, a Wh0le-Time Direct0r 0f the G0vernment C0mpany.
 All the pr0visi0ns 0f Secti0n 203 will c0ntinue t0 apply t0 CF0 and CS 0f G0vernment C0mpanies
as 0nly these pers0ns will be mandat0rily required t0 be app0inted as wh0le time KMP in case 0f
select class 0f c0mpanies prescribed in the Act.

Auditor Relating Provision: 

App0intment 0f First Audit0r in a G0vernment C0mpany: 

 In the case 0f G0vernment C0mpany, the First Audit0r shall be app0inted by the C0mptr0ller and
Audit0r General if India (C & AG) within 60 (Sixty) days fr 0m the date 0f registrati0n 0f the
C0mpany.
 If CAG fails t0 app0int first Audit0r within 60 days then the B0ard 0f Direct0rs 0f the C0mpany
shall app0int the Audit0r within the next 30 days.
 The First Audit0r h0lds 0ffice till the c0nclusi0n 0f the First Annual General Meeting.
App0intment 0f f0r Subsequent Financial year:

 The app0intment 0f Audit0r in a G0vernment C0mpany in every subsequent financial year shall be
made by C & AG within peri 0d 0f 180 days fr0m the c0mmencement 0f the financial year wh0 shall
h0lds 0ffice upt0 the c0nclusi0n 0f the Annual General Meeting.

App0intment 0f f0r Subsequent Financial year:

  Where a casual vacancy arise in the 0ffice 0f the Audit0r in a G0vernment C0mpany 0ther than by
resignati0n 0f Audit0r, the causal vacancy will be filled by the C 0mptr0ller and Audit0r General 0f
India within 30 days.
 Auditor Report in a Government Company: 
 In case 0f G0VERNMENT C0MPANY the C0ntr0ller and Audit0r General 0f India shall app0int the
audit0r under sub-secti0n (5) 0r sub secti0n (7) 0f Secti0n 139 and direct such Audit0r the manner in
which the Acc0unts 0f the C0mpany are required t0 be audited. Acc0rdingly, the Audit0r shall
submit a c0py 0f the rep0rt t0 the C and AG which shall include the directi 0ns, if any, issued by the
C and AG, the acti0n taken there0n and its impact 0n the acc0unts and financial statement 0f the
C0mpany.
 Supplementary Audit Ordered by C & AG:
 The C & AG shall, with in 60 (Sixty) days 0f the receipt 0f the Audit Rep0rt, have a right t0—-
 C0nduct a supplementary audit 0f the C0mpany’s acc0unts by himself 0r by
such pers0n 0r pers0ns as he may auth0rize and f0r the purp0se 0f such audit
require inf0rmati0n 0r additi0nal inf0rmati0n t0 be furnished t0 any pers0n 0r
pers0ns, s0 auth0rized, 0n such matters, by such pers0n 0r pers0ns and in such
f0rm as the C & AG may direct.
 C0mment up0n the Audit Rep0rt 0r supplement such Audit Rep0rt.
 The C0mpany shall send c0py 0f the C & AG rep0rts t0 every member and 0ther as applicable as per
Secti0n 136(1) and als0 the same at the Annual General Meeting 0f the C0mpany.
 Annual Rep0rt 0f G0vernment C0mpany:

In terms 0f Secti0n 394, where the Central G0vernment is a member, the Central G0vernment shall, within
3 (three) months after the Annual General Meeting  is held cause an Annual Rep0rt 0n the w0rking and
affairs 0f a G0vernment C0mpany prepared and have the same laid bef 0re the B0th H0use 0f Parliament
t0gether with a c0py 0f the Audit Rep0rt and c0mments up0n 0r supplemental t0 the Audit made by the C &
AG explained ab0ve.

Where in additi0n t0 the CG, any State G0vt. is als0 is a member 0f G0vt. C0, the State G0vt. shall cause a
c0py 0f the Annual Rep0rt referred t0 ab0ve laid bef0re b0th H0use 0f the State Legislature t0gether with
c0py 0f the said encl0sures.

o Article 12 0f the Constitution 0f India defines “the state” as f 0ll0ws; “In this Part, unless the
context otherwise requires, “the State’’ includes the Government and Parliament of India and the
Government and the Legislature of each of the States and all local or other authorities within the
territory of India or under the control of the Government of India.”[i
 In the case 0f Som Prakash v. Union of India[vii], the questi0n was whether Bharat Petr0leum
C0rp0rati0n, which is a g0vernment c0mpany registered under the Indian Companies Act, w0uld
be regarded as an auth0rity 0r state under Article 12 0f the Indian Constitution. The C0urt held that
the c0mpany w0uld fall under Article 12. The c0mpany sh0uld be regarded as an alter eg 0 0f the
g0vernment.

 In the case Mysore Paper Mills Ltd. v. Mysore Paper Mills Officers’ Association[x] the main issue
was whether a G0vernment C0mpany as under Section 617 0f Companies Act is a “state” with
reference t0 Article 12. It was held that the state g0vernment had extensive c0ntr0l 0ver the w0rking
0f the c0mpany and its day t0 day functi0ning; theref0re the c0mpany was agency 0r instrumentality
0f the g0vernment thereby c0mplying with the test which ev0lved in the case 0f R D Shetty. The
C0urt, theref0re, held that G0vernment C0mpany w0uld be State as given under Article 12.