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PAPER – 2: CORPORATE AND OTHER LAWS
PART – I: ANNOUNCEMENTS STATING APPLICABILITY FOR NOVEMBER, 2021

EXAMINATIONS
Applicability for November, 2021 examinations
The Study Material (October 2020 edition) is applicable for November, 2021 examinations. This
study material is updated for all amendments till 31st October, 2020.
Besides, refer booklet on MCQs and Case scenarios (December 2020 edition) containing
Independent MCQs and Case Scenarios on the topics covered under the study material for 30
marks segment of MCQs in the Examination.
Students should first read the study material and then go through the said booklet. It will help
them with better understanding and practising of the concepts.
Further, all relevant amendments/ circulars/ notifications etc. in the Company law part and the
Other Laws portion, for the period 1st November, 2020 to 30th April, 2021 are mentioned below:
THE COMPANIES ACT, 2013
I. Chapter 1: Preliminary
1. Amendments related to - Notification S.O. 325(E) dated 22 nd January, 2021
The Central Government has amended section 2(52) of the Companies Act, 2013, through the
Companies (Amendment) Act, 2020.
Amendment:
In the Companies Act, 2013, in section 2, in clause (52), the following proviso shall be inserted,
namely:—
"Provided that such class of companies, which have listed or intend to list such class of
securities, as may be prescribed in consultation with the Securities and Exchange Board, shall
not be considered as listed companies.".
Old Law (Pg 1.13)
The amendment is newly inserted.
[Enforcement Date: 22 nd January, 2021]
2. Amendments related to – G.S.R. 92(E) dated 1 st February, 2021
The Central Government has amended the Companies (Specification of Definitions Details)
Rules, 2014, through the Companies (Specification of Definitions Details) Amendment Rules,
2021.
© The Institute of Chartered Accountants of India

PAPER – 2: CORPORATE AND OTHER LAWS 41
Amendment:
In the Companies (Specification of Definitions Details) Rules, 2014, in the rule 2, in sub-rule (1),
after clause (s), the following clause shall be inserted, namely:-
“(t) For the purposes of sub-clause (i) and sub-clause (ii) of clause (85) of section 2 of the Act,
paid up capital and turnover of the small company shall not exceed rupees two crores and
rupees twenty crores respectively.”.
Old Law (Pg 1.20)
[Enforcement Date: 1 st April, 2021]
3. Amendments related to – G.S.R. 123(E) dated 19th February, 2021
The Central Government has amended the Companies (Specification of definitions details)
Rules, 2014, through the Companies (Specification of definitions details) Second Amendment
Rules, 2021.
Amendment:
In the Companies (Specification of definitions details) Rules, 2014, after rule 2, the following
rule shall be inserted, namely:-
“2A. Companies not to be considered as listed companies.- For the purposes of the proviso
to clause (52) of section 2 of the Act, the following classes of companies shall not be cons idered
as listed companies, namely:-
(a) Public companies which have not listed their equity shares on a recognized stock exchange
but have listed their –
(i) non-convertible debt securities issued on private placement basis in terms of SEBI (Issue
and Listing of Debt Securities) Regulations, 2008; or
(ii) non-convertible redeemable preference shares issued on private placement basis in terms
of SEBI (Issue and Listing of Non-Convertible Redeemable Preference Shares)
Regulations, 2013; or
(iii) both categories of (i) and (ii) above.
(b) Private companies which have listed their non-convertible debt securities on private
placement basis on a recognized stock exchange in terms of SEBI (Issue and Listing of Debt
Securities) Regulations, 2008;

42 INTERMEDIATE (NEW) EXAMINATION: NOVEMBER, 2021
(c) Public companies which have not listed their equity shares on a recognized stock exchange
but whose equity shares are listed on a stock exchange in a jurisdiction as specified in sub -
section (3) of section 23 of the Act.”.
Old Law (Pg 1.13)
II. Chapter 2: Incorporation of Company and Matters Incidental thereto
1. Amendments related to - S.O. 4646(E) dated 21 st December, 2020
The Central Government has amended Section 8 of the Companies Act, 2013, through the
Amendment:
In section 8 of the principal Act, in sub-section (11),—
(a) the words "with imprisonment for a term which may extend to three years or" shall be omitted;
(b) for the words "twenty-five lakh rupees, or with both", the words "twenty-five lakh rupees"
shall be substituted.
Old Law (Pg 2.14)
Penalty/ punishment in contravention: If a company makes any default in complying with any of
the requirements laid down in this section, ……. every officer of the company who is in default
shall be punishable with imprisonment for a term which may extend to three years or with
fine varying from twenty-five thousand rupees to twenty-five lakh rupees, or with both.
[Enforcement Date: 21 st December, 2020]
2. Amendments related to - Notification G.S.R. 91(E) dated 1 st February, 2021
The Central Government has amended the Companies (Incorporation) Rules, 2014, by the
Companies (Incorporation) Second Amendment Rules, 2021.
Amendment:
In rule 3,
(a) in sub-rule (1),-
(i) for the words, ―’and resident in India’ the words ―’whether resident in India or otherwise’
shall be substituted;

(ii) in Explanation I, for the words ―’one hundred and eighty two days’ the words ―’one
hundred and twenty days’ shall be substituted;
(b) sub-rule (7) shall be omitted.
Old Law (Pg 2.10) [for Rule 3(1)]
 Only a natural person who is an Indian citizen and resident in India-
(a) shall be eligible to incorporate One Person Company (OPC);
(b) shall be a nominee for the sole member of One Person Company (OPC).
Explanation I - For the purposes of this rule, the term "resident in India" means a person
who has stayed in India for a period of not less than 182 days during the immediately
preceding financial year.
Pg 2.11 [for Rule 3(7)]
 OPC can not convert voluntarily into any kind of company unless two years have
expired from the date of incorporation, except where the paid up share capital is
increased beyond fifty lakh rupees or its average annual turnover during the relevant
period exceeds two crore rupees.
III. Chapter 3: Prospectus and Allotment of Securities
Amendments related to - S.O. 4646(E) dated 21 st December, 2020
The Central Government has amended the following sections of the Companies Act, 20 13,
through the Companies (Amendment) Act, 2020, as follows:
Amendment:
(i) In section 26 of the Companies Act, 2013 in sub-section (9),—
(a) the words "with imprisonment for a term which may extend to three years or" shall be
omitted;
(b) for the words "three lakh rupees, or with both", the words "three lakh rupees'' shall be
substituted.
Old Law (Pg 3.9)
If a prospectus is issued in contravention of the provisions of section 26, the company ……..
prospectus shall be punishable with imprisonment for a term which may extend to three
years or with fine which shall not be less than fifty thousand rupees but which may extend to
three lakh rupees, or with both.
(ii) In section 40 of the Companies Act, 2013 in sub-section (5),—
(a) the words "with imprisonment for a term which may extend to one year or" shall be omitted;

(b) for the words "three lakh rupees, or with both", the words "three lakh rupees" shall be
substituted.
Old Law (Pg 3.23)
Company:
• with minimum fine of five lakh rupees and maximum of fifty lakh rupees
Defaulting officer:
• with imprisonment upto one year, or
• with minimum fine of fifty thousand rupees and maximum of three lakh rupees, or
• with both.

IV. Chapter 4: Share Capital and Debentures
The Central Government has amended the following sections of the Companies Act, 2013,
through the Companies (Amendment) Act, 2020.
Amendment:
(i) In section 48 of the Companies Act, 2013 sub-section (5) shall be omitted.
Old Law (Pg 4.14)
(6) Punishment for Default: According to Section 48 (5), where any default is made in
complying with the provisions of this section, the punishment shall be as under:
• company: It shall be punishable with fine which shall not be less than twenty -five
thousand rupees but which may extend to five lakh rupees;
• every officer of the company who is in default: He shall be punishable with
imprisonment for a term which may extend to six months or with fine which shall not
be less than twenty-five thousand rupees but which may extend to five lakh rupees,
or with both.
(ii) In section 56 of the Companies Act, 2013 for sub-section (6), the following sub-section
shall be substituted, namely:-
"(6) Where any default is made in complying with the provisions of sub-sections (1) to (5), the
company and every officer of the company who is in default shall be liable to a penalty of fifty
thousand rupees.".
Old Law (Pg 4.28)
Punishment for Default in compliance with the provisions: As per Section 56 (6), where any
default is made in complying with the provisions of sub-sections (1) to (5), the
punishment shall be as under:

• company: It shall be punishable with fine varying from 25,000 rupees to 5 lakh rupees
• every officer of the company who is in default: He shall be punishable with minimum
fine of 10,000 rupees and maximum of one lakh rupees.
(iii) In section 59 of the Companies Act, 2013 sub-section (5) shall be omitted.
Old Law (Pg 4.33)
(v) Default in complying with the Order of Tribunal: As per Section 59 (5), if any default
is made in complying with the order of the Tribunal under Section 59, the punishment
shall be as under:
• company: It shall be punishable with fine which shall not be less than one lakh
rupees but which may extend to five lakh rupees, and
• every officer of the company who is in default: He shall be punishable with
imprisonment for a term which may extend to one year or with fine which shall not
be less than one lakh rupees but which may extend to three lakh rupees, or with
both.
(iv) In section 64 of the Companies Act, 2013 in sub-section (2),—
(a) for the words "one thousand rupees", the words "five hundred rupees" shall be substituted;
(b) for the words "or five lakh rupees whichever is less", the words "subject to a maximum of
five lakh rupees in case of a company and one lakh rupees in case of an officer who is in default"
Old Law (Pg 4.43)
(2) Default in Filing of Notice: Section 64 (2) states that where any company fails to comply
with the provisions of sub-section (1), such company and every officer who is in default shall be
liable to a penalty of one thousand rupees for each day during which such default continues,
or five lakh rupees whichever is less.
(v) In section 66 of the Companies Act, 2013 sub-section (11) shall be omitted.
Old Law (Pg 4.47)
(11) Failure to Publish the Order of Confirmation of the Reduction of Share Capital:
Section 66 (11) states that if a company fails to comply with the provisions of sub-section
(4), it shall be punishable with fine which shall not be less than five lakh rupees but which
may extend to twenty-five lakh rupees.

(vi) In section 68 of the Companies Act, 2013 in sub-section (11),—

(a) the words "with imprisonment for a term which may extend to three years or" shall be
omitted;
(b) for the words "three lakh rupees, or with both", the words "three lakh rupees" shall be
substituted.
Old Law (Pg 4.52)
(11) Penalty for Default: Section 68 (11) states that if a company makes default in complying
with the provisions of this section ……………
• Every officer of the company who is in default: He shall be punishable with imprisonment
for a term which may extend to three years or with fine which shall not be less than one
lakh rupees but which may extend to three lakh rupees, or with both.
(vii) In section 71 of the Companies Act, 2013 sub-section (11) shall be omitted.
Old Law (Pg 4.63)
(11) Default in compliance with Order of the Tribunal: According to Section 71 (11), if any
default is made in complying with the order of the Tribunal under this section, every
officer of the company who is in default shall be punishable as under:
• with imprisonment for a term which may extend to three years or with fine which
shall not be less than two lakh rupees but which may extend to five lakh rupees, or
with both.
2. Amendments related to - S.O. 325(E) dated 22 nd January, 2021
The Central Government has amended section 62 of the Companies Act, 2013, through the
Companies (Amendment) Act, 2020, as follows:
Amendment:
In section 62 of the Companies Act, 2013 in sub-section (1), in clause (a), in sub-clause (i),
after the words "less than fifteen days", the words "or such lesser number of days as may be
prescribed" shall be inserted.
Old Law (Pg 4.36)- [The words are newly inserted]
(i) the offer shall be made by notice specifying the number of shares offered and limiting a
time not being less than fifteen days and not exceeding thirty days from the date of the offer
within which the offer, if not accepted, shall be deemed to have been declined .

V. Chapter 6: Registration of Charges

Amendments related to - S.O. 4646(E) dated 21 st December, 2020
Amendment:
In section 86 of the Companies Act, 2013 for sub-section (1), the following sub-section shall be
substituted, namely:-
"(1) If any company is in default in complying with any of the provisions of this Chapter, the
company shall be liable to a penalty of five lakh rupees and every officer of the company who
is in default shall be liable to a penalty of fifty thousand rupees.".
Old Law (Pg 6.16)
if a company contravenes any of the provisions relating to the registration of charges or
modification or satisfaction of charges, the punishment shall be as under:
 the company shall be punishable with minimum fine of ` one lakh and maximum fine
of ` ten lakhs; and
 every defaulting officer of the company shall be punishable with imprisonment
maximum up to six months or with minimum fine of ` twenty-five thousand and
maximum of ` one lakh, or with both.
VI. Chapter 7: Management and Administration
Amendment:
(i) In section 88 of the Companies Act, 2013, for sub-section (5), the following sub-section
"(5) If a company does not maintain a register of members or debenture-holders or other security
holders or fails to maintain them in accordance with the provisions of sub-section (1) or sub-
section (2), the company shall be liable to a penalty of three lakh rupees and every officer of
the company who is in default shall be liable to a penalty of fifty thousand rupees.".

Old Law (Pg 7.7)

Section 88(5) of the Act provides that company and every officer of the company who is
in default shall be punishable with fine which shall not be less than ` 50,000 but which
may extend to ` 3,00,000 and where the failure is a continuing one, with a further fine
which may extend to ` 1,000 per day.
(ii) In section 89 of the Companies Act, 2013—
(a) for sub-section (5), the following sub-section shall be substituted, namely:—
"(5) If any person fails to make a declaration as required under sub-section (1) or sub-section
(2) or sub-section (3), he shall be liable to a penalty of fifty thousand rupees and in case of
continuing failure, with a further penalty of two hundred rupees for each day after the first during
which such failure continues, subject to a maximum of five lakh rupees.";
Old Law (Pg 7.10)
 Related to persons required to make a declaration [Section 89(5)]- If any person fails to
make a declaration as required under section 89, without any reasonable cause, he
shall be punishable with fine which may extend to fifty thousand rupees and where
the failure is a continuing one, with a further fine which may extend to one thousand
rupees for every day after the first during which the failure continues.
(b) for sub-section (7), the following sub-section shall be substituted, namely:—
"(7) If a company, required to file a return under sub-section (6), fails to do so before the expiry
of the time specified therein, the company and every officer of the company who is in default
shall be liable to a penalty of one thousand rupees for each day during which such failure
continues, subject to a maximum of five lakh rupees in the case of a company and two lakh
rupees in case of an officer who is in default.";
Old Law (Pg 7.10)
 Related to company [Section 89(7)]- If a company, required to file a return u/s 89(6),
fails to do so within 30 days of receipt of declaration by it, the company and every
officer of the company who is in default shall be punishable with fine which shall not
be less than five hundred rupees but which may extend to one thousand rupees and
where the failure is a continuing one, with a further fine which may extend to one
thousand rupees for every day after the first during which the failure continues.
(iii) In section 90 of the Companies Act, 2013—
(a) for sub-section (10), the following sub-section shall be substituted, namely:—
"(10) If any person fails to make a declaration as required under sub -section (1), he shall be
liable to a penalty of fifty thousand rupees and in case of continuing failure, with a further penalty

of one thousand rupees for each day after the first during which such failure continues, subject
to a maximum of two lakh rupees.";
Old Law (Pg 7.15)
Where any SBO fails to give required disclosure under the SBO Rules then such
individual(s) shall be liable for the following:
(i) Imprisonment for a term which may extend to one year or
(ii) With fine which shall not be less than one lakh rupees but which may extend to ten
lakh rupees or
(iii) With both
(iv) Where the failure is continuous, with a further fine which may extend to one
thousand rupees for every day after the first day during which the failure continues.
(b) for sub-section (11), the following sub-section shall be substituted, namely:—
"(11) If a company, required to maintain register under sub-section (2) and file the information
under sub-section (4) or required to take necessary steps under sub-section (4A), fails to do so
or denies inspection as provided therein, the company shall be liable to a penalty of one lakh
rupees and in case of continuing failure, with a further penalty of five hundred rupee s for each
day, after the first during which such failure continues, subject to a maximum of five lakh rupees
and every officer of the company who is in default shall be liable to a penalty of twenty -five
thousand rupees and in case of continuing failure, with a further penalty of two hundred rupees
for each day, after the first during which such failure continues, subject to a maximum of one
lakh rupees.".
Old Law (Pg 7.15)
Where the Reporting Company fails to maintain register of SBO or file return of SBO with
ROC or denies inspection, then
(i) Company shall be liable for a fine which shall not be less than INR 10,00,000 but
which may extend to INR 50,00,000
(ii) Every officer in default shall be liable for a fine which shall not be less than
INR 10,00,000 but which may extend to INR 50,00,000
(iii) Where the failure is continuous, with a further fine which may extend to one
thousand rupees for every day after the first day during which the failure continues.
(iv) In section 92 of the Companies Act, 2013—
(a) in sub-section (5),—
(i) for the words "fifty thousand rupees", the words "ten thousand rupees" shall be substituted;

(ii) for the words "five lakh rupees", the words "two lakh rupees in case of a company and fifty
thousand rupees in case of an officer who is in default" shall be substituted;
Old Law (Pg 7.18)
Section 92(5) of the Act specifies that if any company fails to file its annual return under sub -
section (4), before the expiry of the period specified therein, such company and its every officer
who is in default shall be liable to a penalty of fifty thousand rupees and in case of continuing
failure, with further penalty of one hundred rupees for each day during which such failure
continues, subject to a maximum of five lakh rupees.
(b) in sub-section (6), for the words "punishable with fine which shall not be less than fifty
thousand rupees but which may extend to five lakh rupees", the words "liable to a penalty of two
lakh rupees" shall be substituted.
Old Law (Pg 7.19)
If a company secretary in practice, certifies the annual return otherwise than in acc ordance with
this section and the rules made thereunder, he shall be punishable with fine which shall not
be less than ` 50,000 but which may extend to ` 5,00,000
(v) In section 105 of the Companies Act, 2013 in sub-section (5),—
(a) for the words "who knowingly issues the invitations as aforesaid or wilfully authorises or
permits their issue shall be punishable with fine which may extend to one lakh rupees", the
words "who issues the invitation as aforesaid or authorises or permits their issue, shall be liable
to a penalty of fifty thousand rupees" shall be substituted;
(b) in the proviso, for the word "punishable", the word "liable" shall be substituted.
Old Law (Pg 7.32)
If for the purpose of any meeting of a company, invitations to appoint as proxy a person or one
of a number of persons specified in the invitations are issued at the company's expense to any
member entitled to have a notice of the meeting sent to him and to vote thereat by proxy, every
officer of the company who knowingly issues the invitations as aforesaid or willfully
authorises or permits their issue shall be punishable with fine which may extend to one
lakh rupees.
Provided that an officer shall not be punishable under this sub-section by reason only of the
issue to a member at his request in writing of a form of appointment naming the proxy, or of a
list of persons willing to act as proxies, if the form or list is available on request in writing to
every member entitled to vote at the meeting by proxy.

(vi) In section 117 of the Companies Act, 2013—

for sub-section (2), the following sub-section shall be substituted, namely:-
"(2) If any company fails to file the resolution or the agreement under sub-section (1) before the
expiry of the period specified therein, such company shall be liable to a penalty of ten thousand
rupees and in case of continuing failure, with a further penalty of one hundred rupees for each
day after the first during which such failure continues, subject to a maximum of two lakh rupees
and every officer of the company who is in default including liquidator of the company, if any,
shall be liable to a penalty of ten thousand rupees and in case of continuing failure, with a furt her
penalty of one hundred rupees for each day after the first during which such failure continues,
subject to a maximum of fifty thousand rupees.";
Old Law (Pg 7.55)
If any company fails to file the resolution or the agreement under sub-section (1) before
the expiry of the period specified therein, such company shall be liable to a penalty of
one lakh rupees and in case of continuing failure, with further penalty of five hundred
rupees for each day after the first during which such failure continues, subje ct to a
maximum of twenty-five lakh rupees and every officer of the company who is in default
including liquidator of the company, if any, shall be liable to a penalty of fifty thousand
rupees and in case of continuing failure, with further penalty of five hundred rupees for
each day after the first during which such failure continues, subject to a maximum of five
lakh rupees.
2. Amendments related to - S.O. 325(E) dated 22 nd January, 2021
through the Companies (Amendment) Act, 2020, as follows:
Amendment:
(i) In section 89 of the Companies Act, 2013, after sub-section (10), the following sub-section
shall be inserted, namely:-
"(11) The Central Government may, by notification, exempt any class or classes of persons from
complying with any of the requirements of this section, except sub-section (10), if it is considered
necessary to grant such exemption in the public interest and any such exemption may be
granted either unconditionally or subject to such conditions as may be specified in the
notification.".

Old Law (Pg 7.10)

(ii) In section 117 of the Companies Act, 2013-
In sub-section (3), in clause (g), for the second proviso, the following proviso shall be
"Provided further that nothing contained in this clause shall apply in respect of a resolution
passed to grant loans, or give guarantee or provide security in respect of loans under clause (f)
of sub-section (3) of section 179 in the ordinary course of its business by,-
(a) a banking company;
(b) any class of non-banking financial company registered under Chapter IIIB of the Reserve
Bank of India Act, 1934, as may be prescribed in consultation with the Reserve Bank of India;
(c) any class of housing finance company registered under the National Housing Bank Act,
1987, as may be prescribed in consultation with the National Housing Bank; and".
Old Law (Pg 7.55)
Provided further that nothing contained in this clause shall apply to a banking company
in respect of a resolution passed to grant loans, or give guarantee or provide security in
respect of loans under clause (f) of sub-section (3) of section 179 in the ordinary course
of its business; and
3. Amendments related to - S.O. 1066(E) dated 5 th March, 2021
The Central Government has amended the section 92 of the Companies Act, 2013, through the
Amendment:
In section 92 of the Companies Act, 2013-
In sub-section (1),-
(a) clause (c) shall be omitted;
(b) in clause (j), the words "indicating their names, addresses, countries of incorporation,
registration and percentage of shareholding held by them" shall be omitted;
(c) after the proviso, the following proviso shall be inserted, namely:-
'Provided further that the Central Government may prescribe abridged form of annual return for
"One Person Company, small company and such other class or classes of companies as may
be prescribed".'.

Old Law for (a): Pg 7.17

3. its indebtedness [ in diagram]
Old Law for (b): Pg 7.17
10. Details in respect of shares held by or on behalf of the Foreign Institutional Investors
including their names, addresses, countries of incorporation, registration and percentage
of shareholding held by them. [in diagram]
Old Law for (c): The amendment is newly inserted.
[Enforcement Date: 5 th March, 2021]
4. Amendments related to – G.S.R. 159(E) dated 5 th March, 2021
The Central Government has amended the Companies (Management and Administration)
Rules, 2014 through the Companies (Management and Administration) Amendment Rules,
2021.
Amendment:
In the Companies (Management and Administration) Rules, 2014,
in rule 11, for sub-rule (1), the following sub-rule shall be substituted, namely:-
“(1) Every company shall file its annual return in Form No.MGT-7 except One Person Company
(OPC) and Small Company. One Person Company and Small Company shall file annual return
from the financial year 2020-2021 onwards in Form No.MGT-7A”;
Old Law (Pg 7.17)
Every company shall prepare an annual return in Form No. MGT 7 as prescribed in Rules.
VII. Chapter 8: Declaration and Payment of Dividend
Amendments related to - S.O. 1303(E) dated 24 th March, 2021
Amendment:
In section 124 of the Companies Act, 2013 for sub-section (7), the following sub-section shall
be substituted, namely:-
"(7) If a company fails to comply with any of the requirements of this section, such company
shall be liable to a penalty of one lakh rupees and in case of continuing failure, with a further

penalty of five hundred rupees for each day after the first during which such failure continues,
subject to a maximum of ten lakh rupees and every officer of the company who is in default shall
be liable to a penalty of twenty-five thousand rupees and in case of continuing failure, with a
further penalty of one hundred rupees for each day after the first during which such failure
continues, subject to a maximum of two lakh rupees.".
Old Law (Pg 8.17)
(viii) Punishment for Contravention- If a company fails to comply with any of the
requirements relating to unpaid dividend account, it shall be punishable with minimum
fine of rupees five lakhs which may extend to rupees twenty-five lakhs.
Further, every officer of the company who is in default shall be punishable with minimum
fine of rupees one lakh which may extend to rupees five lakhs.
VIII. Chapter 9: Accounts of Companies
Amendment:
(i) In section 128 of the Companies Act, 2013, in sub-section (6),-
(a) the words "with imprisonment for a term which may extend to one year or" shall be omitted;
(b) the words "or with both" shall be omitted.
Old Law (Pg 9.7 and diagram on 9.3)
In case the aforementioned persons fail to take reasonable steps to secure compliance, they
shall in respect of each offence, be punishable with imprisonment for a term which may
extend to one year or with fine which shall not be less than fifty thousand rupees but which
may extend to five lakh rupees or both.
(ii) In section 134 of the principal Act, for sub-section (8), the following sub-section shall be
substituted, namely:—
"(8) If a company is in default in complying with the provisions of this section, the company shall
be liable to a penalty of three lakh rupees and every officer of the company who is in default
shall be liable to a penalty of fifty thousand rupees.".
Old Law (Pg 9.30)
Change the table

(iii) In section 137 of the principal Act, in sub-section (3),-

(a) for the words "one thousand rupees for every day during which the failure continues but
which shall not be more than ten lakh rupees", the words "ten thousand rupees and in case of
continuing failure, with a further penalty of one hundred rupees for each day during which such
failure continues, subject to a maximum of two lakh rupees," shall be substituted;
(b) for the words "one lakh rupees", the words "ten thousand rupees" shall be substituted;
(c) for the words "five lakh rupees", the words "fifty thousand rupees" shall be substituted.
Old Law (Pg 9.51)
(a) The company shall be liable to a penalty of ` 1,000 for every day during which the failure
continues but which shall not be more than ` 10 lacs; and
(1) liable to a penalty which shall not be less than ` 1 lac, and in case of continuing failure,
with further penalty of one hundred rupees for each day after the first during which such failure
continues, subject to a maximum of five lacs rupees.
And change the content in table also
The Central Government has amended section 135 of the Companies Act, 2013 through the
Companies (Amendment) Act, 2019, as follows:
Amendment:
In 1section 135 of the Companies Act, 2013-
(a) in sub-section (5), —
(i) after the words “three immediately preceding financial years,”, the words “or where the
company has not completed the period of three financial years since its incorporation, during
such immediately preceding financial years,” shall be inserted;
(ii) in the second proviso, after the words “reasons for not spending the amount” occurring at
the end, the words, brackets, figure and letters “and, unless the unspent amount relates to any
ongoing project referred to in sub-section (6), transfer such unspent amount to a Fund specified
in Schedule VII, within a period of six months of the expiry of the financial year” shall be inserted;
1 For convenience of students, amended section 135 along with relevant Rules, is given as Annexure.

(b) after sub-section (5), the following sub-sections shall be inserted, namely:—
“(6) Any amount remaining unspent under sub-section (5), pursuant to any ongoing project,
fulfilling such conditions as may be prescribed, undertaken by a company in persuance of its
Corporate Social Responsibility Policy, shall be transferred by the company within a period of
thirty days from the end of the financial year to a special account to be opened by the company
in that behalf for that financial year in any scheduled bank to be called the Unspent Corporate
Social Responsibility Account, and such amount shall be spent by the company in pursuance of
its obligation towards the Corporate Social Responsibility Policy within a period of three financial
years from the date of such transfer, failing which, the company shall transfer the same to a
Fund specified in Schedule VII, within a period of thirty days from the date o f completion of the
third financial year.
(7) If a company contravenes the provisions of sub-section (5) or sub-section (6), the company
shall be punishable with fine which shall not be less than fifty thousand rupees but which may
extend to twenty-five lakh rupees and every officer of such company who is in default shall be
punishable with imprisonment for a term which may extend to three years or with fine which
shall not be less than fifty thousand rupees but which may extend to five lakh r upees, or with
both.
(8) The Central Government may give such general or special directions to a company or class
of companies as it considers necessary to ensure compliance of provisions of this section and
such company or class of companies shall comply with such directions.”.
The Central Government has introduced section 129A and amended section 135 of the
Companies Act, 2013, through the Companies (Amendment) Act, 2020.
Amendment:
(i) After section 129 of the Companies Act, 2013 the following section shall be inserted,
namely:—
"129A. The Central Government may, require such class or classes of unlisted companies, as
may be prescribed,—
(a) to prepare the financial results of the company on such periodical basis and in such form
as may be prescribed;
(b) to obtain approval of the Board of Directors and complete audit or limited review of such
periodical financial results in such manner as may be prescribed; and

(c) file a copy with the Registrar within a period of thirty days of completion of the relevant
period with such fees as may be prescribed.".
Old Law- The section is newly introduced
(ii) In section 135 of the Companies Act, 2013-
(a) in sub-section (5), after the second proviso, the following proviso shall be inserted,
namely:—
"Provided also that if the company spends an amount in excess of the requirements provided
under this sub-section, such company may set off such excess amount against the requirement
to spend under this sub-section for such number of succeeding financial years and in such
manner, as may be prescribed.";
(b) for sub-section (7), the following sub-section shall be substituted, namely:-
"(7) If a company is in default in complying with the provisions of sub-section (5) or sub-section
(6), the company shall be liable to a penalty of twice the amount required to be transferred by
the company to the Fund specified in Schedule VII or the Unspent Corporate Social
Responsibility Account, as the case may be, or one crore rupees, whichever is less, and every
officer of the company who is in default shall be liable to a penalty of one -tenth of the amount
required to be transferred by the company to such Fund specified in Schedule VII, or the
Unspent Corporate Social Responsibility Account, as the case may be, or two lakh rupees,
whichever is less.";
(c) after sub-section (8), the following sub-section shall be inserted, namely:—
"(9) Where the amount to be spent by a company under sub-section (5) does not exceed fifty
lakh rupees, the requirement under sub-section (1) for constitution of the Corporate Social
Responsibility Committee shall not be applicable and the functions of such Commi ttee provided
under this section shall, in such cases, be discharged by the Board of Directors of such
company.".
4. Amendments related to - General Circular No. 01/2021 dated 13th January, 2021
The Ministry of Corporate Affairs have made a clarification on spending of CSR funds for
Awareness and public outreach on COVID-19 Vaccination programme.
This Circular is in continuation to this Ministry's General Circular No. 10/2020 dated 23.03.2020
wherein it was clarified that spending of CSR funds for COVID19 is an eligible CSR activity , it
is further clarified that spending of CSR funds for carrying out awareness campaigns/
programmes or public outreach campaigns on COVID-19 Vaccination programme is an eligible
CSR activity under item no. (i),(ii) and (xii) of Schedule VII of the Companies Act, 2013 relating

to promotion of health care, including preventive health care and sanitization, promoting
education, and, disaster management respectively.
The companies may undertake the aforesaid activities subject to fulfillment of Companies (CSR
Policy) Rules, 2014 and the circulars related to CSR, issued by this ministry from time to time.
5. Amendments related to - Notification G.S.R. 40(E), dated 22nd January, 2021
The Ministry of Corporate Affairs Vide NOTIFICATION G.S.R. 40(E), dated 22nd January, 2021,
in exercise of the powers conferred by section 135 and sub-sections (1) and (2) of section 469
of the Companies Act, 2013, the Central Government hereby makes the follo wing rules further
to amend the Companies (Corporate Social Responsibility Policy) Rules, 2014, namely: -
1. Short title and commencement. - (1) These rules may be called the Companies (Corporate
Social Responsibility Policy) Amendment Rules, 2021.
(2) They shall come into force on the date of their publication in the Official Gazette unless
explicitly provided elsewhere in this notification.
2. In the Companies (Corporate Social Responsibility Policy) Rules, 2014 (hereinafter
referred to as the said rules), for rule 2, the following rule shall be substituted, namely:-
“2. Definitions. - (1) In these rules, unless the context otherwise requires,-
(a) "Act" means the Companies Act, 2013 (18 of 2013);
(b) “Administrative overheads” means the expenses incurred by the company for ‘general
management and administration’ of Corporate Social Responsibility functions in the company
but shall not include the expenses directly incurred for the designing, implementation,
monitoring, and evaluation of a particular Corporate Social Responsibility project or programme;
(c) "Annexure" means the Annexure appended to these rules;
(d) “Corporate Social Responsibility (CSR)” means the activities undertaken by a Company in
pursuance of its statutory obligation laid down in section 135 of the Act in accordance with the
provisions contained in these rules, but shall not include the following, namely: -
(i) activities undertaken in pursuance of normal course of business of the company:
Provided that any company engaged in research and development activity of new vaccine, drugs
and medical devices in their normal course of business may undertake research and
development activity of new vaccine, drugs and medical devices related to COVID -19 for
financial years 2020-21, 2021-22, 2022-23 subject to the conditions that
(a) such research and development activities shall be carried out in collaboration with any of
the institutes or organisations mentioned in item (ix) of Schedule VII to the Act;

(b) details of such activity shall be disclosed separately in the Annual report on CSR included
in the Board’s Report;
(ii) any activity undertaken by the company outside India except for training of Indian sports
personnel representing any State or Union territory at national level or India at international
level;
(iii) contribution of any amount directly or indirectly to any political party under section 182 of
the Act;
(iv) activities benefitting employees of the company as defined in clause (k) of section 2 of the
Code on Wages, 2019 (29 of 2019);
(v) activities supported by the companies on sponsorship basis for deriving marketing benefits
for its products or services;
(vi) activities carried out for fulfilment of any other statutory obligations under any law in force
in India;
(e) "CSR Committee" means the Corporate Social Responsibility Committee of the Board
referred to in section 135 of the Act;
(f) "CSR Policy" means a statement containing the approach and direction given by the board
of a company, taking into account the recommendations of its CSR Committee, and includes
guiding principles for selection, implementation and monitoring of activities as well as
formulation of the annual action plan;
(g) “International Organisation” means an organisation notified by the Central Government as
an international organisation under section 3 of the United Nations (Privileges and Immunities)
Act, 1947 (46 of 1947), to which the provisions of the Schedule to the said Act apply;
(h) "Net profit" means the net profit of a company as per its financial statement prepared in
accordance with the applicable provisions of the Act, but shall not include the following, namely: -
(i) any profit arising from any overseas branch or branches of the company, whether operated
as a separate company or otherwise; and
(ii) any dividend received from other companies in India, which are covered under and
complying with the provisions of section 135 of the Act:
Provided that in case of a foreign company covered under these rules, net profit means t he net
profit of such company as per profit and loss account prepared in terms of clause (a) of sub -
section (1) of section 381, read with section 198 of the Act;
(i) “Ongoing Project” means a multi-year project undertaken by a Company in fulfilment of its
CSR obligation having timelines not exceeding three years excluding the financial year in which

it was commenced, and shall include such project that was initially not approved as a multi -year
project but whose duration has been extended beyond one year by the board based on
reasonable justification;
(j) “Public Authority” means ‘Public Authority’ as defined in clause (h) of section 2 of the Right
to Information Act, 2005 (22 of 2005);
(k) “section” means a section of the Act.
(2) Words and expressions used and not defined in these rules but defined in the Act shall
have the same meanings respectively assigned to them in the Act. ”.
3. In the said rules, in rule 3, in sub-rule (2), in clause (b), for the words, brackets and figure
“sub-section (2) to (5)”, the words, brackets and figure “sub-section (2) to (6)” shall be
substituted.
4. In the said rules, for rule 4, the following rule shall be substituted, namely: -
“4. CSR Implementation. – (1) The Board shall ensure that the CSR activities are undertaken
by the company itself or through -
(a) a company established under section 8 of the Act, or a registered public trust or a
registered society, registered under section 12A and 80 G of the Income Tax Act, 1961 (43 of
1961), established by the company, either singly or along with any other company, or
(b) a company established under section 8 of the Act or a registered trust or a registered
society, established by the Central Government or State Government; or
(c) any entity established under an Act of Parliament or a State legislature; or
(d) a company established under section 8 of the Act, or a registered public trust or a
registered society, registered under section 12A and 80G of the Income Tax Act, 1961, and
having an established track record of at least three years in undertaking similar activities.
(2) (a) Every entity, covered under sub-rule (1), who intends to undertake any CSR activity, shall
register itself with the Central Government by filing the form CSR-1 electronically with the
Registrar, with effect from the 01 st day of April 2021:
Provided that the provisions of this sub-rule shall not affect the CSR projects or programmes
approved prior to the 01st day of April 2021.
(b) Form CSR-1 shall be signed and submitted electronically by the entity and shall be verified
digitally by a Chartered Accountant in practice or a Company Secretary in practice or a Cost
Accountant in practice.
(c) On the submission of the Form CSR-1 on the portal, a unique CSR Registration Number
shall be generated by the system automatically.

(3) A company may engage international organisations for designing, monitoring and
evaluation of the CSR projects or programmes as per its CSR policy as well as for capacity
building of their own personnel for CSR.
(4) A company may also collaborate with other companies for undertaking projects or
programmes or CSR activities in such a manner that the CSR committees of respective
companies are in a position to report separately on such projects or programmes in accordance
with these rules.
(5) The Board of a company shall satisfy itself that the funds so disbursed have been utilised
for the purposes and in the manner as approved by it and the Chief Financial Officer or the
person responsible for financial management shall certify to the effect.
(6) In case of ongoing project, the Board of a Company shall monitor the implementation of
the project with reference to the approved timelines and year-wise allocation and shall be
competent to make modifications, if any, for smooth implementation of the project within the
overall permissible time period.”.
5. In the said rules, in rule 5, for sub-rule (2), the following sub-rule shall be substituted,
namely:-
“(2) The CSR Committee shall formulate and recommend to the Board, an annual action plan in
pursuance of its CSR policy, which shall include the following, namely:-
(a) the list of CSR projects or programmes that are approved to be undertaken in areas or
subjects specified in Schedule VII of the Act;
(b) the manner of execution of such projects or programmes as specified in sub-rule (1) of rule
4;
(c) the modalities of utilisation of funds and implementation schedules for the projects or
programmes;
(d) monitoring and reporting mechanism for the projects or programmes; and
(e) details of need and impact assessment, if any, for the projects undertaken by the company:
Provided that Board may alter such plan at any time during the financial year, as per the
recommendation of its CSR Committee, based on the reasonable justification to that effect. ”.
6. In the said rules, rule 6 shall be omitted.
“7.CSR Expenditure. - (1) The board shall ensure that the administrative overheads shall not
exceed five percent of total CSR expenditure of the company for the financial year.

(2) Any surplus arising out of the CSR activities shall not form part of the business profit of a
company and shall be ploughed back into the same project or shall be transferred to the Unspent
CSR Account and spent in pursuance of CSR policy and annual action plan of the company or
transfer such surplus amount to a Fund specified in Schedule VII, within a period of six months
of the expiry of the financial year.
(3) Where a company spends an amount in excess of requirement provided under sub -section
(5) of section 135, such excess amount may be set off against the requirement to spend under
sub-section (5) of section 135 up to immediate succeeding three financial years subject to the
conditions that –
(i) the excess amount available for set off shall not include the surplus arising out of the CSR
activities, if any, in pursuance of sub-rule (2) of this rule.
(ii) the Board of the company shall pass a resolution to that effect.
(4) The CSR amount may be spent by a company for creation or acquisition of a capital asset,
which shall be held by -
(a) a company established under section 8 of the Act, or a Registered Public Trust or
Registered Society, having charitable objects and CSR Registration Number under sub-rule (2)
of rule 4; or
(b) beneficiaries of the said CSR project, in the form of self-help groups, collectives, entities;
or
(c) a public authority:
Provided that any capital asset created by a company prior to the commencement of the
Companies (Corporate Social Responsibility Policy) Amendment Rules, 2021, shall within a
period of one hundred and eighty days from such commencement comply with the requirement
of this rule, which may be extended by a further period of not more than ninety days with the
approval of the Board based on reasonable justification.”.
“8. CSR Reporting .- (1) The Board's Report of a company covered under these rules pertaining
to any financial year shall include an annual report on CSR containing particulars specified in
Annexure I or Annexure II, as applicable.
(2) In case of a foreign company, the balance sheet filed under clause (b) of sub-section (1)
of section 381 of the Act, shall contain an annual report on CSR containing particulars specified
in Annexure I or Annexure II, as applicable.
(3) (a) Every company having average CSR obligation of ten crore rupees or more in pu rsuance
of subsection (5) of section 135 of the Act, in the three immediately preceding financial years,

shall undertake impact assessment, through an independent agency, of their CSR projects
having outlays of one crore rupees or more, and which have been completed not less than one
year before undertaking the impact study.
(b) The impact assessment reports shall be placed before the Board and shall be annexed to
the annual report on CSR.
(c) A Company undertaking impact assessment may book the expenditure towards Corporate
Social Responsibility for that financial year, which shall not exceed five percent of the total CSR
expenditure for that financial year or fifty lakh rupees, whichever is less. ”.
9. In the said rules, for rule 9, the following rules shall be substituted, namely:-
“9. Display of CSR activities on its website. - The Board of Directors of the Company shall
mandatorily disclose the composition of the CSR Committee, and CSR Policy and Projects
approved by the Board on their website, if any, for public access.
10. Transfer of unspent CSR amount. - Until a fund is specified in Schedule VII for the purposes
of subsection (5) and (6) of section 135 of the Act, the unspent CSR amount, if any, shall be
transferred by the company to any fund included in schedule VII of the Act.”.
10. In the said rules,-
(i) The Annexure shall be numbered as “Annexure –I” and in the heading of Annexure I as so
numbered, after the words “BOARD’S REPORT”, the words and figures “FOR FINANCIAL YEAR
COMMENCED PRIOR TO 1ST DAY OF APRIL, 2020” shall be inserted;
6. Amendments related to: General Circular No. 05/2021, dated 22nd April, 2021
A clarification has been issued on spending of CSR funds for setting up makeshift hospitals and
temporary COVID Care facilities.
In continuation to this Ministry's General Circular No. 10/2020 dated 23.03.2020 wherein it was
clarified that spending of CSR funds for COVID-19 is an eligible CSR activity, it is further clarified
that spending of CSR funds for 'setting up makeshift hospitals and temporary COVID Care
facilities ' is an eligible CSR activity under item nos. (i) and (xii) of Schedule VII of the Companies
Act, 2013 relating to promotion of health care, including preventive health care, and, disaster
management respectively.
7. Amendments related to - Notification G.S.R 205 (E) dated 24 th March, 2021
The Central Government has amended Companies (Accounts) Rules, 2014 through the
Companies (Accounts) Amendment Rules, 2021.
Amendment:
In the Companies (Accounts) Rules, 2014,-
(1) in rule 3, in sub-rule (1), the following proviso shall be inserted, namely:-
“Provided that for the financial year commencing on or after the 1st day of April, 2021, every
company which uses accounting software for maintaining its books of account, shall use only

such accounting software which has a feature of recording audit trail of each and every
transaction, creating an edit log of each change made in books of account along with the date
when such changes were made and ensuring that the audit trail cannot be disabled.”
(2) in rule 8, in sub-rule (5), after clause (x), the following clauses shall be inserted namely: -
“(xi) the details of application made or any proceeding pending under the Insolvency and
Bankruptcy Code, 2016 (31 of 2016) during the year alongwith their status as at the end of the
financial year.
(xii) the details of difference between amount of the valuation done at the time of one time
settlement and the valuation done while taking loan from the Banks or Financial Institutions
along with the reasons thereof.”
Old Law for (1): Pg 9.5
Newly Inserted
Newly Inserted
8. Amendments related to – G.S.R. 247(E) dated 1st April, 2021
The Ministry of Corporate Affairs has further amended the Companies (Audit and Auditors)
Rules, 2014, through the enforcement of the Companies (Accounts) Second Amendment Rules,
2021
Amendment:
In the Companies (Accounts) Rules, 2014, in proviso to sub-rule (1) of rule 3, for the figures,
letters and words “1st day of April, 2021”, the figures, letters and words “1st day of April, 2022”
This amendment is in continuation with the above amendment
X. Chapter 10: Audit and Auditors

Amendment:
(i) In section 140 of the Companies Act, 2013, in sub-section (3), for the words "five lakh
rupees", the words "two lakh rupees" shall be substituted.
Old Law (Pg 10.19)
(d) Penalty for contravention: If the auditor does not comply with aforesaid provision, he or
it shall be liable to a penalty of `50,000 or an amount equal to the remuneration of the auditor,
whichever is less, and in case of continuing failure, with a further penalty of ` 500 for each day
after the first during which such failure continues, subject to a maximum of ` 5 lacs.
(ii) In section 143 of the Companies Act, 2013, for sub-section (15), the following sub-section
"(15) If any auditor, cost accountant, or company secretary in practice does not comply with the
provisions of sub-section (12), he shall-
(a) in case of a listed company, be liable to a penalty of five lakh rupees; and
(b) in case of any other company, be liable to a penalty of one lakh rupees.".
Old Law (Pg 10.37)
If any auditor, cost auditor or the Secretarial auditor, as mentioned above, do not comply
with the provisions of this section (i.e. section 143(12)), he shall be punishable with fine
which shall not be less than `1 lac but which may extend to `25 lacs.
(iii) In section 147 of the Companies Act, 2013—
(a) in sub-section (1),—
(i) the words "with imprisonment for a term which may extend to one year or" shall be omitted;
(ii) for the words "one lakh rupees, or with both", the words "one lakh rupees" shall be
substituted;
(b) in sub-section (2), the word and figures, "section 143" shall be omitted.
Old Law for (a): Pg 10.44
(ii) Penalty on officers [Section 147(1)]:
If any of the provisions of sections 139 to 146 (both inclusive) is contravened, every officer
of the company who is in default shall be punishable with
(1) imprisonment for a term which may extend to 1 year or
(2) with fine which shall not be less than `10,000 but which may extend to `1 lac; or
(3) both with imprisonment and fine.

Old Law for (b): Pg 10.44

If an auditor of a company contravenes any of the provisions of section 139, section 143,
section 144 or section 145, the auditor shall be punishable with fine which shall not be less than
` 25,000 but which may extend to ` 5 lacs or four times the remuneration of the auditor,
whichever is less.
2. Amendments related to - S.O. 206(E) dated 24 th March, 2021
The Ministry of Corporate Affairs has amended the Companies (Audit and Auditors) Rules, 2014,
through the Companies (Audit and Auditors) Amendment Rules, 2021.
Amendment:
In the Companies (Audit and Auditors) Rules, 2014, in rule 11,-
(1) clause (d) shall be omitted.
(2) after clause (d), the following clauses shall be inserted, namely:-
“(e) (i) Whether the management has represented that, to the best of it’s knowledge and belief,
other than as disclosed in the notes to the accounts, no funds have been advanced or loaned
or invested (either from borrowed funds or share premium or any other sources or kind of funds)
by the company to or in any other person(s) or entity(ies), including foreign entities
(“Intermediaries”), with the understanding, whether recorded in writing or otherwise, that the
Intermediary shall, whether, directly or indirectly lend or invest in other persons or entities
identified in any manner whatsoever by or on behalf of the company (“Ultimate Beneficiaries”)
or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries;
(ii) Whether the management has represented, that, to the best of it’s knowledge and belief,
other than as disclosed in the notes to the accounts, no funds have been received by the
company from any person(s) or entity(ies), including foreign entities (“Funding Parties”), with
the understanding, whether recorded in writing or otherwise, that the company shall, whether,
directly or indirectly, lend or invest in other persons or entities identified in any manner
whatsoever by or on behalf of the Funding Party (“Ultimate Beneficiaries”) or provide any
guarantee, security or the like on behalf of the Ultimate Beneficiaries; and
(iii) Based on such audit procedures that the auditor has considered reasonable and
appropriate in the circumstances, nothing has come to their notice that has caused them to
believe that the representations under sub-clause (i) and (ii) contain any material mis-statement.
(f) Whether the dividend declared or paid during the year by the company is in compliance
with section 123 of the Companies Act, 2013.
(g) Whether the company has used such accounting software for maintaining its books of
account which has a feature of recording audit trail (edit log) facility and the same has been
operated throughout the year for all transactions recorded in the software and the audit trail

feature has not been tampered with and the audit trail has been preserved by the company as
per the statutory requirements for record retention.”.
Old Law for (1): (Pg 10.33)
(4) whether the company had provided requisite disclosures in its financial statements
as to holdings as well as dealings in Specified Bank Notes during the period from 8
November2016 to 30 December 2016 and if so, whether these are in accordance with the
books of accounts maintained by the company” (this provision is not relevant now,
however, till the time this requirement is not removed from the law, it will continue to be
reported as not applicable for any financial year post 31 March 2017).
Clauses (e), (f) and (g) are newly inserted.
3. Amendments related to – G.S.R. 248(E) dated 1st April, 2021
The Ministry of Corporate Affairs has further to amended the Companies (Audit and Auditors)
Rules, 2014, through the Companies (Audit and Auditors) Second Amendment Rules, 2021.
Amendment:
In the Companies (Audit and Auditors) Rules, 2014, in rule 11, in clause (g), for the words
“Whether the company”, the words, figures and letters “Whether the company, in respect of
financial years commencing on or after the 1st April, 2022,” shall be substituted.
[Enforcement Date: 1st April, 2021]
[This amendment is in continuation with the above amendment]
# Here, SM means Study Material (i.e. Page number of the Study material in reference to
relevant provisions)

PART – II : QUESTIONS AND ANSWERS
QUESTIONS
DIVISION A: CASE SCENARIO/ MULTIPLE CHOICE QUESTIONS

1. Ramesh started a new venture of on-line business of supply of grocery items at the door-
step of consumers. Initially it was having the area of operations of Jaipur City only. He
employed some young boys having their own bikes and allocated the areas which they
were accustomed of it, for making delivery of the grocery items as per their orders. He also
got developed a website and Mobile App to receive the orders on-line. His friend
Sudhanshu who is a Chartered Accountant, suggested him to corporatize this business
form, from proprietorship business to a One Person Company (OPC). Ramesh agreed and
a OPC was incorporated in the name of “Ask Ramesh4Online Grocery (OPC) Pvt Ltd.” (for
short OPC-1). In this OPC Ramesh became the member and director and Sudha (the
mother of Ramesh) was made as nominee.
After a year Ramesh got married with Rachna. Since the business of on -line supply of
grocery was on rising trend, day by day, he thought to start a new business of supply of
Milk and Milk Products and another OPC in the name of “Rachna Milk Products (OPC) Pvt
Ltd” (for short OPC-2) was incorporated with the help of his professional friend Sudhanshu.
In this OPC-2, Rachna (his wife) became the member and director and Ramesh was named
as Nominee.
To summarise the position, the information is tabulated as under:
Name of OPC Ask Ramesh4Online Grocery Rachna Milk Products
(OPC) Pvt Ltd [OPC-1] (OPC) Pvt Ltd [OPC-2]
Member and Director Ramesh Rachna
Nominee Sudha (Mother of Ramesh) Ramesh (Husband of
Rachna)
After some time, Sudha (the mother of Ramesh) passed away. However, before the death,
Sudha had made a WILL, in which she mentioned that after her demise, her another son
Suresh be made nominee in the OPC-1. When Suresh came to know this fact, he argued
with Ramesh to fulfil the wish of Sudha as per her WILL (Mother of Ramesh and Suresh),
but Ramesh denied this and appointed Rachna (his wife) as nominee.
Aggrieved from the decision of Ramesh for not nominating him (Suresh), Suresh
threatened Ramesh to take appropriate legal action against him for not honouring the WILL
of mother Sudha and consulted his lawyer. Meanwhile due to continuous threatening and
hot talks between Suresh and Ramesh, Rachna became mentally upset and became
insane, as certified by the medical doctor, so lost her capacity to contract. In this situation,
Ramesh being the nominee in OPC-2 became member and director of this OPC-2.

One of the friends of Ramesh advised him to do some charitable work of providing free
education to the girl children of his native village near by Jaipur. Ra mesh thought about
this proposal and asked his professional friend Sudhanshu to convert this OPC -2 into
Section 8 company.
Based on the above facts, answer the following MCQs:
1.1 Since Rachna, being insane, lost the capacity to contract, Ramesh (who was
nominee) became the member of OPC-2. Now who will make nomination for this OPC:
(a) Ramesh in the capacity of husband of Rachna can nominate any person as
Nominee of OPC-2
(b) Ramesh (who was nominee) of OPC-2 has now become member of this OPC
and now as a member of this OPC he can nominate any person as per his choice
as Nominee for this OPC.
(c) When no person is nominated, the Central Govt. will make nomination of such
OPC-2.
(d) When no person is nominated the Registrar shall order the company to be wound
up.
1.2 Whether conversion of OPC-2 into a company governed by Section 8 is permissible?
(a) Yes, OPC can be converted into Section 8 company
(b) No, OPC cannot be converted into Section 8 company
(c) This OPC-2 can be converted into section 8 company, provided the Central Govt
give license
(d) Providing of free education to girl child do not come under the specified objects
mentioned for eligibility incorporation of section 8 company
1.3 Ramesh is a member in OPC-1 and became a member in another OPC-2 (on 2nd
April, 2020) by virtue of his being a nominee in that OPC-2. Ramesh shall, by what
date, meet the eligibility criteria that an individual can be a member in only one OPC:
(a) 17th May 2020
(b) 25th August 2020
(c) 26th August 2020
(d) 29th September 2020
1.4 After the demise of Sudha (the mother of Ramesh), Rachna was nominated by
Ramesh for OPC-1 as Nominee. But now Rachna has become insane, so what
recourse you will suggest to Ramesh:
(a) Ramesh is required to nominate another person as nominee

(b) Ramesh should wait till Rachna becomes good of her health and able to have
the capacity to contract
(c) Although Rachna has become insane, but if she is able to sign, her nomination
in OPC-1 may continue
(d) Sudhanshu (the Chartered Accountant) who helped in incorporation of OPC -1,
may act as legal consultant on behalf of Rachna
2. Ronak and Bhowmik are brothers and they are engaged in the business of dairy. Ronak
is having 10 cows. The monthly revenue and expenses of the cows is tabulated as under:
S. Particulars (`)
No.
1. Revenue: 3,00,000
(25 litres per cow per day) *(10 cows) * (Sale Price ` 40 per
litre) * (30 days in a month) = 3,00,000.
2. Expenses: (1,30,000)
i. For feeding: (300 per cow per day) *(10 cows) * (30 days
in a month) = 90,000
ii. Medical Expenses (Salary to a Veterinary Doctor per
month: 10,000
iii. Labour’s Salary: (2 person *10,000) = 20,000
iv. Petrol exp for milk delivery van: Lump sum = 10,000
Total Exp= 90,000+10,000+20,000+10,000 =1,30,000
3. Savings per month 1,70,000
4. Yearly savings = 1,70,000*12 months 20,40,000
5. Salary to Bhowmik for looking after Ronak’s Diary business: (1,20,000)
10,000*12 = 1,20,000
6. Less: Contingency Expenditure (20,000)
7. Net Revenue to be collected (after a year) 19,00,000
Ronak’s son Chirag is doing Engineering in Dairy Science from Denmark and is in Final
Year. He learnt a lot by his engineering education and want to invite his father to know the
technical aspects of dairy business. Chirag insisted his parents to come to Denmark and
stay for a year to learn the nitty gritty of the dairy business and also enjoy the life in
travelling nearby places.
Ronak, talked to his brother Bhowmik and explained his plan to visit to Denmark for a year
and requested to take care of his cows. The labourers are engaged for the maintenance
of cows and delivery of the milk, and Bhowmik is just to have a watch over it, collect the
revenues etc. and take care of the cows, till he returns back from Denmark. Rona k also

offered Bhowmik that for taking care of his dairy business, he will pay to him Rs 10000 per
month. Ronak also told Bhowmik that the cows are covered under the Insurance Policy,
for which he has already paid advance premium and also shared the Insurance Policy with
Bhowmik. However, Ronak did not disclosed that one cow is under sickness, it very often
falls sick and needs to be taken care. Bhowmik agreed and the cows were shifted to
Bhowmik’s Dairy Farm House.
Ronak and his wife went to Denmark to stay with their son and to understand the dairy
business there and to visit the near places.
Bhowmik was now looking after the dairy business of Ronak along with his dairy business.
During the year, 2 cows gave the birth to 2 calves. One cow, which often use d to fall ill,
had also influenced the other cows, as a result, one cow of Bhowmik, and one cow of
Ronak which remained in close contact with this sick cow, also fell sick. All the three cows
(2 of Ronak and 1 of Bhowmik) died.
When the insurance claim was lodged, the insurance company refused to pass on the
claim on the following reasons:
• One cow of Ronak which was running sick was not insured.
• Post mortem Report of another two cows (one of Ronak and another of Bhowmik)
revealed that these two cows were in close touch of the sick cow and due to infections,
these two cows also died.
When Ronak returned back to India, he demanded his cows back. Bhowmik returned 8
cows (10-2) but did not returned calves. Bhowmik informed Ronak that due to one sick cow
(of Ronak) his cow also became sick and died and no insurance claim was admitted.
Based on the above facts, answer the following MCQs:
2.1 What was the fault on the part of Ronak (bailor) in this case?
(a) Ronak has not taken the Insurance Policy of the sick cow.
(b) Ronak have not informed the continuous sickness of his cow, to Bhowmik
(c) Ronak has left the cows to his brothers and went to Denmark to enjoy the
travelling and tourism.
(d) Ronak, before going to Denmark, should have sold this sick cow.
2.2 Can Bhowmik claim damages for loss of his cow, which died, since this cow, remained
in the close contact of the sick cow of Ronak:
(a) Ronak is not liable for such loss.
(b) Bhowmik should himself take care of his cow.
(c) Ronak is liable to pay the price of the deceased cow of Bhowmik, since this cow
died on account close contact of sick cow of Ronak.
(d) Bhowmik should be vigilant in taking care of the cows.

2.3 Whether Bhowmik is responsible to give delivery of two calves which took birth during
the year, when Ronak was on his tour to Denmark:
(a) Bhowmik is not bound to give delivery of two calves, since he has already lost
his own cow due to mistake of not disclosing the sickness of Ronak’s cow by
him (Ronak).
(b) Bhowmik is duty bound to hand over the delivery of two calves.
(c) Ronak should not insist for delivery of the calves.
(d) Bhowmik can keep the calves with him as the calves were born when the cows
were in Bhowmik’s custody.
2.4 Bhowmik returns only 8 cows, since 2 cows of Ronak died. Whether Ronak is entitled
to claim damages for 2 cows:
(a) Ronak is not entitled to claim damages.
(b) Ronak is entitled to claim damages only, if he can prove that Bhowmik has not
taken care of the cows as a prudent person, not taken the medical help of the
doctor etc.
(c) Bhowmik should morally paid the loss of cows to his brother Ronak
(d) Bhowmik should not claim his salary, since Ronak has already suffered the loss
of two cows.
3. A Limited made a public issue of Debentures. The articles of the company auth orises the
payment of underwriting commission at 2 per cent of the issue price. The company has
negotiated with the proposed underwriters, Gama Brokers and has finalised the rate at
2.25 per cent. The amount that the company is eligible to pay as underwriting commission
is:
(a) 5%
(b) 2%
(c) 2.5%
(d) 2.25%
4. Krishna Religious Publishers Limited has received application money of ` 20,00,000
(2,00,000 equity shares of ` 10 each) on 10 th October, 2019 from the applicants who
applied for allotment of shares in response to a private placement offer of securities made
by the company to them. Select the latest date by which the company must allot the shares
against the application money so received.
(a) 9th November, 2019
(b) 24h November, 2019
(c) 9th December, 2019

(d) 8th January, 2020

5. Such shares which are issued by a company to its directors or employees at a discount or
for a consideration other than cash for working extraordinary hard and achieving desired
output is honoured with:
(a) Equity Shares
(b) Preference Shares
(c) Sweat Equity Shares
(d) Redeemable preference shares
DIVISION B: DESCRIPTIVE QUESTIONS
PART I: COMPANY LAW
The Companies Act, 2013
1. The Board of Directors of GEN X Fashions Limited at its meeting recommended a dividend
on its paid-up equity share capital which was later on approved by the shareholders at the
Annual General Meeting. Thereafter, the directors at another meeting of the Board passed
a board resolution for diverting the total dividend to be paid to the shareholders for
purchase of certain short-term investments in the name of the company. As a result,
dividend was paid to shareholders after 45 days.
Examining the provisions of the Companies Act, 2013, state whether the act of directors is
in violation of the provisions of the Act and if so, state the consequences that shall follow
for the above violative act.
2. The Board of Directors of Moon Light Limited, a listed company appointed Mr. Teja,
Chartered Accountant as its first auditor within 30 days of the date of registration of the
Company to hold office from the date of incorporation to conclusion of the first Annual
General Meeting (AGM). At the first AGM, Mr. Teja was re-appointed to hold office from
the conclusion of its first AGM till the conclusion of 6th AGM. In the light of the provisions
of the Companies Act, 2013, examine the validity of appointment/ reappointment in the
following cases:
(i) Appointment of Mr. Teja by the Board of Directors.
(ii) Re-appointment of Mr. Teja at the first AGM in the above situation.
3. Kim Private Limited was incorporated on 30th September 2016. It has a paid up share
capital of ` 45 crore. The company had a turnover of 250 crore for the financial year
2019-20. The accounts manager of the company has intimated to the company that they
are not required to appoint internal auditor for the financial year 2020-21. The management
of the company have approached you to advise them about the appointment of internal
auditor.
Advise them as per the provisions of the Companies Act, 2013.

4. Define the term “charge” and also explain what is the punishment for default with respect
to registration of charge as per the provisions of the Companies Act, 2013 .
5. Yellow Pvt Ltd. is an unlisted company incorporated in the year 2012. The company have
share capital of rupees fifty crores. The company has decided to issue sweat equity share s
to its directors and employees. The company decided to issue 10% sweat equity shares
(which in total will add up to 30% of its paid up equity shares), with a locking period of five
years, as it is a start-up company. How would you justify these facts in relation to the
provision for issue of sweat equity shares by a start-up company, with reference to the
provision of the Company Act, 2013. Explain?
6. AB Limited issued equity shares of ` 1,00,000 (10000 shares of ` 10 each) on 01.04.2020
which have been fully subscribed whereby XY Limited holds 4000 shares and PQ Limited
holds 2000 shares in AB Limited. AB Limited is also holding 20% equity shares of RS
Limited before the date of issue of equity shares stated above. RS Limited controls the
composition of Board of Directors of XY Limited and PQ Limited from 01.08.2020. Examine
with relevant provisions of the Companies Act, 2013:
(i) Whether AB Limited is a subsidiary of RS Limited?
(ii) Whether AB Limited can hold shares of RS Limited?
(iii) Whether AB Limited can vote at Annual General Meeting of RS Limited held on
30.09.2020?
7. Nutty Buddy Limited is manufacturing premium quality milk based ice cream in two flavors-
first chocolate and second butter scotch. The company called its Annual General Meeting
(AGM) in order to lay down the financial statements for Shareholders’ approval. However,
due to want of quorum, the meeting was cancelled. Also, the Directors of the company did
not file the Annual Return with the Registrar. The directors were of the idea that the time
for filing of returns within 60 days from the date of AGM would not apply, as AGM was
cancelled. Has the company contravened the provisions of Companies Act, 2013? If the
company has contravened the provisions of the Act, how will it be penalized?
8. 500 equity shares of ABC Limited were acquired by Mr. Amit, but the signature of Mr.
Manoj, the transferor, on the transfer deed was forged. Mr. Amit, after getting the shares
registered by the company in his name, sold 250 equity shares to Mr. Abhi on the strength
of the share certificate issued by ABC Limited. Mr. Amit and Mr. Abhi were not aware of
the forgery. What are the liabilities/rights of Mr. Manoj, Amit and Abhi against the company
with reference to the aforesaid shares?
PART II: OTHER LAWS
The Indian Contract Act, 1872
9. Mr. Yadav, a cargo owner, chartered a vessel to carry a cargo of wheat from a foreign port
to Chennai. The vessel got stranded on a reef in the sea 300 miles from the destination.

The ship’s managing agents signed a salvage agreement for Mr. Yadav. The goods (wheat)
being perishable, the salvors stored it at their own expense. Salvors intimated the whole
incident to the cargo owner. Mr. Yadav refuse to reimburse the Salvor, as it is the Ship-
owner, being the bailee of the cargo, who was liable to reimburse the salvor until the
contract remained unterminated. Referring to the provision of The Indian Contract Act
1872, do you acknowledge or decline the act of Salvor, as an agent of nece ssity, for Mr.
Yadav. Explain?
10. Rahul is the owner of electronics shop. Priyanka reached the shop to purchase an air
conditioner whose compressor should be of copper. As Priyanka wanted to purchase the
air conditioner on credit, Rahul demand a guarantor for such transaction. Mr. Arvind ( a
friend of Priyanka) came forward and gave the guarantee for payment of air conditioner.
Rahul sold the air conditioner of a particular brand, misrepresenting that it is made of
copper while it is made of aluminium. Neither Priyanka nor Mr. Arvind had the knowledge
of fact that it is made of aluminium. On being aware of the facts, Priyanka denied for
payment of price. Rahul filed the suit against Mr. Arvind. Explain with reference to the
Indian Contract Act 1872, whether Mr. Arvind is liable to pay the price of air conditioner?
The Negotiable Instruments Act, 1881
11. ‘Akhil’ made a promissory note for `4,500 payable to ‘Bhuvan’, and delivered the same to
‘Bhuvan’ on the condition that he (‘Bhuvan’) will demand payment only on the death of
‘Chaman’. Before the death of ‘Chaman’, ‘Bhuvan’ indorsed and delivered the promissory
note to ‘Deepak’, who receive the promissory note in good faith. On the date of maturity,
‘Deepak’ presented the promissory note for payment but ‘Akhil’ denied for payment by
stating that he issued this promissory note on the condition that it can be paid only on the
death of ‘Chaman’. Can ‘Deepak’ recover the amount due on the promissory note from
‘Akhil’ under the provisions of the Negotiable Instrument Act 1881?
The General Clauses Act, 1897
12. Mr. Sohan has issued a promissory note of `1000 to Mr. Mohan on 17 th May 2021 payable
3 months after date. After that, a sudden holiday was declared on 20 th August 2021 due to
Moharram. As per the provisions of the General Clauses Act 1897, what should be the
date of presentment of promissory note for payment? Whether it should be 19 th August
2021 or 21st August 2021?
Interpretation of Statutes
13. At the time of interpreting a statutes what will be the effect of 'Usage' or 'customs and
Practices'?

SUGGESTED ANSWERS
ANSWER TO CASE SCENARIO / MULTIPULE CHOICE QUESTIONS

1.1 (b)
1.2 (b)
1.3 (d)
1.4 (a)
2.1 (b)
2.2 (c)
2.3 (b)
2.4 (b)
3. (b)
4. (c)
5. (c)
ANSWER TO DESCRIPTIVE QUESTIONS
1. According to section 124 of the Companies Act, 2013, where a dividend has been declared
by a company but has not been paid or claimed within 30 days from the date of the
declaration, the company shall, within 7 days from the date of expiry of the said period of
30 days, transfer the total amount of dividend which remains unpaid or unclaimed to a
special account to be opened by the company in any scheduled bank to be called the
Unpaid Dividend Account.
Further, according to section 127 of the Companies Act, 2013, where a dividend has been
declared by a company but has not been paid or the warrant in respect thereof has not
been posted within 30 days from the date of declaration to any entitled shareholder, every
director of the company shall, if he is knowingly a party to the default, be li able for
punishment.
In the present case, the Board of Directors of GEN X Fashions Limited at its meeting
recommended a dividend on its paid-up equity share capital which was later on approved
by the shareholders at the Annual General Meeting. Thereafter, the directors at another
meeting of the Board decided by passing a board resolution for diverting the total dividend
to be paid to the shareholders for purchase of certain short-term investments in the name
of the company. As a result, dividend was paid to shareholders after 45 days.
(i) Since, declared dividend has not been paid within 30 days from the date of the
declaration to any shareholder entitled to the payment of dividend, the company shall,
within 7 days from the date of expiry of the said period of 30 days, transfer the total

amount of dividend which remains unpaid or unclaimed to a special account to be

opened by the company in any scheduled bank to be called the Unpaid Dividend
Account.
(ii) The Board of Directors of GEN X Fashions Limited has violated section 127 of the
Companies Act, 2013 as it failed to pay dividend to shareholders within 30 days due
to its decision to divert the total dividend to be paid to shareholders for purchase of
certain short-term investments in the name of the company.
Consequences: The following are the consequences for violation of the above
provisions:
(a) Every director of the company shall, if he is knowingly a party to the default, be
punishable with maximum imprisonment of two years and shall also be liable for
a minimum fine rupees one thousand for every day during which such default
continues.
(b) The company shall also be liable to pay simple interest at the rate of 18% p.a.
during the period for which such default continues.
2. As per section 139(6) of the Companies Act, 2013, the first auditor of a company, other
than a Government company, shall be appointed by the Board of Directors within thirty
days from the date of registration of the company and such auditor shall hold office till the
conclusion of the first annual general meeting.
Whereas Section 139(1) of the Companies Act, 2013 states that every company shall, at
the first annual general meeting (AGM), appoint an individual or a firm as an auditor of the
company who shall hold office from the conclusion of 1st AGM till the conclusion of its
6th AGM and thereafter till the conclusion of every sixth AGM.
As per section 139(2), no listed company or a company belonging to such class or classes
of companies as may be prescribed, shall appoint or re-appoint an individual as auditor for
more than one term of five consecutive years.
As per the given provisions following are the answers:
(i) Appointment of Mr. Teja by the Board of Directors is valid as per the provisions of
section 139(6).
(ii) Appointment of Mr. Teja at the first Annual General Meeting is valid due to the fact
that the appointment of the first auditor made by the Board of Directors is a separate
appointment and the period of such appointment is not to be considered, while Mr.
Teja is appointed in the first Annual General Meeting, which is for the period from the
conclusion of the first Annual General Meeting to the conclusion of the sixth Annual
General Meeting.

3. According to section 138 read along with Rules of the Companies Act, 2013, every private
company having—
(A) turnover of 200 crore rupees or more during the preceding financial year; or
(B) outstanding loans or borrowings from banks or public financial institutions exceeding
100 crore rupees or more at any point of time during the preceding financial year.
shall be required to appoint an internal auditor which may be either an individual or a
partnership firm or a body corporate.
In the given question, the company has a paid up capital of ` 45 crore and turnover of
` 250 crore for the financial year 2019-20.
Since, the company is fulfilling the criteria of turnover (i.e. more than ` 200 crore), hence,
it is required to appoint an internal auditor for the financial year 2020 -21.
4. The term charge has been defined in section 2 (16) of the Companies Act, 2013 as ‘an
interest or lien created on the property or assets of a company or any of its undertakings
or both as security and includes a mortgage’.
Punishment for contravention – According to section 86 of the Companies Act, 2013, if
any company is in default in complying with any of the provisions of this Chapter, the
company shall be liable to a penalty of five lakh rupees and every officer of the company
who is in default shall be liable to a penalty of fifty thousand rupees.
Further, if any person willfully furnishes any false or incorrect information or knowingly
suppresses any material information which is required to be registered under section 77,
he shall be liable for action under section 447 (punishment for fraud).
5. Sweat Equity Shares is governed by Section 54 of the Companies Act, 2013 and Rule 8
of Companies (Share capital and debentures) Rules, 2014. According to Section 54 the
company can issue sweat equity shares to its director and permanent employees of the
company.
According to rule 8 (4) proviso, states that a start up company, is defined in a notifica tion
number Ministry of Commerce and industry Government of India, may issue sweat equity
share not exceeding 50% of its paid up share capital up to 10 years from the date of its in
incorporation or registration.
According to Rule 8(5), the sweat equity shares issued to directors or employees shall be
locked in/ non transferable for a period of three years from the date of allotment and the
fact that the share certificates are under lock-in too.
Hence, in the above case the company can issue sweat equity shares by passing special
resolution at its general meeting. The company as a startup company is right in issue of
10% sweat equity share as it is overall within the limit of 50% of its paid up share capital.
But the lock in period of the shares is limited to maximum three years period from the date
of allotment.

6. This given problem is based on sub-clause (87) of Clause 2 read with section 19 of the
Companies Act, 2013.
As per sub-clause (87) of Clause 2 of the Companies Act, 2013 "subsidiary company" or
"subsidiary", in relation to any other company (i.e., the holding company), means a
company in which the holding company—
(i) controls the composition of the Board of Directors; or
(ii) exercises or controls more than one-half of the total voting power either at its own or
together with one or more of its subsidiary companies.
For the purposes of this clause, Explanation is given providing that a company shall be
deemed to be a subsidiary company of the holding company even if the control referred to
in point (i) or point (ii) above, is of another subsidiary company of the holding company.
Whereas Section 19 provides that, no company shall, hold any shares in its holding
company and no holding company shall allot or transfer its shares to any of its subsidia ry
companies and any such allotment or transfer of shares of a company to its subsidiary
company shall be void.
Provided that nothing in this sub-section shall apply to a case where the subsidiary
company is a shareholder even before it became a subsidiary company of the holding
company.
Here in the instant case, AB Ltd. issued 10,000 equity shares on 1.4.2020 whereby XY
Ltd. & PQ Ltd. holds 4000 & 2000 shares respectively in AB Ltd., Considering 1 share = 1
vote, XY Ltd. and PQ Ltd. together holds more than one-half (50%) of the total voting
power. Therefore, AB Ltd. will be subsidiary to XY Ltd. & PQ Ltd. from 1.4.2020.
Whereas AB Ltd. is already holding 20% equity shares of RS Ltd. before the date of issue
of equity shares i.e. 1.4.2020.
Further, RS Ltd. controls the composition of Board of Directors of XY Ltd. and PQ Ltd. from
01.08.2020. In the light of sub-clause (87) of Clause 2, RS Ltd. is a holding company of
XY Ltd. and PQ Ltd. (Subsidiary companies).
Following are the answers to the questions:
(i) Yes. In this case AB Ltd. shall be deemed to be a subsidiary company of the holding
company (RS Ltd.) as RS Ltd. controls the composition of subsidiary companies XY
Ltd. & PQ Ltd. as per explanation to sub-clause (87) of Clause 2.
(ii) Yes. In this case AB Limited is a subsidiary of RS Limited as AB Ltd. was holding
20% of equity shares of RS Ltd. even before it became a subsidiary company of the
RS Ltd. (i.e. on 01.08.2020), according to the exception to section 19.
(iii) No. The subsidiary company shall have a right to vote at a meeting of the holding
company only in respect of the shares held by it as a legal representative or as a
trustee but not where the subsidiary company is a shareholder even before it became

a subsidiary company of the holding company. Therefore, AB Ltd. cannot vote at AGM
of RS Ltd. held on 30.9.2020.
7. According to section 92(4) of the Companies Act, 2013, every company shall file with the
Registrar a copy of the annual return, within sixty days from the date on which the annual
general meeting is held or where no annual general meeting is held in any year
within sixty days from the date on which the annual general meeting should have been
held together with the statement specifying the reasons for not holding the annual general
meeting.
Sub-section (5) of Section 92 also states that if any company fails to file its annual return
under sub-section (4), before the expiry of the period specified therein, such company and
its every officer who is in default shall be liable to a penalty of ten thousand rupees and in
case of continuing failure, with further penalty of one hundred rupees for each day during
which such failure continues, subject to a maximum of two lakh rupees in case of a
company and fifty thousand rupees in case of an officer who is in default.
In the instant case, the idea of the directors that since the AGM was cancelled, the
provisions requiring the company to file annual returns within 60 days from the date of
AGM would not apply, is incorrect.
In the above case, the annual general meeting of Nutty Buddy Limited should have been
held within a period of six months, from the date of closing of the financial year but it did
not take place. Thus, the company has contravened the provisions of section 92 of the
Companies Act, 2013 for not filing the annual return and shall attract the penal provisions
along with every officer of the company who is in default as specified in Section 92(5) of
the Act.
8. According to Section 46(1) of the Companies Act, 2013, a share certificate once issued
under the common seal, if any, of the company or signed by two directors or by a director
and the Company Secretary, wherever the company has appointed a Company Secretary,
specifying the shares held by any person, shall be prima facie evidence of the title of the
person to such shares. Therefore, in the normal course the person named in the share
certificate is for all practical purposes the legal owner of the shares therein and the
company cannot deny his title to the shares.
However, a forged transfer is a nullity. It does not give the transferee (Mr. Amit) any title
to the shares. Similarly, any transfer made by Mr. Amit (to Mr. Abhi) will also not give a
good title to the shares as the title of the buyer is only as good as that of the seller.
Therefore, if the company acts on a forged transfer and removes the name of the real
owner (Mr. Manoj) from the Register of Members, then the company is bound to restore
the name of Mr. Manoj as the holder of the shares and to pay him any dividends which he
ought to have received.
In the above case, therefore, Mr. Manoj has the right against the company to get the shares
recorded in his name. However, neither Mr. Amit nor Mr. Abhi have any rights against the

company even if they are bona fide purchasers. But as Mr. Abhi acted on the faith of share
certificate issued by company, he can demand compensation from Mr. Amit.
9. Section 189 of Indian Contract Act 1872 defines agent's authority in an emergency . An
agent has authority, in an emergency, to do all such acts for the purpose of protecting his
principal from loss as would be done by a person of ordinary prudence, in his own case,
under similar circumstances.
In certain circumstances, a person who has been entrusted with another’ s property may
have to incur unauthorized expenses to protect or preserve it. This is called an agency of
necessity. Hence, in the above case the Salvor had implied authority from the cargo owner
to take care of the cargo. They acted as agents of necessity on behalf of the cargo owner.
Cargo owner were duty-bound towards salvor. Salvor is entitled to recover the agreed sum
from Mr. Yadav and not from the ship owner, as a lien on the goods.
10. As per the provisions of section 142 of the Indian Contract Act 1872, where the guarantee
has been obtained by means of misrepresentation made by the creditor concerning a
material part of the transaction, the surety will be discharged. Further according to
provisions of section 134, the surety is discharged by any contract between the creditor
and the principal debtor, by which the principal debtor is released, or by any act or omission
of the creditor, the legal consequence of which is the discharge of the principal debtor.
In the given question, Priyanka wants to purchase air conditioner whose compressor
should be of copper, on credit from Rahul. Mr. Arvind has given the guarantee for payment
of price. Rahul sold the air conditioner of a particular brand on misrepresenting that it is
made of copper while it is made of aluminium of which both Priyanka & Mr. Arvind were
unaware. After being aware of the facts, Priyanka denied for payment of price. Rahul filed
the suit against Mr. Arvind for payment of price.
On the basis of above provisions and facts of the case, as guarantee was obtained by
Rahul by misrepresentation of the facts, Mr. Arvind will not be liable. He will be discharged
from liability.
11. By virtue of provisions of section 9 of the Negotiable Instrument Act 1881, any person who
for consideration became the possessor of a negotiable instrument in good faith and
without having sufficient cause to believe that any defect existed in the title of the person
from whom he derived his title. While Sec.47 provides if a negotiable instrument is
delivered to a person, upon condition, i.e. it will be effective on the happening of a certain
event, such negotiable instrument cannot be further negotiated unless such event
happens. However, if it is transferred to a holder in due course, his rights will not be
affected by such condition.
‘Akhil’ issued a promissory note to ‘Bhuvan’ on the condition that he (‘Bhuvan’) will demand
payment only on the death of ‘Chaman’. Before the death of ‘Chaman’, ‘Bhuvan’ indorsed
and delivered the promissory note to ‘Deepak’, who receive the promissory note in good

faith. On due date, ‘Deepak’ presented the promissory note for payment but ‘Akhil’ denied
for payment.
From the above provisions and facts of the case, it can be said that ‘Deepak’ has received
the promissory note in good faith, he is a holder in due course and his rights will not be
affected by any condition attached to the instrument by any prior party. Therefore, ‘Deepak’
can recover the amount due on the promissory note from ‘Akhil’.
12. Section10 of the General Clauses Act 1897 provides where by any legislation or regulation,
any act or proceeding is directed or allowed to be done or taken in any court or office on a
certain day or within a prescribed period then, if the Court or office is closed on that day or
last day of the prescribed period, the act or proceeding shall be considered as done or
taken in due time if it is done or taken on the next day afterwards on which the Court or
office is open.
A promissory note of `1000 was issued by Mr. Sohan to Mr. Mohan on 17 th May 2021
which was payable 3 months after date. After that, a sudden holiday was declared on 20 th
August 2021 due to Moharram.
In the given case, the period of 3 months ends on 17 th August 2021. Three days of grace
are to be added. It falls due on 20 th August 2021 which declared to be a public holiday after
the issue of Promissory Note. In the light of provisions of Sec. 10 of the General Clauses
Act 1897, the due date will be on next day when office is open i.e. 21 st August 2021.
13. Effect of usage: Usage or practice developed under the statute is indicative of the
meaning recognized to its words by contemporary opinion. A uniform notorious practice
continued under an old statute and inaction of the Legislature to amend the same are
important factors to show that the practice so followed was based on correct understanding
of the law. When the usage or practice receives judicial or legislative approval it gains
additional weight.
In this connection, we have to bear in mind two Latin maxims:
(i) 'Optima Legum interpres est consuetude' (the custom is the best interpreter of the
law); and
(ii) 'Contemporanea exposito est optima et fortissinia in lege' (the best way to interpret a
document is to read it as it would have been read when made).
Therefore, the best interpretation/construction of a statute or any other document is that
which has been made by the contemporary authority. Simply stated, old statutes and
documents should be interpreted as they would have been at the time when they were
enacted/written.
Contemporary official statements throwing light on the construction of a statute and
statutory instruments made under it have been used as contemporanea expositio to
interpret not only ancient but even recent statutes in India.

ANNEXURE
Section 135 read along with Companies (Social Responsibility Policy) Rules, 2014
The Companies Act, 2013 lays down the provisions requiring corporates to mandatorily spend
a prescribed percentage of their profits on certain specified areas of social upliftment in
discharge of their social responsibilities. Broadly, Corporate Social Responsibility (CSR) implies
a concept, whereby companies decide to contribute to a better society and a cleaner
environment – a concept, whereby the companies integrate social and other useful concerns in
their business operations for the betterment of its stakeholders and society in general.
The provisions related with Corporate Social Responsibility has been enshrined under section
135 and Companies (Social Responsibility Policy) Rules, 2014 1.
DEFINITIONS
1. “Corporate Social Responsibility (CSR)” means the activities undertaken by a Company
in pursuance of its statutory obligation laid down in section 135 of the Act in accordance
with the provisions contained in these rules, but shall not include the following, namely:-
(i) activities undertaken in pursuance of normal course of business of the company:
Provided that any company engaged in research and development activity of new
vaccine, drugs and medical devices in their normal course of business may undertake
research and development activity of new vaccine, drugs and medical devices related
to COVID-19 for financial years 2020-21, 2021-22, 2022-23 subject to the conditions
that
(a) such research and development activities shall be carried out in collaboration
with any of the institutes or organisations mentioned in item (ix) of Schedule VII
to the Act;
(b) details of such activity shall be disclosed separately in the Annual report on CSR
included in the Board’s Report;
(ii) any activity undertaken by the company outside India except for training of Indian
sports personnel representing any State or Union territory at national level or India at
international level;
(iii) contribution of any amount directly or indirectly to any political party under section
182 of the Act;
(iv) activities benefitting employees of the company as defined in clause (k) of section 2
of the Code on Wages, 2019;
1These rules have been recently amended by the Companies (CSR Policy) Amendment Rules, 2021 dated
22nd January, 2021.

(v) activities supported by the companies on sponsorship basis for deriving marketing
benefits for its products or services;
(vi) activities carried out for fulfilment of any other statutory obligations under any law in
force in India; [Rule 2(d)]
2. "CSR Committee" means the Corporate Social Responsibility Committee of the Board
referred to in section 135 of the Act; [Rule 2(e)]
3. "CSR Policy" means a statement containing the approach and direction given by the board
of a company, taking into account the recommendations of its CSR Committee, and
includes guiding principles for selection, implementation and monitoring of activities as well
as formulation of the annual action plan; [Rule 2(f)]
4. “Administrative overheads” means the expenses incurred by the company for ‘general
management and administration’ of Corporate Social Responsibility functions in the
company but shall not include the expenses directly incurred for the designing,
implementation, monitoring, and evaluation of a particular Corporate Social Responsibility
project or programme; [Rule 2(b)]
5. “International Organisation” means an organisation notified by the Central Government
as an international organisation under section 3 of the United Nations (Privileges and
Immunities) Act, 1947, to which the provisions of the Schedule to the said Act apply; [Rule
2(g)]
6. "Net profit" means the net profit of a company as per its financial statement prepared in
accordance with the applicable provisions of the Act, but shall not include the following,
namely:-
(i) any profit arising from any overseas branch or branches of the company, whether
operated as a separate company or otherwise; and
Provided that in case of a foreign company covered under these rules, net profit means
the net profit of such company as per profit and loss account prepared in terms of clause
(a) of sub-section (1) of section 381, read with section 198 of the Act; [Rule 2(h)]
7. “Ongoing Project” means a multi-year project undertaken by a Company in fulfilment of
its CSR obligation having timelines not exceeding three years excluding the financial year
in which it was commenced, and shall include such project that was initially not approved
as a multi-year project but whose duration has been extended beyond one year by the
board based on reasonable justification; [Rule 2(i)]
8. “Public Authority” means ‘Public Authority’ as defined in clause (h) of section 2 of the
Right to Information Act, 2005; [Rule 2(j)]

COMPANIES REQUIRED TO CONSTITUTE CSR COMMITTEE

According to section 135(1), every company having net worth of rupees five hundred crore or
more, or turnover of rupees one thousand crore or more or a net profit of rupees five crore or
more during the immediately preceding financial year shall constitute a Corporate Social
Responsibility Committee of the Board consisting of three or more directo rs, out of which at
least one director shall be an independent director.
Provided that where a company is not required to appoint an independent director under sub -
section (4) of section 149, it shall have in its Corporate Social Responsibility Committee t wo or
more directors.
As per Rule 3(1), every company including its holding or subsidiary, and a foreign company
defined under clause (42) of section 2 of the Act having its branch office or project office in India,
which fulfills the criteria specified in sub-section (1) of section 135 of the Act shall comply with
the provisions of section 135 of the Act and these rules:
Provided that net worth, turnover or net profit. of a foreign company of the Act shall be computed
in accordance with balance sheet and Profit and loss account of such company prepared in
accordance with the provisions of clause (a) of sub-section (1) of section 381 and section 198 of
the Act.
“Net worth” [As per Section 2(57)] means the aggregate value of the paid-up share capital and
all reserves created out of the profits, securities premium account and debit or credit balance of
the profit and loss account, after deducting the aggregate value of the accumulated losses,
deferred expenditure and miscellaneous expenditure not written off, as per the audited balance
sheet, but does not include reserves created out of revaluation of assets, write-back of
depreciation and amalgamation. 2
Example 5: The statutory auditors of a company were required to issue a certificate on the net
worth of the company as per the requirement of the management as on 30 th September 2020
computed as per the provision of section 2(57) of the Companies Act, 2013.
The company had fair valued its property, plant and equipment in the current year which was
mistakenly taken into retained earnings of the company in its books of accounts. Please adv ise
whether this fair valuation would be covered in the net worth of the company as per the legal
requirements.
2For the purposes of this section (i.e. section 135) "net profit" shall not include such sums as
may be prescribed, and shall be calculated in accordance with the provisions of section 198.
For details about more about refer later pages- heading ‘Calculation of Net Profits’

Answer: As per sec 2(57) of the Companies Act 2013, any reserves created out of revaluation
of assets doesn’t form part of net worth. The company fair valued its property, plant and
equipment and took that to retained earnings.
Even if the company has taken the fair valuation to the retained earnings in its books of
accounts, the resultant credit in reserves (by whatever name called) would be in t he category
of ‘reserves created out of revaluation of assets’ which is specifically excluded in the definition
of ‘net worth’ in section 2 (57) and hence should be excluded by the company.
Further the auditors should also consider the matter related to accounting of this reserve
separately at the time of audit of books of accounts of the company.
Exclusion of Companies [Rule 3(2) of the Companies (CSR) Rules, 2014]
Every company which ceases to be a company covered under subsection (1) of section 135 of
the Act for three consecutive financial years shall not be required to -
(a) constitute a CSR Committee; and
(b) comply with the provisions contained in sub-section (2) to (6) of the said section,
till such time it meets the criteria specified in sub-section (1) of section 135.
COMPOSITION OF CSR COMMITTEE
Corporate Social Responsibility Committee of the Board shall consist of three or more directors,
out of which at least one director shall be an independent director.
Provided that where a company is not required to appoint an independent director under sub -
section (4) of section 149, it shall have in its Corporate Social Responsibility Committee two or
more directors.
According to Rule 5(1) of the Companies (CSR) Rules, 2014:
The companies mentioned in the rule 3 shall constitute CSR Committee as under.-
(i) a company covered under subsection (1) of section 135 which is not required to appoint
an independent director pursuant to sub-section (4) of section 149 of the Act, shall have
its CSR Committee without such director;
(ii) a private company having only two directors on its Board shall constitute its CSR
Committee with two such directors;
(iii) with respect to a foreign company covered under these rules, the CSR Committee shall
comprise of at least two persons of which one person shall be as specified under clause
(d) of sub-section (1) of section 380 of the Act and another person shall be nominated by
the foreign company.
Disclosure of composition of CSR Committee
As per section 135(2), the Board's report under sub-section (3) of section 134 shall disclose the
composition of the Corporate Social Responsibility Committee.

DUTIES OF CSR COMMITTEE

According to section 135(3),
The Corporate Social Responsibility Committee shall,—(a) formulate and recommend to the
Board, a Corporate Social Responsibility Policy which shall indicate the activities to be
undertaken by the company in areas or subject, specified in Schedule VII;(b) recommend the
amount of expenditure to be incurred on the activities referred to in clause (a); and (c) monitor
the Corporate Social Responsibility Policy of the company from time to time.
According to Rule 5(2) of Companies (CSR) Rules, 2014,
The CSR Committee shall formulate and recommend to the Board, an annual action plan in
pursuance of its CSR policy, which shall include the following, namely:-
(a) the list of CSR projects or programmes that are approved to be undertaken in areas or
subjects specified in Schedule VII of the Act;
(b) the manner of execution of such projects or programmes as specified in sub-rule (1) of rule
4;
(c) the modalities of utilisation of funds and implementation schedules for the projects or
programmes;
(d) monitoring and reporting mechanism for the projects or programmes; and
(e) details of need and impact assessment, if any, for the projects undertaken by the company:
Provided that Board may alter such plan at any time during the financial year, as per the
recommendation of its CSR Committee, based on the reasonable justification to that effect.
DUTIES OF THE BOARD IN RELATION TO CSR
According to 135(4), the Board of every company referred to in sub -section (1) shall,—(a) after
taking into account the recommendations made by the Corporate Social Responsibility
Committee, approve the Corporate Social Responsibility Policy for the company and disclose
contents of such Policy in its report and also place it on the company's website, if any, in such
manner as may be prescribed; and (b) ensure that the activities as are included in Corporate
Social Responsibility Policy of the company are undertaken by the company.
Display of CSR activities on its website
The Board of Directors of the Company shall mandatorily disclose the composition of the CSR
Committee, and CSR Policy and Projects approved by the Board on their website, if any, for
public access. [Rule 9 of the Companies (CSR Policy) Rules, 2014]
AMOUNT OF CONTRIBUTION TOWARDS CSR
According to section 135(5),
The Board of every company referred to in sub-section (1), shall ensure that the company
spends, in every financial year, at least two per cent. of the average net profits of the company
made during the three immediately preceding financial years or where the company has not

completed the period of three financial years since its incorporation, during such immediately
preceding financial years, in pursuance of its Corporate Social Responsibility Policy:
Provided that the company shall give preference to the local area and areas around it whe re it
operates, for spending the amount earmarked for Corporate Social Responsibility activities:
Provided further that if the company fails to spend such amount, the Board shall, in its report
made under clause (o) of sub-section (3) of section 134, specify the reasons for not spending
the amount and, unless the unspent amount relates to any ongoing project referred to in sub-
section (6), transfer such unspent amount to a Fund specified in Schedule VII, within a period
of six months of the expiry of the financial year.
Provided also that if the company spends an amount in excess of the requirements provided
under this sub-section, such company may set off such excess amount against the requirement
to spend under this sub-section for such number of succeeding financial years and in such
manner, as may be prescribed.
Explanation.—For the purposes of this section "net profit" shall not include such sums as may
be prescribed, and shall be calculated in accordance with the provisions of section 198.
According to section 135(6), any amount remaining unspent under sub -section (5), pursuant to
any ongoing project, fulfilling such conditions as may be prescribed, undertaken by a company
in persuance of its Corporate Social Responsibility Policy, shall be transferred by the company
within a period of thirty days from the end of the financial year to a special account to be opened
by the company in that behalf for that financial year in any scheduled bank to be called the
Unspent Corporate Social Responsibility Account, and such amount shall be spent by the
company in pursuance of its obligation towards the Corporate Social Responsibility Policy within
a period of three financial years from the date of such transfer, failing which, the company shall
transfer the same to a Fund specified in Schedule VII, within a period of thirty days from the
date of completion of the third financial year.
Calculation of Net Profits
1. For the purposes of this section (i.e. section 135) "net profit" shall not include such sums
as may be prescribed, and shall be calculated in accordance with the provisions of section
198. [Explanation in section 135(5)]
2. "Net profit" means the net profit of a company as per its financial statement prepared in
accordance with the applicable provisions of the Act, but shall not include the following,
namely:-
(i) any profit arising from any overseas branch or branches of the company, whether
operated as a separate company or otherwise; and

Provided that in case of a foreign company covered under these rules, net profit means
the net profit of such company as per profit and loss account prepared in terms of clause
(a) of sub-section (1) of section 381, read with section 198 of the Act; [Rule 2(h)]
CSR Expenditure [Rule 7 of Companies (CSR) Rules, 2014]
(1) The board shall ensure that the administrative overheads shall not exceed five percent of
total CSR expenditure of the company for the financial year.
(2) Any surplus arising out of the CSR activities shall not form part of the business profit of a
company and shall be ploughed back into the same project or shall be transferred to the
Unspent CSR Account and spent in pursuance of CSR policy and annual action plan of the
company or transfer such surplus amount to a Fund specified in Schedule VII, within a
period of six months of the expiry of the financial year.
(3) Where a company spends an amount in excess of requirement provided under sub -section
(5) of section 135, such excess amount may be set off against the requirement to spend
under sub-section (5) of section 135 up to immediate succeeding three financial years
subject to the conditions that –
(i) the excess amount available for set off shall not include the surplus arising out of the
CSR activities, if any, in pursuance of sub-rule (2) of this rule.
(ii) the Board of the company shall pass a resolution to that effect.
(4) The CSR amount may be spent by a company for creation or acquisition of a capital asset,
which shall be held by -
(a) a company established under section 8 of the Act, or a Registered Public Trust or
Registered Society, having charitable objects and CSR Registration Number under
sub-rule (2) of rule 4; or
(b) beneficiaries of the said CSR project, in the form of self-help groups, collectives,
entities; or
(c) a public authority:
Provided that any capital asset created by a company prior to the commencement of the
Companies (Corporate Social Responsibility Policy) Amendment Rules, 2021, shall within
a period of one hundred and eighty days from such commencement comply with th e
requirement of this rule, which may be extended by a further period of not more than ninety
days with the approval of the Board based on reasonable justification.
Transfer of unspent CSR amount [Rule 10 of Companies (CSR Policy) Rules, 2014
Until a fund is specified in Schedule VII for the purposes of subsection (5) and (6) of section
135 of the Act, the unspent CSR amount, if any, shall be transferred by the company to any
fund included in schedule VII of the Act.

PENAL PROVISIONS
If a company is in default in complying with the provisions of sub-section (5) or sub-section (6),
the company shall be liable to a penalty of twice the amount required to be transferred by the
company to the Fund specified in Schedule VII or the Unspent Corporate Social Res ponsibility
Account, as the case may be, or one crore rupees, whichever is less, and every officer of the
company who is in default shall be liable to a penalty of one-tenth of the amount required to be
transferred by the company to such Fund specified in Schedule VII, or the Unspent Corporate
Social Responsibility Account, as the case may be, or two lakh rupees, whichever is less.
[Section 135(7)]
SPECIAL INSTRUCTIONS OF THE CENTRAL GOVERNMENT
The Central Government may give such general or special directions to a company or class of
companies as it considers necessary to ensure compliance of provisions of this section and
such company or class of companies shall comply with such directions. [Section 135(8)]
WHEN IT IS NOT NECESSARY TO CONSTITUTE A CSR COMMITTEE
According to section 135(9), where the amount to be spent by a company under sub -section (5)
does not exceed fifty lakh rupees, the requirement under sub-section (1) for constitution of the
Corporate Social Responsibility Committee shall not be applicable and the functions of such
Committee provided under this section shall, in such cases, be discharged by the Board of
Directors of such company.
CSR IMPLEMENTATION [Rule 4 of the Companies (CSR Policy) Rules, 2014]:
(1) The Board shall ensure that the CSR activities are undertaken by the company itself or
through-
(a) a company established under section 8 of the Act, or a registered public trust or a
registered society, registered under section 12A and 80 G of the Income Tax Act,
1961, established by the company, either singly or along with any other company, or
(b) a company established under section 8 of the Act or a registered trust or a registered
society, established by the Central Government or State Government; or
(c) any entity established under an Act of Parliament or a State legislature; or
(d) a company established under section 8 of the Act, or a registered public trust or a
registered society, registered under section 12A and 80G of the Income Tax Act,
1961, and having an established track record of at least three years in undertaking
similar activities.
(2) (a) Every entity, covered under sub-rule (1), who intends to undertake any CSR activity,
shall register itself with the Central Government by filing the form CSR-1 electronically
with the Registrar, with effect from the 01 st day of April 2021:
Provided that the provisions of this sub-rule shall not affect the CSR projects or
programmes approved prior to the 01st day of April 2021.

(b) Form CSR-1 shall be signed and submitted electronically by the entity and shall be
verified digitally by a Chartered Accountant in practice or a Company Secretary in
practice or a Cost Accountant in practice.
(c) On the submission of the Form CSR-1 on the portal, a unique CSR Registration
Number shall be generated by the system automatically.
(3) A company may engage international organisations for designing, monitoring and
evaluation of the CSR projects or programmes as per its CSR policy as well as for capacity
building of their own personnel for CSR.
(4) A company may also collaborate with other companies for undertaking projects or
programmes or CSR activities in such a manner that the CSR committees of respective
companies are in a position to report separately on such projects or programmes in
accordance with these rules.
(5) The Board of a company shall satisfy itself that the funds so disbursed have been utilised
for the purposes and in the manner as approved by it and the Chief Financial Officer or the
person responsible for financial management shall certify to the effect.
(6) In case of ongoing project, the Board of a Company shall monitor the implementation of
the project with reference to the approved timelines and year-wise allocation and shall be
competent to make modifications, if any, for smooth implementation of the project within
the overall permissible time period.
CSR REPORTING (Rule 8)
(1) The Board's Report of a company covered under these rules pertaining to any financial
year shall include an annual report on CSR containing particulars specified in Annexure I
or Annexure II, as applicable.
(2) In case of a foreign company, the balance sheet filed under clause (b) of sub -section (1)
of section 381 of the Act, shall contain an annual report on CSR containing part iculars
specified in Annexure I or Annexure II, as applicable.
(3) (a) Every company having average CSR obligation of ten crore rupees or more in
pursuance of subsection (5) of section 135 of the Act, in the three immediately
preceding financial years, shall undertake impact assessment, through an
independent agency, of their CSR projects having outlays of one crore rupees or
more, and which have been completed not less than one year before undertaking the
impact study.
(b) The impact assessment reports shall be placed before the Board and shall be
annexed to the annual report on CSR.
(c) A Company undertaking impact assessment may book the expenditure towa rds
Corporate Social Responsibility for that financial year, which shall not exceed five
percent of the total CSR expenditure for that financial year or fifty lakh rupees,
whichever is less.

ACTIVITIES SPECIFIED UNDER SCHEDULE VII

Activities which may be included by companies in their CSR Policies (i.e. Activities as specified
under Schedule VII) are as follows:
(1) eradicating hunger, poverty and malnutrition, promoting health care including preventive
health care and sanitation including contribution to the Swach Bharat Kosh set-up by the
Central Government for the promotion of sanitation and making available safe drinking
water;
(2) promoting education, including special education and employment enhancing vocation
skills especially among children, women, elderly, and the differently abled and livelihood
enhancement projects;
(3) promoting gender equality, empowering women, setting up homes and hostels for women
and orphans; setting up old age homes, day care centres and such other facilities for senio r
citizens and measures for reducing inequalities faced by socially and economically
backward groups;
(4) ensuring environmental sustainability, ecological balance, protection of flora and fauna,
animal welfare, agroforestry, conservation of natural resources and maintaining quality of
soil, air and water including contribution to the Clean Ganga Fund set up by the Central
Government for rejuvenation of river Ganga;
(5) protection of national heritage, art and culture including restoration of buildings and sites
of historical importance and works of art; setting up public libraries; promotion and
development of traditional arts and handicrafts;
(6) measures for the benefit of armed forces veterans, war widows and their dependents,
Central Armed Police Forces (CAPF) and Central Para Military Forces (CPMF) veterans,
and their dependents including widows;
(7) training to promote rural sports, nationally recognised sports, paralympic sports and
Olympic sports;
(8) contribution to the Prime Minister’s National Relief Fund or Prime Minister’s Citizen
Assistance and Relief in Emergency situations Fund (PM CARES FUND) any other fund
set up by the Central Government for socio-economic development and relief and welfare
of the Scheduled Castes, Tribes, other backward classes, minorities and women;
(9) (a) Contribution to incubators or research development projects in the field of science,
technology, engineering and medicine, funded by Central Government or State
Government or any agency or Public Sector Undertaking of Central Government or
State Government, and
(b) Contributions to public funded Universities; Indian Institute of Technology (IITs);
National Laboratories and Autonomous Bodies established under Department of
Atomic Energy (DAE); Department of Biotechnology (DBT); Department of Science
and Technology (DST); Department of Pharmaceuticals; Ministry of Ayurveda, Yoga

and Naturopathy, Unani, Siddha and Homoeopathy (AYUSH); Ministry of Electronics and
Information Technology and other bodies, namely Defense Research and Development
Organisation (DRDO);Indian Council of Agricultural Research (ICAR); Indian Council of
Medical Research (ICMR) Council of Scientific and Industrial Research (CSIR), engaged
in conducting research in science, technology, engineering and medicine aimed at
promoting Sustainable Development Goals (SDGs);
(10) rural development projects;
(11) slum area development. [For the purposes of this item, the term ‘slum area’ shall mean
any area declared as such by the Central Government or any State Government or any
other competent authority under any law for the time being in force.
(12) disaster management, including relief, rehabilitation and reconstruction activities.
CLARIFICATIONS
The MCA vide General Circular No. 21/2014 dated 18 June 2014 has provided many
clarifications with regard to provisions of Corporate Social Responsibility under section 135 of
the Companies Act, 2013 which are as under:
(i) The statutory provision and provisions of CSR Rules, 2014, is to ensure that while activities
undertaken in pursuance of the CSR policy must be relatable to Schedule VII of the
Companies Act 2013, the entries in the said Schedule VII must be interpreted liberally so
as to capture the essence of the subjects enumerated in the said Schedule. The items
enlisted in the amended Schedule VII of the Act, are broad-based and are intended to
cover a wide range of activities as illustratively mentioned in the Annexure.
(ii) It is further clarified that CSR activities should be undertaken by the companies in project/
programme mode. One-off events such as marathons/ awards/ charitable contribution/
advertisement/ sponsorships of TV programmes etc. would not be qualified as part of CSR
expenditure.
(iii) Expenses incurred by companies for the fulfillment of any Act/ Statute of regulations (such
as Labour Laws, Land Acquisition Act etc.) would not count as CSR expenditure under the
Companies Act.
3(v) “Any financial year” referred under sub-section (1) of section 135 of the Act read with the
Companies CSR Rule, 2014, implies ‘any of the three preceding financial years.
(vi) Expenditure incurred by Foreign Holding Company for CSR activities in India will qualify
as CSR spend of the Indian subsidiary if, the CSR expenditures are routed through Indian
subsidiaries and if the Indian subsidiary is required to do so as per section 135 of the Act.
(vii) ‘Registered Trust’ would include Trusts registered under Income Tax Act 1956, for those
States where registration of Trust is not mandatory.
3 Point (iv) has been omitted (Refer clarification dated 17.09.2014)

(viii) Contribution to Corpus of a Trust/ society/ section 8 companies etc. will qualify as CSR
expenditure as long as (a) the Trust/ society/ section 8 companies etc. is created
exclusively for undertaking CSR activities or (b) where the corpus is created exclu sively
for a purpose directly relatable to a subject covered in Schedule VII of the Act.
Clarifications with respect to CSR on COVID
1. General Circular No. 10/2020 dated 23 rd March, 2020
The Ministry of Corporate Affairs have clarified that keeping in view of the spread of novel
Corona Virus (COVID-19) in India, its declaration as pandemic by the World Health
Organisation (WHO), and, decision of Government of India to treat this as a notified
disaster, spending of CSR funds for COVID-19 is eligible CSR activity.
Funds may be spent for various activities related to COVID-19 under item nos. (i) and
(xii) of Schedule VII relating to promotion of health care, including preventive health
care and sanitation, and, disaster management. Further, as per General Circular No.
21/2014 dated 18.06.2014, items in Schedule VII are broad based and may be
interpreted liberally for this purpose.
2. General Circular No. 01/2021 dated 13th January, 2021
The Ministry of Corporate Affairs, have made a clarification on spending of CSR funds for
Awareness and public outreach on COVID-19 Vaccination programme.
This Circular is in continuation to this Ministry's General Circular No. 10/2020 dated
23.03.2020 wherein it was clarified that spending of CSR funds for COVID19 is an eligible
CSR activity , it is further clarified that spending of CSR funds for carrying out awareness
campaigns/ programmes or public outreach campaigns on COVID-19 Vaccination
programme is an eligible CSR activity under item no. (i),(ii) and (xii) of Schedule VII of the
Companies Act, 2013 relating to promotion of health care, including preventive health care
and sanitization, promoting education, and, disaster management respectively.
The companies may undertake the aforesaid activities subject to fulfillment of Companies
(CSR Policy) Rules, 2014 and the circulars related to CSR, issued by this ministry from
time to time.
3. General Circular No. 05/2021, dated 22nd April, 2021
A clarification has been issued on spending of CSR funds for setting up makeshift hospitals
and temporary COVID Care facilities.
In continuation to this Ministry's General Circular No. 10/2020 dated 23.03.2020 wherein
it was clarified that spending of CSR funds for COVID-19 is an eligible CSR activity, it is
further clarified that spending of CSR funds for 'setting up makeshift hospitals and
temporary COVID Care facilities' is an eligible CSR activity under item nos. (i) and (xii) of
Schedule VII of the Companies Act, 2013 relating to promotion of health care, including
preventive health care, and, disaster management respectively.

PART – I: ANNOUNCEMENTS STATING APPLICABILITY FOR MAY, 2021

EXAMINATIONS
Applicability for May, 2021 examinations

The Study Material (October 2020 edition) is applicable for May 2021 examinations. This
material is updated for all relevant amendments up to 31 st October 2020. For May 2021
examinations, amendments up to 31 st October, 2020 are applicable.
Besides, refer booklet on MCQS and Case scenarios of December 2020 edition containing
Independent MCQs and Case Scenarios on the topics covered under the study material for 30
marks segment of MCQs in the Examination.
Read thoroughly the study material first and then go with the said booklet to have practice and
revision of concepts with an analytical and application approach with the thorough
understanding of the subject.
PART I- COMPANY LAW
QUESTIONS
DIVISION A – CASE SCENARIO / MULTIPLE CHOICE QUESTIONS
1. Mr. Ajay is a renowned finance professional with wide experience in banking operations.
Due to his experience, he has been appointed as director on the Board of various
companies. He is working as the Executive Director - Finance of Doon Carbonates Limited
(DCL) for the past 4-5 years and heading the finance department there. As per the object
clause of the Memorandum of Association of DCL, it can raise funds by way of loans for
the advancement of its business. Articles of Association of DCL authorizes the directors to
borrow up to INR 50 lakhs on behalf of the company after passing a valid board resolution
and any loans for amounts exceeding the above limit can be raised only after approval at
a general meeting.
Board of Directors of DCL raised INR 80 lakhs from Srikant Finance Services after passing
a board resolution and out of this amount, INR 60 lakhs was used to pay a legitimate
liability of DCL by the directors. DCL is a widely held company with around 5600 members
as per the members register. The 21 st AGM of DCL is convened on 1 st September 2020. A
total of 34 members attended the meeting out of which 7 members attended through proxy.
6 of such members are represented by single proxy, Mr. Das. The articles of DCL is silent
about the quorum.

Mr. Ajay is also director of Padmani Silk Limited (PSL). PSL was established around 25
years back as a private company operating as a micro business with 10 employees in a
three- room building. During these years, the company grew exceptionally and went public
and was also listed on SME exchange. PSL declares the interim dividend out of the
previous year’s undistributed profit on 31 st August 2020 on the occasion of the
25th anniversary of the company. PSL deposited the amount of said dividend in a separate
bank account with a NBFC on 4th of September, 2020.
Mr. Ajay hails from a farming family and carries on the business of cultivation and milling
of paddy. He is also the sole member of New-Deal Limited (NDL), a one person company.
NDL is operated as rice sheller and also deals in trading of high quality basmati rice. Mr.
Ajay’s father is operating as a nominee for the purposes of this OPC. The accounts
department of NDL prepared and published only Profit and Loss Account and Balance
Sheet as a financial statement and did not prepare cash flow statements and explanatory
notes to accounts. A statement of changes in equity is not required in the case of NDL.
Multiple Choice Questions
1.1 Regarding compliance for declaration and distribution of Interim dividend by PSL,
which of the following statements is correct?
(a) There is a violation of the provisions because interim dividend can only be
declared out of current year’s profits.
(b) There is no violation at all, and all the provisions prescribed by law have been
complied with.
(c) There is a violation because the bank account shall be designated and shall be
one of existing banks account of company.
(d) There is a violation because the bank account shall be opened with scheduled
banks only.
1.2 Which of the following statements is correct, with reference to the requirement for
financial Statements of ‘New Deal Limited’ (One Person Company)
(a) NDL fails to meet the requirement because its financial statement do not include
explanatory notes to accounts
(b) NDL fails to meet the requirement because its financial statements do not
include cash flow statement
(c) NDL fails to meet the requirement because its financial statements do not
include explanatory notes to account and cash flow statement
(d) NDL has complied with the requirements related to financial statements
1.3 The borrowing of the sum of INR 80 lakhs by the directors of DCL is
(a) Void-ab-initio

40 INTERMEDIATE (NEW) EXAMINATION: MAY, 2021
(b) Void
(c) Voidable
(d) Valid
1.4 Regarding the validity of the 21st Annual General Meeting of DCL, which of the
following statements is correct?
(a) The meeting doesn’t have a quorum, because 30 members need to be present
in person at the meeting.
(b) The meeting is valid and has a quorum because 30 members are present at
meeting either personally or through a proxy.
(c) The meeting is valid and has a quorum, because only 5 members are required
to be present, either personally or through a proxy, if the number of members as
on the date of the meeting is more than five thousand but not more than ten
thousand
(d) The meeting is valid and has a quorum, because only 15 members are required
to be present, either personally or through a proxy, if the number of members as
on the date of the meeting is more than five thousand but not more than ten
thousand
2. Mr. M. Mishra is a director of Superior Carbonates and Chemicals Limited (SCCL). SCCL
was incorporated by Mr. S. K. Mishra (father of Mr. M. Mishra) on 05th July 1995 as a public
company. SCCL accepts a loan of ` 1.5 crores from Mr. M. Mishra for short term purpose
and the loan is expected to be repaid after twenty four months. SCCL in its books of
account, records the receipt as a loan under non-current liabilities. At the time of advancing
loan, Mr. M. Mishra affirms in writing that such amount is not being given out of funds
acquired by him by borrowing or accepting loans or deposits from others and complete
details of his loan transactions are furnished in the boards’ report.
DBSL which is an unlisted public company, also accept the deposits from the public as on
1st November 2018, which is due for repayment on 30 th September 2023. DBSL also
accepts a LAP (Loan against property) for a term of 10 years from a financial institution on
18th June 2020. Charge was created on that day, but DBSL has neglected to register the
charge with the registrar. Finally, the application for registration of charge is furnished on
18th August 2020.
SCCL has registered office in Paonta-sahib (Himachal Pradesh) and corporate office is
situated in Dehradun (Uttarakhand) but around 15% of members whose name is entered
in members register are residents of Nainital (Uttarakhand). SCCL has a liaison Office at
Nainital. Management of the company is willing to place, the Register of Members at the
Nainital Liaison Office.
DBSL convene its 7 th AGM on 10th September 2020 at the registered office of the company.
Notice for same was served on 21 st August 2020. 78% of members gave consent to

convening AGM at shorter notice due to ambiguity and possibility of another lockdown
starting from 11 th September 2020 on account of the second wave of COVID-19.
Multiple Choice Questions
2.1 Pick the right statement regarding SCCL’s willingness to keep and maintain the
register of members at the Nainital liaison office.
(a) Register of members shall be kept at either registered office or within the same
city that too after passing the resolution, hence SCCL is not correct in placing it
at the Nainital liaison office
(b) Register of members cannot be kept at any other place by SCCL, without
passing an ordinary resolution
(c) Register of members can be kept at Nainital liaison office, after passing a special
resolution, because more than 1/10 th of the total members entered in the register
of members reside there
(d) Register of members cannot be kept at Nainital liaison office, even after passing
a special resolution, because less than 1/5 th of the total members entered in the
register of members reside there
2.2 With reference to deposit accepted by DBSL and its duration, you are required to
identify which of the following statements is correct:
(a) There is no requirement relating to the duration of deposit, DBSL can accept a
deposit for any duration.
(b) Since DBSL is an unlisted company, provision relating to the duration of the
deposit is not applicable.
(c) There is a provision of a minimum duration of six months, but no upper cap to
length is provided. Hence deposit accepted by DBSL is in compliance to
provisions of Law.
(d) Acceptance of deposits by DBSL is in violation of provision of law, because the
maximum period of acceptance of deposit cannot exceed thirty-six months.
2.3 With reference to application to the registrar for registration of charge by DBSL, which
of the following statements is correct?
(a) The charge cannot be registered now, even if the Registrar permits the same.
(b) The charge can be registered, if registrar permits with payment of ad-valorem
fee.
(c) The charge can be registered, if registrar permits but with payment of an
additional fee.
(d) The charge can be registered, with payment of a standard fee.

2.4 With reference to the loan advanced by Mr. M. Mishra to SCCL, state whether the
same is to be classified as a deposit or not?
(a) Deposit, because any sum advanced by the director whether loan or otherwise
is always classified as a deposit.
(b) Deposit, because the tenor of the loan is for a period of more than six months.
(c) Not a deposit, because such amount is recorded as loan in books of account of
SCCL.
(d) Not a deposit, because the written declaration is provided by Mr. M. Mishra, who
was a director when the loan was advanced that the loan is not being given out
of funds acquired by him by borrowing or accepting loans or deposits from
others.
2.5 Considering the provision relating to length of Notice for AGM, pick out the right
option:
(a) Notice served by DBSL is not valid, because notice given within a shorter
duration has to be consented to by all the members entitled to vote at AGM.
(b) Notice served by DBSL is not valid, because notice given within a shorter
duration has to be consented to by at-least 95% of members entitled to vote
thereat.
(c) Notice served by DBSL is valid because the shorter length has been consented
to by 75% of members entitled to vote thereat.
(d) Notice served by DBSL is not valid, because notice given within a shorter length
duration needs has to by at-least 50% of the members entitled to vote at AGM
that too in writing.
3. Which of the following statement is contrary to the provisions of the Companies Act, 2013?
(a) A private company can make a private placement of its securities.
(b) The company has to pass a special resolution for private placement.
(c) Minimum offer per person should have Market Value of ` 20,000.
(d) A public company can make a private placement of its securities.
4. Vishal lends a horse to Preet. The horse is vicious, which is known to Vishal but he does
not disclose the fact to Preet. The horse runs away. Preet is thrown and injured. As per
the provisions of the Contract Act, 1872, which is the correct statement:
(a) Preet is responsible for his injury.
(b) Though the horse belonged to Vishal but he cannot be held responsible
(c) Vishal is responsible to Preet for damage sustained

(d) No one can be held responsible for the damage sustained as no one can take
guarantee for the horse
5. As per the Indian Contract Act, 1872, any guarantee which has been obtained by the
means of misrepresentation made by the creditor concerning a material part of the
transaction, is:
(a) Valid
(b) Invalid
(c) outside the ambit of the Indian Contract Act, 1872
(d) not revocable if the damage sustained is less than 10% of the amount for which the
guarantee is given
DIVISION B - DETAILED QUESTIONS
COMPANY LAW
1. The Board of Directors of Amit Ltd. requested its Statutory Auditor to accept the
assignment of designing and implementation of suitable financial information syste m to
strengthen the internal control mechanism of the Company. How will you approach to this
proposal, as an Statutory Auditor of Amit Ltd., taking into account the consequences, if
any, of accepting this proposal?
2. The Income Tax Authorities in the current financial year 2019-20 observed, during the
assessment proceedings, a need to re-open the accounts of Qurie Ltd. for the financial
year 2008-09 and, therefore, filed an application before the National Company Law
Tribunal (NCLT) to issue the order to Qurie Ltd. for re-opening of its accounts and recasting
the financial statements for the financial year 2008-09. Examine the validity of the
application filed by the Income Tax Authorities to NCLT.
3. (i) Mr. Bindra is holding 950 equity shares of Bio safe Herbals, a section 8 company. Bio
safe Herbals is planning to declare dividend in the Annual General Meeting for the
Financial Year ended 31-03-2020. Examine whether the act of the company is in
accordance with the provisions of the Companies Act, 2013.
(ii) Kiara, holder of 5000 equity shares of ` 100 each of Kanpur Leather Shoes Limited
did not pay final call of ` 10 per share. Kanpur Leather Shoes Limited declared
dividend @ 10%. Examine with reference to relevant provisions of the Companies
Act, 2013, the amount of dividend Kiara should receive.
4. A General Meeting was scheduled to be held on 15th April, 2019 at 3.00 P.M. As per the
notice the members who are unable to attend a meeting in person can appoint a proxy
and the proxy forms duly filled should be sent to the company so as to reach at least 48
hours before the meeting. Mr. X, a member of the company appoints Mr. Y as his proxy
and the proxy form dated 10-04-2019 was deposited by Mr. Y with the company at its

registered Office on 11-04-2019. Similarly, another member Mr. W also gives two
separate proxies to two individuals named Mr. M and Mr. N. In the case of Mr. M, the
proxy dated 12-04-2019 was deposited with the company on the same day and the proxy
form in favour of Mr. N was deposited on 14-04-2019. All the proxies viz., Y, M and N
were present before the meeting.
According to the provisions of the Companies Act, 2013, who would be the persons
allowed to represent as proxies for members X and W respectively?
5. Shiva Cement Limited is engaged in the manufacture of different types of cements and
has got a good brand value. Over the years, it has built a good reputation and its Balance
Sheet as at March 31, 2020 showed the following position:
1. Authorized Share Capital (25,00,000 equity shares of ` 10/- each) ` 2,50,00,000
2. Issued, subscribed and paid-up Share Capital (10,00,000 equity shares of ` 10/-
each, fully paid-up) ` 1,00,00,000
3. Free Reserves ` 3,00,00,000
The Board of Directors are proposing to declare a bonus issue of 1 share for every 2
shares held by the existing shareholders. The Board wants to know the conditions and
the manner of issuing bonus shares under the provisions of the Companies Act, 2013.
6. Pristine Limited, a listed public company, conducted its Annual General Meeting on
31st August, 2020. However, 10 days have passed since 31 st August, 2020, but it has
still not filed report on Annual General Meeting. The Accountant of the company has
approached you to advise them whether Pristine Limited is required to file report on
Annual General Meeting?
7. Keya Limited decides to issue 1,00,000 securities of the company. The company decides
to publish an advertisement of the prospectus. Enumerate to the company about
necessary contents of its memorandum to be specified therein.
8. Nadeem incorporated a "One Person Company" making his sister Nisha as the nominee.
Nisha is leaving India permanently due to her marriage abroad. Due to this fact, she is
withdrawing her consent of nomination in the said One Person Company. Taking into
considerations the provisions of the Companies Act, 2013 answer the questions given
below.
(A) If Nisha is leaving India permanently, is it mandatory for her to withdraw her
nomination in the said One Person Company?
(B) If Nisha maintained the status of Resident of India after her marriage, then can she
continue her nomination in the said One Person Company?

OTHER LAWS
9. Akash is a famous manufacturer of leather goods. He appoints Prashant as his agent.
Prashant is entrusted with the work of recovering money from various traders to whom
Akash sells leather goods. Prashant is paid a monthly remuneration of ` 15,000.
Prashant during a particular month recovers ` 40,000 from traders on account of Akash.
Prashant gives back ` 25,000 to Akash, after deducting his salary.
Examine with reference to relevant provisions of the Indian Contract Act, 1872, whether
act of Prashant is valid.
10. (i) Calculate the date of maturity of bill of exchange drawn on 1.6.2019, payable 120
days after considering the relevant provisions of the Negotiable Instruments Act,
1881.
(ii) Chandra issues a cheque for ` 50,000/- in favour of Daye. Chandra has sufficient
amount in his account with the Bank. The cheque was not presented within
reasonable time to the Bank for payment and the Bank, in the meantime, became
bankrupt. Decide under the provisions of the Negotiable Instruments Act, 1881,
whether Daye can recover the money from Chandra?
11. (i) Mr. Apar and Mr. New, both aspiring Chartered Accountants have met in a
conference for CA students. Both are having an argument about the meaning of
Financial Year. They have approached you as a senior in the profession to guide
them about the meaning of Financial Year as per the provisions of the General
Clauses Act, 1872. Also, brief them about the difference between a calendar year
and financial year.
(ii) What is the meaning of service by post as per provisions of the General Clauses
Act, 1897?
12. At the time of interpreting a statutes what will be the effect of 'Usage' or 'customs and
Practices'?

SUGGESTED ANSWERS
DIVISION A - ANSWER TO CASE SCENARIO / MULTIPULE CHOICE QUESTIONS

1.1 (d)
1.2 (a)
1.3 (c)
1.4 (a)
2.1 (c)
2.2 (d)
2.3 (b)
2.4 (d)
2.5 (b)
3. (c)
4. (c)
5. (b)
DIVISION B - ANSWER TO DETAILES QUESTIONS
1. According to section 144 of the Companies Act, 2013, an auditor appointed under this Act
shall provide to the company only such other services as are approved by the Board of
Directors or the audit committee, as the case may be. But such services shall not include
designing and implementation of any financial information system.
In the said instance, the Board of directors of Amit Ltd. requested its Statutory Auditor to
accept the assignment of designing and implementation of suitable financial information
system to strengthen the internal control mechanism of the company. As per the above
provision said service is strictly prohibited.
In case the Statutory Auditor accepts the assignment, he will attract the penal provisio ns
as specified in Section 147 of the Companies Act, 2013.
In the light of the above provisions, we shall advise the Statutory Auditor not to take up the
above stated assignment.
2. As per section 130 of the Companies Act, 2013, a company shall not re -open its books of
account and not recast its financial statements, unless an application in this regard is made
by the Central Government, the Income-tax authorities, the Securities and Exchange
Board, any other statutory body or authority or any person concerned and an order is made
by a court of competent jurisdiction or the Tribunal to the effect that—
(i) the relevant earlier accounts were prepared in a fraudulent manner; or

(ii) the affairs of the company were mismanaged during the relevant period, c asting a
doubt on the reliability of financial statements:
However, no order shall be made in respect of re-opening of books of account relating to
a period earlier than eight financial years immediately preceding the current financial year.
In the given instance, an application was filed for re-opening and re-casting of the financial
statements of Qurie Ltd. for the financial year 2008-2009 which is beyond 8 financial years
immediately preceding the current financial year.
Though application filed by the Income Tax Authorities to NCLT is valid, its
recommendation for reopening and recasting of financial statements for the period earlier
than eight financial years immediately preceding the current financial year i.e. 2019 -2020,
is invalid.
3. (i) According to Section 8(1) of the Companies Act, 2013, the companies licenced under
Section 8 of the Act (Formation of companies with Charitable Objects, etc.) are
prohibited from paying any dividend to their members. Their profits are intended to
be applied only in promoting the objects for which they are formed.
Hence, in the instant case, the proposed act of Bio safe Herbals, a company licenced
under Section 8 of the Companies Act, 2013, which is planning to declare dividend,
is not in accordance to the provisions of the Companies Act, 2013.
(ii) As per the proviso to section 127 of the Companies Act, 2013, no offence will be
deemed to have been committed by a director for adjusting the calls in arrears
remaining unpaid or any other sum due from a member against the dividend declared
by the company.
Thus, as per the given facts, Kanpur Leather Shoes Limited can adjust the unpaid
call money of ` 50,000 against the declared dividend of 10%, i.e. 5,00,000 x 10/100
= 50,000. Hence, call money of ` 50,000 not paid by Kiara can be adjusted fully from
the entitled dividend amount of ` 50,000 payable to her.
4. A Proxy is an instrument in writing executed by a shareholder authorizing another person
to attend a meeting and to vote thereat on his behalf and in his absence. As per the
provisions of Section 105 of the Companies Act, 2013, every shareholder who is entitled
to attend and vote has a statutory right to appoint another person as his proxy. It is not
necessary that the proxy be a member of the company. Further, any provision in the articles
of association of the company requiring instrument of proxy to be lodged with the company
more than 48 hours before a meeting shall have effect as if 48 hours had been specified
therein. The members have a right to revoke the proxy’s authority by voting himself before
the proxy has voted but once the proxy has voted the member cannot retract his authority.
Where two proxy instruments by the same shareholder are lodged of in such a manner that
one is lodged before and the other after the expiry of the date fixed for lodging proxies, the
former will be counted.

Thus, in case of member X, the proxy Y will be permitted to vote on his behalf as form for
appointing proxy was submitted within the permitted time.
However, in the case of Member W, the proxy M (and not Proxy N) will be permitted to vote
as the proxy authorizing N to vote was deposited in less than 48 hours before the meeting.
5. According to Section 63 of the Companies Act, 2013, a company may issue fully paid -up
bonus shares to its members, in any manner whatsoever, out of -
(i) its free reserves;
(ii) the securities premium account; or
(iii) the capital redemption reserve account.
Provided that no issue of bonus shares shall be made by capitalising reserves created by
the revaluation of assets.
Conditions for issue of Bonus Shares: No company shall capitalise its profits or reserves
for the purpose of issuing fully paid-up bonus shares, unless—
(i) it is authorised by its Articles;
(ii) it has, on the recommendation of the Board, been authorised in the general meeting
of the company;
(iii) it has not defaulted in payment of interest or principal in respect of fixed deposits or
debt securities issued by it;
(iv) it has not defaulted in respect of payment of statutory dues of the employees, such
as, contribution to provident fund, gratuity and bonus;
(v) the partly paid-up shares, if any, outstanding on the date of allotment, are made fully
paid-up;
(vi) it complies with such conditions as are prescribed by Rule 14 of the Companies
(Share Capital and debentures) Rules, 2014 which states that the company which
has once announced the decision of its Board recommending a bonus issue, shall not
subsequently withdraw the same.
Further, the company has to ensure that the bonus shares shall not be issued in lieu of
dividend.
For the issue of bonus shares Shiva Cement Limited will require reserves of ` 50,00,000
(i.e. half of ` 1,00,00,000 being the paid-up share capital), which is readily available with
the company. Hence, after following the above conditions relating to the issue of bonus
shares, the company may proceed for a bonus issue of 1 share for every 2 shares held by
the existing shareholders.
6. According to Section 121, every listed public company shall prepare a report on each
annual general meeting including the confirmation to the effect that the meeting was
convened held and conducted as per the provisions of the Act and the rules made

thereunder. A copy of the report is to be filed with the Registrar in Form No. MGT. 15 within
thirty days of the conclusion of AGM along with the prescribed fee. If the company does
not file such report on Annual General Meeting within 30 days of the conclusion of the
Annual General Meeting then the company and defaulting officers are liable for prescribed
penalties.
Since, Pristine Ltd. is a listed company, hence it has to file a copy of 1annual Report with
the Registrar within 30 days from 31 st August, 2020.
7. According to Section 30, where an advertisement of any prospectus of a company is
published in any manner, it shall be necessary to specify therein the contents of its
memorandum as regards the following:
(i) the objects,
(ii) the liability of members and the amount of share capital of the company,
(iii) the names of the signatories to the memorandum,
(iv) the number of shares subscribed for by the signatories, and
(v) the capital structure of the company.
8. As per Rule 3 & 4 of the Companies (Incorporation) Rules, 2014 following the answers:
(A) Yes, it is mandatory for Nisha to withdraw her nomination in the said OPC as she is
leaving India permanently as only a natural person who is an Indian citizen and
resident in India shall be a nominee in OPC.
(B) Yes, Nisha can continue her nomination in the said OPC, if she maintained the status
of Resident of India after her marriage by staying in India for a period of not less than
182 days during the immediately preceding financial year.
9. The given problem is based on the provision related to ‘agency coupled with interest’.
According to Section 202 of the Indian Contract Act, 1872 an agency becomes irrevocable
where the agent has himself an interest in the property which forms the subject -matter of
the agency, and such an agency cannot, in the absence of an express provision in the
contract, be terminated to the prejudice of such interest.
In the given instance, Akash appointed Prashant as his agent to recover money from
various traders to whom Akash sold his leather goods, on a monthly remuneration of
` 15,000. Prashant during a month recovers ` 40,000 from traders on account of Akash.
Prashant after deducting his salary give the rest amount to Akash. In the said case, interest
was created in favour of Prashant and the said agency is not revocable, therefore, the act
of Prashant is valid.
10. (i) Date of maturity of the bill of exchange: In this case the day of presentment for sight
is to be excluded i.e. 1st June, 2019. The period of 120 days ends on 29th September,
2019 (June 29 days + July 31 days + August 31 Days + September 29 days = 120
days). Three days of grace are to be added. It falls due on 2nd October, 2019, which

happens to be a public holiday. As such it will fall due on 1st October, 2019 i.e., the
next preceding Business Day.
(ii) Section 84(1) of the Negotiable Instruments Act, 1881 provides that cheque should
be presented to Bank within reasonable time. If cheque is not presented within
reasonable time, meanwhile the drawer suffers actual damage, the drawer is
discharged to the extent of such actual damage. This would be so if the cheque would
have been passed if it was presented within reasonable time. As per section 84(2), in
determining what is a reasonable time, regard shall be had to (a) the nature of the
instrument (b) the usage of trade and of bankers, and (c) facts of the particular case.
The drawer will get discharge, but the holder of the cheque will be treated as creditor
of the bank, in place of drawer. He will be entitled to recover the amount from Bank
[section 84(3)].
In the above case drawer i.e. Chandra has suffered damage as cheque was not
presented by Daye within reasonable time. Hence, Chandra will be discharged but
Daye will be the creditor of bank for the amount of cheque and can recover the amount
from the bank.
11. (i) Financial Year: According to section 3(21) of the General Clauses Act, 1897,
financial year shall mean the year commencing on the first day of April.
The term Year has been defined under Section 3(66) as a year reckoned according
to the British calendar. Thus, as per General Clauses Act, Year means calendar year
which starts from January to December.
Difference between Financial Year and Calendar Year: Financial year starts from
first day of April but Calendar Year starts from first day of January.
(ii) Meaning of Service by post: According to section 27 of the General Clauses Act,
1897, where any legislation or regulation requires any document to be served by post,
then unless a different intention appears, the service shall be deemed to be effected
by:
(i) properly addressing
(ii) pre-paying, and
(iii) posting by registered post.
A letter containing the document to have been effected at the time at which the letter
would be delivered in the ordinary course of post.
12. Effect of usage: Usage or practice developed under the statute is indicative of the
meaning recognized to its words by contemporary opinion. A uniform notorious practice
continued under an old statute and inaction of the Legislature to amend the same are
important factors to show that the practice so followed was based on correct understanding
of the law. When the usage or practice receives judicial or legislative approval it gains
additional weight.

In this connection, we have to bear in mind two Latin maxims:

(i) 'Optima Legum interpres est consuetude' (the custom is the best interpreter of the
law); and
(ii) 'Contemporanea exposito est optima et fortissinia in lege' (the best way to interpret a
document is to read it as it would have been read when made).
Therefore, the best interpretation/construction of a statute or any other document is that
which has been made by the contemporary authority. Simply stated, old statutes and
documents should be interpreted as they would have been at the time when they were
enacted/written.
Contemporary official statements throwing light on the construction of a statute and
statutory instruments made under it have been used as contemporanea exposition to
interpret not only ancient but even recent statutes in India.

PART I: ANNOUNCEMENTS STATING APPLICABILITY FOR NOVEMBER, 2020

EXAMINATIONS
The Study Material (July 2019 edition) is applicable for November, 2020 examinations. This
study material is updated for all amendments till 30 th April, 2019. Further, all relevant
amendments/ circulars/ notifications etc. in the Company law part and the Other Laws portion,
for the period 1st May 2019 to 30 th April, 2020 are mentioned below:
PART I- COMPANY LAW
I. Chapter 2: Incorporation of Company and Matters Incidental thereto
Amendments related to - Notification G.S.R. 357(E) dated 10 th May, 2019
Companies (Incorporation) Fifth Amendment Rules, 2019.
In the Companies (Incorporation) Rules, 2014, Rule 8 has been fully substituted by Rule
8, Rule 8A and Rule 8B.
[Note: On page 2.19 of the Study Material, under the heading of Undesirable names, ‘the
words and combinations thereof which shall not be used in the name of a company
depicting the same meaning unless the previous approval of the Central Government has
been obtained for the use of any such word or expression’, were earlier covered under
Rule 8. As per the amendment now they are dealt in with Rule 8B.]
II. Chapter 3: Prospectus and Allotment of Securities
Amendments related to - Companies (Amendment) Act, 2019
Following sections of the Companies Act, 2013 have been amended by the Companies
(Amendment) Act, 2019 through Notification No. S.O. 2947(E) dated 14 th August, 2019 [the
sections contained therein shall deemed to have come into force on 15 th August, 2019]
1. In section 26-
(i) in sub-sections (4), (5) and (6), for the word “registration”, the word “filing” shall
be substituted;
(ii) sub-section (7) shall be omitted
[Amendment to be incorporated on Pg. 3.7 and 3.8 of SM]
2. In section 29-
(i) in sub-section (1), in clause (b), the word “public” shall be omitted;
(ii) after sub-section (1), the following sub-section shall be inserted, namely:-

“(1A) In case of such class or classes of unlisted companies as may be prescribed,

the securities shall be held or transferred only in dematerialised form in the manner
laid down in the Depositories Act, 1996 and the regulations made thereunder.”.
[Amendment to be incorporated on Pg. 3.9 of SM]
3. In section 35, in sub-section (2), in clause (c), for the words “delivery of a copy of the
prospectus for registration”, the words “filing of a copy of the prospectus with the
Registrar” shall be substituted.
III. Chapter 4: Share Capital and Debentures
Amendments related to - Notification G.S.R. 574(E) dated 16 th August, 2019
The Central Government has amended the Companies (Share Capital and Debentures)
Rules, 2014, by the Companies (Share Capital and Debentures) Amendment Rules, 2019.
In the Companies (Share Capital and Debentures) Rules, 2014:
1. In Rule 4, in sub-rule (1),
(i) for clause (c), the following clause shall be substituted, namely:-
“(c) the voting power in respect of shares with differential rights of the company shall
not exceed seventy four per cent. of total voting power including voting power in
respect of equity shares with differential rights issued at any point of time;”;
(ii) clause (d) shall be omitted.
[Enforcement Date: 16 th August, 2019]
2. In the principal rules, in rule 18, for sub-rule (7), the following sub-rule shall be
“(7) The company shall comply with the requirements with regard to Debenture
Redemption Reserve (DRR) and investment or deposit of sum in respect of
debentures maturing during the year ending on the 31st day of March of next year, in
accordance with the conditions given below:-
(a) Debenture Redemption Reserve shall be created out of profits of the company
available for payment of dividend;
(b) the limits with respect to adequacy of Debenture Redemption Reserve and
investment or deposits, as the case may be, shall be as under;-
(i) Debenture Redemption Reserve is not required for debentures issued by
All India Financial Institutions regulated by Reserve Bank of India and
Banking Companies for both public as well as privately placed debentures;
(ii) For other Financial Institutions within the meaning of clause (72) of section
2 of the Companies Act, 2013, Debenture Redemption Reserve shall be as

applicable to Non –Banking Finance Companies registered with Reserve

Bank of India.
(iii) For listed companies (other than All India Financial Institutions and
Banking Companies as specified in sub-clause (i)), Debenture Redemption
Reserve is not required in the following cases-
(A) in case of public issue of debentures –
A. for NBFCs registered with Reserve Bank of India under section
45-IA of the RBI Act, 1934 and for Housing Finance Companies
registered with National Housing Bank;
B. for other listed companies;
(B) in case of privately placed debentures, for companies specified in
sub-items A and B.
(iv) for unlisted companies, (other than All India Financial Institutions and
Banking Companies as specified in sub-clause (i)) –
(A) for NBFCs registered with RBI under section 45-IA of the Reserve
Bank of India Act, 1934 and for Housing Finance Companies
registered with National Housing Bank, Debenture Redemption
Reserve is not required in case of privately placed debentures.
(B) for other unlisted companies, the adequacy of Debenture Redemption
Reserve shall be ten percent. of the value of the outstanding debentures;
(v) In case a company is covered in item (A) or item (B) of sub-clause (iii) of
clause (b) or item (B) of sub-clause (iv) of clause (b), it shall on or before
the 30th day of April in each year, in respect of debentures issued by a
company covered in item (A) or item (B) of subclause (iii) of clause (b) or
item (B) of sub-clause (iv) of clause (b), invest or deposit, as the case may
be, a sum which shall not be less than fifteen per cent., of the amount of
its debentures maturing during the year, ending on the 31st day of March
of the next year in any one or more methods of investments or deposits as
provided in sub-clause (vi):
Provided that the amount remaining invested or deposited, as the case may
be, shall not at any time fall below fifteen percent. of the amount of the
debentures maturing during the year ending on 31st day of March of that year.
(vi) for the purpose of sub-clause (v), the methods of deposits or investments,
as the case may be, are as follows:—
(A) in deposits with any scheduled bank, free from any charge or lien;
(B) in unencumbered securities of the Central Government or any State
Government;

(C) in unencumbered securities mentioned in sub-clause (a) to (d) and

(ee) of section 20 of the Indian Trusts Act, 1882;
(D) in unencumbered bonds issued by any other company which is notified
under sub-clause (f) of section 20 of the Indian Trusts Act, 1882:
Provided that the amount invested or deposited as above shall not be used
for any purpose other than for redemption of debentures maturing during
the year referred above.
(c) in case of partly convertible debentures, Debenture Redemption Reserve shall
be created in respect of non-convertible portion of debenture issue in
accordance with this sub-rule.
(d) the amount credited to Debenture Redemption Reserve shall not be utilized by
the company except for the purpose of redemption of debentures.“
IV. Chapter 7: Management and Administration
Amendments related to - Companies (Amendment) Act, 2019
In section 90,
(i) after sub-section (4), the following sub-section shall be inserted, namely:-
“(4A) Every company shall take necessary steps to identify an individual who is a
significant beneficial owner in relation to the company and require him to comply with
the provisions of this section.”;
(ii) after sub-section (9), as so substituted, the following sub-section shall be inserted, namely:
“(9A) The Central Government may make rules for the purposes of this section.”
(iii) in sub-section (11), after the word, brackets and figure “sub-section (4)”, the words,
brackets, figure and letter “or required to take necessary steps under sub-section
(4A)” shall be inserted.
V. Chapter 9: Accounts of Companies
(A) Amendments related to - Notification G.S.R. 390(E) dated 30 th May, 2019
The Central Government has amended the Schedule VII of the Companies Act, 2013.

In the said Schedule VII, after item (xi) and the entries relating thereto, the following
item and entries shall be inserted, namely:
“(xii) disaster management, including relief, rehabilitation and reconstruction
activities.”
[Enforcement Date: 30 th May, 2019]
(B) Amendments related to - Notification G.S.R. 776(E) dated 11 th October, 2019
In the said Schedule VII, for item (ix) and the entries relating thereto, the following
item and entries shall be substituted, namely:
“(ix) Contribution to incubators funded by Central Government or State Government
or any agency or Public Sector Undertaking of Central Government or State
Government, and contributions to public funded Universities, Indian Institute of
Technology (IITs), National Laboratories and Autonomous Bodies (established under
the auspices of Indian Council of Agricultural Research (ICAR), Indian Council of
Medical Research (ICMR), Council of Scientific and Industrial Research (CSIR),
Department of Atomic Energy (DAE), Defence Research and Development
Organisation (DRDO), Department of Biotechnology (DBT), Department of Science
and Technology (DST), Ministry of Electronics and Information Technology) engaged
in conducting research in science, technology, engineering and medicine aimed at
promoting Sustainable Development Goals (SDGs).”
[Enforcement Date: 11 th October, 2019]
(C) Amendments related to - Companies (Amendment) Act, 2019
Following sections of the Companies Act, 2013 have been amended by the
Companies (Amendment) Act, 2019 through Notification No. S.O. 2947(E) dated 14 th
August, 2019 [the sections contained therein shall deemed to have come into force
on 15th August, 2019]
In section 132—
(i) after sub-section (1), the following sub-section shall be inserted, namely:—
“(1A) The National Financial Reporting Authority shall perform its functions
through such divisions as may be prescribed.”
(ii) after sub-section (3), the following sub-sections shall be inserted, namely:—
“(3A) Each division of the National Financial Reporting Authority shall be
presided over by the Chairperson or a full-time Member authorised by the
Chairperson.

(3B) There shall be an executive body of the National Financial Reporting

Authority consisting of the Chairperson and full-time Members of such Authority
for efficient discharge of its functions under sub-section (2) [other than clause
(a)] and sub-section (4).”;
(iii) in sub-section (4), in clause (c), for sub-clause (B), the following sub-clause shall
be substituted, namely:—
“(B) debarring the member or the firm from—
I. being appointed as an auditor or internal auditor or undertaking any audit
in respect of financial statements or internal audit of the functions and
activities of any company or body corporate; or
II. performing any valuation as provided under section 247,
for a minimum period of six months or such higher period not exceeding ten
years as may be determined by the National Financial Reporting Authority.”.
(D) Amendments related to - Notification G.S.R. 636(E) 5 th September, 2019
The Central Government has amended the National Financial Reporting Authority
Rules, 2018, by the National Financial Reporting Authority (Amendment) Rules, 2019.
In the National Financial Reporting Authority Rules, 2018, after clause (c) of sub -rule
(1) of rule 3, the following explanation shall be inserted, namely:-
“Explanation.- For the purpose of this clause, “banking company” includes
‘corresponding new bank’ as defined in clause (d) of section 2 of the Banking
Companies (Acquisition and Transfer of Undertakings) Act, 1970 (5 of 1970) and
clause (b) of section 2 of the Banking Companies (Acquisition and Transfer of
Undertakings) Act, 1980 (40 of 1980) and ‘subsidiary bank’ as defined in clause (k)
of section 2 of the State Bank of India (Subsidiary Bank) Act, 1959 (38 of 1959).”.
[Enforcement Date: 5 th September, 2019]
(E) Amendments related to - Notification G.S.R. 803 (E) dated 22 nd October, 2019 w.e.f.
1st December , 2019
The Central Government has amended the Companies (Accounts) Rules, 2014, by
the Companies (Accounts) Amendment Rules, 2019.
In the Companies (Accounts) Rules, 2014, in rule 8, in sub-rule (5), after clause (iii),
the following clause shall be inserted namely:—
“(iiia) a statement regarding opinion of the Board with regard to integrity, expertise
and experience (including the proficiency) of the independent directors appointed
during the year”.

Explanation.—For the purposes of this clause, the expression “proficiency” means the
proficiency of the independent director as ascertained from the online proficiency self-
assessment test conducted by the institute notified under sub-section (1) of section 150.
(F) Amendments related to - Notification G.S.R. 313(E).—dated 26th May, 2020
In Schedule VII, item (viii), after the words “Prime Minister’s National Relief Fund”,
the words “or Prime Minister’s Citizen Assistance and Relief in Emergency Situations
Fund (PM CARES Fund)” shall be inserted.
PART II- OTHER LAWS
[I] THE INDIAN CONTRACT ACT, 1872
Amendment via the Jammu and Kashmir Reorganisation Act, 2019, dated 9 th August, 2019. The
amendment is effective with effect from 31 st October, 2019.
As per the Jammu and Kashmir Reorganisation Act, 2019, in the Indian Contract Act, 1872, in
sub-section (2) of section 1, words, "except the State of Jammu and Kashmir" shall be omitted.
Now, Section 1 will be read as under,
‘Short title- This Act may be called the Indian Contract Act, 1872.
Extent, Commencement- It extends to the whole of India and it shall come into force on the
first day of September, 1872.
Saving- Nothing herein contained shall affect the provisions of any Statute, Act or Regulation
not hereby expressly repealed, nor any usage or custom of trade, nor any incident of any
contract, not inconsistent with the provisions of this Act.’
[II] THE GENERAL CLAUSES ACT, 1897
amendment is effective with effect from 31st October, 2019.
As per the Jammu and Kashmir Reorganisation Act, 2019, the General Clauses Act, 1897 has
been extended as a whole.

PART II: QUESTIONS AND ANSWERS
QUESTIONS
Division A: Case Scenario/ Multiple Choice Questions

1. Mr. B R Mohanty, around two-decade back; along with two of his elder brothers and few
friends, who are pharma and chemical engineers by profession promoted two companies;
first being Well-Mount Limited (WML) dealing in wellness products and pharmaceuticals;
whereas other is Tex-Mount Limited (TML) dealing in textile products. During these two
decades, both WML and TML has grown magnificently as both the sectors expanded
beyond imagination. Both companies went public and stock of same listed on leading stock
exchanges of countries.
TML did well in the past and emerged as a major export unit but in recent years the textile
sector witness stiff competition due to new entrants. The increased cost of the workforce
and other input materials is also made sector unprofitable and recent lockdown hit the
sector further adversely. TML’s bottom line for the current financial year is red. TML was
declaring dividends since the very first year of operation and willing to continue the tradition
considering dividend as signalling effect to an investor for valuation purpose. Rate of
dividend for the recent five years was 9%, 10%, 8%, 5% and 2% (9% being five years ago
and 2% being the previous year) respectively. The management at TML decided to declare
dividends out of the profit of previous years. TML deals in export hence came under the
scanner of enforcement authority, who seek financial statements and books of accounts of
TML for scrutiny for the last 10 preceding financial years. In response to notice , TML furnish
financial statements and books of accounts for last 8 immediately preceding financial years
only, stating as per its Article of Association; TML is required to maintain and keep the
books of accounts for 8 immediately preceding financial years only and that too w ithout
any record of vouchers pertaining to such accounts.
WML is doing well, it seizes outbreak of COVID-19 as a business opportunity and registers
significant growth in both top and bottom line. For the past many years, WML declare a
dividend at a constant rate of 20%. During the financial year 2019-20, WML earns a profit
of 580 Crores. Board of directors of WML declares 25% dividend without transferring any
% to reserve on 15th June, 2020. On 14 th July, 2020 some of the amount remaining unpaid,
due to operation of law; has been transferred to unpaid dividend account on 20 th July,
2020. CA. Dev was appointed as auditor under section 139 of Companies Act, 2013 of
WML in individual capacity during 17 th AGM for against the financial year 2018-19.
A. In case of TML, which of the following statements are correct regarding the
declaration of dividend?
(i) TML can’t declare the dividend because it earns a loss in the current financial
year.

(ii) TML can declare the dividend but only up to 9%

(iii) TML can declare the dividend but only up to 5%
(iv) TML can declare the dividend but only up to 6.8%
B. CA. Dev, who is the auditor of WML have to vacate the office of the auditor in and
can be reappointed again only in
(i) 22nd AGM and 27 th AGM
(ii) 27th AGM and 32 nd AGM
(iii) 22nd AGM and 23 rd AGM
(iv) 22nd AGM and can’t be re-appointed again.
C. In case of WML, which of the following statements is correct regarding the declaration
of dividend?
(i) WML can’t declare the dividend at a rate more than 20%
(ii) WML can declare the dividend out current year’s profit but it needs to transfer
sum equal to 20% to reserve first.
(iii) WML can declare the dividend out current year’s profit but it needs to transfer
sum equal to 10% of paid-up share capital to reserve first.
(iv) WML can declare the dividend out of current years’ profit without transferring
any % to reserve.
D. In case of TML, regarding maintenance and keeping the books of account; which of
the following statements hold truth?
(i) TML needs to maintain and keep the books of account for 10 preceding financial
years, hence TML violate the law.
(ii) TML doesn’t violate the provision of law because it keeps the books of account
for 8 immediate preceding financial years.
(iii) TML violate the provision of law because it keeps the books of account for 8
immediately preceding financial years without keeping relevant vouchers in the
record pertaining to such books of account.
(iv) TML doesn’t violate the provision of law because it is complying to its Article of
Association.
E. Regarding declaration and distribution of dividend by WML, which of the following
statements is correct from the view of the timeline?
(i) WML violates the law, because some of the dividend remain unpaid; irrespective
of reason for non-payment

(ii) WML violates the law, because unpaid dividend need to transfer to unpaid
dividend account by 19th July 2020.
(iii) WML doesn’t violate the law, because an unpaid dividend transferred to unpaid
dividend account prior to 21 st July 2020.
(iv) WML doesn’t violate the law, because an unpaid dividend can be transferred to
unpaid dividend account at any time within 90 days from the date of declaration.
2. Mr. Purshottam Prasad, a business graduate from leading B-School, running the chain of
restaurants; as sole proprietor concern; based in Chennai. Mr. Prasad being dynamic
businessman, in order to develop the business; decided to give corporate form to his
business; but concerned with dilution of the control over business decisions.
Mr. Prasad, during some journey met Mr. Chinmay Dass; who is school days friend of Mr.
Prasad and presently working in one of leading corporate advisory firm. Mr. Prasad seeks
advice from Mr. Dass, regarding conversion of sole proprietorship concern to company and
also explain his intention to keep the entire control in his hand. Mr. Dass told, about new
type of company; which can be formed under Companies Act, 2013; One Person Company
(OPC). Mr. Dass quoted section 2 (62), which define 'one person company' , a company
which has only one person as a member.
Mr. Prasad, felt OPC is correct form of business for him, hence promotes an OPC ‘Casa
Hangout Private Limited’ (One Person Company) on 14 th September 2019, to which he
sold his sole proprietor business and himself became sole member. Mr. Prasad, appointed
his younger son Mr. Vijay, who was 21 year old then; as Nominee to OPC. Mr. Anand who
is old friend of Mr. Prasad was appointed as director of OPC, Mr. Prasad himself also
become director of company.
Mr. Vijay is professional photographer, and for some certification course went to abroad
on 23rd October 2019. He came back on 1 st of March 2020. He established photo-studio in
form of OPC ‘Best Click (OPC) Private Limited’ on 20 th March 2020, in which Mr. Prasad
is nominee and he became sole member. In mean time, Mr. Vijay also gave his consent
as nominee to another OPC in which his elder brother Mr. Shankar is sole member.
Mr. Prasad met an accident on 25 th March, 2020, in which he lost his life. Nomination
clause invoked, resultantly Mr. Vijay has to take charge over ‘Casa Hangout (OPC) Private
Limited’ (One Person Company) as member with immediate effect. On 30 th March, 2020
Mr. Shankar was appointed as new nominee to ‘Casa Hangout (OPC) Private Limited’, who
gave written consent on 31 st March 2020. Mr. Shankar who is investment banker by
profession, is of opinion that ‘Casa Hangout (OPC) Private Limited’ need to amend its
object clause and add ‘carry out investment in securities of body corporate’ as one of
object.
Financial Period closed on 31 st March 2020. Financial statements of ‘Casa Hangout (OPC)
Private Limited’, which is not containing cash flow statement; signed by Mr. Anand (who
left as only director after death of Mr. Prasad).

A. With reference to appointment of Mr. Vijay and Mr. Shankar as nominee to ‘Casa
Hangout (OPC) Private Limited’, out of followings, who is eligible to be nominee of
OPC?
(i) Any natural person excluding minor
(ii) Any legal person excluding minor
(iii) Any natural person, who is resident of India; but excluding minor
(iv) Any natural person, who is resident as well as citizen of India; but excluding
minor
B. Mr. Shankar if wish to withdraw his consent as nominee, can do so; by giving written
notice to
(i) Director of OPC and to sole member of company
(ii) Director of OPC and to Registrar of companies
(iii) Sole member of company and to OPC
(iv) Sole member of company and to Registrar of companies
C. With reference to legal position of Mr. Vijay as member/s and nominee/s to various
OPCs, Which of the following statement is correct in reference to ceiling limit in
relation to membership and being nominee to OPC? A person, other than minor; at
specific point of time;
(i) Can be member in any number of OPCs but nominee in one OPC
(ii) Can be member in one OPC and nominee in any number of OPCs
(iii) Can be member in one OPC and nominee in another one OPCs
(iv) Can be member and nominee both in any number of OPCs
D. Which of following statement is correct, in reference to requirement for financial
Statements of ‘Casa Hangout (OPC) Private Limited’
(i) Must be signed by one director
(ii) Must be signed by at-least by two directors
(iii) Must contain cash flow statement as part of financial statements
(iv) None of the above
E. With reference to opinion of Mr. Shankar to add ‘carry out investment in securities of
body corporate’ object, ‘Casa Hangout (OPC) Private Limited’
(i) Can’t carry out non-banking financial investment activities & investment in
securities of body corporate
(ii) Can’t carry out non-banking financial investment, but can invest in securities of
body corporate’

(iii) Can carry-out non-banking financial investment & invest in securities of body
corporate’
(iv) None of the above
3. A is residing in Delhi and has a house in Mumbai. A appoints B by a power of attorney to
take care of his house. State the nature of agency created between A and B:
(a) Implied agency
(b) Agency by ratification
(c) Agency by necessity
(d) Express agency
4. One Person Company shall file a copy of the duly adopted financial statements to the
Registrar in:
(a) 30 days of the date of meeting in which it was adopted
(b) 90 days of the date of meeting in which it was adopted
(c) 90 days from the closure of the financial statement
(d) 180 days from the closure of the financial statement
5. A guarantee which extend to a series of transactions is called
(a) Special Guarantee
(b) Continuing Guarantee
(c) Specific Guarantee
(d) None of the above
6. An aid that expresses the scope, object and purpose of the Act—
(a) Title of the Act
(b) Heading of the Chapter
(c) Preamble
(d) Definitional sections
7. Roma along with her six friends has got incorporated Roma Trading Ltd. in May 2019. She
kept the paid-up share capital at ` 30 lacs. Further, in April 2020, she noticed that in the
last financial year, the turnover of the company was well below ` 2 crores. Advise whether
the company can be treated as a ‘small company’.
(a) Roma Trading Ltd. is definitely a ‘small company’ since its paid-up capital is much
below ` 50 lacs and also its turnover has not exceeded the threshold limit of ` 2
crores.

(b) The concept of ‘small company’ is applicable only in case of a private limited
company/OPC and therefore, despite meeting the criteria of ‘small company’ it being
a public limited company cannot enjoy benefits of ‘small company’.
(c) Unlike a private limited company/OPC which automatically becomes a ‘small
company’ as soon as it meets the criteria of ‘small company’, Roma Trading Ltd. being
a public limited company has to maintain the norms applicable to a ‘small company’
continuously for two years so that, thereafter, it is treated as a ‘small company’.
(d) If all the shareholders of Roma Trading Ltd. give an undertaking to th e ROC stating
that they will not let the paid share capital and also turnover exceed the limits
applicable to a ‘small company’ in the next two years, then it can be treated as a
‘small company’.
8. Red Flag Ltd., which has its registered office at Delhi and having 12500 members is holding
its Annual General Meeting in Ashoka Hotel. Despite swanky arrangements most of the
members did not turn up and quorum was not present within half an hour of the schedule
time of the meeting, as a result meeting was adjourned. However, due to heavy booking
schedule, hotel authorities could not make available, for adjourned meeting, sufficient
space in the same hall where meeting was originally called but allowed conduct of meeting
in a different hall on a different floor next week at same time. Please advise the option
available to board:
(a) The meeting stands adjourned automatically to the same place and time next week
as per provisions of law. There is no alternate but to hold meeting in the same hall,
(b) As same banquet hall is not available meeting can be held at different place as may
be decided appropriate by the Board,
(c) As the same hall is not available to conduct meeting after one week, a fresh notice of
21 days is needed for a different location,
(d) As the same hall is not available to conduct the meeting, the company needs to
conduct meeting electronically through internet and give sufficient notice to
shareholders,
9. Shreyas Mechanics Limited owns a plot of land which was purchased long before. As the
property rates are going up, it is decided to revalue the plot at fair value which is moderately
ten times the original price, thus resulting in a revaluation profit of ` 20,00,000. The Board
of Directors is keen to utilize ` 20,00,000 along with free reserves of ` 24,00,000 for
declaration of dividend at the forthcoming Annual General Meeting (AGM) to be held on
28th September, 2019. Advise the company.
(a) ` 20,00,000 are to be excluded from the distributable profits as the same cannot be
utilized towards declaration of dividend.
(b) Only 25% of ` 20,00,000 can be utilized as distributable profits towards declaration
of dividend.

(c) Up to 50% of ` 20,00,000 can be utilized as distributable profits towards declaration

of dividend.
(d) Up to 60% of ` 20,00,000 can be utilized as distributable profits towards declaration
of dividend.
Division B: Descriptive questions
1. Vijay, a member of Mayur Electricals Ltd. gave in writing to the company that the notice for
any general meeting be sent to him only by registered post at his residential address at
Kanpur for which he deposited sufficient money. The company sent notice to him by
ordinary mail under certificate of posting. Vijay did not receive this notice and could not
attend the meeting and contended that the notice was improper.
Decide:
(i) Whether the contention of Vijay is valid.
(ii) Will your answer be the same if Vijay remains in London for two months during the
notice of the meeting and the meeting held?
2. Shekhar Limited appointed an individual firm, Suresh & Company, Chartered Accountants,
as Auditors of the company at the Annual General Meeting held on 30 th September, 2019.
Mrs. Kamala, wife of Mr. Suresh, invested in the equity shares having face value of ` 1
lakh of Shekhar Limited on 15 th October, 2019. But Suresh & Company continues to
function as statutory auditors of the company. Advice.
3. The Board of Directors of Ramesh Ltd. proposes to issue the prospectus inviting offers
from the public for subscribing the shares of the Company. State the reports which shall
be included in the prospectus for the purposes of providing financial information under t he
provisions of the Companies Act, 2013.
4. Surya Ltd. is engaged in the manufacture of consumer goods and has got a good brand
value. Over the years, it has built a good reputation and its Balance Sheet as at March 31,
2019 shows the following position:
Authorized Share Capital (25,00,000 equity shares of face value of ` 10/- each)
` 2,50,00,000
Issued, subscribed and paid-up capital (10,00,000 equity shares of face value of `10/-
each, fully paid-up) ` 1,00,00,000
Free Reserves ` 3,00,00,000
The Board of Directors are proposing to declare a bonus issue of 1 share for every 2 shares
held by the existing shareholders. The Board wants to know the conditions and the manner
of issuing bonus shares under the provisions of the Companies Act, 2013. Discuss.
5. State, with reasons, whether the following statements are true or false?

(i) XYZ Private Limited may accept the deposits from its members to the extent of `
60.00 Lakh, if the aggregate of its paid-up capital, free reserves and security premium
account is ` 60.00 Lakh.
(ii) A Government Company, which is eligible to accept deposits under Section 76 of the
Companies Act, 2013 cannot accept deposits from public exceeding 25% of the
aggregate of its paid- up capital, free reserves and security premium account.
6. What are the powers of Registrar to make entries of satisfaction and release of charges in
the absence of any intimation from the company. Discuss this matter in the light of
7. Chetan Ltd. issued a notice for holding its Annual general meeting on 7 th November 2019.
The notice was posted to the members on 16 th October 2019. Some members of the
company allege that the company had not complied with the provisions of the Companies
Act, 2013 with regard to the period of notice and as such the meeting was valid. Referring
to the provisions of the Act, decide:
(i) Whether the meeting has been validly called?
(ii) If there is a shortfall, state and explain by how many days does the notice fall short
of the statutory requirement?
(iii) Can the delay in giving notice be condoned?
Other Laws
8. Sandeep guarantees for Gaurav, a retail textile merchant, for an amount of ` 1,00,000, for
which Sharma, the supplier may from time to time supply goods on credit basis to Gaurav
during the next 3 months.
After 1 month, Sandeep revokes the guarantee, when Sharma had supplied goods on
credit for ` 40,000. Referring to the provisions of the Indian Contract Act, 1872, decide
whether Sandeep is discharged from all the liabilities to Sharma for any subsequent credit
supply. What would be your answer in case Gaurav makes default in paying back Sharma
for the goods already supplied on credit i.e. ` 40,000?
9. Raj gives his umbrella to Manoj during raining season to be used for two days during
Examinations. Manoj keeps the umbrella for a week. While going to Raj’s house to return
the umbrella, Manoj accidently slips and the umbrella is badly damaged. Taking into
account the provisions of the Indian Contract Act, 1872, who will bear the loss and why?
10. Rahul drew a cheque in favour of Aman. After having issued the cheque; Rahul requested
Aman not to present the cheque for payment and gave a stop payment request to the bank
in respect of the cheque issued to Aman. Decide, under the provisions of the Negotiable
Instruments Act, 1881 whether the said acts of Rahul constitute an offence?
11. Referring to the provisions of the General Clauses Act, 1897, find out the day/ date on
which the following Act/Regulation comes into force. Give reasons also.

(1) An Act of Parliament which has not specifically mentioned a particular date.
(2) The Securities and Exchange Board of India (Issue of Capital and Disclosure
Requirements) (Fifth Amendment) Regulations, 2015 was issued by SEBI vide
Notification dated 14 th August, 2015 with effect from 1 st January, 2016.
12. ‘Preamble does not over-ride the plain provision of the Act.' Comment. Also give suitable
example.
SUGGESTED ANSWERS/HINTS
Division A –Answers to Case Scenario/ Multiple Choice Question

1. A. (iii)
B. (i)
C. (iv)
D. (iii)
E. (iii)
2. A. (iv)
B. (iii)
C. (iii)
D. (i)
E. (i)
3. (d)
4. (d)
5. (b)
6. (c)
7. (b)
8. (b)
9. (a)
Division B –Answers to Descriptive Type Questions
1. According to section 20(2) of the Companies Act, 2013, a document may be served on
Registrar or any member by sending it to him by post or by registered post or by speed
post or by courier or by delivering at his office or address, or by such electronic or other
mode as may be prescribed.

Provided that a member may request for delivery of any document through a particular
mode, for which he shall pay such fees as may be determined by the company in its annual
general meeting.
Thus, if a member wants the notice to be served on him only by registered post at his
residential address at Kanpur for which he has deposited sufficient money, the notice must
be served accordingly, otherwise service will not be deemed to have been effected.
Accordingly, the questions as asked may be answered as under:
(i) The contention of Vijay shall be tenable, for the reason that the notice was not
properly served.
(ii) In the given circumstances, the company is bound to serve a valid notice to Vijay by
registered post at his residential address at Kanpur and not outside India.
2. Disqualification of auditor: According to section 141(3)(d)(i) of the Companies Act, 2013,
a person who, or his relative or partner holds any security of the company or its subsidiary
or of its holding or associate company a subsidiary of such holding company, which carries
voting rights, such person cannot be appointed as auditor of the company. Provided that
the relative of such person may hold security or interest in the company of face value not
exceeding 1 lakh rupees as prescribed under the Companies (Audit and Auditors) Rules,
2014.
In this case, Mr. Suresh, Chartered Accountants, did not hold any such security. But Mrs.
Kamala, his wife held equity shares of Shekhar Limited of face value ` 1 lakh, which is
within the specified limit.
Further Section 141(4) provides that if an auditor becomes subject, after his appointment,
to any of the disqualifications specified in sub-section 3 of section 141, he shall be deemed
to have vacated his office of auditor. Hence, Suresh & Company can continue to function
as auditors of the Company even after 15 th October, 2019 i.e. after the investment made
by his wife in the equity shares of Shekhar Limited.
3. As per section 26(1) of the Companies Act, 2013, every prospectus issued by or on behalf
of a public company either with reference to its formation or subsequently, or by or on
behalf of any person who is or has been engaged or interested in the formation of a public
company, shall be dated and signed and shall state such information and set out such
reports on financial information as may be specified by the Securities and Exchange Board
in consultation with the Central Government.
Provided that until the Securities and Exchange Board specifies the information and reports
on financial information under this sub-section, the regulations made by the Securities and
Exchange Board under the Securities and Exchange Board of India Act, 1992, in respect
of such financial information or reports on financial information shall apply.
Prospectus issued make a declaration about the compliance of the provisions of this Act
and a statement to the effect that nothing in the prospectus is contrary to the provisions of

this Act, the Securities Contracts (Regulation) Act, 1956 and the Securities and Exchange
Board of India Act, 1992 and the rules and regulations made thereunder.
Accordingly, the Board of Directors of Ramesh Ltd. who proposes to issue the prospectus
shall provide such reports on financial information as may be specified by the Securities
and Exchange Board in consultation with the Central Government in compliance with the
above stated provision and make a declaration about the compliance of the above stated
provisions.
4. According to Section 63 of the Companies Act, 2013, a company may issue fully paid -up
bonus shares to its members, in any manner whatsoever, out of -
(i) its free reserves;
(ii) the securities premium account; or
(iii) the capital redemption reserve account.
Provided that no issue of bonus shares shall be made by capitalising reserves created by
the revaluation of assets.
Conditions for issue of Bonus Shares: No company shall capitalise its profits or reserves
for the purpose of issuing fully paid-up bonus shares, unless—
(i) it is authorised by its Articles;
(ii) it has, on the recommendation of the Board, been authorised in the general meeting
of the company;
(iii) it has not defaulted in payment of interest or principal in respect of fixed deposits or
debt securities issued by it;
(iv) it has not defaulted in respect of payment of statutory dues of the employees, such
as, contribution to provident fund, gratuity and bonus;
(v) the partly paid-up shares, if any outstanding on the date of allotment, are made fully
paid-up;
(vi) it complies with such conditions as may be prescribed.
But the company has to ensure that the bonus shares shall not be issued in lieu of dividend.
To issue bonus shares, company will need reserves of ` 50,00,000 (half of `1,00,00,000),
which is available with the company. Hence, after following the above compliances on
issuing bonus shares under the Companies Act, 2013, Surya Ltd. may proceed for a bonus
issue of 1 share for every 2 shares held by the existing shareholders.
5. (i) As per the provisions of Section 73(2) of the Companies Act, 2013 read with Rule 3
of the Companies (Acceptance of Deposits) Rules, 2014, as amended by the
Companies (Acceptance of Deposits) Amendment Rules, 2016, a company shall
accept any deposit from its members, together with the amount of other deposits
outstanding as on the date of acceptance of such deposits not exceeding thirty five

per cent of the aggregate of the Paid-up share capital, free Reserves and securities
premium account of the company. Provided that a private company may accept from
its members monies not exceeding one hundred per cent of aggregate of the paid up
share capital, free reserves and securities premium account and such company shall
file the details of monies so accepted to the Registrar in such manner as may be
specified.
Therefore, the given statement of eligibility of XYZ Private Ltd. to a ccept deposits
from its members to the extent of ` 60.00 lakh is True.
(ii) A Government company is not eligible to accept or renew deposits under section 76,
if the amount of such deposits together with the amount of other deposits outstanding
as on the date of acceptance or renewal exceeds thirty five per cent of the aggregate
of its Paid-up share capital, free Reserves and securities premium account of the
company.
Therefore, the given statement prescribing the limit of 25% to accept deposits is
False.
6. Section 83 of the Companies Act, 2013 empowers the Registrar to make entries with
respect to the satisfaction and release of charges even if no intimation has been received
by him from the company.
Accordingly, with respect to any registered charge if an evidence is shown to the
satisfaction of Registrar that the debt secured by charge has been paid or satisfied in whole
or in part or that the part of the property or undertaking charged has been released from
the charge or has ceased to form part of the company’s property or undertaking, then he
may enter in the register of charges a memorandum of satisfaction that:
 the debt has been satisfied in whole or in part; or
 the part of the property or undertaking has been released from the charge or has
ceased to form part of the company’s property or undertaking.
This power can be exercised by the Registrar despite the fact that no intimation has been
received by him from the company.
Information to affected parties: The Registrar shall inform the affected parties within 30
days of making the entry in the register of charges.
Issue of Certificate: As per Rule 8 (2), in case the Registrar enters a memorandum of
satisfaction of charge in full, he shall issue a certificate of registration of satisfaction of
charge in Form No. CHG-5.
7. According to section 101(1) of the Companies Act, 2013, a general meeting of a company
may be called by giving not less than clear twenty-one days' notice either in writing or
through electronic mode in such manner as may be prescribed.

Also, it is to be noted that 21 clear days mean that the date on which notice is served and
the date of meeting are excluded for sending the notice.
Further, Rule 35(6) of the Companies (Incorporation) Rules, 2014, provides that in case of
delivery by post, such service shall be deemed to have been effected in the case of a
notice of a meeting, at the expiration of forty eight hours after the letter containing the
same is posted.
Hence, in the given question:
(i) A 21 days’ clear notice must be given. In the given question, only 19 clear days’ notice
is served (after excluding 48 hours from the time of its posting and the day of sending
and date of meeting). Therefore, the meeting was not validly called.
(ii) As explained in (i) above, notice falls short by 2 days.
(iii) The Companies Act, 2013 does not provide anything specific regarding the
condonation of delay in giving of notice. Hence, the delay in giving the notice calling
the meeting cannot be condoned.
8. Discharge of Surety by Revocation: As per section 130 of the Indian Contract Act, 1872
a specific guarantee cannot be revoked by the surety if the liability has already accrued. A
continuing guarantee may, at any time, be revoked by the surety, as to future transactions,
by notice to the creditor, but the surety remains liable for transactions already entered into.
As per the above provisions, liability of Sandeep is discharged with relation to all
subsequent credit supplies made by Sharma after revocation of guarantee, because it is a
case of continuing guarantee.
However, liability of Sandeep for previous transactions (before revocation) i.e. for
` 40,000 remains. He is liable for payment of ` 40,000 to Sharma because the transaction
was already entered into before revocation of guarantee.
9. It is the duty of bailee to return, or deliver according to the bailor’s directions, the goods
bailed without demand, as soon as the time for which they were bailed, has expired, or the
purpose for which they were bailed has been accomplished. [Section 160 of the Indian
Contract Act, 1872]
If, by the default of the bailee, the goods are not returned, delivered or tendered at the
proper time, he is responsible to the bailor for any loss, destruction or deterioration of the
goods from that time. [Section 161]
In the instant case, Manoj shall have to bear the loss since he failed to return the umbrella
within the stipulated time and Section 161 clearly says that where a bailee fails to retur n
the goods within the agreed time, he shall be responsible to the bailor for any loss,
destruction or deterioration of the goods from that time notwithstanding the exercise of
reasonable care on his part.

10. As per the facts stated in the question, Rahul (drawer) after having issued the cheque,
informs Aman (drawee) not to present the cheque for payment and as well as gave a stop
payment request to the bank in respect of the cheque issued to Aman.
Section 138 of the Negotiable Instruments Act, 1881, is a penal provision in the sense that
once a cheque is drawn on an account maintained by the drawer with his banker for
payment of any amount of money to another person out of that account for the discharge
in whole or in part of any debt or liability, is informed by the bank unpaid either because of
insufficiency of funds to honour the cheques or the amount exceeding the arrangement
made with the bank, such a person shall be deemed to have committed an offence.
Once a cheque is issued by the drawer, a presumption under Section 139 of the Negotiable
Instruments Act, 1881 follows and merely because the drawer issues a notice thereafter to
the drawee or to the bank for stoppage of payment, it will not preclude an act ion under
Section 138.
Also, Section 140 of the Negotiable Instruments Act, 1881, specifies absolute liability of
the drawer of the cheque for commission of an offence under the section 138 of the Act.
Section 140 states that it shall not be a defence in a prosecution for an offence under
section 138 that the drawer had no reason to believe when he issued the cheque that the
cheque may be dishonoured on presentment for the reasons stated in that section.
Accordingly, the act of Rahul, i.e., his request of stop payment constitutes an offence under
the provisions of the Negotiable Instruments Act, 1881.
11. (1) According to section 5 of the General Clauses Act, 1897, where any Central Act has
not specifically mentioned a particular date to come into force, it shall be implemented
on the day on which it receives the assent of the President in case of an Act of
Parliament.
(2) If any specific date of enforcement is prescribed in the Official Gazette, the Act shall
come into enforcement from such date.
Thus, in the given question, the SEBI (Issue of Capital and Disclosure Requirements)
(Fifth Amendment) Regulations, 2015 shall come into enforcement on 1 st January,
2016 rather than the date of its notification in the gazette.
12. Preamble: The Preamble expresses the scope, object and purpose of the Act more
comprehensively. The Preamble of a Statute is a part of the enactment and can legitimately
be used as an internal aid for construing it. However, the Preamble does not over-ride the
plain provision of the Act. But if the wording of the statute gives rise to doubts as to its
proper construction, for example, where the words or phrase has more than one meaning
and a doubt arises as to which of the two meanings is intended in the Act, the Pr eamble
can and ought to be referred to in order to arrive at the proper construction.
In short, the Preamble to an Act discloses the primary intention of the legislature but can
only be brought in as an aid to construction if the language of the statute is not clear.
However, it cannot override the provisions of the enactment.

Example: Use of the word ‘may’ in section 5 of the Hindu Marriage Act, 1955 provides that
“a marriage may be solemnized between two Hindus…..” has been construed to be
mandatory in the sense that both parties to the marriage must be Hindus as defined in
section 2 of the Act. It was held that a marriage between a Christian male and a Hindu
female solemnized under the Hindu Marriage Act was void. This result was reached also
having regard to the preamble of the Act which reads: ‘An Act to amend and codify the law
relating to marriage among Hindus” [Gullipoli Sowria Raj V. Bandaru Pavani, (2009)].

PART – I: ANNOUNCEMENTS STATING APPLICABILITY

FOR MAY, 2020 EXAMINATIONS

The Study Material (July 2019 edition) is applicable for May, 2020 examinations. This study
material is updated for all amendments till 30 th April, 2019. Further, all relevant amendments/
circulars/ notifications etc. in the Company law part and the Other Laws portion, for the period
1st May 2019 to 31 st October, 2019 are mentioned below:
PART I- COMPANY LAW
I. Chapter 2: Incorporation of Company and Matters Incidental thereto
Amendments related to - Notification G.S.R. 357(E) dated 10 th May, 2019
Companies (Incorporation) Fifth Amendment Rules, 2019.
In the Companies (Incorporation) Rules, 2014, Rule 8 has been fully substituted by Rule
8, Rule 8A and Rule 8B.
[Note: On page 2.19 of the Study Material, under the heading of Undesirable names, ‘the
words and combinations thereof which shall not be used in the name of a company
depicting the same meaning unless the previous approval of the Central Government has
been obtained for the use of any such word or expression’, were earlier covered under
Rule 8. As per the amendment now they are dealt in with Rule 8B.]
II. Chapter 3: Prospectus and Allotment of Securities
Amendments related to - COMPANIES (AMENDMENT) ACT, 2019
1. In section 26-
(i) in sub-sections (4), (5) and (6), for the word “registration”, the word “filing” shall
be substituted;
(ii) sub-section (7) shall be omitted
[Amendment to be incorporated on Pg 3.7 and 3.8 of SM]
2. In section 29-
(i) in sub-section (1), in clause (b), the word “public” shall be omitted;
(ii) after sub-section (1), the following sub-section shall be inserted, namely:-

“(1A) In case of such class or classes of unlisted companies as may be prescribed,

the securities shall be held or transferred only in dematerialised form in the manner
laid down in the Depositories Act, 1996 and the regulations made thereunder.”.
[Amendment to be incorporated on Pg 3.9 of SM]
3. In section 35, in sub-section (2), in clause (c), for the words “delivery of a copy of the
prospectus for registration”, the words “filing of a copy of the prospectus with the
Registrar” shall be substituted.
III. Chapter 4: Share Capital and Debentures
Amendments related to - Notification G.S.R. 574(E) dated 16 th August, 2019
The Central Government has amended the Companies (Share Capital and Debentures)
Rules, 2014, by the Companies (Share Capital and Debentures) Amendment Rules, 2019.
In the Companies (Share Capital and Debentures) Rules, 2014:
1. In Rule 4, in sub-rule (1),
(i) for clause (c), the following clause shall be substituted, namely:-
“(c) the voting power in respect of shares with differential rights of the company shall
not exceed seventy four per cent. of total voting power including voting power in
respect of equity shares with differential rights issued at any point of time;”;
(ii) clause (d) shall be omitted.
2. In the principal rules, in rule 18, for sub-rule (7), the following sub-rule shall be
“(7) The company shall comply with the requirements with regard to Debenture
Redemption Reserve (DRR) and investment or deposit of sum in respect of debentures
maturing during the year ending on the 31st day of March of next year, in accordance with
the conditions given below:-
(a) Debenture Redemption Reserve shall be created out of profits of the company
available for payment of dividend;
(b) the limits with respect to adequacy of Debenture Redemption Reserve and investment
or deposits, as the case may be, shall be as under;-
(i) Debenture Redemption Reserve is not required for debentures issued by All
India Financial Institutions regulated by Reserve Bank of India and Banking
Companies for both public as well as privately placed debentures;
(ii) For other Financial Institutions within the meaning of clause (72) of section 2 of
the Companies Act, 2013, Debenture Redemption Reserve shall be as

applicable to Non –Banking Finance Companies registered with Reserve Bank

of India.
(iii) For listed companies (other than All India Financial Institutions and Banking
Companies as specified in sub-clause (i)), Debenture Redemption Reserve is
not required in the following cases-
(A) in case of public issue of debentures –
A. for NBFCs registered with Reserve Bank of India under section 45-IA of the
RBI Act, 1934 and for Housing Finance Companies registered with National
Housing Bank;
B. for other listed companies;
(B) in case of privately placed debentures, for companies specified in sub -items
A and B.
(iv) for unlisted companies, (other than All India Financial Institutions and Banking
Companies as specified in sub-clause (i)) –
(A) for NBFCs registered with RBI under section 45-IA of the Reserve Bank of
India Act, 1934 and for Housing Finance Companies registered with National
Housing Bank, Debenture Redemption Reserve is not required in case of
privately placed debentures.
(B) for other unlisted companies, the adequacy of Debenture Redemption
Reserve shall be ten percent. of the value of the outstanding debentures;
(v) In case a company is covered in item (A) or item (B) of sub-clause (iii) of clause
(b) or item (B) of sub-clause (iv) of clause (b), it shall on or before the 30th day
of April in each year, in respect of debentures issued by a company cove red in
item (A) or item (B) of subclause (iii) of clause (b) or item (B) of sub -clause (iv)
of clause (b), invest or deposit, as the case may be, a sum which shall not be
less than fifteen per cent., of the amount of its debentures maturing during the
year, ending on the 31st day of March of the next year in any one or more
methods of investments or deposits as provided in sub-clause (vi):
Provided that the amount remaining invested or deposited, as the case may be,
shall not at any time fall below fifteen percent. of the amount of the debentures
maturing during the year ending on 31st day of March of that year.
(vi) for the purpose of sub-clause (v), the methods of deposits or investments, as
the case may be, are as follows:—
(A) in deposits with any scheduled bank, free from any charge or lien;
(B) in unencumbered securities of the Central Government or any State
Government;
(C) in unencumbered securities mentioned in sub-clause (a) to (d) and (ee) of
section 20 of the Indian Trusts Act, 1882;

(D) in unencumbered bonds issued by any other company which is notified

under sub-clause (f) of section 20 of the Indian Trusts Act, 1882:
Provided that the amount invested or deposited as above shall not be used for any
purpose other than for redemption of debentures maturing during the year referred
above.
(c) in case of partly convertible debentures, Debenture Redemption Reserve shall be
created in respect of non-convertible portion of debenture issue in accordance with
this sub-rule.
(d) the amount credited to Debenture Redemption Reserve shall not be utilized by the
company except for the purpose of redemption of debentures.“
IV. Chapter 7: Management and Administration
Amendments related to - COMPANIES (AMENDMENT) ACT, 2019
In section 90,
(i) after sub-section (4), the following sub-section shall be inserted, namely:-
“(4A) Every company shall take necessary steps to identify an individual who is a
significant beneficial owner in relation to the company and require him to comply with
the provisions of this section.”;
(ii) after sub-section (9), as so substituted, the following sub-section shall be inserted,
namely:-
“(9A) The Central Government may make rules for the purposes of this section.”;
(iii) in sub-section (11), after the word, brackets and figure “sub-section (4)”, the words,
brackets, figure and letter “or required to take necessary steps under sub -section
(4A)” shall be inserted.
V. Chapter 9: Accounts of Companies
(A) Amendments related to - Notification G.S.R. 390(E) dated 30 th May, 2019
In the said Schedule VII, after item (xi) and the entries relating thereto, the following
item and entries shall be inserted, namely:

“(xii) disaster management, including relief, rehabilitation and reconstruction

activities.”
[Enforcement Date: 30 th May, 2019]
(B) Amendments related to - Notification G.S.R. 776(E) dated 11 th October, 2019
In the said Schedule VII, for item (ix) and the entries relating thereto, the following
item and entries shall be substituted, namely:
“(ix) Contribution to incubators funded by Central Government or State Government
or any agency or Public Sector Undertaking of Central Government or State
Government, and contributions to public funded Universities, Indian Institute of
Technology (IITs), National Laboratories and Autonomous Bodies (established under
the auspices of Indian Council of Agricultural Research (ICAR), Indian Council of
Medical Research (ICMR), Council of Scientific and Industrial Research (CSIR),
Department of Atomic Energy (DAE), Defence Research and Development
Organisation (DRDO), Department of Science and Technology (DST), Ministry of
Electronics and Information Technology) engaged in conducting research in science,
technology, engineering and medicine aimed at promoting Sustainable Development
Goals (SDGs).”
[Enforcement Date: 11 th October, 2019]
(C) Amendments related to - COMPANIES (AMENDMENT) ACT, 2019
Following sections of the Companies Act, 2013 have been amended by the
Companies (Amendment) Act, 2019 through Notification No. S.O. 2947(E) dated 14 th
August, 2019 [the sections contained therein shall deemed to have come into force
on 15th August, 2019]
In section 132—
(i) after sub-section (1), the following sub-section shall be inserted, namely:—
“(1A) The National Financial Reporting Authority shall perform its functions
through such divisions as may be prescribed.”;
(ii) after sub-section (3), the following sub-sections shall be inserted, namely:—
“(3A) Each division of the National Financial Reporting Authority shall be
presided over by the Chairperson or a full-time Member authorised by the
Chairperson.
(3B) There shall be an executive body of the National Financial Reporting
Authority consisting of the Chairperson and full-time Members of such Authority

for efficient discharge of its functions under sub-section (2) [other than clause
(a)] and sub-section (4).”;
(iii) in sub-section (4), in clause (c), for sub-clause (B), the following sub-clause shall
be substituted, namely:—
“(B) debarring the member or the firm from—
I. being appointed as an auditor or internal auditor or undertaking any audit
in respect of financial statements or internal audit of the functions and
activities of any company or body corporate; or
II. performing any valuation as provided under section 247,
for a minimum period of six months or such higher period not exceeding ten
years as may be determined by the National Financial Reporting Authority.”.
(D) Amendments related to - Notification G.S.R. 636(E) 5 th September, 2019
The Central Government has amended the National Financial Reporting Authority
Rules, 2018, by the National Financial Reporting Authority (Amendment) Rules, 2019.
In the National Financial Reporting Authority Rules, 2018, after clause (c) of sub-rule
(1) of rule 3, the following explanation shall be inserted, namely:-
“Explanation.- For the purpose of this clause, “banking company” includes
‘corresponding new bank’ as defined in clause (d) of section 2 of the Banking
Companies (Acquisition and Transfer of Undertakings) Act, 1970 (5 of 1970) and
clause (b) of section 2 of the Banking Companies (Acquisition and Transfer of
Undertakings) Act, 1980 (40 of 1980) and ‘subsidiary bank’ as defined in clause (k)
of section 2 of the State Bank of India (Subsidiary Bank) Act, 1959 (38 of 1959).”.
[Enforcement Date: 5 th September, 2019]
PART II- OTHER LAWS
THE INDIAN CONTRACT ACT, 1872

As per the Jammu and Kashmir Reorganisation Act, 2019, in the Indian Contract Act, 1872, in
sub-section (2) of section 1, words, "except the State of Jammu and Kashmir" shall be omitted.
Now, Section 1 will be read as under,
‘Short title- This Act may be called the Indian Contract Act, 1872.

Extent, Commencement- It extends to the whole of India and it shall come into force on the
first day of September, 1872.
Saving- Nothing herein contained shall affect the provisions of any Statute, Act or Regulation
not hereby expressly repealed, nor any usage or custom of trade, nor any incident of any
contract, not inconsistent with the provisions of this Act.’
THE GENERAL CLAUSES ACT, 1897
As per the Jammu and Kashmir Reorganisation Act, 2019, the General Clauses Act, 1897 has
been extended as a whole.
QUESTIONS
DIVISION A – CASE SCENARIO / MULTIPLE CHOICE QUESTIONS
1 A private company by the name of Neha Pvt. Limited was incorporated in the year 2002.
The registered office of the company Neha Pvt. Limited was situated in city K of state Y.
During the financial year beginning on 01/04/2018 and ending on 31/03/2019 the turnover
of the company Neha Pvt. Limited was ` 1010 crore. The net profit of the company Neha
Pvt. Limited for the financial year 2018-19 was ` 4 crore.
The Board of Directors of Neha Pvt. Limited consisted of only two directors namely Mr. M
and Mr. N. Mr. M and Mr. N were the only directors of company Neha Pvt. Limited since
its incorporation in the year 2002.
Mr. M one of the two directors of Neha Pvt. Limited was of the opinion that no Corporate
Social Responsibility Committee of the Board was required to be formed as for the financial
year 2019 – 20 due to the reason that net profit of the company Neha Pvt. Limited for
financial year 2018-19 was ` 4 crore which was less than ` 5 crore.
Mr. N the other director of Neha Pvt. Limited was not having the same opinion as
Mr. M. He was of the opinion that Corporate Social Responsibility Committee of the Board
must be formed for the company Neha Pvt. Limited.
The net profit of the company Neha Pvt. Limited for the financial year 2015-16, 2016-17
and 2017-18 were ` 1 crore, ` 2 crore and ` 3 crore respectively.
Keeping the basic provisions of Companies Act in mind answer the following multiple
choice questions:

(A) Mr. M one of the director of Neha Pvt. Limited was of the opinion that no Corporate
Social Responsibility Committee of Board was required to be formed for financial year
2019-20 but Mr. N other director was of opinion that it was required to be formed.
According to your understanding which one of the two director is right and why:
(a) Mr. M because net profit of Neha Pvt. Limited for financial year 2018-19 was
less than ` 5 crore.
(b) Mr. N because turnover of Neha Pvt. Limited for financial year 2018-19 was
more than ` 1,000 crore.
(c) Mr. N because net profit of Neha Pvt. Limited for financial year 2018-19 was
more than ` 2 crore.
(d) Mr. M because turnover of Neha Pvt. Limited for financial year 2019-19 was less
than ` 1,500 crore.
(B) The company Neha Pvt. Limited must give preference to spend the amount of
contribution towards Corporate Social Responsibility in area of:
(a) City O of State Y
(b) City A of State Z
(c) City G of State Z
(d) City K of State Y
(C) According to law Corporate Social Responsibility Committee shall consist of three or
more directors, so for company Neha Pvt. Limited the Corporate Social Responsibility
Committee will:
(a) Not be formed as it has only two directors namely Mr. M and Mr. N
(b) Be formed only after appointing one more director apart from Mr. M and Mr. N
(c) Be formed with two directors only namely Mr. M and Mr. N
(d) Be formed only after appointing two more directors apart from Mr. M and Mr. N
(D) The company Neha Pvt. Limited shall spend during financial year 2018-19 on
Corporate Social Responsibility an amount of atleast:
(a) ` 0.04 crore
(b) ` 0.12 crore
(c) ` 0.18 crore
(d) ` 0.06 crore
2. GHWX Private Limited was incorporated in the year 2009. The registered office of the company
GHWX Private Limited was situated in city T of state V. The Board of Directors of GHWX Private
Limited comprised of five directors namely Mr. K, Mr. N, Mr. R, Mr. U and Mr. W.
During the financial year beginning on 01/04/2018 and ending on 31/03/2019 the second
meeting of Board of Directors of GHWX Private Limited was held on 7 September, 2018.

Out of 5 directors, Mr. K, Mr. N, Mr. R and Mr. W were present for the said meeting. During
the meeting of Board of Directors a resolution on one of the important matters was passed.
While three directors namely Mr. K, Mr. N and Mr. R agreed with the resolution and voted
in favour of resolution, however, Mr. W did not agree with the resolution and voted against
the resolution.
The minutes of the second meeting of Board of Directors of GHWX Private Limited held on
7 September, 2018 were prepared and they were entered in Minutes Book of mee ting of
Board of Directors of GHWX Private Limited. One of the director Mr. K was of the opinion
that minutes of second meeting of Board of Directors of GHWX Private Limited must be
prepared and entered in Minute Book of meeting of Board of Directors of GH WX Private
Limited by end of October, 2018. The remaining four directors namely Mr. N, Mr. R, Mr. U
and Mr. W did not agree with the opinion of Mr. K because they thought that it was not
within the time limit as prescribed by the law.
One of the directors, Mr. N. opined that minute books of meetings of Board of Directors of
GHWX Private Limited for the years starting with 2009 to 2015 should be shredded to ruins
as these papers were taking a lot of space. He further added that since the Companies
Act, 2013 is silent as to maintaining the minute book of meetings of Board of Directors, it
is not necessary to maintain such minute books.
The Board of Directors of GHWX Private Limited did not decide any place where minute
book of meetings of Board of Directors of GHWX Private Limited will be kept.
Keeping the provisions of the Companies Act, 2013, in mind answer the following multiple
choice questions:
(A) The second meeting of Board of Directors of GHWX Private Limited was held on 7
September, 2018 for the financial year 2018-19. The minutes of second meeting of
Board of Directors of GHWX Private Limited for financial year 2018-19 must contain:
(a) Name of director Mr. U who was absent from the meeting of Board of Directors
held on 7 September, 2018.
(b) Names of all the directors Mr. K, Mr. N, Mr. R, Mr. U and Mr. W comprising Board
of Directors of GHWX Private Limited.
(c) Name of one director Mr. U who was absent and atleast one director who was
present in the meeting of Board of Directors held on 7 September, 2018.
(d) Names of directors Mr. K, Mr. N, Mr. R and Mr. W who were present in the
meeting of Board of Directors held on 7 September, 2018.
(B) In case of the resolution talked in the case study, the minutes of second meeting of
Board of Directors of GHWX Private Limited for financial year 2018-19 held on 7
September, 2018 must contain:
(a) Name of any two directors who were present in meeting and voted in the
resolution.
(b) Name of director Mr. W who voted against the resolution.
(c) Name of directors Mr. K, Mr. N and Mr. R who voted in favour of the resolution.

(d) Names of all the directors Mr. K, Mr. N, Mr. R, Mr. U and Mr. W who all had the
right to attend the meeting and vote in the resolution.
(C) The opinion of one of the director, Mr. K was that minutes of second meeting of Board of
Directors of GHWX Private Limited for financial year 2018-19 must be prepared and
entered in minutes book of meeting of Board of Directors of GHWX Private Limited by the
end of October, 2018 is incorrect. The opinion of Mr. K is incorrect because:
(a) Minutes of second meeting of Board of Directors of GHWX Private Limited for
financial year 2018-19 must be entered in minute book of meeting of Board of
Directors within thirty days of the conclusion of meeting on 7 September, 2018.
(b) Minutes of second meeting of Board of Directors of GHWX Private Limited for
the financial year 2018-19 must be entered in minute book of meeting of Board
of Directors within sixty days of the conclusion of meeting on 7 September, 2018.
(c) Minutes of second meeting of Board of Directors of GHWX Private Limited for the
Directors within ninety days of the conclusion of meeting on 7 September, 2018.
(d) Minutes of second meeting of Board of Directors of GHWX Private Limited for
Directors within one twenty days of the conclusion of meeting on 7 September, 2018.
3. G Ltd. (a company having CSR Committee as per the provision of Section 13 5 of the
Companies Act, 2013) decides to spend and utilize half of the amount of Corporate Social
Responsibility on the activities for the benefit of all the employees of G Limited and the
remaining half of the amount of Corporate Social Responsibility on the activities for the
benefit of family members of employees of G Limited As per the provision of Companies
Act, 2013 this would mean that:-
(a) This is the total amount spent on Corporate Social Responsibility activities by G
Limited for that financial year
(b) No amount spent on Corporate Social Responsibility activities by G Limited for that
financial year
(c) Half amount spent on Corporate Social Responsibility activities by G Limited for that
financial year
(d) Half amount spent on Corporate Social Responsibility activities and remaining half
amount spent on Other Activities by G Limited for that financial year
4. The minute book of General meetings of Alpha Limited will be kept at:
(a) That place where members of Alpha Limited will decide.
(b) That place where all employees of Alpha Limited will decide.
(c) Registered office of the company Alpha Limited.
(d) That place where senior officials of Alpha Limited will decide.
5. R purchases some goods on credit from S, payable within 3 months. After 2 months, R
makes out a blank cheque in favour of S, signs and delivers it to S with a request to fill up

the amount due, as R does not know the exact amount payable by him. S fills up
fraudulently the amount larger than the amount payable by R and endorses the cheque to
C in full payment of S's own due. R's cheque is dishonoured. Referring to the provisions
of the Negotiable Instruments Act, 1881, C:
(a) Can claim the full amount from R
(b) Can claim the full from S
(c) Cannot claim the amount either from R or S
(d) Can claim from S only the exact amount that was due from R to S
COMPANY LAW
1. MNP Ltd. has a paid up share capital of ` 10 crore and free reserves of ` 50 crore, as on
31st March, 2019. The company made a loss of ` 40 lakh after providing for depreciation
for the year ended 31 st March, 2019 and as a result, the company was not in a position to
declare any dividend for the said year out of profits. However, the Board of directors of the
company announced the declaration of dividend of 20% on the equity shares payable out
of free reserves. The average dividend declared by the company in the last three years is
25%. Referring to the provisions of the Companies Act, 2013, examine the validity of
declaration of dividend.
2. New Limited appointed an individual firm, Naresh & Company, Chartered Accountants, a s
Auditors of the company at the Annual General Meeting held on 30 September 201 9.
Mrs. Reena, wife of Mr. Naresh, invested in the equity shares face value of ` 1 lakh of New
Limited on 15 October 2019. But Naresh & Company continues to function as statutory
auditors of the company. Advice, Naresh & Company on the continuation of such
appointment, as per provisions of the Companies Act, 2013.
3. The Board of Directors of Vishwakarma Electronics Limited consists of Mr. Ghanshyam
(Director), Mr. Hyder (Director) and Mr. Indersen (Managing Director). The company has
also employed a full time Secretary.
The Profit and Loss Account and Balance Sheet of the company were signed by
Mr. Ghanshyam and Mr. Hyder. Examine whether the authentication of financial statements of
the company was in accordance with the provisions of the Companies Act, 2013?
4. EFG Ltd. was incorporated on 1.4.2017. No General Meeting of the company has been
held till 30.4.2019. Discuss the provisions of the Companies Act, 2013 regarding the time
limit for holding the first annual general meeting of the Company and the power of the
Registrar to grant extension of time for the First Annual General Meeting.
5. Green Ltd. was dealing in export of rubber to specified foreign countries. The company
was willing to purchase rubber trees in A.P. State. The prospectus issued by the company
contained some important extracts of the expert report and number of trees in A.P. St ate.
The report was found untrue. Mr. Andrew purchased the shares of Green Ltd. on the basis

of the expert’s report published in the prospectus. However, he did not suffer any loss due
to purchase of such shares. Will Mr. Andrew have any remedy against the company? State
also the circumstances where an expert is not liable under the Companies Act, 2013.
6. The Articles of Association of Ajad Ltd. require the personal presence of 7 members to
constitute quorum of General Meetings. The company has 965 members as on the date of
meeting. The following persons were present in the extra-ordinary meeting to consider the
appointment of Managing Director:
(i) A, the representative of Governor of Uttar Pradesh.
(ii) B and C, shareholders of preference shares,
(iii) D, representing Y Ltd. and Z Ltd.
(iv) E, F, G and H as proxies of shareholders.
Can it be said that the quorum was present in the meeting?
7. K Limited, a subsidiary of Old Limited, decides to give a loan of ` 4,00,000 to the Human
Resource Manager, who is not a Key Managerial Personnel of K Limited, drawing salary of
` 30,000 per month, to buy 500 partly paid-up equity Shares of ` 1000 each in K Limited.
Examine the validity of company's decision under the provisions of the Companies Act, 2013.
8. Yadav Dairy Products Private limited has registered its articles along with memorandum at
the time of registration of company in December, 2014. Now directors of the company are
of the view that provisions of articles regarding forfeiture of shares should not be changed
except by a resolution of 90% majority. While as per section 14 of the Companies Act,
2013 articles may be changed by passing a special resolution only. Hence, one of the
directors is of the view that they cannot make a provision against the Companies Act, 2013.
You are required to advise the company on this matter.
OTHER LAWS
9. Pankaj appoints Shruti as his agent to sell his estate. Shruti, on looking over the estate
before selling it, finds the existence of a good quality Granite-Mine on the estate, which is
unknown to Pankaj. Shruti buys the estate herself after informing Pankaj that she (Shruti)
wishes to buy the estate for herself but conceals the existence of Granite-Mine. Pankaj
allows Shruti to buy the estate, in ignorance of the existence of Mine. State giving reasons
in brief the rights of Pankaj, the principal, against Shruti, the agent. Give your answer as
per the provisions of the Contract Act, 1872.
What would be your answer if Shruti had informed Pankaj about the existence of Mine
before she purchased the estate, but after two months, she sold the estate at a profit of
` 10 lac?
10. Discuss with reasons, whether the following persons can be called as a ‘holder’ under the
Negotiable Instruments Act, 1881:

(i) X who obtains a cheque drawn by Y by way of gift.

(ii) A, the payee of the cheque, who is prohibited by a court order from receiving the
amount of the cheque.
(iii) M, who finds a cheque payable to bearer, on the road and retains it.
(iv) B, the agent of C, is entrusted with an instrument without endorsement by C, who is
the payee.
(v) B, who steals a blank cheque of A and forges A’s signature.
11. Mr. Vyas is the owner of House No. 20 in Geeta Colony, Delhi. He has rented two rooms
in this house to Mr. Iyer. The Income Tax Authority has served a show cause notice to Mr.
Vyas. The said notice was received by Mr. Iyer and returned the notice with an
endorsement of refusal. Decide with reference to provisions of "General Clauses Act,
1897”, whether the notice was rightfully served on Mr. Vyas.
12. Explain the function of ‘proviso’ as an internal aid to construction.
DIVISION A - ANSWER TO CASE SCENARIO / MULTIPULE CHOICE QUESTIONS

1. (A) (b)
(B) (d)
(C) (c)
(D) (a)
2. (A) (d)
(B) (b)
(C) (a)
3. (b)
4. (c)
5. (b)
1. As per Second Proviso to Section 123 (1), in the event of inadequacy or absence of profits
in any financial year, a company may declare dividend out of the accumulated profits of
previous years which have been transferred to the free reserves. However, such
declaration shall be subject to the following conditions as per Rule 3 of Companies
(Declaration and Payment of Dividend) Rules, 2014.
(i) The rate of dividend declared shall not exceed the average of the rates at which
dividend was declared by the company in the immediately preceding three years.

As per facts of the question the present rate of dividend is 20% and average dividend
declared in the last three years is 25%. So, this condition is fulfilled.
(ii) The total amount to be drawn from free reserves shall not exceed one-tenth i.e., 10%
of its paid-up share capital and free reserves as per the latest audited financial
statement.
Amount of dividend proposed: ` 2 Crores (20% of ` 10 Crore i.e on paid up capital)
10% of paid up share capital and free reserves: 10% of (10 crore + 50 crore) = ` 6
Crore.
This condition is fulfilled as amount of dividend is not exceeding 10% of its paid -up
share capital and free reserves.
(iii) The amount so drawn shall first be utilized to set off the losses incurred in the financial
year in which dividend is declared and only thereafter, any dividend in respect of
equity shares shall be declared.
(iv) After such withdrawal from free reserves, the residual reserves shall not fall below
15% of its paid-up share capital as per the latest audited financial statement.
Balance of reserves after payment of dividend: ` 48 crore (50 crore – 2 crore)
15% of paid up share capital: 1.5 crore (15% of 10 crore)
This condition is fulfilled.
Taking into account all the conditions, it can be said that declaration of dividend by MN P
Limited is valid.
2. Disqualification of auditor: According to section 141(3)(d)(i) of the Companies Act, 2013,
a person who, or his relative or partner holds any security of the company or its subsidiary
or of its holding or associate company or a subsidiary of such holding company, which
carries voting rights, such person cannot be appointed as auditor of the company. Provided
that the relative of such person may hold security or interest in the company of face value
not exceeding 1 lakh rupees as prescribed under the Companies (Audit and Auditors)
Rules, 2014.
In the case Mr. Naresh, Chartered Accountants, did not hold any such security. But
Mrs. Reena, his wife held equity shares of New Limited of face value ` 1 lakh, which is
within the specified limit.
Further Section 141(4) provides that if an auditor becomes subject, after his appointment,
to any of the disqualifications specified in sub-section 3 of section 141, he shall be deemed
to have vacated his office of auditor. Hence, Naresh & Company can continue to function
as auditors of the Company even after 15 October 2019 i.e. after the investment made by
his wife in the equity shares of New Limited.
3. According to section 134(1) of the Companies Act, 2013, the financial statement, including
consolidated financial statement, if any, shall be approved by the Board of Directors before
they are signed on behalf of the Board by the chairperson of the company where he is
authorised by the Board or by two directors out of which one shall be managing director, if
any, and the Chief Executive Officer, the Chief Financial Officer and the company secretary

of the company, wherever they are appointed, or in the case of One Person Company, only
by one director, for submission to the auditor for his report thereon.
In the instant case, the Balance Sheet and Profit and Loss Account have been signed by
Mr. Ghanshyam and Mr. Hyder, the directors. In view of Section 134(1) of the Companies
Act, 2013, Mr. Indersen, the Managing Director should be one of the two signing directors.
Since, the company has also employed a full- time Secretary, he should also sign the
Balance Sheet and Profit and Loss Account.
4. According to Section 96 of the Companies Act, 2013, every company shall be required to
hold its first annual general meeting within a period of 9 months from the date of closing of
its first financial year.
The first financial year of EFG Ltd is for the period 1st April 2017 to 31st March 2018, the
first annual general meeting (AGM) of the company should be held on or before
31st December, 2018.
The section further provides that the Registrar may, for any special reason, extend the
time within which any annual general meeting, other than the first annual general meeting,
shall be held, by a period not exceeding three months.
Thus, the first AGM of EFG Ltd. should have been held on or before 31 st December, 2018.
Further, the Registrar does not have the power to grant extension to time limit for the first
AGM.
5. Under section 35 (1) of the Companies Act 2013, where a person has subscribed for
securities of a company acting on any statement included in the prospectus which is
misleading and has sustained any loss or damage as a consequence thereof, the company
and every person including an expert shall, be liable to pay compensation to the person
who has sustained such loss or damage.
In the present case, Mr. Andrew purchased the shares of Green Ltd. on the basis of the
expert report published in the prospectus. Mr. Andrew can claim compensation for any loss
or damage that he might have sustained from the purchase of shares. However, he did not
suffer any loss due to purchase of such shares.
Hence, Mr. Andrew will have no remedy against the company.
Circumstances when an expert is not liable: An expert will not be liable for any mis-
statements in the prospectus under the following situations:
(i) Under section 26 (5), that having given his consent, but withdrew it in writing before
delivery of the copy of prospectus for filing, or
(ii) Under section 35 (2), that the prospectus was issued without his knowledge / consent
and that on becoming aware of it, he forthwith gave a reasonable public notice that it
was issued without his knowledge or consent;
(iii) An expert will not be liable in respect of any statement not made by him in the capacity
of an expert and included in the prospectus as such;
(iv) that, as regards every misleading statement purported to be made by an expert or
contained in what purports to be a copy of or an extract from a report or valuation of

an expert, it was a correct and fair representation of the statement, or a correct copy
of, or a correct and fair extract from, the report or valuation; and he had reasonable
ground to believe and did up to the time of the issue of the prospectus believe, that
the person making the statement was competent to make it and that the said person
had given the consent required by section 26(5) to the issue of the prospectus and
had not withdrawn that consent before filing of a copy of the prospectus with the
Registrar or, to the defendant's knowledge, before allotment thereunder.
6. According to section 103 of the Companies Act, 2013, unless the articles of the company
provide for a larger number in case of a public company, five members personally present
if the number of members as on the date of meeting is not more than one thousand, shall
be the quorum.
In this case the quorum for holding a general meeting is 7 members to be personally
present (higher of 5 or 7). For the purpose of quorum, only those members are counted
who are entitled to vote on resolution proposed to be passed in the meeting.
Again, only members present in person and not by proxy are to be counted. Hence, proxies
whether they are members or not will have to be excluded for the purposes of quorum.
If a company is a member of another company, it may authorize a person by resolution to
act as its representative at a meeting of the latter company, then such a person shall be
deemed to be a member present in person and counted for the purpose of quorum Where
two or more companies which are members of another company, appoint a single person
as their representative then each such company will be counted as quorum at a meeting
of the latter company.
Further the President of India or Governor of a State, if he is a member of a company, may
appoint such a person as he thinks fit, to act as his representative at any meeting of the
company. A person so appointed shall be deemed to be a member of such a company and
thus considered as member personally present.
In view of the above there are only three members personally present.
‘A’ will be included for the purpose of quorum. B & C have to be excluded for the purpose
of quorum because they represent the preference shares and since the agenda being the
appointment of Managing Director, their rights cannot be said to be directly affected and
therefore, they shall not have voting rights. D will have two votes for the purpose of quorum
as he represents two companies ‘Y Ltd.’ and ‘Z Ltd.’ E, F, G and H are not to be included
as they are not members but representing as proxies for the members.
Thus, it can be said that the requirements of quorum has not been met and it shall not
constitute a valid quorum for the meeting.
7. Restrictions on purchase by company or giving of loans by it for purchase of its
share: As per section 67 (3) of the Companies Act, 2013 a company is allowed to give a
loan to its employees subject to the following limitations:
(a) The employee must not be a Key Managerial Personnel;
(b) The amount of such loan shall not exceed an amount equal to six months’ salary of
the employee.

(c) The shares to be subscribed must be fully paid shares

In the given instance, Human Resource Manager is not a Key Managerial Personnel of the
K Ltd. He is drawing salary of ` 30,000 per month and took loan taken to buy 500 partly
paid up equity shares of ` 1000 each in K Ltd.
Keeping the above provisions of law in mind, the company’s (K Ltd.) decision is invalid due
to two reasons:
i. The amount of loan being more than 6 months’ salary of the HR Manager, which
should have restricted the loan to ` 1.8 Lakh.
ii. The shares subscribed are partly paid shares whereas the benefit is available only
for subscribing fully paid shares.
8. As per section 5 of the Companies Act, 2013 the article may contain provisions for
entrenchment to the effect that specified provisions of the articles may be altered on ly if
more restrictive conditions than a special resolution, are met.
The provisions for entrenchment shall only be made either on formation of a company, or
by an amendment in the articles agreed to by all the members of the company in the case
of a private company and by a special resolution in the case of a public company.
Where the articles contain provisions for entrenchment, whether made on formation or by
amendment, the company shall give notice to the Registrar of such provisions in prescribed
manner.
In the present case, Yadav Dairy Products Private Limited is a private company and wants
to protect provisions of articles regarding forfeiture of shares. It means it wants to make
entrenchment of articles, which is allowed. But the company will have to pass a resolution
taking permission of all the members and it should also give notice to Register of
Companies regarding entrenchment of articles.
9. Agent’s duty to disclose all material circumstances & his duty not to deal on his own
account without principal’s consent. The problem is based on Sections 215 & 216 of
the Indian Contract Act, 1872. According to Section 215, if an agent deals on his own
account in the business of the agency, without obtaining the consent of his principal and
without acquainting him with all material circumstances, then the principal may repudiate
the transaction. On the other hand, section 216 provides that, if an agent, without the
knowledge of his principal, acts on his own account in the business of the agency, then
the principal may claim any benefit which may have accrued to the agent from such a
transaction. Hence in the first instance, though Pankaj had given his consent to Shruti
permitting the latter to act on his own account in the business of agency, Pankaj may still
repudiate the sale as the existence of the mine, a material circumstance, had not been
disclosed to him.
In the second instance, Pankaj had knowledge that Shruti was acting on her own account
and also that the mine was in existence; hence, Pankaj cannot repudiate the transaction
under section 215. Also, under Section 216, Pankaj cannot claim any benefit from Shruti
as he had knowledge that Shruti was acting on her own account in the business of the
agency.

10. Person to be called as a holder: As per section 8 of the Negotiable Instruments Act, 1881
‘holder’ of a Negotiable Instrument means any person entitled in his own name to the
possession of it and to receive or recover the amount due thereon from the parties thereto.
On applying the above provision in the given cases—
(i) Yes, X can be termed as a holder because he has a right to possession and to receive
the amount due in his own name.
(ii) No, he is not a ‘holder’ because to be called as a ‘holder’ he must be entitled not only
to the possession of the instrument but also to receive the amount mentioned therein.
(iii) No, M is not a holder of the Instrument though he is in possession of the cheque, so
is not entitled to the possession of it in his own name.
(iv) No, B is not a holder. While the agent may receive payment of the amount mentioned
in the cheque, yet he cannot be called the holder thereof because he has no right to
sue on the instrument in his own name.
(v) No, B is not a holder because he is in wrongful possession of the instrument.
11. According to section 27 of the General Clauses Act, 1897, where any legislation or
regulation requires any document to be served by post, then unless a different intention
appears, the service shall be deemed to be effected by:
(i) Properly addressing
(ii) Pre-paying, and
(iii) Posting by registered post.
A letter containing the document to have been effected at the time at which the letter would
be delivered in the ordinary course of post.
The facts of the question are similar to a decided case law, wherein it was held that where
a notice is sent to the landlord by registered post and the same is returned by the tenant
with an endorsement of refusal, it will be presumed that the notice has been served. Thus,
in the given question it can be deemed that the notice was rightfully served on Mr. Vyas.
12. Proviso: The normal function of a proviso is to except something out of the enactment or
to qualify something stated in the enactment which would be within its purview if the proviso
were not there. The effect of the proviso is to qualify the preceding enactment which is
expressed in terms which are too general. As a general rule, a proviso is added to an
enactment to qualify or create an exception to what is in the enactment. Ordinarily a proviso
is not interpreted as stating a general rule.
It is a cardinal rule of interpretation that a proviso to a particular provision of a statute only
embraces the field which is covered by the main provision. It carves out an exception to
the main provision to which it has been enacted as a proviso and to no other. (Ram Narain
Sons Ltd. vs. Assistant Commissioner of Sales Tax, AIR 1955 SC 765).


FOR NOVEMBER, 2019 EXAMINATIONS
The Study Material (July 2017 edition) is applicable for November, 2019 examinations. This
study material is updated for all amendments till 30 th April, 2017. Further, all relevant
amendments/ circulars/ notifications etc. in the Company law part and the Negotiable
Instruments Act, 1881, for the period 1st May 2017 to 30th April, 2019 are mentioned below:
Relevant Legislative amendments from 1 st May 2017 to 30th April, 2019
The Companies Act, 2013/ Corporate Laws
Sl. Relevant Amendments Pg Earlier Law
No. no.*
I Amendments related to - Enforcement of the 5.4 -
Companies (Acceptance of Deposits) Amendment (The words have
Rules, 2017 Vide Notification G.S.R. 454 (E) dated been newly inserted
11th May, 2017 in the said sub-
In the Companies (Acceptance of Deposits) Rules, clause)
2014,
In rule 2, in sub-rule (1), in clause (c), in sub-
clause (xviii), after the words “Domestic Venture
Capital Funds” the words “Infrastructure
Investment Trusts” shall be inserted.
II Amendments related to – Exemptions to 7.51 Such other place as
Government Companies Vide Notification G.S.R. the Central
582(E) Dated 13th June, 2017 Government may
The Central Government amends the Notification approve in this
G.S.R. 463(E), dated 5 th June 2015, whereby behalf.
Exceptions, Modifications and Adaptations were
provided in case of Government companies.
Following is the amendment:
In sub-section (2) of section 96, for the words
"such other place as the Central Government may
approve in this behalf”, the words “such other
place within the city, town or village in which the
registered office of the company is situate or such
other place as the Central Government may
approve in this behalf” shall be substituted.”

Insertion of Paragraph 2A in the principal notification G.S.R. 463(E), dated 5 th June

2015:
The aforesaid exceptions, modifications and adaptations (i.e. as given in Notification
G.S.R. 463(E), dated 5th June 2015 and Notification G.S.R. 582(E) Dated 13th June,
2017) shall be applicable to a Government company which has not committed a default
in filing of its financial statements under section 137 of the Companies Act or annual
return under section 92 of the said Act with the Registrar.
III Amendments related to - Exemptions to Private
Companies Vide Notification G.S.R. 583(E) Dated
13th June, 2017
The Central Government amends the Notification
G.S.R. 464(E), dated 5 th June 2015 whereby
Exceptions, Modifications and Adaptations were
provided in case of Private companies. Following
are the amendments:
(1) In Chapter I, Clause (40) of section 2. 1.9 Provided that the
For the proviso, the following shall be substituted, financial statement,
namely:- with respect to One
Provided that the financial statement, with respect Person Company,
to one person company, small company, dormant small company and
company and private company (if such private dormant company,
company is a start-up) may not include the cash may not include the
flow statement; cash flow statement
Explanation. - For the purposes of this Act, the
term “start-up‟ or “start-up company” means a
private company incorporated under the
Companies Act, 2013 or the Companies Act, 1956
and recognised as start-up in accordance with the
notification issued by the Department of Industrial
Policy and Promotion, Ministry of Commerce and
Industry.
(2) In Chapter V, clauses (a) to (e) of sub-section 5.6 Clause (a) to (e) of
(2) of section 73, shall not apply to a private Section 73 provides
company- conditions for
(A) which accepts from its members monies not acceptance of
exceeding one hundred per cent. of aggregate of deposits from
the paid up share capital, free reserves and members.
securities premium account; or Notification dated 5th
(B) which is a start-up, for five years from the date June, 2015, provided
of its incorporation; or that Clause (a) to (e)
of Sub-section 2 of

(C) which fulfils all of the following conditions, Section 73 shall not
namely:- apply to private
(a) which is not an associate or a subsidiary Companies which
company of any other company; accepts from its
(b) if the borrowings of such a company from members monies not
banks or financial institutions or any body exceeding one
corporate is less than twice of its paid up share hundred per cent, of
capital or fifty crore rupees, whichever is lower; aggregate of the paid
and up share capital and
free reserves, and
(c) such a company has not defaulted in the
such company shall
repayment of such borrowings subsisting at the
file the details of
time of accepting deposits under this section:
monies so accepted
Provided that the company referred to in clauses to the Registrar in
(A), (B) or (C) shall file the details of monies such manner as may
accepted to the Registrar in such manner as may be specified.
be specified.
(3) In Chapter VII, clause (g) of sub-section (1) of 7.11 clause (g) of sub-
section 92, shall apply to private companies which section (1) of section
are small companies, namely:- 92 is read as
“(g) aggregate amount of remuneration drawn by “remuneration of
directors;” directors and key
managerial
personnel”
(4) In Chapter VII, proviso to sub-section (1) of 7.12 (4) However, in
section 92, relation to One
For the proviso, the following proviso shall be Person Company
substituted, namely:- and small company,
“Provided that in relation to One Person Company, the annual return
small company and private company (if such shall be signed by the
private company is a start-up), the annual return company secretary,
shall be signed by the company secretary, or or where there is no
where there is no company secretary, by the company secretary,
director of the company.”. by the director of the
company.
(5) Section 143(3)(i), shall not apply to a private 10.24 (5) Section 143(3)(i)
company:- provides- whether
(i) which is a one person company or a small the company has
company; or adequate internal
(ii) which has turnover less than rupees fifty crores financial controls
as per latest audited financial statement or# system in place and
which has aggregate borrowings from banks or the operating

financial institutions or anybody corporate at any effectiveness of such

point of time during the financial year less than controls;
rupees twenty five crore."
Insertion of Paragraph 2A in the principal notification G.S.R. 464(E), dated 5th June
2015:
The aforesaid exceptions, modifications and adaptations shall be applicable to a
Private company which has not committed a default in filing of its financial
statements under section 137 or annual return under section 92 of the said Act with
the Registrar.
#IV Amendments related to - Corrigendum vide Refer In Section 143(3)(i)
poi
n t 3 the words
Notification S.O. 2218(E) dated 13 th July 2017 with
above “statement or” which
respect to the Notification G.S.R. 583(E) Dated
13 June, 2017
th has been replaced
with the word
Ministry of Corporate Affairs vide corrigendum “statement and”
stated that for the words “statement or” to read as through this
“statement and” under section 143(3)(i). notification.
V Amendments related to - Enforcement of the 10.6 Earlier Rule 5(b)
Companies (Audit and Auditors) Second stated that -all private
Amendment Rules, 2017 Vide Notification G.S.R. limited companies
621(E) dated 22nd June 2017. having paid up share
The Central Government hereby amends the capital of rupees 20
Companies (Audit and Auditors) Rules, 2014. crore or more;
Through this amendment rule, in Rule 5(b), for the

word “twenty”, the word “fifty” shall be substituted.
VI Amendments related to - Clarification regarding - For the purposes of
applicability of exemption given to certain private clause (i) of sub-
companies under section 143(3)(i) vide circular section (3) of section
no. 08/2017 dated 25 th July 2017 143, for the financial
Notification No. G.S.R. 583(E) dated 13th June, years commencing on
2017 stated that requirements of reporting under or after 1st April, 2015,
section 143(3)(i) read Rule 10 A of the Companies the report of the
(Audit and Auditors) Rules, 2014 of the auditor shall state
Companies Act 2013 shall not apply to certain about existence of
private companies. Through issue of this circular, adequate internal
it is hereby clarified that the exemption shall be financial controls
applicable for those audit reports in respect of system and its
financial statements pertaining to financial year, operating
commencing on or after 1st April, 2016, which are effectiveness:
made on or after the date of the said notification.

Provided that auditor

of a company may
voluntarily include the
statement referred to
in this rule for the
financial year
commencing on or
after 1st April, 2014
and ending on or
before 31st March,
2015.
VII Amendments related to - Clarification regarding - For the purposes of
applicability of exemption given to certain private clause (i) of sub-
companies under section 143(3)(i) vide circular section (3) of section
no. 08/2017 dated 25 th July 2017 143, for the financial
Notification No. G.S.R. 583(E) dated 13th June, years commencing on
2017 stated that requirements of reporting under or after 1st April, 2015,
section 143(3)(i) read Rule 10 A of the Companies the report of the
(Audit and Auditors) Rules, 2014 of the auditor ….. controls
Companies Act 2013 shall not apply to certain system and its
private companies. Through issue of this circular, operating
it is hereby clarified that the exemption shall be effectiveness:
applicable for those audit reports in respect of
financial statements pertaining to financial year, Provided that auditor
commencing on or after 1st April, 2016, which are of a company may
made on or after the date of the said notification. voluntarily …… on or
after 1st April, 2014
and ending on or
before 31st March,
2015.
VIII Amendments related to - Enforcement of the 5.8 Provided that a
Companies (Acceptance of Deposits) Second private company
Amendment Rules, 2017 Vide Notification G.S.R. may accept from its
1172(E) dated 19th September, 2017. members monies
In the Companies (Acceptance of Deposits) Rules, not exceeding one
2014, in rule 3, in sub-rule (3), for the proviso, the hundred per cent of
following shall be substituted, namely:- aggregate of the
“Provided that a Specified IFSC Public company paid up share
and a private company may accept from its capital, free
members monies not exceeding one hundred per reserves and
cent. of aggregate of the paid up share capital, securities premium
free reserves and securities premium account and account and such
company shall file

such company shall file the details of monies so the details of

accepted to the Registrar in Form DPT -3. monies so accepted
Explanation.—For the purpose of this rule, a to the Registrar in
Specified IFSC Public company means an unlisted such manner as
public company which is licensed to operate by the may be specified.
Reserve Bank of India or the Securities and
Exchange Board of India or the Insurance
Regulatory and Development Authority of India
from the International Financial Services Centre
located in an approved multi services Special
Economic Zone set-up under the Special
Economic Zones Act, 2005 read with the Special
Economic Zones Rules, 2006:
Provided further that the maximum limit in respect
of deposits to be accepted from members shall not
apply to following classes of private companies,
namely:—
(i) a private company which is a start-up, for five
years from the date of its incorporation;
(ii) a private company which fulfils all of the
following conditions, namely:—
(a) which is not an associate or a subsidiary
company of any other company;
(b) the borrowings of such a company from banks
or financial institutions or any body corporate is
less than twice of its paid up share capital or fifty
crore rupees, whichever is less; and
(c) such a company has not defaulted in the
repayment of such borrowings subsisting at the time
of accepting deposits under section 73:
Provided also that all the companies accepting
deposits shall file the details of monies so
accepted to the Registrar in Form DPT -3.”.
IX Amendments related to - Notification S.O. 1.20 -
3086(E) dated 20th September 2017 (The proviso is newly
The Central Government hereby appoints the 20 th notified)
September, 2017 as the date on which proviso to
clause (87) of section 2 of the said Act shall come
into force.
The proviso to section 2(87) shall be read as,
“Provided that such class or classes of holding

companies as may be prescribed shall not have

layers of subsidiaries beyond such numbers as
may be prescribed.”
X Amendments related to - COMPANIES
(AMENDMENT) ACT, 2017
Following sections of the Companies Act, 2013
(hereinafter referred to as the principal Act) have
been amended by the Companies (Amendment) Act,
2017 via Notification S.O. 351 (E) dated 26th
January, 2018; Notification S. O. 630 (E) dated 9 th
February; 2018, Notifications: S.O. 1833 (E) dated
7th May, 2018; S.O. 2422(E) dated 13 th June, 2018;
SO. 3299(E) dated 5th July, 2018; S.O. 3300(E)
dated 5th July, 2018; S.O. 3684(E) dated 27th July,
2018; S.O. 3838(E) dated 31 st July, 2018; S.O.
3921(E) dated 7th August, 2018 and S.O. 4907(E)
dated 19th September, 2018.
1. In section 2 of the Companies Act, 2013
(hereinafter referred to as the principal Act)-
(i) in clause (6), for the Explanation, the following 1.4 Explanation.— For
Explanation shall be substituted, namely:— the purposes of this
clause, “significant
'Explanation.—For the purpose of this clause,— influence” means
(a) the expression "significant influence" means control of at least
control of at least twenty per cent. of total voting twenty per cent of
power, or control of or participation in business total share capital,
or of business
decisions under an agreement;
decisions under an
(b) the expression "joint venture" means a joint agreement
arrangement whereby the parties that have joint
control of the arrangement have rights to the net
assets of the arrangement;
Enforcement Date: 7 th May, 2018
(i) for clause (28), the following clause shall be 1.7 Cost accountant
substituted, namely:— means a cost
'(28) "Cost Accountant" means a cost accountant accountant as
as defined in clause (b) of sub-section (1) of defined in clause
section 2 of the Cost and Works Accountants Act, (b) of sub-section
1959 and who holds a valid certificate of practice (1) of section 2 of
under sub-section (1) of section 6 of that Act; the Cost and Works

Accountants Act,
1959.
(ii) in clause (30), the following proviso shall be 1.8 –
inserted, namely: (The proviso is newly
"Provided that- inserted)
(a) the instruments referred to in Chapter III-D
of the Reserve Bank of India Act, 1934; and
(b) such other instrument, as may be prescribed
by the Central Government in consultation with the
Reserve Bank of India, issued by a company,
shall not be treated as debenture;";
1(iii) in clause (41), in the first proviso, after the
1.9 -
word "subsidiary", the words "or associate (The words are newly
company" shall be inserted; inserted)
which is a holding
company or a
subsidiary of a
company
incorporated outside
India
(iv) in clause (46), the following Explanation shall 1.11 -
be inserted, namely:- (The Explanation is
'Explanation.—For the purposes of this clause, the newly inserted)
expression "company" includes any body
corporate;';
(v) clause (49) shall be omitted 1.11 (49) Interested
director means a
director who is in
any way, whether
by…………, entered
into or to be entered
into by or on behalf
of a company;
This definition is
relevant for section
174 relating to
quorum …….. 188
1First proviso to section 2(41) has been fully substituted by the Companies (Amendment) Second Ordinance,
2019 (with retrospective effect from 2 nd November, 2018).

relating to related
party transactions
of the Companies
Act, 2013.
(vi) in clause (51),- 1.11 (iii) the whole-time
director;
(a) in sub-clause (iv), the word "and" shall be (iv) the Chief
omitted; Financial Officer;
(b) for sub-clause (v), the following sub-clauses and
shall be substituted, namely:- (v) such other
"(v) such other officer, not more than one level officer as may be
below the directors who is in whole-time prescribed;
employment, designated as key managerial
personnel by the Board; and
(vi) such other officer as may be prescribed;"
(vii) in clause (57), for the words "and securities 1.12 ……the aggregate
premium account", the words ", securities value of the paid-up
premium account and debit or credit balance of share capital and all
profit and loss account," shall be substituted reserves created out
of the profits and
securities premium
account, after
deducting the
aggregate…..
(viii) in clause (71), in sub-clause (a), after the 1.15 –
word "company;", the word "and" shall be inserted; (The word is newly
inserted)
(ix) in clause (72), in the proviso, in clause (A), 1.16 -
after the words “State Act”, the words “other than (The words are newly
this Act or the previous company law” shall be inserted)
inserted;
(x) in clause (76), for sub-clause (viii), the 1.17 (viii) any company
following sub-clause shall be substituted, which is—
namely:— (A) a holding,
subsidiary or an
"(viii) any body corporate which is— associate company
(A) a holding, subsidiary or an associate company of such company;
of such company; or
(B) a subsidiary of a holding company to which it (B) a subsidiary of a
is also a subsidiary; or holding company to

(C) an investing company or the venturer of the which it is also a

company;"; subsidiary;
Explanation.—For the purpose of this clause, “the
investing company or the venturer of a company”
means a body corporate whose investment in the
company would result in the company becoming
an associate company of the body corporate.
(xi) in clause (85)- 1.20 For (a)
(a) in sub-clause (i), for the words "five crore paid-up share capital
rupees", the words "ten crore rupees" shall be of which does not
substituted; exceed fifty lakh
rupees or such
higher amount as
may be prescribed
which shall not be
more than five crore
rupees; or
(b) in sub-clause (ii),- For (b)
(A) for the words "as per its last profit and loss turnover of which as
account", the words "as per profit and loss account per its last profit
for the immediately preceding financial year" shall and loss account
be substituted; does not exceed two
(B) for the words "twenty crore rupees", the crore rupees or such
words "one hundred crore rupees" shall be higher amount as
substituted; may be prescribed
which shall not be
more than twenty
crore rupees:
(ii) in clause (87), in sub-clause (ii), for the words 1.20 (ii) exercises or
“total share capital”, the words “total voting power” controls more than
shall be substituted; one-half of the total
share capital either
Enforcement Date: 7 th May, 2018 at its own or together
with one or more of
its subsidiary
companies:
(xii) for clause (91), the following clause shall be 1.21 (91) Turnover
substituted, namely:- means the
'(91) "turnover" means the gross amount of aggregate value of
revenue recognised in the profit and loss account the realisation of
from the sale, supply, or distribution of goods or amount made from

on account of services rendered, or both, by a the sale, supply or

company during a financial year;'. distribution of
goods or on
account of services
rendered, or both,
by the company
during a financial
year;
Note: There is in
ambiguity in
definition. So, there
is a need for
amendment in this
definition. Further,
the change in
definition is
pending in the
Companies
(Amendment) Bill,
2016.
2. After section 3 of the principal Act, the following 2.4 -
section shall be inserted, namely:- (The section is newly
"3A. If at any time the number of members of a inserted)
company is reduced, in the case of a public
company, below seven, in the case of a private
company, below two, and the company carries on
business for more than six months while the
number of members is so reduced, every person
who is a member of the company during the time
that it so carries on business after those six
months and is cognisant of the fact that it is
carrying on business with less than seven
members or two members, as the case may be,
shall be severally liable for the payment of the
whole debts of the company contracted during that
time, and may be severally sued therefor.".
Enforcement Date: 9 th February, 2018
3. In section 4 of the principal Act, in sub-section 2.11 Upon receipt of an
(5), for clause (i), the following shall be application, the
substituted, namely:- Registrar may, on
"(i) Upon receipt of an application under sub- the basis of
section (4), the Registrar may, on the basis of information and

information and documents furnished along with documents

the application, reserve the name for a period of furnished along
twenty days from the date of approval or such with the
other period as may be prescribed: application, reserve
Provided that in case of an application for the name for a
reservation of name or for change of its name by period of sixty days
an existing company, the Registrar may reserve from the date of the
the name for a period of sixty days from the date application.
of approval."
Enforcement Date: 26 th January, 2018
4. In section 7 of the principal Act, in sub-section 2.18 an affidavit from
(1), in item (c), for the words "an affidavit", the each of the
words "a declaration" shall be substituted. subscribers to the
memorandum and
Enforcement Date: 27 th July, 2018 from persons named
as the first directors,
if any, in the articles
stating that
5. In section 12 of the principal Act,— 2.22 (1) Registered office:
(i) in sub-section (1), for the words "on and from From the 15th day
the fifteenth day of its incorporation", the words of its incorporation
"within thirty days of its incorporation" shall be and at all times
substituted; thereafter a company
shall …..be
Enforcement Date: 27 th July, 2018 addressed to it.
5. In section 12 of the principal Act,— 2.23 (6) Notice of
(ii) in sub-section (4), for the words "within fifteen change to registrar:
days", the words "within thirty days" shall be Notice of every
substituted. change ……..
Enforcement Date: 27 th July, 2018 Registrar within 15
days of the change,
who shall record the
same.
6. In section 21 of the principal Act, for the words 2.35 (ii) an officer of
"an officer of the company", the words "an officer the company duly
or employee of the company" shall be substituted authorised by the
Enforcement Date: 9th February, 2018 Board in this behalf.
7. In section 26 of the principal Act, in sub-section 3.7 -
(1),— (The words have
(i) after the words "signed and shall", the following been newly inserted)
shall be inserted, namely:—

"state such information and set out such reports

on financial information as may be specified by the
Securities and Exchange Board in consultation
with the Central Government:
Provided that until the Securities and Exchange
Board specifies the information and reports on
financial information under this sub-section, the
regulations made by the Securities and Exchange
Board under the Securities and Exchange Board
of India Act, 1992, in respect of such financial
information or reports on financial information
shall apply.";
Enforcement Date: 7th May, 2018

7. In section 26 of the principal Act, in sub-section 3.7, (a) Firstly, under
(1),- 3.8, the general
3.9 information, the
(ii) clauses (a), (b) and (d) shall be omitted. prospectus shall
contained the
following
Enforcement Date: 7 th May, 2018 information,
namely—
(i) names and
addresses of the
………of promoter‘s
contribution;
(b) Secondly,
under the Financial
informations, …….
applied directly or
indirectly;
(d) state such
other matters and
set out such other
reports, as may be
prescribed.
8. In section 35 of the principal Act, in sub-section 3.22 -
(2), after clause (b), the following clause shall be (The clause is newly
inserted, namely:- inserted)

"(c) that, as regards every misleading statement To be inserted in

purported to be made by an expert or contained in Point (2) after point
what purports to be a copy of or an extract from a (b)
report or valuation of an expert, it was a correct
and fair representation of the statement, or a
correct copy of, or a correct and fair extract from,
the report or valuation; and he had reasonable
ground to believe and did up to the time of the
issue of the prospectus believe, that the person
making the statement was competent to make it
and that the said person had given the consent
required by sub-section (5) of section 26 to the
issue of the prospectus and had not withdrawn
that consent before delivery of a copy of the
prospectus for registration or, to the defendant's
knowledge, before allotment thereunder.".
Enforcement Date: 9th February, 2018
9. For section 42 of the principal Act, the following 3.28 The content related
section shall be substituted, namely:— to to section 42 is to be
'42. (1) A company may, subject to the provisions 3.32 deleted
of this section, make a private placement of
securities.
(2) A private placement shall be made only to a
select group of persons who have been identified
by the Board (herein referred to as "identified
persons"), whose number shall not exceed fifty or
such higher number as may be prescribed
[excluding the qualified institutional buyers and
employees of the company being offered
securities under a scheme of employees stock
option in terms of provisions of clause (b) of sub-
section (1) of section 62], in a financial year
subject to such conditions as may be prescribed.
(3) A company making private placement shall
issue private placement offer and application in
such form and manner as may be prescribed to
identified persons, whose names and addresses
are recorded by the company in such manner as
may be prescribed:
Provided that the private placement offer and
application shall not carry any right of
renunciation.

Explanation I.—"private placement" means any

offer or invitation to subscribe or issue of
securities to a select group of persons by a
company (other than by way of public offer)
through private placement offer-cum-application,
which satisfies the conditions specified in this
section.
Explanation II.—"qualified institutional buyer"
means the qualified institutional buyer as defined
in the Securities and Exchange Board of India
(Issue of Capital and Disclosure Requirements)
Regulations, 2009, as amended from time to time,
made under the Securities and Exchange Board of
India Act, 1992.
Explanation III.—If a company, listed or unlisted,
makes an offer to allot or invites subscription, or
allots, or enters into an agreement to allot,
securities to more than the prescribed number of
persons, whether the payment for the securities
has been received or not or whether the company
intends to list its securities or not on any
recognised stock exchange in or outside India, the
same shall be deemed to be an offer to the public
and shall accordingly be governed by the
provisions of Part I of this Chapter.
(4) Every identified person willing to subscribe to
the private placement issue shall apply in the
private placement and application issued to such
person alongwith subscription money paid either
by cheque or demand draft or other banking
channel and not by cash:
Provided that a company shall not utilise monies
raised through private placement unless allotment
is made and the return of allotment is filed with the
Registrar in accordance with sub-section (8).
(5) No fresh offer or invitation under this section
shall be made unless the allotments with respect
to any offer or invitation made earlier have been
completed or that offer or invitation has been
withdrawn or abandoned by the company:
Provided that, subject to the maximum number of
identified persons under sub-section (2), a

company may, at any time, make more than one

issue of securities to such class of identified
persons as may be prescribed.
(6) A company making an offer or invitation under
this section shall allot its securities within sixty
days from the date of receipt of the application
money for such securities and if the company is
not able to allot the securities within that period, it
shall repay the application money to the
subscribers within fifteen days from the expiry of
sixty days and if the company fails to repay the
application money within the aforesaid period, it
shall be liable to repay that money with interest at
the rate of twelve per cent. per annum from the
expiry of the sixtieth day:
Provided that monies received on application
under this section shall be kept in a separate bank
account in a scheduled bank and shall not be
utilised for any purpose other than—
(a) for adjustment against allotment of
securities; or
(b) for the repayment of monies where the
company is unable to allot
securities.
(7) No company issuing securities under this
section shall release any public advertisements or
utilise any media, marketing or distribution
channels or agents to inform the public at large
about such an issue.
(8) A company making any allotment of securities
under this section, shall file with the Registrar a
return of allotment within fifteen days from the date
of the allotment in such manner as may be
prescribed, including a complete list of all
allottees, with their full names, addresses, number
of securities allotted and such other relevant
information as may be prescribed.
(9) If a company defaults in filing the return of
allotment within the period prescribed under sub-
section (8), the company, its promoters and
directors shall be liable to a penalty for each
default of one thousand rupees for each day

during which such default continues but not

exceeding twenty-five lakh rupees.
(10) Subject to sub-section (11), if a company
makes an offer or accepts monies in contravention
of this section, the company, its promoters and
directors shall be liable for a penalty which may
extend to the amount raised through the private
placement or two crore rupees, whichever is
lower, and the company shall also refund all
monies with interest as specified in sub-section (6)
to subscribers within a period of thirty days of the
order imposing the penalty.
(11) Notwithstanding anything contained in sub-
section (9) and sub-section (10), any private
placement issue not made in compliance of the
provisions of sub-section (2) shall be deemed to
be a public offer and all the provisions of this Act
and the Securities Contracts (Regulation) Act,
1956 and the Securities and Exchange Board of
India Act, 1992 shall be applicable.’.
Enforcement Date: 7 th August, 2018
10. In section 47, in sub-section (1), for the words, 4.6 In Point (i), the
figures and brackets "provisions of section 43 and following may be
sub-section (2) of section 50", the words, figures added,
and brackets "provisions of section 43, sub-
“Subject to
section (2) of section 50 and sub-section (1) of
the provisions of
section 188" shall be substituted.
section 43, sub-
Enforcement Date: 9 th February, 2018 section (2) of section
50 and sub-section
(1) of section 188,”
11. In section 53 of the principal Act,- 4.10 For (i)
(i) in sub-section (2), for the words "discounted Any share issued by
price", the word "discount" shall be substituted; a company at a
Enforcement Date: 9 th February, 2018 discounted price
shall be void.
11. In section 53 of the principal Act,- 4.10 For (ii): -
(ii) after sub-section (2), the following sub-section (The sub- section is
shall be inserted, namely:- newly inserted)
"(2A) Notwithstanding anything contained in
sub-sections (1) and (2), a company may issue

shares at a discount to its creditors when its debt

is converted into shares in pursuance of any
statutory resolution plan or debt restructuring
scheme in accordance with any guidelines or
directions or regulations specified by the Reserve
Bank of India under the Reserve Bank of India Act,
1934 or the Banking (Regulation) Act, 1949.".
12. In section 54, in sub-section (1), clause (c) 4.11 (c) not less than
shall be omitted. one year has, at the
date of such issue,
Enforcement Date: 7 th May, 2018 elapsed since the
date on which the
company had
commenced
business; and
13. In section 62 of the principal Act,- 4.22 For (i)
(i) in sub-section (1), in clause (c), for the words (c) to any persons,
"of a registered valuer subject to such conditions if it is authorised by a
as may be prescribed", the words and figures "of special resolution,
a registered valuer, subject to the compliance with ….. is determined by
the applicable provisions of Chapter III and any the valuation report
other conditions as may be prescribed" shall be of a registered
substituted; valuer subject to
such conditions as
Enforcement Date: 9 th February, 2018 prescribed ………
13. In section 62 of the principal Act,- 4.22 For (ii)
The notice of offer
(ii) for sub-section (2), the following sub-section of shares shall be
shall be substituted, namely:- despatched
"(2) The notice referred to in sub-clause (i) of through registered
clause (a) of sub-section (1) shall be dispatched post or speed post
through registered post or speed post or through or through
electronic mode or courier or any other mode electronic mode to
having proof of delivery to all the existing all the existing
shareholders at least three days before the shareholders at
opening of the issue.". least three days
before the opening
of the issue.

14. In section 73 of the principal Act, in sub- 5.6 (c) depositing

section (2),— such sum which
(i) for clause (c), the following clause shall be shall not be less
substituted, namely:— than fifteen per
"(c) depositing, on or before the thirtieth day of cent. of the amount
April each year, such sum which shall not be less of its deposits
than twenty per cent. of the amount of its deposits maturing during a
maturing during the following financial year and financial year and
kept in a scheduled bank in a separate bank the financial year
account to be called deposit repayment reserve next following, and
account;"; kept in a scheduled
bank in a separate
Enforcement Date: 15th August, 2018 bank account to be
called as deposit
repayment reserve
account
14. In section 73 of the principal Act, in sub- 5.6 (d) providing such
section (2),— deposit insurance
(ii) clause (d) shall be omitted; in such manner and
to such extent as
Enforcement Date: 15 th August, 2018 may be prescribed
14. In section 73 of the principal Act, in sub- 5.6 (e) certifying that the
section (2),— ………. Act or
(iii) in clause (e), for the words "such deposits;", payment of interest
the following shall be substituted, namely:— on such deposits
"such deposits and where a default had occurred,
the company made good the default and a period
of five years had lapsed since the date of making
good the default;".
15. In section 74, in sub-section (1), for clause 5.13 repay within one
(b), the following clause shall be substituted, year from such
namely:— commencement or
"(b) repay within three years from such from the date on
commencement or on or before expiry of the which such
period for which the deposits were accepted, payments are due,
whichever is earlier: whichever is earlier
Provided that renewal of any such deposits shall
be done in accordance with the provisions of
Chapter V and the rules made thereunder."


16. In section 76A of the principal Act,- (a) For (a)
(a) in clause (a), for the words, “one crore rupees”, 5.14 the company ….shall
the words “one crore rupees or twice the amount not be less than one
of deposit accepted by the company, whichever is crore rupees but
lower” shall be substituted; which may extend to
ten crore rupees; and
16. In section 76A of the principal Act,- 5.15 For (b)
every officer ….with
(b) in clause (b),- imprisonment which
(i) for the words "seven years or with fine", the may extend to seven
words "seven years and with fine" shall be years or with fine
substituted; which shall not be
less than twenty-five
(ii) the words "or with both" shall be omitted
lakh rupees but
which may extend to
Enforcement Date: 9 th February, 2018 two crore rupees, or
with both
17. In section 77 of the principal Act, in sub- 6.3 -
section (1), after the third proviso, the following (The proviso is newly
proviso shall be inserted, namely:— inserted)
"Provided also that this section shall not apply to
such charges as may be prescribed in consultation
with the Reserve Bank of India.".

18. In section 78 of the principal Act, for the words 6.4 As per section 78
and figures "register the charge within the period ……. to register the
specified in section 77", the words, brackets and charge within the
figures "register the charge within the period of period 30 days, the
thirty days referred to in sub-section (1) of section person in whose
77" shall be substituted. favour the charge is
created may apply
19. In section 82 of the principal Act, in sub- 6.7 According to section
section (1),— 82 of the Companies
(i) the words, brackets and figures "and the Act, 2013, …… from
provisions of sub-section (1) of section 77 shall, the date of such
payment or

as far as may be, apply to an intimation given satisfaction and the

under this section" shall be omitted; provisions of
section 77(1) shall,
Enforcement Date: 5 th July, 2018 as far as may be,
apply to an
intimation given
under this section.
section (1),— (The proviso is newly
(ii) the following proviso shall be inserted, inserted)
namely:—
"Provided that the Registrar may, on an
application by the company or the charge holder,
allow such intimation of payment or satisfaction to
be made within a period of three hundred days of
such payment or satisfaction on payment of such
additional fees as may be prescribed.".
Enforcement Date: 5 th July, 2018

20. In section 89 of the principal Act,— 7.9 For (i), the said words
(i) in sub-section (6), the words and figures, are omitted.
"within the time specified under section 403" shall (however, the study
be omitted; material does not
contain reference of
section 403)
20. In section 89 of the principal Act,— 7.9 the said words have
been substituted
(ii) in sub-section (7), for the words and figures, (however, the study
"under the first proviso to sub-section (1) of material does not
section 403", the word "therein", shall be contain reference of
substituted; section 403)
20. In section 89 of the principal Act,— 7.9 The sub- section is
newly inserted.
(iii) after sub-section (9), the following sub-section
"(10) For the purposes of this section and section
90, beneficial interest in a share includes, directly
or indirectly, through any contract, arrangement or

otherwise, the right or entitlement of a person

alone or together with any other
person to—
(i) exercise or cause to be exercised any or all of
the rights attached to such share; or
(ii) receive or participate in any dividend or other
distribution in respect of such share.".
Enforcement Date: 13 th June, 2018
21. For section 90 of the principal Act, the 7.10 INVESTIGATION OF
following section shall be substituted, namely:— BENEFICIAL
OWNERSHIP OF
‘REGISTER OF SIGNIFICANT BENEFICIAL
SHARES IN CERTAI N
OWNERS IN A COMPANY
CASES The section
(1) Every individual, who acting alone or together, simply enables the
or through one or more persons or trust, including Central …….
a trust and persons resident outside India, holds investigation
beneficial interests, of not less than twenty-five ordered under that
per cent. or such other percentage as may be section.
prescribed, in shares of a company or the right to
exercise, or the actual exercising of significant
influence or control as defined in clause (27) of
section 2, over the company (herein referred to as
"significant beneficial owner"), shall make a
declaration to the company, specifying the nature
of his interest and other particulars, in such
manner and within such period of acquisition of the
beneficial interest or rights and any change
thereof, as may be prescribed:
Provided that the Central Government may
prescribe a class or classes of persons who shall
not be required to make declaration under this
sub-section.
(2) Every company shall maintain a register of the
interest declared by individuals under sub-section
(1) and changes therein which shall include the
name of individual, his date of birth, address,
details of ownership in the company and such
other details as may be prescribed.
(3) The register maintained under sub-section (2)
shall be open to inspection by any member of the
company on payment of such fees as may be
prescribed.

(4) Every company shall file a return of significant

beneficial owners of the company and changes
therein with the Registrar containing names,
addresses and other details as may be prescribed
within such time, in such form and manner as may
be prescribed.
(5) A company shall give notice, in the prescribed
manner, to any person (whether or not a member
of the company) whom the company knows or has
reasonable cause to believe—
(a) to be a significant beneficial owner of the
company;
(b) to be having knowledge of the identity of a
significant beneficial owner or another person
likely to have such knowledge; or
(c) to have been a significant beneficial owner of
the company at any time during the three years
immediately preceding the date on which the
notice is issued,
and who is not registered as a significant
beneficial owner with the company as required
under this section.
(6) The information required by the notice under
sub-section (5) shall be given by the concerned
person within a period not exceeding thirty days of
the date of the notice.
(7) The company shall,—
(a) where that person fails to give the company
the information required by the notice within the
time specified therein; or
(b) where the information given is not
satisfactory,
apply to the Tribunal within a period of fifteen days
of the expiry of the period specified in the notice,
for an order directing that the shares in question
be subject to restrictions with regard to transfer of
interest, suspension of all rights attached to the
shares and such other matters as may be
prescribed.
(8) On any application made under sub-section
(7), the Tribunal may, after giving an opportunity

of being heard to the parties concerned, make

such order restricting the rights attached with the
shares within a period of sixty days of receipt of
application or such other period as may be
prescribed.
(9) The company or the person aggrieved by the
order of the Tribunal may make an application to
the Tribunal for relaxation or lifting of the
restrictions placed under sub-section (8).
(10) If any person fails to make a declaration as
required under sub-section (1), he shall be
punishable with fine which shall not be less than
one lakh rupees but which may extend to ten lakh
rupees and where the failure is a continuing one,
with a further fine which may extend to one
thousand rupees for every day after the first during
which the failure continues.
(11) If a company, required to maintain register
under sub-section (2) and file the information
under sub-section (4), fails to do so or denies
inspection as provided therein, the company and
every officer of the company who is in default shall
be punishable with fine which shall not be less
than ten lakh rupees but which may extend to fifty
lakh rupees and where the failure is a continuing
one, with a further fine which may extend to one
thousand rupees for every day after the first during
(12) If any person wilfully furnishes any false or
incorrect information or suppresses any material
information of which he is aware in the declaration
made under this section, he shall be liable to
action under section 447.'.
22. In section 92 of the principal Act,— 7.12 A copy of annual
return shall be file
(i) in sub-section (4), the words and figures, with the RoC within
"within the time as specified, under section 403" 60 days …… holding
shall be omitted; the AGM within the
time specified
under section 403

been substituted
2(ii) in sub-section (5), for the words and figures, (however, the study
"under section 403 with additional fees" the word material does not
"therein" shall be substituted. contain reference of
section 403)
23. Section 93 of the principal Act shall be 7.13 SECTION 93 –
omitted. RETURN …..
company in each
Enforcement Date: 13th June, 2018 case
24. In section 94 of the principal Act,— 7.14 the change has to be
(i) in sub-section (1), in the first proviso, the words made in the diagram
"and the Registrar has been given a copy of the given on page 7.14
proposed special resolution in advance" shall be
omitted;
24. In section 94 of the principal Act,— 7.14 -
(The proviso is newly
(ii) in sub-section (3), the following proviso shall inserted)
be inserted, namely:—
"Provided that such particulars of the register or
index or return as may be prescribed shall not be
available for inspection under sub-section (2) or
for taking extracts or copies under this sub-
section.".
Enforcement Date: 13th June, 2018
section (2), in the proviso, for the words "Provided (The proviso is newly
that", the following shall be substituted, namely:— inserted)
"Provided that annual general meeting of an
unlisted company may be held at any place in
India if consent is given in writing or by electronic
mode by all the members in advance:
Provided further that".
Enforcement Date: 13th June, 2018
2Sub-section 5 of section 92 has been fully substituted by the Companies (Amendment) Second Ordinance,
2019 (w.r.e.f. 2.11.2018)


section (1), the following proviso shall be inserted, (The proviso is newly
namely:- "Provided that an extraordinary general inserted)
meeting of the company, other than of the wholly
owned subsidiary of a company incorporated
outside India, shall be held at a place within
India.".
27. In section 101 of the principal Act, in sub- 7.19 The proviso to
section (1), for the proviso, the following proviso section 101(1) also
shall be substituted, namely:- states that a shorter
"Provided that a general meeting may be called notice may also be
after giving shorter notice than that specified in given with the
this sub-section if consent, in writing or by consent of 95 per
electronic mode, is accorded thereto- cent of the
(i) in the case of an annual general meeting, by not members entitled to
less than ninty-five per cent. of the members vote. Generally
entitled to vote thereat; and meetings need to be
called by giving a
(ii) in the case of any other general meeting, by
notice of 21 clear
members of the company-
days. However, they
(a) holding, if the company has a share capital, can be called on a
majority in number of members entitled to vote and shorter notice if, 95
who represent not less than ninety-five per cent. per cent of the
of such part of the paid-up share capital of the members entitled to
company as gives a right to vote at the meeting; vote in that meeting
or give their consent
(b) having, if the company has no share capital, in writing or by
not less than ninety-five per cent. of the total electronic mode.
voting power exercisable at that meeting: It is also important
Provided further that where any member of a to note that only the
company is entitled to vote only on some requirement as
resolution or resolutions to be moved at a meeting regards the length
and not on the others, those members shall be of the notice being
taken into account for the purposes of this sub- 21 days, is
section in respect of the former resolution or dispensed with by
resolutions and not in respect of the latter.". such consent of not
Enforcement Date: 9 th February, 2018 less than 95 per
cent of the
members entitled to
vote at such
meeting and not the

necessity to call
and hold such
meeting.
section (1), the following proviso shall be inserted, (The proviso is newly
namely:- inserted)
"Provided that any item of business required to be
transacted by means of postal ballot under clause
(a), may be transacted at a general meeting by a
company which is required to provide the facility
to members to vote by electronic means under
section 108, in the manner provided in that
section."
(i) in sub-section (1), the words and figures “within been omitted
the time specified under section 403” shall be (however, the study
omitted; material does not
Enforcement Date: 7 th May, 2018 contain reference of
section 403)
29. In section 117 of the principal Act,— 7.46 Section 117(2) sets
out …….. to …... the
3(ii) in sub-section (2),— specified time under
(a) for the words and figures “under section 403 section 403 and
……. which shall not
with additional fees”, the word “therein” shall be
be less than
substituted;
` 5,00,000 but which
(b) for the words "not be less than five lakh may extend to
rupees", the words "not be less than one lakh ` 25,00,000 and
rupees" shall be substituted; every officer ……
(c) for the words "one lakh rupees", the words "fifty with fine which shall
thousand rupees" shall be substituted; not be less than
` 1,00,000 but which
Enforcement Date: 7 th May, 2018 may extend to
` 5,00,000
3 Sub-section 2 of section 117 has been fully substituted by the Companies (Amendment) Second
Ordinance, 2019 (w.r.e.f. 2.11.2018)

29. In section 117 of the principal Act,— 7.45 For (a)

(iii) in sub-section (3),— resolutions passed
(a) clause (e) shall be omitted; by a …….. of any of
(b) in clause (g), in the proviso, the word “and” the powers under
shall be omitted and the following proviso shall be …(1)(c)
inserted, namely:—
"Provided further that nothing contained in this For (b)-
clause shall apply to a banking company in (The proviso is newly
respect of a resolution passed to grant loans, or inserted)
give guarantee or provide security in respect of
loans under clause (f) of sub-section (3) of section
179 in the ordinary course of its business; and.".
been omitted/
(i) in sub-section (2), the words and figures “within substituted
the time as specified, under section 403” shall be (however, the study
omitted; material does not
4(ii) in sub-section (3), for the words and figures contain reference of
section 403)
“under section 403 with additional fees”, the word
“therein” shall be substituted.
31. In section 123 of the principal Act,- 8.4
(a) in sub-section (1)-
(i) in clause (a),-
(A) for the words "both; or", the word "both:" (i) For point (A)
shall be substituted; (c) out of both (a)
(B) the following proviso shall be inserted, and (b); or
namely:-
"Provided that in computing profits any amount
representing unrealised gains, notional gains or For point (B): -
revaluation of assets and any change in carrying
amount of an asset or of a liability on
inserted)
measurement of the asset or the liability at fair
value shall be excluded; or";
2019 (w.r.e.f. 2.11.2018)

31. In section 123 of the principal Act,- 8.4 For (ii)

Where a company,
(a) in sub-section (1)- ……. it in previous
(ii) in the second proviso, for the words years and
"transferred by the company to the reserves", the transferred by the
words "transferred by the company to the free company to the
reserves" shall be substituted; reserves, such
declaration of
dividend …… with
Enforcement Date: 9 th February, 2018 prescribed rules.
[Second Proviso to
section 123(1)]
31. In section 123 of the principal Act,- 8.6 According to section
123(3), the Board of
(b) for sub-section (3), the following sub-section Directors of a
shall be substituted, namely:- company may
declare interim
"(3) The Board of Directors of a company may
dividend during any
declare interim dividend during any financial year
financial year out of
or at any time during the period from closure of
the surplus in the
financial year till holding of the annual general
profit and loss
meeting out of the surplus in the profit and loss
account and out of
account or out of profits of the financial year for
profits of the
which such interim dividend is sought to be
financial year in
declared or out of profits generated in the financial
which such interim
year till the quarter preceding the date of
dividend is sought
declaration of the interim dividend:
to be declared.
Provided that in case the company has incurred
However, in case
loss during the current financial year up to the end
the company has
of the quarter immediately preceding the date of
incurred loss
declaration of interim dividend, such interim
during the current
dividend shall not be declared at a rate higher than
financial year up to
the average dividends declared by the company
the end of the
during immediately preceding three financial
quarter immediately
years.".
preceding the date
of declaration of
Enforcement Date: 9 th February, 2018 interim dividend,
such interim
dividend shall not
be declared at a rate
higher than the
average dividends

declared by the
company during
immediately
preceding three
financial years.
32. In section 129 of the principal Act, for sub- 9.8 (1) Where a
section (3), the following sub-section shall be and company has one
substituted, namely:— 9.9 or more
"(3) Where a company has one or more subsidiaries, ……
subsidiaries or associate companies, it shall, in Rule 6 of
addition to financial statements provided under the Companies
sub-section (2), prepare a consolidated financial (Accounts) Rules,
statement of the company and of all the 2014.
subsidiaries and associate companies in the same
form and manner as that of its own and in Explanation—For
accordance with applicable accounting standards,
the purposes of this
which shall also be laid before the annual general
sub-section, the
meeting of the company along with the laying of its
word “subsidiary”
financial statement under sub-section (2):
shall include
Provided that the company shall also attach along
associate company
with its financial statement, a separate statement
and joint venture.
containing the salient features of the financial
statement of its subsidiary or subsidiaries and
associate company or companies in such form as
may be prescribed:
Provided further that the Central Government may
provide for the consolidation of accounts of
companies in such manner as may be prescribed.
33. In section 130 of the principal Act,- 9.13 For (i) -
(i) in sub-section (1), in the proviso,- (The words are newly
(a) after the words "regulatory body or authorities inserted)
concerned", the words "or any other person
concerned" shall be inserted;
(b) after the words "the body or authority
concerned", the words "or the other person
33. In section 130 of the principal Act,- 9.13
(ii) after sub-section (2), the following sub-section For (ii) –

"(3) No order shall be made under sub-section (1) (This sub- section is
in respect of re-opening of books of account newly inserted)
relating to a period earlier than eight financial
years immediately preceding the current financial
year: Provided that where a direction has been
issued by the Central Government under the
proviso to sub-section (5) of section 128 for
keeping of books of account for a period longer
than eight years, the books of account may be
ordered to be re-opened within such longer
period."
34. In section 134 of the principal Act,— 9.16
(a) for sub-section (1), the following sub-section The financial
shall be substituted, namely:— statements,
including
"(1) The financial statement, including
consolidated
consolidated financial statement, if any, shall be
financial statement,
approved by the Board of Directors before they are
…......... for
signed on behalf of the Board by the chairperson
submission to the
of the company where he is authorised by the
auditor for his
Board or by two directors out of which one shall be
report thereon.
managing director, if any, and the Chief Executive
Officer, the Chief Financial Officer and the
company secretary of the company, wherever they
are appointed, or in the case of One Person
Company, only by one director, for submission to
the auditor for his report thereon.";
Enforcement Date: 31 st July, 2018
34. In section 134 of the principal Act,— 9.17 For (i)
(b) in sub-section (3),— Extract of annual
return (in the
(i) for clause (a), the following clause shall be
diagram)
"(a) the web address, if any, where annual return
referred to in sub-section (3) of section 92 has For (ii)
been placed;"; Listed /other public
(ii) in clause (p), for the words "annual evaluation …….
has been made by the Board of its own statement
performance and that of its committees and of annual evaluation
individual directors", the words "annual evaluation of performances of
of the performance of the Board, its Committees Board,

and of individual directors has been made" shall committees and

be substituted; individual directors.
(iii) after clause (q), the following provisos shall be (in the diagram)
"Provided that where disclosures referred to in this For (iii)
sub-section have been included in the financial The proviso is newly
statements, such disclosures shall be referred to inserted (in the
instead of being repeated in the Board's report: diagram)
Provided further that where the policy referred to
in clause (e) or clause (o) is made available on
company's website, if any, it shall be sufficient
compliance of the requirements under such
clauses if the salient features of the policy and any
change therein are specified in brief in the Board's
report and the web-address is indicated therein at
which the complete policy is available.";
Enforcement Date: 31 st July, 2018
34. In section 134 of the principal Act,— - -
(c) after sub-section (3), the following sub-section (The sub- section is
shall be inserted, namely:— newly inserted)
"(3A) The Central Government may prescribe an
abridged Board's report, for the purpose of
compliance with this section by One Person
Company or small company.".
Enforcement Date: 31st July, 2018
(i) in sub-section (1),— during any financial
(a) for the words "any financial year", the words year shall constitute
"the immediately preceding financial year" shall be a Corporate Social
substituted; Responsibility
(b) the following proviso shall be inserted, Committee of the
namely:— Board.
"Provided that where a company is not required to
appoint an independent director under sub-section For (b)-
(4) of section 149, it shall have in its Corporate (The proviso has
Social Responsibility Committee two or more been newly inserted)
directors.";
Enforcement Date: 19 th September, 2018

35. In section 135 of the principal Act,— 9.24 formulate and

(ii) in sub-section (3), in clause (a), for the recommend …….
words and figures "as specified in Schedule VII", which shall indicate
the words and figures "in areas or subject, the activities to be
specified in Schedule VII" shall be substituted; undertaken by the
company as
specified in
Schedule VII;
35. In section 135 of the principal Act,— 9.26 Here, “average net
(iii) in sub-section (5), for the Explanation, the profit” shall be
following Explanation shall be substituted, calculated in
namely:— accordance with the
'Explanation.—For the purposes of this section provisions of
"net profit" shall not include such sums as may be section 198
prescribed, and shall be calculated in accordance
with the provisions of section 198.'.
36. In section 136 of the principal Act,- 9.30 As per the
(i) in sub-section (1),- amendment the word
(a) the words and figures "Without prejudice to the “Without prejudice to
provisions of section 101," shall be omitted; the provisions of
Enforcement Date: 9 th February, 2018 section 101,” shall be
omitted
36. In section 136 of the principal Act,- 9.31 -
(i) in sub-section (1),- (The proviso is newly
inserted)
(b) in the first proviso, for the words "Provided
that", the following shall be substituted, namely:-
"Provided that if the copies of the documents are
sent less than twenty-one days before the date of
the meeting, they shall, notwithstanding that fact,
be deemed to have been duly sent if it is so agreed
by members-
(a) holding, if the company has a share capital,
majority in number entitled to vote and who
represent not less than ninety-five per cent. of
such part of the paid-up share capital of the
company as gives a right to vote at the meeting;
or

(b) having, if the company has no share

capital, not less than ninety five per cent. of the
total voting power exercisable at the meeting:
Provided further that";
36. In section 136 of the principal Act,- 9.31 Related to point (ii)
(i) in sub-section (1),- on Page 9.31
(c) in the second proviso, for the words "Provided
further", the words, "Provided also" shall be
substituted;
36. In section 136 of the principal Act,- 9.31 (iii) Subsidiary
(i) in sub-section (1),- Companies:
(d) for the fourth proviso, the following provisos Every company
shall be substituted, namely:— having a subsidiary
'Provided also that every listed company having a or subsidiaries
subsidiary or subsidiaries shall place separate shall,—
audited accounts in respect of each of subsidiary (1) place separate
on its website, if any: audited accounts in
Provided also that a listed company which has a respect of each of
subsidiary incorporated outside India (herein its subsidiary on its
referred to as "foreign subsidiary")- website, if any;
(a) where such foreign subsidiary is statutorily (2) provide a copy
required to prepare consolidated financial of separate audited
statement under any law of the country of its financial
incorporation, the requirement of this proviso shall statements in
be met if consolidated financial statement of such respect of each of
foreign subsidiary is placed on the website of the its subsidiary, to
listed company; any shareholder of
the company who
(b) where such foreign subsidiary is not
asks for it.
required to get its financial statement audited
under any law of the country of its incorporation
and which does not get such financial statement
audited, the holding Indian listed company may
place such unaudited financial statement on its
website and where such financial statement is in a
language other than English, a translated copy of
the financial statement in English shall also be
placed on the website.’;


(ii) in sub-section (2), the following proviso shall inserted)
be inserted, namely:- Add the proviso in
"Provided that every company having a subsidiary point (iv)
or subsidiaries shall provide a copy of separate
audited or unaudited financial statements, as the
case may be, as prepared in respect of each of its
subsidiary to any member of the company who
asks for it."
(i) in sub-section (1),— (i) Filing of financial
(a) the words and figures "within the time specified statements [Section
under section 403" shall be omitted; 137(1)]: A copy of the
(b) in the second proviso, the words and figures financial ….. fees as
"within the time specified under section 403" shall may be prescribed
be omitted; within the time
specified under
(c) after the fourth proviso, the following proviso
section 403
shall be inserted,
namely:—
For (b)
'Provided also that in the case of a subsidiary
which has been incorporated outside India (herein (c) If the financial
referred to as "foreign subsidiary"), which is not statements are
required to get its financial statement audited adopted …… such
under any law of the country of its incorporation additional
and which does not get such financial statement fees as may be
audited, the requirements of the fourth proviso prescribed within
shall be met if the holding Indian company files the time specified
such unaudited financial statement along with a under section 403.
declaration to this effect and where such financial
statement is in a language other than English, For (c) –
along with a translated copy of the financial (The proviso is newly
statement in English.'. inserted)
37. In section 137 of the principal Act,— 9.35 (v) Annual General
(ii) in sub-section (2), the words and figures meeting not held
“within the time specified, under section 403” shall [Section 137(2)] :
be omitted; Where the annual
general …..

Enforcement Date: 7 th May, 2018 additional fees as

may be prescribed
within the time
specified, under
section 403.
(iii) in sub-section (3), for the words and figures been substituted
“in section 403”, the word “therein” shall be (however, the study
substituted. material does not
Enforcement Date: 7 th May, 2018 contain reference of
section 403)
38. In section 139 of the principal Act, in sub- 10.5 The company shall
section (1), the first proviso shall be omitted. place the matter
Enforcement Date: 7 th May, 2018 relating to such
appointment for
ratification by
members at every
AGM.
539. In section 140 of the principal Act, in sub- 10.15 (d) If the auditor
section (3), for the words "fifty thousand rupees", does not ……. with
the words "fifty thousand rupees or the fine which shall not
remuneration of the auditor, whichever is less," be less than
shall be substituted. ` 50,000 but which
may extend to ` 5
Enforcement Date: 9 th February, 2018 Lacs.
40. In section 141 of the principal Act, in sub- 10.22 (9) any person
section (3), for clause (i), the following clause shall whose subsidiary
be substituted, namely:- or associate
‘(i) a person who, directly or indirectly, renders any company or any
service referred to in section 144 to the company other form of entity,
or its holding company or its subsidiary company. is engaged as on
Explanation.—For the purposes of this clause, the the date of
term "directly or indirectly" shall have the meaning appointment in
assigned to it in the Explanation to section 144.’. consulting and
specialised
services as
2019 (w.r.e.f. 2.11.2018)

provided in section
144
41. In section 143 of the principal Act,- 10.23 (c) Access to record
(i) in sub-section (1), in the proviso, for the words of all its subsidiaries:
"its subsidiaries", at both the places, the words "its The auditor of a …….
subsidiaries and associate companies" shall be the records of all its
substituted; subsidiaries in so
far as it relates to the
consolidation of its
financial statements
with that of its
subsidiaries.
41. In section 143 of the principal Act,- 10.24 (9) whether the
(ii) in sub-section (3), in clause (i), for the words company has
"internal financial controls system", the words adequate internal
"internal financial controls with reference to financial controls
financial statements" shall be substituted; system in place and
Enforcement Date: 9 th February, 2018 the operating
effectiveness of such
controls;
41. In section 143 of the principal Act,- 10.36 The provisions of
(iii) in sub-section (14), in clause (a), for the words section 143 shall
"cost accountant in practice", the words "cost mutatis mutandis
accountant" shall be substituted apply to the cost
accountant in
practice conducting
cost audit under
section 148.
(i) in sub-section (2),- The words shall be
(a) after the words "five lakh rupees", the words inserted in point (iii)
"or four times the remuneration of the auditor, (a)
whichever is less" shall be inserted;
42. In section 147 of the principal Act,- 10.33and
(i) in sub-section (2),-
(b) in the proviso, for the words "and with fine (2) Fine which shall
which shall not be less than one lakh rupees but not be less than ` 1
which may extend to twenty-five lakh rupees", the lac but which may
words "and with fine which shall not be less than extend to ` 25 Lacs
fifty thousand rupees but which may extend to

twenty-five lakh rupees or eight times the

remuneration of the auditor, whichever is less"
shall be substituted;
42. In section 147 of the principal Act,- 10.33 (2) pay for damages
(ii) in sub-section (3), in clause (ii), for the words to the company,
"or to any other persons", the words "or to statutory bodies or
members or creditors of the company" shall be authorities or to any
substituted; other persons for
Enforcement Date: 9 th February, 2018 loss arising out of
incorrect …. audit
report.
(iii) in sub-section (5), the following proviso shall (The proviso is newly
be inserted, namely:- inserted)
"Provided that in case of criminal liability of an
audit firm, in respect of liability other than fine, the
concerned partner or partners, who acted in a
fraudulent manner or abetted or, as the case may
be, colluded in any fraud shall only be liable.".
43. In section 148 of the principal Act,- 10.34 (iv) The cost audit
(i) in sub-section (3),- shall be conducted
(a) for the words "Cost Accountant in practice", the by a Cost
words "cost accountant" shall be substituted; Accountant in
Enforcement Date: 9 th February, 2018 practice who shall
be …… by the
members in such
manner as may be
prescribed.
43. In section 148 of the principal Act,- 10.35 Here, the expression
(i) in sub-section (3),- “cost auditing
(b) in the Explanation, for the words "Institute of standards” mean
Cost and Works Accountants of India", the words such standards as
"Institute of Cost Accountants of India" shall be are issued by the
substituted; Institute of Cost
Enforcement Date: 9 th February, 2018 and Works
Accountants of
India, constituted
under the Cost and

Works Accountants
Act, 1959, with the
approval of the
Central Government.
43. In section 148 of the principal Act,- 10.35 (x) The report on
(ii) in sub-section (5), in the proviso, for the words the audit of cost
"cost accountant in practice", the words "cost records shall be
accountant" shall be substituted submitted by the
Enforcement Date: 9 th February, 2018 cost accountant in
practice to the Board
of Directors (BoD) of
the company.
44. In section 447 of the principal Act,- 3.25 The words are newly
(a) after the words "guilty of fraud", the words inserted
"involving an amount of at least ten lakh rupees or
one per cent. of the turnover of the company,
whichever is lower" shall be inserted.
44. In section 447 of the principal Act,- 3.26 In earlier law the
(b) after the proviso, the following proviso shall be proviso was not
inserted, namely:— "Provided further that where there. The proviso is
the fraud involves an amount less than ten lakh newly inserted
rupees or one per cent. of the turnover of the
company, whichever is lower, and does not
involve public interest, any person guilty of such
fraud shall be punishable with imprisonment for a
term which may extend to five years or with fine
which may extend to 6twenty lakh rupees or with
both.”
XI Amendments related to - Amendment in the 9.7 Replace the footnote
notification number G.S.R. 463(E) dated the 5th ‘Section 129 shall not
June, 2015 vide Notification no. S.O. 802(E) dated apply to the
23rd February, 2018 Government
In exercise of the powers conferred by clauses (a) companies to the
and (b) of sub-section (1) and subsection (2) of extent of
6 The amount of “twenty lakh rupees” has been replaced with “fifty lakh rupees” as per the Companies
(Amendment) Second Ordinance, 2019.

section 462 of the Companies Act, 2013, the application of

Central Government, in the interest of public Accounting
amends the notification of the Government of India Standard 17
in the Ministry of Corporate Affairs number G.S.R. (Segment
463(E) dated the 5th June, 2015 namely:— Reporting) to the
In the said notification, in the Table, for serial companies
number 8 and entries relating thereto, the engaged in defence
following serial number and entries shall be production.
respectively substituted, namely:-
“In Chapter IX, Section 129- Shall not apply to the
companies engaged in defence production to the
extent of application of relevant Accounting
Standard on segment reporting”.
XII Amendments related to - Notification G.S.R. 2.11 -
284(E) dated 23rd March, 2018 (This Rule may be
Rule 9: Reservation of name read with respect to
An application for reservation of name shall be point (iv)
made through the web service available at Requirement for
www.mca.gov.in by using [form RUN](Reserve reservation of the
Unique Name) along with fee as provided in the name of the
Companies (Registration offices and fees) Rules, company)
2014, which may either be approved or rejected,
as the case may be, by the Registrar, Central
Registration Centre after allowing re--submission
of such application within fifteen days for
rectification of the defects, if any.
XIII Amendments related to - Notification G.S.R. 1.4 & As per the
433(E) dated 7th May, 2018 1.21 Companies
The Central Government has amended the (Specification of
Companies (Specification of Definitions Details) Definitions Details)
Rules, 2014, by the Companies (Specification of Rules, 2014, “Total
Definitions Details) Amendment Rules, 2018. It Share Capital”,
shall come into force on 7th May, 2018. ……. (b) convertible
In the Companies (Specification of Definitions preference share
Details) Rules, 2014, in rule 2, in sub-rule (1), capital
clause (r) shall be omitted.
Please note: The said clause (r) deals with ‘Total

Share Capital’

XIV Amendments related to - Notification G.S.R. 4.12 ‘‘Employee’’ means-

434(E) dated 7th May, 2018 (a) a permanent
The Central Government has amended the employee of the
Companies (Share Capital and Debentures) company who has
Rules, 2014, by the Companies (Share Capital been working
and Debentures) Second Amendment Rules, in India or outside
2018. It shall come into force on 7 th May, 2018. India, for at least
In the Companies (Share Capital and Debentures) last one year; or
Rules, 2014, in the principal rules, in rule 8, in sub-
rule (1), in the Explanation, in clause (i) in sub-
clause (a), the words “for at least last one year”
shall be omitted.
XV Amendments related to - Notification G.S.R. 1.- 1. Rule 13 dealt with
560(E) dated 13th June, 2018 7.13 Return of Changes in
The Ministry of Corporate Affairs vide G.S.R. 560 2.- Shareholding
(E) dated 13th June, 2018, has amended the 7.13 Position of Promoters
Companies (Management and Administration) 3.- and Top Ten
Rules, 2014 through the Companies 7.15 Shareholders.
(Management and Administration) Second 4.- 2. MGT- 10
Amendment Rules, 2018. 7.30 3. Copy of proposed
Accordingly, in the Companies (Management and 5.- Special Resolution
Administration) Rules, 2014, 7.37 field with ROC:
1. rule 13 shall be omitted …..at least one day
2. the “Form No.MGT -10” shall be omitted. before the date of
general meeting of
3. in rule 15, the sub-rule(6), shall be omitted
the company in
4. in rule 18, in sub-rule (3), Explanation after Form MGT – 14.
clause (ix), shall be omitted
4. In Diagram ignore
5. in rule 22, in sub-rule(16) for the proviso, the the words, and
following shall be substituted, namely:- Explanation under
"Provided that any aforesaid items of business Rule 18(3)
under this sub-rule, required to be transacted by 5. Provided that
means of postal ballot, may be transacted at a One Person
general meeting by a company which is required Company and other
to provide the facility to members to vote by companies having
electronic means under section 108, in the manner members upto 200
provided in that section: are not required to
Provided further that One Person Companies and transact any
other companies having members upto two business through
hundred are not required to transact any business postal ballot.
through postal ballot"

XVI Amendments related to - Notification G.S.R. 612 5.11 (k) details of

(E) dated 5th July, 2018 deposit insurance
The Central Government has amended the including extent of
Companies (Acceptance of Deposits) Rules, deposit insurance;
2014, by the Companies (Acceptance of Deposits)
Amendment Rules, 2018. It shall come into force
on 15th August, 2018.
In the Companies (Acceptance of Deposits) Rules,
2014 in rule 14, in sub-rule (1), clause (k) shall be
omitted;
XVII Amendments related to - Notification G.S.R. 2.4 (person who has
708(E) dated 27th July, 2018 stayed in India for a
The Central Government has amended the period of not less
Companies (Incorporation) Rules, 2014, by the than 182 days
Companies (Incorporation) Third Amendment during the
Rules, 2018. It shall come into force on 27 th July, immediately
2018. preceding one
In the Companies (Incorporation) Rules, 2014. calendar year)
(a) in rule 3, for Explanation to sub-rule (1), the
following shall be substituted, namely:-
“Explanation I. - For the purposes of this rule, the
term "resident in India" means a person who has
stayed in India for a period of not less than one
hundred and eighty two days during the
immediately preceding financial year.
Explanation II.- For the purposes of this rule, while
counting the number of days of stay of a director
in India for the financial year 2018-2019, any
period of stay between 01.01.2018 till the date of
notification of this rule shall also be counted”;
XVIII Amendments related to - Enforcement of the 10.5 According to the
Companies (Audit and Auditors) Amendment Companies (Audit
Rules, 2018 vide Notification G.S.R. 432 (E) dated and Auditors)
7th May 2018 Rules, 2014, …….
by way of passing
The Central Government makes the Companies of an ordinary
(Audit and Auditors) Second Amendment Rules, resolution.
2018 to amend the Companies (Audit and If the appointment
Auditors) Rules, 2014. is not ……..
1. In the Companies (Audit and Auditors) Rules,
2014, in rule 3 which deals with the Manner and

Procedure of selection and appointment of procedure laid

auditors: down in this behalf
(a) Explanation shall be omitted. under the Act.
(b) proviso to sub-rule (7) shall be omitted.
2. In the principal rules, in rule 10A i.e., related 10.24 As per the rule 10A
to Internal Financial controls system, for the words inserted by the
"adequate internal financial controls system", the Companies (Audit
words "internal financial controls with reference to and Auditors) …..
financial statements" shall be substituted. about existence of
adequate internal
financial controls
system and its
operating
effectiveness.
3. In the principal rules, in rule 14 which deals with 10.34 (A) the Board shall
the remuneration of the cost auditor, following are appoint an individual,
the changes- who is a cost
(a) in clause (a), in sub-clause (i), for the words, accountant in
"who is a cost accountant in practice", the words practice, or a firm of
"who is a cost accountant" shall be substituted;
3. In the principal rules, in rule 14 which deals with 10.34 (2) in the case of
the remuneration of the cost auditor, following are other companies
the changes- which are not
(b) in clause (b) for the words "who is a cost required……, shall
accountant in practice", the words "who is a cost appoint an individual
accountant" shall be substituted. who is a cost
accountant in
practice or a firm of
XIX Amendments related to - Enforcement of the 9.20 -
Companies (Accounts) Amendment Rules, 2018 [Clause (ix) and (x) is
vide Notification G.S.R. 725(E) dated 31st July, newly inserted]
2018
The Central Government makes the Companies
(Accounts) Amendment Rules, 2018 to amend the
Companies (Accounts) Rules, 2014.
1. In the Companies (Accounts) Rules, 2014,
In sub-rule (5) of Rule 8 which deals with the
Matters to be included in Board's report, after
clause (viii) the following clauses shall be inserted,
namely:-

“(ix) a disclosure, as to whether maintenance of

cost records as specified by the Central
Government under sub-section (1) of section 148
of the Companies Act, 2013, is required by the
Company and accordingly such accounts and
records are made and maintained,
(x) a statement that the company has complied
with provisions relating to the constitution of
Internal Complaints Committee under the Sexual
Harassment of Women at Workplace (Prevention,
Prohibition and Redressal) Act, 2013,”
2. In the Companies (Accounts) Rules, 2014, after 9.20 -
sub-rule (5), the following Sub Rule (6), rule shall (Sub- rule 6 is newly
be inserted, namely:- inserted)
“(6) This rule shall not apply to One Person
Company or Small Company”.
XX Amendments related to - Enforcement of the 9.22 (i) Projects or
Companies (Corporate Social Responsibility programs relating to
Policy) Amendment Rules, 2018 vide Notification activities areas or
G.S.R. 865 (E) dated 19th September, 2018 subjects specified in
Schedule VII to the
The Central Government makes the Companies Act; or
(Corporate Social Responsibility Policy) (ii) Projects or
Amendment Rules, 2018 to amend the Companies programs relating to
(Corporate Social Responsibility Policy) Rules, ….. subject to the
2014. condition that
1. In Companies (Corporate Social Responsibility such policy will cover
Policy) Rules, 2014, in rule 2 which deals with the subjects
definitions, - enumerated in
(a) in sub-rule (1), in sub-clause (i) of clause (c) Schedule VII of the
which defines “Corporate Social Responsibility Act.
(CSR)”, after the words “relating to activities”, the
words “, areas or subjects” shall be inserted;
(b) in sub-rule (1), in sub-clause (ii) of clause (c),
for the words “cover subjects enumerated”, the
words “include activities, areas or subjects
specified” shall be substituted;
2. In Companies (Corporate Social Responsibility 9.23 (b) An unlisted
Policy) Rules, 2014, in rule 5 which deals with the public company or
“CSR Committees”, in clause (i) of sub rule (1), for a private company
the words “an unlisted public company or a private which is not required

company”, the words “a company” shall be to appoint an

substituted. independent
3. In Companies (Corporate Social Responsibility 9.24 (a) List of CSR
Policy) Rules, 2014, In rule 6 which states of CSR projects or programs
Policy, following are the changes- which a company
(a) in sub-rule (1), in clause (a), for the words plans to undertake
“falling within the purview of” the words “areas or falling within the
subjects specified in” shall be substituted; purview of the
Schedule VII
3. In Companies (Corporate Social Responsibility 9.24 For point (b)-
Policy) Rules, 2014, in rule 6 which states of CSR (d) The Board of
Policy, following are the changes- Directors shall ….
(b) in sub-rule (1), in second proviso to clause (b), CSR Policy are
for the words, “activities included in Schedule VII” related to the
the words “areas or subjects specified in Schedule activities included
VII” shall be substituted. in Schedule VII of
the Act.
XXI Amendments related to - Constitution of National 9.14 -
Financial Reporting Authority
The Central Government appointed 1 st October,

2018 (Notification S.O. 5099(E) dated 1 st October,
2018) as the date of constitution Of National
Financial Reporting Authority.
Section 132 shall now be read as under:
Constitution of National Financial Reporting
Authority, have also been notified.
132. *(1) The Central Government may, by
notification, constitute a National Financial
Reporting Authority to provide for matters relating
to accounting and auditing standards under this
Act.
**(2) Notwithstanding anything contained in any
other law for the time being in force, the National
Financial Reporting Authority shall—
(a) make recommendations to the Central
Government on the formulation and laying down of
accounting and auditing policies and standards for
adoption by companies or class of companies or
their auditors, as the case may be;

(b) monitor and enforce the compliance with

accounting standards and auditing standards in
such manner as may be prescribed;
(c) oversee the quality of service of the
professions associated with ensuring compliance
with such standards, and suggest measures
required for improvement in quality of service and
such other related matters as may be prescribed;
and
(d) perform such other functions relating to
clauses (a), (b) and (c) as may be prescribed.
(3) The National Financial Reporting Authority
shall consist of a chairperson, who shall be a
person of eminence and having expertise in
accountancy, auditing, finance or law to be
appointed by the Central Government and such
other members not exceeding fifteen consisting of
part-time and full-time members as may be
prescribed:
Provided that the terms and conditions and the
manner of appointment of the chairperson and
members shall be such as may be prescribed:
Provided further that the chairperson and
members shall make a declaration to the Central
Government in the prescribed form regarding no
conflict of interest or lack of independence in
respect of his or their appointment:
Provided also that the chairperson and members,
who are in full-time employment with National
Financial Reporting Authority shall not be
associated with any audit firm (including related
consultancy firms) during the course of their
appointment and two years after ceasing to hold
such appointment.
**(4) Notwithstanding anything contained in any
other law for the time being in force, the National
Financial Reporting Authority shall—
(a) have the power to investigate, either suo moto
or on a reference made to it by the Central
Government, for such class of bodies corporate or

persons, in such manner as may be prescribed

into the matters of professional or other
misconduct committed by any member or firm of
chartered accountants, registered under the
Chartered Accountants Act, 1949:
Provided that no other institute or body shall
initiate or continue any proceedings in such
matters of misconduct where the National
Financial Reporting Authority has initiated an
investigation under this section;
(b) have the same powers as are vested in a civil
court under the Code of Civil Procedure, 1908,
while trying a suit, in respect of the following
matters, namely:—
(i) discovery and production of books of account
and other documents, at such place and at such
time as may be specified by the National Financial
Reporting Authority;
(ii) summoning and enforcing the attendance of
persons and examining them on oath;
(iii) inspection of any books, registers and other
documents of any person referred to in clause (b)
at any place;
(iv) issuing commissions for examination of
witnesses or documents;
(c) where professional or other misconduct is
proved, have the power to make order for—
(A) imposing penalty of—
(I) not less than one lakh rupees, but which
may extend to five times of the fees received, in
case of individuals; and
(II) not less than five lakh rupees, but which
may extend to ten times of the fees received, in
case of firms;
(B) debarring the member or the firm from
engaging himself or itself from practice as member
of the Institute of Chartered Accountant of India

referred to in clause (e) of sub-section (1) of

section 2 of the Chartered Accountants Act, 1949
for a minimum period of six months or for such
higher period not exceeding ten years as may be
decided by the National Financial Reporting
Authority.
Explanation.—For the purposes of his sub-
section, the expression "professional or other
misconduct" shall have the same meaning
assigned to it under section 22 of the Chartered
Accountants Act, 1949.
**(5) Any person aggrieved by any order of the
National Financial Reporting Authority issued
under clause (c) of sub-section (4), may prefer an
appeal before the Appellate Tribunal in such
manner and on payment of such fee as may be
prescribed.
**(10) The National Financial Reporting Authority
shall meet at such times and places and shall
observe such rules of procedure in regard to the
transaction of business at its meetings in such
manner as may be prescribed.
(11) The Central Government may appoint a
secretary and such other employees as it may
consider necessary for the efficient performance
of functions by the National Financial Reporting
Authority under this Act and the terms and
conditions of service of the secretary and
employees shall be such as may be prescribed.
*(12) The head office of the National Financial
Reporting Authority shall be at New Delhi and the
National Financial Reporting Authority may, meet
at such other places in India as it deems fit.
shall cause to be maintained such books of
account and other books in relation to its accounts
in such form and in such manner as the Central
Government may, in consultation with the

Comptroller and Auditor-General of India

prescribe.
**(14) The accounts of the National Financial
Reporting Authority shall be audited by the
Comptroller and Auditor-General of India at such
intervals as may be specified by him and such
accounts as certified by the Comptroller and
Auditor-General of India together with the audit
report thereon shall be forwarded annually to the
Central Government by the National Financial
Reporting Authority.
shall prepare in such form and at such time for
each financial year as may be prescribed its
annual report giving a full account of its activities
during the financial year and forward a copy
thereof to the Central Government and the Central
Government shall cause the annual report and the
audit report given by the Comptroller and Auditor -
General of India to be laid before each House of
Parliament.
Please note: (i) Sub Section (3) and (11) have
been notified on 21st March 2018. [Notification
No. S.O. 1316(E)]
(ii) Sub Section (6), (7), (8) and (9) have been
omitted [with effect from 9th February, 2018]
(iii) *Sub- section (1) and (12) notified on 1st
October, 2018 [Notification S.O. 5098(E) dated 1st
October, 2018]
(iv) **Sub- Section (2),(4),(5),(10),(13),(14) and
(15) have been notified on 24th October 2018
[Notification S.O. 5385(E) dated 24th October,
2018]
XXII Amendments related to - COMPANIES 1.9 Provided that on an

(AMENDMENT) SECOND ORDINANCE, 2019 application made by
Following sections of the Companies Act, 2013 a company or body
(hereinafter referred to as the principal Act) have corporate, which is
been amended by the Companies (Amendment) a holding company
Second Ordinance, 2019 dated 21st February, or a subsidiary or

2019. [It shall be deemed to have come into force associate company
on 2nd November, 2018.] of a company
1. In clause (41) of section 2, incorporated
(a) for the first proviso, the following provisos shall outside India and is
be substituted namely: required to follow a
different financial
“Provided that where a company or body
year for
corporate, which is a holding company or a
consolidation of its
subsidiary or associate company of a company
accounts outside
incorporated outside India and is required to follow
India, the Tribunal
a different financial year for consolidation of its
may, if it is
accounts outside India, the Central Government
satisfied, allow any
may, on an application made by that company or
period as its
body corporate in such form and manner as may
financial year,
be prescribed, allow any period as its financial
whether or not that
year, whether or not that period is a year:
period is a year:
Provided further that any application pending
before the Tribunal as on the date of
commencement of the Companies (Amendment)
Ordinance, 2019, shall be disposed of by the
Tribunal in accordance with the provisions
applicable to it before such commencement.”
(b) for the second proviso, the for the words
“Provided further that”, the words “Provided also
that” shall be substituted.
2. After section 10, the following section shall be - The section is newly
inserted, namely: inserted
“10A.Commencement of business etc.
(1) A company incorporated after the
commencement of the Companies (Amendment)
Ordinance, 2019 and having a share capital shall
not commence any business or exercise any
borrowing powers unless—
(a) a declaration is filed by a director within a
period of one hundred and eighty days of the date
of incorporation of the company in such form and
verified in such manner as may be prescribed, with
the Registrar that every subscriber to the
memorandum has paid the value of the shares
agreed to be taken by him on the date of making
of such declaration; and

(b) The company has filed with the Registrar a

verification of its registered office as provided in
sub-section (2) of section 12.
(2) If any default is made in complying with the
requirements of this section, the company shall be
liable to a penalty of fifty thousand rupees and
every officer who is in default shall be liable to a
penalty of one thousand rupees for each day
during which such default continues but not
exceeding an amount of one lakh rupees.
(3) Where no declaration has been filed with the
Registrar under clause (a) of sub-section (1) within
a period of one hundred and eighty days of the
date of incorporation of the company and the
Registrar has reasonable cause to believe that the
company is not carrying on any business or
operations, he may, without prejudice to the
provisions of sub-section (2), initiate action for the
removal of the name of the company from the
register of companies under Chapter XVIII.”
3. In section 12, after sub- section (8), the 2.24 The sub- section is
following sub- section shall be inserted, namely: newly inserted
“(9) If the Registrar has reasonable cause to
believe that the company is not carrying on any
business or operations, he may cause a physical
verification of the registered office of the company
in such manner as may be prescribed and if any
default is found to be made in complying with the
requirements of sub-section (1), he may without
prejudice to the provisions of sub-section (8),
initiate action for the removal of the name of the
company from the register of companies under
Chapter XVIII.”
4. In section 14, 2.31 However, any such
(i) in Sub- section (1), for the second proviso, the alteration having
following provisos shall be substituted namely: the effect of
“Provided further that any alteration having the conversion of a
effect of conversion of a public company into a public company
private company shall not be valid unless it is into a private
approved by an order of the Central Government company shall not
on an application made in such form and manner take effect except
as may be prescribed: with the approval of

Provided also that any application pending before the Tribunal which
the Tribunal, as on the date of commencement of shall make such
the Companies (Amendment) Ordinance, 2019, order as it may
shall be disposed of by the Tribunal in accordance deem fit.
with the provisions applicable to it before such
commencement.”
4. In section 14, 2.31 Every alteration of
(ii) in sub- section (2), for the word “Tribunal”, the the articles and a
words “Central Government” shall be substituted. copy of the order of
the Tribunal
approving the
alteration, shall be
filed with the
Registrar, together
with a printed copy of
the altered articles,
within a period of
fifteen days in such
manner as may be
prescribed, who shall
register the same.
5. In section 53, for sub – section (3), the 4.10 Where a company
following sub- section shall be substituted, contravenes the
namely: provisions of this
“(3) Where any company fails to comply with the section, the
provisions of this section, such company and company shall be
every officer who is in default shall be liable to a punishable with
penalty which may extend to an amount equal to fine which shall not
the amount raised through the issue of shares at be less than one
a discount or five lakh rupees, whichever is less, lakh rupees but
and the company shall also be liable to refund all which may extend
monies received with interest at the rate of twelve to five lakh rupees
per cent. per annum from the date of issue of such and every officer
shares to the persons to whom such shares have who is in default
been issued.” shall be punishable
with imprisonment
for a term which
may extend to six
months or with fine
which shall not be
less than one lakh
rupees but which
may extend to five

lakh rupees, or with

both.
6. In section 64, for sub- section (2), the following 4.24 If a company and
sub- section shall be substituted, namely: any officer of the
“(2) Where any company fails to comply with the company who is in
provisions of sub-section (1), such company and default contravenes
every officer who is in default shall be liable to a the provisions of
penalty of one thousand rupees for each day sub-section (1), it or
during which such default continues, or five lakh he shall be
rupees whichever is less.” punishable with
fine which may
extend to one
thousand rupees
for each day during
which such default
continues, or five
lakh rupees,
whichever is less.
7. In section 77, in sub- section (1), for the first 6.3 The Registrar may,
and second provisos, the following provisos shall on an application by
be substituted, namely: the company, allow
“Provided that the Registrar may, on an such registration to
application by the company, allow such be made within a
registration to be made- period of three
(a) in case of charges created before the hundred days of
commencement of the Companies (Amendment) such creation on
Ordinance, 2019, within a period of three hundred payment of such
days of such creation; or additional fees as
may be prescribed:
(b) in case of charges created on or after the
commencement of the Companies (Amendment) Provided further
Ordinance, 2019, within a period of sixty days of that if registration
such creation, on payment of such additional fees is not made within a
as may be prescribed: period of three
hundred days of
Provided further that if the registration is not made
such creation, the
within the period specified-
company shall seek
(a) in clause (a) to the first proviso, the extension of time in
registration of the charge shall be made within six accordance with
months from the date of commencement of the section 87:
Companies (Amendment) Ordinance, 2019, on
payment of such additional fees as may be
prescribed and different fees may be prescribed
for different classes of companies;

(b) in clause (b) to the first proviso, the Registrar

may, on an application, allow such registration to
be made within a further period of sixty days after
payment of such advalorem fees as may be
prescribed.”
8. Section 86 of the Companies Act, 2013, shall 6.10 The sub- section is
be numbered as sub- section (1) thereof and after newly inserted
sub- section (1) as so numbered, the following
sub- section shall be inserted, namely:
“(2) If any person wilfully furnishes any false or
incorrect information or knowingly suppresses any
material information, required to be registered in
accordance with the provisions of section 77, he
shall be liable for action under section 447.”
9. For section 87, the following sections shall be 6.10 (1) The Central
substituted, namely: Government on
“87. The Central Government on being satisfied being satisfied
that — that—
(a) the omission to give intimation to the ……… before the
Registrar of the payment or satisfaction of a charge is actually
charge, within the time required under this registered.
Chapter; or
(b) the omission or misstatement of any
particulars, in any filing previously made to the
Registrar with respect to any such charge or
modification thereof or with respect to any
memorandum of satisfaction or other entry made
in pursuance of section 82 or section 83,
was accidental or due to inadvertence or some
other sufficient cause or it is not of a nature to
prejudice the position of creditors or shareholders
of the company, it may, on the application of the
company or any person interested and on such
terms and conditions as it deems just and
expedient, direct that the time for the giving of
intimation of payment or satisfaction shall be
extended or, as the case may require, that the
omission or misstatement shall be rectified.”

10. In section 90, - 7The company or

(i) for sub- section (9), the following sub- section the person
shall be substituted, namely: aggrieved by the
“(9) The company or the person aggrieved by the order of the
order of the Tribunal may make an application to Tribunal may make
the Tribunal for relaxation or lifting of the an application to
restrictions placed under sub-section (8), within a the Tribunal for
period of one year from the date of such order: relaxation or lifting
of the restrictions
Provided that if no such application has been filed
placed under sub-
within a period of one year from the date of the
order under sub-section (8), such shares shall be section (8).
transferred, without any restrictions, to the
authority constituted under sub-section (5) of
section 125, in such manner as may be
prescribed.”
10. In section 90, - -8
(ii) in sub- section (10),- (The words are newly
(a) after the word “punishable”, the words “with inserted)
imprisonment for a term which may extend to one
year or” shall be inserted;
(b) after the words “ten lakh rupees”, the words “or
with both” shall be inserted.
11. In section 92, for sub- section (5), the 7.12 Section 92(5) of the
following sub- section shall be substituted, Act specifies that if
namely: the company
“(5) If any company fails to file its annual return defaults in filing the
under sub-section (4), before the expiry of the annual return within
period specified therein, such company and its the time as
every officer who is in default shall be liable to a specified in this
penalty of fifty thousand rupees and in case of section, the
continuing failure, with further penalty of one company shall be
hundred rupees for each day during which such punishable with
failure continues, subject to a maximum of five fine which shall not
lakh rupees.” be less than
` 50,000 but which
7Section 90 (Investigation of Beneficial Ownership of Shares in Certain cases) has been replaced with section
90 (Register of Significant Beneficial Owners in a Company) via Companies (Amendment) Act, 2017 [w.e.f.
13th June, 2018].
8 Same as footnote 7

may extend to
` 5,00,000 or
imprisonment up to
6 months or with
both.
12. In section 102, for sub- section (5), the 7.22 If any default is
following sub- section shall be substituted, made in complying
namely: with the provisions
“(5) Without prejudice to the provisions of sub- of this section, then
section (4), if any default is made in complying every promoter,
with the provisions of this section, every promoter, director, manager,
director, manager or other key managerial or other key
personnel of the company who is in default shall managerial
be liable to a penalty of fifty thousand rupees or personnel who is in
five times the amount of benefit accruing to the default shall be
promoter, director, manager or other key punishable with
managerial personnel or any of his relatives, fine which may
whichever is higher.” extend to ` 50,000
or 5 times the
amount of benefit
accruing to the
promoter, director,
manager or other
key managerial
personnel or any of
his relatives,
whichever is more.
13. In section 105, in sub- section (3), for the 7.25 Failure to state in
words “punishable with fine which may extend to notice of meeting that
five thousand rupees”, the words “liable to a a member is entitled
penalty of five thousand rupees” shall be to appoint proxy who
substituted. need not be a
member every officer
of the company who
is in default shall be
punishable with
fine which may
extend to ` 5,000.
14. In section 117, for sub- section (2), the 7.46 Section 117(2) sets
following sub- section shall be substituted, out the penalty in
namely: case of failure to
intimate RoC about

“(2) If any company fails to file the resolution or the resolutions and
the agreement under sub-section (1) before the agreements that are
expiry of the period specified therein, such required to be filed
company shall be liable to a penalty of one lakh within the specified
rupees and in case of continuing failure, with time under section
further penalty of five hundred rupees for each day 403 and states that
after the first during which such failure continues, the company shall
subject to a maximum of twenty-five lakh rupees be punishable with
and every officer of the company who is in default fine which shall not
including liquidator of the company, if any, shall be be less than
liable to a penalty of fifty thousand rupees and in ` 5,00,000 but
case of continuing failure, with further penalty of which may extend
five hundred rupees for each day after the first to ` 25,00,000 and
during which such failure continues, subject to a every officer of the
maximum of five lakh rupees.” company who is in
default, including
the liquidator, if
any, shall be
punishable with
fine which shall not
be less than
` 1,00,000 but
which may extend
to ` 5,00,000.
15. In section 121, for sub- section (3), the 7.52 if it fails to file such
following sub- section shall be substituted, report then
namely: company shall be
“(3) If the company fails to file the report under punishable with
sub-section (2) before the expiry of the period fine which shall not
specified therein, such company shall be liable to be less than
a penalty of one lakh rupees and in case of `1,00,000 but which
continuing failure, with further penalty of five may extend to
hundred rupees for each day after the first during `5,00,000 and every
which such failure continues, subject to a officer of the
maximum of five lakh rupees and every officer of company, who is in
the company who is in default shall be liable to a default, shall be
penalty which shall not be less than twenty-five punishable with
thousand rupees and in case of continuing failure, fine which shall not
with further penalty of five hundred rupees for be less than
each day after the first during which such failure `25,000 but which
continues, subject to a maximum of one lakh may extend to
rupees.” `1,00,000.

16. In section 137, in sub- section (3), 9.35 The company shall
(a) for the words “punishable with fine”, the words be punishable with
“liable to a penalty” shall be substitute; fine of `1,000 for
every day during
which the failure
continues
16. In section 137, in sub- section (3), 9.35 any such director, all
(b) for the portion beginning with “punishable with the directors of the
imprisonment”, and ending with “five lakh rupees company, shall be
or with both”, the words “shall be liable to a penalty punishable with:
of one lakh rupees and in case of continuing (1) Imprisonment
failure, with a further penalty of one hundred for a term which
rupees for each day after the first during which may extend to 6
such failure continues, subject to a maximum of months or
five lakh rupees” shall be substituted. (2) Fine which shall
not be less than ` 1
lac but which may
extend to `5 Lacs,
or
(3) Both with
imprisonment and
fine.
17. In section 140, for the sub- section (3), the 10.15 If the auditor does
following sub- section shall be substitute, namely: not comply with
9“(3) If the auditor does not comply with the aforesaid provision,
provisions of sub-section (2), he or it shall be liable he or it shall be
to a penalty of fifty thousand rupees or an amount punishable with
equal to the remuneration of the auditor, fine which shall not
whichever is less, and in case of continuing failure, be less than
with further penalty of five hundred rupees for ` 50,000 but which
each day after the first during which such failure may extend to ` 5
continues, subject to a maximum of five lakh Lacs.
rupees.”
18. In section 447, in the second proviso, for the 3.26 The amount of
words “twenty lakh rupees”, the words “fifty lakh “twenty lakh rupees”
rupees” shall be substituted. has been replaced
with “fifty lakh
rupees” as per the
9Sub-section 3 of section 140 has been fully substituted by the Companies (Amendment) Ordinance, 2019
w.r.e.f. 2.11.2018.

Companies
(Amendment)
Second Ordinance,
2019
XXIII Amendments related to - Notification G.S.R. 2.41 -
1219(E) dated 18th December, 2018 The Rule is newly
The Central Government has amended the inserted
Companies (Incorporation) Rules, 2014, by the
Companies (Incorporation) Fourth Amendment
Rules, 2018. It shall come into force on 18 th
December, 2018.
In the Companies (Incorporation) Rules, 2014
(hereinafter referred to as the said rules), after rule
23, the following rule shall be inserted, namely:-
“23A. Declaration at the time of commencement of
business.-The declaration under section 10A by a
director shall be in Form No.INC-20A and shall be
filed as provided in the Companies (Registration
Offices and Fees) Rules, 2014 and the contents of
the said form shall be verified by a Company
Secretary or a Chartered Accountant or a Cost
Accountant, in practice:
Provided that in the case of a company pursuing
objects requiring registration or approval from any
sectoral regulators such as the Reserve Bank of
India, Securities and Exchange Board of India,
etc., the registration or approval, as the case may
be from such regulator shall also be obtained and
attached with the declaration.”.
XXIV Amendments related to - Notification G.S.R. 1.5.4
42(E) dated 22nd January, 2019 2.
The Central Government has amended the 5.11
Companies (Acceptance of Deposits) Rules, 3.
2014, by the Companies (Acceptance of Deposits) 5.11
Amendment Rules, 2019. It shall come into force
on 22nd January, 2019.
2014 (hereinafter referred to as the said rules):
1. In rule 2, in sub-rule (1), in clause (c), in sub-
clause(xviii), after the words “Infrastructure

Investment Trusts,” the words “Real Estate

Investment Trusts” shall be inserted.
2. In the said rules, in rule 16, the following
Explanation shall be inserted, namely:-
“Explanation.- It is hereby clarified that Form DPT -
3 shall be used for filing return of deposit or
particulars of transaction not considered as
deposit or both by every company other than
Government company.”.
3. In rule 16(A), after sub-rule (2), the following
sub-rule shall be inserted, namely:-
“(3) Every company other than Government
company shall file a onetime return of outstanding
receipt of money or loan by a company but not
considered as deposits, in terms of clause (c) of
sub-rule 1 of rule 2 from the 01st April, 2014 to
*[the date of publication of this notification in the
Official Gazette], as specified in Form DPT -3
within **[ninety days from the date of said
publication of this notification] along with fee as
provided in the Companies (Registration Offices
and Fees) Rules, 2014.”.
XXV Amendments related to - Notification G.S.R. 5.11 Read in reference to
341(E) dated 30th April, 2019 XXIV above
The Central Government has amended the
Companies (Acceptance of Deposits) Rules,
2014, by the Companies (Acceptance of Deposits)
Second Amendment Rules, 2019. It shall come
into force on 22nd January, 2019.
2014, in rule 16A, in sub-rule (3), -
*(a) for the words “the date of publication of this
notification in the Official Gazette”, the figures,
letters and word “31st March, 2019” shall be
substituted;
**(b) for the words “ninety days from the date of
said publication of this notification”, the words,
figures and letters “ninety days from 31st March,
2019” shall be substituted.

XXVI Amendments related to - Notification dated 30 th 6.3 (a) The Registrar

April, 2019 may, on being
The Central Government has amended the satisfied ......... .. .
Companies (Registration of Charges) Rules, Intervening
2014, by the Companies (Registration of Charges) creditors of the
Amendment Rules, 2019. company.
In the Companies (Registration of Charges) Rules,
2014:
1. In Rule 4, the following rules shall be
substituted, namely:
“4. Application to Registrar

(1) For the purposes of the first proviso and clause
(b) of the second proviso to sub-section (1) of
section 77, the Registrar may, on being satisfied
that the company had sufficient cause for not filing
the particulars and instrument of charge, if any,
within a period of thirty days of the date of creation
of the charge including modification thereto, allow
the registration of the same after thirty days but
within the period as specified in the said provisos ,
on payment of fee, additional fee
or advalorem fee, as may be applicable, as
prescribed in the Companies (Registration Offices
and Fees) Rules, 2014.
(2) The application under sub-rule (1) shall be
made in Form No. CHG-l and Form No.CHG-
9 supported by a declaration from the company
signed by its company secretary or a director that
such belated filing shall not adversely affect the
rights of any other intervening creditors of the
company.”
In the Companies (Registration of Charges) Rules, 6.11 II. Condonation of
2014: delay and
2. For Rule 12, the following rule shall be rectification of
substituted, namely: register of charges.
“12. Rectification in register of charges on According to Rule
account of omission or misstatement of 12 ……… in the said
particulars in charge previously recorded and order.
extension of time in filing of satisfaction of
charge.-

The Central Government may on an application

filed in Form No. CHG-8 in accordance with
section 87-
(a) direct rectification of the omission or
misstatement of any particulars, in any filing,
previously recorded with the Registrar with
respect to any charge or modification thereof, or
with respect to any memorandum of satisfaction or
other entry made in pursuance of section 82 or
section 83,
(b) direct extension of time for satisfaction of
charge, if such filing is not made within a period of
three hundred days from the date of such payment
or satisfaction."
I. Amendments related to – THE NEGOTIABLE
INSTRUMENTS (AMENDMENT) ACT, 2018
The Ministry of Law and Justice has made
amendments to the Negotiable Instruments Act,
1881 through the Negotiable Instruments
(Amendment) Act, 2018. This Amendment Act
received the assent of the President and published
in the Official Gazette on 2 nd August, 2018.
In the Negotiable Instruments Act, 1881 -
(hereinafter referred to as the principal Act), after (The section is newly
section 143, the following section shall be inserted)
‘‘143A. Power to direct interim compensation.
(1) Notwithstanding anything contained in the
Code of Criminal Procedure, 1973, the Court
trying an offence under section 138 may order the
drawer of the cheque to pay interim compensation
to the complainant—
(a) in a summary trial or a summons case, where
he pleads not guilty to the accusation made in the
complaint; and
(b) in any other case, upon framing of charge.
(2) The interim compensation under sub-section
(1) shall not exceed twenty per cent. of the amount
of the cheque.

(3) The interim compensation shall be paid within

sixty days from the date of the order under sub-
section (1), or within such further period not
exceeding thirty days as may be directed by the
Court on sufficient cause being shown by the
drawer of the cheque.
(4) If the drawer of the cheque is acquitted, the
Court shall direct the complainant to repay to the
drawer the amount of interim compensation, with
interest at the bank rate as published by the
Reserve Bank of India, prevalent at the beginning
of the relevant financial year, within sixty days
from the date of the order, or within such further
period not exceeding thirty days as may be
directed by the Court on sufficient cause being
shown by the complainant.
(5) The interim compensation payable under this
section may be recovered as if it were a fine under
section 421 of the Code of Criminal Procedure,
1973.
(6) The amount of fine imposed under section 138
or the amount of compensation awarded under
section 357 of the Code of Criminal Procedure,
1973, shall be reduced by the amount paid or
recovered as interim compensation under this
section.’’.
(2) In the principal Act, after section 147, the -
following section shall be inserted, (The section is newly
namely:— inserted)
‘‘148. Power of Appellate Court to order
payment pending appeal against conviction.
(1) Notwithstanding anything contained in the
Code of Criminal Procedure, 1973, in an appeal by
the drawer against conviction under section 138,
the Appellate Court may order the appellant to
deposit such sum which shall be a minimum of
twenty per cent. of the fine or compensation
awarded by the trial Court:
Provided that the amount payable under this sub-
section shall be in addition to any interim
compensation paid by the appellant under section
143A.

(2) The amount referred to in sub-section (1) shall

be deposited within sixty days from the date of the
order, or within such further period not exceeding
thirty days as may be directed by the Court on
sufficient cause being shown by the appellant.
(3) The Appellate Court may direct the release of
the amount deposited by the appellant to the
complainant at any time during the pendency of
the appeal:
Provided that if the appellant is acquitted, the
Court shall direct the complainant to repay to the
appellant the amount so released, with interest at
the bank rate as published by the Reserve Bank
of India, prevalent at the beginning of the relevant
financial year, within sixty days from the date of
the order, or within such further period not
exceeding thirty days as may be directed by the
Court on sufficient cause being shown by the
complainant.’’
# Page number of the Study material (SM) with reference of relevant provisions
Please note: The Ministry of Corporate Affairs has replaced Rule 14 of the Companies
(Prospectus and Allotment of Securities) Rule, 2014 through Companies (Prospectus and
Allotment of Securities) Second Rule, 2018. Hence, students are advised not to read the content
related to Rule 14(2) of the Companies (Prospectus and Allotment of Securities) Rule, 2014 as
contained on pages 3.31 and Page 3.32 of Study Material. [For November 2019 examinations
the said amended rule has not been made applicable for the students.]
QUESTIONS
DIVISION A - MULTIPLE CHOICE QUESTIONS

1. Eztech Machines Limited owns a plot of land which was mortgaged to Urbane Commercial
Bank Limited for raising term loan of ` 2.00 crore. The mortgage was duly registered with
the Central Registry. First loan installment of ` 50.00 lacs was released immediately after
sanction of term loan with the condition that subsequent three installments of `50.00 lacs
shall be released as soon as the earlier released installment is utilized satisfactorily. Is it
necessary either for the company or the bank to register the charge on plot with the

concerned Registrar of Companies (ROC) when the mortgage is registered with the Central
Registry?
(a) It is not necessary either for the bank or the company to register the charge on plot
of land with the concerned Registrar of Companies (ROC) when the mortgage is
registered with the Central Registry.
(b) It is necessary to get the charge on plot on land registered with the concerned
Registrar of Companies (ROC) irrespective of the fact that mortgage is registered
with the Central Registry.
(c) The charge on plot needs to be registered with the concerned Registrar of Companies
(ROC) only when the actual liability of the company with the Bank exceeds ` 1.00
crore.
(d) The charge on plot needs to be registered with the concerned Registrar of Companies
(ROC) only when the term loan sanctioned by the bank to the company exceeds `
2.00 crores.
2. With a view to augment its production, Surya Techno-Products Limited availed a loan of `
50.00 lacs from Shrilaxmi First Bank Limited for purchase of a new machinery by offering
its factory worth ` 2.25 crores as security. However, the company did not initiate any steps
to get the charge on factory registered in favour of lending banker within the specified time.
As soon as the charge-holder bank came to know about the non-registration of charge with
the ROC, it applied to the Registrar for registration of charge along with the instrument
creating the charge and paid the requisite fees when demanded. Advise the bank whether
it can recover the fees so paid for registration of charge from Surya Techno-Products.
(a) Yes, the bank can recover the fees paid by it for registration of charge.
(b) No, the bank cannot recover the fees paid by it for registration of charge because the
bank is equally responsible for getting the charge registered.
(c) Only when it obtains recovery orders from Regional Director (RD), the bank can
recover the fees paid by it for registration of charge from the company.
(d) Only when it obtains recovery orders from National Company Law Tribunal (NCLT),
the bank can recover the fees paid by it for registration of charge from the company.
3. A charge was created by Cygnus Softwares Limited on its office premises to secure a term
loan of ` 1.00 crore availed from Next_Gen Commercial Bank Limited through an
instrument of charge executed by both the parties on 16 th February, 2019. Inadvertently,
the company could not get the charge registered with the concerned Registrar of
Companies (ROC) within the first statutory period permitted by law and the default was
made known to it by the lending banker with a stern warning to take immediate steps for
rectification. Advise the company regarding the latest date within which it must register the
charge with the ROC so that it is not required to pay a specific type of fees for charge
registration.

(a) With a view to avoid paying a specific type of fees for charge registration, the
company must get the charge registered latest by 27 th April, 2019.
(b) With a view to avoid paying a specific type of fees for charge registration, the
company must get the charge registered latest by 17 th April, 2019.
(c) With a view to avoid paying a specific type of fees for charge registration, the
company must get the charge registered latest by 2 nd May, 2019.
(d) The company cannot now get the charge register as the time prescribed by Law has
expired.
4. Cyplish Games and Toys Limited was sanctioned a term loan of ` 60.00 lacs by Zawnn
Industrial Bank Limited on 21 st November, 2018. As a security, the company offered its
office premises situated at Bandra, Mumbai and an instrument of charge was executed.
However, the company failed to get the charge registered with the concerned Registrar
within the first as well as second statutory period available as per law. This was adversely
commented by the internal auditors of the bank and therefore, after a strict advisory
received from Shahji, the senior manager of the bank, the company was prompted to take
steps for registration of charge. Name the specific type of fees which the company is now
required to pay for registration of charge.
(a) Special Fees.
(b) Ad-valorem Fees.
(c) A Late Registration Fees.
(d) Ad-valorem Duty.
5. Sumitra Healthcare and Hospitality Limited had issued 9% non-convertible debentures
which matured four years back. However, 1000 such debentures of ` 100 each are still
remaining unclaimed and unpaid even after the maturity. State the period after which the
company needs to transfer them to Investor Education and Protection Fund (IEPF) if they
remain unclaimed and unpaid.
(a) After the expiry of five years from the maturity date.
(b) After the expiry of six years from the maturity date
(c) After the expiry of seven years from the maturity date
(d) After the expiry of eight years from the maturity date.
6. Delight Sports Garments Limited is contemplating to raise funds through issue of
prospectus in which, according to the directors, a sum of ` 50 crores should be stated as
the minimum amount that needs to be subscribed by the prospective subscribers. The
funds shall be raised in four instalments consisting of application, allotment, first call and
second & final call. Advise the company by which instalment it should receive the minimum
subscription stated in the prospectus.

(a) Along with amount subscribed as application money.

(b) Along with amount subscribed as final call money.
(c) Along with amount subscribed as first call money.
(d) Along with amount subscribed as second and final call money.
7. All the 40 members of Taxila Traders Limited have valid voting rights. Due to some
urgency, its directors are desirous of convening Annual General Meeting (AGM) at a
shorter notice than statutorily required. Is it possible for them to do so?
(a) Taxila Traders Limited cannot convene AGM at shorter notice than statutorily
required.
(b) Taxila Traders Limited can convene AGM at shorter notice than statutorily required,
if consent in writing or by electronic mode is accorded by all the forty members who
are entitled to vote at the AGM.
(c) Taxila Traders Limited can convene AGM at shorter notice than statutorily required if
consent in writing or by electronic mode is accorded by at least 38 members who are
entitled to vote at the AGM.
(d) Taxila Traders Limited can convene AGM at shorter notice than statutorily required if
consent in writing or by electronic mode is accorded by at least 36 members who
are entitled to vote at the AGM.
8. A draws a bill on B for ` 500 payable to the order of A. B accepts the bill, but subsequently
dishonours it by non-payment. A sues B on the bill. B proves that it was accepted for value
as to ` 400, and as an accommodation to the plaintiff as to the residue. Thus, as per the
provisions of the Negotiable Instruments Act, 1881, A can only recover the following
amount:
(a) ` 900
(b) ` 500
(c) ` 400
(d) ` 100
COMPANY LAW
1. S Ltd. is a company in which H Ltd. is holding 60% of its paid up share capital. One of the
shareholder of H Ltd. made a charitable trust and donated his 10% shares in H Ltd. and
`50 crores to the trust. He appoints S Ltd. as the trustee. All the assets of the trust are
held in the name of S Ltd. Can a subsidiary hold shares in its holding company in this way?

2. Vintage security equipments limited is a manufacturer of CCTV cameras. It has raised `

100 crores through public issue of its equity shares for starting one more unit of CCTV
camera manufacturing. It has utilized 10 crores rupees and then it realized that its existing
business has no potential for expansion because government has reduced customs duty
on import of CCTV camera hence imported cameras from china are cheaper than its own
manufacturing. Now it wants to utilize remaining amount in mobile app development
business by adding a new object in its memorandum of association.
Does the Companies Act, 2013 allow such change of object. If not then what advise will
you give to company. If yes, then give steps to be followed.
3. What are the powers of Registrar to make entries of satisfaction and release of charges in
the absence of any intimation from the company. Discuss this matter in the light of
4. Neemrana Infotech Ltd. was incorporated on 1.4.2017. No General Meeting of the
company has been held so far. Explain the provisions of the Companies Act, 2013
regarding the time limit for holding the first annual general meeting of the Company and
the power of the Registrar to grant extension of time for the First Annual General Meeting.
5. Mr. Pink held 100 partly paid up shares of Red Limited. The company asked him to pay
the final call money on the shares. Due to some unavoidable circumstances he was unable
to pay the amount of call money to the company. At a general meeting of the shareholders,
the chairman disallowed him to cast his vote on the ground that the articles do not permit
a shareholder to vote if he has not paid the calls on the shares held by him. Mr. Pink
contested the decision of the Chairman. Referring to the provisions of the Companies Act,
2013 decide whether the contention of Mr. Pink is valid.
6. Red Limited was incorporated on 1st April, 2014 is facing severe effects of depression of
the economy. Owing to its bad financial status most of the members have started
withdrawing their holding from the company. The company had 250 members on 10th
January, 2019. By 15th January, 2019, 244 members had withdrawn their holding. No new
member has invested in the company after 15th February till date. Now, Mr. A, an existing
member has approached you to advise him regarding his liabilities in such a situation.
7. Rijwan Limited, a listed company, is in the business of garment manufacturing and has its
registered office at 123, N Tower, Commercial Beta Complex, Biwadi, Rajasthan. The
company has called its 6 th Annual General Meeting at 3 PM on 22 nd August, 2019 at Ansal
Plaza, Bhiwadi. Some of the members of the company have opposed to calling of the
meeting at Ansal Plaza. The company has approached you to advise them in this regard.
Suppose, Rijwan Limited is an unlisted company and wants to call their 6 th AGM at Jaipur,
will your answer differ.
8. Yellow limited has prepared its financial statements for the year 2018-19. Mr. Prateek, the
Managing director the company is declining to sign these financial statements on the
grounds that it is only the duty of the Board of the directors to sign the financial statements

as approved by the Board and he is not liable to sign the same. Now, Mr. Prateek has
approached you advise him regarding his responsbilty for signing the financial statement.
Advise Mr. Prateek regarding his responsibility for signing the financial statements as per
the provisions of the Companies Act, 2013.
Mr. Prateek has also provided to you the following more informations:
1. The Board as a policy does not authorise the chairperson of the company to sign the
financial statements
2. The company has appointed Ms. Sunanina as its Company Secretary
OTHER LAWS
9. Mr. Chintu was appointed as Site Manager of ABC Constructions Company on a two years
contract at a monthly salary of ` 50,000. Mr. Ganesh gave a surety in respect of Mr. Chintu's
conduct. After six months the company was not in position to pay ` 50,000 to Mr. Chintu
because of financial constraints. Chintu agreed for a lower salary of ` 30,000 from the
company. This was not communicated to Mr. Ganesh. Three months afterwards it was
discovered that Chintu had been doing fraud since the time of his appointment. What is
the liability of Mr. Ganesh during the whole duration of Chintu's Appointment.
10. Mr. Madhavan drew a cheque payable to Mr. Vikas or order. Mr. Vikas lost the cheque and
was not aware of the loss of the cheque. The person who found the cheque forged the
signature of Mr. Vyas and endorsed it to Mr. Pawan as the consideration for goods bought
by him from Mr. Pawan. Mr. Pawan encashed the cheque, on the very same day from the
drawee bank. Mr. Vikas intimated the drawee bank about the theft of the cheque after three
days. Examine the liability of the drawee bank.
Give your answer in reference to the Provisions of Negotiable Instruments Act, 1881.
11. Vyas owned a land with fifty tamarind trees. He sold his land and the timber (obtained after
cutting the fifty trees) to Yash. Vyas wants to know whether the sale of timber tantamounts
to sale of immovable property. Advise him with reference to provisions of "General Clauses
Act, 1897”.
12. Explain whether Foreign Decisions be used for construing Indian Acts.

DIVISION A - ANSWER TO MULTIPLE CHOICE QUESTIONS

Question No. 1 2 3 4 5 6 7 8
Correct Option (b) (a) (b) (b) (c) (a) (c) (c)
1. According to section 19 of the Companies Act, 2013 a company shall not hold any shares
in its holding company either by itself or through its nominees. Also, holding company
shall not allot or transfer its shares to any of its subsidiary companies and any such
allotment or transfer of shares of a company to its subsidiary company shall be void.
Following are the exceptions to the above rule—
(a) where the subsidiary company holds such shares as the legal representative of a
deceased member of the holding company; or
(b) where the subsidiary company holds such shares as a trustee; or
(c) where the subsidiary company is a shareholder even before it became a subsidiary
company of the holding company but in this case it will not have a right to vote in the
meeting of holding company.
In the given case one of the shareholders of holding company has transferred his shares
in the holding company to a trust where the shares will be held by subsidiary company. It
means now subsidiary will hold shares in the holding company. But it will hold shares in
the capacity of a trustee. Therefore, we can conclude that in the given situation S Ltd. can
hold shares in H Ltd.
2. According to section 13 of the Companies Act, 2013 a company, which has raised money
from public through prospectus and still has any unutilised amount out of the money so
raised, shall not change its objects for which it raised the money through prospectus unless
a special resolution is passed by the company and—
(i) the details in respect of such resolution shall also be published in the newspapers
(one in English and one in vernacular language) which is in circulation at the place
where the registered office of the company is situated and shall also be placed on the
website of the company, if any, indicating therein the justification for such change;
(ii) the dissenting shareholders shall be given an opportunity to exit by the promoters
and shareholders having control in accordance with SEBI regulations.
Company will have to file copy of special resolution with ROC and he will certify the
registration within a period of thirty days. Alteration will be effective only after this certificate
by ROC.

Looking at the above provision we can say that company can add the object of mobile app
development in its memorandum and divert public money into that business. But for that it
will have to comply with above requirements.
3. Section 83 of the Act of 2013 empowers the Registrar to make entries with respect to the
satisfaction and release of charges even if no intimation has been received by him from
the company.
Accordingly, with respect to any registered charge if an evidence is shown to the
satisfaction of Registrar that the debt secured by charge has been paid or satisfied in whole
or in part or that the part of the property or undertaking charged has been released from
the charge or has ceased to form part of the company’s property or undertaking, then he
may enter in the register of charges a memorandum of satisfaction that:
• the debt has been satisfied in whole or in part; or
• the part of the property or undertaking has been released from the charge or has
ceased to form part of the company’s property or undertaking.
This power can be exercised by the Registrar despite the fact that no intimation has been
received by him from the company.
Information to affected parties: The Registrar shall inform the affected parties within 30
days of making the entry in the register of charges.
Issue of Certificate: As per Rule 8 (2), in case the Registrar enters a memorandum of
satisfaction of charge in full, he shall issue a certificate of registration of satisfaction of
charge.
4. According to Section 96 of the Companies Act, 2013, every company shall be required to
hold its first annual general meeting within a period of 9 months from the closing of its first
financial year.
Also, if a company holds its first annual general meeting as aforesaid, it shall not be
necessary for the company to hold any annual general meeting in the year of its
incorporation:
It also provide that the Registrar may, for any special reason, extend the time within which
any annual general meeting, other than the first annual general meeting, shall be held, by
a period not exceeding three months.
In the given case, taking the first financial year of Neemrana Infotech Ltd is for the period
1st April 2017 to 31st March 2018, the first annual general meeting of the company should
be held on or before 31st December, 2018.
According to section 99, if any default is made in holding a meeting of the company in
accordance with section 96, the company and every officer of the company who is in
default shall be punishable with fine which may extend to one lakh rupees and in the case

of a continuing default, with a further fine which may extend to five thousand rupees for
every day during which such default continues.
Even though the Registrar of Companies is empowered to grant extension of time for a
period not exceeding 3 months for holding the annual general meetings, such power does
not apply in the case of the first annual general meeting. Thus, the company and its
directors will be liable under section 99 of the Companies Act, 2013 for the default if the
annual general meeting was held after 31 st December, 2018.
5. Section 106 (1) of the Companies Act, 2013 states that the articles of a company may
provide that no member shall exercise any voting right in respect of any shares registered
in his name on which any calls or other sums presently payable by him have not been paid,
or in regard to which the company has exercised any right of lien.
In the present case the articles of the company do not permit a shareholder to vote if he
has not paid the calls on the shares held by him. Therefore, the chairman at the meeting
is well within its right to refuse him the right to vote at the meeting and Mr. Pink’s contention
is not valid.
6. According to section 3A of the Companies Act, 2013, If at any time the number of members
of a company is reduced, in the case of a public company, below seven, in the case of a
private company, below two, and the company carries on business for more than six
months while the number of members is so reduced, every person who is a member of the
company during the time that it so carries on business after those six months and is
cognisant of the fact that it is carrying on business with less than seven members or two
members, as the case may be, shall be severally liable for the payment of the whole debts
of the company contracted during that time, and may be severally sued therefor.
Hence, in the given situation, the number of member in the said public company have fallen
below 7 [250-244=6] and these members have continued beyond the specified limit of 6
months, the reduced members of the company during the period of 1 month shall be
severally liable for the payment of the whole debts of the company contracted during that
time, and may be severally sued therefor.
7. According to section 96(2) of the Companies Act, 2013, every annual general meeting shall
be called during business hours, that is, between 9 a.m. and 6 p.m. on any day that is not
a National Holiday and shall be held either at the registered office of the company or a t
some other place within the city, town or village in which the registered office of the
company is situate.
Provided that annual general meeting of an unlisted company may be held at any place in
India if consent is given in writing or by electronic mode by all the members in advance.
Thus, in the first case, the company is rightful in calling the Annual General meeting at
Ansal Plaza.
In the second scenario, in case of an unlisted company, annual general meeting may be
held at any place in India if consent is given in writing or by electronic mode by all the

members in advance. Hence, if consent is given in writing or by electronic mode by all the
members in advance, the AGM can be called at Jaipur, otherwise not.
8. According to section 134(1) of the Companies Act, 2013, the financial statement, including
consolidated financial statement, if any, shall be approved by the Board of Directors before
they are signed on behalf of the Board by the chairperson of the company where he is
authorised by the Board or by two directors out of which one shall be managing director, if
any, and the Chief Executive Officer, the Chief Financial Officer and the company secretary
of the company, wherever they are appointed, or in the case of One Person Company, only
by one director, for submission to the auditor for his report thereon.
As per the facts of the question, the Board has not authorised the chairperson of the
company to sign the financial statements. Hence, the financial statement shall be signed
by two directors out of which one shall be managing director [i.e. Mr. Prateek].
9. As per the provisions of Section 133 of the Indian Contract Act, 1872, if the creditor makes
any variance (i.e. change in terms) without the consent of the surety, then surety is
discharged as to the transactions subsequent to the change.
In the instant case, Mr. Ganesh is liable as a surety for the loss suffered by ABC
Constructions company due to misappropriation of cash by Mr. Chintu during the first six
months but not for misappropriations committed after the reduction in salary.
Hence, Mr. Ganesh, will be liable as a surety for the act of Mr. Chintu before the change
in the terms of the contract i.e., during the first six months. Variation in the terms of the
contract (as to the reduction of salary) without consent of Mr. Ganesh, will discharge
Mr. Ganesh from all the liabilities towards the act of the Mr. Chintu after such variation.
10. Cheque payable to order
According to Section 85 of the Negotiable Instruments Act, 1881.
(1) Where a cheque payable to order purports to be indorsed by or on behalf of the payee,
the drawee is discharged by payment in due course.
(2) Where a cheque is originally expressed to be payable to bearer, the drawee is
discharged by payment in due course to the bearer thereof, notwithstanding any
indorsement whether in full or in blank appearing thereon, and notwithstanding that
any such indorsement purports to restrict or exclude further negotiation.
As per the given facts, cheque is drawn payable to “Mr. Vikas or order”. It was lost and Mr.
Vikas was not aware of the same. The person found the cheque and forged and endorsed
it to Mr. Pawan, who encashed the cheque from the drawee bank. After few days, Mr. Vikas
intimated about the theft of the cheque, to the drawee bank, by which time, the drawee
bank had already made the payment.
According to above stated section 85, the drawee banker is discharged when it has made
a payment against the cheque payable to order when it is purported to be endorsed by or
on behalf of the payee. Even though the signature of Mr. Vikas is forged, the banker is

protected and is discharged. The true owner, Mr. Vikas, cannot recover the money from
the drawee bank in this situation.
11. “Immovable Property” [Section 3(26) of the General Clauses Act, 1897]: ‘Immovable
Property’ shall include:
(i) Land,
(ii) Benefits to arise out of land, and
(iii) Things attached to the earth, or
(iv) Permanently fastened to anything attached to the earth.
It is an inclusive definition. It contains four elements: land, benefits to arise out of land,
things attached to the earth and things permanently fastened to anything attached to the
earth. Where, in any enactment, the definition of immovable property is in the negative and
not exhaustive, the definition as given in the General Clauses Act will apply to the
expression given in that enactment.
In the instant case, Vyas sold Land along with timber (obtained after cutting trees) of fifty
tamarind trees of his land. According to the above definition, Land is immovable property;
however, timber cannot be immovable property since the same are not attached to the
earth.
12. The normal function of a proviso is to except something out of the enactment or to qualify
something stated in the enactment which would be within its purview if the proviso were
not there. The effect of the proviso is to qualify the preceding enactment which is expressed
in terms which are too general. As a general rule, a proviso is added to an enactment to
qualify or create an exception to what is in the enactment ordinarily a proviso is not
interpreted as it stating a general rule.
the provision to which it has been enacted as a proviso and not to the other. (Ram Narain
Sons Ltd. Vs. Assistant Commissioner of Sales Tax. A.I.R,1995 SC 765)


The Study Material (July 2017 edition) is updated for all amendments till 30 th April, 2017. Further,
all relevant amendments/ circulars/ notifications etc. in the Company law part for the period
1st May 2017 to 31st October, 2018 are mentioned below:
Relevant Legislative amendments from 1 st of May 2017 to 31st October, 2018
Sl. Amendments Relevant Amendments Pg no.* Earlier Law
No. related to
I. Enforcement In the Companies (Acceptance of 5.4 -
of the Deposits) Rules, 2014, (The words have
Companies In rule 2, in sub-rule (1), in clause been newly
(Acceptance (c), in sub-clause (xviii), after the inserted in the
of Deposits) words “Domestic Venture Capital said sub-
Amendment Funds” the words “Infrastructure clause)
Rules, 2017 Investment Trusts” shall be (xviii) any
Vide inserted. amount received
Notification by a company
G.S.R. 454 (E) from Alternate
dated 11th Investment
May, 2017 in Funds, Domestic
exercise of Venture Capital
powers Funds and
conferred by Mutual Funds
section 73 and registered with
73 read with the Securities
469(1) and and Exchange
469(2). Board of India in
accordance with
regulations
made by it.
II. Exemptions to The Central Government amends 7.51 Such other place
Government the Notification G.S.R. 463(E), as the Central
Companies dated 5th June 2015, whereby Government may
Vide Exceptions, Modifications and approve in this
Notification Adaptations were provided in case behalf.
G.S.R. 582(E)

Dated 13th of Government companies.

June, 2017 Following is the amendments:
In sub-section (2) of section 96, for
the words "such other place as the
Central Government may approve
in this behalf”, the words “such
other place within the city, town or
village in which the registered office
of the company is situate or such
other place as the Central
Government may approve in this
behalf” shall be substituted.”.
Insertion of Paragraph 2A in the principal notification G.S.R.
463(E), dated 5th June 2015:
The aforesaid exceptions, modifications and adaptations (i.e. as given
in Notification G.S.R. 463(E), dated 5th June 2015 and Notification
G.S.R. 582(E) Dated 13th June, 2017) shall be applicable to a
Government company which has not committed a default in filing of its
financial statements under section 137 of the Companies Act or annual
III. Exemptions to The Central Government amends
Private the Notification G.S.R. 464(E),
Companies dated 5th June 2015 whereby
Vide Exceptions, Modifications and
Notification Adaptations were provided in case
G.S.R. 583(E) of Private companies. Following
Dated 13TH are the amendments:
June, 2017
(1) In Chapter I, Clause (40) of 1.9 Provided that
section 2. the financial
For the proviso, the following shall statement, with
be substituted, namely:- respect to One
Provided that the financial Person
statement, with respect to one Company, small
person company, small company, company and
dormant company and private dormant
company (if such private company company, may
is a start-up) may not include the not include the
cash flow statement; cash flow
statement
Explanation. - For the purposes of
this Act, the term “start-up‟ or

“start-up company” means a private

company incorporated under the
Companies Act, 2013 or the
Companies Act, 1956 and
recognised as start-up in
accordance with the notification
issued by the Department of
Industrial Policy and Promotion,
Ministry of Commerce and Industry.
(2) In Chapter V, clauses (a) to (e) 5.6 Clause (a) to (e)
of sub-section (2) of section 73, of Section 73
shall not apply to a private provides
(A) which accepts from its acceptance of
members monies not exceeding deposits from
one hundred per cent. of aggregate members.
of the paid up share capital, free Notification
reserves and securities premium dated 5th June,
account; or 2015, provided
(B) which is a start-up, for five that Clause (a)
years from the date of its to (e) of Sub-
incorporation; or section 2 of
(C) which fulfils all of the following Section 73 shall
conditions, namely:- not apply to
private
(a) which is not an associate or a
Companies
subsidiary company of any other
which accepts
company;
from its
(b) if the borrowings of such a members
company from banks or financial monies not
institutions or any body corporate is exceeding one
less than twice of its paid up share hundred per
capital or fifty crore rupees, cent, of
whichever is lower; and aggregate of the
(c) such a company has not paid up share
defaulted in the repayment of such capital and free
borrowings subsisting at the time of reserves, and
accepting deposits under this such company
section: shall file the
Provided that the company referred details of monies
to in clauses (A), (B) or (C) shall file so accepted to
the details of monies accepted to the Registrar in
such manner as

the Registrar in such manner as may be

may be specified. specified.
(3) In Chapter VII, clause (g) of 7.11 clause (g) of
sub-section (1) of section 92, shall sub-section (1)
apply to private companies which of section 92 is
are small companies, namely:- read as
“(g) aggregate amount of “remuneration of
remuneration drawn by directors;” directors and
key managerial
personnel”
(4) In Chapter VII, proviso to sub- 7.12 (4) However, in
section (1) of section 92, relation to One
For the proviso, the following Person
proviso shall be substituted, Company and
namely:- small company,
“Provided that in relation to One the annual
Person Company, small company return shall be
and private company (if such signed by the
private company is a start-up), the company
annual return shall be signed by the secretary, or
company secretary, or where there where there is
is no company secretary, by the no company
director of the company.”. secretary, by the
director of the
company.
(5) Section 143(3)(i), shall not 10.24 (5) Section
apply to a private company:- 143(3)(i)
(i) which is a one person provides-
company or a small company; or whether the
(ii) which has turnover less than company has
rupees fifty crores as per latest adequate
audited financial statement or# internal financial
which has aggregate borrowings controls system
from banks or financial institutions in place and the
or anybody corporate at any point operating
of time during the financial year effectiveness of
less than rupees twenty five crore." such controls;
464(E), dated 5th June 2015:
The aforesaid exceptions, modifications and adaptations shall be
applicable to a Private company which has not committed a default in

filing of its financial statements under section 137 or annual return

under section 92 of the said Act with the Registrar.
#IV Corrigendum Ministry of Corporate Affairs vide Refer point In Section
vide corrigendum stated that for the 3 above 143(3)(i)(ii)
Notification words “statement or” to read as there were the
S.O. 2218(E) “statement and” under section words
dated 13th July 143(3)(i). “statement or”
2017 with which has been
respect to the replaced with
Notification the word
G.S.R. 583(E) “statement and”
Dated 13TH through this
June, 2017 notification.
V Enforcement The Central Government hereby 10.6 Earlier Rule 5(b)
of the amends the Companies (Audit and stated that -all
Companies Auditors) Rules, 2014. private limited
(Audit and companies
Auditors) Through this amendment rule, in having paid up
Second Rule 5(b), for the word “twenty”, the share capital of
Amendment word “fifty” shall be substituted. rupees 20 crore
Rules, 2017 or more;
Vide
Notification
G.S.R. 621(E)
dated 22nd
June 2017 in
exercise of
powers
conferred by
section 139.
VI Clarification Notification No. G.S.R. 583(E) - For the purposes
regarding dated 13th June, 2017 stated that of clause (i) of
applicability of requirements of reporting under sub-section (3)
exemption section 143(3)(i) read Rule 10 A of of section 143,
given to the Companies (Audit and for the financial
certain private Auditors) Rules, 2014 of the years
companies Companies Act 2013 shall not commencing on
under section apply to certain private companies. or after 1st April,
143(3)(i) vide Through issue of this circular, it is 2015, the report
circular no. hereby clarified that the exemption of the auditor
08/2017 dated shall be applicable for those audit shall state about
25th July 2017 reports in respect of financial existence of

statements pertaining to financial adequate internal

year, commencing on or after 1st financial controls
April, 2016, which are made on or system and its
after the date of the said operating
notification. effectiveness:
Provided that
auditor of a
company may
voluntarily
include the
statement
referred to in this
rule for the
financial year
commencing on
or after 1st April,
2014 and ending
on or before 31st
March, 2015.
VII Clarification Notification No. G.S.R. 583(E) - For the purposes
given to the Companies(Audit and Auditors) for the financial
certain private Rules, 2014 of the Companies Act years
companies 2013 shall not apply to certain commencing on
under section private companies. Through issue or after 1st April,
143(3)(i) vide of this circular, it is hereby clarified 2015, the report
circular no. that the exemption shall be of the auditor
08/2017 dated applicable for those audit reports in shall state about
25th July 2017 respect of financial statements existence of
pertaining to financial year, adequate internal
commencing on or after 1st April, financial controls
2016, which are made on or after system and its
the date of the said notification. operating
effectiveness:
Provided that
auditor of a
company may
voluntarily
include the

statement
referred to in this
rule for the
financial year
commencing on
or after 1st April,
2014 and ending
on or before 31st
March, 2015.
VIII Enforcement In the Companies (Acceptance of 5.8 Provided that a
of the Deposits) Rules, 2014, in rule 3, in private company
Companies sub-rule (3), for the proviso, the may accept from
(Acceptance following shall be substituted, its members
of Deposits) namely:- monies not
Second “Provided that a Specified IFSC exceeding one
Amendment Public company and a private hundred per cent
Rules, 2017 company may accept from its of aggregate of
Vide members monies not exceeding the paid up
Notification one hundred per cent. of aggregate share capital,
G.S.R. of the paid up share capital, free free reserves
1172(E) dated reserves and securities premium and securities
19th account and such company shall premium
September, file the details of monies so account and
2017 in accepted to the Registrar in Form such company
exercise of DPT -3. shall file the
powers Explanation.—For the purpose of details of monies
conferred by this rule, a Specified IFSC Public so accepted to
section 73 and company means an unlisted public the Registrar in
73 read with company which is licensed to such manner as
469(1) and operate by the Reserve Bank of may be
469(2). India or the Securities and specified.
Exchange Board of India or the
Insurance Regulatory and
Development Authority of India
from the International Financial
Services Centre located in an
approved multi services Special
Economic Zone set-up under the
Special Economic Zones Act, 2005
read with the Special Economic
Zones Rules, 2006:

Provided further that the maximum

limit in respect of deposits to be
accepted from members shall not
apply to following classes of private
companies, namely:—
(i) a private company which is a
start-up, for five years from the date
of its incorporation;
(ii) a private company which fulfils
all of the following conditions,
namely:—
company;
(b) the borrowings of such a
company from banks or financial
institutions or any body corporate is
less than twice of its paid up share
capital or fifty crore rupees,
whichever is less; and
(c) such a company has not defaulted
in the repayment of such borrowings
subsisting at the time of accepting
deposits under section 73:
Provided also that all the
companies accepting deposits shall
file the details of monies so
accepted to the Registrar in Form
DPT -3.”.
IX Vide The Central Government hereby 1.20 -
notification appoints the 20th September, 2017 (The proviso is
S.O. 3086(E) as the date on which proviso to newly notified)
dated 20th clause (87) of section 2 of the said
September Act shall come into force.
2017
The proviso to section 2(87) shall
be read as, “Provided that such
class or classes of holding
companies as may be prescribed
shall not have layers of subsidiaries
beyond such numbers as may be
prescribed.”

X Companies Following sections of the Companies

(Amendment) Act, 2013 (hereinafter referred to as
Act, 2017 the principal Act) have been
amended by the Companies
(Amendment) Act, 2017 via
Notification S.O. 351 (E) dated 26 th
January, 2018; Notification S. O. 630
(E) dated 9th February; 2018,
Notifications: S.O. 1833 (E) dated
7th May, 2018; S.O. 2422(E) dated
13th June, 2018; SO. 3299(E) dated
5th July, 2018; S.O. 3300(E) dated 5 th
July, 2018; S.O. 3684(E) dated 27 th
July, 2018; S.O. 3838(E) dated 31 st
July, 2018; S.O. 3921(E) dated 7 th
August, 2018 and S.O. 4907(E)
dated 19th September, 2018.
1. In section 2 of the Companies
Act, 2013 (hereinafter referred to
as the principal Act)-
(i) in clause (6), for the 1.4 Explanation.—
Explanation, the following For the
Explanation shall be substituted, purposes of
namely:— this clause,
“significant
'Explanation.—For the purpose of influence”
this clause,— means control
of at least
(a) the expression "significant twenty per cent
influence" means control of at least of total share
twenty per cent. of total voting capital, or of
power, or control of or participation business
in business decisions under an decisions
agreement; under an
agreement
(b) the expression "joint venture"
means a joint arrangement
whereby the parties that have joint
control of the arrangement have
rights to the net assets of the
arrangement;

(i) for clause (28), the following 1.7 Cost

clause shall be substituted, accountant
namely:— means a cost
'(28) "Cost Accountant" means a accountant as
cost accountant as defined in defined in
clause (b) of sub-section (1) of clause (b) of
section 2 of the Cost and Works sub-section (1)
Accountants Act, 1959 and who of section 2 of
holds a valid certificate of practice the Cost and
under sub-section (1) of section 6 Works
of that Act; Accountants
Act, 1959.
(ii) in clause (30), the following 1.8 –
proviso shall be inserted, namely: (The proviso is
"Provided that- newly inserted)
(a) the instruments referred to in
Chapter III-D of the Reserve Bank
of India Act, 1934; and
(b) such other instrument, as
may be prescribed by the Central
Government in consultation with
the Reserve Bank of India, issued
by a company,
shall not be treated as debenture;";
(iii) in clause (41), in the first 1.9 -
proviso, after the word "subsidiary", (The words are
the words "or associate company" newly inserted)
shall be inserted; which is a
holding
company or a
subsidiary of a
company
incorporated
outside India
(iv) in clause (46), the following 1.11 -
Explanation shall be inserted, (The
namely:- Explanation is
'Explanation.—For the purposes of newly inserted)
this clause, the expression
"company" includes any body
corporate;';


director means
a director who
is in any way,
whether by
himself or
through any of
his relatives or
firm, body
corporate or
other
association of
individuals in
which he or any
of his relatives
is a partner,
director or a
member,
interested in a
contract or
arrangement,
or proposed
contract or
arrangement,
entered into or
to be entered
into by or on
behalf of a
company;
This definition
is relevant for
section 174
relating to
quorum for
meetings of the
Board of
Directors, for
section 184
relating to
disclosure of
interest by
directors and
also for section

188 relating to
related party
transactions of
the Companies
Act, 2013.
(vi) in clause (51),- 1.11 (iii) the whole-
time director;
(a) in sub-clause (iv), the word (iv) the Chief
"and" shall be omitted; Financial
(b) for sub-clause (v), the following Officer; and
sub-clauses shall be substituted, (v) such other
namely:- officer as may
"(v) such other officer, not more be prescribed;
than one level below the directors
who is in whole-time employment,
designated as key managerial
personnel by the Board; and
(vi) such other officer as may be
prescribed;"
(vii) in clause (57), for the words 1.12 ……the
"and securities premium account", aggregate value
the words ", securities premium of the paid-up
account and debit or credit balance share capital
of profit and loss account," shall be and all reserves
substituted created out of
the profits and
securities
premium
account, after
deducting the
aggregate…..
(viii) in clause (71), in sub-clause 1.15 –
(a), after the word "company;", the (The word is
word "and" shall be inserted; newly inserted)
(ix) in clause (72), in the proviso, 1.16 -
in clause (A), after the words “State (The words are
Act”, the words “other than this Act newly inserted)
or the previous company law” shall
be inserted;

(x) in clause (76), for sub-clause 1.17 (viii) any

(viii), the following sub-clause shall company which
be substituted, namely:— is—
(A) a holding,
"(viii) any body corporate which subsidiary or
is— (A) a holding, subsidiary or an associate
an associate company of such company of
company; such company;
(B) a subsidiary of a holding or
company to which it is also a (B) a subsidiary
subsidiary; or of a holding
(C) an investing company or the company to
venturer of the company;"; which it is also
a subsidiary;
Explanation.—For the purpose of
this clause, “the investing company
or the venturer of a company”
means a body corporate whose
investment in the company would
result in the company becoming an
associate company of the body
corporate.
(a) in sub-clause (i), for the words paid-up share
"five crore rupees", the words "ten capital of which
crore rupees" shall be substituted; does not exceed
fifty lakh rupees
or such
higher amount
as may be
prescribed
which shall not
be more than
five crore
rupees; or
(A) for the words "as per its last turnover of
profit and loss account", the words which as per its
"as per profit and loss account for last profit and
the immediately preceding financial loss account
year" shall be substituted; does not exceed
two crore rupees

(B) for the words "twenty crore or such higher

rupees", the words "one hundred amount as may
crore rupees" shall be substituted; be prescribed
which shall not
be more than
twenty crore
rupees:
(ii) in clause (87), in sub-clause 1.20 (ii) exercises
(ii), for the words “total share or controls more
capital”, the words “total voting than one-half of
power” shall be substituted; the total share
capital either at
Enforcement Date: 7 th May, 2018 its own or
together with
one or more of
its subsidiary
companies:
(xii) for clause (91), the following 1.21 (91) Turnover

clause shall be substituted, means the
namely:- aggregate
'(91) "turnover" means the gross value of the
amount of revenue recognised in realisation of
the profit and loss account from the amount made
sale, supply, or distribution of from the sale,
goods or on account of services supply or
rendered, or both, by a company distribution of
during a financial year;'. goods or on
account of
services
rendered, or
both, by the
company
during a
financial year;
Note: There is
in ambiguity in
definition. So,
there is a need
for amendment
in this

definition.
Further, the
change in
definition is
pending in the
Companies
(Amendment)
Bill, 2016.
2. After section 3 of the principal 2.4 -
Act, the following section shall be (The section is
inserted, namely:- newly inserted)
"3A. If at any time the number of
members of a company is reduced,
in the case of a public company,
below seven, in the case of a
private company, below two, and
the company carries on business
for more than six months while the
number of members is so reduced,
every person who is a member of
the company during the time that it
so carries on business after those
six months and is cognisant of the
fact that it is carrying on business
with less than seven members or
two members, as the case may be,
shall be severally liable for the
payment of the whole debts of the
company contracted during that
time, and may be severally sued
therefor.".
Enforcement Date: 9 th February,
2018
3. In section 4 of the principal Act, 2.11 Upon receipt
in sub-section (5), for clause (i), the of an
following shall be substituted, application, the
namely:- Registrar may,
"(i) Upon receipt of an application on the basis of
under sub-section (4), the Registrar information
may, on the basis of information and documents
and documents furnished along furnished along
with the application, reserve the with the

name for a period of twenty days application,

from the date of approval or such reserve the
other period as may be prescribed: name for a
Provided that in case of an period of sixty
application for reservation of name days from the
or for change of its name by an date of the
existing company, the Registrar application.
may reserve the name for a period
of sixty days from the date of
approval."
Enforcement Date: 26 th January,
2018
4. In section 7 of the principal Act, 2.18 an affidavit
in sub-section (1), in item (c), for from each of the
the words "an affidavit", the words subscribers to
"a declaration" shall be substituted. the
memorandum
Enforcement Date: 27 th July, and from
2018 persons named
as the first
directors, if any,
in the articles
stating that
5. In section 12 of the principal 2.22 (1) Registered
Act,— office: From the
(i) in sub-section (1), for the words 15th day of its
"on and from the fifteenth day of its incorporation
incorporation", the words "within and at all times
thirty days of its incorporation" shall thereafter a
be substituted; company shall
…..be
Enforcement Date: 27 th July, addressed to it.
2018
5. In section 12 of the principal 2.23 (6) Notice of
Act,— change to
(ii) in sub-section (4), for the registrar: Notice
words "within fifteen days", the of every change
words "within thirty days" shall be …….. Registrar
substituted. within 15 days
Enforcement Date: 27 th July, of the change,
2018

who shall record

the same.
6. In section 21 of the principal Act, 2.35 (ii) an officer
for the words "an officer of the of the company
company", the words "an officer or duly authorised
employee of the company" shall be by the Board in
substituted this behalf.
2018
7. In section 26 of the principal Act, 3.7 -
in sub-section (1),— (The words have
(i) after the words "signed and been newly
shall", the following shall be inserted)
"state such information and set out
such reports on financial
information as may be specified by
the Securities and Exchange Board
in consultation with the Central
Government:
Provided that until the Securities
and Exchange Board specifies the
information and reports on financial
information under this sub-section,
the regulations made by the
Securities and Exchange Board
under the Securities and Exchange
Board of India Act, 1992, in respect
of such financial information or
reports on financial information
shall apply.";

7. In section 26 of the principal Act, 3.7, 3.8, (a) Firstly,
in sub-section (1),- 3.9 under the
general
(ii) clauses (a), (b) and (d) shall be information,
omitted. the prospectus
shall contained
the following

Enforcement Date: 7th May, information,

2018 namely —
(i) names and
addresses of
the
………. of
promoter‘s
contribution;
(b) Secondly,
under the
Financial
informations,
……. applied
directly or
indirectly;
(d) state such
other matters
and set out
such other
reports, as may
be prescribed.
in sub-section (2), after clause (b), (The clause is
the following clause shall be newly inserted)
inserted, namely:- To be inserted in
"(c) that, as regards every Point (2) after
misleading statement purported to point (b)
be made by an expert or contained
in what purports to be a copy of or
an extract from a report or valuation
of an expert, it was a correct and
fair representation of the
statement, or a correct copy of, or
a correct and fair extract from, the
report or valuation; and he had
reasonable ground to believe and
did up to the time of the issue of the
prospectus believe, that the person
making the statement was
competent to make it and that the

said person had given the consent

required by sub-section (5) of
section 26 to the issue of the
prospectus and had not withdrawn
that consent before delivery of a
copy of the prospectus for
registration or, to the defendant's
knowledge, before allotment
thereunder.".
2018
9. For section 42 of the principal 3.28 to The content
Act, the following section shall be 3.32 related to
substituted, namely:— section 42 is to
'42. (1) A company may, subject to be deleted
the provisions of this section, make
a private placement of securities.
(2) A private placement shall be
made only to a select group of
persons who have been identified
by the Board (herein referred to as
"identified persons"), whose
number shall not exceed fifty or
such higher number as may be
prescribed [excluding the qualified
institutional buyers and employees
of the company being offered
securities under a scheme of
employees stock option in terms of
provisions of clause (b) of sub-
section (1) of section 62], in a
financial year subject to such
conditions as may be prescribed.
(3) A company making private
placement shall issue private
placement offer and application in
such form and manner as may be
prescribed to identified persons,
whose names and addresses are
recorded by the company in such
manner as may be prescribed:

Provided that the private placement

offer and application shall not carry
any right of renunciation.
Explanation I.—"private
placement" means any offer or
invitation to subscribe or issue of
securities to a select group of
persons by a company (other than
by way of public offer) through
private placement offer-cum-
application, which satisfies the
conditions specified in this section.
Explanation II.—"qualified
institutional buyer" means the
qualified institutional buyer as
defined in the Securities and
Exchange Board of India (Issue of
Capital and Disclosure
Requirements) Regulations, 2009,
as amended from time to time,
made under the Securities and
Exchange Board of India Act, 1992.
Explanation III.—If a company,
listed or unlisted, makes an offer to
allot or invites subscription, or
allots, or enters into an agreement
to allot, securities to more than the
prescribed number of persons,
whether the payment for the
securities has been received or not
or whether the company intends to
list its securities or not on any
recognised stock exchange in or
outside India, the same shall be
deemed to be an offer to the public
and shall accordingly be governe d
by the provisions of Part I of this
Chapter.
(4) Every identified person willing to
subscribe to the private placement
issue shall apply in the private
placement and application issued
to such person alongwith

subscription money paid either by

cheque or demand draft or other
banking channel and not by cash:
Provided that a company shall not
utilise monies raised through
private placement unless allotment
is made and the return of allotment
is filed with the Registrar in
accordance with sub-section (8).
(5) No fresh offer or invitation under
this section shall be made unless
the allotments with respect to any
offer or invitation made earlier have
been completed or that offer or
invitation has been withdrawn or
abandoned by the company:
Provided that, subject to the
maximum number of identified
persons under sub-section (2), a
company may, at any time, make
more than one issue of securities to
such class of identified persons as
may be prescribed.
(6) A company making an offer or
invitation under this section shall
allot its securities within sixty days
from the date of receipt of the
application money for such
securities and if the company is not
able to allot the securities within
that period, it shall repay the
application money to the
subscribers within fifteen days from
the expiry of sixty days and if the
company fails to repay the
application money within the
aforesaid period, it shall be liable to
repay that money with interest at
the rate of twelve per cent. per
annum from the expiry of the
sixtieth day:
Provided that monies received on
application under this section shall

be kept in a separate bank account

in a scheduled bank and shall not
be utilised for any purpose other
than—
(a) for adjustment against
allotment of securities; or
(b) for the repayment of monies
where the company is unable to
allot
securities.
(7) No company issuing securities
under this section shall release any
public advertisements or utilise any
media, marketing or distribution
channels or agents to inform the
public at large about such an issue.
(8) A company making any
allotment of securities under this
section, shall file with the Registrar
a return of allotment within fifteen
days from the date of the allotment
in such manner as may be
prescribed, including a complete
list of all allottees, with their full
names, addresses, number of
securities allotted and such other
relevant information as may be
prescribed.
(9) If a company defaults in filing
the return of allotment within the
period prescribed under sub-
section (8), the company, its
promoters and directors shall be
liable to a penalty for each default
of one thousand rupees for each
day during which such default
continues but not exceeding
twenty-five lakh rupees.
(10) Subject to sub-section (11), if
a company makes an offer or
accepts monies in contravention of
this section, the company, its

promoters and directors shall be

liable for a penalty which may
extend to the amount raised
through the private placement or
two crore rupees, whichever is
lower, and the company shall also
refund all monies with interest as
specified in sub-section (6) to
subscribers within a period of thirty
days of the order imposing the
penalty.
(11) Notwithstanding anything
contained in sub-section (9) and
sub-section (10), any private
placement issue not made in
compliance of the provisions of
sub-section (2) shall be deemed to
be a public offer and all the
provisions of this Act and the
Securities Contracts (Regulation)
Act, 1956 and the Securities and
Exchange Board of India Act, 1992
shall be applicable.’.
Enforcement Date: 7 th August,
2018
10. In section 47, in sub-section 4.6 In Point (i), the
(1), for the words, figures and following may be
brackets "provisions of section 43 added,
and sub-section (2) of section 50", “Subject to
the words, figures and brackets the provisions of
"provisions of section 43, sub- section 43, sub-
section (2) of section 50 and sub- section (2) of
section (1) of section 188" shall be section 50 and
substituted. sub-section (1)
Enforcement Date: 9 th February, of section 188,”
2018
11. In section 53 of the principal 4.10 For (i)
Act,- Any share
(i) in sub-section (2), for the words issued by a
"discounted price", the word company at a
"discount" shall be substituted; discounted

Enforcement Date: 9 th February, price shall be

2018 void.
11. In section 53 of the principal 4.10 For (ii): -
Act,- (The sub-
(ii) after sub-section (2), the section is newly
following sub-section shall be inserted)
inserted, namely:-
"(2A) Notwithstanding anything
contained in sub-sections (1) and
(2), a company may issue shares at
a discount to its creditors when its
debt is converted into shares in
pursuance of any statutory
resolution plan or debt restructuring
scheme in accordance with any
guidelines or directions or
regulations specified by the
Reserve Bank of India under the
Reserve Bank of India Act, 1934 or
the Banking (Regulation) Act,
1949.".
2018
12. In section 54, in sub-section 4.11 (c) not less
(1), clause (c) shall be omitted. than one year
has, at the date
Enforcement Date: 7 th May, 2018 of such issue,
elapsed since
the date on
which the
company had
commenced
business; and
Act,- (c) to any
(i) in sub-section (1), in clause (c), persons, if it is
for the words "of a registered valuer authorised by a
subject to such conditions as may special
be prescribed", the words and resolution, ….. is
figures "of a registered valuer, determined by
subject to the compliance with the the valuation
applicable provisions of Chapter III report of a

and any other conditions as may be registered

prescribed" shall be substituted; valuer subject to
such conditions
Enforcement Date: 9 th February, as prescribed
2018 ………
13. In section 62 of the principal 4.22 For (ii)
Act,- The notice of
offer of shares
(ii) for sub-section (2), the following shall be
sub-section shall be substituted, despatched
namely:- through
"(2) The notice referred to in sub- registered post
clause (i) of clause (a) of sub- or speed post
section (1) shall be dispatched or through
through registered post or speed electronic
post or through electronic mode or mode to all the
courier or any other mode having existing
proof of delivery to all the existing shareholders at
shareholders at least three days least three days
before the opening of the issue.". before the
opening of the
issue.
2018
14. In section 73 of the principal 5.6 (c) depositing
Act, in sub-section (2),— such sum
(i) for clause (c), the following which shall not
clause shall be substituted, be less than
namely:— fifteen per
"(c) depositing, on or before the cent. of the
thirtieth day of April each year, amount of its
such sum which shall not be less deposits
than twenty per cent. of the amount maturing
of its deposits maturing during the during a
following financial year and kept in financial year
a scheduled bank in a separate and the
bank account to be called deposit financial year
repayment reserve account;"; next following,
and kept in a
Enforcement Date: 15 th August, scheduled
2018 bank in a
separate bank

account to be
called as
deposit
repayment
reserve account
14. In section 73 of the principal 5.6 (d) providing
Act, in sub-section (2),— such deposit
(ii) clause (d) shall be omitted; insurance in
such manner
Enforcement Date: 15 th August, and to such
2018 extent as may
be prescribed
14. In section 73 of the principal 5.6 (e) certifying that
Act, in sub-section (2),— the ………. Act or
(iii) in clause (e), for the words payment of
"such deposits;", the following shall interest on such
be substituted, namely:— deposits
"such deposits and where a default
had occurred, the company made
good the default and a period of five
years had lapsed since the date of
making good the default;".
Enforcement Date: 15th August,
2018
15. In section 74, in sub-section 5.13 repay within
(1), for clause (b), the following one year from
clause shall be substituted, such
namely:— commencemen
"(b) repay within three years from t or from the
such commencement or on or date on which
before expiry of the period for such payments
which the deposits were accepted, are due,
whichever is earlier: whichever is
Provided that renewal of any such earlier
deposits shall be done in
accordance with the provisions of
Chapter V and the rules made
thereunder.".
Enforcement Date: 15th August,
2018

16. In section 76A of the principal (a) 5.14 For (a)

Act,- the company
(a) in clause (a), for the words, “one …..shall not be
crore rupees”, the words “one crore less than one
rupees or twice the amount of crore rupees
deposit accepted by the company, but which may
whichever is lower” shall be extend to ten
substituted; crore rupees;
and
2018
16. In section 76A of the principal For (b)
Act,- 5.15 every officer
…….with
(b) in clause (b),- imprisonment
(i) for the words "seven years or which may
with fine", the words "seven years extend to seven
and with fine" shall be substituted; years or with
fine which shall
(ii) the words "or with both" shall
not be less than
be omitted
twenty-five lakh
rupees but which
Enforcement Date: 9 th February, may extend to
2018 two crore
rupees, or with
both
17. In section 77 of the principal 6.3 -
Act, in sub-section (1), after the (The proviso is
third proviso, the following proviso newly inserted)
"Provided also that this section
shall not apply to such charges as
may be prescribed in consultation
with the Reserve Bank of India.".

18. In section 78 of the principal 6.4 As per section
Act, for the words and figures 78 ……. to
"register the charge within the register the
period specified in section 77", the charge within
words, brackets and figures the period 30

"register the charge within the days, the person

period of thirty days referred to in in whose favour
sub-section (1) of section 77" shall the charge is
be substituted. created may
apply
19. In section 82 of the principal 6.7 According to
Act, in sub-section (1),— section 82 of the
(i) the words, brackets and figures Companies Act,
"and the provisions of sub-section 2013, …… from
(1) of section 77 shall, as far as the date of such
may be, apply to an intimation payment or
given under this section" shall be satisfaction and
omitted; the provisions
of section 77(1)
shall, as far as
Enforcement Date: 5th July, 2018
may be, apply
to an intimation
given under
this section.
Act, in sub-section (1),— (The proviso is
(ii) the following proviso shall be newly inserted)
"Provided that the Registrar may,
on an application by the company
or the charge holder, allow such
intimation of payment or
satisfaction to be made within a
period of three hundred days of
such payment or satisfaction on
payment of such additional fees as
may be prescribed.".
Enforcement Date: 5 th July, 2018

20. In section 89 of the principal 7.9 For (i), the said

Act,— words are
(i) in sub-section (6), the words omitted.
and figures, "within the time (however, the
specified under section 403" shall study material
be omitted; does not contain
reference of
section 403)
20. In section 89 of the principal 7.9 the said words

Act,— have been
substituted
(ii) in sub-section (7), for the (however, the
words and figures, "under the first study material
proviso to sub-section (1) of section does not contain
403", the word "therein", shall be reference of
substituted; section 403)

20. In section 89 of the principal 7.9 The sub- section
Act,— is newly
inserted.
(iii) after sub-section (9), the
following sub-section shall be
"(10) For the purposes of this
section and section 90, beneficial
interest in a share includes, directly
or indirectly, through any contract,
arrangement or otherwise, the right
or entitlement of a person alone or
together with any other
person to—
(i) exercise or cause to be
exercised any or all of the rights
attached to such share; or
(ii) receive or participate in any
dividend or other distribution in
respect of such share.".
Enforcement Date: 13 th June,
2018

21. For section 90 of the principal 7.10 INVESTIGATION

Act, the following section shall be OF BENEFICIAL
substituted, namely:— OWNERSHIP OF
SHARES IN
‘REGISTER OF SIGNIFICANT CERTAIN CASES
BENEFICIAL OWNERS IN A The section
COMPANY simply enables
(1) Every individual, who acting the Central
alone or together, or through one or …….
more persons or trust, including a investigation
trust and persons resident outside ordered under
India, holds beneficial interests, of that section.
not less than twenty-five per cent.
or such other percentage as may
be prescribed, in shares of a
company or the right to exercise, or
the actual exercising of significant
influence or control as defined in
clause (27) of section 2, over the
company (herein referred to as
"significant beneficial owner"), shall
make a declaration to the company,
specifying the nature of his interest
and other particulars, in such
manner and within such period of
acquisition of the beneficial interest
or rights and any change thereof,
as may be prescribed:
Provided that the Central
Government may prescribe a class
or classes of persons who shall not
be required to make declaration
under this sub-section.
(2) Every company shall maintain a
register of the interest declared by
individuals under sub-section (1)
and changes therein which shall
include the name of individual, his
date of birth, address, details of
ownership in the company and
such other details as may be
prescribed.

(3) The register maintained under

sub-section (2) shall be open to
inspection by any member of the
company on payment of such fees
as may be prescribed.
(4) Every company shall file a
return of significant beneficial
owners of the company and
changes therein with the Registrar
containing names, addresses and
other details as may be prescribed
within such time, in such form and
(5) A company shall give notice, in
the prescribed manner, to any
person (whether or not a member
of the company) whom the
company knows or has reasonable
cause to believe—
(a) to be a significant beneficial
owner of the company;
(b) to be having knowledge of the
identity of a significant beneficial
owner or another person likely to
have such knowledge; or
(c) to have been a significant
beneficial owner of the company at
any time during the three years
immediately preceding the date on
which the notice is issued,
and who is not registered as a
significant beneficial owner with the
company as required under this
section.
(6) The information required by the
notice under sub-section (5) shall
be given by the concerned person
within a period not exceeding thirty
days of the date of the notice.
(7) The company shall,—
(a) where that person fails to
give the company the information

required by the notice within the

time specified therein; or
(b) where the information given
is not satisfactory,
apply to the Tribunal within a period
of fifteen days of the expiry of the
period specified in the notice, for an
order directing that the shares in
question be subject to restrictions
with regard to transfer of interest,
suspension of all rights attached to
the shares and such other matters
(8) On any application made under
sub-section (7), the Tribunal may,
after giving an opportunity of being
heard to the parties concerned,
make such order restricting the
rights attached with the shares
within a period of sixty days of
receipt of application or such other
period as may be prescribed.
(9) The company or the person
aggrieved by the order of the
Tribunal may make an application
to the Tribunal for relaxation or
lifting of the restrictions placed
under sub-section (8).
(10) If any person fails to make a
declaration as required under sub-
section (1), he shall be punishable
with fine which shall not be less
than one lakh rupees but which
may extend to ten lakh rupees and
where the failure is a continuing
one, with a further fine which may
extend to one thousand rupees for
every day after the first during
(11) If a company, required to
maintain register under sub-section
(2) and file the information under

sub-section (4), fails to do so or

denies inspection as provided
therein, the company and every
officer of the company who is in
default shall be punishable with fine
which shall not be less than ten
lakh rupees but which may extend
to fifty lakh rupees and where the
failure is a continuing one, with a
further fine which may extend to
one thousand rupees for every day
after the first during which the
failure continues.
(12) If any person wilfully furnishes
any false or incorrect information or
suppresses any material
information of which he is aware in
the declaration made under this
section, he shall be liable to action
under section 447.'.

2018
22. In section 92 of the principal 7.12 A copy of annual
Act,— return shall be
file with the RoC
(i) in sub-section (4), the words within 60 days
and figures, "within the time as …… holding the
specified, under section 403" shall AGM within the
be omitted; time specified
under section
403
Act,— have been
substituted
(ii) in sub-section (5), for the (however, the
words and figures, "under section study material
403 with additional fees" the word does not contain
"therein" shall be substituted. reference of
Enforcement Date: 7 th May, 2018 section 403)

23. Section 93 of the principal Act 7.13 SECTION 93 –

shall be omitted. RETURN …..
company in
Enforcement Date: 13 th June, each case
2018
24. In section 94 of the principal 7.14 the change has
Act,— to be made in
(i) in sub-section (1), in the first the diagram
proviso, the words "and the given on page
Registrar has been given a copy of 7.14
the proposed special resolution in
advance" shall be omitted;

2018
Act,— (The proviso is
newly inserted)
(ii) in sub-section (3), the following
proviso shall be inserted,
namely:—
"Provided that such particulars of
the register or index or return as
may be prescribed shall not be
available for inspection under sub-
section (2) or for taking extracts or
copies under this sub-section.".

2018
Act, in sub-section (2), in the (The proviso is
proviso, for the words "Provided newly inserted)
that", the following shall be
"Provided that annual general
meeting of an unlisted company
may be held at any place in India if
consent is given in writing or by

electronic mode by all the members

in advance:
Provided further that".
2018
Act, in sub-section (1), the following (The proviso is
proviso shall be inserted, namely:- newly inserted)
"Provided that an extraordinary
general meeting of the company,
other than of the wholly owned
subsidiary of a company
incorporated outside India, shall be
held at a place within India.".
2018
27. In section 101 of the principal 7.19 The proviso to
Act, in sub-section (1), for the section 101(1)
proviso, the following proviso shall also states that
be substituted, namely:- a shorter notice
"Provided that a general meeting may also be
may be called after giving shorter given with the
notice than that specified in this consent of 95
sub-section if consent, in writing or per cent of the
by electronic mode, is accorded members
thereto- entitled to vote.
(i) in the case of an annual general Generally
meeting, by not less than ninty-five meetings need
per cent. of the members entitled to to be called by
vote thereat; and giving a notice
of 21 clear
(ii) in the case of any other general
days. However,
meeting, by members of the
they can be
company-
called on a
(a) holding, if the company has shorter notice
a share capital, majority in number if, 95 per cent of
of members entitled to vote and the members
who represent not less than ninety- entitled to vote
five per cent. of such part of the in that meeting
paid-up share capital of the give their
company as gives a right to vote at consent in
the meeting; or writing or by

(b) having, if the company has electronic

no share capital, not less than mode.
ninety-five per cent. of the total It is also
voting power exercisable at that important to
meeting: note that only
Provided further that where any the
member of a company is entitled to requirement as
vote only on some resolution or regards the
resolutions to be moved at a length of the
meeting and not on the others, notice being 21
those members shall be taken into days, is
account for the purposes of this dispensed with
sub-section in respect of the former by such
resolution or resolutions and not in consent of not
respect of the latter.". less than 95 per
Enforcement Date: 9 th February, cent of the
2018 members
entitled to vote
at such
meeting and
not the
necessity to
call and hold
such meeting.
"Provided that any item of business
required to be transacted by means
of postal ballot under clause (a),
may be transacted at a general
meeting by a company which is
required to provide the facility to
members to vote by electronic
means under section 108, in the
manner provided in that section."
2018
Act,— have been
(i) in sub-section (1), the words and omitted
figures “within the time specified (however, the

under section 403” shall be study material

omitted; does not contain
reference of
Enforcement Date: 7th May, 2018 section 403)
29. In section 117 of the principal 7.46 Section 117(2)
Act,— sets out …….. to
…... the
(ii) in sub-section (2),— specified time
under section
(a) for the words and figures “under
403 and …….
section 403 with additional fees”,
which shall not
the word “therein” shall be
be less than
substituted;
` 5,00,000 but
(b) for the words "not be less than which may
five lakh rupees", the words "not be extend to
less than one lakh rupees" shall be ` 25,00,000 and
substituted; every officer
(c) for the words "one lakh rupees", …… with fine
the words "fifty thousand rupees" which shall not
shall be substituted; be less than
` 1,00,000 but
Enforcement Date: 7 th May, 2018 which may
extend to
` 5,00,000
29. In section 117 of the principal 7.45 For (a)
Act,— resolutions
passed by a
(iii) in sub-section (3),— …….. of any of
(a) clause (e) shall be omitted; the powers
under …(1)(c)
(b) in clause (g), in the proviso, the
word “and” shall be omitted and the
following proviso shall be inserted, For (b)-
namely:— (The proviso is
"Provided further that nothing newly inserted)
contained in this clause shall apply
to a banking company in respect of
a resolution passed to grant loans,
or give guarantee or provide
security in respect of loans under
clause (f) of sub-section (3) of

section 179 in the ordinary course

of its business; and.".

Act,— have been
omitted/
(i) in sub-section (2), the words and substituted
figures “within the time as (however, the
specified, under section 403” shall study material
be omitted; does not contain
reference of
section 403)
(ii) in sub-section (3), for the words
and figures “under section 403 with
additional fees”, the word “therein”

31. In section 123 of the principal 8.4
Act,-
(a) in sub-section (1)- (i) For point (A)

(i) in clause (a),- (c) out of both
(A) for the words "both; or", the (a) and (b); or
word "both:" shall be substituted;
(B) the following proviso shall
be inserted, namely:- For point (B): -
"Provided that in computing profits (The proviso is
any amount representing newly inserted)
unrealised gains, notional gains or
revaluation of assets and any
change in carrying amount of an
asset or of a liability on
measurement of the asset or the
liability at fair value shall be
excluded; or";

2018


Act,- Where a
company, …….
(ii) in the second proviso, for the it in previous
words "transferred by the company years and
to the reserves", the words transferred by
"transferred by the company to the the company to
free reserves" shall be substituted; the reserves,
Enforcement Date: 9 th February, such declaration
2018 of dividend ……
with prescribed
rules. [Second
Proviso to
section 123(1)]
Act,- section 123(3),
the Board of
(b) for sub-section (3), the following Directors of a
sub-section shall be substituted, company may
namely:- declare interim
dividend during
"(3) The Board of Directors of a
any financial
company may declare interim
year out of the
dividend during any financial year
surplus in the
or at any time during the period
profit and loss
from closure of financial year till
account and
holding of the annual general
out of profits of
meeting out of the surplus in the
the financial
profit and loss account or out of
year in which
profits of the financial year for
such interim
which such interim dividend is
dividend is
sought to be declared or out of
sought to be
profits generated in the financial
year till the quarter preceding the declared.
date of declaration of the interim However, in
dividend: case the
company has
Provided that in case the company
incurred loss
has incurred loss during the current
during the
financial year up to the end of the
current
quarter immediately preceding the
financial year
date of declaration of interim
up to the end of
dividend, such interim dividend
the quarter
shall not be declared at a rate

higher than the average dividends immediately

declared by the company during preceding the
immediately preceding three date of
financial years.". declaration of
interim
Enforcement Date: 9 February,
th dividend, such
2018 interim
dividend shall
not be declared
at a rate higher
than the
average
dividends
declared by the
company
during
immediately
preceding three
financial years.
32. In section 129 of the principal 9.8 and (1) Where a
Act, for sub-section (3), the 9.9 company has
following sub-section shall be one or more
substituted, namely:— subsidiaries,
"(3) Where a company has one or ……
more subsidiaries or associate Rule 6 of
companies, it shall, in addition to the Companies
financial statements provided (Accounts)
under sub-section (2), prepare a Rules, 2014.
consolidated financial statement of
the company and of all the
Explanation—
subsidiaries and associate
For the
companies in the same form and
purposes of
manner as that of its own and in
this sub-
accordance with applicable
section, the
accounting standards, which shall
word
also be laid before the annual
“subsidiary”
general meeting of the company
shall include
along with the laying of its financial
statement under sub-section (2): associate
company and
Provided that the company shall
joint venture.
also attach along with its financial
statement, a separate statement
containing the salient features of

the financial statement of its

subsidiary or subsidiaries and
associate company or companies
in such form as may be prescribed:
Provided further that the Central
Government may provide for the
consolidation of accounts of
companies in such manner as may
be prescribed.

33. In section 130 of the principal 9.13 For (i) -
Act,- (The words are
newly inserted)
(i) in sub-section (1), in the
proviso,-
(a) after the words "regulatory body
or authorities concerned", the
words "or any other person
(b) after the words "the body or
authority concerned", the words "or
the other person concerned" shall
be inserted;

2018
Act,- For (ii) –
(This sub-
inserted, namely:-
"(3) No order shall be made under
sub-section (1) in respect of re-
opening of books of account
relating to a period earlier than
eight financial years immediately
preceding the current financial
year: Provided that where a
direction has been issued by the

Central Government under the

proviso to sub-section (5) of section
128 for keeping of books of account
for a period longer than eight years,
the books of account may be
ordered to be re-opened within
such longer period."
2018
34. In section 134 of the principal 9.16 The financial
Act,— statements,
including
(a) for sub-section (1), the
consolidated
financial
statement,
"(1) The financial statement, …….. for
including consolidated financial submission to
statement, if any, shall be approved the auditor for
by the Board of Directors before his report
they are signed on behalf of the thereon.
Board by the chairperson of the
company where he is authorised by
the Board or by two directors out of
which one shall be managing
director, if any, and the Chief
Executive Officer, the Chief
Financial Officer and the company
secretary of the company,
wherever they are appointed, or in
the case of One Person Company,
only by one director, for submission
to the auditor for his report
thereon.";
Enforcement Date: 31 st July,
2018
Act,— Extract of
(b) in sub-section (3),— annual return
(i) for clause (a), the following (in the diagram)
clause shall be substituted,
namely:— For (ii)

"(a) the web address, if any, where Listed /other

annual return referred to in sub- public …….
section (3) of section 92 has been statement
placed;"; of annual
(ii) in clause (p), for the words evaluation of
"annual evaluation has been made performances
by the Board of its own of Board,
performance and that of its committees
committees and individual and individual
directors", the words "annual directors.
evaluation of the performance of (in the diagram)
the Board, its Committees and of
individual directors has been
made" shall be substituted; For (iii)
(iii) after clause (q), the following The proviso is
provisos shall be inserted, newly inserted
namely:— (in the diagram)
"Provided that where disclosures
referred to in this sub-section have
been included in the financial
statements, such disclosures shall
be referred to instead of being
repeated in the Board's report:
Provided further that where the
policy referred to in clause (e) or
clause (o) is made available on
company's website, if any, it shall
be sufficient compliance of the
requirements under such clauses if
the salient features of the policy
and any change therein are
specified in brief in the Board's
report and the web-address is
indicated therein at which the
complete policy is available.";
2018
34. In section 134 of the principal - -
Act,— (The sub-
(c) after sub-section (3), the section is newly

"(3A) The Central Government may

prescribe an abridged Board's
report, for the purpose of
compliance with this section by
One Person Company or small
company.".
2018
Act,— during any
(i) in sub-section (1),— financial year
(a) for the words "any financial shall constitute a
year", the words "the immediately Corporate Social
preceding financial year" shall be Responsibility
substituted; Committee of
(b) the following proviso shall be the Board.
"Provided that where a company is For (b)-
not required to appoint an (The proviso has
independent director under sub- been newly
section (4) of section 149, it shall inserted)
have in its Corporate Social
Responsibility Committee two or
more directors.";
Enforcement Date: 19 th
September, 2018
35. In section 135 of the principal 9.24 formulate and
Act,— recommend
(ii) in sub-section (3), in clause ……. which shall
(a), for the words and figures "as indicate the
specified in Schedule VII", the activities to be
words and figures "in areas or undertaken by
subject, specified in Schedule VII" the company as
shall be substituted; specified in
Enforcement Date: 19 th Schedule VII;
September, 2018
35. In section 135 of the principal 9.26 Here, “average
Act,— net profit” shall
(iii) in sub-section (5), for the be calculated in
Explanation, the following accordance
with the

Explanation shall be substituted, provisions

namely:— of section 198
'Explanation.—For the purposes of
this section "net profit" shall not
include such sums as may be
prescribed, and shall be calculated
in accordance with the provisions
of section 198.'.
Enforcement Date: 19 th
September, 2018
36. In section 136 of the principal 9.30 As per the
Act,- amendment the
(i) in sub-section (1),- word Without
(a) the words and figures "Without prejudice to the
prejudice to the provisions of provisions of
section 101," shall be omitted; section 101,"
Enforcement Date: 9 th February, shall be omitted
2018
Act,- (The proviso is
(i) in sub-section (1),- newly inserted)
(b) in the first proviso, for the words

"Provided that", the following shall
"Provided that if the copies of the
documents are sent less than
twenty-one days before the date of
the meeting, they shall,
notwithstanding that fact, be
deemed to have been duly sent if it
is so agreed by members-
(a) holding, if the company has
a share capital, majority in number
entitled to vote and who represent
not less than ninety-five per cent. of
such part of the paid-up share
capital of the company as gives a
right to vote at the meeting; or
(b) having, if the company has
no share capital, not less than

ninety five per cent. of the total

voting power exercisable at the
meeting:
2018
36. In section 136 of the principal 9.31 Related to point
Act,- (ii) on Page 9.31
(c) in the second proviso, for the
words "Provided further", the
words, "Provided also" shall be
substituted;
2018
36. In section 136 of the principal 9.31 (iii) Subsidiary
Act,- Companies:
(i) in sub-section (1),- Every
(d) for the fourth proviso, the company
following provisos shall be having a
substituted, namely:— subsidiary or
'Provided also that every listed subsidiaries
company having a subsidiary or shall,—
subsidiaries shall place separate (1) place
audited accounts in respect of each separate
of subsidiary on its website, if any: audited
Provided also that a listed company accounts in
which has a subsidiary respect of each
incorporated outside India (herein of its
referred to as "foreign subsidiary")- subsidiary on
its website, if
(a) where such foreign
any;
subsidiary is statutorily required to
prepare consolidated financial (2) provide a
statement under any law of the copy of
country of its incorporation, the separate
requirement of this proviso shall be audited
met if consolidated financial financial
statement of such foreign statements in
respect of each

subsidiary is placed on the website of its

of the listed company; subsidiary, to
(b) where such foreign any
subsidiary is not required to get its shareholder of
financial statement audited under the company
any law of the country of its who asks for it.
incorporation and which does not
get such financial statement
audited, the holding Indian listed
company may place such
unaudited financial statement on its
website and where such financial
statement is in a language other
than English, a translated copy of
the financial statement in English
shall also be placed on the
website.’;
2018
newly inserted)
(ii) in sub-section (2), the following Add the proviso
proviso shall be inserted, namely:- in point (iv)
"Provided that every company
having a subsidiary or subsidiaries
shall provide a copy of separate
audited or unaudited financial
statements, as the case may be, as
prepared in respect of each of its
subsidiary to any member of the
company who asks for it."

2018
Act,— (i) Filing of
(i) in sub-section (1),— financial
(a) the words and figures "within statements
the time specified under section [Section 137(1)]:
403" shall be omitted; A copy of the

(b) in the second proviso, the words financial …..

and figures "within the time fees as may
specified under section 403" shall be prescribed
be omitted; within the time
(c) after the fourth proviso, the specified under
following proviso shall be inserted, section 403
namely:—
'Provided also that in the case of a For (b)
subsidiary which has been (c) If the
incorporated outside India (herein financial
referred to as "foreign subsidiary"), statements are
which is not required to get its adopted
financial statement audited under …… such
any law of the country of its additional
incorporation and which does not fees as may be
get such financial statement prescribed
audited, the requirements of the within the time
fourth proviso shall be met if the specified under
holding Indian company files such section 403.
unaudited financial statement
along with a declaration to this
effect and where such financial For (c) –
statement is in a language other (The proviso is
than English, along with a newly inserted)
translated copy of the financial
statement in English.'.

37. In section 137 of the principal 9.35 (v) Annual
Act,— General meeting
(ii) in sub-section (2), the words not held [Section
and figures “within the time 137(2)] :
specified, under section 403” shall Where the
be omitted; annual general
…..
Enforcement Date: 7 th May, 2018 additional fees
as may be
prescribed
within the time
specified,
under section
403.


Act,— have been
(iii) in sub-section (3), for the substituted
words and figures “in section 403”, (however, the
the word “therein” shall be study material
substituted. does not contain
reference of
section 403)
38. In section 139 of the principal 10.5 The company
Act, in sub-section (1), the first shall place the
proviso shall be omitted. matter relating
to such
Enforcement Date: 7 th May, 2018 appointment
for
ratification by
members at
every AGM.
39. In section 140 of the principal 10.15 (d) If the

Act, in sub-section (3), for the auditor does not
words "fifty thousand rupees", the ……. with fine
words "fifty thousand rupees or the which shall not
remuneration of the auditor, be less than
whichever is less," shall be ` 50,000 but
substituted. which may
extend to ` 5
Enforcement Date: 9 th February, Lacs.
2018
40. In section 141 of the principal 10.22 (9) any person
Act, in sub-section (3), for clause whose
(i), the following clause shall be subsidiary or
substituted, namely:- associate
‘(i) a person who, directly or company or
indirectly, renders any service any other form
referred to in section 144 to the of entity, is
company or its holding company or engaged as on
its subsidiary company. the date of
Explanation.—For the purposes of appointment in
this clause, the term "directly or consulting and
indirectly" shall have the meaning specialised
services as

assigned to it in the Explanation to provided in

section 144.’. section 144

2018
41. In section 143 of the principal 10.23 (c) Access to
Act,- record of all its
(i) in sub-section (1), in the proviso, subsidiaries:
for the words "its subsidiaries", at The auditor of a
both the places, the words "its ……. the records
subsidiaries and associate of all its
companies" shall be substituted; subsidiaries in
so far as it
relates to the
consolidation of
2018
its financial
statements with
that of its
subsidiaries.
41. In section 143 of the principal 10.24 (9) whether the
Act,- company has
(ii) in sub-section (3), in clause (i), adequate
for the words "internal financial internal
controls system", the words financial
"internal financial controls with controls
reference to financial statements" system in place
shall be substituted; and the
Enforcement Date: 9 th February, operating
2018 effectiveness of
such controls;
41. In section 143 of the principal 10.36 The provisions
Act,- of section 143
(iii) in sub-section (14), in clause shall mutatis
(a), for the words "cost accountant mutandis apply
in practice", the words "cost to the cost
accountant" shall be substituted accountant in
practice
conducting cost
audit under
2018
section 148.


Act,- The words shall
(i) in sub-section (2),- be inserted in
(a) after the words "five lakh point (iii) (a)
rupees", the words "or four times
the remuneration of the auditor,
2018
42. In section 147 of the principal 10.33 and
Act,-
(i) in sub-section (2),- (2) Fine which
(b) in the proviso, for the words shall not be
"and with fine which shall not be less than Rs. 1
less than one lakh rupees but which lac but which
may extend to twenty-five lakh may extend to
rupees", the words "and with fine Rs. 25 Lacs
which shall not be less than fifty
thousand rupees but which may
extend to twenty-five lakh rupees or
eight times the remuneration of the
auditor, whichever is less" shall be
substituted;
2018
42. In section 147 of the principal 10.33 (2) pay for
Act,- damages to the
(ii) in sub-section (3), in clause (ii), company,
for the words "or to any other statutory bodies
persons", the words "or to members or authorities or
or creditors of the company" shall to any other
be substituted; persons for loss
Enforcement Date: 9 th February, arising out of
2018 incorrect ….
audit report.
(iii) in sub-section (5), the following newly inserted)
proviso shall be inserted, namely:-
"Provided that in case of criminal
liability of an audit firm, in respect

of liability other than fine, the

concerned partner or partners, who
acted in a fraudulent manner or
abetted or, as the case may be,
colluded in any fraud shall only be
liable.".
2018
43. In section 148 of the principal 10.34 (iv) The cost
Act,- audit shall be
(i) in sub-section (3),- conducted by a
(a) for the words "Cost Accountant Cost
in practice", the words "cost Accountant in
accountant" shall be substituted; practice who
Enforcement Date: 9 th February, shall be …… by
2018 the members in
such manner as
may be
prescribed.
43. In section 148 of the principal 10.35 Here, the
Act,- expression “cost
(i) in sub-section (3),- auditing
(b) in the Explanation, for the words standards” mean
"Institute of Cost and Works such standards
Accountants of India", the words as are issued by
"Institute of Cost Accountants of the Institute of
India" shall be substituted; Cost and Works
Enforcement Date: 9 th February, Accountants of
2018 India,
constituted
under the Cost
and Works
Accountants
Act, 1959, with
the approval of
the Central
Government.
43. In section 148 of the principal 10.35 (x) The report
Act,- on the audit of
(ii) in sub-section (5), in the cost records
proviso, for the words "cost shall be

accountant in practice", the words submitted by the

"cost accountant" shall be cost
substituted accountant in
Enforcement Date: 9 th February, practice to the
2018 Board of
Directors (BoD)
of the company.
XI Amendment in In exercise of the powers conferred 9.7 Replace the
the notification by clauses (a) and (b) of sub- footnote
number section (1) and subsection (2) of ‘Section 129
G.S.R. 463(E) section 462 of the Companies Act, shall not apply to
dated the 5th 2013, the Central Government, in the Government
June, 2015 the interest of public amends the companies to
vide notification of the Government of the extent of
Notification India in the Ministry of Corporate application of
no. S.O. Affairs number G.S.R. 463(E) Accounting
802(E) dated dated the 5th June, 2015 namely:— Standard 17
23rd February, In the said notification, in the (Segment
2018 Table, for serial number 8 and Reporting) to
entries relating thereto, the the companies
following serial number and entries engaged in
shall be respectively substituted, defence
namely:- production.
“In Chapter IX, Section 129- Shall
not apply to the companies
engaged in defence production to
the extent of application of relevant
Accounting Standard on segment
reporting”.
XII ‘Reservation Rule 9: Reservation of name 2.11 -
of Name of An application for reservation of (This Rule may
Company’ name shall be made through the be read with
web service available at respect to point
Notification www.mca.gov.in by using [form (iv) Requirement
G.S.R. 284(E) RUN](Reserve Unique Name) for reservation of
dated 23rd along with fee as provided in the the name of the
March, 2018 Companies (Registration offices company)
and fees) Rules, 2014, which may
either be approved or rejected, as
the case may be, by the Registrar,
Central Registration Centre after
allowing re--submission of such

application within fifteen days for

XIII Notification The Central Government has 1.21 As per the
G.S.R. 433(E) amended the Companies Companies
dated 7th May, (Specification of Definitions (Specification
2018 Details) Rules, 2014, by the of Definitions
Companies (Specification of Details) Rules,
Definitions Details) Amendment 2014, “Total
Rules, 2018. It shall come into Share Capital”,
force on 7th May, 2018. ……. (b)
In the Companies (Specification of convertible
Definitions Details) Rules, 2014, in preference
rule 2, in sub-rule (1), clause (r) share capital
shall be omitted.
Please note: The said clause (r)

deals with ‘Total Share Capital’
XIV Notification The Central Government has 4.12 ‘‘Employee’’
G.S.R. 434(E) amended the Companies (Share means-(a) a
dated 7th May, Capital and Debentures) Rules, permanent
2018 2014, by the Companies (Share employee of the
Capital and Debentures) Second company who
Amendment Rules, 2018. It shall has been
come into force on 7th May, 2018. working
In the Companies (Share Capital in India or
and Debentures) Rules, 2014, in outside India,
the principal rules, in rule 8, in sub- for at least last
rule (1), in the Explanation, in one year; or
clause (i) in sub-clause (a), the
words “for at least last one year”
shall be omitted.
XV Notification The Central Government has 5.11 (k) details of
G.S.R. 612 (E) amended the Companies deposit
dated 5th July, (Acceptance of Deposits) Rules, insurance
2018 2014, by the Companies including
(Acceptance of Deposits) extent of
Amendment Rules, 2018. It shall deposit
come into force on 15th August, insurance;
2018.
In the Companies (Acceptance of
Deposits) Rules, 2014 in rule 14, in

sub-rule (1), clause (k) shall be

omitted;
XVI Notification The Central Government has 2.4 (person who
G.S.R. 708(E) amended the Companies has stayed in
dated 27th (Incorporation) Rules, 2014, by the India for a
July, 2018 Companies (Incorporation) Third period of not
Amendment Rules, 2018. It shall less than 182
come into force on 27 th July, 2018. days during the
In the Companies (Incorporation) immediately
Rules, 2014. preceding one
(a) in rule 3, for Explanation to sub- calendar year)
rule (1), the following shall be
“Explanation I. - For the purposes
of this rule, the term "resident in
India" means a person who has
stayed in India for a period of not
less than one hundred and eighty
two days during the immediately
preceding financial year.
Explanation II.- For the purposes
of this rule, while counting the
number of days of stay of a director
in India for the financial year 2018-
2019, any period of stay between
01.01.2018 till the date of
notification of this rule shall also be
counted”;
XVI Enforcement The Central Government makes 10.5 According to
I of the the Companies (Audit and the Companies
Companies Auditors) Second Amendment (Audit
(Audit and Rules, 2018 to amend the and Auditors)
Auditors) Companies (Audit and Auditors) Rules, 2014,
Amendment Rules, 2014. …….
Rules, 2018 1. In the Companies (Audit and by way of
vide Auditors) Rules, 2014, in rule 3 passing of an
Notification which deals with the Manner and ordinary
G.S.R. 432 (E) Procedure of selection and
resolution.
dated 7th May appointment of auditors:
2018 If the
(a) Explanation shall be omitted. appointment is
not ……..

(b) proviso to sub-rule (7) shall be procedure laid

omitted. down in this
behalf under
the Act.
XVI The Central Government makes 10.24 As per the rule
I the Companies (Audit and 10A inserted by
Auditors) Second Amendment the Companies
Rules, 2018 to amend the (Audit and
Companies (Audit and Auditors) Auditors)…..
Rules, 2014. about existence
2. In the principal rules, in rule 10A of adequate
i.e., related to Internal Financial internal
controls system, for the words financial
"adequate internal financial controls
controls system", the words system and
"internal financial controls with its operating
reference to financial statements" effectiveness.
XVI The Central Government makes 10.34 (A) the Board
I the Companies (Audit and shall appoint an
Auditors) Second Amendment individual, who
Rules, 2018 to amend the is a cost
Companies (Audit and Auditors) accountant in
Rules, 2014. practice, or a
3. In the principal rules, in rule 14 firm of
which deals with the remuneration
of the cost auditor, following are the (2) in the case of
changes- other companies
(a) in clause (a), in sub-clause (i), which are not
for the words, "who is a cost required……,
accountant in practice", the words shall appoint an
"who is a cost accountant" shall be individual who
substituted; is a cost
(b) in clause (b) for the words "who accountant
is a cost accountant in practice", in practice or a
the words "who is a cost firm of
accountant" shall be substituted.
XVI Enforcement The Central Government makes 9.20 -
II of the the Companies (Accounts) [Clause (ix) and
Companies Amendment Rules, 2018 to amend (x) is newly
(Accounts) inserted]
Amendment

Rules, 2018 the Companies (Accounts) Rules,

vide 2014.
Notification 1. In the Companies (Accounts)
G.S.R. 725(E) Rules, 2014,
dated 31st In sub-rule (5) of Rule 8 which
July, 2018 deals with the Matters to be
included in Board's report, after
clause (viii) the following clauses
“(ix) a disclosure, as to whether
maintenance of cost records as
specified by the Central
Government under sub-section (1)
of section 148 of the Companies
Act, 2013, is required by the
Company and accordingly such
accounts and records are made
and maintained,
(x) a statement that the company
has complied with provisions
relating to the constitution of
Internal Complaints Committee
under the Sexual Harassment of
Women at Workplace (Prevention,
Prohibition and Redressal) Act,
2013,”
XVI 2. In the Companies (Accounts) 9.20 -
II Rules, 2014, after sub-rule (5), the (Sub- rule 6 is
following Sub Rule (6), rule shall be newly inserted)
inserted, namely:-
“(6) This rule shall not apply to
One Person Company or Small
Company”.
XIX Enforcement The Central Government makes 9.22 (i) Projects or
of the the Companies (Corporate Social programs
Companies Responsibility Policy) Amendment relating to
(Corporate Rules, 2018 to amend the activities areas
Social Companies (Corporate Social or subjects
Responsibility Responsibility Policy) Rules, 2014. specified in
Policy) 1. In Companies (Corporate Social Schedule VII to
Amendment Responsibility Policy) Rules, 2014, the Act; or
Rules, 2018

vide in rule 2 which deals with the (ii) Projects or

Notification definitions, - programs
G.S.R. 865 (E) (a) in sub-rule (1), in sub-clause (i) relating to …..
dated 19th of clause (c) which defines subject to the
September, “Corporate Social Responsibility condition that
2018 (CSR)”, after the words “relating to such policy will
activities”, the words “, areas or cover subjects
subjects” shall be inserted; enumerated in
(b) in sub-rule (1), in sub-clause (ii) Schedule VII of
of clause (c), for the words “cover the Act.
subjects enumerated”, the words
“include activities, areas or
subjects specified” shall be
substituted;
XIX 2. In Companies (Corporate Social 9.23 (b) An unlisted
Responsibility Policy) Rules, 2014, public
in rule 5 which deals with the “CSR company or a
Committees”, in clause (i) of sub private
rule (1), for the words “an unlisted company which
public company or a private is not required to
company”, the words “a company” appoint an
shall be substituted. independent
XIX 3. In Companies (Corporate Social 9.24 For point (a)-
Responsibility Policy) Rules, 2014, (a) List of CSR
In rule 6 which states of CSR projects or
Policy, following are the changes- programs whicha
(a) in sub-rule (1), in clause (a), for company plans to
the words “falling within the purview undertake falling
of” the words “areas or subjects within the
specified in” shall be substituted; purview of the
(b) in sub-rule (1), in second Schedule VII
proviso to clause (b), for the words,
“activities included in Schedule VII” For point (b)-
the words “areas or subjects
(d) The Board of
specified in Schedule VII” shall be
Directors shall
substituted.
…. CSR Policy
are related to the
activities
included in
Schedule VII of
the Act.

XX Constitution of The Central Government appointed 9.14 -

National 1st October, 2018 (Notification S.O.
Financial 5099(E) dated 1st October, 2018)
Reporting as the date of constitution Of
Authority National Financial Reporting
Authority.
Section 132 shall now be read as
under:
Constitution of National
Financial Reporting Authority,
have also been notified.
132. *(1) The Central Government
may, by notification, constitute a
National Financial Reporting
Authority to provide for matters
relating to accounting and auditing
standards under this Act.
**(2) Notwithstanding anything
contained in any other law for the
time being in force, the National
shall—
(a) make recommendations to the
Central Government on the
formulation and laying down of
accounting and auditing policies
and standards for adoption by
companies or class of companies
or their auditors, as the case may
be;
(b) monitor and enforce the
compliance with accounting
standards and auditing standards
in such manner as may be
prescribed;
(c) oversee the quality of service of
the professions associated with
ensuring compliance with such
standards, and suggest measures
required for improvement in quality
of service and such other related

matters as may be prescribed; and

(d) perform such other functions
relating to clauses (a), (b) and (c)
(3) The National Financial
Reporting Authority shall consist of
a chairperson, who shall be a
person of eminence and having
expertise in accountancy, auditing,
finance or law to be appointed by
the Central Government and such
other members not exceeding
fifteen consisting of part-time and
full-time members as may be
prescribed:
Provided that the terms and
conditions and the manner of
appointment of the chairperson and
members shall be such as may be
prescribed:
Provided further that the
chairperson and members shall
make a declaration to the Central
Government in the prescribed form
regarding no conflict of interest or
lack of independence in respect of
his or their appointment:
Provided also that the chairperson
and members, who are in full-time
employment with National Financial
Reporting Authority shall not be
associated with any audit firm
(including related consultancy
firms) during the course of their
appointment and two years after
ceasing to hold such appointment.
**(4) Notwithstanding anything
contained in any other law for the
time being in force, the National


shall—
(a) have the power to investigate,
either suo moto or on a reference
made to it by the Central
Government, for such class of
bodies corporate or persons, in
such manner as may be prescribed
into the matters of professional or
other misconduct committed by any
member or firm of chartered
accountants, registered under the
Chartered Accountants Act, 1949:
Provided that no other institute or
body shall initiate or continue any
proceedings in such matters of
misconduct where the National
Financial Reporting Authority has
initiated an investigation under this
section;
(b) have the same powers as are
vested in a civil court under the
Code of Civil Procedure, 1908,
while trying a suit, in respect of the
following matters, namely:—
(i) discovery and production of
books of account and other
documents, at such place and at
such time as may be specified by
the National Financial Reporting
Authority;
(ii) summoning and enforcing the
attendance of persons and
examining them on oath;
(iii) inspection of any books,
registers and other documents of
any person referred to in clause (b)
at any place;
(iv) issuing commissions for
examination of witnesses or
documents;

(c) where professional or other

misconduct is proved, have the
power to make order for—
(A) imposing penalty of—
(I) not less than one lakh
rupees, but which may extend to
five times of the fees received, in
case of individuals; and
(II) not less than five lakh
rupees, but which may extend to
ten times of the fees received, in
case of firms;
(B) debarring the member or the
firm from engaging himself or itself
from practice as member of the
Institute of Chartered Accountant of
India referred to in clause (e) of
sub-section (1) of section 2 of the
Chartered Accountants Act, 1949
for a minimum period of six months
or for such higher period not
exceeding ten years as may be
decided by the National Financial
Reporting Authority.
Explanation.—For the purposes of
his sub-section, the expression
"professional or other misconduct"
shall have the same meaning
assigned to it under section 22 of
the Chartered Accountants Act,
1949.
**(5) Any person aggrieved by any
order of the National Financial
Reporting Authority issued under
clause (c) of sub-section (4), may
prefer an appeal before the
Appellate Tribunal in such manner
and on payment of such fee as may
be prescribed.

**(10) The National Financial

Reporting Authority shall meet at
such times and places and shall
observe such rules of procedure in
regard to the transaction of
business at its meetings in such
(11) The Central Government may
appoint a secretary and such other
employees as it may consider
necessary for the efficient
performance of functions by the
Authority under this Act and the
terms and conditions of service of
the secretary and employees shall
be such as may be prescribed.
*(12) The head office of the
Authority shall be at New Delhi and
the National Financial Reporting
Authority may, meet at such other
places in India as it deems fit.
Reporting Authority shall cause to
be maintained such books of
account and other books in relation
to its accounts in such form and in
such manner as the Central
Government may, in consultation
with the Comptroller and Auditor-
General of India prescribe.
**(14) The accounts of the National
Financial Reporting Authority shall
be audited by the Comptroller and
Auditor-General of India at such
intervals as may be specified by
him and such accounts as certified
by the Comptroller and Auditor-
General of India together with the
audit report thereon shall be

forwarded annually to the Central

Government by the National
Financial Reporting Authority.
Reporting Authority shall prepare in
such form and at such time for each
financial year as may be prescribed
its annual report giving a full
account of its activities during the
financial year and forward a copy
thereof to the Central Government
and the Central Government shall
cause the annual report and the
audit report given by the
Comptroller and Auditor-General of
India to be laid before each House
of Parliament.
Please note: (i) Sub Section (3)
and (11) have been notified on 21st
March 2018. [Notification No. S.O.
1316(E)]
(ii) Sub Section (6), (7), (8) and (9)
have been omitted [with effect from
9th February, 2018]
(iii) *Sub- section (1) and (12)
notified on 1st October, 2018
[Notification S.O. 5098(E) dated 1st
October, 2018]
(iv) **Sub- Section
(2),(4),(5),(10),(13),(14) and (15)
have been notified on 24th October
2018 [Notification S.O. 5385(E)
dated 24th October, 2018]

7. Amendments The Ministry of Law and Justice has
to the made amendments to the
Negotiable Negotiable Instruments Act, 1881
Instruments through the Negotiable Instruments
Act, 1881 (Amendment) Act, 2018. This

Amendment Act received the

assent of the President and
published in the Official Gazette on
2nd August, 2018.
In the Negotiable Instruments Act, -
1881 (hereinafter referred to as the (The section is
principal Act), after section 143, the newly inserted)
following section shall be inserted,
namely:—
‘‘143A. Power to direct interim
compensation.
contained in the Code of Criminal
Procedure, 1973, the Court trying
an offence under section 138 may
order the drawer of the cheque to
pay interim compensation to the
complainant—
(a) in a summary trial or a summons
case, where he pleads not guilty to
the accusation made in the
complaint; and
(b) in any other case, upon framing
of charge.
(2) The interim compensation
under sub-section (1) shall not
exceed twenty per cent. of the
amount of the cheque.
(3) The interim compensation shall
be paid within sixty days from the
date of the order under sub-section
(1), or within such further period not
exceeding thirty days as may be
directed by the Court on sufficient
cause being shown by the drawer
of the cheque.
(4) If the drawer of the cheque is
acquitted, the Court shall direct the
complainant to repay to the drawer
the amount of interim
compensation, with interest at the
bank rate as published by the

Reserve Bank of India, prevalent at

the beginning of the relevant
financial year, within sixty days
from the date of the order, or within
such further period not exceeding
thirty days as may be directed by
the Court on sufficient cause being
shown by the complainant.
(5) The interim compensation
payable under this section may be
recovered as if it were a fine under
section 421 of the Code of Criminal
Procedure, 1973.
(6) The amount of fine imposed
under section 138 or the amount of
compensation awarded under
section 357 of the Code of Criminal
Procedure, 1973, shall be reduced
by the amount paid or recovered as
interim compensation under this
section.’’.
(2) In the principal Act, after -
section 147, the following section (The section is
shall be inserted, newly inserted)
namely:—
‘‘148. Power of Appellate Court to
order payment pending appeal
against conviction.
contained in the Code of Criminal
Procedure, 1973, in an appeal by
the drawer against conviction
under section 138, the Appellate
Court may order the appellant to
deposit such sum which shall be a
minimum of twenty per cent. of the
fine or compensation awarded by
the trial Court:
Provided that the amount payable
under this sub-section shall be in
addition to any interim

compensation paid by the appellant

under section 143A.
(2) The amount referred to in sub-
section (1) shall be deposited
within sixty days from the date of
the order, or within such further
period not exceeding thirty days as
may be directed by the Court on
sufficient cause being shown by the
appellant.
(3) The Appellate Court may direct
the release of the amount
deposited by the appellant to the
complainant at any time during the
pendency of the appeal:
Provided that if the appellant is
acquitted, the Court shall direct the
complainant to repay to the
appellant the amount so released,
with interest at the bank rate as
published by the Reserve Bank of
India, prevalent at the beginning of
the relevant financial year, within
sixty days from the date of the
order, or within such further period
not exceeding thirty days as may
be directed by the Court on
sufficient cause being shown by the
complainant.’’.
# Page number of the Study material (SM) with reference of relevant provisions
Please note: The Ministry of Corporate Affairs has replaced Rule 14 of the Companies
(Prospectus and Allotment of Securities) Rule, 2014 through Companies (Prospectus and
Allotment of Securities) Second Rule, 2018. Hence, students are advised not to read the content
related to Rule 14(2) of the Companies (Prospectus and Allotment of Securities) Rule, 2014 as
contained on pages 3.31 and Page 3.32 of Study Material. [For May 2019 examinations the said
amended rule has not been made applicable for the students.]

QUESTIONS
DIVISION A - MULTIPLE CHOICE QUESTIONS

1. Rajesh has formed a ‘One Person Company (OPC)’ with his wife Roopali as nominee. For
the last two years his wife Roopali is suffering from terminal illness and due to this hard
fact he wants to change her as nominee. He has a trusted and experienced friend
Ramnivas who could be made nominee or his (Rajesh) son Rakshak who is of seventeen
years of age. Whom should he nominate as nominee in place of his wife?
(a) Since blood relation can only be appointed as nominee in case of OPC, Rajesh needs
to appoint his son Rakshak.
(b) Rajesh can appoint his friend Ramnivas as nominee in his OPC
(c) Roopali is not agreeable to the proposal of Rajesh and hence, Rajesh cannot change
her as the nominee
(d) Either Rakshak or Mr. Ramnivas can be appointed as nominee
2. A Company limited by shares can issue equity shares with differential voting rights. Which
of the following is not a necessary condition to be fulfilled before issue of such shares:
(a) The articles of association of the company shall authorize issue of shares with
differential rights;
(b) The issue of shares shall be authorized by an ordinary resolution passed at a general
meeting of the shareholders;
(c) The issue of shares shall be authorized by special resolution passed at a general
meeting of the shareholders;
(d) The company shall have consistent track record of distributable profits for the last
three years;
3. A Ltd. is the holding company of B Ltd. Another company C Ltd. is the subsidiary company
of B Ltd. Is there any relationship between A Ltd. and C Ltd.
(a) There is no relationship between A Ltd. and C Ltd.
(b) C Ltd. is deemed to be the subsidiary of A Ltd.
(c) A Ltd. shall be deemed to be the holding company of C Ltd. provided A Ltd. acquires
at least 10% stake in C Ltd.
(d) C Ltd. shall be deemed to be the subsidiary of A Ltd. if the latter company acquires
minimum 10% stake in the former company within six months after C Ltd. becomes
subsidiary of B Ltd.

4. Shruti, a common friend of Suchitra and Sukanya, got incorporated OPC sometime before
and during a chit-chat with her friends informed them that there is some limit on the
maximum capital which her OPC can have and she would have to convert her OPC either
into a private or public limited company if such limit exceeded. Suchitra and Sukanya who
are desirous of forming a private limited company for carrying on textile trading business,
are unsure about the maximum capital which a private limited company can have. Advise.
(a) A private limited company can have maximum of ` One crore as share capital.
(b) A private limited company can have maximum of ` Two crores as share capital.
(c) A private limited company can have maximum of ` Five crores as share capital.
(d) A private limited company can have unlimited share capital.
5. Vinay and Sanjay made a name reservation application accompanied by requisite fee to
the Registrar for forming a new private company. The Registrar accorded its approval for
reservation of most preferred name Vinanjay Softwares Private Ltd. on 7 th July, 2018. By
which date necessary documents for incorporation of the company must be submitted to
the Registrar so that the reserved name does not get lapsed.
(a) Latest by 20th July, 2018
(b) Latest by 27th July, 2018
(c) Latest by 4th August, 2018
(d) Latest by 4th September, 2018
6. Aman contracts to indemnify Megha against the consequences of any proceedings which
Chandar may take against Megha in respect of a sum of ` 15000/- advanced by Chandar
to Megha. Now, Megha who is called upon to pay the sum of money to Chandar but she
fails to do so. Now, as per the provisions of the Indian Contract Act, 1872, advise the future
course of action to be taken by Chandar.
(a) Chandar can recover the amount only from Megha
(b) Chandar can recover the full amount from Aman
(c) Chandar cannot recover the amount from Aman
(d) Chandar can recover at least 10% of the total amount from Megha
COMPANY LAW
1. MNO a One Person company (OPC) was incorporated during the year 2015-16 with an
authorised capital of ` 45 lakhs (4.5 lakhs shares of ` 10 each). The capital was fully

subscribed and paid up. Turnover of the company during 2015-16 and 2016-17 was ` 2
crores and ` 2.5 crores respectively. Promoter of the company seeks your advice in the
following circumstances, whether MNO (OPC) can convert into any other kind of company
during 2017-18. Please, advise with reference to relevant provisions of the Companies Act,
2013 in the below mentioned circumstances:
(i) If promoter increases the paid up capital of the company by ` 10 lakhs during 2017-18
(ii) If turnover of the company during 2017-18 was ` 3 crores.
2. The paid-up share capital of Altar Private Limited is ` 1 crore, consisting of 8 lacs Equity
Shares of ` 10 each, fully paid-up and 2 lacs Cumulative Preference Shares of `10 each,
fully paid-up. New Private Limited and Ultra Private Limited are holding 3 lacs Equity
Shares and 50,000 Equity Shares respectively in Altar Private Limited. New Private Limited
and Ultra Private Limited are the subsidiaries of PQR Private Limited. With reference to
the provisions of the Companies Act, 2013 examine whether Altar Private Limited is a
subsidiary of PQR Private Limited? Would your answer be different if PQR Private Limited
has 8 out of 9 Directors on the Board of Altar Private Limited?
3. Data Limited (listed on Stock Exchange) was incorporated on 1 st October, 2018 with a paid-
up share capital of ` 200 crores. Within this small time of 4 months it has earned huge
profits and has topped the charts for its high employee friendly environment. The company
wants to issue sweat equity to its employees. A friend of the CEO of the company has told
him that they cannot issue sweat equity shares as 2 years have not elapsed since the time
company has commenced its business. The CEO of the company has approached you to
advise them about the essential conditions to fulfilled before the issue of sweat equity
shares especially since their company is just a few months old.
4. Walnut Limited has an authorized share capital of 1,00,000 equity shares of ` 100 per
share and an amount of ` 3 crores in its Share Premium Account as on 31-3-2018. The
Board of Directors seeks your advice about the application of share premium account for
its business purposes. Please give your advice.
5. Ashish Ltd. having a net-worth of ` 80 crores and turnover of ` 30 crores wants to accept
deposits from public other than its members. Referring to the provisions of the Companies
Act, 2013, state the conditions and the procedures to be followed by Ashish Ltd. for
accepting deposits from public other than its members.
6. RST Ltd. declared dividend at the rate of 20% for the financial year 2017-2018 in the AGM
scheduled on 15th June 2018. As RST Ltd. is left with certain unpaid and unclaimed
dividend, it transferred amount of unpaid and unclaimed dividend to UDA (unpaid dividend
account). After remaining unpaid and unclaimed for more than 2 years in the UDA, some
of the entitled shareholders made liable RST Ltd. for noncompliance of section 124, and
claimed for their unpaid dividend amount. RST Ltd. denies saying that there were certain
legal issues on the entitlement of the dividend amount to the respective shareholders.

State in the light of the given facts, whether the allegation marked by shareholders and
claim for the divided amount, against RST Ltd. is justifiable?
7. Examine the following situations in the light of the Companies Act, 2013
(i) Mr. Ayush, a Chartered accountant has been appointed as an auditor of X Ltd. in the
Annual General Meeting of the company held in September, 2018, in which he
accepted the assignment. Subsequently, in January, 2019 he joined B, as a partner
for the consultancy firm of Mr. B. Mr. B is working also working as a Finance Executive
of X Ltd.
(ii) “Mr. Abhi”, a practicing Chartered Accountant, is holding securities of “Abhiman Ltd.”
having face value of ` 1000/-. Whether Mr. Abhi is qualified for appointment as an
Auditor of Abhiman Ltd.”?
8. Primal Limited is a company incorporated in India. It owns two subsidiaries- Privy Limited
(in which it holds 75% shares) and Malvy Limited (a wholly owned subsidiary). Both the
subsidiaries are incorporated outside India. The Board of Directors of Primal Limited
intends to call an Extraordinary General Meeting (EGM) of Primal Limited on urgent basis.
Advise the Board of Directors on the following:
(i) EGM be held in India
(ii) EGM be held in Netherlands
OTHER LAWS
9. ‘A’ gives to ‘M’ a continuing guarantee to the extent of ` 8,000 for the fruits to be supplied
by ‘M’ to ‘S’ from time to time on credit. Afterwards ‘S’ became embarrassed and without
the knowledge of ‘A’, ‘M’ and ‘S’ contract that ‘M’ shall continue to supply ‘S’ with fruits for
ready money and that payments shall be applied to the then existing debts between ‘S’
and ‘M’. Examining the provision of the Indian Contract Act, 1872, decide whether ‘A’ is
liable on his guarantee given to M.
10. Manoj owes money to Umesh. Therefore, he makes a promissory note for the amount in
favour of Umesh, for safety of transmission he cuts the note in half and posts one half to
Umesh. He then changes his mind and calls upon Umesh to return the half of the note
which he had sent. Umesh requires Manoj to send the other half of the promissory note.
Decide how rights of the parties are to be adjusted.
Give your answer in reference to the Provisions of Negotiable Instruments Act, 1881.


11. A notice when required under the Statutory rules to be sent by “registered post
acknowledgment due” is instead sent by “registered post” only. Whether the protection of
presumption regarding serving of notice by “registered post” under the General Clauses
Act is tenable? Referring to the provisions of the General Clauses Act, 1897, examine the
validity of such notice in this case.
12. Many a time a proviso is added to a Section of the enactment. Explain the function of such
a proviso in the interpretation of the section/ provision.
DIVISION A - ANSWER TO MULTIPLE CHOICE QUESTIONS

Question No. 1 2 3 4 5 6
Correct Option (b) (c) (b) (d) (b) (b)
1. As per Rule 3 of the Companies (Incorporation) Rules, 2014, One Person Company (OPC)
cannot convert voluntarily into any kind of company unless two years have expired from
the date of incorporation, except where the paid up share capital is increased beyond fifty
lakh rupees or its average annual turnover during the relevant period exceeds two crore
rupees.
Besides, Section 18 of the Companies Act, 2013 provides that a company of any class
registered under this Act may convert itself as a company of other class under this Act by
alteration of memorandum and articles of the company in accordance with the provisions
of the Chapter II of the Act.
According to the above provisions, following are the answers to the given circumstances:
(i) Where, if the promotors increase the paid up capital of the company by ` 10.00 lakh
during 2017-2018 i.e., to ` 55 lakh (45+10= 55), MNO (OPC) may convert itself
voluntarily into any other kind of company due to increase in the paid up share capital
exceeding 50 lakh rupees. This could be done by the MNO by alteration of
memorandum and articles of the company in compliance with the Provisions of the Act.
(ii) Where if the turnover of the MNO during 2017-18 was ` 3.00 crore, there will be no
change in the answer, as it meets up the requirement of minimum turnover i.e, ` 2
crore for voluntarily conversion of MNO (OPC) into any other kind of company.

2. In terms of section 2 (87) of the Companies Act 2013 "subsidiary company" or "subsidiary",
in relation to any other company (that is to say the holding company), means a company
in which the holding company—
(ii) exercises or controls more than one-half of the total voting power either at its own or
together with one or more of its subsidiary companies:
Explanation.—For the purposes of this clause,—
(a) a company shall be deemed to be a subsidiary company of the holding company even
if the control referred to in sub-clause (i) or sub-clause (ii) is of another subsidiary
company of the holding company;
(b) the composition of a company's Board of Directors shall be deemed to be controlled
by another company if that other company by exercise of some power exercisable by
it at its discretion can appoint or remove all or a majority of the directors.
In the present case, New Pvt. Ltd. and Ultra Pvt. Ltd. together hold less than one half of
the total share capital i.e. less than one-half of total voting power. Hence, PQR Private Ltd.
(holding of New Pvt. Ltd. and Ultra Pvt. Ltd) will not be a holding company of Altar Pvt. Ltd.
However, if PQR Pvt. Ltd. has 8 out of 9 Directors on the Board of Altar Pvt. Ltd. i.e.
controls the composition of the Board of Directors; it (PQR Pvt. Ltd.) will be treated as the
holding company of Altar Pvt. Ltd.
3. Sweat equity shares of a class of shares already issued.
According to section 54 of the Companies Act, 2013, a company may issue sweat equity
shares of a class of shares already issued, if the following conditions are fulfilled, namely—
(i) the issue is authorised by a special resolution passed by the company;
(ii) the resolution specifies the number of shares, the current market price,
consideration, if any, and the class or classes of directors or employees to whom
such equity shares are to be issued;
(iii) where the equity shares of the company are listed on a recognised stock exchange,
the sweat equity shares are issued in accordance with the regulations made by the
Securities and Exchange Board in this behalf and if they are not so listed, the sweat
equity shares are issued in accordance with such rules as prescribed under Rule 8 of
the Companies (Share and Debentures) Rules, 2014,
The rights, limitations, restrictions and provisions as are for the time being applicable
to equity shares shall be applicable to the sweat equity shares issued under this section
and the holders of such shares shall rank pari passu with other equity shareholders.

Data Limited can issue Sweat equity shares by following the conditions as mentioned
above. It does not make a difference that the company is just a few months old.
4. According to section 52 of the Companies Act, 2013, where a company issues shares at a
premium, whether for cash or otherwise, a sum equal to the aggregate amount of the
premium received on those shares shall be transferred to a "securities premium account"
and the provisions of this Act relating to reduction of share capital of a company shall,
except as provided in this section, apply as if the securities premium account were the
paid-up share capital of the company.
The securities premium account may be applied by the company—
(a) towards the issue of unissued shares of the company to the members of the company
as fully paid bonus shares;
(b) in writing off the preliminary expenses of the company;
(c) in writing off the expenses of, or the commission paid or discount allowed on, any
issue of shares or debentures of the company;
(d) in providing for the premium payable on the redemption of any redeemable preference
shares or of any debentures of the company; or
(e) for the purchase of its own shares or other securities under section 68
5. Acceptance of deposit from public: According to section 76 of the Companies Act, 2013,
a public company, having net worth of not less than 100 crore rupees or turnover of not
less than 500 crore rupees, can accept deposits from persons other than its members
subject to compliance with the requirements provided in sub-section (2) of section 73 and
subject to such rules as the Central Government may, in consultation with the Reserve
Bank of India, prescribe.
Provided that such a company shall be required to obtain the rating (including its net-worth,
liquidity and ability to pay its deposits on due date) from a recognised credit rating agency
for informing the public the rating given to the company at the time of invitation of deposits
from the public which ensures adequate safety and the rating shall be obtained for every
year during the tenure of deposits.
Provided further that every company accepting secured deposits from the public shall
within thirty days of such acceptance, create a charge on its assets of an amount not less
than the amount of deposits accepted in favour of the deposit holders in accordance with
such rules as may be prescribed.
Since, Ashish Ltd. has a net worth of ` 80 crores and turnover of ` 30 crores, which is
less than the prescribed limits, hence, it cannot accept deposit from public other than its
members. If the company wants to accept deposits from public other than its members,

it has to fulfill the eligibility criteria of net worth or Turnover or both and then the other
conditions as stated above.
6. As per section 124 of the Companies Act, 2013, where a dividend has been declared by a
company but has not been paid/claimed to/by shareholder within 30 days from the date of
the declaration, the company shall, within 7 days from the date of expiry of the said period
of 30 days, transfer the total amount of dividend which remains unpaid/unclaimed to the
Unpaid Dividend Account.
The company shall, within a period of 90 days of making any transfer of an amount, prepare
a statement containing the names, their last known addresses and the unpaid dividend to
be paid to each person and place it on the web-site of the company, if any, and also on
any other web-site approved by the Central Government for this purpose, in such form,
manner and other particulars as may be prescribed.
Accordingly, in the given situation, RST Ltd. failed to give statement of Unpaid/unclaimed
dividend and so liable for the said nonc ompliance of section 124 of the Companies Act,
2013. Any person claiming to be entitled to any money transferred under section 124(1) to
the Unpaid Dividend Account of the company may apply to the company for payment of
the money claimed. Since RST Ltd. failed to comply with the requirements of this section
as to the preparing of a statement of unpaid dividend, so shall be punishable with fine
which shall not be less than five lakh rupees but which may extend to twenty-five lakh
rupees and every officer of the company who is in default shall be punishable with fine
which shall not be less than one lakh rupees but which may extend to 5 lakh rupees.
7. (i) Provisions and Explanation: Section 141(3) (c) of the Companies Act, 2013
prescribes that any person who is a partner or in employment of an officer or
employee of the company will be disqualified to act as an auditor of a company. Sub-
section (4) of Section 141 provides that an auditor who becomes subject, after his
appointment, to any of the disqualifications specified in sub-sections (3) of Section
141, he shall be deemed to have vacated his office as an auditor.
Conclusion: In the present case, Ayush, an auditor of X Ltd., joined as partner with
B, who is Finance executive of X Ltd., has attracted clause (3) (c) of Section 141 and,
therefore, he shall be deemed to have vacated office of the auditor of X Limited.
(ii) As per section 141 (3)(d) (i) an auditor is disqualified to be appointed as an auditor if
he, or his relative or partner holding any security of or interest in the company or its
subsidiary, or of its holding or associate company or a subsidiary of such holding
company:
In the present case, Mr. Abhi. is holding security of ` 1000 in the Abhiman Ltd,
therefore he is not eligible for appointment as an Auditor of “Abhiman Ltd.”

8. According to section 100 of the Companies Act, 2013, the Board may, whenever it deems
fit, call an extraordinary general meeting of the company.
Provided that an extraordinary general meeting of the company, other than of the wholly
owned subsidiary of a company incorporated outside India, shall be held at a place within
India.
In the light of the above provisions:
(i) The Board of Directors can call the EGM in India.
(ii) The Board of Directors cannot call the EGM of Primal Limited outside India as it is a
company incorporated in India.
9. Discharge of surety by variance in terms of contract: The problem asked in the
question is based on the provisions of the Indian Contract Act, 1872 as contained in
Section 133. The section provides that any variance made without the surety’s consent in
the terms of the contract between the principal debtor and the creditor, discharges the
surety as to transactions subsequent to the variance.
In the given problem, ‘M’ and ‘S’ entered into arrangement by entering into a new contract
without knowledge of the Surety ‘A’. Since, the variance made in the contract is without
the surety’s consent in the existing contract, as per the provision, ‘A’ is not liable on his
guarantee for the fruits supplied after this new arrangement. The reason for such a
discharge is that the surety agreed to be liable for a contract which is no more there now
and he is not liable on the altered contract because it is different from the contract made
by him.
10. The question arising in this problem is whether the making of promissory note is complete
when one half of the note was delivered to Umesh. Under Section 46 of the Negoti able
Instruments Act, 1881, the making of a promissory note is completed by delivery, actual or
constructive. Delivery refers to the whole of the instrument and not merely a part of it.
Delivery of half instrument cannot be treated as constructive delivery of the whole. So, the
claim of Umesh to have the other half of the promissory note sent to him is not
maintainable. Manoj is justified in demanding the return of the first half sent by him. He
can change his mind and refuse to send the other half of the promissory note.
11. As per the provisions of Section 27 of the General Clauses Act, 1897, where any legislation
or regulation requires any document to be served by post, then unless a different intention
(i) properly addressing,
(ii) pre-paying, and

(iii) posting by registered post.

Therefore, in view of the above provision, since, the statutory rules itself provides about
the service of notice that a notice when required under said statutory rules to be sent by
‘registered post acknowledgement due’, then, if notice was sent by ‘registered post’ only it
will not be the compliance of said rules. However, if such provision was not provided by
such statutory rules, then service of notice if by registered post only shall be deemed to be
effected.
Furthermore, in similar case of In United Commercial Bank v. Bhim Sain Makhija, AIR 1994
Del 181: A notice when required under the statutory rules to be sent by ‘registered post
acknowledgement due’ is instead sent by ‘registered post’ only, the protection of
presumption regarding serving of notice under ‘registered post’ under this section of the
Act neither tenable not based upon sound exposition of law.
12. T he normal function of a proviso is to except something out of the enactment or to qualify
something stated in the enactment which would be within its purview if the proviso w ere
not there. The effect of the proviso is to qualify the preceding enactment which is expressed
in terms which are too general. As a general rule, a proviso is added to an enactment to
qualify or create an exception to what is in the enactment ordinarily a proviso is not
interpreted as it stating a general rule.
the provision to which it has been enacted as a proviso and not to the other. (Ram Narain
Sons Ltd. Vs. Assistant Commissioner of Sales Tax. A.I.R,1995 SC 765)


FOR NOVEMBER, 2018 EXAMINATIONS
The Study Material (July 2017 edition) is updated for all amendments till 30 th April, 2017. Further,
all relevant amendments/ circulars/ notifications etc. in the Company law part for the period
1st May 2017 to 30th April, 2018 are mentioned below:
Relevant Legislative amendments from 1 st of May 2017 to 30th April, 2018
Sl. Amendments Relevant Amendments Pg no.* Earlier Law
No. related to
1. Enforcement In the Companies (Acceptance of 5.4 (xviii) any
of the Deposits) Rules, 2014, amount received
Companies In rule 2, in sub-rule (1), in clause by a company
(Acceptance (c), in sub-clause (xviii), after the from Alternate
of Deposits) words “Domestic Venture Capital Investment
Amendment Funds” the words “Infrastructure Funds, Domestic
Rules, 2017 Investment Trusts” shall be Venture Capital
Vide inserted. Funds and
Notification Mutual Funds
G.S.R. 454 (E) registered with
dated 11 th the Securities
May, 2017 in and Exchange
exercise of Board of India in
powers accordance with
conferred by regulations
section 73 and made by it.
73 read with
469(1) and
469(2).
2. Exemptions to The Central Government amends 7.51 Such other place
Government the Notification G.S.R. 463(E), as the Central
Companies dated 5th June 2015, whereby Government may
Vide Exceptions, Modifications and approve in this
Notification Adaptations were provided in case behalf.
G.S.R. 582(E) of Government companies.
Dated 13 th Following is the amendments:
June, 2017 In sub-section (2) of section 96, for
the words "such other place as the
Central Government may approve

in this behalf”, the words “such

other place within the city, town or
village in which the registered office
of the company is situate or such
other place as the Central
Government may approve in this
behalf” shall be substituted.”.
463(E), dated 5 th June 2015:
The aforesaid exceptions, modifications and adaptations (i.e. as given
in Notification G.S.R. 463(E), dated 5th June 2015 and Notification
G.S.R. 582(E) Dated 13th June, 2017) shall be applicable to a
Government company which has not committed a default in filing of its
financial statements under section 137 of the Companies Act or annual
3. Exemptions to The Central Government amends
Private the Notification G.S.R. 464(E),
Companies dated 5th June 2015 whereby
Vide Exceptions, Modifications and
Notification Adaptations were provided in case
G.S.R. 583(E) of Private companies. Following
Dated 13TH are the amendments:
June, 2017
(1) In Chapter I, Clause (40) of 1.9 Provided that
section 2. the financial
For the proviso, the following shall statement, with
be substituted, namely:- Provided respect to One
that the financial statement, with Person
respect to one person company, Company, small
small company, dormant company company and
and private company (if such dormant
private company is a start-up) may company, may
not include the cash flow not include the
statement; cash flow
Explanation. - For the purposes of statement
this Act, the term „start-up‟ or
“start-up company” means a private
company incorporated under the
Companies Act, 2013 or the
Companies Act, 1956 and
recognised as start-up in
accordance with the notification
issued by the Department of

Industrial Policy and Promotion,

Ministry of Commerce and Industry.
(2) In Chapter V, clauses (a) to (e) 5.6 Clause (a) to (e)
of sub-section (2) of section 73, of Section 73
shall not apply to a private provides
(A) which accepts from its acceptance of
members monies not exceeding deposits from
one hundred per cent. of aggregate members.
of the paid up share capital, free Notification
reserves and securities premium dated 5th June,
account; or 2015, provided
(B) which is a start-up, for five that Clause (a)
years from the date of its to (e) of Sub-
incorporation; or section 2 of
(C) which fulfils all of the following Section 73 shall
conditions, namely:- not apply to
private
Companies
which accepts
company;
from its
(b) if the borrowings of such a members
company from banks or financial monies not
institutions or any body corporate is exceeding one
less than twice of its paid up share hundred per
capital or fifty crore rupees, cent, of
whichever is lower; and aggregate of the
(c) such a company has not paid up share
defaulted in the repayment of such capital and free
borrowings subsisting at the time of reserves, and
accepting deposits under this such company
section: shall file the
Provided that the company referred details of monies
to in clauses (A), (B) or (C) shall file so accepted to
the details of monies accepted to the Registrar in
the Registrar in such manner as such manner as
may be specified. may be
specified.
(3) In Chapter VII, clause (g) of 7.11 clause (g) of
sub-section (1) of section 92, shall sub-section (1)
apply to private companies which of section 92 is
are small companies, namely:- read as
“remuneration of

“(g) aggregate amount of directors and

remuneration drawn by directors;” key managerial
personnel”
(4) In Chapter VII, proviso to sub- 7.12 (4) However, in
section (1) of section 92, relation to One
For the proviso, the following Person
proviso shall be substituted, Company and
namely:- small company,
“Provided that in relation to One the annual
Person Company, small company return shall be
and private company (if such signed by the
private company is a start-up), the company
annual return shall be signed by the secretary, or
company secretary, or where there where there is
is no company secretary, by the no company
director of the company.”. secretary, by the
director of the
company.
(5) Section 143(3)(i), shall not 10.24 (5) Section
apply to a private company:- 143(3)(i)
(i) which is a one person provides-
company or a small company; or whether the
which has turnover less than company has
rupees fifty crores as per latest adequate
audited financial statement or# internal financial
which has aggregate borrowings controls system
from banks or financial institutions in place and the
or anybody corporate at any point operating
of time during the financial year effectiveness of
less than rupees twenty five crore." such controls;
The aforesaid exceptions, modifications and adaptations shall be
applicable to a Private company which has not committed a default in
filing of its financial statements under section 137 or annual return
under section 92 of the said Act with the Registrar.
#4. Corrigendum Ministry of Corporate Affairs vide Referred In Section
vide corrigendum stated that for the in point 143(3)(i)(ii)
Notification words “statement or” to read as no. 3 there were the
S.O. 2218(E) “statement and” under section above words
dated 13th July 143(3)(i). “statement or”
2017 with which has been

respect to the replaced with

Notification the word
G.S.R. 583(E) “statement and”
Dated 13 TH through this
June, 2017 notification.
5. Enforcement The Central Government hereby 10.6 Earlier Rule 5(b)
of the amends the Companies (Audit and stated that -all
Companies Auditors) Rules, 2014. private limited
(Audit and companies
Auditors) Through this amendment rule, in having paid up
Second Rule 5(b), for the word “twenty”, the share capital of
Amendment word “fifty” shall be substituted. rupees 20 crore
Rules, 2017 or more;
Vide
Notification
G.S.R. 621(E)
dated 22 nd
June 2017 in
exercise of
powers
conferred by
section 139.
6. Clarification Notification No. G.S.R. 583(E) - For the purposes
exemption section 143(3)(i) read Rule 10 A of of sectlon 143,
given to the Companies (Audit and for the financial
certain private Auditors) Rules, 2014 of the years
companies Companies Act 2013 shall not commencing on
under section apply to certain private companies. or after 1st April,
143(3)(i) vide Through issue of this circular, it is 2015, the report
circular no. hereby clarified that the exemption of the auditor
08/2017 dated shall be applicable for those audit shall state about
25th July 2017 reports in respect of financial existence of
statements pertaining to financial adequate internal
year, commencing on or after 1st financial controls
April, 2016, which are made on or system and its
after the date of the said operating
notification. effectiveness:
Provided that
auditor of a
company may

voluntarily
include the
statement
referred to in this
rule for the
financial year
commencing on
or after 1st April,
2014 and ending
on or before 31st
March, 2015.
7. Clarification Notification No. G.S.R. 583(E) - For the purposes
given to the Companies(Audit and Auditors) for the financial
certain private Rules, 2014 of the Companies Act years
companies 2013 shall not apply to certain commencing on
under section private companies. Through issue or after 1st April,
143(3)(i) vide of this circular, it is hereby clarified 2015, the report
circular no. that the exemption shall be of the auditor
08/2017 dated applicable for those audit reports in shall state about
25th July 2017 respect of financial statements existence of
pertaining to financial year, adequate internal
commencing on or after 1st April, financial controls
2016, which are made on or after system and its
the date of the said notification. operating
effectiveness:
Provided that
auditor of a
company may
voluntarily
include the
statement
referred to in this
rule for the
financial year
commencing on
or after 1st April,
2014 and ending
on or before 31st
March, 2015.

8. Enforcement In the Companies (Acceptance of 5.8 Provided that a

of the Deposits) Rules, 2014, in rule 3, in private company
Companies sub-rule (3), for the proviso, the may accept from
(Acceptance following shall be substituted, its members
of Deposits) namely:- monies not
Second “Provided that a Specified IFSC exceeding one
Amendment Public company and a private hundred per cent
Rules, 2017 company may accept from its of aggregate of
Vide members monies not exceeding the paid up
Notification one hundred per cent. of aggregate share capital,
G.S.R. of the paid up share capital, free free reserves
1172(E) dated reserves and securities premium and securities
19th account and such company shall premium
September, file the details of monies so account and
2017 in accepted to the Registrar in Form such company
exercise of DPT-3. shall file the
powers Explanation.—For the purpose of details of monies
conferred by this rule, a Specified IFSC Public so accepted to
section 73 and company means an unlisted public the Registrar in
73 read with company which is licensed to such manner as
469(1) and operate by the Reserve Bank of may be
469(2). India or the Securities and specified.
Exchange Board of India or the
Insurance Regulatory and
Development Authority of India
from the International Financial
Services Centre located in an
approved multi services Special
Economic Zone set-up under the
Special Economic Zones Act, 2005
(28 of 2005) read with the Special
Economic Zones Rules, 2006:
Provided further that the maximum
limit in respect of deposits to be
accepted from members shall not
apply to following classes of private
companies, namely:—
(i) a private company which is a
start-up, for five years from the date
of its incorporation;
(ii) a private company which fulfils
all of the following conditions,
namely:—


company;
(b) the borrowings of such a
company from banks or financial
institutions or any body corporate is
less than twice of its paid up share
capital or fifty crore rupees,
whichever is less ; and
(c) such a company has not
defaulted in the repayment of such
borrowings subsisting at the time of
accepting deposits under section
73:
Provided also that all the
companies accepting deposits shall
file the details of monies so
accepted to the Registrar in Form
DPT-3.”.
9. Vide The Central Government hereby 1.20 Earlier not
notification appoints the 20 th September, 2017 notified
S.O. 3086(E) as the date on which proviso to
dated 20 th clause (87) of section 2 of the said
September Act shall come into force.
2017
10. Companies Following sections of the Companies
(Amendment) Act, 2013 have been amended by the
Act, 2017 Companies (Amendment) Act, 2017
with effect from 26th January, 2018
[Notification S.O. 351 (E)] and from
9th February, 2018 [Notification S. O.
630 (E)]
1. In section 2 of the Companies
Act, 2013 (hereinafter referred to
as the principal Act)-
2018
(i) for clause (28), the following 1.7 Cost
clause shall be substituted, accountant
namely:— means a cost
'(28) "Cost Accountant" means a accountant as
cost accountant as defined in defined in

clause (b) of sub-section (1) of clause (b) of

section 2 of the Cost and Works sub-section (1)
Accountants Act, 1959 and who of section 2 of
holds a valid certificate of practice the Cost and
under sub-section (1) of section 6 Works
of that Act; Accountants
Act, 1959 and
who holds a
valid certificate
of practice
under sub-
section (1) of
section 6 of
that Act.
(ii) in clause (30), the following 1.8 –
proviso shall be inserted, namely: (The proviso is
"Provided that— (a) the newly inserted)
instruments referred to in Chapter
III-D of the Reserve Bank of India
Act, 1934; and (b) such other
instrument, as may be prescribed
by the Central Government in
consultation with the Reserve Bank
of India, issued by a company, shall
not be treated as debenture;";
(iii) in clause (41), in the first 1.9 -
proviso, after the word "subsidiary", which is a
the words "or associate company" holding
shall be inserted; company or a
subsidiary of a
company
incorporated
outside India
(The words are
newly inserted)
(iv) in clause (46), the following 1.11 -
Explanation shall be inserted, (The
namely:- Explanation is
'Explanation.—For the purposes of newly inserted)
this clause, the expression
"company" includes any body
corporate;';


director means
a director who
is in any way,
whether by
himself or
through any of
his relatives or
firm, body
corporate or
other
association of
individuals in
which he or any
of his relatives
is a partner,
director or a
member,
interested in a
contract or
arrangement,
or proposed
contract or
arrangement,
entered into or
to be entered
into by or on
behalf of a
company;
This definition
is relevant for
section 174
relating to
quorum for
meetings of the
Board of
Directors, for
section 184
relating to
disclosure of
interest by
directors and
also for section
188 relating to

related party
transactions of
the Companies
Act, 2013.
(vi) in clause (51),- 1.11 (iii) the whole-
time director;
(a) in sub-clause (iv), the word (iv) the Chief
"and" shall be omitted; Financial
Officer; and
(b) for sub-clause (v), the following (v) such other
sub-clauses shall be substituted, officer as may
namely:- "(v) such other officer, not be prescribed;
more than one level below the
directors who is in whole-time
employment, designated as key
managerial personnel by the
Board; and
(vi) such other officer as may be
prescribed;"
(vii) in clause (57), for the words 1.12 ……the
"and securities premium account", aggregate value
the words ", securities premium of the paid-up
account and debit or credit balance share capital
of profit and loss account," shall be and all reserves
substituted created out of
the profits and
securities
premium
account, after
deducting the
aggregate…..
(viii) in clause (71), in sub-clause 1.15 –
(a), after the word "company;", the (The word is
word "and" shall be inserted; newly inserted)
(ix) in clause (72), in the proviso, 1.16 -
in clause (A), after the words “State Provided that no
Act”, the words “other than this Act institution shall
or the previous company law” shall be so notified
be inserted; unless—
(A) it has been
established or

constituted by or
under any
Central or State
Act;
(The words are
newly inserted)
(x) in clause (76), for sub-clause 1.17 (viii) any
(viii), the following sub-clause shall company which
be substituted, namely:— is—
"(viii) any body corporate which (A) a holding,
is— (A) a holding, subsidiary or subsidiary or
an associate company of such an associate
company; company of
(B) a subsidiary of a holding such company;
company to which it is also a or
subsidiary; or (B) a subsidiary
(C) an investing company or the of a holding
venturer of the company;"; company to
Explanation.—For the purpose of which it is also
this clause, “the investing company a subsidiary;
or the venturer of a company”
means a body corporate whose
investment in the company would
result in the company becoming an
associate company of the body
corporate.
(a) in sub-clause (i), for the words paid-up share
"five crore rupees", the words "ten capital of which
crore rupees" shall be substituted; does not exceed
fifty lakh rupees
or such
higher amount
as may be
prescribed
which shall not
be more than
five crore
rupees; or
(A) for the words "as per its last turnover of
profit and loss account", the words which as per its

"as per profit and loss account for last profit and
the immediately preceding financial loss account
year" shall be substituted; does not exceed
(B) for the words "twenty crore two crore rupees
rupees", the words "one hundred or such higher
crore rupees" shall be substituted; amount as may
be prescribed
which shall not
be more than
twenty crore
rupees:
(xii) for clause (91), the following 1.21 (91) Turnover
clause shall be substituted, means the
namely:- aggregate
'(91) "turnover" means the gross value of the
amount of revenue recognised in realisation of
the profit and loss account from the amount made
sale, supply, or distribution of from the sale,
goods or on account of services supply or
rendered, or both, by a company distribution of
during a financial year;'. goods or on
account of
services
rendered, or
both, by the
company
during a
financial year;
Note: There is
in ambiguity in
definition. So,
there is a need
for amendment
in this
definition.
Further, the
change in
definition is
pending in the
Companies
(Amendment)
Bill, 2016.

2. After section 3 of the principal 2.4 -

Act, the following section shall be (The section is
inserted, namely:- newly inserted)
"3A. If at any time the number of
members of a company is reduced,
in the case of a public company,
below seven, in the case of a
private company, below two, and
the company carries on business
for more than six months while the
number of members is so reduced,
every person who is a member of
the company during the time that it
so carries on business after those
six months and is cognisant of the
fact that it is carrying on business
with less than seven members or
two members, as the case may be,
shall be severally liable for the
payment of the whole debts of the
company contracted during that
time, and may be severally sued
therefor.".
2018
3. In section 4 of the principal Act, 2.11 Upon receipt
in sub-section (5), for clause (i), the of an
following shall be substituted, application, the
namely:- Registrar may,
"(i) Upon receipt of an application on the basis of
under sub-section (4), the Registrar information
may, on the basis of information and documents
and documents furnished along furnished along
with the application, reserve the with the
name for a period of twenty days application,
from the date of approval or such reserve the
other period as may be prescribed: name for a
Provided that in case of an period of sixty
application for reservation of name days from the
or for change of its name by an date of the
existing company, the Registrar application.
may reserve the name for a period

of sixty days from the date of

approval."
Enforcement Date: 26 th January,
2018
4. In section 21 of the principal Act, 2.35 (ii) an officer
for the words "an officer of the of the company
company", the words "an officer or duly authorised
employee of the company" shall be by the Board in
substituted this behalf.
2018
in sub-section (2), after clause (b), To be inserted in
the following clause shall be Point (2) after
inserted, namely:- point (b)
"(c) that, as regards every
misleading statement purported to
be made by an expert or contained
in what purports to be a copy of or
an extract from a report or valuation
of an expert, it was a correct and
fair representation of the
statement, or a correct copy of, or
a correct and fair extract from, the
report or valuation; and he had
reasonable ground to believe and
did up to the time of the issue of the
prospectus believe, that the person
making the statement was
competent to make it and that the
said person had given the consent
required by sub-section (5) of
section 26 to the issue of the
prospectus and had not withdrawn
that consent before delivery of a
copy of the prospectus for
registration or, to the defendant's
knowledge, before allotment
thereunder.".
2018

6. In section 47, in sub-section (1), 4.6 In Point (i), the

for the words, figures and brackets following may be
"provisions of section 43 and sub- added,
section (2) of section 50", the “Subject to
words, figures and brackets the provisions of
"provisions of section 43, sub- section 43, sub-
section (2) of section 50 and sub- section (2) of
section (1) of section 188" shall be section 50 and
substituted. sub-section (1)
Enforcement Date: 9 th February, of section 188,”
2018
Act,- Any share
(i) in sub-section (2), for the words issued by a
"discounted price", the word company at a
"discount" shall be substituted; discounted
price shall be
Enforcement Date: 9 th February, void.
2018
7. In section 53 of the principal 4.10 For (ii): -
Act,-
(ii) after sub-section (2), the
inserted, namely:-
"(2A) Notwithstanding anything
contained in sub-sections (1) and
(2), a company may issue shares at
a discount to its creditors when its
debt is converted into shares in
pursuance of any statutory
resolution plan or debt restructuring
scheme in accordance with any
guidelines or directions or
regulations specified by the
Reserve Bank of India under the
Reserve Bank of India Act, 1934 or
the Banking (Regulation) Act,
1949.".
2018


Act,- (c) to any
(i) in sub-section (1), in clause (c), persons, if it is
for the words "of a registered valuer authorised by a
subject to such conditions as may special
be prescribed", the words and resolution, ….. is
figures "of a registered valuer, determined by
subject to the compliance with the the valuation
applicable provisions of Chapter III report of a
and any other conditions as may be registered
prescribed" shall be substituted; valuer subject to
such conditions
Enforcement Date: 9 th February, as prescribed
2018 ………
Act,- The notice of
offer of shares
(ii) for sub-section (2), the following shall be
sub-section shall be substituted, despatched
namely:- through
"(2) The notice referred to in sub- registered post
clause (i) of clause (a) of sub- or speed post
section (1) shall be dispatched or through
through registered post or speed electronic
post or through electronic mode or mode to all the
courier or any other mode having existing
proof of delivery to all the existing shareholders at
shareholders at least three days least three days
before the opening of the issue.". before the
opening of the
issue.
2018
9. In section 76A of the principal (a) 5.14 For (a)
Act,- the company
(a) in clause (a), for the words, “one …..shall not be
crore rupees”, the words “one crore less than one
rupees or twice the amount of crore rupees
deposit accepted by the company, but which may
whichever is lower” shall be extend to ten
substituted; crore rupees;
and


2018
9. In section 76A of the principal For (b)
Act,- 5.15 every officer
…….with
(b) in clause (b),- imprisonment
(i) for the words "seven years or which may
with fine", the words "seven years extend to seven
and with fine" shall be substituted; years or with
fine which shall
(ii) the words "or with both" shall
not be less than
be omitted
twenty-five lakh
rupees but which
Enforcement Date: 9 th February, may extend to
2018 two crore
rupees, or with
both
"Provided that an extraordinary
general meeting of the company,
other than of the wholly owned
subsidiary of a company
incorporated outside India, shall be
held at a place within India.".
Enforcement Date: 9th February,
2018
11. In section 101 of the principal 7.19 The proviso to
Act, in sub-section (1), for the section 101(1)
proviso, the following proviso shall also states that
be substituted, namely:- a shorter notice
"Provided that a general meeting may also be
may be called after giving shorter given with the
notice than that specified in this consent of 95
sub-section if consent, in writing or per cent of the
by electronic mode, is accorded members
thereto- entitled to vote.
(i) in the case of an annual general Generally
meeting, by not less than ninty-five meetings need
per cent. of the members entitled to to be called by
vote thereat; and giving a notice
of 21 clear

(ii) in the case of any other general days. However,

meeting, by members of the they can be
company- called on a
(a) holding, if the company has shorter notice
a share capital, majority in number if, 95 per cent of
of members entitled to vote and the members
who represent not less than ninety- entitled to vote
five per cent. of such part of the in that meeting
paid-up share capital of the give their
company as gives a right to vote at consent in
the meeting; or writing or by
(b) having, if the company has electronic
no share capital, not less than mode.
ninety-five per cent. of the total It is also
voting power exercisable at that important to
meeting: note that only
Provided further that where any the
member of a company is entitled to requirement as
vote only on some resolution or regards the
resolutions to be moved at a length of the
meeting and not on the others, notice being 21
those members shall be taken into days, is
account for the purposes of this dispensed with
sub-section in respect of the former by such
resolution or resolutions and not in consent of not
respect of the latter.". less than 95 per
cent of the
members
2018
entitled to vote
at such
meeting and
not the
necessity to
call and hold
such meeting.
Act, in sub-section (1), the following
"Provided that any item of business
required to be transacted by means
of postal ballot under clause (a),
may be transacted at a general
meeting by a company which is

required to provide the facility to

members to vote by electronic
means under section 108, in the
manner provided in that section.".
2018
Act,-
(a) in sub-section (1)- (i) For point (A)

(i) in clause (a),- (c) out of both
(A) for the words "both; or", the (a) and (b); or
word "both:" shall be substituted;
(B) the following proviso shall
be inserted, namely:- For point (B): -
"Provided that in computing profits The proviso is
any amount representing newly inserted
unrealised gains, notional gains or
revaluation of assets and any
change in carrying amount of an
asset or of a liability on
measurement of the asset or the
liability at fair value shall be
excluded; or";

2018
Act,- Where a
company, …….
it in previous
(ii) in the second proviso, for the years and
words "transferred by the company transferred by
to the reserves", the words the company to
"transferred by the company to the the reserves,
free reserves" shall be substituted; such declaration
of dividend ……
with prescribed
2018
rules. [Second
Proviso to
section 123(1)]


Act,- section 123(3),
the Board of
(b) for sub-section (3), the following Directors of a
sub-section shall be substituted, company may
namely:- declare interim
dividend during
any financial
"(3) The Board of Directors of a year out of the
company may declare interim surplus in the
dividend during any financial year profit and loss
or at any time during the period account and
from closure of financial year till out of profits of
holding of the annual general the financial
meeting out of the surplus in the year in which
profit and loss account or out of such interim
profits of the financial year for dividend is
which such interim dividend is sought to be
sought to be declared or out of declared.
profits generated in the financial
year till the quarter preceding the
date of declaration of the interim
dividend: Provided that in case the
company has incurred loss during
the current financial year up to the
end of the quarter immediately
preceding the date of declaration of
interim dividend, such interim
dividend shall not be declared at a
rate higher than the average
dividends declared by the company
during immediately preceding three
financial years.".
2018
Act,- Provided that
the court or the
(i) in sub-section (1), in the ……or any other
proviso,- statutory
(a) after the words "regulatory body regulatory body
or authorities concerned", the or authority
concerned and
shall take into

words "or any other person consideration

concerned" shall be inserted; the
(b) after the words "the body or representations,
authority concerned", the words "or if any, …….,
the other person concerned" shall Securities and
be inserted; Exchange Board
or the body or
authority
concerned
2018
before passing
any order under
this section.
(The words are
newly inserted)
Act,- For (ii) –
(This sub-
inserted, namely:-
"(3) No order shall be made under
sub-section (1) in respect of re-
opening of books of account
relating to a period earlier than
eight financial years immediately
preceding the current financial
year: Provided that where a
direction has been issued by the
Central Government under the
proviso to sub-section (5) of section
128 for keeping of books of account
for a period longer than eight years,
the books of account may be
ordered to be re-opened within
such longer period."
Enforcement Date: 9th February,
2018
15. In section 136 of the principal 9.30 As per the
Act,- amendment the
(i) in sub-section (1),- word Without
(a) the words and figures "Without prejudice to the
prejudice to the provisions of provisions of
section 101," shall be omitted;

Enforcement Date: 9 th February, section 101,"

2018 shall be omitted
15. In section 136 of the principal -
(i) in sub-section (1),- newly inserted)
(b) in the first proviso, for the words

"Provided that", the following shall
"Provided that if the copies of the
documents are sent less than
twenty-one days before the date of
the meeting, they shall,
notwithstanding that fact, be
deemed to have been duly sent if it
is so agreed by members-
(a) holding, if the company has
a share capital, majority in number
entitled to vote and who represent
not less than ninety-five per cent. of
such part of the paid-up share
capital of the company as gives a
right to vote at the meeting; or
(b) having, if the company has
no share capital, not less than
ninetyfive per cent. of the total
voting power exercisable at the
meeting:
2018
15. In section 136 of the principal 9.31 Related to point
Act,- (ii) on Page 9.31
(c) in the second proviso, for the
words "Provided further", the
words, "Provided also" shall be
substituted;


2018
15. In section 136 of the principal 9.31 (iii) Subsidiary
Act,- Companies:
(i) in sub-section (1),- Every
company
(d) for the fourth proviso, the having a
following provisos shall be subsidiary or
substituted, namely:— subsidiaries
shall,—
'Provided also that every listed
company having a subsidiary or (1) place
subsidiaries shall place separate separate
audited accounts in respect of each audited
of subsidiary on its website, if any: accounts in
respect of each
Provided also that a listed company
of its
which has a subsidiary
subsidiary on
incorporated outside India (herein
its website, if
referred to as "foreign subsidiary")-
any;
(a) where such foreign
(2) provide a
subsidiary is statutorily required to
copy of
prepare consolidated financial
separate
statement under any law of the
audited
country of its incorporation, the
financial
requirement of this proviso shall be
statements in
met if consolidated financial
respect of each
statement of such foreign
of its
subsidiary is placed on the website
subsidiary, to
of the listed company;
any
(b) where such foreign shareholder of
subsidiary is not required to get its the company
financial statement audited under who asks for it.
any law of the country of its
incorporation and which does not
get such financial statement
audited, the holding Indian listed
company may place such
unaudited financial statement on its
website and where such financial
statement is in a language other
than English, a translated copy of
the financial statement in English
shall also be placed on the
website.’;


2018
newly inserted)
(ii) in sub-section (2), the following Add the proviso
proviso shall be inserted, namely:- in point (iv)
"Provided that every company
having a subsidiary or subsidiaries
shall provide a copy of separate
audited or unaudited financial
statements, as the case may be, as
prepared in respect of each of its
subsidiary to any member of the
company who asks for it."

2018
16. In section 140 of the principal 10.15 (d) If the
Act, in sub-section (3), for the auditor does not
words "fifty thousand rupees", the ……. with fine
words "fifty thousand rupees or the which shall not
remuneration of the auditor, be less than `
whichever is less," shall be 50,000 but which
substituted. may extend to `
5 Lacs.
2018
17. In section 141 of the principal 10.22 (9) any person
Act, in sub-section (3), for clause whose
(i), the following clause shall be subsidiary or
substituted, namely:- associate
‘(i) a person who, directly or company or
indirectly, renders any service any other form
referred to in section 144 to the of entity, is
company or its holding company or engaged as on
its subsidiary company. the date of
Explanation.—For the purposes of appointment in
this clause, the term "directly or consulting and
indirectly" shall have the meaning specialised
services as

assigned to it in the Explanation to provided in

section 144.’. section 144

2018
18. In section 143 of the principal 10.23 (c) Access to
Act,- record of all its
(i) in sub-section (1), in the proviso, subsidiaries:
for the words "its subsidiaries", at The auditor of a
both the places, the words "its ……. the records
subsidiaries and associate of all its
companies" shall be substituted; subsidiaries in
so far as it
relates to the
consolidation of
2018
its financial
statements with
that of its
subsidiaries.
18. In section 143 of the principal 10.24 (9) whether the
Act,- company has
(ii) in sub-section (3), in clause (i), adequate
for the words "internal financial internal
controls system", the words financial
"internal financial controls with controls
reference to financial statements" system in place
shall be substituted; and the
operating
effectiveness of
such controls;
2018
18. In section 143 of the principal 10.36 The provisions
Act,- of section 143
(iii) in sub-section (14), in clause shall mutatis
(a), for the words "cost accountant mutandis apply
in practice", the words "cost to the cost
accountant" shall be substituted accountant in
practice
conducting cost
audit under
2018
section 148.


Act,- The words shall
(i) in sub-section (2),- be inserted in
(a) after the words "five lakh point (iii) (a)
rupees", the words "or four times
the remuneration of the auditor,

2018
19. In section 147 of the principal 10.33 and
Act,-
(i) in sub-section (2),- (2) Fine which
(b) in the proviso, for the words shall not be
"and with fine which shall not be less than Rs. 1
less than one lakh rupees but which lac but which
may extend to twenty-five lakh may extend to
rupees", the words "and with fine Rs. 25 Lacs
which shall not be less than fifty
thousand rupees but which may
extend to twenty-five lakh rupees or
eight times the remuneration of the
auditor, whichever is less" shall be
substituted;

2018
19. In section 147 of the principal 10.33 (2) pay for
Act,- damages to the
(ii) in sub-section (3), in clause (ii), company,
for the words "or to any other statutory bodies
persons", the words "or to members or authorities or
or creditors of the company" shall to any other
be substituted; persons for loss
arising out of
incorrect ….
audit report.
2018
(iii) in sub-section (5), the following newly inserted)

"Provided that in case of criminal

liability of an audit firm, in respect
of liability other than fine, the
concerned partner or partners, who
acted in a fraudulent manner or
abetted or, as the case may be,
colluded in any fraud shall only be
liable.".

2018
20. In section 148 of the principal 10.34 (iv) The cost
Act,- audit shall be
(i) in sub-section (3),- conducted by a
(a) for the words "Cost Accountant Cost
in practice", the words "cost Accountant in
accountant" shall be substituted; practice who
shall be …… by
Enforcement Date: 9 th February, the members in
2018 such manner as
may be
prescribed.
20. In section 148 of the principal 10.35 Here, the
Act,- expression “cost
(i) in sub-section (3),- auditing
(b) in the Explanation, for the words standards” mean
"Institute of Cost and Works such standards
Accountants of India", the words as are issued by
"Institute of Cost Accountants of the Institute of
India" shall be substituted; Cost and Works
Accountants of
Enforcement Date: 9 th February, India,
2018 constituted
under the Cost
and Works
Accountants
Act, 1959, with
the approval of
the Central
Government.

20. In section 148 of the principal 10.35 (x) The report

Act,- on the audit of
(ii) in sub-section (5), in the cost records
proviso, for the words "cost shall be
accountant in practice", the words submitted by the
"cost accountant" shall be cost
substituted accountant in
practice to the
Enforcement Date: 9 th February, Board of
2018 Directors (BoD)
of the company.
11. Amendment in In exercise of the powers conferred 9.7 Replace the
the notification by clauses (a) and (b) of sub- footnote
number section (1) and subsection (2) of ‘Section 129
G.S.R. 463(E) section 462 of the Companies Act, shall not apply to
dated the 5th 2013, the Central Government, in the Government
June, 2015 the interest of public amends the companies to
vide notification of the Government of the extent of
Notification India in the Ministry of Corporate application of
no. S.O. Affairs number G.S.R. 463(E) Accounting
802(E) dated dated the 5th June, 2015 namely:— Standard 17
23rd February, In the said notification, in the (Segment
2018 Table, for serial number 8 and Reporting) to
entries relating thereto, the the companies
following serial number and entries engaged in
shall be respectively substituted, defence
namely:- production.
“In Chapter IX, Section 129- Shall
not apply to the companies
engaged in defence production to
the extent of application of relevant
Accounting Standard on segment
reporting”.
12. Enforcement The Central Government appoints 9.14 -
of sub-section the 21st March, 2018 as the date on (The said sub –
(3) and (11) of which the provisions of sub- sections have
Section 132 of sections (3) and (11) of section 132 been notified)
the of the said Act shall come into
Companies force.
Act, 2013 vide
Notification
No. S.o.

1316(E) dated
21st March,
2018
13. ‘Reservation Rule 9: Reservation of name 2.11 -
of Name of An application for reservation of (This Rule may
Company’ name shall be made through the read with
web service available at respect to point
Notification www.mca.gov.in by using [form (iv) Requirement
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*Page No. of the Study material (New study material) with reference of relevant provisions
QUESTIONS
COMPANY LAW
1. Prakhar Ltd. intends to raise share capital by issuing Equity Shares in different stages over
a certain period of time. However, the company does not wish to issue prospectus each
and every time of issue of shares. Considering the provisions of the Companies Act, 2013,
discuss what formalities Prakhar Ltd. should follow to avoid repeated issuance of
prospectus?
2. Earth Ltd., a Public Company offer the new shares (further issue of shares) to persons
other than the existing shareholders of the Company. Explain the conditions when shares
can be issued to persons other than existing shareholders. Discuss whethe r these shares
can be offered to the Preference Shareholders?
3. Examine the validity of the following with reference to the relevant provisions of the
Companies Act, 2013:
(i) The Board of Directors of Shrey Ltd. called an extraordinary general meeting upon
the requisition of members. However, the meeting was adjourned on the ground that
the quorum was not present at the meeting. Advise the company.

(ii) Mary Ltd is a listed company having turnover of ` 1200 crores during the financial
year 2016-17. The CSR committee of the Board formulated and recommended a
CSR project which was approved by the Board. The company finalised the project
under its CSR initiatives which require funds @ 5 % of average net profit of the
company for last three financial years. Will such excess expense be counted in
subsequent financial years as a part of CSR expenditure? Advise the company.
4. Examine the validity of the following decisions of the Board of Directors with reference of
the provisions of the Companies Act, 2013.
(i) In an Annual General Meeting of Vrinda Ltd. having share capital, 80 members
present in person or by proxy holding more than 1/10 th of the total voting power,
demanded for poll. The chairman of the meeting rejected the request on the ground
that only the members present in person can demand for poll.
(ii) In an annual general meeting, during the process of poll, the members who earlier
demanded for poll want to withdraw it. The chairman of the meeting rejected the
request on the ground that once poll started, it cannot be withdrawn.
5. Growmore Limited’s share capital is divided into different classes. Now, Growmore Limited
intends to vary the rights attached to a particular class of shares. Explain the provisions of
the Companies Act, 2013 to Growmore Limited as to obtaining consent from the
shareholders in relation to variation of rights.
6. Heavy Metals Limited wants to provide financial assistance to its employees, to enable
them to subscribe for certain number of fully paid shares. Considering the provision of the
Companies Act, 2013, what advice would you give to the company in this regard?
7. Lemon & Company, Chartered Accountants a Limited Liability Partnership firm with CA. L,
CA. M and CA. N as partners, is the statutory auditor of a listed company M/s Big Limited
for past 6 years as on 01.04.2014.
CA.M is also a partner in other Chartered Accountant firm Dew & Company, Chartered
Accountants. Advise under the provisions of the Companies Act, 2013 :
(1) Upto how many years can Lemon & Company continue as statutory auditors of M/s
Big Limited?
(2) What shall be the cooling-off period for Lemon & Company with respect to M/s Big
Limited?
(3) Can Dew & Company; be appointed as statutory auditors of M/s Big Limited and it's
another listed subsidiary M/s Dark Limited during such cooling-off period?
(4) Can Lemon & Company be appointed as internal auditors of M/s Big Limited and it's
another listed subsidiary M/s Dark Limited, during such cooling-off period?
8. Mrs. Sita, wife of CA. ‘Arjun' the statutory auditor of Stellar Builders Limited, acquired
shares in the company for a face value of `75000/- on 15th March, 2018. CA. ‘Arjun’, issued
his audit report on 25 th April, 2018. Examine the validity of this transaction under the

Companies Act, 2013. Would your answer be different if face value of the shares have
been ` 150000/- (market value ` 95000/-)?
9. The Board of Directors of Sindhu Limited wants to make some changes and to alter some
Clauses of the Articles of Association which are to be urgently carried out, which include
the increase in Authorized Capital of the company, issue of shares, increase in borrowing
limits and increase in the number of directors.
Discuss about the provisions of the Companies Act, 2013 to be followed for alteration of
Articles of Association.
10. The directors of Element Ltd. want to voluntary revise the Financial statements of the
company. They have approached you to state to them the provisions of the Companies
Act, 2013 regarding voluntary revision of financial statements.
OTHER LAWS
11. Explaining the provisions of the Indian Contract Act, 1872, answer the following:
(i) A contracts with B for a fixed price to construct a house for B within a stipulated time.
B would supply the necessary material to be used in the construction. C guarantees
A’s performance of the contract. B does not supply the material as per the agreement.
Is C discharged from his liability?
(ii) C, the holder of an over due bill of exchange drawn by A as surety for B, and accepted
by B, contracts with X to give time to B. Is A discharged from his liability?
12. Mr. Avinash wanted a loan for expanding his business, from ABC Bank. Mr. Avinash has
pledged the stock of his business to obtain the loan from bank. However, the expansion of
business did not reap the desired results and Mr. Avinash was not able to repay the loan.
Now, ABC bank wants to retain the stock for adjustment of their loan. Advise, ABC Bank
whether they can retain the stock for the adjustment of their loan and also for payment of
interest. Give your answer as per the provisions of the Contract Act, 1872.
13. A bill of exchange has been dishonoured by non- payment. Now, Mr. Sandip, the holder
wants a certificate of protest for such a dishonoured bill. Advise, Mr. Sandip whether he
can get the certificate of protest. Also, advise him regarding the provisions of Protest for
better security.
14. Mr. Ram, an advocate has fraudulently deceived his client Mr. Shyam, who was taking his
expert advise on taxation matters. Now, Mr. Ram is liable to a fine for acting fraudulently
both under the Advocates Act, 1961 as well as the Income Tax Act, 1961. State the
provision as to whether his offence is punishable under the both the Acts, as per the
General Clauses Act, 1897.

Interpretation of Statutes, Deeds and Documents

15. The ‘Statute should be read as a Whole’. Explain the statement.
1. Shelf prospectus means a prospectus in respect of which the securities or class of

securities included therein are issued for subscription in one or more issues over a certain
period without the issue of a further prospectus
(1) According to Section 31 of the Company Act, 2013 any class or classes of companies,
as the Securities and Exchange Board may provide by regulations in this behalf, may
file a shelf prospectus with the Registrar at the stage—
(A) of the first offer of securities included therein which shall indicate a period not
exceeding one year as the period of validity of such prospectus which shall
commence from the date of opening of the first offer of securities under that
prospectus, and
(B) in respect of a second or subsequent offer of such securities issued during the period
of validity of that prospectus, no further prospectus is required.
(2) The other formalities related to such repeated/subsequent issue of shares- A
company filing a shelf prospectus shall be required to file an information
memorandum containing all material facts relating to new charges created, changes
in the financial position of the company as have occurred between the first or previous
offer of securities and the succeeding offer of securities and such other changes as
may be prescribed, with the Registrar within the prescribed time, prior to the issue of
a second or subsequent offer of securities under the shelf prospectus .
Thus, Prakhar Ltd. can follow the above provisions and can issue a shelf prospectus.
2. Issue of Further Shares: Section 62 (1) (a) of the Companies Act, 2013 provides that if,
at any time, a company having a share capital proposes to increase its subscribed capital
by the issue of further shares, such shares should be offered to the existing equity
shareholders of the company as at the date of the offer, in proportion to the capital paid up
on those shares.
However, certain exceptions have been provided in the Companies Act, 2013 when such
further shares of a company may-be offered to other persons as well. These are as under-
(a) Under section 62 (1) (b) issue of further shares may be offered to employees under
a scheme of employees’ stock option subject to a special resolution passed by the
company and subject to such conditions as may be prescribed.
(b) Under section 62 (1) (c) such shares may be offered to any persons, if it is authorised
by a special resolution, either for cash or for a consideration other than cash, if the
price of such shares is determined by the valuation report of a registered valuer,

subject to the compliance with the applicable provisions of Chapter III and any other
conditions as may be prescribed.
(c) if any equity shareholder to whom the shares are offered in terms of section 62 (1)
(a) as described above, declines such offer, the Board of Directors may dispose of
the shares in such manner as is not disadvantageous to the shareholders or to the
company.
Preference Shareholders: From the wordings of Section 62 (1) (c), it is quite clear that
these shares can be issued to any persons who may be preference shareholders as well
provided such issue is authorized by a special resolution of the company and are issued
on such conditions as may be prescribed.
3. (i) According to section 100 (2) of the Companies Act 2013, the Board of directors
must convene a general meeting upon requisition by the stipulated minimum number
of members.
As per Section 103 (2) (b) of the Companies Act, 2013, if the quorum is not present
within half an hour from the appointed time for holding a meeting of the company, the
meeting, if called on the requisition of members, shall stand cancelled. Therefore, the
meeting stands cancelled and the stand taken by the Board of Directors to adjourn it,
is not proper.
(ii) In terms of Section 135(5) of the Companies Act, 2013, the Board of every company
to which section 135 is applicable, shall ensure that the company spends, in every
Financial year at least 2 per cent of average net profits of the company made during
the three immediately preceding financial years, in pursuance of its CSR policy. There
is no provision for carry forward of excess expenditure to the next year(s). The words
used in the section are 'at least'. Therefore, any expenditure over 2% would be
considered as voluntary higher spending. Hence, such excess expense will not be
counted in subsequent financial years as a part of CSR expenditure.
4. Section 109 of the Companies Act, 2013 provides for the demand of poll before or on the
declaration of the result of the voting on any resolution on show of hands. Accordingly law
says that:-
Order of demand for poll by the chairman of meeting: Before or on the declaration of
the result of the voting on any resolution on show of hands, a poll may be ordered to be
taken by the Chairman of the meeting on his own motion, and shall be ordered to be taken
by him on a demand made in that behalf:-
(a) In the case a company having a share capital, by the members present in person or
by proxy, where allowed, and having not less than one-tenth of the total voting power
or holding shares on which an aggregate sum of not less than five lakh rupees or
such higher amount as may be prescribed has been paid-up; and

(b) in the case of any other company, by any member or members present in person or by
proxy, where allowed, and having not less than one tenth of the total voting power.
Withdrawal of the demand: The demand for a poll may be withdrawn at any time by the
persons who made the demand.
Hence, on the basis on the above provisions of the Companies Act, 2013:
(i) The chairman cannot reject the demand for poll as poll can be demanded by the
members present in person or by proxy. subject to provision in the articles of
company.
(ii) The chairman cannot reject the request of the members for withdrawing the demand
of the Poll.
5. According to section 48 of the Companies Act, 2013-
(1) Variation in rights of shareholders with consent: Where a share capital of the
company is divided into different classes of shares, the rights attached to the shares
of any class may be varied with the consent in writing of the holders of not less than
three-fourths of the issued shares of that class or by means of a special resolution
passed at a separate meeting of the holders of the issued shares of that class,—
(a) if provision with respect to such variation is contained in the memorandum or
articles of the company; or
(b) in the absence of any such provision in the memorandum or articles, if such
variation is not prohibited by the terms of issue of the shares of that class:
Provided that if variation by one class of shareholders affects the rights of any other
class of shareholders, the consent of three-fourths of such other class of shareholders
shall also be obtained and the provisions of this section shall apply to such variation.
(2) No consent for variation: Where the holders of not less than ten per cent of the
issued shares of a class did not consent to such variation or vote in favour of the
special resolution for the variation, they may apply to the Tribunal to have the variation
cancelled, and where any such application is made, the variation shall not have effect
unless and until it is confirmed by the Tribunal:
Provided that an application under this section shall be made within twenty-one days
after the date on which the consent was given or the resolution was passed, as the
case may be, and may be made on behalf of the shareholders entitled to make the
application by such one or more of their number as they may appoint in writing for the
purpose.
6. Under section 67 (2) of the Companies Act, 2013 no public company is allowed to give,
directly or indirectly and whether by means of a loan, guarantee, or security, any financial
assistance for the purpose of, or in connection with, a purchase or subscription, by any
person of any shares in it or in its holding company.

However, section 67 (3) makes an exception by allowing companies to give loans to their
employees other than its directors or key managerial personnel, for an amount not
exceeding their salary or wages for a period of six months with a view to enabling them to
purchase or subscribe for fully paid-up shares in the company or its holding company to
be held by them by way of beneficial ownership.
It is further provided that disclosures in respect of voting rights not exercised directly by
the employees in respect of shares to which the scheme relates shall be made in the
Board's report in such manner as may be prescribed.
Hence, Heavy Metals Ltd can provide financial assistance upto the specified limit to its
employees to enable them to subscribe for the shares in the company provided the shares
are purchased by the employees to be held for beneficial ownership by them.
However, the directors or key managerial personnel will not be eligible for such assistance.
7. According to Section 139 (2) of the Companies Act, 2013,
I. Listed companies and other prescribed class or classes of companies (except one
person companies and small companies) shall not appoint or re-appoint an audit firm
as auditor for more than two terms of 5 consecutive years.
II. An audit firm which has completed its term (i.e. two terms of five consecutive years)
shall not be eligible for reappointment as auditor in the same company for five years
from the completion of such term.
III. Further, as on the date of appointment no audit firm having a common partner or
partners to the other audit firm, whose tenure has expired in a company immediately
preceding the financial year, shall be appointed as an auditor of the same company
for a period of five years.
IV. For the purpose of the rotation of auditors, in case of an auditor (whether an individual
or audit firm), the period for which the individual or the firm has held off ice as auditor
prior to the commencement of the Act shall be taken into account for calculating the
period of 5 consecutive years or 10 consecutive years, as the case may be.
Applying the above provisions,
(1) Lemon & Company can continue as statutory auditors of M/s Big Limited for 4 more
years from 1.4.2014, i.e. they can continue in office only till 31.3.2018.
(2) The cooling- off period shall be of 5 years.
(3) Dew & Company cannot be appointed as a statutory auditor of M/s Big Limited during
the cooling – off period of Lemon & Company, as CA. M is the common partner in
both Lemon & Company and Dew & Company.
However, Dew & Company can be appointed as a statutory auditor of M/s Dark
Limited (a listed subsidiary of M/s Big Limited), during the cooling – off period.
(4) As per Section 138 (1) of the Companies Act, 2013, every listed company and other
prescribed class of companies, shall be required to appoint an internal auditor, who

shall either be a chartered accountant or a cost accountant, or such other professional

(which may be either an individual or a partnership firm or a body corporate) as may
be decided by the Board to conduct internal audit of the functions and activities of the
company.
Accordingly, M/s Lemon & Company can be appointed as an internal auditors of M/s
Big Limited and in its subsidiary M/S Dark Limited (a listed company). The provision
of cooling off period as given under Section 139 of the Companies Act, 2013, shall
not be applicable on the Internal auditors.
8. As per Section 141(3)(d)(i) of the Companies Act, 2013, a person who, or his relative or
partner is holding any security of or interest in the company or its subsidiary, or of its
holding or associate company or a subsidiary of such holding company, shall not be
appointed as an auditor of the company.
However, Rule 10 of the Companies (Audit and Auditors) Rules, 2014, states that a relative
of an auditor may hold securities in the company of face value not exceeding rupees one
lakh.
In the given case Mrs. Sita, wife of CA. Arjun acquired shares in Stellar Builders Limited,
in which he was a statutory auditor on 15 th March, 2018. Since, the securities held by Mrs.
Sita is within the prescribed limit of ` 1 lakh, such a transaction is valid.
Yes, the answer will be different in case where the face value of acquired shares is
` 1,50,000. Then in that case:
(i) Corrective action to maintain the limit specified (i.e., 1 lac) shall be taken by the
auditor within 60 days of such acquisition, or
(ii) Auditor has to vacate his office.
9. Alteration in Articles of Association: Section 14 of the Companies Act, 2013, vests
companies with power to alter or add to its articles. The law with respect to alteration of
articles is as follows:
(1) Alteration by special resolution: Subject to the provisions of this Act and the
conditions contained in its memorandum, if any, a company may, by a special
resolution alter its articles.
(2) Filing of alteration with the registrar: Every alteration of the articles and a copy of
the order of the Tribunal approving the alteration, shall be filed with the Registrar,
together with a printed copy of the altered articles, within a period of fifteen days in
such manner as may be prescribed, who shall register the same.
(3) Any alteration made shall be valid: Any alteration of the articles registered as above
shall, subject to the provisions of this Act, be valid as if it were originally contained in
the articles.
(4) Alteration noted in every copy: Every alteration made in articles of a company shall
be noted in every copy of the articles, as the case may be. If a company makes any

default in complying with the stated provisions, the company and every officer who is
in default shall be liable to a penalty of one thousand rupees for every copy of the
articles issued without such alteration. [Section 15]
10. (1) Preparation of revised financial statement or revised report on the approval of
Tribunal: If it appears to the directors of a company that—
(a) the financial statement of the company; or
(b) the report of the Board,
do not comply with the provisions of section 129 or section 134, they may prepare
revised financial statement or a revised report in respect of any of the three preceding
financial years after obtaining approval of the Tribunal on an application made by the
company in such form and manner as may be prescribed and a copy of the order
passed by the Tribunal shall be filed with the Registrar:
Tribunal to serve the notice: Provided that the Tribunal shall give notice to the
Central Government and the Income tax authorities and shall take into consideration
the representations, if any, made by that Government or the authorities before
passing any order under this section:
Number of times of revision and recast: Provided further that such revised
financial statement or report shall not be prepared or filed more than once in a
financial year:
Reason for revision to be disclosed: Provided also that the detailed reasons for
revision of such financial statement or report shall also be disclosed in the Board's
report in the relevant financial year in which such revision is being made.
(2) Limits of revisions: Where copies of the previous financial statement or report have
been sent out to members or delivered to the Registrar or laid before the company in
general meeting, the revisions must be confined to—
(a) the correction in respect of which the previous financial statement or report do
not comply with the provisions of section 129 or section 134; and
(b) the making of any necessary consequential alternation.
(3) Framing of rules by the Central Government in relation to revised financial
statement or director's report: The Central Government may make rules as to the
application of the provisions of this Act in relation to revised financial statement or a
revised director's report and such rules may, in particular—
(a) make different provisions according to which the previous financial statement
or report are replaced or are supplemented by a document indicating the
corrections to be made;
(b) make provisions with respect to the functions of the company's auditor in relation
to the revised financial statement or report;
(c) require the directors to take such steps as may be prescribed.

11. (i) According to Section 134 of the Indian Contract Act, 1872, the surety is discharged
by any contract between the creditor and the principal debtor, by which the principal
debtor is released or by any act or omission of the creditor, the legal consequence of
which is the discharge of the principal debtor.
In the given case, B does not supply the necessary material as per the agreement.
Hence, C is discharged from his liability.
(ii) According to Section 136 of the Indian Contract Act, 1872, where a contract to give
time to the principal debtor is made by the creditor with a third person and not with
the principal debtor, the surety is not discharged.
In the given question the contract to give time to the principal debtor is made by the
creditor with X who is a third person. X is not the principal debtor. Hence , A is not
discharged.
12. According to section 173 of the Indian Contract Act, 1872, the pawnee may retain the
goods pledged, not only for payment of the debt or the performance of the promise, but for
the interest, of the debt, and all necessary expenses incurred by him in respect of the
possession or for the preservation of the goods pledged.
Hence, ABC Bank can retain the stock of business of Mr. Avinash, not only for adjustment
of the loan but also for payment of interest.
13. Protest: According to section 100 of the Negotiable Instruments Act,1881, when a
promissory note or bill of exchange has been dishonored by non-acceptance or non-
payment, the holder may, within a reasonable time, cause such dishonor to be noted and
certified by a notary public. Such certificate is called a protest.
Protest for better security: When the acceptor of a bill of exchange has become
insolvent, or his credit has been publicly impeached, before the maturity of the bill, the
holder may, within a reasonable time, cause a notary public to demand better security of
the acceptor, and on its being refused may, with a reasonable time, cause such facts to be
noted and certified as aforesaid. Such certificate is called a protest for better security.
Thus, Mr. Sandip can get the certificate of protest by following the above provisions.
14. “Provision as to offence punishable under two or more enactments” [Section 26]:
Where an act or omission constitutes an offence under two or more enactments, then the
offender shall be liable to be prosecuted and punished under either or any of those
enactments, but shall not be punished twice for the same offence.
Thus, Mr. Ram shall be liable to punished under the Advocates Act, 1961 or the Income
Tax Act, 1961, but shall not be punished twice for the same offence.

15. ‘Read the Statute as a Whole’: It is the elementary principle that construction of a statute
is to be made of all its parts taken together and not of one part only. The deed/ statute
must be read as a whole in order to ascertain the true meaning of its several clauses, and
the words of each clause should be so interpreted as to bring them into harmony with other
provisions – if that interpretation does no violence to the meaning of which they are
naturally susceptible. And the same approach would apply with equal force with regard to
Acts and Rules passed by the legislature.
One of the safest guides to the construction of sweeping general words is to examine other
words of like import in the same enactment or instrument to see what limitations must be
imposed on them. If we find that a number of such expressions have to be subjected to
limitations and qualifications and that such limitations and qualifications are of the same
nature, that circumstance forms a strong argument for subjecting the expression in dispute
to a similar limitation and qualification.


The Study Material (July 2017 edition) is applicable for May, 2018 Examinations. It is updated
for all relevant amendments/circulars/notifications/clarifications etc. till 30th April, 2017. Further,
all relevant amendments/ circulars/ notifications etc. in the Company law part for th e period 1 st
May 2017 to 31st October, 2017 are mentioned below:
Relevant Legislative amendments from 1 st of May 2017 to 31 st of October 2017
Sl. Amendments related Relevant Page no. of Earlier Law
No. to Amendments the Study
material
(New study
material)
with
reference
of relevant
provisions
1. Enforcement of the In the Companies Pg. 5.4 (xviii) any amount
Companies (Acceptance of received by a
(Acceptance of Deposits) Rules, company from
Deposits) Amendment 2014, Alternate Investment
Rules, 2017 Vide Funds, Domestic
Notification G.S.R. 454 In rule 2, in sub-rule Venture Capital
(E) dated 11 th May, (1), in clause (c), in Funds and Mutual
2017 in exercise of sub-clause (xviii), Funds registered
powers conferred by after the words with the Securities
section 73 and 73 read “Domestic Venture and Exchange Board
with 469(1) and 469(2). Capital Funds” the of India in
words “Infrastructure accordance with
Investment Trusts” regulations made by
shall be inserted. it.
2. Exemptions to The Central Pg 7.51 Such other place as
Government Government amends the Central
Companies Vide the Notification Government may
Notification G.S.R. G.S.R. 463(E), dated approve in this behalf.
5th June 2015,

582(E) Dated 13 th whereby Exceptions,

June, 2017 Modifications and
Adaptations were
provided in case of
Government
companies.
Following is the
amendments:
In sub-section (2) of
section 96, for the
words "such other
place as the Central
Government may
approve in this
behalf”, the words
“such other place
within the city, town
or village in which the
registered office of
the company is
situate or such other
place as the Central
Government may
approve in this
behalf” shall be
substituted.”.
The aforesaid exceptions, modifications and adaptations (i.e. as
given in Notification G.S.R. 463(E), dated 5th June 2015 and
Notification G.S.R. 582(E) Dated 13th June, 2017) shall be
applicable to a Government company which has not committed
a default in filing of its financial statements under section 137 of
the Companies Act or annual return under section 92 of the said
Act with the Registrar.
3. Exemptions to Private The Central
Companies Vide Government amends
Notification G.S.R. the Notification
583(E) Dated 13 TH G.S.R. 464(E), dated
June, 2017 5th June 2015

whereby Exceptions,
Modifications and
Adaptations were
provided in case of
Private companies.
Following are the
amendments:
(1) In Chapter I, (1) Provided that the

Pg 1.9 financial statement,
Clause (40) of
section 2. with respect to One
Person Company,
small company and
For the proviso, the
dormant company,
following shall be
may not include the
cash flow statement
Provided that the
financial statement,
with respect to one
person company,
small company,
dormant company
and private company
(if such private
company is a start-
up) may not include
the cash flow
statement;
Explanation. - For the

purposes of this Act,
the term „start-up‟ or
“start-up company”
means a private
company
incorporated under
the Companies Act,
2013 or the
Companies Act,
1956 and recognised
as start-up in
accordance with the
notification issued by
the Department of

Industrial Policy and

Promotion, Ministry
of Commerce and
Industry.
(2) In Chapter V, (2) Clause (a) to (e)

Pg 5.6
clauses (a) to (e) of of Section 73
sub-section (2) of provides conditions
section 73, shall not for acceptance of
apply to a private deposits from
company- members.
(A) which accepts Notification dated 5th

from its members June, 2015, provided
monies not that Clause (a) to (e)
exceeding one of Sub-section 2 of
hundred per cent. of Section 73 shall not
aggregate of the paid apply to private
up share capital, free Companies which
reserves and accepts from its
securities premium members monies not
account; or exceeding one
hundred per cent, of
aggregate of the paid
(B) which is a start-
up share capital and
up, for five years
free reserves, and
from the date of its
such company shall
incorporation; or
file the details of
monies so accepted
(C) which fulfils all of
to the Registrar in
the following
such manner as may
conditions, namely:-
be specified.
(a) which is not an
associate or a
subsidiary
company of any
other company;
(b)if the borrowings
of such a company
from banks or
financial
institutions or any

body corporate is
less than twice of
its paid up share
capital or fifty crore
rupees, whichever
is lower; and
(c) such a company
has not defaulted in
the repayment of
such borrowings
subsisting at the
time of accepting
deposits under this
section:
Provided that the

company referred to
in clauses (A), (B) or
(C) shall file the
details of monies
accepted to the
Registrar in such
manner as may be
specified.
(3) In Chapter VII, Pg 7.11 (3) clause (g) of sub-

clause (g) of sub- section (1) of section
section (1) of section 92 is read as
92, shall apply to “remuneration of
private companies directors and key
which are small managerial
companies, namely:- personnel”
“(g) aggregate
amount of
remuneration drawn
by directors;”
(4) In Chapter VII, Pg 7.12 (4) However, in

proviso to sub- relation to One
section (1) of section Person Company
92, and small company,

the annual return

For the proviso, the shall be signed by
following proviso the company
shall be substituted, secretary, or where
namely:- there is no company
secretary, by the
“Provided that in director of the
relation to One company.
Person Company,
small company and
private company (if
such private
company is a start-
up), the annual return
shall be signed by
the company
secretary, or where
there is no company
secretary, by the
director of the
company.”.
(5) Section 143(3)(i), (5) Section 143(3)(i)

Pg.10.24 provides- whether
shall not apply to a
private company:- the company has
adequate internal
financial controls
(i) which is a one
person company or a system in place and
small company; or the operating
(ii) which has effectiveness of such
turnover less than controls;
rupees fifty crores as
per latest audited
financial statement
or* which has
aggregate
borrowings from
banks or financial
institutions or
anybody corporate at
any point of time
during the financial
year less than rupees
twenty five crore."


The aforesaid exceptions, modifications and adaptations shall
be applicable to a Private company which has not committed a
default in filing of its financial statements under section 137 or
annual return under section 92 of the said Act with the Registrar.
*4. Corrigendum vide Ministry of Corporate Referred in In Section
Notification S.O. Affairs vide point no. 3 143(3)(i)(ii) there
2218(E) dated 13th July corrigendum stated above were the words
2017 with respect to that for the words “statement or” which
the Notification G.S.R. “statement or” to has been replaced
583(E) Dated 13 TH read as “statement with the word
June, 2017 and” under section “statement and”
143(3)(i). through this
notification.
5. Enforcement of the The Central Pg 10.6 Earlier Rule 5(b)
Companies (Audit and Government hereby stated that -all
Auditors) Second amends the private limited
Amendment Rules, Companies (Audit companies having
2017 Vide Notification and Auditors) Rules, paid up share capital
G.S.R. 621(E) dated 2014. of rupees 20 crore or
22nd June 2017 in more;
exercise of powers
conferred by section Through this
139. amendment rule, in
Rule 5(b), for the
word “twenty”, the
word “fifty” shall be
substituted.
6. Clarification regarding Notification No. - For the purposes of
applicability of G.S.R. 583(E) dated clause (i) of sub-
exemption given to 13th June, 2017 section (3) of sectlon
certain private stated that 143, for the financial
companies under requirements of years commencing on
section 143(3)(i) vide reporting under or after 1st April,
circular no. 08/2017 section 143(3)(i) 2015, the report of the
dated 25 th July 2017 read Rule 10 A of the auditor shall state
Companies (Audit about existence of
and Auditors) Rules, adequate internal
2014 of the financial controls
Companies Act 2013 system and its

shall not apply to operating

certain private effectiveness:
companies. Through
issue of this circular, Provided that auditor
it is hereby clarified of a company may
that the exemption voluntarily include the
shall be applicable statement referred to
for those audit in this rule for the
reports in respect of financial year
financial statements commencing on or
pertaining to financial after 1st April, 2014
year, commencing and ending on or
on or after 1st April, before 31st March,
2016, which are 2015.
made on or after the
date of the said
notification.
7. Enforcement of the In the Companies Pg 5.8 Provided that a
Companies (Acceptance of private company may
(Acceptance of Deposits) Rules, accept from its
Deposits) Second 2014, in rule 3, in members monies not
Amendment Rules, sub-rule (3), for the exceeding one
2017 Vide Notification proviso, the following hundred per cent of
G.S.R. 1172(E) dated shall be substituted, aggregate of the paid
19th September, 2017 namely:- up share capital, free
in exercise of powers reserves and
conferred by section 73 “Provided that a securities premium
and 73 read with Specified IFSC account and such
469(1) and 469(2). Public company and company shall file
a private company the details of monies
may accept from its so accepted to the
members monies not Registrar in such
exceeding one manner as may be
hundred per cent. of specified.
aggregate of the paid
up share capital, free
reserves and
securities premium
account and such
company shall file
the details of monies
so accepted to the

Registrar in Form
DPT-3.
Explanation.—For
the purpose of this
rule, a Specified
IFSC Public
company means an
unlisted public
company which is
licensed to operate
by the Reserve Bank
of India or the
Securities and
Exchange Board of
India or the
Insurance
Regulatory and
Development
Authority of India
from the International
Financial Services
Centre located in an
approved multi
services Special
Economic Zone set-
up under the Special
Economic Zones Act,
2005 (28 of 2005)
read with the Special
Economic Zones
Rules, 2006:
Provided further that

the maximum limit in
respect of deposits to
be accepted from
members shall not
apply to following
classes of private
companies,
namely:—

(i) a private company

which is a start-up,
for five years from
the date of its
incorporation;
(ii) a private company

which fulfils all of the
following conditions,
namely:—
(a) which is not an
associate or a
subsidiary company
of any other
company;
(b) the borrowings of
such a company from
banks or financial
institutions or any
body corporate is
less than twice of its
paid up share capital
or fifty crore rupees,
whichever is less ;
and
(c) such a company
has not defaulted in
the repayment of
such borrowings
subsisting at the time
of accepting deposits
under section 73:
Provided also that all

the companies
accepting deposits
shall file the details of
monies so accepted
to the Registrar in
Form DPT-3.”.

8. Vide notification S.O. The Central Pg 1.20 Earlier not notified

3086(E) dated 20 th Government hereby
September 2017 appoints the 20 th
September, 2017 as
the date on which
proviso to clause (87)
of section 2 of the
said Act shall come
into force.
QUESTIONS
COMPANY LAW
1. The paid-up share capital of Saras Private Limited is ` 1 crore, consisting of 8 lacs Equity
Shares of ` 10 each, fully paid-up and 2 lacs Cumulative Preference Shares of `10 each,
fully paid-up. Jeevan (JVN) Private Limited and Sudhir Private Limited are holding 3 lacs
Equity Shares and 50,000 Equity Shares respectively in Saras Private Limited. Jeevan
Private Limited and Sudhir Private Limited are the subsidiaries of Piyush Private Limited.
With reference to the provisions of the Companies Act, 2013 examine whether Saras
Private Limited is a subsidiary of Piyush Private Limited? Would your answer be differe nt
if Piyush Private Limited has 8 out of 9 Directors on the Board of Saras Private Limited?
2. In a General Meeting of Amit Limited, the Chairman directed to exclude certain matters
detrimental to the interest of the company from the minutes. Manoj, a shareholder
contended that the minutes must contain fair and correct summary of the proceedings
thereat. Decide, whether the contention of Manoj is maintainable under the provisions of
the Companies Act, 2013?
3. Mr Nilesh has transferred 1000 shares of Perfect Ltd. to Ms. Mukta. The company has
refused to register transfer of shares and does not even send a notice of refusal to Mr.
Nilesh or Ms. Mukta respectively within the prescribed period. Discuss as per the
provisions of the Companies Act, 2013, whether aggrieved party has any right(s) against
the company for such refusal?
4. The Director of Happy Limited proposed dividend at 12% on equity shares for the financial
year 2016-17. The same was approved in the annual general meeting of the company held
on 20th September, 2017. The Directors declared the approved dividends. Analysing the
provisions of the Companies Act, 2013, give your opinion on the following matters:

(i) Mr. A, holding equity shares of face value of ` 10 lakhs has not paid an amount of `
1 lakh towards call money on shares. Can the same be adjusted against the dividend
amount payable to him?
(ii) Ms. N was the holder of 1,000 equity shares on 31st March, 2017, but she has
transferred the shares to Mr. R, whose name has been registered on 20th May, 2017.
Who will be entitled to the above dividend?
5. Tirupati Limited, a listed company has made the following profits, the profits reflect eligible
profits under the relevant section of the Companies Act, 2013.
Financial year Amount (` In crores)
2012-13 20
2013-14 40
2014-15 30
2015-16 70
2016-17 50
(i) Calculate the amount that the company has to spend towards CSR for the financial
year 2017-18.
(ii) State the composition of the CSR committee unlisted company and a private
company.
6. Kavish Ltd., desirous of buying back of all its equity shares from the existing shareholders
of the company, seeks your advice. Examining the provisions of the Companies Act, 2013
discuss whether the above buy back of equity shares by the company is possible. Also ,
state the sources out of which buy-back of shares can be financed?
7. Altar Limited has on its Board, four Directors viz. W, X, Y and Z. In addition, the company
has Mr. D as the Managing Director. The company also has a full time Company Secretary,
Mr. Wise, on its rolls. The financial statements of the company for the year ended 31st
March, 2017 were authenticated by two of the directors, Mr. X and Y under their signatures.
Referring to the provisions of the Companies Act, 2013:
(i) Examine the validity of the authentication of the Balance Sheet and Statement of
Profit & Loss and the Board’s Report.
(ii) What would be your answer in case the company is a One Person Company (OPC)
and has only one Director, who has authenticated the Balance Sheet and Statement
of Profit & Loss and the Board’s Report?
8. (a) A company issued a prospectus. All the statements contained therein were literally
true. It also stated that the company had paid dividends for a number of years, but
did not disclose the fact that the dividends were not paid out of trading profits, but out
of capital profits. An allottee of shares wants to avoid the contract on the ground that
the prospectus was false in material particulars. Discuss can he do so?

(b) Mr Akshat entered into an agreement for purchasing a commercial property in Delhi
belonging to NRT Ltd. At the time of registration, Mr Akshat comes to know that the
title deed of the company is not free and the company expresses its inability to get
the title deed transferred in the name of Mr Akshat saying that he ought to have had
the knowledge of charge created on the property of the company. Examine with the
help of ‘Notice of a charge’, whether the contention of NRT LTD. is correct?
9. Kapoor Builders Limited decides to pay 2.5 percent of the value of debentures as
underwriting commission to the underwriters but the Articles of the company authorize only
2.0 percent underwriting commission on debentures. The company further decides to pay
the underwriting commission in the form of flats. Examine the validity of the above
arrangements under the provisions of the Companies Act,2013.
10. Explain how the auditor will be appointed in the following cases:
(i) A Government Company within the meaning of section 394 of the Companies Act,
2013.
(ii) The Auditor of the company (other than government company) has resigned on 31 st
December, 2016, while the Financial year of the company ends on 31 st March, 2017.
OTHER LAWS
11. (a) R instructed S, a transporter, to send a consignment of apples to Chennai. After
covering half the distance, Suresh found that the apples will perish before reaching
Chennai. He sold the same at half the market price. R sued S. Decide will he
succeed?
(b) Ramesh hires a carriage of Suresh and agrees to pay ` 1500 as hire charges. The
carriage is unsafe, though Suresh is unaware of it. Ramesh is injured and claims
compensation for injuries suffered by him. Suresh refuses to pay. Discuss the liability
of Suresh.
12. Mr. A of Delhi engaged Mr. S as his agent to buy a house in Noida Extension area. Mr. S
bought a house for ` 50 lakhs in the name of a nominee and then purchased it himself for
` 60 lakhs. He then sold the same house to Mr. A for ` 80 lakhs. Mr. A later comes to
know the mischief of Mr. S and tries to recover the excess amount paid to Mr. S. Discuss
whether he is entitled to recover any amount from Mr. S? If so, how much?
13. ‘E’ is the holder of a bill of exchange made payable to the order of ‘F’. The bill of exchange
contains the following endorsements in blank:
First endorsement ‘F’
Second endorsement ‘G’.
Third endorsement ‘H’ and

Fourth endorsement ‘I’

‘E’ strikes out, without I’s consent, the endorsements by ‘G’ and ‘H’. Decide with reasons
whether ‘E’ is entitled to recover anything from ‘I’ under the provisions of Negotiable
Instruments Act, 1881.
14. A notice when required under the Statutory rules to be sent by “registered post
acknowledgment due” is instead sent by “registered post” only. Whether the protection of
presumption regarding serving of notice by “registered post” under the General Clauses
Act is tenable? Referring to the provisions of the General Clauses Act, 1897, examine the
validity of such notice in this case.
Interpretation of Statutes, Deeds and Documents
15. Explain the meaning of term ‘Proviso’. Give the distinction between proviso, exception and
Saving Clause.
1. In terms of section 2 (87) of the Companies Act 2013 "subsidiary company" or "subsidiary",
in relation to any other company (that is to say the holding company), means a company
in which the holding company—
(ii) exercises or controls more than one-half of the total share capital either at its own or
together with one or more of its subsidiary companies:
Provided that such class or classes of holding companies as may be prescribed shall not
have layers of subsidiaries beyond such numbers as may be prescribed.
Explanation.—For the purposes of this clause,—
(a) a company shall be deemed to be a subsidiary company of the holding company even
if the control referred to in sub-clause (i) or sub-clause (ii) is of another subsidiary
company of the holding company;
(b) the composition of a company's Board of Directors shall be deemed to be controlled
by another company if that other company by exercise of some power exercisable by
it at its discretion can appoint or remove all or a majority of the directors.
In the present case, Jeevan Pvt. Ltd. and Sudhir Pvt. Ltd. together hold less than one half
of the total share capital. Hence, Piyush Private Ltd. (holding of Jeevan Pvt. Ltd. and Sudhir
Pvt) will not be a holding company of Saras Pvt. Ltd.
However, if Piyush Pvt. Ltd. has 8 out of 9 Directors on the Board of Saras Pvt. Ltd. i.e.
controls the composition of the Board of Directors; it (Piyush Pvt. Ltd.) will be treated as
the holding company of Saras Pvt. Ltd.

2. Under Section 118 (5) of the Companies Act, 2013, there shall not be included in the
Minutes of a meeting, any matter which, in the opinion of the Chairman of the meeting:
(i) is or could reasonably be regarded as defamatory of any person;
(ii) is irrelevant or immaterial to the proceeding; or
(iii) is detrimental to the interests of the company;
Further, under section 118(6) the chairman shall exercise absolute discretion in regard to
the inclusion or non-inclusion of any matter in the Minutes on the grounds specified in sub-
section (5) above.
Hence, in view of the above, the contention of Manoj, a shareholder of Amit Limited is not
valid because the Chairman has absolute discretion on the inclusion or exclusion of any
matter in the minutes for aforesaid reasons.
3. The problem as asked in the question is governed by Section 58 of the Companies Act,
2013 dealing with the refusal to register transfer and appeal against refusal.
In the present case the company has committed the wrongful act of not sending the notice
of refusal of registering the transfer of shares.
Under section 58 (4), if a public company without sufficient cause refuses to register the
transfer of securities within a period of thirty days from the date on which the instrument of
transfer is delivered to the company, the transferee may, within a period of sixty days of
such refusal or where no intimation has been received from the company, within ninety
days of the delivery of the instrument of transfer, appeal to the Tribunal.
Section 58 (5) further provides that the Tribunal, while dealing with an appeal made under
sub-section (4), may, after hearing the parties, either dismiss the appeal, or by order —
(a) direct that the transfer or transmission shall be registered by the company and the
company shall comply with such order within a period of ten days of the receipt of the
order; or
(b) direct rectification of the register and also direct the company to pay damages, if any,
sustained by any party aggrieved;
In the present case Ms. Mukta can make an appeal before the tribunal and claim damages.
4. (i) The given problem is based on the proviso provided in the section 127 (d) of the
Companies Act, 2013. As per the law where the dividend is declared by a company
and there remains calls in arrears and any other sum due from a member, in such
case no offence shall be deemed to have been committed where the dividend has
been lawfully adjusted by the company against any sum due to it from the
shareholder.
As per the facts given in the question, Mr. A is holding equity shares of face value of
` 10 Lakhs and has not paid an amount of ` 1 lakh towards call money on shares.
Referring to the above provision, Mr. A is eligible to get ` 1.20 lakh towards dividend,

out of which an amount of ` 1 lakh can be adjusted towards call money due on his
shares. ` 20,000 can be paid to him in cash or by cheque or in any electronic mode.
According to the above mentioned provision, company can adjust sum of ` 1 lakh due
towards call money on shares against the dividend amount payable to
Mr. A.
(ii) According to section 123(5), dividend shall be payable only to the registered
shareholder of the share or to his order or to his banker. Facts in the given case state
that Ms. N, the holder of equity shares transferred the shares to Mr. R whose name
has been registered on 20 th May 2017. Since, he became the registered shareholder
before the declaration of the dividend in the Annual general meeting of the company
held on 20 th September 2017, so, Mr. Raj will be entitled to the dividend.
5. Section 135 read with Companies (Corporate Social Responsibility Policy) Rules, 2014 of
the Companies Act, 2013 deals with the provisions related to the Corporate Social
Responsibility.
As per the given facts, following are the answers in the given situations -
(i) Amount that Company has to spend towards CSR: According to section 135 of
the Companies Act, 2013, the Board of every company shall ensure that the company
spends, in every financial year, at least two per cent of the average net profits of the
company made during the three immediately preceding financial years, in pursuance
of its CSR Policy.
Accordingly, net profits of Tirupati Ltd. for three immediately preceding financial years
is 150 crores (30+70+50) and 2% of the average net profits of the company made
during these three immediately preceding financial years will constitute 1 crore, can
be spent towards CSR in financial year 2017-2018.
(ii) Composition of CSR Committee: The CSR Committee shall be consisting of 3 or
more directors, out of which at least one director shall be an independent director.
(a) an unlisted public company or a private company covered under section
135(1) which is not required to appoint an independent director, shall have its
CSR Committee without such director;
(b) a private company having only two directors on its Board shall constitute its CSR
Committee with two such directors;
6. In terms of section 68 (2) (c) of the Companies Act, 2013 a company is allowed to buy back
a maximum of 25% of the aggregate of its paid- up capital and free reserves. Hence, the
company in the given case is not allowed to buy back its entire equity shares.
Section 68 (1) of the Companies Act, 2013 specifies the sources of funding buy back of its
shares and other specified securities as under:
(a) Free reserves or
(b) Security Premium account or

(c) Proceeds of the issue of any shares or other specified securities

However, under the proviso to section 68 (1) no buy back of shares or any specified
securities can be made out of the proceeds of an earlier issue of the same kind of shares
or same kind of specified securities.
7. In accordance with the provisions of the Companies Act, 2013, as contained under section
134 (1), the financial statements, including consolidated financial statem ent, if any, shall
be approved by the Board of Directors before they are signed on behalf of the Board by at
least:
(1) The Chairperson of the company where he is authorized by the Board; or
(2) Two directors out of which one shall be the managing director and other the Chief
Executive Officer, if he is a director in the company
(3) The Chief Financial Officer and the Company Secretary of the company, wherever
they are appointed.
In case of a One Person Company, the financial statements shall be signed by only one
director, for submission to the auditor for his report thereon.
The Board’s report and annexures thereto shall be signed by its Chairperson of the
company, if he is authorized by the Board and where he is not so authorized, shall be
signed by at least two directors one of whom shall be a managing director or by the director
where there is one director.
(i) In the given case, the Balance Sheet and Profit & Loss Account have been signed by
Mr. X and Mr. Y, the directors. In view of the provisions of Section 134 (1), the
Managing Director Mr. D should be one of the two signatories. Since, the company
has also employed a full time Secretary, he should also sign the Balance Sheet and
Profit & Loss Account. Therefore, authentication done by two direc tors is not valid.
(ii) In case of OPC, the financial statements should be signed by one director and hence,
the authentication is in order.
8. (a) The non disclosure of the fact that dividends were paid out of capital profits is a
concealment of material fact as a company is normally required to distribute dividend
only from trading or revenue profits and under exceptional circumstances can do so
out of capital profits. Hence, a material misrepresentation has been made. Hence, in
the given case the allottee can avoid the contract of allotment of shares.
(b) According to section 80 of the Companies Act, 2013, where any charge on any
property or assets of a company or any of its undertakings is registered under section
77 of the Companies Act, 2013, any person acquiring such property, assets,
undertakings or part thereof or any share or interest therein shall be deemed to have
notice of the charge from the date of such registration.

Thus, the section clarifies that if any person acquires a property, assets or
undertaking for which a charge is already registered, it would be deemed that he has
complete knowledge of charge from the date the charge is registered.
Thus, the contention of NRT Ltd. is correct
9. Section 40 (6) of the Companies Act 2013, provides that a company may pay commission
to any person in connection with the subscription or procurement of subscription to its
securities, whether absolute or conditional, subject to a number of conditions which are
prescribed under Companies (Prospectus and Allotment of Securities) Rules, 2014. In
relation to the case given, the conditions applicable under the above Rules are as under:
(a) The payment of such commission shall be authorized in the company’s articles of
association;
(b) The commission may be paid out of proceeds of the issue or the profit of the company
or both;
(c) The rate of commission paid or agreed to be paid shall not exceed, in case of shares,
five percent (5%) of the price at which the shares are issued or a rate authorised by
the articles, whichever is less, and in case of debentures, shall not exceed two and a
half per cent (2.5 %) of the price at which the debentures are issued, or as specified
in the company’s articles, whichever is less;
Thus, the Underwriting commission is limited to 5% of issue price in case of shares and
2.5% in case of debentures. The rates of commission given above are maximum rates.
In view of the above, the decision of Kapoor Builders Ltd. to pay underwriting commission
exceeding 2% as prescribed in the Articles is invalid.
The company may pay the underwriting commission in the form of flats as both the
Companies Act and the Rules do not impose any restriction on the mode of payment
though the source has been restricted to either the proceeds of the issue or profits of the
company.
10. (i) The appointment and re-appointment of auditor of a Government Company or a
government controlled company is governed by the provisions of section 139 of the
Companies Act, 2013 which are summarized as under:
The first auditor shall be appointed by the Comptroller and Auditor General of India
within 60 days from the date of incorporation and in case of failure to do so, the Board
shall appoint auditor within next 30 days and on failure to do so by Board of Directors,
it shall inform the members, who shall appoint the auditor within 60 days at an
extraordinary general meeting (EGM), such auditor shall hold office till conclusion of
first Annual General Meeting.
In case of subsequent auditor for existing government companies, the Comptroller &
Auditor General of India shall appoint the auditor within a period of 180 days from the
commencement of the financial year and the auditor so appointed shall hold his
position till the conclusion of the Annual General Meeting.

(ii) The situation as stated in the question relates to the creation of a casual vacancy in
the office of an auditor due to resignation of the auditor before the AGM in case of a
company other government company. Under section 139 (8)(i) any casual vacancy in
the office of an auditor arising as a result of his resignation, such vacancy can be
filled by the Board of Directors within thirty days thereof and in addition the
appointment of the new auditor shall also be approved by the company at a general
meeting convened within three months of the recommendation of the Board and he
shall hold the office till the conclusion of the next annual general meeting.
11. (a) An agent has the authority in an emergency to do all such acts as a man of ordinary
prudence would do for protecting his principal from losses which the principal would
have done under similar circumstances.
A typical case is where the ‘agent’ handling perishable goods like ‘apples’ can decide
the time, date and place of sale, not necessarily as per instructions of the principal,
with the intention of protecting the principal from losses. Here, the agent acts in an
emergency and acts as a man of ordinary prudence. In the given case S had acted in
an emergency situation and hence, R will not succeed against him.
(b) Problem asked in the question is based on the provisions of the Indian Contract Act,
1872 as contained in Section 150. The section provides that if the goods are bailed
for hire, the bailor is responsible for such damage, whether he was or was not aware
of the existence of such faults in the goods bailed. Accordingly, applying the abov e
provisions in the given case Suresh is responsible to compensate Ramesh for the
injuries sustained even if he was not aware of the defect in the carriage.
12. The problem in this case, is based on the provisions of the Indian Contract Act, 1872 as
contained in Section 215 read with Section 216. The two sections provide that where an
agent without the knowledge of the principal, deals in the business of agency on h is own
account, the principal may:
(1) repudiate the transaction, if the case shows, either that the agent has dishonestly
concealed any material fact from him, or that the dealings of the agent have been
disadvantageous to him.
(2) claim from the agent any benefit, which may have resulted to him from the transaction.
Therefore, based on the above provisions, Mr. A is entitled to recover ` 30 lakhs from Mr.
S being the amount of profit earned by Mr. S out of the transaction.
13. According to section 40 of the Negotiable Instruments Act, 1881, where the holder of a
negotiable instrument, without the consent of the endorser, destroys or impairs the
endorser’s remedy against a prior party, the endorser is discharged from liability to the
holder to the same extent as if the instrument had been paid at maturity. Any party liable
on the instrument may be discharged by the intentional cancellation of his signature by the
holder.

In the given question, E is the holder of a bill of exchange of which F is the paye e and it
contains the following endorsement in blank:
First endorsement, ‘F’
Second endorsement, ‘G’
Third endorsement, ‘H’
Fourth endorsement, ‘I’
‘E’, the holder, may intentionally strike out the endorsement by ‘G’ and ‘H’; in that case the
liability of ‘G’ and ‘H’ upon the bill will come to an end. But if the endorsements of ‘G’ and
‘H’ are struck out without the consent of ‘I’, ‘E’ will not be entitled to recover anything from
‘I’. The reason being that as between ‘H’ and ‘I’, ‘H’ is the principal debtor and ‘I’ is surety.
If ‘H’ is released by the holder under Section 39 of the Act, ‘I’, being surety, will be
discharged. Hence, when the holder without the consent of the endorser impairs the
endorser’s remedy against a prior party, the endorser is discharged from liability to the
holder.
Thus, if ‘E’ strikes out, without I’s consent, the endorsements by ‘G’ and ‘H’, ‘I’ will also be
discharged.
14. As per the provisions of Section 27 of the General Clauses Act, 1897, where any legislation
or regulation requires any document to be served by post, then unless a different intention
1. properly addressing,
2. pre-paying, and
3. posting by registered post.
Therefore, in view of the above provision, since, the statutory rules itself provides about
the service of notice that a notice when required under said statutory rules to be sent by
‘registered post acknowledgement due’, then, if notice was sent by ‘registered post’ only it
will not be the compliance of said rules. However, if such provision was not provided by
such statutory rules, then service of notice if by registered post only shall be deemed to be
effected.
Furthermore, in similar case of In United Commercial Bank v. Bhim Sain Makhija, AIR 1994
Del 181: A notice when required under the statutory rules to be sent by ‘registered post
acknowledgement due’ is instead sent by ‘registered post’ only, the protection of
presumption regarding serving of notice under ‘registered post’ under this section of the
Act neither tenable not based upon sound exposition of law.
15. Proviso: The normal function of a proviso is to except something out of the enactment or
to qualify something stated in the enactment which would be within its purview if the proviso
were not there. The effect of the proviso is to qualify the preceding enactment which is

expressed in terms which are too general. As a general rule, a proviso is added to an
enactment to qualify or create an exception to what is in the enactment. Ordinarily a proviso
is not interpreted as stating a general rule.
the main provision to which it has been enacted as a proviso and to no other. (Ram Narain
Sons Ltd. vs. Assistant Commissioner of Sales Tax, AIR 1955 SC 765).
Distinction between Proviso, exception and saving Clause
There is said to exist difference between provisions worded as ‘Proviso’, ’Exception’, or
‘Saving Clause’.
Proviso Exception Saving Clause
Exception’ is intended to ‘Proviso’ is used to remove ‘Saving clause’ is used to
restrain the enacting special cases from general preserve from destruction
clause to particular enactment and provide for certain rights, remedies or
cases them specially privileges already existing

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PAPER – 2: CORPORATE AND OTHER LAWS

PART – I: ANNOUNCEMENTS STATING APPLICABILITY FOR NOVEMBER, 2021

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

[Enforcement Date: 21 st December, 2020]

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

(vi) In section 68 of the Companies Act, 2013 in sub-section (11),—

© The Institute of Chartered Accountants of India

V. Chapter 6: Registration of Charges

© The Institute of Chartered Accountants of India

Old Law (Pg 7.7)

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

(vi) In section 117 of the Companies Act, 2013—

© The Institute of Chartered Accountants of India

Old Law (Pg 7.10)

© The Institute of Chartered Accountants of India

Old Law for (a): Pg 7.17

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

(iii) In section 137 of the principal Act, in sub-section (3),-

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

Old Law for (b): Pg 10.44

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

PART – II : QUESTIONS AND ANSWERS

DIVISION A: CASE SCENARIO/ MULTIPLE CHOICE QUESTIONS

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

(d) 8th January, 2020

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

ANSWER TO CASE SCENARIO / MULTIPULE CHOICE QUESTIONS

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amount of dividend which remains unpaid or unclaimed to a special account to be

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India